----

----

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

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

| Missouri                             | 44-0308260               |
|--------------------------------------|--------------------------|
| (State      or other jurisdiction of | (I.R.S.      Employer    |
| incorporation      or organization)  | Identification      No.) |

| 3520 Broadway, Kansas City,      Missouri(Address      of principal executive offices) | 64111-2565(Zip      Code) |
|----------------------------------------------------------------------------------------|---------------------------|

| Class                        | Outstanding September 30,    2009 |
|------------------------------|-----------------------------------|
| Common      Stock, $1.25 par | 11,649,400      shares            |

----

TABLE OF 

| Part      I.   Financial Information                                                                 | 3      |
|---------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                |   |
| Item      1.  Financial Statements (Unaudited)                                                            | 3      |
|                                                                                                                |   |
| Consolidated Balance Sheets                                                                                         | 3      |
|                                                                                                                |   |
| Consolidated Statements of Income                                                                                   | 4      |
|                                                                                                                |   |
| Consolidated Statements of Stockholders'      Equity                                                                | 5      |
|                                                                                                                |   |
| Consolidated Statements of Cash Flows                                                                               | 6      |
|                                                                                                                |   |
| Notes to Consolidated Financial    Statements                                                                       | 7      |
|                                                                                                                |   |
| Item 2.  Management’s Discussion and Analysis of      Financial Condition and Results of Operations | 29     |
|                                                                                                                |   |
| Item 3.  Quantitative and Qualitative Disclosures      About Market Risk                                  | 71     |
|                                                                                                                |   |
| Item 4.  Controls and    Procedures                                                                       | 71     |
|                                                                                                                |   |
| Part II.  Other Information                                                                               | 72     |
|                                                                                                                |   |
| Item 1.  Legal Proceedings                                                                                | 72     |
|                                                                                                                |   |
| Item 1A. Risk Factors and Cautionary Factors that may      Affect Future Results                                    | 72     |
|                                                                                                                |   |
| Item 2.  Unregistered Sales of Equity Securities      and Use of Proceeds                                 | 73     |
|                                                                                                                |   |
| Item 5.  Other Information                                                                                | 75     |
|                                                                                                                |   |
| Item 6.  Exhibits                                                                                         | 77     |
|                                                                                                                |   |
| Signatures                                                                                                          | 78     |

----

| KANSAS      CITY LIFE INSURANCE COMPANY                                                         |   |              |      |   |             |   |
|-------------------------------------------------------------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|
| CONSOLIDATED BALANCE SHEETS                                                                     |   |              |      |   |             |   |
|                                                                                            |   |              |      |   |             |   |
|                                                                                            |   | September      30 |      |   | December      31 |   |
|                                                                                            |   | 2009              |      |   | 2008             |   |
| ASSETS                                                                                          |   | (Unaudited)       |      |   |             |   |
| Investments:                                                                                    |   |              |      |   |             |   |
| Fixed      maturity securities available for sale, at fair value                                |   | $                 | 2,561,070 |   |             | $      | 2,342,873 |   |
| Equity      securities available for sale, at fair value                                        |   |              | 44,495    |   |             |   | 44,537 |   |
| Mortgage      loans                                                                             |   |              | 446,369   |   |             |   | 445,389 |   |
| Real      estate                                                                                |   |              | 109,939   |   |             |   | 99,576 |   |
| Policy      loans                                                                               |   |              | 86,067    |   |             |   | 88,304 |   |
| Short-term      investments                                                                     |   |              | 37,950    |   |             |   | 35,138 |   |
| Total      investments                                                                          |   |              | 3,285,890 |   |             |   | 3,055,817 |   |
|                                                                                            |   |              |      |   |             |   |   |   |
| Cash                                                                                            |   |              | 12,134    |   |             |   | 9,720 |   |
| Accrued      investment income                                                                  |   |              | 38,745    |   |             |   | 33,689 |   |
| Deferred      acquisition costs                                                                 |   |              | 207,058   |   |             |   | 263,756 |   |
| Value      of business acquired                                                                 |   |              | 68,471    |   |             |   | 82,855 |   |
| Reinsurance      receivables                                                                    |   |              | 172,404   |   |             |   | 168,390 |   |
| Property      and equipment                                                                     |   |              | 24,564    |   |             |   | 25,922 |   |
| Income      taxes                                                                               |   |              | 4,328     |   |             |   | 39,628 |   |
| Other      assets                                                                               |   |              | 35,659    |   |             |   | 28,749 |   |
| Separate      account assets                                                                    |   |              | 302,507   |   |             |   | 258,565 |   |
| Total      assets                                                                               |   | $                 | 4,151,760 |   |             | $      | 3,967,091 |   |
|                                                                                            |   |              |      |   |             |   |   |   |
| LIABILITIES                                                                                     |   |              |      |   |             |   |   |   |
| Future      policy benefits                                                                     |   | $                 | 859,223   |   |             | $      | 853,456 |   |
| Policyholder      account balances                                                              |   |              | 2,041,436 |   |             |   | 2,030,656 |   |
| Policy      and contract claims                                                                 |   |              | 33,247    |   |             |   | 34,913 |   |
| Other      policyholder funds                                                                   |   |              | 135,482   |   |             |   | 125,826 |   |
| Other      liabilities                                                                          |   |              | 152,747   |   |             |   | 136,568 |   |
| Separate      account liabilities                                                               |   |              | 302,507   |   |             |   | 258,565 |   |
| Total      liabilities                                                                          |   |              | 3,524,642 |   |             |   | 3,439,984 |   |
|                                                                                            |   |              |      |   |             |   |   |   |
| 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                                                                 |   |              | 41,065    |   |             |   | 36,281 |   |
| Retained      earnings                                                                          |   |              | 758,310   |   |             |   | 750,600 |   |
| Accumulated      other comprehensive loss                                                       |   |              | (41,134   | )      |             |   | (130,799 | ) |
| Treasury      stock, at cost (2009 - 6,847,280 shares;                                          |   |              |      |   |             |   |   |   |
| 2008      - 7,061,476 shares)                                                                   |   |              | (154,244  | )      |             |   | (152,096 | ) |
| Total      stockholders' equity                                                                 |   |              | 627,118   |   |             |   | 527,107 |   |
|                                                                                            |   |              |      |   |             |   |   |   |
|         Total      liabilities and stockholders' equity |   | $                 | 4,151,760 |   |             | $      | 3,967,091 |   |

----

Table of Contents

| KANSAS      CITY LIFE INSURANCE COMPANY                 |   |               |    |   |                   |   |    |        |   |   |    |   |
|---------------------------------------------------------|--------|--------------------|---------|--------|------------------------|--------|---------|-------------|--------|--------|---------|--------|
| CONSOLIDATED STATEMENTS OF INCOME                       |   |               |    |   |                   |   |    |        |   |   |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |
|                                                    |   | Quarter      Ended |    |   | Nine      Months Ended |   |
|                                                    |   | September      30  |    |   | September      30      |   |
|                                                    |   | 2009               |    |   | 2008                   |   |    | 2009        |   |   | 2008    |   |
| REVENUES                                                |   | (Unaudited)        |    |   |                   |   |    | (Unaudited) |   |   |    |   |
| Insurance      revenues:                                |   |               |    |   |                   |   |    |        |   |   |    |   |
| Premiums                                                |   | $                  | 53,432  |   |                   | $      | 44,861  |        |   | $      | 143,148 |   |   | $ | 134,810 |   |
| Contract      charges                                   |   |               | 26,448  |   |                   |   | 27,227  |        |   |   | 79,418  |   |   |   | 81,054 |   |
| Reinsurance      ceded                                  |   |               | (14,645 | )      |                   |   | (13,279 | )           |   |   | (40,446 | )      |   |   | (39,485 | ) |
| Total      insurance revenues                           |   |               | 65,235  |   |                   |   | 58,809  |        |   |   | 182,120 |   |   |   | 176,379 |   |
| Investment      revenues:                               |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Net      investment income                              |   |               | 44,521  |   |                   |   | 44,337  |        |   |   | 132,265 |   |   |   | 136,416 |   |
| Realized      investment gains, excluding               |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| impairment      losses                                  |   |               | 1,202   |   |                   |   | 3,167   |        |   |   | 5,208   |   |   |   | 5,103 |   |
| Net      impairment losses recognized in earnings:      |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Total      other-than-temporary impairment losses       |   |               | (2,522  | )      |                   |   | (32,462 | )           |   |   | (28,353 | )      |   |   | (42,687 | ) |
| Portion      of impairment losses recognized in         |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| other      comprehensive income (loss)                  |   |               | 203     |   |                   |   | -       |        |   |   | 15,894  |   |   |   | - |   |
| Net      impairment losses recognized in earnings       |   |               | (2,319  | )      |                   |   | (32,462 | )           |   |   | (12,459 | )      |   |   | (42,687 | ) |
| Total      investment revenues                          |   |               | 43,404  |   |                   |   | 15,042  |        |   |   | 125,014 |   |   |   | 98,832 |   |
| Other      revenues                                     |   |               | 3,413   |   |                   |   | 4,241   |        |   |   | 8,303   |   |   |   | 9,489 |   |
| Total      revenues                                     |   |               | 112,052 |   |                   |   | 78,092  |        |   |   | 315,437 |   |   |   | 284,700 |   |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| BENEFITS      AND EXPENSES                              |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Policyholder      benefits                              |   |               | 50,514  |   |                   |   | 43,783  |        |   |   | 135,601 |   |   |   | 134,855 |   |
| Interest      credited to policyholder account balances |   |               | 21,898  |   |                   |   | 21,742  |        |   |   | 64,772  |   |   |   | 65,119 |   |
| Amortization      of deferred acquisition costs         |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| and      value of business acquired                     |   |               | 9,949   |   |                   |   | 10,727  |        |   |   | 29,155  |   |   |   | 29,464 |   |
| Operating      expenses                                 |   |               | 22,779  |   |                   |   | 25,282  |        |   |   | 73,476  |   |   |   | 70,842 |   |
| Total      benefits and expenses                        |   |               | 105,140 |   |                   |   | 101,534 |        |   |   | 303,004 |   |   |   | 300,280 |   |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Income      (loss) before income tax expense (benefit)  |   |               | 6,912   |   |                   |   | (23,442 | )           |   |   | 12,433  |   |   |   | (15,580 | ) |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Income      tax expense (benefit)                       |   |               | 1,731   |   |                   |   | (8,264  | )           |   |   | 3,756   |   |   |   | (5,681 | ) |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| NET      INCOME (LOSS)                                  |   | $                  | 5,181   |   |                   | $      | (15,178 | )           |   | $      | 8,677   |   |   | $ | (9,899 | ) |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Other      comprehensive income (loss), net of taxes:   |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Change      in net unrealized gains and losses on       |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| securities      available for sale                      |   | $                  | 51,133  |   |                   | $      | (22,414 | )           |   | $      | 91,598  |   |   | $ | (73,764 | ) |
| Change      in minimum pension liability                |   |               | -       |   |                   |   | -       |        |   |   | 4,666   |   |   |   | - |   |
| Other      comprehensive income (loss)                  |   |               | 51,133  |   |                   |   | (22,414 | )           |   |   | 96,264  |   |   |   | (73,764 | ) |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| OTHER      COMPREHENSIVE INCOME (LOSS)                  |   | $                  | 56,314  |   |                   | $      | (37,592 | )           |   | $      | 104,941 |   |   | $ | (83,663 | ) |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
|                                                    |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Basic      and diluted earnings per share:              |   |               |    |   |                   |   |    |        |   |   |    |   |   |   |   |   |
| Net      income (loss)                                  |   | $                  | 0.45    |   |                   | $      | (1.30   | )           |   | $      | 0.75    |   |   | $ | (0.85 | ) |

----

Table of Contents

| KANSAS      CITY LIFE INSURANCE COMPANY                  |   |                   |     |   |            |   |
|----------------------------------------------------------|--------|------------------------|----------|--------|-----------------|--------|
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS'      EQUITY     |   |
|                                                     |   |                   |     |   |            |   |
|                                                     |   |                   |     |   |            |   |
|                                                     |   | Nine      Months Ended |     |   | Year      Ended |   |
|                                                     |   | 2009                   |     |   | 2008            |   |
|                                                     |   | (Unaudited)            |     |   |            |   |
|                                                     |   |                   |     |   |            |   |
| COMMON STOCK, beginning      and end of period           |   | $                      | 23,121   |   |            | $      | 23,121 |   |
|                                                     |   |                   |     |   |            |   |   |   |
| ADDITIONAL      PAID IN CAPITAL                          |   |                   |     |   |            |   |   |   |
| Beginning      of period                                 |   |                   | 36,281   |   |            |   | 30,244 |   |
| Excess      of proceeds over cost of treasury stock sold |   |                   | 4,784    |   |            |   | 6,037 |   |
|                                                     |   |                   |     |   |            |   |   |   |
|     End      of period               |   |                   | 41,065   |   |            |   | 36,281 |   |
|                                                     |   |                   |     |   |            |   |   |   |
| RETAINED      EARNINGS                                   |   |                   |     |   |            |   |   |   |
| Beginning      of period                                 |   |                   | 750,600  |   |            |   | 780,133 |   |
| Cumulative      effect of change in accounting           |   |                   |     |   |            |   |   |   |
|     principle      (See Note 6)      |   |                   | 8,399    |   |            |   | - |   |
| Net      income (loss)                                   |   |                   | 8,677    |   |            |   | (17,050 | ) |
| Stockholder      dividends of $0.81 per share            |   |                   |     |   |            |   |   |   |
|     (2008      - $1.08)              |   |                   | (9,366   | )      |            |   | (12,483 | ) |
|                                                     |   |                   |     |   |            |   |   |   |
| End      of period                                       |   |                   | 758,310  |   |            |   | 750,600 |   |
|                                                     |   |                   |     |   |            |   |   |   |
| ACCUMULATED      OTHER COMPREHENSIVE                     |   |                   |     |   |            |   |   |   |
| LOSS                                                     |   |                   |     |   |            |   |   |   |
| Beginning      of period                                 |   |                   | (130,799 | )      |            |   | (19,811 | ) |
| Cumulative      effect of change in accounting           |   |                   |     |   |            |   |   |   |
|     principle      (See Note 6)      |   |                   | (6,599   | )      |            |   | - |   |
| Other      comprehensive income (loss)                   |   |                   | 96,264   |   |            |   | (110,988 | ) |
|                                                     |   |                   |     |   |            |   |   |   |
|     End      of period               |   |                   | (41,134  | )      |            |   | (130,799 | ) |
|                                                     |   |                   |     |   |            |   |   |   |
| TREASURY STOCK, at      cost                             |   |                   |     |   |            |   |   |   |
| Beginning      of period                                 |   |                   | (152,096 | )      |            |   | (129,286 | ) |
| Cost      of 312,236 shares acquired                     |   |                   |     |   |            |   |   |   |
|     (2008      - 552,520 shares)     |   |                   | (9,623   | )      |            |   | (25,972 | ) |
| Cost      of 526,432 shares sold                         |   |                   |     |   |            |   |   |   |
|     (2008      - 222,687 shares)     |   |                   | 7,475    |   |            |   | 3,162 |   |
|                                                     |   |                   |     |   |            |   |   |   |
|     End      of period               |   |                   | (154,244 | )      |            |   | (152,096 | ) |
|                                                     |   |                   |     |   |            |   |   |   |
| TOTAL      STOCKHOLDERS' EQUITY                          |   | $                      | 627,118  |   |            | $      | 527,107 |   |

----

Table of Contents

| KANSAS      CITY LIFE INSURANCE COMPANY                        |   |                   |     |   |   |   |
|----------------------------------------------------------------|--------|------------------------|----------|--------|--------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                          |   |                   |     |   |
|                                                           |   |                   |     |   |   |   |
|                                                           |   | Nine      Months Ended |     |
|                                                           |   | September      30      |     |
|                                                           |   | 2009                   |     |   | 2008   |   |
|                                                           |   | (Unaudited)            |     |   |   |   |
| OPERATING      ACTIVITIES                                      |   |                   |     |   |   |   |
| Net      cash provided (used)                                  |   | $                      | 18,460   |   |   | $      | (3,991 | ) |
|                                                           |   |                   |     |   |   |   |   |   |
| INVESTING      ACTIVITIES                                      |   |                   |     |   |   |   |   |   |
| Purchases      of investments:                                 |   |                   |     |   |   |   |   |   |
| Fixed      maturity securities                                 |   |                   | (267,700 | )      |   |   | (198,806 | ) |
| Equity      securities                                         |   |                   | (2,166   | )      |   |   | (8,204 | ) |
| Mortgage      loans                                            |   |                   | (34,735  | )      |   |   | (34,598 | ) |
| Real      estate                                               |   |                   | (14,510  | )      |   |   | (24,541 | ) |
| Other      investment assets                                   |   |                   | (2,812   | )      |   |   | - |   |
| Sales      of investments:                                     |   |                   |     |   |   |   |   |   |
| Fixed      maturity securities                                 |   |                   | 48,490   |   |   |   | 28,523 |   |
| Equity      securities                                         |   |                   | 3,652    |   |   |   | 5,718 |   |
| Real      estate                                               |   |                   | 3,852    |   |   |   | 20,694 |   |
| Other      investment assets                                   |   |                   | 2,237    |   |   |   | 9,891 |   |
| Maturities      and principal paydowns of investments:         |   |                   |     |   |   |   |   |   |
| Fixed      maturity securities                                 |   |                   | 184,290  |   |   |   | 204,102 |   |
| Mortgage      loans                                            |   |                   | 33,755   |   |   |   | 39,825 |   |
| Net      dispositions (acquisitions) of property and equipment |   |                   | 178      |   |   |   | (102 | ) |
| Net      cash provided (used)                                  |   |                   | (45,469  | )      |   |   | 42,502 |   |
|                                                           |   |                   |     |   |   |   |   |   |
| FINANCING      ACTIVITIES                                      |   |                   |     |   |   |   |   |   |
| Proceeds      from borrowings                                  |   |                   | 1,500    |   |   |   | 98,250 |   |
| Repayment      of borrowings                                   |   |                   | (4,400   | )      |   |   | (101,095 | ) |
| Deposits      on policyholder account balances                 |   |                   | 182,002  |   |   |   | 147,374 |   |
| Withdrawals      from policyholder account balances            |   |                   | (155,102 | )      |   |   | (185,195 | ) |
| Net      transfers from separate accounts                      |   |                   | 6,635    |   |   |   | 13,864 |   |
| Change      in other deposits                                  |   |                   | 5,518    |   |   |   | 7,626 |   |
| Cash      dividends to stockholders                            |   |                   | (9,366   | )      |   |   | (9,394 | ) |
| Net      disposition (acquisition) of treasury stock           |   |                   | 2,636    |   |   |   | (14,177 | ) |
| Net      cash provided (used)                                  |   |                   | 29,423   |   |   |   | (42,747 | ) |
|                                                           |   |                   |     |   |   |   |   |   |
| Increase      (decrease) in cash                               |   |                   | 2,414    |   |   |   | (4,236 | ) |
| Cash      at beginning of year                                 |   |                   | 9,720    |   |   |   | 12,158 |   |
|                                                           |   |                   |     |   |   |   |   |   |
| Cash      at end of period                                     |   | $                      | 12,134   |   |   | $      | 7,922 |   |

----

Table of Contents

1.  NATURE 

----

Table of Contents

----

Table of Contents

| ·   | The      current fair value of the security as compared to  cost; |
|--------------------|-------------------------------------------------------------------|

| ·   | The      credit rating of the security; |
|--------------------|-----------------------------------------|

| ·   | The      extent and the length of time the fair value has been below      cost; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | The      financial position of the issuer, including the current and future impact      of any specific events, material declines in the issuer’s revenues,      margins, cash positions, liquidity issues, asset quality, debt levels and      income results; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant      management or organizationalchanges; |
|--------------------|-------------------------------------------------------|

| ·   | Significant      uncertainty regarding the issuer’sindustry; |
|--------------------|--------------------------------------------------------------------|

| ·   | Violation      of financial covenants; |
|--------------------|----------------------------------------|

| ·   | Consideration      of information or evidence that supports timely  recovery; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | The      Company’s intent and ability to hold a security until it recovers in      value; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Whether      the Company intends to sell the investment and whether it is not more      likely than not that the Company will be required to sell the investment      before recovery of the amortized cost basis;and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      business factors related to the issuer’s  industry. |
|--------------------|----------------------------------------------------------------------|

| ·   | The      risk that the Company’s assessment of an issuer’s ability to meet all of      its contractual obligations will change based on changes in the credit      characteristics of that issuer; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the economic outlook will be worse than expected or have more of      an impact on the issuer thananticipated; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the performance of the underlying collateral for securities      could deteriorate in the future and the Company’s credit enhancement      levels and recovery values do not provide sufficient protection to the      Company’s contractual principal andinterest; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that fraudulent, inaccurate or misleading information could be      provided to the Company’s credit, investment and accounting professionals      who determine the fair value estimates and accounting treatment for      securities; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that new information obtained by the Company or changes in other      facts and circumstances may lead the Company to change its intent to sell      the security before it recovers invalue; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that facts and circumstances change such that it becomes more likely      than not that the Company will be required to sell the investment before      recovery of the amortized cost basis;and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the methodology or assumptions used to develop estimates of the      portion of impairments due to credit prove, over time, to be inaccurate or      insufficient. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Critical      Accounting Estimate | Determination      Methodology                                                                                                                                                                                    | Potential      Effect on DAC, VOBA and Related Items                                                                                                                                  |
|-----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mortality      Experience         | Based      on Company mortality experience.  Industry experience and trends      are also considered.                                                                                                   | A      2.5% increase in expected mortality experience for all future years would      result in a reduction in DAC and VOBA, and a 2% increase in current period      amortization.   |
| Surrender      Rates              | Based      on Company surrender experience.  Industry experience and trends      are also considered.                                                                                                   | A      10% increase in expected surrender rates for all future years would result      in a reduction in DAC and VOBA, and a 1% increase in current period      amortization expense. |
| Interest      Spreads             | Based      on expected future investment returns and expected future crediting rates      applied to policyholder account balances; future crediting rates include      constraints imposed by policy guarantees. | A      10 basis point reduction in future interest rate spreads would result in a      reduction in DAC and VOBA, and a 1% increase in current period      amortization expense.      |
| Maintenance      Expenses         | Based      on Company experience using an internal expense allocation      methodology.                                                                                                                           | A      10% increase in future maintenance expenses would result in a reduction in      DAC and VOBA, and a 1% increase in current period amortization      expense.                   |

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|                                        |   | September      30, 2009 |   |
|---------------------------------------------|--------|-------------------------|--------|
| Assets:                                     |   | Level      1            |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Fixed      maturities available for sale    |   | $                       | 15,324 |   |   | $ | 2,458,530 |   |   | $ | 87,216 |   |   | $ | 2,561,070 |   |
| Equity      securities available for sale   |   |                    | 11,580 |   |   |   | 26,681 |   |   |   | 6,234 |   |   |   | 44,495 |   |
| Total                                       |   | $                       | 26,904 |   |   | $ | 2,485,211 |   |   | $ | 93,450 |   |   | $ | 2,605,565 |   |
|                                        |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      policyholder funds               |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Guaranteed      minimum withdrawal benefits |   | $                       | -      |   |   | $ | - |   |   | $ | (796 | ) |   | $ | (796 | ) |
| Total                                       |   | $                       | -      |   |   | $ | - |   |   | $ | (796 | ) |   | $ | (796 | ) |

|                                        |   | December      31, 2008 |   |
|---------------------------------------------|--------|------------------------|--------|
| Assets:                                     |   | Level      1           |   |   | Level      2 |   |   | Level      3 |   |   | Total |   |
| Fixed      maturities available for sale    |   | $                      | 15,876 |   |   | $ | 2,237,498 |   |   | $ | 89,499 |   |   | $ | 2,342,873 |   |
| Equity      securities available for sale   |   |                   | 12,504 |   |   |   | 26,892 |   |   |   | 5,141 |   |   |   | 44,537 |   |
| Total                                       |   | $                      | 28,380 |   |   | $ | 2,264,390 |   |   | $ | 94,640 |   |   | $ | 2,387,410 |   |
|                                        |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                                |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      policyholder funds               |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Guaranteed      minimum withdrawal benefits |   | $                      | -      |   |   | $ | - |   |   | $ | 755 |   |   | $ | 755 |   |
| Total                                       |   | $                      | -      |   |   | $ | - |   |   | $ | 755 |   |   | $ | 755 |   |

|                                                |   | Quoted      Prices in |   |   |           |   |      |           |   |   |   |   |
|-----------------------------------------------------|--------|-----------------------|--------|--------|----------------|--------|-----------|----------------|--------|--------|--------|--------|
|                                                |   | Active      Markets   |   |   | Significant    |   |      | Significant    |   |   |   |   |
|                                                |   | for      Identical    |   |   | Observable     |   |      | Unobservable   |   |   |   |   |
|                                                |   | Assets                |   |   | Inputs         |   |      | Inputs         |   |   |   |   |
|                                                |   | (Level      1)        |   |   | (Level      2) |   |      | (Level      3) |   |   | Total  |   |
| Fixed      maturities available for sale:           |   |                  |   |   |           |   |      |           |   |   |   |   |
| Priced      from external pricing service           |   | $                     | 15,324 |   |           | $      | 2,307,962 |           |   | $      | -      |   |   | $ | 2,323,286 |   |
| Priced      from independent broker quotations      |   |                  | -      |   |           |   | 124,594   |           |   |   | -      |   |   |   | 124,594 |   |
| Priced      from internal matrices and calculations |   |                  | -      |   |           |   | 25,974    |           |   |   | 87,216 |   |   |   | 113,190 |   |
| Subtotal                                            |   |                  | 15,324 |   |           |   | 2,458,530 |           |   |   | 87,216 |   |   |   | 2,561,070 |   |
| Equity      securities available for sale:          |   |                  |   |   |           |   |      |           |   |   |   |   |   |   |   |   |
| Priced      from external pricing service           |   |                  | 11,580 |   |           |   | 2,307     |           |   |   | -      |   |   |   | 13,887 |   |
| Priced      from independent broker quotations      |   |                  | -      |   |           |   | -         |           |   |   | -      |   |   |   | - |   |
| Priced      from internal matrices and calculations |   |                  | -      |   |           |   | 24,374    |           |   |   | 6,234  |   |   |   | 30,608 |   |
| Subtotal                                            |   |                  | 11,580 |   |           |   | 26,681    |           |   |   | 6,234  |   |   |   | 44,495 |   |
| Total                                               |   | $                     | 26,904 |   |           | $      | 2,485,211 |           |   | $      | 93,450 |   |   | $ | 2,605,565 |   |
| Percent      of Total                               |   |                  | 1      | %      |           |   | 95        | %              |   |   | 4      | %      |   |   | 100 | % |

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|                             |   | Quarter Ended September 30,      2009 |   |   |                               |   |
|----------------------------------|--------|---------------------------------------|--------|--------|------------------------------------|--------|
|                             |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |                                  |   |   | Total      Realized and Unrealized |   |   |   |   |   |   |   |   |   |   |
|                             |   |                                  |   |   | Gains      and (Losses)            |   |   |   |   |   |   |   |   | Ending |   |   | Net      Unrealized |   |
|                             |   | Beginning                             |   |   |                               |   |   | Included      in |   |   |   |   |   |   |   |   | Balance |   |   | Gains      (Losses) |   |
|                             |   | Balance      as                       |   |   | Included                           |   |   | Other |   |   | Purchases |   |   | Net |   |   | as      of |   |   | Relating      to |   |
|                             |   | of      June 30                       |   |   | in                                 |   |   | Comprehensive |   | and |   |   | Transfers |   |   | September      30 |   | Assets      Held at |   |
|                             |   | 2009                                  |   |   | Earnings                           |   |   | Income      (Loss) |   | Dispositions |   | in      (out) |   |   | 2009 |   |   | September      30, 2009 |   |
| Assets:                          |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed      maturities available  |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  for      sale              |   | $                                     | 77,704 |   |                               | $      | - |   |   | $ | 5,125 |   |   | $ | (828 | ) |   | $ | 5,215 |   |   | $ | 87,216 |   |   | $ | 4,518 |   |
| Equity      securities available |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  for      sale              |   |                                  | 5,141  |   |                               |   | - |   |   |   | 285 |   |   |   | - |   |   |   | 808 |   |   |   | 6,234 |   |   |   | 285 |   |
| Total                            |   | $                                     | 82,845 |   |                               | $      | - |   |   | $ | 5,410 |   |   | $ | (828 | ) |   | $ | 6,023 |   |   | $ | 93,450 |   |   | $ | 4,803 |   |
|                             |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                     |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      policyholder funds-   |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        guaranteed minimum   |   |                                  |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        withdrawal benefits  |   | $                                     | (879   | )      |                               | $      | 53 |   |   | $ | - |   |   | $ | 30 |   |   | $ | - |   |   | $ | (796 | ) |   | $ | 53 |   |

|                             |   | Nine Months Ended September 30,      2009 |   |   |                               |   |
|----------------------------------|--------|-------------------------------------------|--------|--------|------------------------------------|--------|
|                             |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                             |   |                                      |   |   | Total      Realized and Unrealized |   |   |   |   |   |   |   |   |   |   |
|                             |   |                                      |   |   | Gains      and (Losses)            |   |   |   |   |   |   |   |   | Ending |   |   | Net      Unrealized |   |
|                             |   | Beginning                                 |   |   |                               |   |   | Included      in |   |   |   |   |   |   |   |   | Balance |   |   | Gains      (Losses) |   |
|                             |   | Balance      as                           |   |   | Included                           |   |   | Other |   |   | Purchases |   |   | Net |   |   | as      of |   |   | Relating      to |   |
|                             |   | of      December 31,                      |   | in     |                               |   | Comprehensive |   | and |   |   | Transfers |   |   | September      30, |   | Assets      Held at |   |
|                             |   | 2008                                      |   |   | Earnings                           |   |   | Income      (Loss) |   | Dispositions |   | in      (out) |   |   | 2009 |   |   | September      30, 2009 |   |
| Assets:                          |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Fixed      maturities available  |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  for      sale              |   | $                                         | 89,499 |   |                               | $      | - |   |   | $ | 9,336 |   |   | $ | (888 | ) |   | $ | (10,731 | ) |   | $ | 87,216 |   |   | $ | 8,729 |   |
| Equity      securities available |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  for      sale              |   |                                      | 5,141  |   |                               |   | - |   |   |   | 285 |   |   |   | - |   |   |   | 808 |   |   |   | 6,234 |   |   |   | 285 |   |
| Total                            |   | $                                         | 94,640 |   |                               | $      | - |   |   | $ | 9,621 |   |   | $ | (888 | ) |   | $ | (9,923 | ) |   | $ | 93,450 |   |   | $ | 9,014 |   |
|                             |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                     |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      policyholder funds-   |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        guaranteed minimum   |   |                                      |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|        withdrawal benefits  |   | $                                         | 755    |   |                               | $      | (1,632 | ) |   | $ | - |   |   | $ | 81 |   |   | $ | - |   |   | $ | (796 | ) |   | $ | (1,632 | ) |

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|                                                                                |   |      |      |   | Gross      |   |    |   |   |
|-------------------------------------------------------------------------------------|--------|-----------|-----------|--------|------------|--------|---------|--------|--------|
|                                                                                |   | Amortized |      |   | Unrealized |   |    | Fair   |   |
| Bonds:                                                                              |   | Cost      |      |   | Gains      |   |    | Losses |   |   | Value |   |
|     U.S.      Treasury securities and                           |   |      |      |   |       |   |    |   |   |   |   |   |
|         obligations      of U.S. Government |   | $         | 109,933   |   |       | $      | 5,670   |   |   | $ | 252 |   |   | $ | 115,351 |   |
|     Federal      agencies 1                                     |   |      | 62,560    |   |       |   | 2,973   |   |   |   | - |   |   |   | 65,533 |   |
|     Federal      agency issued                                  |   |      |      |   |       |   |    |   |   |   |   |   |   |   |   |   |
|         mortgage-backed      securities 1   |   |      | 174,489   |   |       |   | 7,796   |   |   |   | 132 |   |   |   | 182,153 |   |
|             Subtotal    |   |      | 346,982   |   |       |   | 16,439  |   |   |   | 384 |   |   |   | 363,037 |   |
|     Corporate      obligations:                                 |   |      |      |   |       |   |    |   |   |   |   |   |   |   |   |   |
|         Industrial                          |   |      | 421,213   |   |       |   | 22,877  |   |   |   | 3,148 |   |   |   | 440,942 |   |
|         Energy                              |   |      | 194,475   |   |       |   | 10,812  |   |   |   | 464 |   |   |   | 204,823 |   |
|         Technology                          |   |      | 41,349    |   |       |   | 2,428   |   |   |   | 526 |   |   |   | 43,251 |   |
|         Communications                      |   |      | 86,191    |   |       |   | 4,489   |   |   |   | 1,679 |   |   |   | 89,001 |   |
|         Financial                           |   |      | 395,925   |   |       |   | 11,198  |   |   |   | 23,206 |   |   |   | 383,917 |   |
|         Consumer                            |   |      | 309,173   |   |       |   | 18,358  |   |   |   | 2,267 |   |   |   | 325,264 |   |
|     Public      utilities                                       |   |      | 275,550   |   |       |   | 18,565  |   |   |   | 2,187 |   |   |   | 291,928 |   |
|     Total      corporate obligations                            |   |      | 1,723,876 |   |       |   | 88,727  |   |   |   | 33,477 |   |   |   | 1,779,126 |   |
|     Corporate      private-labeled                              |   |      |      |   |       |   |    |   |   |   |   |   |   |   |   |   |
|         mortgage-backed      securities     |   |      | 248,878   |   |       |   | 437     |   |   |   | 50,512 |   |   |   | 198,803 |   |
|     Other                                                       |   |      | 232,065   |   |       |   | 3,701   |   |   |   | 20,654 |   |   |   | 215,112 |   |
| Redeemable      preferred stocks                                                    |   |      | 5,000     |   |       |   | -       |   |   |   | 8 |   |   |   | 4,992 |   |
| Fixed      maturity securities                                                      |   |      | 2,556,801 |   |       |   | 109,304 |   |   |   | 105,035 |   |   |   | 2,561,070 |   |
| Equity      securities                                                              |   |      | 44,541    |   |       |   | 1,744   |   |   |   | 1,790 |   |   |   | 44,495 |   |
| Total                                                                               |   | $         | 2,601,342 |   |       | $      | 111,048 |   |   | $ | 106,825 |   |   | $ | 2,605,565 |   |

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|                                                                                |   |      |      |   | Gross      |   |   |   |   |
|-------------------------------------------------------------------------------------|--------|-----------|-----------|--------|------------|--------|--------|--------|--------|
|                                                                                |   | Amortized |      |   | Unrealized |   |   | Fair   |   |
| Bonds:                                                                              |   | Cost      |      |   | Gains      |   |   | Losses |   |   | Value |   |
|     U.S.      Treasury securities and                           |   |      |      |   |       |   |   |   |   |   |   |   |
|         obligations      of U.S. Government |   | $         | 63,686    |   |       | $      | 2,732  |   |   | $ | 399 |   |   | $ | 66,019 |   |
|     Federal      agencies 1                                     |   |      | 72,135    |   |       |   | 4,074  |   |   |   | - |   |   |   | 76,209 |   |
|     Federal      agency issued                                  |   |      |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
|         mortgage-backed      securities 1   |   |      | 217,964   |   |       |   | 4,193  |   |   |   | 635 |   |   |   | 221,522 |   |
|             Subtotal    |   |      | 353,785   |   |       |   | 10,999 |   |   |   | 1,034 |   |   |   | 363,750 |   |
|     Corporate      obligations:                                 |   |      |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
|         Industrial                          |   |      | 389,580   |   |       |   | 6,501  |   |   |   | 27,368 |   |   |   | 368,713 |   |
|         Energy                              |   |      | 201,172   |   |       |   | 4,261  |   |   |   | 15,693 |   |   |   | 189,740 |   |
|         Technology                          |   |      | 37,264    |   |       |   | 1,109  |   |   |   | 3,056 |   |   |   | 35,317 |   |
|         Communications                      |   |      | 73,035    |   |       |   | 699    |   |   |   | 7,677 |   |   |   | 66,057 |   |
|         Financial                           |   |      | 387,927   |   |       |   | 3,430  |   |   |   | 45,793 |   |   |   | 345,564 |   |
|         Consumer                            |   |      | 302,433   |   |       |   | 4,900  |   |   |   | 27,458 |   |   |   | 279,875 |   |
|     Public      utilities                                       |   |      | 260,529   |   |       |   | 6,013  |   |   |   | 10,918 |   |   |   | 255,624 |   |
|     Total      corporate obligations                            |   |      | 1,651,940 |   |       |   | 26,913 |   |   |   | 137,963 |   |   |   | 1,540,890 |   |
|     Corporate      private-labeled                              |   |      |      |   |       |   |   |   |   |   |   |   |   |   |   |   |
|         mortgage-backed      securities     |   |      | 272,405   |   |       |   | 90     |   |   |   | 52,795 |   |   |   | 219,700 |   |
|     Other                                                       |   |      | 241,172   |   |       |   | 545    |   |   |   | 37,217 |   |   |   | 204,500 |   |
| Redeemable      preferred stocks                                                    |   |      | 15,070    |   |       |   | 52     |   |   |   | 1,089 |   |   |   | 14,033 |   |
| Fixed      maturity securities                                                      |   |      | 2,534,372 |   |       |   | 38,599 |   |   |   | 230,098 |   |   |   | 2,342,873 |   |
| Equity      securities                                                              |   |      | 45,152    |   |       |   | 1,143  |   |   |   | 1,758 |   |   |   | 44,537 |   |
| Total                                                                               |   | $         | 2,579,524 |   |       | $      | 39,742 |   |   | $ | 231,856 |   |   | $ | 2,387,410 |   |

|                                      |   | September      30, 2009 |      |   | December      31, 2008 |   |
|-------------------------------------------|--------|-------------------------|-----------|--------|------------------------|--------|
|                                      |   | Carrying                |      |   | Fair                   |   |   | Carrying |   |   | Fair |   |
|                                      |   | Value                   |      |   | Value                  |   |   | Value |   |   | Value |   |
| Investments:                              |   |                    |      |   |                   |   |   |   |   |   |   |   |
| Fixed      maturities available for sale  |   | $                       | 2,561,070 |   |                   | $      | 2,561,070 |   |   | $ | 2,342,873 |   |   | $ | 2,342,873 |   |
| Equity      securities available for sale |   |                    | 44,495    |   |                   |   | 44,495 |   |   |   | 44,537 |   |   |   | 44,537 |   |
| Mortgage      loans                       |   |                    | 446,369   |   |                   |   | 455,845 |   |   |   | 445,389 |   |   |   | 449,228 |   |
| Policy      loans                         |   |                    | 86,067    |   |                   |   | 86,067 |   |   |   | 88,304 |   |   |   | 88,304 |   |
| Cash      and short-term investments      |   |                    | 50,084    |   |                   |   | 50,084 |   |   |   | 44,858 |   |   |   | 44,858 |   |
|                                      |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities:                              |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Individual      and group annuities       |   |                    | 988,860   |   |                   |   | 966,845 |   |   |   | 956,216 |   |   |   | 938,023 |   |
| Notes      payable                        |   |                    | -         |   |                   |   | - |   |   |   | 2,900 |   |   |   | 2,900 |   |
| Supplementary      contracts without      |   |                    |      |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| life      contingencies                   |   |                    | 60,016    |   |                   |   | 57,359 |   |   |   | 61,268 |   |   |   | 54,327 |   |

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| ·   | The      current fair value of the security as compared to  cost; |
|--------------------|-------------------------------------------------------------------|

| ·   | The      credit rating of the security; |
|--------------------|-----------------------------------------|

| ·   | The      extent and the length of time the fair value has been below      cost; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | The      financial position of the issuer, including the current and future impact      of any specific events, material declines in the issuer’s revenues,      margins, cash positions, liquidity issues, asset quality, debt levels and      income results; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant      management or organizationalchanges; |
|--------------------|-------------------------------------------------------|

| ·   | Significant      uncertainty regarding the issuer’sindustry; |
|--------------------|--------------------------------------------------------------------|

| ·   | Violation      of financial covenants; |
|--------------------|----------------------------------------|

| ·   | Consideration      of information or evidence that supports timely  recovery; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | The      Company’s intent and ability to hold a security until it recovers in      value; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Whether      the Company intends to sell the investment and whether it is not more      likely than not that the Company will be required to sell the investment      before recovery of the amortized cost basis;and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      business factors related to the issuer’s  industry. |
|--------------------|----------------------------------------------------------------------|

----

Table of Contents

| ·   | The      risk that the Company’s assessment of an issuer’s ability to meet all of      its contractual obligations will change based on changes in the credit      characteristics of that issuer; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the economic outlook will be worse than expected or have more of      an impact on the issuer thananticipated; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the performance of the underlying collateral for securities      could deteriorate in the future and the Company’s credit enhancement      levels and recovery values do not provide sufficient protection to the      Company’s contractual principal andinterest; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that fraudulent, inaccurate or misleading information could be      provided to the Company’s credit, investment and accounting professionals      who determine the fair value estimates and accounting treatment for      securities; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that new information obtained by the Company or changes in other      facts and circumstances may lead the Company to change its intent to sell      the security before it recovers invalue; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that facts and circumstances change such that it becomes more likely      than not that the Company will be required to sell the investment before      recovery of the amortized cost basis;and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the methodology or assumptions used to develop estimates of the      portion of impairments due to credit prove, over time, to be inaccurate or      insufficient. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|                                |   | Less Than 12 Months |    |   | 12 Months or Longer |   |   | Total  |   |
|-------------------------------------|--------|---------------------|---------|--------|---------------------|--------|--------|--------|--------|
|                                |   | Fair                |    |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| Bonds:                              |   | Value               |    |   | Losses              |   |   | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| U.S.      Treasury securities and   |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations      of U.S. Government |   | $                   | 11,692  |   |                | $      | 133    |   |   | $ | 3,203 |   |   | $ | 119 |   |   | $ | 14,895 |   |   | $ | 252 |   |
| Federal      agencies 1             |   |                | -       |   |                |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Federal      agency issued          |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed      securities 1   |   |                | 16,179  |   |                |   | 55     |   |   |   | 3,893 |   |   |   | 77 |   |   |   | 20,072 |   |   |   | 132 |   |
| Subtotal                            |   |                | 27,871  |   |                |   | 188    |   |   |   | 7,096 |   |   |   | 196 |   |   |   | 34,967 |   |   |   | 384 |   |
| Corporate      obligations          |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Industrial                          |   |                | 15,795  |   |                |   | 242    |   |   |   | 56,908 |   |   |   | 2,906 |   |   |   | 72,703 |   |   |   | 3,148 |   |
| Energy                              |   |                | 16,873  |   |                |   | 337    |   |   |   | 12,295 |   |   |   | 127 |   |   |   | 29,168 |   |   |   | 464 |   |
| Technology                          |   |                | -       |   |                |   | -      |   |   |   | 7,178 |   |   |   | 526 |   |   |   | 7,178 |   |   |   | 526 |   |
| Communications                      |   |                | 4,009   |   |                |   | 463    |   |   |   | 22,638 |   |   |   | 1,216 |   |   |   | 26,647 |   |   |   | 1,679 |   |
| Financial                           |   |                | 12,483  |   |                |   | 2,613  |   |   |   | 156,914 |   |   |   | 20,593 |   |   |   | 169,397 |   |   |   | 23,206 |   |
| Consumer                            |   |                | 10,837  |   |                |   | 182    |   |   |   | 40,872 |   |   |   | 2,085 |   |   |   | 51,709 |   |   |   | 2,267 |   |
| Public      utilities               |   |                | 16,274  |   |                |   | 650    |   |   |   | 25,954 |   |   |   | 1,537 |   |   |   | 42,228 |   |   |   | 2,187 |   |
| Total      corporate obligations    |   |                | 76,271  |   |                |   | 4,487  |   |   |   | 322,759 |   |   |   | 28,990 |   |   |   | 399,030 |   |   |   | 33,477 |   |
| Corporate      private-labeled      |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed      securities     |   |                | 12,451  |   |                |   | 2,101  |   |   |   | 176,436 |   |   |   | 48,411 |   |   |   | 188,887 |   |   |   | 50,512 |   |
| Other                               |   |                | 57,270  |   |                |   | 3,872  |   |   |   | 112,173 |   |   |   | 16,782 |   |   |   | 169,443 |   |   |   | 20,654 |   |
| Redeemable      preferred stocks    |   |                | -       |   |                |   | -      |   |   |   | 4,992 |   |   |   | 8 |   |   |   | 4,992 |   |   |   | 8 |   |
| Fixed      maturity securities      |   |                | 173,863 |   |                |   | 10,648 |   |   |   | 623,456 |   |   |   | 94,387 |   |   |   | 797,319 |   |   |   | 105,035 |   |
| Equity      securities:             |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial                           |   |                | 3,859   |   |                |   | 875    |   |   |   | 5,556 |   |   |   | 915 |   |   |   | 9,415 |   |   |   | 1,790 |   |
| Other                               |   |                | -       |   |                |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity      securities              |   |                | 3,859   |   |                |   | 875    |   |   |   | 5,556 |   |   |   | 915 |   |   |   | 9,415 |   |   |   | 1,790 |   |
| Total                               |   | $                   | 177,722 |   |                | $      | 11,523 |   |   | $ | 629,012 |   |   | $ | 95,302 |   |   | $ | 806,734 |   |   | $ | 106,825 |   |

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|                       |   | Quarter      Ended |   |   | Nine      Months Ended |   |
|----------------------------|--------|--------------------|--------|--------|------------------------|--------|
|                       |   | September      30  |   |   | September      30      |   |
|                       |   |               |   |   |                   |   |
| Proceeds                   |   | $                  | 8,156  |   |                   | $      | 22,218 |   |
| Gross      realized gains  |   |               | 1,256  |   |                   |   | 3,699 |   |
| Gross      realized losses |   |               | -      |   |                   |   | - |   |

|                                                           |   | Quarter      Ended |    |   | Nine      Months Ended |   |
|----------------------------------------------------------------|--------|--------------------|---------|--------|------------------------|--------|
|                                                           |   | September      30  |    |   | September      30      |   |
|                                                           |   | 2009               |    |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Total      unrealized gains (losses) arising during the year   |   | $                  | 116,381 |   |                   |   | (108,558 | ) |   | $ | 201,468 |   |   |   | (201,840 | ) |
| Less:                                                          |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Realized      investment gains (losses), excluding             |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| impairment      losses                                         |   |               | 1,240   |   |                   |   | 1,430 |   |   |   | 4,083 |   |   |   | 2,182 |   |
| Other-than-temporary      impairment losses                    |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| recognized      in earnings                                    |   |               | (2,522  | )      |                   |   | (32,462 | ) |   |   | (28,353 | ) |   |   | (42,687 | ) |
| Other-than-temporary      impairment losses                    |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| recognized      in other comprehensive income (loss)           |   |               | 203     |   |                   |   | - |   |   |   | 15,894 |   |   |   | - |   |
| Net      unrealized gains (losses) excluding impairment losses |   |               | 117,460 |   |                   |   | (77,526 | ) |   |   | 209,844 |   |   |   | (161,335 | ) |
| Additional      minimum pension liability                      |   |               | -       |   |                   |   | - |   |   |   | 4,666 |   |   |   | - |   |
| Effect      on DAC and VOBA                                    |   |               | (38,794 | )      |                   |   | 42,891 |   |   |   | (68,924 | ) |   |   | 47,304 |   |
| Policyholder      account balances                             |   |               | -       |   |                   |   | 152 |   |   |   | - |   |   |   | 548 |   |
| Deferred      income taxes                                     |   |               | (27,533 | )      |                   |   | 12,069 |   |   |   | (49,322 | ) |   |   | 39,719 |   |
| Other      comprehensive income (loss)                         |   |               | 51,133  |   |                   |   | (22,414 | ) |   |   | 96,264 |   |   |   | (73,764 | ) |
| Net      income (loss)                                         |   |               | 5,181   |   |                   |   | (15,178 | ) |   |   | 8,677 |   |   |   | (9,899 | ) |
| Other      comprehensive income (loss)                         |   | $                  | 56,314  |   |                   |   | (37,592 | ) |   | $ | 104,941 |   |   |   | (83,663 | ) |

|                                   |   | Unrealized          |     |   | Unrealized          |   |    | Additional |   |   |    |   |   |            |    |   |   |   |
|----------------------------------------|--------|---------------------|----------|--------|---------------------|--------|---------|------------|--------|--------|---------|--------|--------|-----------------|---------|--------|--------|--------|
|                                   |   | Gain      (Loss) on |     |   | Gain      (Loss) on |   |    | Minimum    |   |   | DAC/    |   |   |            |    |   |   |   |
|                                   |   | Non-Impaired        |     |   | Impaired            |   |    | Pension    |   |   | VOBA    |   |   |            |    |   |   |   |
|                                   |   | Securities          |     |   | Securities          |   |    | Liability  |   |   | Impact  |   |   | Tax      Effect |    |   | Total  |   |
|                                   |   |                |     |   |                |   |    |       |   |   |    |   |   |            |    |   |   |   |
| Beginning      of year                 |   | $                   | (189,916 | )      |                | $      | (2,197  | )          |   | $      | (48,523 | )      |   | $               | 65,534  |   |   | $      | 44,303 |   |   | $ | (130,799 | ) |
| Cumulative      effect of change in    |   |                |     |   |                |   |    |       |   |   |    |   |   |            |    |   |   |   |   |   |   |   |   |   |
| accounting      principle              |   |                | -        |   |                |   | (13,507 | )          |   |   | -       |   |   |            | 3,355   |   |   |   | 3,553 |   |   |   | (6,599 | ) |
| Other      comprehensive income (loss) |   |                | 211,759  |   |                |   | (1,915  | )          |   |   | 4,666   |   |   |            | (68,924 | )      |   |   | (49,322 | ) |   |   | 96,264 |   |
| End      of period                     |   | $                   | 21,843   |   |                | $      | (17,619 | )          |   | $      | (43,857 | )      |   | $               | (35     | )      |   | $      | (1,466 | ) |   | $ | (41,134 | ) |

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Table of Contents

|                                                                              |   | Quarter      Ended |   |   | Nine      Months Ended |   |
|-----------------------------------------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
|                                                                              |   | September      30  |   |   | September      30      |   |
|                                                                              |   | 2009               |   |   | 2009                   |   |
| Credit      losses on securities held at beginning of period in other             |   |               |   |   |                   |   |
| comprehensive      income (loss)                                                  |   | $                  | 9,505  |   |                   | $      | 5,713 |   |
| Additions      for credit losses not previously recognized in other-than-         |   |               |   |   |                   |   |   |   |
| temporary      impairment                                                         |   |               | -      |   |                   |   | 6,500 |   |
| Additions      for increases in the credit loss for which an other-than-          |   |               |   |   |                   |   |   |   |
| temporary      impairment previously recognized when there was no                 |   |               |   |   |                   |   |   |   |
| intent      to sell the security before recovery of its amortized cost      basis |   |               | 319    |   |                   |   | 597 |   |
| Reductions      for securities sold during the period (realized)                  |   |               | (1,880 | )      |                   |   | (3,952 | ) |
| Reductions      for securities previously recognized in other                     |   |               |   |   |                   |   |   |   |
| comprehensive      income (loss) earnings because of intent to sell               |   |               |   |   |                   |   |   |   |
| the      security before recovery of its amortized cost basis                     |   |               | -      |   |                   |   | - |   |
| Reductions      for increases in cash flows expected to be collected              |   |               |   |   |                   |   |   |   |
| that      are recognized over the remaining life of the security                  |   |               | -      |   |                   |   | (914 | ) |
| Credit      losses on securities held at the end of period in other               |   |               |   |   |                   |   |   |   |
| comprehensive      income (loss)                                                  |   | $                  | 7,944  |   |                   | $      | 7,944 |   |

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Table of Contents

|                                                                           |   | September      30 |   |   | December      31 |   |
|--------------------------------------------------------------------------------|--------|-------------------|--------|--------|------------------|--------|
|                                                                           |   | 2009              |   |   | 2008             |   |
| Federal      Home Loan Bank (FHLB) loans with various maturities and           |   |              |   |   |             |   |
| a      weighted average interest rate, currently no borrowings, (0.95%      at |   |              |   |   |             |   |
| December      31, 2008), secured by mortgage-backed securities                 |   |              |   |   |             |   |
| totaling      $71,706 ($102,155 at December 31, 2008)                          |   | $                 | -      |   |             | $      | 2,900 |   |
|                                                                           |   | $                 | -      |   |             | $      | 2,900 |   |

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Table of Contents

|                        |   |   | Individual |    |   | Group     |   |   | Old      |   |   | Intercompany  |   |   |   |   |
|-----------------------------|--------|--------|------------|---------|--------|-----------|--------|--------|----------|--------|--------|---------------|--------|--------|--------|--------|
|                        |   |   | Insurance  |    |   | Insurance |   |   | American |   |   | Eliminations1 |   |   | Total  |   |
| Insurance      revenues:    |   |   |       |    |   |      |   |   |     |   |   |          |   |   |   |   |
| Third      quarter:         | 2009   |   | $          | 38,630  |   |      | $      | 11,103 |     |   | $      | 15,634        |   |   | $      | (132   | ) |   | $ | 65,235 |   |
|                        | 2008   |   |       | 31,214  |   |      |   | 12,268 |     |   |   | 15,446        |   |   |   | (119   | ) |   |   | 58,809 |   |
| Nine      months:           | 2009   |   |       | 100,317 |   |      |   | 35,757 |     |   |   | 46,460        |   |   |   | (414   | ) |   |   | 182,120 |   |
|                        | 2008   |   |       | 94,384  |   |      |   | 36,235 |     |   |   | 46,175        |   |   |   | (415   | ) |   |   | 176,379 |   |
|                        |   |   |       |    |   |      |   |   |     |   |   |          |   |   |   |   |   |   |   |   |   |
| Net      investment income: |   |   |       |    |   |      |   |   |     |   |   |          |   |   |   |   |   |   |   |   |   |
| Third      quarter:         | 2009   |   | $          | 41,052  |   |      | $      | 136    |     |   | $      | 3,333         |   |   | $      | -      |   |   | $ | 44,521 |   |
|                        | 2008   |   |       | 41,057  |   |      |   | 134    |     |   |   | 3,146         |   |   |   | -      |   |   |   | 44,337 |   |
| Nine      months:           | 2009   |   |       | 122,307 |   |      |   | 406    |     |   |   | 9,552         |   |   |   | -      |   |   |   | 132,265 |   |
|                        | 2008   |   |       | 126,393 |   |      |   | 389    |     |   |   | 9,634         |   |   |   | -      |   |   |   | 136,416 |   |
|                        |   |   |       |    |   |      |   |   |     |   |   |          |   |   |   |   |   |   |   |   |   |
| Net      income (loss):     |   |   |       |    |   |      |   |   |     |   |   |          |   |   |   |   |   |   |   |   |   |
| Third      quarter:         | 2009   |   | $          | 5,384   |   |      | $      | (958   | )        |   | $      | 755           |   |   | $      | -      |   |   | $ | 5,181 |   |
|                        | 2008   |   |       | (14,365 | )      |      |   | (396   | )        |   |   | (417          | )      |   |   | -      |   |   |   | (15,178 | ) |
| Nine      months:           | 2009   |   |       | 8,248   |   |      |   | (1,735 | )        |   |   | 2,164         |   |   |   | -      |   |   |   | 8,677 |   |
| 2008                        |   |   | (8,589     | )       |   |      | (1,444 | )      |     |   | 134    |          |   |   | -      |   |   |   | (9,899 | ) |

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Table of Contents

|                                 |   | Pension      Benefits |   |   | Other      Benefits |   |
|--------------------------------------|--------|-----------------------|--------|--------|---------------------|--------|
|                                 |   | Quarter      Ended    |   |   | Quarter      Ended  |   |
|                                 |   | September      30     |   |   | September      30   |   |
|                                 |   | 2009                  |   |   | 2008                |   |   | 2009 |   |   | 2008 |   |
|                                 |   |                  |   |   |                |   |   |   |   |   |   |   |
| Service      cost                    |   | $                     | 474    |   |                | $      | 421 |   |   | $ | 217 |   |   | $ | 192 |   |
| Interest      cost                   |   |                  | 1,985  |   |                |   | 1,360 |   |   |   | 510 |   |   |   | 346 |   |
| Expected      return on plan assets  |   |                  | (1,867 | )      |                |   | (1,726 | ) |   |   | (11 | ) |   |   | (13 | ) |
| Amortization      of:                |   |                  |   |   |                |   |   |   |   |   |   |   |   |   |   |   |
| Unrecognized      actuarial loss     |   |                  | 1,081  |   |                |   | 421 |   |   |   | 3 |   |   |   | 43 |   |
| Unrecognized      prior service cost |   |                  | (148   | )      |                |   | (118 | ) |   |   | (62 | ) |   |   | (91 | ) |
| Net      periodic benefit cost       |   | $                     | 1,525  |   |                | $      | 358 |   |   | $ | 657 |   |   | $ | 477 |   |

|                                 |   | Pension      Benefits  |   |   | Other      Benefits    |   |
|--------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                 |   | Nine      Months Ended |   |   | Nine      Months Ended |   |
|                                 |   | September      30      |   |   | September      30      |   |
|                                 |   | 2009                   |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
|                                 |   |                   |   |   |                   |   |   |   |   |   |   |   |
| Service      cost                    |   | $                      | 1,592  |   |                   | $      | 1,601 |   |   | $ | 479 |   |   | $ | 583 |   |
| Interest      cost                   |   |                   | 5,969  |   |                   |   | 5,164 |   |   |   | 1,051 |   |   |   | 1,051 |   |
| Expected      return on plan assets  |   |                   | (5,552 | )      |                   |   | (6,555 | ) |   |   | (26 | ) |   |   | (39 | ) |
| Amortization      of:                |   |                   |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Unrecognized      actuarial loss     |   |                   | 3,442  |   |                   |   | 1,597 |   |   |   | (197 | ) |   |   | 130 |   |
| Unrecognized      prior service cost |   |                   | (471   | )      |                   |   | (449 | ) |   |   | (139 | ) |   |   | (279 | ) |
| Net      periodic benefit cost       |   | $                      | 4,980  |   |                   | $      | 1,358 |   |   | $ | 1,168 |   |   | $ | 1,446 |   |

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Item 2.

| ·   | The      sales of life, annuity, and accident and health  products; |
|--------------------|---------------------------------------------------------------------|

| ·   | The      rate of mortality, lapse and surrenders of future policy benefits and      policyholder account balances; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

----

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| ·   | The      rate of morbidity, disability and incurrence of other policyholder      benefits; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Persistency      of existing insurance policies; |
|--------------------|--------------------------------------------------|

| ·   | Interest      rates credited to policyholders; |
|--------------------|------------------------------------------------|

| ·   | The      effectiveness of reinsuranceprograms; |
|--------------------|------------------------------------------------|

| ·   | The      amount of investment assets undermanagement; |
|--------------------|-------------------------------------------------------|

| ·   | Investment      spreads earned on policyholder accountbalances; |
|--------------------|-----------------------------------------------------------------|

| ·   | The      ability to maximize investment returns and minimize risks such as interest      rate risk, credit risk and equityrisk; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | Realized      gains and losses on investments; |
|--------------------|------------------------------------------------|

| ·   | Timely      and cost-effective access toliquidity; |
|--------------------|----------------------------------------------------|

| ·   | Management      of distribution costs and operatingexpenses. |
|--------------------|--------------------------------------------------------------|

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|                                     |   | Quarter      Ended September 30 |   |
|------------------------------------------|--------|---------------------------------|--------|
|                                     |   | 2009                            |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      premiums:                       |   |                            |   |   |   |   |   |   |   |   |   |   |
| Individual      life insurance           |   | $                               | 3,643  |   |   |   | 8 |   |   | $ | 3,358 |   |   |   | 9 |   |
| Immediate      annuities                 |   |                            | 10,842 |   |   |   | 347 |   |   |   | 2,426 |   |   |   | 41 |   |
| Group      life insurance                |   |                            | 359    |   |   |   | (31 | ) |   |   | 518 |   |   |   | 19 |   |
| Group      accident and health insurance |   |                            | 2,764  |   |   |   | 1 |   |   |   | 2,748 |   |   |   | 22 |   |
| Total      new premiums                  |   |                            | 17,608 |   |   |   | 95 |   |   |   | 9,050 |   |   |   | 21 |   |
| Renewal      premiums                    |   |                            | 35,824 |   |   |   | - |   |   |   | 35,811 |   |   |   | 1 |   |
| Total      premiums                      |   | $                               | 53,432 |   |   |   | 19 |   |   | $ | 44,861 |   |   |   | 4 |   |

|                                     |   | Nine      Months Ended September 30 |    |
|------------------------------------------|--------|-------------------------------------|---------|
|                                     |   | 2009                                |    |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      premiums:                       |   |                                |    |   |   |   |   |   |   |   |   |   |
| Individual      life insurance           |   | $                                   | 10,330  |   |   |   | 6 |   |   | $ | 9,769 |   |   |   | 7 |   |
| Immediate      annuities                 |   |                                | 16,842  |   |   |   | 87 |   |   |   | 9,014 |   |   |   | 64 |   |
| Group      life insurance                |   |                                | 1,134   |   |   |   | (29 | ) |   |   | 1,598 |   |   |   | 45 |   |
| Group      accident and health insurance |   |                                | 7,545   |   |   |   | (8 | ) |   |   | 8,232 |   |   |   | 7 |   |
| Total      new premiums                  |   |                                | 35,851  |   |   |   | 25 |   |   |   | 28,613 |   |   |   | 23 |   |
| Renewal      premiums                    |   |                                | 107,297 |   |   |   | 1 |   |   |   | 106,197 |   |   |   | (1 | ) |
| Total      premiums                      |   | $                                   | 143,148 |   |   |   | 6 |   |   | $ | 134,810 |   |   |   | 3 |   |

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|                                   |   | Quarter      Ended September 30 |   |
|----------------------------------------|--------|---------------------------------|--------|
|                                   |   | 2009                            |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      deposits:                     |   |                            |   |   |   |   |   |   |   |   |   |   |
| Universal      life insurance          |   | $                               | 2,119  |   |   |   | (23 | ) |   | $ | 2,741 |   |   |   | 4 |   |
| Variable      universal life insurance |   |                            | 176    |   |   |   | (65 | ) |   |   | 501 |   |   |   | 4 |   |
| Fixed      deferred annuities          |   |                            | 19,323 |   |   |   | 196 |   |   |   | 6,532 |   |   |   | (25 | ) |
| Variable      annuities                |   |                            | 3,330  |   |   |   | (43 | ) |   |   | 5,800 |   |   |   | (15 | ) |
| Total      new deposits                |   |                            | 24,948 |   |   |   | 60 |   |   |   | 15,574 |   |   |   | (16 | ) |
| Renewal      deposits                  |   |                            | 34,196 |   |   |   | 2 |   |   |   | 33,421 |   |   |   | 1 |   |
| Total      deposits                    |   | $                               | 59,144 |   |   |   | 21 |   |   | $ | 48,995 |   |   |   | (5 | ) |

|                                   |   | Nine      Months Ended September 30 |    |
|----------------------------------------|--------|-------------------------------------|---------|
|                                   |   | 2009                                |    |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      deposits:                     |   |                                |    |   |   |   |   |   |   |   |   |   |
| Universal      life insurance          |   | $                                   | 6,079   |   |   |   | (19 | ) |   | $ | 7,482 |   |   |   | (7 | ) |
| Variable      universal life insurance |   |                                | 873     |   |   |   | (42 | ) |   |   | 1,510 |   |   |   | (20 | ) |
| Fixed      deferred annuities          |   |                                | 64,651  |   |   |   | 260 |   |   |   | 17,967 |   |   |   | (13 | ) |
| Variable      annuities                |   |                                | 11,091  |   |   |   | (47 | ) |   |   | 20,811 |   |   |   | 6 |   |
| Total      new deposits                |   |                                | 82,694  |   |   |   | 73 |   |   |   | 47,770 |   |   |   | (5 | ) |
| Renewal      deposits                  |   |                                | 99,308  |   |   |   | - |   |   |   | 99,604 |   |   |   | (5 | ) |
| Total      deposits                    |   | $                                   | 182,002 |   |   |   | 23 |   |   | $ | 147,374 |   |   |   | (5 | ) |

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|                                               |   | Quarter      Ended |   |   | Nine      Months Ended |   |
|----------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
|                                               |   | September      30  |   |   | September      30      |   |
|                                               |   | 2009               |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Gross      gains resulting from:                   |   |               |   |   |                   |   |   |   |   |   |   |   |
| Sales      of investment securities                |   | $                  | 1,256  |   |                   | $      | - |   |   | $ | 3,699 |   |   | $ | 3 |   |
| Investment      securities called, put and other   |   |               | 288    |   |                   |   | 1,430 |   |   |   | 632 |   |   |   | 2,625 |   |
| Sales      of real estate                          |   |               | -      |   |                   |   | 146 |   |   |   | 661 |   |   |   | 722 |   |
| Other      investment gains                        |   |               | 6      |   |                   |   | - |   |   |   | 80 |   |   |   | 1 |   |
| Total      gross gains                             |   |               | 1,550  |   |                   |   | 1,576 |   |   |   | 5,072 |   |   |   | 3,351 |   |
| Gross      losses resulting from:                  |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Sales      of investment securities                |   |               | -      |   |                   |   | - |   |   |   | - |   |   |   | (448 | ) |
| Investment      securities called, put and other   |   |               | (311   | )      |                   |   | - |   |   |   | (313 | ) |   |   | - |   |
| Other      investment losses                       |   |               | (1     | )      |                   |   | - |   |   |   | (15 | ) |   |   | - |   |
| Total      gross losses                            |   |               | (312   | )      |                   |   | - |   |   |   | (328 | ) |   |   | (448 | ) |
| Amortization      of DAC and VOBA                  |   |               | (36    | )      |                   |   | 1,591 |   |   |   | 464 |   |   |   | 2,200 |   |
| Net      realized investment gains, excluding      |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| impairment      losses                             |   |               | 1,202  |   |                   |   | 3,167 |   |   |   | 5,208 |   |   |   | 5,103 |   |
|                                               |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      impairment losses recognized in earnings: |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total      other-than-temporary impairment losses  |   |               | (2,522 | )      |                   |   | (32,462 | ) |   |   | (28,353 | ) |   |   | (42,687 | ) |
| Portion      of loss recognized in other           |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| comprehensive      income (loss)                   |   |               | 203    |   |                   |   | - |   |   |   | 15,894 |   |   |   | - |   |
| Net      impairment losses recognized in earnings  |   |               | (2,319 | )      |                   |   | (32,462 | ) |   |   | (12,459 | ) |   |   | (42,687 | ) |
| Realized      investment losses                    |   | $                  | (1,117 | )      |                   | $      | (29,295 | ) |   | $ | (7,251 | ) |   | $ | (37,584 | ) |

| ·   | Four      securities (from two issuers) were mortgage-backed securities that were      written down by a total of $0.3 million.  The significant      decline in the subprime and non-conforming mortgage markets and the      specific performance of the underlying collateral caused the Company’s      cash flow projections to be less than the  amortized |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | cost      of the securities and created an other-than-temporary      impairment.  Three of these securities had been previously      written down due to reduced projected cash flows from the underlying      securitizations. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and is currently under reorganization was written down $0.2      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written down and      continues to be challenged in its market and industry.  This      security was exchanged for a replacement security during the third quarter      of 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.3 million.  This company has been affected by the credit      crisis, causing reduced access to liquidity and higher borrowing      costs.  This security had been written down in a previous      period.  The Company determined that a credit-related impairment      had occurred, and this security was sold during the third quarter of      2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a financial institution that had been impacted by the      housing and mortgage credit crisis and had been supported through Troubled      Assets Relief Program (TARP) funds.  This company has      experienced large losses in its real estate loan portfolios and has had an      increase in non-performing loans over the past year.  This      security was written down by a total of $1.5 million before it was sold      during the third quarter of 2009. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities (from two issuers) were mortgage-backed securities that were      written down by a total of $0.1 million.  The significant      decline in the subprime and non-conforming mortgage markets and the      specific performance of the underlying collateral caused the Company’s      cash flow projections to be less than the amortized cost of the securities      and creating an other-than-temporary impairment.  These      securities had been previously written down due to reduced projected cash      flows from the underlyingsecuritizations. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a collateralized debt obligation (CDO) that was written down      $0.2 million.  This security has been impacted by the rapid rise      in delinquencies and foreclosures in the subprime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling had caused extreme declines in market valuations, regardless of      individual security performance.  This security had been written      down in previous periods. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and is currently under reorganization was written down $1.0      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written down and      continues to be challenged in its market and  industry. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.5 million.  This company had been affected by the credit      crisis, forcing reduced access to liquidity and higher borrowing      costs.  The Company determined that a credit-related impairment      had occurred. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $2.2 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | One      security was from a mortgage and financial guaranty insurer that was      written down $1.6 million.  Mortgage insurers have suffered from      the deterioration in the U.S. housing market and mortgage credit      market.  Rising mortgage delinquencies and defaults have      resulted in rating downgrades for these insurers.  Recent rating      downgrades, combined with the issuer’s need to raise additional capital to      meet future payments contributed to the other-than-temporary      impairment. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $1.6      million.  As the trucking industry is highly correlated with the      general economy, this company has experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter, but new covenants placed      significant requirements on the issuer.  These restrictions,      combined with the need to retire longer-term debt, place additional stress      on cash resources and led to indications of continued weakening      performance that the Company believes are      other-than-temporary. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that develops, manufactures and markets      imaging products that was written down $1.2 million.   This      company’s past emphasis was in traditional film, which has been largely      surpassed by digital photography.  The decline in the economy      has negatively affected sales, as the consumer photography industry is a      discretionary item.  The company’s declining revenues and      liquidity position led to the other-than-temporary    impairment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities (from one issuer) were mortgage-backed securities that were      written down by a total of $0.6 million.  The significant      decline in the subprime and non-conforming mortgage markets and the      specific performance of the underlying collateral caused the Company’s      cash flow projections to be less than the amortized cost of the securities      and created an other-than-temporaryimpairment. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a mortgage-backed security that was written down $0.1      million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the security and creating an      other-than-temporary impairment. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.0 million as the Company accepted a tender      offer on the Company’s holdings from an issuer during the second quarter      of 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $6.5 million.  These      entities buy and hold mortgages and issue and sell guaranteed      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments were suspended, driving the      fair value of these securitiesdown. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities from the same issuer were from an investment banking firm that      filed for bankruptcy during the third quarter of 2008 and were written      down by a total of $9.2 million.  This firm was part of the      financial industry that was hit hard by the mortgage credit      crisis.  After a severe decline in equity valuations, the      inability to obtain short-term funding and the failure to find an acquirer      forced this firm to file for Chapter 11  bankruptcy. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs that were written down by a total of $5.1      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling have caused extreme declines in market valuations, regardless of      individual security performance. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Two      securities, one issuer a parent organization of the other, are financial      guarantee insurance companies that provide credit enhancement for bond      issuers as well as investment management services and were written down by      a total of $4.9 million.  These issuers had also experienced      declines in value related to the mortgage credit crisis and had been      downgraded to a negative outlook. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from the auto industry and is a supplier of auto parts for      light trucks and sport-utility vehicles.  The deteriorating      truck and sport-utility vehicle markets of the auto industry combined with      the sharp decline in value and recent ratings declines resulted in a $2.1      million write-down. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.1 million as continued price deterioration      occurred on this security that was previously written      down.  This issuer is primarily in the radio and advertising      business. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security provides custom-tailored financing to private and corporate      owners of real estate nationwide.  This security had a rating      decline to below investment grade status combined with continued price      deterioration and was written down $2.8million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a bank holding company that had recently filed for      bankruptcy.  This holding company was the parent of a large      nationwide bank that was recently taken over by the Office of Thrift      Supervision who appointed the Federal Deposit Insurance Corporation (FDIC)      as its receiver.  As a result of the bankruptcy filing, this      security was written down $0.8million. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      of the securities were written down by a total of $3.3 million, primarily      as a result of declines in price and rating agency downgrades on debt      issues from issuers that had recently completed leveraged buyout (LBO)      transactions.  These LBO transactions greatly increased the debt      level of each issuer.  One of these securities had been written      down previously, and the other two securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs and were written down by $2.8 million, primarily due      to price declines that had persisted for periods longer than the Company      considered temporary.  Both securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $3.3 million due to combination of a decline      in price that had persisted for a period longer than the Company      considered temporary, rating agency downgrades and a debt restructuring      during the quarter. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.8 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary and a further deterioration in fair value during the      second quarter of 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Credit      risk, relating to the uncertainty associated with the continued ability of      a given obligor to make timely payments of principal and      interest; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest      rate risk, relating to the market price and/or cash flow associated with      changes in market yields and curves;and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Liquidity      risk, relating to the risk that investments cannot be converted into cash      when needed or that the terms for conversion have a negative effect on the      Company. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                |   |   |      |   |          |   |   | Fair      Value    |   |   |       |   |   | Fair      Value    |    |   |       |   |
|-------------------------------------|--------|--------|-----------|--------|---------------|--------|--------|--------------------|--------|--------|------------|--------|--------|--------------------|---------|--------|------------|--------|
|                                |   |   |      |   |          |   |   | of      Securities |   |   |       |   |   | of      Securities |    |   |       |   |
|                                |   | Total  |      |   |          |   |   | with      Gross    |   |   | Gross      |   |   | with      Gross    |    |   | Gross      |   |
|                                |   | Fair   |      |   | %             |   |   | Unrealized         |   |   | Unrealized |   |   | Unrealized         |    |   | Unrealized |   |
| Bonds:                              |   | Value  |      |   | of      Total |   |   | Gains              |   |   | Gains      |   |   | Losses             |    |   | Losses     |   |
| U.S.      Treasury securities and   |   |   |      |   |          |   |   |               |   |   |       |   |   |               |    |   |       |   |
| obligations      of U.S. Government |   | $      | 115,351   |   |          |   | 5      | %                  |   | $      | 100,456    |   |   | $                  | 5,670   |   |       | $      | 14,895 |   |   | $ | 252 |   |
| Federal      agencies 1             |   |   | 65,533    |   |          |   | 3      | %                  |   |   | 65,533     |   |   |               | 2,973   |   |       |   | - |   |   |   | - |   |
| Federal      agency issued          |   |   |      |   |          |   |   |               |   |   |       |   |   |               |    |   |       |   |   |   |   |   |   |   |
| mortgage-backed      securities 1   |   |   | 182,153   |   |          |   | 7      | %                  |   |   | 162,081    |   |   |               | 7,796   |   |       |   | 20,072 |   |   |   | 132 |   |
| Subtotal                            |   |   | 363,037   |   |          |   | 15     | %                  |   |   | 328,070    |   |   |               | 16,439  |   |       |   | 34,967 |   |   |   | 384 |   |
| Corporate      obligations:         |   |   |      |   |          |   |   |               |   |   |       |   |   |               |    |   |       |   |   |   |   |   |   |   |
| Industrial                          |   |   | 440,942   |   |          |   | 17     | %                  |   |   | 368,239    |   |   |               | 22,877  |   |       |   | 72,703 |   |   |   | 3,148 |   |
| Energy                              |   |   | 204,823   |   |          |   | 8      | %                  |   |   | 175,655    |   |   |               | 10,812  |   |       |   | 29,168 |   |   |   | 464 |   |
| Technology                          |   |   | 43,251    |   |          |   | 2      | %                  |   |   | 36,073     |   |   |               | 2,428   |   |       |   | 7,178 |   |   |   | 526 |   |
| Communications                      |   |   | 89,001    |   |          |   | 3      | %                  |   |   | 62,354     |   |   |               | 4,489   |   |       |   | 26,647 |   |   |   | 1,679 |   |
| Financial                           |   |   | 383,917   |   |          |   | 15     | %                  |   |   | 214,520    |   |   |               | 11,198  |   |       |   | 169,397 |   |   |   | 23,206 |   |
| Consumer                            |   |   | 325,264   |   |          |   | 13     | %                  |   |   | 273,555    |   |   |               | 18,358  |   |       |   | 51,709 |   |   |   | 2,267 |   |
| Public      utilities               |   |   | 291,928   |   |          |   | 11     | %                  |   |   | 249,700    |   |   |               | 18,565  |   |       |   | 42,228 |   |   |   | 2,187 |   |
| Subtotal                            |   |   | 1,779,126 |   |          |   | 69     | %                  |   |   | 1,380,096  |   |   |               | 88,727  |   |       |   | 399,030 |   |   |   | 33,477 |   |
| Corporate      private-labeled      |   |   |      |   |          |   |   |               |   |   |       |   |   |               |    |   |       |   |   |   |   |   |   |   |
| mortgage-backed      securities     |   |   | 198,803   |   |          |   | 8      | %                  |   |   | 9,916      |   |   |               | 437     |   |       |   | 188,887 |   |   |   | 50,512 |   |
| Other                               |   |   | 215,112   |   |          |   | 8      | %                  |   |   | 45,669     |   |   |               | 3,701   |   |       |   | 169,443 |   |   |   | 20,654 |   |
| Redeemable      preferred stocks    |   |   | 4,992     |   |          |   | -      |               |   |   | -          |   |   |               | -       |   |       |   | 4,992 |   |   |   | 8 |   |
| Total                               |   | $      | 2,561,070 |   |          |   | 100    | %                  |   | $      | 1,763,751  |   |   | $                  | 109,304 |   |       | $      | 797,319 |   |   | $ | 105,035 |   |

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|                                |   |   |      |   |          |   |   | Fair      Value    |   |   |       |   |   | Fair      Value    |   |   |       |   |
|-------------------------------------|--------|--------|-----------|--------|---------------|--------|--------|--------------------|--------|--------|------------|--------|--------|--------------------|--------|--------|------------|--------|
|                                |   |   |      |   |          |   |   | of      Securities |   |   |       |   |   | of      Securities |   |   |       |   |
|                                |   | Total  |      |   |          |   |   | with      Gross    |   |   | Gross      |   |   | with      Gross    |   |   | Gross      |   |
|                                |   | Fair   |      |   | %             |   |   | Unrealized         |   |   | Unrealized |   |   | Unrealized         |   |   | Unrealized |   |
| Bonds:                              |   | Value  |      |   | of      Total |   |   | Gains              |   |   | Gains      |   |   | Losses             |   |   | Losses     |   |
| U.S.      Treasury securities and   |   |   |      |   |          |   |   |               |   |   |       |   |   |               |   |   |       |   |
| obligations      of U.S. Government |   | $      | 66,019    |   |          |   | 3      | %                  |   | $      | 59,215     |   |   | $                  | 2,732  |   |       | $      | 6,804 |   |   | $ | 399 |   |
| Federal      agencies 1             |   |   | 76,209    |   |          |   | 3      | %                  |   |   | 76,209     |   |   |               | 4,074  |   |       |   | - |   |   |   | - |   |
| Federal      agency issued          |   |   |      |   |          |   |   |               |   |   |       |   |   |               |   |   |       |   |   |   |   |   |   |   |
| mortgage-backed      securities 1   |   |   | 221,522   |   |          |   | 9      | %                  |   |   | 167,185    |   |   |               | 4,193  |   |       |   | 54,337 |   |   |   | 635 |   |
| Subtotal                            |   |   | 363,750   |   |          |   | 15     | %                  |   |   | 302,609    |   |   |               | 10,999 |   |       |   | 61,141 |   |   |   | 1,034 |   |
| Corporate      obligations:         |   |   |      |   |          |   |   |               |   |   |       |   |   |               |   |   |       |   |   |   |   |   |   |   |
| Industrial                          |   |   | 368,713   |   |          |   | 16     | %                  |   |   | 142,876    |   |   |               | 6,501  |   |       |   | 225,837 |   |   |   | 27,368 |   |
| Energy                              |   |   | 189,740   |   |          |   | 8      | %                  |   |   | 68,412     |   |   |               | 4,261  |   |       |   | 121,328 |   |   |   | 15,693 |   |
| Technology                          |   |   | 35,317    |   |          |   | 2      | %                  |   |   | 22,514     |   |   |               | 1,109  |   |       |   | 12,803 |   |   |   | 3,056 |   |
| Communications                      |   |   | 66,057    |   |          |   | 3      | %                  |   |   | 20,498     |   |   |               | 699    |   |       |   | 45,559 |   |   |   | 7,677 |   |
| Financial                           |   |   | 345,564   |   |          |   | 15     | %                  |   |   | 79,198     |   |   |               | 3,430  |   |       |   | 266,366 |   |   |   | 45,793 |   |
| Consumer                            |   |   | 279,875   |   |          |   | 12     | %                  |   |   | 93,269     |   |   |               | 4,900  |   |       |   | 186,606 |   |   |   | 27,458 |   |
| Public      utilities               |   |   | 255,624   |   |          |   | 11     | %                  |   |   | 116,550    |   |   |               | 6,013  |   |       |   | 139,074 |   |   |   | 10,918 |   |
| Subtotal                            |   |   | 1,540,890 |   |          |   | 67     | %                  |   |   | 543,317    |   |   |               | 26,913 |   |       |   | 997,573 |   |   |   | 137,963 |   |
| Corporate      private-labeled      |   |   |      |   |          |   |   |               |   |   |       |   |   |               |   |   |       |   |   |   |   |   |   |   |
| mortgage-backed      securities     |   |   | 219,700   |   |          |   | 9      | %                  |   |   | 15,219     |   |   |               | 90     |   |       |   | 204,481 |   |   |   | 52,795 |   |
| Other                               |   |   | 204,500   |   |          |   | 9      | %                  |   |   | 20,665     |   |   |               | 545    |   |       |   | 183,835 |   |   |   | 37,217 |   |
| Redeemable      preferred stocks    |   |   | 14,033    |   |          |   | -      |               |   |   | 5,099      |   |   |               | 52     |   |       |   | 8,934 |   |   |   | 1,089 |   |
| Total                               |   | $      | 2,342,873 |   |          |   | 100    | %                  |   | $      | 886,909    |   |   | $                  | 38,599 |   |       | $      | 1,455,964 |   |   | $ | 230,098 |   |

|                                                      |   | September      30, 2009 |      |   |          |   |   | December      31, 2008 |   |   |          |   |
|-----------------------------------------------------------|--------|-------------------------|-----------|--------|---------------|--------|--------|------------------------|--------|--------|---------------|--------|
|                                                      |   | Fair                    |      |   | %             |   |   | Fair                   |   |   | %             |   |
| Equivalent S&P Rating                                 |   | Value                   |      |   | of      Total |   |   | Value                  |   |   | of      Total |   |
| AAA                                                       |   | $                       | 644,551   |   |          |   | 25     | %                      |   | $      | 751,995       |   |   |   | 32 | % |
| AA                                                        |   |                    | 137,783   |   |          |   | 6      | %                      |   |   | 193,074       |   |   |   | 8 | % |
| A                                                         |   |                    | 720,052   |   |          |   | 28     | %                      |   |   | 652,806       |   |   |   | 29 | % |
| BBB                                                       |   |                    | 876,075   |   |          |   | 34     | %                      |   |   | 639,948       |   |   |   | 27 | % |
|     Total      investment grade       |   | $                       | 2,378,461 |   |          |   | 93     | %                      |   |   | 2,237,823     |   |   |   | 96 | % |
| BB                                                        |   |                    | 87,478    |   |          |   | 3      | %                      |   |   | 74,961        |   |   |   | 3 | % |
| B      and below                                          |   |                    | 95,131    |   |          |   | 4      | %                      |   |   | 30,089        |   |   |   | 1 | % |
|     Total      below investment grade |   |                    | 182,609   |   |          |   | 7      | %                      |   |   | 105,050       |   |   |   | 4 | % |
|                                                      |   | $                       | 2,561,070 |   |          |   | 100    | %                      |   | $      | 2,342,873     |   |   |   | 100 | % |

----

Table of Contents

| ·   | Intent      and ability to make all principal and interest payments when      due; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | Near-term      business prospects; |
|--------------------|------------------------------------|

| ·   | Cash      flow and liquidity; |
|--------------------|-------------------------------|

| ·   | Credit      ratings; |
|--------------------|----------------------|

| ·   | Business      climate; |
|--------------------|------------------------|

| ·   | Management      changes; |
|--------------------|--------------------------|

| ·   | Litigation      and government actions; and |
|--------------------|---------------------------------------------|

| ·   | Other      similar factors. |
|--------------------|-----------------------------|

| ·   | The      current fair value of the security as compared to  cost; |
|--------------------|-------------------------------------------------------------------|

| ·   | The      credit rating of the security; |
|--------------------|-----------------------------------------|

| ·   | The      extent and the length of time the fair value has been below      cost; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | The      financial position of the issuer, including the current and future impact      of any specific events, material declines in the issuer’s revenues,      margins, cash positions, liquidity issues, asset quality, debt levels and      income results; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant      management or organizationalchanges; |
|--------------------|-------------------------------------------------------|

| ·   | Significant      uncertainty regarding the issuer’sindustry; |
|--------------------|--------------------------------------------------------------------|

| ·   | Violation      of financial covenants; |
|--------------------|----------------------------------------|

| ·   | Consideration      of information or evidence that supports timely  recovery; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | The      Company’s intent and ability to hold a security until it recovers in      value; |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Whether      the Company intends to sell the investments and whether it is more likely      than not that the Company will be required to sell the investment before      recovery of the amortized cost basis;and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      business factors related to the issuer’s  industry. |
|--------------------|----------------------------------------------------------------------|

----

Table of Contents

| ·   | The      risk that the Company’s assessment of an issuer’s ability to meet all of      its contractual obligations will change based on changes in the credit      characteristics of that issuer; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the economic outlook will be worse than expected or have more of      an impact on the issuer thananticipated; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the performance of the underlying collateral for securities      could deteriorate in the future and the Company’s credit enhancement      levels and recovery values do not provide sufficient protection to the      Company’s contractual principal andinterest; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that fraudulent, inaccurate or misleading information could be      provided to the Company’s credit, investment and accounting professionals      who determine the fair value estimates and accounting treatment for      securities; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that new information obtained by the Company or changes in other      facts and circumstances may lead the Company to change its intent to sell      the security before it recovers invalue; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the facts and circumstances change such that it becomes more      likely than not that the Company will be required to sell the investment      before recovery of the amortized cost basis;and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the methodology or assumptions used to develop estimates of the      portion of impairments due to credit prove, over time, to be inaccurate or      insufficient. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents

|                                    |   | Fair   |    |   | Amortized |   |    | Unrealized |   |   | %             |   |
|-----------------------------------------|--------|--------|---------|--------|-----------|--------|---------|------------|--------|--------|---------------|--------|
|                                    |   | Value  |    |   | Cost      |   |    | Losses     |   |   | of      Total |   |
| Residential &      Non-agency MBS 1 |   |   |    |   |      |   |    |       |   |   |          |   |
| Investment      Grade:                  |   |   |    |   |      |   |    |       |   |   |          |   |
| Vintage      2003 and earlier           |   | $      | 83,798  |   |      | $      | 86,641  |       |   | $      | (2,843        | )      |   |   | 4 | % |
| 2004                                    |   |   | 61,759  |   |      |   | 80,413  |       |   |   | (18,654       | )      |   |   | 28 | % |
| 2005                                    |   |   | 31,302  |   |      |   | 42,749  |       |   |   | (11,447       | )      |   |   | 17 | % |
| 2006                                    |   |   | 4,885   |   |      |   | 5,844   |       |   |   | (959          | )      |   |   | 1 | % |
| 2007                                    |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| Total      investment grade             |   |   | 181,744 |   |      |   | 215,647 |       |   |   | (33,903       | )      |   |   | 50 | % |
|                                    |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Below      Investment Grade:            |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Vintage      2003 and earlier           |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| 2004                                    |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| 2005                                    |   |   | 28,543  |   |      |   | 50,693  |       |   |   | (22,150       | )      |   |   | 34 | % |
| 2006                                    |   |   | 2,461   |   |      |   | 6,203   |       |   |   | (3,742        | )      |   |   | 6 | % |
| 2007                                    |   |   | 4,067   |   |      |   | 5,872   |       |   |   | (1,805        | )      |   |   | 3 | % |
| Total      below investment grade       |   |   | 35,071  |   |      |   | 62,768  |       |   |   | (27,697       | )      |   |   | 43 | % |
|                                    |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Other StructuredSecurities:             |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Investment      grade                   |   |   | 109,306 |   |      |   | 111,636 |       |   |   | (2,330        | )      |   |   | 4 | % |
| Below      investment grade             |   |   | 42,607  |   |      |   | 44,865  |       |   |   | (2,258        | )      |   |   | 3 | % |
| Total      other                        |   |   | 151,913 |   |      |   | 156,501 |       |   |   | (4,588        | )      |   |   | 7 | % |
| Total      structured securities        |   | $      | 368,728 |   |      | $      | 434,916 |       |   | $      | (66,188       | )      |   |   | 100 | % |

----

Table of Contents

|                                    |   | Fair   |    |   | Amortized |   |    | Unrealized |   |   | %             |   |
|-----------------------------------------|--------|--------|---------|--------|-----------|--------|---------|------------|--------|--------|---------------|--------|
|                                    |   | Value  |    |   | Cost      |   |    | Losses     |   |   | of      Total |   |
| Residential &      Non-agency MBS 1 |   |   |    |   |      |   |    |       |   |   |          |   |
| Investment      Grade:                  |   |   |    |   |      |   |    |       |   |   |          |   |
| Vintage      2003 and earlier           |   | $      | 105,722 |   |      | $      | 113,645 |       |   | $      | (7,923        | )      |   |   | 9 | % |
| 2004                                    |   |   | 63,843  |   |      |   | 81,142  |       |   |   | (17,299       | )      |   |   | 21 | % |
| 2005                                    |   |   | 61,672  |   |      |   | 94,517  |       |   |   | (32,845       | )      |   |   | 39 | % |
| 2006                                    |   |   | 7,740   |   |      |   | 12,890  |       |   |   | (5,150        | )      |   |   | 6 | % |
| 2007                                    |   |   | 2,005   |   |      |   | 2,005   |       |   |   | -             |   |   |   | - |   |
| Total      investment grade             |   |   | 240,982 |   |      |   | 304,199 |       |   |   | (63,217       | )      |   |   | 75 | % |
|                                    |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Below      Investment Grade:            |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Vintage      2003 and earlier           |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| 2004                                    |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| 2005                                    |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| 2006                                    |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| 2007                                    |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
| Total      below investment grade       |   |   | -       |   |      |   | -       |       |   |   | -             |   |   |   | - |   |
|                                    |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Other StructuredSecurities:             |   |   |    |   |      |   |    |       |   |   |          |   |   |   |   |   |
| Investment      grade                   |   |   | 135,625 |   |      |   | 156,232 |       |   |   | (20,607       | )      |   |   | 24 | % |
| Below      investment grade             |   |   | 3,270   |   |      |   | 4,031   |       |   |   | (761          | )      |   |   | 1 | % |
| Total      other                        |   |   | 138,895 |   |      |   | 160,263 |       |   |   | (21,368       | )      |   |   | 25 | % |
| Total      structured securities        |   | $      | 379,877 |   |      | $      | 464,462 |       |   | $      | (84,585       | )      |   |   | 100 | % |

----

Table of Contents

|                                |   | Less Than 12 Months |    |   | 12 Months or Longer |   |   | Total  |   |
|-------------------------------------|--------|---------------------|---------|--------|---------------------|--------|--------|--------|--------|
|                                |   | Fair                |    |   | Unrealized          |   |   | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| Bonds:                              |   | Value               |    |   | Losses              |   |   | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| U.S.      Treasury securities and   |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligations      of U.S. Government |   | $                   | 11,692  |   |                | $      | 133    |   |   | $ | 3,203 |   |   | $ | 119 |   |   | $ | 14,895 |   |   | $ | 252 |   |
| Federal      agencies 1             |   |                | -       |   |                |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Federal      agency issued          |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed      securities 1   |   |                | 16,179  |   |                |   | 55     |   |   |   | 3,893 |   |   |   | 77 |   |   |   | 20,072 |   |   |   | 132 |   |
| Subtotal                            |   |                | 27,871  |   |                |   | 188    |   |   |   | 7,096 |   |   |   | 196 |   |   |   | 34,967 |   |   |   | 384 |   |
| Corporate      obligations          |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Industrial                          |   |                | 15,795  |   |                |   | 242    |   |   |   | 56,908 |   |   |   | 2,906 |   |   |   | 72,703 |   |   |   | 3,148 |   |
| Energy                              |   |                | 16,873  |   |                |   | 337    |   |   |   | 12,295 |   |   |   | 127 |   |   |   | 29,168 |   |   |   | 464 |   |
| Technology                          |   |                | -       |   |                |   | -      |   |   |   | 7,178 |   |   |   | 526 |   |   |   | 7,178 |   |   |   | 526 |   |
| Communications                      |   |                | 4,009   |   |                |   | 463    |   |   |   | 22,638 |   |   |   | 1,216 |   |   |   | 26,647 |   |   |   | 1,679 |   |
| Financial                           |   |                | 12,483  |   |                |   | 2,613  |   |   |   | 156,914 |   |   |   | 20,593 |   |   |   | 169,397 |   |   |   | 23,206 |   |
| Consumer                            |   |                | 10,837  |   |                |   | 182    |   |   |   | 40,872 |   |   |   | 2,085 |   |   |   | 51,709 |   |   |   | 2,267 |   |
| Public      utilities               |   |                | 16,274  |   |                |   | 650    |   |   |   | 25,954 |   |   |   | 1,537 |   |   |   | 42,228 |   |   |   | 2,187 |   |
| Total      corporate obligations    |   |                | 76,271  |   |                |   | 4,487  |   |   |   | 322,759 |   |   |   | 28,990 |   |   |   | 399,030 |   |   |   | 33,477 |   |
| Corporate      private-labeled      |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed      securities     |   |                | 12,451  |   |                |   | 2,101  |   |   |   | 176,436 |   |   |   | 48,411 |   |   |   | 188,887 |   |   |   | 50,512 |   |
| Other                               |   |                | 57,270  |   |                |   | 3,872  |   |   |   | 112,173 |   |   |   | 16,782 |   |   |   | 169,443 |   |   |   | 20,654 |   |
| Redeemable      preferred stocks    |   |                | -       |   |                |   | -      |   |   |   | 4,992 |   |   |   | 8 |   |   |   | 4,992 |   |   |   | 8 |   |
| Fixed      maturity securities      |   |                | 173,863 |   |                |   | 10,648 |   |   |   | 623,456 |   |   |   | 94,387 |   |   |   | 797,319 |   |   |   | 105,035 |   |
| Equity      securities:             |   |                |    |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial                           |   |                | 3,859   |   |                |   | 875    |   |   |   | 5,556 |   |   |   | 915 |   |   |   | 9,415 |   |   |   | 1,790 |   |
| Other                               |   |                | -       |   |                |   | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity      securities              |   |                | 3,859   |   |                |   | 875    |   |   |   | 5,556 |   |   |   | 915 |   |   |   | 9,415 |   |   |   | 1,790 |   |
| Total                               |   | $                   | 177,722 |   |                | $      | 11,523 |   |   | $ | 629,012 |   |   | $ | 95,302 |   |   | $ | 806,734 |   |   | $ | 106,825 |   |

----

Table of Contents

|                                |   | Less Than 12 Months |    |   | 12 Months or Longer |   |    | Total  |   |
|-------------------------------------|--------|---------------------|---------|--------|---------------------|--------|---------|--------|--------|
|                                |   | Fair                |    |   | Unrealized          |   |    | Fair   |   |   | Unrealized |   |   | Fair |   |   | Unrealized |   |
| Bonds:                              |   | Value               |    |   | Losses              |   |    | Value  |   |   | Losses |   |   | Value |   |   | Losses |   |
| U.S.      Treasury securities and   |   |                |    |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |
| obligations      of U.S. Government |   | $                   | 1,591   |   |                | $      | 260     |   |   | $ | 5,213 |   |   | $ | 139 |   |   | $ | 6,804 |   |   | $ | 399 |   |
| Federal      agencies 1             |   |                | -       |   |                |   | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Federal      agency issued          |   |                |    |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed      securities 1   |   |                | 28,933  |   |                |   | 419     |   |   |   | 25,404 |   |   |   | 216 |   |   |   | 54,337 |   |   |   | 635 |   |
| Subtotal                            |   |                | 30,524  |   |                |   | 679     |   |   |   | 30,617 |   |   |   | 355 |   |   |   | 61,141 |   |   |   | 1,034 |   |
| Corporate      obligations          |   |                |    |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Industrial                          |   |                | 152,873 |   |                |   | 11,301  |   |   |   | 72,964 |   |   |   | 16,067 |   |   |   | 225,837 |   |   |   | 27,368 |   |
| Energy                              |   |                | 104,230 |   |                |   | 12,571  |   |   |   | 17,098 |   |   |   | 3,122 |   |   |   | 121,328 |   |   |   | 15,693 |   |
| Technology                          |   |                | 5,828   |   |                |   | 1,352   |   |   |   | 6,975 |   |   |   | 1,704 |   |   |   | 12,803 |   |   |   | 3,056 |   |
| Communications                      |   |                | 27,885  |   |                |   | 3,584   |   |   |   | 17,674 |   |   |   | 4,093 |   |   |   | 45,559 |   |   |   | 7,677 |   |
| Financial                           |   |                | 171,513 |   |                |   | 18,408  |   |   |   | 94,853 |   |   |   | 27,385 |   |   |   | 266,366 |   |   |   | 45,793 |   |
| Consumer                            |   |                | 124,295 |   |                |   | 14,605  |   |   |   | 62,311 |   |   |   | 12,853 |   |   |   | 186,606 |   |   |   | 27,458 |   |
| Public      utilities               |   |                | 124,053 |   |                |   | 8,339   |   |   |   | 15,021 |   |   |   | 2,579 |   |   |   | 139,074 |   |   |   | 10,918 |   |
| Total      corporate obligations    |   |                | 710,677 |   |                |   | 70,160  |   |   |   | 286,896 |   |   |   | 67,803 |   |   |   | 997,573 |   |   |   | 137,963 |   |
| Corporate      private-labeled      |   |                |    |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| mortgage-backed      securities     |   |                | 114,480 |   |                |   | 15,261  |   |   |   | 90,001 |   |   |   | 37,534 |   |   |   | 204,481 |   |   |   | 52,795 |   |
| Other                               |   |                | 125,491 |   |                |   | 16,342  |   |   |   | 58,344 |   |   |   | 20,875 |   |   |   | 183,835 |   |   |   | 37,217 |   |
| Redeemable      preferred stocks    |   |                | 8,934   |   |                |   | 1,089   |   |   |   | - |   |   |   | - |   |   |   | 8,934 |   |   |   | 1,089 |   |
| Fixed      maturity securities      |   |                | 990,106 |   |                |   | 103,531 |   |   |   | 465,858 |   |   |   | 126,567 |   |   |   | 1,455,964 |   |   |   | 230,098 |   |
| Equity      securities:             |   |                |    |   |                |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Financial                           |   |                | 852     |   |                |   | 148     |   |   |   | 5,693 |   |   |   | 1,610 |   |   |   | 6,545 |   |   |   | 1,758 |   |
| Other                               |   |                | -       |   |                |   | -       |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Equity      securities              |   |                | 852     |   |                |   | 148     |   |   |   | 5,693 |   |   |   | 1,610 |   |   |   | 6,545 |   |   |   | 1,758 |   |
| Total                               |   | $                   | 990,958 |   |                | $      | 103,679 |   |   | $ | 471,551 |   |   | $ | 128,177 |   |   | $ | 1,462,509 |   |   | $ | 231,856 |   |

| ·   | 48      security issues representing 21% of the issues with unrealized losses,      including 81% being rated as investment grade, were below cost for less      than one year; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 113      security issues representing 50% of the issues with unrealized losses,      including 82% being rated as investment grade, were below cost for one      year or more and less than three years;and, |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 64      security issues representing 29% of the issues with unrealized losses,      including 81% being rated as investment grade, were below cost for three      years or more. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

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| ·   | 293      security issues representing 61% of the issues with unrealized losses,      including 94% being rated as investment grade, were below cost for less      than one year; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 65      security issues representing 13% of the issues with unrealized losses,      including 88% being rated as investment grade, were below cost for one      year or more and less than three years;and, |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 125      security issues representing 26% of the issues with unrealized losses,      including 92% being rated as investment grade, were below cost for three      years or more. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                       |   | September      30, 2009 |    |
|------------------------------------------------------------|--------|-------------------------|---------|
|                                                       |   |                    |    |   |   |   |   | Gross |   |
|                                                       |   | Amortized               |    |   | Fair |   |   | Unrealized |   |
| Securities      owned without realized impairment:         |   | Cost                    |    |   | Value |   |   | Losses |   |
| Unrealized      losses of 10% or less                      |   | $                       | 606,063 |   |   | $ | 584,903 |   |   | $ | 21,160 |   |
| Unrealized      losses of 20% or less and greater than 10% |   |                    | 78,529  |   |   |   | 67,185 |   |   |   | 11,344 |   |
| Subtotal                                                   |   |                    | 684,592 |   |   |   | 652,088 |   |   |   | 32,504 |   |
| Unrealized      losses greater than 20%:                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Investment      grade                                      |   |                    |    |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                    | 38,460  |   |   |   | 25,935 |   |   |   | 12,525 |   |
| Six      months or more and less than twelve months        |   |                    | 57,925  |   |   |   | 42,383 |   |   |   | 15,542 |   |
| Twelve      months or greater                              |   |                    | 33,616  |   |   |   | 22,515 |   |   |   | 11,101 |   |
| Total      investment grade                                |   |                    | 130,001 |   |   |   | 90,833 |   |   |   | 39,168 |   |
| Below      investment grade                                |   |                    |    |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                    | 1,652   |   |   |   | 1,311 |   |   |   | 341 |   |
| Six      months or more and less than twelve months        |   |                    | 17,293  |   |   |   | 11,459 |   |   |   | 5,834 |   |
| Twelve      months or greater                              |   |                    | 14,227  |   |   |   | 8,664 |   |   |   | 5,563 |   |
| Total      below investment grade                          |   |                    | 33,172  |   |   |   | 21,434 |   |   |   | 11,738 |   |
| Unrealized      losses greater than 20%                    |   |                    | 163,173 |   |   |   | 112,267 |   |   |   | 50,906 |   |
| Subtotal                                                   |   | $                       | 847,765 |   |   | $ | 764,355 |   |   | $ | 83,410 |   |
|                                                       |   |                    |    |   |   |   |   |   |   |   |   |   |
| Securities      owned with realized impairment:            |   |                    |    |   |   |   |   |   |   |   |   |   |
| Unrealized      losses of 10% or less                      |   | $                       | 3,305   |   |   | $ | 3,250 |   |   | $ | 55 |   |
| Unrealized      losses of 20% or less and greater than 10% |   |                    | 4,850   |   |   |   | 4,356 |   |   |   | 494 |   |
| Subtotal                                                   |   |                    | 8,155   |   |   |   | 7,606 |   |   |   | 549 |   |
| Unrealized      losses greater than 20%:                   |   |                    |    |   |   |   |   |   |   |   |   |   |
| Investment      grade                                      |   |                    |    |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                    | -       |   |   |   | - |   |   |   | - |   |
| Six      months or more and less than twelve months        |   |                    | -       |   |   |   | - |   |   |   | - |   |
| Twelve      months or greater                              |   |                    | -       |   |   |   | - |   |   |   | - |   |
| Total      investment grade                                |   |                    | -       |   |   |   | - |   |   |   | - |   |
| Below      investment grade                                |   |                    |    |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                    | 33,603  |   |   |   | 17,566 |   |   |   | 16,037 |   |
| Six      months or more and less than twelve months        |   |                    | 12,831  |   |   |   | 7,792 |   |   |   | 5,039 |   |
| Twelve      months or greater                              |   |                    | -       |   |   |   | - |   |   |   | - |   |
| Total      below investment grade                          |   |                    | 46,434  |   |   |   | 25,358 |   |   |   | 21,076 |   |
| Unrealized      losses greater than 20%                    |   |                    | 46,434  |   |   |   | 25,358 |   |   |   | 21,076 |   |
| Subtotal                                                   |   | $                       | 54,589  |   |   | $ | 32,964 |   |   | $ | 21,625 |   |
| Total      unrealized losses                               |   | $                       | 902,354 |   |   | $ | 797,319 |   |   | $ | 105,035 |   |

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|                                                       |   | December      31, 2008 |      |
|------------------------------------------------------------|--------|------------------------|-----------|
|                                                       |   |                   |      |   |   |   |   | Gross |   |
|                                                       |   | Amortized              |      |   | Fair |   |   | Unrealized |   |
| Securities      owned without realized impairment:         |   | Cost                   |      |   | Value |   |   | Losses |   |
| Unrealized      losses of 10% or less                      |   | $                      | 885,917   |   |   | $ | 842,348 |   |   | $ | 43,569 |   |
| Unrealized      losses of 20% or less and greater than 10% |   |                   | 397,964   |   |   |   | 340,187 |   |   |   | 57,777 |   |
| Subtotal                                                   |   |                   | 1,283,881 |   |   |   | 1,182,535 |   |   |   | 101,346 |   |
| Unrealized      losses greater than 20%:                   |   |                   |      |   |   |   |   |   |   |   |   |   |
| Investment      grade                                      |   |                   |      |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                   | 295,534   |   |   |   | 206,441 |   |   |   | 89,093 |   |
| Six      months or more and less than twelve months        |   |                   | 42,755    |   |   |   | 25,613 |   |   |   | 17,142 |   |
| Twelve      months or greater                              |   |                   | -         |   |   |   | - |   |   |   | - |   |
| Total      investment grade                                |   |                   | 338,289   |   |   |   | 232,054 |   |   |   | 106,235 |   |
| Below      investment grade                                |   |                   |      |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                   | 45,631    |   |   |   | 28,490 |   |   |   | 17,141 |   |
| Six      months or more and less than twelve months        |   |                   | 4,547     |   |   |   | 2,098 |   |   |   | 2,449 |   |
| Twelve      months or greater                              |   |                   | -         |   |   |   | - |   |   |   | - |   |
| Total      below investment grade                          |   |                   | 50,178    |   |   |   | 30,588 |   |   |   | 19,590 |   |
| Unrealized      losses greater than 20%                    |   |                   | 388,467   |   |   |   | 262,642 |   |   |   | 125,825 |   |
| Subtotal                                                   |   | $                      | 1,672,348 |   |   | $ | 1,445,177 |   |   | $ | 227,171 |   |
|                                                       |   |                   |      |   |   |   |   |   |   |   |   |   |
| Securities      owned with realized impairment:            |   |                   |      |   |   |   |   |   |   |   |   |   |
| Unrealized      losses of 10% or less                      |   | $                      | 2,644     |   |   | $ | 2,454 |   |   | $ | 190 |   |
| Unrealized      losses of 20% or less and greater than 10% |   |                   | 4,031     |   |   |   | 3,270 |   |   |   | 761 |   |
| Subtotal                                                   |   |                   | 6,675     |   |   |   | 5,724 |   |   |   | 951 |   |
| Unrealized      losses greater than 20%:                   |   |                   |      |   |   |   |   |   |   |   |   |   |
| Investment      grade                                      |   |                   |      |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                   | 6,476     |   |   |   | 4,635 |   |   |   | 1,841 |   |
| Six      months or more and less than twelve months        |   |                   | -         |   |   |   | - |   |   |   | - |   |
| Twelve      months or greater                              |   |                   | -         |   |   |   | - |   |   |   | - |   |
| Total      investment grade                                |   |                   | 6,476     |   |   |   | 4,635 |   |   |   | 1,841 |   |
| Below      investment grade                                |   |                   |      |   |   |   |   |   |   |   |   |   |
| Less      than six months                                  |   |                   | 563       |   |   |   | 428 |   |   |   | 135 |   |
| Six      months or more and less than twelve months        |   |                   | -         |   |   |   | - |   |   |   | - |   |
| Twelve      months or greater                              |   |                   | -         |   |   |   | - |   |   |   | - |   |
| Total      below investment grade                          |   |                   | 563       |   |   |   | 428 |   |   |   | 135 |   |
| Unrealized      losses greater than 20%                    |   |                   | 7,039     |   |   |   | 5,063 |   |   |   | 1,976 |   |
| Subtotal                                                   |   | $                      | 13,714    |   |   | $ | 10,787 |   |   | $ | 2,927 |   |
| Total      unrealized losses                               |   | $                      | 1,686,062 |   |   | $ | 1,455,964 |   |   | $ | 230,098 |   |

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|                                                      |   |   |    |   |          |   |   | Gross      |   |   |          |   |
|-----------------------------------------------------------|--------|--------|---------|--------|---------------|--------|--------|------------|--------|--------|---------------|--------|
|                                                      |   | Fair   |    |   | %             |   |   | Unrealized |   |   | %             |   |
| Equivalent S&P Rating                                 |   | Value  |    |   | of      Total |   |   | Losses     |   |   | of      Total |   |
| AAA                                                       |   | $      | 268,919 |   |          |   | 34     | %          |   | $      | 22,334        |   |   |   | 21 | % |
| AA                                                        |   |   | 39,386  |   |          |   | 5      | %          |   |   | 3,525         |   |   |   | 3 | % |
| A                                                         |   |   | 102,755 |   |          |   | 13     | %          |   |   | 17,166        |   |   |   | 17 | % |
| BBB                                                       |   |   | 255,472 |   |          |   | 32     | %          |   |   | 24,657        |   |   |   | 23 | % |
|     Total      investment grade       |   |   | 666,532 |   |          |   | 84     | %          |   |   | 67,682        |   |   |   | 64 | % |
| BB                                                        |   |   | 56,788  |   |          |   | 7      | %          |   |   | 10,226        |   |   |   | 10 | % |
| B      and below                                          |   |   | 73,999  |   |          |   | 9      | %          |   |   | 27,127        |   |   |   | 26 | % |
|     Total      below investment grade |   |   | 130,787 |   |          |   | 16     | %          |   |   | 37,353        |   |   |   | 36 | % |
|                                                      |   | $      | 797,319 |   |          |   | 100    | %          |   | $      | 105,035       |   |   |   | 100 | % |

|                                                      |   |   |      |   |          |   |   | Gross      |   |   |          |   |
|-----------------------------------------------------------|--------|--------|-----------|--------|---------------|--------|--------|------------|--------|--------|---------------|--------|
|                                                      |   | Fair   |      |   | %             |   |   | Unrealized |   |   | %             |   |
| Equivalent S&P Rating                                 |   | Value  |      |   | of      Total |   |   | Losses     |   |   | of      Total |   |
| AAA                                                       |   | $      | 400,841   |   |          |   | 28     | %          |   | $      | 65,896        |   |   |   | 29 | % |
| AA                                                        |   |   | 79,814    |   |          |   | 5      | %          |   |   | 12,218        |   |   |   | 5 | % |
| A                                                         |   |   | 384,484   |   |          |   | 26     | %          |   |   | 41,718        |   |   |   | 18 | % |
| BBB                                                       |   |   | 499,230   |   |          |   | 34     | %          |   |   | 84,121        |   |   |   | 36 | % |
|     Total      investment grade       |   | $      | 1,364,369 |   |          |   | 93     | %          |   | $      | 203,953       |   |   |   | 88 | % |
| BB                                                        |   |   | 67,694    |   |          |   | 5      | %          |   |   | 17,742        |   |   |   | 8 | % |
| B      and below                                          |   |   | 23,901    |   |          |   | 2      | %          |   |   | 8,403         |   |   |   | 4 | % |
|     Total      below investment grade |   |   | 91,595    |   |          |   | 7      | %          |   |   | 26,145        |   |   |   | 12 | % |
|                                                      |   | $      | 1,455,964 |   |          |   | 100    | %          |   | $      | 230,098       |   |   |   | 100 | % |

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|                                        |   | September      30, 2009 |    |
|---------------------------------------------|--------|-------------------------|---------|
|                                        |   |                    |    |   | Gross |   |
| Fixed      maturity security securities     |   | Fair                    |    |   | Unrealized |   |
| available      for sale:                    |   | Value                   |    |   | Losses |   |
| Due      in one year or less                |   | $                       | 19,453  |   |   | $ | 128 |   |
| Due      after one year through five years  |   |                    | 86,011  |   |   |   | 6,121 |   |
| Due      after five years through ten years |   |                    | 183,952 |   |   |   | 15,659 |   |
| Due      after ten years                    |   |                    | 283,952 |   |   |   | 32,375 |   |
| Total                                       |   |                    | 573,368 |   |   |   | 54,283 |   |
| Mortgage      and asset-backed securities   |   |                    | 218,959 |   |   |   | 50,744 |   |
| Redeemable      preferred stocks            |   |                    | 4,992   |   |   |   | 8 |   |
| Total                                       |   | $                       | 797,319 |   |   | $ | 105,035 |   |

|                                        |   | December      31, 2008 |      |
|---------------------------------------------|--------|------------------------|-----------|
|                                        |   |                   |      |   | Gross |   |
| Fixed      maturity security securities     |   | Fair                   |      |   | Unrealized |   |
| available      for sale:                    |   | Value                  |      |   | Losses |   |
| Due      in one year or less                |   | $                      | 46,704    |   |   | $ | 1,188 |   |
| Due      after one year through five years  |   |                   | 324,178   |   |   |   | 42,218 |   |
| Due      after five years through ten years |   |                   | 472,169   |   |   |   | 73,157 |   |
| Due      after ten years                    |   |                   | 343,121   |   |   |   | 59,002 |   |
| Total                                       |   |                   | 1,186,172 |   |   |   | 175,565 |   |
| Mortgage      and asset-backed securities   |   |                   | 260,858   |   |   |   | 53,444 |   |
| Redeemable      preferred stocks            |   |                   | 8,934     |   |   |   | 1,089 |   |
| Total                                       |   | $                      | 1,455,964 |   |   | $ | 230,098 |   |

| ·   | Seven      securities are subprime or Alt-A mortgage-backed      securities.  Mortgage-backed securities have suffered      indiscriminate price depreciation in the current market, regardless of      individual performance or vintage.  However, all of these      securities continue to perform within their contractual      obligations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is a senior tranche of an asset-backed security structure backed      primarily by subprime mortgages on residential properties.  This      security has also been affected by the price depreciation in the current      market but continues to perform within its contractual      obligations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is mortgage-backed security backed by subprime      collateral.  As previously stated, mortgage-backed securities      have suffered indiscriminate price depreciation in the current market,      regardless of individual performance or vintage.  However, this      security has a monoline insurance guarantee that is performing according      to the terms of the security. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Four      securities from three issuers are from financial institutions that have      been impacted by the housing and mortgage credit crisis.  The      government has supported these institutions through TARP      funds.  All of these securities continue to perform within their      contractual obligations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from a financial institution that has been impacted by the      housing and mortgage credit crisis that has not received TARP      assistance.  This security continues to perform within its      contractual obligations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is a trust preferred security from an issuer that has also been      negatively impacted by the housing and mortgage credit crisis and has      received TARP funds.  This security continues to perform within      its contractual obligations. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | One      security is a subprime asset backed security.  Rising      delinquencies and defaults in the subprime and non-conforming mortgage      markets have resulted in a severe decline in the market value for these      securities.  However, this security continues to perform within      its contractual obligations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from an international banking institution that has been      negatively impacted by the effects of both the global credit deterioration      and the U.S. housing and mortgage credit crisis.  However, the      credit losses have not risen to the level of some of the U.S.-domiciled      banking groups, and all have sufficient capital at this    time. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from a company that sells consumer goods.  Lower      sales resulting from a cyclical decline in consumer spending has impacted      earnings and cash flows.  However, this security continues to      perform within its contractualobligations. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities from one issuer are from real estate investment      trusts.  Credit markets have experienced dislocation that has      impacted price performance of residential and commercial real estate      assets.  These companies maintain unencumbered, high quality,      well located properties that could be used as collateral for additional      liquidity or creditor support, ifneeded. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is a CDO that has been impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling have caused extreme declines in market valuations, regardless of      individual security performance.  This security continues to      perform within its contractualobligations. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from a specialty retailer of items for the home such as      appliances and electronics.  This security is backed by a      revolving pool of secured customer installment loans and private label      credit card receivables originated and serviced by the      company.  This company has been negatively impacted by the      general rise in consumer defaults and delinquency rates and a recent      ratings downgrade.  However, this security continues to perform      within its contractual obligations. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, are financial      guarantee insurance companies that provide credit enhancement for bond      issuers as well as investment management services.  These      issuers have experienced declines in value related to the mortgage credit      crisis and ratings downgrades have limited the amount of new business      written.  However, these securities continue to perform within      their contractual maturities. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                    |   | Quarter      Ended |    |   | Nine      Months Ended |   |
|---------------------------------------------------------|--------|--------------------|---------|--------|------------------------|--------|
|                                                    |   | September      30  |    |   | September      30      |   |
|                                                    |   | 2009               |    |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Insurance      revenues:                                |   |               |    |   |                   |   |   |   |   |   |   |   |
| Premiums                                                |   | $                  | 22,909  |   |                   | $      | 14,521 |   |   | $ | 52,162 |   |   | $ | 44,518 |   |
| Contract      charges                                   |   |               | 26,448  |   |                   |   | 27,227 |   |   |   | 79,418 |   |   |   | 81,054 |   |
| Reinsurance      ceded                                  |   |               | (10,727 | )      |                   |   | (10,534 | ) |   |   | (31,263 | ) |   |   | (31,188 | ) |
| Total      insurance revenues                           |   |               | 38,630  |   |                   |   | 31,214 |   |   |   | 100,317 |   |   |   | 94,384 |   |
| Investment      revenues:                               |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      investment income                              |   |               | 41,052  |   |                   |   | 41,057 |   |   |   | 122,307 |   |   |   | 126,393 |   |
| Realized      investment gains, excluding               |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| impairment      losses                                  |   |               | 1,195   |   |                   |   | 2,940 |   |   |   | 4,927 |   |   |   | 4,773 |   |
| Net      impairment losses recognized in earnings:      |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total      other-than-temporary impairment losses       |   |               | (2,119  | )      |                   |   | (30,924 | ) |   |   | (25,318 | ) |   |   | (40,624 | ) |
| Portion      of impairment losses recognized in         |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| other      comprehensive income (loss)                  |   |               | 187     |   |                   |   | - |   |   |   | 13,774 |   |   |   | - |   |
| Net      impairment losses recognized in earnings       |   |               | (1,932  | )      |                   |   | (30,924 | ) |   |   | (11,544 | ) |   |   | (40,624 | ) |
| Total      investment revenues                          |   |               | 40,315  |   |                   |   | 13,073 |   |   |   | 115,690 |   |   |   | 90,542 |   |
| Other      revenues                                     |   |               | 3,311   |   |                   |   | 4,163 |   |   |   | 8,121 |   |   |   | 9,288 |   |
| Total      revenues                                     |   |               | 82,256  |   |                   |   | 48,450 |   |   |   | 224,128 |   |   |   | 194,214 |   |
|                                                    |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Policyholder      benefits                              |   |               | 31,249  |   |                   |   | 24,087 |   |   |   | 78,092 |   |   |   | 75,868 |   |
| Interest      credited to policyholder account balances |   |               | 21,898  |   |                   |   | 21,742 |   |   |   | 64,772 |   |   |   | 65,119 |   |
| Amortization      of deferred acquisition costs         |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| and      value of business acquired                     |   |               | 6,385   |   |                   |   | 7,401 |   |   |   | 18,823 |   |   |   | 19,490 |   |
| Operating      expenses                                 |   |               | 15,548  |   |                   |   | 17,526 |   |   |   | 50,763 |   |   |   | 47,463 |   |
| Total      benefits and expenses                        |   |               | 75,080  |   |                   |   | 70,756 |   |   |   | 212,450 |   |   |   | 207,940 |   |
|                                                    |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) before income tax expense (benefit)  |   |               | 7,176   |   |                   |   | (22,306 | ) |   |   | 11,678 |   |   |   | (13,726 | ) |
|                                                    |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax expense (benefit)                       |   |               | 1,792   |   |                   |   | (7,941 | ) |   |   | 3,430 |   |   |   | (5,137 | ) |
|                                                    |   |               |    |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income (loss)                                  |   | $                  | 5,384   |   |                   | $      | (14,365 | ) |   | $ | 8,248 |   |   | $ | (8,589 | ) |

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|                           |   | Quarter      Ended September 30 |   |
|--------------------------------|--------|---------------------------------|--------|
|                           |   | 2009                            |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      premiums:             |   |                            |   |   |   |   |   |   |   |   |   |   |
| Individual      life insurance |   | $                               | 1,373  |   |   |   | (8 | ) |   | $ | 1,497 |   |   |   | 6 |   |
| Immediate      annuities       |   |                            | 10,842 |   |   |   | 347 |   |   |   | 2,426 |   |   |   | 41 |   |
| Total      new premiums        |   |                            | 12,215 |   |   |   | 211 |   |   |   | 3,923 |   |   |   | 25 |   |
| Renewal      premiums          |   |                            | 10,694 |   |   |   | 1 |   |   |   | 10,598 |   |   |   | 3 |   |
| Total      premiums            |   | $                               | 22,909 |   |   |   | 58 |   |   | $ | 14,521 |   |   |   | 8 |   |

|                           |   | Nine      Months Ended September 30 |   |
|--------------------------------|--------|-------------------------------------|--------|
|                           |   | 2009                                |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      premiums:             |   |                                |   |   |   |   |   |   |   |   |   |   |
| Individual      life insurance |   | $                                   | 4,023  |   |   |   | (7 | ) |   | $ | 4,339 |   |   |   | 2 |   |
| Immediate      annuities       |   |                                | 16,842 |   |   |   | 87 |   |   |   | 9,014 |   |   |   | 64 |   |
| Total      new premiums        |   |                                | 20,865 |   |   |   | 56 |   |   |   | 13,353 |   |   |   | 37 |   |
| Renewal      premiums          |   |                                | 31,297 |   |   |   | - |   |   |   | 31,165 |   |   |   | - |   |
| Total      premiums            |   | $                                   | 52,162 |   |   |   | 17 |   |   | $ | 44,518 |   |   |   | 9 |   |

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|                                   |   | Quarter      Ended September 30 |   |
|----------------------------------------|--------|---------------------------------|--------|
|                                   |   | 2009                            |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      deposits:                     |   |                            |   |   |   |   |   |   |   |   |   |   |
| Universal      life insurance          |   | $                               | 2,119  |   |   |   | (23 | ) |   | $ | 2,741 |   |   |   | 4 |   |
| Variable      universal life insurance |   |                            | 176    |   |   |   | (65 | ) |   |   | 501 |   |   |   | 4 |   |
| Fixed      deferred annuities          |   |                            | 19,323 |   |   |   | 196 |   |   |   | 6,532 |   |   |   | (25 | ) |
| Variable      annuities                |   |                            | 3,330  |   |   |   | (43 | ) |   |   | 5,800 |   |   |   | (15 | ) |
| Total      new deposits                |   |                            | 24,948 |   |   |   | 60 |   |   |   | 15,574 |   |   |   | 16 |   |
| Renewal      deposits                  |   |                            | 34,196 |   |   |   | 2 |   |   |   | 33,421 |   |   |   | 1 |   |
| Total      deposits                    |   | $                               | 59,144 |   |   |   | 21 |   |   | $ | 48,995 |   |   |   | (5 | ) |

|                                   |   | Nine      Months Ended September 30 |    |
|----------------------------------------|--------|-------------------------------------|---------|
|                                   |   | 2009                                |    |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      deposits:                     |   |                                |    |   |   |   |   |   |   |   |   |   |
| Universal      life insurance          |   | $                                   | 6,079   |   |   |   | (19 | ) |   | $ | 7,482 |   |   |   | (7 | ) |
| Variable      universal life insurance |   |                                | 873     |   |   |   | (42 | ) |   |   | 1,510 |   |   |   | (20 | ) |
| Fixed      deferred annuities          |   |                                | 64,651  |   |   |   | 260 |   |   |   | 17,967 |   |   |   | (13 | ) |
| Variable      annuities                |   |                                | 11,091  |   |   |   | (47 | ) |   |   | 20,811 |   |   |   | 6 |   |
| Total      new deposits                |   |                                | 82,694  |   |   |   | 73 |   |   |   | 47,770 |   |   |   | (5 | ) |
| Renewal      deposits                  |   |                                | 99,308  |   |   |   | - |   |   |   | 99,604 |   |   |   | (5 | ) |
| Total      deposits                    |   | $                                   | 182,002 |   |   |   | 23 |   |   | $ | 147,374 |   |   |   | (5 | ) |

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| ·   | Four      securities (from two issuers) were mortgage-backed securities that were      written down by a total of $0.3 million.  The significant      decline in the subprime and non-conforming mortgage markets and the      specific performance of the underlying collateral caused the Company’s      cash flow projections to be less than the amortized cost of the securities      and created an other-than-temporary impairment.  These      securities had been previously written down due to reduced projected cash      flows from the underlyingsecuritizations. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and is currently under reorganization was written down $0.2      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written down and      continues to be challenged in its market and industry.  This      security was exchanged for a replacement security during the third quarter      of 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.3 million.  This company has been affected by the credit      crisis, causing reduced access to liquidity and higher borrowing      costs.  This security had been written down in a previous      period.  The Company determined that a credit-related impairment      had occurred, and this security was sold during the third quarter of      2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a financial institution that had been impacted by the      housing and mortgage credit crisis and had been supported through TARP      funds.  This company has experienced large losses in its real      estate loan portfolios and has had an increase in non-performing loans      over the past year.  This security was written down by a total      of $1.1 million before it was sold during the third quarter of      2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities (from two issuers) were mortgage-backed securities that were      written down by a total of $0.1 million.  The significant      decline in the subprime and non-conforming mortgage markets and the      specific performance of the underlying collateral caused the Company’s      cash flow projections to be less than the amortized cost of the securities      and creating an other-than-temporary impairment.  These      securities had been previously written down due to reduced projected cash      flows from the underlyingsecuritizations. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a CDO that was written down $0.2 million.  This      security has been impacted by the rapid rise in delinquencies and      foreclosures in the subprime and Alt-A mortgage markets, along with a      decline in the fair value of securities issued by financial      institutions.  Ongoing CDO liquidations and investor selling had      caused extreme declines in market valuations, regardless of individual      security performance.  This security had been written down      before in previous periods. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and is currently under reorganization was written down $1.0      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written down and      continues to be challenged in its market and  industry. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.5 million.  This company had been affected by the credit      crisis, facing reduced access to liquidity and higher borrowing      costs.  The Company determined that a credit-related impairment      had occurred. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $1.8 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | The      Company’s analysis of securities for the first quarter of 2009 resulted in      the determination that investments in six fixed-maturity issuers (seven      specific securities) had other-than-temporary impairments affecting the      Individual Insurance segment.  These securities were written      down by a combined $6.0 million due to credit impairments.  The      aggregate impairment for these securities was $19.2 million, and $13.2      million of this amount was determined to be non-credit and was recognized      in other comprehensive income (loss).  The total fair value of      the affected securities after the write-downs was $19.8      million. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a mortgage and financial guaranty insurer that was      written down $1.6 million.  Mortgage insurers have suffered from      the deterioration in the U.S. housing market and mortgage credit      market.  Rising mortgage delinquencies and defaults have      resulted in rating downgrades for these insurers.  Recent rating      downgrades, combined with the issuer’s need to raise additional capital to      meet future payments contributed to the other-than-temporary      impairment. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $1.6      million.  As the trucking industry is highly correlated with the      general economy, this company has experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter, but new covenants placed      significant requirements on the issuer.  These restrictions,      combined with the need to retire longer-term debt, place additional stress      on cash resources and led to indications of continued weakening      performance that the Company believes are      other-than-temporary. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that develops, manufactures and markets      imaging products that was written down $1.2 million.   This      company’s past emphasis was in traditional film, which has been largely      surpassed by digital photography.  The decline in the economy      has negatively affected sales, as the consumer photography industry is a      discretionary item.  The company’s declining revenues and      liquidity position led to the other-than-temporary    impairment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities (from one issuer) were mortgage-backed securities that were      written down by a total of $0.5 million.  The significant      decline in the subprime and non-conforming mortgage markets and the      specific performance of the underlying collateral caused the Company’s      cash flow projections to be less than the amortized cost of the securities      and created an other-than-temporaryimpairment. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a mortgage-backed security that was written down $0.1      million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the securities and creating an      other-than-temporary impairment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.0 million as the Company accepted a tender      offer on the Company’s holdings from an issuer during the second quarter      of 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $6.5 million.  These      entities buy and hold mortgages and issue and sell guaranteed      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments have been suspended,      driving the fair value of these securitiesdown. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities from the same issuer were from an investment banking firm that      filed for bankruptcy during the third quarter of 2008 and were written      down by a total of $9.2 million.  This firm was part of the      financial industry that was hit hard by the mortgage credit      crisis.  After a severe decline in equity valuations, the      inability to obtain short-term funding and the failure to find an acquirer      forced this firm to file for Chapter 11  bankruptcy. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs that were written down by a total of $5.1      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling have caused |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | extreme      declines in market valuations, regardless of individual security      performance. |
|--------|-------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, are financial      guarantee insurance companies that provide credit enhancement for bond      issuers as well as investment management services and were written down by      a total of $3.9 million.  These issuers had also experienced      declines in value related to the mortgage credit crisis and had recently      been downgraded to a negativeoutlook. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from the auto industry and is a supplier of auto parts for      light trucks and sport-utility vehicles.  The deteriorating      truck and sport-utility vehicle markets of the auto industry combined with      the sharp decline in value and recent ratings declines resulted in a $2.1      million write-down. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.1 million as continued price deterioration      occurred on this security that was previously written down.  The      issuer is primarily in the radio and advertising  business. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security provided custom-tailored financing to private and corporate      owners of real estate nationwide.  This security had a recent      rating decline to below investment grade status combined with continued      price deterioration and was written down $2.3  million. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a bank holding company that recently filed for      bankruptcy.  This holding company was the parent of a large      nationwide bank that was recently taken over by the Office of Thrift      Supervision who appointed the FDIC as its receiver.  As a result      of the bankruptcy filing, this security was written down $0.8      million. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      of the securities were written down by a total of $3.0 million, primarily      as a result of declines in price and rating agency downgrades on debt      issues from issuers that had recently completed leveraged buyout (LBO)      transactions.  These LBO transactions greatly increased the debt      level of each issuer.  One of these securities had been written      down previously, and the other two securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs and were written down by $2.6 million, primarily due      to price declines that had persisted for periods longer than the Company      considered temporary.  Both securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $3.3 million due to combination of a decline      in price that had persisted for a period longer than the Company      considered temporary, rating agency downgrades and a debt restructuring      during the quarter. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.8 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary and a further deterioration in fair value during the      second quarter of 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                |   | Quarter      Ended |   |   | Nine      Months Ended |   |
|-------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
|                                |   | September      30  |   |   | September      30      |   |
|                                |   | 2009               |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Insurance      revenues:            |   |               |   |   |                   |   |   |   |   |   |   |   |
| Premiums                            |   | $                  | 14,250 |   |                   | $      | 14,162 |   |   | $ | 42,536 |   |   | $ | 41,811 |   |
| Reinsurance      ceded              |   |               | (3,147 | )      |                   |   | (1,894 | ) |   |   | (6,779 | ) |   |   | (5,576 | ) |
| Total      insurance revenues       |   |               | 11,103 |   |                   |   | 12,268 |   |   |   | 35,757 |   |   |   | 36,235 |   |
| Investment      revenues:           |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      investment income          |   |               | 136    |   |                   |   | 134 |   |   |   | 406 |   |   |   | 389 |   |
| Other      revenues                 |   |               | 102    |   |                   |   | 78 |   |   |   | 181 |   |   |   | 200 |   |
| Total      revenues                 |   |               | 11,341 |   |                   |   | 12,480 |   |   |   | 36,344 |   |   |   | 36,824 |   |
|                                |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Policyholder      benefits          |   |               | 8,845  |   |                   |   | 8,661 |   |   |   | 25,841 |   |   |   | 25,207 |   |
| Operating      expenses             |   |               | 3,970  |   |                   |   | 4,504 |   |   |   | 13,173 |   |   |   | 13,873 |   |
| Total      benefits and expenses    |   |               | 12,815 |   |                   |   | 13,165 |   |   |   | 39,014 |   |   |   | 39,080 |   |
|                                |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      before income tax benefit |   |               | (1,474 | )      |                   |   | (685 | ) |   |   | (2,670 | ) |   |   | (2,256 | ) |
|                                |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax benefit             |   |               | (516   | )      |                   |   | (289 | ) |   |   | (935 | ) |   |   | (812 | ) |
|                                |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss                       |   | $                  | (958   | )      |                   | $      | (396 | ) |   | $ | (1,735 | ) |   | $ | (1,444 | ) |

|                            |   | Quarter      Ended September 30 |   |
|---------------------------------|--------|---------------------------------|--------|
|                            |   | 2009                            |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      premiums:              |   |                            |   |   |   |   |   |   |   |   |   |   |
| Group      life insurance       |   | $                               | 359    |   |   |   | (31 | ) |   | $ | 518 |   |   |   | 18 |   |
| Group      dental insurance     |   |                            | 1,753  |   |   |   | (23 | ) |   |   | 2,269 |   |   |   | 44 |   |
| Group      disability insurance |   |                            | 1,001  |   |   |   | 142 |   |   |   | 414 |   |   |   | 2 |   |
| Other      group insurance      |   |                            | 10     |   |   |   | (85 | ) |   |   | 65 |   |   |   | (76 | ) |
| Total      new premiums         |   |                            | 3,123  |   |   |   | (4 | ) |   |   | 3,266 |   |   |   | 21 |   |
| Renewal      premiums           |   |                            | 11,127 |   |   |   | 2 |   |   |   | 10,896 |   |   |   | 3 |   |
| Total      premiums             |   | $                               | 14,250 |   |   |   | 1 |   |   | $ | 14,162 |   |   |   | 7 |   |

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Table of Contents

|                            |   | Nine      Months Ended September 30 |   |
|---------------------------------|--------|-------------------------------------|--------|
|                            |   | 2009                                |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
| New      premiums:              |   |                                |   |   |   |   |   |   |   |   |   |   |
| Group      life insurance       |   | $                                   | 1,134  |   |   |   | (29 | ) |   | $ | 1,598 |   |   |   | 45 |   |
| Group      dental insurance     |   |                                | 5,304  |   |   |   | (21 | ) |   |   | 6,704 |   |   |   | 35 |   |
| Group      disability insurance |   |                                | 2,159  |   |   |   | 63 |   |   |   | 1,328 |   |   |   | 18 |   |
| Other      group insurance      |   |                                | 82     |   |   |   | (59 | ) |   |   | 200 |   |   |   | (87 | ) |
| Total      new premiums         |   |                                | 8,679  |   |   |   | (12 | ) |   |   | 9,830 |   |   |   | 12 |   |
| Renewal      premiums           |   |                                | 33,857 |   |   |   | 6 |   |   |   | 31,981 |   |   |   | 1 |   |
| Total      premiums             |   | $                                   | 42,536 |   |   |   | 2 |   |   | $ | 41,811 |   |   |   | 3 |   |

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|                                               |   | Quarter      Ended |   |   | Nine      Months Ended |   |
|----------------------------------------------------|--------|--------------------|--------|--------|------------------------|--------|
|                                               |   | September      30  |   |   | September      30      |   |
|                                               |   | 2009               |   |   | 2008                   |   |   | 2009 |   |   | 2008 |   |
| Insurance      revenues:                           |   |               |   |   |                   |   |   |   |   |   |   |   |
| Premiums                                           |   | $                  | 16,405 |   |                   | $      | 16,297 |   |   | $ | 48,864 |   |   | $ | 48,896 |   |
| Reinsurance      ceded                             |   |               | (771   | )      |                   |   | (851 | ) |   |   | (2,404 | ) |   |   | (2,721 | ) |
| Total      insurance revenues                      |   |               | 15,634 |   |                   |   | 15,446 |   |   |   | 46,460 |   |   |   | 46,175 |   |
| Investment      revenues:                          |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      investment income                         |   |               | 3,333  |   |                   |   | 3,146 |   |   |   | 9,552 |   |   |   | 9,634 |   |
| Realized      investment gains, excluding          |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| impairment      losses                             |   |               | 7      |   |                   |   | 227 |   |   |   | 281 |   |   |   | 330 |   |
| Net      impairment losses recognized in earnings: |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Total      other-than-temporary impairment losses  |   |               | (403   | )      |                   |   | (1,538 | ) |   |   | (3,035 | ) |   |   | (2,063 | ) |
| Portion      of impairment losses recognized in    |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| other      comprehensive income (loss)             |   |               | 16     |   |                   |   | - |   |   |   | 2,120 |   |   |   | - |   |
| Net      impairment losses recognized in earnings  |   |               | (387   | )      |                   |   | (1,538 | ) |   |   | (915 | ) |   |   | (2,063 | ) |
| Total      investment revenues                     |   |               | 2,953  |   |                   |   | 1,835 |   |   |   | 8,918 |   |   |   | 7,901 |   |
| Other      revenues                                |   |               | -      |   |                   |   | - |   |   |   | 1 |   |   |   | 1 |   |
| Total      revenues                                |   |               | 18,587 |   |                   |   | 17,281 |   |   |   | 55,379 |   |   |   | 54,077 |   |
|                                               |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Policyholder      benefits                         |   |               | 10,420 |   |                   |   | 11,035 |   |   |   | 31,668 |   |   |   | 33,780 |   |
| Amortization      of deferred acquisition costs    |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| and      value of business acquired                |   |               | 3,564  |   |                   |   | 3,326 |   |   |   | 10,332 |   |   |   | 9,974 |   |
| Operating      expenses                            |   |               | 3,393  |   |                   |   | 3,371 |   |   |   | 9,954 |   |   |   | 9,921 |   |
| Total      benefits and expenses                   |   |               | 17,377 |   |                   |   | 17,732 |   |   |   | 51,954 |   |   |   | 53,675 |   |
|                                               |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      before income tax expense              |   |               | 1,210  |   |                   |   | (451 | ) |   |   | 3,425 |   |   |   | 402 |   |
|                                               |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax expense                            |   |               | 455    |   |                   |   | (34 | ) |   |   | 1,261 |   |   |   | 268 |   |
|                                               |   |               |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income (loss)                             |   | $                  | 755    |   |                   | $      | (417 | ) |   | $ | 2,164 |   |   | $ | 134 |   |

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|                  |   | Quarter      Ended September 30 |   |
|-----------------------|--------|---------------------------------|--------|
|                  |   | 2009                            |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
|                  |   |                            |   |   |   |   |   |   |   |   |   |   |
| New      premiums     |   | $                               | 2,270  |   |   |   | 22 |   |   | $ | 1,861 |   |   |   | 11 |   |
| Renewal      premiums |   |                            | 14,135 |   |   |   | (2 | ) |   |   | 14,436 |   |   |   | (3 | ) |
| Total      premiums   |   | $                               | 16,405 |   |   |   | 1 |   |   | $ | 16,297 |   |   |   | (1 | ) |

|                  |   | Nine      Months Ended September 30 |   |
|-----------------------|--------|-------------------------------------|--------|
|                  |   | 2009                                |   |   | %      Change |   |   | 2008 |   |   | %      Change |   |
|                  |   |                                |   |   |   |   |   |   |   |   |   |   |
| New      premiums     |   | $                                   | 6,307  |   |   |   | 16 |   |   | $ | 5,430 |   |   |   | 12 |   |
| Renewal      premiums |   |                                | 42,557 |   |   |   | (2 | ) |   |   | 43,466 |   |   |   | (4 | ) |
| Total      premiums   |   | $                                   | 48,864 |   |   |   | - |   |   | $ | 48,896 |   |   |   | (2 | ) |

| ·   | One      security was a mortgage-backed security that was written down by less than      $0.1 million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the security and created an      other-than-temporary impairment.  This security had been      previously written down due to reduced projected cash flows from the      underlying securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a financial institution that had been impacted by the      housing and mortgage credit crisis and had been supported through TARP      funds.  This company has experienced large losses in its real      estate loan portfolios and has had an increase in non-performing loans      over the past year.  This security was written down by a total      of $0.4 million before it was sold during the third quarter of      2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | One      security was a mortgage-backed security that was written down by less than      $0.1 million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the securities and created an      other-than-temporary impairment.  This security had been      previously written down due to reduced projected cash flows from the      underlying securitizations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $0.4 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a mortgage-backed security that was written down by a total      of $0.1 million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the securities and created an      other-than-temporary impairment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, are financial      guarantee insurance companies that provide credit enhancement for bond      issuers as well as investment management services and were written down by      a total of $1.0 million.  These issuers had also experienced      declines in value related to the mortgage credit crisis and had recently      been downgraded to a negativeoutlook. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security provides custom-tailored financing to private and corporate      owners of real estate nationwide.  This security had a rating      decline to below investment grade status combined with continued price      deterioration and was written down $0.5million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.2 million, primarily as a result of a      decline in price on a debt security from an issuer that recently completed      a LBO transaction.  This security had been written down      previously. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A      CDO security was written down by $0.2 million, primarily due to a price      decline that had persisted for a period longer than the Company considered      temporary.  The security was below cost by 20% or more for at      least six consecutive months. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.1 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary and a further deterioration in fair value during the      second quarter of 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                     |   | September      30 |      |   | December      31 |   |
|------------------------------------------|--------|-------------------|-----------|--------|------------------|--------|
|                                     |   | 2009              |      |   | 2008             |   |
| Total      assets less separate accounts |   | $                 | 3,849,253 |   |             | $      | 3,708,526 |   |
| Total      stockholders' equity          |   |              | 627,118   |   |             |   | 527,107 |   |
| Ratio      of stockholders' equity       |   |              |      |   |             |   |   |   |
| to      assets less separate accounts    |   |              | 16        | %      |             |   | 14 | % |

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Item 3.

Item 4.

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Part II

Item 1

Item 1A.

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Item 2

|                          |   | Total              |     |   |   |                |   |   |                    |   |   |                    |   |
|-------------------------------|--------|--------------------|----------|--------|--------|---------------------|--------|--------|-------------------------|--------|--------|-------------------------|--------|
|                          |   | Number      of     |     |   |   |                |   |   | Total      Number of    |   |   | Maximum      Number     |   |
|                          |   | Shares             |     |   |   |                |   |   | Shares      Purchased   |   |   | of      Shares that May |   |
|                          |   | Purchased          |     |   |   | Average             |   |   | as      a Part of       |   |   | Yet      be Purchased   |   |
|                          |   | Open      Market/  |     |   |   | Purchase      Price |   |   | Publicly      Announced |   |   | Under      the          |   |
| Period                        |   | Benefit      Plans |     |   |   | Paid      per Share |   |   | Plans      or Programs  |   |   | Plans      or Programs  |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |
| 1/01/09      - 1/31/09        |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | (19,316  | )      | 2      |                | $      | 42.45  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 2/1/09      - 2/28/09         |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | (13,297  | )      | 2      |                | $      | 27.39  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 3/1/09      - 3/31/09         |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | 6,076    |   | 2      |                | $      | 34.28  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 4/1/09-4/30/09                |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | (23,274  | )      | 2      |                | $      | 34.22  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 5/1/09-5/31/09                |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | (88,502  | )      | 2      |                | $      | 26.71  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 6/1/09-6/30/09                |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | 35,445   |   | 2      |                | $      | 26.31  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 7/1/09-7/31/09                |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | (110,874 | )      | 2      |                | $      | 26.45  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 8/1/09-8/31/09                |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | (454     | )      | 2      |                | $      | 36.15  |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
| 9/1/09-9/30/09                |   |               | -        |   | 1      |                |   | -      |                    |   |   | -                       |   |   |   | 1,000,000 |   |
|                          |   |               | -        |   | 2      |                | $      | -      |                    |   |   |                    |   |   |   |   |   |
|                          |   |               |     |   |   |                |   |   |                    |   |   |                    |   |   |   |   |   |
|     Total |   |               | (214,196 | )      |   |                |   |   |                    |   |   | -                       |   |   |   |   |   |

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Item5

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| KANSAS      CITY LIFE INSURANCE COMPANY                  |   |               |       |   |                   |   |       |   |   |   |       |   |
|----------------------------------------------------------|--------|--------------------|------------|--------|------------------------|--------|------------|--------|--------|--------|------------|--------|
| CONDENSED      CONSOLIDATED INCOME STATEMENT (Unaudited) |   |               |       |   |                   |   |       |
| (amounts      in thousands, except share data)           |   |               |       |   |                   |   |       |   |   |   |       |   |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |
|                                                     |   | Quarter      Ended |       |   | Nine      Months Ended |   |
|                                                     |   | September      30  |       |   | September      30      |   |
|                                                     |   | 2009               |       |   | 2008                   |   |       | 2009   |   |   | 2008       |   |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |
| Revenues                                                 |   | $                  | 112,052    |   |                   | $      | 78,092     |   |   | $      | 315,437    |   |   | $ | 284,700 |   |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |   |   |   |   |
| Net      income (loss)                                   |   | $                  | 5,181      |   |                   | $      | (15,178    | )      |   | $      | 8,677      |   |   | $ | (9,899 | ) |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |   |   |   |   |
| Net      income (loss) per share,                        |   |               |       |   |                   |   |       |   |   |   |       |   |   |   |   |   |
| basic      and diluted                                   |   | $                  | 0.45       |   |                   | $      | (1.30      | )      |   | $      | 0.75       |   |   | $ | (0.85 | ) |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |   |   |   |   |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |   |   |   |   |
| Dividends      paid                                      |   | $                  | 0.27       |   |                   | $      | 0.27       |   |   | $      | 0.81       |   |   | $ | 0.81 |   |
|                                                     |   |               |       |   |                   |   |       |   |   |   |       |   |   |   |   |   |
| Average      number of shares outstanding                |   |               | 11,621,405 |   |                   |   | 11,520,384 |   |   |   | 11,535,374 |   |   |   | 11,606,911 |   |

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Item 6

| (a)   | Exhibits: |
|-----------------|-----------|

| 31(a)  | Section      302 Certification.  |
|--------|----------------------------------|
|   |                             |
| 31(b)  | Section      302 Certification.  |
|   |                             |
| 32(a)  | Section      1350 Certification. |

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SIGNATURES

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

| /s/ Tracy W. Knapp                  |
|-------------------------------------|
| Tracy      W. Knapp                 |
| Senior      Vice President, Finance |
|                                |
|                                |

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