STOCK PURCHASE AGREEMENT

         STOCK PURCHASE  AGREEMENT  dated as of January 2, 1997,  between ALLIED
LIFE FINANCIAL  CORPORATION,  an Iowa  corporation  (the  "Company"),  and STATE
STREET BANK AND TRUST COMPANY,  a  Massachusetts  trust  company,  solely in its
capacity  as trustee  under the Plan  defined  below and not  individually  (the
"Trustee").

                                   WITNESSETH;

         WHEREAS,  the Company has  established  and  maintains  The ALLIED Life
Financial  Corporation  Employee  Stock  Ownership  Plan (the  "Plan"),  for the
benefit of all employees eligible to participate therein;

         WHEREAS,  the Plan  qualifies as an  "employee  stock  ownership  plan"
within the meaning of Section  4975(e)(7) of the Internal  Revenue Code of 1986,
as amended (the "Code");

         WHEREAS,  the Company has  established  and  maintains  The ALLIED Life
Financial  Corporation  Employee  Stock  Ownership  Trust (the  "Trust") and the
Company has  appointed the Trustee to act as the trustee  thereof  pursuant to a
trust  agreement  between the  Company and the Trustee  dated June 20, 1994 (the
"Trust Agreement");

         WHEREAS,  the Trust  Agreement  provides  that the  assets of the trust
created  thereunder  shall be invested in, among other things,  shares of common
stock of the Company  ("Common  Stock") or  convertible  preferred  stock of the
Company;

         WHEREAS,  the  Company  has  designated  300,000  shares as a series of
convertible  preferred  stock,  with no par  value,  called  the  Series  A ESOP
Convertible  Preferred Stock, of which 103,574 shares were previously issued and
of which it has offered  19,143  shares for sale to the Trustee  (the  "Series A
Preferred Stock");

         WHEREAS,  as directed by the ESOP Committee (the "Committee") under the
terms of the Trust  Agreement,  the Trustee is authorized to purchase  shares of
Series A Preferred Stock and the Company wishes to issue and sell such shares of
Series A Preferred  Stock to the Trustee,  and no commission will be paid by the
Trustee in  connection  with the  purchase  of such shares of Series A Preferred
Stock; and

         WHEREAS,   the  Trustee  is  required  under  the  Trust  Agreement  to
independently  determine (i.e., without direction from the Company) the purchase
price  that  shall be paid for any stock of the  Company,  and the  Trustee  has
received an opinion of Houlihan Lokey Howard & Zukin (the  "Valuation  Opinion")
that the  purchase  of the shares of Series A  Preferred  Stock  pursuant to the
terms to this  Agreement is fair and equitable to the  participants  in the Plan
and the price to be paid for the  Series A  Preferred  Stock is not in excess of
adequate consideration.

         NOW  THEREFORE,  in  consideration  of these  premises  and the  mutual
promises  contained herein,  the parties hereto,  intending to be legally bound,
hereby agree as follows:

     1. The Trustee  hereby agrees to purchase (the  "Purchase")  with the funds
directed by the  Committee,  and the Company hereby agrees to issue and sell for
cash to the Trust  19,143  shares of Series A  Preferred  Stock  (the  "Series A
Preferred  Stock") for an aggregate  purchase  price (the  "Purchase  Price") of
$335,000.00  (or $17.50 per  share).  The  Company  will pay all stamp and other
transfer  taxes,  if any, which may be payable in respect of the issuance,  sale
and delivery of the Series A Preferred Stock and shall be entitled to any refund
thereof.

     2. The Purchase shall be consummated at or about 8:00 A.M. Central Standard
Time on  January 2, 1997 (such date of  delivery  being  hereinafter  called the
"Delivery Date") at the offices of the Company, Des Moines, Iowa or as otherwise
agreed by the parties hereto. On the Delivery Date, the Trustee shall deliver to
the Company the Purchase Price in immediately  available  funds together with an
opinion of Goodwin,  Procter & Hoar,  LLP,  counsel to the Trustee,  in the form
attached as Annex A hereto and a copy of the Valuation Opinion,  and the Company
will  deliver to the Trustee a  certificate  or  certificates  representing  the
Series A Preferred  Stock which shall be  registered in the name of the Trustee,
as  trustee  under the Plan,  or in the name of its  nominee,  together  with an
opinion of Katherine E. Schmidt,  Associate Corporate Counsel of the Company, in
the form attached as Annex B hereto.
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     3. The Company hereby represents, warrants and covenants to the Trustee as
 follows:

     4. the Company (i) is a corporation duly organized, validly existing and in
good  standing  under the laws of the State of Iowa and (ii) has full  corporate
power and  authority  to execute and deliver  this  Agreement,  to carry out the
transactions  contemplated  hereby,  to own,  lease and  operate  its assets and
properties, and to carry on its business as now being conducted;

     5. this Agreement has been duly  authorized,  executed and delivered by the
Company  and  constitutes  a  valid  and  binding  obligation  of  the  Company,
enforceable  against  the  Company  in  accordance  with its  terms,  subject to
applicable  bankruptcy,   insolvency,  fraudulent  conveyance,   reorganization,
moratorium and similar laws affecting creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding at law or
in equity);

     6. the execution, delivery and performance of this Agreement by the Company
and the  consummation of the transactions  contemplated  hereby will not violate
(i) the Company's Articles of Incorporation or By-laws,  each as amended to date
or, (ii) any provision of any agreement,  instrument,  order, award, judgment or
decree to which the  Company is a party or by which it or any of its  businesses
or  properties  are  bound,  or (iii) any  statute,  rule or  regulation  of any
federal,  state or local  government or  governmental  agency  applicable to the
Company except in the case of  subparagraphs  (ii) or (iii) of this Section 3(c)
for any such  violations  which either  individually  or in the aggregate do not
have a material  adverse effect on the business or properties of the Company and
its subsidiaries taken as a whole;

     7. except for any necessary  applications with The Nasdaq Stock Market with
respect to any newly  issued  shares of Common  Stock  which may be issued  upon
conversion of the Series A Preferred Stock, no approval,  authorization or other
action by, or filing (other than such filings of the Company as may be necessary
in  connection  with any  registration  for sale of the common stock that may be
issuable upon  conversion of the Series A Preferred  Stock) with, any government
authority is required to be obtained or made by the Company in  connection  with
the execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby;

     8. the  Certificate of  Designations  was filed with the Secretary of State
effective  June 21, 1994 prior to which the Series A  Preferred  Stock were duly
and validly  authorized  and,  when issued and  delivered to and paid for by the
Trustee pursuant to this Agreement,  (i) will be validly issued,  fully paid and
nonassessable  and not  liable  to any  further  call or  assessment,  (ii)  the
certificates   representing  the  Series  A  Preferred  Stock  comply  with  the
applicable  requirements  of Iowa law and (iii) the Trustee  will  acquire  full
right,  title and interest in and to the Series A Preferred Stock free and clear
of any and all liens,  claims,  charges and  encumbrances  (other than rights of
participants in the Plan);

     9. the  Company  (i) has duly  and  validly  authorized  and  reserved  for
issuance a sufficient  number of shares of Common Stock, as may be issued,  from
time to time,  upon  conversion  of the Series A  Preferred  Stock and (ii) such
shares of Common  Stock,  when issued upon  conversion of the Series A Preferred
Stock in  accordance  with the  Certificate  of  Designations,  will be  validly
issued,  fully  paid and  nonassessable  and not liable to any  further  call or
assessment and will not be subject to preemptive rights;

     10.  the Plan has been  duly  authorized  and  established,  and the  Trust
Agreement has been duly  authorized,  by all necessary  corporate  action on the
part of the Company;  the Plan  constitutes in all material  respects in form an
employee stock  ownership  plan within the meaning of Section  4975(e)(7) of the
Code, Code Regulation  Section  54.4975-11 and Section 407(d)(6) of the Employee
Retirement Income Security Act of 1974, as amended  ("ERISA");  and the Series A
Preferred Stock constitutes a qualifying employer security within the meaning of
Section  4975(e)(8)  of  the  Code;  provided,   however,  that  in  making  the
representations  contained  in this Section 3(g) the Company has relied upon the
correctness of the Trustee's  representations  contained in Section 4(h) of this
Agreement;

     11. the  Company's  annual  report on 10-K for the year ended  December 31,
1995 and  quarterly  reports on 10-Q for the  quarterly  periods ended March 31,
June  30 and  September  30,  1996,  on the  respective  dates  filed  with  the
Securities and Exchange Commission  ("SEC"),  conformed in all material respects
to the requirements of the Securities Exchange Act of 1934, as amended;

     12. no person or other entity is entitled to any fees or commissions due to
the Company's actions in connection with the purchase and sale of the Series A 
Preferred Stock;

     13. the Company shall use its best efforts during the term of the Trust to 
cause the Plan to maintain its qualification as an employee stock ownership plan
within the meaning of Section 4975 of the Code; and
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     14. the Company has  furnished  and will continue to furnish to the Trustee
from time to time  copies of all  reports  and  financial  statements  which the
Company shall send or make available to its public stockholders  generally,  all
other written  communications from the Company to public shareholders  generally
and each regular or periodic report, proxy statement,  registration statement or
prospectus, if any, filed by the Company with the SEC; and

     15.The Trustee represents and warrants to the Company as follows:

     16.the Trustee (i) is a duly organized and validly  existing  Massachusetts
trust  company  in good  standing  as a trust  company  and with full  power and
authority  to act as  Trustee  and  exercise  trust  powers,  including  without
limitation,  the  trust  powers  provided  in  and  contemplated  by  the  Trust
Agreement,  and (ii) has full  corporate  power and  authority  to  execute  and
deliver this Agreement and to carry out the transactions contemplated hereby;

     17.this  Agreement has been duly authorized,  executed and delivered by the
Trustee  and  constitutes  a  valid  and  binding  obligation  of  the  Trustee,
enforceable  against  the  Trustee  in  accordance  with its  terms,  subject to
applicable  bankruptcy,   insolvency,  fraudulent  conveyance,   reorganization,
moratorium and similar laws affecting creditors' rights generally and to general
principles of equity (regardless of whether considered in a proceeding at law or
in equity);

     18.the execution, delivery and performance of this Agreement by the Trustee
and the  consummation of the transactions  contemplated  hereby will not violate
(i) the Trustee's Corporate Charter or By-laws, each as amended to date, or (ii)
any provision of any agreement,  instrument, order, award, judgment or decree to
which  the  Trustee  is a  party  or by  which  it or any of its  businesses  or
properties  are bound or (iii) any statute,  rule or  regulation of any federal,
state or local  government  or  governmental  agency  applicable  to the Trustee
except in the case of  subparagraphs  (ii) or (iii) of this Section 4(c) for any
such  violations  which either  individually  or in the  aggregate do not have a
material adverse effect on the business or properties of the Trustee;  provided,
however,  that in making the  representations  contained in clause (iii) of this
Section 4(c),  the Trustee has relied upon the  correctness of (1) the Company's
representations in Section 3(g), as limited by the proviso therein,  and Section
3(i) of this Agreement and (2) the Committee's  direction  letter dated December
30, 1996;

     19.no  approval,  authorization  or other  action by, or filing  with,  any
governmental  authority  is  required  to be  obtained or made by the Trustee in
connection  with the execution,  delivery and performance by the Trustee of this
Agreement and the consummation of the transactions contemplated hereby;

     20.the  Trustee is acquiring the Series A Preferred  Stock on behalf of the
Plan  solely  for  investment  purposes  and not with a view to,  or for sale in
connection with, any distribution thereof; provided,  however, that the Series A
Preferred  Stock will be allocated to the  accounts of the  participants  in the
Plan  pursuant  to the  terms  of the  Plan  and  distributions  may be  made to
participants  and  beneficiaries  of the Plan in shares of Common Stock issuable
upon  conversion of the Series A Preferred  Stock or payable upon  redemption of
the Series A Preferred Stock, including upon exercise of the rights set forth in
Section 7 of the  Certificate  of  Designations,  or in  shares of Common  Stock
otherwise  acquired by the Trustee  pursuant to the terms of the Plan,  it being
understood  that the  Series A  Preferred  Stock are being  sold to the  Trustee
pursuant to an exemption from the  registration  requirements  of the Securities
Act  of  1933,  as  amended  (the  "Securities  Act"),  in  reliance  upon  this
representation and warranty;

     21.the purchase of the Series A Preferred Stock on the Delivery Date by the
Trust for the Purchase Price is for not greater than "adequate consideration" as
that phrase is defined in Section 3(18) of ERISA,  and any proposed  regulations
thereunder,  and will not constitute a prohibited  transaction under Section 406
of ERISA or Section 4975(c) of the Code by reason of the exemptions set forth in
Section 408(e) of ERISA and Section  4975(d) (13) of the Code;  provided that in
making the  representations  contained  in this  Section  4(f),  the Trustee has
relied  upon the  correctness  of the  Company's  representations  contained  in
Sections 3(g), as limited by the proviso therein,  and 3(i) of this Agreement as
well as the Valuation Opinion;

     22.the  Series A Preferred  Stock  purchased by the Trust have a conversion
price which is  reasonable  as of the date hereof;  provided,  however,  that in
making the  representations  contained  in this  Section  4(g),  the Trustee has
relied upon the correctness of the Valuation Opinion; and

     23.no  person or other  entity is  entitled to any  commissions  due to the
Trustee's  actions  in  connection  with the  purchase  and sale of the Series A
Preferred Stock.
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     24. The Trustee hereby (i)  acknowledges  that the Series A Preferred Stock
purchased on behalf of the Trust pursuant to this Agreement may, by their terms,
be issued  only to the Trustee or a  successor  trustee  acting on behalf of the
Trust,  (ii)  acknowledges  that the Trust  Agreement  provides that none of the
Series A Preferred  Stock  shall be  transferred  in any manner to  participants
under the Plan but in lieu thereof  shares of Common Stock shall be  distributed
to  participants  or transferred to the  participants'  Section 401(k)  accounts
pursuant to the terms of the Plan,  (iii)  acknowledges  that the Certificate of
Designations  provides that any Series A Preferred  Stock that are  transferred,
sold or otherwise disposed of by the Trustee shall be automatically, and without
any action on the part of the Company,  converted  into shares of Common  Stock,
and (iv) agrees not to transfer,  sell or otherwise dispose of any of the Series
A Preferred  Stock or other shares of Series A Preferred  Stock or to attempt to
do so, except in compliance with the Trust Agreement.  Nothing contained in this
Section 5 shall be deemed to  restrict  the  ability  of the  Trustee to convert
shares of Series A Preferred Stock into shares of Common Stock or to require the
Company to redeem shares of Series A Preferred Stock, in each case in accordance
with the Certificate of Designations, or the ability of the Trustee to transfer,
sell or otherwise  dispose of shares of Common Stock of the Company  issued upon
conversion of shares of Series A Preferred  Stock or upon a redemption of shares
of Series A Preferred Stock.

     25. The Trustee understands that the certificate(s) representing the Series
A Preferred Stock will bear the following legend and that a notation restricting
their transfer will be made on the stock transfer books of the Company:

              The  shares  of  Series  A  preferred  stock  represented  by this
              certificate  have not been registered  under the Securities Act of
              1933, as amended.  Such shares of stock may not be sold, assigned,
              pledged or  otherwise  transferred  in the absence of an effective
              registration  statement  under said  Securities  Act covering such
              transfer or an opinion of counsel  satisfactory to the issuer that
              registration under said Securities Act is not required.

              The shares of stock represented by this certificate are subject to
              restrictions   on  transfer  set  forth  in  the   Certificate  of
              Designations   relating  to  the   Corporation's   Series  A  ESOP
              Convertible  Preferred  Stock  and in a Stock  Purchase  Agreement
              dated as of January 2, 1997. The  Corporation  will furnish a copy
              of such agreement to the holder of this certificate without charge
              upon written request.

    26. The  Company has at its  expense,  prepared,  filed,  and  obtained  the
effectiveness of, and will use its best efforts to cause to remain effective,  a
registration statement on an appropriate form, including a final prospectus (the
"Registration  Statement"),  under and complying with the Securities Act and the
rules  and  regulations  thereunder,  relating  to the  number  of shares of the
Company's  Common Stock into which the Series A Preferred Stock are from time to
time convertible or as are acquired upon a redemption or repurchase, including a
redemption  pursuant  to the  provisions  of  Section  7 of the  Certificate  of
Designations,  as shall be necessary,  in the opinion of counsel to the Company,
for the  Trustee  to carry  out its  responsibilities  under  the Plan and Trust
Agreement.  Whenever shares of Common Stock are so registered, the Company shall
also use its best  efforts to  register or qualify  such  shares  covered by the
Registration  Statement  under  the  "blue  sky"  or  securities  laws  of  such
jurisdictions  within the United States as the Trustee may  reasonably  request;
provided,  however,  that the  Company  shall not be  required to consent to the
general service of process for all purposes in any jurisdiction  where it is not
then qualified to do business.

   27. The  Company  agrees that it will use its best  efforts to  maintain  the
qualification of the Plan as an employee stock ownership plan within the meaning
of Section 4975(e)(7) of the Code.
   28.    The representations, warranties and agreements in this Agreement shall
survive the date hereof and the Delivery Date.
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   29. This Agreement  shall be governed by and construed in accordance with the
laws of the State of Iowa applicable to contracts to be executed,  delivered and
performed in such state,  to the extent not  preempted by the laws of the United
States of America. The parties hereby irrevocably and unconditionally consent to
submit to the exclusive  jurisdiction of the courts of the State of Iowa and the
United States of America located in Polk County, Iowa for any actions,  suits or
proceedings  arising out of or relating to this Agreement.  This Agreement,  the
Plan and Trust Agreement  (including  documents referred to therein or delivered
pursuant  thereto) set forth the entire Agreement of the parties with respect to
the subject  matter  contained  herein and  supersede all prior oral and written
agreements,  if any,  between the parties with  respect to such subject  matter.
This  Agreement  shall bind and inure to the benefit of all  successors  to, and
assigns of, the parties hereto;  provided,  however,  that the Trustee shall not
assign or  otherwise  transfer  its  interest  in, or  obligations  under,  this
Agreement  without the written  consent of the Company,  except that the Trustee
may assign,  without the Company's written consent,  all its rights hereunder to
any institution  exercising trust powers in connection with any such institution
assuming the duties of a trustee  under the Trust  Agreement.  In the event that
any provision of this Agreement  shall be declared  unenforceable  by a court of
competent  jurisdiction,  such  provision  shall be  stricken  herefrom  and the
remainder of this Agreement shall remain binding on the parties  hereto.  In the
event any such provision shall be so declared  unenforceable due to its scope or
breadth, then it shall be narrowed to the scope or breadth permitted by law.

  30. This Agreement may be executed in two counterparts, each of which shall be
deemed an original,  but each of which taken together  shall  constitute one and
the same instrument.

  31. This  Agreement may not be modified with respect to the  obligations  of a
party hereto except by an instrument in writing signed by such party.


  32. The terms and provisions of the Trust Agreement  relating to the nature of
the  responsibilities  of the Trustee and the  indemnification by the Company of
the Trustee are  incorporated  herein by reference  and made  applicable to this
Agreement.

  33. All notices, requests, or other communications required or permitted to be
delivered  hereunder shall be in writing,  delivered to each party hereto at its
address  specified in the Trust Agreement and shall become  effective as therein
provided.  Any party  hereto may from time to time,  by written  notice given as
aforesaid,  designate  any other  address to which  notices,  requests  or other
communications addressed to it shall be sent.

         IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.

                                            ALLIED LIFE FINANCIAL CORPORATION


                                                  By /s/ Samuel J. Wells

                                                    Name Samual J. Wells

                                                    Title President


                                            STATE  STREET  BANK  AND
                                            TRUST COMPANY  solely in
                                            its  capacity as Trustee
                                            under the Plan and Trust
                                            Agreement   referred  to
                                            herein and not individually


                                                 By /s/ Mariann E. Sullivan

                                                   Name: Mariann E. Sullivan
                                                   
                                                   Title: Vice President

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