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UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




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Form 10-K

þ






|                                            |                                  
|------------------------------------------- | ---------------------------------
|For the fiscal year ended December 31, 2002 | Commission File Number: 000-30898



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AmerUs Group Co.

(Exact name of Registrant as specified in its
charter)


699 Walnut Street

Des Moines, Iowa 50309-3948


(Address of principal executive offices,
including zip code)


|                                                                       |  |                                                   
|---------------------------------------------------------------------- |  | --------------------------------------------------
|Iowa(State or other jurisdiction of
    incorporation or organization) |  | 42-1458424(I.R.S. Employer Identification
    No.)

Registrants telephone number, including
area code (515) 362-3600



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Securities registered pursuant to
Section 12(b) of the Act:

|                            |  |                        
|--------------------------- |  | -----------------------
|                            |  | Name of Each Exchange  
|Title of Each Class         |  | on Which Registered    
|                            |  |                        
|Common Stock (no par value) |  | New York Stock Exchange

Securities registered pursuant to
Section 12(g) of the Act: None

Indicate by check mark whether the Registrant
(1) has filed all reports 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 o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not
contained herein, and will not be contained, to the best of
Registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.     Yes o                 No x

Aggregate market value of voting stock held by
non-affiliates of the Registrant as of March 3, 2003:
$1,032,885,907

Indicate by check mark whether the Registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act)     Yes x.                 No o

Number of shares outstanding of each of the
Registrants classes of common stock on March 3, 2003
was as follows:

|             |  |                  
|------------ |  | -----------------
|Common Stock |  | 39,027,897 shares

DOCUMENTS INCORPORATED BY REFERENCE

Notice of 2003 Annual Meeting of Shareholders and
Proxy Statement

(incorporated into Part III)




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TABLE OF CONTENTS

|                                                        |  |                                                                                                    |  |     
|------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|                                                        |  |                                                                                                    |  | Page
|                                                        |  |                                                                                                    |  |     
|Part I                                                  |  |                                                                                                   
|Item 1.                                                 |  | Business                                                                                           |  | 2   
|Item 2.                                                 |  | Properties                                                                                         |  | 17  
|Item 3.                                                 |  | Legal Proceedings                                                                                  |  | 17  
|Item 4.                                                 |  | Submission of Matters to a Vote of Security
    Holders                                            |  | 17  
|Part II                                                 |  |                                                                                                   
|Item 5.                                                 |  | Market for Registrants Common Equity and
    Related Stockholder Matters                          |  | 18  
|Item 6.                                                 |  | Selected Financial Data                                                                            |  | 20  
|Item 7.                                                 |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |  | 21  
|Item 7A.                                                |  | Quantitative and Qualitative Disclosures About
    Market Risk                                     |  | 44  
|Item 8.                                                 |  | Financial Statements and Supplementary Data                                                        |  | 46  
|Item 9.                                                 |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure           |  | 46  
|Part III                                                |  |                                                                                                   
|Item 10.                                                |  | Directors and Executive Officers of the Registrant                                                 |  | 46  
|Item 11.                                                |  | Executive Compensation                                                                             |  | 46  
|Item 12.                                                |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |  | 46  
|Item 13.                                                |  | Certain Relationships and Related Transactions                                                     |  | 46  
|Item 14.                                                |  | Controls and Procedures                                                                            |  | 46  
|Part IV                                                 |  |                                                                                                   
|Item 15.                                                |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                               |  | 47  
|Index to Exhibits                                       |  | 48                                                                                                
|Signatures                                              |  | 55                                                                                                
|Power of Attorney                                       |  | 55                                                                                                
|Index to Consolidated Financial Statements              |  | F-1                                                                                               
|Index to Consolidated Financial Statement
    Schedules |  | S-1                                                                                               



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SAFE HARBOR STATEMENT

All statements, trend analyses and other
information contained in this report relative to markets for our
products and trends in our operations or financial results, as
well as other statements including words such as
anticipate, believe, plan,
estimate, expect, intend,
and other similar expressions, constitute forward-looking
statements under the Private Securities Litigation Reform Act of
1995. Factors that may cause our actual results to differ
materially from those contemplated by these forward-looking
statements include, among others, the following possibilities:
(a) general economic conditions and other factors,
including prevailing interest rate levels and stock and bond
market performance, which may affect our ability to sell our
products, the market value of our investments and the lapse rate
and profitability of our policies; (b) our ability to
achieve anticipated levels of operational efficiencies and
cost-saving initiatives and to meet cash requirements based upon
projected liquidity sources; (c) customer response to new
products, distribution channels and marketing initiatives;
(d) mortality, morbidity, and other factors which may
affect the profitability of our insurance products; (e) our
ability to develop and maintain effective risk management
policies and procedures and to maintain adequate reserves for
future policy benefits and claims; (f) changes in the
federal income tax laws, regulations and interpretations, which
may affect the relative tax advantages of some of our products;
(g) increasing competition in the sale of insurance and
annuities and the recruitment of sales representatives;
(h) regulatory changes, actions, interpretations or
pronouncements including those relating to the regulation of
insurance companies and the regulation and sale of their
products, (i) our ratings and those of our subsidiaries by
independent rating organizations which we believe are
particularly important to the sale of our products; (j) the
performance of our investment portfolios; (k) the impact of
changes in standards of accounting; (l) our ability to
integrate the business and operations of acquired entities;
(m) expected protection products and accumulation products
margins; (n) the impact of anticipated investment
transactions; and (o) unanticipated litigation or
regulatory investigations or examinations.

There can be no assurance that other factors not
currently anticipated by us will not materially and adversely
affect our results of operations. You are cautioned not to place
undue reliance on any forward-looking statements made by us or
on our behalf. Forward-looking statements speak only as of the
date the statement was made. We undertake no obligation to
update or revise any forward-looking statement.

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PART I

ITEM 1.     BUSINESS

Web Access to Reports

We make our periodic and current reports filed or
furnished pursuant to section 13(a) or 15(d) of the
Securities Exchange Act of 1934, available, free of charge at
our website as soon as practicable after such reports are filed
electronically with or furnished to the U.S. Securities and
Exchange Commission. Our internet website address to obtain such
filings is www.amerus.com.

Definitions

When used in this document, the terms
AmerUs, we, our and
us refer to AmerUs Group Co. (including American
Mutual Holding Company and AmerUs Life Holdings, Inc. as
predecessor entities of AmerUs Group Co.), an Iowa corporation,
and our consolidated subsidiaries, unless otherwise specified or
indicated by the context.

General

We are a holding company whose subsidiaries are
primarily engaged in the business of marketing, underwriting and
distributing a broad range of individual life insurance and
annuity products to individuals and businesses in all
50 states, the District of Columbia and the
U.S. Virgin Islands. We have two reportable operating
segments: protection products and accumulation products. The
protection products segment was formerly known as the life
insurance segment and the accumulation products segment was
formerly known as the annuity segment. The primary offerings of
the protection products segment are interest-sensitive whole
life, equity-indexed life, universal life and term life
insurance policies. The primary offerings of the accumulation
products segment are individual deferred fixed annuities,
equity- indexed annuities and funding agreements.

We were founded in 1896 as the mutual insurer
Central Life Assurance Company. In 1996, we became the first
Mutual Holding Company, or MHC, a structure that allows mutuals
to access the public equity markets, which AmerUs did in 1997
with its initial public offering. In 2000, AmerUs reorganized
its MHC structure through a full demutualization and became a
100% public stock company.

We have had positive organic growth in our
businesses. We have also successfully executed a series of
strategic acquisitions that have helped generate sales growth,
as well as balance our product and geographic distribution. The
following is a summary of these acquisitions and the benefits
created:



| |   |                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In 1994, Central Life Assurance Company and
    American Mutual Life Insurance Co. merged providing us with
    significant scale in our life insurance operations. The merger
    resulted in our becoming one of the 25 largest mutual insurers
    in America at that time.                                                                                                     
|
| |  | In October 1997, the acquisition of Delta Life
    Corporation launched our annuity business. At the time of the
    acquisition, Delta Life had about $2.0 billion in assets
    and specialized in single-premium deferred annuity and
    equity-indexed annuity products.                                                                                                      
|
| |  | In December 1997, we acquired AmVestors Financial
    Corporation, predecessor to AmerUs Annuity Group Co., which
    specialized in the sale of individual fixed annuity products.
    The acquisition further strengthened our presence in asset
    accumulation and retirement and savings markets.                                                                            
|
| |  | In 2001, we acquired Indianapolis Life Insurance
    Company, an Indiana life insurance company, and its subsidiaries
    which had $5.8 billion in consolidated assets at the time
    of the acquisition. The acquisition allowed us to strengthen our
    life insurance business and ultimately provided us with a better
    balance of annuities and life insurance products.

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We sold certain lines of business and made the
decision to exit certain other businesses in 1998. These
businesses are referred to as discontinued operations and
include the following activities: banking, residential real
estate brokerage, and mortgage banking.

Subsidiaries

We have four main direct subsidiaries: AmerUs
Life Insurance Company, or ALIC, an Iowa life insurance company;
AmerUs Annuity Group Co., or AAG, a Kansas corporation; AmerUs
Capital Management Group, Inc., or ACM, an Iowa corporation; and
ILICO Holdings, Inc., an Indiana corporation.

AAG owns, directly or indirectly, two Kansas life
insurance companies: American Investors Life Insurance Company,
Inc., or American; and Financial Benefit Life Insurance Company,
or FBL. Delta Life and Annuity Company, or Delta, was merged
into American effective December 31, 2002.

ILICO Holdings, Inc., has one wholly-owned
subsidiary, Indianapolis Life Insurance Company, or ILIC, an
Indiana life insurance company. ILIC has three wholly-owned
subsidiaries: Bankers Life Insurance Company of New York, or
Bankers Life, a New York life insurance company; IL Securities,
Inc., an Indiana corporation; and IL Annuity and Insurance
Company, or IL Annuity, a Kansas life insurance company. When
used in this document, the term ILICO refers to
ILICO Holdings, Inc. and its consolidated subsidiaries.

Organization as of December 31,
2002







|    |                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------
|(A) | ILICO Holdings, Inc. is owned by AmerUs Group Co.
    (92.2%) and AmerUs Life Insurance Company (7.8%)

Reorganization

We were formerly known as American Mutual Holding
Company, or AMHC and were a mutual insurance holding company,
with our principal asset being a 58% interest in AmerUs Life
Holdings, Inc., or ALHI. Public stockholders owned the remaining
42% interest in ALHI with their interest referred to as minority
interest. ALHI was a holding company which directly or
indirectly owned three principal life insurance subsidiaries:
ALIC, American and Delta. On September 20, 2000, we converted to
stock form, changed our name to AmerUs Group Co. and acquired
the minority interest of ALHI by issuing our common stock in
exchange for the outstanding shares of ALHI held by the public.
The value of the stock exchange was approximately
$298 million and ALHI was merged into us simultaneously
with the stock exchange.

Prior to our conversion to a stock company, which
is referred to as a demutualization, we were owned by
individuals and entities who held insurance policies or annuity
contracts issued by ALIC. Such individuals and entities were
considered members. In connection with our demutualization, we
distributed cash, policy credits

3



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and our newly issued common stock to those
members in exchange for their membership interests. The value of
the distribution totaled approximately $792 million.


The acquisition of the minority interest of ALHI
by us was accounted for as a purchase and 42% of the book value
of the assets and liabilities of ALHI was adjusted to market
value as of the acquisition date. Approximately 42% of the ALHI
earnings for our fiscal periods prior to the acquisition date
are deducted from our results of operations on the line titled
minority interest in our consolidated statements of
income. From the acquisition date forward, our results of
operations include 100% of such earnings.

Closed Block

We have established two closed blocks of
policies: (a) the first on June 30, 1996 in connection with
the reorganization of ALIC from a mutual company to a stock
company, and (b) the second on March 31, 2001 in
connection with the reorganization of ILIC from a mutual company
to a stock company (collectively, the closed block). Insurance
policies which had a dividend scale in effect as of each closed
block establishment date were included in the closed block. The
closed block was designed to give reasonable assurance to owners
of insurance policies that, after the reorganizations of ALIC
and ILIC, assets would be available to maintain the dividend
scales and interest credits in effect prior to the
reorganization, if the experience underlying such scales and
crediting continued. The assets, including revenue therefrom,
allocated to the closed block will accrue solely to the benefit
of the owners of policies included in the closed block until the
closed block no longer exists. We will continue to pay
guaranteed benefits under all policies, including policies
included in the closed block, in accordance with their terms. In
the event that the closed blocks assets are insufficient
to meet the benefits of the closed blocks guaranteed
benefits, general assets would be utilized to meet the
contractual benefits of the closed blocks policyholders.

Acquisition

On May 18, 2001, we completed the
acquisition of ILICO for an amount of cash, policy credits and
shares of our common stock equal to the value of 9.3 million
shares of our common stock. The purchase price totaled a value
of approximately $326 million. The acquisition was
accounted for as a purchase and the total purchase price was
allocated to the assets and liabilities of ILICO based on the
relative fair values as of the acquisition date. See further
discussion in note 15 to the consolidated financial statements.

Dispositions

ILIC previously owned The Indianapolis Life Group
of Companies, Inc., or IL Group. IL Group owned Bankers Life, IL
Securities, Inc., IL Annuity, and Western Security Life
Insurance Company, or WSLIC, an Arizona life insurance company.
Effective on March 5, 2002, IL Group was dissolved and its
four wholly-owned subsidiaries became direct subsidiaries of
ILIC. In addition, on March 29, 2002, WSLIC was sold with
its insurance business transferred to ILIC prior to the sale.
The sale of the corporate organization and insurance licenses
resulted in a gain of approximately $1.9 million which is
included in realized gains and losses on investments.

Financial Information

Our consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States, or GAAP. See note 1 to the
consolidated financial statements for additional information
about GAAP and our significant accounting policies.

We measure our profit or loss and total assets by
operating segments. We have two reportable operating segments:
protection products and accumulation products. See a further
discussion of our operating segments in Item 7
Managements Discussion and Analysis of Financial Condition
and Results of Operations.

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Protection Products Segment

Products

Our protection products segment consists of
individual fixed life insurance premiums from traditional life
insurance products, universal life insurance products and
equity-indexed life insurance products as set forth in the
following table:

|                                      |                               |                                  |         |         |  |      |        |        |  |  |        |        | 
|------------------------------------- | ----------------------------- | -------------------------------- | ------- | ------- |  | ---- | ------ | ------ |  |  | ------ | ------ | 
|                                      |                               |                                 
|                                      |                               | Sales Activity by Product       
|                                      |                               | For The Years Ended December 31,
|                                      |                               |                                 
|                                      |                               | 2002                             |         | 2001    |  | 2000
|                                      |                               |                                  |         |         |  |     
|                                      |                               |                                 
|                                      |                               | ($ in thousands)                
|Traditional life insurance:           |                               |                                  |         |         |  |      |        |        |  |  |        |       
|                                      | Whole life                    |                                  | $       | 4,236   |  |      | $      | 6,842  |  |  | $      | 14,161 | 
|                                      | Interest-sensitive whole life |                                  |         | 30,622  |  |      |        | 12,411 |  |  |        |       | 
|                                      | Term life                     |                                  |         | 16,390  |  |      |        | 7,763  |  |  |        | 7,223  | 
|Universal life                        |                               |                                  | 32,570  |         |  |      | 21,794 |        |  |  | 10,992 |       
|Equity-indexed life                   |                               |                                  | 45,843  |         |  |      | 25,865 |        |  |  | 7,137  |       
|                                      |                               |                                  |         |         |  |      |        |        |  |  |        |       
|Direct first year annualized premiums |                               |                                  | 129,661 |         |  |      | 74,675 |        |  |  | 39,513 |       
|Private label term life premiums      |                               |                                  | 8,970   |         |  |      | 6,637  |        |  |  |       |       
|                                      |                               |                                  |         |         |  |      |        |        |  |  |        |       
|                                      | Total                         |                                  | $       | 138,631 |  |      | $      | 81,312 |  |  | $      | 39,513 | 
|                                      |                               |                                  |         |         |  |      |        |        |  |  |        |       

Traditional Life Insurance Products.Traditional life insurance products
include whole life, interest-sensitive whole life and term life
insurance products.

Whole life insurance is designed to provide
benefits for the life of the insured. This product generally
provides for level premiums and a level death benefit and
requires payments in excess of the mortality cost in earlier
years to offset increasing mortality costs in later years. Sales
of whole life insurance decreased in 2002 and 2001, as compared
to each prior year, due in part to our increased marketing focus
on equity-indexed life products which has resulted in a shift in
sales from whole life to equity-indexed. In addition, there has
been an overall general industry decline in sales of whole life
products. We ceased taking new applications for sales of whole
life insurance on December 31, 2002.

Interest-sensitive whole life insurance also
provides benefits for the life of the insured. However, this
product has flexible premium and benefit patterns not available
with traditional whole life plans. Cash value accumulation is
interest sensitive and responds to current interest and
mortality rates. Sales of interest-sensitive whole life
insurance are all attributable to ILICO.

Term life insurance provides life insurance
protection for a specific time period (which generally can be
renewed at an increased premium). Such policies are
mortality-based and offer no cash accumulation feature. Term
life insurance is a highly competitive and quickly changing
market. Term life insurance sales increased in 2002 and 2001, as
compared to each prior year, due to the acquisition of ILICO.

We also distribute term products of ILICO through
strategic alliances with private label partners. Under private
label arrangements, ILICO designs and issues products that are
distributed through other life insurance companies, our private
label partners. ILICO reinsures a portion of the risks on those
products which we refer to as our private label sales. We have
three private label partners that are actively writing new
business. During the second quarter of 2002, we ceased
recruiting new private label partners.

For the year ended December 31, 2002, sales
of whole life, interest-sensitive whole life and term life
insurance products represented 3%, 24% and 13%, respectively, of
direct first year annualized premiums for individual life
insurance products sold.

Universal Life Insurance Products.We offer universal life insurance
products, which provide flexible benefits for the insured.
Within product limits and state regulations, policyowners may
vary the amount and timing of premiums and the amount of the
death benefit of their policies and keep the policies in force,
as long

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as there are sufficient policy funds available to
cover all policy charges for the next coverage period. Premiums,
net of specified expenses, are credited to the policy, as is
interest, generally at a rate determined from time to time by
us. Specific charges are made against the policy for the cost of
insurance and for expenses. We invest the premiums we receive
from the sale of universal life insurance products in our
investment portfolio. Our gross margin from these products is
the yield we earn on our investment portfolio plus the internal
product charges less interest credited to policies and less
mortality and other expenses.


Sales of universal life increased in 2002 and
2001 primarily as a result of the acquisition of ILICO.
Excluding ILICO, universal life sales decreased
$1.9 million and $5.0 million in 2002 and 2001,
respectively, due to the introduction and growth in sales of
equity-indexed life products in 2000. The weighted average
crediting rate for universal life insurance liabilities was
5.39% for the year 2002, 5.63% for the year 2001 and 5.62% for
the year 2000. The crediting rate has been lowered as a result
of reduced investment yields associated with the declining
interest rate environment. For the year ended December 31,
2002, sales of universal life insurance products represented 25%
of direct first year annualized premiums for individual life
insurance products sold.

Equity-Indexed Life
Products.We also offer equity-indexed
life insurance products which are similar in structure to
universal life products but allow the policyowner to elect an
interest earnings strategy for a portion of the account value
earnings. Earnings are credited based in part on increases in
the appropriate indices, primarily the Standard &
Poors 500 Composite Stock Index(R) (S&P 500 Index),
excluding dividends. The earnings credit is subject to a
participation rate and an annual cap. Our gross margin on our
equity-indexed life products is similar to that of our universal
life insurance products. However, due to the equity-indexed
earnings strategies, we invest a portion of the premiums we
receive from the sale of these products in call options. We may
affect the cost of the call options by adjusting interest
crediting parameters that are provided for in the policy. Our
return on the call options is generally expected, in a growing
equity market, to correspond to the earnings we are
contractually bound to credit on the equity-indexed strategies.
The remainder of the premium is invested in our investment
portfolio to support the contractual minimum guarantees that may
come into effect if the equity index declines. The structure of
our product, together with the allocation of our equity-indexed
life product premiums between call options and our investment
portfolio, are intended to provide for a positive gross margin
in both increasing and decreasing equity markets.

Equity-indexed life insurance sales increased in
2002 and 2001 following our focus on product marketing beginning
in 2000. We are a leading writer of equity-indexed life products
in the United States. Sales of the equity-indexed life product
as a percentage of direct first year individual life insurance
annualized premiums was approximately 35% in 2002.

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The following table sets forth our collected life
insurance premiums, including collected premiums associated with
the closed block, for the periods indicated:

|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |         |         | 
|----------------------------------------- | -------------------- | -------------------------------- | ------- | -------- | ------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                          |                      |                                 
|                                          |                      | Collected Premiums by Product   
|                                          |                      | For The Years Ended December 31,
|                                          |                      |                                 
|                                          |                      | 2002                             |         | 2001     |         | 2000
|                                          |                      |                                  |         |          |         |     
|                                          |                      |                                 
|                                          |                      | ($ in thousands)                
|Individual life premiums collected:       |                      |                                  |         |          |         |      |         |         |         |   |         |        
|                                          | Traditional life:    |                                  |         |          |         |      |         |         |         |   |         |         |        
|                                          |                      | First year and single            |         | $        | 149,740 |      |         | $       | 113,126 |   |         | $       | 83,849  | 
|                                          |                      | Renewal                          |         |          | 344,715 |      |         |         | 274,784 |   |         |         | 185,078 | 
|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |        
|                                          |                      | Total                            |         |          | 494,455 |      |         |         | 387,910 |   |         |         | 268,927 | 
|                                          | Universal life:      |                                  |         |          |         |      |         |         |         |   |         |         |        
|                                          |                      | First year and single            |         |          | 75,761  |      |         |         | 45,597  |   |         |         | 27,306  | 
|                                          |                      | Renewal                          |         |          | 128,869 |      |         |         | 109,485 |   |         |         | 73,737  | 
|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |        
|                                          |                      | Total                            |         |          | 204,630 |      |         |         | 155,082 |   |         |         | 101,043 | 
|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |        
|                                          | Equity-indexed life: |                                  |         |          |         |      |         |         |         |   |         |         |        
|                                          |                      | First year and single            |         |          | 78,797  |      |         |         | 40,504  |   |         |         | 5,265   | 
|                                          |                      | Renewal                          |         |          | 14,526  |      |         |         | 4,212   |   |         |         |        | 
|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |        
|                                          |                      | Total                            |         |          | 93,323  |      |         |         | 44,716  |   |         |         | 5,265   | 
|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |        
|Total individual life                     |                      |                                  | 792,408 |          |         |      | 587,708 |         |         |   | 375,235 |        
|                                          | Reinsurance assumed  |                                  |         | 48,664   |         |      |         | 30,740  |         |   |         | 1,464   |        
|                                          | Reinsurance ceded    |                                  |         | (220,589 | )       |      |         | (74,152 | )       |   |         | (40,740 | )      
|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |        
|Total individual life, net of reinsurance |                      | $                                | 620,483 |          |         | $    | 544,296 |         |         | $ | 335,959 |        
|                                          |                      |                                  |         |          |         |      |         |         |         |   |         |        

Individual life insurance premiums collected
increased in 2002 and 2001 due to the additional premiums from
the acquisition of ILICO and increased equity-indexed life sales.

Reinsurance assumed increased in 2002 and 2001.
The entire amount of the increase is from the ILICO acquisition.
ILICO private labels various term life products and previously
private labeled second-to-die products which are no longer being
sold but which continue to have renewal premiums. The products
are designed by ILICO, issued by ILICOs private label
partners and then assumed in whole or in part by ILICO. We have
three private label partners that are actively writing new
business. During the second quarter of 2002, we ceased
recruiting new private label partners.

Beginning January 1, 2000, ALIC entered into
a new reinsurance arrangement that reduced its retention to 10%
of the net amount of risk on any one policy not to exceed
company retention limits for the majority of policies issued
since July 1, 1996 and for the majority of new business
going forward. ALICs retention limits on any one life vary
by age and rating table and are generally between $150,000 and
$500,000. In addition, effective July 1, 2000, ALIC entered
into a reinsurance agreement covering its closed block policies.
Under this agreement, ALIC has reinsured approximately 90% of
the closed block net amount at risk not previously reinsured.
ALIC also entered into an indemnity reinsurance agreement
effective December 31, 2001 covering universal life
policies of the open block issued prior to July 1, 1996,
that was subsequently replaced by another indemnity reinsurance
agreement effective October 1, 2002 covering 90% of the net
amount at risk not previously reinsured of any one policy. As a
result of these new agreements, ceded reinsurance premium for
ALIC was $127.3 million in 2002, $35.2 million in 2001
and $40.7 million in 2000. The remainder of the ceded
premium was from ILICO and amounted to $93.3 million in 2002 and
$39.0 million in 2001. ILICOs reinsurance agreements
effectively reduce ILICOs retention limit to between
$150,000 and $500,000.

We also entered into new reinsurance agreements
effective December 31, 2002, which did not impact collected
premiums in 2002 but will affect collected premiums beginning
January 1, 2003. ALIC entered into

7



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an 80% modified coinsurance quota share and
coinsurance agreement covering certain individual life policies
of the closed block with a related reinsurance premium of
$1.5 million accrued as of December 31, 2002. Also,
ILIC entered into a reinsurance agreement to cover 100% quota
share of retained net amounts at risk for certain open block and
closed block policies in force at December 31, 2002, for
which a reinsurance premium of $0.9 million was accrued at
December 31, 2002.


The following table sets forth information
regarding our life insurance in force for each date presented:

|                     |                    |                                    |   |            |  |      |   |            |  |  |   |            | 
|-------------------- | ------------------ | ---------------------------------- | - | ---------- |  | ---- | - | ---------- |  |  | - | ---------- | 
|                     |                    |                                   
|                     |                    | Individual Life Insurance in Force
|                     |                    | As of December 31,                
|                     |                    |                                   
|                     |                    | 2002                               |   | 2001       |  | 2000
|                     |                    |                                    |   |            |  |     
|                     |                    |                                   
|                     |                    | ($ in thousands)                  
|Traditional life     |                    |                                    |   |            |  |      |   |            |  |  |   |           
|                     | Number of policies |                                    |   | 451,933    |  |      |   | 405,077    |  |  |   | 245,143    | 
|                     | GAAP life reserves |                                    | $ | 3,236,223  |  |      | $ | 3,101,938  |  |  | $ | 1,744,038  | 
|                     | Face amounts       |                                    | $ | 56,883,000 |  |      | $ | 49,655,000 |  |  | $ | 23,466,000 | 
|Universal life       |                    |                                    |   |            |  |      |   |            |  |  |   |           
|                     | Number of policies |                                    |   | 147,469    |  |      |   | 151,982    |  |  |   | 110,323    | 
|                     | GAAP life reserves |                                    | $ | 1,425,746  |  |      | $ | 1,380,379  |  |  | $ | 943,569    | 
|                     | Face amounts       |                                    | $ | 19,095,000 |  |      | $ | 18,792,000 |  |  | $ | 12,257,000 | 
|Equity-indexed life  |                    |                                    |   |            |  |      |   |            |  |  |   |           
|                     | Number of policies |                                    |   | 23,679     |  |      |   | 10,591     |  |  |   | 2,930      | 
|                     | GAAP life reserves |                                    | $ | 126,821    |  |      | $ | 51,004     |  |  | $ | 13,015     | 
|                     | Face amounts       |                                    | $ | 4,574,000  |  |      | $ | 2,028,000  |  |  | $ | 478,000    | 
|Total life insurance |                    |                                    |   |            |  |      |   |            |  |  |   |           
|                     | Number of policies |                                    |   | 623,081    |  |      |   | 567,650    |  |  |   | 358,396    | 
|                     | GAAP life reserves |                                    | $ | 4,788,790  |  |      | $ | 4,533,321  |  |  | $ | 2,700,622  | 
|                     | Face amounts       |                                    | $ | 80,552,000 |  |      | $ | 70,475,000 |  |  | $ | 36,201,000 | 

The acquisition of ILICO in 2001 increased the
number of policies in force by 213,000, GAAP life reserves by
$1.7 billion and face amounts by $31.2 billion at
December 31, 2001.

Distribution Systems

Our subsidiaries sell life insurance in all 50
states, the District of Columbia and the U.S. Virgin Islands.
The states with the highest geographic concentration of sales,
based on statutory premiums, are California, Illinois, Iowa,
Minnesota, New York and Texas in 2002. These states account for
approximately 47% of our statutory premiums.

Our target customers are individuals in the
middle and upper income brackets and small businesses. We market
our life insurance products on a national basis primarily
through a Preferred Producer agency system, a Personal Producing
General Agent (PPGA) distribution system and through
Independent Marketing Organizations (IMOs). We currently employ
19 regional vice presidents who are responsible for supervising
these distribution systems within their assigned geographic
regions.

Under the Preferred Producer agency system, a
contractual arrangement is entered into with the Preferred
Producer general agent for the sale of insurance products by the
Preferred Producer agents and brokers assigned to the Preferred
Producer general agents agency. The Preferred Producer
general agents are primarily compensated by receiving a
percentage of the first year commissions paid to Preferred
Producer agents and brokers in the Preferred Producer general
agents agency and by renewal commissions on premiums
subsequently collected on that business. In addition, the
Preferred Producers receive certain fringe benefits and other
allowances.

The Preferred Producer general agents are
independent contractors and are generally responsible for the
expenses of operating their agencies, including office and
overhead expenses and the recruiting, selection, contracting,
training and development of Preferred Producer agents and
brokers in their agency. As of December 31, 2002, we had
75 Preferred Producer general agents in 27 states,
through which approximately

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1,200 Preferred Producer agents sell our
products. While Preferred Producer agents in the Preferred
Producer agency system are non-exclusive, most agents use our
products for a majority of their new business for the type of
products offered by us. No single Preferred Producer general
agency accounts for more than 2% of the total first year life
commissions paid by us.


Preferred Producer agents are also independent
contractors and are primarily compensated by commissions on
first year and renewal premiums collected on business written by
them plus certain fringe benefits and other allowances. In
addition, Preferred Producer agents can earn bonus commissions,
graded by production and persistency on their business.

Under the PPGA system, we contract primarily with
individuals who are experienced individual agents or head a
small group of experienced individual agents. These individuals
are independent contractors and are responsible for all of their
own expenses. These individuals often sell products for other
insurance companies, and may offer selected products we offer
rather than our full line of insurance products. The PPGA system
is comprised of approximately 1,300 PPGAs, with
approximately 3,500 agents.

PPGAs are compensated by commissions on first
year and renewal premiums collected on business written by
themselves and the agents in their units. In addition to a base
commission, PPGAs may earn bonus commissions on their business,
graded by production and persistency.

We have also developed programs to sell life
insurance through select IMOs. The customers targeted and the
products sold are similar to those of the Preferred Producer
agency system and the PPGA system.

Under the IMO system, a contractual arrangement
is entered into with an IMO to promote our insurance products to
their network of agents and brokers. The IMO receives a
commission and override commission on the business produced. We
currently have approximately 90 IMOs under contract.

We also distribute term products of ILICO through
strategic alliances with private label partners. Under private
label arrangements, ILICO designs and manufactures products that
are distributed through the field forces of other life insurance
companies, our private label partners. We currently have three
private label partners actively writing new business.

Accumulation Products Segment

Products

Our accumulation products segment offerings
consist of individual deferred fixed annuities (comprised of
traditional deferred fixed annuities and equity-indexed fixed
annuities), variable annuities and funding agreements. Annuities
provide for the payment of periodic benefits over a specified
time period. Benefits may commence immediately or may be
deferred to a future date. Fixed annuities generally are backed
by a general investment account and credited with a rate of
return that is periodically reset. Variable annuities provide
for the policyholder to direct all or a portion of his or her
account balance into an investment that effectively passes the
market risks and rewards of holding that investment to the
policyholders. Funding agreements are arrangements for which we
receive deposit funds and for which we agree to repay the
deposit and a contractual return for the duration of the
contract. Our annuity deposits consisted of approximately 61%
from deferred fixed annuity products, approximately 38% from
equity-indexed annuity products and approximately 1% from

9



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variable annuity products in 2002. Funding
agreement deposits totaled $875 million in 2002. The
following table sets forth deposits for the periods indicated:


|                                   |                    |                                  |           |           |           |      |           |           |           |   |           |           |           | 
|---------------------------------- | ------------------ | -------------------------------- | --------- | --------- | --------- | ---- | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                   |                    |                                 
|                                   |                    | Deposits by Product             
|                                   |                    | For The Years Ended December 31,
|                                   |                    |                                 
|                                   |                    | 2002                             |           | 2001      |           | 2000
|                                   |                    |                                  |           |           |           |     
|                                   |                    |                                 
|                                   |                    | ($ in thousands)                
|Annuities                          |                    |                                  |           |           |           |      |           |           |           |   |           |          
|                                   | Fixed annuities:   |                                  |           |           |           |      |           |           |           |   |           |           |          
|                                   |                    | Deferred fixed annuities         |           | $         | 1,099,872 |      |           | $         | 1,322,725 |   |           | $         | 1,107,147 | 
|                                   |                    | Equity-indexed annuities         |           |           | 683,819   |      |           |           | 612,043   |   |           |           | 374,503   | 
|                                   | Variable annuities |                                  |           | 6,230     |           |      |           | 27,483    |           |   |           |          |          
|                                   |                    |                                  |           |           |           |      |           |           |           |   |           |          
|                                   | Total Annuities    |                                  |           | 1,789,921 |           |      |           | 1,962,251 |           |   |           | 1,481,650 |          
|Funding agreements                 |                    |                                  | 875,000   |           |           |      |          |           |           |   |          |          
|                                   |                    |                                  |           |           |           |      |           |           |           |   |           |          
|                                   |                    | Total                            |           |           | 2,664,921 |      |           |           | 1,962,251 |   |           |           | 1,481,650 | 
|Reinsurance assumed                |                    |                                  |          |           |           |      | 194,317   |           |           |   |          |          
|Reinsurance ceded                  |                    |                                  | (60,916   | )         |           |      | (175,485  | )         |           |   | (34,534   | )        
|                                   |                    |                                  |           |           |           |      |           |           |           |   |           |          
|Total deposits, net of reinsurance |                    | $                                | 2,604,005 |           |           | $    | 1,981,083 |           |           | $ | 1,447,116 |          
|                                   |                    |                                  |           |           |           |      |           |           |           |   |           |          

Deferred Fixed Annuity Products.We offer a variety of interest rate
crediting strategies on our traditional deferred fixed annuity
products. These strategies include initial interest crediting
rates with guarantees for periods of one to five years.
Following the initial guarantee period, we may adjust the
credited interest rate annually, subject to the minimum interest
rates specified in the contracts. Such minimum guarantee rates
currently range from 3% to 4.5%. We also offer an interest rate
crediting strategy that credits the policy with a return
generally based upon the interest rates it earns on assets
supporting the respective policies less management fees. We
invest the deposits we receive from deferred fixed annuity
product sales in our investment portfolio. We call the
difference between the yield we earn on our investment portfolio
and the interest we credit on our deferred fixed annuities our
investment spread. The investment spread is a major driver of
the profitability of our deferred fixed annuity products.
Deferred fixed annuity deposits decreased $222.9 million in
2002 compared to 2001 as a result of deploying capital to
funding agreements which are intended to provide a higher return
on equity. In 2001, deferred fixed annuity deposits increased
$215.6 million compared to 2000 which was primarily
attributable to product repricing, increased marketing efforts
and the acquisition of ILICO.

Effective October 1, 2000, we entered into a
reinsurance agreement to cede 35% of certain fixed annuity
production on a modified coinsurance basis. Fixed annuity
production ceded under this agreement totaled approximately
$160.3 million in 2001 and $34.2 million in 2000. In
the fourth quarter of 2001, the agreement was cancelled and the
previously ceded premiums were recaptured amounting to
$194.3 million. ILICO reinsures approximately 75% of its
fixed annuities on a modified coinsurance basis which increased
reinsurance ceded by approximately $4.7 million in 2002 and
$15.2 million in 2001.

Equity-Indexed Annuities.We offer equity-indexed annuity
products that provide various interest crediting strategies,
including strategies linked to equity and investment grade bond
indices. For deposits allocated to indexed crediting strategies,
interest is credited to these products based in part on the
increases in the applicable indices, less any applicable fees
and subject to any applicable caps. Similar to our deferred
fixed annuity products, we invest the deposits we receive from
equity-indexed annuity product sales in our investment
portfolio. In addition, for deposits allocated to equity-indexed
crediting strategies, we use a portion of the deposits to
purchase call options. We may affect the cost of the call
options by adjusting interest crediting parameters that are
provided for in the policy. Our return on the call options is
generally expected, in a growing equity market, to correspond to
the earnings we are contractually bound to credit on the
equity-indexed strategies. The remainder of the deposit is
invested in our investment portfolio to support the

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contractual minimum guarantees that may come into
effect if the equity index declines. The gross spread on
deposits allocated to our equity-indexed strategy is:


The
yield we earn on our investment portfolio,

Less
the cost of the call options,


Less
any interest credited to policyholders due to minimum guarantees
in effect.


The gross spread, similar to the investment
spread on deferred fixed annuity products, is a major driver of
profitability of our equity-indexed annuity products. The
structure of our product, together with the allocation of our
equity-indexed strategy deposits between call options and our
investment portfolio, are intended to provide for a positive
gross spread in both increasing and decreasing equity markets.

Equity-indexed annuity sales increased in 2002
and 2001 as compared to the prior year periods due to its
popularity with consumers and agents following the introduction
of new products in 2000. In the third quarter of 2002, we
entered into a new modified coinsurance reinsurance agreement to
cede 25% of certain equity-indexed annuity products which
amounted to $56.2 million of ceded premium in 2002.

Variable Annuities.Through our acquisition of ILICO, we obtained a variable annuity
product line. In the first quarter of 2002, we ceased new sales
of these products, except for new policies issued as part of
existing employer-sponsored qualified plan contracts. All sales
were discontinued effective September 30, 2002. Our agents
are encouraged to make new sales of variable annuities through
the Ameritas Joint Venture. As these sales are through the joint
venture, they do not appear in our direct sales amounts. See
Ameritas Joint Venture below. The assets and
liabilities related to the direct variable annuities are shown
on the consolidated balance sheets as separate account
assets and separate account liabilities.

Funding Agreements.We placed primarily fixed rate funding agreements totaling
$875 million in 2002. Funding agreements are arrangements
for which we receive deposit funds and for which we agree to
repay the deposit and a contractual return for the duration of
the contract. Total funding agreements as of December 31,
2002, amounted to $1.125 billion compared to
$250 million at December 31, 2001.

The following table sets forth information
regarding fixed annuities in force for each date presented:

|                                       |                       |                    |   |            |  |      |   |            |  |  |   |           | 
|-------------------------------------- | --------------------- | ------------------ | - | ---------- |  | ---- | - | ---------- |  |  | - | --------- | 
|                                       |                       |                   
|                                       |                       | Annuities in Force
|                                       |                       | As of December 31,
|                                       |                       |                   
|                                       |                       | 2002               |   | 2001       |  | 2000
|                                       |                       |                    |   |            |  |     
|                                       |                       |                   
|                                       |                       | ($ in thousands)  
|Deferred fixed and immediate annuities |                       |                    |   |            |  |      |   |            |  |  |   |          
|                                       | Number of policies    |                    |   | 181,581    |  |      |   | 176,857    |  |  |   | 161,087   | 
|                                       | GAAP annuity reserves |                    | $ | 7,579,869  |  |      | $ | 6,909,793  |  |  | $ | 5,956,929 | 
|Equity-indexed annuities               |                       |                    |   |            |  |      |   |            |  |  |   |          
|                                       | Number of policies    |                    |   | 76,863     |  |      |   | 73,921     |  |  |   | 17,426    | 
|                                       | GAAP annuity reserves |                    | $ | 3,724,598  |  |      | $ | 3,749,971  |  |  | $ | 792,988   | 
|Total fixed annuities                  |                       |                    |   |            |  |      |   |            |  |  |   |          
|                                       | Number of policies    |                    |   | 258,444    |  |      |   | 250,778    |  |  |   | 178,513   | 
|                                       | GAAP annuity reserves |                    | $ | 11,304,467 |  |      | $ | 10,659,764 |  |  | $ | 6,749,917 | 

The acquisition of ILICO in 2001 increased the
total number of annuity policies by 57,000 and GAAP annuity
reserves by $2.9 billion at December 31, 2001.

Distribution Systems

We sell annuities in all 50 states, the
District of Columbia and the U.S. Virgin Islands. The states
with the highest geographic concentration of sales, based on
statutory premiums, are Arizona, California, Florida, Iowa,
Ohio, Pennsylvania and Texas in 2002. These states account for
approximately 51% of our statutory premiums.

We direct our marketing efforts towards the asset
accumulation, conservative savings and retirement markets. We
market our annuity products on a national basis primarily
through networks of independent

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agents. The independent agents are supervised by
regional vice presidents and regional directors or IMOs. At
December 31, 2002, we had approximately 18,000 independent
agents licensed to sell our annuity products. In addition, the
Preferred Producer Agency and PPGA systems discussed previously
are utilized to market certain annuity products.


Our IMOs consist of approximately 36 contracted
organizations and five wholly-owned organizations. The IMOs are
responsible for recruiting, servicing and educating agents in an
effort to promote our products. The IMOs receive an override
commission based on the business produced by their agents. Our
wholly-owned organizations accounted for approximately 43% of
our annuity sales in 2002. No single agent accounted for more
than 1% of total annuity sales in 2002. We do not have exclusive
agency agreements with our agents and we believe most of these
agents sell products similar to ours for other insurance
companies.

We also sell annuities through a bank
distribution system. The customers targeted and the products
sold are similar to those sold by the independent agent
networks. We own an independent marketing organization that is
associated with over 950 community banks in the southeast region
of the United States. Fixed annuity products are the primary
product focus of this organization.

Under the bank distribution system, we contract
with banks and marketing organizations for the sale of annuities
by agents who are employees of the banks. Commissions are paid
to the banks. At December 31, 2002, we had approximately
75 banks and 7 marketing organizations under contract
through which approximately 300 agents sell our products.
We provide training and servicing support to the banks and
marketing organizations.

Ameritas Joint Venture

We participate in a joint venture, the Ameritas
Joint Venture, with Ameritas Life Insurance Corp. (or Ameritas)
through ALICs 34% ownership interest in AMAL Corporation,
a Nebraska corporation. AMAL Corporations operations are
conducted through Ameritas Variable Life Insurance Company, (or
AVLIC), Ameritas Investment Corp. (or AIC), and The Advisors
Group, Inc. (or TAG), its three wholly-owned subsidiaries. AVLIC
is licensed to conduct business in 47 states and the
District of Columbia. AIC and TAG are registered broker-dealers.
Our partner in the Ameritas Joint Venture, Ameritas, is a
Nebraska mutual life insurance company which has been in
existence for more than 100 years.

Our investment in the Ameritas Joint Venture
provides access to a line of existing variable life insurance
and annuity products while providing a lower-cost entry into an
established business, helping to eliminate significant start-up
costs and allowing for immediate potential earnings.

The Ameritas Joint Venture offers through AVLIC
fixed annuity products, flexible premium and single premium
variable universal life insurance products and variable
annuities. Variable products provide for allocation of funds to
a general account or to one or more separate accounts under
which the owner bears the investment risk. Through AVLICs
fund managers, owners of variable annuities and life insurance
policies are able to choose from a range of investment funds
offered by each manager. Under the current terms of the joint
venture agreement, ALIC and Ameritas direct their new variable
annuities and variable life insurance through the Ameritas Joint
Venture.

The variable life insurance products and the
fixed and variable annuities offered by the Ameritas Joint
Venture are distributed through our Preferred Producer general
agency, PPGA and Bank distribution systems, as well as through
the distribution systems of Ameritas and AVLIC.

Under the current terms of the joint venture
agreement, we purchased an additional 5% of AMAL Corporation in
March 2001, for $7.2 million as certain premium growth
targets were met which brought our total ownership in AMAL
Corporation to 39%. During 2002, Ameritas contributed additional
investments, certain in-force business and other assets to the
Ameritas Joint Venture which resulted in the reduction of our
ownership from 39% to 34%. In addition, in December 2002,
both Ameritas and ALIC contributed additional cash which
amounted to $5 million by ALIC to maintain our 34%
interest. ALIC and Ameritas Life Insurance Company each have
guaranteed the policyholder obligations of AVLIC. The guarantee
of each party is joint and several, and will remain in effect
until certain conditions are met.

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As of December 31, 2002, AMAL Corporation
had total consolidated assets of $2,212 million and total
consolidated shareholders equity of $141 million on a
GAAP basis. AVLIC had $8,767 million of insurance in force
and $73 million in surplus as of December 31, 2002, on
a statutory basis.

Competition

We operate in a highly competitive industry. We
compete with numerous life insurance companies and other
entities including banks and other financial institutions, many
of which have greater financial and other resources. We believe
that the principal competitive factors in the sale of insurance
products are product features, price, commission structure,
perceived stability of the insurer, financial strength ratings,
value-added service and name recognition. Many other companies
are capable of competing for sales in our target markets
(including companies that do not presently compete in such
markets). Our ability to compete for sales is dependent upon our
ability to successfully address the competitive factors.

In addition to competing for sales, we compete
for qualified agents and brokers to distribute products. Strong
competition exists among insurance companies for agents and
brokers with demonstrated ability. We believe that the bases of
competition for the services of such agents and brokers are
commission structure, support services, prior relationships and
the strength of an insurers products. Although we believe
that we have good relationships with our agents and brokers, our
ability to compete will depend on our continued ability to
attract and retain qualified persons.

Ratings

Ratings with respect to financial strength are an
increasingly important factor in establishing the competitive
position of insurance companies. The following are the ratings
as of March 1, 2003 for our major insurance subsidiaries
currently writing new business:

|             |  |                |                   |             |  |        |                              |  |  |  |               | 
|------------ |  | -------------- | ----------------- | ----------- |  | ------ | ---------------------------- |  |  |  | ------------- | 
|Company      |  | Rating Service |                   | Rating Type |  | Rating
|             |  |                |                   |             |  |       
|American     |  |                | Standard & Poors |             |  |        | insurer financial strength   |  |  |  | A+ (strong)   | 
|American     |  |                | A. M. Best        |             |  |        | financial condition          |  |  |  | A (excellent) | 
|American     |  |                | Moodys           |             |  |        | insurance financial strength |  |  |  | A3 (good)     | 
|ALIC         |  |                | Standard & Poors |             |  |        | insurer financial strength   |  |  |  | A+ (strong)   | 
|ALIC         |  |                | A. M. Best        |             |  |        | financial condition          |  |  |  | A (excellent) | 
|ALIC         |  |                | Moodys           |             |  |        | insurance financial strength |  |  |  | A3 (good)     | 
|Bankers Life |  |                | Standard & Poors |             |  |        | insurer financial strength   |  |  |  | A+ (strong)   | 
|Bankers Life |  |                | A. M. Best        |             |  |        | financial condition          |  |  |  | A (excellent) | 
|ILICO        |  |                | Standard & Poors |             |  |        | insurer financial strength   |  |  |  | A+ (strong)   | 
|ILICO        |  |                | A. M. Best        |             |  |        | financial condition          |  |  |  | A (excellent) | 
|ILICO        |  |                | Moodys           |             |  |        | insurance financial strength |  |  |  | A3 (good)     | 

Two of our insurance subsidiaries, FBL and IL
Annuity, are not currently writing new business. The ratings for
FBL were a Standard & Poors rating of BBB+ (good)
and an A.M. Best rating of B+ (very good). IL Annuity has a
Standard & Poors rating of BB+ (marginal) and an
A.M. Best rating of A (excellent).

On September 6, 2002, Moodys Investor
Services changed the rating outlook for all of our insurance
subsidiaries to negative from stable. The change occurred as
part of Moodys assessment of its current life
insurers ratings given the current operating environment.
A negative outlook indicates that if certain trends continue or
worsen, Moodys believes the insurance subsidiaries ratings
may have to be adjusted downward.

13



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Insurance Underwriting

We follow detailed, uniform underwriting
practices and procedures in our insurance business which are
designed to assess risks before issuing coverage to qualified
applicants. We have professional underwriters who evaluate
policy applications on the basis of information provided by
applicants and others.

Reinsurance

In accordance with industry practices, we
reinsure portions of our life insurance exposure with
unaffiliated insurance companies under traditional indemnity
reinsurance arrangements. Such reinsurance arrangements are in
accordance with standard reinsurance practices within the
industry. We enter into these arrangements to assist in
diversifying risks and to limit the maximum loss on risks that
exceed policy retention limits. Indemnity reinsurance does not
fully discharge our obligation to pay claims on business we
reinsure. As the ceding company, we remain responsible for
policy claims to the extent the reinsurer fails to pay such
claims. We annually monitor the creditworthiness of our primary
reinsurers, and have experienced no material reinsurance
recoverability problems in recent years.

For accounting purposes, premiums and expenses in
the income statement are reported net of reinsurance ceded.
Policy reserves, policyowner funds and other related assets and
liabilities are not reduced for reinsurance ceded in the balance
sheet, rather a reinsurance receivable is established for such
balance sheet items. Due to the ILICO acquisition, reinsurance
receivables increased as shown on our balance sheet to
$856.1 million at December 31, 2002 compared to
$732.0 million at December 31, 2001 and
$318.4 million at December 31, 2000.

We reinsure mortality risk on individual life
insurance policies. Our retention is generally between $150,000
and $500,000 on any single life depending on the type of policy
reinsured. We also reinsure certain annuity business primarily
on a modified coinsurance basis.

At December 31, 2002 and 2001, we ceded life
insurance with a face amount of $51.4 billion with
47 unaffiliated reinsurers and life insurance with a face
amount of $49.5 billion with 36 unaffiliated
reinsurers, respectively. The following is a summary of our
principal life reinsurers as of December 31, 2002:

|                                               |  |               |      |           |  |             |     |  |  |  |    |  
|---------------------------------------------- |  | ------------- | ---- | --------- |  | ----------- | --- |  |  |  | -- | -
|                                               |  |               |      |           |  | % of Total 
|                                               |  | Face          |      | A.M. Best |  | Face Amount
|Reinsurer                                      |  | Amount Ceded  |      | Rating    |  | Reinsured  
|                                               |  |               |      |           |  |            
|                                               |  | (In Billions) |      |           |  |            
|RGA Reinsurance Company                        |  | $             | 16.0 |           |  |             | A+  |  |  |  | 31 | %
|Reassure America Life Insurance Company (A)    |  |               | 6.2  |           |  |             | A++ |  |  |  | 12 |  
|Employers Reassurance Corporation              |  |               | 5.3  |           |  |             | A++ |  |  |  | 10 |  
|Swiss Re Life & Health America Inc. (A)        |  |               | 3.4  |           |  |             | A++ |  |  |  | 7  |  
|Lincoln National Life Insurance Company (A)    |  |               | 3.3  |           |  |             | A+  |  |  |  | 6  |  
|Transamerica Occidental Life Insurance Company |  |               | 2.5  |           |  |             | A+  |  |  |  | 5  |  
|(A) Affiliated companies                       |  |               |      |           |  |             |     |  |  |  |    |  

At December 31, 2002 and 2001, we ceded
fixed and equity-indexed annuities having reserves of
$1.5 billion and $1.7 billion, respectively. The
following is a summary of our principal annuity reinsurers as of
December 31, 2002:

|                                               |  |                |     |           |  |             |    |  |  |  |    |  
|---------------------------------------------- |  | -------------- | --- | --------- |  | ----------- | -- |  |  |  | -- | -
|                                               |  |                |     |           |  | % of Total 
|                                               |  |                |     | A.M. Best |  | Face Amount
|Reinsurer                                      |  | Reserves Ceded |     | Rating    |  | Reinsured  
|                                               |  |                |     |           |  |            
|                                               |  | (In Billions)  |     |           |  |            
|Transamerica Occidental Life Insurance Company |  | $              | 0.9 |           |  |             | A+ |  |  |  | 61 | %
|RGA Reinsurance Company                        |  |                | 0.4 |           |  |             | A+ |  |  |  | 29 |  

Employees

As of December 31, 2002, we had 1,415
full-time employees. None of these employees are covered by a
collective bargaining agreement and we believe that our
relations with our employees are satisfactory.

14



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##### 



Government Regulation

We are subject to regulation by the states in
which our insurance subsidiaries are domiciled and/or transact
business. State insurance laws generally establish supervisory
agencies with broad administrative and supervisory powers
related to granting and revoking licenses, transacting business,
regulating the payment of dividends to stockholders,
establishing guaranty fund associations, licensing agents,
approving policy forms, regulating sales practices, regulating
premium rates for some lines of business, establishing reserve
requirements, prescribing the form and content of required
financial statements and reports, determining the reasonableness
and adequacy of statutory capital and surplus, and regulating
the type and amount of investments permitted.

Every state in which our insurance companies are
licensed administers a guaranty fund, which provides for
assessments of licensed insurers for the protection of
policyowners of insolvent insurance companies. Assessments can
be partially recovered through a reduction in future premium
taxes in some states.

Risk-based capital, or RBC, standards for life
insurance companies were adopted by the National Association of
Insurance Commissioners, known as the NAIC and require insurance
companies to calculate and report for statutory basis financial
statements information under a risk-based capital formula. The
RBC requirements are intended to allow insurance regulators to
identify at an early stage inadequately capitalized insurance
companies based upon the types and mixtures of risks inherent in
such companies operations. The formula includes components
for asset risk, liability risk, interest rate exposure and other
factors. As of December 31, 2002, each of our life
insurance companies RBC levels were in excess of
authorized control level RBC thresholds established by insurance
regulators.

Although the federal government generally does
not directly regulate the insurance business, federal
initiatives and changes in federal law can often have an impact
on the business in a variety of ways. Current and proposed
federal measures that may significantly affect the insurance
business include limitations on antitrust immunity, minimum
solvency requirements, changes to the tax advantages of life
insurance and annuity products or the programs with which they
are used. Such changes may affect the level of sales and the
financial impact of the policies on policyowners and the
Company. The effect of these changes cannot currently be
evaluated but they could potentially be adverse. New savings and
dividend proposals and the removal of barriers restricting banks
from engaging in the insurance and mutual fund business could
also have an adverse impact on the Company.

Executive Officers of the Company

The following provides information about AmerUs
Group Co.s executive officers:

|                   |                    |     |  |       |    |  |  |                                                                                                                                                               
|------------------ | ------------------ | --- |  | ----- | -- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name of Individual |                    | Age |  | Title
|                   |                    |     |  |      
|                   | Roger Brooks       |     |  |       | 65 |  |  | Chairman of the Board of Directors and President
    and Chief Executive Officer of AmerUs Group Co.                                                          
|                   | Victor N. Daley    |     |  |       | 59 |  |  | Executive Vice President, Chief Administration
    and Human Resources Officer of AmerUs Group Co.                                                            
|                   | Thomas C. Godlasky |     |  |       | 47 |  |  | Executive Vice President and Chief Investment
    Officer of AmerUs Group Co.                                                                                 
|                   | Mark V. Heitz      |     |  |       | 49 |  |  | President and Chief Executive Officer of AmerUs
    Annuity Group, American Investors Life Insurance Company, and
    Financial Benefit Life Insurance Company
|                   | Gary R. McPhail    |     |  |       | 54 |  |  | President and Chief Executive Officer of AmerUs
    Life Insurance Company and Indianapolis Life Insurance Company                                            
|                   | Melinda S. Urion   |     |  |       | 49 |  |  | Executive Vice President and Chief Financial
    Officer of AmerUs Group Co.                                                                                  
|                   | Brian J. Clark     |     |  |       | 37 |  |  | Senior Vice President and Chief Product Officer
    of AmerUs Group Co.                                                                                       

15



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##### 



ROGER K. BROOKS  Des Moines,
Iowa.

Chairman, president and chief executive officer
of AmerUs Group Co. since May 1997 and president and chief
executive officer from its formation in July 1996 to
May 1997. Previously, Mr. Brooks was the chief
executive officer of predecessor or affiliated companies since
1974. He is a director of AMAL. Mr. Brooks has been a director
of AmerUs Group Co. since its formation in July 1996, and
previously served as a director of predecessor or affiliated
companies since 1971. His current term expires in May 2004.

VICTOR N. DALEY  Des Moines,
Iowa.

Executive vice president, chief administration
and human resources officer of AmerUs Group Co. since
February 2000, and senior vice president, chief
administration and human resources officer of AmerUs Group Co.
and predecessor or affiliated companies since
September 1995. From April 1989 to
September 1995, Mr. Daley was senior vice president
and chief administrative officer of Royal Insurance, Charlotte,
North Carolina.

THOMAS C. GODLASKY  Des Moines,
Iowa.

Executive vice president and chief investment
officer of AmerUs Group Co. and predecessor or affiliated
companies since January 1995. Mr. Godlasky has also
been president of AmerUs Capital Management since
January 1998. From February 1988 to January 1995,
he was manager of the Fixed Income and Derivatives Department of
Providian Corporation, Louisville, Kentucky. He is a director of
AVLIC and AIC, wholly-owned subsidiaries of AMAL.

MARK V. HEITZ  Topeka,
Kansas.

President and chief executive officer of AAG,
American and FBL, Topeka, Kansas since December 1997.
Previously, Mr. Heitz served as the president, general
counsel and director of AAG from December 1986 until
December 1997. Mr. Heitz also served as president,
general counsel and director of American from October 1986
until December 1997.

GARY R. McPHAIL  Des Moines,
Iowa.

President and chief executive officer of ALIC
since May 1997 and president and chief executive officer of
ILICO since October 2001. Mr. McPhail was executive
vice president  marketing and individual operations
of New York Life Insurance Company, New York, New York, from
July 1995 to November 1996. From June 1990 to
July 1995, he was president of Lincoln National Sales
Corporation, Fort Wayne, Indiana. Mr. McPhail is a director
of AMAL, AIC and AVLIC.

MELINDA S. URION  Des Moines,
Iowa

Executive vice president and chief financial
officer of AmerUs Group Co. since March 2002. Prior to
joining AmerUs Group Co., she was senior vice president and
chief financial officer at Fortis Financial Group, Woodbury,
Minnesota, from December 1997 to April 2001. From
July 1988 to November 1997, Ms. Urion served in
various accounting and executive positions with American Express
Financial Corp, Minneapolis, Minnesota, including senior vice
president of finance and chief financial officer from
November 1995 to November 1997. Ms. Urion is a
director of AVLIC.

BRIAN J. CLARK  Des Moines,
Iowa.

Senior vice president and chief product officer
of AmerUs Group Co. since August 2001. Mr. Clark has
been with AmerUs Group Co. since 1988 and has previously served
ALIC as chief financial officer and as senior vice president in
various departments and functions, including product
development, product management and asset and liability
management.

16



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##### 



ITEM 2.     PROPERTIES

The following table summarizes the properties we
lease and own at December 31, 2002:

|                                             |                       |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    |                                 
|-------------------------------------------- | --------------------- | ------------------------ |  | ------------ |  | -------- |  | ------------- |  | ----------- |  | ------------------------ |  |  |  | ------ |  |  |  | ------- |  | ------------------ | --------------------------------
|                                             |                       |                          |  |              |  |         
|                                             |                       | Square Feet Occupied By: |  |              |  |         
|                                             |                       |                          |  |              |  |         
|                                             |                       | Protection               |  | Accumulation |  |          |  | Leased to     |  | Total       |  |                         
|Property Address                             |                       | Products                 |  | Products     |  | Other(1) |  | Third Parties |  | Square Feet |  | Use of Other Square Feet
|                                             |                       |                          |  |              |  |          |  |               |  |             |  |                         
|Properties leased from unaffiliated parties: |                       |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                   
|                                             | 699 Walnut Street     |                          |  |             |  |          |  |              |  |             |  | 53,000                   |  |  |  | 16,000 |  |  |  | 69,000  |  |                    | Executive offices and corporate 
|                                             | Des Moines, Iowa      |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    | operations                      
|                                            
|                                             | 611 Fifth Avenue      |                          |  | 62,000       |  |          |  | 2,000         |  |             |  | 56,000                   |  |  |  |       |  |  |  | 120,000 |  |                    | Technology, corporate opera-    
|                                             | Des Moines, Iowa      |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    | tions and cafeteria facilities  
|                                            
|                                             | 65 Froehlich Farms    |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    |                                 
|                                             | Boulevard             |                          |  | 15,000       |  |          |  | 3,000         |  |             |  | 6,000                    |  |  |  |       |  |  |  | 24,000  |  |                    | Technology and cafeteria        
|                                             | Woodbury, New York    |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    | facilities                      
|                                            
|                                             | Various               |                          |  |             |  |          |  |              |  |             |  | 28,000                   |  |  |  |       |  |  |  | 28,000  |  |                    | Corporate operations and records
|                                             |                       |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  | and supply storage
|                                            
|Properties owned:                            |                       |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                   
|                                            
|                                             | 555 South Kansas      |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    |                                 
|                                             | Avenue                |                          |  |             |  |          |  | 67,000        |  |             |  |                         |  |  |  | 45,000 |  |  |  | 112,000 |  |                    |                                 
|                                             | Topeka, Kansas        |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    |                                 
|                                            
|                                             | 2960 North Meridian   |                          |  | 127,000      |  |          |  | 8,000         |  |             |  | 46,000                   |  |  |  | 17,000 |  |  |  | 198,000 |  |                    | Technology and cafeteria        
|                                             | Indianapolis, Indiana |                          |  |              |  |          |  |               |  |             |  |                          |  |  |  |        |  |  |  |         |  |                    | facilities                      



---



| |     |                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------
| | (1) | Other includes shared services that are utilized
    by both the protection products and accumulation products
    segments.

ITEM 3.     LEGAL
PROCEEDINGS

In recent years, the life insurance industry,
including the Company and its subsidiaries, have been subject to
an increase in litigation pursued on behalf of purported classes
of insurance purchasers, questioning the conduct of insurers in
the marketing of their products. The Company is involved in
litigation, including class actions, reinsurance claims and
regulatory proceedings, arising in the ordinary course of its
business. Some of these claims and legal actions are in
jurisdictions where juries are given substantial latitude in
assessing damages, including punitive damages. Although no
assurances can be given and no determinations can be made at
this time, the Company believes that the ultimate liability, if
any, with respect to these claims and legal actions, would have
no material effect on its results of operations and financial
position.

As previously disclosed, one of the
Companys subsidiaries, IL Annuity, has had a dispute with
the reinsurer of a block of its annuity business. In December of
2002, the reinsurer began arbitration proceedings against IL
Annuity claiming approximately $11.3 million and other
appropriate relief related to investment charges in connection
with a reinsurance agreement between the reinsurer and IL
Annuity. The arbitration process is in its preliminary stages.
Although predicting the outcome is not feasible, the Company
believes it has strong defenses against the claims, and based
upon currently available information, that any liability arising
from these claims would not have a material adverse effect on
the Companys consolidated financial position or results of
operations.

ITEM 4.     SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

17



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##### 



PART II



|        |                                                                          
|------- | -------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS

Our common stock is listed and traded on the New
York Stock Exchange (NYSE) under the symbol
AMH. The following table sets forth, for the periods
indicated, the high and low sales prices per share of AmerUs
Group Co. common stock as quoted on the NYSE and the dividends
per share declared during such quarter.

|               |  |                     |         |     |  |           |         |  |  |   |      | 
|-------------- |  | ------------------- | ------- | --- |  | --------- | ------- |  |  | - | ---- | 
|               |  |                    
|               |  | AmerUs Common Stock
|               |  |                    
|               |  | High                |         | Low |  | Dividends
|               |  |                     |         |     |  |          
|2001           |  |                     |         |     |  |           |         |  |  |   |      | 
|First Quarter  |  | $                   | 32.0000 |     |  | $         | 27.0000 |  |  | $ | 0.00 | 
|Second Quarter |  | $                   | 36.5000 |     |  | $         | 28.5600 |  |  | $ | 0.00 | 
|Third Quarter  |  | $                   | 35.2000 |     |  | $         | 30.9000 |  |  | $ | 0.00 | 
|Fourth Quarter |  | $                   | 36.4300 |     |  | $         | 30.2700 |  |  | $ | 0.40 | 
|2002           |  |                     |         |     |  |           |         |  |  |   |      | 
|First Quarter  |  | $                   | 39.5000 |     |  | $         | 34.0000 |  |  | $ | 0.00 | 
|Second Quarter |  | $                   | 39.9000 |     |  | $         | 34.4500 |  |  | $ | 0.00 | 
|Third Quarter  |  | $                   | 37.2100 |     |  | $         | 28.2100 |  |  | $ | 0.00 | 
|Fourth Quarter |  | $                   | 32.2600 |     |  | $         | 25.8700 |  |  | $ | 0.40 | 

Holders

As of March 3, 2003, the number of holders
of record of each class of common equity was as follows:

|             |  |           |         | 
|------------ |  | --------- | ------- | 
|             |  | Number of
|             |  | Holders  
|             |  |          
|Common stock |  |           | 124,121 | 

Equity Compensation Plan Information

The following table sets forth information
regarding our equity compensation plans:

|                                                                  |       |                      |           |                   |  |                          |       |       |  |  |        |        | 
|----------------------------------------------------------------- | ----- | -------------------- | --------- | ----------------- |  | ------------------------ | ----- | ----- |  |  | ------ | ------ | 
|                                                                  |       |                      |           |                   |  | (c) Number of Securities
|                                                                  |       | (a) Number of        |           | (b) Weighted      |  | Remaining Available for 
|                                                                  |       | Securities To Be     |           | Average Exercise  |  | Future Issuance Under   
|                                                                  |       | Issued Upon Exercise |           | Price of          |  | Equity Compensation     
|                                                                  |       | of Outstanding       |           | Outstanding       |  | Plans (Excluding        
|                                                                  |       | Options, Warrants    |           | Options, Warrants |  | Securities Reflected    
|Plan Category                                                     |       | and Rights           |           | and Rights        |  | in Column(a))           
|                                                                  |       |                      |           |                   |  |                         
|Equity compensation plans approved by security
    holders        |       |                      | 3,469,317 |                   |  | $                        | 27.10 |       |  |  | 8,364  |       
|Equity compensation plans not approved by
    security holders(1) |       |                      | 305,881   |                   |  |                          | 29.89 |       |  |  | 53,600 |       
|                                                                  |       |                      |           |                   |  |                          |       |       |  |  |        |       
|                                                                  | Total |                      |           | 3,775,198         |  |                          | $     | 27.33 |  |  |        | 61,964 | 
|                                                                  |       |                      |           |                   |  |                          |       |       |  |  |        |       



---



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes phantom stock units issued under the MIP
    Plan to senior executives and other management employees and
    stock appreciation rights under the Non-Employee Plan which may
    be paid in cash or Company common stock. Historically, the
    Companys practice has been to pay participants, on
    exercise of a stock appreciation right or the end of the
    deferral period relative to phantom stock units, as applicable,
    in cash only.

Equity Compensation Plans not Approved by
Security Holders

The Company adopted the AmerUs Group Co. MIP
Deferral Plan on September 1, 1998 (referred to as the MIP
Plan, or SEIP, with respect to senior executives). The
description of the material features of the AmerUS Group Co. MIP
Deferral Plan is contained in footnote A to the
Executive Compensation and

18



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##### 



Related Information table in the
Companys Notice of 2003 Annual Meeting of Shareholders and
Proxy Statement (Proxy) and is incorporated herein by reference.
Other management employees participate in the MIP Plan on
essentially the same terms as senior executives
participation which is described in the Proxy.


On February 12, 1999, the Company adopted the
AmerUs Group Co. Non-Employee Stock Option Plan (Non-Employee
Plan) to give agents of the Company and/or its subsidiaries who
make significant contributions to the success of the Company
and/or its subsidiaries an interest in the Companys
performance. Under the Non-Employee Plan, participants may
receive stock options and/or stock appreciation rights. On
exercise of stock appreciation rights, a participant may be paid
in cash or stock, in the discretion of the Company.

Dividends

We had declared and paid a quarterly dividend of
$0.10 per share of common stock, from the second quarter of 1997
through the first quarter of 2000. Beginning in 2000, our Board
of Directors approved moving from a quarterly dividend of $0.10
per share of common stock to an annual dividend of $0.40 per
share of common stock beginning in 2000. The declaration and
payment of dividends in the future is subject to the discretion
of the Board of Directors and will be dependent upon the
financial condition, results of operations, cash requirements,
future prospects, regulatory restrictions on the payment of
dividends by the life insurance subsidiaries and other factors
deemed relevant by the Board of Directors.

Under our revolving credit agreement, we are
prohibited from paying dividends on common stock in excess of an
amount equal to 3% of the consolidated net worth as of the last
day of the preceding fiscal year.

In connection with the 8.85% Capital Securities,
Series A (the Capital Securities), issued in
1997 by AmerUs Capital I, a subsidiary trust, we have agreed not
to declare or pay any dividends on the Companys capital
stock (including the common stock) during any period for which
we elect to extend interest payments on our junior subordinated
debentures, except for stock dividends where the dividend stock
is the same stock as that on which the dividend is being paid.
Dividends on our capital stock cannot be paid until all accrued
interest on the Capital Securities has been paid. The Capital
Securities have an outstanding principal balance of $48.1
million at December 31, 2002.

As of December 31, 2002, we have outstanding
$0.2 million of 6.86% quarterly income preferred securities
(QUIPS) which mature July 27, 2003. Dividends on our
capital stock cannot be paid until all accrued interest on the
QUIPS have been paid.

On March 6, 2002, we issued and sold in a
private placement $185 million aggregate original principal
amounts of optionally convertible equity-linked accreting notes
(OCEANs). The OCEANs are senior subordinated debt and were
issued and sold in an original principal amount of $1,000 per
OCEAN, with a principal amount at maturity of $1,270 per OCEAN.
The maturity date of the OCEANs is March 6, 2032. The
OCEANs will have aggregate principal amount at maturity of
$235 million. The notes are convertible into shares of
AmerUs Group Co.s common stock at an initial conversion
price (subject to adjustment) of $37.60 per share only if the
sale price of the common stock exceeds $47.85 per share for at
least 20 trading days in a 30-day trading period or in certain
other limited circumstances. The OCEANs were registered on
Form S-3 filed with the Securities and Exchange Commission
on September 20, 2002.

As a holding company, our principal assets
consist of all of the outstanding shares of the common stock of
our life insurance subsidiaries. Our ongoing ability to pay
dividends to shareholders and meet other obligations, including
operating expenses and any debt service, primarily depends upon
the receipt of sufficient funds from our life insurance
subsidiaries in the form of dividends, interest payments or
loans.

Based on statutory insurance regulations and 2001
results, our insurance subsidiaries could have paid an estimated
$80.5 million in dividends in 2002 without obtaining
regulatory approval. Of this amount, our subsidiaries paid to us
$20.6 million in dividends in 2002. Based on 2002 results,
our subsidiaries can pay an estimated $82.3 million in
dividends in 2003 without obtaining regulatory approval.

19



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##### 





|         |                        
|-------- | -----------------------
|ITEM  6. | SELECTED FINANCIAL DATA

The following table sets forth certain financial
and operating data of the Company.

|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |          |      | 
|------------------------------------------------------------------------------- | ----------------------------------------------------- | ------------------------------------------ | ------- | -------- | ---- | ---- | ------- | -------- | ---- | ---- | ------- | -------- | ---- | - | ------- | -------- | ---- | - | ------- | -------- | ---- | 
|                                                                                |                                                       |                                           
|                                                                                |                                                       | As of or for the Year Ended December 31,  
|                                                                                |                                                       |                                           
|                                                                                |                                                       | 2002                                       |         | 2001 (A) |      | 2000 |         | 1999     |      | 1998
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |     
|                                                                                |                                                       |                                           
|                                                                                |                                                       | ($ in millions, except for per share data)
|Consolidated Income Statement Data:                                             |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Revenues:                                                                       |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|                                                                                | Insurance premiums                                    |                                            | $       | 350.8    |      |      | $       | 305.9    |      |      | $       | 266.2    |      |   | $       | 268.6    |      |   | $       | 267.1    |     
|                                                                                | Product charges                                       |                                            |         | 161.5    |      |      |         | 146.1    |      |      |         | 99.9     |      |   |         | 90.8     |      |   |         | 87.7     |     
|                                                                                | Net investment income                                 |                                            |         | 994.0    |      |      |         | 873.2    |      |      |         | 699.5    |      |   |         | 665.4    |      |   |         | 629.9    |     
|                                                                                | Realized/unrealized gains (losses) on
    investments |                                            |         | (149.9   | )    |      |         | (90.6    | )    |      |         | (29.0    | )    |   |         | (1.4     | )    |   |         | 11.0     |     
|                                                                                | Other income                                          |                                            |         | 72.0     |      |      |         | 47.0     |      |      |         | 35.3     |      |   |         | 22.8     |      |   |         | 15.5     |     
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Total revenues                                                                  |                                                       |                                            | 1,428.4 |          |      |      | 1,281.6 |          |      |      | 1,071.9 |          |      |   | 1,046.2 |          |      |   | 1,011.2 |         
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Benefits and expenses:                                                          |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|                                                                                | Policyowner benefits                                  |                                            |         | 890.7    |      |      |         | 753.0    |      |      |         | 624.4    |      |   |         | 630.2    |      |   |         | 620.3    |     
|                                                                                | Total insurance and other expenses                    |                                            |         | 314.7    |      |      |         | 283.1    |      |      |         | 227.5    |      |   |         | 216.0    |      |   |         | 193.6    |     
|                                                                                | Dividends to policyowners                             |                                            |         | 104.9    |      |      |         | 98.9     |      |      |         | 74.3     |      |   |         | 70.8     |      |   |         | 77.0     |     
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Total benefits and expenses                                                     |                                                       |                                            | 1,310.3 |          |      |      | 1,135.0 |          |      |      | 926.2   |          |      |   | 917.0   |          |      |   | 890.9   |         
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Income from continuing operations                                               |                                                       |                                            | 118.1   |          |      |      | 146.6   |          |      |      | 145.7   |          |      |   | 129.2   |          |      |   | 120.3   |         
|Interest expense                                                                |                                                       |                                            | 25.5    |          |      |      | 26.0    |          |      |      | 29.7    |          |      |   | 29.0    |          |      |   | 27.9    |         
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Income before tax expense and minority interest                                 |                                                       |                                            | 92.6    |          |      |      | 120.6   |          |      |      | 116.0   |          |      |   | 100.2   |          |      |   | 92.4    |         
|Income tax expense                                                              |                                                       |                                            | 29.7    |          |      |      | 39.5    |          |      |      | 42.5    |          |      |   | 33.7    |          |      |   | 29.1    |         
|Minority interest                                                               |                                                       |                                            |        |          |      |      |        |          |      |      | 21.7    |          |      |   | 28.1    |          |      |   | 26.9    |         
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Net income from continuing operations                                           |                                                       |                                            | 62.9    |          |      |      | 81.1    |          |      |      | 51.8    |          |      |   | 38.4    |          |      |   | 36.4    |         
|Discontinued operations (net of tax):                                           |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|                                                                                | Income (loss) from discontinued operations            |                                            |         |         |      |      |         |         |      |      |         |         |      |   |         |         |      |   |         | (7.8     | )   
|                                                                                | Gain on sale of discontinued operations               |                                            |         |         |      |      |         |         |      |      |         |         |      |   |         |         |      |   |         | 74.9     |     
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Net income before cumulative effect of change in
    accounting for derivatives |                                                       |                                            | 62.9    |          |      |      | 81.1    |          |      |      | 51.8    |          |      |   | 38.4    |          |      |   | 103.5   |         
|Cumulative effect of change in accounting for
    derivatives, net of tax       |                                                       |                                            |        |          |      |      | (8.2    | )        |      |      |        |          |      |   |        |          |      |   |        |         
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Net income                                                                      |                                                       | $                                          | 62.9    |          |      | $    | 72.9    |          |      | $    | 51.8    |          |      | $ | 38.4    |          |      | $ | 103.5   |         
|                                                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|Net income from continuing operations per share
    (B and E):                  |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|                                                                                | Basic                                                 |                                            | $       | 1.57     |      |      | $       | 2.20     |      |      | $       | 2.48     |      |   | $       | 2.21     |      |   | $       | 2.10     |     
|                                                                                | Diluted                                               |                                            | $       | 1.56     |      |      | $       | 2.17     |      |      | $       | 2.46     |      |   | $       | 2.20     |      |   | $       | 2.07     |     
|Weighted average number of shares outstanding (in
    millions) (B):            |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|                                                                                | Basic                                                 |                                            |         | 40.0     |      |      |         | 36.9     |      |      |         | 20.9     |      |   |         | 17.4     |      |   |         | 17.4     |     
|                                                                                | Diluted                                               |                                            |         | 40.4     |      |      |         | 37.5     |      |      |         | 21.0     |      |   |         | 17.5     |      |   |         | 17.6     |     
|Dividends declared per common share (C)                                         |                                                       | $                                          | 0.40    |          |      | $    | 0.40    |          |      | $    | 0.40    |          |      | $ |        |          |      | $ |        |         
|Consolidated Balance Sheet Data:                                                |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|                                                                                | Total invested assets                                 |                                            | $       | 16,932.5 |      |      | $       | 15,052.4 |      |      | $       | 9,606.8  |      |   | $       | 9,059.7  |      |   | $       | 9,166.0  |     
|                                                                                | Total assets                                          |                                            | $       | 20,293.7 |      |      | $       | 18,299.2 |      |      | $       | 11,471.5 |      |   | $       | 11,091.9 |      |   | $       | 10,786.8 |     
|                                                                                | Notes payable                                         |                                            | $       | 511.3    |      |      | $       | 384.6    |      |      | $       | 413.3    |      |   | $       | 387.9    |      |   | $       | 357.8    |     
|                                                                                | Total liabilities                                     |                                            | $       | 19,030.7 |      |      | $       | 17,060.6 |      |      | $       | 10,643.5 |      |   | $       | 10,010.8 |      |   | $       | 9,633.0  |     
|                                                                                | Minority interest                                     |                                            | $       |         |      |      | $       |         |      |      | $       |         |      |   | $       | 309.1    |      |   | $       | 364.3    |     
|                                                                                | Total stockholders equity                            |                                            | $       | 1,262.9  |      |      | $       | 1,238.5  |      |      | $       | 828.0    |      |   | $       | 772.0    |      |   | $       | 789.5    |     
|Other Operating Data:                                                           |                                                       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |         
|                                                                                | Adjusted net operating income (C)                     |                                            | $       | 144.5    |      |      | $       | 114.0    |      |      | $       | 62.3     |      |   | $       | 49.1     |      |   | $       | 39.3     |     
|                                                                                | Adjusted net operating income per common share:       |                                            |         |          |      |      |         |          |      |      |         |          |      |   |         |          |      |   |         |          |     
|                                                                                |                                                       | Basic                                      |         | $        | 3.62 |      |         | $        | 3.09 |      |         | $        | 2.98 |   |         | $        | 2.82 |   |         | $        | 2.26 | 
|                                                                                |                                                       | Diluted                                    |         | $        | 3.58 |      |         | $        | 3.05 |      |         | $        | 2.97 |   |         | $        | 2.81 |   |         | $        | 2.23 | 
|                                                                                | Ratio of earnings to fixed charges (D)                |                                            |         | 4.53     |      |      |         | 5.10     |      |      |         | 3.95     |      |   |         | 3.43     |      |   |         | 2.86     |     

20



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##### 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Financial data for 2001 includes the results for
    ILICO, subsequent to the acquisition date of May 18, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(B) | Our predecessor, AMHC, was originally formed in
    1996 as a mutual holding company and therefore, had no shares of
    common stock outstanding until its demutualization on
    September 20, 2000. On September 20, 2000, we
    distributed 17.4 million shares of common stock to our
    former members and exchanged our common stock for the
    12.6 million shares of common stock held by the public in
    ALHI, our former subsidiary and another of our predecessor
    entities, on a one-for-one basis. Our operating income for the
    full fiscal years presented above primarily reflects the
    operating income of ALHI. Therefore, adjusted net operating
    income and net income from continuing operations per share was
    calculated based on the number of shares of stock we owned of
    ALHI through September 20, 2000. Since then, adjusted net
    operating income and net income from continuing operations per
    share has been calculated based on the shares of our common
    stock actually outstanding.
|   
|(C) | We did not have common stock until our
    demutualization on September 20, 2000, therefore, there
    were no dividends to declare on common stock for the years 1998
    and 1999. ALHI, our predecessor to our company did declare
    dividends on its common stock of $0.40 per share for the years
    ended December 31, 1999 and 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(D) | Adjusted net operating income reflects net income
    adjusted to eliminate certain items (net of applicable income
    taxes and minority interest) which our management believes are
    not indicative of overall operating trends, including net
    realized gains or losses on investments. Different items are
    likely to occur in each period presented and others may have
    different opinions as to which items may warrant adjustment. The
    adjusted net operating income shown does not constitute net
    income computed in accordance with GAAP. See additional
    description of Adjusted Net Operating Income included in
    Item 7.                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(E) | Basic and diluted adjusted net operating income
    per common share is calculated using the weighted average number
    of shares as shown in the table above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(F) | For purposes of computing the ratio of earnings
    to fixed charges, earnings consist of income from
    operations before income taxes, fixed charges and pre-tax
    earnings required to cover preferred stock dividend
    requirements. Fixed charges consist of interest
    expense on debt, amortization of debt expense and preferred
    stock dividend requirements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|ITEM  7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following analysis of the consolidated
financial condition and results of operations of AmerUs Group
Co. should be read in conjunction with the Selected Financial
Data and Consolidated Financial Statements and related notes.

Nature of Operations

We are a holding company whose subsidiaries are
primarily engaged in the business of marketing, underwriting and
distributing a broad range of individual life, annuity and
insurance deposit products to individuals and businesses in
50 states, the District of Columbia and the U.S. Virgin
Islands. We have two reportable operating segments: protection
products and accumulation products. The protection products
segment was formerly known as the life insurance segment and the
accumulation products segment was formerly known as the annuity
segment. The primary offerings of the protection products
segment are interest-sensitive whole life, term life, universal
life and equity-indexed life insurance policies. The primary
offerings of the accumulation products segment are individual
fixed annuities and funding agreements.

We acquired ILICO which had assets of
approximately $6 billion on May 18, 2001. Its
operations have been included with ours since that date.

21



---



##### 



Financial Highlights

Our financial highlights are as follows:

|                                       |                                   |                                         |            |         |         |      |            |        |         |   |            |        |         | 
|-------------------------------------- | --------------------------------- | --------------------------------------- | ---------- | ------- | ------- | ---- | ---------- | ------ | ------- | - | ---------- | ------ | ------- | 
|                                       |                                   |                                        
|                                       |                                   | For The Years Ended December 31,       
|                                       |                                   |                                        
|                                       |                                   | 2002                                    |            | 2001    |         | 2000
|                                       |                                   |                                         |            |         |         |     
|                                       |                                   |                                        
|                                       |                                   | ($ in thousands, except per share data)
|Adjusted pre-tax operating income (A): |                                   |                                         |            |         |         |      |            |        |         |   |            |       
|                                       | Protection Products               |                                         | $          | 129,739 |         |      | $          | 95,955 |         |   | $          | 59,073 |        
|                                       | Accumulation Products             |                                         |            | 120,655 |         |      |            | 95,912 |         |   |            | 88,209 |        
|                                       | Other operations                  |                                         |            | (6,622  | )       |      |            | 6,138  |         |   |            | 11,982 |        
|                                       |                                   |                                         |            |         |         |      |            |        |         |   |            |       
|                                       |                                   | Total adjusted pre-tax operating income |            | $       | 243,772 |      |            | $      | 198,005 |   |            | $      | 159,264 | 
|Adjusted net operating income (A)      |                                   | $                                       | 144,533    |         |         | $    | 114,047    |        |         | $ | 62,311     |       
|Net income                             |                                   | $                                       | 62,866     |         |         | $    | 72,907     |        |         | $ | 51,840     |       
|Diluted earnings per share:            |                                   |                                         |            |         |         |      |            |        |         |   |            |       
|                                       | Adjusted net operating income (A) |                                         | $          | 3.58    |         |      | $          | 3.05   |         |   | $          | 2.96   |        
|                                       | Net income                        |                                         | $          | 1.56    |         |      | $          | 1.95   |         |   | $          | 2.46   |        
|Total assets                           |                                   | $                                       | 20,293,665 |         |         | $    | 18,299,152 |        |         | $ | 11,471,522 |       
|Stockholders equity (without AOCI)    |                                   | $                                       | 1,174,426  |         |         | $    | 1,225,848  |        |         | $ | 845,143    |       




|    |                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Adjusted operating income does not constitute net
    income computed in accordance with accounting principles
    generally accepted in the United States, or GAAP. See Adjusted
    Net Operating Income section for additional information.

Adjusted pre-tax operating income in both of our
operating segments increased in 2002 and 2001 as compared to
each of the prior years. Growth in our protection products
adjusted pre-tax operating income in 2002 was primarily
attributable to the acquisition of ILICO combined with a slight
growth in product margins and a decline in operating expenses.
The increase in the protection products adjusted pre-tax
operating income in 2001 was primarily due to the acquisition of
ILICO together with decreased insurance expenses and level gross
margins. Our accumulation products pre-tax operating income also
increased in 2002 and 2001 due to the acquisition of ILICO. In
addition, increased Independent Marketing Organizations (IMOs)
operating income and the discontinuation of goodwill
amortization in 2002 also contributed to the growth in
accumulation products earnings. Adjusted pre-tax operating
income from other operations primarily consists of holding
company revenues and expenses and operations of our real estate
management subsidiary. Adjusted pre-tax operating income from
other operations has declined each year as compared to the prior
year as we reduce our investments in real estate management. In
addition, we had more revenues at our holding company in 2000
from cash equivalents we were holding to fund the
demutualization payments to our former members in October of
2000.

Net income increased in 2001 compared to 2000
primarily as a result of the growth in our protection products
and accumulation products segments. In addition, 2000 net income
was reduced for amounts applicable to minority interest
shareholders through September 2000, when we acquired such
interest. Partially offsetting these additions to net income
were increased realized losses on investments and increased net
unrealized losses from SFAS 133 related market value
adjustments on trading securities, derivatives and certain
annuity contracts. Net income decreased in 2002 compared to 2001
primarily as a result of realized losses on investments,
unrealized losses from SFAS 133 and increased restructuring
charges. The 2002 reductions in net income were partially offset
by the growth in our protection and accumulation products
segments. See the Adjusted Net Operating Income section for a
further discussion of the items included in net income but
excluded from operating income.

Total assets increased $2.0 billion during
2002 primarily as a result of the placement of funding
agreements totaling $875 million, growth in annuity sales,
net of surrenders, and increased investment market values. Total
assets increased $6.8 billion during 2001 primarily due to
the acquisition of ILICO.

Stockholders equity, excluding accumulated
other comprehensive income (AOCI), declined $51.4 million
in 2002 as a result of treasury stock purchases of
$112.1 million and dividends of $15.5 million. The
stock

22



---



##### 



repurchases and dividends were partially offset
by an increase in equity for 2002 net income of
$62.9 million. Stockholders equity, excluding AOCI,
increased $380.7 million in 2001, primarily due to the
issuance of $232.4 million worth of stock in connection
with the acquisition of ILICO, the issuance of
$127.5 million of stock in connection with the conversion
of capital securities, and net income. Treasury stock purchases
in 2001 were $45.0 million.


Adjusted Net Operating Income

The following table reflects net income adjusted
to eliminate certain items which management believes do not
necessarily indicate overall operating trends. Adjusted net
operating income is the basis we use to assess our overall
performance. Adjusted net operating income as described by us
may not be comparable to similarly titled measures reported by
other companies, including insurance companies. The adjusted net
operating income shown below does not constitute net income
computed in accordance with GAAP. The adjustments are presented
net of income taxes. In addition, the adjustments for 2000 and
prior years are also presented after minority interest.

|                                                                                  |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |            | 
|--------------------------------------------------------------------------------- | ------- | --------------------------------------- | ------- | ---------- |  | ---- | ------- | ---------- |  | ---- | ------ | ---------- |  | - | ------ | ---------- |  | - | ------- | ---------- | 
|                                                                                  |         |                                        
|                                                                                  |         | For the Years Ended December 31,       
|                                                                                  |         |                                        
|                                                                                  |         | 2002                                    |         | 2001       |  | 2000 |         | 1999       |  | 1998
|                                                                                  |         |                                         |         |            |  |      |         |            |  |     
|                                                                                  |         |                                        
|                                                                                  |         | ($ in thousands, except per share data)
|Net Income                                                                        |         | $                                       | 62,866  |            |  | $    | 72,907  |            |  | $    | 51,840 |            |  | $ | 38,436 |            |  | $ | 103,499 |           
|Non-core realized losses (A)                                                      |         |                                         | 66,386  |            |  |      | 25,475  |            |  |      | 5,153  |            |  |   | 6,030  |            |  |   | 2,946   |           
|Net amortization of DAC and VOBA due to non-core
    realized gains or losses (B) |         |                                         | (10,869 | )          |  |      | (3,613  | )          |  |      | (4,028 | )          |  |   | 805    |            |  |   | (74     | )         
|Net effect of accounting differences from the
    adoption of SFAS 133 (C)        |         |                                         | 14,638  |            |  |      | 6,417   |            |  |      |       |            |  |   |       |            |  |   |        |           
|Demutualization costs (D)                                                         |         |                                         | 1,186   |            |  |      | 969     |            |  |      | 10,063 |            |  |   | 6,322  |            |  |   |        |           
|Restructuring costs (E)                                                           |         |                                         | 13,225  |            |  |      | 5,476   |            |  |      |       |            |  |   |       |            |  |   |        |           
|Other income from non-insurance
    operations (F)                                |         |                                         | (2,898  | )          |  |      | (1,820  | )          |  |      | (717   | )          |  |   | (2,504 | )          |  |   | (67,053 | )         
|Cumulative effect of change in accounting for
    derivatives (G)                 |         |                                         |        |            |  |      | 8,236   |            |  |      |       |            |  |   |       |            |  |   |        |           
|                                                                                  |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           
|Adjusted Net Operating Income                                                     |         | $                                       | 144,534 |            |  | $    | 114,047 |            |  | $    | 62,311 |            |  | $ | 49,089 |            |  | $ | 39,318  |           
|                                                                                  |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           
|Adjusted Net Operating Income per common share
    (H):                           |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           
|                                                                                  | Basic   |                                         | $       | 3.62       |  |      | $       | 3.09       |  |      | $      | 2.98       |  |   | $      | 2.82       |  |   | $       | 2.26       | 
|                                                                                  |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           
|                                                                                  | Diluted |                                         | $       | 3.58       |  |      | $       | 3.05       |  |      | $      | 2.96       |  |   | $      | 2.81       |  |   | $       | 2.23       | 
|                                                                                  |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           
|Weighted average common shares
    outstanding (H):                               |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           
|                                                                                  | Basic   |                                         |         | 39,972,328 |  |      |         | 36,949,198 |  |      |        | 20,922,371 |  |   |        | 17,390,165 |  |   |         | 17,372,136 | 
|                                                                                  |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           
|                                                                                  | Diluted |                                         |         | 40,398,378 |  |      |         | 37,453,428 |  |      |        | 21,035,518 |  |   |        | 17,467,132 |  |   |         | 17,609,748 | 
|                                                                                  |         |                                         |         |            |  |      |         |            |  |      |        |            |  |   |        |            |  |   |         |           



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Represents total realized gains or losses on
    investments less core realized gains or losses (defined as gains
    or losses from the closed block and gains or losses on the
    convertible preferred stock and bond portfolios). Non-core
    realized gains or losses may vary widely between periods. Such
    amounts are determined by managements timing of individual
    transactions or current market conditions and do not necessarily
    correspond to the underlying operating trends.
|   
|(B) | Represents amortization of DAC and value of
    business acquired (VOBA) on the non-core realized gains or
    losses that are included in our product margins.                                                                                                                                                                                                                                                                                                                                           

23



---



##### 





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(C) | Represents the net effect of Statement of
    Financial Accounting Standard (SFAS) 133, Accounting
    for Derivative Instruments and Hedging Activities, related
    accounting entries. The accounting entries consist of cash flow
    hedge amortization, market value adjustments on trading
    securities, derivatives, certain annuity contracts, and the
    associated change in amortization of DAC and VOBA resulting from
    such adjustments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(D) | Represents costs directly related to our
    demutualizations. The costs consist primarily of legal,
    actuarial and consulting expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(E) | Represents costs of restructuring our operations
    to eliminate duplicative functions. The costs consist primarily
    of relocation of employees, severance and termination benefits,
    and system conversions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(F) | Represents the net income from our residential
    financing and property operations which is not part of our
    insurance operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(G) | Represents the cumulative effect of change in
    accounting for derivatives, as of January 1, 2001,
    resulting from our adoption of SFAS 133.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(H) | Our predecessor, AMHC, was originally formed in
    1996 as a mutual holding company and, therefore, had no shares
    of common stock outstanding until the demutualization of our
    group on September 20, 2000. On September 20, 2000, we
    distributed 17.4 million shares of our common stock to our
    former members and exchanged our common stock for the
    12.6 million shares of common stock held by the public in
    ALHI, our former subsidiary and another of our predecessor
    entities, on a one-for-one basis. Our operating income primarily
    reflects the operating income of ALHI. Therefore, adjusted net
    operating income per share was calculated based on the number of
    shares of stock we owned of ALHI through September 30,
    2000. Since then, adjusted net operating income per share has
    been calculated based on the shares of our common shares
    actually outstanding.

The increase in adjusted net operating income in
2002 compared to 2001 was primarily attributable to the
acquisition of ILICO which operations have been included in our
consolidated financial statements since May 18, 2001 and
the growth in our protection products and accumulation products
segments as explained in the next two sections. The increase in
adjusted net operating income in 2001 compared to 2000 was
primarily due to the acquisition of ILICO and the reduction in
income applicable to the minority interests.

Segment Income

We use the same accounting policies and
procedures to measure operating segment income as we use to
measure consolidated income from operations with the exception
of the elimination of certain items which management believes
are not necessarily indicative of overall operating trends.
These items are shown between adjusted pre-tax operating income
and income from continuing operations on the following operating
segment tables and are as follows:



| |                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------
| | 1) Realized gains and losses on non-core
    investments.                                                                       
|
| | 2) Market value changes and amortization of
    assets and liabilities associated with the application of SFAS
    133, such as:



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | Unrealized gains and losses on securities held
    for trading.                                                       
|
| |  | Change in option value of equity-indexed products
    and market value adjustments on total return strategy annuities.
|
| |  | Cash flow hedge amortization.                                                                                         



| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | 3) Amortization of DAC and VOBA related to the
    realized gains and losses on the non-core investments and the
    SFAS 133 adjustments.
|
| | 4) Demutualization costs.                                                                                                                 
|
| | 5) Restructuring costs.                                                                                                                   
|
| | 6) Other income from non-insurance operations.                                                                                            

24



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##### 



These items will fluctuate from period to period
depending on the prevailing interest rate and economic
environment, are not continuing in nature, or are not part of
the core insurance operations. As a result, management believes
they do not reflect the ongoing earnings capacity of our
operating segments.

Protection Products

Our protection products segment consists of whole
life, interest-sensitive whole life, term life, universal life
and equity-indexed life insurance policies. These products are
marketed on a national basis primarily through a Preferred
Producer agency system, PPGA distribution system and IMOs.
Included in protection products is the closed block of ALIC and
the closed block of ILIC established when the companies
reorganized from mutual forms to stock forms of ownership. When
protection products are sold, we invest the premiums we receive
in our investment portfolio and establish a liability
representing our commitment to the policyholder. We manage
investment spread by seeking to maximize the return on these
invested assets, consistent with our asset/ liability and credit
quality needs. Protection products in force totaled
$80.0 billion at December 31, 2002, $70.5 billion
at December 31, 2001 and $36.2 billion at
December 31, 2000. A summary of our protection products
segment operations follows:

|                                                                    |                                                                        |                                  |         |         |         |      |        |         |         |   |        |         |         | 
|------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------- | ------- | ------- | ------- | ---- | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                                                    |                                                                        |                                 
|                                                                    |                                                                        | For the Years Ended December 31,
|                                                                    |                                                                        |                                 
|                                                                    |                                                                        | 2002                             |         | 2001    |         | 2000
|                                                                    |                                                                        |                                  |         |         |         |     
|                                                                    |                                                                        |                                 
|                                                                    |                                                                        | ($ in thousands)                
|Revenues:                                                           |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                    | Insurance premiums                                                     |                                  | $       | 341,114 |         |      | $      | 300,690 |         |   | $      | 252,157 |        
|                                                                    | Universal life product charges                                         |                                  |         | 120,161 |         |      |        | 110,403 |         |   |        | 65,126  |        
|                                                                    | Net investment income                                                  |                                  |         | 335,111 |         |      |        | 283,330 |         |   |        | 212,100 |        
|                                                                    | Core realized gains (losses) on investments                            |                                  |         | (2,400  | )       |      |        | 8,720   |         |   |        | (695    | )      
|                                                                    | Other income                                                           |                                  |         | 4,026   |         |      |        | 1,947   |         |   |        |        |        
|                                                                    |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                    |                                                                        | Total revenues                   |         |         | 798,012 |      |        |         | 705,090 |   |        |         | 528,688 | 
|                                                                    |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|Benefits and expenses:                                              |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                    | Policyowner benefits                                                   |                                  |         | 429,339 |         |      |        | 384,159 |         |   |        | 308,177 |        
|                                                                    | Underwriting, acquisition and other expenses                           |                                  |         | 70,801  |         |      |        | 69,035  |         |   |        | 51,532  |        
|                                                                    | Amortization of DAC and VOBA, net of non-core
    gain/loss adjustment |                                  |         | 63,267  |         |      |        | 56,996  |         |   |        | 35,570  |        
|                                                                    | Dividends to policyowners                                              |                                  |         | 104,866 |         |      |        | 98,945  |         |   |        | 74,338  |        
|                                                                    |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                    |                                                                        | Total benefits and expenses      |         |         | 668,273 |      |        |         | 609,135 |   |        |         | 469,617 | 
|                                                                    |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|Adjusted pre-tax operating income 
    Protection Products segment |                                                                        | $                                | 129,739 |         |         | $    | 95,955 |         |         | $ | 59,071 |        
|                                                                    |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        

Adjusted pre-tax operating income from our
protection products increased 35% in 2002 and 62% in 2001
compared to the respective prior years. The increase in 2002 was
due to a slight growth in product margins, a decline in
operating expenses and the acquisition of ILICO. The increase in
2001 was primarily due to the acquisition of ILICO together with
decreased insurance expenses and level gross margins. The key
drivers of our protection products business include sales,
persistency, net investment income, mortality and expenses.

Sales, Premiums and Product
Charges.Annualized premium for new
products issued represents sales for protection products. As
illustrated in the Sales Activity Product table presented in
Item 1 Business  Protection Products
Segment, direct first year annualized premiums increased
74% in 2002 compared to 2001 and 89% in 2001 compared to 2000.
The increases were primarily due to the acquisition of ILICO
during the second quarter of 2001. Excluding the sales from
ILICO, life insurance sales increased 31% in 2002 and 11% in
2001. We experienced growth in almost all our protection product
lines with significant increases coming from our
interest-sensitive whole life and equity-indexed life products.
Interest-sensitive whole life insurance has flexible premium and
benefit patterns and its cash value accumulation changes with
current interest and mortality rates. The equity-indexed life
product allows the policyowner to elect an earnings strategy for
a portion of the account value whereby earnings are credited
based primarily on increases in the S&P 500 Index, excluding
dividends. The earnings credit is subject to a participation
rate and an annual cap. Sales of interest-

25



---



##### 



sensitive whole life and equity-indexed life
products were $76.5 million in 2002 as compared to
$33.6 million in 2001 and $7.1 million in 2000. We are
a leading writer of equity-indexed life products in the United
States.


We also distribute term products of ILICO through
strategic alliances with private label partners. Under private
label arrangements, ILICO designs and issues products that are
distributed through other life insurance companies, our private
label partners. ILICO reinsures a portion of the risks on those
products which we refer to as our private label sales. We have
three private label partners that are actively writing new
business. During the second quarter of 2002, we ceased
recruiting new private label partners.

We recognize premiums on traditional life
insurance policies as revenues when the premiums are due.
Amounts received as payments for universal life and
equity-indexed life insurance policies are not recorded as
premium revenue, but are instead recorded as a policyholder
liability. Revenues from the universal life and equity-indexed
life policies consist of product charges for the cost of
insurance, policy administration and policy surrender. All
revenue is reported net of reinsurance ceded. Insurance premium
revenue and product charge revenue increased in 2002 and 2001 as
compared to the respective prior years primarily due to the
acquisition of ILICO.

Persistency.Annualized lapse rates were as follows:

|            |                 |                     |  |      |   |      |  |      |   |  |  |      |  
|----------- | --------------- | ------------------- |  | ---- | - | ---- |  | ---- | - |  |  | ---- | -
|            |                 |                    
|            |                 | For the Years Ended
|            |                 | December 31,       
|            |                 |                    
|            |                 | 2002                |  | 2001 |   | 2000
|            |                 |                     |  |      |   |     
|Lapse rate: |                 |                     |  |      |   |      |  |      |   |  |  |     
|            | Including ILICO |                     |  | 7.28 | % |      |  | 7.70 | % |  |  |     |  
|            | Excluding ILICO |                     |  | 6.81 | % |      |  | 7.34 | % |  |  | 6.44 | %

Our persistency experience remained within our
pricing assumptions. Our lapse rate, including ILICO, for 2002
as compared to 2001 and 2000 increased as expected due to the
completion of ILICOs demutualization payout in July 2001.
Lapses tend to decline in anticipation of a demutualization
transaction as policyholders want to remain policyholders so
they will be eligible for the demutualization payout. Following
a demutualization, lapses tend to increase for a period before
they return to a more normal level. Our lapse rate, excluding
ILICO, decreased in 2002 compared to 2001 and increased in 2001
compared to 2000. ALIC experienced higher lapse rates in 2001
following the completion of a demutualization in the third
quarter of 2000.

Net Investment
Income.Net investment income
increased in 2002 and 2001 compared to the respective prior
years. The increases were primarily attributable to the
acquisition of ILICO partially offset by lower effective yields.
The effective yield of the investment portfolio was 7.22% in
2002 compared to 7.32% in 2001 and 7.94% in 2000. The decrease
in yields in 2002 and 2001 was primarily a result of the lower
interest rate market.

Mortality and Benefit
Expense.For 2002 and 2001, we
experienced favorable mortality but, due to the acquisition of
ILICO, total benefit expense is higher than in the respective
prior years. Total policyowner benefits for ILICO were
$186.9 million for the full year of 2002 and
$127.4 million for the portion of the year after its
acquisition in May 2001. In addition, we had increased
reinsurance recoveries in 2002 and 2001, which decrease benefit
expense, as a result of the additional reinsurance arrangements
entered into in 2002, 2001 and 2000.

Underwriting, Acquisition and Other
Expenses.Expenses increased in 2002
and 2001 compared to the respective prior years, primarily due
to the acquisition of ILICO. The addition of expenses associated
with ILICO of $30.1 million and $19.5 million for 2002
and 2001, respectively, were partially offset by increased
reimbursement from reinsurers for commission and expense
allowances. Commission and expense allowances increased as more
policies were subject to reinsurance. In addition, expenses
decreased due to expense structure changes resulting from the
integration with ILICO.

Outlook.We expect
to continue to increase sales through our multiple distribution
channels and to continue to shift to higher return products, in
particular the equity-indexed life products. We also expect to

26



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##### 



continue to realize operating efficiencies
created by the restructuring and centralization of our
administrative functions as discussed later in
Non-recurring Expenses.


Accumulation Products

Our accumulation products segment primary
offerings consist of individual fixed annuities and funding
agreements. The fixed annuities are marketed on a national basis
primarily through IMOs and independent brokers. Similar to our
protection products segment, we invest the deposits we receive
from accumulation product sales in our investment portfolio and
establish a liability representing our commitment to our
policyholder. We manage investment spread by seeking to maximize
the return on our invested assets consistent with our asset/
liability management and credit quality needs. When appropriate,
we periodically reset the interest rates credited to our
policyholder liability. Accumulation products in force totaled
$11.3 billion at December 31, 2002, $10.7 billion
at December 31, 2001 and $6.7 billion at
December 31, 2000. A summary of our accumulation products
segment operations follows:

|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |         |         | 
|--------------------------------------------------------------------- | ---------------------------------------------------------------------- | -------------------------------- | ------- | ------- | ------- | ---- | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                                                      |                                                                        |                                 
|                                                                      |                                                                        | For the Years Ended December 31,
|                                                                      |                                                                        |                                 
|                                                                      |                                                                        | 2002                             |         | 2001    |         | 2000
|                                                                      |                                                                        |                                  |         |         |         |     
|                                                                      |                                                                        |                                 
|                                                                      |                                                                        | ($ in thousands)                
|Revenues:                                                             |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                      | Immediate annuity and supplementary contract
    premiums              |                                  | $       | 8,702   |         |      | $      | 5,083   |         |   | $      | 13,768  |        
|                                                                      | Annuity product charges                                                |                                  |         | 41,349  |         |      |        | 35,652  |         |   |        | 34,814  |        
|                                                                      | Net investment income                                                  |                                  |         | 653,220 |         |      |        | 577,913 |         |   |        | 468,404 |        
|                                                                      | Core realized/unrealized gains (losses) on
    investments             |                                  |         |        |         |      |        |        |         |   |        | (16,597 | )      
|                                                                      | Other income                                                           |                                  |         | 11,778  |         |      |        | 8,474   |         |   |        | 2,806   |        
|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                      |                                                                        | Total revenues                   |         |         | 715,049 |      |        |         | 627,122 |   |        |         | 503,195 | 
|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|Benefits and expenses:                                                |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                      | Policyowner benefits                                                   |                                  |         | 483,151 |         |      |        | 419,132 |         |   |        | 315,508 |        
|                                                                      | Underwriting, acquisition and other expenses                           |                                  |         | 34,040  |         |      |        | 41,401  |         |   |        | 36,343  |        
|                                                                      | Amortization of DAC and VOBA, net of non-core
    gain/loss adjustment |                                  |         | 91,300  |         |      |        | 78,891  |         |   |        | 65,902  |        
|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                      |                                                                        | Total benefits and expenses      |         |         | 608,491 |      |        |         | 539,424 |   |        |         | 417,753 | 
|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|IMO Operations:                                                       |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                      | Other income                                                           |                                  |         | 48,642  |         |      |        | 27,724  |         |   |        | 18,981  |        
|                                                                      | Other expenses                                                         |                                  |         | 34,545  |         |      |        | 19,510  |         |   |        | 16,211  |        
|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|                                                                      |                                                                        | Net IMO operating income         |         |         | 14,097  |      |        |         | 8,214   |   |        |         | 2,770   | 
|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        
|Adjusted pre-tax operating income 
    Accumulation Products segment |                                                                        | $                                | 120,655 |         |         | $    | 95,912 |         |         | $ | 88,212 |        
|                                                                      |                                                                        |                                  |         |         |         |      |        |         |         |   |        |        

Adjusted pre-tax operating income from our
accumulation products operations increased 26% in 2002 and 9% in
2001 compared to the respective prior years. The increases in
2002 and 2001 were primarily due to the acquisition of ILICO in
2001 and increased IMO operating income. In addition, the
increase in 2002 was also due to the discontinuation of goodwill
amortization. The drivers of profitability in our accumulation
products business are sales, persistency, investment spread,
expenses and IMO operations.

Sales and Product
Charges.Deposits we receive for
annuities and funding agreements represent sales for
accumulation products. As illustrated in the Deposits by Product
table presented in Item 1 Business 
Accumulation Products Segments, direct accumulation
product sales increased 36% in 2002 compared to 2001 and 32% in
2001 as compared to 2000. Total annuity sales decreased 9% in
2002 compared to 2001 and increased 32% in 2001 compared to
2000. The 2002 decrease resulted from the deployment of capital
to funding agreements which should provide a higher return on
equity. The 2001 increase in annuity sales was primarily due to
product repricing, increased marketing efforts and the
acquisition of ILICO.

We placed primarily fixed rate funding agreements
totaling $875 million in 2002. Funding agreements are
arrangements for which we receive deposit funds and for which we
agree to repay the deposit and a contractual

27



---



##### 



return for the duration of the contract. Total
funding agreements as of December 31, 2002 amounted to
$1.125 billion compared to $250 million at
December 31, 2001 and 2000.


The deposits we receive on accumulation products
are not recorded as revenue but instead as a policyholder
liability. Surrender charges are recorded as revenue as an
annuity product charge. Annuity product charges increased in
2002 and 2001 as compared to each prior year due to the growth
in business and the acquisition of ILICO.

Persistency.Withdrawals represent funds taken out of accumulation products
by policyowners not including those due to the death of
policyowners. Annuity withdrawal rates both with and without
internal replacements continued to improve in 2002 as compared
to 2001 and 2000. Annuity withdrawals and annualized annuity
withdrawal rates were as follows:

|                                     |                                              |                                  |   |         |       |      |   |         |       |   |   |         |       |  
|------------------------------------ | -------------------------------------------- | -------------------------------- | - | ------- | ----- | ---- | - | ------- | ----- | - | - | ------- | ----- | -
|                                     |                                              |                                 
|                                     |                                              | For the Years Ended December 31,
|                                     |                                              |                                 
|                                     |                                              | 2002                             |   | 2001    |       | 2000
|                                     |                                              |                                  |   |         |       |     
|Annuity withdrawal rates:            |                                              |                                  |   |         |       |      |   |         |       |   |   |        
|                                     | Withdrawals including internal replacements: |                                  |   |         |       |      |   |         |       |   |   |         |      
|                                     |                                              | Including ILICO                  |   |         | 11.02 | %    |   |         | 12.47 | % |   |         |      |  
|                                     |                                              | Excluding ILICO                  |   |         | 7.36  | %    |   |         | 10.69 | % |   |         | 16.75 | %
|                                     | Withdrawals excluding internal replacements: |                                  |   |         |       |      |   |         |       |   |   |         |      
|                                     |                                              | Including ILICO                  |   |         | 10.55 | %    |   |         | 11.42 | % |   |         |      |  
|                                     |                                              | Excluding ILICO                  |   |         | 6.70  | %    |   |         | 9.16  | % |   |         | 13.95 | %
|Annuity withdrawals ($ in millions): |                                              |                                  |   |         |       |      |   |         |       |   |   |        
|                                     | Including ILICO                              |                                  | $ | 1,354.0 |       |      | $ | 1,222.6 |       |   |   |        |      
|                                     | Excluding ILICO                              |                                  | $ | 687.2   |       |      | $ | 884.7   |       |   | $ | 1,258.6 |      

Our withdrawal experience remained within our
pricing assumptions. Withdrawal rates declined in 2002 and 2001
as compared to the respective prior years as our annuity
products provide a favorable investment return in this current
low interest rate and declining equity market environment.

Investment Spread.Investment results and interest crediting rates were as follows
for deferred fixed annuities:

|                       |                   |                     |      |      |   |      |      |      |   |  |      |      |  
|---------------------- | ----------------- | ------------------- | ---- | ---- | - | ---- | ---- | ---- | - |  | ---- | ---- | -
|                       |                   |                    
|                       |                   | For the Years Ended
|                       |                   | December 31,       
|                       |                   |                    
|                       |                   | 2002                |      | 2001 |   | 2000
|                       |                   |                     |      |      |   |     
|Investment yield       |                   |                     | 6.62 | %    |   |      | 7.07 | %    |   |  | 6.98 | %   
|Average crediting rate |                   |                     | 4.58 | %    |   |      | 5.07 | %    |   |  | 4.95 | %   
|                       |                   |                     |      |      |   |      |      |      |   |  |      |     
|                       | Investment spread |                     |      | 2.04 | % |      |      | 2.00 | % |  |      | 2.03 | %
|                       |                   |                     |      |      |   |      |      |      |   |  |      |     

The investment spread on deferred fixed annuities
increased 4 basis points to 204 basis points in 2002 compared to
2001. The investment spread decreased 3 basis points to 200
basis points in 2001 compared to 2000. Crediting rates were
lowered in the fourth quarter of 2001 and throughout 2002 to
correspond with the decline in investment yields caused by lower
rates on new and reinvested funds. At December 31, 2002,
the account value of deferred fixed annuities totaled
$7.1 billion of which $1.0 billion did not have a
differential between the credited rate and minimum guarantee
rate and as such could not be lowered. Additionally, deferred
fixed annuities with account values totaling $1.3 billion
have multi-year interest rate guarantees for which the credited
rate cannot be decreased until the end of the multi-year period.
At the end of the multi-year guarantee period, we will have the
ability to lower the crediting rate to the minimum guaranteed
rate by an average decrease of approximately 200 basis points.
Also, at December 31, 2002, account values of
equity-indexed annuities totaled $3.7 billion which provide
guaranteed rates based on a cumulative floor over the term of
the product. Due to these limitations on the ability to lower
interest crediting rates and the potential for additional credit
defaults and lower reinvestment rates on investments, we could
experience spread compression in future periods.

28



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##### 



Underwriting, Acquisition and Other
Expenses.Expenses decreased in 2002
compared to 2001 primarily due to goodwill no longer being
amortized effective January 1, 2002 with the adoption of
SFAS 142. Goodwill amortization amounted to
$7.6 million in 2001 and $8.3 million in 2000.
Expenses in 2001 increased as compared to 2000 primarily due to
the acquisition of ILICO.

IMO Operations.We
own five IMOs which are marketing organizations with contractual
arrangements to promote our insurance products to their networks
of agents and brokers. Additionally, they also contract with
third party insurance companies. The income from IMO operations
primarily represents annuity commissions received by our IMOs
from those third party insurance companies. Net IMO operating
income increased $5.9 million in 2002 compared to 2001 due
to our acquisition of an IMO in 2002 and increased
$5.4 million in 2001 compared to 2000 due to an IMO
acquired in 2001 and in mid-2000.

Outlook.We
anticipate increased product sales from our IMOs but decreased
product sales from other distribution as we manage our sales in
this current low interest rate environment. We also expect to
continue the shift of our product mix to higher return products,
in particular the equity-indexed annuity products. In addition,
we will continue to manage our spreads as we strive for our
desired profitability in this economic environment.

Other

The other segment primarily consists of holding
company revenues and expenses and operations of our real estate
management subsidiary. The adjusted pre-tax operating loss in
2002 as compared to the adjusted pre-tax operating income in
2001 is primarily due to real estate investment and management
fee income which continue to decline as we reduce these
investment holdings and a decline in investment fee income for
asset management services provided to ILICO prior to the
acquisition amounting to $2.8 million in 2001 and
$2.6 million in 2000. After the acquisition of ILICO, such
fees are eliminated with expenses in consolidation. Also, other
segment income declined in 2001 compared to 2000 from the
reduction in holding company cash equivalents of approximately
$340 million generated primarily from the sale of
discontinued operations in 1998 and distributed to our members
in connection with our demutualization in October 2000.

Income Statement Reconciliation

A reconciliation of our adjusted pre-tax
operating income by segment to net income as shown in our
consolidated statements of income follows:

|                                                   |                                                               |                                                                                                                                              |                                         |         |          |         |   |        |         |         |   |        |         |         | 
|-------------------------------------------------- | ------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------- | -------- | ------- | - | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                                   |                                                               |                                                                                                                                             
|                                                   |                                                               | For The Years Ended December 31,                                                                                                            
|                                                   |                                                               |                                                                                                                                             
|                                                   |                                                               | 2002                                                                                                                                         |                                         | 2001    |          | 2000   
|                                                   |                                                               |                                                                                                                                              |                                         |         |          |        
|                                                   |                                                               |                                                                                                                                             
|                                                   |                                                               | ($ in thousands)                                                                                                                            
|Adjusted pre-tax operating income:                 |                                                               |                                                                                                                                              |                                         |         |          |         |   |        |         |         |   |       
|                                                   | Protection Products                                           |                                                                                                                                              | $                                       | 129,739 |          |         | $ | 95,955 |         |         | $ | 59,071 |        
|                                                   | Accumulation Products                                         |                                                                                                                                              |                                         | 120,655 |          |         |   | 95,912 |         |         |   | 88,212 |        
|                                                   | Other operations                                              |                                                                                                                                              |                                         | (6,622  | )        |         |   | 6,138  |         |         |   | 11,982 |        
|                                                   |                                                               |                                                                                                                                              |                                         |         |          |         |   |        |         |         |   |       
|                                                   |                                                               |                                                                                                                                              | Total adjusted pre-tax operating income |         |          | 243,772 |   |        |         | 198,005 |   |        |         | 159,265 | 
|Non-operating increases (decreases) to
    income: |                                                               |                                                                                                                                              |                                         |         |          |         |   |        |         |         |   |       
|                                                   | Realized and unrealized losses on assets and
    liabilities: |                                                                                                                                              |                                         |         |          |         |   |        |         |         |   |        |        
|                                                   |                                                               | Realized losses on non-core investments                                                                                                      |                                         |         | (102,310 | )       |   |        | (39,299 | )       |   |        | (11,683 | )      
|                                                   |                                                               | Unrealized losses on non-core trading investments                                                                                            |                                         |         | (45,209  | )       |   |        | (60,050 | )       |   |        |        |        
|                                                   |                                                               | Fair value change in option value of
    equity-indexed annuity products and market value adjustments on
    total return strategy annuities |                                         |         | 28,759   |         |   |        | 52,747  |         |   |        |        |        
|                                                   |                                                               | Cash flow hedge amortization                                                                                                                 |                                         |         | (4,351   | )       |   |        |        |         |   |        |        |        
|                                                   |                                                               | Amortization of DAC & VOBA due to non-core
    realized gains or losses                                                                      |                                         |         | 15,002   |         |   |        | 2,988   |         |   |        | 8,722   |        

29



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|                                                                          |                                            |                                  |                                       |       |         |         |         |       |        |         |         |     |         |         | 
|------------------------------------------------------------------------- | ------------------------------------------ | -------------------------------- | ------------------------------------- | ----- | ------- | ------- | ------- | ----- | ------ | ------- | ------- | --- | ------- | ------- | 
|                                                                          |                                            |                                 
|                                                                          |                                            | For The Years Ended December 31,
|                                                                          |                                            |                                 
|                                                                          |                                            | 2002                             |                                       | 2001  |         | 2000   
|                                                                          |                                            |                                  |                                       |       |         |        
|                                                                          |                                            |                                 
|                                                                          |                                            | ($ in thousands)                
|                                                                          | Non-recurring expenses:                    |                                  |                                       |       |         |         |         |       |        |         |         |     |        
|                                                                          |                                            | Demutualization costs            |                                       |       | (1,186  | )       |         |       | (969   | )       |         |     | (11,265 | )      
|                                                                          |                                            | Restructuring costs              |                                       |       | (21,225 | )       |         |       | (8,566 | )       |         |     |        |        
|                                                                          | Other income from non-insurance operations |                                  |                                       | 4,865 |         |         |         | 1,820 |        |         |         | 717 |        
|                                                                          |                                            |                                  |                                       |       |         |         |         |       |        |         |         |    
|                                                                          |                                            |                                  | Income from continuing operations     |       |         | 118,117 |         |       |        | 146,676 |         |     |         | 145,756 | 
|Interest expense                                                          |                                            |                                  | (25,487                               | )     |         |         | (26,011 | )     |        |         | (29,723 | )  
|Income tax expense                                                        |                                            |                                  | (29,764                               | )     |         |         | (39,522 | )     |        |         | (42,516 | )  
|Minority interest                                                         |                                            |                                  |                                      |       |         |         |        |       |        |         | (21,677 | )  
|                                                                          |                                            |                                  |                                       |       |         |         |         |       |        |         |         |    
|                                                                          |                                            |                                  | Net income from continuing operations |       |         | 62,866  |         |       |        | 81,143  |         |     |         | 51,840  | 
|Cumulative effect of change in accounting for
    derivatives, net of tax |                                            |                                  |                                      |       |         |         | (8,236  | )     |        |         |        |    
|                                                                          |                                            |                                  |                                       |       |         |         |         |       |        |         |         |    
|                                                                          |                                            |                                  | Net income                            |       | $       | 62,866  |         |       | $      | 72,907  |         |     | $       | 51,840  | 
|                                                                          |                                            |                                  |                                       |       |         |         |         |       |        |         |         |    

Realized and Unrealized Losses on Assets and
Liabilities.Realized losses on
non-core investments in 2002 consisted primarily of realized
losses and writedowns on investments related to Dynegy Holdings,
Green Tree Financial, National Century, NRG Northeast
Generating, Trenwick Group, United Airlines, US Air, and
WorldCom Inc. The realized losses in 2001 consisted primarily of
writedowns on investments mainly related to telecommunications
and emerging markets investments. The level of realized gains
and losses will fluctuate from period to period depending on the
prevailing interest rate, the economic environment and the
timing of investment sales.

Unrealized losses on non-core investments are
generated from our options and trading securities. We use
options to hedge our equity-indexed products. In accordance with
SFAS 133, we adjusted our options to market value, which, due to
the economic environment and deteriorating stock market
conditions, resulted in an unrealized loss of $40.0 million and
$54.2 million in 2002 and 2001, respectively. In addition,
we also have trading securities that back our total return
strategy fixed annuity products. The market value adjustment on
the trading securities resulted in a loss of $5.2 million
and $5.9 million in 2002 and 2001, respectively. Most of
the unrealized gains and losses on the options and trading
securities are offset by similar adjustments to the option
portion of the equity-indexed product reserves and to the total
return strategy annuity reserves. The reserve adjustments are
reflected in policyowner benefits expense in the consolidated
statements of income and are included in the fair value change
of $28.8 million in 2002 and $52.7 million in 2001
explained in the following paragraph.

The fair value change in options embedded within
our equity-indexed products and the fair value changes on our
total return strategy fixed annuity contracts are being recorded
in accordance with SFAS No. 133, which we adopted
January 1, 2001. As previously discussed, these fair value
changes are offset by similar adjustments to unrealized gains
(losses) on investments related to the fair value changes
on the options that hedge the equity-indexed products and on the
trading securities that back the total return strategy products.
The reduction in such contract expense is less than the decline
in investment income primarily due to the inability to lower
crediting rates below minimum guaranteed interest rates.

Non-recurring
Expenses.The 2000 demutualization
costs consist primarily of legal, actuarial and consulting
expenses associated with our demutualization that was completed
in the third quarter of 2000. The 2001 demutualization costs are
associated with the demutualization of ILIC, which was completed
when we acquired ILICO in May 2001. As a requirement of
ILICs demutualization, we undertook a commission-free
program under which shareholders with less than one hundred
shares could redeem those shares for cash or purchase additional
shares, commission-free, to reach a holding of at least one
hundred shares. The 2002 costs are primarily for commissions,
postage and printing under this program. Since these costs are
not ongoing, they have been excluded from our operating segment
amounts.

Restructuring costs relate to our consolidation
of various functions in connection with a restructuring of our
protection products and accumulation products operations and
investment activities which began in the

30



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third quarter of 2001. The objective of the
restructuring plan is to eliminate duplicative functions for all
business units and to reduce on-going operating costs. Corporate
administrative functions are being transitioned so they are
performed primarily in Des Moines, Iowa. Protection products
administration processes were previously planned to be performed
in Indianapolis, Indiana; Des Moines; or Woodbury, New York;
however, it has now been determined that these processes will be
transitioned so they are performed in Des Moines, Woodbury, or
outsourced. This will result in the elimination of additional
positions in Indianapolis. Accumulation products functions are
being transitioned to Topeka. Investment activities have been
restructured to eliminate certain real estate management
services which have been outsourced.


The restructuring charges expensed in 2002
included pre-tax severance and termination benefits of
$9.5 million related to the elimination of approximately
240 positions and other pre-tax costs of $11.7 million
primarily related to systems conversion and relocation of
employees. The restructuring charges expensed in 2001 included
pre-tax severance and termination benefits of $6.8 million
related to the elimination of approximately 80 positions and
other pre-tax costs of $1.8 million. An accrual for
severance and termination benefits not yet paid amounted to
$6.1 million at December 31, 2002. Additional charges
will be incurred for continuing restructuring activities
primarily involving severance or relocation benefits for
affected employees; various administrative, financial and
actuarial system conversion costs; and building disposition
costs. System conversion costs will be expensed as incurred and
are expected to be substantially completed by the fourth quarter
of 2003. A majority of the severance costs due to the transition
in 2003 of the protection products processes from Indianapolis
to Des Moines, Woodbury or to be outsourced were accrued in the
fourth quarter of 2002.

Minority Interest.Minority interest represents the minority stockholders
ownership percentage share of net income of ALHI prior to our
acquisition of this minority interest. The minority shareholder
ownership percentage was 42% through September 20, 2000,
the date at which the minority interest was acquired. As a
result of our acquisition of the minority interest, there is no
net income applicable to the minority interest after 2000.

Change in
Accounting.We adopted SFAS
No. 133 on January 1, 2001. In accordance with the
provisions of the statement, we recorded the differences between
the previous carrying amounts of our derivative instruments and
the fair value of our derivative instruments, as of this initial
application date, as the effect of a change in accounting
principle. The gross difference between carrying amounts and
fair value amounts of our derivative instruments was a reduction
of approximately $11.3 million. The DAC and VOBA
amortization impact from the derivative adjustments was
approximately $1.1 million and the income tax benefit was
$4.2 million, resulting in the net cumulative effect of
change in accounting for derivatives of $8.2 million.

Liquidity And Capital Resources

AmerUs Group Co.

As a holding company, AmerUs Group Co.s
cash flows from operations consist of dividends from
subsidiaries, if declared and paid, interest from income on
loans and advances to subsidiaries (including a surplus note
issued to us by ALIC), investment income on our assets and fees
which we charge our subsidiaries, offset by the expenses
incurred for debt service, salaries and other expenses.

We intend to rely primarily on dividends and
interest income from our insurance subsidiaries in order to make
dividend payments to our shareholders. The payment of dividends
by our insurance subsidiaries is regulated under various state
laws. Generally, under the various state statutes, our insurance
subsidiaries dividends may be paid only from the earned
surplus arising from their respective businesses and must
receive the prior approval of the respective state regulator to
pay any dividend that would exceed certain statutory
limitations. The current statutes generally limit any dividend,
together with dividends paid out within the preceding
12 months, to the greater of (i) 10% of the respective
companys policyowners statutory surplus as of the
preceding year end or (ii) the statutory net gain from
operations for the previous calendar year. Generally, the
various state laws give the state regulators discretion to
approve or disapprove requests for dividends in excess of these
limits. Based on these limitations and 2001 results, our life
insurance subsidiaries

31



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could have paid us an estimated
$80.5 million in dividends in 2002 without obtaining
regulatory approval. Our subsidiaries paid us $20.6 million
in 2002. Based on 2002 results, our subsidiaries can pay an
estimated $82.3 million in dividends without obtaining
regulatory approval during 2003. We also consider risk-based
capital levels, capital and liquidity operating needs, and other
factors prior to paying dividends from the insurance
subsidiaries.


We generated cash flows from operating activities
of $920.1 million, $97.1 million and $373.3 million
for the years ended December 31, 2002, 2001, and 2000,
respectively. Operating cash flows were primarily used to
increase our investment portfolio.

We have a $175 million revolving credit
facility with a syndicate of lenders (which we refer to as the
Revolving Credit Agreement). As of December 31, 2002, there
was a $113 million outstanding loan balance under the
facility. The Revolving Credit Agreement provides for typical
events of default and covenants with respect to the conduct of
business and requires the maintenance of various financial
levels and ratios. Among other covenants, we (a) cannot
have a leverage ratio greater than 0.35:1.0, (b) cannot
have an interest coverage ratio less than 2.50:1.0, (c) are
prohibited from paying cash dividends on common stock in excess
of an amount equal to 3% of consolidated net worth as of the
last day of the preceding fiscal year, and (d) must cause
our insurance subsidiaries to maintain certain levels of
risk-based capital. We closely monitor all of these covenants to
ensure continued compliance.

On March 6, 2002, we issued and sold in a
private placement $185 million aggregate original principal
amount of OCEANs. The OCEANs are senior subordinated debt and
were issued and sold in an original principal amount of $1,000
per OCEAN, with a principal amount at maturity of $1,270 per
OCEAN. The maturity date of the OCEANs is March 6, 2032.
The OCEANs will have aggregate principal amount at maturity of
$235 million. The notes are convertible into shares of
AmerUs Group Co.s common stock at an initial conversion
price (subject to adjustment) of $37.60 per share only if the
sale price of the common stock exceeds $47.85 per share for at
least 20 trading days in a 30-day trading period or in certain
other limited circumstances. The OCEANs were registered on
Form S-3 filed with the Securities and Exchange Commission
on September 20, 2002.

Proceeds from the OCEANs were used to repay
borrowings on the Revolving Credit Agreement and to purchase
approximately 1.7 million shares, amounting to
$59 million, of AmerUs Group Co.s common stock. The
OCEANs are senior subordinated debt, subordinated in right of
payment to all existing and future senior debt and senior to all
existing and future junior subordinated debt.

Our Board of Directors approved a stock purchase
program effective August 9, 2002, under which we may purchase up
to three million shares of our common stock at such times and
under such conditions, as we deem advisable. The purchases may
be made in the open market or by such other means as we
determine to be appropriate, including privately negotiated
purchases. The purchase program supercedes all prior purchase
programs. We plan to fund the purchase program from a
combination of our internal sources, dividends from insurance
subsidiaries and Revolving Credit Agreement. We repurchased
shares in the first six months of 2002 under prior purchase
programs. During the first six months of 2002, 2.5 million
shares were repurchased and were primarily funded by
approximately $59 million from the OCEANs offering and
approximately $30 million from the Revolving Credit Agreement.
During the last six months of 2002, approximately
0.7 million shares were repurchased and were primarily
funded by approximately $23 million from the Revolving
Credit Agreement.

We establish internal targeted capital and
surplus levels for our insurance subsidiaries, which are in
excess of regulatory requirements. As a result of high annuity
product sales and related regulatory requirements on statutory
capital and surplus, additional capital contributions were
provided for at the end of 2002 to certain of our insurance
subsidiaries to maintain these levels. Approximately
$50 million was drawn on the Revolving Credit Facility to
fund these capital contributions during the first quarter of
2003.

We manage liquidity on a continuing basis. One
way is to minimize our need for capital. We accomplish this by
attempting to use our capital as efficiently as possible and by
developing capital-efficient products in our insurance
subsidiaries. We also manage our mix of sales by focusing on the
more capital-efficient products.

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In addition, we use reinsurance agreements, where
cost-effective, to generate capital in the insurance
subsidiaries. We also focus on optimizing the consolidated
capital structure to properly balance the levels and sources of
borrowing and the issuance of equity securities. We are
currently exploring additional alternatives for increasing
liquidity.


Insurance Subsidiaries

The cash flows of our insurance subsidiaries
consist primarily of premium income; deposits to policyowner
account balances; income from investments; sales, maturities and
calls of investments and repayments of investment principal.
Cash outflows are primarily related to withdrawals of
policyowner account balances, investment purchases, payment of
policy acquisition costs, payment of policyowner benefits,
payment of debt, income taxes and current operating expenses.
Insurance companies generally produce a positive cash flow from
operations, as measured by the amount by which cash flows are
adequate to meet benefit obligations to policyowners and normal
operating expenses as they are incurred. The remaining cash flow
is generally used to increase the asset base to provide funds to
meet the need for future policy benefit payments and for writing
new business.

Management believes that the current level of
cash and available-for-sale and short-term securities, combined
with expected net cash inflows from operations, maturities of
fixed maturity investments, principal payments on
mortgage-backed securities and its insurance products, will be
adequate to meet the anticipated short-term cash obligations of
the insurance subsidiaries.

Matching the investment portfolio maturities to
the cash flow demands of the type of insurance being provided is
an important consideration for each type of protection product
and accumulation product. We continuously monitor benefits and
surrenders to provide projections of future cash requirements.
As part of this monitoring process, we perform cash flow testing
of assets and liabilities under various scenarios to evaluate
the adequacy of reserves. In developing our investment strategy,
we establish a level of cash and securities which, combined with
expected net cash inflows from operations, maturities of fixed
maturity investments and principal payments on mortgage-backed
securities, are believed adequate to meet anticipated short-term
and long-term benefit and expense payment obligations. There can
be no assurance that future experience regarding benefits and
surrenders will be similar to historic experience since
withdrawal and surrender levels are influenced by such factors
as the interest rate environment and general economic conditions
and the claims-paying and financial strength ratings of the
insurance subsidiaries.

We take into account asset/ liability management
considerations in the product development and design process.
Contract terms for the interest-sensitive products include
surrender and withdrawal provisions which mitigate the risk of
losses due to early withdrawals. These provisions generally do
one or more of the following: limit the amount of penalty-free
withdrawals, limit the circumstances under which withdrawals are
permitted, or assess a surrender charge or market value
adjustment relating to the underlying assets. The following
table summarizes statutory liabilities for interest-sensitive
life products and annuities by their contractual withdrawal
provisions at December 31, 2002 (including liabilities in
the closed blocks and the general account):

|                                                            |                                                           |                 |        |        | 
|----------------------------------------------------------- | --------------------------------------------------------- | --------------- | ------ | ------ | 
|                                                            |                                                           | ($ in millions)
|                                                            |                                                           |                
|Not subject to discretionary withdrawal                     |                                                           | $               | 492    |       
|                                                            | Subject to discretionary withdrawal with
    adjustments: |                 |        |        | 
|                                                            | Specified surrender charges(A)                            |                 |        | 7,525  | 
|                                                            | Market value adjustments                                  |                 |        | 3,035  | 
|                                                            |                                                           |                 |        |       
|                                                            | Subtotal                                                  |                 |        | 10,560 | 
|                                                            |                                                           |                 |        |       
|Subject to discretionary withdrawal without
    adjustments |                                                           |                 | 2,062  |       
|                                                            |                                                           |                 |        |       
|Total                                                       |                                                           | $               | 13,114 |       
|                                                            |                                                           |                 |        |       



---

|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Includes $1,126 million of statutory
    liabilities with a contractual surrender charge of less than
    five percent of the account balance.

33



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In addition to the interest-sensitive products,
an insurance subsidiary is party to a $250 million fixed
rate funding agreement. Under the transaction, a five-year
floating rate insurance contract was issued to a commercial
paper conduit and the liability was swapped to a fixed-rate.
During 2002, our insurance subsidiaries placed additional
funding agreements totaling $875 million primarily in six
to ten year fixed rate insurance contracts. The assets backing
the funding agreements are legally segregated and are not
subject to claims that arise out of any other business of the
insurance subsidiaries. The funding agreements are further
backed by the general account assets of the insurance
subsidiaries. The segregated assets and liabilities are included
with general account assets in the financial statements. The
funding agreements may not be cancelled unless there is a
default under the agreement, but the insurance subsidiaries may
terminate the agreement at any time.

In addition, there are variable separate account
assets and liabilities representing funds that are separately
administered, principally for variable annuity contracts, and
for which the contractholder bears the investment risk. Separate
account assets and liabilities are reported at fair value and
amounted to $235.9 million at December 31, 2002.
Separate account contractholders have no claim against the
assets of the general account. The operations of the separate
accounts are not included in the accompanying consolidated
financial statements.

Through their respective memberships in the
Federal Home Loan Banks (FHLB) of Des Moines and Topeka, ALIC
and American Investors Life Insurance Company, Inc. are eligible
to borrow under variable-rate short term fed funds arrangements
to provide additional liquidity. These borrowings are secured
and interest is payable at the current rate at the time of each
advance. There were no borrowings under these arrangements
outstanding at December 31, 2002. In addition, ALIC has
long-term fixed rate advances from the FHLB outstanding of
$13.9 million at December 31, 2002.

The insurance subsidiaries may also obtain
liquidity through sales of investments. The investment portfolio
as of December 31, 2002, had a carrying value of
$16.9 billion, including closed block investments.

The level of capital in the insurance companies
is also regulated by risk-based capital formulas and is
monitored by rating agencies. In order to maintain appropriate
capital levels, it may be necessary from time to time for AmerUs
Group Co. to provide additional capital to the insurance
companies.

In the current economic environment, including
the decline in the interest rates and in the bond and equity
markets, insurance regulators are closely monitoring the capital
and liquidity position of insurance companies in their periodic
financial examinations. One of our insurance subsidiaries which
is no longer writing new business is now under its periodic
financial examination and is involved in discussions with state
examiners concerning its capital position. The Company believes
that these discussions will be concluded without any material
effect upon the Companys consolidated financial position
or results of operation, but that some contribution of capital
to that subsidiary may be appropriate.

At December 31, 2002, the statutory surplus
of the insurance subsidiaries was approximately
$797 million. Management believes that each insurance
company has statutory capital which provides adequate risk based
capital that exceeds required levels.

In the future, in addition to cash flows from
operations and borrowing capacity, the insurance subsidiaries
may obtain their required capital from AmerUs Group Co.

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Summary of Contractual Obligations and
Commitments

Our contractual obligations primarily consist of
amounts owed for notes payable and operating lease commitments.
See note 8 to the consolidated financial statements for further
discussion about the notes payable and note 12 for additional
information regarding leases. Maturities of notes payable and
lease obligations are as follows for each of the five years
ending December 31, 2002:

|                                      |  |                  |         |      |  |      |       |      |  |      |         |      |  |            |         |  |  |   |       |  |  |   |        |  |  |   |         | 
|------------------------------------- |  | ---------------- | ------- | ---- |  | ---- | ----- | ---- |  | ---- | ------- | ---- |  | ---------- | ------- |  |  | - | ----- |  |  | - | ------ |  |  | - | ------- | 
|Obligation                            |  | Total            |         | 2003 |  | 2004 |       | 2005 |  | 2006 |         | 2007 |  | Thereafter
|                                      |  |                  |         |      |  |      |       |      |  |      |         |      |  |           
|                                      |  |                 
|                                      |  | ($ in thousands)
|Optionally Convertible                |  |                  |         |      |  |      |       |      |  |      |         |      |  |            |         |  |  |   |       |  |  |   |        |  |  |   |         | 
|Equity-Linked                         |  |                  |         |      |  |      |       |      |  |      |         |      |  |            |         |  |  |   |       |  |  |   |        |  |  |   |         | 
|Accreting Notes                       |  | $                | 186,233 |      |  | $    |      |      |  | $    |        |      |  | $          |        |  |  | $ |      |  |  | $ |       |  |  | $ | 186,233 | 
|Senior notes                          |  |                  | 125,000 |      |  |      |      |      |  |      |        |      |  |            | 125,000 |  |  |   |      |  |  |   |       |  |  |   |        | 
|Revolving credit agreement            |  |                  | 113,000 |      |  |      |      |      |  |      | 113,000 |      |  |            |        |  |  |   |      |  |  |   |       |  |  |   |        | 
|Surplus note                          |  |                  | 25,000  |      |  |      |      |      |  |      |        |      |  |            |        |  |  |   |      |  |  |   |       |  |  |   | 25,000  | 
|Federal Home Loan Bank advances       |  |                  | 13,871  |      |  |      | 532   |      |  |      | 568     |      |  |            | 606     |  |  |   | 647   |  |  |   | 690    |  |  |   | 10,828  | 
|Capital Securities  Series A         |  |                  | 48,095  |      |  |      |      |      |  |      |        |      |  |            |        |  |  |   |      |  |  |   | 48,095 |  |  |   |        | 
|Quarterly Income Preferred Securities |  |                  | 154     |      |  |      | 154   |      |  |      |        |      |  |            |        |  |  |   |      |  |  |   |       |  |  |   |        | 
|Operating leases                      |  |                  | 10,855  |      |  |      | 2,872 |      |  |      | 2,886   |      |  |            | 2,093   |  |  |   | 1,502 |  |  |   | 1,502  |  |  |   |        | 
|                                      |  |                  |         |      |  |      |       |      |  |      |         |      |  |            |         |  |  |   |       |  |  |   |        |  |  |   |         | 
|                                      |  | $                | 522,208 |      |  | $    | 3,558 |      |  | $    | 116,454 |      |  | $          | 127,699 |  |  | $ | 2,149 |  |  | $ | 50,287 |  |  | $ | 222,061 | 
|                                      |  |                  |         |      |  |      |       |      |  |      |         |      |  |            |         |  |  |   |       |  |  |   |        |  |  |   |         | 

We have an agreement with Bank One, N.A. whereby
we guarantee the payment of loans made to certain managers and
executives for the purpose of purchasing common stock and ACES
pursuant to the stock purchase program. Our liability in respect
of the principal amount of loans is limited to
$20.1 million. We have also guaranteed interest and all
other fees and obligations owing on the loans. Each participant
in the program has agreed to repay any amounts paid by us under
the guarantee in accordance with a reimbursement agreement with
the participant. This agreement was entered into in 1999, prior
to the restrictions imposed by the Sarbanes-Oxley Act regarding
loans with executive officers.

We have obligations to make future capital
contributions to various partnerships of up to $3.1 million
and to loan funds up to $6.9 million to partnerships. In
addition, at December 31, 2002, we had loan guarantees
which totaled $6.1 million.

ALIC and its joint venture partner are
contingently liable in the event the joint venture, AVLIC,
cannot meet its obligations. At December 31, 2002, AVLIC
had statutory assets of $2,004 million, liabilities of
$1,931 million and surplus of $73 million.

We are contingently liable for the portion of the
policies reinsured under existing reinsurance agreements in the
event the reinsurance companies are unable to pay their portion
of any reinsured claim. Management believes that any liability
from this contingency is unlikely. However, to limit the
possibility of such losses, we evaluate the financial condition
of reinsurers and monitor concentration of credit risk.

Investment Portfolio

General

We maintain a diversified portfolio of
investments which is supervised by an experienced in-house staff
of investment professionals. Sophisticated asset/liability
management techniques are employed in order to achieve
competitive yields, while maintaining risk at acceptable levels.
The asset portfolio is segmented by liability type, with
tailored investment strategies for specific product lines.
Investment policies and significant individual investments are
subject to approval by the Board of Directors of each of the
insurance companies and are overseen by the Investment and Risk
Management Committee of our Board of Directors. Management
regularly monitors individual assets and asset groups, in
addition to monitoring the overall asset mix. In addition, the
insurance companies boards and the Investment and Risk
Management Committee review investment guidelines and monitor
internal controls.

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Investment Strategy

Our investment philosophy is to employ an
integrated asset/liability management approach with separate
investment portfolios for specific product lines, such as
traditional life, universal life, equity-indexed life, deferred
fixed annuities, equity-indexed annuities, variable annuities
and funding agreements to generate attractive risk-adjusted
returns on capital. Essential to this philosophy is coordinating
investments in the investment portfolio with product strategies,
focusing on risk-adjusted returns and identifying and evaluating
associated business risks.

Investment policies and strategies have been
established based on the specific characteristics of each
product line. The portfolio investment policies and strategies
establish asset duration, quality and other guidelines.
Analytical systems are utilized to establish an optimal asset
mix for each line of business. We seek to manage the
asset/liability mismatch and the associated interest rate risk
through active management of the investment portfolio.
Financial, actuarial, investment, product development and
product marketing professionals work together throughout the
product development, introduction and management phases to
jointly develop and implement product features, initial and
renewal crediting strategies, and investment strategies based on
extensive modeling of a variety of factors under a number of
interest rate scenarios.

Invested Assets

Our diversified portfolio of investments includes
public and private fixed maturity securities and commercial
mortgage loans. Our objective is to maintain a high-quality,
diversified fixed maturity securities portfolio that produces a
yield and total return that supports the various product line
liabilities and our earnings goals.

The following table summarizes invested assets by
asset category as of December 31, 2002 and 2001:

|                          |         |                       |       |          |          |          |     |       |       |   |       |          |          |  |     |      |       |  
|------------------------- | ------- | --------------------- | ----- | -------- | -------- | -------- | --- | ----- | ----- | - | ----- | -------- | -------- |  | --- | ---- | ----- | -
|                          |         |                      
|                          |         | Invested Assets      
|                          |         | December 31,         
|                          |         |                      
|                          |         |                       |       |         
|                          |         | 2002                  |       | 2001    
|                          |         |                       |       |         
|                          |         | Carrying              |       | % of     |          | Carrying |     | % of 
|                          |         | Value                 |       | Total    |          | Value    |     | Total
|                          |         |                       |       |          |          |          |     |      
|                          |         |                      
|                          |         | ($ in millions)      
|Fixed maturity securities |         |                       |       |          |          |          |     |       |       |   |       |          |          |  |     |     
|                          | Public  |                       | $     | 13,573.6 |          |          |     | 80.2  | %     |   | $     | 11,790.3 |          |  |     | 78.3 | %    
|                          | Private |                       |       | 1,599.2  |          |          |     | 9.4   | %     |   |       | 1,422.2  |          |  |     | 9.4  | %    
|                          |         |                       |       |          |          |          |     |       |       |   |       |          |          |  |     |     
|                          |         | Subtotal              |       |          | 15,172.8 |          |     |       | 89.6  | % |       |          | 13,212.5 |  |     |      | 87.7  | %
|Equity securities         |         |                       | 63.3  |          |          |          | 0.4 | %     |       |   | 23.4  |          |          |  | 0.2 | %   
|Mortgage loans            |         |                       | 883.0 |          |          |          | 5.2 | %     |       |   | 944.5 |          |          |  | 6.3 | %   
|Policy loans              |         |                       | 496.8 |          |          |          | 2.9 | %     |       |   | 506.3 |          |          |  | 3.4 | %   
|Real estate               |         |                       | 0.5   |          |          |          | 0.0 | %     |       |   | 1.4   |          |          |  | 0.0 | %   
|Other investments         |         |                       | 283.8 |          |          |          | 1.7 | %     |       |   | 345.2 |          |          |  | 2.3 | %   
|Short-term investments    |         |                       | 32.3  |          |          |          | 0.2 | %     |       |   | 19.1  |          |          |  | 0.1 | %   
|                          |         |                       |       |          |          |          |     |       |       |   |       |          |          |  |     |     
|                          |         | Total invested assets |       | $        | 16,932.5 |          |     |       | 100.0 | % |       | $        | 15,052.4 |  |     |      | 100.0 | %
|                          |         |                       |       |          |          |          |     |       |       |   |       |          |          |  |     |     

Fixed Maturity Securities

The fixed maturity securities portfolio consists
primarily of investment grade corporate fixed maturity
securities, high-quality mortgage-backed securities (or MBS) and
United States government and agency obligations. As of
December 31, 2002, fixed maturity securities were
$15,172.8 million, or 89.6% of the carrying value of
invested assets with public and private fixed maturity
securities constituting $13,573.6 million, or 89.5%, and
$1,599.2 million, or 10.5%, respectively, of total fixed
maturity securities, respectively.

36



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The following table summarizes the composition of
the fixed maturity securities by category as of
December 31, 2002 and 2001:

|                                          |                          |                                          |         |         |          |          |      |       |       |   |         |         |          |  |      |      |       |  
|----------------------------------------- | ------------------------ | ---------------------------------------- | ------- | ------- | -------- | -------- | ---- | ----- | ----- | - | ------- | ------- | -------- |  | ---- | ---- | ----- | -
|                                          |                          |                                         
|                                          |                          | Composition of Fixed Maturity Securities
|                                          |                          | December 31,                            
|                                          |                          |                                         
|                                          |                          |                                          |         |        
|                                          |                          | 2002                                     |         | 2001   
|                                          |                          |                                          |         |        
|                                          |                          | Carrying                                 |         | % of    |          | Carrying |      | % of 
|                                          |                          | Value                                    |         | Total   |          | Value    |      | Total
|                                          |                          |                                          |         |         |          |          |      |      
|                                          |                          |                                         
|                                          |                          | ($ in millions)                         
|U.S. government/agencies                  |                          | $                                        | 973.0   |         |          |          | 6.4  | %     |       | $ | 773.5   |         |          |  | 5.9  | %   
|State and political subdivisions          |                          |                                          | 50.0    |         |          |          | 0.3  | %     |       |   | 48.3    |         |          |  | 0.4  | %   
|Foreign government bonds                  |                          |                                          | 246.9   |         |          |          | 1.6  | %     |       |   | 134.2   |         |          |  | 1.0  | %   
|Corporate bonds                           |                          |                                          | 9,931.6 |         |          |          | 65.5 | %     |       |   | 9,224.1 |         |          |  | 69.8 | %   
|Redeemable preferred stocks               |                          |                                          | 120.1   |         |          |          | 0.8  | %     |       |   | 156.6   |         |          |  | 1.2  | %   
|Asset-backed bonds                        |                          |                                          | 777.6   |         |          |          | 5.1  | %     |       |   | 746.0   |         |          |  | 5.6  | %   
|Collateralized mortgage-backed securities |                          |                                          | 682.3   |         |          |          | 4.5  | %     |       |   | 385.0   |         |          |  | 2.9  | %   
|MBS                                       |                          |                                          |         |         |          |          |      |       |       |   |         |         |          |  |      |     
|                                          | U.S. government/agencies |                                          |         | 2,118.9 |          |          |      | 14.0  | %     |   |         | 1,291.2 |          |  |      | 9.8  | %    
|                                          | Non-government/agencies  |                                          |         | 272.4   |          |          |      | 1.8   | %     |   |         | 453.6   |          |  |      | 3.4  | %    
|                                          |                          |                                          |         |         |          |          |      |       |       |   |         |         |          |  |      |     
|                                          | Subtotal-MBS             |                                          |         | 2,391.3 |          |          |      | 15.8  | %     |   |         | 1,744.8 |          |  |      | 13.2 | %    
|                                          |                          |                                          |         |         |          |          |      |       |       |   |         |         |          |  |      |     
|                                          |                          | Total                                    |         | $       | 15,172.8 |          |      |       | 100.0 | % |         | $       | 13,212.5 |  |      |      | 100.0 | %
|                                          |                          |                                          |         |         |          |          |      |       |       |   |         |         |          |  |      |     

The following table summarizes fixed maturity
securities by remaining maturity as of December 31, 2002:

Remaining Maturity of Fixed Maturity
Securities

|     |                                |                 |   |          |          |  |  |      |       |  
|---- | ------------------------------ | --------------- | - | -------- | -------- |  |  | ---- | ----- | -
|     |                                | Carrying        |   | %       
|     |                                | Value           |   | of Total
|     |                                |                 |   |         
|     |                                |                
|     |                                | ($ in millions)
|Due: |                                |                 |   |          |          |  |  |     
|     | In one year or less (2003)     |                 | $ | 534.5    |          |  |  | 3.5  | %    
|     | One to five years (2004-2008)  |                 |   | 4,281.4  |          |  |  | 28.2 | %    
|     | Five to 10 years (2009-2013)   |                 |   | 4,250.2  |          |  |  | 28.0 | %    
|     | 10 to 20 years (2014-2023)     |                 |   | 1,499.0  |          |  |  | 9.9  | %    
|     | Over 20 years (2024 and after) |                 |   | 2,216.4  |          |  |  | 14.6 | %    
|     |                                |                 |   |          |          |  |  |     
|     |                                | Subtotal        |   |          | 12,781.5 |  |  |      | 84.2  | %
|     | MBS                            |                 |   | 2,391.3  |          |  |  | 15.8 | %    
|     |                                |                 |   |          |          |  |  |     
|     |                                | Total           |   | $        | 15,172.8 |  |  |      | 100.0 | %
|     |                                |                 |   |          |          |  |  |     

The portfolio of investment grade fixed maturity
securities is diversified by number and type of issuer. As of
December 31, 2002, investment grade fixed maturity
securities included the securities of 903 issuers, with
2,761 different issues of securities. No
non-government/agency issuer represents more than 1% of
investment grade fixed maturity securities.

Below-investment grade fixed maturity securities
as of December 31, 2002, included the securities of 252
issuers representing 6.8% of total invested assets, with the
largest being a $21.2 million investment.

37



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As of December 31, 2002, 82.8% of total
invested assets were investment grade fixed maturity securities.
The following table sets forth the credit quality, by NAIC
designation and Standard & Poors rating equivalents,
of fixed maturity securities as of December 31, 2002:

Fixed Maturity Securities by NAIC
Designation

December 31, 2002


|                                 |  |                                          |         |                       |          |         |     |          |       |       |      |          |         |       |     |   |       |   |         |   |          |  |     |   |       |  
|-------------------------------- |  | ---------------------------------------- | ------- | --------------------- | -------- | ------- | --- | -------- | ----- | ----- | ---- | -------- | ------- | ----- | --- | - | ----- | - | ------- | - | -------- |  | --- | - | ----- | -
|                                 |  |                                          |         |                       |          |         |     |         
|                                 |  |                                          |         | Public                |          | Private |     | Total   
|                                 |  |                                          |         |                       |          |         |     |         
|NAIC                             |  |                                          |         | Carrying              |          | % of    |     | Carrying |       | % of  |      | Carrying |         | % of 
|Designation                      |  | Standard & Poors Equivalent Designation |         | Value                 |          | Total   |     | Value    |       | Total |      | Value    |         | Total
|                                 |  |                                          |         |                       |          |         |     |          |       |       |      |          |         |      
|                                 |  |                                          |         |                      
|                                 |  |                                          |         | (Dollars in millions)
|1                                |  | A- or higher                             |         | $                     | 8,809.9  |         |     |          | 64.9  | %     |      | $        | 1,101.7 |       |     |   | 68.9  | % |         | $ | 9,911.6  |  |     |   | 65.3  | %
|2                                |  | BBB- to BBB+                             |         |                       | 3,705.7  |         |     |          | 27.3  | %     |      |          | 401.2   |       |     |   | 25.0  | % |         |   | 4,106.9  |  |     |   | 27.1  | %
|                                 |  |                                          |         |                       |          |         |     |          |       |       |      |          |         |       |     |   |       |   |         |   |          |  |     |   |       |  
|                                 |  | Total investment grade                   |         |                       | 12,515.6 |         |     |          | 92.2  | %     |      |          | 1,502.9 |       |     |   | 93.9  | % |         |   | 14,018.5 |  |     |   | 92.4  | %
|                                 |  |                                          |         |                       |          |         |     |          |       |       |      |          |         |       |     |   |       |   |         |   |          |  |     |   |       |  
|3                                |  | BB to BB+                                |         |                       | 662.9    |         |     |          | 4.9   | %     |      |          | 58.6    |       |     |   | 3.7   | % |         |   | 721.5    |  |     |   | 4.8   | %
|4                                |  | BB to BB+                                |         |                       | 296.4    |         |     |          | 2.2   | %     |      |          | 8.9     |       |     |   | 0.6   | % |         |   | 305.3    |  |     |   | 2.0   | %
|5 & 6                            |  | CCC or lower                             |         |                       | 98.7     |         |     |          | 0.7   | %     |      |          | 28.8    |       |     |   | 1.8   | % |         |   | 127.5    |  |     |   | 0.8   | %
|                                 |  |                                          |         |                       |          |         |     |          |       |       |      |          |         |       |     |   |       |   |         |   |          |  |     |   |       |  
|Total
    below investment grade |  |                                          | 1,058.0 |                       |          |         | 7.8 | %        |       |       | 96.3 |          |         |       | 6.1 | % |       |   | 1,154.3 |   |          |  | 7.6 | %
|                                 |  |                                          |         |                       |          |         |     |          |       |       |      |          |         |       |     |   |       |   |         |   |          |  |     |  
|                                 |  | Total                                    |         | $                     | 13,573.6 |         |     |          | 100.0 | %     |      | $        | 1,599.2 |       |     |   | 100.0 | % |         | $ | 15,172.8 |  |     |   | 100.0 | %
|                                 |  |                                          |         |                       |          |         |     |          |       |       |      |          |         |       |     |   |       |   |         |   |          |  |     |   |       |  

MBS investments are mortgage-related securities
including collateralized mortgage obligations (or CMOs) and
pass-through mortgage securities. Asset-backed securities are
both residential and non-residential including exposure to home
equity loans, home improvement loans, manufactured housing loans
as well as securities backed by loans on automobiles, credit
cards, and other collateral or collateral bond obligations. As
of December 31, 2002, asset-backed residential mortgages
total $496.9 million or 2.9% of total invested assets. As
of December 31, 2002, residential mortgage pass-through and
CMOs total $2,391.3 million or 14.1% of total invested
assets. As of December 31, 2002, $2,118.9 million or
88.6% of MBS were from government sponsored enterprises. Other
MBS were $272.4 million or 11.4% of MBS as of
December 31, 2002. Management believes that the quality of
assets in the MBS portfolio is generally high, with 99.7% of
such assets representing agency backed or AAA rated
securities. Collateralized mortgage backed securities (or CMBS)
total $682.3 million or 4.0% of total invested assets as of
December 31, 2002.

Interest rate swaps and options are used to
reduce exposure to changes in interest rates and to manage
duration mismatches. Call options are used to hedge
equity-indexed products. Credit default swaps are coupled with a
bond to synthetically create an investment cheaper than the
equivalent instrument traded in the cash market. Although we are
subject to the risk that counterparties will fail to perform,
credit standings of counterparties are monitored regularly. We
only enter into transactions with highly rated counterparties.
We are also subject to the risk associated with changes in the
value of contracts. However, such adverse changes in value
generally are offset by changes in the value of the items being
hedged. The notional principal amounts of the swaps and options,
which represent the extent of our involvement in such contracts
but not the risk of loss, at December 31, 2002, amounted to
$2,155.7 million. The interest rate swaps had a carrying
value of a net payable position of $5.6 million at
December 31, 2002. The credit default swaps had a carrying
value of a net payable position of $0.2 million at
December 31, 2002. The carrying value of options amounted
to $65.8 million at December 31, 2002. For each of
these derivatives, the carrying value is equal to fair value as
of December 31, 2002. The derivatives are reflected as
other investments on the consolidated financial statements as of
December 31, 2002. The net amount payable or receivable
from interest rate and credit default swaps are accrued as an
adjustment to interest income. Effective January 1, 2001,
we adopted SFAS 133. See note 4 to the consolidated
financial statements for further discussion of the impact of
adopting SFAS 133.

Mortgage Loans

As of December 31, 2002, mortgage loans in
the investment portfolio were $883.0 million, or 5.2% of
the aggregate carrying value of invested assets. As of
December 31, 2002, commercial mortgage loans and
residential mortgage loans comprised 99.8% and 0.2%,
respectively, of total mortgage loans. Commercial

38



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##### 



mortgage loans consist primarily of fixed-rate
mortgage loans. As of December 31, 2002, we held 710 individual
commercial mortgage loans with an average balance of
$1.2 million.


As of December 31, 2002, one loan in the
loan portfolio with a principal balance of $1.7 million was
classified as delinquent and no loans were in foreclosure. As of
the same date, only two loans aggregating $3.5 million, or
0.1%, of the loan portfolio (as measured by principal balance)
were classified as restructured. During 2002, we had no
foreclosures.

Other

We held $496.8 million of policy loans on
individual insurance products as of December 31, 2002.
Policy loans are permitted to the extent of a policys
contractual limits and are fully collateralized by policy cash
values. As of December 31, 2002, we held equity securities
of $63.3 million of which the largest holding was Federal
Home Loan Bank common stock totaling $50.3 million.

We held $283.8 million of other invested
assets (including short-term investments and real estate) on
December 31, 2002. Other invested assets consist primarily
of our Ameritas Joint Venture investment, various other joint
ventures and limited partnership investments and derivatives.

Structured Securities
Arrangements

We have utilized a limited number of structured
finance arrangements. The structures primarily consist of
interests in collateralized bond obligations and special-purpose
entities with principal protected limited partnership interests.
Neither AmerUs nor any management members have operating control
or management oversight of the entities and accordingly the
entities are not consolidated but rather accounted for as
available for sale debt securities or equity method investments.
In addition, we do not have any continued obligation or
commitment to provide additional financing to the entities. At
December 31, 2002 and 2001, approximately $560 million
and $535 million, respectively, of such structured finance
investments were included in invested assets. See additional
discussion of structured securities and related accounting
developments in Emerging Accounting Matters.

Effects Of Inflation And Interest Rate
Changes

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

Interest rate changes may have temporary effects
on the sale and profitability of the protection products and
accumulation products offered. For example, if interest rates
rise, competing investments (such as annuities or life insurance
products offered by competitors, certificates of deposit, mutual
funds, and similar instruments) may become more attractive to
potential purchasers of our products until we increase the
interest rate credited to owners of our protection products and
accumulation products. In contrast, as interest rates fall, we
attempt to adjust credited rates to compensate for the
corresponding decline in reinvestment rates. We monitor interest
rates and sell annuities and life insurance policies that permit
flexibility to make interest rate changes as part of management
of interest spreads. However, the profitability of our products
is based upon persistency, mortality and expenses, as well as
interest rate spreads.

We manage our investment portfolio in part to
reduce exposure to interest rate fluctuations. In general, the
market value of our fixed maturity portfolio increases or
decreases in an inverse relationship with fluctuations in
interest rates, and net investment income increases or decreases
in a direct relationship with interest rate changes.

We have developed an asset/liability management
approach with separate investment portfolios for major product
lines such as traditional life, universal life, equity-indexed
life, deferred annuities, equity-indexed annuities, variable
annuities and funding agreements. Investment policies and
strategies have been established based on the specific
characteristics of each product line. The portfolio investment
policies and strategies establish asset duration, quality and
other guidelines. Analytical systems are utilized to establish
an optimal asset mix for each line of business. We seek to
manage the asset/liability mismatch and the associated interest

39



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##### 



rate risk through active management of the
investment portfolio. Financial, actuarial, investment, product
development and product marketing professionals work together
throughout the product development, introduction and management
phases to jointly develop and implement product features,
initial and renewal crediting strategies, and investment
strategies based on extensive modeling of a variety of factors
under a number of interest rate scenarios.


In force reserves and the assets allocated to
each segment are modeled on a regular basis to analyze projected
cash flows under a variety of economic scenarios. The result of
this modeling is used to modify asset allocation, investment
portfolio duration and renewal crediting strategies. We invest
in derivatives to hedge against the effects of interest rate
fluctuations or to hedge growth in policyowner liabilities for
certain life and annuity products and funding agreements. For a
further discussion and disclosure of the nature and extent of
the use of derivatives, see note 4 to the consolidated financial
statements.

Federal Income Tax Matters

AmerUs Group and our non-life subsidiaries file a
consolidated federal income tax return. The life insurance
subsidiaries file separate federal income tax returns, except
for ILIC, Bankers Life and IL Annuity which together file a
consolidated tax return beginning in 2002. The separate return
method is used to compute the provision for allocating federal
income taxes. Deferred income tax assets and liabilities are
determined based on differences among the financial reporting
and tax bases of assets and liabilities and are measured using
the enacted tax rates and laws.

Critical Accounting Policies

The preparation of financial statements in
conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities.
The following are considered our critical accounting policies
due to their subjective nature and significance to the financial
statements.

Valuation of Financial
Instruments

A significant portion of our assets are carried
at fair value, primarily securities available-for-sale,
securities held for trading purposes and derivative financial
instruments. Market values are based on quoted market prices
where available.

Securities in our portfolio with a carrying value
of approximately $1,625 million at December 31, 2002 do not
have readily determinable market prices. For these securities,
we estimate their fair value by comparison to similar securities
with quoted prices when possible. Otherwise, we use our most
recent purchases and sales of similar unquoted securities,
independent broker quotes, or internally prepared valuations
(including those based on estimates of future profitability) to
estimate the fair value of those securities. All such
investments are classified as available for sale. Our ability to
liquidate our positions in these securities will be impacted to
a significant degree by the lack of an actively traded market,
and we may not be able to dispose of these investments in a
timely manner. Although we believe our estimates reasonably
reflect the fair value of those securities, our key assumptions
about the risk-free interest rates, risk premiums, performance
of underlying collateral (if any), and other factors may not be
realized in the event of an actual sale.

Securities are also reviewed to identify
potential impairments. In determining if and when a decline in
market value below amortized cost is other-than-temporary, we
evaluate the market conditions, offering prices, trends of
earnings, price multiples, and other key measures for our
investments in marketable equity securities and debt
instruments. When such a decline in value is deemed to be
other-than-temporary, we recognize an impairment loss in the
current period operating results to the extent of the decline.

Investments in mortgage loans, real estate,
policy loans and other investments are monitored for possible
impairment. If it is determined that collection of all amounts
due under the contractual terms is doubtful or carrying values
exceed the fair value of underlying collateral, such investments
are considered impaired and the asset carrying value is adjusted
or a valuation allowance is established.

40



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Derivatives

We hold derivative financial instruments to hedge
growth in policyowner liabilities for certain life and annuity
products, to hedge the interest variability of a floating-rate
funding agreement and to hedge market risk for fixed income
investments. These derivatives qualify for hedge accounting or
are considered economic hedges as discussed in detail in note 4
to our consolidated financial statements.

Hedge accounting results when we designate and
document the hedging relationships involving derivative
instruments. Economic hedging instruments are those instruments
whose change in fair value acts as a natural hedge against the
change in fair value of hedged assets or liabilities with both
changes wholly or partially being offset in earnings.

To hedge equity market risk, we primarily use
S&P 500 Index call options to hedge the growth in interest
credited to the customer as provided by our equity-indexed life
and annuity products. We also use interest rate swaps to
effectively provide for fixed interest payments of a floating
rate funding agreement liability and hedge market risk from
fixed income investments. Credit default swaps are coupled with
a bond to synthetically create an instrument cheaper than an
equivalent investment traded in the cash market.

We have not changed our methods of calculating
the fair values of derivatives or the underlying assumptions.
The fair values of these derivatives will change over time as
cash receipts and payments are made and as market conditions
change.

Our derivative instruments are not subject to a
multiple or use of leverage on the underlying price index. We do
not believe we are exposed to more than a nominal amount of
credit risk in our interest rate or equity hedges as the
counterparties are established, well-capitalized financial
institutions. Information about the fair values, notional
amounts, and contractual terms of these instruments can be found
in note 4 to our consolidated financial statements and the
section titled Quantitative and Qualitative Disclosures
About Market Risk.

Amortization of DAC and VOBA

We generally amortize DAC based on a percentage
of our expected gross margins (EGMs) over the life of the
policies. Our estimated EGMs are computed based on assumptions
related to the underlying policies written, including the lives
of the underlying policies, growth rate of the assets supporting
the liabilities, and level of expenses necessary to maintain the
policies over their entire life. We amortize DAC by estimating
the present value of the EGMs over the lives of the insurance
policies and then calculate a percentage of the policy
acquisition cost deferred as compared to the present value of
the EGMs. That percentage is used to amortize the DAC such that
the amount amortized over the life of the policies results in a
constant percentage of amortization when related to the actual
and future gross margins.

Because the EGMs are only an estimate of the
profits we expect to recognize from these policies, the EGMs are
adjusted at each balance sheet date to take into consideration
the actual gross profits to date and any changes in the
remaining expected future gross margins. When EGMs are adjusted,
we also adjust the amortization of the deferred policy
acquisition costs amount to maintain a constant percentage over
the entire life of the policies.

We amortize the VOBA based on the incidence of
the expected cash flows from insurance contracts using the
interest rate credited to the underlying policies. The expected
future cash flows are based on actuarially determined
projections of future premium receipts, mortality, surrenders,
operating expenses, changes in insurance liabilities, investment
yields on the assets retained to support the policy liabilities
and other factors. These projections take into account all
factors known or expected by management. The actual cash flows
may vary from expected levels due to differences in renewal
premium, investment spread, investment gains or losses,
mortality and morbidity costs and other factors.

41



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##### 



Purchase Accounting
Valuations

We followed the purchase method of accounting for
our acquisition of ILICO in May 2001. Under the purchase method,
we were required to determine the fair value of the acquired
assets and liabilities. The fair value of the assets and
liabilities were determined as follows:



| |                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Investments
    based on quoted market prices, or in cases where quoted market
    prices were not available, by using discounted cash flow or
    other valuation techniques.                                                        
|
| | Receivables and other
    assets reflected at
    replacement values or realizable values based on the present
    value of amounts to be received determined at appropriate
    interest rates less amounts considered uncollectible.
|
| | Value of business
    acquired actuarially
    determined future profits from in force business calculated at a
    15% risk discount rate using current best estimate assumptions.                                                   
|
| | Policyowner reserves and
    funds established at the
    present value of all future benefits and expenses associated
    with the policies using current best estimate assumptions.                                                 
|
| | Other liabilities and
    debt determined as the
    present value of amounts to be paid using appropriate interest
    rates.                                                                                                        

The excess of the purchase price over the fair
value of the net assets acquired for ILICO was recorded as
goodwill amounting to $36 million.

Emerging Accounting Matters

SFAS 141 and SFAS 142

In July 2001, the Financial Accounting Standards
Board issued SFAS 141, Business Combinations,
and SFAS 142, Goodwill and Other Intangible
Assets. SFAS 141 requires the purchase method of
accounting be used for all business combinations initiated or
completed after June 30, 2001. SFAS 141 also specifies
criteria intangible assets acquired in a purchase method
business acquisition must meet to be recognized apart from
goodwill. The adoption of SFAS 141 did not have an impact
on the consolidated financial statements.

SFAS 142 requires goodwill and intangible
assets with indefinite useful lives to no longer be amortized
but instead tested for impairment at least annually. The
evaluation of the impairment analysis for goodwill and other
intangible assets, principally VOBA, was completed in 2002 with
no impairment indicated as of January 1, 2002. In addition,
a reassessment was performed as of October 1, 2002 in
conjunction with our annual evaluation which resulted in no
indication of impairment of goodwill or other intangible assets.
See note 17 to the consolidated financial statements for
additional information regarding the adoption of SFAS 142.

SFAS 146

In July 2002, the Financial Accounting Standards
Board issued SFAS 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS 146
provides for costs to exit an activity or dispose of long-lived
assets to be recorded when they are incurred and are to be
measured at fair value. Under previous accounting guidance, a
liability for an exit cost was recognized at the date of the
commitment to an exit plan. SFAS 146 is effective for exit
or disposal activities initiated after December 31, 2002
and its adoption had no impact on net income or
stockholders equity as of or for the year ended
December 31, 2002.

SFAS 148

In December 2002, the Financial Accounting
Standards Board issued SFAS 148, Accounting for
Stock-Based Compensation  Transition and
Disclosure. SFAS 148 amends SFAS 123,
Accounting for Stock-Based Compensation, and
provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS 148
requires more

42



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##### 



prominent and more frequent disclosures in
financial statements about the effects of stock-based
compensation. As of December 31, 2002, we continue to
account for employee stock-based compensation using the
intrinsic value method provided under SFAS 123 and
SFAS 148. The disclosure requirements of both standards
have been provided in note 1 to the consolidated financial
statements.


FIN 45

In November 2002, the Financial Accounting
Standards Board issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, or FIN 45. FIN 45 clarifies disclosure
and recognition and measurement requirements related to certain
guarantees. The disclosure requirements are effective for
financial statements issued after December 15, 2002 and the
recognition and measurement requirements are effective on a
prospective basis for guarantees issued or modified after
December 31, 2002. See note 12 to the consolidated
financial statements for disclosures related to our guarantees.

FIN 46

In January 2003, the Financial Accounting
Standards Board issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an
Interpretation of ARB 51, or FIN 46. FIN 46
provides guidance to identify variable interest entities, or
VIEs, and their consolidation by a primary beneficiary. A VIE is
defined as an entity in which either 1) the equity
investors, if any, do not have a controlling financial interest,
or 2) the equity investment at risk is insufficient to
finance that entitys activities without receiving
additional subordinated financial support from other parties. An
enterprise whose investment in a VIE absorbs the majority of the
VIEs expected losses or receives a majority of its
expected residual returns is considered a primary beneficiary,
although not all VIEs will have a primary beneficiary.
FIN 46 requires primary beneficiaries to consolidate VIEs
in their financial statements and also requires additional
disclosures for enterprises which are not primary beneficiaries
but which have a significant variable interest in a VIE. The
provisions of FIN 46 are effective immediately for VIEs created
after January 31, 2003 and is to be applied in the first
interim period beginning after June 15, 2003 for interests
in VIEs acquired before February 1, 2003. The additional
disclosure is required for financial statements issued after
January 31, 2003. At December 31, 2002, we held
interests in structured securities arrangements which meet the
definition of VIEs. We would be considered the primary
beneficiary for several of those structured securities, which if
consolidated at December 31, 2002, would result in an
increase in total assets of $167 million, an increase in
total liabilities of $154 million and an increase in total
stockholders equity of $13 million. See note 3
to the consolidated financial statements for disclosures and
additional information related to our VIE interests.

SFAS 133 Implementation 
Embedded Derivatives

In February 2003, the Financial Accounting
Standards Boards Derivatives Implementation Group issued
SFAS 133 Implementation Issue No. B36, Embedded
Derivatives: Bifurcation of a Debt Instrument that Incorporates
both Interest Rate Risk and Credit Risk Exposures that are
Unrelated or Only Partially Related to the Creditworthiness of
the Issuer of that Instrument, or DIG Issue B36. DIG Issue
B36 applies to modified coinsurance and coinsurance with funds
withheld reinsurance agreements where interest is determined by
reference to a pool of fixed maturity assets or a total return
debt index. Such arrangements in which funds are withheld by the
ceding insurer cause the reinsurer to recognize a receivable
from the ceding insurer as well as a liability representing
reserves for the insurance coverage assumed under the
reinsurance arrangements. The terms of the reinsurers
receivable provide for the future payment of principal plus a
rate of return on either its general account assets or a
specified block of those assets which is typically composed of
fixed-rate debt securities. DIG Issue B36 considers the
reinsurers receivable from the ceding company to contain
an embedded derivative that must be bifurcated and accounted for
separately under SFAS 133. DIG Issue B36 is tentatively planned
to be effective for quarters beginning after June 15, 2003.
Currently, we do not account for such reinsurance receivables
and payables as having an embedded derivative which would be
bifurcated and accounted for separately. We continue to evaluate
the impacts of implementing DIG Issue B36; however, at this
time, we are unable to estimate the effects on the financial
statements.

43



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##### 





|         |                                                                
|-------- | ---------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
    MARKET RISK.

The main objectives in managing our investment
portfolios and our insurance subsidiaries are to maximize
investment income and total investment returns while minimizing
credit risks in order to provide maximum support to the
insurance underwriting operations. Investment strategies are
developed based on many factors including asset liability
management, regulatory requirements, fluctuations in interest
rates and consideration of other market risks. Investment
decisions are centrally managed by investment professionals
based on guidelines established by management and approved by
the boards of directors.

Market risk represents the potential for loss due
to adverse changes in the fair value of financial instruments.
The market risks related to our financial instruments primarily
relate to the investment portfolio, which exposes us to risks
related to interest rates and, to a lesser extent, credit
quality and prepayment variation. Analytical tools and
monitoring systems are in place to assess each of these elements
of market risk.

Interest rate risk is the price sensitivity of a
fixed income security to changes in interest rates. Management
views these potential changes in price within the overall
context of asset and liability management. Actuarial
professionals estimate the payout pattern of our liabilities,
primarily lapses, to determine duration, which is the present
value of the fixed income investment portfolios after
consideration of the duration of these liabilities and other
factors, which management believes mitigates the overall effect
of interest rate risk.

For variable and equity-indexed products,
profitability on the portion of the policyholders account
balance invested in the fixed general account option, if any, is
also affected by the spreads between interest yields on
investments and rates credited to the policies. For the variable
products, the policyholder assumes essentially all the
investment earnings risk for the portion of the account balance
invested in the separate accounts. For the equity-indexed
products, we purchase call options that are designed to match
the return owed to contract holders who elect to participate in
one or more market indices. Profitability on the portion of the
equity-indexed products tied to market indices is significantly
impacted by the spread on interest earned on investments and the
sum of (1) cost of underlying call options purchased to
match the returns owed to contract holders and (2) minimum
interest guarantees owed to the contract holder, if any.
Profitability on the equity-indexed products is also impacted by
changes in the fair value of the embedded option which provides
the contract holder the right to participate in market index
returns after the next anniversary date of the contract. This
impacts profitability as we only purchase one-year call options
to fund the returns owed to the contract holders at the
inception of each contract year. This practice matches with the
contract holders rights to switch to different indices on
each anniversary date. The value of the forward starting options
embedded in the equity-index can fluctuate with changes in
assumptions as to future volatility of the market indices, risk
free interest rates, market returns and the lives of the
contracts.

44



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##### 



The table below provides information about our
fixed maturity investments and mortgage loans for both our
trading and other than trading portfolios at December 31,
2002. The table presents cash flows of principal amounts and
related weighted average interest rates by expected maturity
dates. The cash flows are based on the earlier of the call date
or the maturity date or, for mortgage-backed securities,
expected payment patterns. Actual cash flows could differ from
the expected amounts.

As of December 31, 2002

|                                                        |       |                     |       |           |  |      |       |       |  |      |       |            |  |      |       |       |  |   |       |       |  |   |       |       |  |   |        |        |  |   |        |        | 
|------------------------------------------------------- | ----- | ------------------- | ----- | --------- |  | ---- | ----- | ----- |  | ---- | ----- | ---------- |  | ---- | ----- | ----- |  | - | ----- | ----- |  | - | ----- | ----- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                        |       |                    
|                                                        |       | Expected Cash Flows
|                                                        |       |                     |       | Amortized |  | Fair
|                                                        |       | 2003                |       | 2004      |  | 2005 |       | 2006  |  | 2007 |       | Thereafter |  | Cost |       | Value
|                                                        |       |                     |       |           |  |      |       |       |  |      |       |            |  |      |       |      
|                                                        |       |                    
|                                                        |       | ($ in millions)    
|Fixed maturity securities available-for-sale            |       | $                   | 1,759 |           |  | $    | 1,282 |       |  | $    | 1,292 |            |  | $    | 1,053 |       |  | $ | 1,184 |       |  | $ | 6,298 |       |  | $ | 12,868 |        |  | $ | 13,329 |       
|Average interest rate                                   |       |                     | 6.7%  |           |  |      | 6.7%  |       |  |      | 7.1%  |            |  |      | 6.7%  |       |  |   | 6.6%  |       |  |   | 6.3%  |       |  |   |        |        |  |   |        |       
|Fixed maturity securities held for trading
    purposes |       | $                   | 117   |           |  | $    | 222   |       |  | $    | 272   |            |  | $    | 139   |       |  | $ | 166   |       |  | $ | 928   |       |  | $ | 1,844  |        |  | $ | 1,844  |       
|Average interest rate                                   |       |                     | 4.8%  |           |  |      | 2.9%  |       |  |      | 2.9%  |            |  |      | 2.9%  |       |  |   | 3.4%  |       |  |   | 4.6%  |       |  |   |        |        |  |   |        |       
|Mortgage loans                                          |       | $                   | 50    |           |  | $    | 63    |       |  | $    | 66    |            |  | $    | 65    |       |  | $ | 62    |       |  | $ | 577   |       |  | $ | 883    |        |  | $ | 978    |       
|Average interest rate                                   |       |                     | 8.1%  |           |  |      | 8.1%  |       |  |      | 8.0%  |            |  |      | 8.0%  |       |  |   | 7.9%  |       |  |   | 7.8%  |       |  |   |        |        |  |   |        |       
|                                                        | Total |                     | $     | 1,926     |  |      | $     | 1,567 |  |      | $     | 1,630      |  |      | $     | 1,257 |  |   | $     | 1,412 |  |   | $     | 7,803 |  |   | $      | 15,595 |  |   | $      | 16,151 | 
|                                                        |       |                     |       |           |  |      |       |       |  |      |       |            |  |      |       |       |  |   |       |       |  |   |       |       |  |   |        |        |  |   |        |       

In accordance with our strategy of minimizing
credit quality risk, we consistently invest in high quality
marketable securities. Fixed maturity securities are comprised
of U.S. Treasury, government agency, mortgage-backed and
corporate securities. Approximately 68% of fixed maturity
securities are issued by the U.S. Treasury or U.S. government
agencies or are rated A or better by Moodys, Standard and
Poors, or the NAIC. Less than 8% of the bond portfolio is
below investment grade. Fixed maturity securities have an
average maturity of approximately 6.9 years.

Prepayment risk refers to the changes in
prepayment patterns that can either shorten or lengthen the
expected timing of the principal repayments and thus the average
life and the effective yield of a security. Such risk exists
primarily within the portfolio of mortgage-backed securities.
Management monitors such risk regularly. We invest primarily in
those classes of mortgage-backed securities that have average or
lower prepayment risk.

Our use of derivatives is generally limited to
hedging purposes and has principally consisted of using interest
rate swaps and options. These instruments, viewed separately,
subject us to varying degrees of market and credit risk. However
when used for hedging, the expectation is that these instruments
would reduce overall market risk. Credit risk arises from the
possibility that counterparties may fail to perform under the
terms of the contracts. See note 4 of the consolidated
financial statements for additional information about our
derivative positions.

Equity price risk is the potential loss arising
from changes in the value of equity securities. In general,
equities have more year-to-year price variability than
intermediate term grade bonds. However, returns over longer time
frames have been consistently higher. Our equity securities are
of high quality and readily marketable.

All of the above risks are monitored on an
ongoing basis. A combination of in-house systems and proprietary
models and externally licensed software are used to analyze
individual securities as well as each portfolio. These tools
provide the portfolio managers with information to assist them
in the evaluation of the market risks of the portfolio.

45



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##### 



ITEM 8.     FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements begin on
page F-1. Reference is made to the Index to Financial Statements
on page F-1 herein.

Additional financial statement schedules begin on
page S-1. Reference is made to the Index to Financial
Statement Schedules on page S-1 herein.



|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|ITEM  9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    ON ACCOUNTING AND FINANCIAL DISCLOSURE.

KPMG LLP was the independent auditors for AmerUs
Group Co. On February 19, 2001, management notified KPMG
LLP that their appointment as independent auditors would be
terminated effective upon issuance of KPMG LLP reports on the
consolidated financial statements for the year ended
December 31, 2000. Ernst & Young LLP was engaged as
independent auditors effective upon KPMG LLP termination. The
decision to change auditors was recommended by the audit
committee of the board of directors and approved by the board of
directors.

In connection with the audit of the fiscal year
ended December 31, 2000, there were no disagreements with
KPMG LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures,
which disagreements if not resolved to their satisfaction would
have caused them to make reference in connection with their
opinion to the subject matter of the disagreement.

The audit report of KPMG LLP on the consolidated
financial statements of AmerUs Group Co. and subsidiaries as of
and for the year ended December 31, 2000, did not contain
any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or
accounting principles.

PART III

The Notice of 2003 Annual Meeting of Shareholders
and Proxy Statement (the Proxy Statement), which, when filed
pursuant to Regulation 14A under the Securities Exchange
Act of 1934, is incorporated by reference in this Annual Report
on Form 10-K pursuant to General Instruction G(3) of
Form 10-K, provides the information required under
Part III (Items 11. Executive Compensation,
12. Security Ownership of Certain Beneficial Owners and
Management Related Stockholder Matters and 13. Certain
Relationships and Related Transactions).

ITEM 10.     DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT



|    |                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Information concerning directors of AmerUs Group
    Co. appears in the Proxy Statement, under Election of
    Directors. This portion of the Proxy Statement is
    incorporated herein by reference.                                                                
|   
|(b) | For information with respect to Executive
    Officers, see Part I of this Annual Report on
    Form 10-K, under Executive Officers of the
    Company.                                                                                                               
|   
|(c) | Information concerning Section 16(a)
    beneficial ownership reporting compliance appears in the Proxy
    Statement, under Section 16(a) Beneficial Ownership
    Reporting Compliance. This portion of the Proxy Statement
    is incorporated herein by reference.

ITEM 14.     CONTROLS
AND PROCEDURES



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Based upon their evaluation within 90 days
    prior to the filing date of this Annual Report on
    Form 10-K, our Chief Executive Officer and Chief Financial
    Officer, have concluded that our disclosure controls and
    procedures as defined in Rule 13a-14(c) under the
    Securities Exchange Act of 1934, as amended, are effective for
    recording, processing, summarizing and reporting the information
    we are required to disclose in our reports filed under such act.
|   
|(b) | There were no significant changes in our internal
    controls or in other factors that could significantly affect
    these controls subsequent to the date of the evaluation referred
    to above.                                                                                                                                                                                                                                                                                          

46



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##### 



PART IV



|          |                                                            
|--------- | -----------------------------------------------------------
|ITEM  15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
    REPORTS ON

FORM 8-K.


(a) 1.     Financial
Statements. Reference is made to the Index on page F-1 of the
report.

2.     Financial
Statement Schedules. Reference is made to the Index on page S-1
of the report.

3.     Exhibits.
Reference is made to the Index to Exhibits on
page      of the report.

(b) The following reports on Form 8-K
were filed during the quarter ended December 31, 2002:



| |                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Form 8-K dated November 5, 2002
    announcing the release of third quarter 2002 earnings.
    Supplemental financial information of AmerUs Group Co. was
    attached.                                
|
| | Form 8-K dated November 13, 2002
    providing Chief Executive Officer and Chief Financial Officer
    certifications pursuant to Section 1350 of Chapter 63
    of Title 18 of the United States Code.
|
| | Form 8-K dated December 5, 2002, which
    included the Companys investor presentation presented at
    the Companys investor conference held on December 5,
    2002, and related press release.    

47



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AMERUS GROUP CO. AND SUBSIDIARIES



INDEX TO EXHIBITS


|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ---- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 2.1  |             |  | Plan of Reorganization dated October 27,
    1995, filed as Exhibit 2.1 to the Registration Statement of
    AmerUs Life Holdings, Inc. on Form S-1, Registration Number
    333-12239, is hereby incorporated by reference.                                                                                                                                                                                                           
|        | 2.2  |             |  | Amended and Restated Agreement and Plan of
    Merger, dated as of September 19, 1997 and as amended and
    restated as of October 8, 1997, by and among AmerUs Life
    Holdings, Inc., AFC Corp. and AmVestors Financial Corporation
    (AmVestors), filed as Exhibit 2.2 to the
    Registration Statement of AmerUs Life Holdings, Inc. on
    Form S-4, Registration Number 333-40065 is hereby
    incorporated by reference.
|        | 2.3  |             |  | Agreement and Plan of Merger, dated as of
    August 13, 1997 and as amended as of September 5,
    1997, among AmerUs Life Holdings, Inc., a wholly owned
    subsidiary of AmerUs Life Holdings, Inc. and Delta Life
    Corporation, filed as Exhibit 2.2 to Form 8-K of
    AmerUs Life Holdings, Inc. dated October 8, 1997, is hereby
    incorporated by reference.                                                             
|        | 2.4  |             |  | Combination and Investment Agreement, dated
    February 18, 2000, among American Mutual Holding Company,
    AmerUs Life Holdings, Inc., Indianapolis Life Insurance Company
    and The Indianapolis Life Group of Companies, Inc., filed as
    Exhibit 2.1 to AmerUs Life Holdings, Inc.s report on
    Form 8-K/ A on March 6, 2000, is hereby incorporated
    by reference.                                                    
|        | 2.5  |             |  | Purchase Agreement, dated as of February 18,
    2000, by and between American Mutual Holding Company and AmerUs
    Life Holdings, Inc., filed as Exhibit 2.5 on
    Form 10-K, dated March 8, 2000, is hereby incorporated
    by reference.                                                                                                                                                                                         
|        | 2.6  |             |  | Agreement and Plan of Merger, dated
    December 17, 1999, by and between American Mutual Holding
    Company and AmerUs Life Holdings, Inc., filed as
    Exhibit 2.6 on Form 10-K, dated March 8, 2000, is
    hereby incorporated by reference.                                                                                                                                                                                     
|        | 2.7  |             |  | Amendment No. 1 to Agreement and Plan of
    Merger, dated February 18, 2000, by and between American
    Mutual Holding Company and AmerUs Life Holdings, Inc., filed as
    Exhibit 2.7 on Form 10-K, dated March 8, 2000, is
    hereby incorporated by reference.                                                                                                                                                                  
|        | 2.8  |             |  | Letter Agreement, dated December 17, 1999,
    by and between American Mutual Holding Company and AmerUs Life
    Holdings, Inc., filed as Exhibit 2.8 on Form 10-K,
    dated March 8, 2000, is hereby incorporated by reference.                                                                                                                                                                                                     
|        | 2.9  |             |  | Notification Agreement, dated as of
    February 18, 2000, by and among American Mutual Holding
    Company, AmerUs Life Holdings, Inc. and Bankers Trust Company,
    filed as Exhibit 2.9 on Form 10-K, dated March 8,
    2000, is hereby incorporated by reference.                                                                                                                                                                
|        | 2.10 |             |  | Amendment No. 2 to Agreement and Plan of
    Merger, dated April 3, 2000, by and between American Mutual
    Holding Company and AmerUs Life Holdings, Inc., filed as
    Exhibit 2.10 on Form 10-Q, dated May 15, 2000, is
    hereby incorporated by reference.                                                                                                                                                                      
|        | 2.11 |             |  | Amendment No. 1 to the Purchase Agreement,
    dated April 3, 2000, by and between American Mutual Holding
    Company and AmerUs Life Holdings, Inc., filed as
    Exhibit 2.11 on Form 10-Q, dated May 15, 2000, is
    hereby incorporated by reference.                                                                                                                                                                            
|        | 2.12 |             |  | Amendment to Combination and Investment Agreement
    dated February 18, 2000 among American Mutual Holding
    Company, AmerUs Life Holdings, Inc., Indianapolis Life Insurance
    Company and The Indianapolis Life Group of Companies, Inc.,
    dated September 18, 2000, filed as Exhibit 2.2 to Form
    8- K12G3 of the Registrant dated September 21, 2000, is
    hereby incorporated by reference.                          
|        | 2.13 |             |  | Stock Purchase Agreement, dated January 1,
    2002, by and among AmerUs Annuity Group Co., and the
    Stockholders of Family First Advanced Estate Planning and Family
    First Insurance Services, files as Exhibit 2.13 on
    Form 10-Q dated August 12, 2002, is hereby
    incorporated by reference.                                                                                                                          

48



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|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ---- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 3.1  |             |  | Amended and Restated Articles of Incorporation of
    the Registrant filed as Exhibit 3.1 on Form 10-Q,
    dated November 14, 2000 is hereby incorporated by reference.                                                                                                                                                                                                                                                                              
|        | 3.2  |             |  | Amended and Restated Bylaws of the Registrant,
    filed as Exhibit 3.2 on Form 10-K, dated
    March 15, 2002, is hereby incorporated by reference.                                                                                                                                                                                                                                                                                                  
|        | 4.1  |             |  | Amended and Restated Trust Agreement dated as of
    February 3, 1997 among AmerUs Life Holdings, Inc.,
    Wilmington Trust Company, as property trustee, and the
    administrative trustees named therein (AmerUs Capital I business
    trust), filed as Exhibit 3.6 to the registration statement
    of AmerUs Life Holdings, Inc. and AmerUs Capital I on
    Form S-1, Registration Number 333-13713, is hereby
    incorporated by reference.
|        | 4.2  |             |  | Indenture dated as of February 3, 1997
    between AmerUs Life Holdings, Inc. and Wilmington Trust Company
    relating to the Companys 8.85% Junior Subordinated
    Debentures, Series A, filed as Exhibit 4.1 to the
    registration statement of AmerUs Life Holdings, Inc. and AmerUs
    Capital I on Form S-1, Registration Number, 333-13713, is
    hereby incorporated by reference.                                                      
|        | 4.3  |             |  | Guaranty Agreement dated as of February 3,
    1997 between AmerUs Life Holdings, Inc., as guarantor, and
    Wilmington Trust Company, as trustee, relating to the 8.85%
    Capital Securities, Series A, issued by AmerUs Capital I,
    filed as Exhibit 4.4 to the registration statement on
    Form S-1, Registration Number, 333-13713, is hereby
    incorporated by reference.                                                              
|        | 4.4  |             |  | Amended and Restated Declaration of Trust of
    AmerUs Capital II, dated as of July 27, 1998, among AmerUs
    Life Holdings, Inc., First Union Trust Company and the
    administrative trustees named therein, relating to AmerUs Life
    Holdings, Inc.s 7.0% ACES Units, filed as Exhibit 4.5
    on Form 10-Q, dated August 13, 1998, is hereby
    incorporated by reference.                                                                
|        | 4.5  |             |  | Certificate of Trust of AmerUs Capital III filed
    as Exhibit 4.7 to the registration statement of AmerUs Life
    Holdings, Inc., AmerUs Capital II and AmerUs Capital III, on
    Form S-3 (No. 333-50249), is hereby incorporated by
    reference.                                                                                                                                                                                              
|        | 4.6  |             |  | Common Trust Securities Guarantee Agreement,
    dated as of July 27, 1998, by AmerUs Life Holdings, Inc.,
    relating to AmerUs Life Holdings, Inc.s 7.0% ACES Units,
    filed as Exhibit 4.7 on Form 10-Q, dated
    August 13, 1998, is hereby incorporated by reference.                                                                                                                                                                       
|        | 4.7  |             |  | QUIPS Guarantee Agreement, dated as of
    July 27, 1998, by AmerUs Life Holdings, Inc., relating to
    AmerUs Life Holdings, Inc.s 7.0% ACES Units, filed as
    Exhibit 4.8 on Form 10-Q, dated August 13, 1998, is
    hereby incorporated by reference.                                                                                                                                                                                         
|        | 4.8  |             |  | Master Unit Agreement, dated as of July 27,
    1998, between AmerUs Life Holdings, Inc. and First Union
    National Bank relating to AmerUs Life Holdings, Inc.s 7.0%
    ACES Units, filed as Exhibit 4.9 on Form 10-Q, dated
    August 13, 1998, is hereby incorporated by reference.                                                                                                                                                           
|        | 4.9  |             |  | Call Option Agreement, dated as of July 27,
    1998, between Goldman, Sachs & Co. and First Union
    National Bank relating to AmerUs Life Holdings, Inc.s 7.0%
    ACES Units, filed as Exhibit 4.10 on Form 10-Q, dated
    August 13, 1998, is hereby incorporated by reference.                                                                                                                                                                
|        | 4.10 |             |  | Pledge Agreement, dated as of July 27, 1998,
    among AmerUs Life Holdings, Inc., Goldman, Sachs & Co.
    and First Union National Bank relating to AmerUs Life Holdings,
    Inc.s 7.0% ACES Units, filed as Exhibit 4.11 on
    Form 10-Q, dated August 13, 1998, is hereby
    incorporated by reference.                                                                                                                                       
|        | 4.11 |             |  | Senior Indenture, dated as of June 16, 1998,
    by and between AmerUs Life Holdings, Inc. and First Union
    National Bank, as Indenture Trustee, relating to the AmerUs Life
    Holdings, Inc.s 6.95% Senior Notes, filed as
    Exhibit 4.14 on Form 10-Q, dated August 13, 1998,
    is hereby incorporated by reference.                                                                                                                      

49



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##### 



|        |      |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- | ---- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |            
|No.     |      | Description
|        |      |            
|        | 4.12 |             |  | Subordinated Indenture, dated as of July 27,
    1998, by and between AmerUs Life Holdings, Inc. and First Union
    National Bank, as Indenture Trustee, relating to AmerUs Life
    Holdings, Inc.s 6.86% Junior Subordinated Deferrable
    Interest Debentures, filed as Exhibit 4.15 on
    Form 10-Q, dated August 13, 1998, is hereby
    incorporated by reference.                                                                                  
|        | 4.13 |             |  | First Supplement to Indenture dated
    February 3, 1997 among American Mutual Holding Company,
    AmerUs Life Holdings, Inc. and Wilmington Trust Company as
    Trustee, relating to the Companys 8.85% Junior
    Subordinated Debentures, Series A, dated September 20,
    2000, filed as Exhibit 4.14 on Form 10-Q dated
    November 14, 2000, is hereby incorporated by reference.                                                                  
|        | 4.14 |             |  | Assignment and Assumption Agreement to Amended
    and Restated Trust Agreement, dated February 3, 1997
    between American Mutual Holding Company and AmerUs Life
    Holdings, Inc., dated September 20, 2000, filed as Exhibit
    4.15 on Form 10-Q dated November 14, 2000, is hereby
    incorporated by reference.                                                                                                                                    
|        | 4.15 |             |  | Assignment and Assumption to Guaranty Agreement,
    dated February 3, 1997 between American Mutual Holding
    Company and AmerUs Life Holdings, Inc., dated September 20,
    2000, filed as Exhibit 4.16 on Form 10-Q, dated
    November 14, 2000, is hereby incorporated by reference.                                                                                                                                                                   
|        | 4.16 |             |  | First Supplement to Subordinated Indenture, dated
    July 27, 1998, relating to AmerUs Life Holdings,
    Inc.s 6.86% Junior Subordinated Deferrable Interest
    Debentures, among American Mutual Holding Company, AmerUs Life
    Holdings, Inc. and First Union National Bank, as Indenture
    Trustee, dated September 20, 2000, filed as
    Exhibit 4.17 on Form 10-Q, dated November 14,
    2000, is hereby incorporated by reference.            
|        | 4.17 |             |  | First Supplement to Master Unit Agreement dated
    July 27, 1998, relating to AmerUs Life Holdings,
    Inc.s 7.0% ACES units, between American Mutual Holding
    Company and First Union National Bank, as Unit Agent, dated
    September 20, 2000, filed as Exhibit 4.18 on
    Form 10-Q, dated November 14, 2000, is hereby
    incorporated by reference.                                                                                            
|        | 4.18 |             |  | Assignment and Assumption Agreement to the QUIPS
    Guarantee Agreement dated July 27, 1998, relating to AmerUs
    Life Holdings, Inc.s 7.0% ACES units, between American
    Mutual Holding Company and AmerUs Life Holdings, Inc., dated
    September 20, 2000, filed as Exhibit 4.19 on
    Form 10-Q, dated November 14, 2000, is hereby
    incorporated by reference.                                                                               
|        | 4.19 |             |  | Assignment and Assumption Agreement to the Common
    Trust Securities Guarantee Agreement dated July 27, 1998,
    relating to AmerUs Life Holdings, Inc.s 7.0% ACES units,
    between American Mutual Holding Company and AmerUs Life
    Holdings, Inc., dated September 20, 2000, filed as
    Exhibit 4.20 on Form 10-Q, dated November 14,
    2000, is hereby incorporated by reference.                                                             
|        | 4.20 |             |  | First Supplement to Purchase Contracts between
    American Mutual Holding Company and Holders, as specified, dated
    September 20, 2000, filed as Exhibit 4.21on
    Form 10-Q, dated November 14, 2000, is hereby
    incorporated by reference.                                                                                                                                                                                                          
|        | 4.21 |             |  | First Supplement to the Pledge Agreement dated
    July 27, 1998, relating to AmerUs Life Holdings,
    Inc.s 7.0% ACES units, among American Mutual Holding
    Company, Goldman Sachs & Co., as Call Option Holder,
    the Chase Manhattan Bank, as Collateral Agent and First Union
    National Bank, as Unit Agent, dated September 20, 2000,
    filed as Exhibit 4.22 on Form 10-Q, dated
    November 14, 2000, is hereby incorporated by reference.
|        | 4.22 |             |  | First Supplement to Senior Indenture dated
    June 16, 1998, relating to AmerUs Life Holdings,
    Inc.s 6.95% Senior Notes, among American Mutual Holding
    Company, AmerUs Life Holdings, Inc. and First Union National
    Bank, as Trustee, dated September 20, 2000, filed as
    Exhibit 4.23 on Form 10-Q, dated November 14,
    2000, is hereby incorporated by reference.                                                                       
|        | 4.23 |             |  | Indenture dated as of March 6, 2002 between
    AmerUs Group Co. and BNY Midwest Trust Company, as Trustee,
    filed as Exhibit 4.1 on form 8-K/ A, dated
    February 28, 2002, is hereby incorporated by reference.                                                                                                                                                                                                                                        

50



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##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                 
|------- | ----- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 4.24  |             |  | Registration Rights Agreement dated as of
    March 6, 2002 between AmerUs Group Co. and 2002, is hereby
    incorporated by reference.                                                                                                                                                                                                                                                         
|        | 10.1  |             |  | Joint Venture Agreement, dated as of
    June 30, 1996, between American Mutual Insurance Company
    and Ameritas Life Insurance Corp., filed as Exhibit 10.2 on
    Form 10-K, dated March 25, 1998, is hereby
    incorporated by reference.                                                                                                                                                 
|        | 10.2  |             |  | Management and Administration Service Agreement,
    dated as of April 1, 1996, among American Mutual Life
    Insurance Company, Ameritas Variable Life Insurance Company and
    Ameritas Life Insurance Corp., filed as Exhibit 10.3 to the
    registration statement of AmerUs Life Holdings, Inc. on
    Form S-1, Registration Number 333-12239, is hereby
    incorporated by reference.
|        | 10.3  |             |  | AmerUs Life Holdings, Inc. Executive Stock
    Purchase Plan, dated November 13, 1998, filed as
    Exhibit 4.11 to the registration statement of AmerUs Life
    Holdings, Inc. on Form S-8, Registration Number 333-72237,
    is hereby incorporated by reference.                                                                                                                           
|        | 10.4  |             |  | AllrAmerUs Supplemental Executive Retirement
    Plan, effective January 1, 1996, filed as Exhibit 10.6
    to the registration statement of AmerUs Life Holdings, Inc. on
    Form S-1, Registration Number 333-12239, is hereby
    incorporated by reference.                                                                                                                                
|        | 10.5  |             |  | Management Incentive Plan, filed as
    Exhibit 10.9 to the registration statement of AmerUs Life
    Holdings, Inc. on Form S-1, Registration Number 333-12239,
    is hereby incorporated by reference.                                                                                                                                                                                       
|        | 10.6  |             |  | AmerUs Life Insurance Company Performance Share
    Plan, filed as Exhibit 10.10 to the registration statement of
    AmerUs Life Holdings, Inc. on Form S-1, Registration Number
    333-12239, is hereby incorporated by reference.                                                                                                                                                           
|        | 10.7  |             |  | AmerUs Life Stock Incentive Plan, filed as
    Exhibit 10.11 to the registration statement of AmerUs Life
    Holdings, Inc. on Form S-1, Registration Number 333-12239,
    is hereby incorporated by reference.                                                                                                                                                                               
|        | 10.8  |             |  | AmerUs Life Non-Employee Director Stock Plan,
    filed as Exhibit 10.13 to the registration statement of
    AmerUs Life Holdings, Inc. on Form S-1, Registration Number
    333-12239, is hereby incorporated by reference.                                                                                                                                                                   
|        | 10.9  |             |  | Form of Indemnification Agreement executed with
    directors and certain officers, filed as Exhibit 10.33 to
    the registration statement of AmerUs Life Holdings, Inc. on
    Form S-1, Registration Number 333-12239, is hereby
    incorporated by reference.                                                                                                                             
|        | 10.10 |             |  | Tax Allocation Agreement dated as of
    November 4, 1996, filed as Exhibit 10.68 to the
    registration statement of AmerUs Life Holdings, Inc. on Form
    S-1, Registration Number 333-12239, is hereby incorporated by
    reference.                                                                                                                                                      
|        | 10.11 |             |  | AmVestors Financial Corporation 1996 Incentive
    Stock Option Plan, filed as Exhibit (4)(a) to Registration
    Statement of AmVestors Financial Corporation on Form S-8,
    Registration Number 333-14571 dated October 21, 1996, is
    hereby incorporated by reference.                                                                                                                  
|        | 10.12 |             |  | AmerUs Group Co. Amended and Restated MIP
    Deferral Plan dated as of May 10, 2001 filed as
    Exhibit 10.12 on Form 10-K dated March 15, 2002,
    is hereby incorporated by reference.                                                                                                                                                                                                     
|        | 10.13 |             |  | Open Line of Credit Application and Terms
    Agreement, dated March 5, 1999, between Federal Home Loan
    Bank of Des Moines and AmerUs Life Insurance Company, filed as
    Exhibit 10.34 on Form 10-Q dated May 14, 1999, is
    hereby incorporated by reference.                                                                                                                          
|        | 10.14 |             |  | Facility and Guaranty Agreement, dated
    February 12, 1999, among The First National Bank of Chicago
    and AmerUs Life Holdings, Inc., filed as Exhibit 10.39 on
    Form 10-Q dated May 14, 1999, is hereby incorporated
    by reference.                                                                                                                                                 
|        | 10.15 |             |  | Form of Reimbursement Agreement, dated
    February 15, 1999, among AmerUs Life Holdings, Inc. and
    Roger K. Brooks, Victor N. Daley, Thomas C. Godlasky, Marcia S.
    Hanson, Mark V. Heitz and Gary R. McPhail, filed as
    Exhibit 10.40 on Form 10-Q dated May 14, 1999, is
    hereby incorporated by reference.                                                                      

51



---



##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | ----- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.16 |             |  | Amendment No. 1 to Facility Agreement, dated
    March 23, 1999, among The First National Bank of Chicago
    and AmerUs Life Holdings, Inc., filed as Exhibit 10.41 on
    Form 10-Q dated May 14, 1999, is hereby incorporated
    by reference.                                                                                                                                                                                                                                    
|        | 10.17 |             |  | 1999 Non-Employee Stock Option Plan, dated
    April 19, 1999, filed on Form S-3, Registration Number
    333-72643, is hereby incorporated by reference.                                                                                                                                                                                                                                                                                                                             
|        | 10.18 |             |  | Amendment No. 2 to Facility Agreement, dated
    January 25, 2000, among The First National Bank of Chicago
    and the Registrant, filed as Exhibit 10.44 on
    Form 10-K, dated March 8, 2000, is hereby incorporated
    by reference.                                                                                                                                                                                                                                            
|        | 10.19 |             |  | Amendment No. 3 to Facility Agreement dated
    December 12, 2001, among the First National Bank of Chicago
    and the Registrant filed as Exhibit 10.19 on Form 10-K
    dated March 15, 2002, is hereby incorporated by reference.                                                                                                                                                                                                                                                 
|        | 10.20 |             |  | Irrevocable Standby Letter of Credit Application
    and Terms Agreement, dated February 1, 2000, between
    Federal Home Loan Bank of Des Moines and AmerUs Life Insurance
    Company, filed as Exhibit 10.45 on Form 10-K, dated
    March 8, 2000, is hereby incorporated by reference.                                                                                                                                                                                          
|        | 10.21 |             |  | Investment Advisory Agreements, dated as of
    February 18, 2000, by and between Indianapolis Life
    Insurance Company, Bankers Life Insurance Company of New York,
    IL Annuity and Insurance Company, Western Security Life
    Insurance Company and AmerUs Capital Management Group, Inc.
    filed as Exhibits 10.1,10.3, 10.4 and 10.2, respectively, to
    AmerUs Life Holdings, Inc.s report on Form 8-K/ A on
    March 6, 2000, are hereby incorporated by reference.
|        | 10.22 |             |  | Advance, Pledge and Security Agreement, dated
    April 12, 2000, by and between the Federal Home Loan Bank
    of Topeka and American Investors Life Insurance Company, Inc.,
    filed as Exhibit 10.48 on Form 10-Q, dated
    May 15, 2000, is hereby incorporated by reference.                                                                                                                                                                                                  
|        | 10.23 |             |  | Institutional Custody Agreement, dated
    April 12, 2000, by and between the Federal Home Loan Bank
    of Topeka and American Investors Life Insurance Company, Inc.,
    filed as Exhibit 10.49 on Form 10-Q, dated
    May 15, 2000, is hereby incorporated by reference.                                                                                                                                                                                                         
|        | 10.24 |             |  | Line of Credit Application, dated April 12,
    2000, by and between the Federal Home Loan Bank of Topeka and
    American Investors Life Insurance Company, Inc., filed as
    Exhibit 10.50 on Form 10-Q, dated May 15, 2000,
    is hereby incorporated by reference.                                                                                                                                                                                                              
|        | 10.25 |             |  | Stock Purchase Agreement, dated February 1,
    2000, by and among AmVestors Financial Corporation, Creative
    Marketing International Corporation and the Stockholders of
    Creative Marketing International Corporation, filed as
    Exhibit 10.51 on Form 10-Q, dated May 15, 2000,
    is hereby incorporated by reference.                                                                                                                                                  
|        | 10.26 |             |  | Stock Purchase Agreement, dated February 23,
    2000, by and among American Investors Sales Group, Inc.,
    Community Bank Marketing, Inc. and Community Financial Services,
    Inc., filed as Exhibit 10.52 on Form 10-Q, dated
    May 15, 2000, is hereby incorporated by reference.                                                                                                                                                                                            
|        | 10.27 |             |  | Agreement for Advances, Pledge and Security
    Agreement, dated March 12, 1992, by and between Central
    Life Assurance Company and the Federal Home Loan Bank of Des
    Moines, filed as Exhibit 10.53 on Form 10-Q, dated
    May 15, 2000, is hereby incorporated by reference.                                                                                                                                                                                                
|        | 10.28 |             |  | Agreement for Advances, Pledge and Security
    Agreement, dated September 1, 1995, by and between American
    Vanguard Life Insurance Company and the Federal Home Loan Bank
    of Des Moines, filed as Exhibit 10.54 on Form 10-Q,
    dated May 15, 2000, is hereby incorporated by reference.                                                                                                                                                                                   
|        | 10.29 |             |  | Agreement and Plan of Merger, dated
    September 30, 1998, by and among AmVestors Financial
    Corporation, Senior Benefit Services of Kansas, Inc., Senior
    Benefit Services Insurance Agency, Inc., National Senior Benefit
    Services, Inc. and Richard McCarter, filed as Exhibit 10.55
    on Form 10-Q, dated May 15, 2000, is hereby
    incorporated by reference.                                                                                                     

52



---



##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- | ----- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.30 |             |  | Affirmation Agreement to Facility and Guaranty
    Agreement dated February 12, 1999 by American Mutual
    Holding Company, survivor of a merger with AmerUs Life Holdings,
    Inc. in favor of the Agent and the Lenders, dated
    September 20, 2000, filed as Exhibit 10.58 on
    Form 10-Q, dated November 14, 2000, is hereby
    incorporated by reference.                                                                                                     
|        | 10.31 |             |  | Amendment to Facility and Guaranty Agreement
    dated February 12, 1999 among The First National Bank of
    Chicago and AmerUs Group Co., dated September 20, 2000,
    filed as Exhibit 10.59 on Form 10-Q, dated
    November 14, 2000, is hereby incorporated by reference.                                                                                                                                                                                          
|        | 10.32 |             |  | AmerUs Group Co. 2000 Stock Incentive Plan, dated
    November 15, 2000, filed as Exhibit 99.9 to the
    registration statement of AmerUs Group Co. on Form S-8,
    Registration Number 333-50030, is hereby incorporated by
    reference.                                                                                                                                                                                                                             
|        | 10.33 |             |  | Employment Agreement between Indianapolis Life
    Insurance Company and Larry R. Prible dated May 11, 2000,
    filed as Exhibit 10.44 on Form 10-Q, dated
    November 13, 2001, is hereby incorporated by reference.                                                                                                                                                                                                                                                   
|        | 10.34 |             |  | Credit Agreement dated December 12, 2001,
    among AmerUs Group Co., Various Lending Institutions, the Bank
    of New York, Mellon Bank N.A., and Fleet National Bank as
    Co-Arranters and J P Morgan Chase Bank as Administrative Agent
    and Co-Arranger filed as Exhibit 10.35 on Form 10-K
    dated March 15, 2002, is hereby incorporated by reference.                                                                                                      
|        | 10.35 |             |  | First Amendment to Credit Agreement dated as of
    February 22, 2002, among AmerUs Group Co., the lending
    institutions party hereto, The Bank of New York, Mellon Bank
    N.A. and Fleet National Bank as Co-Arrangers and JPMorgan Chase
    Bank as Administrative Agent and Co-Arranger, files as
    Exhibit 10.35 on Form 10-Q dated May 14, 2002, is
    hereby incorporated by reference.                                                                    
|        | 10.36 |             |  | Consent dated as of March 15, 2002, among
    AmerUs Group Co., the lending institutions party hereto, The
    Bank of New York, Mellon Bank N.A. and Fleet National Bank as
    Co-Arrangers and JPMorgan Chase Bank as Administrative Agent and
    Co-Arranger, filed as Exhibit 10.36 on Form 10-Q dated
    May 14, 2002, is hereby incorporated by reference.                                                                                                       
|        | 10.37 |             |  | Amendment No. 1 to Joint Venture Agreement,
    dated April 1, 2002, by and between Ameritas Life Insurance
    Corp. and AmerUs Life Insurance Company filed as
    Exhibit 10.37 on Form 10-Q dated August 12, 2002
    is hereby incorporated by reference.                                                                                                                                                                                                            
|        | 10.38 |             |  | Distribution Commitment Agreement for Variable
    Business, dated April 1, 2002, by and between AmerUs Group
    Co. and Ameritas Variable Life Insurance Company filed as
    Exhibit 10.38 on Form 10-Q dated August 12, 2002
    is hereby incorporated by reference.                                                                                                                                                                                                 
|        | 10.39 |             |  | Amendment No. 4 to Facility Agreement dated
    February 12, 1999 by and among AmerUs Group Co. and Bank
    One, NA (f/k/a The First National Bank of Chicago), dated
    June 30, 2002 filed as Exhibit 10.39 on Form 10-Q
    dated August 12, 2002 is hereby incorporated by reference.                                                                                                                                                                               
|        | 10.40 |             |  | Supplemental Benefit Agreement among AmerUs Group
    Co. and Melinda S. Urion dated March 4, 2002 filed as
    Exhibit 10.1 on Form 10-Q dated November 13, 2002
    is hereby incorporated by reference.                                                                                                                                                                                                                                                                
|        | 10.41 |             |  | Retirement Agreement, dated March 14, 2000,
    by and between Victor N. Daley and AmerUs Life Holdings, Inc.,
    filed as Exhibit 99.8 on Form 10-Q, dated May 15,
    2000, is hereby incorporated by reference.                                                                                                                                                                                                                                                       
|        | 10.42 |             |  | First Amendment to Employment Agreement, dated as
    of April 15, 1999, to the Employment Agreement dated as of
    September 19, 1997, among Mark V. Heitz, AmVestors
    Financial Corporation, American Investors Life Insurance
    Company, Inc., AmVestors Investment Group, Inc., American
    Investors Sales Group, Inc., and AmerUs Life Holdings, Inc.,
    filed as Exhibit 99.4 on Form 10-Q dated August 13,
    1999, is hereby incorporated by reference.

53



---



##### 



|        |       |             |  |                                                                                                                                                                                                                                                                                 
|------- | ----- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|No.     |       | Description
|        |       |            
|        | 10.43 |             |  | Supplemental Benefit Agreement, dated as of
    April 15, 1999, among Roger K. Brooks and AmerUs Life
    Holdings, Inc., filed as Exhibit 99.5 on 10-Q dated
    August 13, 1999, is hereby incorporated by reference.                                                         
|        | 10.44 |             |  | Form of Supplemental Benefit Agreement, dated as
    of April 15, 1999, among AmerUs Life Holdings, Inc. and
    Victor N. Daley, Thomas C. Godlasky and Gary R. McPhail, filed
    as Exhibit 99.6 on Form 10-Q dated August 13,
    1999, is hereby incorporated by reference.
|        | 10.45 |             |  | Form of Supplemental Benefit Agreement, dated as
    of February 7, 2000, among AmerUs Life Holdings, Inc. and
    Victor N. Daley, Thomas C. Godlasky and Gary R. McPhail, filed
    as Exhibit 99.7 on Form 10-K, dated March 8, 2000
    is hereby incorporated by reference.
|        | 10.46 |             |  | AllrAmerUs Supplemental Executive Retirement Plan
    filed as Exhibit 4.3 to the registration statement on
    Form S-8, Registration Number 333-101961, is hereby
    incorporated by reference.                                                                              
|        | 12*   |             |  | Computation of Ratios of Earnings to Fixed
    Charges.                                                                                                                                                                                                                         
|        | 16.1  |             |  | Letter re Change in Certifying Accountant, filed
    as Exhibit 16.1 on Form 10-K dated March 9, 2001, is
    hereby incorporated by reference.                                                                                                                                 
|        | 21.1* |             |  | List of Subsidiaries of the Registrant.                                                                                                                                                                                                                                         
|        | 23.1* |             |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                   
|        | 23.2* |             |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                            




|  |                
|- | ---------------
|* | included herein

54



---



##### 



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |                                                
| | -----------------------------------------------
| | AMERUS GROUP CO.                               
|
| | /s/ ROGER K. BROOKS                            
| |                                                
| | Roger K. Brooks                                
| | Chairman, President and Chief Executive Officer

Date: March 14, 2003

POWER OF ATTORNEY

We, the undersigned officers and directors of
AmerUs Group Co., hereby severally and individually constitute
and appoint Melinda S. Urion, Brenda J. Cushing and James A.
Smallenberger, and each of them, the true and lawful attorneys
and agents of each of us to execute in the name, place and stead
of each of us (individually and in any capacity stated below)
any and all amendments to this Annual Report on Form 10-K
and all instruments necessary or advisable in connection
therewith and to file the same with the Securities and Exchange
Commission, each of said attorneys and agents to have the power
to act with or without the others and to have full power and
authority to do and perform in the name and on behalf of each of
the undersigned every act whatsoever necessary or advisable to
be done on the premises as fully and to all intents and purposes
as any of the undersigned might or could do in person, and we
hereby ratify and confirm our signatures as they may be signed
by or said attorneys and agents or each of them to any and all
such amendments and instruments.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities indicated.

|                                               |  |                                                                                               
|---------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|/s/ ROGER K. BROOKSRoger K. Brooks             |  | Chairman, President and Chief Executive Officer
    (principal executive officer) and Director
|/s/ MELINDA S. URIONMelinda S. Urion           |  | Executive Vice President and Chief Financial
    Officer (principal financial officer)        
|/s/ BRENDA J. CUSHINGBrenda J. Cushing         |  | Senior Vice President and Controller (principal
    accounting officer)                       
|/s/ JOHN R. ALBERSJohn R. Albers               |  | Director                                                                                      
|/s/ DAVID A. ARLEDGEDavid A. Arledge           |  | Director                                                                                      
|/s/ MALCOLM CANDLISHMalcolm Candlish           |  | Director                                                                                      
|/s/ ALECIA A. DECOUDREAUXAlecia A. DeCoudreaux |  | Director                                                                                      

55



---



##### 



|                                             |  |         
|-------------------------------------------- |  | --------
|/s/ THOMAS F. GAFFNEYThomas F. Gaffney       |  | Director
|/s/ JOHN W. NORRIS, JR.John W. Norris, Jr.   |  | Director
|/s/ ANDREW J. PAINE, JR.Andrew J. Paine, Jr. |  | Director
|/s/ JACK C. PESTERJack C. Pester             |  | Director
|/s/ JOHN A. WINGJohn A. Wing                 |  | Director
|/s/ F. A. WITTERN, JR.F. A. Wittern, Jr.     |  | Director

56



---



##### 



CERTIFICATIONS

I, Roger K. Brooks, Chairman, President and Chief
Executive Officer of AmerUs Group Co., certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of AmerUs Group Co;                                                                                                                                                                                                                                                                     
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                          



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Dated: March 14, 2003



|   |                     | 
|-- | ------------------- | 
|By | /s/ ROGER K. BROOKS | 

|                                                                     | 
|-------------------------------------------------------------------- | 
|                                                                     | 
|Roger K. Brooks                                                      | 
|Chairman, President and Chief Executive Officer
    AmerUs Group Co. | 

57



---



##### 



I, Melinda S. Urion, Chief Financial Officer of
AmerUs Group Co., certify that:



| |    |                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | I have reviewed this annual report on
    Form 10-K of AmerUs Group Co;                                                                                                                                                                                                                                                                     
|
| | 2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|
| | 3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this annual report;                       
|
| | 4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and have:                                                                                                          



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;
|
| | b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



| |    |                                                                                                                                                                                                                                                                
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent functions):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



| |    |                                                                                                                                                                                                                                                                                                                                                                                                        
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6. | The registrants other certifying officers
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Dated: March 14, 2003



|   |                      | 
|-- | -------------------- | 
|By | /s/ MELINDA S. URION | 

|                                         | 
|---------------------------------------- | 
|                                         | 
|Melinda S. Urion                         | 
|Chief Financial Officer AmerUs Group Co. | 

58



---



##### 



AMERUS GROUP CO.

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                         |  |                  
|-------------------------------------------------------------------------------------------------------- |  | -----------------
|Independent Auditors Reports                                                                            |  | F-2 through F-3  
|Consolidated Balance Sheets as of
    December 31, 2002 and 2001                                         |  | F-4 through F-5  
|Consolidated Statements of Income for the Years
    Ended December 31, 2002, 2001 and 2000               |  | F-6              
|Consolidated Statements of Comprehensive Income
    for the Years Ended December 31, 2002, 2001 and 2000 |  | F-7              
|Consolidated Statements of Stockholders
    Equity for the Years Ended December 31, 2002, 2001 and 2000 |  | F-8              
|Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2002, 2001 and 2000           |  | F-9 through F-11 
|Notes to Consolidated Financial Statements                                                               |  | F-12 through F-57

Separate financial statements of subsidiaries not
consolidated and 50% or less owned persons accounted for by the
equity method have been omitted because they do not individually
constitute a significant subsidiary.

F-1



---



##### 



REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS

The Board of Directors and Stockholders

AmerUs Group Co.


We have audited the accompanying consolidated
balance sheets of AmerUs Group Co. as of December 31, 2002
and 2001, and the related consolidated statements of income,
comprehensive income, stockholders equity, and cash flows
for the two years then ended. These financial statements are the
responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements based on our audits. The consolidated statements of
income, comprehensive income, stockholders equity and cash
flows of AmerUs Group Co. for the year ended December 31,
2000, were audited by other auditors whose report dated
February 5, 2001, expressed an unqualified opinion on those
statements.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the 2002 and 2001 financial
statements referred to above present fairly, in all material
respects, the consolidated financial position of AmerUs Group
Co. as of December 31, 2002 and 2001, and the consolidated
results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally
accepted in the United States.

As discussed in note 1 to the consolidated
financial statements, in 2002 the Company changed its method of
accounting for goodwill and other intangibles and in 2001 the
Company changed its method of accounting for derivative
instruments and its method of accounting for its closed block of
business.



| |                        
| | -----------------------
| | (ERNST & YOUNG LLP SIG)

Des Moines, Iowa

February 5, 2003


F-2



---



##### 



REPORT OF KPMG LLP, INDEPENDENT
AUDITORS

The Board of Directors and Stockholders

AmerUs Group Co.:


We have audited the accompanying consolidated
statements of income, comprehensive income, stockholders
equity and cash flows of AmerUs Group Co. and subsidiaries for
the year ended December 31, 2000. These consolidated
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the consolidated results of operations and cash flows
of AmerUs Group Co. and subsidiaries for the year ended December
31, 2000 in conformity with accounting principles generally
accepted in the United States of America.



| |           
| | ----------
| | (KPMG LLP)

Des Moines, Iowa

February 5, 2001


F-3



---



##### 



AMERUS GROUP CO.

CONSOLIDATED BALANCE SHEETS

($ in thousands)


|                                     |                                                         |                           |                   |         |            |            |         |         |            |            | 
|------------------------------------ | ------------------------------------------------------- | ------------------------- | ----------------- | ------- | ---------- | ---------- | ------- | ------- | ---------- | ---------- | 
|                                     |                                                         |                          
|                                     |                                                         | December 31,             
|                                     |                                                         |                          
|                                     |                                                         | 2002                      |                   | 2001   
|                                     |                                                         |                           |                   |        
|Assets                               |                                                         |                           |                   |         |            |            |         |        
|Investments:                         |                                                         |                           |                   |         |            |            |         |        
|                                     | Securities available-for-sale at fair value:            |                           |                   |         |            |            |         |         |           
|                                     |                                                         | Fixed maturity securities |                   | $       | 13,328,902 |            |         | $       | 11,037,425 |           
|                                     |                                                         | Equity securities         |                   |         | 63,345     |            |         |         | 11,362     |           
|                                     |                                                         | Short-term investments    |                   |         | 32,318     |            |         |         | 14,881     |           
|                                     | Securities held for trading purposes at fair
    value: |                           |                   |         |            |            |         |         |           
|                                     |                                                         | Fixed maturity securities |                   |         | 1,843,868  |            |         |         | 2,175,106  |           
|                                     |                                                         | Equity securities         |                   |         |           |            |         |         | 12,013     |           
|                                     |                                                         | Short-term investments    |                   |         |           |            |         |         | 4,212      |           
|                                     | Mortgage loans                                          |                           |                   | 883,034 |            |            |         | 944,532 |           
|                                     | Real estate                                             |                           |                   | 476     |            |            |         | 1,405   |           
|                                     | Policy loans                                            |                           |                   | 496,753 |            |            |         | 506,318 |           
|                                     | Other investments                                       |                           |                   | 283,794 |            |            |         | 345,179 |           
|                                     |                                                         |                           |                   |         |            |            |         |        
|                                     |                                                         |                           | Total investments |         |            | 16,932,490 |         |         |            | 15,052,433 | 
|Cash and cash equivalents            |                                                         |                           | 102,612           |         |            |            | 179,376 |        
|Accrued investment income            |                                                         |                           | 185,660           |         |            |            | 174,238 |        
|Premiums, fees and other receivables |                                                         |                           | 13,082            |         |            |            | 9,920   |        
|Reinsurance receivables              |                                                         |                           | 865,930           |         |            |            | 732,030 |        
|Deferred policy acquisition costs    |                                                         |                           | 884,239           |         |            |            | 642,680 |        
|Value of business acquired           |                                                         |                           | 454,159           |         |            |            | 583,829 |        
|Goodwill                             |                                                         |                           | 218,995           |         |            |            | 195,484 |        
|Property and equipment               |                                                         |                           | 74,188            |         |            |            | 83,221  |        
|Deferred income taxes                |                                                         |                           |                  |         |            |            | 12,140  |        
|Other assets                         |                                                         |                           | 326,397           |         |            |            | 305,416 |        
|Separate account assets              |                                                         |                           | 235,913           |         |            |            | 328,385 |        
|                                     |                                                         |                           |                   |         |            |            |         |        
|                                     |                                                         |                           | Total assets      |         | $          | 20,293,665 |         |         | $          | 18,299,152 | 
|                                     |                                                         |                           |                   |         |            |            |         |        

See accompanying notes to consolidated financial
statements.

F-4



---



##### 



AMERUS GROUP CO.



CONSOLIDATED BALANCE SHEETS


($ in thousands)


|                                         |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |           |            |            | 
|---------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | ------------------------------------------ | --------- | ---------- | ---------- | ---------- | --------- | ---------- | ---------- | 
|                                         |                                                                                                                                                                                                               |                                        
|                                         |                                                                                                                                                                                                               | December 31,                           
|                                         |                                                                                                                                                                                                               |                                        
|                                         |                                                                                                                                                                                                               | 2002                                    |                                            | 2001     
|                                         |                                                                                                                                                                                                               |                                         |                                            |          
|Liabilities and Stockholders
    Equity |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          
|Liabilities:                             |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          
|                                         | Policy reserves and policyowner funds:                                                                                                                                                                        |                                         |                                            |           |            |            |            |           |           
|                                         |                                                                                                                                                                                                               | Future life and annuity policy benefits |                                            | $         | 16,244,016 |            |            | $         | 15,102,001 |           
|                                         |                                                                                                                                                                                                               | Policyowner funds                       |                                            |           | 1,335,144  |            |            |           | 432,941    |           
|                                         |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          
|                                         |                                                                                                                                                                                                               |                                         | 17,579,160                                 |           |            |            | 15,534,942 |          
|                                         | Accrued expenses and other liabilities                                                                                                                                                                        |                                         |                                            | 283,836   |            |            |            | 512,500   |           
|                                         | Dividends payable to policyowners                                                                                                                                                                             |                                         |                                            | 303,062   |            |            |            | 221,224   |           
|                                         | Policy and contract claims                                                                                                                                                                                    |                                         |                                            | 39,569    |            |            |            | 33,147    |           
|                                         | Income taxes payable                                                                                                                                                                                          |                                         |                                            | 61,325    |            |            |            | 45,809    |           
|                                         | Deferred income taxes                                                                                                                                                                                         |                                         |                                            | 16,499    |            |            |            |          |           
|                                         | Notes payable                                                                                                                                                                                                 |                                         |                                            | 511,353   |            |            |            | 384,628   |           
|                                         | Separate account liabilities                                                                                                                                                                                  |                                         |                                            | 235,913   |            |            |            | 328,385   |           
|                                         |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          
|                                         |                                                                                                                                                                                                               |                                         | Total liabilities                          |           |            | 19,030,717 |            |           |            | 17,060,635 | 
|Stockholders equity:                    |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          
|                                         | Preferred Stock, no par value, 20,000,000 shares
    authorized, none issued                                                                                                                                  |                                         |                                            |          |            |            |            |          |           
|                                         | Common Stock, no par value, 230,000,000 shares
    authorized; 43,656,280 shares issued and 39,011,578 shares
    outstanding in 2002; 43,505,998 shares issued and 41,759,450
    shares outstanding in 2001 |                                         |                                            | 43,656    |            |            |            | 43,506    |           
|                                         | Additional paid-in capital                                                                                                                                                                                    |                                         |                                            | 1,179,646 |            |            |            | 1,177,688 |           
|                                         | Accumulated other comprehensive income (loss)                                                                                                                                                                 |                                         |                                            | 88,522    |            |            |            | 12,669    |           
|                                         | Unearned compensation                                                                                                                                                                                         |                                         |                                            | (458      | )          |            |            | (727      | )         
|                                         | Unallocated ESOP shares                                                                                                                                                                                       |                                         |                                            | (1,443    | )          |            |            | (224      | )         
|                                         | Retained earnings                                                                                                                                                                                             |                                         |                                            | 109,517   |            |            |            | 62,187    |           
|                                         | Treasury stock, at cost (4,644,702 shares in 2002
    and 1,746,548 shares in 2001)                                                                                                                           |                                         |                                            | (156,492  | )          |            |            | (56,582   | )         
|                                         |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          
|                                         |                                                                                                                                                                                                               |                                         | Total stockholders equity                 |           |            | 1,262,948  |            |           |            | 1,238,517  | 
|                                         |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          
|                                         |                                                                                                                                                                                                               |                                         | Total liabilities and stockholders equity |           | $          | 20,293,665 |            |           | $          | 18,299,152 | 
|                                         |                                                                                                                                                                                                               |                                         |                                            |           |            |            |            |          

See accompanying notes to consolidated financial
statements.

F-5



---



##### 



AMERUS GROUP CO.



CONSOLIDATED STATEMENTS OF INCOME


($ in thousands, except share data)


|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |            |  
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | -------------------------------- | --------- | ---------- | - | ---- | --------- | ---------- | - | - | --------- | ---------- | -
|                                                                          |                                                                                      |                                 
|                                                                          |                                                                                      | For The Years Ended December 31,
|                                                                          |                                                                                      |                                 
|                                                                          |                                                                                      | 2002                             |           | 2001       |   | 2000
|                                                                          |                                                                                      |                                  |           |            |   |     
|Revenues:                                                                 |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Insurance premiums                                                                   |                                  | $         | 350,812    |   |      | $         | 305,905    |   |   | $         | 266,155    |  
|                                                                          | Universal life and annuity product charges                                           |                                  |           | 161,510    |   |      |           | 146,055    |   |   |           | 99,940     |  
|                                                                          | Net investment income                                                                |                                  |           | 994,007    |   |      |           | 873,174    |   |   |           | 699,525    |  
|                                                                          | Realized/unrealized gains (losses) on
    investments                                |                                  |           | (149,919   | ) |      |           | (90,629    | ) |   |           | (28,975    | )
|                                                                          | Other income                                                                         |                                  |           | 71,986     |   |      |           | 47,024     |   |   |           | 35,292     |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          |                                                                                      |                                  | 1,428,396 |            |   |      | 1,281,529 |            |   |   | 1,071,937 |           
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Benefits and expenses:                                                    |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Policyowner benefits                                                                 |                                  |           | 890,688    |   |      |           | 753,003    |   |   |           | 624,361    |  
|                                                                          | Underwriting, acquisition and other expenses                                         |                                  |           | 152,749    |   |      |           | 140,471    |   |   |           | 123,467    |  
|                                                                          | Demutualization costs                                                                |                                  |           | 1,186      |   |      |           | 969        |   |   |           | 11,265     |  
|                                                                          | Restructuring costs                                                                  |                                  |           | 21,225     |   |      |           | 8,566      |   |   |           |           |  
|                                                                          | Amortization of deferred policy acquisition costs
    and value of business acquired |                                  |           | 139,565    |   |      |           | 132,899    |   |   |           | 92,750     |  
|                                                                          | Dividends to policyowners                                                            |                                  |           | 104,866    |   |      |           | 98,945     |   |   |           | 74,338     |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          |                                                                                      |                                  | 1,310,279 |            |   |      | 1,134,853 |            |   |   | 926,181   |           
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Income from continuing operations                                         |                                                                                      |                                  | 118,117   |            |   |      | 146,676   |            |   |   | 145,756   |           
|Interest expense                                                          |                                                                                      |                                  | 25,487    |            |   |      | 26,011    |            |   |   | 29,723    |           
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Income before income tax expense and minority
    interest                |                                                                                      |                                  | 92,630    |            |   |      | 120,665   |            |   |   | 116,033   |           
|Income tax expense                                                        |                                                                                      |                                  | 29,764    |            |   |      | 39,522    |            |   |   | 42,516    |           
|Minority interest                                                         |                                                                                      |                                  |          |            |   |      |          |            |   |   | 21,677    |           
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Net income from continuing operations                                     |                                                                                      |                                  | 62,866    |            |   |      | 81,143    |            |   |   | 51,840    |           
|Cumulative effect of change in accounting for
    derivatives, net of tax |                                                                                      |                                  |          |            |   |      | (8,236    | )          |   |   |          |           
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Net income                                                                |                                                                                      | $                                | 62,866    |            |   | $    | 72,907    |            |   | $ | 51,840    |           
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Net income from continuing operations per common
    share:               |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Basic                                                                                |                                  | $         | 1.57       |   |      | $         | 2.20       |   |   | $         | 2.48       |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Diluted                                                                              |                                  | $         | 1.56       |   |      | $         | 2.17       |   |   | $         | 2.46       |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Net income per common share:                                              |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Basic                                                                                |                                  | $         | 1.57       |   |      | $         | 1.97       |   |   | $         | 2.48       |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Diluted                                                                              |                                  | $         | 1.56       |   |      | $         | 1.95       |   |   | $         | 2.46       |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|Weighted average common shares outstanding:                               |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Basic                                                                                |                                  |           | 39,972,328 |   |      |           | 36,949,198 |   |   |           | 20,922,371 |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           
|                                                                          | Diluted                                                                              |                                  |           | 40,398,378 |   |      |           | 37,453,428 |   |   |           | 21,035,518 |  
|                                                                          |                                                                                      |                                  |           |            |   |      |           |            |   |   |           |           

See accompanying notes to consolidated financial
statements.

F-6



---



##### 



AMERUS GROUP CO.



CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME


($ in thousands)


|                                               |                                                                                 |                                                                                                  |         |         |          |      |         |         |         |   |         |         |         |  
|---------------------------------------------- | ------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ------- | ------- | -------- | ---- | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                               |                                                                                 |                                                                                                 
|                                               |                                                                                 | For The Years Ended December 31,                                                                
|                                               |                                                                                 |                                                                                                 
|                                               |                                                                                 | 2002                                                                                             |         | 2001    |          | 2000
|                                               |                                                                                 |                                                                                                  |         |         |          |     
|Net income                                     |                                                                                 | $                                                                                                | 62,866  |         |          | $    | 72,907  |         |         | $ | 51,840  |        
|Other comprehensive income (loss), before tax: |                                                                                 |                                                                                                  |         |         |          |      |         |         |         |   |         |        
|                                               | Unrealized gains (losses) on securities:                                        |                                                                                                  |         |         |          |      |         |         |         |   |         |         |        
|                                               |                                                                                 | Transfer related to unrealized gain on
    available-for-sale securities reclassified to trading |         |         |         |      |         |         | (662    | ) |         |         |        |  
|                                               |                                                                                 | Unrealized holding gains (losses) arising
    during period                                      |         |         | 17,324   |      |         |         | 31,298  |   |         |         | 92,221  |  
|                                               |                                                                                 | Less: Reclassification adjustment for gains
    (losses) included in net income                  |         |         | (101,261 | )    |         |         | (14,792 | ) |         |         | (15,994 | )
|                                               |                                                                                 | Minimum pension liability adjustment                                                             |         |         | (1,888   | )    |         |         | (3,587  | ) |         |         |        |  
|                                               |                                                                                 |                                                                                                  |         |         |          |      |         |         |         |   |         |        
|                                               | Other comprehensive income (loss), before tax                                   |                                                                                                  |         | 116,697 |          |      |         | 41,841  |         |   |         | 108,215 |        
|                                               | Income tax (expense) benefit related to
    items of other comprehensive income |                                                                                                  |         | (40,844 | )        |      |         | (14,645 | )       |   |         | (37,875 | )      
|                                               |                                                                                 |                                                                                                  |         |         |          |      |         |         |         |   |         |        
|                                               |                                                                                 |                                                                                                  | 75,853  |         |          |      | 27,196  |         |         |   | 70,340  |        
|                                               | Amounts attributable to:                                                        |                                                                                                  |         |         |          |      |         |         |         |   |         |         |        
|                                               |                                                                                 | Minority interest                                                                                |         |         |         |      |         |         |        |   |         |         | (19,580 | )
|                                               |                                                                                 | Change in accounting for derivatives                                                             |         |         |         |      |         |         | 2,661   |   |         |         |        |  
|                                               |                                                                                 |                                                                                                  |         |         |          |      |         |         |         |   |         |        
|                                               | Other comprehensive income (loss), net of taxes                                 |                                                                                                  |         | 75,853  |          |      |         | 29,857  |         |   |         | 50,760  |        
|                                               |                                                                                 |                                                                                                  |         |         |          |      |         |         |         |   |         |        
|Comprehensive income (loss)                    |                                                                                 | $                                                                                                | 138,719 |         |          | $    | 102,764 |         |         | $ | 102,600 |        
|                                               |                                                                                 |                                                                                                  |         |         |          |      |         |         |         |   |         |        

See accompanying notes to consolidated financial
statements.

F-7



---



##### 



AMERUS GROUP CO.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY


For the Years Ended December 31, 2002,
2001 and 2000


($ in thousands)


|                                                                                                        |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  
|------------------------------------------------------------------------------------------------------- |  | ------ | ------ | ---------- |  | ------------- | --------- | ------------ |  | ----------- | ------- | ---------- |  | -------- | ---- | -------- |  | ------------- | ------ | - |  | - | -------- | - |  | - | ------- | - |  | - | -------- | - |  | - | --------- | -
|                                                                                                        |  |        |        |            |  | Accumulated   |           |              |  |             |         |            |  |          |      |          |  |              
|                                                                                                        |  |        |        | Additional |  | Other         |           |              |  | Unallocated |         |            |  |          |      |          |  | Total        
|                                                                                                        |  | Common |        | Paid-In    |  | Comprehensive |           | Unearned     |  | ESOP        |         | Unassigned |  | Retained |      | Treasury |  | Stockholders
|                                                                                                        |  | Stock  |        | Capital    |  | Income (Loss) |           | Compensation |  | Shares      |         | Surplus    |  | Earnings |      | Stock    |  | Equity       
|                                                                                                        |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |              
|Balance at December 31, 1999                                                                            |  | $      |       |            |  | $             |          |              |  | $           | (67,948 | )          |  | $        | (187 | )        |  | $             | (797   | ) |  | $ | 840,962  |   |  | $ |        |   |  | $ |         |   |  | $ | 772,030   |  
|2000:                                                                                                   |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  
|Net income                                                                                              |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   | 33,801   |   |  |   | 18,039  |   |  |   |          |   |  |   | 51,840    |  
|Net unrealized gain (loss) on securities                                                                |  |        |        |            |  |               |           |              |  |             | 50,937  |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   | 50,937    |  
|Stock issued under various incentive plans, net
    of forfeitures                                      |  |        | 6      |            |  |               | 169       |              |  |             |        |            |  |          | 105  |          |  |               |       |   |  |   | 273      |   |  |   |        |   |  |   |         |   |  |   | 553       |  
|Dividends declared on common stock                                                                      |  |        |       |            |  |               |          |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   | (11,972 | ) |  |   |         |   |  |   | (11,972   | )
|Allocation of shares in leveraged ESOP                                                                  |  |        |       |            |  |               | 600       |              |  |             |        |            |  |          |     |          |  |               | 695    |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 1,295     |  
|Minority interest ownership changes                                                                     |  |        |       |            |  |               |          |              |  |             | (177    | )          |  |          |     |          |  |               | (2     | ) |  |   | 94       |   |  |   |        |   |  |   |         |   |  |   | (85       | )
|Acquisition of minority interest                                                                        |  |        | 12,615 |            |  |               | 285,405   |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 298,020   |  
|Demutualization of AmerUs Group                                                                         |  |        | 17,390 |            |  |               | 518,535   |              |  |             |        |            |  |          | (64  | )        |  |               | (579   | ) |  |   | (875,130 | ) |  |   |        |   |  |   |         |   |  |   | (339,848  | )
|Other                                                                                                   |  |        |       |            |  |               | 5,185     |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 5,185     |  
|                                                                                                        |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  
|Balance at December 31, 2000                                                                            |  |        | 30,011 |            |  |               | 809,894   |              |  |             | (17,188 | )          |  |          | (146 | )        |  |               | (683   | ) |  |   |         |   |  |   | 6,067   |   |  |   |         |   |  |   | 827,955   |  
|2001:                                                                                                   |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  
|Net income                                                                                              |  |        |       |            |  |               |          |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   | 72,907  |   |  |   |         |   |  |   | 72,907    |  
|Change in accounting for derivatives                                                                    |  |        |       |            |  |               |          |              |  |             | 2,661   |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 2,661     |  
|Transfer related to unrealized gain (loss) on
    available-for-sale securities reclassified to trading |  |        |       |            |  |               |          |              |  |             | (430    | )          |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | (430      | )
|Net unrealized gain (loss) on securities                                                                |  |        |       |            |  |               |          |              |  |             | 35,891  |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 35,891    |  
|Net unrealized gain (loss) on derivatives
    designated as cash flow hedges                            |  |        |       |            |  |               |          |              |  |             | (5,933  | )          |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | (5,933    | )
|Stock issued under various incentive plans, net
    of forfeitures                                      |  |        | 206    |            |  |               | 5,861     |              |  |             |        |            |  |          | (581 | )        |  |               |       |   |  |   |         |   |  |   |        |   |  |   | 108      |   |  |   | 5,594     |  
|Stock issued under exercise of warrants                                                                 |  |        |       |            |  |               | (1,383    | )            |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   | 4,468    |   |  |   | 3,085     |  
|Dividends declared on common stock                                                                      |  |        |       |            |  |               |          |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   | (16,787 | ) |  |   |         |   |  |   | (16,787   | )
|Purchase of treasury stock                                                                              |  |        |       |            |  |               |          |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   | (44,985  | ) |  |   | (44,985   | )
|Acquisition of IL Holdings                                                                              |  |        | 9,047  |            |  |               | 223,358   |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 232,405   |  
|Conversion of company-obligated mandatorily
    redeemable preferred capital securities                 |  |        | 4,242  |            |  |               | 139,478   |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   | (16,173  | ) |  |   | 127,547   |  
|Allocation of shares in leveraged ESOP                                                                  |  |        |       |            |  |               | 480       |              |  |             |        |            |  |          |     |          |  |               | 459    |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 939       |  
|Minimum pension liability adjustment                                                                    |  |        |       |            |  |               |          |              |  |             | (2,332  | )          |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | (2,332    | )
|                                                                                                        |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  
|Balance at December 31, 2001                                                                            |  |        | 43,506 |            |  |               | 1,177,688 |              |  |             | 12,669  |            |  |          | (727 | )        |  |               | (224   | ) |  |   |         |   |  |   | 62,187  |   |  |   | (56,582  | ) |  |   | 1,238,517 |  
|2002:                                                                                                   |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  
|Net income                                                                                              |  |        |       |            |  |               |          |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   | 62,866  |   |  |   |         |   |  |   | 62,866    |  
|Net unrealized gain (loss) on securities                                                                |  |        |       |            |  |               |          |              |  |             | 73,646  |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 73,646    |  
|Net unrealized gain (loss) on derivatives
    designated as cash flow hedges                            |  |        |       |            |  |               |          |              |  |             | 3,434   |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 3,434     |  
|Stock issued under various incentive plans, net
    of forfeitures                                      |  |        | 150    |            |  |               | 5,730     |              |  |             |        |            |  |          | 269  |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   | 1        |   |  |   | 6,150     |  
|Stock issued under exercise of warrants                                                                 |  |        |       |            |  |               | (3,802    | )            |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   | 12,205   |   |  |   | 8,403     |  
|Purchase of ESOP shares and treasury stock                                                              |  |        |       |            |  |               |          |              |  |             |        |            |  |          |     |          |  |               | (2,522 | ) |  |   |         |   |  |   |        |   |  |   | (112,116 | ) |  |   | (114,638  | )
|Dividends declared on common stock                                                                      |  |        |       |            |  |               |          |              |  |             |        |            |  |          |     |          |  |               |       |   |  |   |         |   |  |   | (15,536 | ) |  |   |         |   |  |   | (15,536   | )
|Allocation of shares in leveraged ESOP                                                                  |  |        |       |            |  |               | 30        |              |  |             |        |            |  |          |     |          |  |               | 1,303  |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | 1,333     |  
|Minimum pension liability adjustment                                                                    |  |        |       |            |  |               |          |              |  |             | (1,227  | )          |  |          |     |          |  |               |       |   |  |   |         |   |  |   |        |   |  |   |         |   |  |   | (1,227    | )
|                                                                                                        |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  
|Balance at December 31, 2002                                                                            |  | $      | 43,656 |            |  | $             | 1,179,646 |              |  | $           | 88,522  |            |  | $        | (458 | )        |  | $             | (1,443 | ) |  | $ |         |   |  | $ | 109,517 |   |  | $ | (156,492 | ) |  | $ | 1,262,948 |  
|                                                                                                        |  |        |        |            |  |               |           |              |  |             |         |            |  |          |      |          |  |               |        |   |  |   |          |   |  |   |         |   |  |   |          |   |  |   |           |  

See accompanying notes to consolidated financial
statements.

F-8



---



##### 



AMERUS GROUP CO.



CONSOLIDATED STATEMENTS OF CASH
FLOWS


($ in thousands)


|                                                                                      |                                                                                                                       |                                                            |                        |          |          |         |            |          |          |         |            |         |          |         |  
|------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ---------------------- | -------- | -------- | ------- | ---------- | -------- | -------- | ------- | ---------- | ------- | -------- | ------- | -
|                                                                                      |                                                                                                                       |                                                           
|                                                                                      |                                                                                                                       | For The Years Ended December 31,                          
|                                                                                      |                                                                                                                       |                                                           
|                                                                                      |                                                                                                                       | 2002                                                       |                        | 2001     |          | 2000   
|                                                                                      |                                                                                                                       |                                                            |                        |          |          |        
|Cash flows from operating activities                                                  |                                                                                                                       |                                                            |                        |          |          |         |            |          |          |         |            |        
|Net income                                                                            |                                                                                                                       | $                                                          | 62,866                 |          |          | $       | 72,907     |          |          | $       | 51,840     |        
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                                                       |                                                            |                        |          |          |         |            |          |          |         |            |        
|                                                                                      | Cumulative effect of change in accounting for
    derivatives                                                         |                                                            |                        |         |          |         |            | 8,236    |          |         |            |        |         
|                                                                                      | Product charges on universal life and annuity
    products                                                            |                                                            |                        | (129,387 | )        |         |            | (121,547 | )        |         |            | (72,952 | )       
|                                                                                      | Interest credited to policyowner account balances                                                                     |                                                            |                        | 437,557  |          |         |            | 392,663  |          |         |            | 310,175 |         
|                                                                                      | Change in option value of equity-indexed products
    and market value adjustments on total return strategy annuities |                                                            |                        | (28,759  | )        |         |            | (52,747  | )        |         |            |        |         
|                                                                                      | Realized/unrealized (gains) losses on
    investments                                                                 |                                                            |                        | 149,919  |          |         |            | 90,629   |          |         |            | 28,975  |         
|                                                                                      | Goodwill amortization                                                                                                 |                                                            |                        |         |          |         |            | 8,324    |          |         |            | 8,259   |         
|                                                                                      | DAC and VOBA amortization                                                                                             |                                                            |                        | 139,565  |          |         |            | 132,899  |          |         |            | 92,750  |         
|                                                                                      | Minority interest                                                                                                     |                                                            |                        |         |          |         |            |         |          |         |            | 21,677  |         
|                                                                                      | Change in:                                                                                                            |                                                            |                        |          |          |         |            |          |          |         |            |         |         
|                                                                                      |                                                                                                                       | Accrued investment income                                  |                        |          | (11,422  | )       |            |          | (6,891   | )       |            |         | (6,889   | )      
|                                                                                      |                                                                                                                       | Reinsurance receivables                                    |                        |          | (129,638 | )       |            |          | (123,569 | )       |            |         | (3,929   | )      
|                                                                                      |                                                                                                                       | Securities held for trading purposes:                      |                        |          |          |         |            |          |          |         |            |         |          |        
|                                                                                      |                                                                                                                       |                                                            | Fixed maturities       |          |          | 321,836 |            |          |          | 49,329  |            |         |          |        |  
|                                                                                      |                                                                                                                       |                                                            | Equity securities      |          |          | 12,013  |            |          |          | (11,342 | )          |         |          |        |  
|                                                                                      |                                                                                                                       |                                                            | Short-term investments |          |          | 4,221   |            |          |          | (4,186  | )          |         |          |        |  
|                                                                                      |                                                                                                                       | DAC and VOBA                                               |                        |          | (405,493 | )       |            |          | (318,653 | )       |            |         | (193,073 | )      
|                                                                                      |                                                                                                                       | Liabilities for future policy benefits                     |                        |          | 525,538  |         |            |          | 54,746   |         |            |         | 133,371  |        
|                                                                                      |                                                                                                                       | Accrued expenses and other liabilities                     |                        |          | (40,684  | )       |            |          | (64,984  | )       |            |         | 10,919   |        
|                                                                                      |                                                                                                                       | Policy and contract claims and other policyowner
    funds |                        |          | 30,769   |         |            |          | (48,423  | )       |            |         | (5,500   | )      
|                                                                                      |                                                                                                                       | Income taxes:                                              |                        |          |          |         |            |          |          |         |            |         |          |        
|                                                                                      |                                                                                                                       |                                                            | Current                |          |          | 14,837  |            |          |          | 39,092  |            |         |          | (12,563 | )
|                                                                                      |                                                                                                                       |                                                            | Deferred               |          |          | (24,363 | )          |          |          | (7,914  | )          |         |          | 20,691  |  
|                                                                                      | Other, net                                                                                                            |                                                            |                        | (9,321   | )        |         |            | 8,545    |          |         |            | (10,500 | )       
|                                                                                      |                                                                                                                       |                                                            |                        |          |          |         |            |          |          |         |            |        
|                                                                                      | Net cash provided by operating activities                                                                             |                                                            |                        | 920,054  |          |         |            | 97,114   |          |         |            | 373,251 |         
|                                                                                      |                                                                                                                       |                                                            |                        |          |          |         |            |          |          |         |            |        
|Cash flows from investing
    activities:                                             |                                                                                                                       |                                                            |                        |          |          |         |            |          |          |         |            |        
|Purchase of fixed maturities available-for-sale                                       |                                                                                                                       |                                                            | (8,269,367             | )        |          |         | (4,673,375 | )        |          |         | (1,954,326 | )      
|Proceeds from sale of fixed maturities
    available-for-sale                         |                                                                                                                       |                                                            | 5,736,480              |          |          |         | 2,745,381  |          |          |         | 949,325    |        
|Maturities, calls and principal reductions of
    fixed maturities available-for-sale |                                                                                                                       |                                                            | 959,293                |          |          |         | 1,006,631  |          |          |         | 690,060    |        
|Purchase of equity securities                                                         |                                                                                                                       |                                                            | (66,408                | )        |          |         | (51,190    | )        |          |         | (141,532   | )      
|Proceeds from sale of equity securities                                               |                                                                                                                       |                                                            | 771                    |          |          |         | 57,013     |          |          |         | 30,933     |        
|Change in short-term investments, net                                                 |                                                                                                                       |                                                            | (17,216                | )        |          |         | 5,656      |          |          |         | (22,353    | )      
|Purchase of mortgage loans                                                            |                                                                                                                       |                                                            | (64,416                | )        |          |         | (150,143   | )        |          |         | (90,964    | )      

F-9



---



##### 



AMERUS GROUP CO.

CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)

($ in thousands)


|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |        |          |  
|----------------------------------------------------------------------------- | ----------------- | ------------------------------------------------------- | ---------- | ------ | ---------- | ---- | ---------- | ------ | -------- | - | ---------- | ------ | -------- | -
|                                                                              |                   |                                                        
|                                                                              |                   | For The Years Ended December 31,                       
|                                                                              |                   |                                                        
|                                                                              |                   | 2002                                                    |            | 2001   |            | 2000
|                                                                              |                   |                                                         |            |        |            |     
|Proceeds from repayment and sale of mortgage loans                            |                   |                                                         | 130,855    |        |            |      | 118,479    |        |          |   | 202,270    |       
|Purchase of real estate and other invested assets                             |                   |                                                         | (28,872    | )      |            |      | (104,438   | )      |          |   | (104,284   | )     
|Proceeds from sale of real estate and other
    invested assets               |                   |                                                         | 61,661     |        |            |      | 48,417     |        |          |   | 122,113    |       
|Change in policy loans, net                                                   |                   |                                                         | 9,565      |        |            |      | 3,883      |        |          |   | (14,763    | )     
|Other assets, net                                                             |                   |                                                         | 4,684      |        |            |      | (75,997    | )      |          |   | (104,999   | )     
|Acquisitions, net of cash acquired                                            |                   |                                                         |           |        |            |      | 156,925    |        |          |   |           |       
|Purchase of minority interest                                                 |                   |                                                         |           |        |            |      |           |        |          |   | (969       | )     
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|                                                                              |                   | Net cash used in investing activities                   |            |        | (1,542,970 | )    |            |        | (912,758 | ) |            |        | (439,489 | )
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|Cash flows from financing
    activities:                                     |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|Deposits to policyowner account balances                                      |                   |                                                         | 2,180,925  |        |            |      | 2,137,698  |        |          |   | 1,567,284  |       
|Withdrawals from policyowner account balances                                 |                   |                                                         | (1,630,869 | )      |            |      | (1,231,109 | )      |          |   | (1,435,150 | )     
|Change in debt, net                                                           |                   |                                                         | (38,703    | )      |            |      | 74,947     |        |          |   | 19,364     |       
|Dividends to shareholders                                                     |                   |                                                         | (15,536    | )      |            |      | (16,787    | )      |          |   | (13,240    | )     
|Stock issued under various incentive plans, net
    of forfeitures            |                   |                                                         | 14,553     |        |            |      | 8,678      |        |          |   |           |       
|Purchase of treasury stock                                                    |                   |                                                         | (114,638   | )      |            |      | (44,985    | )      |          |   |           |       
|Proceeds from issuance of OCEANs                                              |                   |                                                         | 179,593    |        |            |      |           |        |          |   |           |       
|Purchase of company-obligated mandatorily
    redeemable capital securities   |                   |                                                         | (20,805    | )      |            |      |           |        |          |   |           |       
|Conversion of company-obligated mandatorily
    redeemable capital securities |                   |                                                         |           |        |            |      | 154        |        |          |   |           |       
|Adoption and allocation of shares in leveraged
    ESOP                       |                   |                                                         | 1,333      |        |            |      | 939        |        |          |   | 1,295      |       
|Cash paid for demutualization distribution                                    |                   |                                                         |           |        |            |      |           |        |          |   | (306,168   | )     
|Transfer of pension obligation to trustee                                     |                   |                                                         | (9,481     | )      |            |      |           |        |          |   |           |       
|Other, net                                                                    |                   |                                                         | (220       | )      |            |      |           |        |          |   | 640        |       
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|                                                                              |                   | Net cash provided by (used in) financing
    activities |            |        | 546,152    |      |            |        | 929,535  |   |            |        | (165,975 | )
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|                                                                              |                   | Net increase (decrease) in cash                         |            |        | (76,764    | )    |            |        | 113,891  |   |            |        | (232,213 | )
|Cash and cash equivalents at beginning of period                              |                   |                                                         | 179,376    |        |            |      | 65,485     |        |          |   | 297,698    |       
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|Cash and cash equivalents at end of period                                    |                   | $                                                       | 102,612    |        |            | $    | 179,376    |        |          | $ | 65,485     |       
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|Supplemental disclosure of cash
    activities:                               |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|                                                                              | Interest paid     |                                                         | $          | 25,408 |            |      | $          | 29,325 |          |   | $          | 39,415 |         
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       
|                                                                              | Income taxes paid |                                                         | $          | 22,351 |            |      | $          | 1,914  |          |   | $          | 4,043  |         
|                                                                              |                   |                                                         |            |        |            |      |            |        |          |   |            |       

F-10



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##### 



AMERUS GROUP CO.

CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)

($ in thousands)


|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |           | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | - | ---- |  | ---- | - | --------- | - |  | - | --------- | 
|                                             |                                                                                                                                   |                                 
|                                             |                                                                                                                                   | For The Years Ended December 31,
|                                             |                                                                                                                                   |                                 
|                                             |                                                                                                                                   | 2002                             |   | 2001 |  | 2000
|                                             |                                                                                                                                   |                                  |   |      |  |     
|Details of acquisitions:                     |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|                                             | Fair value of assets acquired                                                                                                     |                                  | $ |     |  |      | $ | 5,676,350 |   |  | $ |          | 
|                                             | Liabilities assumed                                                                                                               |                                  |   |     |  |      |   | 5,349,908 |   |  |   |          | 
|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|                                             | Carrying value of acquisitions                                                                                                    |                                  |   |     |  |      |   | 326,442   |   |  |   |          | 
|                                             | Common stock issued                                                                                                               |                                  |   |     |  |      |   | (232,405  | ) |  |   |          | 
|                                             | Accrual of cash payout component of purchase price                                                                                |                                  |   |     |  |      |   | (9,000    | ) |  |   |          | 
|                                             | Preliminary investment in ILGC                                                                                                    |                                  |   |     |  |      |   | (77,200   | ) |  |   |          | 
|                                             | Acquisition costs previously paid                                                                                                 |                                  |   |     |  |      |   | (2,857    | ) |  |   |          | 
|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|                                             | Cash paid                                                                                                                         |                                  |   |     |  |      |   | 4,980     |   |  |   |          | 
|                                             | Less: Cash acquired                                                                                                               |                                  |   |     |  |      |   | 161,905   |   |  |   |          | 
|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|                                             | Net cash (received in) acquisitions                                                                                               |                                  | $ |     |  |      | $ | (156,925  | ) |  | $ |          | 
|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|Details of acquisition of minority interest: |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|                                             | Minority interest ownership in assets acquired                                                                                    |                                  | $ |     |  |      | $ |          |   |  | $ | 4,750,145 | 
|                                             | Minority interest ownership of liabilities assumed                                                                                |                                  |   |     |  |      |   |          |   |  |   | 4,499,238 | 
|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|                                             | Fair value of minority interest acquired                                                                                          |                                  |   |     |  |      |   |          |   |  |   | 250,907   | 
|                                             | Allocation of excess costs of acquiring the
    minority interest over the fair value of identifiable assets
    less liabilities |                                  |   |     |  |      |   |          |   |  |   | 47,113    | 
|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          
|                                             | Value of common stock issued to acquire minority
    interest                                                                     |                                  | $ |     |  |      | $ |          |   |  | $ | 298,020   | 
|                                             |                                                                                                                                   |                                  |   |      |  |      |   |           |   |  |   |          

See accompanying notes to consolidated financial
statements.

F-11



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##### 



AMERUS GROUP CO.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


(1) SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Nature of Operations

AmerUs Group Co. (Company) is a holding company
whose subsidiaries are primarily engaged in the business of
marketing, underwriting and distributing a broad range of
individual life insurance, annuity and insurance deposit
products to individuals and businesses in all 50 states, the
District of Columbia and the U.S. Virgin Islands. The Company
has two reportable operating segments: protection products and
accumulation products. The protection products segment was
formerly known as the life insurance segment and the
accumulation products segments was formerly known as the annuity
segment. The primary offerings of the protection products
segments are whole life, interest-sensitive whole life, term
life, universal life and equity-indexed life insurance policies.
The primary offerings of the accumulation products segment are
individual deferred fixed annuities, equity-indexed annuities
and funding agreements.

Demutualization

The Company was formerly known as American Mutual
Holding Company (AMHC) and was a mutual insurance holding
company whose principal asset was a 58% interest in AmerUs Life
Holdings, Inc. (ALHI). Public stockholders owned the remaining
42% interest in ALHI (Minority Interest). ALHI was a holding
company which directly or indirectly owned three principal life
insurance subsidiaries: AmerUs Life Insurance Company (ALIC),
American Investors Life Insurance Company, Inc. (American) and
Delta Life and Annuity Company (Delta). On September 20,
2000, AMHC converted to stock form, changed its name to AmerUs
Group Co. and acquired the Minority Interest of ALHI by issuing
AmerUs Group Co. common stock in exchange for the outstanding
shares of ALHI held by the public. The value of the stock
exchange was approximately $298 million and ALHI merged
into the Company simultaneously with the stock exchange.

Prior to the conversion of the Company to a stock
form, the Company was owned by individuals and entities who held
insurance policies or annuity contracts issued by ALIC
(Members). In the conversion, which is referred to as a
demutualization, the Company distributed cash, policy credits
and its newly issued common stock to its Members in exchange for
their membership interests. The value of the distribution
totaled approximately $792 million.

The acquisition of the ALHI Minority Interest by
the Company was accounted for as a purchase and accordingly 42%
of the book value of the assets and liabilities of ALHI were
adjusted to market value as of the acquisition date.
Approximately 42% of the ALHI earnings for the reporting periods
up to the acquisition date are reduced from the Companys
results of operations on the line titled minority interest in
the Companys consolidated statements of income. From the
acquisition date forward, the Companys results of
operations include 100% of these earnings.

Consolidation and Basis of
Presentation

The accompanying consolidated financial
statements of the Company and its wholly-owned subsidiaries have
been prepared in conformity with accounting principles generally
accepted in the United States (GAAP) which, as to the insurance
company subsidiaries, differ from statutory accounting practices
prescribed or permitted by regulatory authorities.

The accompanying consolidated financial
statements include the accounts and operations of the Company
and its wholly-owned subsidiaries, principally, ALIC, AmerUs
Annuity Group Co. (AAG, formerly AmVestors Financial Corporation
(AmVestors)), AmerUs Capital Management Group, Inc. (ACM), and
ILICO Holdings, Inc., the holding company of Indianapolis Life
Insurance Company (ILIC) and its subsidiaries (ILICO). As
discussed in note 15, ILICO was acquired in May 2001. All
significant intercompany transactions and balances have been
eliminated in consolidation.

F-12



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Effective on March 29, 2002, Western
Security Life Insurance Company, a subsidiary of ILIC, was sold.
The insurance business of Western Security Life Insurance
Company was transferred to ILIC prior to the sale. The sale of
the corporate organization and insurance licenses resulted in a
gain of approximately $1.9 million which is included in
realized gains.

The residential financing and property operations
were previously for sale and were carried as discontinued
operations in the consolidated financial statements. During
2002, it was determined the sale would not be completed. As a
result, the consolidated financial statements for prior periods
have been restated to reclassify the assets, liabilities, and
income of the discontinued operations to the respective
financial statement line items. There was no adjustment to the
carrying value of the net assets of these operations, and
accordingly, there was no effect on stockholders equity or
net income for the restatement.

Certain amounts in the 2001 and 2000 financial
statements have been reclassified to conform to the 2002
financial statement presentation.

The preparation of consolidated financial
statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates. The valuation of financial instruments, derivatives,
amortization of deferred policy acquisition costs and value of
business acquired, and purchase accounting valuations are areas
which involve a high degree of estimation to determine their
reported amounts. These areas are described in more detail in
the following policies.

Cash and Cash Equivalents

For purposes of reporting cash flows, the Company
includes cash and amounts due from other financial institutions
and interest-bearing deposits in other financial institutions
purchased with original maturities of three months or less in
cash and cash equivalents. Amounts of interest-bearing deposits
included as cash equivalents at December 31, 2002 and 2001
were $99.1 million and $186.4 million, respectively.

Closed Block

The Company has established two Closed Blocks of
policies: (a) the first on June 30, 1996 in connection
with the reorganization of ALIC from a mutual company to a stock
company, and (b) the second on March 31, 2001 in
connection with the reorganization of ILIC from a mutual company
to a stock company (collectively, the Closed Block). Insurance
policies which had a dividend scale in effect as of each Closed
Block establishment date were included in the Closed Block. The
Closed Block was designed to give reasonable assurance to owners
of insurance policies that, after the reorganization of ALIC and
ILIC, assets would be available to maintain the dividend scales
and interest credits in effect prior to the reorganization, if
the experience underlying such scales and crediting continues.
The assets, including revenue therefrom, allocated to the Closed
Block will accrue solely to the benefit of the owners of
policies included in the Closed Block until the Closed Block no
longer exists. The Company will continue to pay guaranteed
benefits under all policies, including policies included in the
Closed Block, in accordance with their terms. In the event that
the Closed Blocks assets were insufficient to meet the
benefits of the Closed Blocks guaranteed benefits, general
assets would be utilized to meet the contractual benefits of the
Closed Blocks policyholders.

A policyholder dividend obligation is required to
be established for earnings in the Closed Block that are not
available to shareholders. A model of the Closed Block was
established to produce the pattern of expected earnings in the
Closed Block. If actual cumulative earnings of the Closed Block
are greater than the expected cumulative earnings of the Closed
Block, only the expected cumulative earnings will be recognized
in income with the excess recorded as a policyholder dividend
obligation. This policyholder dividend obligation represents
undistributed accumulated earnings that will be paid to Closed
Block policyholders as additional

F-13



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##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

policyholder dividends unless offset by future
performance of the Closed Block that is less favorable than
originally expected. If actual cumulative performance is less
favorable than expected, only actual earnings will be recognized
in income.

Effective January 1, 2001, the Company
adopted the Accounting Standards Executive Committees
Statement of Position 00-3 Accounting by Insurance
Enterprises for Demutualizations and Formations of Mutual
Insurance Holding Companies and for Long-Duration Participating
Contracts (SOP 00-3). The provisions of SOP 00-3
required the Company to modify its presentation of the Closed
Block in its consolidated financial statements to no longer show
the operations of the Closed Block and the assets and
liabilities of the Closed Block as single line items. In
addition, SOP 00-3 required the Company to report unrealized
gains and losses on the Closed Blocks investments as a
component of the Closed Blocks policyholder dividend
obligation rather than accumulated other comprehensive income
(AOCI). As a result, unrealized gains net of deferred taxes
amounting to $6.0 million at December 31, 2000 were
reclassified from accumulated other comprehensive income to
dividends payable to policyowners. There was no net income
effect of adopting SOP 00-3.

Investments

Investments in fixed maturity securities, equity
securities and short-term investments that are to be held for
indefinite periods of time are reported as securities
available-for-sale and are reported in the accompanying
consolidated financial statements at fair value. Any valuation
changes resulting from changes in the fair value of these
securities are reflected as a component of stockholders
equity, except for certain policies which have specific
investments identified and for which valuation changes and
related unrealized gains and losses are included in future life
and annuity policy benefits. These unrealized gains or losses in
stockholders equity are reported net of taxes and
adjustments to deferred policy acquisition costs (DAC), value of
business acquired (VOBA) and policy reserves. Fixed maturity and
equity securities that are bought and held principally to back
our total return strategy fixed annuity products are reported as
trading securities and are carried at fair value with unrealized
gains or losses reported in operations. Premiums and discounts
on fixed maturity securities are amortized or accreted over the
life of the related security as an adjustment to yield using the
effective interest method. The accreted carrying value of
investments in structured securities that can be contractually
prepaid or settled in a way that substantially all of an
investment may not be recovered is determined by updating the
estimate for the amount and timing of cash flows with resulting
adjustments in the accretable yield accounted for prospectively.
Should this estimate of cash flows reflect an adverse change
from an immediately preceding estimate, an other-than-temporary
impairment is deemed to have occurred and, accordingly, the
structured security is written down to fair value with the
change reflected in income. For loan-backed and structured
securities included in fixed maturity securities, income is
recognized using a constant effective yield based on currently
anticipated cash flows.

Investments are considered impaired when the
Company determines that collection of principal or interest is
doubtful and adjusts such investments to fair value when it is
determined an impairment is other than temporary.

Market values of fixed maturity securities are
reported based on quoted market prices, where available. Market
values of fixed maturity securities not actively traded in a
liquid market are estimated by comparison to similar securities
with quoted prices when possible. Otherwise, the most recent
purchases and sales of similar unquoted securities, independent
broker quotes or internally prepared valuations are used to
estimate fair value. Internally prepared valuations use a matrix
calculation assuming a spread (based on interest rates and a
risk assessment of the bonds) over U.S. Treasury bonds. Market
values of the conversion features embedded in convertible fixed
maturity securities are estimated using an option-pricing model.
Market values of redeemable preferred stocks and equity
securities are based on the latest quoted market prices, or for
those not readily marketable, generally at values which are
representative of the market values of comparable issues.

F-14



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Loans and other long-term investments are stated
at cost less amortized discounts and allowances for possible
losses. Policy loans are stated at their aggregate unpaid
balances. Investments in loans and real estate are considered
impaired when the Company determines that collection of all
amounts due under the contractual terms is doubtful or carrying
values exceed the fair value of underlying collateral. The
Company adjusts such assets to their estimated net realizable
value at the point at which it determines an impairment is other
than temporary. Interest income on impaired mortgage loans is
recognized when cash is received. In addition, the Company has
established a valuation allowance for loans, real estate, and
other invested assets. Valuation allowances for other than
temporary impairments in value are netted against the asset
categories to which they apply, and additions to valuation
allowances are included in total investment results.

Real estate is stated at cost less accumulated
depreciation. Depreciation is calculated over the estimated
useful lives using primarily accelerated depreciation methods.

The Company issued a $250 million fixed rate
funding agreement in 1999. Under the transaction, a five-year
floating rate insurance contract was issued to a commercial
paper conduit which was swapped to a fixed-rate. During 2002,
additional funding agreements totaling $875 million were
placed primarily in six to ten year fixed rate insurance
contracts. The assets backing the funding agreements are legally
segregated and are not subject to claims that arise out of any
other business of the Company. The funding agreements are
further backed by the general account assets of the insurance
companies. The segregated assets and liabilities are included
with general account assets in the financial statements. The
funding agreements may not be cancelled by the counter-party
unless there is a default under the agreements, but the Company
may terminate the agreements at any time.

Investments in partnerships in which the
Companys ownership percentage exceeds 3% and joint
ventures are generally accounted for under the equity method
whereby the Company initially records the investment at cost.
Subsequently, the Company increases or decreases the carrying
amount of the investment for its share of income or loss, of the
investee. Investments in partnerships in which the
Companys ownership percentage is less than 3% are
generally accounted for under the cost method whereby dividends
received by the investee are recognized as income. The Company
is primarily a limited partner in such investments. These
investments are shown as other investments and totaled
approximately $56.3 million and $75.1 million at
December 31, 2002 and 2001, respectively.

Realized gains and losses are included in
earnings and are determined using the specific identification
method. The carrying value of investments is reduced to its
estimated realizable value if a decline in fair value is
considered other than temporary with such reduction charged to
earnings.

Derivative Instruments and Hedging
Activities

The Company uses financial instruments including
options, futures, swaps, caps and swaptions to reduce its
exposure to changes in interest rates and to manage duration
mismatches. The Company also uses call options to hedge
equity-indexed life and annuity products. The use of these
financial instruments modifies the exposure of these risks with
the intent to reduce the risk and variability to the Company.
Although the Company is subject to the risk that counterparties
will fail to perform, credit standings of counterparties are
monitored regularly. The Company is not a party to leveraged
derivatives. Derivative instruments are included in other
investments.

Effective January 1, 2001, the Company
adopted Statement of Financial Accounting Standard
(SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by
SFAS 137 and 138. SFAS 133 requires that all
derivative instruments, including certain derivative instruments
embedded in other contracts, be reported on the consolidated
balance sheet at fair value. Accounting for gains and losses
resulting from changes in the fair values of derivatives is
dependent upon the

F-15



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

use of the derivative and its qualification for
special hedge accounting. See note 4 for additional
information regarding the adoption of SFAS 133.

Prior to the adoption of SFAS 133, the net
interest effect of interest rate swap transactions was recorded
as an adjustment to investment income over the periods covered
by the agreements. The initial cost of other hedging instruments
was amortized over their remaining lives as adjustments to
investment income. Certain agreements that hedged assets carried
at fair value were also carried at fair value. Any unamortized
gains or losses were recognized when the underlying investments
were sold.

Policy Acquisition Costs

Certain commissions, policy issue and
underwriting costs, and other variable costs, including bonus
interest, incurred to acquire or renew traditional life
insurance, universal life insurance, and annuity products are
deferred. The method of amortizing DAC for traditional life
insurance products varies, dependent upon whether the contract
is participating or non-participating. Participating contracts
are those which are expected to pay dividends to policyowners in
proportion to their relative contribution to the Companys
statutory surplus. DAC for participating traditional life
insurance is generally amortized over the life of the policies
in proportion to the present value of estimated gross margins.
Non-participating traditional life insurance DAC is amortized
over the premium-paying period of the related policies in
proportion to the ratio of annual premium revenues to total
anticipated premium revenues using assumptions consistent with
those used in computing policy benefit reserves. For universal
life insurance and annuity products, DAC is generally amortized
in proportion to the present value of estimated gross margins
from surrender charges and investment, mortality, and expense
margins. The amortization for participating traditional life,
universal life, and annuity products is adjusted retrospectively
when current or estimated future gross margins on the underlying
policies vary from previous estimates. The DAC asset is also
adjusted for the impact on estimated gross profits of net
unrealized gains and losses on securities.

Value of Business Acquired

The portion of the purchase price from insurance
companies allocated to the right to receive future cash flows
from insurance contracts existing at the date of the acquisition
is referred to as VOBA. This cost of policies purchased
represents the actuarially determined present value of the
projected future cash flows from the acquired policies.

The expected future cash flows used in
determining such value are based on actuarially determined
projections of future premium receipts, mortality, surrenders,
operating expenses, changes in insurance liabilities, investment
yields on the assets retained to support the policy liabilities
and other factors. These projections take into account all
factors known or expected at the valuation date, based on the
judgment of management. The actual experience on purchased
business may vary from projections due to differences in renewal
premium, investment spread, investment gains or losses,
mortality and morbidity costs and other factors.

The discount rate used to determine the value of
policies purchased is the rate of return required in order to
invest in the business being acquired. Factors in determining
this rate include the cost of capital required to fund the
acquisition; the acquired companys compatibility with
other Company activities that may impact future cash flows; the
complexity of the acquired company; and recent discount rates
used by others to determine valuations to acquire similar blocks
of business.

VOBA is amortized based on the incidence of the
expected cash flows using the interest rate credited to the
underlying policies. If cash flows differ from expectations, the
amortization of the VOBA is adjusted. The VOBA asset is adjusted
for the impact on estimated gross profits of net unrealized
gains and losses on securities. Each year, the recoverability of
the VOBA is evaluated and if the evaluation indicates that the

F-16



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

existing insurance liabilities, together with the
present value of future net cash flows from the blocks of
business acquired, is insufficient to recover the VOBA, the
difference is charged to expense as an additional write-off of
the VOBA.

Goodwill

Goodwill represents the excess of the amount paid
to acquire a company over the fair value of its net assets.
Prior to 2002, goodwill was amortized on a straight-line basis
over a thirty year period. Effective January 1, 2002, the
Company adopted SFAS 142, Goodwill and Other Intangible
Assets. SFAS 142 adopts a nonamortization,
impairment  only model for the Companys
goodwill and indefinite-lived intangible assets. This includes a
more stringent impairment test methodology for measuring and
recognizing impairment losses. The Company accordingly
discontinued amortization of goodwill on January 1, 2002.
See note 17 for additional information regarding the
adoption of SFAS 142.

Property and Equipment

Property and equipment is recorded at cost and is
depreciated principally under the straight-line method over the
estimated useful lives of the assets.

Separate Account

Separate account assets and liabilities represent
funds that are separately administered, principally for variable
annuity contracts, and for which the contractholder, rather than
the Company, bears the investment risk. Separate account
contractholders have no claim against the assets of the general
funds of the Company. Separate account assets are reported at
fair value. The operations of the separate accounts are not
included in the accompanying consolidated financial statements.

Recognition of Revenues

Premiums for traditional life insurance products
(including those products with fixed and guaranteed premiums and
benefits and which consist principally of whole life insurance
policies and certain annuities with life contingencies) are
recognized as revenues when due. For limited payment life
insurance policies, premiums are recorded as income when due
with any excess profit deferred and recognized over the expected
lives of the contracts. Amounts received as payments for
universal life insurance policies, annuity products (including
deferred annuities and annuities without life contingencies) and
funding agreements are not recorded as premium revenue. Revenues
for such contracts consist of policy charges for the cost of
insurance, policy administration charges, and surrender charges
assessed against policyowner account balances during the period.
All insurance-related revenue is reported net of reinsurance
ceded.

Future Policy Benefits

The liability for future policy benefits for
traditional life insurance is computed using the net level
method, utilizing the guaranteed interest and mortality rates
used in calculating cash surrender values as described in the
contracts. Reserve interest assumptions range from
2.00 percent to 7.50 percent. The weighted average
interest rate for all traditional life policy reserves was
4.60 percent in 2002, 4.81 percent in 2001 and
4.35 percent in 2000. Policy benefit claims are charged to
expense in the period that the claims are incurred. All
insurance-related benefits, losses, and expenses are reported
net of reinsurance ceded.

Future policy benefit reserves for universal life
insurance, annuity products and funding agreements are computed
under a retrospective deposit method and represent policy
account balances before applicable surrender charges. In
addition, reserves for universal life policies include a
deferred revenue liability, if any, for excess first-year
policyowner charges. Policy benefits and claims that are charged
to expense include benefit

F-17



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

claims incurred in the period in excess of
related policy account balances. The weighted average interest
crediting rates for universal life products were
5.39 percent in 2002, 5.63 percent in 2001 and
5.62 percent in 2000. The range of interest crediting rates
for annuity products, excluding bonus interest payouts, was 3.00
to 7.20 percent in 2002, 3.00 to 7.16 percent in 2001 and
4.00 to 7.16 percent in 2000. The weighted average interest
rate for funding agreements was 4.69 percent for the
fixed-rate agreements and 2.01 percent for the
floating-rate agreements in 2002, 4.46 percent for the
floating-rate agreement in 2001 and 6.75 percent for the
floating-rate agreement in 2000.

Reinsurance

The Company enters into reinsurance agreements
with other companies in the normal course of business. The
Company may assume reinsurance or cede reinsurance to other
companies. Assets and liabilities related to reinsurance ceded
are reported on a gross basis. Premiums and expenses are
reported net of reinsurance ceded. The Company is contingently
liable for the portion of the policies reinsured under each of
its existing reinsurance agreements in the event the reinsurance
companies are unable to pay their portion of any reinsured
claim. Management believes that any liability from this
contingency is unlikely. However, to limit the possibility of
such losses, the Company evaluates the financial condition of
its reinsurers and monitors concentration of credit risk.

Participating Policies

Participating policies entitle the policyowners
to receive dividends based on actual interest, mortality,
morbidity, and expense experience for the related policies.
These dividends are distributed to the policyowners through an
annual dividend using current dividend scales which are approved
by the board of directors. Approximately 56 percent in 2002
and 66 percent in 2001 of traditional life policies are
currently paying dividends. Traditional life policies represent
approximately 70 percent in 2002 and 2001 of the
Companys individual life policies in force (based on face
amounts).

Stock-Based Compensation

At December 31, 2002, the Company has
stock-based employee compensation plans, which are described
more fully in note 13. The Company accounts for those plans
under the recognition and measurement principles of APB Opinion
No. 25, Accounting for Stock Issued to
Employees, and related interpretations. No stock-based
employee compensation cost is reflected in net income, as all
options granted under those plans had an exercise price equal to
the market value of the underlying common stock on the date of
grant. The following table illustrates the effect on net income
and earnings per share if the Company had applied the

F-18



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

fair value recognition provisions of SFAS 123,
Accounting for Stock-Based Compensation, to
stock-based employee compensation ($ in thousands):

|                                                                                                                                                    |  |                                  |        |      |  |      |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                                                                                    |  |                                 
|                                                                                                                                                    |  | For The Years Ended December 31,
|                                                                                                                                                    |  |                                 
|                                                                                                                                                    |  | 2002                             |        | 2001 |  | 2000
|                                                                                                                                                    |  |                                  |        |      |  |     
|Net income, as reported                                                                                                                             |  | $                                | 62,866 |      |  | $    | 72,907 |   |  | $ | 51,840 |  
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects |  |                                  | (5,094 | )    |  |      | (5,123 | ) |  |   | (1,555 | )
|                                                                                                                                                    |  |                                  |        |      |  |      |        |   |  |   |        |  
|Pro forma net income                                                                                                                                |  | $                                | 57,772 |      |  | $    | 67,784 |   |  | $ | 50,285 |  
|                                                                                                                                                    |  |                                  |        |      |  |      |        |   |  |   |        |  
|Earnings per share:                                                                                                                                 |  |                                  |        |      |  |      |        |   |  |   |        |  
|Basic  as reported                                                                                                                                 |  | $                                | 1.57   |      |  | $    | 1.97   |   |  | $ | 2.48   |  
|                                                                                                                                                    |  |                                  |        |      |  |      |        |   |  |   |        |  
|Basic  pro forma                                                                                                                                   |  | $                                | 1.45   |      |  | $    | 1.83   |   |  | $ | 2.40   |  
|                                                                                                                                                    |  |                                  |        |      |  |      |        |   |  |   |        |  
|Diluted  as reported                                                                                                                               |  | $                                | 1.56   |      |  | $    | 1.95   |   |  | $ | 2.46   |  
|                                                                                                                                                    |  |                                  |        |      |  |      |        |   |  |   |        |  
|Diluted  pro forma                                                                                                                                 |  | $                                | 1.43   |      |  | $    | 1.81   |   |  | $ | 2.39   |  
|                                                                                                                                                    |  |                                  |        |      |  |      |        |   |  |   |        |  

Guaranty Fund Assessments

The Company is subject to insurance guaranty laws
in the states in which it writes business. These laws provide
for assessments against insurance companies for the benefit of
policyowners and claimants in the event of insolvency of other
life insurance companies. As of December 31, 2002 and 2001,
the Company has accrued for the gross amount of guaranty fund
assessments for known insolvencies and has established an other
asset for assessments expected to be recovered through future
premium tax offsets.

Benefit Plan Costs

The Company accounts for its pension benefits and
other post retirement benefits other than pensions, including
medical and life insurance, using the full accrual method.

Income Taxes

The Company and its non-life insurance
subsidiaries file a consolidated federal income tax return. The
life insurance subsidiaries file separate federal income tax
returns, except for ILIC, Bankers Life Insurance Company of
New York and IL Annuity and Insurance Company (IL Annuity)
which together file a consolidated tax return beginning in 2002.
In prior years, the life insurance subsidiaries filed separate
federal income tax returns. The separate return method is used
to compute the Companys provision for allocating federal
income taxes. Deferred income tax assets and liabilities are
determined based on differences among the financial reporting
and tax bases of assets and liabilities and are measured using
the enacted tax rates and laws.

Comprehensive Income (Loss)

Comprehensive income (loss) includes all
changes in stockholders equity during a period except
those resulting from investments by and distributions to
stockholders. Other comprehensive income (loss) excludes
net realized investment gains included in net income which
merely represent transfers from unrealized to realized gains and
losses. Such amounts totaled ($101.3) million, ($14.8) million
and ($16.0) million in 2002, 2001 and 2000, respectively.

F-19



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Earnings Per Share

Basic earnings per share of common stock are
computed by dividing net income by the weighted-average number
of common shares outstanding during the period. Diluted earnings
per share assumes the issuance of common shares applicable to
stock options and warrants and is calculated using the treasury
stock method. In addition, diluted earnings per share applicable
to the Companys Optionally Convertible Equity-linked
Accreting Notes (OCEANsSM) are determined using the
if-converted method for the number of days in the period in
which the common stock price conversion condition is met. No
undistributed net income has been allocated to the convertible
securities holders since their participation in dividends with
common stockholders is established at the amount of the annual
regular dividend. See further discussion of the OCEANs in
note 8.

Emerging Accounting Matters

FIN 45

In November 2002, the Financial Accounting
Standards Board issued FASB Interpretation No. 45, 
Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others, or FIN 45. FIN 45 clarifies disclosure
and recognition and measurement requirements related to certain
guarantees. The disclosure requirements are effective for
financial statements issued after December 15, 2002 and the
recognition and measurement requirements are effective on a
prospective basis for guarantees issued or modified after
December 31, 2002. See note 12 for disclosures related
to our guarantees.

FIN 46

In January 2003, the Financial Accounting
Standards Board issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an
Interpretation of ARB 51, (FIN 46). FIN 46
provides guidance to identify variable interest entities, or
VIEs, and their consolidation by a primary beneficiary. A VIE is
defined as an entity in which either 1) the equity
investors, if any, do not have a controlling financial interest,
or 2) the equity investment at risk is insufficient to
finance that entitys activities without receiving
additional subordinated financial support from other parties. An
enterprise whose investment in a VIE absorbs the majority of the
VIEs expected losses or receives a majority of its
expected residual returns is considered a primary beneficiary,
although not all VIEs will have a primary beneficiary.
FIN 46 requires primary beneficiaries to consolidate VIEs
in their financial statements and also requires additional
disclosures for enterprises which are not primary beneficiaries
but which have a significant variable interest in a VIE. The
provisions of FIN 46 are effective immediately for VIEs created
after January 31, 2003 and is to be applied in the first
interim period beginning after June 15, 2003 for interests
in VIEs acquired before February 1, 2003. The additional
disclosure is required for financial statements issued after
January 31, 2003. At December 31, 2002, the Company
held interests in structured securities arrangements which meet
the definition of VIEs. The Company would be considered the
primary beneficiary for several of those structured securities,
which if consolidated at December 31, 2002, would result in
an increase in total assets of $167 million, an increase in
total liabilities of $154 million and an increase in total
stockholders equity of $13 million. See note 3
for disclosures and additional information related to the VIE
interests.

Business Risks

The Company operates in a business environment
which is subject to various risks and uncertainties. Such risks
and uncertainties include interest rate risk, legal and
regulatory changes and default risk.

Interest rate risk is the potential for interest
rates to change, which can cause fluctuations in the value of
investments. To the extent that fluctuations in interest rates
cause the duration of assets and liabilities to differ, the
Company may have to sell assets prior to their maturity and
realize losses. Interest rate exposure for

F-20



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the investment portfolio is managed through
asset/liability management techniques which attempt to match the
duration of the assets with the estimated duration of the
liabilities. The Company also utilizes derivative investment
contracts to manage interest rate risk.

The potential also exists for changes in the
legal or regulatory environment in which the Company operates,
which can create additional costs and expenses not anticipated
by the Company in pricing its products. Such regulatory
initiatives or new legal theories may create costs for the
Company beyond those recorded in the financial statements. The
Company mitigates this risk by closely monitoring the regulatory
environment to anticipate changes and by using underwriting
practices which identify and minimize the potential adverse
impact of this risk.

Default risk is the risk that issuers of
securities owned by the Company may default or that other
parties, including reinsurers, may not be able to pay amounts
due the Company. The Company attempts to minimize this risk by
adhering to a conservative investment strategy, holding a well
diversified portfolio of assets to minimize concentrations,
maintaining sound reinsurance and credit and collection policies
and providing allowances or reserves for any amounts deemed
uncollectible.

(2) CLOSED BLOCK

The Closed Block is presented on a pre-tax basis
and accordingly does not include current or deferred taxes.
Summarized financial information of the Closed Block as of
December 31, 2002, 2001 and 2000 and for the years then
ended is as follows:

|                                                                                                           |                   |                  |           |           |  |      |           |           |  |   |           |           | 
|---------------------------------------------------------------------------------------------------------- | ----------------- | ---------------- | --------- | --------- |  | ---- | --------- | --------- |  | - | --------- | --------- | 
|                                                                                                           |                   | 2002             |           | 2001      |  | 2000
|                                                                                                           |                   |                  |           |           |  |     
|                                                                                                           |                   |                 
|                                                                                                           |                   | ($ in thousands)
|Liabilities:                                                                                               |                   |                  |           |           |  |      |           |           |  |   |           |          
|Future life and annuity policy benefits                                                                    |                   | $                | 2,840,041 |           |  | $    | 2,835,423 |           |  | $ | 1,654,784 |          
|Policyowner funds                                                                                          |                   |                  | 4,400     |           |  |      | 4,656     |           |  |   | 5,081     |          
|Accrued expenses and other liabilities                                                                     |                   |                  | 44,295    |           |  |      | 69,678    |           |  |   | 36,621    |          
|Dividends payable to policyowners                                                                          |                   |                  | 147,177   |           |  |      | 154,139   |           |  |   | 138,991   |          
|Policy and contract claims                                                                                 |                   |                  | 10,390    |           |  |      | 8,843     |           |  |   | 5,495     |          
|Policyowner dividend obligation                                                                            |                   |                  | 118,623   |           |  |      | 61,486    |           |  |   | 24,916    |          
|                                                                                                           |                   |                  |           |           |  |      |           |           |  |   |           |          
|                                                                                                           | Total Liabilities |                  |           | 3,164,926 |  |      |           | 3,134,225 |  |   |           | 1,865,888 | 
|                                                                                                           |                   |                  |           |           |  |      |           |           |  |   |           |          
|Assets:                                                                                                    |                   |                  |           |           |  |      |           |           |  |   |           |          
|Fixed maturity securities (amortized cost
    2002  $1,869,218; 2001  $1,785,042;
    2000  $1,182,324) |                   |                  | 1,970,659 |           |  |      | 1,829,060 |           |  |   | 1,191,592 |          
|Mortgage loans                                                                                             |                   |                  | 90,872    |           |  |      | 105,901   |           |  |   |          |          
|Policy loans                                                                                               |                   |                  | 354,784   |           |  |      | 363,981   |           |  |   | 201,092   |          
|Other investments                                                                                          |                   |                  | 1,047     |           |  |      | 4,653     |           |  |   | 2,934     |          
|Cash and cash equivalents                                                                                  |                   |                  | 6,178     |           |  |      | 18,382    |           |  |   | 3,025     |          
|Accrued investment income                                                                                  |                   |                  | 30,726    |           |  |      | 32,396    |           |  |   | 16,811    |          
|Premiums and fees receivable                                                                               |                   |                  | 16,999    |           |  |      | 22,414    |           |  |   | 7,062     |          
|Other assets                                                                                               |                   |                  | 23,917    |           |  |      | 41,827    |           |  |   | 41,885    |          
|                                                                                                           |                   |                  |           |           |  |      |           |           |  |   |           |          
|                                                                                                           | Total Assets      |                  |           | 2,495,182 |  |      |           | 2,418,614 |  |   |           | 1,464,401 | 
|                                                                                                           |                   |                  |           |           |  |      |           |           |  |   |           |          
|Maximum future earnings to be recognized from
    assets and liabilities of the Closed Block               |                   | $                | 669,744   |           |  | $    | 715,611   |           |  | $ | 401,487   |          
|                                                                                                           |                   |                  |           |           |  |      |           |           |  |   |           |          

F-21



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                      |  |                  |          |      |  |      |          |   |  |   |          |  
|--------------------------------------------------------------------- |  | ---------------- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                                      |  | 2002             |          | 2001 |  | 2000
|                                                                      |  |                  |          |      |  |     
|                                                                      |  |                 
|                                                                      |  | ($ in thousands)
|Change in policyowner dividend
    obligation:                        |  |                  |          |      |  |      |          |   |  |   |          |  
|Balance at beginning of year                                          |  | $                | 61,486   |      |  | $    | 24,916   |   |  | $ |         |  
|Impact on net income before income taxes                              |  |                  | (287     | )    |  |      | 1,820    |   |  |   | (783     | )
|Unrealized investment gains (losses)                                  |  |                  | 57,424   |      |  |      | 34,750   |   |  |   | 25,699   |  
|                                                                      |  |                  |          |      |  |      |          |   |  |   |          |  
|Balance at end of year                                                |  | $                | 118,623  |      |  | $    | 61,486   |   |  | $ | 24,916   |  
|                                                                      |  |                  |          |      |  |      |          |   |  |   |          |  
|Operations:                                                           |  |                  |          |      |  |      |          |   |  |   |          |  
|Insurance premiums                                                    |  | $                | 265,586  |      |  | $    | 220,291  |   |  | $ | 185,350  |  
|Universal life and annuity product charges                            |  |                  | 8,750    |      |  |      | 12,200   |   |  |   | 12,485   |  
|Net investment income                                                 |  |                  | 157,928  |      |  |      | 132,402  |   |  |   | 97,952   |  
|Realized gains (losses) on investments                                |  |                  | (2,400   | )    |  |      | 8,719    |   |  |   | (695     | )
|Policyowner benefits                                                  |  |                  | (284,821 | )    |  |      | (239,688 | ) |  |   | (200,850 | )
|Underwriting, acquisition and other expenses                          |  |                  | (4,843   | )    |  |      | (5,958   | ) |  |   | (1,415   | )
|Dividends to policyowners                                             |  |                  | (95,443  | )    |  |      | (91,609  | ) |  |   | (68,324  | )
|                                                                      |  |                  |          |      |  |      |          |   |  |   |          |  
|Contribution from the Closed Block before income
    taxes            |  | $                | 44,757   |      |  | $    | 36,357   |   |  | $ | 24,503   |  
|                                                                      |  |                  |          |      |  |      |          |   |  |   |          |  
|Maximum future earnings from Closed Block
    assets and liabilities: |  |                  |          |      |  |      |          |   |  |   |          |  
|Beginning of year                                                     |  | $                | 715,611  |      |  | $    | 401,487  |   |  | $ | 420,119  |  
|Pretax contribution from the Closed Block                             |  |                  | (44,757  | )    |  |      | (36,357  | ) |  |   | (24,503  | )
|Federal income taxes funded by the Closed Block                       |  |                  | 14,553   |      |  |      | 5,336    |   |  |   | 21,492   |  
|Acquisition of Minority Interest adjustment                           |  |                  |         |      |  |      |         |   |  |   | 13,993   |  
|Acquisition of Closed Block and related adjustment                    |  |                  | (15,663  | )    |  |      | 345,145  |   |  |   |         |  
|Unrealized losses limited to zero policyowner
    dividend obligation |  |                  |         |      |  |      |         |   |  |   | (29,614  | )
|                                                                      |  |                  |          |      |  |      |          |   |  |   |          |  
|Balance at end of year                                                |  | $                | 669,744  |      |  | $    | 715,611  |   |  | $ | 401,487  |  
|                                                                      |  |                  |          |      |  |      |          |   |  |   |          |  

F-22



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(3) INVESTMENTS

Investment Assets

The Companys investments at
December 31, 2002 and 2001 classified as securities
available-for-sale and securities held for trading purposes are
summarized as follows (the amortized cost for securities held
for trading purposes represents carrying value):

|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |           |            | 
|-------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------ | ------ | ---------- | ---------- | ---------- | ----- | ------- | ------- | - | --- | ------- | ------- | - | ------ | --------- | ---------- | 
|                                                         |                                           |                                                 
|                                                         |                                           | 2002                                            
|                                                         |                                           |                                                 
|                                                         |                                           |                                                  |        | Gross      |            | Gross      |       |        
|                                                         |                                           | Amortized                                        |        | unrealized |            | unrealized |       | Fair   
|                                                         |                                           | cost                                             |        | gains      |            | losses     |       | value  
|                                                         |                                           |                                                  |        |            |            |            |       |        
|                                                         |                                           |                                                 
|                                                         |                                           | ($ in thousands)                                
|Fixed maturity securities available-for-sale:            |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|                                                         | Corporate bonds                           |                                                  | $      | 8,111,585  |            |            | $     | 510,062 |         |   | $   | 133,461 |         |   | $      | 8,488,186 |           
|                                                         | U.S. government bonds                     |                                                  |        | 638,103    |            |            |       | 28,392  |         |   |     | 421     |         |   |        | 666,074   |           
|                                                         | State and political subdivisions          |                                                  |        | 45,336     |            |            |       | 4,633   |         |   |     |        |         |   |        | 49,969    |           
|                                                         | Foreign government bonds                  |                                                  |        | 236,601    |            |            |       | 9,831   |         |   |     | 3,157   |         |   |        | 243,275   |           
|                                                         | Asset-backed bonds                        |                                                  |        | 796,877    |            |            |       | 20,376  |         |   |     | 43,984  |         |   |        | 773,269   |           
|                                                         | Collateralized mortgage-backed securities |                                                  |        | 639,236    |            |            |       | 36,760  |         |   |     | 365     |         |   |        | 675,631   |           
|                                                         | Mortgage-backed bonds                     |                                                  |        | 2,248,055  |            |            |       | 72,721  |         |   |     | 278     |         |   |        | 2,320,498 |           
|                                                         | Redeemable preferred stock                |                                                  |        | 151,919    |            |            |       | 282     |         |   |     | 40,201  |         |   |        | 112,000   |           
|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total fixed maturities available-for-sale        |        |            | 12,867,712 |            |       |         | 683,057 |   |     |         | 221,867 |   |        |           | 13,328,902 | 
|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|Fixed maturity securities held for trading
    purposes: |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|                                                         | Corporate bonds                           |                                                  |        | 1,443,401  |            |            |       |        |         |   |     |        |         |   |        | 1,443,401 |           
|                                                         | U.S. government bonds                     |                                                  |        | 306,970    |            |            |       |        |         |   |     |        |         |   |        | 306,970   |           
|                                                         | Foreign government bonds                  |                                                  |        | 3,633      |            |            |       |        |         |   |     |        |         |   |        | 3,633     |           
|                                                         | Asset-backed bonds                        |                                                  |        | 4,352      |            |            |       |        |         |   |     |        |         |   |        | 4,352     |           
|                                                         | Collateralized mortgage-backed securities |                                                  |        | 6,632      |            |            |       |        |         |   |     |        |         |   |        | 6,632     |           
|                                                         | Mortgage-backed bonds                     |                                                  |        | 70,754     |            |            |       |        |         |   |     |        |         |   |        | 70,754    |           
|                                                         | Redeemable preferred stock                |                                                  |        | 8,126      |            |            |       |        |         |   |     |        |         |   |        | 8,126     |           
|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total fixed maturities held for trading purposes |        |            | 1,843,868  |            |       |         |        |   |     |         |        |   |        |           | 1,843,868  | 
|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total fixed maturities                           |        | $          | 14,711,580 |            |       | $       | 683,057 |   |     | $       | 221,867 |   |        | $         | 15,172,770 | 
|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|Equity securities available-for-sale                     |                                           | $                                                | 62,602 |            |            | $          | 1,163 |         |         | $ | 420 |         |         | $ | 63,345 |          
|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          
|Short-term investments available-for-sale                |                                           | $                                                | 32,050 |            |            | $          | 308   |         |         | $ | 40  |         |         | $ | 32,318 |          
|                                                         |                                           |                                                  |        |            |            |            |       |         |         |   |     |         |         |   |        |          

F-23



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |           |            | 
|-------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------ | ------ | ---------- | ---------- | ---------- | --- | ------- | ------- | - | --- | ------- | ------- | - | ------ | --------- | ---------- | 
|                                                         |                                           |                                                 
|                                                         |                                           | 2001                                            
|                                                         |                                           |                                                 
|                                                         |                                           |                                                  |        | Gross      |            | Gross      |     |        
|                                                         |                                           | Amortized                                        |        | unrealized |            | unrealized |     | Fair   
|                                                         |                                           | cost                                             |        | gains      |            | losses     |     | value  
|                                                         |                                           |                                                  |        |            |            |            |     |        
|                                                         |                                           |                                                 
|                                                         |                                           | ($ in thousands)                                
|Fixed maturity securities available-for-sale:            |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|                                                         | Corporate bonds                           |                                                  | $      | 7,236,357  |            |            | $   | 228,831 |         |   | $   | 110,355 |         |   | $      | 7,354,833 |           
|                                                         | U.S. government bonds                     |                                                  |        | 484,923    |            |            |     | 21,378  |         |   |     | 277     |         |   |        | 506,024   |           
|                                                         | State and political subdivisions          |                                                  |        | 45,729     |            |            |     | 2,619   |         |   |     |        |         |   |        | 48,348    |           
|                                                         | Foreign government bonds                  |                                                  |        | 128,785    |            |            |     | 7,467   |         |   |     | 2,083   |         |   |        | 134,169   |           
|                                                         | Asset-backed bonds                        |                                                  |        | 773,648    |            |            |     | 14,897  |         |   |     | 44,866  |         |   |        | 743,679   |           
|                                                         | Collateralized mortgage-backed securities |                                                  |        | 373,339    |            |            |     | 9,879   |         |   |     | 854     |         |   |        | 382,364   |           
|                                                         | Mortgage-backed bonds                     |                                                  |        | 1,683,891  |            |            |     | 32,699  |         |   |     | 4,086   |         |   |        | 1,712,504 |           
|                                                         | Redeemable preferred stock                |                                                  |        | 174,580    |            |            |     | 1,810   |         |   |     | 20,886  |         |   |        | 155,504   |           
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total fixed maturities available-for-sale        |        |            | 10,901,252 |            |     |         | 319,580 |   |     |         | 183,407 |   |        |           | 11,037,425 | 
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|Fixed maturity securities held for trading
    purposes: |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|                                                         | Corporate bonds                           |                                                  |        | 1,869,228  |            |            |     |        |         |   |     |        |         |   |        | 1,869,228 |           
|                                                         | U.S. government bonds                     |                                                  |        | 267,536    |            |            |     |        |         |   |     |        |         |   |        | 267,536   |           
|                                                         | Asset-backed bonds                        |                                                  |        | 2,308      |            |            |     |        |         |   |     |        |         |   |        | 2,308     |           
|                                                         | Collateralized mortgage-backed securities |                                                  |        | 2,638      |            |            |     |        |         |   |     |        |         |   |        | 2,638     |           
|                                                         | Mortgage-backed bonds                     |                                                  |        | 32,270     |            |            |     |        |         |   |     |        |         |   |        | 32,270    |           
|                                                         | Redeemable preferred stock                |                                                  |        | 1,126      |            |            |     |        |         |   |     |        |         |   |        | 1,126     |           
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total fixed maturities held for trading purposes |        |            | 2,175,106  |            |     |         |        |   |     |         |        |   |        |           | 2,175,106  | 
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total fixed maturities                           |        | $          | 13,076,358 |            |     | $       | 319,580 |   |     | $       | 183,407 |   |        | $         | 13,212,531 | 
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|Equity securities available-for-sale                     |                                           | $                                                | 11,021 |            |            | $          | 770 |         |         | $ | 429 |         |         | $ | 11,362 |          
|Equity securities held for trading purposes              |                                           |                                                  | 12,013 |            |            |            |    |         |         |   |    |         |         |   | 12,013 |          
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total equity securities                          |        | $          | 23,034     |            |     | $       | 770     |   |     | $       | 429     |   |        | $         | 23,375     | 
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|Short-term investments available-for-sale                |                                           | $                                                | 14,829 |            |            | $          | 52  |         |         | $ |    |         |         | $ | 14,881 |          
|Short-term investments held for trading purposes         |                                           |                                                  | 4,212  |            |            |            |    |         |         |   |    |         |         |   | 4,212  |          
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          
|                                                         |                                           | Total short-term investments                     |        | $          | 19,041     |            |     | $       | 52      |   |     | $       |        |   |        | $         | 19,093     | 
|                                                         |                                           |                                                  |        |            |            |            |     |         |         |   |     |         |         |   |        |          

The amortized cost and estimated fair value of
investments in fixed maturity securities at December 31,
2002, are summarized by stated maturity as follows:

|                                     |                            |                  |            |           |  |   |            |           | 
|------------------------------------ | -------------------------- | ---------------- | ---------- | --------- |  | - | ---------- | --------- | 
|                                     |                            | Amortized        |            | Fair     
|                                     |                            | cost             |            | value    
|                                     |                            |                  |            |          
|                                     |                            |                 
|                                     |                            | ($ in thousands)
|Fixed maturities available-for-sale: |                            |                  |            |           |  |   |            |          
|                                     | Due in 2003                |                  | $          | 511,837   |  |   | $          | 519,274   | 
|                                     | Due in 2004  2008         |                  |            | 3,504,545 |  |   |            | 3,679,663 | 
|                                     | Due in 2009  2013         |                  |            | 3,807,686 |  |   |            | 3,935,632 | 
|                                     | Due after 2013             |                  |            | 2,795,589 |  |   |            | 2,873,835 | 
|                                     | Mortgage-backed securities |                  |            | 2,248,055 |  |   |            | 2,320,498 | 
|                                     |                            |                  |            |           |  |   |            |          
|                                     |                            | $                | 12,867,712 |           |  | $ | 13,328,902 |          
|                                     |                            |                  |            |           |  |   |            |          

F-24



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                            |                            |   |           |         | 
|------------------------------------------- | -------------------------- | - | --------- | ------- | 
|Fixed maturities held for trading purposes: |                            |   |           |        
|                                            | Due in 2003                |   | $         | 15,208  | 
|                                            | Due in 2004  2008         |   |           | 601,765 | 
|                                            | Due in 2009  2013         |   |           | 314,584 | 
|                                            | Due after 2013             |   |           | 841,557 | 
|                                            | Mortgage-backed securities |   |           | 70,754  | 
|                                            |                            |   |           |        
|                                            |                            | $ | 1,843,868 |        
|                                            |                            |   |           |        

The foregoing data is based on the stated
maturities of the securities. Actual maturities will differ for
some securities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.

Included in equity securities available-for-sale
is Federal Home Loan Bank of Des Moines (FHLB) capital
stock amounting to $50.3 million and $6.3 million at
December 31, 2002 and 2001, respectively. As a member of
the FHLB, the Company is required to own the capital stock to
utilize various FHLB financing and other services.

At December 31, 2002 and 2001, investments
in fixed maturity securities with a carrying amount of
$47.1 million and $55.6 million, respectively, were on
deposit with state insurance departments to satisfy regulatory
requirements.

No investment in any person or its affiliates
exceeded 10 percent of stockholders equity at
December 31, 2002 and 2001.

Other investments include investments which are
carried on the equity method of accounting. Distributions from
such equity method investments amounted to $2.6 million,
$7.7 million and $4.4 million in 2002, 2001 and 2000,
respectively.

Major categories of investment income are
summarized as follows:

|                          |  |                          |           |      |  |      |         |  |  |   |         | 
|------------------------- |  | ------------------------ | --------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                          |  |                         
|                          |  | Years Ended December 31,
|                          |  |                         
|                          |  | 2002                     |           | 2001 |  | 2000
|                          |  |                          |           |      |  |     
|                          |  |                         
|                          |  | ($ in thousands)        
|Fixed maturity securities |  | $                        | 872,862   |      |  | $    | 760,670 |  |  | $ | 599,331 | 
|Equity securities         |  |                          | 304       |      |  |      | 4,546   |  |  |   | 7,795   | 
|Mortgage loans            |  |                          | 77,592    |      |  |      | 64,723  |  |  |   | 43,527  | 
|Real estate               |  |                          | 136       |      |  |      | 53      |  |  |   | 36      | 
|Policy loans              |  |                          | 31,170    |      |  |      | 29,004  |  |  |   | 19,833  | 
|Other                     |  |                          | 25,256    |      |  |      | 27,599  |  |  |   | 39,990  | 
|                          |  |                          |           |      |  |      |         |  |  |   |         | 
|Gross investment income   |  |                          | 1,007,320 |      |  |      | 886,595 |  |  |   | 710,512 | 
|Investment expenses       |  |                          | 13,313    |      |  |      | 13,421  |  |  |   | 10,987  | 
|                          |  |                          |           |      |  |      |         |  |  |   |         | 
|Net investment income     |  | $                        | 994,007   |      |  | $    | 873,174 |  |  | $ | 699,525 | 
|                          |  |                          |           |      |  |      |         |  |  |   |         | 

F-25



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Realized and Unrealized Gains
(Losses)

Realized and unrealized gains and losses on
investments and provisions for loan losses are summarized as
follows:

|                                                                        |                           |                          |          |      |          |          |         |   |         |         |         |   |         |         |  
|----------------------------------------------------------------------- | ------------------------- | ------------------------ | -------- | ---- | -------- | -------- | ------- | - | ------- | ------- | ------- | - | ------- | ------- | -
|                                                                        |                           |                         
|                                                                        |                           | Years Ended December 31,
|                                                                        |                           |                         
|                                                                        |                           | 2002                     |          | 2001 |          | 2000    
|                                                                        |                           |                          |          |      |          |         
|                                                                        |                           |                         
|                                                                        |                           | ($ in thousands)        
|Securities available-for-sale:                                          |                           |                          |          |      |          |          |         |   |         |         |         |  
|                                                                        | Fixed maturity securities |                          |          |      |          |          |         |   |         |         |         |   |        
|                                                                        |                           | Gross realized gains     |          | $    | 141,687  |          |         | $ | 52,101  |         |         | $ | 33,606  |        
|                                                                        |                           | Gross realized losses    |          |      | (236,063 | )        |         |   | (75,295 | )       |         |   | (52,524 | )      
|                                                                        | Equity securities         |                          |          |      |          |          |         |   |         |         |         |   |        
|                                                                        |                           | Gross realized gains     |          |      | 418      |          |         |   | 833     |         |         |   | 1       |        
|                                                                        |                           | Gross realized losses    |          |      | (155     | )        |         |   | (12     | )       |         |   | (1,492  | )      
|Realized/unrealized gains (losses) on other
    investments             |                           |                          | (12,474  | )    |          |          | (9,313  | ) |         |         | 8,869   |  
|Provision for loan losses                                               |                           |                          | 1,877    |      |          |          | 1,106   |   |         |         | 2,225   |  
|Realized/unrealized gains/(losses) on swaps                             |                           |                          | 2,674    |      |          |          |        |   |         |         |        |  
|Realized/unrealized gains/(losses) on option
    assets                 |                           |                          | (42,942  | )    |          |          | (54,186 | ) |         |         | (19,660 | )
|                                                                        |                           |                          |          |      |          |          |         |   |         |         |         |  
|Realized/unrealized gains/(losses) on
    available-for-sale securities |                           |                          | (144,978 | )    |          |          | (84,766 | ) |         |         | (28,975 | )
|Realized/unrealized gains/(losses) on
    held-to-maturity securities   |                           |                          | (4,941   | )    |          |          | (5,863  | ) |         |         |        |  
|                                                                        |                           |                          |          |      |          |          |         |   |         |         |         |  
|                                                                        |                           |                          | Total    |      | $        | (149,919 | )       |   | $       | (90,629 | )       |   | $       | (28,975 | )
|                                                                        |                           |                          |          |      |          |          |         |   |         |         |         |  

The unrealized appreciation (depreciation) on
invested assets available-for-sale is reported as a separate
component of stockholders equity, reduced by adjustments
to DAC, VOBA, future life and annuity policy benefits, and a
provision for deferred income taxes. Unrealized appreciation
(depreciation) attributable to the Closed Block amounting
to $101.4 million at December 31, 2002,
$44.0 million at December 31, 2001 and
$9.3 million at December 31, 2000 have been included
in dividends payable to policyowners.

A summary of the components of the net unrealized
appreciation (depreciation) on invested assets carried at
fair value and other components of accumulated other
comprehensive income is as follows:

|                                           |                           |                  |          |         |  |   |         |         | 
|------------------------------------------ | ------------------------- | ---------------- | -------- | ------- |  | - | ------- | ------- | 
|                                           |                           |                 
|                                           |                           | December 31,    
|                                           |                           |                 
|                                           |                           | 2002             |          | 2001   
|                                           |                           |                  |          |        
|                                           |                           |                 
|                                           |                           | ($ in thousands)
|Unrealized appreciation (depreciation)     |                           |                  |          |         |  |   |         |        
|Securities available-for-sale:             |                           |                  |          |         |  |   |         |        
|                                           | Fixed maturity securities |                  | $        | 461,190 |  |   | $       | 136,173 | 
|                                           | Equity securities         |                  |          | 743     |  |   |         | 341     | 
|                                           | Short-term investments    |                  |          | 268     |  |   |         | 52      | 
|Other investments                          |                           |                  | (3,538   | )       |  |   | (9,059  | )      
|Deferred policy acquisition costs and VOBA |                           |                  | (216,973 | )       |  |   | (60,209 | )      
|Policy reserves and policyowner funds      |                           |                  | 1,402    |         |  |   | (203    | )      
|Deferred income taxes                      |                           |                  | (47,654  | )       |  |   | (6,821  | )      
|Minimum pension liability adjustment       |                           |                  | (5,475   | )       |  |   | (3,587  | )      
|Policyowner dividend obligation            |                           |                  | (101,441 | )       |  |   | (44,018 | )      
|                                           |                           |                  |          |         |  |   |         |        
|                                           |                           | $                | 88,522   |         |  | $ | 12,669  |        
|                                           |                           |                  |          |         |  |   |         |        

The change in unrealized appreciation
(depreciation) on fixed maturity securities was an increase
of $325.0 million, an increase of $ 158.8 million and
an increase of $296.5 million for the years ended

F-26



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

December 31, 2002, 2001 and 2000,
respectively; the corresponding amounts for equity securities
was an increase of $0.4 million, an increase of
$0.3 million and a decrease of $0.8 million, respectively.

Variable Interest Entities

The Company has investments in variable interest
entities as described by FIN 46. The following is a description
of those interests for which the Company would be considered
primary beneficiary as well as those for which the Company would
not be the primary beneficiary. If an enterprise is considered
to be a primary beneficiary, the variable interest entity would
be consolidated upon adoption of FIN 46.

Interests as Primary
Beneficiary

The Company holds investments in trusts that
contain a limited partnership interest and either U.S. treasury
strips or Aaa/ AAA rated corporate strips. The purpose of these
entities is to enable the Company to invest in limited
partnerships in a defeased form. The investments were made
between 1998 and 2001. The Companys carrying value of
these fixed income investments is $463.9 million at
December 31, 2002. The total assets of the entities are
$472.1 million. In addition to the Companys interests,
there are $8.2 million of minority interests. The holders
of these minority interests have no recourse against the
Company. No Company assets are used to collateralize any
obligations. The Companys maximum exposure to loss is its
carrying value of the investment.

The Company issued a $250 million
collateralized bond obligation (CBO) in 1996 and 1997 and
currently holds interests in several of the tranches, most of
which are held in trusts along with U.S. treasury strips. The
purpose of the CBO is to securitize high yield bonds and earn a
spread over the cost of the funds from the different tranches
issued. The collateral for this transaction was high yield and
emerging markets debt. The outstanding balance of all tranches
was $203.3 million at December 31, 2002, of which
third parties hold $146.1 million. These third parties have
no recourse against the Company. The total value of the CBO
assets is $220.0 million at December 31, 2002. The
total carrying value of the Companys interests is
$60.7 million at December 31, 2002. There is no
exposure to loss as the trusts in which the Company holds most
of its interests also contain treasury strips, which can only be
used to satisfy the Companys interests. The face amount of
these treasury strips exceeds the total carrying value of the
Companys interests. The remaining assets do not
collateralize any obligation other than the tranches of the CBO.

Interests Not as Primary
Beneficiary

The Company holds residual interests in
structures that contain first and second lien residential
mortgages. The purpose of these structures is to provide a form
of financing for the lender. The investments were made in 1999,
2000 and 2001. As of December 31, 2002, the total assets of
these structures are approximately $291.6 million. The
Companys maximum exposure to loss is its carrying value of
the residual interests, which is $22.1 million at
December 31, 2002.

The Company holds an investment in a limited
partnership which was formed to construct multifamily housing.
The investment was made in 2001. As of December 31, 2002,
the total assets of the partnership are approximately $45
million. The Companys maximum exposure to loss is the
carrying value of its asset which amounted to $10.4 million
at December 31, 2002.

(4) DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES

Effective January 1, 2001, the Company
adopted SFAS 133 which requires that all derivative instruments,
including certain derivative instruments embedded in other
contracts, be reported on the balance sheet at fair value.
Accounting for gains and losses resulting from changes in the
values of derivatives is dependent upon the use of the
derivative and its qualification for special hedge accounting.
In accordance with

F-27



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the provisions of SFAS 133, the Company recorded
a transition adjustment as of January 1, 2001 upon adoption
of the standard to recognize its derivative instruments at fair
value resulting in a pre-tax reduction to income of
$12.4 million ($8.2 million after-tax) and an increase
to AOCI of $2.7 million, net of tax. The basic and diluted
earnings per common share for the cumulative effect of the
change in accounting for derivatives amounted to $0.22 for 2001.
The reduction to income, which is classified as a
cumulative effect of change in accounting for derivatives,
net of tax in the consolidated statements of income, is
attributable to losses on basis swaps that were natural hedges
and losses on interest rate swaps reclassified from AOCI that
have been redesignated as cash flow hedges of a floating rate
funding agreement liability effective January 1, 2001. In
addition, the reduction to income includes adjustments to fair
value for options being used as natural hedges of embedded
options contained within equity-indexed life and annuity
products. The increase in AOCI, which is classified as
change in accounting for derivatives in the
consolidated statements of comprehensive income, is attributable
to the reclassification of the interest rate swaps fair
value adjustment from AOCI to the consolidated statements of
income.

Initially, upon adoption of the new derivative
accounting requirements, and prospectively, on the date a
derivative contract is entered into, the Company designates the
derivative as either (1) a hedge of a recognized asset or
liability or an unrecognized firm commitment (a fair value
hedge), (2) a hedge of a forecasted transaction or of the
variability of cash flows to be received or paid related to a
recognized asset or liability (a cash flow hedge), or (3) a
natural hedging instrument whose change in fair value is
recognized to act as an economic hedge against changes in the
values of the hedged item and which does not meet the accounting
hedge criteria for SFAS 133 (a natural hedge).

For fair value hedges, both the effective and
ineffective portion of the changes in the fair value of the
derivative, along with the gain or loss on the hedged item that
is attributable to the hedged risk, are recorded in earnings and
reported net in the consolidated statements of income. The
effective portion of the changes in the fair value of a
derivative that is designated as a cash flow hedge is recorded
in AOCI. When the hedged cash transaction is realized, the gain
or loss included in AOCI is reported net in the consolidated
statements of income with the hedged cash transaction item. In
addition, the ineffective portion of the changes in the fair
value of derivatives designated as cash flow hedges are reported
in net investment income in the consolidated statements of
income. For derivatives designated as a natural hedge, changes
in fair value are classified as realized/unrealized gains
(losses) on investments in the consolidated statement of
income.

The Company formally documents its hedge
relationships, including identification of the hedging
instruments and the hedged items, as well as its risk management
objectives and strategies for undertaking the hedge transaction.
Free standing derivatives are recorded in the consolidated
balance sheets at fair value in other assets and option
derivatives embedded in equity-indexed annuity products are
marked to fair value and classified in the consolidated balance
sheets as policy reserves and policyowner funds.
This process includes linking derivatives that are designated as
hedges of specific assets, liabilities, firm commitments or
forecasted transactions. The Company also formally assesses at
inception and at least quarterly thereafter, whether the
derivatives that are used in hedging transactions, other than
natural hedges, are highly effective in offsetting changes in
either the fair value or cash flows of the hedged item. When a
determination is made that a derivative ceases to be a highly
effective hedge, the Company will discontinue hedge accounting
for the hedge.

To manage interest rate risk, the Company has
entered into interest rate swaps that effectively fix the
interest payments of a floating rate funding agreement liability
and other interest swaps that hedge market risk from fixed
income securities. These interest rate swap agreements are
accounted for as cash flow and fair value hedges, respectively.
Credit default swaps are coupled with a bond to synthetically
create an investment cheaper than the equivalent instrument
traded in the cash market.

The Company has equity-indexed life and annuity
products that guarantee the return of principal to the customer
and credits interest based on certain indices, primarily the
Standard & Poors 500 Composite Stock Price Index®
(S&P 500 Index). A portion of the premium from each customer
is invested in investment grade

F-28



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

fixed income securities and is intended to cover
the minimum guaranteed value due the customer at the end of the
term. A portion of the premium is used to purchase call options
to hedge the growth in interest credited to the customer as a
direct result of increases in the related indices. The amounts
to be paid or received pursuant to these agreements are accrued
and recognized in income over the life of the agreements. Both
call options held by the Company and the options embedded in the
policy, which the Company has designated as a natural hedge, are
valued at fair value. The change in fair value for the call
options is included in realized/unrealized gains
(losses) on investments and the change in fair value of the
embedded options is included in policyowner benefits in the
consolidated statements of income.

The Company has certain products that credit
interest based on a total return strategy. Under the total
return strategy, the policyowner is allowed to allocate their
premium payments to different asset classes within the
Companys general account assets to which the selected
strategy is linked, less certain charges. The total return
adjustment is paid when a policyowner accesses the funds. The
Company guarantees a minimum return of premium plus
approximately 3% interest per annum over the life of the
contract. The general account assets backing the total return
strategy of these products are fixed maturity securities and are
designated by the Company as held for trading. Both the trading
securities held by the Company and the product contracts are
valued at fair value. The change in fair value for the trading
securities is included in realized/unrealized gains
(losses) on investments and the change in fair value of the
contracts is included in policyowner benefits in the
consolidated statements of income.

During 2002 and 2001, realized/unrealized gains
(losses) on investments included an unrealized loss of
$40.0 million and $54.2 million, respectively, from
the change in fair value on call options used as a natural hedge
of embedded options within equity-indexed products.
Additionally, 2002 and 2001 included an unrealized loss of
$5.2 million and $5.9 million, respectively, from the
change in fair value on the trading securities backing the total
return strategy products. Policyowner benefits included an
offsetting adjustment to reduce contract liabilities for fair
value changes in options embedded within the equity-indexed
products and fair value changes on total return strategy annuity
contracts of $28.8 million and $52.7 million in 2002
and 2001, respectively. In addition, basis swaps were terminated
during 2001 and an increase in fair value of $1.8 million
on those swaps were included in net investment income. AOCI
included an unrealized gain of $3.4 million and a loss of
$5.9 million from the fair value change in interest rate
swaps used to hedge the floating rate funding agreement
liability during 2002 and 2001, respectively. In 2002, the
Company undesignated a cash flow hedge and is now amortizing the
amount in AOCI to earnings over the remaining life of the swap,
which amounted to $4.4 million expense in 2002 from the
fair value change in interest rate swaps used to hedge the
floating rate funding agreement liability. The Company estimates
that $2.6 million after-tax of derivative losses included
in AOCI will be reclassified into earnings within the next
twelve months. The ineffectiveness of the interest rate swap
cash flow hedge was not considered significant for 2002 and 2001.

F-29



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes the income
(loss) impact of the market value adjustment on trading
securities and derivatives and the cash flow hedge amortization
for 2002 and 2001:

|                                                         |                 |                     |         |         |   |   |         |        |  
|-------------------------------------------------------- | --------------- | ------------------- | ------- | ------- | - | - | ------- | ------ | -
|                                                         |                 |                    
|                                                         |                 | For The Years Ended
|                                                         |                 | December 31,       
|                                                         |                 |                    
|                                                         |                 | 2002                |         | 2001   
|                                                         |                 |                     |         |        
|                                                         |                 |                    
|                                                         |                 | ($ in thousands)   
|Fixed maturity securities held for trading               |                 | $                   | (5,190  | )       |   | $ | (5,863  | )     
|Options on equity-indexed products                       |                 |                     | (40,019 | )       |   |   | (54,186 | )     
|Equity-indexed and total return strategy
    liabilities |                 |                     | 28,759  |         |   |   | 52,747  |       
|Cash flow hedge amortization                             |                 |                     | (4,351  | )       |   |   |        |       
|DAC amortization impact of net adjustments above         |                 |                     | (1,719  | )       |   |   | (1,664  | )     
|                                                         |                 |                     |         |         |   |   |         |       
|                                                         | Pre-tax total   |                     |         | (22,520 | ) |   |         | (8,966 | )
|Income taxes                                             |                 |                     | 7,882   |         |   |   | 3,138   |       
|                                                         |                 |                     |         |         |   |   |         |       
|                                                         | After-tax total |                     | $       | (14,638 | ) |   | $       | (5,828 | )
|                                                         |                 |                     |         |         |   |   |         |       

The Companys outstanding derivative
positions shown in notional or contract amounts, along with
their carrying value and estimated fair values, are summarized
as follows:

|                     |  |                   |           |          |  |       |        |   |  |   |        |  
|-------------------- |  | ----------------- | --------- | -------- |  | ----- | ------ | - |  | - | ------ | -
|                     |  |                  
|                     |  | December 31, 2002
|                     |  |                  
|                     |  | Notional          |           | Carrying |  | Fair 
|                     |  | amount            |           | value    |  | value
|                     |  |                   |           |          |  |      
|                     |  |                  
|                     |  | ($ in thousands) 
|Interest rate swaps  |  | $                 | 849,000   |          |  | $     | (5,571 | ) |  | $ | (5,571 | )
|Credit default swaps |  |                   | 145,000   |          |  |       | (231   | ) |  |   | (231   | )
|Options              |  |                   | 1,161,653 |          |  |       | 65,753 |   |  |   | 65,753 |  
|                     |  |                   |           |          |  |       |        |   |  |   |        |  
|                     |  | $                 | 2,155,653 |          |  | $     | 59,951 |   |  | $ | 59,951 |  
|                     |  |                   |           |          |  |       |        |   |  |   |        |  

|                     |  |                   |           |          |  |       |         |   |  |   |         |  
|-------------------- |  | ----------------- | --------- | -------- |  | ----- | ------- | - |  | - | ------- | -
|                     |  |                  
|                     |  | December 31, 2001
|                     |  |                  
|                     |  | Notional          |           | Carrying |  | Fair 
|                     |  | amount            |           | value    |  | value
|                     |  |                   |           |          |  |      
|                     |  |                  
|                     |  | ($ in thousands) 
|Interest rate swaps  |  | $                 | 218,500   |          |  | $     | (10,343 | ) |  | $ | (10,343 | )
|Credit default swaps |  |                   | 100,000   |          |  |       | (218    | ) |  |   | (218    | )
|Options              |  |                   | 822,826   |          |  |       | 72,136  |   |  |   | 72,136  |  
|                     |  |                   |           |          |  |       |         |   |  |   |         |  
|                     |  | $                 | 1,141,326 |          |  | $     | 61,575  |   |  | $ | 61,575  |  
|                     |  |                   |           |          |  |       |         |   |  |   |         |  

In 2000, prior to the adoption of SFAS 133,
the amounts to be received or paid pursuant to interest swap
agreements were accrued and recognized in the consolidated
statements of income through an adjustment to investment income
over the life of the agreements. Gains or losses realized on
closed or terminated agreements accounted for as hedges were
deferred and amortized to investment income on a constant yield
basis over the shorter of the life of the agreements or the
expected remaining life of the underlying assets or liabilities.
The amounts to be received or paid pursuant to call option
agreements were accrued and recognized as an adjustment to
income over the life of the agreements.

F-30



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table shows the maturities of
derivative products as of December 31, 2002:

|                      |                  |                                                   |   |         |   |      |   |         |   |      |   |        |   |      |   |        |   |      |   |         |   |  |   |       |   |  |   |       |   |  |   |        |   |  |   |        |   |  |   |         |  
|--------------------- | ---------------- | ------------------------------------------------- | - | ------- | - | ---- | - | ------- | - | ---- | - | ------ | - | ---- | - | ------ | - | ---- | - | ------- | - |  | - | ----- | - |  | - | ----- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                      |                  |                                                  
|                      |                  | Maturity Schedule by Year for Derivative Products
|                      |                  |                                                  
|                      |                  | 2003                                              |   | 2004    |   | 2005 |   | 2006    |   | 2007 |   | 2008   |   | 2009 |   | 2010   |   | 2011 |   | 2012   
|                      |                  |                                                   |   |         |   |      |   |         |   |      |   |        |   |      |   |        |   |      |   |        
|                      |                  |                                                  
|                      |                  | ($ in thousands)                                 
|Interest rate swaps:  |                  |                                                   |   |         |   |      |   |         |   |      |   |        |   |      |   |        |   |      |   |         |   |  |   |       |   |  |   |       |   |  |   |        |   |  |   |        |   |  |   |        
|                      | Notional amount  |                                                   | $ | 50,000  |   |      | $ | 355,000 |   |      | $ |       |   |      | $ |       |   |      | $ | 187,000 |   |  | $ | 5,000 |   |  | $ |      |   |  | $ |       |   |  | $ |       |   |  | $ | 252,000 |  
|Weighted average:     |                  |                                                   |   |         |   |      |   |         |   |      |   |        |   |      |   |        |   |      |   |         |   |  |   |       |   |  |   |       |   |  |   |        |   |  |   |        |   |  |   |        
|                      | Receive rate (A) |                                                   |   | 2.981   | % |      |   | 3.104   | % |      |   | 3.506  | % |      |   | 3.506  | % |      |   | 3.506   | % |  |   | 3.638 | % |  |   | 3.605 | % |  |   | 3.605  | % |  |   | 3.605  | % |  |   | 3.605   | %
|                      | Pay rate (B)     |                                                   |   | 3.447   | % |      |   | 3.582   | % |      |   | 3.403  | % |      |   | 3.403  | % |      |   | 3.403   | % |  |   | 3.562 | % |  |   | 3.605 | % |  |   | 3.605  | % |  |   | 3.605  | % |  |   | 3.605   | %
|Credit default swaps: |                  |                                                   |   |         |   |      |   |         |   |      |   |        |   |      |   |        |   |      |   |         |   |  |   |       |   |  |   |       |   |  |   |        |   |  |   |        |   |  |   |        
|                      | Notional amount  |                                                   | $ | 50,000  |   |      | $ | 65,000  |   |      | $ | 20,000 |   |      | $ |       |   |      | $ | 10,000  |   |  | $ |      |   |  | $ |      |   |  | $ |       |   |  | $ |       |   |  | $ |        |  
|Weighted average:     |                  |                                                   |   |         |   |      |   |         |   |      |   |        |   |      |   |        |   |      |   |         |   |  |   |       |   |  |   |       |   |  |   |        |   |  |   |        |   |  |   |        
|                      | Receive rate (C) |                                                   |   | 0.880   | % |      |   | 0.890   | % |      |   | 0.930  | % |      |   | 0.930  | % |      |   | 0.680   | % |  |   |      |   |  |   |      |   |  |   |       |   |  |   |       |   |  |   |        |  
|Options:              |                  |                                                   |   |         |   |      |   |         |   |      |   |        |   |      |   |        |   |      |   |         |   |  |   |       |   |  |   |       |   |  |   |        |   |  |   |        |   |  |   |        
|                      | Notional amount  |                                                   | $ | 916,566 |   |      | $ | 101,646 |   |      | $ | 41,346 |   |      | $ | 13,700 |   |      | $ | 10,200  |   |  |   | 5,330 |   |  | $ | 5,905 |   |  | $ | 19,420 |   |  | $ | 22,950 |   |  | $ | 24,590  |  






|    |                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | The actual variable rates in the agreements are
    based on a constant maturity treasury (CMT) plus a spread and
    one-month LIBOR and the table assumes that such rates will
    remain constant at December 31, 2002, levels. To the extent
    that actual rates change, the variable interest rate information
    will change accordingly.
|   
|(B) | The actual rates in the agreements are either
    fixed or based on three-month LIBOR and the table assumes that
    such rates will remain constant at December 31, 2002,
    levels. To the extent that actual rates change, the variable
    interest rate information will change accordingly.                                                
|   
|(C) | The actual rates in the agreements are fixed
    based on the amount of risk assumed at the time of the
    transaction.                                                                                                                                                                                                                          

(5) MORTGAGE LOANS

Mortgage loans consisted of the following:

|                            |  |                  |         |      |  |   |         |  
|--------------------------- |  | ---------------- | ------- | ---- |  | - | ------- | -
|                            |  |                 
|                            |  | December 31,    
|                            |  |                 
|                            |  | 2002             |         | 2001
|                            |  |                  |         |     
|                            |  |                 
|                            |  | ($ in thousands)
|Single-family real estate   |  | $                | 1,671   |      |  | $ | 8,410   |  
|Multi-family real estate    |  |                  | 63,805  |      |  |   | 60,591  |  
|Commercial real estate      |  |                  | 831,607 |      |  |   | 891,351 |  
|Other                       |  |                  | 1,324   |      |  |   | 1,430   |  
|                            |  |                  |         |      |  |   |         |  
|                            |  |                  | 898,407 |      |  |   | 961,782 |  
|Allowance for credit losses |  |                  | (15,373 | )    |  |   | (17,250 | )
|                            |  |                  |         |      |  |   |         |  
|                            |  | $                | 883,034 |      |  | $ | 944,532 |  
|                            |  |                  |         |      |  |   |         |  

The Company manages its credit risk associated
with these loans by diversifying its mortgage portfolio by
property type and geographic location and by seeking favorable
loan to value ratios on secured properties. At December 31,
2002, the states with the highest concentration of mortgage
loans were Texas, Florida, California and Ohio with principal
balances of $126.6 million, $121.9 million,
$77.9 million and $65.1 million, respectively.

The amounts the Company will ultimately realize
from these loans could differ materially from their carrying
values because of future developments affecting the underlying
collateral or the borrowers ability to repay the loans and
leases. As of December 31, 2002, there were no material
commitments to lend additional funds to customers whose loans
were classified as nonaccrual or restructured.

F-31



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

No mortgage loan on any one individual property
exceeded $8.0 million at December 31, 2002 and 2001.

Provisions for losses are summarized as follows:

|                               |  |                          |        |      |  |      |        |   |  |   |        |  
|------------------------------ |  | ------------------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                               |  |                         
|                               |  | Years Ended December 31,
|                               |  |                         
|                               |  | 2002                     |        | 2001 |  | 2000
|                               |  |                          |        |      |  |     
|                               |  |                         
|                               |  | ($ in thousands)        
|Balance at beginning of year   |  | $                        | 17,250 |      |  | $    | 15,671 |   |  | $ | 18,046 |  
|Charge offs, net of recoveries |  |                          |       |      |  |      | (3,690 | ) |  |   | (150   | )
|Acquired during the year       |  |                          |       |      |  |      | 6,375  |   |  |   |       |  
|Provision for losses           |  |                          | (1,877 | )    |  |      | (1,106 | ) |  |   | (2,225 | )
|                               |  |                          |        |      |  |      |        |   |  |   |        |  
|Balance at end of year         |  | $                        | 15,373 |      |  | $    | 17,250 |   |  | $ | 15,671 |  
|                               |  |                          |        |      |  |      |        |   |  |   |        |  

Write downs on loans sold or transferred to real
estate fluctuate between periods in relation to foreclosure
activity and the related underlying collateral values.

(6) DEFERRED POLICY ACQUISITION
COSTS

A summary of the policy acquisition costs
deferred and amortized are as follows:

|                                                                              |  |                          |         |      |  |      |         |   |  |   |          |  
|----------------------------------------------------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- | - |  | - | -------- | -
|                                                                              |  |                         
|                                                                              |  | Years Ended December 31,
|                                                                              |  |                         
|                                                                              |  | 2002                     |         | 2001 |  | 2000
|                                                                              |  |                          |         |      |  |     
|                                                                              |  |                         
|                                                                              |  | ($ in thousands)        
|Balance at beginning of year                                                  |  | $                        | 672,690 |      |  | $    | 404,143 |   |  | $ | 534,993  |  
|Policy acquisition costs deferred                                             |  |                          | 389,035 |      |  |      | 318,653 |   |  |   | 193,073  |  
|Policy acquisition costs amortized                                            |  |                          | (67,698 | )    |  |      | (49,379 | ) |  |   | (50,776  | )
|Reclassification of deferred VOBA expense                                     |  |                          | (10,582 | )    |  |      |        |   |  |   |         |  
|Amortization of cumulative effect of change in
    accounting for derivatives |  |                          |        |      |  |      | (727    | ) |  |   |         |  
|Acquisition of Minority Interest adjustment                                   |  |                          |        |      |  |      |        |   |  |   | (273,147 | )
|                                                                              |  |                          |         |      |  |      |         |   |  |   |          |  
|                                                                              |  |                          | 983,445 |      |  |      | 672,690 |   |  |   | 404,143  |  
|Unrealized (gain) loss on available-for-sale
    securities                   |  |                          | (99,206 | )    |  |      | (30,010 | ) |  |   | 33,169   |  
|                                                                              |  |                          |         |      |  |      |         |   |  |   |          |  
|Balance at end of year                                                        |  | $                        | 884,239 |      |  | $    | 642,680 |   |  | $ | 437,312  |  
|                                                                              |  |                          |         |      |  |      |         |   |  |   |          |  

F-32



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(7) VALUE OF BUSINESS ACQUIRED

A summary of VOBA established and amortized is as
follows:

|                                                                              |  |                          |          |      |  |      |         |   |  |   |         |  
|----------------------------------------------------------------------------- |  | ------------------------ | -------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                              |  |                         
|                                                                              |  | Years Ended December 31,
|                                                                              |  |                         
|                                                                              |  | 2002                     |          | 2001 |  | 2000
|                                                                              |  |                          |          |      |  |     
|                                                                              |  |                         
|                                                                              |  | ($ in thousands)        
|Balance at beginning of the year                                              |  | $                        | 614,028  |      |  | $    | 479,695 |   |  | $ | 202,392 |  
|VOBA established during the year                                              |  |                          | 19,183   |      |  |      | 6,422   |   |  |   | 1,308   |  
|Amortization of VOBA asset                                                    |  |                          | (71,867  | )    |  |      | (83,520 | ) |  |   | (41,974 | )
|Amortization of cumulative effect of change in
    accounting for derivatives |  |                          |         |      |  |      | (400    | ) |  |   |        |  
|Acquired during the year                                                      |  |                          |         |      |  |      | 211,831 |   |  |   |        |  
|Reclassification from deferred DAC expense                                    |  |                          | 10,582   |      |  |      |        |   |  |   |        |  
|Acquisition of Minority Interest adjustment                                   |  |                          |         |      |  |      |        |   |  |   | 317,969 |  
|                                                                              |  |                          |          |      |  |      |         |   |  |   |         |  
|                                                                              |  |                          | 571,926  |      |  |      | 614,028 |   |  |   | 479,695 |  
|Unrealized (gain) loss on available-for-sale
    securities                   |  |                          | (117,767 | )    |  |      | (30,199 | ) |  |   | (11,265 | )
|                                                                              |  |                          |          |      |  |      |         |   |  |   |         |  
|Balance at end of year                                                        |  | $                        | 454,159  |      |  | $    | 583,829 |   |  | $ | 468,430 |  
|                                                                              |  |                          |          |      |  |      |         |   |  |   |         |  

Amortization is recognized in proportion to
expected future gross profits over a 20 year period and is
based on the average interest crediting rates which range from
1.06% to 7.61% for 2002 and over the next five years. Interest
accrued on the unamortized VOBA amounted to $32.1 million,
$28.5 million and $15.4 million in 2002, 2001 and 2000,
respectively, which is netted with the VOBA amortization expense.

The estimated amortization for in force business
for the next five years is as follows ($ in thousands):

|     |  |   |        | 
|---- |  | - | ------ | 
|2003 |  | $ | 71,678 | 
|2004 |  |   | 66,020 | 
|2005 |  |   | 59,767 | 
|2006 |  |   | 54,299 | 
|2007 |  |   | 47,527 | 

F-33



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(8) NOTES PAYABLE

Notes payable consist of the following:

|                                                                                                                                                                                                            |  |                  |         |      |  |   |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | ---- |  | - | ------- | 
|                                                                                                                                                                                                            |  |                 
|                                                                                                                                                                                                            |  | December 31,    
|                                                                                                                                                                                                            |  |                 
|                                                                                                                                                                                                            |  | 2002             |         | 2001
|                                                                                                                                                                                                            |  |                  |         |     
|                                                                                                                                                                                                            |  |                 
|                                                                                                                                                                                                            |  | ($ in thousands)
|Optionally Convertible Equity-linked Accreting
    Notes due on March 6, 2032 (A)                                                                                                                           |  | $                | 186,233 |      |  | $ |        | 
|Senior notes bearing interest at 6.95% due June,
    2005                                                                                                                                                   |  |                  | 125,000 |      |  |   | 125,000 | 
|Revolving credit agreement due December,
    2004 (B)                                                                                                                                                       |  |                  | 113,000 |      |  |   | 150,000 | 
|Surplus note bearing interest at 8.66% due on
    April 11, 2011 (C)                                                                                                                                        |  |                  | 25,000  |      |  |   | 25,000  | 
|Federal Home Loan Bank community investment
    long-term advances with a weighted average interest rate of
    6.37% at December 31, 2002 and 2001 maturing at various
    dates through June 12, 2012 (D) |  |                  | 13,871  |      |  |   | 14,369  | 
|Note payable to a bank repaid in 2002                                                                                                                                                                       |  |                  |        |      |  |   | 1,205   | 
|AmerUs Capital I 8.85% Capital Securities
    Series A due February 1, 2007 (E)                                                                                                                             |  |                  | 48,095  |      |  |   | 68,900  | 
|AmerUs Capital II 7.00% Quarterly Income
    Preferred Securities due July 27, 2003                                                                                                                         |  |                  | 154     |      |  |   | 154     | 
|                                                                                                                                                                                                            |  |                  |         |      |  |   |         | 
|                                                                                                                                                                                                            |  | $                | 511,353 |      |  | $ | 384,628 | 
|                                                                                                                                                                                                            |  |                  |         |      |  |   |         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | On March 6, 2002, the Company issued
    $185 million aggregate original principal amount of OCEANs.
    The OCEANs are senior subordinated debt and were issued and sold
    in an original principal amount of $1,000 per OCEAN, with a
    principal amount at maturity of $1,270 per OCEAN. The maturity
    date of the OCEANs is March 6, 2032. The OCEANs will have
    aggregate principal amount at maturity of $235 million. The
    notes are convertible into shares of the Companys common
    stock at an initial conversion price (subject to adjustment) of
    $37.60 per share only if the sale price of the common stock
    exceeds $47.85 per share for at least 20 trading days in a
    30-day trading period or in certain other limited circumstances.
    The yield on the OCEANs (without taking into account contingent
    interest) is 3.83% per annum compounded semiannually through
    March 6, 2007 and 2.28% per annum compounded semiannually
    from March 6, 2007 through maturity. A portion of the yield
    is paid semiannually at a rate of 2.00% per annum on the issue
    price. The difference between the yield and the interest paid is
    accreted to the OCEANs principal. In addition, contingent
    interest will be paid quarterly based on the regular cash
    dividend on the Companys common stock. The OCEANs were
    registered on Form S-3 filed with the Securities and
    Exchange Commission on September 20, 2002.
|   
|(B) | The revolving credit agreement provides for a
    maximum borrowing of $175 million with the balance maturing in
    December 2004. This agreement replaced a $150 million
    revolving credit agreement in 2001. The interest rate is
    variable, however, the Company may elect to fix the rate for
    periods from 30 days to six months. The loan agreement
    contains various financial and operating covenants which, among
    other things, limit future indebtedness and restrict the amount
    of future dividend payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(C) | Payment of interest and principal on the surplus
    note, may only be paid from ILICs earnings, subject to
    approval by the Indiana Department of Insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(D) | The Company has multiple credit arrangements with
    the Federal Home Loan Bank (FHLB). In addition to the long-term
    advances disclosed above, the Company is eligible to borrow
    under variable-rate short term fed funds arrangements of which
    no amount was outstanding at December 31, 2002. The
    carrying value of the securities pledged to the FHLB under all
    agreements was $14.6 million at December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-34



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(E) | The Capital Securities were issued through a
    wholly-owned subsidiary trust, AmerUs Capital I. The sole
    asset of the trust is the junior subordinated debentures of the
    Company in the principal amount of $88.66 million with
    interest at 8.85% maturing February 1, 2027. The Company
    has fully and unconditionally guaranteed the obligation of the
    trust under the Capital Securities and is obligated to
    mandatorily redeem the securities on February 1, 2027. The
    Company may prepay the securities at anytime after
    February 1, 2007. On March 26, 2002,
    $20.8 million of the Capital Securities were repurchased
    which did not result in a material gain. Dividends on capital
    stock cannot be paid until all accrued interest on the Capital
    Securities has been paid.



| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | Maturities of notes payable are as follows for
    each of the next five years is as follows:

|                         |            |                  |         |         |         | 
|------------------------ | ---------- | ---------------- | ------- | ------- | ------- | 
|                         |            | ($ in thousands)
|                         |            |                 
|Year ending December 31, |            |                  |         |        
|                         |            | 2003             |         | $       | 686     | 
|                         |            | 2004             |         |         | 113,568 | 
|                         |            | 2005             |         |         | 125,606 | 
|                         |            | 2006             |         |         | 647     | 
|                         |            | 2007             |         |         | 48,785  | 
|                         | Thereafter |                  |         | 222,061 |        
|                         |            |                  |         |        
|                         |            | $                | 511,353 |        
|                         |            |                  |         |        

(9) INCOME TAXES

Comprehensive federal income tax expense
(benefit) is summarized as follows:

|                             |                                           |                          |        |        |  |      |        |        |  |   |        |        | 
|---------------------------- | ----------------------------------------- | ------------------------ | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                             |                                           |                         
|                             |                                           | Years Ended December 31,
|                             |                                           |                         
|                             |                                           | 2002                     |        | 2001   |  | 2000
|                             |                                           |                          |        |        |  |     
|                             |                                           |                         
|                             |                                           | ($ in thousands)        
|Income tax expense (benefit) |                                           |                          |        |        |  |      |        |        |  |   |        |       
|                             | Continuing operations                     |                          | $      | 29,764 |  |      | $      | 39,522 |  |   | $      | 42,516 | 
|                             | Other comprehensive income                |                          |        | 40,844 |  |      |        | 14,645 |  |   |        | 37,875 | 
|                             | Cumulative effect of change in accounting |                          |        |       |  |      |        | 4,202  |  |   |        |       | 
|                             |                                           |                          |        |        |  |      |        |        |  |   |        |       
|                             |                                           | $                        | 70,608 |        |  | $    | 58,369 |        |  | $ | 80,391 |       
|                             |                                           |                          |        |        |  |      |        |        |  |   |        |       

The effective income tax rate on pre-tax income
varies from the prevailing corporate federal income tax rate and
is summarized as follows:

|                                               |                    |                          |        |        |  |      |        |        |  |  |        |        | 
|---------------------------------------------- | ------------------ | ------------------------ | ------ | ------ |  | ---- | ------ | ------ |  |  | ------ | ------ | 
|                                               |                    |                         
|                                               |                    | Years Ended December 31,
|                                               |                    |                         
|                                               |                    | 2002                     |        | 2001   |  | 2000
|                                               |                    |                          |        |        |  |     
|Corporate federal income tax rate              |                    |                          | 35.00% |        |  |      | 35.00% |        |  |  | 35.00% |       
|Acquisitions costs and reorganization expenses |                    |                          | 0.53%  |        |  |      | 0.64%  |        |  |  | 3.91%  |       
|Net benefit of tax credits                     |                    |                          | (0.19% | )      |  |      | (1.59% | )      |  |  | (2.14% | )     
|Goodwill amortization                          |                    |                          |       |        |  |      | 2.37%  |        |  |  | 2.51%  |       
|Dividend received deduction                    |                    |                          | (0.42% | )      |  |      | (1.23% | )      |  |  | (2.57% | )     
|Tax exempt income                              |                    |                          | (5.37% | )      |  |      | (2.50% | )      |  |  | (0.42% | )     
|Other items, net                               |                    |                          | 2.58%  |        |  |      | 0.06%  |        |  |  | 0.35%  |       
|                                               |                    |                          |        |        |  |      |        |        |  |  |        |       
|                                               | Effective tax rate |                          |        | 32.13% |  |      |        | 32.75% |  |  |        | 36.64% | 
|                                               |                    |                          |        |        |  |      |        |        |  |  |        |       

F-35



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Companys federal income tax expense
(benefit) from continuing operations is summarized as
follows:

|                         |  |                          |         |      |  |      |        |   |  |   |        | 
|------------------------ |  | ------------------------ | ------- | ---- |  | ---- | ------ | - |  | - | ------ | 
|                         |  |                         
|                         |  | Years Ended December 31,
|                         |  |                         
|                         |  | 2002                     |         | 2001 |  | 2000
|                         |  |                          |         |      |  |     
|                         |  |                         
|                         |  | ($ in thousands)        
|Current                  |  | $                        | 41,958  |      |  | $    | 43,661 |   |  | $ | 21,825 | 
|Deferred                 |  |                          | (12,194 | )    |  |      | (4,139 | ) |  |   | 20,691 | 
|                         |  |                          |         |      |  |      |        |   |  |   |        | 
|Total income tax expense |  | $                        | 29,764  |      |  | $    | 39,522 |   |  | $ | 42,516 | 
|                         |  |                          |         |      |  |      |        |   |  |   |        | 

The significant components of net deferred income
tax assets (liabilities) are summarized as follows:

|                                 |                                                                                                                            |                                           |         |          |          |   |         |          |          |  
|-------------------------------- | -------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                 |                                                                                                                            |                                          
|                                 |                                                                                                                            | December 31,                             
|                                 |                                                                                                                            |                                          
|                                 |                                                                                                                            | 2002                                      |         | 2001    
|                                 |                                                                                                                            |                                           |         |         
|                                 |                                                                                                                            |                                          
|                                 |                                                                                                                            | ($ in thousands)                         
|Deferred income tax assets:      |                                                                                                                            |                                           |         |          |          |   |         |         
|                                 | Policy reserves, policyowner funds and dividends                                                                           |                                           | $       | 663,164  |          |   | $       | 562,970  |         
|                                 | DAC and VOBA related to unrealized appreciation
    on available-for-sale securities and investments reflected in
    AOCI |                                           |         | 75,941   |          |   |         | 21,074   |         
|                                 | Employee benefits and deferred compensation                                                                                |                                           |         | 22,024   |          |   |         | 25,431   |         
|                                 | Credit carryover                                                                                                           |                                           |         | 58,607   |          |   |         | 35,647   |         
|                                 | Unearned income                                                                                                            |                                           |         | 6,273    |          |   |         | 10,125   |         
|                                 | Other                                                                                                                      |                                           |         | 14,790   |          |   |         | 14,341   |         
|                                 |                                                                                                                            |                                           |         |          |          |   |         |         
|                                 |                                                                                                                            | Total gross deferred income tax asset     |         |          | 840,799  |   |         |          | 669,588  |  
|                                 |                                                                                                                            | Valuation allowance                       |         |          | 15,773   |   |         |          | 15,773   |  
|                                 |                                                                                                                            |                                           |         |          |          |   |         |         
|                                 |                                                                                                                            |                                           | 825,026 |          |          |   | 653,815 |         
|                                 |                                                                                                                            |                                           |         |          |          |   |         |         
|Deferred income tax liabilities: |                                                                                                                            |                                           |         |          |          |   |         |         
|                                 | DAC                                                                                                                        |                                           |         | (246,214 | )        |   |         | (139,317 | )       
|                                 | Net unrealized appreciation on available-for-sale
    securities and investments reflected in AOCI                         |                                           |         | (123,595 | )        |   |         | (27,895  | )       
|                                 | VOBA                                                                                                                       |                                           |         | (200,175 | )        |   |         | (214,910 | )       
|                                 | Reinsurance receivables                                                                                                    |                                           |         | (265,856 | )        |   |         | (258,491 | )       
|                                 | Other                                                                                                                      |                                           |         | (5,685   | )        |   |         | (1,062   | )       
|                                 |                                                                                                                            |                                           |         |          |          |   |         |         
|                                 |                                                                                                                            | Total gross deferred income tax liability |         |          | (841,525 | ) |         |          | (641,675 | )
|                                 |                                                                                                                            |                                           |         |          |          |   |         |         
|                                 |                                                                                                                            | Net deferred income tax asset (liability) |         | $        | (16,499  | ) |         | $        | 12,140   |  
|                                 |                                                                                                                            |                                           |         |          |          |   |         |         

The Company is required to establish a
valuation allowance for any portion of the deferred
tax asset that management believes will not be realized. A
valuation allowance has been established at December 31,
2002 for certain credit carryovers which may not be realized.

Federal income tax returns for the Company for
years through 1992 are closed to further assessment of taxes.
The Internal Revenue Service is examining federal income tax
returns of the Company for 1993 through 2001. Management
believes adequate provisions have been made for any additional
taxes which may become due with respect to open years.

F-36



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(10) EMPLOYEE BENEFIT PLANS

Defined Benefit Plans

The Company has a defined benefit pension plan
which covered substantially all of the Companys employees.
The plan provided for benefits based upon years of service and
the employees compensation. The Company froze the plan
effective December 31, 1995. Effective January 1,
1996, the plan was replaced by a defined contribution savings
and retirement plan which also replaced the Companys
defined contribution pension plans.

In addition, ILICO has a noncontributory defined
benefit pension plan, which generally covered all qualified
employees that had attained the age of twenty-one. Benefits were
based on years of service and compensation levels during
employment. All plan assets consisted primarily of deposit
administration funds and group annuity contracts held by ILICO.
The Company froze the plan effective December 31, 2001 and
merged this plan into the Companys defined benefit pension
plan. The Company is filing a request with the IRS for approval
to permit the Company to offer ILICO employees distribution
options under a qualified spin-off plan. Effective
January 1, 2002, the plan participants are included in the
Companys defined contribution savings and retirement plan.

The plans funded status, reconciled to
amounts recognized in the consolidated financial statements is
as follows:

|                                |                                                |                                          |   |         |        |  |   |         |        | 
|------------------------------- | ---------------------------------------------- | ---------------------------------------- | - | ------- | ------ |  | - | ------- | ------ | 
|                                |                                                |                                         
|                                |                                                | December 31,                            
|                                |                                                |                                         
|                                |                                                | 2002                                     |   | 2001   
|                                |                                                |                                          |   |        
|                                |                                                |                                         
|                                |                                                | ($ in thousands)                        
|Change in benefit obligation:   |                                                |                                          |   |         |        |  |   |        
|                                | Benefit obligation at beginning of year        |                                          | $ | 78,619  |        |  | $ | 33,387  |       
|                                | Service cost                                   |                                          |   |        |        |  |   | 1,035   |       
|                                | Interest cost                                  |                                          |   | 5,368   |        |  |   | 4,154   |       
|                                | Actuarial loss                                 |                                          |   | 1,131   |        |  |   | 3,885   |       
|                                | Addition for ILICO plan in May 2001            |                                          |   |        |        |  |   | 40,232  |       
|                                | Actual benefits paid                           |                                          |   | (5,205  | )      |  |   | (4,074  | )     
|                                |                                                |                                          |   |         |        |  |   |        
|                                |                                                | Benefit obligation at end of year        |   | $       | 79,913 |  |   | $       | 78,619 | 
|                                |                                                |                                          |   |         |        |  |   |        
|Change in plan assets:          |                                                |                                          |   |         |        |  |   |        
|                                | Fair value of plan assets at beginning of year |                                          | $ | 68,550  |        |  | $ | 38,004  |       
|                                | Actual return on plan assets                   |                                          |   | 3,766   |        |  |   | 5,119   |       
|                                | Addition for ILICO plan in May 2001            |                                          |   |        |        |  |   | 29,183  |       
|                                | Company contribution                           |                                          |   | 602     |        |  |   | 317     |       
|                                | Benefits paid and transfers                    |                                          |   | (5,205  | )      |  |   | (4,073  | )     
|                                |                                                |                                          |   |         |        |  |   |        
|                                |                                                | Fair value of plan assets at end of year |   | $       | 67,713 |  |   | $       | 68,550 | 
|                                |                                                |                                          |   |         |        |  |   |        
|Reconciliation of funded status |                                                |                                          |   |         |        |  |   |        
|                                | Accumulated benefit obligation                 |                                          | $ | (79,913 | )      |  | $ | (78,619 | )     
|                                |                                                |                                          |   |         |        |  |   |        
|                                | Projected benefit obligation                   |                                          | $ | (79,913 | )      |  | $ | (78,619 | )     
|                                | Market value of plan assets                    |                                          |   | 67,713  |        |  |   | 68,550  |       
|                                |                                                |                                          |   |         |        |  |   |        
|                                | Funded status                                  |                                          |   | (12,200 | )      |  |   | (10,069 | )     
|                                | Unrecognized transition obligation             |                                          |   | (5      | )      |  |   | (7      | )     
|                                | Unrecognized prior service cost                |                                          |   | 391     |        |  |   | 342     |       
|                                | Unrecognized net loss                          |                                          |   | 5,547   |        |  |   | 3,735   |       
|                                |                                                |                                          |   |         |        |  |   |        
|                                | Prepaid (accrued) benefit cost                 |                                          | $ | (6,267  | )      |  | $ | (5,999  | )     
|                                |                                                |                                          |   |         |        |  |   |        

F-37



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                     |                                        |                                    |  |       |        |   |  |       |        |  
|-------------------------------------------------------------------- | -------------------------------------- | ---------------------------------- |  | ----- | ------ | - |  | ----- | ------ | -
|                                                                     |                                        |                                   
|                                                                     |                                        | December 31,                      
|                                                                     |                                        |                                   
|                                                                     |                                        | 2002                               |  | 2001 
|                                                                     |                                        |                                    |  |      
|                                                                     |                                        |                                   
|                                                                     |                                        | ($ in thousands)                  
|Amounts recognized in the consolidated balance
    sheet consist of: |                                        |                                    |  |       |        |   |  |      
|                                                                     | Liabilities                            |                                    |  |       |        |   |  |       |       
|                                                                     |                                        | Accrued pension cost               |  | $     | (7,762 | ) |  | $     | (7,787 | )
|                                                                     |                                        | Additional minimum liability       |  |       | (5,932 | ) |  |       | (4,070 | )
|                                                                     | Assets                                 |                                    |  |       |        |   |  |       |       
|                                                                     |                                        | Prepaid pension cost               |  |       | 1,495  |   |  |       | 1,788  |  
|                                                                     |                                        | Intangible asset                   |  |       | 457    |   |  |       | 483    |  
|                                                                     | Accumulated other comprehensive income |                                    |  | 5,475 |        |   |  | 3,587 |       
|                                                                     |                                        |                                    |  |       |        |   |  |      
|                                                                     |                                        | Net prepaid (accrued) pension cost |  | $     | (6,267 | ) |  | $     | (5,999 | )
|                                                                     |                                        |                                    |  |       |        |   |  |      
|Weighted-average assumptions as of end of year                       |                                        |                                    |  |       |        |   |  |      
|                                                                     | Discount rate                          |                                    |  | 6.50% |        |   |  | 7.00% |       
|                                                                     | Expected return on plan assets         |                                    |  | 7.50% |        |   |  | 7.50% |       
|                                                                     | Rate of compensation increase          |                                    |  | N/A   |        |   |  | N/A   |       

|                                         |                                       |                          |   |        |   |      |   |        |   |  |   |        |  
|---------------------------------------- | ------------------------------------- | ------------------------ | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                         |                                       |                         
|                                         |                                       | Years Ended December 31,
|                                         |                                       |                         
|                                         |                                       | 2002                     |   | 2001   |   | 2000
|                                         |                                       |                          |   |        |   |     
|                                         |                                       |                         
|                                         |                                       | ($ in thousands)        
|Components of net periodic benefit cost: |                                       |                          |   |        |   |      |   |        |   |  |   |       
|                                         | Service cost                          |                          | $ |       |   |      | $ | 1,035  |   |  | $ |       |  
|                                         | Interest cost                         |                          |   | 5,368  |   |      |   | 4,154  |   |  |   | 2,455  |  
|                                         | Expected return on plan assets        |                          |   | (4,934 | ) |      |   | (4,064 | ) |  |   | (2,829 | )
|                                         | Amortization of transition obligation |                          |   | (2     | ) |      |   | (1     | ) |  |   | (2     | )
|                                         | Amortization of prior service cost    |                          |   | (49    | ) |      |   | (49    | ) |  |   | (76    | )
|                                         | Amortization of actuarial loss        |                          |   | 40     |   |      |   |       |   |  |   |       |  
|                                         |                                       |                          |   |        |   |      |   |        |   |  |   |       
|                                         | Net periodic benefit cost             |                          | $ | 423    |   |      | $ | 1,075  |   |  | $ | (452   | )
|                                         |                                       |                          |   |        |   |      |   |        |   |  |   |       

Defined Contribution Pension Plans

The Company has a defined contribution savings
and retirement plan. Company contributions are non-discretionary
and consist of a matching contribution of an amount equal to
125 percent of the first 4 percent of employee
contributions and an annual core contribution of an amount equal
to 4 percent of annual employee compensation. The Company
uses a combination of cash and Company common stock for the
annual contribution. The shares for this purpose are provided by
the Companys leveraged Employee Stock Ownership Plan
(ESOP). Compensation expense for the employer match and annual
contribution amounted to $5.3 million, $4.2 million
and $4.3 million, including $1.3 million,
$0.9 million and $1.3 million of ESOP compensation
expense, in 2002, 2001 and 2000, respectively.

In addition, ILICO had a defined contribution
savings plan. Company contributions were non-discretionary and
consisted of a matching contribution equal to 50 percent of
the first 3 percent of employee contributions. This plan
was merged in the Companys defined contribution savings
and retirement plan as of October 1, 2001; however, certain
provisions of the plan remained in effect through
December 31, 2001. Compensation expense for the employer
match amounted to $0.3 million in 2001.

F-38



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Leveraged Employee Stock Ownership
Plan

The Company has a leveraged ESOP. The shares of
the ESOP are used to fund a portion of the annual core
contribution of the Companys defined contribution savings
and retirement plan. The ESOP was originally sponsored by
AmVestors, an acquired subsidiary of the Company. The ESOP
acquired AmVestors stock, which was subsequently exchanged for
the Companys stock, through the proceeds of a note payable
to American, a subsidiary of AmVestors. The note was repaid in
December 2002. During 2002, the ESOP purchased 80,000
shares of the Companys stock which was funded by an
employer loan from the Company.

The Company accounts for its ESOP in accordance
with SOP 93-6. Accordingly, as unallocated shares are
allocated, compensation expense, or a reduction in the annual
defined contribution savings and retirement plan liability, is
reported equal to the current market price of the shares, and
the shares become outstanding for earnings-per-share
(EPS) computations. ESOP compensation expense was
$1.3 million, $0.9 million and $1.3 million for
2002, 2001 and 2000, respectively.

The ESOP shares were as follows:

|                                                           |  |              |         |      |  |   |         | 
|---------------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                                           |  |             
|                                                           |  | December 31,
|                                                           |  |             
|                                                           |  | 2002         |         | 2001
|                                                           |  |              |         |     
|Allocated shares                                           |  |              | 259,671 |      |  |   | 211,987 | 
|Unallocated shares                                         |  |              | 45,773  |      |  |   | 12,912  | 
|                                                           |  |              |         |      |  |   |         | 
|Total ESOP shares                                          |  |              | 305,444 |      |  |   | 224,899 | 
|                                                           |  |              |         |      |  |   |         | 
|Fair market value of unallocated shares (in
    thousands) |  | $            | 1,294   |      |  | $ | 463     | 
|                                                           |  |              |         |      |  |   |         | 

Nonqualified Benefit Plans

The Company has nonqualified benefit plans
covering certain agents, directors and officers. Accumulated
benefits of the plans are unfunded and are included in other
liabilities at December 31, 2002 and 2001, amounting to
$84.4 million and $81.4 million, respectively. Total
nonqualified benefit expense amounted to $3.6 million,
$5.3 million and $6.8 million for 2002, 2001 and 2000,
respectively.

Postretirement Plans

The Company has postretirement benefit plans
which provide eligible participants and dependents with certain
medical, dental and life insurance benefits. The plans
funded status, reconciled to amounts recognized in the
consolidated financial statements is as follows:

|                              |                                         |                                   |   |        |        |  |   |        |        | 
|----------------------------- | --------------------------------------- | --------------------------------- | - | ------ | ------ |  | - | ------ | ------ | 
|                              |                                         |                                  
|                              |                                         | December 31,                     
|                              |                                         |                                  
|                              |                                         | 2002                              |   | 2001  
|                              |                                         |                                   |   |       
|                              |                                         |                                  
|                              |                                         | ($ in thousands)                 
|Change in benefit obligation: |                                         |                                   |   |        |        |  |   |       
|                              | Benefit obligation at beginning of year |                                   | $ | 14,698 |        |  | $ | 7,843  |       
|                              | Service cost                            |                                   |   | 345    |        |  |   | 204    |       
|                              | Interest cost                           |                                   |   | 1,087  |        |  |   | 792    |       
|                              | Plan participants contributions        |                                   |   | 332    |        |  |   | 191    |       
|                              | Amendments                              |                                   |   |       |        |  |   | 253    |       
|                              | Actuarial (gain) loss                   |                                   |   | 2,153  |        |  |   | (175   | )     
|                              | Addition for ILICO plan                 |                                   |   |       |        |  |   | 6,723  |       
|                              | Curtailments                            |                                   |   | (796   | )      |  |   |       |       
|                              | Actual benefits paid                    |                                   |   | (1,580 | )      |  |   | (1,133 | )     
|                              |                                         |                                   |   |        |        |  |   |       
|                              |                                         | Benefit obligation at end of year |   | $      | 16,239 |  |   | $      | 14,698 | 
|                              |                                         |                                   |   |        |        |  |   |       

F-39



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                |                                                |                                          |   |         |         |   |   |         |         |  
|----------------------------------------------- | ---------------------------------------------- | ---------------------------------------- | - | ------- | ------- | - | - | ------- | ------- | -
|                                                |                                                |                                         
|                                                |                                                | December 31,                            
|                                                |                                                |                                         
|                                                |                                                | 2002                                     |   | 2001   
|                                                |                                                |                                          |   |        
|                                                |                                                |                                         
|                                                |                                                | ($ in thousands)                        
|Change in plan assets:                          |                                                |                                          |   |         |         |   |   |        
|                                                | Fair value of plan assets at beginning of year |                                          | $ |        |         |   | $ |        |        
|                                                | Company contribution                           |                                          |   | 1,248   |         |   |   | 942     |        
|                                                | Plan participant contribution                  |                                          |   | 332     |         |   |   | 191     |        
|                                                | Benefits paid                                  |                                          |   | (1,580  | )       |   |   | (1,133  | )      
|                                                |                                                |                                          |   |         |         |   |   |        
|                                                |                                                | Fair value of plan assets at end of year |   | $       |        |   |   | $       |        |  
|                                                |                                                |                                          |   |         |         |   |   |        
|Reconciliation of funded status:                |                                                |                                          |   |         |         |   |   |        
|                                                | Accumulated postretirement benefit obligation  |                                          | $ | (16,239 | )       |   | $ | (14,698 | )      
|                                                | Market value of plan assets                    |                                          |   |        |         |   |   |        |        
|                                                |                                                |                                          |   |         |         |   |   |        
|                                                | Funded status                                  |                                          |   | (16,239 | )       |   |   | (14,698 | )      
|                                                | Unrecognized prior service cost                |                                          |   | 518     |         |   |   | 581     |        
|                                                | Unrecognized net (gain)                        |                                          |   | 1,022   |         |   |   | (1,097  | )      
|                                                |                                                |                                          |   |         |         |   |   |        
|                                                |                                                | Accrued benefit cost                     |   | $       | (14,699 | ) |   | $       | (15,214 | )
|                                                |                                                |                                          |   |         |         |   |   |        
|Weighted-average assumptions as of end of year: |                                                |                                          |   |         |         |   |   |        
|                                                | Discount rate                                  |                                          |   | 6.50    | %       |   |   | 7.00    | %      
|                                                | Initial weighted health care cost trend rate   |                                          |   | 10.40   | %       |   |   | 8.00    | %      
|                                                | Ultimate health care cost trend rate           |                                          |   | 5.00    | %       |   |   | 5.00    | %      

|                                         |                                    |                          |   |       |  |      |   |     |   |  |   |     |  
|---------------------------------------- | ---------------------------------- | ------------------------ | - | ----- |  | ---- | - | --- | - |  | - | --- | -
|                                         |                                    |                         
|                                         |                                    | Years Ended December 31,
|                                         |                                    |                         
|                                         |                                    | 2002                     |   | 2001  |  | 2000
|                                         |                                    |                          |   |       |  |     
|                                         |                                    |                         
|                                         |                                    | ($ in thousands)        
|Components of net periodic benefit cost: |                                    |                          |   |       |  |      |   |     |   |  |   |    
|                                         | Service cost                       |                          | $ | 345   |  |      | $ | 204 |   |  | $ | 158 |  
|                                         | Interest cost                      |                          |   | 1,087 |  |      |   | 792 |   |  |   | 574 |  
|                                         | Amortization of prior service cost |                          |   | 63    |  |      |   | 53  |   |  |   | 74  |  
|                                         | Amortization of net (gain)         |                          |   |      |  |      |   | (61 | ) |  |   | (40 | )
|                                         |                                    |                          |   |       |  |      |   |     |   |  |   |    
|                                         | Net periodic benefit cost          |                          | $ | 1,495 |  |      | $ | 988 |   |  | $ | 766 |  
|                                         |                                    |                          |   |       |  |      |   |     |   |  |   |    

Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care
plans. A one-percentage-point change in the assumed health care
cost trend rates would have the following effects in 2002:

|                                                            |  |                  |       |            |  |   |        |  
|----------------------------------------------------------- |  | ---------------- | ----- | ---------- |  | - | ------ | -
|                                                            |  | 1% Point         |       | 1% Point  
|                                                            |  | Increase         |       | (Decrease)
|                                                            |  |                  |       |           
|                                                            |  |                 
|                                                            |  | ($ in thousands)
|Effect on total of service and interest cost
    components |  | $                | 61.7  |            |  | $ | (55.9  | )
|Effect of postretirement benefit obligation                 |  | $                | 868.8 |            |  | $ | (774.5 | )

(11) REINSURANCE

The Company has indemnity reinsurance agreements
with various companies whereby life insurance in excess of its
retention limits is reinsured. The Companys retention of
the net amount at risk is generally between $150,000 and
$500,000. Insurance in force ceded to nonaffiliated companies
under risk sharing arrangements at December 31, 2002 and
2001, totaled approximately $51.4 billion and
$49.5 billion,

F-40



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

respectively. In addition, certain fixed and
equity-indexed annuities are reinsured primarily on a modified
coinsurance basis.

Net premiums and amounts earned were as follows:

|                                                               |  |                          |          |      |  |      |         |   |  |   |         |  
|-------------------------------------------------------------- |  | ------------------------ | -------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                               |  |                         
|                                                               |  | Years Ended December 31,
|                                                               |  |                         
|                                                               |  | 2002                     |          | 2001 |  | 2000
|                                                               |  |                          |          |      |  |     
|                                                               |  |                         
|                                                               |  | ($ in thousands)        
|Direct premiums and amounts assessed against
    policyholders |  | $                        | 419,015  |      |  | $    | 373,421 |   |  | $ | 296,273 |  
|Reinsurance assumed                                            |  |                          | 49,544   |      |  |      | 26,351  |   |  |   | 1,385   |  
|Reinsurance ceded                                              |  |                          | (117,747 | )    |  |      | (93,867 | ) |  |   | (31,503 | )
|                                                               |  |                          |          |      |  |      |         |   |  |   |         |  
|Net premiums and amounts earned                                |  | $                        | 350,812  |      |  | $    | 305,905 |   |  | $ | 266,155 |  
|                                                               |  |                          |          |      |  |      |         |   |  |   |         |  

Reinsurance recoveries on ceded reinsurance
contracts were $134.2 million, $98.4 million and
$20.6 million during 2002, 2001 and 2000, respectively.

Effective October 1, 2000, the Company
entered into a reinsurance agreement to cede 35% of certain
fixed annuity production on a modified coinsurance basis. In
2001, the contract was cancelled and the previous reinsurance
activity was recaptured. Fixed annuity production ceded under
this agreement totaled approximately $160.1 million and
$34.2 million in 2001 and 2000, respectively, and
$194.3 million was assumed in 2001 as part of the recapture.

The Company has entered into modified coinsurance
arrangements to cede between 70% and 80% of certain annuity
products. In 2002, the Company entered modified coinsurance and
similar coinsurance with funds with-held arrangements to cede
80% of certain Closed Block life policies. Future policy benefit
reserves include $2,681.2 million and $1,684.4 million
at December 31, 2002 and 2001, respectively, that are
subject to transfer pursuant to these agreements. Under these
arrangements, the Company transfers the risks and rewards of the
business to the assuming company; however, the ceding company
retains the assets and liabilities associated with the business.

(12) COMMITMENTS AND
CONTINGENCIES

At December 31, 2002, the Company is
obligated to make future capital contributions to various
partnerships of up to $3.1 million and to loan funds up to
$6.9 million to partnerships. In addition, at
December 31, 2002, the Company had loan guarantees which
totaled approximately $6.1 million.

The Company has an agreement with Bank One, N.A.
whereby the Company guarantees the payment of loans made to
certain of the Companys managers and executives for the
purpose of purchasing Common Stock pursuant to the Stock
Purchase Program. The liability of the Company in respect of the
principal amount of loans is limited to $20.1 million. The
Company has also guaranteed interest and all other fees and
obligations owing on the loans. Each participant in the program
has agreed to repay the Company for any amounts paid by the
Company under the guarantee in accordance with a reimbursement
agreement entered into between the participant and the Company.

AmerUs and its joint venture partner are
contingently liable in the event the joint venture, Ameritas
Variable Life Insurance Company (AVLIC), cannot meet its
policyholder obligations. At December 31, 2002, AVLIC had
statutory assets of $2,004 million, liabilities of
$1,931 million, and surplus of $73 million.

The Company leases office space under various
operating leases with terms through 2007. Rental expense for
operating leases amounted to $3.3 million,
$2.8 million and $2.4 million in 2002, 2001 and 2000,

F-41



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

respectively. At December 31, 2002, future
minimum annual lease commitments under these non-cancelable
operating leases were as follows ($ in thousands):

|           |  |   |        | 
|---------- |  | - | ------ | 
|2003       |  | $ | 2,872  | 
|2004       |  |   | 2,886  | 
|2005       |  |   | 2,093  | 
|2006       |  |   | 1,502  | 
|2007       |  |   | 1,502  | 
|Thereafter |  |   |       | 
|           |  |   |        | 
|           |  | $ | 10,855 | 
|           |  |   |        | 

In recent years, the life insurance industry,
including the Company and its subsidiaries, have been subject to
an increase in litigation pursued on behalf of purported classes
of insurance purchasers, questioning the conduct of insurers in
the marketing of their products. The Company is involved in
litigation, including class actions, reinsurance claims and
regulatory proceedings, arising in the ordinary course of its
business. Some of these claims and legal actions are in
jurisdictions where juries are given substantial latitude in
assessing damages, including punitive damages. Although no
assurances can be given and no determinations can be made at
this time, the Company believes that the ultimate liability, if
any, with respect to these claims and legal actions, would have
no material effect on its results of operations and financial
position.

As previously disclosed, one of the
Companys subsidiaries, IL Annuity, has had a dispute
with the reinsurer of a block of its annuity business. In
December of 2002, the reinsurer began arbitration proceedings
against IL Annuity claiming approximately
$11.3 million and other appropriate relief related to
investment charges in connection with a reinsurance agreement
between the reinsurer and IL Annuity. The arbitration
process is in its preliminary stages. Although predicting the
outcome is not feasible, the Company believes it has strong
defenses against the claims, and based upon currently available
information, that any liability arising from these claims would
not have a material adverse effect on the Companys
consolidated financial position or results of operations.

(13) STOCKHOLDERS EQUITY

Generally, the stockholders equity of the
Companys insurance subsidiaries available for distribution
to the Company is limited to the amounts that the insurance
subsidiaries net assets, as determined in accordance with
statutory accounting practices, exceed minimum statutory capital
requirements; however, payments of such amounts as dividends may
be subject to approval by regulatory authorities. In 2003, the
Companys insurance subsidiaries can distribute
$82.3 million in the form of dividends to the Company
without prior approval of such regulatory authorities.

Stock Option Plans

The Company has three stock incentive plans
authorizing the issuance of incentive and non-qualified stock
options to employees, officers and non-employee directors of the
Company. The Company has reserved 3,150,000 shares of
Common Stock for issuance under these plans.

In conjunction with the acquisition of AmVestors,
the Company has two additional plans in which no additional
shares may be granted. They are a non-qualified stock option
plan and an incentive stock option plan.

The date of grant and the term of the option may
not be longer than ten years. Generally, all options have a
three-year vesting schedule with one-third of the options
granted vesting at the end of each of the three years.

F-42



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the Companys stock option plan
follows:

|                               |  |                          |           |          |  |        |       |          |  |        |           |          |  |   |       |  |  |  |           |   |  |   |       | 
|------------------------------ |  | ------------------------ | --------- | -------- |  | ------ | ----- | -------- |  | ------ | --------- | -------- |  | - | ----- |  |  |  | --------- | - |  | - | ----- | 
|                               |  |                         
|                               |  | Years Ended December 31,
|                               |  |                         
|                               |  |                          |           |          |  |       
|                               |  | 2002                     |           | 2001     |  | 2000  
|                               |  |                          |           |          |  |       
|                               |  |                          |           | Weighted |  |        |       | Weighted |  |        |           | Weighted
|                               |  | Number                   |           | Average  |  | Number |       | Average  |  | Number |           | Average 
|                               |  | of                       |           | Exercise |  | of     |       | Exercise |  | of     |           | Exercise
|                               |  | Shares                   |           | Price    |  | Shares |       | Price    |  | Shares |           | Price   
|                               |  |                          |           |          |  |        |       |          |  |        |           |         
|Outstanding, beginning of year |  |                          | 2,370,134 |          |  | $      | 24.64 |          |  |        | 1,942,054 |          |  | $ | 22.65 |  |  |  | 1,509,764 |   |  | $ | 24.27 | 
|Granted at market price        |  |                          | 626,086   |          |  |        | 37.95 |          |  |        | 776,250   |          |  |   | 31.73 |  |  |  | 628,000   |   |  |   | 20.15 | 
|Exercised                      |  |                          | (151,501  | )        |  |        | 22.87 |          |  |        | (169,778  | )        |  |   | 24.99 |  |  |  | (9,441    | ) |  |   | 21.41 | 
|Forfeited                      |  |                          | (109,356  | )        |  |        | 26.90 |          |  |        | (178,392  | )        |  |   | 33.66 |  |  |  | (186,269  | ) |  |   | 27.47 | 
|                               |  |                          |           |          |  |        |       |          |  |        |           |          |  |   |       |  |  |  |           |   |  |   |       | 
|Outstanding, end of year       |  |                          | 2,735,363 |          |  | $      | 27.64 |          |  |        | 2,370,134 |          |  | $ | 24.64 |  |  |  | 1,942,054 |   |  | $ | 22.65 | 
|                               |  |                          |           |          |  |        |       |          |  |        |           |          |  |   |       |  |  |  |           |   |  |   |       | 
|Exercisable, end of year       |  |                          | 1,859,471 |          |  | $      | 24.99 |          |  |        | 1,329,557 |          |  | $ | 23.35 |  |  |  | 1,115,832 |   |  | $ | 23.87 | 
|                               |  |                          |           |          |  |        |       |          |  |        |           |          |  |   |       |  |  |  |           |   |  |   |       | 

The following table summarizes information about
stock options outstanding under the Companys option plan
as of December 31, 2002:

|                         |  |                     |           |               |  |          |     |  |  |   |       | 
|------------------------ |  | ------------------- | --------- | ------------- |  | -------- | --- |  |  | - | ----- | 
|                         |  |                    
|                         |  | Options Outstanding
|                         |  |                    
|                         |  |                     |           | Weighted      |  | Weighted
|                         |  | Remaining           |           | Average       |  | Average 
|                         |  | Options             |           | Contractual   |  | Exercise
|Range of Exercise Prices |  | Outstanding         |           | Life in Years |  | Price   
|                         |  |                     |           |               |  |         
|$11.98-$15.96            |  | $                   | 99,719    |               |  |          | 1.3 |  |  | $ | 15.12 | 
|$15.97-$19.95            |  |                     | 230,946   |               |  |          | 3.1 |  |  |   | 19.11 | 
|$19.96-$23.94            |  |                     | 750,076   |               |  |          | 6.8 |  |  |   | 20.55 | 
|$23.95-$27.93            |  |                     | 380,500   |               |  |          | 4.6 |  |  |   | 27.82 | 
|$27.94-$31.92            |  |                     | 573,036   |               |  |          | 7.7 |  |  |   | 30.26 | 
|$31.93-$35.91            |  |                     | 133,786   |               |  |          | 8.2 |  |  |   | 35.47 | 
|$35.92-$39.90            |  |                     | 567,300   |               |  |          | 9.0 |  |  |   | 38.09 | 
|                         |  |                     |           |               |  |          |     |  |  |   |       | 
|                         |  | $                   | 2,735,363 |               |  |          | 6.7 |  |  | $ | 27.64 | 
|                         |  |                     |           |               |  |          |     |  |  |   |       | 

The following table summarizes information about
stock options exercisable under the Companys option plan
as of December 31, 2002:

|                         |  |                     |           |          |  |   |       | 
|------------------------ |  | ------------------- | --------- | -------- |  | - | ----- | 
|                         |  |                    
|                         |  | Options Exercisable
|                         |  |                    
|                         |  |                     |           | Weighted
|                         |  |                     |           | Average 
|                         |  | Options             |           | Exercise
|Range of Exercise Prices |  | Exercisable         |           | Price   
|                         |  |                     |           |         
|$11.98-$15.96            |  |                     | 99,719    |          |  | $ | 15.12 | 
|$15.97-$19.95            |  |                     | 229,279   |          |  |   | 19.11 | 
|$19.96-$23.94            |  |                     | 632,407   |          |  |   | 20.63 | 
|$23.95-$27.93            |  |                     | 380,500   |          |  |   | 27.82 | 
|$27.94-$31.92            |  |                     | 341,065   |          |  |   | 30.33 | 
|$31.93-$35.91            |  |                     | 39,001    |          |  |   | 35.40 | 
|$35.92-$39.90            |  |                     | 137,500   |          |  |   | 38.01 | 
|                         |  |                     |           |          |  |   |       | 
|                         |  |                     | 1,859,471 |          |  | $ | 24.99 | 
|                         |  |                     |           |          |  |   |       | 

F-43



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The fair value of options granted was estimated
on the date of grant using the Black-Scholes pricing model with
an expected life equal to the contractual expiration and the
following weighted average assumptions:

|                                               |  |      |       |      |  |      |       |   |  |   |       |  
|---------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                               |  | 2002 |       | 2001 |  | 2000
|                                               |  |      |       |      |  |     
|Expected Volatility                            |  |      | 32.00 | %    |  |      | 32.00 | % |  |   | 37.00 | %
|Risk-free Interest Rate                        |  |      | 5.39  | %    |  |      | 5.36  | % |  |   | 6.82  | %
|Dividend Yield                                 |  |      | 1.06  | %    |  |      | 1.27  | % |  |   | 1.99  | %
|Weighted average fair value of options granted |  | $    | 17.57 |      |  | $    | 14.33 |   |  | $ | 9.40  |  

The Company applies Accounting Principles Board
Opinion 25 and related Interpretations in accounting for its
stock option plans for employees, officers and non-employee
directors. Accordingly, no compensation expense has been
recognized for its option plans. Had compensation expense for
the Companys option plans been determined based on the
fair value at the grant dates for awards under those plans
consistent with the method prescribed by SFAS 123, the
Companys net earnings and diluted earnings per share would
have been reduced to the pro forma amounts indicated below:

|                               |             |                          |   |        |  |      |   |        |  |  |   |        | 
|------------------------------ | ----------- | ------------------------ | - | ------ |  | ---- | - | ------ |  |  | - | ------ | 
|                               |             |                         
|                               |             | Years Ended December 31,
|                               |             |                         
|                               |             | 2002                     |   | 2001   |  | 2000
|                               |             |                          |   |        |  |     
|Net earnings ($ in thousands): |             |                          |   |        |  |      |   |        |  |  |   |       
|                               | As reported |                          | $ | 62,866 |  |      | $ | 72,907 |  |  | $ | 51,840 | 
|                               | Pro forma   |                          | $ | 57,772 |  |      | $ | 67,784 |  |  | $ | 50,285 | 
|Basic earnings per share:      |             |                          |   |        |  |      |   |        |  |  |   |       
|                               | As reported |                          | $ | 1.57   |  |      | $ | 1.97   |  |  | $ | 2.48   | 
|                               | Pro forma   |                          | $ | 1.45   |  |      | $ | 1.83   |  |  | $ | 2.40   | 
|Diluted earnings per share:    |             |                          |   |        |  |      |   |        |  |  |   |       
|                               | As reported |                          | $ | 1.56   |  |      | $ | 1.95   |  |  | $ | 2.46   | 
|                               | Pro forma   |                          | $ | 1.43   |  |      | $ | 1.81   |  |  | $ | 2.39   | 

Non-vested Stock

The Company has awarded common stock to eligible
employees and non-employee directors under the two stock
incentive plans. The plans have restriction periods of one to
five years tied to employment and/or service. The awards were
recorded at the market value on the date of the grant as
unearned compensation since common shares were legally issued on
that date. The initial values of these grants are amortized over
the restriction periods, net of forfeitures.

Non-vested stock and compensation expense
information is as follows:

|                                      |  |                          |         |          |  |        |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 
|------------------------------------- |  | ------------------------ | ------- | -------- |  | ------ | ----- | -------- |  | ------ | ------- | -------- |  | - | ----- |  |  |  | ------- | - |  | - | ----- | 
|                                      |  |                         
|                                      |  | Years Ended December 31,
|                                      |  |                         
|                                      |  |                          |         |          |  |       
|                                      |  | 2002                     |         | 2001     |  | 2000  
|                                      |  |                          |         |          |  |       
|                                      |  | Number                   |         | Weighted |  | Number |       | Weighted |  | Number |         | Weighted
|                                      |  | of                       |         | Average  |  | of     |       | Average  |  | of     |         | Average 
|                                      |  | Shares                   |         | Value    |  | Shares |       | Value    |  | Shares |         | Value   
|                                      |  |                          |         |          |  |        |       |          |  |        |         |         
|Outstanding, beginning of year        |  |                          | 51,635  |          |  | $      | 29.36 |          |  |        | 30,835  |          |  | $ | 24.35 |  |  |  | 36,245  |   |  | $ | 26.85 | 
|Granted at market price               |  |                          | 13,149  |          |  |        | 33.70 |          |  |        | 34,803  |          |  |   | 33.78 |  |  |  | 12,466  |   |  |   | 20.26 | 
|Exercised                             |  |                          | (23,857 | )        |  |        | 24.66 |          |  |        | (14,003 | )        |  |   | 29.32 |  |  |  | (17,576 | ) |  |   | 26.47 | 
|Forfeited                             |  |                          | (9,000  | )        |  |        | 33.45 |          |  |        |        |          |  |   |      |  |  |  | (300    | ) |  |   | 31.56 | 
|                                      |  |                          |         |          |  |        |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 
|Outstanding, end of year              |  |                          | 31,927  |          |  | $      | 33.51 |          |  |        | 51,635  |          |  | $ | 29.36 |  |  |  | 30,835  |   |  | $ | 24.35 | 
|                                      |  |                          |         |          |  |        |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 
|Compensation expense ($ in thousands) |  |                          |         |          |  | $      | 554   |          |  |        |         |          |  | $ | 648   |  |  |  |         |   |  | $ | 435   | 
|                                      |  |                          |         |          |  |        |       |          |  |        |         |          |  |   |       |  |  |  |         |   |  |   |       | 

F-44



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Non-employee Stock Options

As part of the stock incentive plans and the
non-employee stock option plan, the Human Resources and
Compensation Committee of the Board of Directors is authorized
to grant stock appreciation rights (SARs) to
employees, officers, agents and other non-employees in tandem
with stock options. A SAR can be exercised only to the extent
the option with respect to which it is granted is not exercised,
and is subject to the same terms and conditions as the option to
which it relates. Issuance of SARs is made at the sole
discretion of the Human Resources and Compensation Committee of
the Board of Directors. The Company has reserved 100,000 shares
of Common Stock for issuance under this plan. The terms and
conditions under this plan are the same as under the employee
stock incentive plans.

The Companys SARs are summarized as follows:

|                                      |  |                          |        |          |  |        |       |          |  |        |        |          |  |   |       |  |  |  |        |  |  |   |       | 
|------------------------------------- |  | ------------------------ | ------ | -------- |  | ------ | ----- | -------- |  | ------ | ------ | -------- |  | - | ----- |  |  |  | ------ |  |  | - | ----- | 
|                                      |  |                         
|                                      |  | Years Ended December 31,
|                                      |  |                         
|                                      |  |                          |        |          |  |       
|                                      |  | 2002                     |        | 2001     |  | 2000  
|                                      |  |                          |        |          |  |       
|                                      |  |                          |        | Weighted |  |        |       | Weighted |  |        |        | Weighted
|                                      |  | Number                   |        | Average  |  | Number |       | Average  |  | Number |        | Average 
|                                      |  | of                       |        | Exercise |  | of     |       | Exercise |  | of     |        | Exercise
|                                      |  | Shares                   |        | Price    |  | Shares |       | Price    |  | Shares |        | Price   
|                                      |  |                          |        |          |  |        |       |          |  |        |        |         
|Outstanding, beginning of year        |  |                          | 39,233 |          |  | $      | 24.58 |          |  |        | 25,000 |          |  | $ | 22.22 |  |  |  | 13,500 |  |  | $ | 23.31 | 
|Granted at market price               |  |                          | 12,000 |          |  |        | 35.30 |          |  |        | 16,900 |          |  |   | 27.77 |  |  |  | 11,500 |  |  |   | 20.94 | 
|Exercised                             |  |                          | (2,833 | )        |  |        | 22.06 |          |  |        | (1,668 | )        |  |   | 22.73 |  |  |  |       |  |  |   |      | 
|Forfeited                             |  |                          | (2,000 | )        |  |        | 29.85 |          |  |        | (999   | )        |  |   | 22.67 |  |  |  |       |  |  |   |      | 
|                                      |  |                          |        |          |  |        |       |          |  |        |        |          |  |   |       |  |  |  |        |  |  |   |       | 
|Outstanding, end of year              |  |                          | 46,400 |          |  | $      | 27.28 |          |  |        | 39,233 |          |  | $ | 24.58 |  |  |  | 25,000 |  |  | $ | 22.22 | 
|                                      |  |                          |        |          |  |        |       |          |  |        |        |          |  |   |       |  |  |  |        |  |  |   |       | 
|Compensation expense ($ in thousands) |  |                          |        |          |  | $      | (140  | )        |  |        |        |          |  | $ | 179   |  |  |  |        |  |  | $ | 103   | 
|                                      |  |                          |        |          |  |        |       |          |  |        |        |          |  |   |       |  |  |  |        |  |  |   |       | 

Stock Warrants

In conjunction with the acquisition of AmVestors,
the Company had outstanding warrants to purchase shares of the
Companys Common Stock. The warrants were exercisable at
$24.42 per share and expired on April 2, 2002. The
Companys stock warrant activity is summarized as follows:

|                                        |  |                          |          |      |  |      |          |   |  |   |         | 
|--------------------------------------- |  | ------------------------ | -------- | ---- |  | ---- | -------- | - |  | - | ------- | 
|                                        |  |                         
|                                        |  | Years Ended December 31,
|                                        |  |                         
|                                        |  | 2002                     |          | 2001 |  | 2000
|                                        |  |                          |          |      |  |     
|Warrants outstanding, beginning of year |  |                          | 347,262  |      |  |      | 473,596  |   |  |   | 473,596 | 
|Exercise of warrants                    |  |                          | (344,154 | )    |  |      | (126,334 | ) |  |   |        | 
|Forfeiture of warrants                  |  |                          | (3,108   | )    |  |      |         |   |  |   |        | 
|                                        |  |                          |          |      |  |      |          |   |  |   |         | 
|Warrants outstanding, end of year       |  |                          |         |      |  |      | 347,262  |   |  |   | 473,596 | 
|                                        |  |                          |          |      |  |      |          |   |  |   |         | 
|Compensation expense ($ in thousands)   |  | $                        |         |      |  | $    |         |   |  | $ |        | 
|                                        |  |                          |          |      |  |      |          |   |  |   |         | 

(14) STATUTORY ACCOUNTING
PRACTICES

The Companys insurance subsidiaries had
statutory net loss of $30.0 million for 2002, statutory net loss
of $6.9 million for 2001 and statutory net income of
$69.4 million for 2000. The Companys insurance
subsidiaries statutory surplus and capital was
$797.2 million and $690.4 million at December 31,
2002 and 2001, respectively. The minimum capital and surplus
requirements are met in all the states in which the insurance
subsidiaries are domiciled.

The Companys insurance subsidiaries are
domiciled in Indiana, Iowa, Kansas and New York and prepare
their statutory-basis financial statements in accordance with
accounting practices prescribed or

F-45



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

permitted by those respective state insurance
departments. The National Association of Insurance Commissioners
(NAIC) has codified statutory accounting practices which have
been adopted without exception by the states in which the
insurance subsidiaries are domiciled and which constitute the
only source of prescribed statutory accounting practices.
Codification was effective January 1, 2001 and changed
prescribed statutory accounting practices and resulted in
changes to the accounting practices insurance enterprises used
to prepare statutory financial statements. The impact of
adopting Codification was an increase to statutory surplus of
approximately $25 million, excluding ILICO.

The respective insurance departments impose
minimum risk-based capital (RBC) requirements on insurance
enterprises that were developed by the NAIC. The formulas for
determining the amount of RBC specify various weighting factors
that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory
compliance is determined by a ratio of the enterprises
regulatory total adjusted capital, to its authorized control
level RBC. The life insurance subsidiaries exceed the authorized
control level RBC requirements.

(15) ACQUISITIONS

On May 18, 2001, the Company completed the
acquisition of ILICO for an amount of cash, policy credits and
shares of the Companys common stock equal to the value of
9.3 million shares of the Companys common stock. The
purchase price totaled a value of approximately
$326 million. The acquisition was accounted for using the
purchase method of accounting and accordingly the total purchase
price was allocated to the assets and liabilities of ILICO based
on the relative fair values as of May 18, 2001, with the
excess of the purchase price over the fair value of the assets
acquired less the fair value of the liabilities assumed recorded
as goodwill. The operations of ILICO for the period of
May 18, 2001 through December 31, 2001 and for all of
2002 have been included in the consolidated statement of income
of the Company.

The allocation of the purchase price of ILICO is
as follows ($ in millions):

|                                                            |                           |   |          |       | 
|----------------------------------------------------------- | ------------------------- | - | -------- | ----- | 
|Investments (including cash and short-term
    investments) |                           | $ | 4,674.1  |      
|Receivables and other assets                                |                           |   | 434.7    |      
|Value of business acquired                                  |                           |   | 215.4    |      
|Goodwill                                                    |                           |   | 36.2     |      
|Separate account assets                                     |                           |   | 345.6    |      
|Policyowner reserves and funds                              |                           |   | (4,880.4 | )    
|Other liabilities                                           |                           |   | (128.6   | )    
|Debt                                                        |                           |   | (25.0    | )    
|Separate account liabilities                                |                           |   | (345.6   | )    
|                                                            |                           |   |          |      
|                                                            | Total investment in ILICO |   | $        | 326.4 | 
|                                                            |                           |   |          |      

In conjunction with the Companys
demutualization previously discussed, on September 20,
2000, the Company acquired the 42% Minority Interest of its
subsidiary, ALHI, in a stock exchange valued at approximately
$298 million. ALHI merged into the Company simultaneously
with the stock exchange. The acquisition of the ALHI minority
interest by the Company was accounted for as a purchase and
accordingly 42% of the book value of the assets and liabilities
of ALHI were adjusted to market value as of the acquisition
date. Goodwill was reduced by approximately $34 million.
Approximately 42% of the ALHI earnings for the reporting periods
up to the acquisition date are reduced from the Companys
results of operations in minority interest on the Companys
consolidated statements of income. From the acquisition date
forward, the Companys results of operations include 100%
of these earnings.

Demutualization costs associated with the
Companys demutualization of $11.3 million are
included in expenses for 2000. Demutualization costs for the
ILICO demutualization of $1.0 million are included in

F-46



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

expenses in 2001. These costs consist primarily
of legal, actuarial and consulting expenses associated with the
Companys and ILICOs demutualizations. As a
requirement of ILICs demutualization, the Company
undertook a commission-free program under which shareholders
with less than one hundred shares to redeem those shares for
cash or purchase additional shares, commission-free, to reach a
holding of at least one hundred shares. The 2002 costs amounting
to $1.2 million are primarily for commissions, postage and
printing under this program.

On March 28, 2001, ALIC acquired an
additional 5% ownership interest in AMAL Corporation
(AMAL) for $7.2 million. During 2002, AVLIC made
additional contributions to AMAL which diluted ALICs
ownership percentage in AMAL to 34%. In December 2002, both
Ameritas and ALIC contributed additional cash, amounting to
$5 million by ALIC, which maintained ALICs 34%
ownership.

(16) RESTRUCTURING CHARGES

During the third quarter of 2001, the Company
began consolidating various functions in connection with a
restructuring of its protection products and accumulation
products operations and investment activities. The objective of
the restructuring plan is to eliminate duplicative functions for
all business units and to reduce ongoing costs. Corporate
administrative functions are being transitioned so they are
performed primarily in Des Moines, Iowa. Protection products
administration processes were previously planned to be performed
primarily in Indianapolis, Indiana; Des Moines, Iowa; or
Woodbury, New York; however, it has now been determined that
these processes will be transitioned so they are performed
primarily in Des Moines, Woodbury, or outsourced. This will
result in the elimination of additional positions in
Indianapolis. Accumulation products functions will be
transitioned to Topeka, Kansas. Investment activities have been
restructured to eliminate certain real estate management
services which have been outsourced.

Restructuring charges have been included in
operating expenses in the consolidated statement of income and
include pre-tax severance and termination benefits of
$9.5 million and $6.8 million related to the
elimination of approximately 240 positions and 80 positions and
other pre-tax costs of $11.7 million and $1.8 million
for 2002 and 2001, respectively, related to systems conversion
and relocation of employees. An accrual for severance and
termination benefits not yet paid amounted to $6.1 million
and $2.1 million at December 31, 2002 and 2001,
respectively. Details of the pre-tax restructuring charges are
as follows:

|                                   |  |                  |       |        |  |          |        |              |  |   |         |   |  |   |       | 
|---------------------------------- |  | ---------------- | ----- | ------ |  | -------- | ------ | ------------ |  | - | ------- | - |  | - | ----- | 
|                                   |  | Accrual at       |       |        |  |          |        | Accrual at  
|                                   |  | December 31,     |       | 2002   |  | Cash     |        | December 31,
|                                   |  | 2001             |       | Charge |  | Payments |        | 2002        
|                                   |  |                  |       |        |  |          |        |             
|                                   |  |                 
|                                   |  | ($ in thousands)
|Severance and termination benefits |  | $                | 2,101 |        |  | $        | 9,527  |              |  | $ | (6,495  | ) |  | $ | 5,133 | 
|Other costs                        |  |                  |      |        |  |          | 11,698 |              |  |   | (10,686 | ) |  |   | 1,012 | 
|                                   |  |                  |       |        |  |          |        |              |  |   |         |   |  |   |       | 
|                                   |  | $                | 2,101 |        |  | $        | 21,225 |              |  | $ | (17,181 | ) |  | $ | 6,145 | 
|                                   |  |                  |       |        |  |          |        |              |  |   |         |   |  |   |       | 

|                                   |  |                  |   |        |  |          |       |              |  |   |        |   |  |   |       | 
|---------------------------------- |  | ---------------- | - | ------ |  | -------- | ----- | ------------ |  | - | ------ | - |  | - | ----- | 
|                                   |  | Accrual at       |   |        |  |          |       | Accrual at  
|                                   |  | December 31,     |   | 2001   |  | Cash     |       | December 31,
|                                   |  | 2000             |   | Charge |  | Payments |       | 2001        
|                                   |  |                  |   |        |  |          |       |             
|                                   |  |                 
|                                   |  | ($ in thousands)
|Severance and termination benefits |  | $                |  |        |  | $        | 6,802 |              |  | $ | (4,701 | ) |  | $ | 2,101 | 
|Other costs                        |  |                  |  |        |  |          | 1,764 |              |  |   | (1,764 | ) |  |   |      | 
|                                   |  |                  |   |        |  |          |       |              |  |   |        |   |  |   |       | 
|                                   |  | $                |  |        |  | $        | 8,566 |              |  | $ | (6,465 | ) |  | $ | 2,101 | 
|                                   |  |                  |   |        |  |          |       |              |  |   |        |   |  |   |       | 

Additional charges will be incurred for
continuing restructuring activities primarily involving
severance or relocation benefits for affected employees; various
administrative, financial and actuarial system conversion

F-47



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

costs; and building disposition costs. System
conversion costs will be expensed as incurred and are expected
to be substantially completed by the fourth quarter of 2003.

(17) ADOPTION OF SFAS 142

SFAS 142, Goodwill and Other
Intangible Assets, changed the accounting for goodwill and
other intangible assets and became effective January 1,
2002. SFAS 142 adopts a nonamortization, impairment-only
model for the Companys goodwill and indefinite-lived
intangible assets. This includes a more stringent impairment
test methodology for measuring and recognizing impairment
losses. The Company accordingly discontinued amortization of
goodwill on January 1, 2002. As of December 31, 2002,
goodwill of $35.5 million is in the protection products
segment and $183.5 million is in the accumulation products
segment. The only intangible asset other than goodwill, is VOBA
which is being amortized and amounted to a gross carrying amount
of $838.0 million and accumulated amortization of
$383.8 million at December 31, 2002. Goodwill changed
from $195.5 million at December 31, 2001 to
$219.0 million at December 31, 2002 primarily due to
the adjustment of the ILICO purchase price allocation which
increased goodwill approximately $15.3 million and goodwill
attributable to the acquisition of independent marketing
organizations of approximately $8.2 million. The Company
evaluated the transitional impairment analysis for goodwill and
other intangible assets and determined such assets were not
impaired as of January 1, 2002. In addition, the Company
has completed its annual impairment analysis for goodwill and
other intangible assets as of October 1, 2002, with no
impairment indicated.

A reconciliation of net income and basic and
diluted earnings per share reported for 2001 and 2000 to exclude
amortization expense of goodwill is as follows:

|                                       |                                     |                          |        |        |  |      |        |        |  |   |        |        | 
|-------------------------------------- | ----------------------------------- | ------------------------ | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                       |                                     |                         
|                                       |                                     | Years Ended December 31,
|                                       |                                     |                         
|                                       |                                     | 2002                     |        | 2001   |  | 2000
|                                       |                                     |                          |        |        |  |     
|                                       |                                     |                         
|                                       |                                     | ($ in thousands, except 
|                                       |                                     | per share amounts)      
|Net income as reported                 |                                     | $                        | 62,866 |        |  | $    | 72,907 |        |  | $ | 51,840 |       
|Goodwill amortization expense          |                                     |                          |       |        |  |      | 8,324  |        |  |   | 8,259  |       
|                                       |                                     |                          |        |        |  |      |        |        |  |   |        |       
|                                       | Adjusted net income                 |                          | $      | 62,866 |  |      | $      | 81,231 |  |   | $      | 60,099 | 
|                                       |                                     |                          |        |        |  |      |        |        |  |   |        |       
|Basic earnings per share as reported   |                                     | $                        | 1.57   |        |  | $    | 1.97   |        |  | $ | 2.48   |       
|Goodwill amortization expense          |                                     |                          |       |        |  |      | 0.23   |        |  |   | 0.39   |       
|                                       |                                     |                          |        |        |  |      |        |        |  |   |        |       
|                                       | Adjusted basic earnings per share   |                          | $      | 1.57   |  |      | $      | 2.20   |  |   | $      | 2.87   | 
|                                       |                                     |                          |        |        |  |      |        |        |  |   |        |       
|Diluted earnings per share as reported |                                     | $                        | 1.56   |        |  | $    | 1.95   |        |  | $ | 2.46   |       
|Goodwill amortization expense          |                                     |                          |       |        |  |      | 0.22   |        |  |   | 0.39   |       
|                                       |                                     |                          |        |        |  |      |        |        |  |   |        |       
|                                       | Adjusted diluted earnings per share |                          | $      | 1.56   |  |      | $      | 2.17   |  |   | $      | 2.85   | 
|                                       |                                     |                          |        |        |  |      |        |        |  |   |        |       

F-48



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(18) EARNINGS PER SHARE (EPS)

|                              |                                       |                                            |        |           |  |           |        |        |  |           |      |           |   |        |        |           |  |           |        |        |  |   |      |       |   |   |        |        |  |  |        |        |  |   |      |       |  
|----------------------------- | ------------------------------------- | ------------------------------------------ | ------ | --------- |  | --------- | ------ | ------ |  | --------- | ---- | --------- | - | ------ | ------ | --------- |  | --------- | ------ | ------ |  | - | ---- | ----- | - | - | ------ | ------ |  |  | ------ | ------ |  | - | ---- | ----- | -
|                              |                                       |                                           
|                              |                                       | For The Years Ended December 31,          
|                              |                                       |                                           
|                              |                                       |                                            |        |           |  |          
|                              |                                       | 2002                                       |        | 2001      |  | 2000     
|                              |                                       |                                            |        |           |  |          
|                              |                                       | Net                                        |        | Number of |  | Per Share |        | Net    |  | Number of |      | Per Share |   | Net    |        | Number of |  | Per Share
|                              |                                       | Income                                     |        | Shares    |  | Amount    |        | Income |  | Shares    |      | Amount    |   | Income |        | Shares    |  | Amount   
|                              |                                       |                                            |        |           |  |           |        |        |  |           |      |           |   |        |        |           |  |          
|                              |                                       |                                           
|                              |                                       | ($ in thousands, except per share amounts)
|Basic EPS                     |                                       |                                            |        |           |  |           |        |        |  |           |      |           |   |        |        |           |  |           |        |        |  |   |      |       |   |   |        |        |  |  |        |        |  |   |      |      
|                              | Net Income from Continuing Operations |                                            | $      | 62,866    |  |           |        | 39,972 |  |           | $    | 1.57      |   |        | $      | 81,143    |  |           |        | 36,949 |  |   | $    | 2.20  |   |   | $      | 51,840 |  |  |        | 20,922 |  |   | $    | 2.48  |  
|Effect of dilutive securities |                                       |                                            |        |           |  |           |        |        |  |           |      |           |   |        |        |           |  |           |        |        |  |   |      |       |   |   |        |        |  |  |        |        |  |   |      |      
|                              | Options                               |                                            |        |          |  |           |        | 404    |  |           |      | (0.01     | ) |        |        |          |  |           |        | 395    |  |   |      | (0.02 | ) |   |        |       |  |  |        | 114    |  |   |      | (0.02 | )
|                              | Warrants                              |                                            |        |          |  |           |        | 22     |  |           |      |          |   |        |        |          |  |           |        | 109    |  |   |      | (0.01 | ) |   |        |       |  |  |        |       |  |   |      |      |  
|                              |                                       |                                            |        |           |  |           |        |        |  |           |      |           |   |        |        |           |  |           |        |        |  |   |      |       |   |   |        |        |  |  |        |        |  |   |      |      
|Diluted EPS                   |                                       | $                                          | 62,866 |           |  |           | 40,398 |        |  | $         | 1.56 |           |   | $      | 81,143 |           |  |           | 37,453 |        |  | $ | 2.17 |       |   | $ | 51,840 |        |  |  | 21,036 |        |  | $ | 2.46 |      
|                              |                                       |                                            |        |           |  |           |        |        |  |           |      |           |   |        |        |           |  |           |        |        |  |   |      |       |   |   |        |        |  |  |        |        |  |   |      |      

(19) FAIR VALUE OF FINANCIAL
INSTRUMENTS

SFAS 107, Disclosures about Fair Values of
Financial Instruments, requires disclosures of fair value
information about financial instruments, whether recognized or
not recognized in a companys balance sheet, for which it
is practicable to estimate that value. In cases where quoted
market prices are not available, fair values are based on
estimates using discounted cash flow or other valuation
techniques. Those techniques are significantly affected by the
assumptions used, including the discount rates and estimates of
the amount and timing of future cash flows. SFAS 107
excludes certain insurance liabilities and other non-financial
instruments from its disclosure requirements. The fair value
amounts presented herein do not include an amount for the value
associated with customer or agent relationships, the expected
interest margin (interest earnings over interest credited) to be
earned in the future on investment-type products or other
intangible items. Accordingly, the aggregate fair value amounts
presented herein do not necessarily represent the underlying
value of the Company; likewise, care should be exercised in
deriving conclusions about the Companys business or
financial condition based on the fair value information
presented herein.

The Company closely monitors the level of its
insurance liabilities, the level of interest rates credited to
its interest-sensitive products and the assumed interest margin
provided for within the pricing structure of its other products.
Those amounts are taken into consideration in the Companys
overall management of interest rate risk that attempts to
minimize exposure to changing interest rates through the
matching of investment maturities with amounts expected to be
due under insurance contracts. As such, the Company believes
that it has reduced the volatility inherent in its fair value
adjusted stockholders equity, although such volatility
will not be completely eliminated. The Company has used discount
rates in the determination of fair values for its liabilities
that are consistent with market yields for related assets. The
use of the asset market yield is consistent with
managements opinion that the risks inherent in the
Companys asset and liability portfolios are similar and
the fact that fair values for both assets and liabilities
generally will react in much the same manner during periods of
interest rate changes. However, that assumption might not result
in fair values that are consistent with values obtained through
an actuarial appraisal of the Companys business or values
that might arise in a negotiated transaction.

The following presentation reflects fair values
for those instruments specifically covered by SFAS 107, along
with fair value amounts for those traditional insurance
liabilities for which disclosure is permitted but not required.
The fair values for all other assets and liabilities have been
reported at their carrying amounts.

F-49



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Valuation Methods and Assumptions

The following methods and assumptions were used
to estimate the fair value of each class of financial
instruments:

Short-term investments, policy loans and other
investments:the carrying amounts for
these instruments approximate their fair values.

Fixed maturities and equity
securities:fair values for bonds are
based on quoted market prices or dealer quotes. If a quoted
market price is not available, fair value is estimated using
values obtained from independent pricing services or, in the
case of private placements, are estimated by discounting
expected future cash flows using a current market rate
applicable to the yield, credit quality, and maturity of the
investments. The fair values for preferred and common stocks are
based on quoted market prices.

Mortgage loans:for
all performing fixed interest rate loans, the estimated net cash
flows to maturity were discounted to derive an estimated market
value. The discount rate used was based on the individual
loans remaining weighted average life and a basis point
spread based on the market conditions for the type of loan and
credit quality. These spreads were over the United States
Treasury yield curve as of each respective year end. Performing
variable rate commercial loans and residential loans were valued
at the current outstanding balance. Loans which have been
restructured, in foreclosure, significantly delinquent or are to
affiliates were valued primarily at the lower of the estimated
net cash flows to maturity discounted at a market rate of
interest or the current outstanding principal balance.

Derivative
instruments:fair values for
derivative securities are based on broker prices using current
assumptions and are classified as other investments or policy
reserves.

Policy reserves:fair values of the Companys liabilities under contracts
not involving significant mortality or morbidity risks
(primarily annuities) are stated at the cost the Company would
incur to extinguish the liability (i.e., the cash surrender
value).

Notes payable:fair
values for notes payable are estimated using discounted cash
flow analysis based on the Companys current incremental
borrowing rate for similar types of borrowing arrangements.

The carrying amounts of cash and cash
equivalents; accrued investment income; premiums, fees and other
receivables; reinsurance receivables and accrued expenses and
other liabilities; and dividends payable to policyowners
approximate their fair values. Assets and liabilities related to
separate accounts are reported at fair value in the consolidated
balance sheets.

F-50



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The estimated fair values of the Companys
significant financial instruments are as follows:

|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |            |            |  
|---------------------- | ----------------------------------------------------------- | ------------------------- | - | -------------- | ---------- | -------- | - | -------------- | ---------- | - | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                       |                                                             |                          
|                       |                                                             | December 31,             
|                       |                                                             |                          
|                       |                                                             |                           |   |               
|                       |                                                             | 2002                      |   | 2001          
|                       |                                                             |                           |   |               
|                       |                                                             | Carrying                  |   | Estimated fair |            | Carrying |   | Estimated fair
|                       |                                                             | amount                    |   | value          |            | amount   |   | value         
|                       |                                                             |                           |   |                |            |          |   |               
|                       |                                                             |                          
|                       |                                                             | ($ in thousands)         
|Financial assets:      |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Securities available-for-sale:                              |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |            |           
|                       |                                                             | Fixed maturity securities |   | $              | 13,328,902 |          |   | $              | 13,328,902 |   |   | $          | 11,037,425 |   |   | $          | 11,037,425 |  
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       |                                                             | Equity securities         |   | $              | 63,345     |          |   | $              | 63,345     |   |   | $          | 11,362     |   |   | $          | 11,362     |  
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       |                                                             | Short-term investments    |   | $              | 32,318     |          |   | $              | 32,318     |   |   | $          | 14,881     |   |   | $          | 14,881     |  
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Securities held for trading purposes:                       |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |            |           
|                       |                                                             | Fixed maturity securities |   | $              | 1,843,868  |          |   | $              | 1,843,868  |   |   | $          | 2,175,106  |   |   | $          | 2,175,106  |  
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       |                                                             | Equity securities         |   | $              |           |          |   | $              |           |   |   | $          | 12,013     |   |   | $          | 12,013     |  
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       |                                                             | Short-term investments    |   | $              |           |          |   | $              |           |   |   | $          | 4,212      |   |   | $          | 4,213      |  
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Loans                                                       |                           | $ | 883,034        |            |          | $ | 978,291        |            |   | $ | 944,532    |            |   | $ | 981,160    |           
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Policy loans                                                |                           | $ | 496,753        |            |          | $ | 496,753        |            |   | $ | 506,318    |            |   | $ | 506,319    |           
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Other investments (excluding derivatives)                   |                           | $ | 223,843        |            |          | $ | 223,843        |            |   | $ | 283,604    |            |   | $ | 283,604    |           
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Derivatives:                                                |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |            |           
|                       |                                                             | Interest rate swaps       |   | $              | (5,571     | )        |   | $              | (5,571     | ) |   | $          | (10,343    | ) |   | $          | (10,343    | )
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       |                                                             | Credit default swaps:     |   | $              | (231       | )        |   | $              | (231       | ) |   | $          | (218       | ) |   | $          | (218       | )
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       |                                                             | Options                   |   | $              | 65,753     |          |   | $              | 65,753     |   |   | $          | 72,136     |   |   | $          | 72,136     |  
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|Financial liabilities: |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Policy reserves for investment-type insurance
    contracts |                           | $ | 11,942,022     |            |          | $ | 11,259,523     |            |   | $ | 11,476,346 |            |   | $ | 10,711,609 |           
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           
|                       | Notes, contracts payable and capital securities             |                           | $ | 511,353        |            |          | $ | 404,344        |            |   | $ | 384,628    |            |   | $ | 351,482    |           
|                       |                                                             |                           |   |                |            |          |   |                |            |   |   |            |            |   |   |           

(20) OPERATING SEGMENTS

The Company has two operating segments:
Protection Products and Accumulation Products. Products
generally distinguish a segment. A brief description of each
segment follows:

Protection Products

The primary product offerings consist of whole
life, interest-sensitive whole life, term life, universal life
and equity-indexed life insurance policies. These products are
marketed on a national basis primarily through a Preferred
Producer agency system, a Personal Producing General Agent
distribution system and Independent Marketing Organizations
(IMOS).

F-51



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Accumulation Products

The primary product offerings consist of
individual deferred fixed annuities and equity-indexed
annuities, marketed on a national basis primarily through IMOS
and independent brokers, and insurance contracts issued through
funding agreements.

The Company uses the same accounting policies and
procedures to measure operating segment income and assets as it
uses to measure its consolidated income from operations and
assets with the exception of the elimination of certain items
which management believes are not necessarily indicative of
overall operating trends. These items are shown between adjusted
pre-tax operating income and income from continuing operations
on the following operating segment tables and are as follows:



| |    |                                                                                                                                                                                                     
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) | Realized gains and losses excluding gains or
    losses from the Closed Block and gains or losses on the
    convertible preferred stock and bond portfolios which are
    considered core earnings.
|
| | 2) | Market value changes and amortization of assets
    and liabilities associated with the application of SFAS 133,
    such as:                                                                       



| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | Unrealized gains and losses on securities held
    for trading.                                                       
|
| |  | Change on option value of equity-indexed products
    and market value adjustments on total return strategy annuities.
|
| |  | Cash flow hedge amortization.                                                                                         



| |    |                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------
| | 3) | Amortization of DAC and VOBA related to the
    realized gains and losses on the open block investment and the
    SFAS 133 adjustments.
|
| | 4) | Demutualization costs.                                                                                                                  
|
| | 5) | Restructuring costs.                                                                                                                    
|
| | 6) | Other income from non-insurance operations.                                                                                             

These items will fluctuate from period to period
depending on the prevailing interest rate and economic
environment, are not continuing in nature, or are not part of
the core insurance operations. As a result, management believes
they do not reflect the Companys ongoing earnings capacity
of its operating segments.

Premiums, product charges, policyowner benefits,
insurance expenses, amortization of DAC and VOBA and dividends
to policyowners are attributed directly to each operating
segment. Net investment income and core realized gains and
losses on investments are allocated based on directly-related
assets required for transacting the business of that segment.
Other revenues and benefits and expenses which are deemed not to
be associated with any specific segment are grouped together in
the All Other category. These items primarily consist of holding
company revenues and expenses and the operations of the
Companys real estate management subsidiary.

Assets are segmented based on policy liabilities
directly attributable to each segment. There are no significant
intersegment transactions. Depreciation and amortization,
excluding amortization of DAC and VOBA as previously discussed,
are not significant.

F-52



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Operating Segment Income

($ in thousands)


|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |          |        | 
|--------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ------- | ------------ | - | --------- | ------- | ------------ |  | - | ------ | ------ |  |  | --------- | -------- | ------ | 
|                                  |                                                                                                                                   |                             
|                                  |                                                                                                                                   | Year Ended December 31, 2002
|                                  |                                                                                                                                   |                             
|                                  |                                                                                                                                   | Protection                   |         | Accumulation |   |           |         | Total       
|                                  |                                                                                                                                   | Products                     |         | Products     |   | All Other |         | Consolidated
|                                  |                                                                                                                                   |                              |         |              |   |           |         |             
|Revenues:                         |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|                                  | Insurance premiums                                                                                                                |                              | $       | 341,114      |   |           | $       | 8,702        |  |   | $      | 996    |  |  | $         | 350,812  |       
|                                  | Universal life and annuity product charges                                                                                        |                              |         | 120,161      |   |           |         | 41,349       |  |   |        |       |  |  |           | 161,510  |       
|                                  | Net investment income                                                                                                             |                              |         | 335,111      |   |           |         | 653,220      |  |   |        | 5,676  |  |  |           | 994,007  |       
|                                  | Core realized gains (losses) on investments                                                                                       |                              |         | (2,400       | ) |           |         |             |  |   |        |       |  |  |           | (2,400   | )     
|                                  | Other income                                                                                                                      |                              |         | 4,026        |   |           |         | 60,420       |  |   |        | 2,675  |  |  |           | 67,121   |       
|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|                                  |                                                                                                                                   |                              | 798,012 |              |   |           | 763,691 |              |  |   | 9,347  |        |  |  | 1,571,050 |         
|Benefits and expenses:            |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|                                  | Policyowner benefits                                                                                                              |                              |         | 429,339      |   |           |         | 483,151      |  |   |        | 2,606  |  |  |           | 915,096  |       
|                                  | Underwriting, acquisition, and other expenses                                                                                     |                              |         | 70,801       |   |           |         | 68,585       |  |   |        | 13,363 |  |  |           | 152,749  |       
|                                  | Amortization of DAC and VOBA, net of non-core
    loss adjustment of ($15,002)                                                    |                              |         | 63,267       |   |           |         | 91,300       |  |   |        |       |  |  |           | 154,567  |       
|                                  | Dividends to policyowners                                                                                                         |                              |         | 104,866      |   |           |         |             |  |   |        |       |  |  |           | 104,866  |       
|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|                                  |                                                                                                                                   |                              | 668,273 |              |   |           | 643,036 |              |  |   | 15,969 |        |  |  | 1,327,278 |         
|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|Adjusted pre-tax operating income |                                                                                                                                   | $                            | 129,739 |              |   | $         | 120,655 |              |  | $ | (6,622 | )      |  |  | 243,772   |         
|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|                                  | Realized gains (losses) on non-core
    investment                                                                                |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | (102,310 | )     
|                                  | Unrealized gains (losses) on non-core
    options and trading investments                                                         |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | (45,209  | )     
|                                  | Change in option value of equity-indexed annuity
    products and market value adjustments on total return strategy
    annuities |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | 28,759   |       
|                                  | Cash flow hedge amortization                                                                                                      |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | (4,351   | )     
|                                  | Amortization of DAC and VOBA due to non-core
    losses                                                                           |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | 15,002   |       
|                                  | Demutualization costs                                                                                                             |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | (1,186   | )     
|                                  | Restructuring costs                                                                                                               |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | (21,225  | )     
|                                  | Other income from non-insurance operations                                                                                        |                              |         |              |   |           |         |              |  |   |        |        |  |  |           | 4,865    |       
|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|Income from continuing operations |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  | 118,117   |         
|Interest (expense)                |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  | (25,487   | )       
|Income tax (expense)              |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  | (29,764   | )       
|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         
|                                  |                                                                                                                                   | Net income                   |         |              |   |           |         |              |  |   |        |        |  |  |           | $        | 62,866 | 
|                                  |                                                                                                                                   |                              |         |              |   |           |         |              |  |   |        |        |  |  |           |         

F-53



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Operating Segment Income

($ in thousands)


|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |         |        | 
|------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------- | ---------------------------- | ------- | ------------ |  | --------- | ------- | ------------ |  | - | ------ | ------ |  |  | --------- | ------- | ------ | 
|                                                                          |                                                                                                                                   |                             
|                                                                          |                                                                                                                                   | Year Ended December 31, 2001
|                                                                          |                                                                                                                                   |                             
|                                                                          |                                                                                                                                   | Protection                   |         | Accumulation |  |           |         | Total       
|                                                                          |                                                                                                                                   | Products                     |         | Products     |  | All Other |         | Consolidated
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |             
|Revenues:                                                                 |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|                                                                          | Insurance premiums                                                                                                                |                              | $       | 300,690      |  |           | $       | 5,083        |  |   | $      | 132    |  |  | $         | 305,905 |       
|                                                                          | Universal life and annuity product charges                                                                                        |                              |         | 110,403      |  |           |         | 35,652       |  |   |        |       |  |  |           | 146,055 |       
|                                                                          | Net investment income                                                                                                             |                              |         | 283,330      |  |           |         | 577,913      |  |   |        | 11,931 |  |  |           | 873,174 |       
|                                                                          | Core realized gains (losses) on investments                                                                                       |                              |         | 8,720        |  |           |         |             |  |   |        |       |  |  |           | 8,720   |       
|                                                                          | Other income                                                                                                                      |                              |         | 1,947        |  |           |         | 36,198       |  |   |        | 7,059  |  |  |           | 45,204  |       
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|                                                                          |                                                                                                                                   |                              | 705,090 |              |  |           | 654,846 |              |  |   | 19,122 |        |  |  | 1,379,058 |        
|Benefits and expenses:                                                    |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|                                                                          | Policyowner benefits                                                                                                              |                              |         | 384,159      |  |           |         | 419,132      |  |   |        | 2,459  |  |  |           | 805,750 |       
|                                                                          | Underwriting, acquisition, and other expenses                                                                                     |                              |         | 69,035       |  |           |         | 60,911       |  |   |        | 10,525 |  |  |           | 140,471 |       
|                                                                          | Amortization of DAC and VOBA, net of non-core
    loss adjustment of ($2,988)                                                     |                              |         | 56,996       |  |           |         | 78,891       |  |   |        |       |  |  |           | 135,887 |       
|                                                                          | Dividends to policyowners                                                                                                         |                              |         | 98,945       |  |           |         |             |  |   |        |       |  |  |           | 98,945  |       
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|                                                                          |                                                                                                                                   |                              | 609,135 |              |  |           | 558,934 |              |  |   | 12,984 |        |  |  | 1,181,053 |        
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|Adjusted pre-tax operating income                                         |                                                                                                                                   | $                            | 95,955  |              |  | $         | 95,912  |              |  | $ | 6,138  |        |  |  | 198,005   |        
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|                                                                          | Realized gains (losses) on non-core
    investments                                                                               |                              |         |              |  |           |         |              |  |   |        |        |  |  |           | (39,299 | )     
|                                                                          | Unrealized gains (losses) on non-core
    options and trading investments                                                         |                              |         |              |  |           |         |              |  |   |        |        |  |  |           | (60,050 | )     
|                                                                          | Change in option value of equity-indexed annuity
    products and market value adjustments on total return strategy
    annuities |                              |         |              |  |           |         |              |  |   |        |        |  |  |           | 52,747  |       
|                                                                          | Amortization of DAC and VOBA due to non-core
    losses                                                                           |                              |         |              |  |           |         |              |  |   |        |        |  |  |           | 2,988   |       
|                                                                          | Demutualization costs                                                                                                             |                              |         |              |  |           |         |              |  |   |        |        |  |  |           | (969    | )     
|                                                                          | Restructuring costs                                                                                                               |                              |         |              |  |           |         |              |  |   |        |        |  |  |           | (8,566  | )     
|                                                                          | Other income from non-insurance operations                                                                                        |                              |         |              |  |           |         |              |  |   |        |        |  |  |           | 1,820   |       
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|Income from continuing operations                                         |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  | 146,676   |        
|Interest (expense)                                                        |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  | (26,011   | )      
|Income tax (expense)                                                      |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  | (39,522   | )      
|Cumulative effect of change in accounting for
    derivatives, net of tax |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  | (8,236    | )      
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        
|                                                                          |                                                                                                                                   | Net income                   |         |              |  |           |         |              |  |   |        |        |  |  |           | $       | 72,907 | 
|                                                                          |                                                                                                                                   |                              |         |              |  |           |         |              |  |   |        |        |  |  |           |        

F-54



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Operating Segment Income

($ in thousands)


|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |         |        | 
|--------------------------------- | ----------------------------------------------------------------------------- | ---------------------------- | ------- | ------------ | - | --------- | ------- | ------------ | - | - | ------ | ------ |  |  | --------- | ------- | ------ | 
|                                  |                                                                               |                             
|                                  |                                                                               | Year Ended December 31, 2000
|                                  |                                                                               |                             
|                                  |                                                                               | Protection                   |         | Accumulation |   |           |         | Total       
|                                  |                                                                               | Products                     |         | Products     |   | All Other |         | Consolidated
|                                  |                                                                               |                              |         |              |   |           |         |             
|Revenues:                         |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|                                  | Insurance premiums                                                            |                              | $       | 252,157      |   |           | $       | 13,768       |   |   | $      | 230    |  |  | $         | 266,155 |       
|                                  | Universal life and annuity product charges                                    |                              |         | 65,126       |   |           |         | 34,814       |   |   |        |       |  |  |           | 99,940  |       
|                                  | Net investment income                                                         |                              |         | 212,100      |   |           |         | 468,404      |   |   |        | 19,021 |  |  |           | 699,525 |       
|                                  | Core realized gains (losses) on investments                                   |                              |         | (695         | ) |           |         | (16,597      | ) |   |        |       |  |  |           | (17,292 | )     
|                                  | Other income                                                                  |                              |         |             |   |           |         | 21,787       |   |   |        | 12,788 |  |  |           | 34,575  |       
|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|                                  |                                                                               |                              | 528,688 |              |   |           | 522,176 |              |   |   | 32,039 |        |  |  | 1,082,903 |        
|Benefits and expenses:            |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|                                  | Policyowner benefits                                                          |                              |         | 308,177      |   |           |         | 315,508      |   |   |        | 676    |  |  |           | 624,361 |       
|                                  | Underwriting, acquisition, and other expenses                                 |                              |         | 51,532       |   |           |         | 52,554       |   |   |        | 19,381 |  |  |           | 123,467 |       
|                                  | Amortization of DAC and VOBA, net of non-core
    loss adjustment of ($8,722) |                              |         | 35,570       |   |           |         | 65,902       |   |   |        |       |  |  |           | 101,472 |       
|                                  | Dividends to policyowners                                                     |                              |         | 74,338       |   |           |         |             |   |   |        |       |  |  |           | 74,338  |       
|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|                                  |                                                                               |                              | 469,617 |              |   |           | 433,964 |              |   |   | 20,057 |        |  |  | 923,638   |        
|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|Adjusted pre-tax operating income |                                                                               | $                            | 59,071  |              |   | $         | 88,212  |              |   | $ | 11,982 |        |  |  | 159,265   |        
|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|                                  | Realized gains (losses) on non-core
    investments                           |                              |         |              |   |           |         |              |   |   |        |        |  |  |           | (11,683 | )     
|                                  | Amortization of DAC and VOBA due to non-core
    losses                       |                              |         |              |   |           |         |              |   |   |        |        |  |  |           | 8,722   |       
|                                  | Demutualization costs                                                         |                              |         |              |   |           |         |              |   |   |        |        |  |  |           | (11,265 | )     
|                                  | Other income from non-insurance operations                                    |                              |         |              |   |           |         |              |   |   |        |        |  |  |           | 717     |       
|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|Income from continuing operations |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  | 145,756   |        
|Interest (expense)                |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  | (29,723   | )      
|Income tax (expense)              |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  | (42,516   | )      
|Minority interest                 |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  | (21,677   | )      
|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        
|                                  |                                                                               | Net income                   |         |              |   |           |         |              |   |   |        |        |  |  |           | $       | 51,840 | 
|                                  |                                                                               |                              |         |              |   |           |         |              |   |   |        |        |  |  |           |        

F-55



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Operating Segment Assets

($ in thousands)


|                                           |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|------------------------------------------ |  | ---------- | --------- | ------------ |  | --------- | ---------- | ------------ |  | - | ------- |  |  | - | ---------- | 
|                                           |  | Protection |           | Accumulation |  |           |            | Total       
|                                           |  | Products   |           | Products     |  | All Other |            | Consolidated
|                                           |  |            |           |              |  |           |            |             
|December 31, 2002                          |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|Investments                                |  | $          | 4,966,449 |              |  | $         | 11,941,384 |              |  | $ | 24,657  |  |  | $ | 16,932,490 | 
|Deferred policy acquisition costs and VOBA |  |            | 691,849   |              |  |           | 646,549    |              |  |   |        |  |  |   | 1,338,398  | 
|Other assets                               |  |            | 703,697   |              |  |           | 1,235,412  |              |  |   | 83,668  |  |  |   | 2,022,777  | 
|                                           |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|Total assets                               |  | $          | 6,361,995 |              |  | $         | 13,823,345 |              |  | $ | 108,325 |  |  | $ | 20,293,665 | 
|                                           |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|December 31, 2001                          |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|Investments                                |  | $          | 4,595,113 |              |  | $         | 10,432,660 |              |  | $ | 24,660  |  |  | $ | 15,052,433 | 
|Deferred policy acquisition costs and VOBA |  |            | 613,945   |              |  |           | 612,564    |              |  |   |        |  |  |   | 1,226,509  | 
|Other assets                               |  |            | 547,812   |              |  |           | 1,340,123  |              |  |   | 132,275 |  |  |   | 2,020,210  | 
|                                           |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|Total assets                               |  | $          | 5,756,870 |              |  | $         | 12,385,347 |              |  | $ | 156,935 |  |  | $ | 18,299,152 | 
|                                           |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|December 31, 2000                          |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|Investments                                |  | $          | 2,673,659 |              |  | $         | 6,859,314  |              |  | $ | 73,833  |  |  | $ | 9,606,806  | 
|Deferred policy acquisition costs and VOBA |  |            | 365,819   |              |  |           | 539,923    |              |  |   |        |  |  |   | 905,742    | 
|Other assets                               |  |            | 216,088   |              |  |           | 660,738    |              |  |   | 82,148  |  |  |   | 958,974    | 
|                                           |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 
|Total assets                               |  | $          | 3,255,566 |              |  | $         | 8,059,975  |              |  | $ | 155,981 |  |  | $ | 11,471,522 | 
|                                           |  |            |           |              |  |           |            |              |  |   |         |  |  |   |            | 

(21) QUARTERLY RESULTS
(UNAUDITED)

2002 Quarterly Data

|                                                 |         |                                                    |         |            |  |              |         |             |  |   |         |            |  |   |         |            | 
|------------------------------------------------ | ------- | -------------------------------------------------- | ------- | ---------- |  | ------------ | ------- | ----------- |  | - | ------- | ---------- |  | - | ------- | ---------- | 
|                                                 |         |                                                   
|                                                 |         | Quarter Ended                                     
|                                                 |         |                                                   
|                                                 |         | March 31                                           |         | June 30    |  | September 30 |         | December 31
|                                                 |         |                                                    |         |            |  |              |         |            
|                                                 |         |                                                   
|                                                 |         | ($ in thousands, except earnings per common share)
|Total revenues (excluding realized gains)        |         | $                                                  | 386,761 |            |  | $            | 404,383 |             |  | $ | 393,730 |            |  | $ | 393,441 |           
|Realized/unrealized gains (losses)               |         | $                                                  | (24,712 | )          |  | $            | (75,911 | )           |  | $ | (21,951 | )          |  | $ | (27,345 | )         
|Total benefits and expenses                      |         | $                                                  | 320,132 |            |  | $            | 317,717 |             |  | $ | 325,027 |            |  | $ | 347,403 |           
|Net income from continuing operations            |         | $                                                  | 24,914  |            |  | $            | 4,262   |             |  | $ | 26,490  |            |  | $ | 7,200   |           
|Weighted average number of shares:               |         |                                                    |         |            |  |              |         |             |  |   |         |            |  |   |         |           
|                                                 | Basic   |                                                    |         | 41,349,785 |  |              |         | 40,155,276  |  |   |         | 39,497,355 |  |   |         | 38,919,178 | 
|                                                 | Diluted |                                                    |         | 41,968,570 |  |              |         | 40,661,337  |  |   |         | 39,835,426 |  |   |         | 39,168,989 | 
|Net income from continuing operations per share: |         |                                                    |         |            |  |              |         |             |  |   |         |            |  |   |         |           
|                                                 | Basic   |                                                    | $       | 0.60       |  |              | $       | 0.11        |  |   | $       | 0.67       |  |   | $       | 0.18       | 
|                                                 | Diluted |                                                    | $       | 0.59       |  |              | $       | 0.10        |  |   | $       | 0.66       |  |   | $       | 0.18       | 

F-56



---



##### 



AMERUS GROUP CO.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2001 Quarterly Data

|                                          |         |                                                    |         |            |  |              |         |             |  |   |         |            |  |   |         |            | 
|----------------------------------------- | ------- | -------------------------------------------------- | ------- | ---------- |  | ------------ | ------- | ----------- |  | - | ------- | ---------- |  | - | ------- | ---------- | 
|                                          |         |                                                   
|                                          |         | Quarter Ended                                     
|                                          |         |                                                   
|                                          |         | March 31                                           |         | June 30    |  | September 30 |         | December 31
|                                          |         |                                                    |         |            |  |              |         |            
|                                          |         |                                                   
|                                          |         | ($ in thousands, except earnings per common share)
|Total revenues (excluding realized gains) |         | $                                                  | 270,082 |            |  | $            | 324,905 |             |  | $ | 382,636 |            |  | $ | 394,535 |           
|Realized/unrealized gains (losses)        |         | $                                                  | (39,835 | )          |  | $            | (11,825 | )           |  | $ | (45,649 | )          |  | $ | 6,680   |           
|Total benefits and expenses               |         | $                                                  | 193,022 |            |  | $            | 276,492 |             |  | $ | 299,758 |            |  | $ | 365,581 |           
|Net income from continuing operations     |         | $                                                  | 19,872  |            |  | $            | 20,228  |             |  | $ | 21,510  |            |  | $ | 19,533  |           
|Weighted average number of shares:        |         |                                                    |         |            |  |              |         |             |  |   |         |            |  |   |         |           
|                                          | Basic   |                                                    |         | 29,973,039 |  |              |         | 34,364,932  |  |   |         | 41,536,389 |  |   |         | 41,741,649 | 
|                                          | Diluted |                                                    |         | 30,365,387 |  |              |         | 34,528,541  |  |   |         | 42,060,929 |  |   |         | 42,288,468 | 
|Net income per share:                     |         |                                                    |         |            |  |              |         |             |  |   |         |            |  |   |         |           
|                                          | Basic   |                                                    | $       | 0.66       |  |              | $       | 0.59        |  |   | $       | 0.52       |  |   | $       | 0.47       | 
|                                          | Diluted |                                                    | $       | 0.65       |  |              | $       | 0.59        |  |   | $       | 0.51       |  |   | $       | 0.46       | 

F-57



---



##### 



AMERUS GROUP CO.



INDEX TO CONSOLIDATED FINANCIAL STATEMENT
SCHEDULES


|                                           |  |                                                                        |  |                 
|------------------------------------------ |  | ---------------------------------------------------------------------- |  | ----------------
|                                           |  |                                                                       
|Schedule                                   |  | Page                                                                  
|                                           |  |                                                                       
|Independent Auditors Reports on Schedules |  | S-2 through S-3                                                       
|I                                          |  | Summary of Investments  Other than
    Investments in Related Parties |  | S-4             
|II                                         |  | Condensed Financial Information of Registrant                          |  | S-5 through S-10
|III                                        |  | Supplementary Insurance Information                                    |  | S-11            
|IV                                         |  | Reinsurance                                                            |  | S-12            

All other schedules are omitted for the reason
that they are not required, amounts are not sufficient to
require submission of the schedule, or that the equivalent
information has been included in the consolidated financial
statements and notes thereto.

S-1



---



##### 



REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS, ON SCHEDULES

The Board of Directors and Stockholders

AmerUs Group Co.


We have audited the consolidated balance sheets
of AmerUs Group Co. as of December 31, 2002 and 2001, and
the related consolidated statements of income, comprehensive
income, stockholders equity, and cash flows for the years
then ended, and have issued our report thereon dated
February 5, 2003 (included elsewhere in this Annual Report
on Form 10-K). Our audits also included the 2002 and 2001
financial schedules listed on page S-1 of this Annual
Report on Form 10-K. These schedules are the responsibility
of the Companys management. Our responsibility is to
express an opinion based on our audits.

In our opinion, the 2002 and 2001 financial
statement schedules referred to above, when considered in
relation to the 2002 and 2001 basic financial statements taken
as a whole, present fairly in all material respects the
information set forth therein. As discussed in note 1 to
the consolidated financial statement, in 2002 the Company
changed its method of accounting for goodwill and other
intangibles and in 2001 the Company changed its method of
accounting for derivative instruments and its method of
accounting for its closed block of business.



| |                        
| | -----------------------
| | (ERNST & YOUNG LLP SIG)

Des Moines, Iowa

February 5, 2003


S-2



---



##### 



REPORT OF KPMG LLP, INDEPENDENT AUDITORS, ON
SCHEDULES

The Board of Directors and Stockholders

AmerUs Group Co.:


Under date of February 5, 2001, we reported
on the consolidated balance sheet of AmerUs Group Co. and
subsidiaries as of December 31, 2000, and the related
consolidated statements of income, stockholders equity,
comprehensive income, and cash flows for the year then ended as
contained in Part II, Item 8 of the annual report on
Form 10-K for the year 2000. In connection with our audit
of the aforementioned consolidated financial statements, we also
audited the related 2000 consolidated financial statement
schedules as listed in the accompanying index. These financial
statement schedules are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statement schedules based on our audit.

In our opinion, such 2000 financial statement
schedules, when considered in relation to the 2000 basic
consolidated financial statements taken as a whole, present
fairly, in all material respects, the information set forth
therein.



| |           
| | ----------
| | (KPMG LLP)



Des Moines, Iowa

February 5, 2001


S-3



---



##### 



AMERUS GROUP CO.

SCHEDULE I

SUMMARY OF INVESTMENTS


OTHER THAN INVESTMENTS IN RELATED
PARTIES


|                              |                            |                                                                      |                         |           |           |             |        |         |           |            |         |         |           |            | 
|----------------------------- | -------------------------- | -------------------------------------------------------------------- | ----------------------- | --------- | --------- | ----------- | ------ | ------- | --------- | ---------- | ------- | ------- | --------- | ---------- | 
|                              |                            |                                                                     
|                              |                            | December 31, 2002                                                   
|                              |                            |                                                                     
|                              |                            |                                                                      |                         | Amount at
|                              |                            |                                                                      |                         | which    
|                              |                            |                                                                      |                         | Shown in 
|                              |                            | Amortized                                                            |                         | Market    |           | the Balance
|Type of Investment            |                            | Cost(1)                                                              |                         | Value     |           | Sheet      
|                              |                            |                                                                      |                         |           |           |            
|                              |                            |                                                                     
|                              |                            | ($ in thousands)                                                    
|Fixed Maturities:             |                            |                                                                      |                         |           |           |             |        |         |           |            |         |        
|                              | Bonds                      |                                                                      |                         |           |           |             |        |         |           |            |         |         |          
|                              |                            | United States Government and government agencies
    and authorities |                         | $         | 2,996,814 |             |        | $       | 3,091,939 |            |         | $       | 3,091,939 |           
|                              |                            | States, municipalities and political subdivisions                    |                         |           | 45,336    |             |        |         | 49,969    |            |         |         | 49,969    |           
|                              |                            | Foreign governments                                                  |                         |           | 240,234   |             |        |         | 246,908   |            |         |         | 246,908   |           
|                              |                            | Public utilities                                                     |                         |           | 1,198,414 |             |        |         | 1,227,833 |            |         |         | 1,227,833 |           
|                              |                            | Convertibles and bonds with warrants attached                        |                         |           | 1,122,662 |             |        |         | 1,061,226 |            |         |         | 1,061,226 |           
|                              |                            | All other corporate bonds                                            |                         |           | 8,948,075 |             |        |         | 9,374,769 |            |         |         | 9,374,769 |           
|                              | Redeemable preferred stock |                                                                      |                         | 160,045   |           |             |        | 120,126 |           |            |         | 120,126 |          
|                              |                            |                                                                      |                         |           |           |             |        |         |           |            |         |        
|                              |                            |                                                                      | Total fixed maturities  |           |           | 14,711,580  |        |         |           | 15,172,770 |         |         |           | 15,172,770 | 
|Equity securities:            |                            |                                                                      |                         |           |           |             |        |         |           |            |         |        
|                              | Common stocks              |                                                                      |                         |           |           |             |        |         |           |            |         |         |          
|                              |                            | Banks, trust and insurance companies                                 |                         |           | 50,657    |             |        |         | 50,712    |            |         |         | 50,712    |           
|                              |                            | Industrial, miscellaneous and all other                              |                         |           | 1,723     |             |        |         | 1,515     |            |         |         | 1,515     |           
|                              |                            | Non-redeemable preferred stocks                                      |                         |           | 10,222    |             |        |         | 11,118    |            |         |         | 11,118    |           
|                              |                            |                                                                      |                         |           |           |             |        |         |           |            |         |        
|                              |                            |                                                                      | Total equity securities |           |           | 62,602      |        |         |           | 63,345     |         |         |           | 63,345     | 
|Mortgage loans on real estate |                            |                                                                      | 883,034                 |           |           |             |        |         |           |            | 883,034 |        
|Real estate                   |                            |                                                                      | 476                     |           |           |             |        |         |           |            | 476     |        
|Policy loans                  |                            |                                                                      | 496,753                 |           |           |             |        |         |           |            | 496,753 |        
|Other long-term investments   |                            |                                                                      | 283,485                 |           |           |             |        |         |           |            | 283,794 |        
|Short-term investments        |                            |                                                                      | 32,050                  |           |           |             | 32,318 |         |           |            | 32,318  |        
|                              |                            |                                                                      |                         |           |           |             |        |         |           |            |         |        
|                              |                            |                                                                      | Total investments       |           | $         | 16,469,980  |        |         |           |            |         |         | $         | 16,932,490 | 
|                              |                            |                                                                      |                         |           |           |             |        |         |           |            |         |        




|    |                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On the basis of cost adjusted for repayments and
    amortization of premiums and accrual of discounts for fixed
    maturities, other long-term investments and short-term
    investments; original cost for equity securities; unpaid
    principal balance for mortgage loans on real estate and policy
    loans; and original cost less accumulated depreciation for
    investment real estate.

S-4



---



##### 



AMERUS GROUP CO.

SCHEDULE II

CONDENSED FINANCIAL INFORMATION OF
REGISTRANT




CONDENSED BALANCE SHEETS


(Parent Company)


|                                       |                                                    |                  |           |        |           |  |           |        |           | 
|-------------------------------------- | -------------------------------------------------- | ---------------- | --------- | ------ | --------- |  | --------- | ------ | --------- | 
|                                       |                                                    |                 
|                                       |                                                    | December 31,    
|                                       |                                                    |                 
|                                       |                                                    | 2002             |           | 2001  
|                                       |                                                    |                  |           |       
|                                       |                                                    |                 
|                                       |                                                    | ($ in thousands)
|ASSETS                                 |                                                    |                  |           |        |           |  |           |       
|Investments:                           |                                                    |                  |           |        |           |  |           |       
|                                       | Equity securities available-for-sale at fair value |                  | $         | 311    |           |  | $         | 482    |          
|                                       | Loans                                              |                  |           |       |           |  |           | 37     |          
|                                       | Other investments                                  |                  |           | 50,000 |           |  |           | 50,000 |          
|Investments in subsidiaries, at equity |                                                    |                  | 1,735,782 |        |           |  | 1,561,066 |       
|Cash and cash equivalents              |                                                    |                  | 15,512    |        |           |  | 42,208    |       
|Accrued investment income              |                                                    |                  | 1,161     |        |           |  | 1,125     |       
|Property and equipment                 |                                                    |                  | 13,534    |        |           |  | 11,853    |       
|Deferred income taxes                  |                                                    |                  | 12,902    |        |           |  | 8,511     |       
|Other assets                           |                                                    |                  | 11,335    |        |           |  | 7,495     |       
|                                       |                                                    |                  |           |        |           |  |           |       
|                                       |                                                    | Total assets     |           | $      | 1,840,537 |  |           | $      | 1,682,777 | 
|                                       |                                                    |                  |           |        |           |  |           |       

See accompanying notes to condensed financial
statements.

S-5



---



##### 



AMERUS GROUP CO.

CONDENSED FINANCIAL INFORMATION OF
REGISTRANT



CONDENSED BALANCE SHEETS


(Parent Company)


|                                         |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |           |           | 
|---------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | --------- | --------- |  | ------ | --------- | --------- | 
|                                         |                                                                                                                                                                                                                   |                                           
|                                         |                                                                                                                                                                                                                   | December 31,                              
|                                         |                                                                                                                                                                                                                   |                                           
|                                         |                                                                                                                                                                                                                   | 2002                                       |        | 2001     
|                                         |                                                                                                                                                                                                                   |                                            |        |          
|                                         |                                                                                                                                                                                                                   |                                           
|                                         |                                                                                                                                                                                                                   | ($ in thousands)                          
|Liabilities and Stockholders
    Equity |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|Liabilities:                             |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|                                         | Accrued expenses and other liabilities                                                                                                                                                                            |                                            | $      | 57,736    |           |  | $      | 50,077    |          
|                                         | Income taxes payable                                                                                                                                                                                              |                                            |        | 6,709     |           |  |        | 10,850    |          
|                                         | Notes payable                                                                                                                                                                                                     |                                            |        | 479,626   |           |  |        | 352,627   |          
|                                         |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|                                         |                                                                                                                                                                                                                   | Total liabilities                          |        |           | 544,071   |  |        |           | 413,554   | 
|                                         |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|Minority interest                        |                                                                                                                                                                                                                   |                                            | 33,518 |           |           |  | 30,706 |          
|                                         |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|Stockholders equity:                    |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|                                         | Preferred Stock, no par value,
    20,000,000 shares authorized, none issued                                                                                                                                      |                                            |        |          |           |  |        |          |          
|                                         | Common Stock, no par value,
    230,000,000 shares authorized; 43,656,280 shares
    issued and 39,011,578 shares outstanding in 2002;
    43,505,998 shares issued and 41,759,450 shares
    outstanding in 2001 |                                            |        | 43,656    |           |  |        | 43,506    |          
|                                         | Paid-in capital                                                                                                                                                                                                   |                                            |        | 1,179,646 |           |  |        | 1,177,688 |          
|                                         | Accumulated other comprehensive income (loss)                                                                                                                                                                     |                                            |        | 88,522    |           |  |        | 12,669    |          
|                                         | Unearned compensation                                                                                                                                                                                             |                                            |        | (458      | )         |  |        | (727      | )        
|                                         | Unallocated ESOP shares                                                                                                                                                                                           |                                            |        | (1,443    | )         |  |        | (224      | )        
|                                         | Retained earnings                                                                                                                                                                                                 |                                            |        | 109,517   |           |  |        | 62,187    |          
|                                         | Treasury stock, at cost (4,644,702 shares in
    2002 and 1,746,548 shares in 2001)                                                                                                                               |                                            |        | (156,492  | )         |  |        | (56,582   | )        
|                                         |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|                                         |                                                                                                                                                                                                                   | Total stockholders equity                 |        |           | 1,262,948 |  |        |           | 1,238,517 | 
|                                         |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          
|                                         |                                                                                                                                                                                                                   | Total liabilities and stockholders equity |        | $         | 1,840,537 |  |        | $         | 1,682,777 | 
|                                         |                                                                                                                                                                                                                   |                                            |        |           |           |  |        |          

See accompanying notes to condensed financial
statements.

S-6



---



##### 



AMERUS GROUP CO.

CONDENSED FINANCIAL INFORMATION OF
REGISTRANT



CONDENSED STATEMENTS OF INCOME


(Parent Company)


|                                                                          |                                    |                          |        |        |   |      |        |        |  |   |         |        | 
|------------------------------------------------------------------------- | ---------------------------------- | ------------------------ | ------ | ------ | - | ---- | ------ | ------ |  | - | ------- | ------ | 
|                                                                          |                                    |                         
|                                                                          |                                    | Years Ended December 31,
|                                                                          |                                    |                         
|                                                                          |                                    | 2002                     |        | 2001   |   | 2000
|                                                                          |                                    |                          |        |        |   |     
|                                                                          |                                    |                         
|                                                                          |                                    | ($ in thousands)        
|Revenues:                                                                 |                                    |                          |        |        |   |      |        |        |  |   |         |       
|                                                                          | Equity in earnings of subsidiaries |                          | $      | 88,563 |   |      | $      | 88,829 |  |   | $       | 80,014 | 
|                                                                          | Net investment income              |                          |        | 4,739  |   |      |        | 5,191  |  |   |         | 14,337 | 
|                                                                          | Realized investment gains          |                          |        | 874    |   |      |        |       |  |   |         |       | 
|                                                                          | Other income (loss)                |                          |        | (178   | ) |      |        | 13     |  |   |         |       | 
|                                                                          |                                    |                          |        |        |   |      |        |        |  |   |         |       
|                                                                          |                                    |                          | 93,998 |        |   |      | 94,033 |        |  |   | 94,351  |       
|Expenses:                                                                 |                                    |                          |        |        |   |      |        |        |  |   |         |       
|                                                                          | Operating expenses                 |                          |        | 8,906  |   |      |        | 4,832  |  |   |         | 5,626  | 
|                                                                          | Demutualization costs              |                          |        | 954    |   |      |        |       |  |   |         | 8,284  | 
|                                                                          | Restructuring costs                |                          |        | 11,021 |   |      |        | 1,843  |  |   |         |       | 
|                                                                          | Interest expense                   |                          |        | 22,165 |   |      |        | 23,583 |  |   |         | 6,021  | 
|                                                                          |                                    |                          |        |        |   |      |        |        |  |   |         |       
|                                                                          |                                    |                          | 43,046 |        |   |      | 30,258 |        |  |   | 19,931  |       
|                                                                          |                                    |                          |        |        |   |      |        |        |  |   |         |       
|Income before income tax expense and minority
    interest                |                                    |                          | 50,952 |        |   |      | 63,775 |        |  |   | 74,420  |       
|Income tax (expense) benefit                                              |                                    |                          | 14,593 |        |   |      | 10,016 |        |  |   | (903    | )     
|Minority interest                                                         |                                    |                          | (2,679 | )      |   |      | (763   | )      |  |   | (21,677 | )     
|                                                                          |                                    |                          |        |        |   |      |        |        |  |   |         |       
|Net income from continuing operations                                     |                                    |                          | 62,866 |        |   |      | 73,028 |        |  |   | 51,840  |       
|Cumulative effect of change in accounting for
    derivatives, net of tax |                                    |                          |       |        |   |      | (121   | )      |  |   |        |       
|                                                                          |                                    |                          |        |        |   |      |        |        |  |   |         |       
|Net income                                                                |                                    | $                        | 62,866 |        |   | $    | 72,907 |        |  | $ | 51,840  |       
|                                                                          |                                    |                          |        |        |   |      |        |        |  |   |         |       

See accompanying notes to condensed financial
statements.

S-7



---



##### 



AMERUS GROUP CO.

CONDENSED FINANCIAL INFORMATION OF
REGISTRANT



CONDENSED STATEMENTS OF CASH FLOWS


(Parent Company)


|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |         |          |  
|------------------------------------------------------------------------------------- | ----------------------------------------- | ------------------------------------------------------- | -------- | ------- | ------- | ---- | ------- | ------- | ------- | - | -------- | ------- | -------- | -
|                                                                                      |                                           |                                                        
|                                                                                      |                                           | Years Ended December 31,                               
|                                                                                      |                                           |                                                        
|                                                                                      |                                           | 2002                                                    |          | 2001    |         | 2000
|                                                                                      |                                           |                                                         |          |         |         |     
|                                                                                      |                                           |                                                        
|                                                                                      |                                           | ($ in thousands)                                       
|Cash flows from operating
    activities:                                             |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|Net income                                                                            |                                           | $                                                       | 62,866   |         |         | $    | 72,907  |         |         | $ | 51,840   |        
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|                                                                                      | Cumulative effect of change in accounting |                                                         |          |        |         |      |         | 121     |         |   |          |        |         
|                                                                                      | Equity in undistributed earnings          |                                                         |          | (88,563 | )       |      |         | (88,829 | )       |   |          | (80,014 | )       
|                                                                                      | Dividends from subsidiaries               |                                                         |          | 45,332  |         |      |         | 75,900  |         |   |          | 48,848  |         
|                                                                                      | Realized investment gains                 |                                                         |          | (874    | )       |      |         |        |         |   |          |        |         
|                                                                                      | Minority interest                         |                                                         |          | 2,679   |         |      |         | 763     |         |   |          | 21,677  |         
|Change in:                                                                            |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|                                                                                      | Income taxes                              |                                                         |          | (8,463  | )       |      |         | 12,141  |         |   |          | 9,771   |         
|                                                                                      | Other, net                                |                                                         |          | 14,867  |         |      |         | (18,709 | )       |   |          | (7,201  | )       
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|                                                                                      |                                           | Net cash provided by operating activities               |          |         | 27,844  |      |         |         | 54,294  |   |          |         | 44,921   |  
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|Cash flows from investing
    activities:                                             |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|Purchase of investments                                                               |                                           |                                                         |         |         |         |      | (19,505 | )       |         |   | (15,000  | )      
|Sale of investments                                                                   |                                           |                                                         | 37       |         |         |      | 18,000  |         |         |   | 13,653   |        
|Proceeds from repayment of loans                                                      |                                           |                                                         | 3        |         |         |      | 142     |         |         |   | 131      |        
|Cash received in merger with ALHI                                                     |                                           |                                                         |         |         |         |      |        |         |         |   | 2,914    |        
|Acquisition of ILICO                                                                  |                                           |                                                         |         |         |         |      | (4,980  | )       |         |   |         |        
|Other assets, net                                                                     |                                           |                                                         | (1,681   | )       |         |      | (1,675  | )       |         |   | (637     | )      
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|                                                                                      |                                           | Net cash (used in) provided by investing
    activities |          |         | (1,641  | )    |         |         | (8,018  | ) |          |         | 1,061    |  
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|Cash flows from financing
    activities:                                             |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|Change in debt and capital securities, net                                            |                                           |                                                         | (38,430  | )       |         |      | 75,747  |         |         |   | 14,305   |        
|Allocation of shares in leveraged ESOP                                                |                                           |                                                         | 1,333    |         |         |      | 938     |         |         |   | 1,295    |        
|Purchase of treasury stock, net of issuance                                           |                                           |                                                         | (114,638 | )       |         |      | (44,985 | )       |         |   |         |        
|Issuance of OCEANs                                                                    |                                           |                                                         | 179,593  |         |         |      |        |         |         |   |         |        
|Purchase of company-obligated mandatorily
    redeemable capital securities           |                                           |                                                         | (20,805  | )       |         |      |        |         |         |   |         |        
|Cash paid for demutualization distribution                                            |                                           |                                                         |         |         |         |      |        |         |         |   | (306,168 | )      
|Capital contribution to subsidiaries                                                  |                                           |                                                         | (58,930  | )       |         |      | (39,306 | )       |         |   |         |        
|Dividends paid to stockholders                                                        |                                           |                                                         | (15,536  | )       |         |      | (16,787 | )       |         |   | (11,971  | )      
|Stock issued under various incentive plans, net
    of forfeitures                    |                                           |                                                         | 14,623   |         |         |      | 8,679   |         |         |   |         |        
|Other, net                                                                            |                                           |                                                         | (109     | )       |         |      | 117     |         |         |   | 173      |        
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|                                                                                      |                                           | Net cash (used in) financing activities                 |          |         | (52,899 | )    |         |         | (15,597 | ) |          |         | (302,366 | )
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|Net increase (decrease) in cash                                                       |                                           |                                                         | (26,696  | )       |         |      | 30,679  |         |         |   | (256,384 | )      
|Cash at beginning of period                                                           |                                           |                                                         | 42,208   |         |         |      | 11,529  |         |         |   | 267,913  |        
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        
|Cash at end of period                                                                 |                                           | $                                                       | 15,512   |         |         | $    | 42,208  |         |         | $ | 11,529   |        
|                                                                                      |                                           |                                                         |          |         |         |      |         |         |         |   |          |        

See accompanying notes to condensed financial
statements.

S-8



---



##### 



AMERUS GROUP CO.

(Parent Company)




NOTES TO CONDENSED FINANCIAL
STATEMENTS

(1) BASIS OF PRESENTATION

AmerUs Group Co. (the Company) is the parent
company of its primary subsidiaries, AmerUs Life Insurance
Company (ALIC), AmerUs Annuity Group Co. (AAG, formerly
AmVestors Financial Corporation (AmVestors)) and AmerUs Capital
Management Group, Inc. (ACM). The Company and ALIC together own
all of ILICO Holdings, Inc., (ILICO), the holding company of
Indianapolis Life Insurance Company (ILIC). ALICs
7.8 percent ownership in ILICO is recorded as minority
interest. The Companys investment in its subsidiaries is
stated at cost plus equity in undistributed earnings of the
subsidiaries. The Companys share of net income of its
unconsolidated subsidiaries is included in income using the
equity method. These financial statements should be read in
conjunction with AmerUs Group Co.s consolidated financial
statements.

(2) NOTES PAYABLE

Notes payable consist of the following:

|                                                                                 |  |              |         |      |  |   |         | 
|-------------------------------------------------------------------------------- |  | ------------ | ------- | ---- |  | - | ------- | 
|                                                                                 |  |             
|                                                                                 |  | December 31,
|                                                                                 |  |             
|                                                                                 |  | 2002         |         | 2001
|                                                                                 |  |              |         |     
|Optionally Convertible Equity-linked Accreting
    Notes due on March 6, 2032(A) |  | $            | 186,233 |      |  | $ |        | 
|Senior notes bearing interest at 6.95% due June
    2005                         |  |              | 125,000 |      |  |   | 125,000 | 
|Revolving credit agreement due December 2004(B)                                  |  |              | 113,000 |      |  |   | 150,000 | 
|ESOP Note                                                                        |  |              |        |      |  |   | 225     | 
|Bank note repaid in 2002                                                         |  |              |        |      |  |   | 1,205   | 
|Junior Subordinated debentures bearing interest
    at 8.85%(C)                  |  |              | 50,755  |      |  |   | 71,560  | 
|Junior Subordinated debentures bearing interest
    at 7.00%                     |  |              | 4,638   |      |  |   | 4,637   | 
|                                                                                 |  |              |         |      |  |   |         | 
|                                                                                 |  | $            | 479,626 |      |  | $ | 352,627 | 
|                                                                                 |  |              |         |      |  |   |         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | On March 6, 2002, the Company issued
    $185 million aggregate original principal amount of OCEANs.
    The OCEANs are senior subordinated debt and were issued and sold
    in an original principal amount of $1,000 per OCEAN, with a
    principal amount at maturity of $1,270 per OCEAN. The
    maturity date of the OCEANs is March 6, 2032. The OCEANs
    will have aggregate principal amount at maturity of
    $235 million. The OCEANs were registered on Form S-3
    filed with the Securities and Exchange Commission on
    September 20, 2002.
|   
|(B) | The revolving credit agreement provides for a
    maximum borrowing of $175 million with the balance maturing
    in December 2004. This agreement replaced the $150 million
    credit agreement in 2001. The interest rate is variable,
    however, the Company may elect to fix the rate for periods from
    30 days to six months. The loan agreement contains various
    financial and operating covenants which, among other things,
    limit future indebtedness and restrict the amount of future
    dividend payments.                              
|   
|(C) | The Company issued $88.66 million of junior
    subordinated debentures to a wholly-owned subsidiary trust in
    connection with capital securities issued by the trust. The
    debentures bear interest at the rate of 8.85% and mature
    February 1, 2027.                                                                                                                                                                                                                                                                                                  
|   
|(D) | The Company issued $149.4 million of junior
    subordinated debentures to a wholly-owned subsidiary trust in
    connection with adjustable conversion-rate equity security units
    (ACES) issued by the trust. In connection with the maturity
    of the forward stock purchase component of the Companys
    ACES units on July 27, 2001, $144.7 million of the
    junior subordinated debentures were liquidated. The remaining
    quarterly income preferred securities bear interest at the rate
    of 7.00% and mature July 27, 2003.               

S-9



---



##### 



AMERUS GROUP CO.


(Parent Company)


NOTES TO CONDENSED FINANCIAL
STATEMENTS  (Continued)

Maturities of notes payable are as follows for
each of the next five years is as follows ($ in thousand):

|           |  |   |         | 
|---------- |  | - | ------- | 
|2003       |  | $ | 4,638   | 
|2004       |  |   | 113,000 | 
|2005       |  |   | 125,000 | 
|2006       |  |   |        | 
|2007       |  |   | 50,755  | 
|Thereafter |  |   | 186,233 | 
|           |  |   |         | 
|           |  | $ | 479,626 | 
|           |  |   |         | 

(3) DEMUTUALIZATION

The Company was formerly known as American Mutual
Holding Company (AMHC) and was a mutual insurance holding
company whose principal asset was a 58% interest in AmerUs Life
Holdings, Inc. (ALHI). Public stockholders owned the remaining
42% interest in ALHI (Minority Interest). ALHI was a holding
company which directly or indirectly owned three principal life
insurance subsidiaries: ALIC, American Investors Life Insurance
Company (American) and Delta Life and Annuity Company (Delta).
On September 20, 2000, AMHC converted to stock form,
changed its name to AmerUs Group Co. and acquired the Minority
Interest of ALHI by issuing AmerUs Group Co. common stock in
exchange for the outstanding shares of ALHI held by the public.
The value of the stock exchange was approximately
$298 million and ALHI merged into the Company
simultaneously with the stock exchange.

Prior to the conversion of the Company to a stock
form, the Company was owned by individuals and entities who held
insurance policies or annuity contracts issued by ALIC
(Members). In the conversion, which is referred to as a
demutualization, the Company distributed cash, policy credits
and its newly issued common stock to its Members in exchange for
their membership interests. The value of the distribution
totaled approximately $792 million. Demutualization costs
of $8.3 million and $5.3 million are included in the
Companys expenses for the years ended December 31,
2001 and 2000, respectively. These costs consist primarily of
legal, actuarial and consulting expenses associated with the
Companys demutualization. The 2002 costs are primarily for
commissions, postage and printing for a program to enable
shareholders from the AMHC demutualization with less than one
hundred shares to redeem those shares for cash or purchase
additional shares, commission-free, to reach a holding of at
least one hundred shares.

The acquisition of the ALHI minority interest by
the Company was accounted for as a purchase and accordingly 42%
of the book value of the assets and liabilities of ALHI were
adjusted to market value as of the acquisition date.
Approximately 42% of the ALHI earnings for the reporting periods
up to the acquisition date are reduced from the Companys
results of operations on the line titled minority interest on
the Companys consolidated statements of income. From the
acquisition date forward, the Companys results of
operations include 100% of these earnings.

S-10



---



##### 



AMERUS GROUP CO.

SCHEDULE III



SUPPLEMENTARY INSURANCE INFORMATION


FOR THE YEARS ENDED DECEMBER 31, 2002,
2001, AND 2000


($ in thousands)


|                      |  |       |           |                  |  |          |            |              |  |         |   |            |  |            |        |              |  |           |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         |  |  |  |     | 
|--------------------- |  | ----- | --------- | ---------------- |  | -------- | ---------- | ------------ |  | ------- | - | ---------- |  | ---------- | ------ | ------------ |  | --------- | ------- | -------- |  | - | ------- |  |  | - | ------- |  |  | - | ------- |  |  | - | ------- |  |  |  | --- | 
|                      |  |       |           |                  |  |          |            |              |  |         |   |            |  | Benefits,  |        |              |  |           |         |         
|                      |  |       |           | Future policy    |  |          |            | Other policy |  |         |   |            |  | claims,    |        |              |  |           |         |         
|                      |  |       |           | benefits, losses |  |          |            | claims &     |  |         |   | Net        |  | losses &   |        | Amortization |  | Other     |         |         
|                      |  | DAC & |           | claims & loss    |  | Unearned |            | benefits     |  | Premium |   | investment |  | settlement |        | of DAC &     |  | operating |         | Premiums
|Segment               |  | VOBA  |           | expenses(1)      |  | premiums |            | payable(2)   |  | revenue |   | income     |  | expenses   |        | VOBA         |  | expenses  |         | written 
|                      |  |       |           |                  |  |          |            |              |  |         |   |            |  |            |        |              |  |           |         |         
|Protection Products   |  |       |           |                  |  |          |            |              |  |         |   |            |  |            |        |              |  |           |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         |  |  |  |     | 
|12/31/2002            |  | $     | 691,849   |                  |  | $        | 5,428,918  |              |  | $       |  |            |  | $          | 36,058 |              |  | $         | 341,114 |          |  | $ | 335,111 |  |  | $ | 531,169 |  |  | $ | 62,523  |  |  | $ | 70,801  |  |  |  | n/a | 
|12/31/2001            |  | $     | 613,945   |                  |  | $        | 4,752,903  |              |  | $       |  |            |  | $          | 29,152 |              |  | $         | 300,690 |          |  | $ | 283,330 |  |  | $ | 482,362 |  |  | $ | 59,693  |  |  | $ | 69,035  |  |  |  | n/a | 
|12/31/2000            |  | $     | 365,820   |                  |  | $        | 2,750,669  |              |  | $       |  |            |  | $          | 11,890 |              |  | $         | 252,157 |          |  | $ | 212,100 |  |  | $ | 382,515 |  |  | $ | 36,054  |  |  | $ | 51,532  |  |  |  | n/a | 
|Accumulation Products |  |       |           |                  |  |          |            |              |  |         |   |            |  |            |        |              |  |           |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         |  |  |  |     | 
|12/31/2002            |  | $     | 646,549   |                  |  | $        | 12,363,587 |              |  | $       |  |            |  | $          | 2,570  |              |  | $         | 8,702   |          |  | $ | 653,220 |  |  | $ | 461,779 |  |  | $ | 77,042  |  |  | $ | 68,585  |  |  |  | n/a | 
|12/31/2001            |  | $     | 612,564   |                  |  | $        | 10,925,389 |              |  | $       |  |            |  | $          | 3,505  |              |  | $         | 5,083   |          |  | $ | 577,913 |  |  | $ | 367,127 |  |  | $ | 73,206  |  |  | $ | 60,911  |  |  |  | n/a | 
|12/31/2000            |  | $     | 539,922   |                  |  | $        | 7,207,576  |              |  | $       |  |            |  | $          |       |              |  | $         | 13,768  |          |  | $ | 468,404 |  |  | $ | 315,508 |  |  | $ | 56,696  |  |  | $ | 52,554  |  |  |  | n/a | 
|Other                 |  |       |           |                  |  |          |            |              |  |         |   |            |  |            |        |              |  |           |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         |  |  |  |     | 
|12/31/2002            |  | $     |          |                  |  | $        | 89,719     |              |  | $       |  |            |  | $          | 941    |              |  | $         | 996     |          |  | $ | 5,676   |  |  | $ | 2,606   |  |  | $ |        |  |  | $ | 35,774  |  |  |  | n/a | 
|12/31/2001            |  | $     |          |                  |  | $        | 77,874     |              |  | $       |  |            |  | $          | 490    |              |  | $         | 132     |          |  | $ | 11,931  |  |  | $ | 2,459   |  |  | $ |        |  |  | $ | 20,060  |  |  |  | n/a | 
|12/31/2000            |  | $     |          |                  |  | $        | 17,372     |              |  | $       |  |            |  | $          |       |              |  | $         | 230     |          |  | $ | 19,021  |  |  | $ | 676     |  |  | $ |        |  |  | $ | 30,646  |  |  |  | n/a | 
|Total(3)              |  |       |           |                  |  |          |            |              |  |         |   |            |  |            |        |              |  |           |         |          |  |   |         |  |  |   |         |  |  |   |         |  |  |   |         |  |  |  |     | 
|12/31/2002            |  | $     | 1,338,398 |                  |  | $        | 17,882,222 |              |  | $       |  |            |  | $          | 39,569 |              |  | $         | 350,812 |          |  | $ | 994,007 |  |  | $ | 995,554 |  |  | $ | 139,565 |  |  | $ | 175,160 |  |  |  | n/a | 
|12/31/2001            |  | $     | 1,226,509 |                  |  | $        | 15,756,166 |              |  | $       |  |            |  | $          | 33,147 |              |  | $         | 305,905 |          |  | $ | 873,174 |  |  | $ | 851,948 |  |  | $ | 132,899 |  |  | $ | 150,006 |  |  |  | n/a | 
|12/31/2000            |  | $     | 905,742   |                  |  | $        | 9,975,617  |              |  | $       |  |            |  | $          | 11,890 |              |  | $         | 266,155 |          |  | $ | 699,525 |  |  | $ | 698,699 |  |  | $ | 92,750  |  |  | $ | 134,732 |  |  |  | n/a | 






|    |                                                                             
|--- | ----------------------------------------------------------------------------
|(1) | Policy reserves, policyowner funds and dividends
    payable to policyowners
|   
|(2) | Policy and contract claims                                                  

S-11



---



##### 



AMERUS GROUP CO.

SCHEDULE IV

REINSURANCE


FOR THE YEARS ENDED DECEMBER 31, 2002,
2001, AND 2000


|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |       |  
|---------------------------- | -------------- | ---------------- | ---------- | --------- |  | ---------- | ---------- | ------- |  | ---------- | ---------- | ------ |  | - | ---------- | ------- |  |  | ------ | ----- | -
|                             |                |                  |            |           |  |            |            |         |  | Percentage
|                             |                |                  |            | Ceded to  |  | Assumed    |            |         |  | of amount 
|                             |                | Gross            |            | Other     |  | From Other |            | Net     |  | assumed   
|                             |                | Amount           |            | Companies |  | Companies  |            | Amount  |  | to net    
|                             |                |                  |            |           |  |            |            |         |  |           
|                             |                |                 
|                             |                | ($ in thousands)
|Year ended December 31, 2002 |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Life insurance in force      |                | $                | 64,639,247 |           |  | $          | 59,656,761 |         |  | $          | 15,912,642 |        |  | $ | 6,394,190  |         |  |  | 248.86 | %    
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Premiums                     |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|                             | Life insurance |                  | $          | 401,794   |  |            | $          | 109,846 |  |            | $          | 49,166 |  |   | $          | 341,114 |  |  |        | 14.41 | %
|                             | Annuities      |                  |            | 8,702     |  |            |            |        |  |            |            |       |  |   |            | 8,702   |  |  |        |      | %
|                             | Other          |                  |            | 8,519     |  |            |            | 7,901   |  |            |            | 378    |  |   |            | 996     |  |  |        | 37.95 | %
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Total premiums               |                | $                | 419,015    |           |  | $          | 117,747    |         |  | $          | 49,544     |        |  | $ | 350,812    |         |  |  | 14.12  | %    
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Year ended December 31, 2001 |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Life insurance in force      |                | $                | 66,268,038 |           |  | $          | 49,453,962 |         |  | $          | 4,206,218  |        |  | $ | 21,020,294 |         |  |  | 20.01  | %    
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Premiums                     |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|                             | Life insurance |                  | $          | 366,666   |  |            | $          | 92,327  |  |            | $          | 26,351 |  |   | $          | 300,690 |  |  |        | 8.76  | %
|                             | Annuities      |                  |            | 5,222     |  |            |            | 139     |  |            |            |       |  |   |            | 5,083   |  |  |        |      | %
|                             | Other          |                  |            | 1,533     |  |            |            | 1,401   |  |            |            |       |  |   |            | 132     |  |  |        |      | %
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Total premiums               |                | $                | 373,421    |           |  | $          | 93,867     |         |  | $          | 26,351     |        |  | $ | 305,905    |         |  |  | 8.61   | %    
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Year ended December 31, 2000 |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Life insurance in force      |                | $                | 35,503,699 |           |  | $          | 25,208,439 |         |  | $          | 697,800    |        |  | $ | 10,993,060 |         |  |  | 6.35   | %    
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Premiums                     |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|                             | Life insurance |                  | $          | 280,948   |  |            | $          | 30,172  |  |            | $          | 1,381  |  |   | $          | 252,157 |  |  |        | 0.55  | %
|                             | Annuities      |                  |            | 13,768    |  |            |            |        |  |            |            |       |  |   |            | 13,768  |  |  |        |      | %
|                             | Other          |                  |            | 1,557     |  |            |            | 1,331   |  |            |            | 4      |  |   |            | 230     |  |  |        | 1.74  | %
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      
|Total premiums               |                | $                | 296,273    |           |  | $          | 31,503     |         |  | $          | 1,385      |        |  | $ | 266,155    |         |  |  | 0.52   | %    
|                             |                |                  |            |           |  |            |            |         |  |            |            |        |  |   |            |         |  |  |        |      

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