Annual Report (Form 10-K), fiscal year 1994

Item 1. BUSINESS
(a) General Development of Business
Kansas City Life Insurance Company ("Kansas City Life") was originally incorporated under the assessment laws of Missouri in 1895 as the Bankers Life Association. In 1900, its present corporate title was adopted and it was reorganized as a legal reserve company in 1903.
The Company offers a variety of individual life insurance and annuity policies as well as group life insurance. In 1994, 79% of the Company's statutory premium and deposit fund revenues were derived from individual life insurance and annuities, including a small amount of assumed life reinsurance, with the remainder derived from group insurance. Only non-participating individual life policies are offered. The Company's life insurance in force is distributed over all age groups,without an unusual concentration in either the over 65 or under 20 age groups.
The Company is licensed to do business and operates in 46 states and the District of Columbia. It is not licensed in New York or some of the New England states. In 1994, the Company received $151,349,000 in direct statutory insurance premiums. The distribution of its direct statutory insurance premiums received in 1994 in those states from which the largest amount of its business was produced is set forth in the following table, excluding life reinsurance assumed and before deductions of life reinsurance ceded:
1994 Direct Statutory Percent of Premiums Received Total (000's omitted)
Missouri $23,381 15 Texas 13,552 9 Florida 9,802 7 Kansas 9,325 6 Colorado 8,294 6 California 8,233 5 Pennsylvania 5,452 4 Arkansas 4,670 3 Ohio 4,526 3 Wisconsin 4,458 3
TOTAL $91,693 61
The Company's sales operations are conducted through general agencies. As of December 31, 1994, the Company was represented by 109 agencies, located throughout the jurisdictions in which the Company is licensed to do business.
As of December 31, 1994, the Company was represented through its general agencies by 1,547 producing part and full time sales agents.
Subsidiaries
In February of 1974, the Company purchased the majority of the shares of Sunset Life Insurance Company of America ("Sunset"). In December, 1990, Sunset became a wholly owned subsidiary of the Company. Only non-participating policies are offered by Sunset. Sunset is licensed to do business and operates in 21 states.
The distribution of its direct insurance premiums received in 1994 in those states from which the largest amount of its business was produced is set forth in the following table, excluding life reinsurance assumed and before deductions of life reinsurance ceded: 1994 Direct Statutory Percent of Premiums Received Total (000's omitted)
California $13,130 35 Washington 7,595 21 Hawaii 2,726 7
TOTAL $23,451 63
Sunset's life insurance in force is distributed over all age groups, without an unusual concentration in either the over 65 or under 20 age groups.
In 1994, Sunset's statutory premium income (including directly written in- surance and assumed reinsurance) was almost entirely individual life insurance and annuities. Total statutory direct premiums for 1994 were $37,420,000.
In October, 1991, the Company purchased 100% of the outstanding shares of Old American Insurance Company ("Old American"). Old American is licensed to do business and operates in 46 states and the District of Columbia.
The distribution of its direct insurance premiums received in 1994 in those states from which the largest amount of its business was produced is set forth in the following table, excluding reinsurance assumed and before deductions of life reinsurance ceded:
1994 Direct Statutory Percent of Premiums Received Total (000's omitted)
Missouri $ 9,103 9 Texas 5,914 6 Illinois 5,779 6 Kansas 5,151 5 Tennessee 4,967 5 California 4,953 5 Kentucky 4,669 5 Indiana 3,689 4 Mississippi 3,466 4 Florida 3,417 4
TOTAL $51,108 53
Old American's business is distributed between whole life insurance and supplementary accident and health coverages. Of $96,394,000 of 1994 statutory premium income, 88% was individual life insurance. Life insurance is sold in small amounts, generally on a standard basis, and primarily to insureds ages 50 to 80 to cover funeral and other final expenses. Old American ceased offering its home health care product in 1993 due to adverse claim experience.
(b) Financial Information about Industry Segments
The Company is only in the life insurance business and therefore, Paragraph (b) is deemed inapplicable.
See Selected Financial Data of the Company for five years ended December 31, 1994 on Page 1 of the Company's Annual Report to Shareholders.
(c) Narrative Description of Business
Universal life and flexible annuity products are the foundations for the Company's sales and marketing efforts. These efforts are enhanced by a full line of traditional and group life and disability products, and with the addi- tion, in 1991, of Old American's senior oriented sales and marketing efforts, the consolidated group of companies offer a wide variety of products that can be tailored to fit most consumer needs.
New sales of universal life products accounted for 23% of consolidated new statutory premiums and deposit funds and 31% of total statutory premiums and deposit funds. New flexible annuity deposits totaled 46% of new statutory premiums and 20% of total statutory premiums. Group products totaled 9% of new statutory premiums and 12% of total statutory premiums. Old American does not sell universal life, flexible annuity deposits or group products. Sales from Old American totaled 12% of new premiums and 28% of total premiums. The Company is preparing to introduce a variable annuity and variable universal life insurance policy in late 1995.
(i) Principal Products
The following table sets forth pertinent information concerning Kansas City Life Insurance Company and its subsidiaries for the past five years (in thousands of dollars except number of policies in force, lapse ratio and net investment yield.) Old American results are included for the last two months of 1991 and all of 1992, 1993 and 1994. On October 31, 1991, the purchase of Old American included 254,339 policies with a face value of insurance in force totaling $948,247,000, for an average of $3,728 per policy.
1990 1991 1992 1993 1994
Life Insurance in Force at the Beginning of Each Year:
$15,853,221 15,976,803 18,069,161 18,862,336 19,028,772
Life Insurance Written by Type of Policy at Face Amount:
Life and Endowment:
$ 1,823,780 1,849,657 1,831,916 1,615,723 1,596,909
Term:
$ 521,882 580,123 578,771 519,304 821,046
Group:
$ 230,486 583,277 399,188 264,589 552,937
(ii) Status of Products
Terminations as Reported in the Statutory Annual Statement at Face Amount:
Death:
$ 48,563 59,873 89,006 84,685 93,994
Maturity:
$ 1,407 1,161 1,193 1,272 2,619
Conversion:
$ 44,090 66,588 59,144 110,453 147,408
Expiry:
$ 18,264 24,554 22,531 28,485 23,895 1990 1991 1992 1993 1994
Surrender:
$ 701,376 1,092,310 882,075 1,130,064 1,135,425
Lapse:
$ 1,229,729 1,210,660 1,414,061 1,409,621 1,143,917
Insurance in Force at the End of the Year:
$15,976,803 18,069,161 18,862,336 19,028,772 20,023,820
Reinsurance Ceded at the End of the Year:
$ 829,769 1,281,785 1,544,061 1,616,049 2,072,447
Number of Ordinary Policies in Force at the End of the Year:
391,642 641,322 658,246 663,123 655,141
Average Face Amount per Ordinary Policy in Force:
$ 33,432 23,477 24,219 24,777 26,299
Ordinary Lapse Ratio:
10.29% 11.40 11.60 11.30 11.11
Lapse ratio is defined as:
Total Lapses and Surrenders of Ordinary Insurance divided by Average Ordinary Insurance in Force for the Year
Cash and Invested Assets:
$ 1,786,917 2,009,541 2,158,250 2,266,726 2,258,669
Insurance Revenues:
Life and Accident and Health Premiums:
$ 52,009 61,163 125,290 129,929 134,220
Contract Charges: (arising from universal life-type contracts, including flexible annuities)
$ 50,880 57,143 63,202 66,900 69,607
Total Insurance Revenues:
$ 102,889 118,306 188,492 196,829 203,827
Net Investment Income:
$ 162,043 170,523 171,581 163,237 173,388
Net Investment Yield on a GAAP basis:
9.53% 9.29 8.54 7.65 7.71 (iv) The Company does not have any material patents, licenses, franchises or concessions; however, the Company is licensed to do business in 46 states and the District of Columbia.
(vi) Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference from Pages 12 and 13 of the Annual Report to Shareholders for an analysis of operating performance and liquidity position.
(x) An analysis of Best's Key Rating Guide, Life-Health Edition, 1994, discloses that as of December 31, 1993, through consolidation of its subsidiaries, the Company would rank among the 100 largest U. S. stock life companies when measured by total admitted assets. The Company is engaged in a highly competitive industry. It competes with over 1,800 legal reserve life insurance companies. The management of the companies believe that their policies and premium rates are generally competitive with those issued by other insurers.
(xiii) As of December 31, 1994, Kansas City Life had 480 full time employees, not including its sales representatives and general agents. As of the same date, the Company was represented by approximately 1,547 producing full and part time sales representatives and general agents.
Sunset Life Insurance Company of America had 136 full time employees and approximately 887 full and part time sales representatives as of December 31, 1994.
Old American Insurance Company had 105 full time employees and approximately 1,328 full and part time sales representatives as of December 31, 1994.
(d) Financial Information about Foreign and Domestic Operations and Export Sales
The Company does not engage in material operations in foreign countries or derive a material portion of its revenue from customers in foreign countries.
Item 2.



Item 2. PROPERTIES
Kansas City Life's Home Office is located at 3520 Broadway, Kansas City, Missouri 64111-2565, in two five story buildings which are owned and wholly occupied by the Company. The main part of the complex was completed in 1924, with a substantial addition being completed in 1957. An adjacent structure of approximately 85,000 square feet was completed in 1985. The buildings are connected with both above and underground walkways, are of steel and concrete construction, are fully air-conditioned, and contain approximately 243,700 square feet of useable office space. As of December 31, 1994, the depreciated cost of these buildings and the surrounding eight acre tract of landscaped land owned by the Company was $8,743,000.
Sunset's Home Office property is located at 3200 Capitol Boulevard, Olympia, Washington, 98501-3396. The main building is located on approximately 4.3 acres of land, is of reinforced concrete construction, one and one-half story in height, with approximately 25,000 square feet of usable space. In 1981, the subsidiary constructed a separate building of reinforced concrete of a similar design to the main office building. It is located adjacent to and connects to the main office building. It is a one-story structure with a full basement with a total of approximately 12,500 square feet. As of December 31, 1994, the depreciated cost of both of these buildings and the surrounding area of land was $1,141,000.
Old American leased its Home Office facilities at 4900 Oak Street in Kansas City, Missouri. The lease has 15 years remaining. The building has a net rentable area of approximately 77,000 square feet and approximately 76,000 square feet of parking garage space. All of Old American's Home Office operations have been relocated in Kansas City Life's Home Office. Old American has subleased the 4900 Oak property and has two and one-half years remaining on the original sublease. The sublease agreement provides for an option to renew the lease term for five years under similar terms.
In addition to the property owned for the purpose of carrying on the business of insurance, Kansas City Life and its subsidiaries also own property, or an interest therein, for investment purposes or as the result of mortgage foreclosures.
Item 3.

Item 3. LEGAL PROCEEDINGS
On April 8, 1994, a jury in the District Court of Woods County, Oklahoma returned a verdict against the Company assessing (a) $25,000 of compensatory damages, (b) $500,000 of actual damages and (c) $10,000,000 of punitive damages. In addition to the judgment against the Company, the jury awarded a separate verdict against Defendant Stearman for $1,000,000 actual damages and $20,000,000 in punitive damages. The case, Nita Charlene Pelter Cox and Verna Leanne Pelter Graybill, Personal Representatives of the Estate of Leora Pearl Pelter, Deceased, Plaintiffs, vs. Kansas City Life Insurance Company and Billy D. Stearman, Defendants, arose out of certain actions by one of the Company's agents. The agent Stearman had taken a beneficiary designation form, signed in blank by the policyowner, and subsequently named the agent's wife as beneficiary for $25,000 of the $100,000 death benefit. The Company settled the death claim on the insured's death by paying $25,000 to the agent's wife (under her maiden name), with the balance of the proceeds to the policyowner/ beneficiary. Upon learning of this misappropriation over a year after the death claim had been settled, the Company investigated the facts and tendered to the policyowner/beneficiary the $25,000, plus interest, within 90 days. At trial, Plaintiffs asserted the Company's tender of $25,000, plus interest, in return for a release and the policyowner/beneficiary's agreement to testify against the agent in any criminal indictment was oppressive and in bad faith. The Company firmly believes that it committed no wrong in its handling of this matter, and has appealed the jury verdict and intends to pursue its appeal vigorously. The probability of a favorable or unfavorable outcome is difficult to assess. Appellate courts are generally not disposed to reverse jury verdicts. However, it is the Company's position that the trial court committed numerous errors in the conduct of the trial, determination of issues of evidence, rulings on dispositive motions, and instructing the jury. The most significant error raised on appeal is the court's submission of the case to the jury on the theory of intentional infliction of emotional distress based on evidence which failed to meet the burden of proof under Oklahoma law with respect to the conduct alleged against Kansas City Life, and with respect to the alleged resulting distress to Mrs. Pelter.
In the ordinary course of operations the Company and its subsidiaries are engaged in routine litigation which often includes claims seeking punitive damages. Although recovery of such punitive damages is not probable in the opinion of counsel, the frequency of awards for punitive damages has increased in some jurisdictions. Management believes it is unlikely that the outcome of any pending litigation will have a material adverse effect on the Company's financial condition.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5.

Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated by Reference.
Item 6.

Item 6. SELECTED FINANCIAL DATA
Incorporated by Reference. Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Incorporated by Reference.
Item 8.


Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by Reference.
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
Item 10.



Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following information, as of December 31, 1994, is provided with respect to each Director:
Term as Director Served as Expires Other Positions Director Name of Director Age in April with the Company From
W. E. Bixby (1)(2)(3) 63 1995 Vice Chairman of the 1966 Board and President
David D. Dysart 66 1995 None 1972 (2)(3)(6)
Francis P. Lemery 55 1995 Senior Vice President 1985 (1)(2)(3) and Actuary
Michael J. Ross 52 1995 None 1972 (2)(3)(4)(5)(6)
Wood Arnold, II (6) 59 1995 None 1980
Jack D. Hayes (3) 54 Nominee Senior Vice President, -- Marketing
Kathryn A. Bixby-Haddad 45 1996 None 1984 (6)
Daryl D. Jensen (6) 56 1996 None 1978
Ilus W. Davis (4)(5)(6) 77 1996 None 1985
Webb R. Gilmore (6) 50 1996 None 1990
C. John Malacarne 53 1996 Vice President, 1991 (1)(2) General Counsel and Secretary
J. R. Bixby (1)(2) 69 1997 Chairman of the Board 1957
Robert Philip Bixby 41 1997 Senior Vice President, 1985 (1)(2) Operations
Larry Winn, Jr. 75 1997 None 1985 (2)(4)(5)(6)
Term as Director Served as Expires Other Positions Director Name of Director Age in April with the Company From
Richard L. Finn 53 1997 Senior Vice President, 1983 (1)(2) Finance
Warren J. Hunzicker, M.D. 74 1997 None 1989 (5)(6)
(1) See below with respect to the business experience of executive officers of the Company.
(2) Member of Executive Committee.
(3) Subject to the approval of the shareholders at the annual meeting of share- holders to be held on April 20, 1995, will be elected for three year term ending in 1998.
(4) Member of Audit Committee.
(5) Member of Compensation Committee.
(6) Mr. Arnold has been President and Chief Executive Officer of Package Development Corporation since 1972. Mrs. Bixby-Haddad was elected Assistant Vice President of the Company in 1980 and served as Vice President, Compensation from 1981 until 1985. Mr. Davis is a partner in the law firm of Armstrong, Teasdale, Schlafly and Davis, is a former Mayor of Kansas City, Missouri, and also serves as a Director of Boatmen's Bancshares, Inc., St. Louis, Missouri. Mr. Dysart served as Executive Vice President from 1980 until he retired in January, 1987. Mr. Gilmore is a partner in the law firm of Gilmore & Bell. Dr. Hunzicker was elected by the Board of Directors to an unexpired term in 1989. Dr. Hunzicker served as the Company's Medical Director from 1987 to 1989; he formerly served as a member of the Company's Board of Directors from 1977 to 1980. Mr. Jensen has been President of Sunset Life Insurance Company of America, a subsidiary of Registrant, since 1973. Mr. Malacarne was elected by the Board of Directors to fill an unexpired term in 1991. Mr. Ross has been President of Jefferson Bank and Trust Company, St. Louis, Missouri, since 1971 and was elected Chairman of the Board in 1983. Mr. Winn is retired as the Kansas Third District Representative to the U.S. Congress.
Name, Age and Business Experience Position During Past 5 Years
Joseph R. Bixby, 69 Chairman since 1972; President from 1964 until he Chairman of the Board retired in April, 1990; responsible for overall corporate policy. Director of Sunset Life, a subsidiary.
W. E. Bixby, 63 Vice Chairman of the Board since 1974; elected Vice Chairman of the Executive Vice President in January, 1987 and Board, President and CEO President and CEO in April, 1990; primarily responsible for the operation of the Company. Chairman of the Board of Sunset Life and President and Chairman of the Board of Old American, subsidiaries.
Robert Philip Bixby, 41 Elected Assistant Secretary in 1979; Assistant Vice Senior Vice President, President in 1982; Vice President in 1984 and to Operations present position in 1990; responsible for Customer Services, Computer Services, Claims, New Business Issue and Underwriting. Name, Age and Business Experience Position During Past 5 Years
Richard L. Finn, 53 Elected Vice President in 1976; Financial Vice Senior Vice President, President in 1983 and to present position in 1984; Finance chief financial officer and responsible for investment of the Company's funds, accounting and taxes. Director, Vice President and Chief Financial Officer of Old American, a subsidiary.
Jack D. Hayes, 54 Elected Senior Vice President, Marketing in Senior Vice President, February, 1994; responsible for Marketing, Marketing Marketing Administration, Communications and Public Relations. Served as Executive Vice President and Chief Marketing Officer of Fidelity Union Life, Dallas, Texas, from June, 1981 to January, 1994.
Francis P. Lemery, 55 Elected Vice President in 1979; Vice President and Senior Vice President Actuary in 1980, and to present position in 1984; Actuary responsible for Group Insurance Department, Actuarial Services and State Compliance. Director of Sunset Life and Old American, subsidiaries.
Robert C. Miller, 48 Elected Assistant Auditor in 1972; Auditor in 1973; Senior Vice President, Vice President and Auditor in 1987; and to present Administrative Services position in 1991. Responsible for Human Resources and Home Office building and maintenance.
Charles R. Duffy, Jr., 47 Elected to present position in November, 1989; Vice President, Insur- responsible for the Company's computer operations. ance Administration Senior Account Executive, Cybertek Corporation, January, 1989 to November, 1989. Director of Old American, a subsidiary.
Michael P. Horton, 52 Elected to present position in July, 1984; Vice President, Group responsible for the Company's group insurance operations.
John K. Koetting, 49 Elected Assistant Controller in 1975 and to present Vice President and position in 1980; chief accounting officer; Controller responsible for all corporate accounting reports. Director and Vice President and Controller of Old American, a subsidiary.
C. John Malacarne, 53 Elected Associate General Counsel in 1976; General Vice President, General Counsel in 1980; Vice President and General Counsel Counsel and Secretary in 1981; and to present position in 1991. Responsible for Legal Department, Office of the Secretary and Stock Transfer Department. Director of Sunset Life and Director and Secretary of Old American, subsidiaries.
Walter E. Bixby, III, 36 Elected Assistant Vice President, Electronic Sales Vice President, Support in 1985; Assistant Vice President, Marketing Operations Marketing Operations in 1989; Vice President, Marketing in 1990; and to present position in 1992. Director of Sunset Life and Old American, subsidiaries.
Ronald E. Hiatt, 58 Elected Assistant Treasurer in 1976 and to present Treasurer position in 1983; responsible for cash management and safeguarding of Company assets. Name, Age and Business Experience Position During Past 5 Years
Daryl D. Jensen, 56 Vice President, 1968; Executive Vice President, Vice Chairman of the 1970; President, 1973; elected to present position Board and President, in 1975. Sunset Life Insurance Company of America, a subsidiary
Bret L. Benham, 35 Elected Assistant Vice President, Planning and Vice President, Research in August, 1991; Vice President, Research Agency Marketing Planning in May, 1993; and to present position in June, 1994; responsible for directing the development and execution of marketing plans and programs and managing the agency force. Served as a Consultant with Tillinghast from 1987 to August, 1991.
(d) Joseph R. Bixby, Chairman of the Board, and W. E. Bixby, Vice Chairman of the Board and President, are brothers. Kathryn A. Bixby- Haddad is the daughter of Joseph R. Bixby; Robert Philip Bixby and Walter E. Bixby, III are brothers and the sons of W. E. Bixby.
(e) See Business Experience During Past 5 Years above.
(f) There have been no events under any bankruptcy act, no criminal pro- ceedings and no judgments or injunctions material to the evaluation of the ability and integrity of any director, nominee or executive officer during the past five years.
Item 11.

Item 11. EXECUTIVE COMPENSATION
(a) Compensation
The following table sets forth information concerning cash compensation paid or accrued by the Company and its subsidiaries to the Chief Executive Officer and the other four most highly paid executive officers as of December 31, 1994 for the fiscal years ending December 31, 1994, 1993 and 1992. SUMMARY COMPENSATION TABLE
Annual Compensation Other All Annual Other Compen- Compen- sation sation Name and Principal Position Year Salary($) Bonus($) $ $
W. E. Bixby, Vice Chairman of the 1994 377,880 121,921 7,000 50,350 Board, President and CEO, Kansas 1993 356,460 71,692 7,000 47,360 City Life; Chairman of the Board, 1992 305,400 98,128 7,000 42,050 Sunset Life, and Chairman of the Board and President, Old American, subsidiaries.
R. L. Finn, Senior Vice President, 1994 184,140 43,672 5,000 20,778 Finance and Director, Kansas City 1993 174,120 22,145 5,000 19,611 Life; Director, Old American, a 1992 147,000 29,760 5,000 18,021 subsidiary.
F. P. Lemery, Senior Vice Presi- 1994 184,140 40,449 7,000 22,452 dent and Actuary and Director, 1993 174,120 22,165 7,000 19,508 Kansas City Life; Director, 1992 147,000 29,800 7,000 17,953 Sunset Life and Old American, subsidiaries.
D. D. Jensen, Director, Kansas 1994 168,750 39,020 6,000 19,944 City Life; Vice Chairman of 1993 170,788 20,343 6,000 19,085 the Board and President, Sunset 1992 135,000 30,400 6,000 16,648 Life, a subsidiary.
R. P. Bixby, Senior Vice Presi- 1994 161,160 37,248 4,000 16,836 dent, Operations and Director, 1993 144,780 9,370 4,000 15,108 Kansas City Life. 1992 104,820 22,884 4,000 12,254
ALL OTHER COMPENSATION INCLUDES THE FOLLOWING:
The Company has an employee stock plan in the form of a profit sharing plan which is commonly referred to as a PAYSOP or ESOP. Directors and officers who are full time employees participate in the plan on the same basis as all other employees. The total amount contributed to the plan for the accounts of the named individuals for fiscal year 1992 are respectively as follows: W. E. Bixby, $1,492; R. L. Finn, $1,492; F. P. Lemery, $1,492; D. D. Jensen, $1,492; R. P. Bixby, $1,492. No contributions were made to the plan in 1993 or 1994.
The Company has a contributory Internal Revenue Code Section 401(k) savings and investment plan. Directors and officers who are full time employees of the Registrant or its subsidiaries participate in the plan on the same basis as all other employees. Employees may contribute from 1% to 10% of their monthly base salary. Highly compensated employees are limited to contributions of 6%. The Company contributes an amount equal to the employee contributions in the form of capital stock of the Company. The total amount contributed to the plan for the accounts of the named individuals for fiscal years 1992, 1993 and 1994 are respectively as follows: W. E. Bixby, $8,728, $8,994, $9,000; R. L. Finn, $7,350, $8,706, $9,000; F. P. Lemery, $7,350, $8,706, $9,000; D. D. Jensen, $6,750, $8,537, $9,000; R. P. Bixby, $5,241, $7,239, $9,000.
The Company has adopted a nonqualified deferred compensation plan for approximately 68 highly compensated officers and employees. It is similar to the Company's 401(k) plan. Participants contribute amounts to this plan that they cannot contribute to the 401(k) plan up to a total of 10% of their monthly salary and the Company contributes an equal amount. The amount contributed to the plan for fiscal years 1992, 1993 and 1994 respectively for the accounts of the named individuals are as follows: W. E. Bixby, $21,812, $26,652, $28,788; R. L. Finn, $7,350, $8,706, $9,414; F. P. Lemery, $7,350, $8,706, $9,414; D. D. Jensen, $6,750, $8,537, $7,875; R. P. Bixby, $5,241, $7,239, $7,116.
The Company provides yearly renewable term insurance to its employees in the amount of 2 1/2 times their annual salary. Directors and officers who are full time employees participate in the program on the same basis as all other employees. Premiums paid for the named individuals for fiscal years 1992, 1993 and 1994 respectively are as follows: W. E. Bixby, $10,018, $11,714, $12,562; R. L. Finn, $1,829, $2,199, $2,364; F. P. Lemery, $1,741, $2,096, $4,038; D. D. Jensen $1,656, $2,010, $3,069; R. P. Bixby $280, $630, $720.
(f) Defined Benefit or Actuarial Plan Disclosure
PENSION PLAN TABLE
The following table illustrates the possible annual pension benefits upon completion of the indicated years of service with the five year average salary for all officers and employees. Benefits are calculated on a straight life annuity basis. The Social Security offset and benefit has been estimated.
Compensation Years of Service SS**
10 20 30 40
$ 75,000 $ 18,750 $ 37,500 $ 52,500 $ 53,027* $13,946 100,000 25,000 50,000 70,000 73,027* 13,946 125,000 31,250 62,500 87,500 93,027* 13,946 150,000 37,500 75,000 105,000 113,027* 13,946 200,000 50,000 100,000 140,000 153,027* 13,946 250,000 62,500 125,000 175,000 193,027* 13,946 300,000 75,000 150,000 210,000 233,027* 13,946 350,000 87,500 175,000 245,000 273,027* 13,946 400,000 100,000 200,000 280,000 313,027* 13,946 450,000 112,500 225,000 315,000 353,027* 13,946 500,000 125,000 250,000 350,000 393,027* 13,946
*Maximum pension based on an estimate of Social Security. **Estimated annual Social Security benefit at age 65.
The Company has a noncontributory defined benefit pension plan which covers all full time employees age 21 and over. A participant's retirement benefit is determined by multiplying his or her highest average annual salary for five consecutive years, from the last ten years of his or her employment, by a percentage determined from the participant's total years of service from that participant's 21st birthdate. The participant's percentage is determined by multiplying 2 1/2% for each of the participant's years of service up to the first twenty years, 2% for each year of service for the next ten years, and 1% for each year of the next ten. A participant's benefit may not exceed 80% of such average salary reduced by 1/2 of his or her Social Security benefit. Early retirement benefits are available after age 55, depending upon years of service and age. Benefits are fully vested after five years of service following a participant's 18th birthdate.
A participant's base salary not to exceed $150,000 (as adjusted for cost of living) commencing January 1, 1994, was used to determine compensation under the plan. For the individuals named in the Cash Compensation Table, the years of service covered by the plan for the year ended December 31, 1994, were: W. E. Bixby, 37 years; R. L. Finn, 20 years; F. P. Lemery, 34 years; D. D. Jensen, 28 years; R. P. Bixby, 16 years.
The Company has adopted an unfunded excess benefit plan which covers any employee who is an active participant in the noncontributory defined benefit pension plan and whose pension benefit under that plan would exceed the maximum benefit limited under Internal Revenue Code Section 415. A participant under this plan is entitled to a monthly benefit of the difference between the maxi- mum monthly normal, early, or deferred vested retirement benefit determined without regard to the Internal Revenue Code Section 415 limitation and the monthly equivalent of the maximum benefit permitted by Internal Revenue Code Section 415.
(g) Compensation of Directors
Outside directors are paid $4,000 quarterly; $2,000 if they attend Special Board Meetings; $1,000 if they attend Executive Committee Meetings; $500 if they attend all other Committee Meetings. Inside directors are paid $1,000 quarterly and $400 if they attend Special Board Meetings. J. R. Bixby, Chairman of the Board, is paid $30,000 quarterly. Directors of Sunset Life, a subsidiary, are paid $500 quarterly and directors of Old American are paid $250 quarterly. Directors fees are included in the Compensation Table.
(h) Employment Contracts and Termination of Employment and Change in Control Arrangements
There are no employment contracts between the Company and its executive officers. The Company's benefit plans contain typical provisions applicable to all employees for termination of employment.
(j) Additional Information with Respect to Compensation Committee
The members of the Compensation Committee are Ilus W. Davis, Michael J. Ross and Larry Winn, Jr.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
The following sets forth information as of February 28, 1995, concerning holding of voting securities of the Company's $2.50 par value capital stock, which is the Company's only class of voting stock.
Name and Address of Beneficial Owners:
John K. Koetting, Robert C. Miller and Ronald E. Hiatt, Trustees of the Kansas City Life Insurance Company Savings and Investment Plan 3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
424,410 shares 6.9
John K. Koetting, Robert C. Miller and Ronald E. Hiatt, Trustees of the Kansas City Life Employee Stock Plan 3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership* Percent of Class
45,649 shares .7
*Trustees have the power to sell plan assets. Participants may instruct the Trustees how to vote their shares. Angeline I. Oxler c/o William A. Hirsch, Esq. Morrison & Hecker 2600 Grand Avenue, Kansas City, MO 64108
Amount and Nature of Ownership** Percent of Class
341,292 shares 5.5
Walter E. Bixby, III Vice President, Marketing Operations Kansas City Life Insurance Company 3520 Broadway, Kansas City, MO 64111-2565
Amount and Nature of Ownership** Percent of Class
344,315 shares 5.6
**Includes 165,035 shares in the Walter E. Bixby Descendants Trust. Angeline I. Oxler, Robert Philip Bixby and Walter E. Bixby, III are Co- Trustees. The Trustees share voting and investment power. The terms of the Trust restrict the transfer of the shares. Also includes shares as to which Mr. Bixby is Custodian for his nephew under the Missouri Uniform Gift to Minors law and the approximate vested beneficial interest in shares held by the Trustees of Kansas City Life Insurance Company employee benefit plans. Participants in the plans may instruct the Trustees how to vote those shares held in their account.
Angeline I. Oxler; Joseph R. Bixby; Margie Morris Bixby; Kathryn A. Bixby- Haddad; Kathryn A. Bixby-Haddad as Custodian for Kellie S. Curtis; Sorouch Haddad; Nancy Bixby Hudson; Robert Philip Bixby; Walter E. Bixby, III; James R. Gammon as Trustee of the Walter E. Bixby Family Trust; Robert Philip Bixby, Angeline I. Oxler, and Walter E. Bixby, III, as Co-Trustees of the Walter E. Bixby Descendants Trust; W. E. Bixby; W. E. Bixby as Trustee for Trust B created pursuant to the Will of Edwin Bixby and Trust B created pursuant to the Will of Angeline Reynolds Bixby were members of a group that agreed to act together for the purpose of holding Common Stock, and the Common Stock ownership of such group was reflected in a Schedule 13D filed with the Commission on November 23, 1988 and subsequently amended. The agreement that documented the various rights and obligations among all of the members of that group expired May 20, 1990.
Nonetheless, Mrs. Oxler and other former members of the Bixby Group in subsequent filings with the Commission have indicated that they currently share the expectation of many members of their extended family that a majority of the Common Stock will continue to be beneficially owned by such individuals or be under the control of trustees under certain testamentary or inter vivos trusts for the benefit of such individuals. (b) Security Ownership of Management
The names of the nominees proposed by management for election to three year terms at the annual meeting to be held April 20, 1995 are set forth as follows:
Served Shares of as a Record and Principal Director Beneficially Percent Nominee Occupation Since Owned of Class
W. E. Bixby Vice Chairman of 1966 1,158,195 19.2 3520 Broadway the Board and 23,103(2) Kansas City, MO President
David D. Dysart Director 1972 9,000 * HCR 69, Box 395 Sunrise Beach, MO
Francis P. Lemery Senior Vice Presi- 1985 708 * 3520 Broadway dent and Actuary 5,620(2) Kansas City, MO
Michael J. Ross Chairman of the 1972 300 * 12826 Dubon Lane Board and President, St. Louis, MO Jefferson Bank and Trust Company St. Louis, MO
Jack D. Hayes Senior Vice Presi- -- 1,000 * 3520 Broadway dent, Marketing Kansas City, MO
The following directors were elected April 22, 1993 for a three year term:
Kathryn A. Bixby-Haddad Investor 1984 170,776(1) 2517 W. 118th St. 30,000(4) 3.3 Leawood, KS
C. John Malacarne Vice President, 1991 10 3520 Broadway General Counsel 5,074(2) * Kansas City, MO and Secretary
Daryl D. Jensen Vice Chairman of the 1978 24 2143 Old Port Dr. Board and President, 9,670(2) * Olympia, WA Sunset Life Insurance Company of America Olympia, WA
Ilus W. Davis Partner - Armstrong, 1985 1,000 * Attorney at Law Teasdale, et al. 1001 W. 59th Terr. Kansas City, MO
Webb R. Gilmore Partner - 1990 20 * Attorney at Law Gilmore & Bell 833 Westover Rd. Kansas City, MO
The following Directors were elected April 21, 1994 for a three year term:
Served Shares of as a Record and Principal Director Beneficially Percent Nominee Occupation Since Owned of Class
Joseph R. Bixby Chairman of the 1957 1,484,989(1) 24.1 3520 Broadway Board Kansas City, MO
Richard L. Finn Senior Vice Presi- 1983 12 3520 Broadway dent, Finance 5,600(2) * Kansas City, MO
Robert Philip Bixby Senior Vice Presi- 1985 176,181 3520 Broadway dent, Operations 4,877(2) 5.7 Kansas City, MO 165,035(3) 7,080(5)
Larry Winn, Jr. Retired Represent- 1985 166 * 8420 Roe Ave. ative, U.S. Congress Prairie Village, KS
Warren J. Hunzicker, M.D. Director 1989 150 * 1248 Stratford Rd. Kansas City, MO
All directors, executive officers and their spouses (also includes all shares held by Trustees of Company benefit plans and shares held by the Bixby Family and related Trusts) 4,194,684 68.1
*Less than 1%.
(1) Includes shares owned by the spouses of these directors: Mr. Joseph R. Bixby 900; Mrs. Bixby-Haddad 2,847. Beneficial ownership of these shares is disclaimed.
(2) Approximate vested beneficial interest in shares held by the Trustees of Kansas City Life Insurance Company employee benefit plans. Participants in the plans may instruct the Trustees how to vote those shares held in their account.
(3) Shares in the Walter E. Bixby Descendants Trust. Robert Philip Bixby, Walter E. Bixby, III and Angeline Oxler are Co-Trustees. The Trustees share voting and investment power. The terms of the trust restrict transferring shares.
(4) Shares as to which Mrs. Kathryn A. Bixby-Haddad is Custodian for her niece, Kellie Curtis, and has voting and investment power. The terms of the deed of gift restrict the transfer of these shares.
(5) Shares as to which Robert Philip Bixby is Custodian for minor nieces and nephews under the Missouri Uniform Gifts to Minors law.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(c) Indebtedness of management
There is none, other than certain life insurance policy loans secured by the cash value of insurance policies held by certain officers and directors of the Company, and their associates. These loans were made on the same terms as those available to holders of comparable policies. PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements of Kansas City Life Insurance Company are incorporated by reference from the Company's Annual Report to Shareholders for the year ended December 31, 1994 at the following pages:
Page
Consolidated Income Statement - Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . 14 Consolidated Balance Sheet - December 31, 1994 and 1993 . . . . . . . . . . . . . . . . 15 Consolidated Statement of Stockholders' Equity - Years Ended December 31, 1994, 1993 and 1992 . . . . . . . 16 Consolidated Statement of Cash Flows - Years Ended December 31, 1994, 1993 and 1992 . . . . . . . 17 Notes to Consolidated Financial Statements . . . . . . . . . 18-25 Report of Independent Auditors . . . . . . . . . . . . . . . 26
(a)(2) Supplementary Data and Financial Statement Schedules
Schedules are attached hereto at the following pages:
Page
I - Summary of Investments - Other than Investments in Related Parties, December 31, 1994 . . . . . . . 21 V - Supplementary Insurance Information, Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . 22 VIII - Valuation and Qualifying Accounts, Years Ended December 31, 1994, 1993 and 1992 . . . . . . . . . 22
All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.
(b) Reports on Form 8-K
None
(c) Exhibits
Exhibit Number: Basic Documents:
3(a) 1986 Restatement of Articles of Incorporation. [Filed as Exhibit 3(a) to the Company's 10-K Report for 1986 and incorporated herein by reference]
3(b) Bylaws as amended October 26, 1986. [Filed as Exhibit 3(b) to the Company's 10-K Report for 1986 and incorporated herein by reference]
3(c) Specimen copies of Capital Stock Certificates, (a) less than 100 shares; (b) 100 shares; and (c) unlimited. [Filed as Exhibit 3(d) to the Company's 10-K Report for 1985 and incorporated herein by reference]
10(a) Fourth Amendment, Kansas City Life Deferred Compensation Plan. [Filed as Exhibit 10(a) to the Company's 10-K Report for 1993 and incorporated herein by reference] Exhibit Number: Basic Documents:
10(a) Fourth Amendment, Kansas City Life Deferred Compensation Plan. [Filed as Exhibit 10(a) to the Company's 10-K Report for 1993 and incorporated herein by reference]
10(b) Twenty-first Amendment, Kansas City Life Insurance Company Savings and Investment Plan.
10(c) Ninth Amendment, Kansas City Life Employee Stock Plan.
10(d) Kansas City Life Excess Benefit Plan. [Filed as Exhibit 10(e) to the Company's 10-K Report for 1990 and incorporated herein by reference]
11 Statement re Computation of Per Share Earnings.
13 Annual Report to Shareholders for the year ended December 31, 1994.
21 Subsidiaries.
23(a) Consent of Independent Auditors.
23(b) Consent of Independent Auditors.
27 Financial Data Schedule.
99(a) Form 11-K for the Kansas City Life Insurance Company Savings and Investment Plan for the year 1994 and filed as a part hereof and incorporated herein by reference.
99(b) Prospectus for Kansas City Life Insurance Company Savings and Investment Plan. [Filed as Exhibit 28(b) to the Company's 10-K Report for 1991 and incorporated herein by reference]
99(c) Summary of Modifications to the Prospectus and Summary Plan Description dated December 1, 1992. [Filed as Exhibit 99(c) to the Company's 10-K Report for 1993 and incorporated herein by reference]
99(d) Summary of Modifications to the Prospectus and Summary Plan Description dated September 1, 1993. [Filed as Exhibit 99(d) to the Company's 10-K Report for 1993 and incorporated herein by reference]
99(e) Summary of Modifications to the Prospectus and Summary Plan Description dated January 1, 1994. [Filed as Exhibit 99(e) to the Company's 10-K Report for 1993 and incorporated herein by reference]
99(f) Summary of Modifications to the Prospectus and Summary Plan Description dated January 1, 1995. SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
KANSAS CITY LIFE INSURANCE COMPANY
By: /s/ John K. Koetting John K. Koetting Vice President and Controller (Principal Accounting Officer) Date: March 16, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Regis- trant and in the capacities and on the dates indicated.
By: /s/ W. E. Bixby By: /s/ Richard L. Finn W. E. Bixby Richard L. Finn Director; Vice Chairman of the Director; Senior Vice Board and President President, Finance (Principal Executive Officer) (Principal Financial Officer) Date: March 16, 1995 Date: March 16, 1995
By: /s/ J. R. Bixby By: /s/ Francis P. Lemery J. R. Bixby Francis P. Lemery Director; Chairman of Director; Senior Vice the Board President and Actuary Date: March 16, 1995 Date: March 16, 1995
By: /s/ Warren J. Hunzicker By: /s/ Daryl D. Jensen Warren J. Hunzicker Daryl D. Jensen Director Director Date: March 16, 1995 Date: March 16, 1995
By: /s/ C. John Malacarne By: /s/ R. Philip Bixby C. John Malacarne R. Philip Bixby Director; Vice President, Director; Senior Vice General Counsel and Secretary President, Operations Date: March 16, 1995 Date: March 16, 1995