UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FOR ANNUAL AND TRANSITION REPORTS

 

FORM 10-Q

 

Commission File Number 2-40764

 

KANSAS CITY LIFE INSURANCE COMPANY

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Registrant's Telephone Number, including Area Code: 816-753-7000

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

 

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

 

 

KANSAS CITY LIFE INSURANCE COMPANY

TABLE OF CONTENTS

 

 

 

 

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Part I Financial Information

Item 1. Financial Statements (Unaudited)

 

 

 

 

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Kansas City Life Insurance Company

Notes to Consolidated Financial Statements (Unaudited)

(amounts in thousands, except share data)

 

1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

The unaudited consolidated financial statements, the accompanying notes to these unaudited financial statements and Management’s Discussion and Analysis of Operations of Kansas City Life Insurance Company include the accounts of the Company and its subsidiaries, principally Sunset Life Insurance Company of America (Sunset Life) and Old American Insurance Company (Old American).

 

The unaudited consolidated financial statements have been prepared in accordance with U. S. generally accepted accounting principles (GAAP) for interim financial reporting and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. As such, these unaudited interim financial statements should be read in conjunction with the Company's 2005 Annual Report on Form 10-K. Management believes that the disclosures are adequate to make the information presented not misleading, and all normal and recurring adjustments necessary to present fairly the financial position at September 30, 2006 and the results of its operations for all periods presented have been made. The results of operations for any interim period are not necessarily indicative of the Company’s operating results for a full year.

 

Significant intercompany transactions have been eliminated in consolidation and certain reclassifications have been made to the prior period results to conform with the current period’s presentation.

 

The preparation of the unaudited consolidated financial statements requires management of the Company to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the unaudited consolidated financial statements, and the reported amounts of revenue and expenses during the period. These estimates are inherently subject to change and actual results could differ from these estimates.

 

Business Changes

On January 23, 2006, the Company entered into a definitive agreement to sell its bank subsidiary, Generations Bank, for $10.1 million in cash to Brooke Corporation, with an expected gain on the sale of approximately $1.9 million. This transaction is subject to regulatory approval by the Office of Thrift Supervision and is expected to close by the end of 2006. The bank subsidiary and the results of its operations are not material to the unaudited financial statements of the Company and are not disclosed separately.

 

Significant Accounting Policies

A complete summary of significant accounting policies is included in Note 1 to the audited consolidated financial statements included in the Company’s 2005 Annual Report on Form 10-K.

 

 

In September 2005, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants (AcSEC) issued Statement of Position 05-1 (SOP 05-1), “Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts”. SOP 05-1 provides guidance on accounting by insurance enterprises for deferred acquisition costs on internal replacements of insurance contracts other than those specifically described in Statement of Financial Accounting Standards (SFAS) No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments”. SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights, or coverages that occurs by exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 31, 2006. Retrospective application of SOP 05-1 to previously issued consolidated financial statements is not permitted. The

 

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Kansas City Life Insurance Company

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Company is continuing to evaluate SOP 05-1 but does not believe that it will have a material impact on the consolidated financial statements.

 

In June 2006, the Financial Accounting Standards Board (FASB) issued Interpretation 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 applies to all tax positions accounted for under SFAS 109 “Accounting for Income Taxes”. FIN 48 addresses whether tax positions taken or to be taken on tax returns should be reflected in the financial statements before they are resolved with the appropriate taxing authority. Previous statements provided no specific guidance related to such positions. FIN 48 is effective January 1, 2007. The Company has evaluated the impact of the implementation of FIN 48 and does not believe that it will have a material impact on the consolidated financial statements.

 

In August 2006, the Securities and Exchange Commission (SEC) adopted SEC Release No. 33-8732A, “Executive Compensation and Related Person Disclosure” which amends the disclosure requirements for executive and director compensation, related person transactions, director independence and other corporate governance matters and security ownership of officers and directors. The release expands the currently required tabular disclosures and adds a narrative Compensation Discussion & Analysis (CD&A) which must describe the Company’s compensation policies and decisions. The amendments in the release apply to disclosures included in proxy and information statements, periodic and current reports, as well as other filings under the Securities Exchange Act of 1934 and to registration statements under the Exchange Act and the Securities Act of 1933. For financial statement purposes, this release is effective for years ending on or after December 15, 2006. The Company is currently evaluating the impact of the additional disclosures that will be included in the consolidated financial statements as of December 31, 2006.

 

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (FAS 157). FAS 157 provides a single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the use of fair value to measure assets and liabilities. FAS 157 also emphasizes that fair value is a market-based measurement, not an entity-specific measurement, and established a fair value hierarchy with the highest priority being the quoted price in active markets. This statement is effective for years beginning on or after November 15, 2007. The Company is currently evaluating the impact of this statement but does not believe that it will have a material impact on the consolidated financial statements.

 

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (FAS 158). FAS 158 requires calendar year-end companies with publicly traded equity securities that sponsor postretirement benefit plans to fully recognize, as an asset or liability, the overfunded or underfunded status of the benefit plans as of December 31, 2006. The funded status is to be measured as the difference between the fair value of the plan’s assets and its benefit obligation. The Company has evaluated the impact of the implementation of FAS 158 with regard to its postretirement benefit plans and does not believe that it will have a material impact on the consolidated financial statements.

 

All other Standards and Interpretations of those Standards issued during the nine months ended 2006 did not relate to accounting policies and procedures pertinent to the Company at this time.

 

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Kansas City Life Insurance Company

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

3. UNREALIZED LOSSES ON SECURITIES

 

As of September 30, 2006, the Company had unrealized losses of $47.4 million on investment securities that had a fair value of $1.6 billion. As of December 31, 2005, the Company had unrealized losses of $41.9 million on investment securities that had a fair value of $1.5 billion. The increase in unrealized losses is primarily attributable to the increase in interest rates during the nine months ended September 30, 2006.

 

The following table provides information regarding unrealized losses on investment securities available for sale, as of September 30, 2006.

 

 

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¹ Federal agency securities are not backed by the full faith and credit of the U.S. Government.

 

Included in the above table, the Company holds a corporate debt security with an unrealized loss of $1.1 million in the category of investments with losses 12 months or longer. This security is from an issuer in the printing industry and has been below cost by 20% or more for 11 months. The unrealized loss is primarily caused by the operational interruptions that are the result of an equipment upgrade undertaken by the issuer. The technology upgrades will continue to affect the issuer in the near-term, but it has sufficient sources of liquidity to execute a plan for operating improvements. Because this security is expected to continue to perform to the original contractual terms and the Company has the ability and intent to hold the security until the recovery of the fair value up to the cost of the security, which may be maturity, this security is not considered to be other-than-temporarily impaired at September 30, 2006.

 

4. COMPREHENSIVE INCOME (LOSS)

 

Comprehensive income (loss) is comprised of net income and other comprehensive income (loss). Other comprehensive income (loss) includes the unrealized investment gains or losses on securities available for sale (net of reclassification adjustments for realized investment gains or losses) net of adjustments to DAC, VOBA, policyholder account balances, and the change in the additional minimum pension liability. Other comprehensive income (loss) also includes deferred income taxes on these items.

 

 

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Kansas City Life Insurance Company

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Comprehensive income was $46.5 million in the third quarter of 2006, which consisted of net income of $9.5 million and other comprehensive income of $37.0 million. The other comprehensive income of $37.0 million was due primarily to a decrease in unrealized investment losses as the result of a decrease in interest rates over the period. Comprehensive loss was $22.7 million in the third quarter of 2005, which consisted of net income of $8.9 million and other comprehensive loss of $31.6 million. The other comprehensive loss of $31.6 million was due primarily to a decrease in unrealized investment gains as the result of an increase in interest rates over the period.

 

Comprehensive income was $13.5 million for the nine months ended 2006, which consisted of net income of $26.8 million and other comprehensive loss of $13.3 million. Comprehensive income was $4.7 million for the nine months ended 2005, which consisted of net income of $25.3 million and other comprehensive loss of $20.6 million. The change in other comprehensive loss for both periods was due primarily to a decrease in unrealized investment gains as the result of an increase in interest rates over the period.

 

5. INCOME PER SHARE

 

Due to the Company’s capital structure and the absence of other potentially dilutive securities, there is no difference between basic and diluted earnings per common share for any of the periods reported. The weighted average number of shares outstanding was 11,875,104 and 11,923,181 for the quarters ended September 30, 2006 and 2005, respectively. The weighted average number of shares outstanding was 11,888,046 and 11,925,389 for the nine months ended September 30, 2006 and 2005, respectively.

 

6. INCOME TAXES

 

The third quarter income tax expense was $3.8 million or 28% of income before tax for 2006, versus $3.3 million or 27% of income before tax for the prior year period. The income tax expense for the nine months ended September 30, 2006 was $10.6 million or 28% of income before tax for 2006, versus $9.4 million or 27% of income before tax for the prior year period.

 

The effective income tax rate in both years was lower than the prevailing corporate federal income tax rate of 35% primarily due to income tax credits generated from the Company’s investments in affordable housing. The effect of the affordable housing tax credits on the effective tax rate in the third quarter was a benefit of approximately 6% of income before tax in both 2006 and 2005. The effect of the affordable housing tax credits on the effective tax rate for the nine months ended September 30, was a benefit of approximately 6% of income before tax in both 2006 and 2005.

 

 

The Company has three reportable business segments, which are defined based on the nature of the products and services offered: Individual Insurance, Group Insurance and Old American. The Individual Insurance segment consists of individual insurance products for both Kansas City Life and Sunset Life. The Individual Insurance segment is marketed through a nationwide sales force of independent general agents. The Group Insurance segment consists of sales of group life, group disability, stop loss and dental products. This segment is marketed through a nationwide sales force of independent general agents, group brokers and third-party marketing arrangements. Old American consists of individual insurance products designed primarily as final expense products. These products are marketed through a nationwide general agency sales force with exclusive territories, using direct response marketing to supply agents with leads.

 

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Kansas City Life Insurance Company

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

Separate investment portfolios are maintained for each of the three life insurance companies of the Company. However, investments are allocated to the Group Insurance segment based upon its cash flows. Its investment income is modeled using the year of investment method. Home office functions are fully integrated for the three companies to maximize economies of scale. Therefore, operating expenses are allocated to the segments based upon internal cost studies, which are consistent with industry cost methodologies.

 

Inter-segment revenues are not material. The Company operates in the United States and no individual customer accounts for 10% or more of the Company's revenue.

 

The following schedule provides, in thousands, the financial performance of each of the three reportable operating segments of the Company.

 

*   Insurance revenues for the nine months of 2006 included unrecorded renewal premiums from earlier periods of $0.6 million. An adjustment was reflected in the second quarter of 2006 that related to renewal premiums attributable to years 2003 through 2006. The unrecorded premiums in 2003, 2004 and 2005 were $0.1 million, $0.2 million and $0.3 million, respectively. No adjustment was necessary in the third quarter 2006. Excluding the unrecorded premiums, the net loss for the segment was $1.6 million for the nine months ended September 30, 2006. Management has assessed the materiality of such premiums against prior periods and deemed the unrecorded premiums were not material.

 

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Kansas City Life Insurance Company

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

 

Components of net periodic benefit cost:

 

 

 

 

The Company has a long-term incentive plan for senior management that awards participants for the increase in the share price of the Company’s common stock through units (phantom shares) assigned by the Board of Directors. The awards are calculated over three-year intervals on a calendar year basis. At the conclusion of each three-year interval, participants will receive awards based on the increase in the share price times the number of units. The increase in the share price will be determined based on the change in the share price from the beginning to the end of the three-year interval. Dividends are accrued and paid at the end of each interval to the extent that they exceed negative stock price appreciation. Plan payments are contingent on the continued employment of the participant unless termination is due to a qualifying event such as death, disability or retirement.

 

In the first quarter of 2006, the plan made a payment of $1.5 million to plan participants for the three-year interval ended December 31, 2005. No payments were made in the second or third quarters of 2006. At each reporting period, an estimate of the share-based compensation expense is accrued utilizing fair value at the period end share price. The cost of compensation that has been charged (credited) as an operating expense was ($193) and $547 for

 

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Kansas City Life Insurance Company

Notes to Consolidated Financial Statements (Unaudited) – Continued

 

the third quarters of 2006 and 2005, respectively. The associated tax expense (benefit) for these periods was $68 and ($191), respectively. The cost of compensation that has been charged (credited) as an operating expense for the nine month periods ending September 30, 2006 and 2005 was ($482) and $938, respectively. The associated tax expense (benefit) for these periods was $169 and ($328), respectively.

 

 

In the normal course of business, the Company has open purchase and sale commitments. At September 30, 2006, the Company had purchase commitments to fund mortgage loans and other investments of $18.3 million and real estate sale commitments totaling $6.5 million. Subsequent to September 30, 2006, the Company entered into commitments to fund additional mortgage loans of $16.5 million and real estate sales commitments of $15.5 million.

 

11. CONTINGENT LIABILITIES

 

The life insurance industry, including the Company, has been subject to an increase in litigation in recent years. Such litigation has been pursued on behalf of purported classes of policyholders and other claims and legal actions in jurisdictions where juries often award punitive damages, which are grossly disproportionate to actual damages.

 

Although no assurances can be given and no determinations can be made at this time, management believes that the ultimate liability, if any, with respect to these claims and actions, would have no material effect on the Company’s business, results of operations or financial position.

 

 

The Company is subject to various guarantees and indemnification obligations issued in conjunction with certain transactions, primarily assumption reinsurance agreements, stock purchase agreements, mortgage servicing agreements, asset sale agreements, performance guarantees and borrowing agreements whose terms range in duration and often are not explicitly defined. Generally, a maximum obligation is not explicitly stated; therefore, the overall maximum amount of the obligation under the guarantees and indemnifications cannot be reasonably estimated. While we are unable to estimate with certainty the ultimate legal and financial liability with respect to these guarantees and indemnifications, we believe the likelihood is remote that material payments would be required under such obligations, and therefore such guarantees and indemnifications would not result in a material adverse effect on the Company’s business, financial position or results of operations.

 

In the third quarter of 2006, the Company became a guarantor of a $24 million construction loan to one of its real estate joint ventures. The guarantee expires with the completion of construction, which is expected by March 31, 2008.

 

 

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

 

Cautionary Statement on Forward-Looking Information

 

This report reviews the Company’s financial condition and results of operations, and historical information is presented and discussed. Where appropriate, factors that may affect future financial performance are also identified and discussed. Certain statements made in this report include “forward-looking statements” that fall within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate or imply future results, performance or achievements rather than historical facts and may contain words like “believe,” “expect,” “estimate,” “project,” “forecast,” “anticipate,” “plan,” “will,” “shall,” and other words, phrases or expressions with similar meaning.

 

Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that could cause the Company’s future results to differ materially from expected results include, but are not limited to:

 

 

The Company cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

 

Consolidated Results of Operations

 

Summary of Results

The Company’s net income increased $0.6 million or 7% to $9.5 million in the third quarter of 2006, versus the same quarter in the prior year. Net income per share increased to $0.80 versus $0.75 per share in the prior year. The Company’s net income increased $1.5 million or 6% to $26.8 million in the nine months ended 2006, versus the prior year. Net income per share for the nine months increased to $2.26 per share versus $2.12 per share in the prior year.

 

Comparative results for the third quarter of 2006 versus 2005 show that insurance revenues increased $1.1 million, realized investment gains increased $0.9 million, net investment income declined $0.3 million, and other revenues increased $0.7 million from increased supplementary contract receipts. As a result of these changes, total revenues for the third quarter increased $2.3 million or 2% to $111.4 million. However, these revenue increases were offset by a 4% increase in policyholder benefits, primarily due to an increase in death benefits.

 

The increase in net income for the nine months of 2006 was largely due to an increase in net investment income of $1.7 million, an increase in realized investment gains of $1.5 million, a decline in policyholder benefits of $1.8 million and a decline in interest credited to policyholder account balances of $1.2 million. These were partially offset by three items, including a decline in insurance revenues of $1.7 million due to lower premiums. Second, amortization of deferred acquisition costs (DAC) and value of business acquired (VOBA) increased by $1.4 million as the positive impact of DAC unlocking in 2006 was significantly less than 2005. Third, operating expenses increased $1.4 million, which reflected lower insurance operating costs in 2005 as a result of reduced accruals for post retirement benefits and agent benefit plans.

 

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Sales

The Company measures sales in terms of new premiums and deposits. Premiums are included in insurance revenues in the Consolidated Statements of Income (Unaudited). Deposits are shown in the Consolidated Statements of Cash Flows (Unaudited), but are not included in insurance revenues. The first set of tables below reconciles premiums included in insurance revenues and provides detail by new and renewal business. New premiums are also detailed by product. The second set of tables reconciles deposits with the Consolidated Statements of Cash Flows (Unaudited) and provides detail by new and renewal deposits. New deposits are also detailed by product.

 

Total premiums increased 2% in the third quarter of 2006 but declined 2% in the nine months ended September 30, 2006. New individual life premiums declined 26% in the third quarter and 7% in the nine months due to two factors. First, there was a decline in sales by GuideOne agents primarily in response to a change in marketing emphasis to increase sales of property casualty policies offered by GuideOne Insurance. Second, sales within the Old American business segment have declined due to increased competition and a reduction in the accrual of premiums. In response, Old American has recently made changes in marketing that are intended to result in a favorable long-term impact on premium growth. Excluding these two factors, there was growth in the Company’s individual life sales during both the quarter and nine-month periods.

 

New annuity premiums increased $1.3 million in the third quarter but declined 51% for the nine months. The increase in the third quarter was primarily the result of a $1.7 million annuity reclassification in the third quarter of 2005, as described in the Insurance Revenues section noted below. The decline in the year-to-date sales of immediate annuities is consistent with the effect of increased competition and the emergence of alternative products preferred by consumers in the current environment.

 

New group accident and health premiums increased 17% for the third quarter and 19% for the nine months. The increase in group accident and health premiums for the nine months resulted primarily from an increase in the dental product line, which experienced an increase in new sales of $1.9 million. New group life premiums decreased 26% in the third quarter and 28% in the nine months. The Company continues to pursue opportunities for revenue growth through improved productivity of group representatives and selective third-party marketing arrangements. Total accident and health premiums increased 6% in the third quarter and 7% in the nine months, primarily due to the dental product line.

 

Renewal premiums increased 1% for the quarter, including a 5% increase in group accident and health renewal premiums. Renewal premiums also increased 1% for the nine months ended, including an 8% increase in group accident and health renewal premiums. During the second quarter of 2006, the Company identified unrecorded group dental renewal premiums attributable to several prior periods that accounted for $0.6 million of the nine months’ renewal premiums. The unrecorded group dental premiums are discussed in more detail in the business segment section of Group Insurance.

 

 

 

 

 

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New universal life deposits increased 16% in the third quarter and 7% in the nine months. However, total new deposits declined 30% in the third quarter and 31% in the nine months. These declines were primarily due to decreases in new fixed deferred annuity deposits and new variable annuity deposits. New fixed deferred annuity deposits declined 48% in the third quarter and 43% in the nine months. New variable annuity deposits declined 6% in the third quarter and 24% in the nine months. The decline in sales of fixed deferred annuity and variable annuity deposits can be attributed to increased competition and the emergence of alternative products. New variable universal life deposits increased 14% in the third quarter and 11% in the nine months. Renewal deposits declined 12% in the third quarter and 11% in the nine months, largely due to declines in renewal deposits from fixed deferred annuities and variable annuities.

 

 

 

 

 

Insurance Revenues

Insurance revenues consist of premiums and contract charges less reinsurance ceded. Insurance revenues increased 2% in the third quarter of 2006, primarily reflecting an increase in immediate annuity premiums. New immediate annuity premiums increased $1.3 million for the quarter due to a 2005 reclassification discussed below. Excluding

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this reclassification, immediate annuity premiums would have decreased. New individual life premiums decreased 26% versus the prior year quarter due to the decline in individual life sales, as discussed above. New group accident and health premiums increased 17% in the third quarter, primarily reflecting increased premiums from the group dental product line. Total renewal premiums increased 1%. Total premiums in the third quarter increased 2% over the same period a year ago.

 

In the third quarter 2005, the Company reclassified a $1.7 million overstatement of immediate annuity premiums which occurred in the first half of 2005. This reclassification of immediate annuity premiums was exactly offset by a corresponding reclassification to immediate annuity benefit withdrawals included in policyholder benefits. The net effect of the reclassifications had no impact on net income, but annuity premiums were reduced by $1.7 million in the third quarter for this reclassification and policyholder benefits were likewise reduced.

 

Insurance revenues decreased 1% in the nine months as premiums decreased 2%. Total individual life premiums decreased 1% compared with a year earlier. New individual life premiums decreased 7% in the nine months, partially offsetting an increase in renewal premiums. Total immediate annuity premiums declined $4.3 million in the nine months, reflecting increased competition and the emergence of alternative products as previously discussed. Total accident and health premiums increased 7% in the nine months, largely due to increased premiums from group accident and health products. New group accident and health products increased 19%, primarily from growth in new group dental sales.

 

Contract charges were essentially flat for the third quarter but increased 1% for the nine months. This increase was primarily the result of a prior year unlocking adjustment in the second quarter of 2005 that reduced revenues by $1.0 million. There was no significant unlocking adjustment in 2006.

 

Certain contract charges for universal life insurance are not recognized in income immediately but are deferred as unearned revenues and are amortized into income in a manner similar to the amortization of DAC. These contract charges, which are recorded as unearned revenues, are recognized into income in proportion to the expected future gross profits of the business. In the same manner as DAC, profit expectations are based upon assumptions of future interest margins, mortality margins, expense margins and policy and premium persistency experience. At least annually, a review is performed of the assumptions related to profit expectations. If it is determined the assumptions should be revised, the impact is recorded as a change in the revenue reported in the current period as an unlocking adjustment.

 

Investment Revenues

Net investment income decreased 1% in the third quarter but increased 1% in the nine months ended September 30, 2006. Gross investment income, before the deduction of investment expenses, was lower in both periods primarily due to a lower level of investment assets. The increase in net investment income for the nine months was due to investment expenses, which were lower in 2006 versus 2005. Investment expenses in 2005 were impacted by a $1.9 million increase in real estate expenses recorded in the quarter ended June 30, 2005.

 

The Company recorded a realized investment gain of $0.8 million in the third quarter of 2006, compared with a $0.1 million realized investment loss a year ago. Realized investment gains were $2.4 million for the nine months, compared with $0.9 million in realized investment gains a year ago. The following table provides detail concerning realized investment gains and losses for the third quarter and the nine-month periods 2006 and 2005.

 

 

 

 

 

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The Company regularly evaluates the quality of its investment portfolio. Occasionally, in a diversified portfolio, certain investments may suffer market price deterioration due to a wide variety of factors. Distressed securities are placed onto watch lists that are then further analyzed to identify any specific securities that the Company believes may have experienced other than temporary declines in fair value. To the extent that the Company believes these fluctuations represent an other than temporary decline in value, the value of the investment is adjusted by a charge to income as a realized investment loss. The Company's analysis identified no securities with other than temporary impairment in the third quarter or nine months ended September 30, 2006 and 2005.

 

Policyholder Benefits

Policyholder benefits consist of death benefits (mortality), annuity benefits, accident and health benefits, surrenders and the associated increase or decrease in reserves for future policy benefits. Policyholder benefits increased $1.5 million or 4% in the third quarter but declined $1.8 million or 1% for the nine months. Death benefits increased in the third quarter and for the nine months due to an increase in mortality. Surrenders of life insurance products increased in the third quarter and for the nine months. Other benefits increased both in the third quarter and nine months due, in part, to an increase in dental benefits paid in the group business. The increase in death benefits, surrenders and other benefits was partially offset by a decrease in reserves for future policy benefits for both the third quarter and nine-month periods. In the third quarter, the change in reserves was higher due to the 2005 reclassification described in the Insurance Revenues section. However, the change in reserves for the nine months was also lower as a result of reduced immediate annuity premiums.

 

Interest Credited to Policyholder Account Balances

Interest was credited to policyholder account balances for universal life, fixed deferred annuities and other investment-type products. Interest credited to policyholder account balances decreased $0.3 million or 1% in the third quarter and $1.2 million or 2% for the nine months. The decrease in interest credited to policyholder account balances was primarily due to lower policyholder account balances.

 

Amortization of Deferred Acquisition Costs (DAC) and Value of Business Acquired (VOBA)

The amortization of DAC was $9.0 million for both the third quarter of 2006 and 2005. The amortization of DAC was $27.9 million for the nine months ended September 30, 2006, compared with $26.4 million for 2005. The increase for the nine months reflects the effects of DAC unlocking year over year. Due to unlocking, the amortization of DAC decreased by $0.7 million in the second quarter of 2006, whereas the amortization of DAC decreased by $2.2 million in the second quarter of 2005.

 

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DAC is amortized in proportion to the expected future gross profits of certain life insurance and annuity products. Profit expectations are based upon assumptions of future interest margins, mortality margins, expense margins and policy and premium persistency experience. At least annually, a review is performed of the assumptions related to profit expectations. If it is determined the assumptions should be revised, the impact of the change is recorded as a change in DAC amortization in the current period as an unlocking adjustment.

 

The amortization of VOBA was $1.6 million in the third quarter of 2006 and $1.7 million in the third quarter of 2005. The amortization of VOBA was $5.0 million for the nine months of 2006 and $5.2 million in 2005. There was no unlocking or impairments of VOBA in the periods presented.

 

Operating Expenses

Operating expenses consist of several items that include: commissions and production allowances, expenses associated with operations, insurance related taxes and other expenses. Operating expenses are reduced for the capitalization of commissions and production allowances. Operating expenses increased $0.1 million or 1% in the third quarter of 2006 relative to the prior year. Commissions and production allowances decreased $0.8 million for the third quarter due to lower sales. The decrease in commission and production allowances was offset by decreases in the capitalization of these costs and an increase in insurance operating expenses of $0.4 million.

 

Operating expenses increased $1.4 million or 2% in the nine months of 2006 versus the prior year. Commissions and production allowances decreased $1.8 million for the nine-month period due to lower sales. This change was offset by decreases in the capitalization of these costs and an increase in insurance operating expenses of $2.0 million. The increase in insurance operating expenses reflected lower insurance operating costs in 2005 as a result of reduced accruals for post retirement benefits and agent benefit plans.

 

Income Taxes

The third quarter income tax expense was $3.8 million or 28% of income before tax for 2006, versus $3.3 million or 27% of income before tax for the prior year period. The income tax expense for the nine months ended September 30, 2006 was $10.6 million or 28% of income before tax for 2006, versus $9.4 million or 27% of income before tax for the prior year period.

 

The effective income tax rate in both years was lower than the prevailing corporate federal income tax rate of 35% primarily due to income tax credits generated from the Company’s investments in affordable housing. The effect of the affordable housing tax credits on the effective tax rate in the third quarter was a benefit of approximately 6% of income before tax in both 2006 and 2005. The effect of the affordable housing tax credits on the effective tax rate for the nine months ended September 30, was a benefit of approximately 6% of income before tax in both 2006 and 2005.

 

Operating Results by Segment

 

The Company has three reportable business segments, which are defined based on the nature of the products and services offered: Individual Insurance, Group Insurance and Old American. The Individual Insurance segment consists of individual insurance products for both Kansas City Life and Sunset Life. The Individual Insurance segment is marketed through a nationwide sales force of independent general agents. The Group Insurance segment consists of sales of group life, group disability, stop loss and dental products. This segment is marketed through a nationwide sales force of independent general agents, group brokers and third-party marketing arrangements. Old American consists of individual insurance products designed primarily as final expense products. These products are marketed through a nationwide general agency sales force with exclusive territories, using direct response marketing to supply agents with leads. Refer to Note 7 - Segment Information in the Notes to the Consolidated Financial Statements (Unaudited).

 

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Individual Insurance

The following table presents financial data of the Individual Insurance business segment for the third quarters and nine months ended September 30, 2006 and 2005 (in thousands):

 

 

 

Premium information is provided in the table below.

 

 

 

 

 

 

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Deposit information is provided in the table below.

 

 

 

 

 

Net income for this segment in the third quarter was $8.7 million, an increase of $1.2 million over 2005. The increase was due to several factors, including a $1.0 million increase in insurance revenues, a $0.5 million increase in realized gains, a $0.7 million increase in other revenues, a $0.3 million decrease in interest credited to policyholder account balances, and a $0.6 million decrease in operating expenses. These favorable changes were partially offset by a $0.4 million decrease in net investment income, a $0.5 million increase in policyholder benefits, and a $0.2 million increase in the amortization of DAC and VOBA.

 

Net income for the first nine months was $24.3 million, an increase of $0.8 million from 2005. Contributing to the improvement, net investment income increased $1.3 million, realized investment gains increased $1.0 million, policyholder benefits decreased $2.6 million, and interest credited to policyholder account balances decreased $1.2 million. Partially offsetting these favorable changes was a $3.2 million decrease in insurance revenues, a $1.9 million increase in amortization of deferred acquisition cost and value of business acquired, and a $0.2 million increase in operating expenses.

 

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Insurance revenues for this segment increased 3% in the third quarter but declined 3% in the nine months. The increase in insurance revenues in the third quarter was primarily the result of the $1.7 million reclassification in immediate annuities during 2005, as described earlier. The decline in premiums for the nine months, principally immediate annuities, was due to increased competition and the emergence of alternative products preferred by consumers in the current environment. Premiums from new individual life insurance products decreased 23% in the third quarter but increased 1% in the nine months. The decline was due to lower sales by GuideOne agents primarily in response to a change in marketing emphasis to increase sales of property casualty policies offered by GuideOne Insurance. Total premiums increased 10% in the third quarter but declined 9% in the nine months. The increase in total premiums for the third quarter reflects the immediate annuity reclassification as described above, along with an increase in renewal premiums. However, total premiums for the nine months decreased, reflecting a decline in immediate annuity premiums.

 

Contract charges decreased 1% in the third quarter but increased 1% in the nine months. The increase in contract charges for the nine months was primarily attributable to an unlocking adjustment in 2005, as previously discussed which reduced contract charges $1.0 million. There was no significant unlocking adjustment in 2006.

 

Total new deposits decreased 30% for the third quarter and 31% in the nine months. These decreases reflect a decline in new fixed deferred annuity receipts of 48% for the third quarter and 43% for the nine months. Also, new variable annuity receipts declined 6% in the third quarter and 24% in the nine months. Conversely, new universal life deposits increased 16% in the third quarter and 7% for the nine months, while variable universal life deposits increased 14% in the third quarter and 11% in the nine months. As previously mentioned, the decline in sales of fixed deferred annuity and variable annuity deposits, and to a lesser extent other deposit products, can be attributed to increased competition and the emergence of alternative products. However, the Company’s focus on individual life products, including deposit-type products, has resulted in an improving sales direction.

 

Net investment income decreased 1% in the third quarter but increased 1% in the nine months. Gross investment income, before the deduction of investment expenses, was lower in both periods primarily due to a lower level of investment assets. The increase in net investment income for the nine months was due to a $1.9 million increase in real estate expenses recorded in 2005. This segment experienced a realized investment gain of $0.7 million during the third quarter of 2006 versus a $0.2 million gain during the prior year’s third quarter. Realized investment gains were $2.1 million for the nine months versus $1.1 million for the same period a year earlier.

 

Policyholder benefits increased $0.5 million or 2% in the third quarter but decreased $2.6 million or 3% in the nine months. Death benefits increased for the third quarter and nine months, respectively, but were partially offset by a decrease in reserves in both periods. Surrenders of life insurance products increased in both the third quarter and nine months. Other benefits decreased in the third quarter but increased slightly for the nine months. Both surrenders and other benefits were offset by a decrease in reserves. In the third quarter, the change in reserves was higher due to the 2005 reclassification of $1.7 million, as described earlier.

 

Interest credited to policyholder account balances decreased 1% in the third quarter and 2% in the nine months. The decrease in both the third quarter and the nine months was primarily due to lower policyholder account balances.

 

The amortization of DAC and VOBA increased 2% in the third quarter and 9% in the nine months. The increase for the nine-month period was due to a change in DAC unlocking year over year. Due to unlocking, the amortization of DAC decreased by $0.7 million in the second quarter of 2006, whereas the amortization of DAC decreased by $2.2 million in the second quarter of 2005.

 

Operating expenses consist of several items that include: commissions and production allowances, expenses associated with operations, insurance related taxes and other expenses. Operating expenses are reduced for the capitalization of commissions and production allowances. Operating expenses decreased 5% for the third quarter but increased 1% in the nine months. Commissions and production allowances decreased 17% for the third quarter and 12% for the nine months due to lower sales. These decreases in commissions and production allowances were offset by decreases in the capitalization of these items. Insurance operating expenses decreased 4% for the third quarter but increased 3% for the nine months. The increase for the nine months reflected lower insurance operating expenses in 2005 as a result of reduced accruals for post retirement benefits and agent benefit plans.

 

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Group Insurance

The following table presents financial data of the Group Insurance business segment for the third quarters and nine months ended September 30, 2006 and 2005 (in thousands):

 

 

 

Premium information is provided in the table below.

 

 

 

 

 

 

 

 

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Insurance revenues for the Group Insurance segment increased $0.7 million or 6% in the third quarter and $3.1 million or 10% in the nine months. These increases were primarily the result of increases in new and renewal premiums, largely from the dental line. New dental premiums increased $0.6 million or 59% in the third quarter and $1.9 million or 63% for the nine months, compared to a year earlier. Renewal dental premiums remained constant during the third quarter but increased $0.6 million or 4% over last year for the nine months. Reinsurance on premiums decreased 2% in the third quarter and 5% for the nine months, reflecting lower premiums in the group life insurance product line.

 

Renewal premiums increased for the nine months, in part, due to unrecorded premiums from earlier periods of $0.6 million. An adjustment was reflected in the second quarter of 2006 that related to renewal premiums attributable to years 2003 through 2006. The unrecorded premiums in 2003, 2004 and 2005 were $0.1 million, $0.2 million and $0.3 million, respectively.

 

Policyholder benefits increased $1.2 million or 19% in this segment in the third quarter and $2.3 million or 11% for the nine months of 2006 versus 2005. These increases were primarily from the group life and dental lines. Group life and dental both increased $0.6 million in the third quarter 2006 versus 2005. The nine months increase was primarily from the dental line, which increased $2.1 million over 2005. Unfavorable claims experience in the dental product line and an increase in death benefits in the group life product line contributed to the increases. In addition, claim reserves were increased in the nine months as a result of premium growth in the dental product line. Partially offsetting the increases in dental and life benefits for the nine months compared to last year were declines in stop loss benefits, short-term disability benefits and long-term disability benefits.

 

Operating expenses consist of several items that include: commissions and production allowances, expenses associated with operations, insurance related taxes and other expenses. Operating expenses decreased 9% in the third quarter and 1% for the nine months of 2006 compared with the same periods in 2005. The decrease for both periods was due to a decrease in insurance operating expenses partially offset by an increase in commissions, premium taxes and other expenses.

 

The net loss for this segment totaled $0.5 million for the third quarter of 2006, compared with a net loss of $0.4 million in 2005. The net loss totaled $1.2 million for the nine months of 2006, compared with a net loss of $1.9 million for the first nine months in 2005. Excluding the unrecorded premiums previously discussed, the net loss for this segment would have been $1.6 million for the nine months ended September 30, 2006. The Company continues to pursue opportunities for revenue growth through improved productivity of group representatives and selective third-party marketing arrangements.

 

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Old American Insurance Company

The following table presents financial data of the Old American Insurance Company business segment for the third quarters and nine months ended September 30, 2006 and 2005 (in thousands):

 

 

 

Premium information is provided in the table below.

 

 

 

 

 

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Net income for this segment was $1.4 million in the third quarter of 2006, a 27% decrease from the same period in the prior year. Net income for this segment was $3.7 million in the nine months of both 2006 and 2005. The decrease during the quarter was primarily the result of declines in insurance revenues and an increase in operating expenses in the third quarter of 2006 compared to the prior year. These changes were partially offset by realized investment gains and a decrease in policyholder benefits during the quarter compared to the same period a year ago. During the nine months of 2006 versus 2005, a decline in insurance revenues and an increase in operating expenses were offset by an increase in net investment income, increased realized investment gains, and a decline in policyholder benefits.

 

Insurance revenues decreased 4% in the third quarter and 3% in the nine months of 2006 compared to 2005. Contributing to the decrease was a decline in new premiums of 28% in the third quarter compared to a year ago. The segment also experienced a decline in new premiums of 14% for the nine months of 2006 versus the same period in the prior year. The decline in new sales is attributed to increased competition and a reduction in the accrual of premiums. In response, Old American has recently made changes to marketing that are intended to have a favorable long-term impact on premium growth. Renewal premiums declined 1% in the third quarter and 3% for the nine months versus a year ago. However, total policyholder benefits declined $0.3 million or 2% for the third quarter and $1.4 million or 4% for the nine months of 2006 relative to 2005, primarily reflecting decreases in death benefits in both the quarter and nine-month periods.

 

Net investment income increased 1% in the third quarter and 4% in the nine months of 2006 versus 2005, primarily due to lower investment expenses. This segment recorded realized investment gains in both the third quarter and nine months of 2006 versus realized investment losses in the same periods one year ago.

 

Operating expenses consist of several items that include: commissions and production allowances, expenses associated with operations, insurance related taxes and other expenses. Operating expenses are reduced for the capitalization of commissions and production allowances. Operating expenses increased 46% for the third quarter and 13% through the first nine months of 2006, compared to the same periods of 2005. These increases were primarily due to the result of reduced accrual adjustments in the prior year. Increased salary and benefits and lead production costs also contributed to the increase in 2006 compared to 2005.

 

Liquidity and Capital Resources

 

Liquidity

Statements made in the Company's 2005 Form 10-K and the 2005 Annual Report to Stockholders remain pertinent, as the Company’s liquidity position is materially unchanged from year-end 2005.

 

The Company and each insurance subsidiary meet liquidity requirements primarily through cash flows generated from operations. The Company has sufficient sources of liquidity to satisfy operational requirements. Primary sources of cash flow are premiums, other insurance considerations and deposits, receipts for policyholder accounts, investment sales and maturities, investment income and access to credit from other financial institutions. The principal uses of cash are for the insurance operations, including the purchase of investments, payment of insurance benefits, operating expenses, withdrawals from policyholder accounts, costs related to acquiring new business, dividends and income taxes.

 

Net cash used from operations was $6.2 million for the nine months ended September 30, 2006, versus net cash provided from operations of $29.9 million a year earlier. This decline in cash provided was primarily the result of a $3.2 million decrease in immediate annuity premiums received, a $6.4 million increase in paid policyholder benefits, a $7.7 million decrease in accounts payable and other liabilities, a $6.6 million decrease in deposits at Generations Bank, a $7.7 million decline in the amount payable for securities, a $2.6 million increase in accrued investment income, and a $1.1 million increase in other receivables.

 

Net cash provided from investing activities was $63.5 million for the nine months, up from $31.1 million for the same period in 2005. Cash used for fixed maturity security purchases and mortgage loans decreased $241.2 million and $30.4 million, respectively. Conversely, cash used for real estate purchases increased $33.2 million versus last year. Cash provided from investment maturities and principal paydowns decreased $132.4 million, while cash provided from sales of investments decreased $67.4 million.

 

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Net cash used for financing activities was $65.0 million for the nine months, compared with net cash used of $62.3 million in 2005. Deposits on policyholder account balances decreased $34.7 million and withdrawals from policyholder account balances increased $20.6 million. The Company had a net reduction in borrowed money of $9.2 million for the nine-month period ended September 30, 2006, compared with a net reduction in borrowed money of $58.5 million for the same period a year earlier. Net transfers from separate accounts increased $11.7 million versus the nine months a year earlier.

 

This information excludes net proceeds from variable insurance products. These proceeds are segregated into separate accounts and are not held in the Company’s general investments because the policyholders, rather than the Company, assume the underlying investment risks.

 

Debt and Short-term Borrowing

The Company and certain subsidiaries have access to borrowing capacity through their membership affiliation with the Federal Home Loan Bank (FHLB). The Company also enters into construction loans on real estate development and uses long-term debt in association with real estate investments from time-to-time. At September 30, 2006, all of the Company’s debt had maturities of less than one year. Outstanding balances with the FHLB totaled $17.5 million, and the Company had one construction loan of $0.5 million.

 

Borrowings totaled $18.0 million at September 30, 2006, down $9.2 million from year-end 2005. The decrease in borrowings is largely due to reductions in borrowing from the FHLB. Short-term borrowings decreased $8.6 million through the first nine months of 2006. The Company has unsecured revolving lines of credit of $60.0 million from two major commercial banks with no balances outstanding.

 

Capital Resources

The Company considers existing capital resources to be more than adequate to support the current level of business activities.

 

The following table shows the capital adequacy for the Company.

 

 

The ratio of equity to assets less separate accounts has remained relatively constant, as identified above. Unrealized investment gains on available for sale securities, which are included as a part of stockholders’ equity, totaled $4.2 million at September 30, 2006 (net of related taxes, policyholder account balances and deferred acquisition costs). This represents a decrease of $13.3 million from year-end 2005. The decrease in investments with unrealized gains is primarily attributable to the increase in interest rates during the nine months.

 

Stockholders’ equity increased $1.8 million from year-end 2005. The increase is primarily the result of an increase in retained earnings from net income less stockholder dividends for the nine months of 2006. Offsetting most of this increase is an increase in accumulated other comprehensive loss, reflecting the aforementioned decline in unrealized investment gains. Consolidated book value per share equaled $57.43 at September 30, 2006, a 1% increase from year-end 2005.

 

As previously disclosed in a Form 8-K filed on September 8, 2006, the Company entered into an agreement with a broker to allow the Company to purchase shares of its common stock under the authority granted by the Board of Directors, as previously disclosed in the Company’s Form 10-K. The Company may or may not effect share purchases during the term of this agreement. During the nine months of 2006, the Company did not purchase any of its shares under the stock repurchase authorization. Under this authorization, the Company may purchase up to one million shares on the open market during 2006.

 

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On October 30, 2006, the Board of Directors declared a quarterly dividend of $0.27 per share, unchanged from the prior year, that will be paid November 14, 2006, to stockholders of record as of November 9, 2006.

 

Current legislative activities are not expected to have a significant impact on the ongoing operations of the Company.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk  

 

Market risks have not changed materially from those disclosed in the Company’s 2005 Annual Report on Form 10-K.

 

Item 4. Controls and Procedures

 

As required by Exchange Act Rule 13a-15(b), Kansas City Life Insurance Company management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation as of the end of the period covered by this report, of the effectiveness of the Company’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. As required by Exchange Act 13a-15(d), Kansas City Life Insurance Company management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting. Based on that evaluation, there has been no such change during the period covered by this report.

 

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Part II: Other Information

 

Item 1. Legal Proceedings

 

The life insurance industry, including the Company and its subsidiaries, has been subject to an increase in litigation in recent years. Such litigation has been pursued on behalf of purported classes of insurance purchasers, often questioning the conduct of insurers in the marketing of their products.

 

In addition to the above, the Company and its subsidiaries are defendants in, or subject to other claims or legal actions. Some of these claims and legal actions are in jurisdictions where juries are given substantial latitude in assessing damages, including punitive damages. Although no assurances can be given and no determinations can be made at this time, management believes that the ultimate liability, if any, with respect to these other claims and legal actions would have no material effect on the Company’s business, results of operations or financial position.

 

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Item 5. Other Information

 

 

 

Kansas City Life Announces Third Quarter 2006 Results

 

Net income increased 7% for the third quarter at Kansas City Life Insurance Company, rising to $9.5 million or $0.80 per share from $8.9 million or $0.75 per share a year earlier. Net income for the nine months increased 6% to $26.8 million or $2.26 per share from $25.3 million or $2.12 per share in 2005. The increase in earnings for both periods was due to increased revenues, including a 2% increase during the third quarter and a 1% increase for the nine months.

 

The growth in revenues was $2.3 million during the third quarter and was primarily the result of increased premiums and improvement in realized investment gains. Growth in revenues during the nine months reflected increases in net investment income, realized investment gains, and other revenues totaling $2.6 million.

 

Deposits from new universal life sales increased 16% for the third quarter and 7% for the nine months. New individual life insurance premiums declined for the third quarter and nine months, but new variable universal life deposits increased for both periods. New deposits from fixed deferred and variable annuities continued to decline due to competitive factors, while group accident and health sales increased for the quarter and year-to-date as a result of improved group dental sales.

 

Net investment income declined 1% in the third quarter but increased 1% for the nine months. Interest rates have generally increased over the prior year and the increase has helped improve investment yields. Offsetting the improved yields, the Company’s invested assets declined for both the third quarter and the nine months compared with the same periods a year ago. Increased surrenders of life insurance policies and lower sales of annuities contributed to the lower level of invested assets.

 

Policyholder benefits increased 4% for the third quarter, primarily due to increased death benefits, but decreased 1% for the nine months. Death benefits increased in both the third quarter and nine months compared with the prior year, while interest credited to policyholder account balances declined 1% for the third quarter and 2% for the nine months. Interest credited has declined primarily due to reduced policyholder account balances.

 

Today’s financial services environment is intensely competitive, but Kansas City Life believes that there are many unique opportunities for success and growth. At Kansas City Life, Security Assured is built and honored over time. The Company’s core strengths of a solid financial base, emphasis on growth, a commitment to those we serve and steady earnings, position us well to meet today’s and tomorrow’s challenges. While we acknowledge the ever-present challenges, we are pleased with the results we have attained and we look forward to continuing the Company’s achievements as we conclude 2006.

 

Additionally, the Kansas City Life Board of Directors approved a quarterly dividend of $0.27 per share to be paid November 14, 2006, to shareholders of record as of November 9, 2006.

 

Kansas City Life Insurance Company (NASDAQ: KCLI) was established in 1895 and is based in Kansas City, Missouri. The Company’s primary business is providing financial protection through the sale of life insurance and annuities. The Company’s revenues were $450.1 million in 2005, and assets and life insurance in force were $4.6 billion and $30.9 billion, respectively, as of December 31, 2005. The Company and its affiliates operate in 49 states and the District of Columbia. Please refer to the Company’s Form 10-Q at www.kclife.com.

 

(Continued on next page)

 

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Kansas City Life Announces

Third Quarter 2006 Results

November 1, 2006; Page Two

 

 

 

 

 

 

 

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Item 6. Exhibits.

 

 

 

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

KANSAS CITY LIFE INSURANCE COMPANY

 

 

 

R. Philip Bixby

President, Chief Executive Officer

and Chairman of the Board

 

 

Tracy W. Knapp

Senior Vice President, Finance

 

Date: October 30, 2006

 

 

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