10-Q 1 sept2002.txt AMERICO LIFE, INC. SEPTEMBER 30, 2002 FORM 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934* For the Quarterly Period Ended September 30, 2002 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number: 33-64820 AMERICO LIFE, INC. (exact name of registrant as specified in its charter) MISSOURI (State of other jurisdiction of incorporation or organization) 43-1627599 (I.R.S. Employer Identification No.) 1055 BROADWAY KANSAS CITY, MISSOURI 64105 (Address of principal executive offices) (816) 391-2000 (Registrant's telephone number, including area code) 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. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class and Title of Shares Outstanding Capital Stock as of November 13, 2002 ------------- ----------------------- Common Stock $1.00 Par Value 10,000 * Registrant is a voluntary filer under Section 15(d). AMERICO LIFE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In thousands - unaudited) September 30, December 31, 2002 2001 ---- ---- Assets Investments: Fixed maturities: Held to maturity, at amortized cost (market: $654,453 and $712,314) $ 601,776 $ 694,889 Available for sale, at market (amortized cost: $1,473,297 and $1,308,773) 1,571,979 1,321,040 Trading, at market (amortized cost: $147,343 and $57,747) 160,862 57,760 Equity securities, at market (cost: $54,454 and $48,598) 54,056 74,531 Investment in equity subsidiaries 7,314 7,518 Mortgage loans on real estate, net 288,133 269,910 Investment real estate, net 26,761 28,196 Policy loans 184,181 189,683 Other invested assets 30,058 41,602 -------------- -------------- Total investments 2,925,120 2,685,129 Cash and cash equivalents 147,886 59,714 Accrued investment income 34,477 34,050 Amounts receivable from reinsurers 1,108,522 1,125,586 Other receivables 447,045 55,353 Deferred policy acquisition costs 197,364 242,170 Cost of business acquired 124,277 149,679 Amounts due from affiliates 431 7,980 Other assets 20,087 19,375 ------------- ------------- Total assets $ 5,005,209 $ 4,379,036 ============= ============= Liabilities and stockholder's equity Policyholder account balances $ 2,820,822 $ 2,729,865 Reserves for future policy benefits 815,801 811,355 Unearned policy revenues 27,709 50,907 Policy and contract claims 38,716 38,068 Other policyholder funds 166,467 151,946 Notes payable 101,377 101,547 Amounts payable to reinsurers 24,087 39,489 Deferred income taxes 81,876 65,825 Due to brokers 568,515 70,588 Other liabilities 63,295 67,138 -------------- -------------- Total liabilities 4,708,665 4,126,728 Stockholder's equity: Common stock ($1 par value; 30,000 shares authorized, 10,000 shares issued and outstanding) 10 10 Preferred stock, net of investment in parent company preferred stock - - Additional paid-in capital 33,745 3,745 Accumulated other comprehensive income 38,316 30,757 Retained earnings 224,473 217,796 -------------- -------------- Total stockholder's equity 296,544 252,308 -------------- -------------- Commitments and contingencies Total liabilities and stockholder's equity $ 5,005,209 $ 4,379,036 ============= =============

See notes to consolidated financial statements AMERICO LIFE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (In thousands, except per share amounts - unaudited) Three Months Nine Months Ended September 30, Ended September 30, 2002 2001 2002 2001 ---- ---- ---- ---- Income Premiums and policy revenues $ 57,617 $ 50,611 $ 163,882 $ 154,968 Net investment income 51,603 49,855 153,388 148,206 Net realized investment losses (5,747) (3,071) (10,848) (6,077) Other income 1,931 1,762 6,430 5,982 ----------- ----------- ----------- ----------- Total income 105,404 99,157 312,852 303,079 Benefits and Expenses Policyholder benefits: Death benefits 25,934 30,913 86,563 88,356 Interest credited on policyholder funds 28,931 27,992 86,481 83,637 Other policyholder benefits 3,578 1,087 13,038 9,074 Change in reserves for future policy benefits 672 919 (4,186) (4,058) Commissions 1,107 951 3,859 6,106 Amortization expense 21,789 13,739 52,347 37,576 Interest expense 2,404 2,411 7,091 7,216 Other operating expenses 18,311 19,191 54,860 59,823 Restructuring expenses - - - 4,696 ----------- ----------- ----------- ----------- Total benefits and expenses 102,726 97,203 300,053 292,426 ----------- ----------- ----------- ----------- Income before provision for income taxes and cumulative effect of a change in accounting principle 2,678 1,954 12,799 10,653 Provision for income taxes 890 621 4,346 3,520 ----------- ----------- ----------- ----------- Income before cumulative effect of a change in accounting principle 1,788 1,333 8,453 7,133 Cumulative effect of a change in accounting principle - - - 832 ----------- ----------- ----------- ----------- Net income $ 1,788 $ 1,333 $ 8,453 $ 7,965 =========== =========== =========== =========== Net income per common share: Income before cumulative effect of a change in accounting principle $ 178.80 $ 133.30 $ 845.30 $ 713.30 Cumulative effect of a change in accounting principle - - - 83.20 ---------- ---------- ---------- ---------- Net income $ 178.80 $ 133.30 $ 845.30 $ 796.50 ========== ========== ========== ==========

See notes to consolidated financial statements AMERICO LIFE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands - unaudited) Nine Months Ended September 30, ------------------- 2002 2001 ---- ---- Cash flows from operating activities Net income $ 8,453 $ 7,965 --------- --------- Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 53,843 45,901 Deferred policy acquisition costs (47,117) (48,337) Undistributed earnings of equity subsidiaries (488) 532 Amortization of unrealized gains (3,707) (3,072) (Increase) decrease in assets: Accrued investment income (428) (3,324) Amounts receivable from reinsurers 20,764 52,536 Other receivables (4,808) 1,015 Other assets, net of amortization expense (1,432) (3,674) Increase (decrease) in liabilities: Policyholder account balances (61,271) (66,785) Reserves for future policy benefits and unearned policy revenues 1,724 15,684 Policy and contract claims 648 (201) Other policyholder funds 14,522 13,228 Amounts payable to reinsurers (15,402) (11,702) Provision for deferred income taxes 11,954 1,614 Federal income taxes payable 59 (73) Affiliate balances 7,549 472 Other liabilities (3,905) (9,178) Change in trading securities (103,102) 398 Net realized losses on investments sold 10,848 6,077 Amortization on bonds and mortgage loans (721) 1,261 Other changes 59 (1,551) --------- --------- Total adjustments (120,411) (9,179) --------- --------- Net cash used by operating activities (111,958) (1,214) --------- --------- (Continued)

See notes to consolidated financial statements AMERICO LIFE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) (In thousands - unaudited) Nine Months Ended September 30, 2002 2001 Cash flows from investing activities Purchases of fixed maturity investments $ (964,802) $(1,306,392) Purchases of equity securities (18,014) (35,879) Purchases of other investments (4,637) (16,815) Mortgage loans originated (33,161) (15,789) Maturities or redemptions of fixed maturity investments 118,896 29,624 Sales of fixed maturity available for sale investments 752,019 1,022,849 Sales of fixed maturity held to maturity investments 26,126 - Sales of equity securities 9,238 30,185 Sales of other investments 15,156 1,878 Repayments from mortgage loans 15,107 15,995 Change in due to brokers 98,645 88,697 Change in policy loans 5,502 3,103 ----------- ----------- Net cash provided by (used by) investing activities 20,075 (182,544) ----------- ----------- Cash flows from financing activities Receipts credited to policyholder account balances 325,910 308,094 Return of policyholder account balances (173,683) (172,254) Repayments of notes payable (396) (362) Capital contribution from parent 30,000 - Dividends paid (1,776) (1,500) ----------- ----------- Net cash provided by financing activities 180,055 133,978 ----------- ----------- Net increase (decrease) in cash and cash equivalents 88,172 (49,780) ----------- ----------- Cash and cash equivalents at beginning of period 59,714 110,260 ----------- ----------- Cash and cash equivalents at end of period $ 147,886 $ 60,480 =========== ===========

See notes to consolidated financial statements AMERICO LIFE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the Nine Months Ended September 30, 2002 and 2001 (In thousands, except per share amounts - unaudited) The following notes should be read in conjunction with the notes to the consolidated financial statements contained in the Americo Life, Inc. ("the Company") December 31, 2001 Form 10-K as filed with the Securities and Exchange Commission. 1. ACCOUNTING POLICIES The unaudited consolidated financial statements as of September 30, 2002 and for the three and nine months ended September 30, 2002 and 2001 reflect all adjustments, consisting of normal recurring adjustments, that are necessary for a fair statement of financial position and results of operations on a basis consistent with accounting principles described fully in Note 1 of the Company's December 31, 2001 consolidated financial statements. The results of operations for the three and nine months ended September 30, 2002 and 2001 are not necessarily indicative of the expected results for the full year 2002, nor the results experienced for the year 2001. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Reclassifications Previously reported amounts for the prior year have in some instances been reclassified to conform to the current year presentation. Newly adopted accounting pronouncements In 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." SFAS No. 141 supersedes previously issued guidance on accounting for business combinations. SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations initiated after July 1, 2001 and also changes the criteria used to recognize intangible assets apart from goodwill. SFAS No. 142 supersedes the current accounting guidance for goodwill and intangible assets. Under SFAS No. 142, goodwill and indefinite-lived intangible assets will no longer be amortized but will be reviewed for impairment. Intangible assets with finite lives will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. For all other goodwill and intangible assets, the amortization provisions are effective upon adoption of SFAS No. 142. The impairment provisions of SFAS No. 142 are effective upon adoption of the statement. The Company's adoption of SFAS No. 142 on January 1, 2002 did not have a significant effect on its consolidated financial position or results of operations. During 2001, the FASB issued SFAS No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets" which provides guidance on the accounting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and amends Accounting Principles Board Opinion No. 30 ("APB No. 30") "Reporting Results of Operations - Reporting the Effects of Disposal of a Segment of a Business." SFAS No. 144 requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, entities are no longer required to include under "discontinued operations" operating losses that have not yet occurred. The Company's adoption of SFAS No. 144 on January 1, 2002 did not have a significant effect on its consolidated financial position or results of operations. AMERICO LIFE, INC. AND SUBSIDIARIES During 2001, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position No. 01-06 ("SOP 01-06") "Accounting by Certain Entities (Including Entities with Trade Receivables) That Lend to or Finance the Activities of Others." The guidance in SOP 01-06 relating to financing and lending activities is explicitly applicable to insurance companies. SOP 01-06 reconciles and conforms the accounting and financial reporting guidance presently contained in other accounting guidance. The Company's accounting practices for its lending activities are already consistent with the guidance contained in SOP 01-06. Therefore, adoption of SOP 01-06 on January 1, 2002 did not have a significant effect on the Company's financial statements. Recently issued accounting pronouncements During 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds prior Statements that required the classification of gains or losses from the extinguishment of debt as extraordinary. As a result, gains or losses from extinguishments of debt will only be classified as extraordinary if they meet existing accounting criteria. SFAS No. 145 also rescinds SFAS No. 44 "Accounting for Intangible Assets of Motor Carriers" and amends SFAS No. 13 "Accounting for Leases" to require sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also makes various technical corrections to existing pronouncements. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The Company's consolidated financial statements will not be affected by the adoption of SFAS No. 145. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement provides guidance on the recognition and measurement of liabilities associated with disposal activities. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Consequently, the Company's consolidated financial statements for 2002 will not be affected by the adoption of SFAS No. 146. 2. INVESTMENTS Certain circumstances during the nine months ended September 30, 2002 caused the Company to change its intent to hold specific securities to maturity. Due to evidence of significant deterioration in several issuers' creditworthiness, $25,897 of held-to-maturity securities were sold. The sales resulted in realized gains of $229. Net realized investment losses for the nine months ended September 30, 2002 includes $5,879 of write-downs on fixed maturity securities to reflect an other than temporary impairment. Short sale obligations, which totaled $424.1 million at September 30, 2002, are shown as a liability and included in the due to broker liability on the balance sheet. The Company obtains collateral for the short sale transactions by entering into repurchase agreements. At September 30, 2002, the Company had $425.7 million of repurchase agreement receivables, which are included in other receivables. 3. STOCKHOLDER'S EQUITY Comprehensive income (loss) for the three and nine months ended September 30, 2002 and 2001 is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2002 2001 2002 2001 ---- ---- ---- ---- Net income $ 1,788 $ 1,333 $ 8,453 $ 7,965 Other comprehensive income (loss) 5,877 5,432 7,559 (1,593) --------- --------- --------- --------- Comprehensive income $ 7,665 $ 6,765 $ 16,012 $ 6,372 ========= ========= ========= =========

AMERICO LIFE, INC. AND SUBSIDIARIES Following are the components of net unrealized investment gains (losses) which comprise accumulated other comprehensive income Nine Months Ended September 30, December 31, September 30, 2002 2001 2002 ---- ---- ----- Investment securities: Fixed maturities available for sale $ 96,368 $ 9,966 $ 86,402 Fixed maturities reclassified from available for sale to held to maturity 18,883 22,590 (3,707) Equity securities 1,832 25,939 (24,107) ---------- ---------- ---------- 117,083 58,495 58,588 Effect on other balance sheet accounts (59,276) (12,391) (46,885) Deferred income taxes (19,491) (15,347) (4,144) ---------- ---------- ---------- Net unrealized investment gains $ 38,316 $ 30,757 $ 7,559 ========== ========== ==========

During both the nine months ended September 30, 2002 and 2001, the Company paid cash dividends on its common stock to Financial Holding Corporation ("FHC") totaling $1,500. During the three months ended September 30, 2002, FHC contributed $30,000 of capital to the Company in the form of cash. During the nine months ended September 30, 2002, the Company paid dividends on its preferred stock of $5,417, consisting of 44,500 shares of newly issued preferred stock with a stated value of $100 per share and $967 of cash. During the nine months ended September 30, 2002, the Company received dividends on FHC preferred stock of $5,141, consisting of 44,500 shares of newly issued preferred stock with a stated value of $100 per share and $691 of cash. The Company has accounted for its investment in the FHC preferred stock as an offset to its own preferred stock in stockholder's equity. Dividends on the Company's preferred stock and the dividends receivable on the FHC preferred stock are both recorded directly to retained earnings. 4. COMMITMENTS AND CONTINGENCIES On January 15, 2002, the United States District Court for the Northern District of Texas approved a class-wide settlement and dismissed with prejudice the claims of the class members in a certified class action in which Great Southern Life Insurance Company ("Great Southern") had been a defendant. The class consists of certain present and former policyholders who purchased interest-sensitive whole life and universal life insurance policies issued or acquired by Great Southern between January 1, 1982 and December 31, 1999. The orders approving the settlement are now final, as no appeals were filed. The Company has accounted for the terms of the settlement in its consolidated financial statements. Under the terms of the settlement, potential class members were given an opportunity to exclude themselves from the class by sending a written exclusion notice to the settlement administrator. Of those present and former policyholders who filed such notices, approximately 1,500 are represented by counsel. In early February 2002, Great Southern filed actions in twelve states against approximately 1,300 of these policyholders seeking, among other things, a declaration of nonliability. Pursuant to Great Southern's request, the Judicial Panel ("Panel") on Multidistrict Litigation has transferred the actions filed outside of Texas to the United States District Court for the Northern District of Texas for consolidated pretrial proceedings. In addition, several other policyholders who sent in exclusion notices have filed separate actions against Great Southern in several states asserting claims related to sales practices and seeking actual and punitive damages. Great Southern is unable to estimate the costs it might incur as a result of the exclusion notices or if the outcomes of the above-referenced actions are adverse to it. On January 25, 2002, the 111th District Court of Webb County, Texas approved a class-wide settlement and dismissed with prejudice the claims of the class members in a certified class action in which Americo Financial Life and Annuity Insurance Company ("Americo Financial)", as well as certain affiliates of the Company, had been defendants. The class consists of certain present and former owners of certain annuities and interest-sensitive life insurance policies issued or acquired by Americo Financial between January 1, 1993 and October 1, 2001. The orders approving the settlement are now final, as no appeals were filed. The Company has accounted for the anticipated costs of the settlement in its consolidated financial statements. AMERICO LIFE, INC. AND SUBSIDIARIES On September 5, 2002, a purported class action lawsuit was filed against Great Southern in the First Judicial District Court of Santa Fe, New Mexico (Barr v. Great Southern and Ohio Life Insurance Company, No. D-0101-CV-2002-01927). The plaintiff, on behalf of herself and all current owners of individual insurance policies issued by Great Southern who paid premiums on a monthly, quarterly, or semi-annual basis, alleges that Great Southern engaged in unfair, deceptive, and illegal practices by allegedly failing to disclose the dollar amount and effective annual percentage rate of the extra cost associated with paying premiums on a modal basis. The plaintiff has requested for herself and the putative class an award of damages, treble damages, punitive damages, attorneys' fees, interest, injunctive relief, and declaratory relief. Great Southern has denied all allegations of wrongdoing and damages, has removed the action to federal court, and is vigorously defending itself. The Company and its subsidiaries are also named as defendants in other pending actions, including but not limited to purported class actions filed against Great Southern, Americo Financial and Ohio State Life Insurance Company asserting claims related to sales practices and premiums charged in connection with certain life insurance products and sales practices in connection with annuity products. Plaintiffs in these actions generally are seeking indeterminate amounts, including punitive and treble damages. Although there can be no assurances, at the present time the Company does not anticipate that the ultimate liability arising from such pending litigation, after consideration of amounts provided for in the consolidated financial statements, will have a material adverse effect on the financial condition of the Company. 5. SEGMENT INFORMATION The table below presents information about the reported revenues and income before provision for income taxes for the Company's reportable segments as defined in the Company's December 31, 2001 Form 10-K. Asset information by segment is not reported, since the Company does not produce such information internally. Life Insurance Asset Accumulation Reconciling Consolidated Operations Operations Items Totals ---------- ---------- ----- ------ Nine months ended September 30, --------------------------------------------------------------------------------------------------------------------- 2002 2001 2002 2001 2002 2001 2002 2001 ---- ---- ---- ---- ---- ---- ---- ---- Revenues $279,104 $273,274 $55,476 $47,338 $(21,728) $(17,533) $312,852 $303,079 Income (loss) before income taxes 34,753 38,973 6,851 (1,663) (28,805) (26,657) 12,799 10,653 Three months ended September 30, ---------------------------------------------------------------------------------------------------------------------- 2002 2001 2002 2001 2002 2001 2002 2001 ---- ---- ---- ---- ---- ---- ---- ---- Revenues $95,699 $89,976 $18,983 $16,238 $(9,278) $(7,057) $105,404 $99,157 Income (loss) before income taxes 12,710 5,541 2,163 973 (12,195) (4,560) 2,678 1,954

Significant reconciling items shown in the above table which are not allocated to specific segments include interest expense, gains or losses from changes in fair values of the Company's asset and liability derivatives and a portion of (i) net investment income, (ii) operating expenses and (iii) net realized investment gains (losses). Prior to 2002, the Company reported a non-life insurance investments segment. The Company has determined that the investments that comprised this segment are no longer significant enough for reporting as a separate segment. All periods presented have been restated to include these investments with the other reconciling items. AMERICO LIFE, INC. AND SUBSIDIARIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following discussion analyzes significant items affecting the results of operations and the financial condition of the Company. This discussion should be read in conjunction with the accompanying consolidated financial statements and the notes thereto. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, the Company cautions readers regarding certain forward-looking statements contained in this report and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (the "SEC"). Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Statements using verbs such as "plan", "anticipate", "believe", "expect" or words of similar import generally involve forward-looking statements. Without limiting the foregoing, forward-looking statements include statements which represent the Company's beliefs concerning future levels of sales and surrenders of the Company's products, investment spreads and yields, or the earnings and profitability of the Company's activities. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and many of which are subject to change. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable developments. Some may be national in scope, such as general economic conditions, changes in tax law and changes in interest rates. Some may be related to the insurance industry generally, such as pricing competition, regulatory developments and industry consolidation. Others may relate to the Company specifically, such as credit, volatility and other risks associated with the investment portfolio. Investors are also directed to consider other risks and uncertainties discussed in documents filed by the Company with the SEC. The Company disclaims any obligation to update forward-looking information. CRITICAL ACCOUNTING POLICIES Reference is made to the Company's Form 10-K for the year ended December 31, 2001 for a discussion of the Company's critical accounting policies and the use of estimates and judgment in the preparation of the Company's consolidated financial statements. Estimated settlement costs associated with class action litigation were revised in the three months ended September 30, 2002, as discussed below in the comparison of amortization expense between 2002 and 2001. There were no other changes in estimates during the nine months ended September 30, 2002 which had a significant impact on the Company's reported results of operations or financial condition. SEGMENT RESULTS Revenues and income before provision for income taxes for the Company's operating segments, as defined by Statement of Financial Accounting Standard No. 131, "Financial Reporting for Segments of a Business Enterprise", are summarized as follows (in millions): Life Insurance Asset Accumulation Operations Operations ------------------------ ----------------------- Nine months ended September 30, 2002 2001 2002 2001 ---- ---- ---- ---- ~~Revenues $279.1 $273.3 $55.5 $47.3 Income before income taxes 34.8 39.0 6.9 (1.7)~~

Three months ended September 30, 2002 2001 2002 2001 ---- ---- ---- ---- ~~Revenues $95.7 $90.0 $19.0 $16.2 Income before income taxes 12.7 5.5 2.2 1.0~~

AMERICO LIFE, INC. AND SUBSIDIARIES Prior to 2002, the Company reported a non-life insurance investments segment. The Company has determined that the investments that comprised this segment are no longer significant enough for reporting as a separate segment. All periods presented have been restated to include these investments with the other reconciling items. Life insurance operations. Income before income taxes for the nine months ended September 30, 2002 was $34.8 million compared to $39.0 million for the nine months ended September 30, 2001. The decrease in income from 2001 to 2002 is primarily due to (i) a $15.7 million increase in amortization expense, partially offset by (ii) a $4.7 million decrease in death benefits, net of reserves for future policy benefits released on traditional life insurance death benefits. Income before income taxes for the three months ended September 30, 2002 was $12.7 million compared to $5.5 million for the three months ended September 30, 2001. The increase in income from 2001 to 2002 is primarily due to (i) improved mortality experience and (ii) lower other operating expenses, partially offset by (iii) higher amortization expense in 2002. Asset accumulation operations. Income before income taxes for the nine months ended September 30, 2002 was $6.9 million compared to a $1.7 million loss for the same period in 2001. This increase in income was due to increased interest spreads on the Company's annuities, increased surrender charges, and lower other operating expenses in 2002. Income before income taxes for the three months ended September 30, 2002 was $2.2 million compared to $1.0 million for the same period in 2001. The increase in income is due to increased interest spreads on the Company's annuities and lower amortization expense in 2002. Reconciling items. The difference between the segment revenues and income before income taxes shown in the table above and the consolidated financial statements result from items not allocated to specific segments. The significant reconciling items are interest expense, gains or losses from changes in fair values of the Company's asset and liability derivatives and a portion of (i) net investment income, (ii) operating expenses and (iii) net realized investment gains (losses). The loss before income taxes from reconciling items increased $2.2 million for the nine months ended September 30, 2002 from the same period in 2001 primarily due to (i) an increase in net realized investment losses of $4.8 million in 2002, (ii) a $3.7 million net loss from changes in the fair values of the Company's asset and liability derivatives, partially offset by (iii) restructuring expenses of $4.7 million in 2001. The loss before income taxes from reconciling items was $12.2 million and $4.6 million for the three months ended September 30, 2002 and 2001, respectively. The increase in the loss in 2002 compared to 2001 resulted primarily from net realized investment losses of $5.7 million in 2002 compared to net realized investment losses of $3.1 million in 2001. NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2001 Income before income taxes and cumulative effect of a change in accounting principle for the nine months ended September 30, 2002 was $12.8 million compared to $10.7 million for the nine months ended September 30, 2001. The primary reasons for the increase in income in 2002 compared to 2001 were (i) higher premiums and policy revenues, (ii) a decrease in death benefits, (iii) a decrease in commissions, (iv) lower other operating expenses, and (v) restructuring expenses recorded in 2001. These factors were partially offset by (i) increased net realized investment losses in 2002 and (ii) an increase in amortization expense. Premiums and policy revenues. Premiums and policy revenues totaled $163.9 million for the nine months ended September 30, 2002 compared to $155.0 million for the nine months ended September 30, 2001. Premiums from preneed business increased $2.7 million for the nine months ended September 30, 2002 compared to the nine months ended September 30, 2001. Policy revenues from interest-sensitive life and annuity products increased $5.2 million from 2001 to 2002. During 2002, the Company recorded $1.7 million of additional policy revenue from deferred revenue liability amortization caused by realized gains on bonds. During 2001, the Company revised its estimate of future gross profits on certain interest-sensitive life insurance business, which had the effect of increasing its deferred revenue liability at December 31, 2001. Consequently, revenue arising from amortization of the deferred revenue liability was higher during the nine months ended September 30, 2002 as compared to the same period in 2001. AMERICO LIFE, INC. AND SUBSIDIARIES Net investment income. Net investment income totaled $153.4 million for the nine months ended September 30, 2002 compared to $148.2 million for the nine months ended September 30, 2001. Net investment income for the nine months ended September 30, 2002 and 2001 was comprised of the following (in millions): 2002 2001 ---- ---- Fixed maturities $ 113.7 $ 108.1 Mortgage loans 16.5 15.5 Policy loans 7.9 7.4 Reinsurance funds held by reinsurer 36.4 36.6 Derivatives (20.0) (21.2) Other, net of investment expenses (1.1) 1.8 ---------- ---------- Net investment income $ 153.4 $ 148.2 ========== ==========

Income from fixed maturities investments was higher in 2002 compared to 2001 due primarily to larger amounts of such investments in 2002 compared to 2001. The increase in investments is consistent with the increase in the Company's liabilities. In addition, a bond owned by the Company was called in 2002 at a premium, generating an additional $0.8 million of investment income. The changes in the fair values of call options and futures contracts owned by the Company are recorded as a component of investment income. The fair value of the Company's call options and futures contracts decreased $20.0 million and $21.2 million during the nine months ended September 30, 2002 and 2001, respectively. The decrease in the fair value of these call options and futures contracts was offset by the decline in value of the options embedded in the Company's equity-indexed annuity liabilities, which is recorded as a component of policyholder benefits and referred to below under "Policyholder Benefits." Net realized investment losses. Net realized investment losses totaled $10.8 million for the nine months ended September 30, 2002 compared to $6.1 million for the nine months ended September 30, 2001. The increase in net realized investment losses in 2002 compared to 2001 resulted primarily from (i) $5.9 million of writedowns in 2002 on fixed maturity investments to reflect an other than temporary impairment, (ii) a net loss of $8.6 million resulting from market value adjustments of the Company's fixed maturities trading portfolio and related short sale obligations, (iii) losses on common stocks of $5.0 million in 2002 compared to gains on common stocks in 2001 of $1.3 million, and (iv) realized gains on other fixed maturity investments of $8.6 million in 2002 compared to realized losses of $6.2 million in 2001. The Company records changes in the market value of short sale obligations and bonds classified as trading as realized investment gains and losses. The loss in the short sale obligations in 2002 resulted from the decline in the U.S. Treasury yields. The Company entered into short sale obligations in an effort to reduce the price risk in the Company's available for sale bond portfolio associated with movements in the U.S. Treasury yields. The increase in the market values of the available for sale bonds is recorded as a component of other comprehensive income. Policyholder benefits. Policyholder benefits totaled $181.9 million for the nine months ended September 30, 2002 compared to $177.0 million for the nine months ended September 30, 2001. The primary reasons for the increase in 2002 compared to 2001 were (i) higher interest credited on policyholder funds due to the overall growth of the Company's universal life-type policies and annuities, and (ii) an increase in other policy benefits of $4.0 million, partially offset by (iii) a decrease in death benefits of $1.8 million. As discussed above, included in policyholder benefits is the change in the fair value of issued options embedded in the Company's equity-indexed annuity liabilities. During the nine months ended September 30, 2002 and 2001, the fair values of the issued options decreased $19.3 million and $24.2 million, respectively. Commissions. Commission expense was $3.9 million and $6.1 million for the nine months ended September 30, 2002 and 2001, respectively. The decrease in commission expense from 2001 to 2002 is due to higher amounts of nondeferrable commissions incurred during the first nine months of 2001. AMERICO LIFE, INC. AND SUBSIDIARIES Amortization expense. Amortization expense totaled $52.3 million for the nine months ended September 30, 2002 compared to $37.6 million for the nine months ended September 30, 2001. During 2002, the Company recorded amortization expense of $5.8 million related to realized gains on bonds. During the nine months ended September 30, 2001, the Company revised its estimates of the future gross profits on certain of its universal life-type and annuity products. The revisions primarily consisted of changes in estimated policy revenues and benefits paid to policyholder account balances. The net effect of these revisions was to decrease amortization expense for the nine months ended September 30, 2001 by $4.5 million. During 2001, the Company revised its estimate of future gross profits on certain interest-sensitive business, which had the effect of increasing its deferred policy acquisition cost assets at December 31, 2001. Consequently, amortization expense related to deferred policy acquisition cost assets was higher during the nine months ended September 30, 2002 as compared to the same period in 2001. The above increases in amortization expense were partially offset by a $2.0 million decrease in amortization expense as a result of revisions during 2002 of the estimated costs associated with a class action settlement. During 2001, the Company had reduced its deferred policy acquisition cost asset by including estimated settlement costs in its estimate of the future gross profits used to amortize such asset. In 2002, the Company reduced its estimate of the settlement costs, which increased the deferred policy acquisition cost asset and decreased amortization expense. Other operating expenses. Other operating expenses totaled $54.9 million for the nine months ended September 30, 2002 compared to $59.8 million for the nine months ended September 30, 2001. The Company has realized significant cost savings in 2002 as a result of the Company's decision to cease operations in the third quarter of 2001 of an entity that previously provided administration for retirement and cafeteria plans to school districts and other clients. Partially offsetting the decreases in operating expenses in 2002 are approximately $1.0 million of expenses associated with the transition of the operations from the Company's offices in Austin, Texas to its Kansas City, Missouri offices. These transition expenses were not eligible for inclusion in the exit costs recorded by the Company in the fourth quarter of 2001. Restructuring expenses. During 2001, the Company made certain changes to its administrative and sales operations involved in the sale of insurance products to the tax-qualified market. During the second quarter of 2001, the Company determined that a portion of the goodwill related to the entities involved in such operations had become impaired. Based upon the Company's best estimate of the future results of operations of these entities, the goodwill asset was reduced by $4.7 million. THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2001 Income before income taxes and cumulative effect of a change in accounting principle for the three months ended September 30, 2002 was $2.7 million compared to $2.0 million for the three months ended September 30, 2001. The primary reasons for the increase in income in 2002 compared to 2001 were (i) higher premiums and policyholder revenues, (ii) lower death benefits in 2002, and (iii) lower other operating expenses. Factors which partially offset these increases in income were (i) increased net realized investment losses in 2002 and (ii) an increase in amortization expense in 2002. Premiums and policy revenues. Premiums and policy revenues totaled $57.6 million for the three months ended September 30, 2002 compared to $50.6 million for the three months ended September 30, 2001. Policy revenues from interest-sensitive life and annuity products increased $6.7 million from 2001 to 2002 due to accelerated amortization of the deferred revenue liability resulting from revisions of estimated gross profits at the end of 2001 and an increase in amortization of the deferred revenue liability caused by realized gains on bonds in 2002. AMERICO LIFE, INC. AND SUBSIDIARIES Net investment income. Net investment income totaled $51.6 million for the three months ended September 30, 2002 compared to $49.9 million for the three months ended September 30, 2001. Net investment income for the three months ended September 30, 2002 and 2001 was comprised of the following (in millions): 2002 2001 ---- ---- Fixed maturities $ 37.2 $ 38.7 Mortgage loans 5.7 5.1 Policy loans 2.6 2.9 Reinsurance funds held by reinsurer 12.6 12.3 Derivatives (6.1) (8.5) Other, net of investment expenses (0.4) (0.6) --------- --------- Net investment income $ 51.6 $ 49.9 ========= =========

The changes in the fair values of call options and futures contracts owned by the Company are recorded as a component of investment income. The fair value of the Company's call options and futures contracts decreased $6.1 million and $8.5 million during the three months ended September 30, 2002 and 2001, respectively. The decrease in the fair value of these call options and futures contracts was offset by the decline in value of the options embedded in the Company's equity-indexed annuity liabilities, which is recorded as a component of policyholder benefits. Net realized investment losses. Net realized investment losses totaled $5.7 million for the three months ended September 30, 2002 compared to $3.1 million for the three months ended September 30, 2001. The increase in net realized investment losses in 2002 compared to 2001 resulted primarily from (i) a net loss of $9.0 million resulting from market value adjustments of the Company's fixed maturities trading portfolio and related short sale obligations, (ii) losses on common stocks of $2.6 million in 2002 compared to gains on common stocks in 2001 of $2.2 million, and (iii) realized gains on other fixed maturity investments of $5.8 million in 2002 compared to realized losses of $2.9 million in 2001. The Company records changes in the market value of short sale obligations and bonds classified as trading as realized investment gains and losses. The loss in the short sale obligations in 2002 resulted from the decline in the U.S. Treasury yields. The Company entered into short sale obligations in an effort to reduce the price risk in the Company's available for sale bond portfolio associated with movements in the U.S. Treasury yields. The increase in the market values of the available for sale bonds is recorded as a component of other comprehensive income. Policyholder benefits. Policyholder benefits totaled $59.1 million for the three months ended September 30, 2002 compared to $60.9 million for the three months ended September 30, 2001. As discussed above, included in other policyholder benefits is the change in the fair value of issued options embedded in the Company's equity-indexed annuity liabilities. During the three months ended September 30, 2002 and 2001, the fair values of the issued options decreased $5.7 million and $9.8 million, respectively. This increase in other policyholder benefits in 2002 compared to 2001 was offset by a $5.0 million decrease in death benefits. Amortization expense. Amortization expense totaled $21.8 million for the three months ended September 30, 2002 compared to $13.7 million for the three months ended September 30, 2001. The increase in amortization expense in 2002 over 2001 was due to additional amortization on realized bond gains in 2002 and revisions of gross profit estimates on certain universal life-type and annuity products in 2001 as discussed above in the comparison of the nine months results of operations. These increases in amortization expense were partially offset by a $2.0 million decrease in amortization expense as a result of revisions during 2002 of the estimated costs associated with a class action settlement. During 2001, the Company had reduced its deferred policy acquisition cost asset by including estimated settlement costs in its estimate of the future gross profits used to amortize such asset. In 2002, the Company reduced its estimate of the settlement costs, which increased the deferred policy acquisition cost asset and decreased amortization expense. AMERICO LIFE, INC. AND SUBSIDIARIES FINANCIAL CONDITION AND LIQUIDITY The changes occurring in the Company's consolidated balance sheet from December 31, 2001 to September 30, 2002 primarily reflect the normal operations of the Company's life insurance subsidiaries and a capital contribution consisting of $30 million of cash from the Company's parent. The Company's balance sheet has also been affected by short sales of U.S. Treasury securities by the Company during 2002. The use of short sales by the Company increased significantly as discussed in the comparison of net realized investment losses between 2002 and 2001. The short sale obligations, which totaled $424.1 million at September 30, 2002, are shown as a liability and included in the due to broker liability on the balance sheet. The Company obtains collateral for the short sale transactions by entering into repurchase agreements. At September 30, 2002, the Company had $425.7 million of repurchase agreement receivables, which are included in other receivables. The quality of the Company's fixed maturity investments at September 30, 2002 remained consistent with the quality at December 31, 2001. Non-investment grade securities totaled 4% of the Company's total fixed maturity investments at September 30, 2002. The Company has not made any significant changes to its investment philosophy during 2002. The Company's net unrealized investment gains increased $7.6 million during the first nine months of 2002. The components of the change during the nine months ended September 30, 2002 were as follows (in millions): Investment securities: Fixed maturities available for sale $ 86.4 Fixed maturities reclassified from available for sale to held to maturity (3.7) Equity securities (24.1) --------- 58.6 Effect on insurance assets and liabilities (46.9) Deferred income tax effect (4.1) --------- Net unrealized investment gains $ 7.6 =========

The increase in unrealized gains on fixed maturities available for sale is due to the general decline in market interest rates during the first nine months of 2002. Recently issued accounting pronouncements During 2002, the FASB issued SFAS No. 145 "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 rescinds prior Statements that required the classification of gains or losses from the extinguishment of debt as extraordinary. As a result, gains or losses from extinguishments of debt will only be classified as extraordinary if they meet existing accounting criteria. SFAS No. 145 also rescinds SFAS No. 44 "Accounting for Intangible Assets of Motor Carriers" and amends SFAS No. 13 "Accounting for Leases" to require sale-leaseback accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also makes various technical corrections to existing pronouncements. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The Company's consolidated financial statements will not be affected by the adoption of SFAS No. 145. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement provides guidance on the recognition and measurement of liabilities associated with disposal activities. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. Consequently, the Company's consolidated financial statements in 2002 will not be affected by the adoption of SFAS No. 146. AMERICO LIFE, INC. AND SUBSIDIARIES ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The quantitative and qualitative disclosures about market risk are summarized in Management's Discussion and Analysis of Financial Condition and Results of Operations as of December 31, 2001, included in the Company's Form 10-K for the year ended December 31, 2001. During the nine months ended September 30, 2002, changes in the interest rate environment did not materially affect the Company's economic position. These rate changes do not materially affect disclosures included in the Company's December 31, 2001 Form 10-K regarding the Company's exposure to market risk. ITEM 4. CONTROLS AND PROCEDURES The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. Within 90 days of the filing of this Report, the Chief Executive Officer and the Chief Financial Officer have reviewed and evaluated the Company's disclosure controls and procedures. Based on, and as of the date of, that review and evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effectively serving the stated purposes. In addition, there have been no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation. No significant deficiencies or material weaknesses in the internal controls were identified during the evaluation and, as a consequence, no corrective action is required to be taken. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the Company's Annual Report on Form 10-K for the year ended December 31, 2001 and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2002 and June 30, 2002 regarding certain legal proceedings to which the Company and/or certain of its subsidiaries are parties. Included among the matters reported in the Form 10-K was a purported class action lawsuit (Pritzker v. College Life Insurance Company of America (now Americo Financial) and Loyalty Life Insurance Company, U.S. District Court for the District of Massachusetts), in which Plaintiff alleged misrepresentations, breach of contract and other wrongful conduct in connection with the imposition of increased cost of insurance charges and the calculation of interest due under certain universal life policies assumed by defendants. This suit sought actual and punitive damages, restitutionary and injunctive relief and an accounting. The suit was settled in July, 2002 by the payment of a nominal amount to the individual named plaintiff and the filing of a stipulation of dismissal with prejudice. On September 5, 2002, a purported class action lawsuit was filed against Great Southern in the First Judicial District Court of Santa Fe, New Mexico (Barr v. Great Southern and Ohio Life Insurance Company, No. D-0101-CV-2002-01927). The plaintiff, on behalf of herself and all current owners of individual insurance policies issued by Great Southern who paid premiums on a monthly, quarterly, or semi-annual basis, alleges that Great Southern engaged in unfair, deceptive, and illegal practices by allegedly failing to disclose the dollar amount and effective annual percentage rate of the extra cost associated with paying premiums on a modal basis. The plaintiff has requested for herself and the putative class an award of damages, treble damages, punitive damages, attorneys' fees, interest, injunctive relief, and declaratory relief. Great Southern has denied all allegations of wrongdoing and damages, has removed the action to federal court, and is vigorously defending itself. AMERICO LIFE, INC. AND SUBSIDIARIES Included among the matters reported in the Form 10-K and in the Form 10-Q for the period ended March 31, 2002, was the settlement in January, 2002 of a class action filed against Great Southern (In re Great Southern Life Insurance Company Sales Practices Litigation, MDL 1214, in the United States District Court for the Northern District of Texas). As previously reported, in February 2002, Great Southern filed actions in twelve states seeking a declaration of nonliability against approximately 1,300 of its policyholders who had opted out of the settlement. Pursuant to Great Southern's request, the Judicial Panel on Multidistrict Litigation has transferred the actions filed by Great Southern outside of Texas to the United States District Court for the Northern District of Texas for consolidated pretrial proceedings. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 3.1 Restated Articles of Incorporation, as amended December 28, 2001, of the Registrant (incorporated by reference from Exhibit 3.1 to Registrant's Form 10-K [File No. 33-64820] for the year ended December 31, 2001. 3.2 Bylaws, as amended, of the Registrant (incorporated by reference from Exhibit 3.2 to Registrant's Form S-4 [File No. 33-64820] filed June 22, 1993). ------------------------------------------------------------------------------- (b) Reports on Form 8-K: There were no reports on Form 8-K filed for the three months ended September 30, 2002. AMERICO LIFE, INC. AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICO LIFE, INC. BY: /s/ Mark K. Fallon --------------------- Name: Mark K. Fallon Title: Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Date: November 14, 2002 AMERICO LIFE, INC. AND SUBSIDIARIES CERTIFICATIONS I, Gary L. Muller, President and Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Americo Life, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ Gary L. Muller -------------------------------------------- Gary L. Muller President and Chief Executive Officer AMERICO LIFE, INC. AND SUBSIDIARIES I, Mark K. Fallon, Senior Vice President and Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Americo Life, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 14, 2002 /s/ Mark K. Fallon -------------------------------------------- Mark K. Fallon Senior Vice President and Chief Financial Officer

AMERICO LIFE INC 10-Q