SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

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FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): August 13, 1996

AmVestors Financial Corporation
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)

Kansas
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)

48-1021516
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(I.R.S. Employer Identification Number)

0-15330
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(Commission File Number)

415 Southwest Eighth Avenue, Topeka, Kansas 66603
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(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code (913) 232-6945

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Item 5. Other Events.

Attached is additional information regarding AmVestors Financial
Corporation, a Kansas corporation (the "Company") and the corporation formerly
known as Financial Benefit Group, a Florida corporation ("FBG"), which was
recently acquired by the Company and is now a wholly- owned subsidiary of the
Company.

Summary Financial Data

The Company. The following table summarizes certain selected financial data
of the Company derived from the historical consolidated financial statements of
the Company and related notes thereto. The information in this table does not
reflect the effect of the acquisition of FBG, which occurred April 8, 1996.

Three Months Ended
March 31,
-----------------------
1996 1995
---------- -----------
(dollar amounts in
thousands, except
per share data)

Total revenue ............................................................................................. $ 49,278 $ 40,212
Operating earnings (loss) ................................................................................. 11,456 5,430
Net earnings (loss) ....................................................................................... 7,421 3,516
Earnings (loss) per share of common stock:
Primary ........................................................................................ 0.71 0.34
Fully diluted .................................................................................. 0.71 0.34
Dividends ................................................................................................. 0.075 --
Total assets .............................................................................................. 2,475,623 2,284,359
Total debt ................................................................................................ 7,000 --
Stockholders' equity ...................................................................................... 149,282 117,894
Fully diluted book value per share ........................................................................ 14.14 11.38

Other balance sheet data (excluding effects of SFAS No. 115)<F1>:
Total assets ................................................................................... 2,454,953 2,281,489
Stockholders' Equity ........................................................................... 135,846 115,024
Fully diluted book value per share ............................................................. 12.93 11.12

Other operating data:
Operating earnings (loss), excluding net investment gains (losses)
and related amortization of deferred acquisition costs<F2>.................................... 6,281 5,444
Net operating earnings (loss); excluding net investment gains (losses) and
related amortization of deferred acquisition costs and associated income taxes<F3>............ 4,113 3,539
Net operating earnings (loss), excluding net investment gains (losses) and related
amortization of deferred acquisition costs and associated income taxes, per common share<F4>:
Primary ...................................................................... $ 0.39 $ 0.34
Fully Diluted ................................................................ 0.39 0.34
Average shares outstanding:
Primary ...................................................................... 10,427 10,251
Fully diluted ................................................................ 10,493 10,292
Other data:
Ratio of earnings to fixed charges<F5> ......................................................... 91.6x 258.6x
Ratio of earnings to fixed charges pro forma<F5><F6>............................................ 76.4 --

Years Ended December 31,
----------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(dollar amounts in thousands, except per share data)

Total revenue .......................................................... $ 166,651 $ 149,700 $ 162,523 $ 175,708 $ 173,372
Operating earnings (loss) .............................................. 25,206 19,286 27,749 19,761 10,577
Net earnings (loss) .................................................... 16,599 13,693 17,978 16,818 10,119
Earnings (loss) per share of common stock:
Primary ..................................................... 1.60 1.32 2.59 2.87 1.84
Fully diluted ............................................... 1.60 1.32 2.46 2.56 1.84
Dividends .............................................................. 0.075 -- -- -- --
Total assets ........................................................... 2,476,204 2,260,021 2,114,696 2,090,136 1,959,071
Total debt ............................................................. 7,000 -- -- 19,859 28,437
Stockholders' equity ................................................... 174,445 104,196 100,345 49,463 30,936
Fully diluted book value per share ..................................... 16.43 10.16 9.70 7.50 5.13

Other balance sheet data (excluding effects of SFAS No. 115)<F1>:
Total assets ................................................ 2,406,402 2,267,834 2,114,696 2,090,136 1,959,071
Stockholders' Equity ........................................ 129,073 112,009 100,345 49,463 30,936
Fully diluted book value per share .......................... 12.33 10.89 9.61 7.50 5.13

Other operating data:
Operating earnings (loss), excluding net investment
gains (losses) and related amortization of deferred
acquisition costs<F2> ..................................... 24,412 18,687 15,491 7,887 2,871
Net operating earnings (loss); excluding net investment
gains (losses) and related amortization of deferred
acquisition costs and associated income taxes<F3> ......... 15,910 13,064 10,733 4,012 1,037
Net operating earnings (loss), excluding net investment
gains (losses) and related amortization of deferred
acquisition costs and associated income taxes, per
common share<F4>:
Primary ................................... $ 1.54 $ 1.26 $ 1.54 $ 0.68 $ 0.19
Fully Diluted ............................. 1.53 1.26 1.47 0.61 0.19
Average shares outstanding:
Primary ................................... 10,354 10,341 6,860 5,770 5,508
Fully diluted ............................. 10,404 10,341 7,315 6,567 5,510
Other data:
Ratio of earnings to fixed charges<F5> ...................... 327.4x -- 27.9x 8.1x 2.5x
Ratio of earnings to fixed charges pro forma<F5><F6> ........ 319.1 -- -- -- --

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<FN>

<F1> "Other balance sheet data (excluding effects of SFAS No. 115)" is a non-GAAP measure, used by investment analysts to understand
a company's financial position, and is not intended as an alternative to the GAAP measures of assets, liabilities or
stockholders' equity.

<F2> Amounts shown reflect operating earnings (earnings before interest expense and taxes) adjusted to exclude net investment gains
(losses) and accelerated (reduced) amortization of deferred acquisition costs related to such investment gains (losses).
Amortization of deferred acquisition costs related to net investment gains (losses) excluded were: $2.0 million and $-0-
million for the three months ended March 31, 1996 and 1995, respectively, and $.2 million, $.2 million, $4.8 million, $8.7
million, and $8.8 million for the years ended December 31, 1995, 1994, 1993, 1992 and 1991, respectively. Such other operating
data is a non-GAAP measure, used by investment analysts to understand the nature of a company's recurring results of
operations, and is not intended as an alternative to the GAAP measures of operating earnings or net earnings. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- The Company -- Margin Analysis."

<F3> Represents operating earnings after taxes adjusted to exclude net investment gains (losses) and accelerated (reduced)
amortization of deferred acquisition costs related to such investment gains (losses) and to exclude associated income tax
expense. See Note 1 above.

<F4> Related per share amounts are computed by dividing net operating earnings, as defined above, by the sum of weighted average
number of shares outstanding during the period plus dilutive common stock equivalents applicable to stock options and warrants.
See Notes 1 and 2 above.

<F5> For purposes of calculating the ratio of earnings to fixed charges, earnings consist of operating earnings which is before
income taxes and fixed charges. Fixed charges consist of interest expense on debt.

<F6> Assumes the replacement of existing debt under the Company's Credit Facility with proceeds of the recent Offering by the
Company of its 3% Convertible Subordinated Debentures.

Summary Financial Data

FBG. The following table summarizes certain selected financial data of FBG
derived from the historical consolidated financial statements of FBG and related
notes thereto.

Three Months Ended
March 31, Years Ended December 31,
--------------------- -------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- --------- --------- --------- ---------- --------- ----------
(dollar amounts in thousands, except per share data)

Total revenue ...................................... $ 11,402 $ 13,440 $ 54,224 $ 51,063 $ 79,969 $ 81,204 $ 73,954
Operating earnings (loss) .......................... (471) 2,228 7,817 4,657 15,448 14,174 7,051
Net earnings (loss) ................................ (519) 1,284 4,601 726 9,118 9,966 6,129
Earnings (loss) per share of common stock:
Primary ................................. $ (0.06) $ 0.15 $ 0.53 $ 0.09 $ 1.11 $ 1.33 $ 0.89
Fully diluted ........................... (0.06) 0.15 0.53 0.09 0.51 1.19 0.87
Cash Dividends ..................................... -- -- -- -- -- -- --
Total assets ....................................... 711,581 731,453 719,945 730,903 789,569 787,607 769,274
Total debt ......................................... 15,500 16,000 15,500 16,000 15,000 15,000 1,627
Stockholders' equity ............................... 36,594 31,207 41,037 27,276 29,476 20,020 9,587
Fully diluted book value per share ................. 4.09 3.54 4.56 3.13 3.36 2.43 1.27

Other balance sheet data:
(excluding effects of SFAS No. 115)<F1>:
Total assets ............................ 708,403 731,948 710,517 734,281 789,569 787,607 769,274
Stockholders' equity .................... 34,592 31,702 35,005 30,654 29,476 20,020 9,587
Fully diluted book value per share ...... 3.88 3.59 3.93 3.48 3.36 2.43 1.27
Other operating data:
Operating earnings (loss), excluding
net investment gains (losses) and
related amortization of deferred
acquisition costs<F2>.................. (554) 1,982 6,809 3,657 (5,446) 1,073 (3,560)
Net operating earnings (loss),
excluding net investment gains
(losses) and related amortization
of deferred acquisition costs and
associated income taxes<F3>............ (349) 1,398 4,985 2,841 (3,554) 792 (3,455)
Net operating earnings (loss),
excluding net investment gains
(losses) and related amortization
of deferred acquisition costs and
associated income taxes, per common
share<F4><F5>
Primary .......................... $ (0.04) $ 0.17 $ 0.58 $ 0.34 $ (0.43) $ 0.11 $ (0.50)
Fully diluted .................... (0.04) 0.17 0.58 0.34 (0.20) 0.09 (0.49)

Average shares outstanding:
Primary .......................... 8,807 8,418 8,622 8,466 8,203 7,492 6,924
Fully diluted .................... 8,807 8,418 8,622 8,466 17,983 8,409 7,077

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<FN>

<F2> Amounts shown reflect operating earnings (earnings before interest expense and taxes) adjusted to exclude net investment gains
(losses) and accelerated amortization of deferred acquisition costs related to such investment gains (losses). Amortization of
deferred acquisition costs related to net investment gains (losses) excluded were $.1 million and $.4 million for the three
months ended March 31, 1996 and 1995, respectively, and $1.7 million, $1.7 million, $.9 million, $-0- and $-0- for the years
ended December 31, 1995, 1994, 1993, 1992 and 1991 respectively. Such other operating data is a non-GAAP measure, used by
investment analysts to understand the nature of a company's recurring results of operations, and is not intended as an
alternative to the GAAP measures of operating earnings or net earnings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- FBG -- Margin Analysis."

<F4> Operating earnings for 1993 include a non-recurring charge ($7.0 million) related to the effect of a reinsurance transaction.
See Note 4 of Notes to Consolidated Financial Statements.

<F5> Related per share amounts are computed by dividing net operating earnings, as defined above, by the sum of weighted average
number of shares outstanding during the period plus dilutive common stock equivalents applicable to stock options and warrants.
See Notes 1 and 2 above.

Summary Pro Forma Financial Data

The following table sets forth certain unaudited pro forma operating and
balance sheet data of the Company. The unaudited pro forma information gives
effect to the acquisition of FBG, using the purchase method of accounting
assuming for purposes of the operating data that the acquisition of FBG was
consummated on January 1, 1995 and for purposes of the balance sheet data that
the acquisition of FBG was consummated on the dates indicated. This data should
be read in conjunction with the selected historical data and the pro forma
financial data included elsewhere herein and the separate historical
consolidated financial statements of the Company and FBG which are included
elsewhere herein.

The pro forma financial data does not purport to represent what the
Company's consolidated financial position or results of operations actually
would have been had the acquisition of FBG been completed on the dates for which
the acquisition of FBG is being given effect, nor is it necessarily indicative
of the future financial position or operating results of the Company.

Three Months Year Ended
Ended March 31, December 31,
--------------- ---------------
(in thousands, except
per share data)

Pro Forma Operating Data:
Total revenue ......................................................................... $ 61,397 $ 238,831
Operating earnings .................................................................... 13,140 43,922
Net earnings .......................................................................... 8,111 27,594
Net earnings per common share - fully diluted ......................................... .60 2.07
Weighted average common and common equivalent shares outstanding ...................... 13,414 13,325
Ratio of earnings to fixed charges <F1>................................................ 20.5x 20.6x
Ratio of earnings to fixed charges - as adjusted <F2><F3>.............................. 17.7 14.8

As Adjusted As
As of of March 31,
March 31, 1996 1996 <F3>
--------------- ---------------
(in thousands, except
per share data)

Pro Forma Balance Sheet Data:
Total assets .......................................................................... $ 3,201,802 $ 3,231,453
Total debt ............................................................................ 35,000 60,000
Stockholders' equity .................................................................. 186,974 186,747
Fully diluted book value per share .................................................... 13.87 14.37

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<FN>

<F1> For purposes of calculating the ratio of earnings to fixed charges, earnings consist of operating earnings (which is before
taxes and fixed charges). Fixed charges consist of interest expense on debt.

<F2> Assumes the replacement of $35 million of existing debt under a credit facility with proceeds of the Company's recent Offering
of its 3% Convertible Subordinated Debentures.

<F3> Gives effect to the offering of the Debentures and assumes net Offering proceeds of $61,750,000 and a Conversion Price of
$17.125.

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

The following table sets forth for the periods and dates indicated,
selected historical financial data of the Company and does not reflect the
acquisition of FBG which occurred on April 8, 1996. The selected consolidated
income statement and balance sheet data for the five years in the period ended
December 31, 1995, is derived from the Company's audited consolidated financial
statements. The selected consolidated financial data for the three month periods
ended March 31, 1996 and 1995 is derived from the unaudited consolidated
financial statements of the Company and, in the opinion of management, reflect
all adjustments necessary for a fair presentation of the results of operations
and financial condition and is presented on a basis consistent with historical
practice. All such adjustments are of a normal recurring nature. The results of
operations for an interim period are not necessarily indicative of results that
may be expected for a full year or any other interim period and the audited
financial statements. The following should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere herein
and with "Management's Decision and Analysis of Financial Condition and Results
of Operations."

Three Months Ended
March 31, Years Ended December 31,
--------------------- --------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- ---------- --------- --------- ---------- ---------- ----------
(dollars in thousands, except per share amounts)

Income Statement and Other Data:
Revenue:

Insurance premiums and policy charges<F1>....... $ 2,457 $ 1,904 $ 8,500 $ 6,331 $ 6,594 $ 7,545 $ 11,798
Net investment income<F2>....................... 39,169 38,220 156,510 142,009 138,539 141,155 144,940
Net investment gains (losses) .................. 7,627 (10) 156 803 17,049 20,521 16,477
Income from disposal of private
placement securities<F3>...................... -- -- -- -- -- 5,821 --
Other revenue .................................. 25 98 1,485 557 341 666 157
--------- --------- --------- --------- --------- --------- ---------
Total Revenue .................................. 49,278 40,212 166,651 149,700 162,523 175,708 173,372
--------- --------- --------- --------- --------- --------- ---------
Benefits and expenses:

Benefits, claims and interest credited
to policyholders ............................. 30,620 29,000 118,886 112,310 113,848 128,049 135,209
Amortization of deferred policy
acquisition costs ............................ 4,970 2,988 12,365 9,026 9,436 16,409 14,967
General insurance expenses ..................... 1,921 2,215 8,370 7,587 8,830 8,694 9,447
Premium and other taxes, licenses,
fees and other expenses ...................... 311 579 1,824 1,491 2,660 2,795 3,172
--------- --------- --------- --------- --------- --------- ---------
Total benefits and expenses .................... 37,822 34,782 141,445 130,414 134,774 155,947 162,795
--------- --------- --------- --------- --------- --------- ---------
Operating earnings (loss) ...................... 11,456 5,430 25,206 19,286 27,749 19,761 10,577
Interest expense ............................... 125 21 77 -- 994 2,443 4,273
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before income tax expense
(benefit and extraordinary item ............. 11,331 5,409 25,129 19,286 26,755 17,318 6,304
Income tax expense (benefit) ................... 3,910 1,893 8,530 5,593 8,564 118 (3,815)
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before extraordinary
item ......................................... 7,421 3,516 16,599 13,693 18,191 17,200 10,119
Extraordinary item<F4>.......................... -- -- -- -- (213) (382) --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) ............................ $ 7,421 $ 3,516 $ 16,599 $ 13,693 $ 17,978 $ 16,818 $ 10,119
========= ========= ========= ========= ========= ========= =========

Benefits and Expenses:

Earnings (loss) before extraordinary
item per share of common stock:
Primary .................................. $ 0.71 $ 0.34 $ 1.60 $ 1.32 $ 2.62 $ 2.94 $ 1.84
Fully diluted ............................ 0.71 0.34 1.60 1.32 2.49 2.62 1.84
Earnings (loss) per share of common stock:
Primary .................................. $ 0.71 $ 0.34 $ 1.60 $ 1.32 $ 2.59 $ 2.87 $ 1.84
Fully diluted ............................ 0.71 0.34 1.60 1.32 2.46 2.56 1.84
Dividends ................................... $ 0.075 -- $ 0.075 -- -- -- --
Other operating data:
Operating earnings (loss); excluding
net investment gains (losses) and
related amortization of deferred
acquistion costs<F5>...................... $6,28l $ 5,444 $ 24,412 $ 18,687 $ 15,491 $ 7,887 $ 2,871
Net operating earnings (loss);
excluding net investment gains
(losses) and related amortization
of deferred acquisition costs and
associated income taxes<F6> ............... 4,113 3,539 15,910 13,064 10,733 4,012 1,037
Net operating earnings (loss)
excluding net investment gains
(losses) and related amortization
of deferred acquisition costs and
associated income taxes per
common share<F7>:
Primary ................................... $ 0.39 $ 0.34 $ 1.54 $ 1.26 $ 1.54 $ 0.68 $ 0.19
Fully diluted ............................. 0.39 0.34 1.53 1.26 1.47 0.61 0.19
Average shares outstanding:
Primary ................................... $ 10,427 $ 10,251 $ 10,354 $ 10,341 $ 6,860 $ 5,770 $ 5,508
Fully diluted ............................. 10,493 10,292 10,404 10,341 7,315 6,567 5,510
Balance sheet data (at end of period):
Total assets<F8>........................... $2,454,953 $2,284,359 $2,406,402 $2,260,021 $2,114,696 $2,090,136 $1,959,071
Total debt ................................ 7,000 -- 7,000 -- -- 19,859 28,437
Stockholders' equity ...................... 149,282 117,894 174,445 104,196 100,345 49,463 30,936
Fully diluted book value
per share<F10>........................... 14.14 11.38 16.43 10.16 9.70 7.50 5.13
Other balance sheet data
(excluding effects of SFAS No. 115):<F11>
Total assets .............................. 2,454,953 2,281,489 2,406,402 2,267,834 2,114,696 2,090,136 1,959,071
Stockholders' equity ...................... 135,846 115,024 129,073 112,009 100,345 49,463 30,936
Fully diluted book value
per share ............................... 12.93 11.12 12.33 10.89 9.61 7.50 5.13
Statutory Data:<F12>
Net statutory
premiums<F12>............................ 97,869 72,710 353,877 269,448 219,455 169,235 219,222
Statutory capital and
surplus<F13> ............................ 97,433 85,845 98,289 87,521 87,146 74,461 68,571
Total AVR/MSVR<F14>........................ 27,216 24,488 26,441 23,633 24,376 17,452 17,507
Total IMR<F14>............................. 11,247 9,924 6,910 10,595 11,961 6,971 --

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<FN>

<F1> For generally accepted accounting principles ("GAAP") reporting, premiums received from single premium immediate annuities
without life contingencies and single premium deferred annuities are not reported as premium revenue. Net statutory premiums
as presented for statutory reporting purposes include such premium received.

<F2> Net investment income is presented net of investment expense.

<F3> The income from disposal of private placement securities represents the amount received in excess of market value when the
securities were sold to an affiliate of the placement agent in that offering. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- The Company -- Results of Operations -- Years Ended December 31, 1995, 1994,
and 1993" and Note 10 of Notes to Consolidated Financial Statements of the Company.

<F4> As a result of the restructuring of the Company's bank debt on April 24, 1992, the remainder of the expenses initially
incurred and capitalized under the original debt agreements was written off, resulting in an extraordinary loss on early
extinguishment of debt in the amount of $.4 million for the year ended December 31, 1992.

<F5> Amounts shown reflect operating earnings (earnings before interest and taxes) adjusted to exclude net investment gains
(losses) and accelerated (reduced) amortization of deferred acquisition costs related to such investment gains (losses).
Amortization of deferred acquisition costs related to net investment gains (losses) excluded were: $2.0 million and $-0-
million for the three months ended March 31, 1996 and 1995, respectively, and $.2 million, $.2 million, $4.8 million, $8.7
million, and ($8.8) million for the years ended December 31, 1995, 1994, 1993, 1992 and 1991, respectively. Such other
operating data is a non-GAAP measure, used by investment analysts to understand the nature of a company's recurring results of
operations, and is not intended as an alternative to the GAAP measures of operating earnings or net earnings. See
"Management's Discussion and Analysis of Financial Condition and Results of Operations -- The Company -- Margin Analysis."

<F6> Represents operating earnings after taxes adjusted to exclude net investment gains (losses) and accelerated (reduced)
amortization of deferred acquisition costs related to such investment gains (losses) and to exclude associated income tax
expense. See Note 5 above.

<F7> Related per share amounts are computed by dividing net operating earnings, as defined above, by the sum of weighted average
number of shares outstanding during the period plus dilutive common stock equivalents applicable to stock options and
warrants. See Notes 5 and 6 above.

<F8> Effective January 1, 1993, the Company adopted the provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts" and has restated assets to present the effects of reinsurance contracts on a gross
basis for all balance sheet data presented above.

<F9> Effective January 1, 1994, the Company adopted the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", the effect of which was an increase in stockholders' equity of $19.6 million. This represented the
aggregate excess fair value over cost for securities included in the available-for-sale category, net of associated
amortization of deferred policy acquisition costs and deferred income taxes. See Note 1 of Notes to Consolidated Financial
Statements of the Company.

<F10> Fully diluted book value per share is computed by dividing stockholders' equity, adjusted for the proceeds received from the
assumed exercise of dilutive stock options and warrants, by the number of Company shares of Common Stock outstanding at the
balance sheet date, adjusted for the number of shares resulting from the assumed conversion of the outstanding convertible
Preferred Stock and the exercise of dilutive stock options and warrants.

<F11> "Other balance sheet data (excluding effects of SFAS No. 115)" is a non-GAAP measure, used by investment analysts to
understand a company's financial position, and is not intended as an alternative to the GAAP measures of assets, liabilities
or stockholders' equity.

<F12> Statutory data has been derived from the annual and quarterly statements of American as filed with insurance regulatory
authorities and prepared in accordance with statutory accounting practices.

<F13> Statutory capital and surplus does not include AVR/MSVR or IMR. During 1986, 1988, 1989 and 1990, American entered into
certain modified coinsurance treaties with ERC, commonly referred to as "surplus relief" or "MODCO" reinsurance, pursuant to
which it ceded certain risks related to $407.1 million of annuity business to ERC and received ceded commissions of $28.2
million. These transactions are not reflected in financial statements prepared in accordance with GAAP. American paid ERC
annual fees ranging from 3% to 3.5% of the outstanding coding commissions which in 1992 amounted to $.4 million.

<F14> IMR and AVR were required to be included in reports filed on or after December 31, 1992. Prior to that date American was
required to post a MSVR. The adoption of the rules replacing MSVR with AVR and IMR had no material adverse effect on American.

SELECTED HISTORICAL FINANCIAL INFORMATION OF FBG

The following table sets forth for the periods and dates indicated,
selected historical financial data of FBG. The selected consolidated income
statement and balance sheet data for the five years in the period ended December
31, 1995, is derived from FBG's audited consolidated financial statements. The
selected consolidated financial data for the three month periods ended March 31,
1996, and 1995 is derived from the unaudited consolidated financial statements
of FBG and, in the opinion of management, reflect all adjustments necessary for
a fair presentation of the results of operations and financial condition and is
presented on a basis consistent with historical practice and the audited
financial statements. All such adjustments are of a normal recurring nature. The
results of operations for an interim period are not necessarily indicative of
results that may be expected for a full year or any other interim period and the
audited financial statements. The following should be read in conjunction with
the consolidated financial statements and notes thereto appearing elsewhere
herein and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- FBG."

Income Statement and Other Data:
Revenue:
Net investment income<F1>................... $ 9,578 $ 10,894 $ 43,072 $ 43,126 $ 53,006 $ 61,954 $ 57,608
Realized gains on investments .............. 224 657 2,706 2,668 21,827 13,101 10,611
Commissions and marketing fees ............. 453 579 2,887 1,423 1,062 1,209 876
Other Income ............................... 1,146 1,310 5,559 3,846 4,074 4,940 4,859
--------- --------- --------- --------- --------- --------- ---------
Total Revenue .............................. 11,402 13,440 54,224 51,063 79,969 81,204 73,954
--------- --------- --------- --------- --------- --------- ---------
Benefits and expenses:
Increase in future policy benefits ......... 6,517 6,868 28,114 28,067 41,468 63,700 51,675
General and administrative expenses ........ 2,560 1,055 4,591 4,117 4,794 2,742 3,699
Payroll and related expenses ............... 481 746 2,847 2,860 2,447 2,317 2,492
Amortization of deferred acquisition costs . 2,267 2,492 10,655 11,168 15,550 (2,008) 8,749
Interest ................................... 353 408 1,533 1,406 1,476 677 736
Depreciation and amortization .............. 48 51 200 194 262 279 288
--------- --------- --------- --------- --------- --------- ---------
Total benefits and expenses ................ 12,226 11,620 47,940 47,812 65,997 67,707 67,639
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income tax expense
and extraordinary charge ................. (824) 1,820 6,284 3,251 13,972 13,497 6,315
Income tax expense ......................... (305) 536 1,683 725 4,854 3,531 186
--------- --------- --------- --------- --------- --------- ---------
Earnings (loss) before extraordinary
charge ................................... (519) 1,284 4,601 2,526 9,118 9,966 6,129
Extraordinary charge on extinguishment of
debt, net of tax<F2>...................... -- -- -- (1,800) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) .......................... $ (519) $ 1,284 $ 4,601 $ 726 $ 9,118 $ 9,966 $ 6,129
========= ========= ========= ========= ========= ========= =========
Earnings (loss) before extraordinary item
per share of common stock
Primary .......................... $ (0.06) $ 0.15 $ 0.53 $ 0.30 $ 1.11 $ 1.33 $ 0.89
Fully diluted .................... (0.06) 0.15 0.53 0.30 0.51 1.19 0.87
Earnings (loss) per share of common stock
Primary .......................... (0.06) 0.15 0.53 0.09 1.11 1.33 0.89
Fully diluted .................... 0.06 0.15 0.53 0.09 0.51 1.19 0.87
Other operating data:
Operating earnings (loss) excluding net
investment gains (losses) and related
amortization of deferred acquistion
costs<F3>............ .................... (554) 1,982 6,809 3,657 (5,446) 1,073 (3,560)
Net operating earnings (loss) excluding net
investment gains (losses) and related
amortization of deferred acquisition costs
and income taxes<F4>...................... $ (349) $ 1,398 $ 4,985 $ 2,841 $ (3,554) $ 792 $ (3,455)
Net operating earnings (loss) excluding net
investment gains (losses) and related
amortization of deferred acquisition costs
and income taxes per common share<F5>:
Primary .......................... $ (0.04) $ 0.17 $ 0.58 $ 0.34 $ (0.43) $ 0.11 $ (0.50)
Fully diluted .................... (0.04) 0.17 0.58 0.34 (0.20) 0.09 (0.49)
Balance sheet data (at end of period):
Total assets<F6>............................ 711,581 731,453 719,945 730,903 789,569 787,607 769,274
Total debt ................................. 15,500 16,000 15,500 16,000 15,000 15,000 1,627
Shareholders' equity ....................... 36,594 31,207 41,037 27,276 29,476 20,020 9,587
Fully diluted book value per share<F7>...... 4.09 3.54 4.56 3.13 3.36 2.43 1.27
Other balance sheet data
(excluding effects of SFAS No. 115):<F8>
Total assets ............................... 708,403 731,948 710,517 734,281 789,569 787,607 769,274
Shareholders' equity ....................... 34,592 31,702 35,005 30,654 29,476 20,020 9,587
Fully diluted book value per share ......... 3.88 3.59 3.93 3.48 3.36 2.43 1.27
Statutory Data:<F9>
Net statutory premiums ..................... 20,480 18,351 62,498 76,533 57,777 110,149 143,412
Statutory capital and surplus<F10>.......... 32,627 30,782 33,476 30,258 31,092 27,282 23,910
Total AVR/MSVR<F11>......................... 8,955 8,804 8,933 8,728 8,741 8,236 7,609
Total IMR<F11>.............................. 7,746 7,743 7,727 7,861 7,006 3,612 0

- ----------
<FN>

<F1> Net investment income is presented net of investment expense.

<F2> As a result of restructuring FBG's outstanding long term debt on June 27, 1994, a $2.0 million charge was incurred for the
early extinguishment of the former obligation. The estimated tax benefit was $200,000 for the year ended December 31, 1994.

<F3> Amounts shown reflect operating earnings (earnings before interest expense and taxes adjusted to exclude net investment gains
(losses) and accelerated amortization of deferred acquisition costs related to such investment gains (losses). Amortization of
deferred acquisition costs related to net investment gains (losses) excluded were $.1 million and $.4 million for the three
months ended March 31, 1996 and 1995, respectively, and $1.7 million, $1.7 million, $.9 million, $-0-, and $-0- for the years
ended December 31, 1995, 1994, 1993, 1992 and 1991 respectively. Such other operating data is a non-GAAP measure, used by
investment analysts to understand the nature of a company's recurring results of operations, and is not intended as an
alternative to the GAAP measures of operating earnings or net earnings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - FBG -- Margin Analysis."

<F4> Represents operating earnings after taxes adjusted to exclude net investment gains (losses) and accelerated (reduced)
amortization of deferred acquisition costs related to such investment gains (losses) and to exclude associated income tax
expense.

<F6> Effective January 1, 1993, FBG adopted the provisions of SFAS No. 113, "Accounting and Reporting for Reinsurance of
Short-Duration and Long-Duration Contracts" and has restated assets to present the effects of reinsurance contracts on a gross
basis for all balance sheet data presented above.

<F7> Fully diluted book value per share is computed by dividing stockholders' equity, adjusted for the proceeds received from the
assumed exercise of dilutive stock options and warrants, by the number of FBG shares of Common Stock outstanding at the
balance sheet date, adjusted for the number of shares resulting from the assumed exercise of the dilutive stock options and
warrants.

<F8> "Other balance sheet data (excluding effects of SFAS No. 115)" is a non-GAAP measure, used by investment analysts to
understand a company's financial operation, and is not intended as an alternative to the GAAP measures of assets, liabilities
or stockholders' equity.

<F9> Statutory data has been derived from the annual and quarterly statements of FBG as filed with insurance regulatory authorizes
and prepared in accordance with statutory accounting practices.

<F10> Statutory capital and surplus does not include AVR/MSVR or IMR. During 1991, FBG entered into a modified coinsurance treaty
with a reinsurer, commonly referred to as "surplus relief" or "MODCO" reinsurance, pursuant to which it ceded certain risks
related to $138.9 million of deferred annuity business to the reinsurer and received ceded commissions of $10.0 million. These
transactions are not reflected in statements prepared in accordance with GAAP. FBG paid the reinsurer a risk charge of 3.0% of
the outstanding ceded commission, or $300,000, which is included in General and Administrative Expenses under GAAP.

<F11> IMR and AVR are required to be included in reports filed on or after December 31, 1992. Prior to that date FBG was required to
post a MSVR. The adoption of the rules replacing MSVR with AVR and IMR had no material adverse effect on FBG.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company

General

References to the Company in this section relate to the results of the
Company and do not give effect to the acquisition of FBG, which occurred on
April 8, 1996. For an analysis of FBG results see "--FBG."

The Company specializes in the sale of fixed annuity products as a
retirement savings vehicle for individuals. During each of the three years ended
December 31, 1995, 1994 and 1993, sales of fixed annuities have accounted for at
least 96% of the Company's premiums received, while sales of Single Premium
Immediate Annuities (SPIAs) and Flexible Premium Universal Life policies (FPULs)
have accounted for virtually all remaining premiums received.

The Company's operating earnings are derived primarily from its investment
income, including realized gains (losses), less interest credited to annuity
contracts and expenses. Under Generally Accepted Accounting Principles ("GAAP"),
premiums received on deferred annuities, SPIAs without life contingencies and
FPULs are not recognized as revenue at the time of sale. Similarly, policy
acquisition costs (principally commissions) related to such sales are not
recognized as expenses but are capitalized as deferred acquisitions costs
("DAC"). As a result of this deferral of costs and the lack of revenue
recognition for premiums received, no profit or loss is realized on these
contracts at the time of sale. Premiums received on deferred annuities, SPIAs
without life contingencies and FPULs are reflected on the Company's balance
sheet by an increase in assets equal to the premiums received and by a
corresponding increase in future policy liabilities.

The Company's earnings depend, in significant part, upon the persistency of
its annuities. Over the life of the annuity, net investment income, net
investment gains (losses) and policy charges are realized as revenue, and DAC is
amortized as an expense. The timing of DAC amortization is based on the
projected realization of profits including realized gains (losses) for each type
of annuity contract and is periodically adjusted for actual experience. If a
policy is terminated prior to its expected maturity, any remaining related DAC
is expensed in the current period. Most of American's annuity policies in force
have surrender charges, which expire over a period of from five to fourteen
years, which are designed to discourage and mitigate the effect of premature
withdrawals. As a result, the impact on earnings from surrenders will depend
upon the extent to which available surrender charges offset the associated
amortization of DAC. For the years ended 1995, 1994 and 1993, the Company's
weighted average expected surrender levels were 8.9%, 9.0% and 13.0%, compared
to the weighted average actual surrender levels of 14.2%, 9.8%, and 14.7% of
annuities in force at the beginning of the year. For the first three months of
1996, the Company's weighted average expected surrender level was 12.3%,
compared with the actual surrender level of 14.6% for that period. Historically,
the negative impact on earnings of any difference between the actual surrender
levels and expected surrender levels has been more than offset by the
realization of gains on the sale of securities and the change in future expected
gross profits as a result of the Company's reduction in credited rates.

Recent periods of low interest rates have reduced the Company's investment
yields. As a result of the lower investment yields, the Company elected to
reduce credited interest rates on certain of its annuity products. Certain
annuities issued by the Company include a "bailout" feature. This feature
generally allows policyowners to withdraw their entire account balance without
surrender charge for a period of 45 to 60 days following the initial
determination of a renewal credited rate below a predetermined level. If a
policyowner elects not to withdraw funds during this period, surrender charges
are reinstated. On policies including a "bailout" feature, the Company announces
its renewal credited rates on January 14 of each year. In January 1995, the
Company did not credit interest rates below the "bailout" rate. In January 1994
and 1993, the Company deemed it advisable, due to the general decline in
interest rates and the yield on its investment portfolio, to reduce credited
interest rates on certain annuity contracts below the "bailout" level. The
aggregate account values of annuity contracts on which the credited rate was
reduced below the "bailout" level totalled $109.8 million and $326.2 million
during 1994 and 1993, respectively. As a result, $18.3 million, or 17%, and
$139.6 million, or 43%, of such policies were surrendered during 1994 and 1993,
respectively. The Company was able to offset the negative impact of "bailout"
surrenders on its earnings through the realization of gains on the sale of its
securities. Excluding surrenders from "bailout" products, American's annuity
withdrawal rates were 9% for 1994 and 7% for 1993. As of March 31, 1996,
approximately $226.8 million, or 11% of annuity account values contained a
"bailout" provision and the current credited rates on these policies are above
the "bailout" rate. The "bailout" rate on $224.7 million of this amount is 6% or
less. If the Company reduces credited rates below the "bailout" rates on
policies containing "bailout" provisions in the future, it intends to pay any
resulting surrenders from cash provided by operations and premiums received. In
the event such sources are not sufficient to pay surrenders, the Company would
have to sell securities at the then current market prices. American expects that
withdrawals on its annuity contracts will increase as such contracts approach
the end of the surrender charge period. There is no certainty as to the
Company's ability to realize investment gains in the future to offset the
adverse impact on earnings, should future "bailout" surrenders occur.

Margin Analysis

The Company's earnings are primarily derived from the excess of investment
income over the amount it pays to its policyholders and the associated
amortization of DAC. From time to time and to a lesser extent in recent periods,
the Company's earnings have been impacted by realized investment gains and
losses and by the associated amortization of DAC. The actual timing and pattern
of such amortization is determined by the actual profitability to date (which
includes realized investment gains and losses) and the expected future
profitability of the Company's annuity contracts. To the extent investment
income is accelerated through realization of investment gains, the corresponding
amortization of DAC is also accelerated as the stream of profitability on the
underlying annuities is effectively accelerated. When investment losses are
realized, the reverse is true. The following analysis depicts the components of
the Company's margin:

Three Months Ended
March 31, Years Ended December 31,
--------------------- ----------------------------------
1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- ----------
(dollars in millions)

Average invested assets<F1>............................................... $ 2,078.4 $ 1,936.2 $ 1,992.7 $ 1,862.3 $ 1,770.9
========== ========== ========== ========== ==========
Insurance premiums and policy charges .................................... $ 2.5 $ 1.9 $ 8.5 $ 6.3 $ 6.6
Net investment income<F2>................................................. 39.2 38.2 156.5 142.0 138.5
Net investment gains (losses), core<F4>................................... 0.4 -- (0.9) -- --
Policyholder benefits .................................................... (30.6) (29.0) (118.9) (112.3) (113.8)
---------- ---------- ---------- ---------- ----------
Gross interest margin .................................................... 11.4 11.1 45.2 36.0 31.3
Associated amortization of DAC ........................................... (2.9) (3.0) (12.1) (8.8) (4.7)
---------- ---------- ---------- ---------- ----------
Net interest margin ...................................................... 8.5 8.1 33.1 27.2 26.6
---------- ---------- ---------- ---------- ----------
Net investment gains (losses), other ..................................... 7.2 -- 1.0 0.8 17.0
Associated amortization of DAC ........................................... (2.0) -- (0.2) (0.2) (4.8)
---------- ---------- ---------- ---------- ----------
Net margin (loss) from investment gains (losses), other .................. 5.2 -- 0.8 0.6 12.2
---------- ---------- ---------- ---------- ----------
Total net margin (loss) .................................................. 13.7 8.1 33.9 27.8 38.8
Expenses, net ............................................................ (2.2) (2.7) (8.7) (8.5) (11.1)
---------- ---------- ---------- ---------- ----------
Operating earnings (loss) ................................................ 11.5 5.4 25.2 19.3 27.7
Interest expense ......................................................... (0.1) -- (0.1) -- (1.0)
---------- ---------- ---------- ---------- ----------
Earnings before income taxes ............................................. 11.3 5.4 25.1 19.3 26.7
Income tax expense (benefit) ............................................. 3.9 1.9 8.5 5.6 8.5
---------- ---------- ---------- ---------- ----------
Net earnings (loss) before extraordinary loss ............................ 7.4 3.5 16.6 13.7 18.2
Extraordinary loss on early extinguishment of debt ....................... -- -- -- -- (0.2)
---------- ---------- ---------- ---------- ----------
Net earnings ............................................................. $ 7.4 $ 3.5 $ 16.6 $ 13.7 $ 18.0
========== ========== ========== ========== ==========
Operating earnings (loss) ................................................ $ 11.5 $ 5.4 $ 25.2 $ 19.3 $ 27.7
Less:Net margin (loss) from investment gains (losses) .................... 5.2 -- 0.8 0.6 12.2
---------- ---------- ---------- ---------- ----------
Operating earnings excluding net investment gains
(losses) and associated amortization of DAC<F3> ........................... $ 6.3 $ 5.4 $ 24.4 $ 18.7 $ 15.5
========== ========== ========== ========== ==========

Three Months Ended
March 31, Years Ended December 31,
-------------------- ----------------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- --------
(annualized)
(percentage of average invested assets)

Average invested assets<F1>........................................ 100.00% 100.00% 100.00% 100.00% 100.00%
======= ======= ======= ======= =======
Insurance premiums and policy charges ............................. 0.47% 0.39% 0.43% 0.34% 0.37%
Net investment income<F2>.......................................... 7.54 7.90 7.85 7.62 7.82
Net investment gains (losses), core<F4> ............................ 0.08 -- (0.04) -- --
Policyholder benefits ............................................. (5.89) (5.99) (5.97) (6.03) (6.43)
------ ------ ------ ------ ------
Gross interest margin ............................................. 2.20 2.30 2.27 1.93 1.76
Associated amortization of DAC .................................... (0.57) (0.62) (0.61) (0.47) (0.26)
------ ------ ------ ------ ------
Net interest margin ............................................... 1.63 1.68 1.66 1.46 1.50
------ ------ ------ ------ ------
Net investment gains (losses), other .............................. 1.39 -- 0.05 0.04 0.96
Associated amortization of DAC .................................... (0.39) -- (0.01) (0.01) (0.27)
------ ------ ------ ------ ------
Net margin (loss) from investment gains (losses), other
1.00 -- 0.04 0.03 0.69
------ ------ ------ ------ ------
Total net margin (loss) ........................................... 2.63 1.68 1.70 1.49 2.19
Expenses, net ..................................................... (0.42) (0.56) (0.44) (0.46) (0.62)
------ ------ ------ ------ ------
Operating earnings (loss) ......................................... 2.20 1.12 1.26 1.03 1.57
Interest expense .................................................. (0.02) -- -- -- (0.06)
------ ------ ------ ------ ------
Earnings before income taxes ...................................... 2.18 1.12 1.26 1.03 1.51
Income tax expense (benefit) ...................................... 0.75 0.39 0.43 0.30 0.48
------ ------ ------ ------ ------
Net earnings (loss) before extraordinary loss ..................... 1.42 0.73 0.83 0.73 1.03
Extraordinary loss on early extinguishment of debt ................ -- -- -- -- (0.01)
------ ------ ------ ------ ------
Net earnings ...................................................... 1.42% 0.73% 0.83% 0.73% 1.02%
====== ====== ====== ====== ======
Operating earnings (loss) ......................................... 2.20% 1.12% 1.26% 1.03% 1.57%
Less: Net margin (loss) from investment gains (losses)............. 1.00 -- 0.04 0.03 0.69
------ ------ ------ ------ ------
Operating earnings excluding net investment gains
(losses) and associated amortization of DAC<F3>.................. 1.20% 1.12% 1.22% 1.00% 0.88%
====== ====== ====== ====== ======
- ----------
<FN>

<F1> Average of cash, invested assets (before SFAS No. 115 adjustment) and net amounts due to or from brokers on unsettled security
trades at the beginning and end of period.

<F2> Net investment income is presented net of investment expense.

<F3> The Company believes that disclosure of operating earnings excluding net investment gains (losses) and related amortization of
deferred acquisition costs provides a supplemental measure, which may be useful to investors, of the Company's earnings from
its operations separated from the impact of net investment gains (losses) whose timing may be influenced by investment and
other considerations unrelated to operations.

<F4> Represents the net of all trading gains (losses) and gains (losses) on securities upon which the expected returns are
dependent upon the performance of the underlying equity.

May not add due to rounding.

Results of Operations

Three Months Ended March 31, 1996, and 1995.

Insurance premiums and policy charges increased $.6 million or 32%, to $2.5
million in 1996 from $1.9 million in 1995, due to a $.4 million increase in
surrender charges received as a result of increased surrenders of annuity
policies and a $.2 million increase in SPIA sales. The increased surrender
activity realized in 1996 and 1995 reflects both the increased number of
policies no longer covered by a surrender charge and the returns available on
alternative investments as annuity rates have declined.

Net investment income increased $1.0 million, or 3%, to $39.2 million in
1996 from $38.2 million in 1995. This increase reflects an increase in average
invested assets from $1.9 billion in 1995 to $2.1 billion in 1996, offset in
part by a decrease in the average yield on investment assets from 7.9% for the
three months ended March 31, 1995, to 7.5% for the same period in 1996.

Net investment gains were $7.6 million in 1996, compared with a loss of
approximately $10,000 in 1995. Gains and losses may be realized upon securities
which are disposed of for various reasons. The gains realized during both 1995
and 1996 are the result of general portfolio management. Unrealized gains
(losses) in the Company's bond portfolio were $28.1 million and $96.8 million as
of March 31, 1996 and December 31, 1995, respectively.

Benefits, claims and interest credited to policyholders increased to $1.6
million, or 6% to $30.6 million in 1996 from $29.0 million in 1995. This
increase resulted primarily from an increase in annuity liabilities to $2.1
billion on March 31, 1996, from $2.0 billion on March 31, 1995. The interest
rate credited on the Company's annuity liabilities was 5.9% on March 31, 1996
and 1995.

Amortization of deferred policy acquisition costs increased $2.0 million,
or 67%, to $5.0 million in 1996 from $3.0 million in 1995. Amortization of DAC
associated with gross interest margin decreased $.1 million to $2.9 millon in
1996 from $3.0 million in 1995. Amortization of DAC associated with investment
gains increased to $2.0 million on $7.6 million of gains in 1996 from a benefit
of approximately $3,700 on losses of approximately $10,000. Acquisition costs
incurred in 1996 and deferred into future policy periods were $9.1 million,
compared with $7.4 million in 1995.

Income tax expense increased $2.0 million to $3.9 million in 1996 from $1.9
million in 1995. Taxes were provided at an effective rate of 35% on both 1996
and 1995 income.

Years Ended December 31, 1995, 1994 and 1993.

Insurance premiums and policy charges increased $2.2 million or 35%, to
$8.5 million in 1995 from $6.3 million in 1994, due to an increase in surrender
charges assessed on the surrender of annuity policies. This follows a decrease
of $.3 million or 5%, to $6.3 million in 1994 from $6.6 million in 1993. This
decrease reflects a $.5 million decrease in SPIA sales which was partially
offset by a $.3 million increase in surrender charges assessed on the surrender
of annuity policies. Surrender benefits increased $113.4 million to $307.4
million in 1995 from $194.0 million in 1994. The 1994 amount of $194.0 million
represents a decrease of $76.8 million from $270.8 million in 1993. The increase
in surrenders realized in 1995 reflects both the increased number of policies no
longer covered by a surrender charge and the returns available on alternative
investments as annuity rates decline. The decrease realized in 1994 reflects the
reduction in surrenders from "bailout" products to $18.3 million in 1994 from
$139.6 million in 1993.

Net investment income increased $14.5 million, or 10%, to $156.5 million
from $142.0 million in 1994. This increase resulted from both an increase in
average invested assets from $1.9 billion in 1994 to $2.0 billion in 1995 and an
increase in the average yield on invested assets from 7.6% in 1994 to 7.9% in
1995. Net investment income increased $3.5 million, or 3%, to $142.0 million in
1994 from $138.5 million in 1993. This increase resulted from an increase in
average invested assets from $1.8 billion in 1993 to $1.9 billion in 1994,
offset in part by a reduction in the average yield on invested assets from 7.8%
in 1993 to 7.6% in 1994. The 1994 yield was impacted by losses generated by an
investment in investment partnerships. These partnerships form a fund of funds
totalling $23.1 million on December 31, 1995, which is structured in an attempt
to consistently provide returns in excess of the Standard & Poor's ("S&P") 500
over time without regard to the general direction of financial markets. This
fund generated income of $3.6 million in 1995 compared with a loss of $1.9
million in 1994 and income of $1.2 million in 1993.

Net trading losses of $.9 million in 1995 primarily result from a program
designed to create capital losses for tax purposes which can be carried back
against capital gains realized in 1992. To accomplish this, the Company utilized
a preferred stock dividend roll program, buying the stock at prices which
included the dividend, collecting the dividend and then selling the stock at
prices excluding the dividend. The net effect of this program was to generate
dividend income of $1.0 million, included in net investment income, and capital
losses of $1.0 million. The Company had no trading activity in either 1994 or
1993.

Net investment gains increased $.2 million, or 25%, to $1.0 million in 1995
from $.8 million in 1994. This follows a decrease of $16.2 million, or 95%, to
$.8 million in 1994 from $17.0 million in 1993. The 1995 gain reflects the
release of the allowance for credit losses that was first established in 1989.
The release of this reserve increased 1995 investment gains by $2.2 million.
Gains and losses may be realized upon securities which are disposed of for
various reasons. The gains realized in 1994 are the result of general portfolio
management while those taken in 1993 were to reduce the effects of the statutory
losses resulting from surrenders following the reduction of interest crediting
rates on certain annuity policies below the "bailout" rate. The decision to
realize gains or losses lies to a great degree in management's discretion.
Unrealized gains (losses) in the Company's bond portfolio were $96.8 million,
($105.6) million and $81.4 million as of December 31, 1995, 1994 and 1993
respectively.

Other revenue increased $.9 million, or 150%, to $1.5 million in 1995 from
$.6 million in 1994. This increase resulted from a gain of $.7 million
recognized on the sale of Omni-Tech Medical Inc., and a $.3 million increase in
Omni-Tech sales. Other revenue increased $.3 million to $.6 million in 1994 from
$.3 million in 1993. This increase is due to an increase in Omni-Tech sales.

Benefits, claims and interest credited to policyholders increased $6.6
million, or 6%, to $118.9 million in 1995 from $112.3 million in 1994. This
increase results primarily from an increase in the average interest rate
credited on the Company's annuity liabilities, from 5.9% as of December 31, 1994
to 6.0% as of December 31, 1995, along with an increase in annuity liabilities
to $2.1 billion on December 31, 1995 from $2.0 billion on December 31, 1994. In
1994, this expense decreased $1.5 million, to $112.3 million from $113.8 million
in 1993. This decrease resulted primarily from a reduction in the average
interest rate credited on annuity liabilities, from 6.2% as of December 31, 1993
to 5.9% as of December 31, 1994. This decrease was partially offset by an
increase in annuity liabilities to $2.0 billion on December 31, 1994 from $1.8
billion on December 31, 1993.

Amortization of DAC increased $3.4 million, or 38%, to $12.4 million in
1995 from $9.0 million in 1994. Amortization of DAC associated with gross
interest margin increased $3.3 million to $12.1 million in 1995 from $8.8
million in 1994. Amortization of DAC associated with investment gains was
unchanged at an expense of $.2 million on gains of $1.0 million in 1995 and an
expense of $.2 million on gains of $.8 million in 1994. The increase in 1995
amortization associated with gross interest margin reflects the increased
surrenders realized during 1995. Amortization of DAC decreased $.4 million, to
$9.0 million in 1994 from $9.4 million in 1993. Amortization of DAC associated
with gross interest margins increased $4.1 million, to $8.8 million in 1994,
from $4.7 million in 1993. Amortization of DAC associated with investment gains
decreased $4.6 million, to $.2 million in 1994, from $4.8 million in 1993. The
1993 amortization amounts reflect the lowering of interest crediting rates and
the resulting increase in the estimates of future expected gross profits and the
realization of $17.0 million of investment gains. Acquisition costs incurred in
1995 and deferred into future policy periods were $34.8 million, compared with
$25.8 million in 1994 and $18.2 million in 1993.

General insurance expenses increased $.8 million, or 11%, to $8.4 million
in 1995 from $7.6 million in 1994. Management believes this increase can be
attributed to increases in business activity and assets under management. This
follows a decrease of $1.2 million to $7.6 million in 1994 from $8.8 million in
1993. This decrease is primarily attributable to the deferral of additional
expenses related to the acquisition of annuity contracts in 1994.

Premium and other taxes, licenses and fees increased $.3 million, or 23%,
to $1.6 million in 1995 from $1.3 million in 1994 following a decrease of $1.1
million in 1994 from $2.4 million in 1993. The above amounts include charges of
approximately $1.0 million, $.5 million and $1.6 million for the years 1995,
1994 and 1993, respectively, for nonrecoverable guaranty fund assessments
resulting from the significant number of insolvencies that have occurred in
recent years.

Interest expense increased $.1 million in 1995 as a result of $7.0 million
of borrowing under the Company's Credit Facility. The proceeds of this borrowing
were contributed to the surplus of American. Interest expense decreased $1.0
million in 1994 following the repayment of all debt in November, 1993, with
proceeds from the Company's 1993 common stock offering.

Income tax expense increased $2.9 million to $8.5 million in 1995
from $5.6 million in 1994. This follows a $3.0 million decrease in 1994 from
$8.6 million in 1993. Taxes were provided at an effective rate of 34%, 29% and
32% in 1995, 1994 and 1993, respectively.

Liquidity and Capital Resources

The Company is an insurance holding company whose principal assets are the
common stock of American and FBL. As a holding company, the Company relies on
funds received from American and FBL to meet its cash requirements at the
holding company level. The Company's primary cash requirements are to pay
operating expenses. See "-- FBG" for a discussion of FBL's liquidity and capital
resources.

The Company receives funds from American in the form of commissions paid to
American Sales, investment fees paid to AVIG, rent, administrative, printing and
data processing charges and dividends. The insurance laws of Kansas generally
limit the ability of American to pay cash dividends in excess of certain amounts
without prior regulatory approval and also require that certain agreements
relating to the payment of fees and charges to the Company by American be
approved by the Kansas Insurance Commissioner.

The liquidity requirements of American are met by premiums received from
annuity sales, net investment income received, and proceeds from investments
upon maturity, sale or redemption as well as the proceeds of investments. The
primary uses of funds by American are the payment of surrenders, policy
benefits, operating expenses and commissions, as well as the purchase of assets
for investment.

American must maintain capital and surplus levels, determined on the
statutory accounting basis, in order to conduct business in the jurisdictions in
which it is licensed. American is required under Florida statutes to maintain
capital and surplus of at least 4.0% of policyowner liabilities exclusive of the
Asset Valuation Reserve ("AVR") and Interest Maintenance Reserve ("IMR"). At
March 31, 1996, American's capital and surplus/liabilities ratio was 4.8%.

For purposes of the Company's consolidated statements of cash flows,
financing activities include premiums received from sales of SPDAs, surrenders
and death benefits paid, and surrender and policy charges collected on these
contracts. The net cash provided by (used in) these particular financing
activities for the three months ended March 31, 1996, and 1995, was $5.2 million
and $(19.2) million, respectively.

The increase in net cash provided by annuity contracts without life
contingencies in the first three months of 1996 resulted primarily from a $21.3
million increase in premiums received from $75.8 million to $97.1 million and a
$2.7 million decrease in surrender and death benefits paid from $96.5 million to
$93.8 million.

Net cash provided by the Company's operating activities was $38.7 million
and $40.1 million in 1996 and 1995, respectively.

American can generate cash through the sale of securities from its
available-for-sale and trading portfolios. As of March 31, 1996, these
portfolios had a carrying value of $2.1 billion. As of March 31, 1996, 8.4% of
these securities were invested in below investment grade securities compared
with 7.9% as of December 31, 1995. As of March 31, 1996, American owned
securities with an original cost of $7.5 million which were determined to have
other than a temporary decline in value. Accordingly, writedowns were taken
which resulted in no value being carried in the Company's financial statements.

Cash provided by financing and operating activities and by the sale and
maturity of portfolio investments is used primarily to purchase portfolio
investments and for the payment of acquisition costs (commissions and expenses
associated with the sale and issue of policies). To meet its anticipated
liquidity requirements, the Company purchases investments taking into account
the anticipated future cash flow requirements of its underlying liabilities. In
addition, the Company invests a portion of its assets in short-term investments
and maturities of less than one year (2% and 1% as of March 31, 1996, and
December 31, 1995, respectively). The weighted average duration of the Company's
investment portfolio was 4.5 years as of March 31, 1996.

The Company continually assesses its capital requirements in light of
business developments and various capital and surplus adequacy ratios which
affect insurance companies. During the past five years, the Company has met its
capital needs and those of American through several different sources including
bank borrowing and the sale of both preferred and common stock. On December 31,
1991, the Company issued 172,000 shares of its $2.00 Series B Convertible
Preferred Stock with a total stated value of $4.3 million. The Preferred Stock
was convertible at $7.50 per share into 573,332 shares of the Company's Common
Stock. On December 30, 1992, the Company issued and sold 235,294 shares of
Common Stock at $10.625 per share to the Company's Leveraged Employee Stock
Ownership Plan ("LESOP"). This purchase was financed with the proceeds of a $2.5
million loan from American. For additional information regarding the LESOP, see
Note 6 of Notes to Consolidated Financial Statements. In 1993, the Company
raised $29.4 million through the sale of 3,451,668 shares of Common Stock. On
December 31, 1994, the Company entered into a credit agreement with The First
National Bank of Chicago and Boatmen's First National Bank of Kansas City, as
lenders. Under the terms of this agreement, the lenders have committed to lend
up to $15 million in the form of a 5-year reducing credit facility, of which $7
million has been borrowed at December 31, 1995. For additional information
regarding this credit agreement, see Note 5 of Notes to Consolidated Financial
Statements.

Dividends by American to the Company are limited by laws applicable to
insurance companies. Under Kansas law, American may pay a dividend from its
surplus profits, without prior consent of the Kansas Commissioner of Insurance,
if the dividend does not exceed the greater of 10% of statutory capital and
surplus at the end of the preceding year or all of the statutory net gain from
operations of the preceding year.

Recent regulatory actions against certain large life insurers encountering
financial difficulty have prompted the various state guaranty associations to
begin assessing life insurance companies for the resulting losses. For further
information regarding the effects of guaranty fund assessments, see Note 11 of
Notes to Consolidated Financial Statements.

Reinsurance. The Company had amounts receivable under reinsurance
agreements of $144.2 million and $146.6 million as of March 31, 1996, and
December 31, 1995, respectively. Of the amounts, $142.5 million and $145.0
million, respectively, were associated with a single insurer, Employers
Reinsurance Corporation ("ERC"). In 1989, the Company entered into a coinsurance
agreement which ceded 90% of the risk on the Company's block of Single Premium
Whole Life ("SPWL") policies written prior to 1989 to ERC. The agreement
provides that ERC assumes 90% of all risks associated with each policy in the
block. Under the terms of the contract, the Company continues to administer the
policies and is reimbursed for all payments made under the terms of those
policies. The Company also received a fee from the reinsurer for administering
such policies. Cash settlements under the contract are made with ERC on a
monthly basis. If ERC were to become insolvent, American would remain
responsible for the payment of all policy liabilities.

In addition, the Company is a party to two assumption reinsurance
agreements with other reinsurers.

Effect of Inflation and Changes in Interest Rates. The Company does not
believe that inflation has had a material effect on its consolidated results of
operations during the past three years. The Company seeks to manage its
investment portfolio, in part, to reduce its exposure to interest rate
fluctuations. In general, the market value of the Company's fixed income
securities increases or decreases directly with interest rate changes. For
example, if interest rates decline (as was the case in 1995), the Company's
fixed income investments generally will increase in market value, while net
investment income will decrease. Conversely, if interest rates rise (as was the
case in 1996), fixed income investments generally will decrease in market value,
while net investment income will increase.

In a rising interest rate environment (such as that experienced in 1994),
the Company's average cost of funds would increase over time as it prices its
new and renewing annuities to maintain a generally competitive market rate.
During such a rise in interest rates, new funds would be invested in bonds with
higher yields than the liabilities assumed. In a declining interest rate
environment, the Company's cost of funds would decrease over time, reflecting
lower interest crediting rates on its fixed annuities.

In addition to the increase in the Company's average cost of funds caused
by a rising interest rate environment, surrenders of annuities that are no
longer protected by surrender charges increase. While the Company experienced a
decrease in total surrenders during 1994, the decrease was primarily due to the
large number of bailout surrenders in 1993. Throughout 1994, the Company saw an
increase in surrenders of policies which no longer were covered by surrender
charges. Management believes that increased surrenders experienced in 1994 were
due to the increasing interest rates through 1994. This surrender trend
continued throughout 1995 and into 1996. Management believes that surrenders are
lower during periods of declining interest rates.

FBG

General

FBG specialized (and FBL continues to specialize) in the sale of deferred
annuity products as a retirement savings vehicle for individuals. During each of
the three years ended December 31, 1995, 1994 and 1993, sales of deferred
annuities have accounted for at least 93% of FBL's premiums received, while
sales of SPIAs have accounted for the remainder. FBL also markets and sells
deferred annuities for unaffiliated insurers and is paid marketing fees and
commissions for such sales and services.

FBG's operating earnings have been derived primarily from its investment
results, including realized gains (losses), less interest credited to annuity
contracts and expenses. Under GAAP, premiums received are not recognized as
revenue at the time of sale. Similarly, policy acquisition costs (principally
commissions) related to such sales are not recognized as expenses but are
capitalized as DAC. As a result of this deferral of costs and the absence of
revenue recognition for premiums received, no profit or loss is realized on
these contracts at the time of sale. Premiums received are reflected on FBG's
balance sheet by an increase in assets equal to the premiums received and by a
corresponding increase in future policy liabilities.

FBG's earnings have depended, in large part, upon the persistency of its
annuities. Over the life of the annuity, net investment income and net
investment gains are realized as revenue, and DAC is amortized as an expense.
The timing of DAC amortization is based on the projected realization of profits
including realized gains (losses) for each type of annuity contract and is
periodically adjusted for actual experience. If a policy is terminated prior to
its expected maturity, any remaining related DAC is expended in the current
period. Most of FBL's annuity policies in force have surrender charges which are
designed to discourage and mitigate the effects of premature withdrawals. As a
result, the impact on earnings from surrenders will depend upon the extent to
which available surrender charges offset the associated amortization of DAC.
Historically, the negative impact on earnings of any difference between the
actual surrender levels and expected surrenders levels has been offset by the
realization of gains on the sale of securities and the change in future expected
gross profits as a result of FBL's reduction in credited rates.

Recent periods of low interest rates reduced FBG's investment yields. As a
result of the lower investment yields, FBL elected to reduce credited interest
rates on certain of its annuity products. Certain annuities issues by FBL
include a "bailout" feature. This feature generally allows policyowners to
withdraw their account balance without surrender charge for a period of 30 days
following the initial determination of a renewal crediting rate below a
predetermined level. If a policyowner elects not to withdraw funds during this
period, surrender charges are reinstated. The aggregate account values of
annuity contracts on which the crediting rate was reduced below the "bailout"
level totalled $14.6 million, $182.5 million, and $74.7 million during 1995,
1994 and 1993 respectively. As a result, $5.3 million, or 36%, $73.1 million, or
40%, and $25.3 million, or 34% of such policies were surrendered during 1995,
1994 and 1993, respectively.

FBG was able to offset the negative impact of "bailout" on its earnings
through the realization of gains on the sale of its securities. Excluding
surrenders from "bailout" products, FBL's annuity withdrawal rates were 16.7%
for 1995, 11.6% for 1994, and 9.6% for 1993, which management believes is
consistent with industry experience for comparable product durations. Annuity
account values that contained a "bailout provision" were $45.6 million or 8.9%,
$66.4 million or 12.8%, and $250 million or 44.6% as of December 31, 1995, 1994,
and 1993, respectively. The current weighted average credited rates on the
remaining policies with "bailout" provisions is 4.5% or less. FBL is now less
disposed to reduce credited interest rates below current "bailout" rate levels
because the current earnings rate on its investment portfolios is 7.5% and the
reinvestment rate is approximately 6.75%. Furthermore, FBL no longer markets
products with "bailout" interest rates, hence it has been a matter of
diminishing concern. If FBL reduces credited rates below the "bailout" rates on
policies containing "bailout" provisions in the future, it intends to pay any
resulting surrenders from cash provided by operations and premiums received. In
the event such sources are not sufficient to pay surrenders, FBL would have to
sell securities at the then current market prices. FBL expects the withdrawals
on its annuity contracts will increase as such contracts approach maturity
because as the surrender charges "wear off," the policies become more
susceptible to disintermediation. FBL may not be able to realize investment
gains in the future to offset the adverse impact on earnings, should future
"bailout" surrenders occur.

Margin Analysis.

FBG's earnings are primarily derived from the excess of investment income
over the amount it pays to its policy holders and the associated amortization of
DAC. From time to time and to a lesser extent in recent periods, FBG's earnings
have been impacted by realized investment gains and losses and by the associated
amortization of DAC. The actual timing pattern of such amortization is
determined by the actual profitability to date (which includes realized
investment gains and losses) and the expected future profitability on a
particular annuity contract. To the extent investment income is accelerated
through realization of investment gains, the corresponding amortization of DAC
is also accelerated as the stream of profitability on the underlying annuities
is effectively accelerated. When investment losses are realized, the reverse is
true. The following analysis depicts the components of FBG's margin:

Three Months Ended
March 31, Years Ended December 31,
-------------------- ---------------------------------
1996 1995 1995 1994 1993
--------- -------- -------- -------- ---------
(dollars in millions)

Average invested assets<F1>.............................................. $ 531.5 $ 529.8 $ 530.0 $ 546.7 $ 625.3
======== ======== ======== ======== ========
Net investment income<F2>................................................ $ 9.6 $ 10.9 $ 43.0 $ 43.1 $ 53.0
Policyholder benefits ................................................... 6.5 6.9 28.1 28.1 41.5
-------- -------- -------- -------- --------
Gross interest margin ................................................... 3.1 4.0 14.9 15.0 11.5
Associated amortization of DAC .......................................... 2.1 2.1 9.0 9.5 14.7
-------- -------- -------- -------- --------
Net interest margin ..................................................... 1.0 1.9 5.9 5.5 (3.2)
-------- -------- -------- -------- --------
Net investment gains .................................................... 0.2 0.7 2.7 2.7 21.9
Associated amortization of DAC .......................................... 0.1 0.4 1.7 1.7 0.9
-------- -------- -------- -------- --------
Net margin from investment gains ........................................ 0.1 0.3 1.0 1.0 21.0
-------- -------- -------- -------- --------
Total net margin ........................................................ 1.1 2.2 6.9 6.5 17.8
Expenses, net ........................................................... 1.5 -- (0.9) 1.9 2.3
-------- -------- -------- -------- --------
Operating earnings (loss) ............................................... (0.4) 2.2 7.8 4.6 15.5
Interest expense ........................................................ 0.4 0.4 1.5 1.4 1.5
-------- -------- -------- -------- --------
Earnings before income taxes ............................................ (0.8) 1.8 6.3 3.2 14.0
Income tax expense (benefit) ............................................ (0.3) 0.5 1.7 0.7 4.9
-------- -------- -------- -------- --------
Earnings (loss) before extraordinary loss ............................... (0.5) 1.3 4.6 2.5 9.1
Extraordinary loss on early extinguishment of debt ...................... -- -- -- 1.8 --
-------- -------- -------- -------- --------
Net earnings ............................................................ $ (0.5) $ 1.3 $ 4.6 $ 0.7 $ 9.1
======== ======== ======== ======== ========
Operating earnings (loss) ............................................... $ (0.4) $ 2.2 $ 7.8 $ 4.6 $ 15.5
Less:Net margin from investment gains ................................... 0.1 0.3 1.0 1.0 21.0
-------- -------- -------- -------- --------
Operating earnings excluding net investment
gains (losses) and associated amortization of DAC<F3>.................. $ (0.5) $ 1.9 $ 6.8 $ 3.6 $ (5.5)
======== ======== ======== ======== ========

Three Months Ended
March 31, Years Ended December 31,
------------------- ------------------------------
1996 1995 1995 1994 1993
------- ------- ------- ------- -------
(annualized)
(percentage of average invested assets)

Average invested assets<F1>............................................... 100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ======
Net investment income<F2>................................................. 7.22 8.22 8.11 7.88 8.48
Policyholder benefits .................................................... 4.89 5.21 5.30 5.14 6.64
------ ------ ------ ------ ------
Gross interest margin .................................................... 2.33 3.02 2.81 2.74 1.84
Associated amortization of DAC ........................................... 1.58 1.59 1.70 1.74 2.35
------ ------ ------ ------ ------
Net interest margin ...................................................... 0.75 1.43 1.11 1.01 (0.51)
------ ------ ------ ------ ------
Net investment gains (losses) ............................................ 0.15 0.53 0.51 0.49 3.50
Associated amortization of DAC ........................................... 0.08 0.30 0.32 0.31 0.14
------ ------ ------ ------ ------
Net margin (loss) from investment gains (losses) ......................... 0.07 0.23 0.19 0.18 3.36
------ ------ ------ ------ ------
Total net margin (loss) .................................................. 0.83 1.66 1.30 1.19 2.85
Expenses, net ............................................................ 1.13 -- (0.17) 0.35 0.37
------ ------ ------ ------ ------
Operating earnings (loss) ................................................ (0.30) 1.66 1.47 0.84 2.48
Interest expense ......................................................... 0.30 0.30 0.28 0.26 0.24
------ ------ ------ ------ ------
Earnings before income taxes and extraordinary item ...................... (0.60) 1.36 1.19 0.59 2.24
Income tax expense (benefit) ............................................. (0.23) 0.38 0.32 0.13 0.78
------ ------ ------ ------ ------
Earnings (loss) before extraordinary loss ................................ (0.37) 0.98 0.87 0.46 1.46
Extraordinary loss on early extinguishment of debt ....................... -- -- -- 0.33 --
------ ------ ------ ------ ------
Net earnings (loss) ...................................................... (0.37) 0.98 0.87 0.13 1.46
====== ====== ====== ====== ======
Operating earnings (loss) ................................................ (0.30) 1.66 1.47 0.84 2.48
Less: Net margin (loss) from investment gains (losses).................... 0.07 0.23 0.19 0.18 3.36
------ ------ ------ ------ ------
Operating earnings excluding net investment gains
(losses) and associated amortization of DAC<F3>........................... (0.37)% 1.43% 1.28% 0.66% (0.88)%
====== ====== ====== ====== ======
- ----------
<FN>

<F1> Average of cash and invested assets (before SFAS No. 115 adjustment) at the beginning and end of period.

<F2> Net investment income is presented net of investment expense.

May not add due to rounding.

Results of Operations

Three Months Ended March 31, 1996 and 1995.

After tax earnings from operations before realized gains on investments and
interest decreased to a loss of $.3 million for the quarter ended March 31, 1996
from $1.4 million for the quarter ended March 31, 1995. The decrease was
attributed to certain non-recurring professional fees related to the merger with
a subsidiary of the Company. Also, the investment portfolio of FBL, FBG's
wholly-owned subsidiary, yielded less in investment income due to restructuring
to shorten maturities in addition to adjustments to reflect changes in expected
maturities on mortgage-backed securities following changes in market interest
rates.

Net income, including capital gains and interest expense, decreased to a
loss of $.5 million for the quarter ended March 31, 1996 from earnings of $1.3
million for the quarter ended March 31, 1995. The decrease is attributed to the
aforesaid non-recurring professional fees and changes to the investment
portfolio of FBL.

Investment income, aggregated for the available-for-sale and the
held-to-maturity portfolios, decreased to $9.6 million for the quarter ended
March 31, 1996 from $10.9 million for the quarter ended March 31, 1995. The
decrease was attributed to restructuring the investment portfolio of FBL to
achieve shorter overall maturities in addition to an adjustment to the expected
maturities of its mortgage-backed portfolio resulting from changes in market
interest rates. Investment income as a percentage of invested assets decreased
to 7.5% for the three months ended March 31, 1996 from 8.5% for the three months
ended March 31, 1995.

Realized gains on investments decreased to $.2 million for the quarter
ended March 31, 1996 from $.7 million for the quarter ended March 31, 1995.

Commissions and marketing fees decreased to $.5 million for the quarter
ended March 31, 1996 from $.6 million for quarter ended March 31, 1995. The
decrease was attributed to less production during the current period for one of
the client companies that was a significant producer in the year- earlier
period.

Other income which includes surrender charges and rental income on the home
office building decreased to $1.1 million for the quarter ended March 31, 1996
from $1.3 million for the quarter ended March 31, 1995. The decrease related to
slightly less surrender charge income during the current period due to a
disparate mix of surrendering business when compared to the year earlier period.

Interest credited to policyowners decreased to $6.5 million for the three
months ended March 31, 1996 from $6.9 million for the three months ended March
31, 1995. The decrease related to lower average credited interest rates on
policyowner reserves in the current period compared to the year-earlier period.

General and administrative expenses increased to $2.6 million for the
quarter ended March 31, 1996 from $1.1 million for the quarter ended March 31,
1995. The increase resulted principally to non-recurring professional fees
related to the acquisition of FBG by the Company.

Payroll and related expenses decreased to $.5 million for the quarter ended
March 31, 1996 from $.7 million for the quarter ended March 31, 1995. The
decrease related to the termination of FBG's ESOP as of December 31, 1995 and
also to the discontinuance of accrued bonuses during the current period.

Amortization of DAC decreased to $2.3 million for the quarter ended March
31, 1996 from $2.5 million for the quarter ended March 31, 1995. The decrease
related to the relative level of overall policy surrenders and withdrawals for
FBL which were less than expected during the current period.

Interest expense was $.4 million for the quarter ended March 31, 1996 and
$.4 million for the quarter ended March 31, 1995.

Years Ended December 31, 1995, 1994 and 1993

After tax earnings from operations before realized gains on investments and
interest increased to $5.0 million for the year ended December 31, 1995 from
$2.8 million for the year ended December 31, 1994. The improvement was
attributed to maintenance of FBL's core investment spread on its in force
annuity business combined with reduced amortization of DAC which directly
related to reduced surrender activity in FBL. Also, increased commissions and
marketing fees earned through FBG's other wholly-owned subsidiaries, AIMCOR and
TIM primarily accounted for the remainder of the earnings improvement. After tax
earnings from operations before realized gains on investments, interest and
reinsurance effects increased to $2.8 million for the year ended December 31,
1994 from a loss of $3.6 million for the year ended December 31, 1993. This
improvement was attributed to FBL's increased spread between the earned rate on
its investments and the credited rates on annuity policies issued by FBL.

Net income, including capital gains and interest expense, increased to $4.6
million for the year ended December 31, 1995 from $2.5 million before a
tax-effected extraordinary charge for the early extinguishment of convertible
debt for the year ended December 31, 1994. The improvement is again attributed
to the reduction in amortization of DAC and the increased commissions and
marketing fees. Net income, before a non-recurring, extraordinary charge related
to the early extinguishment of debt and including capital gains, interest
expense and the effects of reinsurance, decreased to $2.5 million in 1994 from
$9.1 million in 1993. Primary earnings per share, before the extraordinary
charge, decreased to $.30 in 1994 from $1.11 in 1993. The decline in net income
was attributable to the fact that 1993 earnings included net realized capital
gains on investments (after taxes and amortization of capital gains and related
DAC) of $13.6 million while 1994 earnings included only $.8 million of net
realized gains on investments.

The extraordinary charge in 1994 of $2.0 million before a tax benefit of
$200,000 related to the early extinguishment of both a $10 million subordinated
convertible debenture owed to Southwestern Life Insurance Company of Dallas,
Texas, a subsidiary of Southwestern Life Corporation, and a $5.0 million term
note owed to Southwestern Life Corporation (formerly I.C.H. Corporation). These
debts were refinanced through a $16.0 million borrowing from Fleet Bank
(formerly Shawmut Bank) of Hartford, Connecticut.

Effective June 30, 1993, FBL entered into a reinsurance arrangement with
Philadelphia Life Insurance Company ("Philadelphia Life") under which FBL ceded
$140.1 million of statutory annuity reserves on 6,000 policies to Philadelphia
Life on a coinsurance basis. The account value relating to this block of
business totaled $154.6 million and the DAC totaled $21.5 million as of the June
30, 1993 transaction date. As of December 31, 1995, the reserves totaled $114.8
million and the DAC totaled $7.3 million.

Investment income remained unchanged at $43.1 million in 1995 and 1994.
Investment income from the available-for-sale portfolio increased to $42.0
million in 1995 from $27.4 million in 1994. Investment income from the
held-to-maturity portfolio decreased to $1.0 million in 1995 from $15.7 million
in 1994. Investment income as a percentage of invested assets increased to 8.5%
in 1995 from 8.2% in 1994. The slight increase was attributed to higher average
effective interest rates in 1995 compared to 1994. Investment income decreased
to $43.1 million in 1994 from $53.0 million in 1993. The $43.1 million consists
of $27.4 million from the available-for-sale portfolio and $15.7 million from
the held-to-maturity portfolio. The decrease resulted primarily from the smaller
asset base under management following the $140.1 million transfer of reserves to
Philadelphia Life effective June 30, 1993. Secondarily, lower prevailing
reinvestment interest rates and the excess of surrenders over new premiums
written contributed to the decrease. Investment income as a percentage of
invested assets declined to 8.2% in 1994 from 8.9% in 1993. This reduction was
attributed to lower average effective interest rates in 1994 compared to 1993.

Realized gains on investments were unchanged at $2.7 million for 1995 and
1994. Included in realized gains for 1995 was $.3 million from the sale of FBG's
Causeway manufactured home community. Realized gains on investments decreased to
$2.7 million in 1994 from $21.8 million in 1993. Net capital gains during 1993
related principally to FBL's sale of corporate bonds to effect the Philadelphia
Life reinsurance treaty.

Commissions and marketing fees increased to $2.9 million in 1995 from $1.4
million in 1994. The increase relates primarily to a new client company for both
AIMCOR and TIM. Commissions and marketing fees increased to $1.4 million in 1994
from $1.1 million in 1993. The increase relates to both the commission income of
TIM and to the growth in AIMCOR's marketing fees. FBG receives quarterly
marketing fees based on the policyholders' account value on business produced
for four unaffiliated carriers.

Other income which includes surrender charges and rental income on the home
office building increased to $5.6 million in 1995 from $3.8 million in 1994. The
increase primarily relates to increased surrender charge income. During 1994,
FBL credited renewal interest rates on existing policies at levels which, in
some cases, entitled policyowners to surrender their policies without surrender
charges for a limited period after notice was given of the new rate. During 1995
this option was available on a significantly smaller block of business.

The increase in future policy benefits remained unchanged at $28.1 million
for 1995 and 1994. The increase in liability for future policy benefits
decreased to $28.1 million in 1994 from $41.4 million in 1993. The decrease is
attributed to lower credited interest rates in 1994.

General and administrative expenses increased to $4.6 million for 1995 from
$4.1 million for 1994. The increase related principally to non-recurring
professional fees related to the acquisition of FBG by the Company. General and
administrative expenses decreased to $4.1 million in 1994 from $4.8 million in
1993. The decrease is attributed to reduced marketing expenses for non-life
company operations. In addition, expenses were offset by the settlement of a
lawsuit against a former money manager of FBG.

Payroll and related expenses decreased to $2.8 million in 1995 from $2.9
million in 1994 due to reductions in executive staff and deferred compensation
costs which was offset by increases in compensation for merit. Payroll and
related expenses increased to $2.9 million in 1994 from $2.4 million in 1993.
The increase related to merit pay increases, temporary help utilized to process
an increase in policyowner surrenders and added management staff in non-life
company operations.

Amortization of DAC decreased $10.7 million in 1995 from $11.2 million in
1994. The decrease related to the relative level of overall policy surrenders
and withdrawals for FBL which were less during 1995. Amortization of DAC
decreased to $11.2 million in 1994 from $15.6 million in 1993. The decrease is
primarily attributed to prior year amortization relating to the Philadelphia
Life reinsurance treaty. Current year amortization would have been slightly
higher due to the effect of surrenders and capital gains.

Interest expense increased to $1.5 million in 1995 from $1.4 million in
1994. The increase related to the higher average level of short term interest
rates in 1995 to which FBL's interest rate is indexed to. Interest expense
decreased to $1.4 million in 1994 from $1.5 million in 1993. The slight decrease
reflects the effects of a lower interest rate on outstanding debt following a
refinancing which occurred in June, 1994.

Liquidity and Capital Resources

The liquidity and cash requirements of FBL are met by premiums received
from annuity sales, net investment income received and proceeds from investments
upon maturity, sales or redemption. The primary uses of funds by FBL are the
payment of surrenders, policy benefits, operating expenses and commissions, as
well as the purchase of securities for investment.

FBL must maintain capital and surplus levels, determined on the statutory
accounting basis, in order to conduct business in the jurisdictions in which it
is licensed. FBL is required under Florida statutes to maintain capital and
surplus of at least 4.0% of policyowner liabilities exclusive of the Asset
Valuation Reserve ("AVR") and Interest Maintenance Reserve ("IMR"). At March 31,
1996, FBL's capital and surplus/liabilities ratio was 6.6%.

Florida's insurance statutes and regulations restrict FBL's dividends.
Florida insurance regulations limit the aggregate dividends that Florida
domiciled life insurance companies, including FBL, can pay without prior
regulatory approval to the greater of its statutory net operating profits and
realized net operating profits for the preceding year (provided there is
available surplus from net operating profits and net capital gains) or 10% of
its available and accumulated statutory surplus derived from net operating
profits and net realized capital gains. After payment of a dividend, FBL must
have 115% of required statutory surplus. Aggregate dividends exceeding these
mandated limits require special permission from the Florida Insurance
Department. Approximately $3.4 million is available as of April 30, 1996 for the
payment of dividends by FBL without regulatory approval.

FBL can generate cash by the sale of securities from its available-for-sale
portfolio. As of March 31, 1996, the available-for-sale portfolio had a carrying
value of $508.4 million. FBL carried approximately 8.1% of its fixed maturity
and equity portfolio in less than investment grade securities at March 31, 1996
and 8.3% as of December 31, 1995. As of March 31, 1996, FBL did not own any
bonds that were in default or issued by entities in bankruptcy.

As of March 31, 1996, FBG had $15.5 million of debt outstanding to Fleet
National Bank. In connection with the acquisition of FBG by the Company this
loan was repaid.

Effects of Inflation and Changes in Interest Rates.

FBG does not believe that inflation has had a material effect on its
consolidated results of operations during the past three years. FBG seeks to
manage its investment portfolio, in part, to reduce its exposure to interest
rate fluctuations. In general, the market value of FBG's fixed income securities
increases or decreases directly with interest rate changes. For example, if
interest rates decline (as was the case in 1995), FBG's fixed income investments
generally will increase in market value, while net investment income will
decrease. Conversely, if interest rates rise (as was the case in 1996), fixed
income investments generally will decrease in market value, while net investment
income will increase.

In a rising interest rate environment (such as experienced in 1994), FBG's
average cost of funds would increase over time as it prices its new and renewing
annuities to maintain a generally competitive market rate. During such a rise in
interest rates, new funds would be invested in bonds with higher yields that the
liabilities assumed. In a declining interest rate environment, FBG's cost of
funds would decrease over time, reflecting lower interest crediting rates on its
fixed annuities.

In addition to the increase in FBG's average cost of funds caused by a
rising interest rate environment, surrenders of annuities that are no longer
protected by surrender charges increase. While FBG experienced a decrease in
total surrenders during 1994, the decrease was primarily due to the large number
of bailout surrenders in 1993. Throughout 1994, FBG saw an increase in
surrenders of policies which no longer were covered by surrender charges.
Management believes that increased surrenders experienced in 1994 were due to
the increasing interest rates through 1994. This trend continued throughout 1995
and into 1996. Management believes that surrenders are lower during periods of
declining interest rates.

BUSINESS

General

The Company is an insurance holding company which operates through
subsidiaries that are engaged in the development, underwriting, marketing and
servicing of fixed annuity products in the United States. Through its insurance
subsidiaries, American Investors Life Insurance Company, Inc. ("American") and
Financial Benefit Life Insurance Company ("FBL"), the Company offers a variety
of annuity products through approximately 9,100 agents in 47 states and the
District of Columbia. As a result of its recent acquisition of Financial Benefit
Group, Inc. ("FBG"), the Company's assets increased from approximately $2.5
billion to $3.2 billion, stockholders' equity increased from $149.3 million to
$187.0 million, and annuities in force increased from approximately $2.1 billion
to $2.6 billion, on a pro forma basis as of March 31, 1996. The acquisition was
completed on April 8, 1996. The management of the Company believes that the
acquisition of FBG provides the Company with: (i) an attractive block of
in-force annuity contracts; (ii) enhanced marketing opportunities through new
agency relationships; (iii) diversified sources of revenue from FBG marketing
subsidiaries; and (iv) opportunities for economies of scale and operating
synergies derived from the consolidation of administrative and operations
functions.

The Company's operating earnings have historically been derived from
American. Following the acquisition of FBG, the Company's operating earnings
will be derived from American, FBL, and to a lesser extent, AIMCOR and TIM.

The Company's principal operating subsidiaries are American Investors Life
Insurance Company, Inc. (American), American Investors Sales Group, Inc.
(American Sales), AmVestors Investment Group, Inc. (AVIG), Financial Benefit
Life Insurance Company (FBL), Annuity International Marketing Corporation
(AIMCOR) and The Insurancemart, Inc. (TIM).

Industry Overview and Target Customer

The Company's business is in the growing asset accumulation industry, which
offers financial products to the large market of middle-aged individuals and
senior citizens who are approaching or have reached retirement age. U.S. Census
Bureau statistics indicate that the 45 to 64 age group, which numbered
approximately 46.4 million people in 1990, is projected to grow to 61.0 million
by the year 2000 and 78.6 million by 2010. The Company targets individuals aged
50 and older, which in 1995 accounted for over 85% of premiums at American and
over 84% of premiums at FBL.

The Company believes that the growth in the fixed annuities market is the
result of several demographic trends including longer life expectancy, rising
per capita income, the aging population, declines in coverage from corporate
pension plans and concerns about the long-term viability of the social security
system. Fixed annuities involve a one-time deposit or periodic deposits of cash
into an account that, after an accumulation period specified by the customer,
entitles the customer to receive the principal value plus accumulated interest
in the form of a lump sum payment or through annuity payments over a certain
period or for life. Interest credited during the accumulation period is
generally not subject to federal or state income tax until withdrawn.

The Company believes that annuity products are attractive to purchasers who
are concerned with out-living their savings. Total industry-wide fixed annuity
premiums have grown from approximately $30 billion in 1982 to over $137 billion
in 1994, and annuity premiums have exceeded traditional life insurance premiums
since 1986.

The typical fixed annuity buyer is of pre-retirement age, with a household
income below $75,000. The average premium for single premium annuities in 1995
was $31,000 (as compared to American's and FBL's combined average of
approximately $29,000). The anticipated uses for annuity income are retirement
expenses, nursing home care and unanticipated medical costs.

American, American Sales, AVIG

Overview

Founded in 1965, American has focused on the sale of single premium fixed
annuities since 1984. During various periods prior to 1984, American offered
participating and nonparticipating ordinary life insurance, flexible premium
annuities and certain disability income and cancer expense policies. However, in
the middle 1980s, American perceived greater opportunities in the savings and
retirement market and began to concentrate its marketing efforts on the sale of
single premium fixed annuities. The Company was incorporated in 1986 to serve as
a holding company for all the common stock of American.

Deferred fixed annuities accounted for approximately 96% of all premiums
received by the Company in 1995. Other products offered include single premium
immediate annuities (SPIAs) and flexible premium universal life policies
(FPULs). As of March 31, 1996, American had total annuity contracts in force of
$2.1 billion.

To access the market of potential annuity buyers, American maintains a
network of independent agents licensed in 47 states and the District of
Columbia. As of March 31, 1996, American had approximately 7,300 agents
contracted to sell its annuity products. American does not market its products
through stockbrokers or financial institutions. Agents selling American's
annuities are recruited through the Company's wholly-owned subsidiary, American
Sales, as well as through various other marketing organizations. American
endeavors to attract agents to sell its products by offering a broad selection
of fixed annuity products with competitive commission rates, by providing
timely, comprehensive services to agents and customers and by continuing to
specialize in annuity products. From January 1, 1990 to December 31, 1995,
approximately 31% of annuity premiums received by American have been produced by
agents recruited by American Sales, resulting in commission savings for American
as compared with business produced by agents recruited through other marketing
organizations.

The Company's strategy for American is to expand sales in a growing market,
attract quality agents, sell products with profit potential and maintain a high
quality investment portfolio. The Company also has a goal to grow and diversify
within the financial services industry through market affiliations and
acquisitions.

American incorporates certain features in its annuity contracts that are
designed to reduce the occurrence and effect of premature contract terminations
and significant withdrawals. Such features include surrender charges which
decline over time and which apply, subject to certain exceptions, to premature
terminations during the first five to fourteen years of an annuity contract. In
addition, annual withdrawals free of surrender charges are generally limited to
10% of an annuity's cash value. Certain of American's annuities also provide for
deferred payments of the surrender value of the annuity over a five year period
or market value adjustments of surrender value which reflect changes in interest
rates.

Certain annuity policies incorporate a "bailout" feature which generally
allows policyowners to withdraw their account balances for a limited period of
time, free of surrender charges, if credited rates fall below a specified level.
American experienced significant surrenders following the reduction of credited
rates below specified "bailout" levels during 1992 and 1993. As of March 31,
1996, 11% of American's in-force annuity business was subject to this "bailout"
provision, with an average "bailout" rate of 5.16%.

On May 9, 1995, A.M. Best Company which rates insurance companies based on
factors of concern to policyowners, reaffirmed American's "A-" (Excellent)
rating. On April 14, 1996, Duff & Phelps reaffirmed American's claims paying
ability rating of "A+" (High).

Strategy

The Company has developed a business strategy to better enable American to
capitalize on what it perceives as significant opportunities in the growing
fixed annuity market. The elements of this strategy are to (i) expand sales in
the growing fixed annuity market, (ii) attract quality agents, (iii) design and
sell products with profit potential, and (iv) maintain a high quality investment
portfolio. The Company also has a goal to grow and diversify within the
financial services industry through market affiliations and acquisitions.

Expand Sales in a Growing Market. American believes that its focus on
deferred annuity products in the expanding savings and retirement market
provides opportunity for growth. American seeks to meet the needs of the savings
and retirement market by offering a portfolio of single premium fixed annuity
products nationwide. In 1995, over 85% of American's premiums received were from
individuals ages 50 and over.

Attract Quality Agents. American intends to pursue growth of its business
through increased production from existing agents and through the creation of
new agent relationships. American believes that it is able to attract agents to
sell its products by providing a broad selection of fixed annuity products with
competitive commission rates, and timely, comprehensive services to agents and
customers. American recruits agents through its wholly-owned subsidiary,
American Sales, and through other marketing organizations, and regularly
evaluates its distribution system for growth opportunities. American has
approximately 7,300 independent insurance agents licensed to sell its products
in 47 states and the District of Columbia.

Design and Sell Products with Profit Potential. American seeks to design
its products to enhance the potential for profit and reduce the risk of loss.
Management's philosophy is to limit sales of annuities when it believes that
market conditions would prevent American from achieving targeted spreads.
American adjusts credited rates based on prevailing market conditions and
available investment yields, subject to certain interest rate guarantees.
Annuities currently issued by American include features such as surrender
charges, limited free withdrawal privileges, market value adjustments and
deferred payout provisions. These features are designed to encourage persistency
and provide protection from losses due to premature termination. Management of
American continuously monitors and adjusts its product features and terms in
response to market conditions.

Maintain a High Quality Investment Portfolio. American's investments are
managed by a wholly-owned subsidiary of the Company, AVIG, which seeks to
maintain a high quality investment portfolio and to purchase investments taking
into account the anticipated cash flows of its assets and liabilities. As of
March 31, 1996, approximately 98% of American's investment portfolio consisted
of bonds approximately 92% of which were investment grade. The weighted average
duration of American's bond portfolio was 4.5 years as of that date.

Diversification and Growth. The Company has a goal to diversify in the
financial services industry. The Company may pursue this goal, and otherwise
expand its current business, through acquisitions and joint venture marketing
opportunities. The Company has no current agreements or understandings with any
entity with respect to any such acquisition or marketing affiliation.

Marketing and Distribution

American maintains contact with approximately 29,000 agents that do not
currently sell American's products, but have either sold American's annuities in
the past or have expressed an interest in doing so. These agents continue to
receive periodic mailings related to interest rate and commission changes, and
new product introductions, and are reappointed upon their request, at the
discretion of American, in order to represent American in selling its products.
In order to save costs associated with reappointing existing agents, American
does not automatically reappoint an agent that has not written business for
twelve months. Such costs include the annual appointment fee of $20 to $40 per
agent. American collects premiums from policyowners throughout the United
States. During 1995, 62.0% of its deferred annuity sales were in the following
states: California (10.6%), Florida (8.7%), Ohio (6.5%), Texas (6.1%), Illinois
(6.0%), New Jersey (5.5%), Pennsylvania (5.1%), Wisconsin (4.8%), Kansas (4.6%)
and Michigan (4.1%).

American recruits new agents through American Sales and through other
marketing organizations. Because both American Sales and other marketing
organizations rely on independent agents, American does not maintain an
exclusive or captive sales force thereby avoiding the related costs. In
addition, American does not market its annuity products through stock brokers or
financial institutions. From January 1, 1990 to December 31, 1995, approximately
31% of annuity premiums received by American have been produced by agents
recruited through American Sales. Marketing organizations are responsible for,
and bear the cost of, recruiting agents. In accordance with industry custom,
American Sales and the marketing organizations receive a gross commission from
American for originating an annuity contract, a portion of which is paid to the
originating agent (the "street commission"). The marketing organizations or
American Sales retains the difference between the gross commission and the
street commission (the "override commission"). The availability of override
commissions provides an economic incentive to the marketing organizations to
recruit agents who produce business.

In recruiting new agents, principally through direct mail solicitations,
American analyzes the market for its products and reviews the number and
geographical distribution of its agents regularly. Data reviewed include
premiums received and agents contracted by state. This allows American to
identify specific regions of the country where it believes it can most
effectively recruit agents for the sales of its annuity products. American
develops a targeted list of potential agents from sources such as databases of
licensed agents maintained by state insurance commissioners as well as industry
associations such as the Million Dollar Round Table and the American Society of
Chartered Life Underwriters. American also regularly advertises its products,
rates and commission levels in various industry trade publications. To be
contracted by American, agents must be licensed by state insurance regulatory
authorities and have their applications approved by American.

Credited rates, commissions, the perceived quality of the issuer, product
features and services are generally the principal factors influencing an agent's
willingness and ability to sell particular annuity products. American believes
that both agents and policyowners value the service provided by American. For
example, American generally issues a fixed annuity policy, together with the
agent's commission check, within 72 hours of receiving the application and
premium. American also seeks to provide ongoing service to the agent. Towards
that end, American provides agents with access to American's senior executives.
American has developed an interactive system accessible by all agents to obtain
policy information. In addition, agents and policy owners can access information
about their policies via a toll-free telephone number.

American is not dependent on any one agent or agency for any substantial
amount of its business. No single agent accounted for more than 1% of American's
annual sales in 1995, and the top twenty individual agents accounted for
approximately 11% of American's volume in 1995. American does not have exclusive
agency agreements with its agents and management believes most of these agents
sell products, similar to those sold by American, for other insurance companies.
This can result in sales declines if for any reason American is relatively less
competitive or there are concerns such as existed in 1991, about asset quality,
the downgrade in American's A.M. Best Company rating, and the insolvencies of
other insurance companies.

The four major independent marketing organizations, exclusive of American
Sales, through which American recruits agents to sell its annuity products were
responsible for the recruitment of agents that accounted for 45% of premiums
received during 1995. While the termination of American's relationships with any
of its marketing organizations could result in the loss of agents and could
adversely affect the level of sales and surrenders, American does not believe
that the loss of any one marketing organization would have a material adverse
effect on the financial condition of American.

Products

American specializes in the sale of fixed annuity products to individuals.
During each of the past three years, sales of deferred annuities have accounted
for approximately 96% of American's premiums received, while sales of SPIAs and
FPULs have accounted for virtually all remaining premiums received.

Single premium deferred annuities involve a one-time premium deposit by the
policyowner at the time of issuance. Following an accumulation period, the
policyowner is entitled to receive the principal value plus accumulated interest
credited to such annuity account, payable either in a lump-sum or through
annuity payments over a certain period or for life. Interest credited during the
accumulation period generally is not subject to federal or state income tax.

American currently sells annuity products with different benefits, interest
rates and commission structures. These products offer tax-deferred accumulation
of interest, various interest guarantees, guaranteed cash values, and a choice
of guaranteed income options on the selected maturity date. The portfolio of
products is continuously reviewed with new plans added and others discontinued
in an effort to remain competitive.

American's operating earnings are derived primarily from its investment
results, including realized gains (losses), less interest credited to annuity
contracts and expenses. In determining credited rates, American takes into
account the profitability of its annuity business and the relative competitive
positions of its products. Credited rates during the initial and any renewal
period are based on assumptions and estimates relating principally to
persistency, investment yield and expenses as well as management's judgment as
to certain market and competitive conditions.

American's fixed annuities have an initial credited interest rate (as of
May 24, 1996) of 5.30% to 9.80%, depending on the features of the contract)
guaranteed for a period of one to five years. From January 1, 1990 to December
31, 1995, the initial credited interest rates on 60% of American's annuities
issued were guaranteed for one year, 35% were guaranteed for from one to two
years, and 5% were guaranteed for five years. Following the initial guarantee
period, American may adjust the credited interest rate annually, subject to the
guaranteed minimum interest rates specified in the contracts. The minimum
guaranteed rates currently range from 3% to 6%. At March 31, 1996, the credited
rates on deferred annuities with accumulated values of approximately $458.4
million were set at the minimum guaranteed rate. The credited rates on deferred
annuities representing a majority of total accumulated value may be reset by the
Company within a period of one year subject to the guaranteed minimum rate. The
accumulated values of deferred annuities by credited interest rates are as
follows as of March 31, 1996:

Credited Rates Accumulated Value
(in millions)
----------------------------------------- -----------------

Less than 5.5%........................... $ 924.3
5.5% to 6.5%............................. 664.6
6.5% to 7.5%............................. 261.7
Greater than 7.5%........................ $ 169.8
---------
$ 2,020.4

American incorporates a number of features in its annuity products designed
to reduce the occurrence and adverse effect of premature termination of the
policy. Premature termination of an annuity contract results in the loss of
future investment earnings related to the annuity deposit and in the accelerated
recognition of deferred expenses related to policy acquisition, principally
commissions, which are otherwise expensed over the life of the policy.

The primary feature incorporated by American to minimize premature
terminations is a surrender charge. While the policyowner is permitted at any
time to withdraw all or part of the accumulated value of their policy, such
withdrawals are generally subject to a surrender charge for the period of years
specified in the contract. The surrender charge, which is a percentage of the
total accumulated value including accrued interest, is designed to discourage
premature termination. Surrender charges, subject to certain exceptions, apply
for the number of years specified in the contract and decline to zero over a
period of five to fourteen years. All annuities policies currently issued by
American include surrender charges. As of March 31, 1996, 83% of American's
contracts in force had surrender charges. In addition, annual withdrawals free
of surrender charges are limited to 10% of an annuity's accumulated value.

The following table indicates information as of March 31, 1996 on surrender
charges associated with the five products that comprise the largest blocks of
American's in-force business:

Total Weighted Average Surrender Charge Weighted Average Surrender Charge Period
Account Value Period Remaining on all Remaining on Policies with Surrender
Product ($ in millions) Policies (Years) Charges (Years)
- ------------------------------ --------------- --------------------------------- ----------------------------------------

SPDA I........................ $291.8 2.9 4.0
SPDA VII...................... 234.5 1.5 3.7
SPDA XI....................... 306.2 3.6 3.6
SPDA XIB...................... 235.4 6.8 6.8
Alliance Series
(FPDA, PO, FPDA P2, FPDA P4).. 199.2 10.8 10.8

When American receives a request for surrender of an annuity policy, a
conservation letter is mailed to the policyowner. This letter is designed to
inform the policyowner of the possible tax implications and the surrender charge
payable under the annuity policy. It is the practice of the Company that
surrender benefits are not generally paid until American receives a written
response to the conservation letter. Typically policyowners who have requested a
surrender of $10,000 or more are personally contacted by telephone. American's
conservation procedures are designed to (i) attempt to conserve the business,
(ii) ascertain the causes of the surrenders, and (iii) identify and terminate
agents who write low persistency business. In certain contracts, the surrender
charge is waived for a period of 45 to 60 days following the crediting of a
renewal rate below a specified rate (the "bailout" rate). Of American's $2.1
billion annuity contracts in force as of March 31, 1996, approximately $226.8
million have a "bailout" feature remaining. The "bailout" rate on $224.7 million
of this amount is 6% or less. Surrender charges also generally do not apply to
one-time annual withdrawals by policyowners of up to 10% of the accumulated
value of the annuity.

Approximately 40% of the deferred annuity business in force as of March 31,
1996 provides that American may pay any surrender value in level installments
over 60 months in lieu of a lump sum payment. Additionally, at that date
approximately 12% of American's deferred annuity business in force had a market
value adjustment provision that will provide American with additional protection
during a period of rising interest rates through a reduction in the surrender
value payable upon surrender of the policy during the period the surrender
charge is in effect.

Investments

American's earnings are largely determined by its ability to maintain a
spread between its investment results and the interest credited on its annuity
products. As of March 31, 1996, American had $2.13 billion of cash and invested
assets of which $2.06 billion or approximately 97% represented investments in
bonds, which had a duration of 4.5 years. At that date, approximately 92% of
American's bond portfolio was rated investment grade. As of March 31, 1996, the
market value of American's bond portfolio exceeded its historical cost by $28.1
million.

The following table depicts the Company's investment portfolio by asset
class as of March 31, 1996:

GAAP CARRYING VALUE MARKET
--------------------------- -------------------------
Dollars (000) Percent Dollars (000) Percent
------------- -------- ------------- -------

US Treasury & Government Obligations ............ $ 50,772 2.40% $ 50,772 2.40%
Municipal ....................................... 19,617 0.93 19,617 0.93
Corporate-Investment Grade ...................... 1,146,011 54.12 1,146,011 54.12
Corporate-Non-Investment Grade .................. 162,558 7.68 162,558 7.68
Mortgage Backed Securities
Pass-Throughs ................................. 3,292 0.16 3,292 0.16
CMO Non-Sequential ............................ 541,508 25.57 541,508 25.57
CMO Sequential-Investment Grade ............... 134,648 6.36 134,648 6.36
CMO Sequential-Non-Investment Grade ........... 6,407 0.30 6,407 0.30
Mortgage loans on Real Estate ................... 5,336 0.25 5,345 0.25
Real Estate Investments ......................... 419 0.02 419 0.02
Equity Securities ............................... 1,585 0.07 1,585 0.07
Preferred Securities
Investment Grade .............................. 14,836 0.70 14,836 0.70
Non-Investment Grade .......................... 1,271 0.06 1,271 0.06
Policy Loans .................................... 5,231 0.25 5,231 0.25
Collateral Loans ................................ 3,039 0.14 3,039 0.14
Partnerships .................................... 20,488 0.97 20,488 0.97
Other Investments ............................... 2 0.00 2 0.00
Short Term Investments .......................... 428 0.02 428 0.02
---------- ------ ---------- -------
Total ........................................... $2,117,448 100.00% $2,117,457 100.00%
========== ====== ========== =======

Investment Results

The following table summarizes the Company's investment results for the
period indicated:

Three Months Ended March 31, Year Ended December 31,
---------------------------- ---------------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(dollars in Millions)

Average invested assets<F1>.................... $ 2,078.4 $ 1,936.2 $ 1,992.7 $ 1,862.3 $ 1,770.9
Net investment income<F2>...................... 39.2 38.2 156.5 142.0 138.5
Yield<F3>...................................... 7.5% 7.9% 7.9% 7.6% 7.8%
Net investment gains<F4>....................... $ 7.6 -- $ 0.1 $ 0.8 $ 17.0

- ----------
<FN>

<F1> Average of cash, invested assets (before SFAS 115 adjustment) and net amounts due to or from brokers on unsettled security
trades at the beginning and end of period.

<F2> Net of investment expenses.

<F3> Net investment income divided by average invested assets.

<F4> Net invested gains (losses) include in 1994 and 1993 provisions for impairments in value that were considered other than
temporary.

Reinsurance.

American reinsures portions of life insurance risks with unaffiliated
insurance companies under traditional indemnity reinsurance agreements.
Generally, American enters into traditional reinsurance arrangements to assist
in diversifying its risk and to limit its maximum loss exposure on risks that
exceed American's policy retention limits, currently $150,000 per life.
Reinsurance does not fully discharge American's obligation to pay policy claims
on the reinsured business. American remains responsible for policy claims to the
extent the reinsurer is unable to pay claims. No reinsurer of business ceded by
American has failed to pay any policy claims (either individually or in the
aggregate) with respect to such ceded business. As of March 31, 1996, American
had ceded to reinsurers $234.7 million of its $305.7 million of life insurance
in force ($211.8 million and $280.1 million, respectively, of which are whole
life policies substantially all of which were written by American prior to 1989)
and had recorded $144.2 million of related reinsurance receivables against
future policy benefits. Of the insurance ceded and reinsurance receivables
recorded, $205.1 million and $142.5 million, respectively, relate to one
reinsurance contract with Employers Reassurance Corporation ("ERC"). This
reinsurance agreement pertains to the coinsurance of 90% of all risks associated
with all of the SPWL policies written by American prior to 1989. Based on a
review of the statutory Annual Statements filed by ERC with the Kansas Insurance
Department and ERC's A.M. Best rating of "A+" (Superior), the Company believes
that ERC is solvent and capable of meeting its obligations on the policies
reinsured.

Properties

The Company owns its home office complex consisting of four buildings and
the adjacent real property in Topeka, Kansas. Total floor space in the four
buildings is approximately 31,000 square feet. As of March 31, 1996, the book
value of such properties was $1.4 million. The Company intends to sell such
properties. During 1995, American began construction of a six-story home office
building containing 102,000 square feet in Topeka, Kansas. The estimated total
cost of such construction is $10.0 to $12.0 million, which American anticipates
will be funded through normal cash flows. The Company plans to occupy three
floors of the new facility by early 1997, with the balance leased to tenants.

FBL, AIMCOR, TIM

Overview

FBL is a life insurance company which, like American, specializes in the
sale of fixed annuity products. FBL was initially licensed in Florida, its state
of domicile, in 1983 and is now authorized to sell insurance in 39 additional
states, the U.S. Virgin Islands and the District of Columbia. Since January,
1984, when FBL's single premium annuity sales commenced, FBL has offered a
variety of single and flexible premium deferred fixed annuity and single premium
immediate annuity plans. Deferred fixed annuity products accounted for
approximately 96% of all premiums received by FBL in 1995 and approximately 96%
of all premiums received by it during the first three months of 1996.

FBL's fixed annuity products are targeted to both the retirement market (up
to age 75) and the super senior market (up to age 100). Specific products,
underwritten by FBL, are designed for each segment and are sold through
independent agents recruited by The Insurancemart (TIM) and other unaffiliated
national marketing organizations. FBL does not market its products through
stockbrokers or financial institutions. As of January 1, 1996, approximately
1,800 independent agents were licensed to sell FBL's products. From January 1,
1990 to December 31, 1995, approximately 67% of annuity premiums received by FBL
have been produced by agents recruited by TIM, resulting in commission savings
as compared with business written by other marketing companies.

FBL's strategy is to increase its annuity premium writings by expanding
into additional territories, recruiting and contracting with quality agents, and
designing and selling profitable annuity products while maintaining its quality
investment portfolio and its investment margins.

FBL incorporates certain features in its annuity contracts that are
designed to reduce the occurrence and effect of premature contract terminations
and significant withdrawals. Such features include surrender charges which
decline over time and which apply to premature terminations during the first
seven to nine years of an annuity contract. In addition, annual withdrawals free
of surrender charges are limited to 10% of an annuity's accumulated value or, in
some cases, the prior twelve months' earned interest. Certain of FBL's annuities
also provide for deferred payments of the surrender value of the annuity over a
five year period.

Certain annuity policies written by FBL incorporate a "bailout" feature
which generally allows policyowners to withdraw their account balances for a
limited period of time, free of surrender charges, if credited rates fall below
a specified level. FBL experienced significant surrenders following the
reduction of credited rates below specified "bailout" levels from 1992 through
1994. In January, 1992 over 83% of FBL's in force annuity business was subject
to this "bailout" provision. As of March 31, 1996, this percentage was reduced
to only 5% of FBL's in-force annuity business with an average credited "bailout"
rate of 4.5%.

FBL is rated "B" (Adequate) by A.M. Best Company.

AIMCOR and TIM, along with FBL, are former subsidiaries of FBG. AIMCOR is a
developer and marketer of annuities for its client companies, FBL and several
other unaffiliated insurance companies. AIMCOR provides turn-key service to its
client companies and receives royalty income that is based upon the accumulated
value of annuity policies generated by TIM on behalf of these companies. TIM
functions as a wholesaler for FBL, American, all of the life insurance companies
with which AIMCOR has marketing agreements and for other unaffiliated carriers.
TIM has approximately 5,400 independent agents and it earns an override
commission on its sales of annuity products.

Strategy

FBL has developed a business strategy to increase its market share in the
growing fixed annuity market. The elements of this strategy include: (i)
expanding into additional territories; (ii) recruiting and contracting with
quality agents; (iii) designing and selling profitable products; and (iv)
maintaining a quality investment portfolio.

Expanding into Additional Territories. FBL is currently licensed in 39
states, the U.S. Virgin Islands and the District of Columbia. Sales of annuities
in 1996 were primarily in Florida, Ohio, Michigan, Indiana, Texas, Wisconsin,
Arizona, Iowa and California, representing over 72% of total sales. Its more
recent admissions to Texas and California, two populous states, substantially
widen its agent recruiting opportunities and allow FBL to market its products to
agents with a broader base of annuity consumers. FBL continues to seek admission
into other states such as Illinois, New Jersey and Connecticut.

Recruiting Quality Agents. FBL intends to pursue growth of its business
through increased production from existing agents and through the recruitment of
new agents. As of March 31, 1996, over 70% of agents contracted by FBL were
recruited through its affiliate, TIM.

Designing and Selling Profitable Products. FBL seeks to design its products
to enhance the potential for profit and reduce the risk of loss. FBL adjusts
credited rates based on prevailing market conditions and available investment
yields, subject to certain interest rate guarantees. Annuities currently issued
by FBL include features such as surrender charges, limited free withdrawal
privileges, and deferred payout provisions. These features are designed to
encourage persistency and provide protection from losses due to premature
termination.

Maintaining Quality Investment Portfolio. Following completion of the
acquisition of FBG, investments are managed by a wholly-owned subsidiary of the
Company, AVIG, which seeks to maintain a high quality investment portfolio and
to purchase investments taking into account the anticipated cash flows of its
assets and liabilities. As of March 31, 1996, approximately 95% of FBL's
investment portfolio consisted of bonds approximately 92% of which were
investment grade bonds. The weighted average duration of FBL's bond portfolio
was 5.0 years as of that date. FBL has minimal holdings in mortgage loans and
equities and the only real estate holding is its home office building.

Marketing and Distribution

To sell its products to the annuity buyer, FBL maintains a network of
independent agents licensed in 39 states, the U.S. Virgin Islands and the
District of Columbia. FBL does not market its annuity products through
stockbrokers or financial institutions. As of March 31, 1996, FBL had
approximately 1,800 agents contracted to sell its annuity products. In order to
maintain a contract with FBL, an agent must produce business in the prior twelve
months before time for reappointment, otherwise said agent will generally not be
reappointed.

FBL also maintains contact with a group of prospective agents who were at
one time licensed with FBL or had expressed an interest in doing so. These
agents currently receive agent communications and new product introductions on a
periodic basis.

All of FBL's annuity sales have been made by independent agents contracted
to FBL and recruited through marketing organizations, primarily TIM. For the
year ended December 31, 1995, agents contracted through TIM produced
approximately 71% of annuity premiums for FBL. Agents recruited through one
independent marketing company produced approximately 27% of FBL's annuity
premium during that same time period. Marketing companies, including TIM,
receive an override commission on the business written by the agents they
recruit and absorb all of the cost of recruiting an FBL agent. FBL's premium
written was $76.5 million in 1994, $62.5 million in 1995 and $20.9 million
through March 31, 1996.

FBL is not dependent on any one agent or agency for any substantial amount
of its business. No single agent accounted for more than 2.0% of FBL's annual
sales in 1995, and the top twenty individual agents accounted for approximately
24% of FBL's volume in 1995. FBL does not have any exclusive agreements with its
agents, and management believes all of these agents sell products for other
insurance companies, including American.

Products

FBL specializes in the sale of fixed annuity products to individuals.
During each of the past three years ended December 31, 1995, 1994 and 1993,
sales of deferred fixed annuities have accounted for over 93% of FBL's premiums
received. The balance of premium receipts were from sales of SPIAs.

FBL, like American, currently sells annuity products with various benefits,
interest rates and commission structures. These products offer tax-deferred
accumulation of interest, various interest guarantees, guaranteed cash values
and a choice of guaranteed income options on the selected maturity date. FBL's
operating earnings are derived in the same manner as American as are rate
crediting practices.

FBL markets two distinct annuity products, one targeted to the retirement
market (the "Champion Annuity") and a second to the super senior market (the
"Senior Advantage Annuity"). The Champion Annuity, which is issued to age 75,
guarantees an initial credited rate for one year and an annual renewal rate each
year thereafter. The policy has a nine year surrender charge period and a
minimum guaranteed credited rate of 3%. The Senior Advantage Annuity, which is
issued to age 100, has a seven year surrender charge period with the same
guarantees on initial and minimum rates.

As of March 31, 1996, the credited rates on deferred annuities with
accumulated values of approximately $197 million were set at the minimum
guaranteed rate. The accumulated values of deferred annuities by credited
interest rates are as follows at March 31, 1996:

Credited Rates Accumulated Value
(in millions)
------------------------------------------------- -----------------

Less than 4.5%............................... $ 340.5
4.5% to 5.5%................................. 39.6
5.5% to 6.5%................................. 69.6
Greater than 6.5%............................ 63.8
--------
$ 512.7

The surrender charge provisions in the FBL fixed annuities are similar to
those contained in the American fixed annuities and are included to minimize
premature terminations. All fixed annuities currently issued by FBL include
surrender charges and over 95% of FBL's deferred annuity contracts in force as
of March 31, 1996 have surrender charges.

The following table indicates information as of March 31, 1996, on
surrender charges associated with the three products that comprise the largest
blocks of FBL's in-force business.

Weighted Average Weighted Average Surrender
Total Surrender Charge Period Charge Period Remaining on
Account Value Remaining on all Policies with Surrender
Product ($ in millions) Policies (Years) Charges (Years)
- ------------- --------------- ----------------------- --------------------------

Champion..... $220.4 5.2 5.2
Senior....... 70.8 5.4 5.4
Accumulator.. 186.3 3.0 3.0

In certain FBL fixed annuity contracts, the surrender charge is waived for
a period of 30 days following the crediting of a renewal rate below a specified
rate ( the "bailout rate"). Of FBL's $512.7 million of annuity reserves in force
as of March 31, 1996, $27.2 million or 5.3% have a "bailout" feature remaining
with a weighted average "bailout" rate of 4.5% or less.

Approximately 62% of the deferred annuity business in force as of March 31,
1996, provides that FBL may pay any surrender value in level installments over
60 months in lieu of a lump sum payment.

Investments

Similar to the earnings of American, FBL's earnings are largely determined
by its ability to maintain a spread between its investment results and the
interest credited on its annuity products. As of March 31, 1996, FBL had $540.4
million of cash and invested assets of which $511.4 million or approximately 95%
represented investments in bonds, which had a duration of 5.0 years. At that
date, approximately 92% of FBL's bond portfolio was rated investment grade. As
of March 31, 1996, the market value of the bond portfolio exceeded its
historical cost by $8.7 million.

The following table depicts FBG's investment portfolio by asset class as of
March 31, 1996:

GAAP CARRYING VALUE MARKET
----------------------- -----------------------
DOLLARS DOLLARS
(000) PERCENT (000) PERCENT
--------- ------- -------- --------

BONDS
US Treasury & Government Obligations ......................................... $ 1,473 0.28% $ 1,509 0.29%
Corporate-Investment Grade ................................................... 276,960 52.57 277,008 52.57
Corporate-Non-Investment Grade ............................................... 43,903 8.33 43,903 8.33
Mortgage Backed Securities:
Pass-Throughs ..................................................... 265 0.05 265 0.05
CMO Non-Sequential ................................................ 145,770 27.67 145,770 27.66
CMO Sequential-Investment Grade ................................... 43,638 8.28 43,638 8.28
Mortgage Loans on Real Estate ................................................ 5,895 1.12 5,895 1.12
Equity Securities ............................................................ 792 0.15 792 0.15
Preferred Securities
Pfd.-Investment Grade ............................................. 4,700 0.89 4,700 0.89
Pfd.-Non-Investment Grade ......................................... 3,500 0.66 3,500 0.66
Total ........................................................................ $526,980 100.00% $526,980 100.00%
======== ====== ======== =======

The following table summarizes FBG's investment results for the periods
indicated:

Three Months Ended March 31, For the Year Ended December 31,
---------------------------- ------------------------------------------
1996 1995 1995 1994 1993
---------- ----------- --------- --------- ---------
(dollars in Millions)

Average invested assets<F1>.................... $ 531.5 $ 529.8 $ 530.0 $ 546.7 $ 625.3
Net investment income<F2>...................... 9.6 10.9 43.0 43.1 53.0
Yield<F3>...................................... 7.2% 8.4% 8.1% 7.9% 8.5%
Net investment gains .......................... $ 0.2 $ 0.7 $ 2.7 $ 2.7 $ 21.9

- ----------
<FN>

<F1> Average of cash, invested assets (before SFAS No. 115 adjustment) and net amounts due to or from brokers on unsettled security
trades at the beginning and end of period.

<F2> Net of investment expenses.

<F3> Net investment income divided by average invested assets.

Reinsurance

In July, 1993, FBL entered into a coinsurance treaty with Philadelphia
Life, a Pennsylvania domiciled subsidiary of Life Partners Group, Inc. Under the
terms of the agreement, FBL ceded $140.1 million of statutory annuity reserves
to Philadelphia Life on approximately 6,000 policies. FBL is to receive a share
in future profits from the business ceded, on a coinsurance basis, and is to
continue to administer the business on a fee basis.

AIMCOR

AIMCOR develops and markets annuities for FBL and several other
unaffiliated insurance companies. AIMCOR provides turn-key service to its client
companies and receives royalty income that is based upon the accumulated value
of annuity policies generated on behalf of AIMCOR clients.

The Insurancemart, Inc.

TIM is a marketing company, or wholesaler, which recruits agents to sell
annuities and in some cases, life insurance, for FBL, American, all insurers
with which AIMCOR has marketing agreements and other unaffiliated carriers. TIM
was acquired by FBG in November, 1987. Agents under contract through TIM now
exceed 5,400. These agents have generated $23.9 million of annuity premium in
the three months ended March 31, 1996. TIM receives an override on all annuity
and life insurance premiums sold through TIM recruited agents.

PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN THOUSANDS)

Historical as of
March 31, 1996
---------------------------- Pro Forma
Adjustments Pro
AmVestors FBG <F1> Forma
------------ ------------ ------------ ------------

ASSETS

Bonds -- available for sale ........................................ $ 2,063,146 508,436 1,426 2,573,008
Other investments .................................................. 54,302 18,460 (234) 72,528
----------- ----------- ----------- -----------
TOTAL INVESTMENTS ....................................... 2,117,448 526,896 1,192 2,645,536

Cash and cash equivalents .......................................... 12,512 13,515 -- 26,027
Amounts due from reinsurers ........................................ 144,169 111,166 -- 255,335
Deferred policy acquisition costs-- AmVestors ...................... 163,812 -- 163,812
Deferred policy acquisition costs-- FBG ............................ 46,150 (46,150) 0
Present value of future profits-- FBG .............................. -- 45,000 45,000
Goodwill ........................................................... -- -- 11,295 11,295
Other assets ....................................................... 37,682 13,854 3,261 54,797
----------- ----------- ----------- -----------
$ 2,475,623 711,581 14,598 3,201,802
=========== =========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY

Liabilities:
Policy liabilities ...................................... $ 2,302,900 650,174 -- 2,953,074
Existing credit facility ................................ 7,000 15,500 (22,500) 0
New Credit Facility ..................................... -- -- 35,000 35,000
Other liabilities ....................................... 16,441 9,313 1,000 26,754
----------- ----------- ----------- -----------
2,326,341 674,987 13,500 3,014,828
----------- ----------- ----------- -----------
Stockholders' equity:
Common stock ............................................ 12,922 -- 3,403 16,325
Paid-in capital ......................................... 64,371 -- 34,289 98,660
Unrealized investments gains ............................ 13,436 -- -- 13,436
Retained earnings ....................................... 61,382 -- -- 61,382
FBG net equity .......................................... -- 36,594 (36,594) 0
Leveraged employee stock ownership plan ................. (2,829) -- -- (2,829)
----------- ----------- ----------- -----------
149,282 36,594 1,098 186,974
----------- ----------- ----------- -----------
$ 2,475,623 711,581 14,598 3,201,802
=========== =========== =========== ===========

Number of common shares outstanding ................................ 10,155 7,065 -- 12,830
=========== =========== =========== ===========

NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)

(1) Pro forma Balance Sheet adjustments related to the acquisition of FBG by the Company (the "Merger") and the financing thereof
are summarized in the following table and more fully described in the notes that follow.

Bank
Financing
Acquisition Total
Stock Fees and Fair Value Pro Forma
Issuance (a) Expenses (b) Adjustments (c) Adjustments
-------------- ------------ --------------- -----------

Bonds -- available for sale ................................ -- 1,426 -- 1,426
Other investments .......................................... (234) -- -- (234)
Deferred policy acquisition costs-- FBG .................... -- -- (46,150) (46,150)
Present value of future profits-- FBG ...................... -- -- 45,000 45,000
Goodwill ................................................... -- -- 11,295 11,295
Acquisition costs .......................................... 37,926 11,074 (49,000) --
Other assets ............................................... -- -- 3,261 3,261
Existing credit facility ................................... -- (22,500) -- (22,500)
New credit facility ........................................ -- 35,000 -- 35,000
Other liabilities .......................................... -- -- 1,000 1,000
Common stock ............................................... 3,403 -- -- 3,403
Paid-in-capital ............................................ 34,289 -- -- 34,289
FBG net equity ............................................. -- -- (36,594) (36,594)

- --------------
<FN>

(a) Represents the issuance of 2.7 million shares of Company Common Stock exchanged for 7.1 million shares of FBG Class A Common
Stock and the estimated value of the Company Warrants recorded at $.31 for each share of FBG Class A Common Stock exchanged.
The pro forma calculations assume a Company Stock Price of $12.1625 and reflect the components of the "Merger Consideration"
in connection with the acquisition of FBG.

(b) Represents $35 million of borrowings under the Credit Facility to (i) refinance $22.5 million of borrowings under the old
credit facility of FBG and the Company (ii) pay the $10.0 million cash portion of the Merger Consideration and make cash
payments in lieu of fractional shares and fractional Company Warrants and to pay certain holders of FBG Options and dissenting
stockholders of FBG and (iii) pay $1.082 million of related fees and expenses.

(c) Represents adjustments to reflect FBG net assets at estimated fair market value based upon management's preliminary allocation
of the aggregate Merger Consideration. The following depicts the components of the aggregate Merger Consideration in millions:

Common shares issued (2.7 million shares @ $12.1625) $ 32.8
Cash 10.0
Warrants to purchase common shares (.66 million @ $3.326) 2.2
Substitute options and warrants 3.0
Expenses, rounding 1.0
------
$ 49.0
======

PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Historical
Year Ended
December 31, 1995
-----------------------
Pro Forma Pro
AmVestors FBG Adjustments Forma
--------- ---------- ------------ -----------

Insurance premiums and policy charges .................................. $ 8,500 4,871 -- 13,371
Net investment income .................................................. 156,510 43,072 287(a) 199,869
Net investment gains ................................................... 156 2,706 17,669(a) 20,531
Other revenue .......................................................... 1,485 3,575 -- 5,060
-------- -------- -------- --------
Total revenue ...................................................... 166,651 54,224 17,956 238,831
-------- -------- -------- --------
Benefits, claims and interest credited to policyholders ................ 118,886 28,114 -- 147,000
Amortization of:
Deferred policy acquisition costs .................................. 12,365 10,655 (11,382)(b) 11,638
Present value of future profits .................................... -- -- 19,078 (b) 19,078
Goodwill ........................................................... -- -- 993 (b) 993
Other expenses ......................................................... 10,194 7,638 (1,632)(c) 16,200
-------- -------- -------- --------
Total benefits and expenses ........................................ 141,445 46,407 7,057 194,909
-------- -------- -------- --------
Operating earnings ..................................................... 25,206 7,817 10,899 43,922
Interest expense ....................................................... 77 1,533 527(d) 2,137
-------- -------- -------- --------
Earnings before taxes .................................................. 25,129 6,284 10,372 41,785
Income tax expense ..................................................... 8,530 1,683 3,978(e) 14,191
-------- -------- -------- --------
Net earnings ........................................................... 16,599 4,601 6,394 27,594
======== ======== ======== ========
Net earnings per common share:
Primary ............................................................ $ 1.60 .53 2.08
======== ======== ========
Fully diluted ...................................................... $ 1.60 .53 2.07
======== ======== ========
Average shares outstanding(f):
Primary ............................................................ 10,354 8,622 13,275
Fully diluted ...................................................... 10,404 8,622 13,325

PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

Historical Three Months
Ended March 31, 1996
------------------------
Pro Forma Pro
AmVestors FBG Adjustments Forma
----------- ----------- -------------- -----------

Insurance premiums and policy charges ..................................... $ 2,457 983 -- 3,440
Net investment income ..................................................... 39,169 9,578 64(a) 48,811
Net investment gains ...................................................... 7,627 224 653(a) 8,504
Other revenue ............................................................. 25 617 -- 642
----------- ----------- ----------- -----------
Total revenue ......................................................... 49,278 11,402 717 61,397
----------- ----------- ----------- -----------
Benefits, claims and interest credited to policyholders ................... --
30,620 6,517 37,137
Amortization of:
Deferred policy acquisition costs ..................................... 4,970 2,267 (2,504) 4,733
Present value of future profits ....................................... -- -- 2,288 2,288
Goodwill .............................................................. -- -- 248 248
Other expenses ............................................................ 2,232 3,089 (1,470) 3,851
----------- ----------- ----------- -----------
Total benefits and expenses ........................................... 37,822 11,873 (1,438) 48,257
----------- ----------- ----------- -----------
Operating earnings ........................................................ 11,456 (471) 2,155 13,140
Interest expense .......................................................... 125 353 162 640
----------- ----------- ----------- -----------
Earnings before taxes ..................................................... 11,331 (824) 1,993 12,500
Income tax expense ........................................................ 3,910 (305) 784 4,389
----------- ----------- ----------- -----------
Net earnings .............................................................. 7,421 (519) 1,209 8,111
=========== =========== =========== ===========
Net earnings per common share:
Primary ............................................................... $ .71 (.06) -- .61
=========== =========== ===========
Fully diluted ......................................................... .71 (.06) -- .60
=========== =========== ===========
Average shares outstanding(f):
Primary ............................................................... 10,427 8,807 -- 13,348
Fully diluted ......................................................... 10,493 8,807 -- 13,414

NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)

Pro Forma Statement of Earnings adjustments related to the acquisition and
financing thereof are as follows:

(a) Represents additional amortization of discounts on securities held for the
period and adjustment of net investment gains (losses) resulting from the
application of purchase accounting on a pro forma basis.

(b) Represents amortization of present value of future profits and amortization
of goodwill resulting from the application of purchase accounting, reduced
by a reversal of historical amortization of deferred policy acquisition
costs applicable to policies written prior to January 1, 1995. Present value
of future profits are amortized in relation to the incidence of expected
gross profits on the in-force blocks of business over the expected life of
the policies, using a discount rate for amortization purposes equal to the
respective policy credited rate as of January 1, 1995. Pro forma
amortization of present value of future profits for the five years ending
December 31, 1999 are estimated to be approximately $19.1 million, $9.2
million, $8.0 million, $6.9 million, and $5.4 million, respectively.
Goodwill amortization is calculated over a period of 30 years using the
straight line method.

(c) Represents the estimated reduction in expenses attributable to certain
employment agreements which would result from the Merger and professional
fees incurred by FBG as a result of the Merger.

(d) Represents additional interest expense related to the incremental borrowings
under the New Credit Facility, including amortization of debt issue costs.
Interest under the Credit Facility will be determined at the option of the
Company to be (i) a fluctuating interest rate equal to the higher of (a) the
corporate base rate of interest announced by the lender, or (b) the weighted
average of the rates on overnight Federal Funds transactions with members of
the Federal Reserve System arranged by Federal Funds brokers, as published
by the Federal Reserve Bank of New York, plus 1/2% per annum; or (ii) the
Eurodollar Rate plus 1.75% (which percentage will decrease throughout the
term of the Credit Facility at a rate to be determined prior to each
interest payment date). For purposes of calculating pro forma interest
expense, an interest rate of 7.75% was assumed.

(e) To adjust income tax expense for the income tax effect of the foregoing pro
forma adjustments at the statutory rate of 35%.

(f) Historical earnings per common share amounts are computed by dividing
earnings by the sum of the weighted average number of shares outstanding
during the period plus dilutive common stock Zequivalents applicable to
stock options and warrants. Pro forma earnings per common share amounts are
computed by dividing pro forma earnings by the pro forma weighted average
shares of Company Common Stock after the acquisition. In addition to the
historical weighted average shares of the Company Common Stock for each
period presented, the pro forma weighted average includes an estimated
2,921,000 shares of the Company Common Stock to be issued in connection with
the acquisition, based on an assumed Company Stock Price of $12.1625.

(g) Net operating earnings, which represents operating earnings after taxes
adjusted to exclude net investment gains (losses) and accelerated (reduced)
amortization of deferred acquisition costs related to such investment gains
(losses) and to exclude associated income tax expense for the pro forma
periods are as follows:

Historical Pro
AmVestors Forma
----------- -------------

Year Ended December 31, 1995:
Net operating earnings ..................... $ 15,910 21,417
Per common share--
fully diluted .......................... 1.53 1.61
Three Months Ended March 31, 1996:
Net operating earnings ..................... 4,114 4,555
Per common share--
fully diluted .......................... $ .39 $ .34

Net operating earnings is a non-GAAP measure, used by investment analysts to
understand the nature of a company's recurring results of operations, and is not
intended as an alternative to the GAAP measures of operating earnings or net
earnings.

INDEX TO FINANCIAL STATEMENTS

AmVestors Financial Corporation
Independent Auditors' Report ...................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994 ...... F-3
Consolidated Statements of Earnings for the Years Ended
December 31, 1995, 1994 and 1993 .................................. F-5
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993 ............................ F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 ............................ F-7
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1995, 1994 and 1993 ............................ F-9
Consolidated Interim Financial Statements (Unaudited) ............. F-31
Notes to Consolidated Interim Financial Statements ................ F-37

Financial Benefit Group, Inc. ............................................
Independent Auditors' Report ...................................... F-55
Consolidated Balance Sheets as of December 31, 1995 and 1994 ...... F-56
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 ............................ F-57
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1995, 1994 and 1993 ............................ F-58
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 ............................ F-59
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1995, 1994 and 1993 ............................ F-60
Consolidated Interim Financial Statements (Unaudited) ............. F-83
Notes to Consolidated Interim Financial Statements ................ F-87

F-1

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
AmVestors Financial Corporation
Topeka, Kansas

We have audited the accompanying consolidated balance sheets of AmVestors
Financial Corporation and subsidiaries (the company) as of December 31, 1995 and
1994, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of AmVestors Financial Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.

The company adopted the provisions of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities in 1994.

/s/ Deloitte & Touche LLP

Kansas City, Missouri
February 29, 1996

F-2

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's Omitted)

As of December 31,
-------------------------------
ASSETS 1995 1994
- ------------------------------------------------------------------------------------------- ---------- -----------

Investments:
Debt securities:
Bonds:
Held-to-maturity (market: $-0- and $1,145,692) .............................. $ -- 1,237,185
Available-for-sale (cost: $1,947,777 and $621,138) .......................... 2,044,606 607,046
Trading (cost: $1,489 and $-0-) ............................................. 1,485 --
---------- ----------
2,046,091 1,844,231
---------- ----------
Equity securities:
Common stock, available-for sale (cost: $1,047 and $2,124) ........................ 1,181 2,325
Preferred stock, available-for-sale (cost: $7,566 and $45) ........................ 7,733 31
Preferred stock, trading (cost: $619 and $-0-) .................................... 629 --
---------- ----------
9,543 2,356
---------- ----------
Other long-term investments ............................................................... 39,491 58,773
Short-term investments .................................................................... 436 520
---------- ----------
2,095,561 1,905,880
Less allowance for credit losses .......................................................... -- (2,231)
---------- ----------
Total investments .................................................................. 2,095,561 1,903,649
---------- ----------

Cash and cash equivalents ................................................................. 48,281 10,621
Accounts receivable (net of allowance for uncollectible accounts of $739 and $227) ........ 454 2,310
Amounts receivable under reinsurance agreements ........................................... 146,618 149,656
Amounts receivable on securities settlements in process ................................... 10,873 905
Accrued investment income ................................................................. 29,357 29,296
Deferred policy acquisition costs ......................................................... 140,476 148,871
Deferred income taxes ..................................................................... -- 11,136
Other assets .............................................................................. 4,584 3,577
---------- ----------
Total assets .............................................................................. $2,260,021 2,476,204
========== ==========

See notes to consolidated financial statements.

F-3

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(000's Omitted, except share and per share data)

As of December 31,
--------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------------------------------------------------------------- ------------ ------------

Liabilities:
Policy liabilities:
Future policy benefits ............................................................. $ 2,259,028 2,148,763
Other policy liabilities ........................................................... 7,312 2,983
----------- ----------
2,266,340 2,151,746
Notes payable ................................................................ 7,000 --
Deferred income taxes ........................................................ 22,901 --
Amounts due on securities settlements in process ................................... 1,438 274
Accrued expenses and other liabilities ............................................. 4,080 3,805
----------- ----------
Total liabilities ............................................................ 2,301,759 2,155,825
----------- ----------
Commitments and contingencies

Stockholders' equity:
Preferred stock, $1.00 par value authorized - 2,000,000 shares ..................... -- --
Common stock, no par value, authorized - 25,000,000 shares; issued and outstanding -
10,140,738 shares in 1995 and 10,034,742 shares in 1994....................... 12,904 12,769
Paid in capital .................................................................... 64,284 63,499
Unrealized investment gains (losses) (net of deferred policy acquisition cost
amortization expense (benefit) of $27,327 and ($3,476) and deferred income tax
expense (benefit) of $24,431 and ($2,616)).................................... 45,372 (7,813)
Retained earnings .................................................................. 54,714 38,876
----------- ----------
177,274 107,331
Less leveraged employee stock ownership trust (LESOP) .............................. (2,829) (3,135)
----------- ----------
Total stockholders' equity ................................................... 174,445 104,196
----------- ----------
Total liabilities and stockholders' equity ................................... $ 2,476,204 2,260,021
=========== ==========

See notes to consolidated financial statements.

F-4

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(000's Omitted, except per share data)
For the Year Ended December 31,
-----------------------------------------
1995 1994 1993
------------ ----------- ------------

Revenue:
Insurance premiums and policy charges.......................................... $ 8,500 6,331 6,594
Net investment income.......................................................... 156,510 142,009 138,539
Net trading losses............................................................. (882) -- --
Net investment gains........................................................... 1,038 803 17,049
Other revenue.................................................................. 1,485 557 341
------------ ----------- ------------
Total revenue............................................................ 166,651 149,700 162,523
------------ ----------- ------------
Benefits and expenses:
Benefits, claims and interest credited to policyholders........................ 118,886 112,310 113,848
Amortization of deferred policy acquisition costs.............................. 12,365 9,026 9,436
General insurance expenses..................................................... 8,370 7,587 8,830
Premium and other taxes, licenses and fees..................................... 1,603 1,252 2,395
Other expenses................................................................. 221 239 265
------------ ----------- ------------
Total benefits and expenses.............................................. 141,445 130,414 134,774
------------ ----------- ------------

Operating earnings.................................................................... 25,206 19,286 27,749
Interest expense...................................................................... 77 -- 994
------------ ----------- ------------
Earnings before income tax expense and extraordinary item............................. 25,129 19,286 26,755
Income tax expense.................................................................... 8,530 5,593 8,564
------------ ----------- ------------
Earnings before extraordinary item.................................................... 16,599 13,693 18,191
Extraordinary item: Loss on early extinguishment of debt (net of income tax benefit
of $100)................................................................. -- -- (213)
------------ ----------- ------------
Net earnings.......................................................................... $ 16,599 13,693 17,978
============ =========== ============
Earnings per share of common stock:
Primary:
Earnings before extraordinary item....................................... $ 1.60 1.32 2.62
Extraordinary item....................................................... -- -- (.03)
------------ ----------- ------------
Net earnings............................................................. $ 1.60 1.32 2.59
============ =========== ============
Fully diluted:
Earnings before extraordinary item....................................... $ 1.60 1.32 2.49
Extraordinary item....................................................... -- -- (.03)
------------ ----------- ------------
Net earnings............................................................. $ 1.60 1.32 2.46
============ =========== ============
Average shares outstanding:
Primary.................................................................. 10,354 10,341 6,860
Fully diluted............................................................ 10,404 10,341 7,315

See notes to consolidated financial statements.

F-5

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000's Omitted, except share and per share data)

Unrealized
Investment
Common Paid-in Gains Retained Treasury
Stock Capital (Losses) Earnings Stock LESOP Total
---------- -------------- ------------ ----------- ---------- --------- ----------

Balance as of January 1, 1993............. $ 8,186 45,016 (809) 7,441 (6,855) (3,688) 49,463
Net earnings.............................. -- -- -- 17,978 -- -- 17,978
Change in unrealized investment gains
(losses)................................ -- -- 1,873 -- -- -- 1,873
Cash dividends to stockholders ($1.50
per share on preferred stock)........... -- -- -- (236) -- -- (236)
Cash paid on reverse stock split.......... -- (25) -- -- -- -- (25)
Issuance of common stock:
upon completion of stock offering....... 4,392 25,014 -- -- -- -- 29,406
upon exercise of options................ 290 1,704 <F1> -- -- -- -- 1,994
upon conversion of preferred stock...... 729 (557) -- -- -- -- --
Retirement of treasury stock.............. (690) (6,165) -- -- 6,855 -- --
Repurchase of warrants on debt payment.... -- (375) -- -- -- -- (375)
Allocation of LESOP shares................ -- -- -- -- -- 267 267
---------- -------------- ------------ ----------- ---------- --------- ----------
Balance as of December 31, 1993........... 12,907 64,612 1,064 25,183 -- (3,421) 100,345

Net earnings.............................. -- -- -- 13,693 -- -- 13,693
Cumulative effect of adoption of
SFAS 115................................ -- -- 19,613 -- -- -- 19,613
Change in unrealized investment gains
(losses)................................ -- -- (28,490) -- -- -- (28,490)
Remaining offering costs.................. -- (135) -- -- -- -- (135)
Redemption stockholders rights plan....... -- (101) -- -- -- -- (101)
Issuance of common stock:
upon exercise of options................ 28 143 <F1> -- -- -- -- 171
Purchase of treasury shares............... -- -- -- -- (1,186) -- (1,186)
Retirement of treasury stock.............. (166) (1,020) -- -- 1,186 -- --
Allocation of LESOP shares................ -- -- -- -- -- 286 286
---------- -------------- ------------ ----------- ---------- --------- ----------
Balance as of December 31, 1994........... 12,769 63,499 (7,813) 38,876 -- (3,135) 104,196

Net earnings.............................. -- -- -- 16,599 -- -- 16,599
Change in unrealized investment gains
(losses)................................ -- -- 53,185 -- -- -- 53,185
Cash dividends to stockholders ($.075 per
share on common stock).................. -- -- -- (761) -- -- (761)
Issuance of common stock:
upon exercise of options................ 135 785 <F1> -- -- -- -- 920
Allocation of LESOP shares................ -- -- -- -- -- 306 306

Balance December 31, 1995................. $ 12,904 64,284 45,372 54,714 -- (2,829) 174,445
========== ============== ============ =========== ========== ========= ==========

- ----------------
<FN>

<F1> Net of income tax benefit of $440, $10 and $129 for the years ended December 31, 1995, 1994 and 1993, respectively.

See notes to consolidated financial statements.

F-6

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents

(000's Omitted)
For the Year Ended December 31,
------------------------------------------------------------------
1995 1994 1993
--------------------- ------------------- -------------------

Operating Activities:
Net earnings.............................................. $16,599 13,693 17,978
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Interest credited to policyholders...................... 121,182 114,871 116,942
Amortization of (discounts) premiums on debt securities,
net................................................... (1,561) (2,347) (1,905)
Amortization of deferred policy acquisition costs....... 12,365 9,026 9,436
Net trading losses...................................... 882 -- --
Net investment (gains).................................. (1,038) (803) (17,049)
Accrued investment income............................... (61) (2,752) (2,366)
Deferred income taxes................................... 6,990 651 4,635
Other, net.............................................. 2,538 (1,830) 1,982
--------------------- ------------------- -------------------
Net cash provided by operating activities..... 157,896 130,509 129,653
--------------------- ------------------- -------------------
Investing Activities:
Purchases of securities:
Held-to-maturity.................................... (5,052) (242,464) (578,918)
Available-for-sale.................................. (343,322) (332,647) --
Trading............................................. (72,018) -- --
Proceeds from sale of securities:
Held-to-maturity.................................... -- 8,302 341,498
Available-for-sale.................................. 140,742 319,846 --
Trading............................................. 69,017 -- --
Proceeds from maturity or redemption:
Held-to-maturity..................................... 26,303 35,375 184,280
Available-for-sale.................................. 85,767 86,973 --
Other long-term investments, net.......................... 19,271 (20,215) (20,326)
Short-term investments, net............................... 83 1,392 (487)
Capitalization of deferred policy acquisition costs....... (34,775) (25,750) (18,212)
Other, net................................................ (1,741) (413) (497)
--------------------- ------------------- -------------------
Net cash used in investing activities......... (115,725) (169,601) (92,662)
--------------------- ------------------- -------------------
Financing Activities:
Premiums received......................................... 357,705 267,802 222,177
Surrender and death benefits paid......................... (372,234) (246,632) (318,880)
Surrender and risk charges collected...................... 6,971 5,409 5,161
Securities settlements in process......................... (8,804) 573 (25,609)
Proceeds from notes payable............................... 7,000 -- --
Payments on notes payable................................. -- -- (19,918)
Cash dividends to stockholders............................ (761) -- --
Issuance of common stock.................................. 920 171 31,400
Other, net................................................ 4,692 608 (2,590)
--------------------- ------------------- -------------------
Net cash provided by (used in) financing
activities.................................. (4,511) 27,931 (108,259)
--------------------- ------------------- -------------------
Increase (Decrease) in Cash and Cash Equivalents................. 37,660 (11,161) (71,268)
Cash and Cash Equivalents:
Beginning of year......................................... 10,621 21,782 93,050
--------------------- ------------------- -------------------
End of year............................................... $48,281 10,621 21,782
===================== =================== ===================

See notes to consolidated financial statements.

F-7

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Increase (Decrease) in Cash and Cash Equivalents

(000's Omitted)
For the Year Ended December 31,
-------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------

Supplemental schedule of cash flow information:

Income tax payments (refunds) ...................................... $ (1,507) 6,150 3,204
================= ================= =================

Interest payments .................................................. $ 43 -- 1,071
================= ================= =================

Change in net unrealized investment gains (losses)......................... $ 111,035 (56,823) --

Less: Associated reduction in amortization of deferred policy acquisition
costs............................................................... (30,803) 16,221 --

Deferred income tax (expense) benefit .............................. -- (27,047) 13,177
----------------- ----------------- -----------------

Net change in net unrealized investment gains (losses) .................... $ 53,185 (27,425) --
================= ================= =================

See notes to consolidated financial statements.

F-8

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 1995, 1994 and 1993

1. Summary of Significant Accounting Policies:
- ----------------------------------------------

a. Principles of consolidation:

The consolidated financial statements include the accounts of AmVestors and
its wholly-owned subsidiaries American Investors Life Insurance Company, Inc.
(American), American Investors Sales Group, Inc. (American Sales), AmVestors
Investment Group, Inc. (AIG), (collectively the company). All significant
intercompany accounts and transactions have been eliminated.

b. Investments:

Debt securities held-to-maturity are carried at amortized cost, except that
those securities with an other than temporary impairment in value are carried at
estimated net realizable value. Debt securities available-for-sale are carried
at estimated market value, with any unrealized gains or losses recorded in
stockholders' equity.

Investments are reviewed on each balance sheet date to determine if they are
impaired. In determining whether an investment is impaired, the company
considers whether the decline in market value at the balance sheet date is an
other than temporary decline; if so, then the investment's carrying value is
reduced to a new cost basis which represents estimated net realizable value. The
decline in value is reported as a realized loss, and a recovery from the new
cost basis is recognized as a realized gain only at sale.

The estimates of net realizable value are based on information obtained from
published financial information provided by issuers, independent sources such as
broker dealers or the company's independent investment advisor. Such amounts
represent an estimate of the consideration to be received in the future when the
defaulted company's debt is settled through the sale of their assets or the
restructuring of their debt. These estimates do not represent the discounted
present value of these future considerations.

Investments in common stock and preferred stock are carried at market, with
unrealized gains (losses) recorded in stockholders' equity for securities
available-for-sale.

Investments in debt and equity securities which were purchased principally
for the purpose of selling such securities in the near term are classified as
trading securities and are carried at market. Unrealized gains (losses) are
included currently in the results of earnings.

The cost of securities sold is determined on the identified certificate
basis.

Other long-term investments include policy loans and mortgage loans on real
estate which are carried at cost less principal payments since date of
acquisition, and certain partnership investments which are carried at an amount
equal to the partner's estimated market value with any unrealized gains or
losses recorded in net investment income.

c. Fair value of financial instruments:

F-9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

the estimates of fair value, the estimates presented are not necessarily
indicative of the amounts that could be realized in a current market exchange.

The carrying values and estimated fair values of the company's financial
instruments as of December 31, 1995 and 1994 were as follows:

(000's Omitted)
---------------------------------------------------------------------------------
1995 1994
------------------------------------------ ------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------------- ------------------- ----------------- ---------------

Assets:
Debt securities........................... $2,046,091 2,046,091 1,844,231 1,752,738
Equity securities......................... 9,543 9,543 2,356 2,356
Other long-term investments............... 39,491 39,546 58,773 58,536
Short-term investments.................... 436 436 520 520
Cash and cash equivalents................. 48,281 48,281 10,621 10,621
Amounts receivable on securities
settlement in process................... 10,873 10,873 905 905
Accounts receivable and accrued
investment income....................... 29,811 29,811 31,606 31,606
Liabilities:
Future policy benefits - investment
contracts............................... 2,022,653 1,900,895 1,917,066 1,799,090
Other policy liabilities.................. 7,312 7,312 2,983 2,983
Notes payable............................. 7,000 7,000 -- --
Amounts due on securities settlements in
process................................. 1,438 1,438 274 274
Accrued expenses and other liabilities.... 4,080 4,080 3,805 3,805

Debt securities - Fair values are based on quoted market prices or dealer
quotes, if available. If a quoted market price is not available, fair value is
estimated using quoted market prices for similar securities.

Equity securities - Fair value equals the carrying value as these securities
are carried at quoted market value.

Other long-term investments - For certain homogeneous categories of mortgage
loans, fair value is estimated using quoted market prices for securities backed
by similar loans, adjusted for differences in loan characteristics. Fair value
of policy loans and other long-term investments is estimated to approximate the
assets' carrying value.

Short-term investments and cash and cash equivalents - The carrying amounts
reported in the balance sheet approximate the assets' fair value.

Amounts receivable on securities settlements in process - The carrying amount
reported in the balance sheet approximate the fair value of this asset.

Accounts receivable and accrued investment income - The carrying amounts
reported in the balance sheet for these assets approximates fair value.

F-10

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

similar to a deposit liability. The amount payable at the reporting date was
calculated as the account balance less any applicable surrender charges.

Notes payable - The fair value of the company's note payable has been
estimated to be an amount equal to the balance reported in the balance sheet.

Other policy liabilities - The carrying amount reported in the balance sheet
approximates the fair value of these liabilities.

Amounts due on securities settlements in process - The carrying amount
reported in the balance sheet approximates the fair value of this liability.

Accrued expenses and other liabilities - The carrying amount in the balance
sheet approximates the fair value of these liabilities.

The use of different market assumptions and/or estimation methodologies could
have a material effect on the estimated fair value amounts.

d. Significant Risks and Uncertainties

Nature of Operations - The company specializes in the sale of deferred
annuity products, the earnings on which are not currently taxable to the annuity
owner. Any changes in tax regulation which eliminate or significantly reduce
this advantage of tax deferred income would adversely impact the operations of
the company. The company's products are marketed through a network of
independent agents licensed in 47 states and the District of Columbia. The
company is not dependent on any one agent or agency for a substantial amount of
its business. No single agent accounted for more than 1% of annuity sales in
1995, and the top twenty individual agents accounted for approximately 11% of
1995 annuity sales.

Use of Estimates in the Preparation of Financial Statements - The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results may differ
from those estimates.

Certain Significant Estimates - Certain costs incurred to acquire new
business are deferred and amortized in relation to the incidence of expected
gross profits over the expected life of the policies. Determination of expected
gross profits includes management's estimate of certain elements over the life
of the policies, including investment income, interest to be credited to the
contract, surrenders and resultant surrender charges, deaths and in the case of
life insurance, mortality charges to be collected. These estimates of expected
gross profits are used as a basis for amortizing deferred costs. These estimates
are periodically reviewed by management and if actual experience indicates that
the estimates should be revised the total amortization recorded to date is
adjusted by a charge or credit to earnings.

e. Deferred policy acquisition costs:

F-11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

deferred annuity contracts are amortized in relation to the incidence of
expected gross profits over the expected life of the policies. For single
premium life insurance, deferred policy acquisition costs are amortized over the
life of the policies, but not more than 20 years for policies issued before
January 1, 1987, and not more than 30 years for policies issued after December
31, 1986, based on the expected gross profits for the amortization periods. The
deferred costs related to traditional life contracts are amortized over the
premium paying period for the related policies using the same actuarial
assumptions as to interest, mortality and withdrawals as are used to calculate
the reserves for future benefits.

Net investment gains realized in 1995, 1994 and 1993 resulted in the company
experiencing investment margins greater than those estimated. As a result,
$3,902, $203,940 and $4,790,523 of the unamortized balance of deferred policy
acquisition costs were expensed in 1995, 1994 and 1993, respectively. The amount
charged off is based on actual gross profits earned to date in relation to total
gross profits expected to be earned over the life of the related contracts.

Estimates of the expected gross profits to be realized in future years
include the anticipated yield on investments. Deferred policy acquisition costs
will be adjusted in the future based on actual investment income earned.

f. Future policy benefits:

Liabilities for future policy benefits under life insurance policies, other
than single premium life insurance, have been computed by the net level premium
method based upon estimated future policy benefits (excluding participating
dividends), investment yield, mortality and withdrawals giving recognition to
risk of adverse deviation. Interest rates range from 4 1/2% to 10 1/2% depending
on the year of issue, with mortality and withdrawal assumptions based on company
and industry experience prevailing at the time of issue.

For single premium life insurance and single premium annuities, the future
policy benefits are equal to the accumulation of the single premiums at the
credited rate of interest and for single premium whole life, less any mortality
charges.

g. Participating policies:

The company issued participating policies on which dividends are paid to
policyholders as determined annually by the Board of Directors. The amount of
dividends declared but undistributed is included in other liabilities. Policy
benefit reserves do not include a provision for estimated future participating
dividends.

h. Depreciation:

The home office buildings are depreciated on the straight-line basis over
estimated lives of 40 years. Other depreciation is provided on the straight-line
basis over useful lives ranging from 5 to 8 years.

i. Income taxes:

The company and its subsidiaries prepare and file their income tax returns on
a consolidated basis.

F-12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The company provides for the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
reported in the financial statements on the liability method.

j. Earnings per share:

Primary earnings per share of common stock is computed by dividing net
earnings (reduced by preferred dividend requirements in 1993) by the sum of the
weighted average number of shares outstanding during the period plus dilutive
common stock equivalents applicable to stock options and warrants, calculated
using the treasury stock method. During 1993, 573,332 common shares were issued
upon conversion of $4,300,000 of Series B Convertible Preferred Stock. Had this
conversion occurred on January 1, 1993, primary earnings per share would have
been $2.46 for 1993. During 1993, 1,646,883 shares of common stock were sold to
retire debt in the amount of $14,030,289. Had this sale and the corresponding
retirement of debt occurred on January 1, 1993, primary earnings per share would
have been $2.25 for 1993.

k. Consolidated statements of cash flows:

For purposes of reporting cash flows, cash and cash equivalents includes cash
and money market accounts and other securities with original maturities within
three months.

l. New accounting standards:

Effective January 1, 1994, the company adopted the provisions of SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities." This
Statement addresses the accounting and reporting for certain investments in debt
and equity securities by requiring such investments to be classified in
held-to-maturity, available-for-sale, or trading categories. The cumulative
effect of the adoption of this Statement was an increase in stockholder's equity
of $19,612,653 (net of related amortization of deferred policy acquisition costs
of $12,745,031 and deferred income tax expense of $10,560,659), representing the
aggregate excess fair value over cost for those securities included in the
available-for-sale category, net of associated amortization of deferred policy
acquisition costs and deferred income tax expense.

Effective November 30, 1995, the company adopted the provisions of "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" and transferred all bonds with an amortized cost of
$1,159,390,768 classified as held to maturity to available-for-sale. The effect
of the adoption was an increase in stockholders' equity of $21,218,205 (net of
related amortization of deferred policy acquisition costs of $12,792,403 and
deferred income taxes of $11,425,188). Net earnings for the year ended
December 31, 1995 were not affected by the adoption of this implementation
guide.

Effective for fiscal years beginning after December 15, 1995, SFAS No. 121,
"Accounting for the Impairment Of Long Lived Assets" establishes accounting
standards for the impairment of long-lived assets, certain intangibles, and
goodwill related to those assets. The company does not expect this Statement to
have a material effect on its consolidated financial statements.

Effective January 1, 1996, SFAS No. 123, "Accounting for Stock-Based
Compensation," will require increased disclosure of compensation expense arising
from stock compensation plans. The Statement encourages rather than requires
companies to adopt a new method that accounts for stock compensation awards

F-13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

based on their estimated fair value at the date they are granted. Companies will
be permitted, however, to continue accounting under APB Opinion No. 25 which
requires compensation cost be recognized based on the difference, if any,
between the quoted market price of the stock on the date of grant and the amount
an employee must pay to acquire the stock. The company will continue to apply
APB Opinion No. 25 in its consolidated financial statements and will disclose
pro forma net income and earnings per share in a footnote to its consolidated
financial statements, determined as if the new method were applied.

m. Reclassifications:

Certain reclassifications have been made to conform prior years' financial
statements to the December 31, 1995, presentation.

2. Investments:

A summary of investment income is as follows:

(000's Omitted)
For the Year Ended December 31,
-------------------------------------------------------------------
1995 1994 1993
--------------------- -------------------- --------------------

Net investment income:
Debt securities ....................................... $ 148,040 142,469 136,533
Equity securities ..................................... 1,158 50 76
Other long-term investments ........................... 8,032 486 3,096
Short-term investments ................................ 1,612 830 931
--------------------- -------------------- --------------------
158,842 143,835 140,636
Less investment expenses .............................. 2,332 1,826 2,097
--------------------- -------------------- --------------------
Net investment income ........................................ $ 156,510 142,009 138,539
===================== ==================== ====================
Net investment gains (losses):
Debt securities ....................................... $ 417 (533) 18,486
Equity securities ..................................... 646 1,335 (274)
Other ................................................. (25) 1 (1,163)
--------------------- -------------------- --------------------
Net investment gains (losses) ................................ $ 1,038 803 17,049
===================== ==================== ====================
Net trading gains (losses):
Debt securities ....................................... $ 68 -- --
Equity securities ..................................... (950) -- --
--------------------- -------------------- --------------------
Net trading gains (losses) ................................... $ (882) -- --
===================== ==================== ====================

F-14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

yield in excess of the S&P 500 Index. The partnerships are carried at an amount
equal to the company's share of the partnerships' estimated market value with
related unrealized gains and losses recorded in net investment income. In
accordance with the permitted guidelines, the investments purchased by these
partnerships may experience greater than normal volatility which could
materially affect the company's earnings for any given period.

The maturity of the company's debt and equity securities portfolio as of
December 31, 1995 was as follows:

(000's Omitted)
As of December 31, 1995
-----------------------------------------------------------------------
Available-for-sale Trading
-------------------------------- -------------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
------------ ------------ ------------ ------------

Debt Securities:
Bonds:
One year or less ................................... $ 25,660 23,361 -- --
Two years through five years ....................... 461,364 478,490 -- --
Six years through ten years ........................ 1,228,934 1,302,318 462 467
Eleven years and after ............................. 231,819 240,437 1,027 1,018
---------- ---------- ---------- ----------
1,947,777 2,044,606 1,489 1,485
Equity securities .................................. 8,613 8,914 619 629
---------- ---------- ---------- ----------
$1,956,390 2,053,520 2,108 2,114
========== ========== ========== ==========

These tables include mortgage-backed securities based on the estimated
future cash flows of the underlying mortgages.

F-15

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The amortized cost, estimated market value and unrealized market gains and
losses of debt and equity securities as of December 31, 1995, and 1994 were as
follows:

(000's Omitted)
Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------

December 31, 1995

Bonds available-for-sale:
Corporate debt obligations
Investment grade ...................................... $1,076,873 63,321 724 1,139,470
High-yield............................................. 147,878 5,468 1,810 151,536
---------- ---------- ---------- ----------
1,224,751 68,789 2,534 1,291,006
U.S. Treasury obligations.................................... 51,743 942 21 52,664
Mortgage-backed securities
Investment grade ...................................... 661,652 32,062 1 693,713
High-yield............................................. 9,631 -- 2,408 7,223
---------- ---------- ---------- ----------
Bonds available-for-sale .................................... 1,947,777 101,793 4,964 2,044,606
---------- ---------- ---------- ----------
Bonds trading:
Corporate debt obligations
Investment grade ...................................... 458 -- 7 451
High-yield............................................. 1,031 5 2 1,034
---------- ---------- ---------- ----------
Bonds trading................................................ 1,489 5 9 1,485
---------- ---------- ---------- ----------
Total bonds ................................................. 1,949,266 101,798 4,973 2,046,091
Equity securities............................................ 9,232 614 303 9,543
---------- ---------- ---------- ----------
$1,958,498 102,412 5,276 2,055,634
========== ========== ========== ==========
December 31, 1994

Bonds held-to-maturity:
Corporate debt obligations
Investment grade ...................................... $ 792,746 1,160 62,907 730,999
High-yield ............................................ 135,698 108 9,267 126,539
---------- ---------- ---------- ----------
928,444 1,268 72,174 857,538
U.S. Treasury obligations.................................... 3,618 -- 319 3,299
Mortgage-backed securities .................................. 305,123 20,169 20,269 284,855
---------- ---------- ---------- ----------
Bonds held-to-maturity ...................................... 1,237,185 1,269 92,762 1,145,692
---------- ---------- ---------- ----------
Bonds available-for-sale:
Corporate debt obligations
Investment grade ...................................... 253,055 1,005 5,633 248,427
High-yield............................................. 1,218 -- 8 1,210
---------- ---------- ---------- ----------
254,273 1,005 5,641 249,637
Mortgage-backed securities .................................. 366,865 590 10,046 357,409
---------- ---------- ---------- ----------
Bonds available-for-sale .................................... 621,138 1,595 15,687 607,046
---------- ---------- ---------- ----------
Total bonds ................................................. 1,858,323 2,864 108,449 1,752,738
Equity securities............................................ 2,169 417 230 2,356
---------- ---------- ---------- ----------
$1,860,492 3,281 108,679 1,755,094
========== ========== ========== ==========

F-16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The preceding table includes the carrying value and estimated market value
of debt securities which the company has determined to be impaired (other than
temporary decline in value) as follows:

Original Accumulated Carrying Estimated
Cost Writedowns Value Market Value
----------- ----------- ----------- ------------

December 31, 1995 ........ $7,545 7,545 -- --
December 31, 1994 ........ $9,535 7,814 1,721 1,721

The company defines high-yield securities as those corporate debt
obligations rated below investment grade by Standard & Poor's and Moody's or, if
unrated, those that meet the objective criteria developed by the company's
independent investment advisory firm. Management believes that the return on
high-yield securities adequately compensates the company for additional credit
and liquidity risks that characterize such investments. In some cases, the
ultimate collection of principal and timely receipt of interest is dependent
upon the issuer attaining improved operating results, selling assets or
obtaining financing.

The amortized cost, estimated market value and unrealized market gains and
losses by type of mortgage-backed security as of December 31, 1995, and
December 31, 1994 were as follows:

(000's Omitted)
Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------

December 31, 1995

Government agency mortgaged-backed securities:
Planned amortization classes and accretion directed classes .............. $71,164 1,823 -- 72,987
Targeted amortization classes and accretion directed classes ............. 7,833 360 -- 8,193
Pass-throughs
32 3 -- 35
---------- ---------- ---------- ----------
Total government agency mortgage-backed securities.................. 79,029 2,186 -- 81,215
---------- ---------- ---------- ----------
Government sponsored enterprise mortgage-backed securities:
Planned amortization classes ............................................. 403,359 23,750 -- 427,109
Sequential classes ....................................................... 19,546 1,405 -- 20,951
Pass-throughs............................................................. 3,258 21 -- 3,279
---------- ---------- ---------- ----------
Total government sponsored enterprise mortgage-backed
securities ................................................... 426,163 25,176 -- 451,339
---------- ---------- ---------- ----------
Other mortgage-backed securities:
Planned amortization classes ............................................. 18,574 172 -- 18,746
Sequential classes ....................................................... 134,245 4,484 1 138,728
Pass-throughs ............................................................ 11 -- -- 11
Subordinated classes...................................................... 13,261 44 2,408 10,897
---------- ---------- ---------- ----------
Total other mortgage-backed securities.............................. 166,091 4,700 2,409 168,382
---------- ---------- ---------- ----------
Total mortgage-backed securities ................................................ $671,283 32,062 2,409 700,936
========== ========== ========== ==========

F-17

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

(000's Omitted)
Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ---------- ---------- ----------

December 31, 1994

Government agency mortgaged-backed securities:
Planned amortization classes and accretion directed classes ......... $ 75,557 12 5,614 69,955
Targeted amortization classes and accretion directed classes ........ 7,729 -- 319 7,410
Pass-throughs 40 2 -- 42
---------- ---------- ---------- ----------
Total government agency mortgage-backed securities............. 83,326 14 5,933 77,407
---------- ---------- ---------- ----------
Government sponsored enterprise mortgage-backed securities:
Planned amortization classes ........................................ 410,313 104 15,852 394,565
Sequential classes .................................................. 19,705 -- 1,087 18,618
Pass-throughs........................................................ 299 -- 2 297
---------- ---------- ---------- ----------
Total government sponsored enterprise mortgage-backed
securities .............................................. 430,317 104 16,941 413,480
---------- ---------- ---------- ----------
Other mortgage-backed securities:
Planned amortization classes ........................................ 22,686 22 745 21,963
Sequential classes .................................................. 125,100 451 5,345 120,206
Pass-throughs ....................................................... 13 -- -- 13
Subordinated classes................................................. 10,546 -- 1,351 9,195
---------- ---------- ---------- ----------
Total other mortgage-backed securities......................... 158,345 473 7,441 151,377
---------- ---------- ---------- ----------
Total mortgage-backed securities ........................................... $ 671,988 591 30,315 642,264
========== ========== ========== ==========

Certain mortgage-backed securities are subject to significant prepayment
risk. This is due to the fact that in periods of declining interest rates,
mortgages may be repaid more rapidly than scheduled, as individuals refinance
higher rate mortgages to take advantage of the lower current rates. As a result,
holders of mortgage-backed securities may receive large prepayments on their
investments which they are unable to reinvest at an interest rate comparable to
the rate on the prepaying mortgages. Mortgage-backed pass-through securities and
sequential classes, which comprised 23.4% and 21.6% of the carrying value of the
company's mortgage-backed securities as of December 31, 1995 and December 31,
1994, respectively, are sensitive to this prepayment risk.

A portion of the company's mortgage-backed securities portfolio consists of
planned amortization class ("PAC"), targeted amortization class ("TAC") and
accretion directed class ("AD") instruments. These securities are designed to
amortize in a more predictable manner by shifting the primary risk of prepayment
to investors in other tranches (support classes) of the mortgage-backed
security. PAC, TAC and AD securities comprised 74.6% and 76.8% of the carrying
value of the company's mortgage- backed securities as of December 31, 1995 and
December 31, 1994, respectively.

As of December 31, 1995, 75.3% of the company's mortgage-backed securities
were issued by either government agencies or government sponsored enterprises,
compared to 76.4% as of December 31, 1994. The credit risk associated with these
securities is generally less than other mortgage-backed securities. With the
exception of six issues, with a carrying value of $19.3 million as of

F-18

December 31, 1995, all of the company's investments in other mortgage-backed
securities are rated A or better by Standard & Poor's or Moody's.

The following investments held as of December 31, 1995, exceeded ten
percent of stockholders' equity:

(000's Omitted)
As of December 31,
----------------------------------------------------------------------
1995 1994
---------------------------------- ---------------------------------
Amortized Estimated Amortized Estimated
Cost Market Cost Market
---------------- -------------- ---------------- --------------

10% of Stockholders' Equity................................. $17,444 -- 10,420 --
================ ================
Bonds:
FNMA 94 83 B, 7.5%, 7-2003.................................. $19,197 20,598 19,177 18,031

LA County Pension Oblig, various interest rates and due
dates through 2005.................................... 18,633 20,675 -- --
Quebec Province CDA, 8.625%, due 01-2005.................... 20,199 21,923 -- --

The amounts shown as "estimated market" are primarily based on quotations
obtained from independent sources such as broker dealers who make markets in
similar securities. Unless representative trades of securities actually occur at
the balance sheet date, these quotes are generally estimates of market value
based on an evaluation of appropriate factors such as institution-size trading
in similar securities, yield, credit quality, coupon rate, maturity, type of
issue and other market data. Losses are recognized in the period they occur
based upon specific review of the securities portfolio and other factors.

The consideration received on sales of debt and equity securities, carrying
value and realized gains and losses on those sales were as follows:

(000's Omitted)
For the Year Ended December 31,
-----------------------------------
1995 1994 1993
--------- --------- ---------

Consideration received .................. $ 275,012 462,138 393,142
Carrying value .......................... 275,204 461,335 374,584
--------- --------- ---------
Net investment gains (losses) .... (192) 803 18,558
========= ========= =========
Investment gains ........................ $ 2,773 4,268 18,677
Investment losses ....................... (2,965) (3,465) (119)
--------- --------- ---------
Net investment gains (losses) .... $ (192) 803 18,558
========= ========= =========

During 1995, the company transferred bonds of four issuers from
held-to-maturity to available-for- sale based upon a significant deterioration
in the issuers' creditworthiness. The book value of these bonds at the time of
transfer was $16,128,888. Included in the above table are 1995 losses of
$2,151,154 on the sale of bonds of four issuers which the company had
transferred from held-to- maturity to available-for-sale.

F-19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The 1994 amounts include bonds of one issuer which the company had
classified as held-to- maturity, the sale of which resulted in a loss of
$205,526. The decision to sell these bonds was based upon a significant
deterioration in the issuers' creditworthiness. The book value of these bonds at
the time of sale was $8,507,732.

Net unrealized gains (losses) on debt securities held-to-maturity, debt
securities available-for-sale, equity securities available-for-sale and other
long-term investments changed as follows:

(000's) Omitted
Net Unrealized Gains (Losses)
------------------------------------------------------------------------------------
Debt Debt Equity
Securities Securities Debt Securities Equity Other
Held-to- Available-for- Securities Available-for- Securities Long-term
Maturity Sale Trading Sale Trading Investments
---------- -------------- ---------- -------------- --------- ------------

Balance as of January 1, 1993 ............. $ 37,420 4,115 -- (809) -- --
1993 Net Change ........................... 911 38,920 -- 1,091 -- 1,330
--------- --------- --------- --------- --------- ---------
Balance as of December 31, 1993 .......... 38,331 43,035 -- 282 -- 1,330
1994 Net Change ........................... (129,824) (57,127) -- (95) -- (1,330)
--------- --------- --------- --------- --------- ---------
Balance as of December 31, 1994 .......... (91,493) (14,092) -- 187 -- --
1995 Net Change ........................... 91,493 110,921 (4) 114 10 --
--------- --------- --------- --------- --------- ---------
Balance as of December 31, 1995 .......... $ -- 96,829 (4) 301 10 --
========= ========= ========= ========= ========= =========

At December 31, 1995 and 1994, investments with statutory carrying values
of $1,956,343,973 and $1,866,074,033, respectively, were on deposit with various
insurance departments. These amounts exceeded the minimum required deposits by
$53,856,902 and $66,325,834 as of December 31, 1995 and 1994 respectively.

F-20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

3. Other Assets:

Other assets consist of the following:

(000's) Omitted
As of December 31,
-------------------
1995 1994
------ ------

Property and equipment at cost:
Home office building (including
land of $352) ............................... $3,643 2,152
Furniture and equipment ....................... 3,711 3,464
Automobiles ................................... 99 115
------ ------
7,453 5,731
Less accumulated depreciation ........................ 3,650 3,336
------ ------
3,803 2,395
Other ................................................ 781 1,182
------ ------
$4,584 3,577
====== ======

4. Reinsurance:

The company reinsures portions of insurance it writes. The maximum amount
of risk retained by the company on any one life is $150,000.

A summary of reinsurance data follows (000's Omitted):

For the Ceded to
Year Ended Gross other Net
December 31, Descriptions amount companies amount
- ------------------------ -------------------------------------- ------------------- ------------------ -------------------

1995 Life insurance in force $ 311,991 240,206 71,785
Insurance premiums and policy charges $ 9,409 909 8,500
Future policy benefits $ 2,259,028 145,183 2,113,845
1994 Life insurance in force $ 330,108 259,200 70,908
Insurance premiums and policy charges $ 7,308 977 6,331
Future policy benefits $ 2,148,763 148,575 2,000,188
1993 Life insurance in force $ 354,703 280,819 73,884
Insurance premiums and policy charges $ 7,936 1,342 6,594
Future policy benefits $ 2,005,339 150,500 1,854,839

The company is contingently liable for the portion of the policies
reinsured under each of its existing reinsurance agreements in the event the
reinsurance companies are unable to pay their portion of any reinsured claim.
Management believes that any liability from this contingency is unlikely.

The company had amounts receivable under reinsurance agreements of
$146,617,611 and $149,656,094 as of December 31, 1995, and December 31, 1994,
respectively. Of the amounts, $144,965,371 and $147,949,099 were associated with
a single reinsurer. In 1989, the company entered into a coinsurance agreement

F-21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

which ceded 90% of the risk on the company's block of single premium whole life
policies written prior to 1989 to Employers Reassurance Corporation (ERC). The
agreement provides that ERC assumes 90% of all risks associated with each policy
in the block. Reimbursements received from ERC for amounts paid by the company
on the reinsured risks totalled $12,044,418, $9,740,717 and $7,991,680 for the
years ended December 31, 1995, 1994 and 1993, respectively.

The following table identifies the components of the amounts receivable
from ERC:

(000's) Omitted
As of December 31,
-----------------------
1995 1994
-------- --------

Reserve for future policy benefits ............... $143,558 146,919
Reimbursement for benefit payments ............... 1,407 1,030
-------- --------
$144,965 147,949
======== ========

5. Credit Agreement:

On December 29, 1994, the company entered into a credit agreement with The
First National Bank of Chicago (First Chicago) and Boatmen's First National Bank
of Kansas City (Boatmen's), as Lenders. On July 28, 1995, this agreement was
amended to reduce the commitment from $25,000,000 to $15,000,000. The company
has agreed to pay a commitment fee of .25% per annum on the unused portion of
the commitment. Borrowings under this agreement may be used for general
corporate purposes. During December, 1995, the company borrowed $7,000,000
(effective annual interest at December 31, 1995 of 6.91%) under the credit
agreement and contributed the proceeds to the capital and surplus of American.
Principal repayments for this borrowing are as follows: 1996 - $-0- 1997 -
$1,820,000 1998 - $2,240,000 1999 - $2,940,000.

Interest on the borrowings under this agreement is determined at the option
of the company to be: (i) a fluctuating rate of interest equal to the higher of
the corporate base announced by First Chicago from time to time, and a
fluctuating rate equal to the weighted average of rates on overnight Federal
Funds transactions with members of the Federal Reserve System as published by
the Federal Reserve Bank of New York plus .50% per annum, or (ii) a Eurodollar
rate plus a margin ranging from 1.00% to 1.25%.

In addition to general covenants which are customary for facilities such as
this, the company has agreed to maintain minimum consolidated net worth, a
minimum cash flow coverage ratio, minimum risk based capital for American,
minimum capital, surplus and asset valuation reserve of American and to maintain
a maximum debt to equity (including indebtedness) ratio.

Additional covenants include: (i) limitations on acquisitions; (ii)
maintenance of current lines of business; (iii) limitations on additional
indebtedness; (iv) limitations on investments; (v) limitations on dividends and
stock repurchases, and (vi) limitations on mergers, consolidations and sales of
assets, typical of such facilities.

F-22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

6. Retirement Plans:

The company sponsors an Employee Stock Ownership Plan (ESOP) for all
full-time employees with one year of service. Qualifying participants may
contribute an amount not to exceed ten percent of covered compensation. The
company made no contributions to the plan during the three years ended
December 31, 1995.

The company sponsors a Leveraged Employee Stock Ownership Plan (LESOP) for
all full-time employees with one year of service.

The LESOP has acquired 370,244 shares of the company's stock through the
proceeds of a note payable to American. The note bears interest at 7.0% and is
payable in annual installments through December 30, 2002. The note had unpaid
principal balances of $3,010,882 and $3,336,038 as of December 31, 1995 and
1994, respectively.

Each year, the company will make contributions to the LESOP which are to be
used to make loan interest and principal payments. On December 31 of each year,
a portion of the common stock is allocated to participating employees. Of the
361,735 shares of the company's common stock now owned by the LESOP, 119,518
shares have been allocated to the participating employees with the remaining
242,217 shares being held by American as collateral for the loan.

The unallocated portion of the company's common stock owned by the LESOP
has been recorded as a separate reduction of stockholders' equity. Contributions
to the LESOP during December 31, 1995, 1994 and 1993 were $305,564, $285,565 and
$266,886, respectively.

During 1992, the company's Board of Directors approved retirement plans for
its members and members of the Board of Directors of certain of its
subsidiaries. The plans provide that retired Directors shall serve as Advisory
Members to the Board at a fee of $750 per meeting attended and a monthly
lifetime benefit in the amount of $750 be paid to each qualified Director upon
retirement. In addition, the company has agreed to continue any life insurance
policies being provided as of the date of retirement.

To qualify for this benefit, a Director must have reached the age of 60 and
meet years of service requirements thereafter. The plan also calls for a
mandatory retirement on the date the Director's term expires following age 70.

A liability in the amount of $435,637, representing the present value of
future benefits, has been established. Charges (credits) to earnings relating to
the plans were ($85,543), ($40,244) and ($3,282), for the years ended December
31, 1995, 1994 and 1993, respectively.

Effective January 1, 1993, the company adopted an Age-Weighted Money
Purchase Plan for all full-time employees with one year of service. The full
cost of this plan will be paid by the company with qualifying participants
receiving contributions based upon their age at plan implementation and current
salary. Contributions to the Age-Weighted Money Purchase Plan for the year ended
December 31, 1995, 1994 and 1993, were $210,907, $215,664 and $213,059,
respectively.

F-23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

7. Stockholders' Equity:

Dividends by American to AmVestors are limited by laws applicable to
insurance companies. Under Kansas law, American may pay a dividend from its
surplus profits, without prior consent of the Kansas Commissioner of Insurance,
if the dividend does not exceed the greater of 10% of statutory capital and
surplus at the end of the preceding year or all of the statutory net gain from
operations of the preceding year. As of December 31, 1995, surplus profits of
American were $16,764,059 and 10% of statutory capital and surplus was
$9,828,859. American is also required to maintain, on a statutory basis, paid-in
capital stock and surplus (capital in excess of par value and unassigned
surplus) of $400,000 each. As of December 31, 1995 and 1994 American's statutory
capital and surplus was $98,288,590 and $87,521,204 respectively. Statutory net
income (loss) for the years 1995, 1994 and 1993 was $5,984,601, $4,167,120 and
($1,469,786), respectively.

In connection with the original establishment of the Interest Maintenance
Reserve (IMR), the Commissioner of Insurance of Kansas, the company's
domiciliary state, ordered that American prepare its December 31, 1992, NAIC
Annual Statement Form to equitably allocate 1992 capital gains and losses, not
included in the calculation of the Asset Valuation Reserve (AVR), on other than
government securities, fifty (50%) percent to surplus and fifty (50%) percent to
IMR, after calculation of the AVR pursuant to the instructions provided by the
NAIC. This differs from prescribed statutory accounting practices.

This represented a permitted accounting practice for regulatory purposes,
the effect of which was to increase statutory surplus by $8,168,000 as of
December 31, 1992 ($6,371,000 as of December 31, 1995).

In addition, American received permission from the Commissioner of
Insurance of Kansas to amortize the effects of changing to Actuarial Guideline
No. 32 concerning the Commissioners Annuity Reserve Valuation Method for
individual annuity contracts over a three-year period beginning in 1995 rather
than to record the full amount of the change of $2,176,000. The effect of this
permitted accounting practice was to increase statutory surplus by $943,150 as
of December 31,1995.

On March 17, 1989, the Board of Directors of the company adopted the 1989
Nonqualified Stock Option Plan. The options granted under the 1989 Nonqualified
Plan will cover the same number of shares and have the same exercise price as
the cancelled options, and none of such options may be exercised beyond ten
years from the original date of grant of the cancelled option. A total of
839,841 options to acquire common stock are outstanding under the 1989
Nonqualified Plan.

The 1989 Nonqualified Plan is administered by the Board of Directors and
officers of the company and its subsidiaries. The terms of the options,
including the number of shares, and the exercise price are subject to the sole
discretion of the Board of Directors.

F-24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

Changes during the years were as follows:

For the Year Ended December 31,
-----------------------------------------------------
1995 1994 1993
------------- ------------- -------------

Options outstanding, beginning of year ................................. 859,837 816,107 757,340
Options granted ........................................................ 86,000 95,000 413,000
Options exercised ...................................................... (105,996) (22,200) (227,561)
Options expired ........................................................ -- (29,070) (126,659)
Options cancelled ...................................................... -- -- (13)
-------- -------- --------
Options outstanding, end of year ....................................... 839,841 859,837 816,107
======== ======== ========
Outstanding options exercisable at end of year ......................... 779,841 764,837 403,107
======== ======== ========
Options reserved for future grants at end of year ...................... 46,247 132,247 145,677
======== ======== ========
Option prices per share:
Exercised, during the year ...................................... $4.84-$10.63 $ 5.31-$7.50 $ 4.84-$9.60
Outstanding, end of year ........................................ $4.84-$12.66 $4.84-$12.66 $4.84-$13.75

On March 17, 1989, the Board of Directors also adopted the 1989 Stock
Appreciation Rights Plan (the SAR Plan) and the 1989 Restricted Stock Plan (the
Restricted Stock Plan). The SAR Plan authorized the Board of Directors to grant
stock appreciation rights to employees, officers and directors in such amounts
and with such exercise prices as it shall determine. No stock appreciation
rights granted under the SAR Plan may be exercised more than five years from its
date of grant. The SAR Plan authorized a maximum of 125,000 shares to be issued
pursuant to stock appreciation rights granted thereunder.

For the Year Ended December 31,
-------------------------------
1995 1994 1993
----- ------- -------

Rights outstanding, beginning of year ...... -- 30,000 60,000
Rights granted ............................. -- -- --
Rights exercised ........................... -- -- (30,000)
Rights expired ............................. -- (30,000) --
Rights cancelled ........................... -- -- --
----- ------- -------
Rights outstanding, end of year ............ -- -- 30,000
===== ======= =======
Reserved for future grants ................. 5,000 5,000 5,000
===== ======= =======

The company recorded compensation expense relating to stock appreciation
rights of $-0-, $-0- and $1,875, for the years ended December 31, 1995, 1994,
and 1993, respectively.

The Restricted Stock Plan authorizes the Board of Directors to make
restricted stock awards to employees, officers and directors in such amounts as
it shall determine. The stock issued pursuant to such awards is subject to
restrictions on transferability for a period of five years. Such stock is
subject to a five-year vesting schedule, and the company is required to
repurchase all vested stock from a grantee if such grantee's employment with the
company is terminated prior to the lapse of the transfer restrictions. The
Restricted Stock Plan authorizes a maximum of 125,000 shares to be issued
thereunder. No restricted stock awards have been granted pursuant to the
Restricted Stock Plan.

F-25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

In conjunction with a previous bank borrowing, the company issued ten-year
warrants to purchase a total of 170,002 shares of its common stock as summarized
in the following table:

Warranty Issue Number of Exercise Expiration
Holder Date Shares Price Date
- -------------------- ------------- ------------ ------------- --------------
Morgan Guaranty 12/8/88 75,000 $ 3.9688 12/9/98
4/30/92 95,002 6.3855 5/1/02
------------
170,002
============

8. Stockholders' Rights Plan:

On June 30, 1994, the company's Board of Directors voted to repeal the 1988
Stockholders' Rights Plan and set the close of business on July 22, 1994 as the
record date for the payment of the one cent per share redemption price.
Stockholders of record were paid on August 8, 1994, in full redemption of the
rights under the plan. The total amount to redeem the Rights was $101,432.

9. Other Revenue:

Effective December 1, 1989, the company entered into a coinsurance
agreement with Employers Reassurance Corporation (ERC) which reinsured 90% of
the risk on the company's block of SPWL policies written prior to 1989. The
agreement provides that ERC assumes 90% of all risks associated with each policy
in the block. These policies continue to be administered by American. In return,
American receives an administrative allowance of $31.50 per policy per year. The
total allowance received in 1995, 1994 and 1993 was $121,780, $129,972 and
$136,912, respectively.

F-26

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

10. Income Taxes:

The provision for income taxes charged to operations was as follows:

(000's Omitted)
For the Year Ended December 31,
-------------------------------
1995 1994 1993
-------- -------- -------

Current income tax expense .................... $1,540 4,942 4,477
Deferred income tax expense (benefit) ......... 6,990 651 4,087
-------- -------- -------
Total income tax expense (benefit) ..... $8,530 5,593 8,564
======== ======== =======

The net deferred tax asset was comprised of the following:

(000's Omitted)
For the Year Ended
December 31,
------------------------
1995 1994
--------- ---------

Gross deferred tax assets:
Investments ................................. $ 679 7,178
Deferred policy acquisition costs ........... 9,565 --
Property and equipment ...................... 314 341
Other assets ................................ 143 11
Reserves for future policy benefits ......... 109,273 107,448
Accrued expenses and other liabilities....... 1,708 1,828
--------- ---------
121,682 116,806
--------- ---------
Gross deferred tax liabilities:
Investments ................................. 36,442 1,011
Accounts receivable ......................... 50,708 51,940
Accrued investment income ................... -- 193
Deferred policy acquisition costs ........... 55,530 49,653
Policy and contract claims .................. 335 279
--------- ---------
143,015 103,076
--------- ---------
(21,333) 13,730
Less valuation allowance .............. (1,568) (2,594)
--------- ---------
Net deferred tax asset (liability) .... $ (22,901) 11,136
========= =========

The company's net deferred tax asset (liability) consists of amounts that
represent both ordinary tax deductions and capital losses in future tax returns
and includes a valuation allowance as it is more likely than not that a portion
of the deferred tax asset will not be realized. The inability to offset ordinary
income with capital losses and uncertainty as to the timing of future losses and
the ability to carry those losses back against prior income has resulted in the
company establishing a valuation allowance.

F-27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

The actual tax expense (benefit) for each year differs from the "expected"
tax expense (computed by applying the Federal tax rate of 35% to earnings before
income taxes) as follows:

(000's Omitted)
For the Year Ended December 31,
---------------------------------------------------------------------
1995 1994 1993
------------------- ----------------- ------------------

Expected tax expense................................... $8,795 6,750 9,091
State Income tax....................................... 71 254 201
Change in valuation allowance on future deductions..... 188 (153) (470)
Change in valuation allowance on capital loss temporary
differences..................................... (179) (597) (555)
Change in expected tax rate on future deductions....... -- (321) --
Change in other net temporary differences, not
previously tax effected......................... (345) (340) 297
------------------- ----------------- ------------------
Actual income tax expense (benefit).................... $8,530 5,593 8,564
=================== ================= ==================

Deferred income taxes are provided for the tax effects of transactions that
are reported in different periods for financial reporting and tax return
purposes. The primary component of the deferred income tax provision are as
follows:

(000's Omitted)
For the Year Ended December 31,
---------------------------------------------------------------------
1995 1994 1993
------------------- ----------------- ------------------

Investments............................................ $3,067 (692) 938
Accounts receivable.................................... (1,232) 843 4,447
Accrued investment income.............................. (193) 204 (10)
Deferred policy acquisition costs...................... 7,094 6,629 2,488
Property and equipment................................. 27 (234) (107)
Other assets........................................... (133) (9) (1)
Future policy benefits................................. (1,825) (5,632) (2,485)
Policy and contract claims............................. 56 178 --
Accrued expenses and other liabilities................. 120 114 (440)
Operating loss carryforward............................ -- -- 282
Valuation allowance on future deductions and capital
loss differences................................ 9 (750) (1,025)
------------------- ----------------- ------------------
Deferred income tax expense (benefit).................. $6,990 651 4,087
=================== ================= ==================

11. Acquisition:

On September 8, 1995, the company signed a merger agreement pursuant to
which it will acquire all of the outstanding capital stock of Financial Benefit
Group (FBG), a Delaware corporation, for $5.31 per share, payable in the
company's common stock warrants and cash.

F-28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

41 jurisdictions, which includes 39 states, the District of Columbia and the
U.S. Virgin Islands. FBG also owns all of the shares of Annuity International
Marketing Corporation and The Insurancemart, Inc. both of which specialize in
the distribution and marketing of annuities.

The merger is subject to the approval of the stockholders of FBG and the
company and the fulfillment of certain other conditions set forth in the merger
agreement. Special Meetings of Stockholders for both FBG and the company will be
held on April 8, 1996 to approve the acquisition, with the closing expected to
occur as soon thereafter as practicable.

In connection with the acquisition, the company received a bank commitment
from First Chicago for borrowing of up to $35 million, the proceeds of which
will be used to fund the cash portion of the purchase price and refinance
existing indebtedness of the company and FBG.

The transaction will be accounted for using the purchase method with any
resulting goodwill being amortized over a period not to exceed 40 years.

12. Commitments and Contingencies:

The company's insurance subsidiary is subject to state guaranty association
assessments in all states in which it is admitted. Generally these associations
guarantee specified amounts payable to residents of the state under policies
issued by insolvent insurers. Most state laws permit assessments or some portion
thereof to be credited against future premium taxes. Charges (credits) relating
to guaranty fund assessments impacted 1995, 1994 and 1993 income before taxes by
approximately $1,001,000, $504,000 and $1,594,000, respectively. The company
expects that further changes to income may be required in the future and will
record such amounts when they become known.

13. Quarterly results (Unaudited):

The company's quarterly results are set forth in the following table:

(000's Omitted, except per share data)
1995 Quarter Ended
March 31 June 30 Sept. 30 Dec. 31
--------------- --------------- -------------- ----------------

Total revenue....................... $ 40,212 40,378 40,378 45,683
=============== =============== ============== ================
Earnings before income taxes........ $ 5,409 5,494 5,607 8,619
Income tax expense.................. 1,893 1,923 1,801 2,913
--------------- --------------- -------------- ----------------
Net earnings........................ $ 3,516 3,571 3,806 5,706
=============== =============== ============== ================

Per share of common stock:
Primary:
Net earnings........................ $ .34 .35 .37 .55
=============== =============== ============== ================
Fully diluted:
Net earnings........................ $ .34 .34 .37 .55
=============== =============== ============== ================

F-29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

1994 Quarter Ended
------------------------------------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
--------------- --------------- -------------- ----------------

Total revenue....................... $37,491 35,594 37,519 38,188
=============== =============== ============== ================

Earnings before income taxes........ $ 5,412 3,771 4,833 5,270
Income tax expense.................. 1,840 1,282 1,628 843
--------------- --------------- -------------- ----------------
Net earnings........................ $ 3,572 2,489 3,205 4,427
=============== =============== ============== ================

Per share of common stock:
Primary:
Net earnings........................ $ .34 .24 .31 .43
=============== =============== ============== ================

Fully diluted:
Net earnings........................ $ .34 .24 .31 .43
=============== =============== ============== ================

F-30

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
(000's Omitted)
(Unaudited)

1996 1995
---------- ---------

ASSETS

Investments:
Debt securities:
Bonds:
Available-for-sale (cost: $2,035,105 and $1,947,777) ......................... $2,063,146 2,044,606
Trading (cost: $1,650 and $1,489) ............................................ 1,668 1,485
---------- ---------
2,064,814 2,046,091
---------- ---------
Equity securities:
Common stock:
Available-for sale (cost: $1,347 and $1,047) ................................. 1,585 1,181
Preferred stock:
Available-for-sale (cost: $14,533 and $7,566) ................................ 15,016 7,733
Trading (cost: $1,074 and $619) .............................................. 1,091 629
---------- ---------
17,692 9,543
---------- ---------
Other long-term investments ................................................................ 34,515 39,491
Short-term investments ..................................................................... 427 436
---------- ---------
Total investments ................................................................... 2,117,448 2,095,561
---------- ---------
Cash and cash equivalents .................................................................. 12,512 48,281
Accounts receivable (net of allowance for uncollectible accounts of $815 and $739).......... 275 454
Amounts receivable under reinsurance agreements............................................. 144,169 146,618
Amounts receivable on securities settlements in process..................................... 1,743 10,873
Accrued investment income .................................................................. 29,501 29,357
Deferred policy acquisition costs .......................................................... 163,812 140,476
Other assets ............................................................................... 6,163 4,584
---------- ---------
Total assets ........................................................................ $2,475,623 2,476,204
========== =========

See notes to consolidated interim financial statements.

F-31

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995 (000's Omitted, except share and per share data)
(Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- --------------------------------------------------------------------------------------------- --------------- ---------------

Liabilities:
Policy liabilities:
Future policy benefits.......................................................... $ 2,296,246 2,259,028
Other policy liabilities........................................................ 6,654 7,312
--------------- ---------------
2,302,900 2,266,340
Notes payable......................................................................... 7,000 7,000
Amounts due on securities settlements in process...................................... 3,400 1,438
Deferred income taxes................................................................. 6,443 22,901
--------------- ---------------
Accrued expenses and other liabilities................................................ 6,598 4,080
--------------- ---------------
Total liabilities......................................................... 2,326,341 2,301,759
--------------- ---------------
Commitments and contingencies

Stockholders' equity:
Preferred stock, $1.00 par value authorized - 2,000,000 shares........................ -- --
Common stock, no par value, authorized - 25,000,000 shares; issued and
outstanding - 10,154,995 shares in 1996 and 10,140,738 shares in 1995........... 12,922 12,904
Paid in capital....................................................................... 64,371 64,284
Unrealized investment gains (losses) (net of deferred policy acquisition cost
amortization expense (benefit) of $8,092 and $27,327 and deferred
income tax expense (benefit) of $7,234 and $24,431)............................. 13,436 45,372
Retained earnings..................................................................... 61,382 54,714
--------------- ---------------
152,111 177,274
Less leveraged employee stock ownership trust (LESOP)................................. (2,829) (2,829)
--------------- ---------------
Total stockholders' equity................................................ 149,282 174,445
--------------- ---------------
Total liabilities and stockholders' equity................................ $ 2,475,623 2,476,204
=============== ===============

See notes to consolidated financial statements.

F-32

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended March 31, 1996 and 1995 (000's Omitted, except share and per share data)
(Unaudited)

1996 1995
------------- -----------

Revenue:
Insurance premiums and policy charges........................................................ $ 2,457 1,904
Net investment income........................................................................ 39,169 38,220
Net investment gains (losses)................................................................ 7,627 (10)
Other revenue................................................................................ 25 98
------------- -----------
Total revenue.......................................................................... 49,278 40,212
------------- -----------
Benefits and expenses:
Benefits, claims and interest credited to policyholders...................................... 30,620 29,000
Amortization of deferred policy acquisition costs............................................ 4,970 2,988
General insurance expenses................................................................... 1,921 2,215
Premium and other taxes, licenses and fees................................................... 251 525
Other expenses............................................................................... 60 54
------------- -----------
Total benefits and expenses............................................................ 37,822 34,782
------------- -----------

Operating earnings.................................................................................. 11,456 5,430
Interest expense.................................................................................... 125 21
------------- -----------
Earnings before income tax expense ................................................................. 11,331 5,409
Income tax expense.................................................................................. 3,910 1,893
------------- -----------
Net earnings........................................................................................ $ 7,421 3,516
============= ===========
Earnings per share of common stock:
Primary:
Net earnings........................................................................... $ .71 .34
============= ===========
Fully diluted:
Net earnings........................................................................... $ .71 .34
============= ===========
Average shares outstanding:
Primary................................................................................ 10,427 10,251
Fully diluted.......................................................................... 10,493 10,292

See notes to consolidated interim financial statements.

F-33

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(000's Omitted, except share and per share data)
(Unaudited)

Unrealized
Investment
Common Paid-in Gains Retained
Stock Capital (Losses) Earnings LESOP Total
-------- ------------ ---------- ---------- ---------- ---------

Balance as of January 1, 1995 ....................... $ 12,769 63,499 (7,813) 38,876 (3,135) 104,196
Net earnings ........................................ -- -- -- 16,599 -- 16,599
Change in unrealized investment
gains (losses) ............................... -- -- 53,185 -- -- 53,185
Cash dividends to stockholders
($.075 per share on common stock) ............ -- -- -- (761) -- (761)
Issuance of common stock:
upon exercise of options ..................... 135 785<F1> -- -- -- 920
Allocation of LESOP shares .......................... -- -- -- -- 306 306
-------- -------- -------- -------- -------- --------
Balance as of December 31, 1995 ..................... 12,904 64,284 45,372 54,714 (2,829) 174,445
Net earnings ........................................ -- -- -- 7,421 -- 7,421
Change in unrealized investment
gains (losses) ............................... -- -- (31,936) -- -- (31,936)
Cash dividends to stockholders
($.075 per share on common stock) ............ -- -- -- (753) -- (753)
Issuance of common stock:
upon exercise of options ..................... 18 87<F1> -- -- -- 105
-------- -------- -------- -------- -------- --------
Balance March 31, 1996 .............................. $ 12,922 64,371 13,436 61,382 (2,829) 149,282
======== ======== ======== ======== ======== ========
- ----------------
<FN>

<F1> Net of income tax benefit of $29 and $440 for the period ended March 31, 1996, and December 31, 1995, respectively.

See notes to consolidated financial statements.

F-34

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended March 31, 1996 and 1995
(000's Omitted)
(Unaudited)

1996 1995
---------------- ---------------

Operating Activities:
Net earnings............................................................................ $ 7,421 3,516
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Interest credited to policyholders................................................ 30,835 29,242
Amortization of (discounts) premiums on debt securities, net...................... (241) (266)
Amortization of deferred policy acquisition costs................................. 4,970 2,988
Net investment (gains) losses..................................................... (7,627) 10
Accrued investment income......................................................... (144) 133
Deferred income taxes............................................................. 737 2,411
Other, net........................................................................ 2,779 2,093
---------------- ---------------
Net cash provided by operating activities................................... 38,730 40,127
---------------- ---------------
Investing Activities:
Purchases of securities:
Held-to-maturity............................................................ -- (612)
Available-for-sale.......................................................... (261,348) (40,042)
Trading..................................................................... (6,332) --
Proceeds from sale of securities:
Held-to-maturity............................................................ -- --
Available-for-sale.......................................................... 135,203 1,721
Trading..................................................................... 6,290 --
Proceeds from maturity or redemption of securities:
Held-to-maturity............................................................ -- 4,793
Available-for-sale.......................................................... 38,558 25,131
Trading..................................................................... 259 --
Other long-term investments, net.................................................. 4,977 4,728
Short-term investments, net....................................................... 9 67
Capitalization of deferred policy acquisition costs............................... (9,071) (7,436)
Other, net........................................................................ (984) (156)
---------------- ---------------
Net cash used in investing activities....................................... (92,439) (11,806)
---------------- ---------------
Financing Activities:
Premiums received................................................................. 97,144 75,768
Surrender and death benefits paid................................................. (93,786) (96,499)
Surrender and risk charges collected.............................................. 1,880 1,507
Securities settlements in process................................................. 11,092 65
Cash dividends to stockholders.................................................... (753) --
Issuance of common stock.......................................................... 105 260
Other, net........................................................................ 2,258 424
---------------- ---------------
Net cash provided by (used in) financing activities......................... 17,940 (18,475)
---------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents............................................... (35,769) 9,846
Cash and Cash Equivalents:
Beginning of year................................................................. 48,281 10,621
---------------- ---------------
End of year....................................................................... $12,512 20,467
================ ===============

See notes to consolidated financial statements.

F-35

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Increase (Decrease) in Cash and Cash Equivalents
Three Months Ended March 31, 1996 and 1995
(000's Omitted)
(Unaudited)

Supplemental schedule of cash flow information: 1996 1995
-------- --------

Income tax payments (refunds) .......................................................................... $ 315 (1,272)

======== ========
Interest payments ...................................................................................... $ 118 --
======== ========

Change in net unrealized investment gains (losses) ..................................................... $(68,368) 19,792
Less: Associated increase reduction in amortization of deferred policy acquisition costs ........ 19,235 (4,948)
Deferred income tax (expense) benefit ............................................................ 17,197 (4,161)
-------- --------
Net change in net unrealized investment gains (losses) ................................................. $(31,936) 10,683
======== ========

See Notes to Consolidated Interim Financial Statements.

F-36

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies:

a. Principles of Consolidation:

The consolidated financial statements include the accounts of AmVestors and
its wholly-owned subsidiaries American Investors Life Insurance Company, Inc.
(American), American Investors Sales Group, Inc. (American Sales), and AmVestors
Investment Group, Inc. (AIG) (collectively the company). All significant
intercompany accounts and transactions have been eliminated.

b. Accounting Principles and Practices:

The accompanying unaudited consolidated financial statements have been
prepared on the basis of generally accepted accounting principles as promulgated
by the American Institute of Certified Public Accountants. In the opinion of the
company, the consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly the
financial position as of March 31, 1996 and the results of earnings and the
statements of cash flows for the three month periods ended March 31, 1996 and
1995.

c. Investments:

Debt securities held-to-maturity are carried at amortized cost, except that
those securities with an other than temporary impairment in value, are carried
at estimated net realizable value. Debt securities available-for-sale are
carried at estimated market value, with any unrealized gains or losses recorded
in stockholders' equity.

Investments are reviewed on each balance sheet date to determine if they
are impaired. In determining whether an investment is impaired, the company
considers whether the decline in market value at the balance sheet date is an
other than temporary decline; if so, then the investment's carrying value is
reduced to a new cost basis which represents estimated net realizable value. The
decline in value is reported as a realized loss, and a recovery from the new
cost basis is recognized as a realized gain only at sale.

The estimates of net realizable value are based on information obtained
from published financial information provided by issuers, independent sources
such as broker dealers or the company's independent investment advisors. Such
amounts represent an estimate of the consideration to be received in the future
when the defaulted company's debt is settled through the sale of their assets or
the restructuring of their debt. These estimates do not represent the discounted
present value of these future considerations.

Investments in common and preferred stock are carried at market, with
unrealized gains (losses) recorded in stockholders' equity for securities
available-for-sale.

The cost of securities sold is determined on the identified certificate
basis.

F-37

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

Other long-term investments include policy loans and mortgage loans on real
estate which are carried at cost less principal payments since date of
acquisition, and certain partnership investments which are carried at an amount
equal to the company's share of the partner's estimated market value with any
unrealized gains or losses recorded in net investment income.

d. Fair Value of Financial Instruments:

Estimated fair value amounts have been determined by the company using
available market information and appropriate valuation methodologies. Due to the
fact that considerable judgment is required to interpret market data to develop
the estimates of fair value, the estimates presented are not necessarily
indicative of the amounts that could be realized in a current market exchange.

The carrying values and estimated fair values of the company's financial
instruments as of March 31, 1996, and December 31, 1995, were as follows:

(000's Omitted)
1996 1995
----------------------------------------- ------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------------- ------------------- ----------------- ----------------

Assets:
Debt securities............................ $2,064,814 2,064,814 2,046,091 2,046,091
Equity securities.......................... 17,692 17,692 9,543 9,543
Other long-term investments................ 34,515 34,524 39,491 39,546
Short-term investments..................... 427 427 436 436
Cash and cash equivalents.................. 12,512 12,512 48,281 48,281
Amounts receivable on securities
settlements in process................ 1,743 1,743 10,873 10,873
Accounts receivable and accrued investment
income................................ 29,776 29,776 29,811 29,811
Liabilities:
Future policy benefits - investment
contracts............................. 2,059,172 1,935,054 2,022,653 1,900,895
Other policy liabilities................... 6,654 6,654 7,312 7,312
Notes payable.............................. 7,000 7,000 7,000 7,000
Amounts due on securities settlements in
process............................... 3,400 3,400 1,438 1,438
Accrued expenses and other liabilities..... 6,598 6,598 4,080 4,080

Equity securities - Fair value equals the carrying value as these
securities are carried at quoted market value.

Other long-term investments - For certain homogeneous categories of
mortgage loans, fair value is estimated using quoted market prices for
securities backed by similar loans, adjusted for differences in loan
characteristics. Fair value of policy loans and other long-term investments is
estimated to approximate the assets' carrying value.

Short-term investments and cash and cash equivalents - The carrying amounts
reported in the balance sheet approximate the assets' fair value.

F-38

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

Amounts receivable on securities settlements in process - The carrying
amount reported in the balance sheet approximates the fair value of this asset.

Accounts receivable and accrued investment income - The carrying amounts
reported in the balance sheet for these assets approximates fair value.

Future policy benefits for investment contracts - The fair values for
deferred annuities were estimated to be the amount payable on demand at the
reporting date as those investment contracts have no defined maturity and are
similar to a deposit liability. The amount payable at the reporting date was
calculated as the account balance less any applicable surrender charges.

Other policy liabilities - The carrying amount reported in the balance
sheet approximates the fair value of these liabilities.

Notes payable - The fair value of the company's note payable has been
estimated to be an amount equal to the balance reported in the balance sheet.

Amounts due on securities settlements in process - The carrying amount
reported in the balance sheet approximates the fair value of this liability.

Accrued expenses and other liabilities - The carrying amount reported in
the balance sheet approximates the fair value of these liabilities.

The use of different market assumptions and/or estimation methodologies
could have a material effect on the estimated fair value amounts.

e. Significant Risks and Uncertainties:

Nature of Operations - The company specializes in the sale of deferred
annuity products, the earnings on which are not currently taxable to the annuity
owner. Any changes in tax regulations which eliminate or significantly reduce
this advantage of tax deferred income would adversely impact the operations of
the company. The company's products are marketed through a network of
independent agents licensed in 47 states and the District of Columbia. The
company is not dependent on any one agent or agency for a substantial amount of
its business. No single agent accounted for more than 1% of annuity sales in
1995, and the top twenty individual agents accounted for approximately 11% of
1995 annuity sales.

Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from those estimates.

F-39

are periodically reviewed by management and, if actual experience indicates that
the estimates should be revised, the total amortization recorded to date is
adjusted by a charge or credit to earnings.

f. Deferred Policy Acquisition Costs:

The costs of acquiring new business (primarily commissions and policy
expenses), which vary with and are directly related to the production of new
business, have been deferred. The deferred costs related to investment-type
deferred annuity contracts are amortized in relation to the incidence of
expected gross profits over the expected life of policies. For single premium
life insurance, deferred policy acquisition costs are amortized over the life of
the policies, but not more than 20 years for policies issued before January 1,
1987, and not more than 30 years for policies issued after December 31, 1986,
based on the expected gross profits for the amortization periods. The deferred
costs related to traditional life contracts are amortized over the premium
paying period for the related policies using the same actuarial assumptions as
to interest, mortality and withdrawals as are used to calculate the reserves for
future benefits.

Net investment gains (losses) realized in the first three months of 1996
and 1995 resulted in the company experiencing investment margins greater than
those estimated. As a result, $2,147,467 and $3,731 of the unamortized balance
of deferred policy acquisition costs were expensed in the three months ended
March 31, 1996 and 1995, respectively. The amount charged off is based on actual
gross profits earned to date in relation to total gross profits expected to be
earned over the life of the related contracts.

g. Future Policy Benefits:

h. Participating Policies:

The company issued participating policies in past years on which dividends
are paid to policyholders as determined annually by the Board of Directors. The
amount of dividends declared but undistributed is included in other liabilities.
Policy benefit reserves do not include a provision for estimated future
participating dividends.

F-40

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

i. Depreciation:

j. Income Taxes:

The company and its subsidiaries prepare and file their income tax returns
on a consolidated basis.

k. Earnings per Share:

Earnings per share of common stock are computed by dividing net earnings by
the sum of the weighted average number of shares outstanding during the period
plus dilutive common stock equivalents applicable to stock options and warrants
calculated using the treasury stock method.

l. Consolidated Statements of Cash Flows:

For purposes of reporting cash flows, cash and cash equivalents includes
cash and money market accounts.

m. New Accounting Standards:

Effective January 1, 1995, the company adopted the provisions of SFAS No.
119, "Disclosure About Derivative Financial Instruments and Fair Value of
Financial Instruments." This Statement requires disclosure about the amount,
nature, and terms of derivative financial instruments. Since the company has no
derivative financial instruments as defined in the Statement, the adoption of
this accounting standard did not result in any additional financial statement
disclosure.

Effective November 30, 1995, the company adopted the provisions of "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in Debt
and Equity Securities" and transferred all bonds with an amortized cost of
$1,159,390,768 classified as held-to-maturity to available-for-sale. The effect
of the adoption was an increase in stockholders' equity of $21,218,205 (net of
related amortization of deferred policy acquisition costs of $12,792,403 and
deferred income taxes of $11,425,188). Net earnings for the year ended December
31, 1995 were not affected by the adoption of this implementation guide.

Effective for fiscal years beginning after December 15, 1995, SFAS No. 121,
"Accounting for the Impairment of Long Lived Assets" establishes accounting
standards for the impairment of long-lived assets, certain intangibles, and
goodwill related to those assets. The company does not expect this Statement to
have a material affect on its consolidated financial statements.

Effective for financial statements for fiscal years beginning after
December 15, 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," will
require increased disclosure of compensation expense arising from stock
compensation plans. The Statement encourages rather than requires companies to
adopt a new method that accounts for stock compensation awards based on their

F-41

estimated fair value at the date they are granted. Companies will be permitted,
however, to continue accounting under APB Option No. 25 which requires
compensation cost be recognized based on the difference, if any, between the
quoted market price of the stock on the date of grant and the amount an employee
must pay to acquire the stock. The company will continue to apply APB Option No.
25 in its consolidated financial statements and will disclose pro forma net
income and earnings per share in a footnote to its consolidated financial
statements, determined as if the new method were applied.

n. Reclassifications:

Certain reclassifications have been made to conform the March 31, 1995 and
December 31, 1995 financial statements to the March 31, 1996 presentation.

2. Investments:

A summary of investment income is as follows:

(000's Omitted)
For the Period Ended
March 31,
---------------------------
1996 1995
------- -------

Debt securities ............................................................................. $37,781 36,199
Equity securities ........................................................................... 168 6
Other long-term investments ................................................................. 1,234 2,113
Short-term investments ...................................................................... 715 435
------- -------
39,898 38,753
Less investment expenses .................................................................... 729 533
------- -------
Net investment income ....................................................................... $39,169 38,220
======= =======
Net investment gains (losses): Realized investment gains (losses):
Debt securities, available-for-sale .................................................. $ 7,203 7
Debt securities, held-to-maturity .................................................... -- 6
Debt securities, trading ............................................................. 280 --
Equity securities, available-for-sale ................................................ -- 2
Equity securities, trading ........................................................... 115 --
Other ................................................................................ -- (25)
------- -------
Net realized investment gains (losses) ...................................................... 7,598 (10)
------- -------
Unrealized investment gains (losses):
Debt securities, trading ............................................................. 22 --
Equity securities, trading ........................................................... 7 --
------- -------
Net unrealized investment gains (losses) .................................................... 29 --
------- -------
Net investment gains (losses) ............................................................... $ 7,627 (10)
======= =======

F-42

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

Certain limited partnership investments are included in income from other
long-term investments. These funds (commonly referred to as hedge funds) are
managed by outside investment advisors. The investment guidelines of these
partnerships provide for a broad range of investment alternatives, including
stocks, bonds, futures, options, commodities, and various other financial
instruments. These investments were purchased with the strategy that yields in
excess of the S&P 500 Index may be obtained. The partnerships are carried at an
amount equal to the company's share of the partnerships' estimated market value
with related unrealized gains and losses recorded in net investment income. In
accordance with the permitted guidelines, the investments purchased by these
partnerships may experience greater than normal volatility which could
materially affect the company's earnings for any given period.

The maturity of the company's debt and equity securities portfolio as of
March 31, 1996 was as follows:

(000's Omitted)
As of March 31, 1996
-------------------------------------------------------------------------
Available-for-sale Trading
---------------------------------- -----------------------------------
Amortized Estimated Amortized Estimated
Cost Market Value Cost Market Value
--------------- --------------- --------------- ---------------

Debt securities:
One year or less ................................ $ 41,941 40,151 -- --

Two years through five years .................... 439,092 449,821 759 756
Six years through ten years ..................... 1,254,470 1,275,156 729 753
Eleven years and after........................... 299,602 298,018 162 159
--------------- --------------- --------------- ---------------
2,035,105 2,063,146 1,650 1,668
Equity securities 15,880 16,601 1,074 1,091
--------------- --------------- --------------- ---------------
$ 2,050,985 2,079,747 2,724 2,759
=============== =============== =============== ===============

These tables include mortgage-backed securities based on the estimated cash
flows of the underlying mortgages.

F-43

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

The book value, estimated market value and unrealized market gains and
losses of debt and equity securities as of March 31, 1996, and December 31,
1995, were as follows:

(000's Omitted)
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
------------ ------------ ------------ ------------

March 31, 1996
- ----------------------------------------------------

Bonds, available-for-sale:
Corporate debt obligations
Investment grade ...................... $1,143,316 33,583 12,780 1,164,119
High-yield............................. 162,099 2,771 2,471 162,399
---------- ---------- ---------- ----------
1,305,415 36,354 15,251 1,326,518
U.S. Treasury obligations ................... 50,138 774 140 50,772
Mortgage-backed securities
Investment grade ...................... 671,010 14,134 5,695 679,449
High-yield............................. 8,542 -- 2,135 6,407
---------- ---------- ---------- ----------
Bonds, available-for-sale ................... 2,035,105 51,262 23,221 2,063,146
---------- ---------- ---------- ----------
Bonds, trading:
Corporate debt obligations
Investment grade ...................... 1,489 23 3 1,509
High-yield............................. 161 1 3 159
---------- ---------- ---------- ----------
Bonds, trading............................... 1,650 24 6 1,668
---------- ---------- ---------- ----------
Total bonds ................................. 2,036,755 51,286 23,227 2,064,814
Equity securities............................ 16,954 1,300 562 17,692
---------- ---------- ---------- ----------
$2,053,709 52,586 23,789 2,082,506
========== ========== ========== ==========
December 31, 1995
- ----------------------------------------------------

Bonds, available-for-sale:
Corporate debt obligations
Investment grade ...................... $1,076,873 63,321 724 1,139,470
High-yield ............................ 147,878 5,468 1,810 151,536
---------- ---------- ---------- ----------
1,224,751 68,789 2,534 1,291,006
U.S. Treasury obligations ................... 51,743 942 21 52,664

Mortgage-backed securities
Investment grade ...................... 661,652 32,062 1 693,713
High-yield ............................ 9,631 -- 2,408 7,223
---------- ---------- ---------- ----------
Bonds, available-for-sale: ......................... 1,947,777 101,793 4,964 2,044,606
---------- ---------- ---------- ----------
Bonds, trading:
Corporate debt obligations
Investment grade ...................... 458 -- 7 451
High-yield ............................ 1,031 5 2 1,034
---------- ---------- ---------- ----------
Bonds, trading .............................. 1,489 5 9 1,485
---------- ---------- ---------- ----------
Total bonds ................................. 1,949,266 101,798 4,973 2,046,091
Equity securities ........................... 9,232 614 303 9,543
---------- ---------- ---------- ----------
$1,958,498 102,412 5,276 2,055,634
========== ========== ========== ==========

F-44

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

The preceding table includes the carrying value and estimated market
value of debt securities which the company has determined to be impaired (other
than temporary decline in value) as follows:

(000's omitted)
Original Accumulated Carrying Estimated
Cost Write Downs Value Market Value
------------ ------------ ------------ ------------

March 31, 1996.......... $7,545 7,545 -- --
December 31, 1995....... $7,545 7,545 -- --

The amortized cost, estimated market value and unrealized market gains
and losses by type of mortgage-backed security as of March 31, 1996, and
December 31, 1995 were as follows:

(000's Omitted)
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
------------ ------------ ------------ ------------

March 31, 1996
- ----------------------------------------------------------------------------

Government agency mortgaged-backed securities:
Planned amortization classes ........................................ $ 64,212 401 -- 64,613
Targeted amortization classes and accretion directed classes ........ 7,858 191 -- 8,049
Pass-throughs ....................................................... 29 3 -- 32
------------ ------------ ------------ ------------
Total government agency mortgage- backed securities ........... 72,099 595 -- 72,694
------------ ------------ ------------ ------------
Government-sponsored enterprise mortgage-backed securities:
Planned amortization classes ........................................ 433,709 11,001 4,323 440,387
Sequential classes .................................................. 272 4 -- 276
Pass-throughs ....................................................... 3,230 20 -- 3,250
------------ ------------ ------------ ------------
Total government sponsored enterprise mortgage-backed
securities .............................................. 437,211 11,025 4,323 443,913
------------ ------------ ------------ ------------
Other mortgage-backed securities:
Planned amortization classes ........................................ 17,312 78 -- 17,390
Sequential classes .................................................. 140,782 2,428 1,372 141,838
Pass-throughs ....................................................... 10 -- -- 10
Subordinated classes
12,138 8 2,135 10,011
------------ ------------ ------------ ------------
Total other mortgage-backed securities.......................... 170,242 2,514 3,507 169,249
------------ ------------ ------------ ------------
Total mortgage-backed securities ........................................... $ 679,552 14,134 7,830 685,856
============ ============ ============ ============

F-45

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

(000's Omitted)
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
------------ ------------ ------------ ------------

December 31, 1995
- ----------------------------------------------------------------------------

Government agency mortgage-backed securities:
Planned amortization classes ........................................ $ 71,164 1,823 -- 72,987
Targeted amortization classes and accretion directed classes ........ 7,833 360 -- 8,193
Pass-throughs........................................................ 32 3 -- 35
------------ ------------ ------------ ------------
Total government agency mortgage- backed securities............ 79,029 2,186 -- 81,215
------------ ------------ ------------ ------------
Government sponsored enterprise mortgage-backed securities:
Planned amortization classes ........................................ 403,359 23,750 -- 427,109
Sequential classes .................................................. 19,546 1,405 -- 20,951
Pass-throughs........................................................ 3,258 21 -- 3,279
------------ ------------ ------------ ------------
Total government sponsored enterprise mortgage-backed
securities .............................................. 426,163 25,176 -- 451,339
------------ ------------ ------------ ------------
Other mortgage-backed securities:
Planned amortization classes ........................................ 18,574 172 -- 18,746
Sequential classes .................................................. 134,245 4,484 1 138,728
Pass-throughs ....................................................... 11 -- -- 11
Subordinated classes................................................. 13,261 44 2,408 10,897
------------ ------------ ------------ ------------
Total other mortgage-backed securities ........................ 166,091 4,700 2,409 168,382
------------ ------------ ------------ ------------
Total mortgage-backed
securities ................................................................. $ 671,283 32,062 2,409 700,936
============ ============ ============ ============

Certain mortgage-backed securities are subject to significant prepayment
risk. This is due to the fact that in periods of declining interest rates,
mortgages may be repaid more rapidly than scheduled, as individuals refinance
higher rate mortgages to take advantage of the lower current rates. As a result,
holders of mortgage-backed securities may receive large prepayments on their
investments which they are unable to reinvest at an interest rate comparable to
the rate on the prepaying mortgages. Mortgage-backed pass-through securities and
sequential classes, which comprised 21.2% and 23.4% of the carrying value of the
company's mortgage-backed securities as of March 31, 1996 and December 31, 1995,
respectively, are sensitive to this prepayment risk.

A portion of the company's mortgage-backed securities portfolio consists
of planned amortization class ("PAC"), targeted amortization class ("TAC") and
accretion directed class ("AD") instruments. These securities are designed to
amortize in a more predictable manner by shifting the primary risk of prepayment
to investors in other tranches (support classes) of the mortgage-backed
security. PAC, TAC and AD securities comprised 77.0% and 74.6% of the carrying
value of the company's mortgage-backed securities as of March 31, 1996 and
December 31, 1995.

As of March 31, 1996, 74.9% of the company's mortgage-backed securities
were issued by either government agencies or government-sponsored enterprises,
compared to 75.3% as of December 31, 1995. The credit risk associated with these
securities is generally less than other mortgage-backed securities. With the
exception of six issues, with a carrying value of $18,082,768 as of March 31,
1996, all of the company's investments in other mortgage-backed securities are
rated A or better by Standard & Poor's or Moody's.

F-46

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

The consideration received on sales of debt and equity securities,
carrying value and realized gains and losses on those sales were as follows:

(000's Omitted)
For the Period Ended
March 31,
-------------------------
1996 1995
--------- ---------

Consideration received .......................... $ 180,312 33,873
Carrying value .................................. 172,714 33,858
Change in unrealized gains (losses) on trading
securities..................................... 29 --
--------- ---------
Net investment gains (losses) ............ $ 7,627 15
========= =========
Investment gains ................................ $ 8,365 15
Investment losses ............................... (767) --
Change in unrealized gains (losses) on trading
securities..................................... 29 --
--------- ---------
Net investment gains (losses) ............ $ 7,627 15
========= =========

The above table contains no sales of securities which the company had
classified as held-to-maturity.

Net unrealized gains (losses) on debt securities held-to-maturity, debt
securities available-for-sale, debt securities trading, equity securities
available-for-sale and equity securities trading changed as follows:

(000's) Omitted
Net Unrealized Gains (Losses)
--------------------------------------------------------------------------------------
Debt Debt Equity
Securities Securities Debt Securities Equity
Held- Available-for Securities Available-for Securities
to-Maturity -Sale Trading -Sale Trading
--------------- --------------- --------------- --------------- ---------------

Balance as of January 1, 1995 .............. $ (91,493) (14,092) -- 187 --
1995 Net Change ............................ 91,493 110,921 (4) 114 10
--------------- --------------- --------------- --------------- ---------------
Balance as of December 31, 1995 ............ -- 96,829 (4) 301 10
1996 Net Change ............................ -- (68,788) 22 420 7
--------------- --------------- --------------- --------------- ---------------
Balance as of March 31, 1996 ............... $ -- 28,041 18 721 17
=============== =============== =============== =============== ===============

F-47

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

At March 31, 1996, and December 31, 1995, investments with statutory
carrying values of $2,026,957,262 and $1,956,343,973, respectively, were on
deposit with various insurance departments. These amounts exceeded the minimum
required deposits by $61,109,979 and $53,856,902 as of March 31, 1996, and
December 31, 1995, respectively.

3. Other Assets:

Other assets consist of the following:

(000's) Omitted
------------------------------------------------------
March 31, December 31,
1996 1995
------------------------- -------------------------

Property and equipment at cost:
Home office building (including land of $352)...................... $4,559 3,643
Furniture and equipment............................................ 3,645 3,711
Automobiles........................................................ 99 99
------------------------- -------------------------
8,303 7,453
Less accumulated depreciation............................................. 3,656 3,650
------------------------- -------------------------
4,647 3,803
Other..................................................................... 1,516 781
------------------------- -------------------------
6,163 4,584
========================= =========================

4. Reinsurance:

The company reinsures portions of insurance it writes. The maximum amount
of risk retained by the company on any one life is $150,000.

A summary of reinsurance data follows (000's Omitted):

Ceded to
For the Gross Other Net
Period Ended Descriptions Amount Companies Amount
- ----------------------- -------------------------------------- ------------------- ------------------ -------------------

March 31, 1996 Life insurance in force............... $ 305,699 234,692 71,007
Insurance premiums and policy charges. $ 2,649 192 2,457
March 31, 1995 Life insurance in force............... $ 324,030 252,801 71,229
Insurance premiums and policy charges. $ 2,188 284 1,904
March 31, 1996 Future policy benefits................ $ 2,296,246 143,406 2,152,840
December 31, 1995 Future policy benefits................ $ 2,259,028 145,183 2,113,845

F-48

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

The company had amounts receivable under reinsurance agreements of
$144,169,337 and $146,617,611 as of March 31, 1996, and December 31, 1995,
respectively. Of the amounts, $142,507,965 and $144,965,371 were associated with
a single reinsurer. In 1989, the company entered into a coinsurance agreement
which ceded 90% of the risk on the company's block of single premium whole life
policies written prior to 1989 to Employers Reassurance Corporation (ERC). The
agreement provides that ERC assumes 90% of all risks associated with each policy
in the block. Reimbursement received from ERC for amounts paid by the company on
the reinsured risks totalled $2,416,764 and $3,891,613 for periods ended March
31, 1996 and 1995, respectively.

The following table identifies the components of the amounts receivable
from ERC:

(000's) Omitted
--------------------------
March 31, December 31,
1996 1995
------------ ------------

Reserve for future policy benefits ................. $ 141,778 143,558
Reimbursement for benefit payments
and administrative allowance ..................... 730 1,407
------------ ------------
$ 142,508 144,965
============ ============

5. Credit Agreement:

On December 29, 1994, the company entered into a credit agreement with
The First National Bank of Chicago (First Chicago) and Boatmen's First National
Bank of Kansas City (Boatmen's), as Lenders. On July 28, 1995, this agreement
was amended to reduce the commitment from $25,000,000 to $15,000,000. The
company has agreed to pay a commitment fee of .25% per annum on the unused
portion of the commitment. Borrowings under this agreement may be used for
general corporate purposes. During December, 1995, the company borrowed
$7,000,000 (effective annual interest at March 31, 1996 of 6.67%) under the
credit agreement and contributed the proceeds to the capital and surplus of
American. Principal repayments for this borrowing are as follows: 1996 - $-0-
1997 - $1,820,000 1998 - $2,240,000 1999 - $2,940,000.

Interest on the borrowings under this agreement is determined at the
option of the company to be: (i) a fluctuating rate of interest equal to the
higher of the corporate base rate announced by First Chicago from time to time,
and a fluctuating rate equal to the weighted average of rates on overnight
Federal Funds transactions with members of the Federal Reserve System as
published by the Federal Reserve Bank of New York plus .50% per annum, or (ii) a
Eurodollar rate plus a margin ranging from 1.00% to 1.25%.

In addition to general covenants which are customary for facilities such
as this, the company has agreed to maintain minimum consolidated net worth, a
minimum cash flow coverage ratio, minimum risk based capital for American,
minimum capital, surplus and asset valuation reserve of American and to maintain
a maximum debt to equity (including indebtedness) ratio.

Additional covenants include: (i) limitations on acquisitions; (ii)
maintenance of current lines of business; (iii) limitations on additional
indebtedness; (iv) limitations on investments; (v) limitations on dividends and
stock repurchases; and (vi) limitations on mergers, consolidations and sales of
assets, typical of such facilities.

F-49

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

6. Retirement Plans:

The company sponsors an Employee Stock Ownership Plan (ESOP) for all
full-time employees with one year of service. Qualifying participants may
contribute an amount not to exceed 10% of covered compensation. The company made
no contributions to this plan during either the three months ended March 31,
1996 or 1995.

The company sponsors a Leveraged Employee Stock Ownership Plan (LESOP)
for all full-time employees with one year of service.

The LESOP has acquired 370,244 shares of the company's stock through the
proceeds of a note payable to American. The note bears interest at 7.0% and is
payable in annual installments through December 30, 2002. The note had an unpaid
principal balance of $3,010,882 as of March 31, 1996, and December 31, 1995.

Each year the company will make contributions to the LESOP which are to
be used to make loan interest and principal payments. On December 31 of each
year, a portion of the common stock will be allocated to participating
employees. Of the 361,213 shares of the company's common stock now owned by the
LESOP, 118,996 shares have been allocated to the participating employees with
the remaining 242,217 shares being held by American as collateral for the loan.

The unallocated portion of the company's common stock owned by the LESOP
has been recorded as a separate reduction of stockholders' equity. Accrued
contributions to the LESOP were $81,738, and $76,391, for the three months ended
March 31, 1996, and 1995, respectively.

During 1992, the company's Board of Directors approved retirement plans
for its members and members of the Board of Directors of certain of its
subsidiaries. The plans provide that retired Directors shall serve as Advisory
Members to the Board at a fee of $750 per meeting attended and a monthly
lifetime benefit in the amount of $750 be paid to each qualified Director upon
retirement. In addition, the company has agreed to continue any life insurance
policies being provided as of the date of retirement.

To qualify for this benefit, a Director must reach the age of 60 and meet
years of service requirements thereafter. The plan also calls for a mandatory
retirement on the date the Director's term expires following age 70.

A liability in the amount of $437,623, representing the present value of
future benefits, has been established. Charges (credits) to earnings related to
the plans were $1,986 and $(1,395) for the three months ended March 31, 1996 and
1995, respectively.

Effective January 1, 1993, the company adopted an Age-Weighted Money
Purchase Plan for all full-time employees with one year of service. The full
cost of this plan will be paid by the company with qualifying participants
receiving contributions based upon their age at plan implementation and current
salary. Contributions to the Age-Weighted Money Purchase Plan for the three
months ended March 31, 1996, and 1995 were $67,249 and $65,276 respectively.

F-50

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

7. Stockholders' Equity:

Dividends by American to AmVestors are limited by laws applicable to
insurance companies. Under Kansas law, American may pay a dividend from its
surplus profits, without prior consent of the Kansas Commissioner of Insurance,
if the dividend does not exceed the greater of 10% of statutory capital and
surplus at the end of the preceding year or all of the statutory net gain from
operations of the preceding year, provided that such dividend does not exceed
its unassigned surplus (surplus profits) at the end of the preceding year. As of
December 31, 1995, surplus profits of American were $16,764,059 and 10% of
statutory capital and surplus was $9,828,859. American is also required to
maintain, on a statutory basis, paid-in capital stock and surplus (capital in
excess of par value and unassigned surplus) of $400,000 each. As of March 31,
1996, and December 31, 1995, American's statutory capital and surplus was
$97,433,060 and $98,288,590, respectively. Statutory net income (loss) for 1995
was $5,984,601.

This represented a permitted accounting practice for regulatory purposes,
the effect of which was to increase statutory surplus by $8,168,000 as of
December 31, 1992 ($5,533,000 as of March 31, 1996).

On March 17, 1989, the Board of Directors of the company adopted the 1989
Nonqualified Stock Option Plan. These options have an exercise price equal to
the closing price of the company's stock on the date of grant and none may be
exercised beyond ten years from the grant date. A total of 832,084 options to
acquire common stock are outstanding under the 1989 Nonqualified Plan.

F-51

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

Changes during the periods were as follows:

For the Period Ended
-----------------------------------------------------------
March 31, December 31,
1996 1995
------------------------- -------------------------

Options outstanding, beginning of period....................... 841,341 859,837
Options granted................................................ 5,000 87,500
Options exercised.............................................. (14,257) (105,996)
------------------------- -------------------------
Options outstanding, end of period............................. 832,084 841,341
========================= =========================
Outstanding options exercisable at end of period............... 825,584 779,841
========================= =========================
Options reserved for future grants at end of period............ 39,747 44,747
========================= =========================
Option prices per share:
Exercised, during the period............................ $5.31 $4.84-$10.63
Outstanding, end of period.............................. $4.84-$12.66 $4.84-$12.66

For the Period Ended
---------------------------------------------------------------
March 31, December 31,
1996 1995
--------------------------- ----------------------------

Rights outstanding, beginning of period..................... -- --
Rights granted.............................................. -- --
Rights exercised............................................ -- --
Rights expired.............................................. -- --
Rights cancelled............................................ -- --
--------------------------- ----------------------------
Rights outstanding, end of period........................... --0-- --0--
=========================== ============================
Rights reserved for future grants at end of period.......... 5,000 5,000
=========================== ============================

The company recorded no compensation expense relating to stock
appreciation rights for the three months ended March 31, 1996, and 1995,
respectively.

F-52

NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS-(Continued)

In conjunction with a previous bank borrowing, the company issued
ten-year warrants to purchase a total of 170,002 shares of its common stock as
summarized in the following table:

Warranty Issue Number of Exercise Expiration
Holder Date Shares Price Date
- ---------------------------- ------------------- --------------------------- --------------------- -----------------------

Morgan Guaranty 12/8/88 75,000 $ 3.9688 12/9/98

4/30/92 95,002 6.3855 5/1/02
---------------------------
170,002
===========================

8. Other Revenue:

Effective December 1, 1989, the company entered into a coinsurance
agreement with Employers Reassurance Corporation (ERC) which reinsured 90% of
the risk on the company's block of SPWL policies written prior to 1989. The
agreement provides that ERC assumes 90% of all risks associated with each policy
in the block. These policies continue to be administered by American. In return,
American receives an administrative allowance of $31.50 per policy per year. The
total allowance received during the three months ended March 31, 1996 and 1995
was $29,187 and $31,301, respectively.

9. Income Taxes:

The provision for income taxes charged to operations was as follows:

(000's Omitted)
For the Three Months Ended
March 31,
--------------------------------------------------------------
1996 1995
------------------------------ -------------------------

Current income tax expense (benefit)..................... $3,172 (518)
Deferred income tax expense (benefit).................... 738 2,411
------------------------------ -------------------------
Total income tax expense.......................... $3,910 1,893
============================== =========================

10. Acquisition:

On September 8, 1995, the company signed a merger agreement pursuant to
which it will acquire all of the outstanding capital stock of Financial Benefit
Group, Inc., (FBG) a Delaware corporation, for $5.31 per share, payable in the
company's common stock, warrants and cash.

FBG is an insurance holding company which owns all of the shares of
Financial Benefit Life Insurance Company, a Florida domiciled insurer which
specializes in the sale and underwriting of annuity products and is admitted in
41 jurisdictions, which includes 39 states, the District of Columbia and the
U.S. Virgin Islands. FBG also owns all of the shares of Annuity International
Marketing Corporation and The Insurancemart, Inc. both of which specialize in
the distribution and marketing of annuities.

F-53

The merger received the approval of the shareholders of both FBG and the
company, and became effective on April 8, 1996.

In connection with the acquisition, the company borrowed $35,000,000
under a credit agreement with The First National Bank of Chicago, Fleet National
Bank and Boatmen's First National Bank of Kansas City, the proceeds of which
were used to fund the cash portion of the purchase price and refinance existing
indebtedness of the company and FBG.

The transaction will be accounted for using the purchase method with any
resulting goodwill being amortized over a period not to exceed 40 years.

11. Contingencies:

The company's insurance subsidiary is subject to state guaranty
association assessments in all states in which it is admitted. Generally, these
associations guarantee specified amounts payable to residents of the state under
policies issued by insolvent insurers. Most state laws permit assessments or
some portion thereof to be credited against future premium taxes. Charges
(credits) relating to the guaranty fund assessments impacted 1995 and 1994
income before taxes by approximately $1,001,000 and $504,000, respectively. The
company expects that further charges to income may be required in the future and
will record such amounts when they become known.

F-54

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Financial Benefit Group, Inc. And Subsidiaries:

We have audited the accompanying consolidated balance sheets of Financial
Benefit Group, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Financial Benefit Group, Inc.
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, the
Company changed its method of accounting for debt and equity securities
effective January 1, 1994 to conform with Statement of Financial Accounting
Standards No. 115.

/s/ DELOITTE & TOUCHE LLP

Miami, Florida
March 22, 1996

F-55

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994

1995 1994
---------- ----------
(in thousands,
except share data)

ASSETS

INVESTMENTS (Notes 1,2,10,11):
Fixed maturities available-for-sale ...................................................................... $ 485,079 $ 289,787
Fixed maturities held-to-maturity ........................................................................ 11,772 190,836
Real estate investments .................................................................................. 3,230
Mortgage loans on real estate ............................................................................ 5,898 3,903
Equity securities ........................................................................................ 792 800
---------- ----------
Total investments ................................................................................. 503,541 488,556

CASH AND CASH EQUIVALENTS ................................................................................ 52,860 27,462
ACCRUED INVESTMENT INCOME ................................................................................ 5,742 8,152
DEFERRED POLICY ACQUISITION COSTS (Note 1) ............................................................... 43,077 73,959
FUTURE POLICY BENEFITS RECOVERABLE FROM REINSURER (Note 4) ............................................... 107,507 123,076
OTHER ASSETS (Note 3) .................................................................................... 7,218 9,698
---------- ----------
TOTAL .................................................................................................... $ 719,945 $ 730,903
========== ==========

LIABILITIES

FUTURE POLICY BENEFITS AND CLAIMS ACCRUAL (Notes 1,4) .................................................... $ 653,612 $ 682,039
OTHER LIABILITIES AND ACCRUED EXPENSES ................................................................... 9,796 5,588
LONG-TERM DEBT (Note 5) .................................................................................. 15,500 16,000
---------- ----------
Total liabilities ................................................................................. 678,908 703,627
---------- ----------
SHAREHOLDERS' EQUITY (Notes 5,6):
CLASS A COMMON STOCK, $.01 par value; authorized 25,000,000 shares; issued 6,958,192 in 1995
and 6,898,422 shares in 1994; outstanding 6,471,567 shares
in 1995 and 6,411,797 shares in 1994 ................................................................... 70 68
CLASS B COMMON STOCK, $.01 par value; authorized 1,750,000 shares; issued 412,115 shares in
1995 and 416,822 shares in 1994; outstanding 323,667 shares in 1995 and 328,374
shares in 1994 ......................................................................................... 4 5
ADDITIONAL PAID-IN CAPITAL ............................................................................... 22,411 22,313
RETAINED EARNINGS ........................................................................................ 14,524 9,923
NET UNREALIZED APPRECIATION (DEPRECIATION) ON AVAILABLE-FOR-SALE SECURITIES NET OF DEFERRED POLICY
ACQUISITION COSTS, $15,875 IN 1995 AND $7,630 IN 1994 AND OF TAXES, $3,396 IN 1995 AND
($1,786) IN 1994 ....................................................................................... 5,524 (3,378)
SUBSCRIPTIONS RECEIVABLE - ESOP .......................................................................... (159)
COMMON STOCK IN TREASURY, at cost ........................................................................ (1,496) (1,496)
---------- ----------
Total shareholders' equity ........................................................................ 41,037 27,276
---------- ----------
TOTAL .................................................................................................... $ 719,945 $ 730,903
========== ==========

See notes to consolidated financial statements.

F-56

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1995 1994 1993
------------- ------------- --------------
(in thousands, except share data)
----------------------------------------------

REVENUE:
Net investment income:
Fixed maturities available-for-sale.................................. $42,038 $27,417 --
Fixed maturities held-to-maturity.................................... 1,034 15,709 --
Fixed maturities..................................................... -- -- $53,006
Realized gains on investments (Note 2)..................................... 2,706 2,668 21,827
Commissions and marketing fees............................................. 2,887 1,423 1,062
Other Income............................................................... 5,559 3,846 4,074
------------- ------------- --------------
Total revenue............................................ 54,224 51,063 79,969
------------- ------------- --------------

BENEFITS AND EXPENSES:
Increase in liability for future policy benefits........................... 28,114 28,067 41,468
General and administrative expenses........................................ 4,591 4,117 4,794
Payroll and related expenses............................................... 2,847 2,860 2,447
Amortization of deferred acquisition costs................................. 10,655 11,168 15,550
Interest expense........................................................... 1,533 1,406 1,476
Depreciation and amortization.............................................. 200 194 262
------------- ------------- --------------

Total benefits and expenses.............................. 47,940 47,812 65,997
------------- ------------- --------------

INCOME BEFORE INCOME TAX PROVISION AND EXTRAORDINARY CHARGE....................... 6,284 3,251 13,972

INCOME TAX PROVISION (Note 8)..................................................... 1,683 725 4,854
------------- ------------- --------------
INCOME BEFORE EXTRAORDINARY CHARGE................................................ 4,601 2,526 9,118
EXTRAORDINARY CHARGE ON EXTINGUISHMENT OF DEBT, NET OF TAX OF APPROXIMATELY $200.. (1,800)
------------- ------------- --------------
NET INCOME........................................................................ 4,601 726 9,118
============= ============= ==============
EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT:
Primary:
Weighted average shares.............................................. 8,622,251 8,466,144 8,203,291
Earnings before extraordinary charge................................. $ 0.53 $ 0.30 $ 1.11
Extraordinary charge................................................. -- (0.21) --
------------- ------------- --------------
Net income........................................................... $ 0.53 $ 0.09 $ 1.11
============= ============= ==============
Fully diluted:
Weighted average shares.............................................. Not Not 17,982,767
applicable applicable
Earnings before extraordinary charge
Net income........................................................... $ 0.51
==============

See notes to consolidated financial statements.

F-57

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(In Thousands, except per share data)

Class A Class B Additional Investment Subscriptions Cost of Total
Common Common Paid-In Retained Gains Receivable Treasury Shareholders'
Stock Stock Capital Earnings (Losses) ESOP Stock Equity
-------- -------- -------- -------- -------- ----------- -------- --------

BALANCE, JANUARY 1, 1993 ................. $ 59 $ 5 $20,276 $ 1,960 $ 51 $ (835) $ (1,496) $ 20,020

Exercise of stock options ................ 1 -- 43 -- -- -- -- 44
Net Changes in unrealized depreciation on
equity securities....................... -- -- -- -- (51) -- -- (51)
Payment received on ESOP subscriptions.... -- -- -- -- -- 345 -- 345
Net Income ............................... -- -- -- 9,118 -- -- -- 9,118
-------- -------- -------- -------- -------- ----------- -------- --------

BALANCE, DECEMBER 31, 1993 ............... 60 5 20,319 11,078 -- (490) (1,496) 29,476

Effect on net unrealized appreciation on
available-for-sale securities of
adopting Statement of Financial
Accounting Standards No. 115............ -- -- -- -- 1,687 -- -- 1,687
Stock dividend of one Class A Common share
for twenty Class A or B Common shares... 6 -- 1,875 (1,881) -- -- -- --
Exercise of stock options ................ 2 -- 119 -- -- -- -- 121
Net changes in unrealized depreciation on
available-for-sale securities........... -- -- -- -- (5,065) -- -- (5,065)
Payment received on ESOP subscriptions.... -- -- -- -- -- 331 -- 331
Net income ............................... -- -- -- 726 -- -- -- 726
-------- -------- -------- -------- -------- ----------- -------- --------

BALANCE, DECEMBER 31, 1994 ............... 68 5 22,313 9,923 (3,378) (159) (1,496) 27,276

Exercise of stock options ................ 2 (1) 98 -- -- -- -- 99
Net changes in unrealized depreciation on
available-for-sale securities........... -- -- -- -- 8,902 -- -- 8,902
Payment received on ESOP subscriptions.... -- -- -- -- -- 159 -- 159
Net income ............................... -- -- -- 4,601 -- -- -- 4,601
-------- -------- -------- -------- -------- ----------- -------- --------

BALANCE, DECEMBER 31, 1995 ............... $ 70 $ 4 $22,411 $14,524 $ 5,524 $ -- $ (1,496) $ 41,037
======== ======== ======== ======== ======== =========== ======== ========

See notes to consolidated financial statements.

F-58

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1995 1994 1993
--------- --------- ----------
(in thousands)

OPERATING ACTIVITIES:
Net income ........................................................................... $ 4,601 $ 726 $ 9,118
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by operating activities:
Extraordinary charge on extinguishment of
debt, net of tax benefit ....................................................... -- 1,800 --
Change in future policy benefits and claims accrual .................................. 28,114 28,067 41,468
Realized investment (gains) losses, net .............................................. (2,706) (2,668) (21,827)
Depreciation and amortization ........................................................ 200 194 262
Change in deferred policy acquisition costs .......................................... 3,817 (791) 9,325
Change in accrued investment income .................................................. 2,410 (168) 3,636
Change in deferred taxes, net ........................................................ (356) 1,361 247
Change in other assets and liabilities, net .......................................... 599 1,585 3,291
--------- --------- ---------
Total adjustments .................................................. 32,078 29,380 36,402
--------- --------- ---------
Net cash provided by operating activities .......................... 36,679 30,106 45,520
--------- --------- ---------

INVESTING ACTIVITIES:
Purchases of available-for-sale securities ........................................... (338,222) (146,381) --
Purchase of held-to-maturity securities .............................................. -- (41,672) --
Purchase of investments .............................................................. -- -- (690,364)
Purchase of common and preferred stock ............................................... (1,004) -- --
Proceeds for sales of available-for-sale securities .................................. 346,670 214,339 --
Proceeds from sales of held-to-maturity securities ................................... 7,804 -- --
Proceeds for sales of investments .................................................... 44 -- 651,380
Proceeds from sale of real estate .................................................... 1,590 -- --
Proceeds from maturities and redemptions of
available-for-sale securities and held-to-maturity securities....................... 9,550 10,429 --
Proceeds from maturity of investments ................................................ -- -- 71,576
Purchase of property and equipment ................................................... (57) (198) (137)
--------- --------- ---------
Net cash provided by investing activities .......................... 26,375 36,517 32,455
--------- --------- ---------

FINANCING ACTIVITIES:
Premiums received .................................................................... 62,493 76,533 57,777
Surrenders and other benefits paid ................................................... (99,907) (145,386) (104,767)
Borrowings under long-term debt ...................................................... 16,000 5,000
Principal payments on long-term debt ................................................. (500) (15,000) (7,119)
Payment to extinguish debt ........................................................... -- (2,000) --
Exercise of stock options ............................................................ 99 121 44
Payment received on ESOP subscriptions ............................................... 159 331 345
--------- --------- ---------
Net cash used in financing activities .............................. (37,656) (69,401) (48,720)
--------- --------- ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS......................................... 25,398 (2,778) 29,255

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................................................. 27,462 30,240 985
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR ...................................................... $ 52,860 $ 27,462 $ 30,240
========= ========= =========

See notes to consolidated financial statements.

F-59

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

Financial Benefit Group, Inc. (the "Company") is a holding corporation
formed to create and sell insurance products through its wholly-owned
subsidiaries. Its principal products are deferred and immediate annuities.
Subsidiaries include Financial Benefit Life Insurance Company ("Financial
Benefit Life"), Financial Benefit Management Corporation, Annuity
International Marketing Corporation ("AIMCOR"), The Insurancemart, Inc. and
Rainbow Card Pack Publications, Inc.

Accounting Policies

Basis of Consolidation - The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
include the accounts of the Company and its wholly-owned subsidiaries. All
material intercompany transactions and balances have been eliminated.

Significant Risks and Uncertainties

Nature of Operations - The Company specializes in the sale of deferred
annuity products, the earnings on which are not currently taxable to the
annuity owner. Any changes in tax regulation which eliminate or
significantly reduce this advantage of tax deferred income would adversely
impact the operations of the Company.

Use of Estimates in the Preparation of Financial Statements- The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.

Certain Significant Estimates - Certain costs incurred to acquire new
business are deferred and amortized in relation to the incidence of
expected gross profits over the expected life of the policies.
Determination of expected gross profits includes management's estimate of
certain elements over the life of the policies, including investment
income, interest to be credited to the contract, surrenders and resultant
surrender charges, deaths and in the case of life insurance, mortality
charges to be collected. These estimates of expected gross profits are used
as a basis for amortizing deferred costs. These estimates are periodically
reviewed by management and if actual experience indicates that the
estimates should be revised the total amortization recorded to date is
adjusted by a charge or credit to earnings.

Investments - Statement of Financial Accounting Standards ("SFAS") No. 115,
Accounting for Certain Investments in Debt and Equity Securities
("Statement No. 115"), was adopted by the Company as of January 1, 1994. In
accordance with Statement No. 115, the Company's prior- year financial
statements have not been restated to reflect the change in accounting
principle. Under Statement No. 115, securities are classified as either
available-for-sale, held-to-maturity or trading. The Company classified
approximately 60% of its fixed maturity securities portfolio as

F-60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

"available-for-sale" with the remainder classified as "held-to-maturity."
Securities classified as available-for-sale are carried at fair value and
unrealized gains and losses on such securities are reported as a separate
component of shareholders' equity. Securities classified as
held-to-maturity are carried at cost, adjusted for amortization of premium
or discount.

The effect of adopting Statement No. 115 on January 1, 1994 caused
shareholders' equity to be increased by $1,687,000 (net of $4,016,000
deferred policy acquisition costs amortization and of deferred taxes of
$991,000 that would have been recorded if those securities had been sold at
their fair value on January 1, 1994).

Effective November 30, 1995, the Company adopted the provisions of "A Guide
to Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities" and transferred bonds with an amortized cost of
$165,826,000 classified as held-to- maturity to available-for-sale. The
effect of the adoption was an increase in stockholders' equity of
$1,165,000 (net of related amortization of deferred policy acquisition
costs of $3,114,000 and deferred income taxes of $684,000). Net earnings
for the year ended December 31, 1995 were not affected by the adoption of
this implementation guide.

Prior to the adoption of Statement No. 115, the Company carried a small
portion of its fixed maturity investments (designated as held-for-sale) at
lower of cost or market with the other than temporary declines in value
recognized through charges to realized gain (loss) on investments. The
remainder of fixed maturity investments were carried at amortized cost.
Equity securities continue to be carried at fair value with the unrealized
gains and losses reported as a separate component of shareholders' equity.
The adoption of Statement No. 115 had no effect on net income.

Real estate held for investment is carried at cost. Real estate held for
sale was carried at the lower of cost or fair value.

Mortgage loans are reported at principal balance less allowances for
estimated uncollectible amounts, if any.

Deferred Policy Acquisition Costs - The costs of acquiring new business
(primarily commissions and policy expenses), which vary with and are
directly related to the production of new business, have been deferred. For
annuity contracts issued prior to 1991, such costs are being amortized
using the interest method which recognizes acquisition and interest costs
as expenses at a constant rate applied to net policy liabilities. For
annuity contracts issued subsequent to December 1992, such costs are being
amortized generally in proportion to the present value of expected gross
profits using the retrospective deposit method. Management, periodically,
based on actuarial studies, reviews the recoverability of these costs. As
of December 31, 1995 and 1994, based on such studies, management has
concluded that these costs are recoverable.

Future Policy Benefits - Reserves for future policy benefits on annuity
contracts, which are considered investment contracts as defined in SFAS No.
97, are calculated using the prospective deposit method. Under this method,
the benefit reserve is established for the present value of future benefits
based on various assumptions as to mortality and surrenders. Benefit
reserve factors are prepared per unit in force and applied to the actual
premium in force at the valuation date. Effective January 1, 1992, future

F61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

policy benefits for annuity contracts represent policyholder account
balances consisting of the premiums received plus credited interest, less
any withdrawals.

Property and Equipment - Property, plant and equipment is recorded at cost,
and depreciation is provided on a straight-line basis over the estimated
useful life. The principal estimated useful lives are: buildings and
improvements, 10 to 40 years, and machinery, equipment, and fixtures, 3 to
5 years. Certain leases for computers have been capitalized and are
included in office equipment and depreciated on a straight-line basis over
5 years.

Income Taxes - The Company records its income taxes under SFAS No. 109,
which it adopted in 1993, and requires taxes to be recorded based on the
liability method. The adoption of SFAS No. 109 did not have a material
effect on the financial statements that had previously been prepared using
SFAS No. 96.

Cash Flows - In the preparation of the statement of cash flows, highly
liquid investments (U.S. Treasury Bills - $49,999,223 and $25,088,000 as of
December 31, 1995 and 1994, respectively) with maturities under three
months are considered to be cash equivalents. Cash of $2,861,000 and
$2,374,000 as of December 31, 1995 and 1994 is invested at a rate of 5.5%
and 5.8%, respectively.

Stock Dividends - Stock dividends are recorded by applying the number of
shares declared to the closing bid price on the record date.

Earnings Per Share - Earnings per common share and common equivalent share
were computed by dividing net income by the weighted average number of
shares of common stock and common stock equivalents outstanding during the
year, as adjusted for all stock dividends. Outstanding warrants and options
(see Notes 5, 6 and 7) have been included in the calculation when the
average market price of common stock exceeds the exercise price of the
options and warrants using the modified treasury stock method. The
convertible debentures were not considered common stock equivalents.

Earnings per common share assuming full dilution was determined for 1993 on
the assumption that the convertible debentures were converted on the issue
date, October 28, 1992, and the option to acquire 51% of the Company was
exercised. As to the debentures and the 51% option, net earnings for 1993
were adjusted by $1,147,000 for net interest less the tax effect. On April
22, 1994, the Company paid $2 million to accelerate the payment of the
subordinated convertible debenture resulting in the extinguishment of the
conversion rights (see Note 5). As to the options and warrants, the
year-end common stock price of $4.75, $3.00 and $3.375 for 1995, 1994 and
1993, respectively, was used in the calculation. As of December 31, 1995,
there were no dilutive securities other than the common stock equivalents
used in computing primary earnings per share.

New Accounting Pronouncements - The Company did not adopt SFAS No. 123,
Accounting for Stock-Based Compensation, which establishes financial
accounting and reporting standards for stock-based employee compensation
plans, including stock options, stock purchase plans and restricted stock
appreciation rights. SFAS No. 123 defines and encourages the use of the
fair value method of accounting for employee stock-based compensation. The
Company presently accounts for stock options in accordance with the
standards established by Accounting Principles Board Opinion no. 25 ("APB
No. 25"). The Company has not determined whether it will adopt the method
of accounting prescribed in SFAS No. 123 or continue to use the method of

F-62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

accounting prescribed in APB No. 25. SFAS No. 123 is effective for
transactions entered into in fiscal years that begin after December 15,
1995.

Reclassifications - Certain reclassifications have been made to conform
prior years' financial statements to the current year presentation.

2. INVESTMENTS AND INVESTMENT INCOME

The following table summarizes investments in available-for-sale and
held-to-maturity securities at the indicated dates:

December 31, 1995
---------------------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gain Loss Fair
Value
(in thousands)

Available-for-sale securities:
Bonds:
United States Government and
government agencies and authorities............. $ 138,036 $ 5,208 $ 203 $ 143,041
Public utilities...................................... 7,925 545 -- 8,470
Investment grade corporate bonds...................... 271,704 17,208 634 288,278
High-yield corporate bonds............................ 42,112 3,195 17 45,290
------------- ------------- ------------- -------------
Total available-for-sale.................................... $ 459,777 $ 26,156 $ 854 $ 485,079
============= ============= ============= =============

Held-to-maturity securities:
Bonds:
United States Government and
government agencies and authorities............. $ 2,522 $ 69 $ -- $ 2,591
Public utilities......................................
Investment grade corporate bonds...................... 1,050 21 1 1,070
High-yield corporate bonds............................
Preferred stock............................................. 8,200 -- 77 8,123
------------- ------------- ------------- -------------
Total held-to-maturity...................................... $ 11,772 $ 90 $ 78 $ 11,784
============= ============= ============= =============

F-63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 1994
--------------------------------------------------------
Amortized Unrealized Unrealized Estimated
Cost Gain Loss Fair
Value
(in thousands)

Available-for-sale securities:
Bonds:
United States Government and
government agencies and authorities.................... $ 85,226 $ 125 $ 6,120 $ 79,231
Public utilities............................................. 39,588 260 2,762 37,086
Investment grade corporate bonds............................. 132,763 2,888 5,370 130,281
High-yield corporate bonds................................... 44,764 367 1942 43,189
------------ ------------ ------------ -----------
Total available-for-sale........................................... $ 302,341 $ 3,640 $ 16,194 $ 289,787
============ ============ ============ ===========
Held-to-maturity securities:
Bonds:
United States Government and
government agencies and authorities.................... $ 58,136 $ 42 $ 5,775 $ 52,403
Public utilities............................................. 10,579 4 797 9,786
Investment grade corporate bonds............................. 112,791 1,306 8,598 105,499
High-yield corporate bonds................................... 1,997 9 144 1,862
Preferred stock.................................................... 7,333 -- -- 7,333
------------ ------------ ------------ -----------

Total held-to-maturity............................................. $ 190,836 $ 1,361 $ 15,314 $ 176,883
============ ============ ============ ===========

F-64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The cost and fair value by maturity date for investment securities is as
follows:

1995
-------------------------------------
Amortized Estimated
Cost Fair
Value
(in thousands)
Available-for-sale
1996.................................... $ 3,458 $ 3,529
1997 - 2001............................. 153,088 164,458
2002 - 2006............................. 270,779 283,673
After 2006.............................. 32,452 33,419
---------------- -----------------
$ 459,777 $ 485,079
================ =================

Held-to-maturity
1996..................................... $ 1,899 $ 1,908
1997 - 2001.............................. 2,773 2,372
2002 - 2006.............................. 3,600 4,004
After 2006............................... 3,500 3,500
---------------- -----------------
$ 11,772 $ 11,784
================ =================

F-65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The Company defines high-yield securities as those corporate debt
obligations rated below investment grade by independent bond rating
agencies or, if unrated, those that meet objective criteria developed by
the Company. Management believes that when carefully selected, high-yield
securities can provide a return that adequately compensates the Company for
the additional credit and liquidity risk that characterize such
investments. The ultimate collection of principal and timely receipt of
interest is dependent upon the issuer attaining improved operating results,
selling assets or obtaining additional financing. Generally, estimates of
market value are based on an evaluation of appropriate factors such as
institution-size trading in similar securities, yield, credit quality,
coupon rate, maturity, type of issue and other market data. The market
value of high- yield securities and the secondary market for high-yield
securities may be volatile because these securities are affected by
fundamental factors in addition to interest rate levels. Probable losses
are recognized in the period they occur based upon a specific review of the
high-yield securities portfolio and other factors.

Under the terms of certain high-yield securities, the payment of all or a
portion of current interest is deferred until periods later than the period
in which the interest is earned by the Company. The Company recognizes such
interest income until future cash receipts are not probable.

Real estate investments of $-0- and $3,230,000 for 1995 and 1994,
respectively, consist of investments in a manufactured home community. As
part of a planned divestiture strategy, the Company sold one property in
October 1992, three on January 22, 1993, one on May 27, 1993 and one on
June 29, 1995. In addition, the Company gave up one property in a
foreclosure proceeding during 1993 which resulted in a loss of $3.8
million. In connection with the sales occurring in 1993 and 1995, the
Company received five mortgage loans on these properties for $5.9 million.
Interest rates on the mortgages range from 7.5% to 9.25% and the mortgages
are due in varying installments over the next fifteen years.

The following table summarizes investment income for all securities for the
periods indicated:

Year Ended December 31,
------------------------------------
1995 1994 1993
(In thousands)

United States Government Bonds............ $ 11,678 $ 11,578 $ 12,512
Other Bonds............................... 28,492 29,053 37,141
Cash on deposit and short-term
investments............................. 1,221 1,284 1,857
Common and preferred stock................ 674 773 837
Real estate and mortgages................. 1,140 570 823
---------- ----------- -----------
43,205 43,258 53,170

Investment expense........................ (133) (132) (164)
---------- ----------- -----------

Net investment income..................... $ 43,072 $ 43,126 $ 53,006
========== =========== ===========

At December 31, 1995 and 1994, approximately $3.7 million was on deposit
with state regulatory authorities for policyholder protection.

F-66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Cost of marketable equity securities was $1.3 million and $800,000 in 1995
and 1994, respectively.

Operating data concerning sales of securities is as follows:

Year Ended December 31,
-----------------------------------------------
1995 1994 1993
(in thousands)

Proceeds from sale of available-for-sale securities................................. $346,670 $214,339 --
Proceeds from sales of held-to-maturity securities.................................. 7,804 -- --
Proceeds from sales of investment securities........................................ -- -- 651,380
Gross realized gains from sales of available-for-sale securities.................... 5,997 2,946 --
Gross realized losses from sales of available-for-sale securities................... 3,600 454 --
Gross realized losses from sales of held-to-maturity securities..................... 39 -- --
Gross realized gains from sales of investment securities............................ -- -- 26,001
Gross realized losses from sales of investment securities........................... -- -- 852

Realized losses recognized for impairment of real estate investments were
$-0-, $-0- and $3,322,000 in 1995, 1994 and 1993, respectively. There were
no realized losses recognized for impairment of high-yield corporate bonds
in any of the last three years.

3. OTHER ASSETS

Other assets consist of the following:

December 31,
--------------------
1995 1994
(in thousands)

Property and equipment, at cost:
Land and improvements .................................. $ 715 $ 715
Building and improvements .............................. 2,731 2,731
Furniture and equipment ................................ 1,200 1,245
------- -------
4,646 4,691
Less accumulated depreciation .......................... (1,891) (1,787)
------- -------
2,755 2,904
Deferred taxes ......................................... 1,384
Due from reinsurer ..................................... 2,044 1,857
Income tax recoverable ................................. 353 1,375
Other assets ........................................... 2,066 2,178
------- -------
$ 7,218 $ 9,698
======= =======

F-67

4. REINSURANCE

Effective June 30, 1993, Financial Benefit Life entered into a reinsurance
arrangement with Philadelphia Life Insurance Company ("Philadelphia Life")
under which Financial Benefit Life ceded $137.4 million of statutory
annuity reserves on 6,000 policies to Philadelphia Life on a coinsurance
basis. Under the arrangement, Philadelphia Life had the right to assume the
policies (assumption reinsurance - full legal arrangement) through
notification of Financial Benefit Life until January 1, 1995. No such
notification was received and, thus, Financial Benefit Life will continue
to administer the policies and will receive a fee for these services in
addition to a share of future profits exceeding $3.5 million. The account
value of GAAP reserves relating to this block of business totaled $154.6
million and the deferred acquisition costs ("DAC") totaled $21.5 million as
of June 30, 1993. Since the majority of the policies ceded under this
arrangement are considered investment products, investment accounting was
applied as opposed to reinsurance accounting. In that regard, the amount of
cash transferred to Philadelphia Life was accounted for as an investment
asset - future policy benefits recoverable from reinsurer and the
policyholder balances continue to remain as liabilities of the Company and
are included in future policy benefits in the accompanying financial
statements. Deferred acquisition costs were reduced by the difference
between (a) the DAC on the block of business of $21.5 million and (b) the
difference between the statutory reserves and the related policyholder
liabilities. The 1993 net loss from the transfer was approximately $7
million and consisted of (a) the DAC write-off discussed above of
approximately $4.3 million and (b) the difference between cash transferred
and statutory reserves of approximately $2.7 million. The account value of
this business was $114.8 million and $133.9 million as of December 31, 1995
and 1994, respectively. In addition, the DAC was $7.3 million and $10.8
million as of December 31, 1995 and 1994, respectively.

5. LONG-TERM DEBT

December 31,
---------------------------
1995 1994

Revolving note ................................. $15,500,000 $16,000,000
=========== ===========

The principal required to be paid for the next five years is as follows:

1996............................................ -- $ 2,000,000
1997............................................ -- 3,000,000
1998............................................ -- 4,000,000
1999............................................ -- 6,500,000

Interest paid on all outstanding debt was $1,532,659 in 1995, $1,406,075 in
1994 and $1,494,841 in 1993.

Revolving Note

On June 27, 1994, the Company entered into a revolving credit agreement
with Shawmut Bank (the "Bank") of Hartford, Connecticut whereby the Bank
provided $16 million of financing to the Company. The proceeds were used to
retire both the Southwestern Life Corporation term loan, the Southwestern
Life Insurance Company subordinated convertible debenture and provide $1.0

F-68

million towards a $2.0 million charge for early extinguishment of the
convertible debt. The revolving credit agreement with the Bank is
collateralized by the common stock of FBL.

The term of the Bank credit agreement is 5.5 years with interest indexed to
either the prime rate or London Interbank Offered Rate ("LIBOR") plus a
specified number of basis points based on the A.M. Best Company rating of
Financial Benefit Life. The agreement also provides for specific reductions
in principal each year.

In connection with the Bank credit agreement, the Company granted
detachable warrants to purchase 75,000 shares of its Class A Common Stock
at $3.25 per share. The warrants expire June 30, 2001.

In addition to general covenants which are typical in such financing, the
Company has agreed to certain levels of consolidated net worth, statutory
capital and surplus of Financial Benefit Life, GAAP earnings and that
interest expense and fixed charges meet certain coverage ratios each
quarter. As of December 31, 1995, the Company failed to meet covenants
regarding meeting minimum GAAP earnings and minimum statutory earnings. The
Company obtained a written waiver in March 1996 from the Bank waiving such
noncompliance. Should the merger discussed in note 12 be consummated the
Company would again be in violation of the Agreement. At that point either
the debt would be repaid or an additional waiver would be necessary.

Senior Term Note and Loan

On February 18, 1992, the Company executed a $5 million term note with
Wabash Life Insurance Company, a subsidiary of Life Partners Group, which
was paid in full on November 17, 1993. The note required interest, to be
paid quarterly, at the lesser of the prime rate plus 1.5% or the maximum
non-usurious rate permitted by law. Principal payments were not required
until the date of maturity, February 18, 1994.

In connection with the note, the Company granted five and ten-year
detachable warrants to purchase 1,000,000 shares of its Class A Common
Stock, exercisable at $1.00 and $.75 per share, respectively. The warrants
became exercisable in periodic increments over the term of the note and as
of the prepayment date, 500,000 (375,000 - $.75, 125,000 - $1.00) warrants
were granted. All rights to the remaining 500,000 were extinguished.

On November 16, 1993, the Company executed a $5 million term loan with
Southwestern Life Corporation (formerly I.C.H. Corporation) which was paid
in full on June 27, 1994. The proceeds were used to prepay the term note
due Wabash Life Insurance Company. Quarterly amortizing payments of
$250,000 were required until maturity. Interest accrued at the prime rate
plus 2.0%. For collateral, the Company has pledged the stock of Financial
Benefit Life. The proceeds for the loan payment were received as part of
the Shawmut Bank refinancing.

Subordinated Convertible Debenture

On October 28, 1992, the Company issued a $10 million convertible
subordinated debenture to Southwestern Life Insurance company ("SWL") of
Dallas, Texas, a subsidiary of Southwestern Life Corporation, pursuant to a
debenture Purchase Agreement dated October 27, 1992. The debenture was also
paid in full on June 27, 1994, as part of the Shawmut Bank refinancing.
Under the terms of the Debenture Purchase Agreement, SWL purchased a
ten-year 10% debenture convertible into Class A Common Stock of the Company

F-69

at a price of $2.50 per share, with annual increases in the conversion
price beginning in 1993 subject to anti-dilution provisions. The debenture
required quarterly interest payments with the principal balance payable
October 2002. In addition, under a Stockholders' Agreement among the
Company, SWL and certain of the Company's stockholders, SWL was granted an
option, exercisable after conversion of the debenture, to enable it to
acquire, in the aggregate, 51% of all of the Company's common stock on a
fully diluted basis. The Company had reserved sufficient shares of unissued
common stock for the potential conversion and/or acquisition as discussed
above.

Under the terms of a modification agreement signed on April 22, 1994, the
Company was allowed, for cash consideration of $2.0 million, to accelerate
payment of both the subordinated convertible debenture and also the senior
term loan. The payment extinguished conversion rights to approximately 4.2
million shares of the Company's Class A Common Stock as well as eliminated
an option to purchase a controlling interest of the Company. The $2.0
million payment is recorded as an extraordinary charge net of the
applicable income tax benefit of $200,000 in the accompanying 1994
consolidated statement of operations.

6. SHAREHOLDERS' EQUITY

a. Financial Benefit Life's shareholders' equity and results of operations
reported on a statutory basis to state regulatory authorities and
reported on a GAAP basis are as follows:

Statutory GAAP
(In thousands)

Shareholders' equity:

December 31, 1995 ........................................ $33,476 $55,815
(Unaudited)

December 31, 1994 ........................................ 30,256 43,181

Net income for period ended:

December 31, 1995 ........................................ $ 3,355 $ 3,737
(Unaudited)

December 31, 1994 ........................................ 1,674 2,918

December 31, 1993 ........................................ 3,502 9,313

The principal differences between GAAP and statutory accounting are as
follows: (a) acquisition costs, such as commissions and other costs in
connection with acquiring new business, are charged to current
operations as incurred for statutory purposes; (b) premium deposits for
annuity policies are recognized as revenue for statutory purposes but
are excluded under SFAS No. 97 for GAAP; (c) policy reserves are based
on statutory assumptions for statutory purposes where as under SFAS No.
97, policy reserves reflect account value for GAAP; (d) deferred income
taxes are not provided for differences in reporting policy reserves, and
other material book-tax timing differences for statutory purposes; (e)
the interest maintenance reserve and the asset valuation reserve are
reported as

F-70

liabilities for statutory purposes; (f) certain assets designated as
"nonadmitted assets" (principally furniture and equipment) have been
charged to surplus for statutory purposes; (g) for statutory purposes,
reinsurance arrangements for investment and insurance products are
recorded using reinsurance accounting and all balances are recorded net
of such reinsurance; and (h) for statutory purposes, there is no
requirement to classify investment securities as available-for-sale or
held-to-maturity and, therefore, all bonds are recorded at amortized
cost.

Florida's insurance statutes and regulations restrict the flow of funds,
including dividends, from Financial Benefit Life to the Company. Florida
insurance regulations limit the aggregate dividends that Florida
domiciled life insurance companies, including Financial Benefit Life,
can pay without prior regulatory approval to the greater of its
statutory net operating profits and realized net operating profits for
the preceding year (provided there is available surplus from net
operating profits and net capital gains) or 10% of its available and
accumulated statutory surplus derived from net operating profits and net
realized capital gains. After payment of a dividend, Financial Benefit
Life must have 115% of required statutory surplus. Aggregate dividends
exceeding these mandated limits require special permission from the
Florida Insurance Department. The Company does not intend to rely on
dividends in excess of those not requiring special permission.
Approximately $3.4 million is available in 1996 for the payment of
dividends by Financial Benefit Life without regulatory approval.

b. The Class A and Class B Common Stock are identical, except that (a) the
holders of the Class A Common Stock, voting as a class, elect one-third
(or the next lower whole number) of the directors, and the holders of
the Class B Common Stock, voting as a class, elect two-thirds (or the
next higher whole number) of the directors, (b) voting on any amendment
to change the relative rights and preferences of the Class A and Class B
Common Stock are by class and the approval of the majority of each class
is required, and (c) each share of Class B Common Stock is convertible
at the option of the holder into 1.35 shares of Class A Common Stock.
Voting on all other matters is on a one share, one vote basis, without
regard to class.

c. On December 9, 1992, the Board of Directors of the Company declared a 5%
stock dividend on Class A and Class B Common Stock held as of January
19, 1993 paid through Class A shares. This dividend resulted in the
issuance of 278,228 shares of Class A Common Stock on January 31, 1993.
Fractional shares were paid in cash.

d. On January 7, 1994, the Board of Directors of the Company declared a 5%
stock dividend on Class A and Class B Common Stock held as of January
18, 1994 paid through Class A shares. This dividend resulted in the
issuance of 296,677 shares of Class A Common Stock on January 28, 1994.
Fractional shares were paid in cash.

e. On December 8, 1994, the Board of Directors of the Company declared a 5%
stock dividend on Class A and Class B Common Stock held as of January
17, 1995 paid through Class A shares. This dividend resulted in the
issuance of 320,825 shares of Class A Common Stock on January 27, 1995.
Fractional shares were paid in cash.

F-71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

7. EMPLOYEE BENEFIT PLANS AND RETIREMENT PLANS

In June 1988, the Company provided an employment agreement and deferred
compensation plan for its Chief Executive Officer. In June 1990, this plan
was terminated and replaced by a new plan which extended the term by one
year and increased the benefit level.

In March 1991, this plan was amended to provide for a lump sum payment
equal to the present value of vested benefits to a Trust established for
its Chief Executive Officer. The Amendment required the Company to pay
monthly to the Trustees the amount necessary to fund the accrued present
value of vested benefits.

In June 1991 and March 1994, the plan was further amended to provide for
one-year extensions and increased benefit levels. As of December 31, 1994,
the plan was terminated by mutual consent of the parties.

The plan provided that if the employee was terminated after May 31, 1993,
the annual benefit would be determined using 75% of average annual
compensation for a period of 118 months. The plan also provided for reduced
compensation in the event of earlier termination of employment, disability,
death or mutual agreement. Compensation expense under the plan for 1995,
1994 and 1993 was $-0-, $372,000 and $479,000, respectively.

The Company has an Incentive Stock Option Plan for employees, an Equity
Incentive Non-qualified Warrant/Option Program for agents and others, and a
newly adopted Non-qualified Option Plan for agents and others.

The Employee Incentive Stock Option Plan ("Employee Option Plan") covers
800,000 shares of Class A Common Stock and 300,000 shares of Class B Common
Stock adjusted for annual stock dividends. However, at no time shall the
total number of Class A and Class B common shares subject to outstanding
Employee Incentive Stock Options be more than 20% of the total number of
Class A and Class B common shares outstanding, after adjusting the
authorized shares for annual stock dividends.

The Equity Incentive Non-qualified Warrant/Option Program covers 750,000
shares of Class A Common Stock and 150,000 shares of Class B Common Stock
(adjusted for annual stock dividends). Under this plan, officers and
directors of the Company and other key persons were granted warrants and
National Sales Offices, contracted to AIMCOR, were granted non-qualified
options based on premium writings.

Effective June 2, 1994, the Company adopted a new Option Plan covering
150,000 shares of Class A Common Stock (adjusted for annual stock
dividends) under which non-employee directors, certain independent
contractors of the Company, National Marketing Organizations ("NMO") of the
Company, shareholders, officers or employees of NMOs and other key persons
may be eligible to receive grants.

Options and warrants granted under all plans are at 100% of the fair market
value of the shares on the date of grant and are adjusted for stock
dividends. The accompanying table discloses the changes for all plans for
the year.

F-72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Class A Shares Class B Shares
Year Ended Year Ended
December 31, December 31,
--------------------------- ---------------------------
1995 1994 1995 1994

Options and warrants outstanding, beginning of year ............. 1,456,601 1,570,031 445,130 445,130
Granted ......................................................... 12,500 -- -- --
Increased by dividends .......................................... -- 90,558 -- --
Exercised ....................................................... (53,447) (190,798) -- --
Cancelled or expired ............................................ (4,823) (13,190) -- --
---------- ---------- ----------- -----------
Options and warrants outstanding at end of year ................. 1,410,831 1,456,601 445,130 445,130
========== ========== =========== ===========
Outstanding options and warrants exercisable at end of year ..... 1,143,324 896,974 339,796 251,463
========== ========== =========== ===========
Option and warrant prices per share:
Outstanding, end of year ................................. $.59-$3.10 $.59-$3.10 $1.00-$4.50 $1.00-$4.50
========== ========== =========== ===========

The plans, as amended, provide that options granted shall be granted with
respect to the Class A Common Stock except that in the cases of grants made
to officers of the Company with more than four years of continuous service
as such at the time of the grant, options may be granted with respect to
the Class B Common Stock.

During the second quarter of 1989, the Company established an Employee
Stock Ownership Plan ("ESOP"). The ESOP purchased 625,000 shares of Class A
Common Stock from the Company for $1,954,000. To purchase the shares, the
ESOP borrowed the funds from the Company. The loan bears interest at the
prime rate and requires equal quarterly principal payments over the
seven-year term. The revenues of the ESOP will primarily consist of
contributions by the Company of up to 25% of eligible employees' salaries.
In 1995, 1994 and 1993, the Company incurred $385,000, $354,000 and
$386,000, respectively, of expense in connection with this plan.

During 1993, the Company's Board of Directors approved a Director's
Severance Plan for the members of the Board of Directors. The Plan provides
a benefit equal to 50% of the average annual attendance fees (including
Board and all committees) earned in the last three years. The benefit
continues for the same number of years that the member served on the Board.
A liability in the amount of $200,000, representing the present value of
future benefits, has been established as of December 31, 1995.

In connection with the planned merger with AmVestors Financial Corporation
("AmVestors") (see Note 12), the Company has a contingent liability in
terms of a severance plan for its employees which provides a cash benefit
on termination, based on four weeks plus two additional weeks for every
year of service. Management does not consider the amount to be material.

8. INCOME TAX

The Company and its subsidiaries file a consolidated income tax return.
Deferred income taxes, which are included in other assets, are the result
of temporary differences between the amounts reported for financial

F-73

statement purposes and amounts per the tax return. The differences
principally relate to:

1. The use of statutory formulas for computing future policy benefits on
the tax return which differ from the computations for financial
reporting purposes.

2. Non-life operating loss carry forwards which are limited in their usage
against life Company taxable income.

3. Deferred acquisition costs which are substantially expensed for tax
purposes and capitalized and amortized for financial statement purposes.

4. Losses on investments are recorded for financial statement purposes when
an other than temporary decline in value occurs but are not recorded for
tax purposes until the investment is sold.

5. Accrual of market discount is recorded currently in the financial
statements but deferred for tax purposes until the bond is sold.

6. Unrealized appreciation or depreciation on available-for-sale securities
is recorded through stockholders' equity but is not recorded for tax
purposes until the gains or losses are realized through the sale of the
securities.

Year Ended
December 31,
--------------------------------------
1995 1994 1993
(in thousands)

Current................................ $ 2,039 $ (836) $ 4,607
Deferred............................... (356) 1,361 247
------------- --------- ----------
$ 1,683 $ 525 $ 4,854
============= ========= ==========

The following are the components of the deferred tax provision:

Year Ended
December 31,
--------------------------------------
1995 1994 1993
(in thousands)

Deferred acquisition cost.............. $ (2,766) $ (698) $ (8,884)
Future policy benefits................. 3,015 1,928 9,590
Other.................................. (605) 131 (459)
------------- --------- ----------
$ (356) $ 1,361 $ 247
============= ========= ==========

F-74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Year Ended
December 31,
--------------------------------------
1995 1994 1993
(in thousands)

Expected tax at statutory rate......... $ 2,136 $ 423 $ 4,750
Tax benefit of temporary differences
not previously fully tax effected.... (83) (71) (427)
Limitation on deductibility of capital
and non-life losses.................. (283) 759 105
Settlement of tax examination
contingency.......................... (245) (623) --
State tax and other.................... 158 37 426
------------- --------- ----------
$ 1,683 $ 525 $ 4,854
============= ========= ==========

At December 31, the net deferred tax asset (liability) consisted of the
following:

1995 1994

Deferred acquisition costs ........................... $(21,161) $(19,990)
Future policy benefits ............................... 21,792 20,805
Unrealized capital (gains) losses .................... (3,396) 1,904
Other ................................................ (419) (580)
-------- --------
Net deferred tax assets .............................. (3,184) 2,139
Less valuation allowance ............................. 376 755
-------- --------
Net .................................................. $ (3,560) $ 1,384
======== ========

Financial Benefit Life has no net realized capital loss carry forwards
available to offset future capital gains for financial statement purposes.

A valuation allowance has been established to the extent future reversals
of existing deductible temporary differences may not generate a tax
benefit.

Income tax paid (refunded) was $638,000 ($1,683,000) and $6,175,000 in
1995, 1994 and 1993, respectively.

9. REGULATORY MATTERS

Financial Benefit Life is subject to regulation by the Insurance Department
of the State of Florida (the "Department") and other states in which it is
admitted. Financial Benefit Life is required to meet minimum statutory
capital requirements imposed by the Department in order to operate without
restrictions. As of December 31, 1995 and 1994, the minimum statutory
capital requirements are the greater of $1.5 million or 4% of statutory
liabilities (approximately $19.8 million and $20.0 million, respectively).
Financial Benefit Life's statutory capital, as reported in its Annual
Statement to the Department as of December 31, 1995 and 1994, was $33.5

F-75

million (unaudited) and $30.3 million, respectively. Statutory capital does
not include the asset valuation reserve or the interest maintenance
reserve.

During March and August 1992, the Department notified Financial Benefit
Life that certain investments in limited partnerships of affiliates
exceeded limitations established by Florida Statutes and, as a result,
Financial Benefit Life did not meet minimum capital requirements. On
December 21, 1992, the Department issued an Order to Show Cause alleging
certain technical violations of Florida Statutes relating to the financial
condition of Financial Benefit Life as of September 30, 1992, due to its
investments in limited partnerships with its affiliates.

On January 8, 1993, the Department and Financial Benefit Life agreed to a
Consent Order in which the Department recognized certain actions, past and
future, taken by Financial Benefit Life to meet minimum capital
requirements. Past actions included the Company's issuance of a $10 million
convertible subordinated debenture (see Note 5) and contribution of $7
million to Financial Benefit Life as additional surplus. Future actions
included divestiture of these limited partnerships and/or dissolution and
conversion to direct investments in real estate by March 31, 1993.
Financial Benefit Life sold its interest in four of the partnerships as of
March 31, 1993, sold another on May 27, 1993, and dissolved and converted
the remaining two partnerships to direct investments in real estate.
Management believes Financial Benefit Life met all the requirements of the
Consent Order, which specifically recognized that in consideration of these
events, Financial Benefit Life was in compliance as of November 30, 1992,
with the minimum capital and surplus requirement.

As discussed in Note 4, the Company entered into a reinsurance arrangement
with Philadelphia Life. For statutory purposes, the Company has taken
reserve credit of approximately $107 million and $123 million in its 1995
and 1994 Annual Statement, respectively, filed with the Department of
Insurance. The Company has taken reserve credit for this arrangement since
management believes that such arrangement qualifies for credit under
Florida Statute 624.810 and related Florida Regulation 4-144, thereby
meeting all transfer of risk requirements. The primary effects in 1995,
1994 and 1993, respectively, for statutory purposes of this arrangement was
(a) to recognize liability gains of approximately $12 million, net of tax
in 1993, and (b) to reduce policyholder liabilities by approximately $107
million, $123 million and $134 million and therefore reduce the amount of
surplus that otherwise would have been required by approximately $4.3
million, $4.9 million and $5.3 million.

Financial Benefit Life is required to disclose Risk Based Capital ("RBC")
in its statutory filing with the Department. The RBC calculation serves as
a benchmark for the regulation of Financial Benefit Life's solvency by
state insurance regulators. RBC provides an elastic means of setting the
capital standards for insurance companies to support their overall business
operations in light of their size and risk profile. The RBC formulas focus
on four general types of risk: (1) asset or default risk: (2)insurance or
underwriting risk; (3) interest rate risk (asset/liability matching); and
(4) business risk.

Financial Benefit Life's total adjusted capital at December 31, 1995 of
$42.4 million (surplus and asset valuation reserve) exceeded all the RBC
levels. The required RBC levels were as follows: Company action level RBC
of $17.1 million; Regulatory action level RBC of $12.8 million; Authorized
control level RBC of $8.5 million; and Mandatory control level RBC of $5.9
million. The Company anticipates continuing to meet RBC requirements in
1996.

F-76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair values of the Company's financial instruments are as
follows:

1995 1994
------------------ ------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
(in thousands)

Financial assets:
Cash and short-term investments............................................................. $ 52,860 $ 52,860 $ 27,462 $ 27,462
Available-for-sale securities .............................................................. 485,079 485,079 289,787 289,787
Held-to-maturity securities ................................................................ 11,772 11,784 190,689 176,736
Equity securities .......................................................................... 792 792 800 800
Mortgage loans ............................................................................. 5,898 5,898 3,903 3,903
Future policy benefits recoverable from reinsurer........................................... 107,507 -- 123,076 --

Financial liabilities:
Annuity contracts .......................................................................... 649,603 587,468 677,775 606,228
Revolving note ............................................................................. 15,500 15,500 16,000 16,000

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate fair values.

Cash and Short-Term Investments - The carrying amount is a reasonable
estimate of fair value.

Investment and Equity Securities - Fair value equals quoted market price,
if available. If a quoted market price is not available, fair values are
based on quotations obtained from an independent source that provides a
pricing service (see Note 2).

Annuity Contracts - Certain of the Company's long-duration single premium
deferred annuity products, not subject to significant mortality risk, are
considered investment contracts. Fair value is estimated based on the cash
surrender value of the contracts.

Long-Term Debt - Rates currently available to the Company for debt with
similar terms and remaining maturities, with considerations for warrants,
prepayment and convertible features, are used to estimate fair value of
existing debt.

Mortgage Loans - Since all mortgage loans were made in 1993 and 1995 and
were made in connection with real estate disposals, the carrying amount is
a reasonable estimate of fair value.

Future Policy Benefits Recoverable - As this instrument cannot be exchanged
in a current transaction, it was deemed impractical to estimate the fair
value.

F-77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

11. INVESTMENTS OVER TEN PERCENT

At December 31, 1995, direct investments in other than bonds and notes of
the United States Government, or of a United States Government Agency or
authority, which exceeded ten percent of total stockholders' equity
consisted of the following:

Amortized Cost Amortized Cost
Name (in thousands) Name (in thousands)

Associates Corp. $5,420 Kemper $4,743
Burlington Northern 4,997 Marriott International 4,956
Cigna 5,000 MetLife Insurance Co. 4,998
Chase 4,997 Nabisco 4,996
Chase 1994-1A4 6,581 Norwest Corp. 4,962
Citicorp 8,974 Price/Costco Inc. 4,940
DLJ Mortgage Acceptance Corp. 4,860 Prudential Ins. Co. 5,087
DLJ Mortgage Acceptance Corp. 5,000 Reebok 5,100
Dayton Hudson Corp. 4,996 Ryder Systems 5,967
Deere (John) Capital Corp. 6,163 Sears Roebuck & Co. 4,470
FMC Corp. 5,477 Secured Finance Inc. 5,190
First Chicago 4,980 SASI 95-B A3 10,814
First Union 5,064 Spartan Holdings, Inc. 5,133
Ford Motor Credit 5,981 Telecommunications Inc. 5,044
General Motors Corp. 7,000 USX Corp. 4,742
Georgia Pacific Corp. 5,000 UNUM Corp. 4,857
Goldman Sachs 144A 5,883 U.S. West Cap. Fndg. 5,000
ITT Destinations 5,991

At December 31, 1994, direct investments in other than bonds and notes of
the United States Government, or of a United States Government Agency or
authority, which exceeded ten percent or total stockholders' equity
consisted of the following:

Amortized Cost Amortized Cost
Name (in thousands) Name (in thousands)

Aetna Life & Casualty $3,497 General Motors Corp. $7,000
American Life $2.32 Cum.Pref. 3,000 Georgia Pacific Corp. 5,000
B.H.P. Co. Ltd. 7,965 GTE Corp. 2,991
Bank of Scotland 2,997 Home Mac Mtg. Secs. 87-3D 3,424
Broad, Inc. 3,000 Illinois Power Co. 4,970
Capstead 1994 - H2 15A3 3,534 John Hancock 5,952
Chase 1994 - 1A4 4,187 Long Island Lighting 4,984
Dayton Hudson Corp. 4,494 Louisiana Power and Light 10,000
Deere (John) Capital Corp. 5,870 Mass Mutual Life 4,978
Detroit Edison 4,996 Morgan Stanley Group 4,984
Dial Corp. 5,000 Newscorp 5,037
Dillard Dept. Stores 2,992 Paramount Communications 4,936
DLJ Cumulative Exch. Pfd. 3,000 Province of Quebec 9,949
DLJ Mortgage Accep. Corp. 3,000 Scott Paper Notes 2,998
DLJ Mortgage Accep. Corp. 3,954 Secured Finance Inc. 3,693
Equitable Co.'s Inc. 4,975 Spartan Holdings Inc. 5,207
First Chicago Corp. 3,991 Texas Utilities Elec. Co. 4,991
FMC Corp. 4,478 Time Warner Entertainment 3,962
GATC 2,996 USX Corp. 8,235

F-78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

12. SUBSEQUENT EVENTS

The Company announced on September 8, 1995 a proposed merger with
AmVestors. On March 4, 1996, the Company and AmVestors jointly set March 5,
1996 as the record date for their respective Special Meetings of
Stockholders to be held on Monday, April 8, 1996. The purpose of the
Special Meetings is to seek stockholder approval of the merger of the
Company with and into AmVestors.

F-79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

13. CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY

Condensed Balance Sheets - Parent Company

Year Ended
December 31,
-------------------------------
1995 1994 1993
(in thousands)

ASSETS
Cash............................................................................................... $ 143 $ 93 $ 19
Investment in life insurance subsidiary ........................................................... 55,815 43,181 44,636
Investments in other subsidiaries ................................................................. 1,726 542 846
Property and equipment (net) ...................................................................... 32 16 25
Income tax recoverable and deferred taxes ......................................................... 4,024 2,722 1,732
Other assets ...................................................................................... 387 502 482
-------- -------- --------
Total assets....................................................................................... $ 62,127 $ 47,056 $ 47,740
======== ======== ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Revolving note.............................................................................. $ 15,500 $ 16,000 $ --
Senior term loan ........................................................................... -- -- 5,000
Subordinated convertible debenture ......................................................... -- -- 10,000
Accounts payable ........................................................................... 767 231 314
Accrued interest payable ................................................................... -- -- 214
Accounts payable to subsidiaries ........................................................... 4,823 3,549 2,736
-------- -------- --------
Total liabilities ................................................................................. 21,090 19,780 18,264
-------- -------- --------
Shareholders' equity:
Class A Common Stock ....................................................................... 70 68 60
Class B Common Stock ....................................................................... 4 5 5
Additional paid-in capital ................................................................. 22,411 22,313 20,319
Retained earnings .......................................................................... 14,524 9,923 11,078
Net unrealized appreciation (depreciation) on securities ................................... 5,524 (3,378) --
Subscriptions receivable - ESOP ............................................................ -- (159) (490)
-------- -------- --------
42,533 28,772 30,972

Less treasury stock, at cost ...................................................................... (1,496) (1,496) (1,496)
-------- -------- --------
Total shareholders' equity ........................................................................ 41,037 27,276 29,476
-------- -------- --------
Total liabilities and shareholders' equity......................................................... $ 62,127 $ 47,056 $ 47,740
======== ======== ========

F-80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Statements of Income - Parent Company

Year Ended
December 31,
----------------------------
1995 1994 1993
(in thousands)

Net interest income................................................................................... $ 20 $ 20 --
Dividend income from subsidiaries .................................................................... 625 1,706 $ 1,440
Other income ......................................................................................... -- -- 60
------- ------- -------
Total income ............................................................................ 645 1,726 1,500
------- ------- -------
General expenses ..................................................................................... 773 638 462
Interest expense ..................................................................................... 1,522 1,399 1,476
------- ------- -------
Total expenses .......................................................................... 2,295 2,037 1,938
------- ------- -------
Income (loss) from operations before income taxes and extraordinary charge............................ (1,650) (311) (438)
Provision for income (taxes) benefit ................................................................. 1,484 1,225 1,011
Equity in undistributed net income of subsidiaries.................................................... 4,767 1,612 8,545
------- ------- -------
Income before extraordinary charge ................................................................... 4,601 2,526 9,118
Extraordinary charge on extinguishment of debt, net of tax of approximately $200,000.................. -- (1,800) --
------- ------- -------
Net income............................................................................................ $ 4,601 $ 726 $ 9,118
======= ======= =======

F-81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Condensed Statement of Cash Flows - Parent Company

Year Ended
December 31,
-------------------------------
1995 1994 1993
(in thousands)

Operating Activities:
Net Income.................................................................................. $ 4,601 $ 726 $ 9,118
Adjustment to reconcile net income to net cash provided by operating activities:
Equity in undistributed net of subsidiaries ................................................ (4,767) (1,612) (8,545)
Extraordinary charge on extinguishment of debt, net of the benefit ......................... -- 1,800 --
Depreciation and amortization .............................................................. 10 8 15
Change in other assets and other liabilities, net .......................................... 623 (304) (1,914)
Other, net ................................................................................. 500
-------- -------- --------
Net cash provided by (used in) operating activities ........................................ 467 618 (826)
-------- -------- --------
Financing activities:
Borrowings under long-term debt ............................................................ -- 16,000 5,000
Principal payments under long-term debt .................................................... (500) (15,000) (5,000)
Payment to extinguish debt ................................................................. -- (2,000) --
Exercise of stock options .................................................................. 99 125 44
Subscriptions receivable - ESOP ............................................................ 159 331 345
-------- -------- --------
Net cash provided by (used in) financing activities .................................. (242) (544) 389
-------- -------- --------
Cash flows from investing activities:
Acquisition property ....................................................................... (26) -- (15)
Investments in subsidiaries ................................................................ (149) -- --
-------- -------- --------
Net cash provided by (used in) investing activities .................................. (175) -- (15)
-------- -------- --------

Net change in cash ................................................................................ 50 74 (452)

Cash, beginning of year ........................................................................... 93 19 471
-------- -------- --------
Cash, end of year.................................................................................. $ 143 $ 93 $ 19
======== ======== ========

F-82

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM BALANCE SHEETS

March 31, December 31,
1996 1995
----------- ------------
(unaudited)
(in thousands)

ASSETS

INVESTMENTS:
Fixed maturities available for sale at fair value ............................................. $ 508,436 $ 485,079
Fixed maturities held to maturity at amortized cost (market
value $11,257 at March 31, 1996; $11,784 at December 31, 1995 ............................... 11,772 11,772
Equity securities are market, cost $1,300 at March 31, 1996
and $1,300 at December 31, 1995 ............................................................. 792 792
Mortgage loans on real estate, at amortized cost .............................................. 5,896 5,898
--------- ---------
Total Investments ....................................................................... 526,896 503,541

CASH AND CASH EQUIVALENTS ............................................................................ 13,515 52,860
ACCRUED INVESTMENT INCOME ............................................................................ 7,373 5,742
DEFERRED POLICY ACQUISITION COSTS .................................................................... 46,150 43,077
FUTURE POLICY BENEFITS RECOVERABLE FROM REINSURER .................................................... 111,166 107,507
OTHER ASSETS ......................................................................................... 6,481 7,218
--------- ---------
TOTAL ASSETS .................................................................................. $ 711,581 $ 719,945
========= =========
LIABILITIES

FUTURE POLICY BENEFITS AND CLAIMS ACCRUAL ............................................................ $ 650,174 $ 653,612
OTHER LIABILITIES AND ACCRUED EXPENSES ............................................................... 9,313 9,796
LONG-TERM DEBT ....................................................................................... 15,500 15,500
--------- ---------
TOTAL LIABILITIES ............................................................................. 674,987 678,908

SHAREHOLDERS' EQUITY
Class A Common Stock $.01 par value:
Authorized 25,000,000 shares:Issued 7,047,155 shares in 1996 and 6,958,192
shares in 1995; outstanding 6,560,530 in 1996 and 6,471,567 in 1995 ......................... 70 70
Class B Common Stock $.01 par value:
Authorized 1,750,000 shares:Issued 462,015 shares in 1996 and 412,115 shares
in 1995; outstanding 373,567 shares in 1996 and 323,667 shares in 1995 ...................... 5 4
Additional paid-in capital ........................................................................... 22,516 22,411
Retained earnings .................................................................................... 14,005 14,524
Net unrealized appreciation (depreciation) on available-for-sale securities net of
deferred policy acquisition costs and taxes ........................................................ 1,494 5,524
Less common stock in treasury, at cost ............................................................... (1,496) (1,496)
--------- ---------
Total shareholder's equity .............................................................. 36,594 41,037
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............................................. $ 711,581 $ 719,945
========= =========
See note to consolidated interim financial statements.

F-83

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS

Three Months Ended
March 31,
-----------------------------
1996 1995
------------ -----------
(Unaudited)
(in thousands except
share data)

REVENUE:
Net investment income .............................................................. $ 9,578 10,894
Realized gains on investments ...................................................... 224 657
Commissions and marketing fees ..................................................... 453 579
Other income ....................................................................... 1,147 1,310
----------- -----------
11,402 13,440
BENEFITS AND EXPENSES:
Increase in future policy benefits ....................................................... 6,517 6,868
General and administrative expenses ...................................................... 2,560 1,055
Payroll and related expenses ............................................................. 481 746
Amortization of deferred acquisition costs ............................................... 2,267 2,492
Interest expense ......................................................................... 353 408
Depreciation and amortization ............................................................ 48 51
----------- -----------
12,226 11,620
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) ............................................... (824) 1,820
INCOME TAX EXPENSE (BENEFIT) .................................................................... (305) 536
----------- -----------
NET INCOME (LOSS) ............................................................................... $ (519) 1,284
=========== ===========
EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT:
Primary:
Weighted Average Shares ............................................................ 8,806,546 8,418,456
Net Income (Loss) .................................................................. (.06) .15
=========== ===========
Fully Diluted:
Weighted Average Shares ............................................................ N/A N/A
Net Income (Loss) .................................................................. N/A N/A
=========== ===========

See note to consolidated interim financial statements.

F-84

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF SHAREHOLDER'S EQUITY
(In thousands except share data)

Net
Unrealized
Appreciation
(Depreciation)
Class A Class B Additional On Available- Subscriptions Cost of Total
Common Common Paid-in Retained for-Sale Receivable- Treasury Shareholders'
Stock Stock Capital Earnings Securities ESOP Stock Equity
------- ------- ---------- -------- -------------- ------------- -------- -------------

Balance, January 1, 1994...... $ 60 5 20,319 11,078 0 (490) (1,496) 29,476
Effect on net unrealized
appreciation on available-
for-sale-securities of
adopting Statement of
Financial Accounting
Standards No. 115........... -- -- -- -- 1,687 -- -- 1,687
Stock dividend of one Class A
Common share for twenty
Class A or B Common shares.. 6 -- 1,875 (1,881) -- -- -- --
Exercise of stock options..... 2 -- 119 -- -- -- -- 121
Net changes in unrealized
appreciation on available-
for-sale securities......... -- -- -- -- (5,065) -- -- (5,065)
Payment received on ESOP
subscriptions .............. -- -- -- -- -- 331 -- 331
Net Income ................... -- -- -- 726 -- -- -- 726
------- ------- ---------- -------- -------------- ------------- -------- -------------
Balance, December 31, 1994.... 68 5 22,313 9,923 (3,378) (159) (1,496) 27,276

Exercise of stock options..... 2 (1) 98 -- -- -- -- 99
Net changes in unrealized
depreciation on available-
for-sale securities ........ -- -- -- -- 8,902 -- -- 8,902
Payment received on ESOP
subscriptions............... -- -- -- -- -- 159 -- 159
Net Income ................... -- -- -- 4,601 -- -- -- 4,601
------- ------- ---------- -------- -------------- ------------- -------- -------------
Balance December 31, 1995 .... 70 4 22,411 14,524 5,524 -- (1,496) 41,037
Exercise of stock options .... -- 1 105 -- -- -- -- 106
Net changes in unrealized
appreciation on available-
for-sale securities ........ -- -- -- -- (4,030) -- -- (4,030)
Net Loss ..................... -- -- -- (519) -- -- -- (519)
------- ------- ---------- -------- -------------- ------------- -------- -------------
Balance, March 31, 1996....... 70 5 22,516 14,005 1,494 -- (1,496) 36,594
======= ======= ========== ======== ============== ============= ======== =============

See note to consolidated interim financial statements.

F-85

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

Three Months Ended
March 31,
1996 1995
--------- ---------
(Unaudited)
(in thousands)

Cash Flow from Operating Activities
Net Income .................................................................................... $ (519) 1,284
Adjustments to reconcile net income to net cash provided by
operating activities
Interest credited to policyholders ...................................................... 6,517 6,868
Realized investment gains, net .......................................................... (224) (657)
Depreciation and amortization ........................................................... 48 51
Change in deferred policy acquisition costs ............................................. 116 417
Change in accrued investment income ..................................................... (1,631) (169)
Change in deferred taxes, net ........................................................... (305) 536
Change in other assets and liabilities, net ............................................. 3,280 1,510
-------- --------
Total Adjustments ....................................................................... 7,801 8,556
-------- --------
Net cash provided by operating activities ............................................... 7,282 9,840
-------- --------
Cash Flows from Investment Activities:
Proceeds from sales of available-for-sale securities........................................... 7,093 68,387
Proceeds from maturities and redemptions of available-for-sale securities and
held-to-maturity securities............................................................. 1,050 1,559
Purchase of available-for-sale securities ..................................................... (48,558) (69,110)
Purchase of property and equipment ............................................................ -- (23)
-------- --------
Net cash provided by (used in) investing activities............................................ (40,415) 813
-------- --------
Cash Flows from Financing Activities:
Premiums received ............................................................................. 20,476 18,350
Surrenders and other benefits paid ............................................................ (26,794) (26,440)
Exercise of Stock Options ..................................................................... 106 7
Collection of Subscriptions receivable - ESOP ................................................. -- 123
-------- --------
Net cash used in financing activities ......................................................... (6,212) (7,960)
-------- --------
Net decrease in cash and cash equivalents ............................................................ (39,345) 2,693
Cash and cash equivalents at beginning of period ..................................................... 52,860 27,462
-------- --------
Cash and cash equivalents at end of period ........................................................... $ 13,515 30,155
======== ========
See note to consolidated interim financial statements.

F-86

FINANCIAL BENEFIT GROUP, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Note 1 - The above statements are unaudited but include all adjustments
(consisting of only normal recurring accruals) which the Company
considers necessary to present fairly the financial position and the
statements of income and cash flow.

F-87

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------

2.1 Agreement and Plan of Merger by and among AmVestors Financial
Corporation and AmVestors Acquisition Subsidiary, Inc. and FBG
dated September 8, 1995, Amendment No., 1 thereto dated October 17,
1995, Amendment No. 2 thereto dated December 28, 1995, and
Amendment No. 3 thereto dated February 14, 1996 (incorporated
herein by reference to Exhibit 2.1 to Registration Statement on
Form S-4, File No. 333-01309 dated March 1, 1996.)*

4.1 Indenture dated July 12, 1996 between AmVestors Financial
Corporation and Boatmen's Trust Company.

4.2 Form of 3% Convertible Subordinated Debentures due 2003 (included
in Indenture filed as Exhibit 4.1).

4.3 Registration Rights Agreement dated July 12, 1996 between
AmVestors Financial Corporation and The Robinson-Humphrey Company,
Inc.

4.4 Purchase Agreement dated July 12, 1996 between AmVestors Financial
Corporation and purchasers of the 3% Convertible Subordinated
Debentures due 2003.

4.5 Custodial Agreement dated July 12, 1996 between Boatmen's Trust
Company and The Robinson-Humphrey Company, Inc.

4.6 Warrant Agreement by and between AmVestors Financial Corporation
and Boatmen's Trust Company, as Warrant Agent (incorporated herein
by reference to Exhibit 4.3 to Registration Statement on Form S-4,
File No. 333-01309 dated March 1, 1996).

4.7 Form of Warrant Certificate (incorporated herein by reference to
Exhibit 4.4 to Registration Statement on Form S-4, File No.
333-01309 dated March 1, 1996).

4.8 AmVestors Financial Corporation 1989 Non-Qualified Stock Option
Plan (incorporated herein by reference to Exhibit 4.5 to
Registration Statement on Form S-4, File No. 333- 01309 dated
March 1, 1996).

27.1 Financial Data Schedule.

- ----------
* The Company hereby agrees to furnish supplementally a copy of any omitted
schedles to this Agreement to the Securities and Exchange Commission upon its
request.