<PAGE>
                    WAIVER, RELEASE AND TERMINATION AGREEMENT dated as of
               August 3, 1999 (this "Agreement"), to the Credit Agreement
               dated as of June 24, 1997, as amended by the Release and
               Amendment dated as of December 15, 1997, the Amendment dated as
               of April 20, 1998, the Amendment dated as of October 23, 1998,
               the Amendment dated as of October 30, 1998 and the Amendment
               dated as of January 6, 1999 (the "Credit Agreement"), among ARM
               FINANCIAL GROUP, INC., a Delaware corporation (the "Borrower"),
               the financial institutions from time to time party thereto (the
               "Lenders") and THE CHASE MANHATTAN BANK, a New York banking
               corporation, as administrative agent for the Lenders (in such
               capacity, the "Administrative Agent").

          WHEREAS, pursuant to the Credit Agreement, the Lenders have
extended and agreed to extend credit to the Borrower subject to the terms and
conditions set forth therein;

          WHEREAS, the Borrower is, simultaneously with the execution of this
Agreement, paying in full the principal of and interest accrued on all the
Loans (all such Obligations being called the "Designated Obligations");

          WHEREAS, the amount of the Designated Obligations owed to each
Lender, and the aggregate amount of the Designated Obligations, are set forth
in Schedule I hereto;

          WHEREAS, capitalized terms used and not otherwise defined herein
shall have the meanings assigned to them in the Credit Agreement.

          NOW, THEREFORE, in consideration of and effective upon the payment
in full of the Designated Obligations simultaneously with the execution and
delivery of this Agreement;

          1.  The parties hereto hereby agree that all obligations,
liabilities, covenants and agreements of the Borrower, the Lenders and the
Administrative Agent under or in connection with the Credit Agreement and the
other Loan Documents are hereby terminated and canceled and are of no further
force or effect (other than any such obligations and agreements that by their
terms survive the termination of the Credit Agreement).

          2.  The Lenders hereby waive the applicability of Section 2.14 to
the prepayment of Loans on the date hereof.

          3.  The Lenders hereby waive any notice of termination of
commitments required by Section 2.09 of the Credit Agreement and any notice
of prepayment required by Section 2.11 of the Credit Agreement.


<PAGE>

                                                                              2

          4.  Notwithstanding the foregoing provisions, the obligations under
Section 2.12, 2.18 and 9.05 of the Credit Agreement will survive the
repayment of the Loans and the termination of the commitments.

          5.  This Agreement shall become effective (a) upon the execution
and delivery of counterparts hereof by the Borrower and The Chase Manhattan
Bank (individually and as Administrative Agent under the Credit Agreement)
and acknowledged and agreed to by each Lender and are in the possession of
the Administrative Agent and (b) the Administrative Agent has received by
wire transfer of immediately available funds the aggregate amount of the
Designated Obligations, as set forth in Schedule I hereto.

          6.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          7.  This Agreement may be executed in any number of counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement. Delivery of an executed counterpart
of a signature page of this Agreement shall be effective as delivery of a
manually executed counterpart of this Agreement.

          8.  This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Lenders, The Chase Manhattan Bank (individually and as
Administrative Agent) and their respective successors and assigns.


<PAGE>

                                                                             3

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


                                       ARM FINANCIAL GROUP, INC.

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


                                         by /s/ William Panning
                                           --------------------
                                           Name: William Panning
                                           Title: EVP Chief Investment Officer


                                       THE CHASE MANHATTAN BANK,
                                       individually, as Administrative
                                       Agent, and as Representative,

                                         by
                                           --------------------
                                           Name:
                                           Title:


                                       BANK OF TOKYO-MITSUBISHI TRUST
                                       COMPANY,

                                         by
                                           --------------------
                                           Name:
                                           Title:


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

                                         by
                                           --------------------
                                           Name:
                                           Title:


                                         by
                                           --------------------
                                           Name:
                                           Title:


<PAGE>
                                                                              4




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

                                         by
                                           --------------------
                                           Name:
                                           Title:

                                         by
                                           --------------------
                                           Name:
                                           Title:


                                       THE FIRST NATIONAL BANK OF
                                       CHICAGO,

                                         by
                                           --------------------
                                           Name:
                                           Title:


                                       FIRST UNION NATIONAL BANK,

                                         by
                                           --------------------
                                           Name:
                                           Title:


                                       PNC BANK, N.A.,

                                         by
                                           --------------------
                                           Name:
                                           Title:


                                       SUNTRUST BANK, CENTRAL FLORIDA,
                                       NATIONAL ASSOCIATION,

                                         by
                                           --------------------
                                           Name:
                                           Title: