ARM FINANCIAL GROUP, INC.
                                515 WEST MARKET STREET
                              LOUISVILLE, KENTUCKY 40202


                                                       December 4, 1997

Mr. John R. Lindholm
ARM Financial Group, Inc.
515 West Market Street
Louisville, Kentucky 40202

Dear John:

          This letter amendment (this "AMENDMENT") sets forth our mutual
understanding concerning an amendment to your Employment Agreement with ARM
Financial Group, Inc. (the "COMPANY") dated as of July 1, 1996 (the "EMPLOYMENT
AGREEMENT").

          1. Section 5.1.1 is hereby amended by inserting the words "the 
     penultimate sentence of this Section 5.1.1 and" after the word "of" in
     the first line of Section 5.1.1.

          2.   Section 5.1.1 is hereby further amended by inserting the 
     following as the penultimate sentence in such Section 5.1.1:

          "In the event the Executive terminates his employment hereunder
          pursuant to Section 5.4(iv) or (v), the payments described in the
          first sentence of this Section 5.1.1 shall be reduced by an amount
          equal to the payments received by the Executive as a Sale Bonus under
          the Company's Sale Bonus Plan."

          3.   The parenthetical contained in the second line of Section 5.4 is 
     amended in its entirety to read as follows: "(without the Executive's prior
     written consent in the case of clauses (i), (ii) and (iii) below)".

          4.   Section 5.4 is further hereby amended by inserting a new 
     subsection (ii) to read as follows and to renumber the subsections that
     follow accordingly:

          "(ii) a material diminution of the authority, responsibilities or 
     positions of the Executive with the Company;"




                                          2

          5.   This Amendment shall be governed in accordance with the laws of 
     the State of New York.

          6.   Except as modified hereby, the Employment Agreement remains in 
     full force and effect.

          Please evidence your agreement with this Amendment by executing the
acknowledgment set forth below.

                                        ARM FINANCIAL GROUP, INC.

                                        /s/ Frank V. Sica
                                        -------------------------
                                        Name: 
                                        Title:

ACKNOWLEDGED AND
AGREED AS OF THE DATE
FIRST ABOVE WRITTEN


/s/ John R. Lindholm
- ---------------------
John R. Lindholm