Kansas City Life Insurance Co.
Annual Report 2010

Plain-text annual report

We’ll Be With You KANSAS CITY LIFE INSURANCE COMPANY HOME OFFICE: KANSAS CITY, MISSOURI 2010 Annual Report Message from the President Kansas City Life Insurance Company has faced a vari- ety of opportunities and challenges during its 115-year history. While the economy generally improved dur- ing 2010, many of the issues that were evident in 2009 remained. The low interest rate environment continues to present special challenges to the financial industry and, in particular, the insurance sector. However, Kan- sas City Life has responded to this adversity by staying focused on making the best decisions for the long term and its fundamental mission of providing Security Assured to its policyholders. The Company is focused on providing consumers with the products they need to help assure financial security. In 2010, the Lifetime Income Rider was introduced in response to consumer demand. As many consumers watched their retirement portfolio dwindle during the recent recession, this new product rider was specifically designed to provide guaranteed income for life and income flexibility from a Kansas City Life fixed annuity. Moving forward, the Company will explore additional products and riders to enhance its already strong portfolio. The Company recorded net income for 2010 of $22.3 million or $1.95 per share, an increase from $10.7 million or $0.93 per share for the same period in 2009. The changes that impacted the year included a $10.6 million improvement in realized investment gains and losses, growth in insurance revenues, lower amortization of deferred acquisi- tion costs and reduced operating expenses. Partially offsetting these improvements was an increase in policyholder benefits. Total life insurance premiums increased $2.5 million or 2% for the year compared to the prior year, as new life insurance premiums increased $2.3 million or 16%. The growth was driven by an increase of 29% in life insurance premiums from new sales in the Old American segment. In addition, total life insurance premiums improved from increases in renewal premiums on individual life insurance products. Deposits from new universal life Stockholder Information CORPORATE HEADQUARTERS Kansas City Life Insurance Company 3520 Broadway Post Office Box 219139 Kansas City, Missouri 64121-9139 Telephone: 816-753-7000 Fax: 816-753-4902 Internet: http://www.kclife.com E-mail: kclife@kclife.com NOTICE OF ANNUAL MEETING The annual meeting of stockholders will be held at 9 a.m. on Thursday, April 21, 2011 at Kansas City Life Insurance Company’s corporate headquarters. TRANSFER AGENT Janice Poe, Stock Agent and Assistant Secretary Kansas City Life Insurance Company Post Office Box 219139 Kansas City, Missouri 64121-9139 10-K REQUEST Stockholders may request a free copy of Kansas City Life’s Form 10-K, as filed with the Securities and Exchange Commission, by writing to Secretary, Kansas City Life Insurance Company. SECURITY HOLDERS As of Jan. 31, 2011, Kansas City Life had approximately 2,500 security holders, including individual participants in security position listings. Please refer to the Company’s Form 10-K and Proxy Statement as filed with the Secu- rities and Exchange Commission (SEC). Stock and Dividend information Stock and Dividend Information The following table presents the high and low prices for the Company’s common stock for the periods indicated and the dividends declared per share and paid during such periods. The Company’s common stock is traded on the NASDAQ Capital Market under the symbol “KCLI”. 2010 First quarter Second quarter Third quarter Fourth quarter 2009 First quarter Second quarter Third quarter Fourth quarter High Low $ 33.50 35.85 32.63 33.77 $ 24.86 27.84 28.58 30.42 $ 44.63 40.22 37.75 33.31 $ 15.20 19.70 25.39 25.00 Dividend Paid $ $ $ $ 0.27 0.27 0.27 0.27 1.08 0.27 0.27 0.27 0.27 1.08 A quarterly dividend of $0.27 per share was paid Feb. 9, 2011. NASDAQ market quotations are compiled according to Company records and may reflect inter-dealer prices, without markup, markdown or commission and may not necessarily represent actual transac- tions. 2 15 Board of Directors – Kansas City Life Insurance Company R. Philip Bixby President, Chief Executive Officer and Chairman of the Board Kansas City Life Insurance Company Kansas City, Missouri John C. Cozad President Cozad Company, LLC Platte City, Missouri Richard L. Finn Walter E. Bixby, LLIF Vice Chairman of the Board Kansas City Life Insurance Company President Retired Senior Vice President, Finance Kansas City Life Insurance Company Kansas City, Missouri Cecil R. Miller, CPA Retired Partner KPMG LLP Kansas City, Missouri Mark A. Milton, FSA, CERA, MAAA Senior Vice President and Actuary Kansas City Life Insurance Company Kansas City, Missouri Old American Insurance Company Nancy Bixby Hudson Bradford T. Nordholm Kansas City, Missouri Kevin G. Barth President and Chief Operating Officer Commerce Bank Kansas City, Missouri William R. Blessing Retired Senior Vice President, Corporate Strategy and Development Embarq Overland Park, Kansas Michael Braude Retired President and Chief Executive Officer Kansas City Board of Trade Kansas City, Missouri Investor Lander, Wyoming Daryl D. Jensen, MAAA, FLMI Retired Vice President of Finance Western Institutional Review Board Olympia, Washington Retired President and Vice Chairman of the Board Sunset Life Insurance Company of America Kansas City, Missouri Tracy W. Knapp Senior Vice President, Finance Kansas City Life Insurance Company Kansas City, Missouri Chief Executive Officer Starwood Energy Group Global LLC Greenwich, Connecticut William A. Schalekamp, JD, CLU, FLMI Retired Senior Vice President, General Counsel and Secretary Kansas City Life Insurance Company Kansas City, Missouri and variable universal life products increased $3.7 million or 33% for the year compared to the prior year. The growth in overall new life insurance sales was primarily attributable to positive results being attained from the Company’s recruiting efforts and the improved productivity of general agents and agents, along with an improving economy. The Company experienced realized investment gains of $0.5 million for the year. This represented significant improvement from the realized losses recognized one year ear- lier. The low interest rate and improving overall credit environment resulted in improved fair values within the Company’s investment portfolio and further strengthened the Com- pany’s capital position. Specifically, the investment portfolio had a net unrealized gain position of $110.2 million at December 31, 2010, an improvement of $110.0 million from December 31, 2009. The Company’s stockholders’ equity improved 8% during the year, further strengthening the Company’s capital position. In addition, the Company continues to focus resources on the training and development of its field force. Specifically, the Company places a priority on recruiting new general agents and agents, both of which are essential for the Company’s long-term success. While many in the industry have abandoned the agency career-based system, the Com- pany believes this system sets it apart from competitors in the life insurance industry. During 2010, 30 new general agents joined the Company as valued partners. The Company believes that its relationships with its shareholders, policyholders, general agents and agents, and associates are the foundation from which the Company builds its future. Kansas City Life continues to provide competitive products, superior customer service, financial strength, specialized training and superior sales and marketing support. Kansas City Life is a company that has proven its financial strength over time and contin- ues to provide value-oriented products, throughout economic cycles. R. Philip Bixby President, Chief Executive Officer and Chairman of the Board 14 Board of Directors 3 The Kansas City Life Group of Companies Kansas City Life Insurance Company Since 1895, Kansas City Life Insurance Company (www.kclife.com) has been dedi- cated to the present and future financial security of its customers. Kansas City Life and its subsidiaries provide financial services, including insurance and investments, to consumers throughout 48 states and the District of Columbia.* More than 2,200 general agents and agents serve individuals, families, small businesses and corpora- tions with a diverse range of products including universal life, term life, whole life, variable life insurance,* variable annuities,* fixed deferred annuities and group prod- ucts. Kansas City Life has been providing Security Assured for more than 115 years. Old American Insurance Company Since 1939, the mission of Old American Insurance Company (www.oaic.com) has been to provide peace of mind to the senior market and, in turn, enhance the quality of life for policyholders and their beneficiaries. Agents assist individuals ages 50 – 85 through final arrangements planning, charitable giving life insurance, and Social Security and retirement income replacement insurance. In addition, Old American began targeting individuals ages 20 to 65 in 2009 with its Level Term 20 life insur- ance product. The subsidiary operates in 46 states and the District of Columbia. Sunset Financial Services Inc.* Sunset Financial Services (www.sunsetfinancial.com) is a full-service brokerage firm and registered investment advisor. Sunset Financial Services’ registered representatives are also licensed with Kansas City Life. Investment options include variable products, mutual funds, stocks and bonds, money market funds, CDs and asset management products. Sunset Life Insurance Company of America Sunset Life (www.sunsetlife.com) was originally founded in 1937 in Olympia, Wash. Kansas City Life purchased Sunset Life in 1974 and its operations were consolidated into the Company’s Home Office in 1999. The Sunset Life sales force was integrated into the Kansas City Life sales force in 2006. Financial Ratings, evaluated by A.M. Best Kansas City Life Insurance Company – A (Excellent; Stable Outlook) Old American Insurance Company – B++ (Good; Positive Outlook) Sunset Life Insurance Company – A (Excellent; Stable Outlook) These ratings represent A.M. Best’s opinion of the financial strength and stability of Kansas City Life, Old American and Sunset Life Insurance Companies and each com- pany’s ability to meet ongoing obligations to policyholders, as of June 2010. There are 15 financial strength ratings offered by A.M Best, ranging from A++ (superior) to F (in liquidation). Please refer to the Company’s Form 10-K and Proxy Statement as filed with the Securities and Exchange Commission (SEC). 4 *Securities are distributed through Sunset Financial Services Inc., 3520 Broadway, Kansas City, MO 64111, 816-753-7000. Member FINRA and SIPC. Senior Officers Kansas City Life Insurance Company R. Philip Bixby President, Chief Executive Officer and Chairman of the Board Walter E. Bixby, LLIF Vice Chairman of the Board Kansas City Life Insurance Company President Old American Insurance Company Charles R. Duffy Jr., FLMI Senior Vice President, Operations Tracy W. Knapp Senior Vice President, Finance Donald E. Krebs, MSM, CLU, ChFC Senior Vice President, Sales and Marketing Mark A. Milton, FSA, CERA, MAAA Senior Vice President and Actuary William A. Schalekamp, JD, CLU, FLMI* Senior Vice President, General Counsel and Secretary Gregory M. Galvin Vice President, Real Estate David A. Laird, CPA, FLMI Vice President and Controller Bruce G. Olberding Vice President, Broker Dealer Robert J. Milroy Vice President, Underwriting and New Richard D. Ropp, FLMI, ACS Vice President, Customer Services and Claims Stephen E. Ropp Vice President, Operations Services J. Todd Salash Vice President, Computer Information Services Dan L. Schick, CPA, CLU, FLMI Vice President and Auditor Jeffrey M. Seeman Vice President, Group Philip A. Williams, CFA Vice President, Securities Old American Insurance Company R. Philip Bixby Chairman of the Board Walter E. Bixby, LLIF President John C. Alderton Vice President, Sales Business Richard D. Ropp, FLMI, ACS Vice President, Customer Services and Claims Sunset Life Insurance Company of America R. Philip Bixby President, Chairman of the Board Walter E. Bixby, LLIF Vice Chairman of the Board Daryl D. Jensen, MAAA, FLMI** Vice Chairman of the Board Donald E. Krebs, MSM, CLU, ChFC Vice President, Sales and Marketing David A. Laird, CPA, FLMI Vice President and Controller Robert J. Milroy Vice President, Insurance Services and Assistant Secretary Mark A. Milton, FSA, CERA, MAAA Vice President and Actuary Richard D. Ropp, FLMI, ACS Vice President, Policy Administration A. Craig Mason, Jr. Vice President, General Counsel and Secretary Gary K. Hoffman, JD, CLU, FLMI Vice President, Associate General Counsel and Secretary Matthew R. O’Connor Secretary Robert J. Milroy Vice President, Underwriting and New Tracy W. Knapp Chief Financial Officer *William A. Schalekamp retired from the Company in October 2010 David A. Laird, CPA, FLMI Vice President and Controller **Daryl D. Jensen retired as Sunset Life Vice Chairman in April 2010 Business John L. Nogalski, CPA, FLMI Vice President, Taxes Kansas City Life Insurance Company Old American Insurance Company Sunset Life Insurance Company of America Sunset Financial Services Inc. Home Office 3520 Broadway Kansas City, MO 64111 Phone: 816-753-7000 Visit us on the Internet: www.kclife.com www.oaic.com www.sunsetlife.com www.sunsetfinancial.com 13 Sunset Financial Services Inc. Kansas City Life Insurance Company’s wholly-owned broker-dealer facilitates the purchase, sale and management of securities, such as variable universal life and variable annuity products. Through this alliance, Sunset Financial Services (SFS) provides insurance agents who are regis- tered representatives the flexibility to also market a wide range of securities products through a single relationship. Despite continued domestic and international market volatility, SFS performed well during 2010. Specifically, SFS recorded a 16% increase in gross revenue for 2010, following a 34% decrease in 2009. Assets under management also increased during 2010. Moving forward, SFS has laid the groundwork for increased sales and improved performance. Further, SFS will continue working with Kansas City Life to help recruit and retain quality agen- cies and producers, who are interested in selling securities products. Sunset Financial Services is Kansas City Life’s wholly-owned broker-dealer. These six Home Office associates work to provide representatives and securities customers with the services needed to secure a sound financial future. The six individuals represent more than 105 years of service to the Company. Pictured (from left): Janet Tate, senior brokerage services associate; Kelly Ul- lom, assistant vice president, chief compliance officer; Bruce Olberding, president; Tonja Coleman, operations services associate; Stephen Foster, project manager; and Susie Denney, assistant vice president, chief operations officer. Stephen Foster: 12 years of educating the field Since 1999, Stephen Foster has played a key role in bridging the gap between the Sunset Financial Services (SFS) Century II product portfolio, the Company’s field force and clients. As project manager for the portfolio, Stephen works to educate the field force so that they fully understand the value of each product and can effectively convey that information to their clients. “It is very rewarding that the knowledge I have passed on to our field force ultimately helps their clients achieve a better life through financial security,” Stephen says. “I enjoy know- ing that I’m helping them prepare for whatever the future holds.” In turn, Stephen’s work has helped bring out the best in him. “I enjoy working for a Company with such strong family values and it has taught me a lot about mutual respect,” says Stephen. “Having a strong foundation of integrity and dedication is rare these days and I am proud of that heritage.” 12 Corporate Highlights We’ll be with you … We’re Kansas City Life Since 1895, Kansas City Life Insur- ance Company has been a leader in the life insurance and financial services industry. The men and women of Kansas City Life are dedicated to offering the Com- pany’s shareholders, policyholders, general agents and agents with the superior products and quality services needed to build a solid financial plan. So who are we? We are a united Company, dedicated to the values of honesty and integrity, sound business practices and most of all Security Assured. For more than 115 years, Kansas City Life has built a foundation of success that is well documented. Through eco- nomic prosperity and challenges, our promise is clear: We’ll be with you … We’re Kansas City Life. 5 The Sales and Marketing Department provides the Company’s field force with excellent marketing service and support to assist in providing Secu- rity Assured to the Company’s policyholders. Representing the department are five individuals whose combined 107 years of service to the Company embody the mission of Security Assured. Pictured (from left): Cheryl Genova, advanced sales underwriter; Dale French, senior application sys- tems analyst; Leigh Ann Faherty, senior administrative assistant; Mary Jo Olinger, manager, sales materials; and Jim Wilcox (seated), assistant vice president, marketing services and product information. Dale French: 19 years of helping agencies succeed For almost 20 years, Dale French, senior application systems analyst, Sales and Marketing, has been helping Kansas City Life Insurance Company’s general agents and agents successfully grow their businesses. In fact, Dale manages all the sales-based production data for each field force member under contract with the Company. By tracking production, he is able to assist agents in planning for the future and setting long-term production goals. More importantly, Dale is not only supporting the Company’s field force in their efforts to grow their businesses, he believes he is helping policyholders gain financial security. “Indirectly, I feel like I’ve helped our policyholders achieve the life insurance and financial protection they need,” he says. “That definitely gives me a sense of accomplishment.” Since Dale joined Kansas City Life in 1992, he has witnessed first- hand how the Company has grown in its commitment to provide Secu- rity Assured to its policyholders. This dedication has always impressed him, especially during the recent economic challenges. “Witnessing the repercussions of the economic downturn has helped me appreciate what it means to work for a stable company like Kansas City Life. I will always value that.” Individual Insurance Kansas City Life Insurance Company’s Individual In- surance segment provides financial security to con- sumers in 48 states. Life insurance products are distributed through two me- diums: the Company’s field force, and through alliance with third-party marketing arrangements. Company’s field force The Company’s field force is represented by indepen- dent agencies, which are operated by general agents and agents across the U.S. Kansas City Life provides each agency with the prod- uct portfolio and marketing support necessary to suc- ceed in serving consumers in their local markets. The Company’s expanding prod- uct portfolio and individual one-on-one support from the Home Office are attrac- tive recruiting resources, set- ting Kansas City Life apart from many in the industry. Third-party alliances Independent alliances with American Republic In 1991, Old American joined forces with Kansas City Life Insurance Company, launching a new chapter in the Company’s history. Walter E. Bixby, a fourth generation member of the Bixby family leadership, has served as the Company’s President for nearly 15 years. Old American accounted for 26% of Kansas City Life’s consolidated insurance revenues in 2010, 2009 and 2008. Old American had a 29% increase in new premiums during 2010, following a 20% increase in new premiums in 2009. In fact, 2010 proved to be a banner year for Old American in sales, following consecutive years of remarkable success. The Company recorded more sales in each period during 2010 relative to 2009. Contributing to this success was the experience, commitment and loyalty of veteran general agent managers who provided the foundation for increased sales momentum. During 2010, four of the Company’s 25 general agencies produced at least 2,000 new policies during the year. Additionally, two of the Company’s agencies, McAfee and Associates in Hannibal, Mo., and Whittenburg Insurance and Investment Group in Alpine, Utah, generated more than 3,000 new policies. Old American continues to focus on the recruiting and development of new agencies and agents. The six newly-hired general agencies in 2010 produced an impressive total of new sales. In addition, approximately 40% of all new policies were produced by agents in their first three years of service with the Company. A key to the success of new agencies and agents, along with existing agencies, is the unique ability of Old American to generate sales leads. Old American has a deep and successful history as a pioneer in direct marketing techniques and processes. This ability remains a strategic advantage for the Company and its field force, particularly in aiding the success of new agencies and agents. Moving forward, the Company plans to continue to expand its sales territories, increase its recruiting efforts, remain focused on agent productivity for its general agencies and hold steadfast in its approach to support the field force through its lead generation efforts. As always, Old American will remain focused on its mission that has guided the Company for more than seven decades – delivering peace of mind to the senior market. 11 The combined efforts of the New Business and Customer Services Departments supply the Company’s policyholders and field force with outstanding, one-on-one support. With a combined total of 145 years of experience, these five individuals have dedicated much of their lives to service and Kansas City Life. Pictured (from left) Randy Hays, direc- tor, underwriting research; Beth Bolyard, senior underwriting consultant; Dave Toney, senior service specialist; Joyce Seuferling, manager, New Business; and Marta Conley, senior service specialist. Joyce Seuferling: 40 years of managing success Much can change during the course of 40 years. For Kansas City Life Insurance Com- pany’s New Business Department, one con- stant remains throughout four decades: Joyce Seuferling has anchored a staff that directly impacts policyholders, general agents and agents. As manager for New Business and Training, Joyce fulfills many responsi- bilities that include helping to keep new and potential policyholder informa- tion moving through the application process from start to finish. With 40 years of experience, Joyce successfully oversees a department in which meticu- lous accuracy and timeliness are imperative. “We have a tremendous responsibility to our policyholders and our field force,” Joyce says. “What we do impacts our distribution and how they inter- act with their clients, so it’s important to us and we take our responsibility seriously.” Forty years can also change what a person values most. While Joyce be- lieves she has always known the value of life insurance, she discovered its true impact when Kansas City Life began publishing “Real Life Stories” designed to illustrate how life insurance impacted real people. “When we started circulating those stories, it hit me that I wasn’t just helping unknown people I’ll never meet. The stories really showed me that what we do has a direct impact on people’s lives, which is gratifying,” she says. 6 Old American Insurance Company Old American Insurance Company opened its doors in 1939 to respond to a market need it still serves today – the senior market. In its rich history, the Company has consistently been recognized in the final expense industry for its considerable expertise and success at marketing final expense insurance products through its nationwide general agency system with exclusive territories. Old American Insurance Company supports its policyholders and field force through a variety of departments, including the Customer Services, Marketing and New Business Departments. With more than 154 years of combined service, these associates are leaders for their departments. Pictured (from left): Denise Ramsey, telephone inspector; Karla Tolbert, senior services associ- ate; Kathy Meissen, agency services program coordinator; Mike Kershner, assistant vice president, New Business; Holly Ropp, assistant vice president, marketing communications; and Barbara Shaw, senior services associate. Kathy Meissen, an Old American staple for 35 years For 35 years, Kathy Meissen has dedicated her service to Old American Insurance Com- pany. As the agency services project coordinator for Sales and Marketing, Kathy’s days are oc- cupied with tasks from building recruiting and marketing campaigns to managing production numbers. For three and-a-half decades, Kathy has helped Old American grow, while helping policyholders achieve peace of mind. One of her favorite projects is to assist with the Company’s annual New Agent of Merit seminar, where newly contracted agents attend a two-day conference at the Home Office. “Watching these new agents learn and seeing their enthusiasm for the industry is amaz- ing,” says Kathy. “They leave here with a new-found fire to be successful, which is impressive.” That success has left an indelible mark on Kathy, and it drives her to continue to support the Company. “Old American has stayed on course despite a multitude of changes since I started,” she says. “It’s amazing to have witnessed these changes, and to watch how the Company has consistently stood by its standards and is just as, if not more, successful as it was when I first joined.” Insurance Company and GuideOne Mutual Insurance Company allow agents from both compa- nies to distribute Kansas City Life’s products. These agreements provide agents from both compa- nies with the complementary products and services they need to offer financial security to their clients. Life insurance sales Life insurance sales and new business production at Kansas City Life are measured by new pre- miums recorded and new deposits received. Premiums include receipts from traditional indi- vidual life insurance and immediate annuity products. Deposits are received from universal life insurance, variable universal life insurance and fixed deferred and variable annuity products. The Individual Insurance segment generated $69.2 million in total premiums for 2010, remaining flat compared to 2009. Total renewal premiums increased 1% in 2010, compared to a 1% de- crease in the previous year. Total new deposits declined $3.2 million or 3% in 2010, following a $34.8 million or 51% in- crease in 2009. The decline in 2010 was due to an $8.9 million or 12% decrease in new fixed deferred annuity deposits. Partially offsetting the decrease in new deposits in 2010 were the following improvements: new universal life deposits increased $3.5 million or 35%, new vari- able annuity deposits increased $2.0 million or 13%, and new variable universal life deposits increased $0.2 million or 19%. Total renewal deposits increased $1.8 million or 1% in 2010, due to a $5.7 million or 21% in- crease in fixed deferred annuity deposits. This increase largely resulted from higher sales of this product than experienced during 2009. The increases in sales of fixed deferred annuities during 2009 were attributed to consumer preferences for fixed-rate products, resulting from the volatility in the equity markets. This volatility and the difficult economic environment were also significant factors in the declines in sales of variable annuities, variable universal life and universal life. Future growth The Individual Insurance segment is an essential part of Kansas City Life’s core business, repre- senting a majority of the Company’s revenue and net income. The Company plans to continue to grow the segment by recruiting talented general agents and agents. Additions to the product portfolio, increased focus on sales development and enhanced marketing support are elements that will be emphasized to attract new field representatives. As an additional point of emphasis, the Company will also seek potential third-party market- ing relationships, such as those established with American Republic and GuideOne, to enhance future sales. 10 7 The segment’s core distribution and third-party arrangements combined to set a sales record for Group Insurance including an increase in new premiums of 22% over 2009. In 2010, the Group Insurance segment generated 20% of the Company’s consolidated insurance revenues, the same proportion as in 2009. Total Group premiums increased $1.3 million or 2% in 2010, following an $0.8 million or 1% increase in 2009. In addition, the Company uses reinsurance in its life and disability product lines to help mitigate risk. Reinsurance on premiums increased $0.9 million or 11% in 2010, following a $0.6 million or 8% increase in 2009. The increase in 2010 was primarily due to an increase in short-term disability business that is highly reinsured. The increase in 2009 was largely due to short- and long-term disability business sold through a third-party arrangement. Moving forward, the Group Insurance segment is focused on three primary areas of emphasis to help improve sales: 1. Growing in-force business, both through the Company’s sales representatives as well as select third-party marketing arrangements. 2. 3. Improving administrative efficiency through increased use of customer- interface technology, which is designed to reduce expenses and improve customer service. Enhancing the segment’s product portfolio, through delivery of new product offerings and flexible options to meet the dynamic needs of the employee benefits market. Group Insurance Kansas City Life Insur- ance Company offers several insurance prod- ucts in the Group Insur- ance segment, including dental, life, vision, and short- and long-term disability insurance. These offerings encom- pass both traditional, employer-funded group insurance, as well as vol- untary, employee-paid products. The Group Insurance segment markets its products primarily to small- and mid-size or- ganizations. Group prod- ucts are sold through sales representatives who target a nationwide network of independent general agents and group brokers, along with the Company’s career gen- eral agents. This sales network is this segment’s core distribution sys- tem. The Company also markets Group products through select third-party marketing arrangements. The Group Department is dedicated to providing products and services designed to offer benefit-solutions to both employees and employers. These five department representatives combine for more than 102 years of service to the Company. Pictured (from left) Talva Parker, assistant vice president, Group; Sheli Paull, manager Group sales support; Jody Robinson, manager, Group client services (seated); Debbie Petroll, senior Group sales coordinator; and Renee Medellin, Group underwriter (seated). Twenty-six years and counting: Renee Medellin thrives under pressure As a member of Kansas City Life’s Group In- surance Department, Renee Medellin’s responsibil- ities keep her behind the scenes of the day-to-day operation. But that doesn’t mean the role she plays is any less important as those in the forefront. As a Group Underwriter since 1988, Renee works in a fast-paced, deadline-oriented envi- ronment that relies on her to excel under pressure. She is responsible for working directly with the Group Insurance segment’s sales force across the U.S. to ensure its products, dental, vision, short- and long-term disability and life insurance, are quoted properly. She and her team are essential to provide quick and accurate price quotes in a very competitive market. She is proud of helping people gain their benefits. “In this or any economy, it is absolutely imperative for people to have benefits,” Renee says. “We play an important role by providing those prod- ucts, which is rewarding to know that I’m making a difference.” Renee’s days are often spent adjusting to what any given day may bring, but that doesn’t slow her down. Instead, she concentrates on one quote at a time, one client at a time knowing that she’s making a difference. “People recognize our history, and they understand what we stand for,” she says. “I’m proud to work for Kansas City Life.” 8 9 The segment’s core distribution and third-party arrangements combined to set a sales record for Group Insurance including an increase in new premiums of 22% over 2009. In 2010, the Group Insurance segment generated 20% of the Company’s consolidated insurance revenues, the same proportion as in 2009. Total Group premiums increased $1.3 million or 2% in 2010, following an $0.8 million or 1% increase in 2009. In addition, the Company uses reinsurance in its life and disability product lines to help mitigate risk. Reinsurance on premiums increased $0.9 million or 11% in 2010, following a $0.6 million or 8% increase in 2009. The increase in 2010 was primarily due to an increase in short-term disability business that is highly reinsured. The increase in 2009 was largely due to short- and long-term disability business sold through a third-party arrangement. Moving forward, the Group Insurance segment is focused on three primary areas of emphasis to help improve sales: 1. Growing in-force business, both through the Company’s sales representatives as well as select third-party marketing arrangements. 2. 3. Improving administrative efficiency through increased use of customer- interface technology, which is designed to reduce expenses and improve customer service. Enhancing the segment’s product portfolio, through delivery of new product offerings and flexible options to meet the dynamic needs of the employee benefits market. Group Insurance Kansas City Life Insur- ance Company offers several insurance prod- ucts in the Group Insur- ance segment, including dental, life, vision, and short- and long-term disability insurance. These offerings encom- pass both traditional, employer-funded group insurance, as well as vol- untary, employee-paid products. The Group Insurance segment markets its products primarily to small- and mid-size or- ganizations. Group prod- ucts are sold through sales representatives who target a nationwide network of independent general agents and group brokers, along with the Company’s career gen- eral agents. This sales network is this segment’s core distribution sys- tem. The Company also markets Group products through select third-party marketing arrangements. The Group Department is dedicated to providing products and services designed to offer benefit-solutions to both employees and employers. These five department representatives combine for more than 102 years of service to the Company. Pictured (from left) Talva Parker, assistant vice president, Group; Shelli Paul, senior Group sales coordinator; Jody Robinson, manager, Group contract and customer services (seated); Debbie Petroll, senior Group sales coordinator; and Renee Medellin, Group underwriter (seated). Twenty-six years and counting: Renee Medellin thrives under pressure As a member of Kansas City Life’s Group In- surance Department, Renee Medellin’s responsibil- ities keep her behind the scenes of the day-to-day operation. But that doesn’t mean the role she plays is any less important as those in the forefront. As a Group Underwriter since 1988, Renee works in a fast-paced, deadline-oriented environment that relies on her to excel under pressure. She is responsible for working directly with the Group Insurance segment’s sales force across the U.S. to ensure its products, den- tal, vision, short- and long-term disability and life insurance, are quoted properly. She and her team are essential to provide quick and accurate price quotes in a very competitive market. She is proud of helping people gain their benefits. “In this or any economy, it is absolutely imperative for people to have benefits,” Renee says. “We play an important role by providing those prod- ucts, which is rewarding to know that I’m making a difference.” Renee’s days are often spent adjusting to what any given day may bring, but that doesn’t slow her down. Instead, she concentrates on one quote at a time, one client at a time knowing that she’s making a difference. “People recognize our history, and they understand what we stand for,” she says. “I’m proud to work for Kansas City Life.” 8 9 Old American Insurance Company Old American Insurance Company opened its doors in 1939 to respond to a market need it still serves today – the senior market. In its rich history, the Company has consistently been recognized in the final expense industry for its considerable expertise and success at marketing final expense insurance products through its nationwide general agency system with exclusive territories. Old American Insurance Company supports its policyholders and field force through a variety of departments, including the Customer Services, Marketing and New Business Departments. With more than 154 years of combined service, these associates are leaders for their departments. Pictured (from left): Denise Ramsey, telephone inspector; Karla Tolbert, senior services associ- ate; Kathy Meissen, agency services program coordinator; Mike Kershner, assistant vice president, New Business; Holly Ropp, assistant vice president, marketing communications; and Barbara Shaw, senior services associate. Kathy Meissen: An Old American staple for 35 years For 35 years, Kathy Meissen has dedicated her service to Old American Insurance Com- pany. As the agency services project coordinator for Sales and Marketing, Kathy’s days are oc- cupied with tasks from building recruiting and marketing campaigns to managing production numbers. For three and-a-half decades, Kathy has helped Old American grow, while helping policyholders achieve peace of mind. One of her favorite projects is to assist with the Company’s annual New Agent of Merit seminar, where newly contracted agents attend a two-day conference at the Home Office. “Watching these new agents learn and seeing their enthusiasm for the industry is amaz- ing,” says Kathy. “They leave here with a new-found fire to be successful, which is impressive.” That success has left an indelible mark on Kathy, and it drives her to continue to support the Company. “Old American has stayed on course despite a multitude of changes since I started,” she says. “It’s amazing to have witnessed these changes, and to watch how the Company has consistently stood by its standards and is just as, if not more, successful as it was when I first joined.” Insurance Company and GuideOne Mutual Insurance Company allow agents from both compa- nies to distribute Kansas City Life’s products. These agreements provide agents from both compa- nies with the complementary products and services they need to offer financial security to their clients. Life insurance sales Life insurance sales and new business production at Kansas City Life are measured by new pre- miums recorded and new deposits received. Premiums include receipts from traditional indi- vidual life insurance and immediate annuity products. Deposits are received from universal life insurance, variable universal life insurance and fixed deferred and variable annuity products. The Individual Insurance segment generated $69.2 million in total premiums for 2010, remaining flat compared to 2009. Total renewal premiums increased 1% in 2010, compared to a 1% de- crease in the previous year. Total new deposits declined $3.2 million or 3% in 2010, following a $34.8 million or 51% in- crease in 2009. The decline in 2010 was due to an $8.9 million or 12% decrease in new fixed deferred annuity deposits. Partially offsetting the decrease in new deposits in 2010 were the following improvements: new universal life deposits increased $3.5 million or 35%, new vari- able annuity deposits increased $2.0 million or 13%, and new variable universal life deposits increased $0.2 million or 19%. Total renewal deposits increased $1.8 million or 1% in 2010, due to a $5.7 million or 21% in- crease in fixed deferred annuity deposits. This increase largely resulted from higher sales of this product than experienced during 2009. The increases in sales of fixed deferred annuities during 2009 were attributed to consumer preferences for fixed-rate products, resulting from the volatility in the equity markets. This volatility and the difficult economic environment were also significant factors in the declines in sales of variable annuities, variable universal life and universal life. Future growth The Individual Insurance segment is an essential part of Kansas City Life’s core business, repre- senting a majority of the Company’s revenue and net income. The Company plans to continue to grow the segment by recruiting talented general agents and agents. Additions to the product portfolio, increased focus on sales development and enhanced marketing support are elements that will be emphasized to attract new field representatives. As an additional point of emphasis, the Company will also seek potential third-party market- ing relationships, such as those established with American Republic and GuideOne, to enhance future sales. 10 7 Individual Insurance Kansas City Life Insurance Company’s Individual In- surance segment provides financial security to con- sumers in 48 states. Life insurance products are distributed through two me- diums: the Company’s field force, and through alliance with third-party marketing arrangements. Company’s field force The Company’s field force is represented by indepen- dent agencies, which are operated by general agents and agents across the U.S. Kansas City Life provides each agency with the prod- uct portfolio and marketing support necessary to suc- ceed in serving consumers in their local markets. The Company’s expanding prod- uct portfolio and individual one-on-one support from the Home Office are attrac- tive recruiting resources, set- ting Kansas City Life apart from many in the industry. Third-party alliances Independent alliances with American Republic In 1991, Old American joined forces with Kansas City Life Insurance Company, launching a new chapter in the Company’s history. Walter E. Bixby, a fourth generation member of the Bixby family leadership, has served as the Company’s President for nearly 15 years. Old American accounted for 26% of Kansas City Life’s consolidated insurance revenues in 2010, 2009 and 2008. Old American had a 29% increase in new premiums during 2010, following a 20% increase in new premiums in 2009. In fact, 2010 proved to be a banner year for Old American in sales, following consecutive years of remarkable success. The Company recorded more sales in each period during 2010 relative to 2009. Contributing to this success was the experience, commitment and loyalty of veteran general agent managers who provided the foundation for increased sales momentum. During 2010, four of the Company’s 25 general agencies produced at least 2,000 new policies during the year. Additionally, two of the Company’s agencies, McAfee and Associates in Hannibal, Mo., and Whittenburg Insurance and Investment Group in Alpine, Utah, generated more than 3,000 new policies. Old American continues to focus on the recruiting and development of new agencies and agents. The six newly-hired general agencies in 2010 produced an impressive total of new sales. In addition, approximately 40% of all new policies were produced by agents in their first three years of service with the Company. A key to the success of new agencies and agents, along with existing agencies, is the unique ability of Old American to generate sales leads. Old American has a deep and successful history as a pioneer in direct marketing techniques and processes. This ability remains a strategic advantage for the Company and its field force, particularly in aiding the success of new agencies and agents. Moving forward, the Company plans to continue to expand its sales territories, increase its recruiting efforts, remain focused on agent productivity for its general agencies and hold steadfast in its approach to support the field force through its lead generation efforts. As always, Old American will remain focused on its mission that has guided the Company for more than seven decades – delivering peace of mind to the senior market. 11 The combined efforts of the New Business and Customer Services Departments supply the Company’s policyholders and field force with outstanding, one-on-one support. With a combined total of 145 years of experience, these five individuals have dedicated much of their lives to service and Kansas City Life. Pictured (from left) Randy Hays, direc- tor, underwriting research; Beth Bolyard, senior underwriting consultant; Dave Toney, senior service specialist; Joyce Seuferling, manager, New Business; and Marta Conley, senior service specialist. Joyce Seuferling: 40 years of managing success Much can change during the course of 40 years. For Kansas City Life Insurance Com- pany’s New Business Department, one con- stant remains throughout four decades: Joyce Seuferling has anchored a staff that directly impacts policyholders, general agents and agents. As manager for New Business and Training, Joyce fulfills many responsi- bilities that include helping to keep new and potential policyholder informa- tion moving through the application process from start to finish. With 40 years of experience, Joyce successfully oversees a department in which meticu- lous accuracy and timeliness are imperative. “We have a tremendous responsibility to our policyholders and our field force,” Joyce says. “What we do impacts our distribution and how they inter- act with their clients, so it’s important to us and we take our responsibility seriously.” Forty years can also change what a person values most. While Joyce be- lieves she has always known the value of life insurance, she discovered its true impact when Kansas City Life began publishing “Real Life Stories” designed to illustrate how life insurance impacted real people. “When we started circulating those stories, it hit me that I wasn’t just helping unknown people I’ll never meet. The stories really showed me that what we do has a direct impact on people’s lives, which is gratifying,” she says. 6 Sunset Financial Services Inc. Kansas City Life Insurance Company’s wholly-owned broker-dealer facilitates the purchase, sale and management of securities, such as variable universal life and variable annuity products. Through this alliance, Sunset Financial Services (SFS) provides insurance agents who are regis- tered representatives the flexibility to also market a wide range of securities products through a single relationship. Despite continued domestic and international market volatility, SFS performed well during 2010. Specifically, SFS recorded a 16% increase in gross revenue for 2010, following a 34% decrease in 2009. Assets under management also increased during 2010. Moving forward, SFS has laid the groundwork for increased sales and improved performance. Further, SFS will continue working with Kansas City Life to help recruit and retain quality agen- cies and producers, who are interested in selling securities products. Sunset Financial Services is Kansas City Life’s wholly-owned broker-dealer. These six Home Office associates work to provide representatives and securities customers with the services needed to secure a sound financial future. The six individuals represent more than 105 years of service to the Company. Pictured (from left): Janet Tate, senior brokerage services associate; Kelly Ul- lom, assistant vice president, chief compliance officer; Bruce Olberding, president; Tonja Coleman, operations services associate; Stephen Foster, project manager; and Susie Denney, assistant vice president, chief operations officer. Stephen Foster: 12 years of educating the field Since 1999, Stephen Foster has played a key role in bridging the gap between the Sunset Financial Services (SFS) Century II product portfolio, the Company’s field force and clients. As project manager for the portfolio, Stephen works to educate the field force so that they fully understand the value of each product and can effectively convey that information to their clients. “It is very rewarding that the knowledge I have passed on to our field force ultimately helps their clients achieve a better life through financial security,” Stephen says. “I enjoy know- ing that I’m helping them prepare for whatever the future holds.” In turn, Stephen’s work has helped bring out the best in him. “I enjoy working for a Company with such strong family values and it has taught me a lot about mutual respect,” says Stephen. “Having a strong foundation of integrity and dedication is rare these days and I am proud of that heritage.” 12 Corporate Highlights We’ll be with you … We’re Kansas City Life Since 1895, Kansas City Life Insur- ance Company has been a leader in the life insurance and financial services industry. The men and women of Kansas City Life are dedicated to offering the Com- pany’s shareholders, policyholders, general agents and agents with the superior products and quality services needed to build a solid financial plan. So who are we? We are a united Company, dedicated to the values of honesty and integrity, sound business practices and most of all Security Assured. For more than 115 years, Kansas City Life has built a foundation of success that is well documented. Through eco- nomic prosperity and challenges, our promise is clear: We’ll be with you … We’re Kansas City Life. 5 The Sales and Marketing Department provides the Company’s field force with excellent marketing service and support to assist in providing Secu- rity Assured to the Company’s policyholders. Representing the department are five individuals whose combined 107 years of service to the Company embody the mission of Security Assured. Pictured (from left): Cheryl Genova, advanced sales underwriter; Dale French, senior application sys- tems analyst; Leigh Ann Faherty, senior administrative assistant; Mary Jo Olinger, manager, sales materials; and Jim Wilcox (seated), assistant vice president, marketing services and product information. Dale French: 19 years of helping agencies succeed For almost 20 years, Dale French, senior application systems analyst, Sales and Marketing, has been helping Kansas City Life Insurance Company’s general agents and agents successfully grow their businesses. In fact, Dale manages all the sales-based production data for each field force member under contract with the Company. By tracking production, he is able to assist agents in planning for the future and setting long-term production goals. More importantly, Dale is not only supporting the Company’s field force in their efforts to grow their businesses, he believes he is helping policyholders gain financial security. “Indirectly, I feel like I’ve helped our policyholders achieve the life insurance and financial protection they need,” he says. “That definitely gives me a sense of accomplishment.” Since Dale joined Kansas City Life in 1992, he has witnessed first- hand how the Company has grown in its commitment to provide Secu- rity Assured to its policyholders. This dedication has always impressed him, especially during the recent economic challenges. “Witnessing the repercussions of the economic downturn has helped me appreciate what it means to work for a stable company like Kansas City Life. I will always value that.” The Kansas City Life Group of Companies Kansas City Life Insurance Company Since 1895, Kansas City Life Insurance Company (www.kclife.com) has been dedi- cated to the present and future financial security of its customers. Kansas City Life and its subsidiaries provide financial services, including insurance and investments, to consumers throughout 48 states and the District of Columbia.* More than 2,200 general agents and agents serve individuals, families, small businesses and corpora- tions with a diverse range of products including universal life, term life, whole life, variable life insurance,* variable annuities,* fixed deferred annuities and group prod- ucts. Kansas City Life has been providing Security Assured for more than 115 years. Old American Insurance Company Since 1939, the mission of Old American Insurance Company (www.oaic.com) has been to provide peace of mind to the senior market and, in turn, enhance the quality of life for policyholders and their beneficiaries. Agents assist individuals ages 50 – 85 through final arrangements planning, charitable giving life insurance, and Social Security and retirement income replacement insurance. In addition, Old American began targeting individuals ages 20 to 65 in 2009 with its Level Term 20 life insur- ance product. The subsidiary operates in 46 states and the District of Columbia. Sunset Financial Services Inc.* Sunset Financial Services (www.sunsetfinancial.com) is a full-service brokerage firm and registered investment advisor. Sunset Financial Services’ registered representatives are also licensed with Kansas City Life. Investment options include variable products, mutual funds, stocks and bonds, money market funds, CDs and asset management products. Sunset Life Insurance Company of America Sunset Life (www.sunsetlife.com) was originally founded in 1937 in Olympia, Wash. Kansas City Life purchased Sunset Life in 1974 and its operations were consolidated into the Company’s Home Office in 1999. The Sunset Life sales force was integrated into the Kansas City Life sales force in 2006. Financial Ratings, evaluated by A.M. Best Kansas City Life Insurance Company – A (Excellent; Stable Outlook) Old American Insurance Company – B++ (Good; Positive Outlook) Sunset Life Insurance Company – A (Excellent; Stable Outlook) These ratings represent A.M. Best’s opinion of the financial strength and stability of Kansas City Life, Old American and Sunset Life Insurance Companies and each com- pany’s ability to meet ongoing obligations to policyholders, as of June 2010. There are 15 financial strength ratings offered by A.M Best, ranging from A++ (superior) to F (in liquidation). Please refer to the Company’s Form 10-K and Proxy Statement as filed with the Securities and Exchange Commission (SEC). 4 *Securities are distributed through Sunset Financial Services Inc., 3520 Broadway, Kansas City, MO 64111, 816-753-7000. Member FINRA and SIPC. Senior Officers Kansas City Life Insurance Company R. Philip Bixby President, Chief Executive Officer and Chairman of the Board Walter E. Bixby, LLIF Vice Chairman of the Board Kansas City Life Insurance Company President Old American Insurance Company Charles R. Duffy Jr., FLMI Senior Vice President, Operations Tracy W. Knapp Senior Vice President, Finance Donald E. Krebs, MSM, CLU, ChFC Senior Vice President, Sales and Marketing Mark A. Milton, FSA, CERA, MAAA Senior Vice President and Actuary William A. Schalekamp, JD, CLU, FLMI* Senior Vice President, General Counsel and Secretary Gregory M. Galvin Vice President, Real Estate David A. Laird, CPA, FLMI Vice President and Controller Bruce G. Olberding Vice President, Broker Dealer Robert J. Milroy Vice President, Underwriting and New Richard D. Ropp, FLMI, ACS Vice President, Customer Services and Claims Stephen E. Ropp Vice President, Operations Services J. Todd Salash Vice President, Computer Information Services Dan L. Schick, CPA, CLU, FLMI Vice President and Auditor Jeffrey M. Seeman Vice President, Group Philip A. Williams, CFA Vice President, Securities Old American Insurance Company R. Philip Bixby Chairman of the Board Walter E. Bixby, LLIF President John C. Alderton Vice President, Sales Business Richard D. Ropp, FLMI, ACS Vice President, Customer Services and Claims Sunset Life Insurance Company of America R. Philip Bixby President, Chairman of the Board Walter E. Bixby, LLIF Vice Chairman of the Board Daryl D. Jensen, MAAA, FLMI** Vice Chairman of the Board Donald E. Krebs, MSM, CLU, ChFC Vice President, Sales and Marketing David A. Laird, CPA, FLMI Vice President and Controller Robert J. Milroy Vice President, Insurance Services and Assistant Secretary Mark A. Milton, FSA, CERA, MAAA Vice President and Actuary Richard D. Ropp, FLMI, ACS Vice President, Policy Administration A. Craig Mason, Jr. Vice President, General Counsel and Secretary Gary K. Hoffman, JD, CLU, FLMI Vice President, Associate General Counsel and Secretary Matthew R. O’Connor Secretary Robert J. Milroy Vice President, Underwriting and New Tracy W. Knapp Chief Financial Officer *William A. Schalekamp retired from the Company in October 2010 David A. Laird, CPA, FLMI Vice President and Controller **Daryl D. Jensen retired as Sunset Life Vice Chairman in April 2010 Business John L. Nogalski, CPA, FLMI Vice President, Taxes Kansas City Life Insurance Company Old American Insurance Company Sunset Life Insurance Company of America Sunset Financial Services Inc. Home Office 3520 Broadway Kansas City, MO 64111 Phone: 816-753-7000 Visit us on the Internet: www.kclife.com www.oaic.com www.sunsetlife.com www.sunsetfinancial.com 13 Board of Directors – Kansas City Life Insurance Company R. Philip Bixby President, Chief Executive Officer and Chairman of the Board Kansas City Life Insurance Company Kansas City, Missouri John C. Cozad President Cozad Company, LLC Platte City, Missouri Richard L. Finn Walter E. Bixby, LLIF Vice Chairman of the Board Kansas City Life Insurance Company President Retired Senior Vice President, Finance Kansas City Life Insurance Company Kansas City, Missouri Cecil R. Miller, CPA Retired Partner KPMG LLP Kansas City, Missouri Mark A. Milton, FSA, CERA, MAAA Senior Vice President and Actuary Kansas City Life Insurance Company Kansas City, Missouri Old American Insurance Company Nancy Bixby Hudson Bradford T. Nordholm Kansas City, Missouri Kevin G. Barth President and Chief Operating Officer Commerce Bank Kansas City, Missouri William R. Blessing Retired Senior Vice President, Corporate Strategy and Development Embarq Overland Park, Kansas Michael Braude Retired President and Chief Executive Officer Kansas City Board of Trade Kansas City, Missouri Investor Lander, Wyoming Daryl D. Jensen, MAAA, FLMI Retired Vice President of Finance Western Institutional Review Board Olympia, Washington Retired President and Vice Chairman of the Board Sunset Life Insurance Company of America Kansas City, Missouri Tracy W. Knapp Senior Vice President, Finance Kansas City Life Insurance Company Kansas City, Missouri Chief Executive Officer Starwood Energy Group Global LLC Greenwich, Connecticut William A. Schalekamp, JD, CLU, FLMI Retired Senior Vice President, General Counsel and Secretary Kansas City Life Insurance Company Kansas City, Missouri and variable universal life products increased $3.7 million or 33% for the year compared to the prior year. The growth in overall new life insurance sales was primarily attributable to positive results being attained from the Company’s recruiting efforts and the improved productivity of general agents and agents, along with an improving economy. The Company experienced realized investment gains of $0.5 million for the year. This represented significant improvement from the realized losses recognized one year ear- lier. The low interest rate and improving overall credit environment resulted in improved fair values within the Company’s investment portfolio and further strengthened the Com- pany’s capital position. Specifically, the investment portfolio had a net unrealized gain position of $110.2 million at December 31, 2010, an improvement of $110.0 million from December 31, 2009. The Company’s stockholders’ equity improved 8% during the year, further strengthening the Company’s capital position. In addition, the Company continues to focus resources on the training and development of its field force. Specifically, the Company places a priority on recruiting new general agents and agents, both of which are essential for the Company’s long-term success. While many in the industry have abandoned the agency career-based system, the Com- pany believes this system sets it apart from competitors in the life insurance industry. During 2010, 30 new general agents joined the Company as valued partners. The Company believes that its relationships with its shareholders, policyholders, general agents and agents, and associates are the foundation from which the Company builds its future. Kansas City Life continues to provide competitive products, superior customer service, financial strength, specialized training and superior sales and marketing support. Kansas City Life is a company that has proven its financial strength over time and contin- ues to provide value-oriented products, throughout economic cycles. R. Philip Bixby President, Chief Executive Officer and Chairman of the Board 14 Board of Directors 3 Message from the President Kansas City Life Insurance Company has faced a vari- ety of opportunities and challenges during its 115-year history. While the economy generally improved dur- ing 2010, many of the issues that were evident in 2009 remained. The low interest rate environment continues to present special challenges to the financial industry and, in particular, the insurance sector. However, Kan- sas City Life has responded to this adversity by staying focused on making the best decisions for the long term and its fundamental mission of providing Security Assured to its policyholders. The Company is focused on providing consumers with the products they need to help assure financial security. In 2010, the Lifetime Income Rider was introduced in response to consumer demand. As many consumers watched their retirement portfolio dwindle during the recent recession, this new product rider was specifically designed to provide guaranteed income for life and income flexibility from a Kansas City Life fixed annuity. Moving forward, the Company will explore additional products and riders to enhance its already strong portfolio. The Company recorded net income for 2010 of $22.3 million or $1.95 per share, an increase from $10.7 million or $0.93 per share for the same period in 2009. The changes that impacted the year included a $10.6 million improvement in realized investment gains and losses, growth in insurance revenues, lower amortization of deferred acquisi- tion costs and reduced operating expenses. Partially offsetting these improvements was an increase in policyholder benefits. Total life insurance premiums increased $2.5 million or 2% for the year compared to the prior year, as new life insurance premiums increased $2.3 million or 16%. The growth was driven by an increase of 29% in life insurance premiums from new sales in the Old American segment. In addition, total life insurance premiums improved from increases in renewal premiums on individual life insurance products. Deposits from new universal life Stockholder Information CORPORATE HEADQUARTERS Kansas City Life Insurance Company 3520 Broadway Post Office Box 219139 Kansas City, Missouri 64121-9139 Telephone: 816-753-7000 Fax: 816-753-4902 Internet: http://www.kclife.com E-mail: kclife@kclife.com NOTICE OF ANNUAL MEETING The annual meeting of stockholders will be held at 9 a.m. on Thursday, April 21, 2011 at Kansas City Life Insurance Company’s corporate headquarters. TRANSFER AGENT Janice Poe, Stock Agent and Assistant Secretary Kansas City Life Insurance Company Post Office Box 219139 Kansas City, Missouri 64121-9139 10-K REQUEST Stockholders may request a free copy of Kansas City Life’s Form 10-K, as filed with the Securities and Exchange Commission, by writing to Secretary, Kansas City Life Insurance Company. SECURITY HOLDERS As of Jan. 31, 2011, Kansas City Life had approximately 2,500 security holders, including individual participants in security position listings. Please refer to the Company’s Form 10-K and Proxy Statement as filed with the Secu- rities and Exchange Commission (SEC). Stock and Dividend information Stock and Dividend Information The following table presents the high and low prices for the Company’s common stock for the periods indicated and the dividends declared per share and paid during such periods. The Company’s common stock is traded on the NASDAQ Capital Market under the symbol “KCLI”. 2010 First quarter Second quarter Third quarter Fourth quarter 2009 First quarter Second quarter Third quarter Fourth quarter High Low $ 33.50 35.85 32.63 33.77 $ 24.86 27.84 28.58 30.42 $ 44.63 40.22 37.75 33.31 $ 15.20 19.70 25.39 25.00 Dividend Paid $ $ $ $ 0.27 0.27 0.27 0.27 1.08 0.27 0.27 0.27 0.27 1.08 A quarterly dividend of $0.27 per share was paid Feb. 9, 2011. NASDAQ market quotations are compiled according to Company records and may reflect inter-dealer prices, without markup, markdown or commission and may not necessarily represent actual transac- tions. 2 15 We’ll Be With You KANSAS CITY LIFE INSURANCE COMPANY HOME OFFICE: KANSAS CITY, MISSOURI 2010 Annual Report 

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