Edgar Filing: KANSAS CITY LIFE INSURANCE CO

United States

Securities and Exchange Commission

Washington, D. C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 16, 2007

Kansas City Life Insurance Company

(Exact Name of Registrant as Specified in Charter)

Missouri

2-40764

44-0308260

(State of Incorporation)

(Commission File Number)

(IRS Employer Identification No.)

3520 Broadway

Kansas City, Missouri

64111-2565

(Address of Principal Executive Offices)

(Zip Code)

Telephone Number: (816) 753-7000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02 – Results of Operations and Financial Condition.

Included below is a release of financial information mailed to stockholders on March 16, 2007. It reflects the financial condition, in a condensed format, for Kansas City Life Insurance Company as of December 31, 2006, and was previously included in the Company's year end Form 10-K report filed on March 1, 2007.

Message from the President, CEO and Chairman of the Board

Kansas City Life’s 2006 results reflect solid earnings and continued financial strength. Net income increased 2% to $36.9 million for the year, and earnings per share improved to $3.11 from $3.03 in 2005. The growth in earnings primarily stemmed from reduced benefit costs and improved net investment income. Net income and earnings per share for the fourth quarter were $10.1 million and $0.86, respectively.

The Company continues to emphasize the growth of its individual life insurance business. Kansas City Life’s commitment to growing this business has resulted in improved recruiting of new general agents and agents in its Individual Insurance Segment. In addition to growing sales through the Company’s traditional general agency distribution system, Kansas City Life was pleased to begin a new relationship in 2006 with American Republic Insurance Company. These agents are now afforded the opportunity to provide Kansas City Life products to their clients. Kansas City Life believes that life insurance is unequalled as a means of providing protection and is dedicated to promoting the sale of life insurance at a reasonable cost to meet the needs of individuals and their families.

Renewal premiums increased 1% for the year, but new premiums declined primarily due to lower sales of immediate annuities. Renewal deposits declined due to lower receipts of fixed deferred and variable annuities, while new universal life and variable universal life deposits grew 1% and 7%, respectively, in 2006.

The Company benefited from lower investment expenses and $5.6 million in net realized investment gains for the year. In spite of slightly higher interest rates during 2006, the investment environment remains challenging. However, the Company continues to benefit from a diversified mix of high-quality investments.

Total benefit costs declined by $5.9 million or 2% in 2006 versus the prior year. This improvement was net of a $6.2 million or 5% increase in death benefits paid. Partially offsetting the increase in death benefits was the favorable impact of reinsurance from insurers with whom the Company cedes mortality risk. Interest credited to policyholder account balances declined which also helped lower total benefit costs.

The Company has recorded steady earnings in recent years and added significantly to its capital position. Based upon the Company’s good earnings experience and strong balance sheet, the Board of Directors recognized the opportunity to reward shareholders at a meeting on January 29, 2007, as two dividends were declared. Consistent with recent quarters, a dividend of $0.27 per share was declared. In addition, the Board of Directors declared a special dividend of $2.00 per share. Both dividends were paid on February 13, 2007 to shareholders of record as of February 8, 2007.

The Company has long been committed to providing present and future financial security to its policyholders and shareholders. The Company has maintained this position in a highly competitive industry for 111 years through superior relationships, an array of competitive products, solid earnings and a strong capital position. Kansas City Life provides Security Assured, a commitment and a promise that has been developed, honed and guarded over the years. This promise is the basis for both the Company’s rich tradition and commitment to growth and success in the future. Kansas City Life looks forward to the continued opportunity to serve you in 2007.

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Consolidated
Balance Sheets
(Thousands)
			December 31
			2006		2005
Assets
Investments:
	Fixed maturity securities available
		for sale, at fair value	$	2,719,439	$	2,865,476
	Equity securities available
		for sale, at fair value		52,351		52,775
	Mortgage loans			472,019		458,668
	Short-term investments			41,037		46,383
	Other investments			210,173		185,137
		Total investments		3,495,019		3,608,439

Cash				2,660		10,985
Deferred acquisition costs				220,595		226,963
Value of business acquired				82,769		89,505
Other assets				258,630		254,620
Separate account assets				400,749		367,860
		Total assets	$	4,460,422	$	4,558,372

Liabilities
Future policy benefits			$	854,447	$	860,284
Policyholder account balances				2,191,105		2,278,418
Notes payable				14,700		27,282
Income taxes				35,319		40,155
Other liabilities				279,798		304,154
Separate account liabilities				400,749		367,860
		Total liabilities		3,776,118		3,878,153

Stockholders’ equity
Common stock				23,121		23,121
Additional paid in capital				25,852		25,063
Retained earnings				780,892		756,807
Accumulated other
	comprehensive loss			(25,118)		(8,406)
Less treasury stock				(120,443)		(116,366)
		Total stockholders’ equity		684,304		680,219

		Total liabilities and equity	$	4,460,422	$	4,558,372

See accompanying Notes to Consolidated Financial Statements.

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Consolidated
Statements of Income
(Thousands, except share data)
				Quarter ended				Year ended
				December 31				December 31
				2006		2005		2006		2005
Revenues
Insurance revenues:
	Premiums		$	44,465	$	45,023	$	175,637	$	179,347
	Contract charges			28,279		29,323		114,496		114,745
	Reinsurance ceded			(14,357)		(14,293)		(54,979)		(55,597)
		Total insurance revenues		58,387		60,053		235,154		238,495
Investment revenues:
	Net investment income			49,549		49,616		196,280		194,608
	Realized investment gains			3,224		5,250		5,621		6,113
Other revenues				2,514		2,479		11,349		10,312
		Total revenues		113,674		117,398		448,404		449,528

Benefits and expenses
Policyholder benefits				41,663		43,752		167,795		169,693
Interest credited to policyholder account balances				23,628		24,492		94,648		98,637
Amortization of deferred acquisition costs
	and value of business acquired			8,696		10,910		41,634		42,429
Operating expenses				25,895		23,334		93,080		89,144
		Total benefits and expenses		99,882		102,488		397,157		399,903

Income before income tax expense				13,792		14,910		51,247		49,625

Income tax expense				3,698		4,013		14,329		13,441

Net income			$	10,094	$	10,897	$	36,918	$	36,184

Per common share:
	Net income, basic and diluted		$	0.86	$	0.90	$	3.11	$	3.03

	Cash dividends		$	0.27	$	0.27	$	1.08	$	1.08

See accompanying Notes to Consolidated Financial Statements.

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Consolidated
Statements of Cash Flows
(Thousands)
		Year ended
		December 31
			2006		2005
Operating activities
	Net cash provided	$	23,936	$	44,365

Investing activities
Purchases of investments:
	Fixed maturity securities		(274,662)		(541,305)
	Equity securities		(10,761)		(5,690)
	Mortgage loans		(72,569)		(109,561)
	Other investment assets		(46,142)		(17,823)
Sales of investments:
	Fixed maturity securities		94,717		175,317
	Equity securities		5,078		6,296
	Other investment assets		28,994		62,322
Maturities and principal paydowns
	of other investments		345,305		485,806
Net additions to property and
	equipment		(2,028)		(1,061)
	Net cash provided		67,932		54,301

Financing activities
Proceeds from borrowings			67,001		45,315
Repayment of borrowings			(79,583)		(110,252)
Deposits on policyholder account
	balances		218,548		265,219
Withdrawals from policyholder
	account balances		(294,252)		(270,521)
Net transfers from separate accounts			16,451		5,213
Change in other deposits			(12,237)		(12,577)
Cash dividends to stockholders			(12,833)		(12,876)
Net acquisition of treasury stock			(3,288)		(1,348)
	Net cash used		(100,193)		(91,827)

Increase (decrease) in cash			(8,325)		6,839
Cash at beginning of year			10,985		4,146

	Cash at end of year	$	2,660	$	10,985

See accompanying Notes to Consolidated Financial Statements.

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Notes

•	Comprehensive income (loss) was $6.6 million and ($3.1) million for the
	fourth quarter of 2006 and 2005; and $20.2 million and $1.5 million for the
	twelve months ended December 31, 2006 and 2005, respectively. This varies
	from net income largely due to unrealized gains or losses on investments and
	changes in pension liability.

•	Income per common share is based upon the weighted average
	number of shares outstanding during the year, 11,883,830
	shares (2005 - 11,923,831).

•	These financial statements should be read in conjunction with the Company's
	Form 10-K. Please refer to the Company's Form 10-K as filed with the
	U.S. Securities and Exchange Commission at www.kclife.com.

•	Certain amounts in prior years have been reclassified to conform with
	the current year presentation.

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SIGNATURE

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

KANSAS CITY LIFE INSURANCE COMPANY

(Registrant)

By:/s/William A. Schalekamp

William A. Schalekamp,

Senior Vice President,

General Counsel & Secretary

March 16, 2007

(Date)

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