# United States
Securities
and Exchange Commission
Washington, D.C. 20549

# Form 10-Q

# Quarterly
Report Under Section 13 or 15 (d) of the

Securities Exchange Act of 1934

# For the
Quarter ended June 30, 2004

# Commission
File No. 2-40764

# Kansas City
Life Insurance Company

3520 Broadway

Kansas City, Missouri 64111-2565

# Phone: (816) 753-7000

# IRS Number:
44-0308260

# Incorporated
in the State of Missouri

The Registrant (1) has
filed all reports required to be filed by section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.

`Yes    X                       No______`

Indicate the number of
shares outstanding of each of the issuer's classes of common stock, as of the
most recent date available.

`Class                                  Outstanding April 29, 2004
Common Stock, $1.25 par value                        11,927,064 shares`

# KANSAS CITY
LIFE INSURANCE COMPANY
TABLE OF
CONTENTS

`Part I.   Financial Information........................................................................3

Item 1.   Financial Statements.........................................................................3

          Consolidated Balance Sheets..................................................................3

          Consolidated Statements of Income............................................................4

          Consolidated Statements of Cash Flows........................................................5

          Notes to Consolidated Financial Statements...................................................6

Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations.......11

Item 3.   Quantitative and Qualitative Disclosures About Market Risk..................................22

Item 4.   Controls and Procedures.....................................................................23


Part II.  Other Information...........................................................................24

Item 1.   Legal Proceedings...........................................................................24

Item 5.   Other Information...........................................................................25

Item 6.   Exhibits and Reports on Form 8-K............................................................27

Signatures............................................................................................28`

## Part I
Financial InformationItem 1.   
Financial Statements

KANSAS CITY LIFE INSURANCE COMPANY
               CONSOLIDATED BALANCE SHEETS
        (amounts in thousands, except share data)

`June 30           December 31
                                                                 2004               2003      
ASSETS                                                       (Unaudited)
Investments:
     Fixed maturities available for sale, at fair value   $     2,902,074    $      2,814,485
     Equity securities available for sale, at fair value           62,229              63,808
     Mortgage loans                                               426,401             456,656
     Real estate                                                  110,050             112,691
     Policy loans                                                 110,805             114,420
     Short-term investments                                        37,209              71,823
     Other investments                                                821                 903 
             Total investments                                  3,649,589           3,634,786

Cash                                                                1,698              20,029
Accrued investment income                                          40,794              39,132
Deferred acquisition costs                                        239,852             241,057
Value of business acquired                                        102,441             106,334
Reinsurance recoverable                                           150,796             151,577
Other assets                                                       52,550              54,306
Separate account assets                                           321,250             304,691 
             Total assets                                 $     4,558,970    $      4,551,912 
                                                                                              

LIABILITIES
Future policy benefits                                    $       870,124    $        872,114
Policyholder account balances                                   2,258,740           2,239,223
Policy and contract claims                                         31,899              33,012
Other policyholder funds                                           98,980             101,084
Notes payable                                                     129,217             133,670
Income taxes                                                       22,202              36,918
Other liabilities                                                 206,027             186,762
Separate account liabilities                                      321,250             304,691 
             Total liabilities                                  3,938,439           3,907,474 

STOCKHOLDERS' EQUITY
Common stock, par value $1.25 per share
     Authorized 36,000,000 shares,
             issued 18,496,680 shares                              23,121              23,121
Additional paid in capital                                         23,708              23,310
Retained earnings                                                 695,372             688,800
Accumulated other comprehensive income (loss)                      (7,200)             23,418
Less treasury stock, at cost (2004 - 6,569,467 shares;
     2003 - 6,572,087 shares)                                    (114,470)           (114,211)
             Total stockholders' equity                           620,531             644,438 

             Total liabilities and stockholders' equity   $     4,558,970    $      4,551,912`

See accompanying Notes to Consolidated Financial Statements.

KANSAS CITY LIFE INSURANCE COMPANY
                    CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
       (amounts in thousands, except share data)

`Quarter ended June 30        Six Months ended June 30  
                                                             2004           2003            2004           2003    
REVENUES
Insurance revenues:
     Premiums                                           $     47,319   $     54,337    $    94,370    $    101,630
     Contract charges                                         29,381         25,251         58,530          51,366
     Reinsurance ceded                                       (14,342)       (11,143)       (26,860)        (21,410)
             Total insurance revenues                         62,358         68,445        126,040         131,586
Investment revenues:
     Net investment income                                    48,391         45,823         99,118          93,359
     Realized investment gains (losses)                          724         (9,229)         1,527         (31,003)
Other revenues                                                 1,734          2,362          4,268           4,906 
             Total revenues                                  113,207        107,401        230,953         198,848 

BENEFITS AND EXPENSES
Policyholder benefits                                         45,656         51,992         96,226         101,755
Interest credited to policyholder account balances            23,038         21,807         47,347          42,138
Amortization of deferred acquisition costs
     and value of business acquired                           10,446          7,875         20,192          18,514
Operating expenses                                            23,872         24,502         49,611          49,472 
             Total benefits and expenses                     103,012        106,176        213,376         211,879 

Income (loss) before income tax expense (benefit)             10,195          1,225         17,577         (13,031)

Income tax expense (benefit)                                   2,673           (310)         4,460          (7,108)

NET INCOME (LOSS)                                       $      7,522   $      1,535    $    13,117    $     (5,923)
                                                                                                                   

Basic and diluted earnings per share:
     Net income (loss)                                  $       0.63   $       0.13    $      1.10    $      (0.50)`

See accompanying Notes to Consolidated Financial Statements.

KANSAS CITY LIFE INSURANCE COMPANY
                    CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                       (amounts in thousands)

`Six Months ended June 30     
                                                                            2004               2003     
OPERATING ACTIVITIES
Net cash provided                                                    $         38,744   $        53,905 

INVESTING ACTIVITIES
Purchases of investment securities:
     Fixed maturities                                                        (475,685)         (497,408)
     Equity securities                                                         (2,077)           (1,447)
Sales of investment securities:
     Fixed maturities                                                          80,424           109,541
     Equity securities                                                          2,211             8,652
Maturities and principal paydowns of investment securities:
     Fixed maturities                                                         247,509           345,309
     Equity securities                                                            265             3,289
Purchases of other investments                                                (32,327)          (51,641)
Sales, maturities and principal paydowns of other investments                  69,478            56,085
Net sales (purchases) of short-term investments                                34,614           (17,958)
Net additions to property and equipment                                          (712)             (381)
Insurance business acquired                                                         -           (61,150)
         Net cash used                                                        (76,300)         (107,109)

FINANCING ACTIVITIES
Proceeds from borrowings                                                        1,306             3,118
Repayment of borrowings                                                        (5,759)             (514)
Deposits on policyholder contracts                                            139,090           151,720
Withdrawals from policyholder account balances                               (103,294)          (83,303)
Net transfers to separate accounts                                             (7,805)           (1,787)
Change in other deposits                                                        2,093             3,920
Cash dividends to stockholders                                                 (6,545)           (6,462)
Net disposition (acquisition) of treasury stock                                   139            (2,527)
         Net cash provided                                                     19,225            64,165 

Increase (decrease) in cash                                                   (18,331)           10,961
Cash at beginning of year                                                      20,029            14,645 

         Cash at end of period                                       $          1,698   $        25,606`

See accompanying Notes to Consolidated Financial Statements.

Kansas City
Life Insurance Company

Notes to
Consolidated Financial Statements

                                               (amounts in thousands, except share data)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of
Presentation
The unaudited consolidated
financial statements, the accompanying notes to these financial statements and
the accompanying Managements Discussion and Analysis of Operations of
Kansas City Life Insurance Company include the accounts of the Company and its
subsidiaries, principally Sunset Life Insurance Company of America (Sunset
Life), and Old American Insurance Company (Old American). These items have been
prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP) for interim financial reporting and with the
instructions to Form 10-Q of Regulation S-X. Accordingly, they do not include
all of the disclosures required by GAAP for complete financial statements and as
such, these unaudited interim financial statements should be read in conjunction
with the Company's 2003 Form 10-K and the 2003 Annual Report to Stockholders.
Management believes that the disclosures are adequate to make the information
presented not misleading, and all normal and recurring adjustments necessary to
present fairly the financial position at June 30, 2004 and the results of its
operations for all periods presented have been made. The results of operations
for any interim period are not necessarily indicative of the Companys
operating results for a full year.

Significant intercompany
transactions have been eliminated in consolidation and certain reclassifications
have been made to the prior year results to conform with the current years
presentation.

Insurance
Company Acquisition
On June 30, 2003, the Company
acquired all of the issued and outstanding stock of GuideOne Life Insurance
Company (GuideOne) from GuideOne Financial Group, Inc. and GuideOne Mutual
Company. The purchase price of the acquisition was $59.4 million and added
$393.1 million in assets on the acquisition date, including an identifiable
intangible asset called the value of business acquired (VOBA) of $38.0 million.
The financial position and results of operations of GuideOne have been included
in these financial statements on a GAAP basis using the purchase method of
accounting since July 1, 2003. As of October 1, 2003, GuideOne was merged into
Kansas City Life Insurance Company. For segment reporting purposes, GuideOne is
included in the Kansas City Life - Individual segment.

Significant
Accounting Policies
These significant
accounting policies should be read in conjunction with statements and
disclosures made in the Companys 2003 Form 10-K as filed with the United
States Securities and Exchange Commission.

The preparation of the
consolidated financial statements requires management of the Company to make
estimates and assumptions relating to the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the consolidated financial statements, and the reported amounts of revenue
and expenses during the period. These estimates are inherently subject to change
and actual results could differ from these estimates.

The Company establishes
liabilities for amounts payable under insurance policies, including traditional
life insurance, annuities and accident and health insurance. Generally, amounts
are payable over an extended period of time and the profitability of the
products is dependent on the assumptions used in the pricing of the products.
Principal assumptions used in pricing policies and in the establishment of
liabilities for future policy benefits are mortality, morbidity, expenses,
persistency, investment returns and inflation. Differences between actual
experience and assumptions used in the pricing of these policies and in the
establishment of liabilities may result in variability of net income.

Policyholder account
balances include universal life insurance, fixed deferred annuity contracts and
investment-type contracts. The account balances for universal life contracts are
equal to cumulative premiums, less contract charges, plus interest credited. The
account balances for fixed deferred annuities and investment contracts are equal
to the cumulative deposits less any applicable contract charges plus interest credited. The profitability of
these products is also dependent on principal assumptions similar to traditional
insurance products, and differences between actual experience and pricing
assumptions may result in variability of net income.

Deferred acquisition costs
(DAC), principally agent commissions and other selling, selection and issue
costs, which vary with and are directly related to the production of new
business, are capitalized as incurred. These deferred costs are then amortized
in proportion to future premium revenues or the expected future profits of the
business, depending upon the type of product. Profit expectations are based upon
assumptions of future interest spreads, mortality margins, expense margins and
policy and premium persistency experience. These assumptions involve judgment
and are compared to actual experience on an ongoing basis. If it is determined
that the assumptions related to the profit expectations for interest sensitive
and variable insurance products should be revised, the impact of the change is
reported in the current periods income as an unlocking adjustment.

When new business is
acquired, a portion of the purchase price is allocated to a separately
identifiable intangible asset, called the value of business acquired (VOBA).
VOBA is established as the actuarially determined present value of future gross
profits of the business acquired and is amortized in proportion to future
premium revenues or the expected future profits, depending on the type of
business acquired. Similar to DAC, the assumptions regarding future experience
can affect the carrying value of VOBA, including interest spreads, mortality,
expense margins and policy and premium persistency experience. Significant
changes in these assumptions can impact the carrying balance of VOBA and produce
changes that must be reflected in the current periods income as an
unlocking adjustment.

The Company maintains a
diversified securities portfolio. The Companys securities available for
sale are carried at fair value in the Companys balance sheet. The Company
receives fair values for its securities portfolio from a variety of external
sources. Various measures have been taken to manage the portfolios credit
and interest rate risks, as discussed in the Companys 2003 Form 10-K and
the 2003 Annual Report to Stockholders. The Company performs a review of its
securities' fair values on an ongoing basis to determine changes in the value of
the portfolio. Several factors are analyzed in evaluating these securities,
including an analysis of the issuing company, its industry, valuation levels and
subsequent developments. Based upon these inputs, the Company establishes its
securities values in accordance with GAAP.

Premiums for traditional
life insurance products are reported as revenue when due. Premiums on accident
and health, disability and dental insurance are reported as earned over the
contract period. A reserve is provided for the portion of premiums written which
relates to unexpired terms of coverage.

Deposits related to
universal life, fixed deferred annuity contracts and investment-type products
are credited to policyholder account balances. Revenues from such contracts
consist of amounts assessed against policyholder account balances for mortality,
policy administration and surrender charges, and are recognized in the period in
which the services are provided.

In the normal course of
business, the Company cedes risks to other insurers primarily to protect the
Company against adverse fluctuations in mortality experience. The Company also
assumes risks ceded by other companies. Reinsurance is effected on individual
risks and through various pooling arrangements. Business is reinsured primarily
through yearly renewable term and coinsurance agreements. Under yearly renewable
term insurance, the Company pays annual premiums and the reinsurer reimburses
claims paid related to this coverage. Under coinsurance, the reinsurer receives
a proportionate share of the premiums less applicable commissions and is liable
for a corresponding share of policy benefits. The Company remains contingently
liable if the reinsurer should be unable to meet obligations assumed under the
reinsurance contract.

Reinsurance recoverable
includes amounts related to paid benefits and estimated amounts related to
unpaid policy and contract claims, future policy benefits and policyholder
account balances. The cost of reinsurance is accounted for over the terms of the
underlying reinsured policies using assumptions consistent with those used to
account for the policies.

New Accounting
Pronouncements
FASB Interpretation (FIN)
46, "Consolidation of Variable Interest Entities," was issued in January
2003. This is an interpretation of Accounting Research Bulletin (ARB) No. 51,
"Consolidated Financial Statements." This interpretation requires the
consolidation of entities in which an enterprise absorbs a majority of the
entitys expected losses, receives a majority of the entitys expected
residual returns, or both, as a result of ownership, contractual terms or other
financial interests in the entity. This interpretation was adopted July 1, 2003
and had no material impact. Subsequently, in December 2003, the FASB issued a
revision known as FIN 46R, which replaces FIN 46. The Company will be required
to apply FIN 46R to variable interest entities created after December 31, 2003.
This revised interpretation was adopted on January 1, 2004, with no material
impact.

Statement of Position (SOP)
03-01, "Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts," was
issued in July 2003 by the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants. The SOP addresses: 1)
separate account presentation; 2) accounting for an insurance companys
proportionate interest in separate accounts; 3) transfers of assets from the
general account to a separate account; 4) valuation of certain insurance
liabilities and policy features such as guaranteed minimum death benefits and
annuitization benefits; and 5) accounting for sales inducements. This SOP was
adopted on January 1, 2004, with no material impact.

All other Standards and
Interpretations of those Standards issued during 2004 did not relate to
accounting policies and procedures pertinent to the Company at this time.

Comprehensive
Income
Comprehensive income is comprised of net income and other comprehensive income, which includes unrealized
investment gains or losses on securities available for sale and the change in the additional minimum pension
liability.  For the second quarter, comprehensive loss was $49.0 million in 2004, and comprehensive income was
$44.5 million in 2003.  Excluding the second quarter 2004 net income of $7.5 million, other comprehensive loss
was $56.5 million.  This other comprehensive loss amount consisted of unrealized investment losses on securities,
which was net of reclassification adjustments of investment losses realized in net income, and net of applicable
deferred acquisition costs and income taxes.

For the six months, comprehensive loss was $17.5 million in 2004, and comprehensive income was $60.6 million for
2003.   Excluding the six months ended 2004 net income of $13.1 million, other comprehensive loss was $30.6
million.  This other comprehensive loss amount consisted of unrealized investment losses on securities, which was
net of reclassification adjustments of investment losses realized in net income, and net of applicable deferred
acquisition costs and income taxes.

Income Per
Share
Due to the Companys
capital structure and the absence of other potentially dilutive securities,
there is no difference between basic and diluted earnings per common share for
any of the periods reported. The weighted average number of shares outstanding
were 11,926,817 and 11,959,345 for the six months of 2004 and 2003,
respectively.

Income Taxes
Deferred income taxes are
recorded on the differences between the tax bases of assets and liabilities and
the amounts at which they are reported in the consolidated financial statements.
Recorded amounts are adjusted to reflect changes in income tax rates and other
tax law provisions as they become enacted. For the second quarter, the effective
tax rate was an expense of 26.2% for 2004, versus a benefit of 25.3% for 2003.
For the six months, the effective tax rate was an expense of 25.4% for 2004,
versus a benefit of 54.5% for 2003. Actual tax rates differ from the enacted
rates primarily due to tax credits received from affordable housing investments
and, in 2003, a reversal of taxes accrued related to a recently closed tax year.

2.  SEGMENT INFORMATION

Company operations have
been classified and summarized into four reportable segments. The segments,
while generally classified along Company lines, are based upon distribution
method, product portfolio and target market. The Parent Company is divided into
two segments. The Kansas City Life - Individual segment consists of sales of
variable life and annuities, interest sensitive products and traditional life
insurance products through a nationwide sales force of independent general
agents. GuideOne is included in the Kansas City Life  Individual Segment.
The Kansas City Life - Group segment consists of sales of group life,
disability, dental products and administrative services only. Group segment
products and services are marketed by a nationwide sales force of independent
general agents and group brokers, along with third party marketing arrangements.
The Sunset Life segment consists of sales of interest sensitive and traditional
products through a nationwide sales force of independent general agents. The Old
American segment sells final expense insurance products nationwide through its
general agency system, using direct response marketing to supply agents with
leads in their exclusive territories.

Separate investment
portfolios are maintained for each of the companies. However, investments are
allocated to the group segment based upon its cash flows. Its investment income
is modeled using the year of investment method. Home office functions are fully
integrated for the three companies in order to maximize economies of scale.
Therefore, operating expenses are allocated to the segments based upon internal
cost studies, which are consistent with industry cost methodologies.

Inter-segment revenues are
not material. The Company operates solely in the United States and no individual
customer accounts for 10% or more of the Company's revenue.

The following schedule
provides, in thousands, the financial performance of each of the four reportable
operating segments of the Company.

`Kansas City Life            Sunset          Old
                                         Individual        Group          Life        American         Total
Insurance revenues:
             Second quarter:    2004   $      31,533   $    10,597   $     3,279   $      16,949   $     62,358
                                2003          36,082        11,664         3,417          17,282         68,445
             Six months:        2004   $      63,179   $    21,620   $     7,229   $      34,012   $    126,040
                                2003          66,090        23,087         7,708          34,701        131,586

Net investment income:
             Second quarter:    2004   $      37,834   $        69   $     7,221   $       3,267   $     48,391
                                2003          34,853            74         7,491           3,405         45,823
             Six months:        2004   $      78,239   $       149   $    14,185   $       6,545   $     99,118
                                2003          70,951           154        15,093           7,161         93,359

Net income (loss):
             Second quarter:    2004   $       4,370   $    (1,041)  $     2,562   $       1,631   $      7,522
                                2003             332          (666)        1,187             682          1,535
             Six months:        2004   $       8,319   $    (1,351)  $     3,912   $       2,237   $     13,117
                                2003          (5,092)       (1,651)        1,124            (304)        (5,923)`

3.  CONTINGENT LIABILITIES

The life insurance
industry, including the Company, has been subject to an increase in litigation
in recent years. Such litigation has been pursued on behalf of purported classes
of policyholders and other claims and legal actions in jurisdictions where
juries often award punitive damages which are grossly disproportionate to actual
damages. Although no assurances can be given and no determinations can be made
at this time, management believes that the ultimate liability, if any, with
respect to these claims and actions, would have no material effect on the
Companys business, results of operations or financial position.

4.  GUARANTEES AND INDEMNIFICATIONS

The Company is subject to
various indemnification obligations issued in conjunction with certain
transactions, primarily assumption reinsurance agreements, stock purchase
agreements, mortgage servicing agreements and borrowing agreements whose terms
range in duration and often are not explicitly defined. Generally, a maximum
obligation is not explicitly stated; therefore, the overall maximum amount of
the obligation under the indemnifications cannot be reasonably estimated. While
we are unable to estimate with certainty the ultimate legal and financial
liability with respect to these indemnifications, we believe the likelihood is
remote that material payments would be required under such indemnifications and
therefore such indemnifications would not result in a material adverse effect on
our business, financial position or results of operations.

5.  COMMITMENTS

In the normal  course of  business  the Company has open  purchase  and sale  commitments.  At June 30,  2004,  the
Company had open purchase  commitments of $10.1 million and open sales  commitments of $4.3 million.  Subsequent to
June 30, 2004,  the Company  entered  into  purchase  commitments  of $2.8  million and sales  commitments  of $9.6
million.  Typically,  these  purchase  and sales  commitments  are for  securities,  mortgage  loans,  real estate,
affordable  housing and other  investments.  The ultimate  financial  impact of these  commitments is not presently
determinable.

Item 2.   
Management's Discussion and Analysis of Financial Condition and Results of
Operations

## Cautionary
Statement on Forward-Looking Information

This report reviews the
Companys financial condition and results of operations, and historical
information is presented and discussed. Where appropriate, factors that may
affect future financial performance are also identified and discussed. Certain
statements made in this report include forward-looking statements
that fall within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements include any statement that may predict,
forecast, indicate or imply future results, performance or achievements rather
than historical facts and may contain words like believe,
expect, estimate, project,
forecast, anticipate, plan,
will, shall, and other words, phrases or expressions
with similar meaning.

Forward-looking statements
are subject to known and unknown risks, uncertainties and other factors that may
cause actual results to differ materially from those contemplated by the
forward-looking statements. Factors that could cause the Companys future
results to differ materially from expected results include, but are not limited
to:

- Changes in general economic conditions, including the performance of financial markets and interest rates;
- Increasing competition, which may affect the Company's ability to sell its products;
- Customer and agent response to new products, distribution channels and marketing initiatives;
- Fluctuations  in experience  regarding  current  mortality,  morbidity,  persistency  and interest  rates relative to expected
         amounts used in pricing the Company's products;
- Changes in assumptions related to deferred acquisition costs and the value of business acquired;
- Regulatory, accounting or tax changes that may affect the cost of, or the demand for, the Company's products or services;
- Unanticipated changes in industry trends and ratings assigned by nationally recognized rating organizations.

The Company cannot give
assurances that such statements will prove to be correct. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.

## Consolidated
Results of Operations

In the second quarter of 2004,
the Companys net income increased $6.0 million versus the prior year, to a
total of $7.5 million. Net income per share increased to $0.63 per share versus
$0.13 per share in last year's second quarter. For the first six months of 2004,
net income increased $19.0 million to equal $13.1 million and net income per
share increased to $1.10 per share compared to a loss of $0.50 per share in the
prior year. The largest factor in the increase was the improvement in realized
investment gains and losses. In the second quarter, the Company recorded
realized investment gains of $0.7 million, a $10.0 million increase over last
years second quarter loss. For the six months, net realized investment
gains totaled $1.5 million, versus a net realized investment loss of $31.0
million in the prior year. This improvement was the result of a general
improvement in the overall economy and credit markets. Additionally, contributing to this improvement year-to-year was an
improvement in investment income due to increased invested assets, which resulted from
the acquisition of GuideOne and the sizable sales of annuity products in the
prior year.  Partially offsetting this improvement was a decrease in premiums due
to reduced sales of immediate annuities and an increase in income tax expense.

Sales
The Company measures sales
in terms of new premiums and deposits. Premiums are included in insurance
revenues in the Consolidated Statements of Income, while deposits are shown in
the Consolidated Statements of Cash Flows. The first set of tables below
reconciles premiums included in insurance revenues and provides detail by new
and renewal business. New premiums are also detailed by product. The second set
of tables provided reconciles deposits with the Consolidated Statements of Cash
Flows and provides detail by new and renewal deposits. New deposits are also
detailed by product.

For the second quarter, new
premiums declined 46% due to a 75% decrease in immediate annuity sales. New
premiums for the six months decreased 33% versus last year, primarily due to a
69% decrease in the sale of immediate annuities. These sales have been slowing
since the second half of 2003, due in part to an emphasis on life insurance
sales and changes in the marketplace.

Individual life insurance
premiums increased 26% for the second quarter and 16% for the six months
versus 2003. For the second quarter, group life sales increased 61% and group
accident and health sales grew 28%. For the six months, group life sales
increased 54%, and group accident and health sales grew 47%. Third party
marketing arrangements continue to generate strong sales in both the long-term
disability and stop loss lines. Renewal premiums grew 5% for the second quarter
and 4% in the six months, largely due to the acquisition of GuideOne.

`Quarter ended June 30        
                                                     2004      % chg       2003      % chg  
New premiums:
     Individual life insurance                   $     3,538       26  $     2,809       (4)
     Immediate annuities                               3,429      (75)      13,611      163
     Group life insurance                                394       61          244      (24)
     Group accident and health insurance               3,351       28        2,613      (11)
     Individual accident and health insurance           (334)       -            -        -
         Total new premiums                           10,378      (46)      19,277       70
Renewal premiums                                      36,941        5       35,060       (7)
Total premiums                                   $    47,319      (13) $    54,337       11`

`Six Months ended June 30         
                                                     2004      % chg       2003      % chg  
New premiums:
     Individual life insurance                   $     6,196       16  $     5,323      (12)
     Immediate annuities                               6,307      (69)      20,436      245
     Group life insurance                                811       54          525      (11)
     Group accident and health insurance               7,171       47        4,888      (13)
     Individual accident and health insurance            308        -            -        -
         Total new premiums                           20,793      (33)      31,172       72
Renewal premiums                                      73,577        4       70,458       (6)
Total premiums                                   $    94,370       (7) $   101,630        9`

Total new deposits declined
27% for both the second quarter and six months largely due to a 45% decrease in
fixed deferred annuity sales for the second quarter and a 40% decrease in fixed
deferred annuity sales for the six months. As mentioned earlier, sales declined
for immediate and fixed deferred annuities in the second half of 2003, and that
trend has continued during the first half of 2004. New deposits on universal
life products increased 60% in the second quarter and 29% for the six months.
For the second quarter, new variable annuities increased 17% and new variable
universal life sales increased 117%. Variable annuity deposits and variable
universal life deposits each increased 12% for the six months, reflecting
renewed interest in variable products due to improvement in the overall market.
Renewal deposits increased 13% for the second quarter and 14% for the six
months, primarily due to contracts received in the GuideOne acquisition.

`Quarter ended June 30         
                                                     2004      % chg       2003      % chg  
New deposits:
     Universal life insurance                    $     3,306       60  $     2,069       15
     Variable universal life insurance                 1,350      117          621      (77)
     Fixed deferred annuities                         18,223      (45)      33,098      100
     Variable annuities                                9,008       17        7,696       18
         Total new deposits                           31,887      (27)      43,484       58
Renewal deposits                                      38,861       13       34,356        3
Total deposits                                   $    70,748       (9) $    77,840       28`

`Six Months ended June 30         
                                                     2004      % chg       2003      % chg  
New deposits:
     Universal life insurance                    $     5,547       29  $     4,289       11
     Variable universal life insurance                 1,981       12        1,773      (64)
     Fixed deferred annuities                         37,605      (40)      63,161       91
     Variable annuities                               16,202       12       14,410       14
         Total new deposits                           61,335      (27)      83,633       53
Renewal deposits                                      77,755       14       68,087       (2)
Total deposits                                   $   139,090       (8) $   151,720       23`

Insurance Revenues
Insurance revenues consist
of premiums and contract charges, less reinsurance ceded. Insurance revenues
decreased 9% in the second quarter and 4% in the first half. Overall premiums
decreased 13% in the second quarter and 7% for the six months, primarily due to
the decrease in immediate annuities. Contract charges increased 16% for the
second quarter and 14% for the six months, largely due to the addition of
GuideOnes portfolio of universal life and annuity products. Reinsurance
ceded increased 29% in the second quarter and 26% in the six months. The Company
has expanded its use of reinsurance over the past few years to help mitigate
potential adverse exposure in virtually all individual and group life and
accident and health lines of business. In addition, the GuideOne acquisition
accounted for 22% of the growth in reinsurance premiums paid in the first half.

The volatility of the
equity markets continues to influence consumers preferences favorably
toward interest sensitive products and more traditional life and annuity
insurance products. Consumers continue to desire a broad portfolio of products
with safety and competitive return objectives, which the Company strives to
provide. Variable insurance products allow policyholders to participate in both
the equity and fixed income markets; interest sensitive and traditional
insurance products combine safety of principal with competitive interest
returns.

Insurance revenues may be
affected by the persistency of policyholders, which may be influenced by
economic conditions as well as competitive forces and fluctuations in mortality
experience. The Companys persistency and mortality experience have been
consistent with expectations over time.

Investment Revenues
Net investment income
increased 6% in both the second quarter and first half. While the Companys
overall yield declined due to lower available market yields, the Companys
investable assets were significantly greater than a year ago due to both the
acquisition of GuideOne and the sizable sales of annuity products in the prior
year.

As discussed above, the
Company recorded realized investment gains for the second quarter of $0.7
million.  This was a $10.0 million increase over realized investment losses of $9.2
million in the prior year. The Company recorded realized investment gains for
the first half of $1.5 million, a $32.5 million improvement over a loss of $31.0
million one year earlier. The Company continues to improve its portfolio quality
while seeking to maximize its overall returns. The overall improvement in the
economy and credit markets have been the primary reason for the decline in
realized losses. The following table provides detail concerning realized
investment gains and losses for the second quarter and six month periods of 2004
and 2003.

`Quarter ended                Six Months ended
                                                             June 30                      June 30       
Realized Investment Gains and Losses                  2004           2003          2004           2003  
Gross gains resulting from:
   Sales of investment securities               $     1,894   $      3,104   $     4,659    $     4,710
   Investment securities called                          41            572           349            943
   Sales of real estate                               1,304            963         1,590          1,129 
     Total gross gains                                3,239          4,639         6,598          6,782 
Gross losses resulting from:
   Sales of investment securities                    (2,075)        (5,607)       (3,781)       (10,487)
   Write-downs of investment securities                (555)        (8,066)         (555)       (26,925)
   Investment securities called                         (94)          (276)       (1,009)          (450)
     Total gross losses                              (2,724)       (13,949)       (5,345)       (37,862)
Amortization of deferred acquisition costs              209             81           274             77 
Realized investment gains (losses)              $       724   $     (9,229)  $     1,527    $   (31,003)`

The Company regularly
evaluates the quality of its investment portfolio. Occasionally, in a
diversified portfolio, certain investments may suffer market price deterioration
due to a wide variety of factors. Distressed securities are placed onto watch
lists that are then further analyzed to identify any specific securities that
the Company believes may have experienced other than temporary declines in fair
value. To the extent that the Company believes that these fluctuations represent
an other than temporary decline in value, the value of the investment is
adjusted by charging off the loss against income. The Company's analysis
identified $0.6 million in other than temporary declines in value in the second
quarter and first half. In the first half of 2003, the Company recorded $26.9
million in other than temporary declines in value, which were largely due to
investments in the airline industry.

While the credit markets have generally improved over the reporting period, the recent rise in interest rates
resulted in a general decline in market values for fixed maturity type securities at June 30, 2004.  Accordingly,
investments of $1.5 billion in fair value had unrealized losses of $49.2 million.  At year-end 2003, investments
of $1.0 billion had unrealized losses of $28.9 million.

Policyholder Benefits and Interest Credited to Policyholder Account Balances
Policyholder benefits
decreased 12% or $6.3 million in the second quarter and 5% or $5.5 million in
the first half. Policyholder benefits decreased in the first half primarily due
to lower immediate annuity sales, which resulted in lower required reserves.
This decline was partially offset by an increase in incurred individual death
benefit payments, primarily due to the GuideOne acquisition and other benefits.
Other benefits include individual accident and health payments from the GuideOne
acquisition, along with group and accident and health payments. For the first
half, mortality experience on the non-GuideOne business was better than expected
and mortality on the GuideOne acquisition was consistent with expectations.

Interest credited to
policyholder account balances increased 6% in the second quarter and 12% in the
first half. This increase was largely the result of interest credited on
policyholder account balances received in the GuideOne acquisition.

Deferred Acquisition Costs (DAC) and Value of Business Acquired (VOBA)
For the second quarter, the
amortization of DAC was $8.8 million and $6.2 million for 2004 and 2003,
respectively. The amortization of DAC for the first half totaled $16.6 million
in 2004 versus $15.2 million in 2003. This increase is largely due to the
unlocking of DAC assumptions in 2003, which reduced the amortization of DAC by
$1.8 million. The Company evaluates the assumptions used in the
amortization of deferred acquisition costs on a regular basis. As warranted by a
combination of historical results and expected future trends, the Company
unlocks these assumptions and accordingly increases or decreases the deferred
acquisition costs. For the first six months of 2004, the unlocking of DAC
assumptions was not material to the financial statements.

The amortization of VOBA
was $1.7 million in the second quarter of 2004 and $1.6 million for the same period in 2003. VOBA
amortization was $3.6 million for the first six months of 2004 compared to $3.3
million in 2003. Further, additional VOBA was established on June 30, 2003 at $38.0
million due to the acquisition of GuideOne.

Operating Expenses
Insurance operating
expenses decreased 3% in the second quarter of 2004 but were level for the first
half. The Company strives to contain its operating expenses in the face of
rising costs on a variety of fronts. Increases in government regulations such as
Sarbanes-Oxley, employee benefits, the need to continually maintain and improve
its computer environment and processing systems, as well as the general rise in
inflation are all forces that the Company must manage. This level of expense
control was achieved even with the inclusion of operating expenses related to
the GuideOne acquisition.

Income Taxes
The effective income tax
rate was an expense of 26.2% for the second quarter of 2004 versus a benefit of
25.3% for the prior year period. The effective income tax rates for the first
half were an expense of 25.4% and a benefit of 54.5% in 2004 and 2003,
respectively. The income tax rate in both years was affected by tax credits
generated from the Companys investments in affordable housing. Also, in
2003 the Company benefited from the reversal of taxes accrued related to a
recently closed tax year.

## Operating
Results by Segment

The following schedules
provide key supplemental financial information for each of the Company's four
reportable operating segments for the first quarters of 2004 and 2003 and are
reconciled to the financial statements contained herein (in thousands):

`Kansas City Life               Sunset           Old
                                               Individual          Group            Life          American         Total
2004 (second quarter):
Premiums:
     New premiums                            $      4,555      $      3,745    $        102   $       1,976   $      10,378
     Renewal premiums                               9,445             9,619           1,296          16,581          36,941 
Total premiums                                     14,000            13,364           1,398          18,557          47,319
Contract charges                                   23,641                 -           5,740               -          29,381
Reinsurance ceded                                  (6,109)           (2,767)         (3,859)         (1,607)        (14,342)
     Total insurance revenues                $     31,532      $     10,597    $      3,279   $      16,950   $      62,358 
Net investment income                              37,833                69           7,222           3,267          48,391
Realized investment gains (losses)                    565                 -             557            (398)            724
Other revenues                                      1,081               585              26              42           1,734
Policyholder benefits and interest credited
     to policyholder account balances              44,830             7,839           4,894          11,131          68,694
Expenses and taxes                                 21,812             4,452           3,628           7,099          36,991 
Net income (loss)                            $      4,369      $     (1,040)   $      2,562   $       1,631   $       7,522 
                                                                                                                            

Deposits:
     New deposits                            $     30,546      $          -    $      1,341   $           -   $      31,887
     Renewal deposits                              30,767                 -           8,094               -          38,861 
Total deposits                               $     61,313      $          -    $      9,435   $           -   $      70,748`

`Kansas City Life               Sunset           Old
                                               Individual          Group            Life          American         Total
2003 (second quarter):
Premiums:
     New premiums                            $     14,340      $      2,857    $        190   $       1,890   $      19,277
     Renewal premiums                               6,411            10,065           1,361          17,223          35,060 
Total premiums                                     20,751            12,922           1,551          19,113          54,337
Contract charges                                   19,587                 -           5,664               -          25,251
Reinsurance ceded                                  (4,257)           (1,259)         (3,797)         (1,830)        (11,143)
     Total insurance revenues                $     36,081      $     11,663    $      3,418   $      17,283   $      68,445 
Net investment income                              34,853                74           7,491           3,405          45,823
Realized investment gains (losses)                 (6,537)                -          (1,395)         (1,297)         (9,229)
Other revenues                                      1,495               724              80              63           2,362
Policyholder benefits and interest credited
     to policyholder account balances              47,968             8,226           5,610          11,995          73,799
Expenses and taxes                                 17,592             4,901           2,797           6,777          32,067 
Net income (loss)                            $        332      $       (666)   $      1,187   $         682   $       1,535 
                                                                                                                            

Deposits:
     New deposits                            $     40,519      $          -    $      2,965   $           -   $      43,484
     Renewal deposits                              26,412                 -           7,944               -          34,356 
Total deposits                               $     66,931      $          -    $     10,909   $           -   $      77,840`

`Kansas City Life               Sunset           Old
                                               Individual          Group            Life          American         Total
2004 (six months):
Premiums:
     New premiums                            $      9,078      $      7,982    $        213   $       3,520   $      20,793
     Renewal premiums                              18,618            18,771           2,697          33,491          73,577 
Total premiums                                     27,696            26,753           2,910          37,011          94,370
Contract charges                                   47,068                 -          11,462               -          58,530
Reinsurance ceded                                 (11,586)           (5,132)         (7,143)         (2,999)        (26,860)
     Total insurance revenues                $     63,178      $     21,621    $      7,229   $      34,012   $     126,040 
Net investment income                              78,238               149          14,186           6,545          99,118
Realized investment gains (losses)                  1,333                 -             412            (218)          1,527
Other revenues                                      2,510             1,272             424              62           4,268
Policyholder benefits and interest credited
     to policyholder account balances              94,009            15,193          11,120          23,251         143,573
Expenses and taxes                                 42,932             9,199           7,219          14,913          74,263 
Net income (loss)                            $      8,318      $     (1,350)   $      3,912   $       2,237   $      13,117 
                                                                                                                            

Deposits:
     New deposits                            $     58,921      $          -    $      2,414   $           -   $      61,335
     Renewal deposits                              61,511                 -          16,244               -          77,755 
Total deposits                               $    120,432      $          -    $     18,658   $           -   $     139,090`

`Kansas City Life               Sunset           Old
                                               Individual          Group            Life          American         Total
2003 (six months):
Premiums:
     New premiums                            $     21,937      $      5,413    $        465   $       3,357   $      31,172
     Renewal premiums                              12,667            20,214           2,753          34,824          70,458 
Total premiums                                     34,604            25,627           3,218          38,181         101,630
Contract charges                                   39,942                 -          11,424               -          51,366
Reinsurance ceded                                  (8,456)           (2,541)         (6,934)         (3,479)        (21,410)
     Total insurance revenues                $     66,090      $     23,086    $      7,708   $      34,702   $     131,586 
Net investment income                              70,951               154          15,093           7,161          93,359
Realized investment gains (losses)                (22,847)                -          (4,890)         (3,266)        (31,003)
Other revenues                                      3,108             1,513             211              74           4,906
Policyholder benefits and interest credited
     to policyholder account balances              90,068            16,592          11,675          25,558         143,893
Expenses and taxes                                 32,326             9,812           5,323          13,417          60,878 
Net income (loss)                            $     (5,092)     $     (1,651)   $      1,124   $        (304)  $      (5,923)
                                                                                                                            

Deposits:
     New deposits                            $     74,032      $          -    $      9,601   $           -   $      83,633
     Renewal deposits                              53,293                 -          14,794               -          68,087 
Total deposits                               $    127,325      $          -    $     24,395   $           -   $     151,720`

Kansas City Life Insurance Company - Individual Insurance
Insurance revenues for this
segment decreased 13% in the second quarter and 4% in the first half, as the
decline in immediate annuity premiums more than offset the increase in premiums
resulting from the GuideOne acquisition. New premiums decreased 59% for the six
months compared with a year ago, primarily due to a 69% decrease in new sales of
immediate annuity premiums. New individual life premiums increased 46%.

New deposits decreased 20%,
reflecting the decrease in fixed deferred annuity sales. However, universal life
deposits increased 57%. Both variable annuity deposits and variable universal
life deposits increased 12%.

Contract charges increased
21% in the second quarter and 18% for the six months, largely due to the
addition of the GuideOne portfolio of universal life and annuity products.

Net investment income for
this segment grew 9% for the second quarter and 10% for the first half of 2004.
This increase reflects the growth in investable assets from the prior year due
to the GuideOne acquisition and sales growth, more than offsetting the impact of
a declining interest rate environment in recent periods. Realized investment
gains totaled $0.6 million in the second quarter and were $1.3 million for the
six months ended 2004. This is an improvement of $7.1 million over the second
quarter of 2003 and $24.2 million over the six months of 2003.

Policyholder benefits and
interest credited to policyholder account balances decreased 7% in the second
quarter but increased 4% for the first half relative to 2003 results. Overall
mortality exceeded expectations on the non-GuideOne block of business and was
within expectations for the acquisition block. Other benefits, which are
included in policyholder benefits, declined 6% for the quarter but increased 29%
for the six months compared with 2003. This line is mostly composed of annuity,
supplemental contracts and individual accident and health benefits. The increase
in this line is due in part to the high volume of immediate annuity sales in
2003 and the GuideOne acquisition, which contained certain individual accident
and health business where the timing of the benefit payments lagged the premium
receipt. At year-end 2003, the Company discontinued the sale of certain elements
of this accident and health business. Surrender benefits, which are part of
policyholder benefits, declined 21% in the second quarter and 3% for the six
months compared with 2003. Interest credited to policyholder account balances
was up 12% for the second quarter and 18% for the six months. The increase is
driven from the GuideOne acquired block of business, which added nearly $280
million in policyholder account balances as of June 30, 2003.  These additional policyholder account balances resulted in significant
policyholder benefits to the current periods results. However, excluding
the effect of the acquisition, policyholder benefits were down for both the
second quarter and the six month periods.

The amortization of
deferred acquisition cost increased 58% in the second quarter and 6% for the six
months compared with 2003. This increase is primarily the result of unlocking
DAC assumptions in the prior years second quarter of $1.3 million. The
Company regularly evaluates the assumptions used in the amortization of DAC and
unlocks the assumptions when warranted.

Net income for this segment
increased $4.0 million in the second quarter and $13.4 million for the six
months versus 2003. As discussed above, this improvement was largely due to the
change in realized investment gains.

Kansas City Life Insurance Company - Group Insurance
Insurance revenues for the
Group insurance segment decreased 9% in the second quarter and 6% for the six
months. This was largely attributable to lower premiums in the dental line,
which experienced a loss of a third party marketing arrangement at December 31,
2003. However, new group life premiums increased 54%, for the six months,
reflecting strong sales from the independent group agents. In addition, the
Company's other third party marketing arrangements produced strong sales of
long-term disability products and stop loss products. Direct premiums from the
long-term disability line increased $1.8 million over the six months last year.
The stop loss line, which was reintroduced as a new product in the fourth
quarter of 2003, generated $1.4 million in premiums in the six months of 2004.

Policyholder benefits
decreased 8% for the six months of 2004 compared with 2003, primarily due to
increased reinsurance ceded benefits on group life insurance. Overall, the
claims ratio (total benefits divided by total insurance revenues) for this
segment improved versus last year, falling from 72% in 2003 to 70% in 2004.

For the second quarter of
2004, the net loss increased $0.4 million to $1.0 million. In the first half of 2004 the net loss decreased $0.3 million to $1.4 million.

Sunset Life Insurance Company of America
Insurance revenues for this
segment decreased 4% in the second quarter and 6% for the six months compared
with 2003. Total life and annuity premiums decreased 10% for both the second
quarter and the first half, largely due to reduced immediate annuity sales.

Net investment income
declined 4% in the second quarter and 6% for the six months compared with 2003,
as a result of declines in both investable assets and the recent interest rate
environment. However, realized investment gains improved $2.0 million for the
second quarter and $5.3 million for the six months.

Policyholder benefits
decreased 13% for the second quarter and 5% for the six months in large part due
to improved mortality. Additionally, insurance operating expenses declined for
both the second quarter and six months, primarily due to the release of an
accrued expense associated with a legal settlement from 2001.

Net income for this segment
was $2.6 million in the second quarter, a $1.4 million increase over 2003. Net
income for the six months totaled $3.9 million, improving $2.8 million versus the prior year period. As discussed above, these increases are largely the result
of the change in realized investment gains.

Old American Insurance Company
Insurance revenues
decreased 2% in both the second quarter and six months. New life premiums in
this segment continued to grow at a rate of 5%, the same as the first quarter.
However the improved sales results were offset by renewal decreases.
Policyholder benefits decreased 7% for the second quarter versus a year ago and
9% for the six months compared with 2003, largely due to improved mortality
experience.

Net investment income
declined 4% in the second quarter and 9% for the six months compared with 2003,
as a result of declines in both investable assets and the recent interest rate
environment. However, realized investment losses declined $0.9 million in the
second quarter of 2004 and $3.0 million for the six months compared with 2003.

Net income for this segment
was $1.6 million in the second quarter, a $0.9 million improvement versus 2003.
Net income for the six months increased $2.5 million versus the prior year and
totaled $2.2 million. This change largely reflected reduced realized losses and
improved mortality experience.

## Liquidity and
Capital Resources

Liquidity
Statements made in the
Company's Form 10-K and the 2003 Annual Report to Stockholders remain pertinent,
as the Companys liquidity position is materially unchanged from year-end.

The Company and each
insurance subsidiary meets liquidity requirements primarily through positive
cash flows from its operations. The Company has sufficient sources of liquidity
to satisfy operational requirements. Primary sources of cash flow are premiums,
other insurance considerations and deposits, receipts for policyholder accounts,
investment sales and maturities, investment income and access to credit from
other financial institutions. The principal uses of cash are for the insurance
operations, including the purchase of investments, payments of insurance
benefits, operating expenses, withdrawals from policyholder accounts, costs
related to acquiring new business, dividends and income taxes.

Cash provided from
operations totaled $38.7 million for the six months ended June 30, 2004, down
from $53.9 million a year ago. This decrease is primarily due to two factors.
First, net cash premium receipts for the first six months of 2004 declined $5.2
million versus the same period of 2003. This decrease is largely the result of a
decrease in the receipts of immediate annuities. However, additional premium
from the GuideOne acquired business offset most of the decline in premium
receipts from immediate annuities. Second, net cash benefit payments increased $11.2 million for the six
month period of 2004 relative to 2003. This increase is primarily due to the
GuideOne acquired business.

Net cash used in investing
activities was $76.3 million for the six months, which was down from $107.1
million in 2003. The decrease is largely due to the acquisition of GuideOne in
2003.

Net cash provided from
financing activities was $19.2 million in 2004, versus $64.2 million in 2003.
This decrease is primarily the result of three factors. First, reduced fixed
deferred annuity sales resulted in decreased cash flow of $12.6 million. Second,
withdrawals on policyholder account balances increased $20.0 million. And,
third, net transfers to separate accounts have increased $6.0 million over the
same time last year.

Asset and liability
maturities and yields are closely managed and exposure to changing interest
rates is minimized so that funds will be available as needed to meet future
policyholder obligations. Cash flow testing is performed to ensure sufficient
interest spreads are earned.

This information excludes
net proceeds from variable insurance products. These proceeds are segregated
into separate accounts and are not held in the Companys general
investments because the policyholders, rather than the Company, assume the
underlying investment risks.

Debt and short-term borrowing
The Company and certain
subsidiaries have access to borrowing capacity through their membership
affiliation with the Federal Home Loan Bank. At June 30, 2004, outstanding
balances under this agreement totaled $108.5 million in maturities of less than
one year. The primary purpose for these borrowings is to ensure access to
liquidity. This is accomplished through the purchase of highly liquid,
marketable securities from the proceeds of these borrowings.

The Company established a
two-year note payable for $2.0 million associated with the GuideOne purchase,
due in June 2005. Outstanding borrowings of $18.3 million are related to real
estate ownership, and the Company has one construction loan totaling $0.5
million.

Borrowings totaled $129.2
million at June 30, 2004, down $4.5 million from year-end 2003. The Company has
unsecured revolving lines of credit of $60 million with two major commercial
banks with no balances outstanding.

Capital resources
The Company considers
existing capital resources to be more than adequate to support the current level
of business activities.

The following table shows
the capital adequacy for the Company.

`June 30        December 31   
                                           2004              2003      
Total assets less separate accounts  $     4,237,720  $      4,247,221
Total stockholders' equity                   620,531           644,438
Ratio of stockholders' equity
   to assets less separate accounts              15%               15%`

The ratio of equity to
assets less separate accounts has remained relatively constant as identified
above. Unrealized investment gains on available for sale securities, which are
included as a part of stockholders equity, totaled $16.3 million at June
30, 2004, a $30.6 million decrease from year-end 2003. This change is the result
of an increase in interest rates during the second quarter.

Stockholders equity
decreased $23.9 million from year-end. This decline is the result of the change
in accumulated other comprehensive income, which decreased $30.6 million from
year-end. This is reflective of the decrease in unrealized investment gains on
securities, as described above. Consolidated book value per share equaled $52.03
at June 30, 2004, a 4% decrease from year-end 2003.

During the first half of
2004, the Company did not purchase any of its shares under the stock repurchase
program. Under this program, the Company may purchase up to one million shares
on the open market during 2004.

On July 26, 2004, the Board
of Directors declared a quarterly dividend of $0.27 per share, unchanged from
the prior year, that will be paid August 23, 2004 to stockholders of record as
of August 9, 2004.

Current legislative
activities are not expected to have a significant impact on the ongoing
operations of the Company.

Item 3.   
Quantitative and Qualitative Disclosures About Market Risk

Statements made in the
Companys Form 10-K and the 2003 Annual Report to Stockholders regarding
the market and interest rate risk analysis remain pertinent.

The Company holds a
diversified portfolio of investments that includes cash, bonds, preferred
stocks, mortgage-backed securities, commercial mortgages and real estate. Each
of these investments is subject, in varying degree, to market risks that can
affect their return and their fair value. A majority of these assets are debt
instruments of corporations or U.S. Government Sponsored Enterprises (GSE) and
are considered fixed income investments. Thus, the primary market risks
affecting the Companys portfolio are interest rate risk, credit risk and
liquidity risk.

Interest rate risk arises
from the price sensitivity of investments to changes in interest rates. Coupon
and dividend income represent the greatest portion of an investments total
return for most fixed income instruments in stable interest rate environments.
The changes in the fair market price of such investments are inversely related
to changes in market interest rates. As interest rates fall, the coupon and
dividend streams of existing fixed rate investments become more valuable and
market values rise. As interest rates rise, the opposite effect occurs.

Market changes rarely
follow a linear pattern in one direction for any length of time. Within any
diversified portfolio, an investor will likely find embedded options, both puts
and calls, that change the structure of the cash flow stream. Mortgage-backed
securities are particularly sensitive to interest rate changes. As long-term
interest rates fall, homeowners become more likely to refinance their mortgage
or move up to a larger home, causing a prepayment of the outstanding mortgage
principal, which must then be reinvested at a lower rate. Should interest rates
rise suddenly, prepayments expected by investors may decrease, extending the
duration of a mortgage pool. This represents a further interest rate risk to
investors.

As interest rates rise,
policyholders may become more likely to surrender policies or to borrow against
cash values, often to meet sudden needs in an inflationary environment or to
invest in higher yielding opportunities elsewhere. This risk of
disintermediation may force the Company to liquidate parts of its portfolio at a
time when the fair market value of fixed income investments is falling. If
interest rates fall, the Company may also be forced to invest new cash receipts
at levels below the minimum guaranteed rates payable to policyholders, eroding
profit margins. The Company can usually adapt to small sudden changes in
interest rates, or even large changes that occur over longer periods of time.
Cash flow may increase or decrease over the course of the business cycle.
Therefore, the Company takes steps to ensure that adequate liquidity is
available to meet obligations in a timely manner. To this end, the Company
maintains lines of credit with commercial banks and other short-term borrowing
arrangements with financial institutions.

The majority of the
Companys investments are exposed to varying degrees of credit risk. Credit
risk is the risk that the value of the investment may decline due to
deterioration in the financial strength of the issuer and that the timely
payment of principal or interest might not occur.

Over the past three years,
credit defaults in the marketplace have increased significantly relative to
historical norms. The increase in the default rate has been attributed to
several factors, including the economic slowdown experienced by the U.S.
economy, the increased use of leverage by corporate issuers, fraud and adverse
legal judgments against corporations, among others. A default by a rated issuer
usually involves some loss of principal to the investor, as evidenced by the
write-downs taken by the Company. Losses can be mitigated by timely sales of
affected securities or by active involvement in a restructuring process.
However, there can be no assurance that the efforts of an investor will lead to
favorable outcomes in a bankruptcy or restructuring.

The Company mitigates
credit risk by diversifying the investment portfolio across a broad range of
issuers, investment sectors and security types, and by limiting the amount
invested in any particular entity. With the exception of certain GSEs,
there is no exposure to any single issuer greater than one percent of assets on
a book value basis. The Company also invests in securities carrying a lien
against physical assets. These securities can improve the likelihood of payment
according to contractual terms and increase recovery amounts in the case of
bankruptcy or restructuring.

As market interest rates
fluctuate, so will the value of the Company's investment portfolio and its
stockholders' equity. At June 30, 2004, the Company had an unrealized investment
gain of $16.3 million, net of related taxes, policyholder account balances and
deferred acquisition costs, compared to $46.9 million at year-end 2003.
This decrease is primarily the result of changes in the term structure of
interest rates and the volatility in credit spreads within the corporate bond
market. The Company continues its practice of the limited use of derivatives as
a form of risk mitigation.

The Company markets certain
variable products. The policyholder assumes essentially all the investment
earnings risk for the portion of the account balance invested in the separate
accounts. However, the Company assesses certain charges based on the policy
account values and changes to the account values can affect the Company's
earnings. The portion of the policyholder's account balance invested in the
fixed general account, if any, is affected by the spreads between interest
yields on investments and rates credited to the policyholder's accounts.

Item 4.   
Controls and Procedures

(a)     Evaluation of disclosure  controls and  procedures.  The Chief Executive  Officer and Chief  Financial  Officer of Kansas City Life
Insurance  Company have  concluded,  based on their  evaluation as of the end of the period covered by this report,  that the Company's
disclosure  controls and procedures are effective for gathering,  analyzing and disclosing the  information  the Company is required to
disclose in the Company's reports under the Securities Exchange Act of 1934.

(b)     Changes in internal  controls.  There were no significant  changes in the Company's  internal controls over financial  reporting or
in other  factors that could  significantly  affect those  controls made during the quarter  covered by this report,  that have, or are
reasonably likely to materially affect the Company's internal control over financial reporting.

## Part II: Other
Information

Item 1.   Legal
Proceedings

The life insurance
industry, including the Company and its subsidiaries, has been subject to an
increase in litigation in recent years. Such litigation has been pursued on
behalf of purported classes of insurance purchasers, often questioning the
conduct of insurers in the marketing of their products.

In addition to the above,
the Company and its subsidiaries are defendants in, or subject to other claims
or legal actions. 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, management believes that the ultimate liability, if any,
with respect to these other claims and legal actions would have no material
effect on the Companys business, results of operations or financial
position.

Item 5.   
Other Information.

`3520 Broadway, Kansas City, MO 64111                     Contact: Tracy W. Knapp, Chief Financial Officer,
                                                                        (816) 753-7299, Extension 8216

For Immediate Release: August 6, 2004, press release reporting financial results for the second quarter of
2004.`

# Kansas City
Life Announces Second Quarter 2004 Results

Kansas
City Life Insurance Company recorded second quarter net income of $7.5 million
or $0.63 per share, an increase of $6.0 million or $0.50 per share over 2003
results. The Company posted net income of $13.1 million or $1.10 per share for
the six months ended June 30, 2004, an improvement of $19.0 million from the
prior year. The largest factor in the improved results was the favorable change
in realized investment gains and losses. In addition, increased investment
income from growth in invested assets contributed to the Companys positive
results.

Total
revenues grew $5.8 million or 5.4% and $32.1 million or 16.1% for the second
quarter and six-month period, respectively. These changes were driven by the
Companys realized investment gains of $0.7 million for the quarter and
$1.5 million for the six months, compared to realized investment losses of $9.2
million and $31.0 million for the same periods in 2003. These results reflect
the improved economy and general progress in the performance of corporate credit
markets. As the economy and credit markets have improved, so too has the credit
quality of the Companys investment securities.

Investment
revenues have also increased from the growth in invested assets, which has
resulted from new product sales during the past year and the acquisition of
GuideOne Life in 2003. In spite of the low interest rate environment, net
investment income increased 5.6% and 6.2% for the second quarter and six-month
period, respectively.

Insurance
premiums decreased by $7.0 million or 12.9% for the second quarter and $7.3
million or 7.1% for the first half of 2004, primarily due to a decline in the
sale of immediate annuities. However, included in these figures is growth in the
Companys primary life insurance product lines. Life insurance premiums
grew by $2.6 million or 8.9% and $5.2 million or 8.9% for the second quarter and
six-month period, respectively, largely due to the GuideOne acquisition. The Company continues to emphasize growth in the
life protection product lines.

The
Company also experienced favorable benefits and expenses, which declined by 3.0%
for the second quarter and were level for the six-month period.

On
July 26, 2004, the Board of Directors declared a quarterly dividend of $0.27 per
share, payable on August 23, 2004 to stockholders of record on August 9, 2004.

The
first half of 2004 has seen the Company benefit from the improving economy and
increased sales of life insurance. This sales growth has been produced by both
Kansas City Lifes independent general agency sales force and the new
agencies from GuideOne. This sales growth is the direct result of the
Companys emphasis and continuing focus on its core life insurance
business. We look forward to further improvements in the operating environment,
along with growth in our ability to extend life protection.

Kansas
City Life Insurance Company (NASDAQ: KCLI) was established in 1895 and is based
in Kansas City, Missouri. The Companys primary business is providing
financial protection through the sale of life insurance and annuities. The
Company's revenues were $446 million in 2003, and assets and life insurance in
force were $4.6 billion and $32.6 billion, respectively, as of December 31,
2003. The Company operates in 48 states and the District of Columbia. For more
information, please visit www.kclife.com.

(Continued on next page)

Kansas City Life Announces
Second Quarter 2004 Results
August 6, 2004; Page Two

KANSAS CITY LIFE INSURANCE COMPANY
                           CONDENSED CONSOLIDATED INCOME STATEMENT (Unaudited)
                            (amounts in thousands, except share data)

`Quarter ended                                Six months ended
                                                     June 30                                        June 30
                                            2004                 2003                       2004                2003
                                       ---------------       --------------           ---------------       --------------

Revenues                             $       113,207      $       107,401           $       230,953      $       198,848
                                       ===============       ==============           ===============       ==============

Net income (loss)                    $         7,522      $         1,535           $        13,117      $        (5,923)
                                      ===============       ==============           ===============       ==============

Net income(loss) per share,
   basic and diluted                 $          0.63      $          0.13           $          1.10      $         (0.50)
                                      ===============       ==============           ===============       ==============


Dividends paid                       $          0.27      $          0.27           $          0.54      $          0.54
                                      ===============       ==============           ===============       ==============`

A quarterly dividend of $.27 per share will be paid August 23, 2004 to shareholders of record as of August 9, 2004.

`Average number of shares outstanding      11,928,419           11,941,855                11,926,817           11,959,345`

Item 6.   
Exhibits and Reports on Form 8-K.

`(a)  Exhibits:

                 (31)a      Rule 13a-15(e)/15d-15(e) Certifications.

                 (31)b      Rule 13a-15(e)/15d-15(e) Certifications.

                 (32)       Item 32 - Section 906 Certification.

         (b)  Reports on Form 8-K:

                 1.    On May 14, 2004,  the Company  filed a Form 8-K Item 12, which  furnished  the release of
                       financial  information  mailed to  stockholders  on May 13, 2004  reporting the financial
                       results of the first quarter of 2004.`

# SIGNATURES

Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.

# KANSAS CITY
LIFE INSURANCE COMPANY

`/s/R. Philip Bixby           
R. Philip Bixby
President, Chief Executive Officer
and Vice Chairman of the Board




/s/Tracy W. Knapp            
Tracy W. Knapp
Senior Vice President, Finance`

Date:  August 6, 2004