UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

AMERUS GROUP CO.

(Exact name of registrant as specified in its charter)

IOWA		42-1458424
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
699 Walnut Street Des Moines, Iowa		50309-3948
(Address of principal executive offices)		(Zip code)

(515) 362-3600
Registrant’s telephone number, including area code

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 þ          No o

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

Large accelerated filer þ                    Accelerated filer o                    Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes o          No þ

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

Common Stock 38,169,982 shares as of July 31, 2006

 

 

INDEX

		Page No.
PART I — FINANCIAL INFORMATION			4
Item 1. Financial Statements			4
Consolidated Balance Sheets June 30, 2006 (Unaudited) and December 31, 2005			4
Consolidated Statements of Income (Unaudited) For the Three and Six Months Ended June 30, 2006 and 2005			6
Consolidated Statements of Comprehensive Income (Unaudited) For the Three and Six Months Ended June 30, 2006 and 2005			7
Consolidated Statements of Stockholders’ Equity For the Six Months Ended June 30, 2006 (Unaudited) and the Year Ended December 31, 2005			8
Consolidated Statements of Cash Flows (Unaudited) For the Six Months Ended June 30, 2006 and 2005			9
Notes to Consolidated Financial Statements (Unaudited)			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3. Quantitative and Qualitative Disclosures About Market Risk			43
Item 4. Controls and Procedures			44
PART II — OTHER INFORMATION			45
Item 1. Legal Proceedings			45
Item 1A. Risk Factors			46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			47
Item 4. Submissions of Matters to a Vote of Security Holders			48
Item 6. Exhibits			48
Signatures			49
Index to Exhibits			50
Computation of Ratios of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Certification of CEO
Certification of CFO
Certification of CEO
Certification of CFO

SAFE HARBOR STATEMENT

     This Quarterly Report on Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to trends in our operations and financial results and our business and products, which include words such as “anticipate,” “believe,” “plan,” “estimate,” “expect,” “intend,” and other similar expressions. Forward-looking statements are made based upon management’s current expectations and beliefs concerning future developments and their potential effects on the Company. Such forward-looking statements are not guarantees of future performance. Factors that may cause our actual results to differ materially from those contemplated by these forward-looking statements include, among others, the following possibilities: (a) our shareholders may not approve and adopt the merger agreement with Aviva plc and the transactions contemplated by the merger agreement at the special shareholder meeting; (b) the parties may be unable to obtain governmental and regulatory approvals required for such merger, or required governmental and regulatory approvals may delay the merger or result in the imposition of conditions that could cause the parties to abandon the merger; (c) the parties may be unable to complete the merger because, among other reasons, conditions to the closing of the merger may not be satisfied or waived; (d) general economic conditions and other factors, including prevailing interest rate levels and stock and bond market performance, which may affect (1) our ability to sell our products, (2) the market value of our investments and consequently protection product and accumulation product margins and (3) the lapse rate and profitability of policies; (e) the performance of our investment portfolios which may be affected by general economic conditions, the continued credit quality of the companies whose securities we invest in and the impact of other investment transactions; (f) customer response to new products, distribution channels and marketing initiatives and increasing competition in the sale of insurance and annuities and the recruitment of sales representatives from companies that may have greater financial resources, broader arrays of products, higher ratings and stronger financial performance may impair our ability to retain existing customers, attract new customers and maintain our profitability; (g) our ratings and those of our subsidiaries by independent rating organizations which we believe are particularly important to the sale of our products; (h) mortality, morbidity, and other factors which may affect the profitability of our insurance products; (i) our ability to develop and maintain effective risk management policies and procedures and to maintain adequate reserves for future policy benefits and claims; (j) litigation or regulatory investigations or examinations; (k) regulatory changes, interpretations, initiatives or pronouncements, including those relating to the regulation of insurance companies and the regulation and sales of their products and the programs in which they are used; (l) changes in the federal income tax and other federal laws, regulations, and interpretations, including federal regulatory measures that may significantly affect the insurance business including limitations on antitrust immunity, the applicability of securities laws to insurance products, minimum solvency requirements, and changes to the tax advantages offered by life insurance and annuity products or programs with which they are used; (m) the impact of changes in standards of accounting; (n) our ability to achieve anticipated levels of operational efficiencies and cost-saving initiatives and to meet cash requirements based upon projected liquidity sources; (o) our ability to integrate the business and operations of acquired entities; and (p) various other factors discussed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the period ended December 31, 2005, and of this Quarterly Report on Form 10-Q.

     There can be no assurance that other factors not currently anticipated by us will not materially and adversely affect our results of operations. You are cautioned not to place undue reliance on any forward-looking statements made by us or on our behalf. Forward-looking statements speak only as of the date the statement was made. We undertake no obligation to update or revise any forward-looking statement.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

AMERUS GROUP CO.

CONSOLIDATED BALANCE SHEETS
($ in thousands)

		June 30,				December 31,
		2006				2005
		(unaudited)
Assets
Investments:
Securities available-for-sale at fair value:
Fixed maturity securities		$	16,201,102			$	16,727,933
Equity securities			80,119				75,658
Short-term investments			9,999				9,998
Securities held-for-trading purposes at fair value:
Fixed maturity securities			1,276,341				1,414,225
Equity securities			4,143				2,358
Short-term investments			3,962				—
Mortgage loans			988,008				976,135
Policy loans			500,410				483,441
Other investments			425,004				347,552
Total investments			19,489,088				20,037,300
Cash and cash equivalents			491,229				600,160
Accrued investment income			236,155				237,221
Premiums, fees and other receivables			35,855				40,667
Income taxes receivable			25,477				9,005
Reinsurance receivables			745,907				730,532
Deferred policy acquisition costs			2,134,740				1,755,159
Deferred sales inducements			340,675				261,322
Value of business acquired			356,674				356,949
Goodwill			229,670				228,869
Property and equipment			46,398				44,467
Other assets			312,851				306,655
Separate account assets			209,605				221,694
Total assets		$	24,654,324			$	24,830,000

See accompanying notes to consolidated financial statements.

AMERUS GROUP CO.
CONSOLIDATED BALANCE SHEETS
($ in thousands)

		June 30,				December 31,
		2006				2005
		(unaudited)
Liabilities and Stockholders’ Equity
Liabilities:
Policy reserves and policyowner funds:
Future life and annuity policy benefits		$	19,690,434			$	19,486,854
Policyowner funds			1,584,548				1,483,873
			21,274,982				20,970,727
Accrued expenses and other liabilities			438,726				500,858
Payable for collateral under securities lending and other transactions			391,468				474,561
Dividends payable to policyowners			160,874				278,839
Policy and contract claims			50,329				66,137
Deferred income taxes			3,191				58,818
Notes payable			564,744				556,051
Separate account liabilities			209,605				221,694
Total liabilities			23,093,919				23,127,685
Stockholders’ equity:
Preferred Stock, no par value, 20,000,000 shares authorized, 6,000,000 shares issued and outstanding in 2006 and 2005			144,774				144,830
Common Stock, no par value, 230,000,000 shares authorized; 46,944,310 shares issued and 38,137,344 shares outstanding in 2006; 46,675,811 shares issued and 38,612,874 shares outstanding in 2005			46,944				46,676
Additional paid-in capital — common stock			1,244,023				1,231,533
Accumulated other comprehensive loss			(219,214	)			(3,612	)
Unearned compensation			—				(3,783	)
Retained earnings			728,197				604,747
Treasury stock, at cost (8,806,966 shares in 2006 and 8,062,937 shares in 2005)			(384,319	)			(318,076	)
Total stockholders’ equity			1,560,405				1,702,315
Total liabilities and stockholders’ equity		$	24,654,324			$	24,830,000

See accompanying notes to consolidated financial statements.

AMERUS GROUP CO.

CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share data)

		For The Three Months Ended June 30,								For The Six Months Ended June 30,
		2006				2005				2006				2005
		(unaudited)
Revenues:
Insurance premiums		$	54,845			$	61,001			$	108,343			$	123,547
Product charges			68,740				54,638				136,802				113,671
Net investment income			286,972				277,040				572,290				545,751
Realized/unrealized capital gains (losses)			(62,865	)			6,266				(12,220	)			(42,678	)
Other income			11,968				11,229				24,885				23,785
			359,660				410,174				830,100				764,076
Benefits and expenses:
Policyowner benefits			170,791				244,203				382,783				413,786
Underwriting, acquisition and other expenses			42,255				38,419				83,223				79,027
Amortization of deferred policy acquisition costs and value of business acquired			46,762				35,058				115,282				87,801
Dividends to policyowners			17,683				31,864				36,416				51,867
			277,491				349,544				617,704				632,481
Income from continuing operations			82,169				60,630				212,396				131,595
Interest expense			8,765				8,191				17,430				15,971
Income before income tax expense			73,404				52,439				194,966				115,624
Income tax expense			25,431				16,872				66,078				18,569
Net income			47,973				35,567				128,888				97,055
Dividends on preferred stock			2,719				—				5,438				—
Net income available to common stockholders		$	45,254			$	35,567			$	123,450			$	97,055
Net income available to common stockholders per common share:
Basic		$	1.18			$	0.91			$	3.20			$	2.46
Diluted		$	1.09			$	0.83			$	2.96			$	2.27
Weighted average common shares outstanding:
Basic			38,487,501				39,264,504				38,616,506				39,412,211
Diluted			41,417,538				42,751,912				41,702,996				42,845,240

See accompanying notes to consolidated financial statements.

AMERUS GROUP CO.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)

		For The Three Months Ended June 30,								For The Six Months Ended June 30,
		2006				2005				2006				2005
		(unaudited)
Net income		$	47,973			$	35,567			$	128,888			$	97,055
Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period			(162,388	)			143,592				(341,998	)			20,050
Reclassification adjustment for losses included in net income			8,030				860				9,978				1,134
Minimum pension liability adjustment			—				—				325				—
Other comprehensive income (loss), before tax			(154,358	)			144,452				(331,695	)			21,184
Income tax (expense) benefit related to items of other comprehensive income			54,025				(50,558	)			116,093				(7,414	)
Other comprehensive income (loss), net of taxes			(100,333	)			93,894				(215,602	)			13,770
Comprehensive income (loss)		$	(52,360	)		$	129,461			$	(86,714	)		$	110,825

See accompanying notes to consolidated financial statements.

AMERUS GROUP CO.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Six Months Ended June 30, 2006 and the Year Ended December 31, 2005
($ in thousands)

										Additional				Accumulated
										Paid-In				Other																Total
		Preferred								Capital				Comprehensive				Unearned				Retained				Treasury				Stockholders'
		Stock				Common Stock				Common Stock				Income (Loss)				Compensation				Earnings				Stock				Equity
Balance at December 31, 2004		$	—			$	44,226			$	1,198,379			$	114,670			$	(1,238	)		$	431,911			$	(164,479	)		$	1,623,469
2005:
Net income			—				—				—				—				—				191,179				—				191,179
Net unrealized loss on securities			—				—				—				(118,034	)			—				—				—				(118,034	)
Net unrealized loss on derivatives designated as cash flow hedges			—				—				—				(248	)			—				—				—				(248	)
Issuance of preferred stock, net of costs			144,830				—				—				—				—				—				—				144,830
Conversion of OCEANs			—				1,675				9,069				—				—				—				—				10,744
Stock issued under various incentive plans, net of forfeitures			—				775				24,085				—				(2,545	)			—				958				23,273
Purchase of treasury stock			—				—				—				—				—				—				(154,555	)			(154,555	)
Dividends declared on preferred stock			—				—				—				—				—				(2,417	)			—				(2,417	)
Dividends declared on common stock			—				—				—				—				—				(15,926	)			—				(15,926	)
Balance at December 31, 2005			144,830				46,676				1,231,533				(3,612	)			(3,783	)			604,747				(318,076	)			1,702,315
2006 (unaudited):
Net income			—				—				—				—				—				128,888				—				128,888
Net unrealized loss on securities			—				—				—				(215,741	)			—				—				—				(215,741	)
Net unrealized loss on derivatives designated as cash flow hedges			—				—				—				(72	)			—				—				—				(72	)
Costs for issuance of preferred stock			(56	)			—				—				—				—				—				—				(56	)
Stock issued under various incentive plans, net of forfeitures			—				268				16,273				—				—				—				(9,926	)			6,615
Purchase of treasury stock			—				—				—				—				—				—				(56,317	)			(56,317	)
Dividends declared on preferred stock			—				—				—				—				—				(5,438	)			—				(5,438	)
Reclassification of unearned compensation under SFAS 123R			—				—				(3,783	)			—				3,783				—				—				—
Minimum pension liability adjustment			—				—				—				211				—				—				—				211
Balance at June 30, 2006		$	144,774			$	46,944			$	1,244,023			$	(219,214	)		$	—			$	728,197			$	(384,319	)		$	1,560,405

See accompanying notes to consolidated financial statements.

AMERUS GROUP CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

		For The Six Months Ended June 30,
		2006				2005
		(unaudited)
Cash flows from operating activities
Net income		$	128,888			$	97,055
Adjustments to reconcile net income to net cash provided by operating activities:
Product charges			(136,802	)			(113,671	)
Interest credited to policyowner account balances			261,170				251,539
Change in option value of indexed products and market value adjustments on total return strategy annuities			(62,341	)			(12,589	)
Realized/unrealized capital losses			12,220				42,678
DAC and VOBA amortization			115,282				87,801
Deferred sales inducements amortization			18,075				10,902
DAC and VOBA capitalized			(241,021	)			(242,496	)
Change in:
Accrued investment income			1,066				(3,314	)
Reinsurance receivables			(57,460	)			(66,884	)
Securities held-for-trading purposes:
Fixed maturities			150,923				127,774
Equity securities			(1,785	)			15,413
Short-term investments			(3,962	)			—
Liabilities for future policy benefits			(70,597	)			(85,412	)
Accrued expenses and other liabilities			(61,783	)			38,553
Policy and contract claims and other policyowner funds			84,357				49,261
Income taxes:
Current			(18,583	)			(39,595	)
Deferred			60,439				(15,671	)
Other, net			19,668				18,016
Net cash provided by operating activities			197,754				159,360
Cash flows from investing activities:
Purchase of fixed maturities available-for-sale			(2,354,309	)			(2,507,941	)
Proceeds from sale of fixed maturities available-for-sale			1,556,153				1,078,389
Maturities, calls and principal reductions of fixed maturities available-for-sale			500,476				702,208
Purchase of equity securities			(13,906	)			(3,986	)
Proceeds from sale of equity securities			10,180				4,625
Change in short-term investments, net			1,420				(8,381	)
Purchase of mortgage loans			(84,548	)			(122,181	)

AMERUS GROUP CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
($ in thousands)

		For The Six Months Ended June 30,
		2006				2005
		(unaudited)
Proceeds from repayment and sale of mortgage loans			71,968				56,446
Purchase of other invested assets			(145,999	)			(65,358	)
Proceeds from sale of other invested assets			103,252				46,699
Change in policy loans, net			(16,969	)			700
Other assets, net			(7,128	)			(3,403	)
Net cash used in investing activities			(379,410	)			(822,183	)
Cash flows from financing activities:
Deposits to policyowner account balances			1,537,106				1,610,235
Withdrawals from policyowner account balances			(1,335,898	)			(867,110	)
Change in debt, net			(306	)			482
Change in payable for collateral under securities lending and other transactions			(83,093	)			132,600
Dividends to preferred shareholders			(5,438	)			—
Stock issued under various incentive plans, net of forfeitures			6,615				7,804
Purchase of treasury stock			(56,317	)			(24,584	)
Excess tax benefits on share-based compensation			2,110				—
Debt and preferred stock issuance costs			(1,054	)			—
Retirement of senior notes			—				(125,000	)
Proceeds from revolving credit agreement			9,000				100,000
Net cash provided by financing activities			72,725				834,427
Net (decrease) increase in cash			(108,931	)			171,604
Cash and cash equivalents at beginning of period			600,160				478,441
Cash and cash equivalents at end of period		$	491,229			$	650,045
Supplemental disclosure of cash activities:
Interest paid		$	17,354			$	16,942
Income taxes paid		$	19,240			$	69,904
Supplemental disclosure of non-cash operating activities:
Capitalization of deferred sales inducements		$	53,029			$	54,618

See accompanying notes to consolidated financial statements.

AMERUS GROUP CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) CONSOLIDATION AND BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All adjustments were of a normal recurring nature, unless otherwise noted in the Notes to Consolidated Financial Statements. Operating results for the six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. The consolidated balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. For further information and for capitalized terms not defined in this Form 10-Q, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. On July 12, 2006, Aviva plc and the Company entered into an Agreement and Plan of Merger as discussed in note 11.

     The accompanying consolidated financial statements include the accounts and operations of the Company and its wholly-owned subsidiaries, principally AmerUs Life Insurance Company (ALIC), AmerUs Annuity Group Co. and its subsidiaries (collectively, AAG), AmerUs Capital Management Group, Inc. and its subsidiaries (collectively, ACM), and ILICO Holdings, Inc., the holding company of Indianapolis Life Insurance Company (ILIC) and its subsidiaries (collectively, ILICO). All significant intercompany transactions and balances have been eliminated in consolidation.

     Certain amounts in the 2005 financial statements have been reclassified to conform to the 2006 financial statement presentation.

(2) SHARE-BASED COMPENSATION

Adoption of SFAS 123R

     The Company has various share-based compensation plans, which provide for equity awards including stock options, non-vested stock, non-vested stock units, stock appreciation rights (“SARs”), a long-term incentive plan and a management incentive payment deferral plan. In December 2004, the Financial Accounting Standards Board issued a revision to Statement of Financial Accounting Standards No. 123, “Share-Based Payment,” (SFAS 123R) which is a revision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” (SFAS 123). The statement supercedes APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Effective on January 1, 2006, the Company adopted the modified prospective transition method provided under SFAS 123R. Compensation cost associated with share-based compensation plans recognized for the six months ended June 30, 2006 includes (1) the amortization related to the remaining unvested portion of all share-based awards granted prior to January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123, and (2) the amortization related to all share-based awards granted on or after January 1, 2006, based on the grant date fair value estimated in accordance with SFAS 123R.

     The effect on pro-forma net income and earnings per share in 2005 if the Company had applied the fair value recognition provisions of SFAS 123 to share-based employee compensation would have been as follows:

		For The Three Months Ended June 30,								For The Six Months Ended June 30,
		2006				2005				2006				2005
						($ in thousands, except share data)
Net income available to common stockholders, as reported		$	45,254			$	35,567			$	123,450			$	97,055
Add: 2005 stock-based compensation expense included in reported net income, net of related tax effects			—				193			$	—				1,306
Deduct: 2005 total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects			—				(749	)			—				(2,521	)
2006 actual and 2005 pro forma net income available to common stockholders		$	45,254			$	35,011			$	123,450			$	95,840
Earnings per common share:
Basic — as reported		$	1.18			$	0.91			$	3.20			$	2.46
Basic — pro forma		$	1.18			$	0.89			$	3.20			$	2.43
Diluted — as reported		$	1.09			$	0.83			$	2.96			$	2.27
Diluted — pro forma		$	1.09			$	0.82			$	2.96			$	2.24

     As part of the adoption of SFAS 123R, the unrecognized compensation cost related to non-vested share-based compensation awards granted prior to January 1, 2006, previously recognized as a separate component of stockholders’ equity amounting to $3.8 million was reclassified to additional paid-in capital. In addition, prior to the adoption of SFAS 123R, the tax benefits resulting from the exercise of share-based compensation were reported as operating cash flows in the consolidated statement of cash flows. SFAS 123R requires that cash flows resulting from tax deductions in excess of cumulative compensation cost recognized for exercise be classified as financing cash flows. There was no initial change to net income or total stockholders’ equity upon adoption of SFAS 123R.

General

     Stock options, non-vested stock, non-vested stock units, non-vested stock units under the long-term incentive plan and management incentive payment deferral plan units are settled in the Company’s stock. Upon exercise of these awards, the Company issues shares from treasury or issues new shares of common stock as the awards cannot be settled for cash. The Company’s SARs and Agent Bonus Plan are settled in cash rather than shares of stock.

     If the proposed merger, as discussed in note 11, is completed, at the effective time of the merger each outstanding option to purchase Company common stock will be canceled and converted into the right to receive an amount of cash per share equal to the excess, if any, of $69.00 over the exercise price of the option. Each stock unit, performance unit or similar award will be converted into the right to receive $69.00 in cash per unit or award held, with unvested performance units vesting at target levels. Each stock appreciation right will be converted into the right to receive an amount of cash per stock appreciation right equal to the excess of $69.00 over the fair market value of a share of Company common stock on the date of the grant.

     Total compensation expense for share-based awards amounted to $4.0 million ($2.6 million after-tax) and $2.3 million ($1.5 million after-tax) for the six months ended June 30, 2006 and 2005, respectively. As of June 30, 2006, there was $26.1 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to stock-based compensation. That cost is expected to be recognized over vesting periods of generally three to five years.

Stock Option Plans

     The Company has four stock incentive plans authorizing the issuance of incentive and non-qualified stock options to employees, officers and non-employee directors of the Company. The option price per share under all plans may not be less than the fair value of the Company’s common stock on the date of grant and the term of the option may not be longer than ten years. Options granted on or subsequent to January 1, 2003, have a five-year vesting schedule with one-fifth of the options granted vesting at the end of each of the five years. Generally, options granted prior to January 1, 2003, have a three-year vesting schedule with one-third of the options granted vesting at the end of each of the three years. Option expense was recorded for the first time in 2006, which amounted to $1.7 million for the six months ended June 30, 2006.

     A summary of the Company’s stock option plans follows:

		Six Months Ended June 30, 2006
						Weighted
		Number				average
		of				exercise
		shares				price
Outstanding, beginning of period			2,754,287			$	32.00
Granted at market price			321,500				59.81
Exercised			(197,285	)			26.97
Forfeited			(3,000	)			53.57
Outstanding, end of period			2,875,502			$	35.44
Exercisable, end of period			2,038,438			$	30.65

     The following table summarizes information about stock options outstanding under the Company’s option plans as of June 30, 2006:

Options Outstanding
						Weighted				Weighted
Range		Remaining				average				average
of exercise		options				contractual				exercise
prices		outstanding				life in years				price
18.30 - 24.40			414,930				3.2			$	20.91
24.40 - 30.50			925,350				5.1				28.39
30.50 - 36.60			251,584				4.4				34.21
36.60 - 42.70			684,505				6.4				37.99
42.70 - 48.80			254,133				8.5				46.70
48.80 - 54.90			16,500				9.2				51.48
54.90 - 61.00			328,500				9.6				59.76
			2,875,502				5.9			$	35.44

     The following table summarizes information about stock options exercisable under the Company’s option plans as of June 30, 2006:

Options Exercisable
						Weighted
Range						average
of exercise		Options				exercise
prices		exercisable				price
18.30 - 24.40			414,930			$	20.91
24.40 - 30.50			797,270				28.64
30.50 - 36.60			238,915				34.20
36.60 - 42.70			537,420				38.09
42.70 - 48.80			49,903				46.51
			2,038,438			$	30.65

     The total intrinsic value of options exercised was $6.7 million for the six months ended June 30, 2006. The aggregate intrinsic value of options outstanding and options exercisable as of June 30, 2006 was $66.5 million and $56.9 million, respectively.

     The fair values of options granted are estimated on the date of grant using a Monte Carlo simulation pricing model for awards granted on or after January 1, 2006, and the Black-Scholes pricing model for awards granted prior to January 1, 2006. The determination of the fair value of option awards on the date of grant using an option-pricing model is affected by the stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. For the 2006 pricing model, the expected term of options granted is estimated by taking the average of the vesting term and the contractual term of the option. The

volatility of the common stock is estimated by considering both historical and implied volatility in market traded options. The risk-free interest rate in the option valuation model is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options. The option valuation model contains an assumption that the Company plans to continue paying a $0.40 per share cash dividend for the foreseeable future. The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. Historical data is used to estimate pre-vesting option forfeitures and record compensation expense only for those awards that are expected to vest. All option awards are amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. The following are the weighted average assumptions used:

		2006				2005
Expected Volatility			24.64	%			30.11	%
Risk-free Interest Rate			4.68	%			4.31	%
Dividend Yield			0.66	%			0.88	%
Weighted average fair value of options granted		$	19.44			$	20.25

Non-vested Stock

     The Company has awarded restricted stock to eligible employees and non-employee directors under two of the stock incentive plans. The awards have restriction periods of one to five years tied to employment and/or service. The awards are recorded at the market value on the date of the grant as unearned compensation, included in additional paid-in capital, since common shares were legally issued on that date. The initial values of these grants are amortized over the restriction periods, net of forfeitures. Non-vested stock and compensation expense information is as follows:

		Six Months Ended June 30, 2006
						Weighted
		Number				average
		of				exercise
		shares				price
Outstanding, beginning of period			48,277			$	39.57
Granted at market price			7,080				58.57
Outstanding, end of period			55,357			$	42.00
Compensation expense ($ in thousands)						$	206

Non-vested Stock Units

     The Company awarded 57,296 non-vested common stock units to an employee under one of the stock incentive plans in 2005. The awards have restriction periods of three to four years tied to employment or service. The awards were recorded at the market value on the date of the grant as unearned compensation, included in additional paid-in capital, as shares will be issued at the end of the restriction period. The initial values of these grants are amortized over the restriction periods, net of forfeitures. Compensation expense amounted to $0.4 million for the six months ended June 30, 2006. As of June 30, 2006 and December 31, 2005, there were 49,962 units outstanding.

Stock Appreciation Rights

     The Company is authorized to grant SARs to agents under its non-employee stock option plan. Issuance of SARs is made at the sole discretion of the Company. The terms and conditions under this plan are similar to the employee stock incentive plans. The SARs are accounted for as a liability instrument since the awards are settled for cash. The liability for the awards is adjusted based on the current market value of the Company’s stock at each reporting date. The Company’s SARs are summarized as follows:

		Six Months Ended June 30, 2006
		Number				Weighted
		of				average
		shares				value
Outstanding, beginning of period			51,755			$	34.77
Granted at market price			9,500				60.09
Exercised			(4,218	)			32.27
Outstanding, end of period			57,037			$	39.17
Compensation expense ($ in thousands)						$	131

Long-term Incentive Plan

     As part of the stock incentive plans for employees and non-employees, the Human Resources and Compensation Committee of the Board of Directors is authorized to grant awards to senior officers in connection with a long-term incentive plan. The plan provides for an initial grant of units. The units are earned over a multi-year period and the number of units earned varies with the level of performance achieved over such performance period. The number of units earned range from zero to 200% of the initial units granted. Expense is determined based on the grant date fair value of the units determined by a Monte Carlo simulation model. Awards will be paid in common stock or such other consideration as the committee may determine. Awards under this plan are granted under and subject to the terms and conditions of the employee stock incentive plans. As of June 30, 2006 and December 31, 2005, there were 0.1 million units outstanding under the plan. Compensation expense for the plan amounted to $1.0 million and $1.2 million for the six months ended June 30, 2006 and 2005, respectively. The total fair value of awards granted amounted to $4.2 million and $2.6 million during the six months ended June 30, 2006 and 2005, respectively.

Management Incentive Payment Deferral Plan

     The Company has a management incentive payment deferral plan under which eligible employees can elect to defer their annual cash bonuses. The Human Resources and Compensation Committee of the Board of Directors determines each year the maximum amount of deferral and percentage of match by the Company. Employees can defer up to 100% of bonuses received. Participant deferrals are 50% matched by the Company up to a maximum match of $10,000. The total deferrals, including participant deferrals and Company match, have a restriction period of three years during which the deferrals cannot be paid out except for certain specified events. Deferrals and match amounts are used to purchase units equal in value to a share of the Company’s common stock on the date of deferral. Shares of common stock are distributed at the end of the restriction period. At June 30, 2006 and December 31, 2005, there were 0.2 million and 0.3 million units outstanding with the value of the vested and partially vested units outstanding amounting to $1.0 million and $0.6 million, respectively, which is included as unearned compensation in additional paid-in capital in stockholders’ equity of the consolidated balance sheet. The total fair value of deferrals and match awards granted amounted to $2.5 million and $2.6 million during

the six months ended June 30, 2006 and 2005, respectively. Compensation expense associated with the match portion of the plan amounted to $0.1 million and $0.3 million for the six months ended June 30, 2006 and 2005, respectively.

Agent Bonus Plan

     The Company has a bonus plan under which eligible agents receive awards based on exceeding production goals. Units are awarded for the applicable year using the Company’s common stock price at the award date. Vesting is generally over a five year period and is dependent on achieving production goals in subsequent years. The bonus plan is accounted for as a liability instrument since the awards are settled for cash. The liability for the awards is adjusted based on the current market value of the Company’s stock at each reporting date. At June 30, 2006 and December 31, 2005, there were 0.1 million units outstanding with the value of the vested and partially vested units outstanding amounting to $3.3 million, which is included as an accrued expense in the consolidated balance sheet. The total fair value of the units amounted to $1.0 million and $1.5 million during the six months ended June 30, 2006 and 2005, respectively. Compensation expense associated with the match portion of the plan amounted to $0.4 million and $0.3 million for the six months ended June 30, 2006 and 2005, respectively.

(3) EARNINGS PER SHARE

     Basic earnings per share of common stock are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per share assumes the issuance of common shares applicable to stock options, PRIDES^SM and the Company’s Optionally Convertible Equity-Linked Accreting Notes (OCEANs^SM) and is calculated using the treasury stock method.

     Diluted earnings per share applicable to the Company’s PRIDES securities are determined using the treasury stock method as it is currently anticipated that holders of the PRIDES are more likely to tender cash in the future for the securities’ forward contract. The PRIDES added 2,258,370 and 2,356,301 shares to the diluted earnings per share calculation for the three and six months ended June 30, 2006, respectively, and 1,579,084 and 1,540,923 shares to the diluted earnings per share calculation for the three and six months ended June 30, 2005, respectively.

     As of September 13, 2005, all of the Company’s OCEANs were converted with settlement in cash and common stock. Diluted earnings per share applicable to the OCEANs were determined using the guidance of the Financial Accounting Standards Board’s Emerging Issues Task Force Issue 04-8 (EITF 04-8), “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” which was effective for periods ending after December 15, 2004. EITF 04-8 requires diluted earnings per share to be computed following the guidance of EITF 90-19, “Convertible Bonds with Issuer Option to Settle for Cash upon Conversion,” for securities such as the OCEANs which are considered to be “Instrument C” securities. The conversion spread portion of an Instrument C security should be included in diluted earnings per share based on the number of shares that would be required to be delivered if the instrument had been converted at the end of the period. The OCEANs added 1,075,335 and 1,032,701 shares to the diluted earnings per share calculation for the three and six months ended June 30, 2005, respectively.

		For The Three Months Ended June 30,
		2006												2005
						Number of				Per Share								Number of				Per Share
		Net Income				Shares				Amount				Net Income				Shares				Amount
		($ in thousands, except share data)
Basic EPS
Net income available to common stockholders from continuing operations		$	45,254				38,488			$	1.18			$	35,567				39,265			$	0.91
Effect of dilutive securities
Equity compensation			—				672				(0.02	)			—				833				(0.01	)
PRIDES			—				2,258				(0.07	)			—				1,579				(0.04	)
OCEANs			—				—				—				—				1,075				(0.03	)
Diluted EPS		$	45,254				41,418			$	1.09			$	35,567				42,752			$	0.83

		For The Six Months Ended June 30,
		2006												2005
						Number of				Per Share								Number of				Per Share
		Net Income				Shares				Amount				Net Income				Shares				Amount
		($ in thousands, except share data)
Basic EPS
Net income available to common stockholders from continuing operations		$	123,450				38,617			$	3.20			$	97,055				39,412			$	2.46
Effect of dilutive securities
Equity compensation			—				730				(0.05	)			—				859				(0.04	)
PRIDES			—				2,356				(0.19	)			—				1,541				(0.09	)
OCEANs			—				—								—				1,033				(0.06	)
Diluted EPS		$	123,450				41,703			$	2.96			$	97,055				42,845			$	2.27

(4) CLOSED BLOCK

     The Company has established two closed blocks, which we refer to collectively as the Closed Block. The first was established on June 30, 1996 in connection with the reorganization of ALIC from a mutual company to a stock company. The second was established as of March 31, 2000 in connection with the reorganization of ILIC from a mutual company to a stock company. Insurance policies which had a dividend scale in effect as of each Closed Block establishment date were included in the Closed Block. The Closed Block was designed to provide reasonable assurance to owners of insurance policies included therein that, after the reorganization of ALIC and ILIC, assets would be available to maintain the dividend scales and interest credits in effect prior to the reorganization if the experience underlying such scales and credits continues.

     Summarized financial information of the Closed Block as of June 30, 2006 and December 31, 2005 and for the three and six months ended June 30, 2006 and 2005 are as follows:

		June 30,				December 31,
		2006				2005
		($ in thousands)
Liabilities:
Future life and annuity policy benefits		$	2,740,595			$	2,765,095
Policyowner funds			7,408				7,835
Accrued expenses and other liabilities			7,352				6,420
Dividends payable to policyowners			152,314				154,793
Policy and contract claims			13,658				17,986
Policyowner dividend obligation			1,018				116,684
Total Liabilities			2,922,345				3,068,813
Assets:
Fixed maturity securities available-for-sale at fair value			1,854,774				1,916,052
Mortgage loans			52,481				60,541
Policy loans			333,646				331,561
Other investments			1,918				—
Cash and cash equivalents			7,636				63,506
Accrued investment income			33,163				32,972
Premiums and fees receivable			48,060				58,778
Total Assets			2,331,678				2,463,410
Maximum future earnings to be recognized from assets and liabilities of the Closed Block		$	590,667			$	605,403

		For The Three Months Ended June 30,
		2006				2005
		($ in thousands)
Operations:
Insurance premiums		$	38,023			$	42,998
Product charges			1,508				1,445
Net investment income			35,998				40,361
Realized losses on investments			(1,056	)			(40	)
Policyowner benefits			(48,625	)			(45,282	)
Underwriting, acquisition and other expenses			(1,544	)			(631	)
Dividends to policyowners			(15,461	)			(29,823	)
Contribution from the Closed Block before income taxes		$	8,843			$	9,028

		For The Six Months Ended June 30,
		2006				2005
		($ in thousands)
Operations:
Insurance premiums		$	75,372			$	84,885
Product charges			3,118				3,146
Net investment income			71,601				74,780
Realized gains (losses) on investments			(2,118	)			90
Policyowner benefits			(94,651	)			(95,403	)
Underwriting, acquisition and other expenses			(3,039	)			(1,188	)
Dividends to policyowners			(32,337	)			(47,991	)
Contribution from the Closed Block before income taxes		$	17,946			$	18,319

(5) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     The Company accounts for derivatives, including certain derivative instruments embedded in other contracts, at fair value. Accounting for gains and losses resulting from changes in the values of derivatives is dependent upon the use of the derivative and its qualification for special hedge accounting. In addition, we also have trading securities that back our total return strategy traditional annuity products. During the first six months of 2006 and 2005, an unrealized loss has been recognized amounting to $0.2 million and $13.4 million, respectively, primarily from the change in fair value on the trading securities backing the total return strategy products. Additionally, realized/unrealized gains (losses) on investments included an unrealized loss of $2.2 million and $28.0 million for the first six months of 2006 and 2005, respectively, primarily from the change in fair value on call options used as a natural hedge of embedded options within indexed products. Policyowner benefits included an adjustment to contract liabilities for fair value changes in options embedded within the indexed products and fair value changes on total return strategy annuity contracts. The total adjustment to policyowner benefits amounted to a decrease in expense of $62.3 million and $12.6 million for the first six months of 2006 and 2005, respectively.

     The following table summarizes the income (loss) impact of the market value adjustments on trading securities and derivatives for the six months ended June 30, 2006 and 2005:

		Six Months Ended June 30, 2006
		Total Return				Indexed
		Products				Products				Other				Total
		($ in thousands)
Fixed maturity securities held-for-trading		$	2,289			$	—			$	(2,483	)		$	(194	)
Options			—				(2,228	)			(3	)			(2,231	)
Market value adjustment to liabilities			(2,089	)			60,181				4,248				62,340
Cash flow hedge amortization			—				—				54				54
DAC and deferred sales inducements amortization of impact of net adjustments above			(1,205	)			(20,520	)			—				(21,725	)
Pre-tax total			(1,005	)			37,433				1,816				38,244
Income taxes			351				(13,101	)			(635	)			(13,385	)
After-tax total		$	(654	)		$	24,332			$	1,181			$	24,859

		Six Months Ended June 30, 2005
		Total Return				Indexed
		Products				Products				Other				Total
		($ in thousands)
Fixed maturity securities held-for-trading		$	(12,388	)		$	—			$	(992	)		$	(13,380	)
Options			—				(28,068	)			20				(28,048	)
Market value adjustment to liabilities			2,431				10,119				39				12,589
Cash flow hedge amortization			—				—				77				77
DAC and deferred sales inducements amortization of impact of net adjustments above			991				4,579				—				5,570
Pre-tax total			(8,966	)			(13,370	)			(856	)			(23,192	)
Income taxes			3,138				4,679				300				8,117
After-tax total		$	(5,828	)		$	(8,691	)		$	(556	)		$	(15,075	)

(6) FEDERAL INCOME TAXES

     The effective income tax rate varied from the prevailing corporate rate primarily as a result of tax exempt income and a reduction in the income tax accrual for the six months ended June 30, 2006 and 2005. The accrual reductions were for the release of provisions originally established for potential tax adjustments related to open Internal Revenue Service exam years from 1997 through 2003 which were settled or eliminated during 2006 and 2005. The accrual was reduced $0.5 million in 2006 and $19.7 million in 2005. The 2005 accrual reduction was primarily related to the settlement of the tax treatment of a leveraged lease investment and the determination of taxable income of some partnership investments. The effective income tax rate excluding the accrual reductions was 34.1% and 33.1% for the six months ended June 30, 2006 and 2005, respectively.

(7) COMMITMENTS AND CONTINGENCIES

     AmerUs is routinely involved in litigation and other proceedings, including class actions, reinsurance claims and regulatory proceedings arising in the ordinary course of its business. In recent years, the life insurance industry, including AmerUs Group Co. and its subsidiaries, has been subject to an increase in litigation pursued on behalf of both individuals and purported classes of insurance purchasers, questioning the conduct of insurers and their agents in the marketing of their products. AmerUs’ pending lawsuits raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including, but not limited to, the underlying facts of each matter, novel legal issues, variations between jurisdictions in which matters are being litigated, differences in applicable laws and judicial interpretations, the length of time before many of these matters might be resolved by settlement or through litigation and, in some cases, the fact that many of these matters are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined, the fact that many of these matters involve multi-state class actions in which the applicable law(s) for the claims at issue is in dispute and therefore unclear, and the current challenging legal environment faced by large corporations and insurance companies. In addition, state and federal regulatory bodies, such as state insurance departments and attorneys general, periodically make inquiries and conduct examinations concerning compliance by AmerUs and others with applicable insurance and other laws. AmerUs responds to such inquiries and cooperates with regulatory examinations in the ordinary course of business.

     During 2005 nationwide class actions were filed on April 7, 2005 (United States District Court for the Central District of California), April 25, 2005 (United States District Court for the District of Kansas), May 19, 2005 (United States District Court for Eastern District of Pennsylvania), August 29, 2005 (United States District Court for the Middle District of Florida), November 8, 2005 (United States District Court for the Eastern District of Pennsylvania) and December 8, 2005 (United States District Court for the Eastern District of Pennsylvania) on behalf of certain purchasers of our products against AmerUs Group Co. and/or certain of its subsidiaries (including American and ALIC). On July 7, 2005 a statewide class action was also filed on behalf of certain purchasers of our products in the United States District Court for the Middle District of Florida against many of these same AmerUs entities. The aforementioned lawsuits relate to the use of purportedly inappropriate sales practices and products in the senior citizen market. The complaints allege, among other things, the unauthorized practice of law involving the marketing of estate or financial planning services, the lack of suitability of the products, the improper manner in which they were sold, including pretext sales and non-disclosure of surrender charges, as well as other violations of the state consumer and insurance laws. The plaintiffs in the lawsuits seek compensatory damages, rescission, injunctive relief, treble and/or punitive damages, attorneys fees and other relief and damages. In November 2005, each of the aforementioned lawsuits as well as certain other statewide class actions and individual lawsuits were assigned to the United States District Court for the Eastern District of Pennsylvania for coordinated and consolidated pretrial proceedings.

     On February 10, 2005, the California Attorney General and the Insurance Commissioner of the State of California filed suit in the California Superior Court for the County of Los Angeles against American and certain other subsidiaries of AmerUs Group Co. alleging the unauthorized practice of law, claims related to the suitability of the products for, and the manner in which they were sold to, the senior citizen market, including violations of California’s insurance code and unfair competition laws. The plaintiffs seek civil penalties, restitution, injunctive relief and other relief and damages.

     AmerUs Group Co. and certain of its subsidiaries are among the defendants in a lawsuit by the Attorney General of Pennsylvania on behalf of certain Pennsylvania residents, some of whom were purchasers of our products alleging, in part, claims related to the marketing of our products to senior citizens and violations of consumer protection laws. The plaintiffs seek fines, restitution, injunctive and other relief.

     In November 2005, the Superior Court of the State of California for the County of San Luis Obispo approved a settlement of a statewide class of annuity holders and purchasers of estate planning services, Cheves v. American Investors Life Insurance Company, Family First Estate Planning and Family First Insurance Services, et al. The allegations in this case involved claims of breach of contract, misrepresentation, unfair competition and deceptive trade practices. Given the charges previously taken regarding this matter, AmerUs does not currently anticipate that any additional charges will be required as a result of this settlement.

     In these matters, plaintiffs seek a variety of remedies including equitable relief in the form of injunctive and other remedies and monetary relief in the form of contractual and extra-contractual damages. Some of these claims and legal actions are in jurisdictions where juries are given substantial latitude in assessing damages, including punitive and exemplary damages. Often more specific information beyond the type of relief sought is not available because plaintiffs have not requested more specific relief in their court pleadings. In our experience, monetary demands in plaintiffs’ court pleadings bear little relation to the ultimate loss, if any, to AmerUs. Estimates of possible losses or ranges of losses for particular matters cannot in the ordinary course be made with a reasonable degree of certainty. It is possible that AmerUs’ results of operations or cash flow in a particular quarterly or annual period could be materially adversely affected by an ultimate unfavorable resolution of pending litigation and regulatory matters.

(8) EMPLOYEE BENEFIT PLANS

     The Company has a frozen defined benefit pension plan and also has defined benefit plans which provide supplemental retirement benefits to certain agents and executives. In addition to pension benefits, the Company also provides certain health care and life insurance benefits for retired employees. The following is a summary of net periodic benefit cost for these plans for the six months ended June 30, 2006 and 2005:

		Six Months Ended June 30,
		2006				2005
		($ in thousands)
Components of net periodic benefit cost:
Service cost		$	533			$	157
Interest cost			3,065				2,944
Expected return on plan assets			(2,438	)			(2,431	)
Amortization of prior service cost			(69	)			44
Amortizaton of actuarial loss			338				356
Total expense		$	1,429			$	1,070

(9) ACCOUNTING DEVELOPMENTS

     In June 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109,” (FIN 48). FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is assessing the impact of adopting FIN 48.

(10) OPERATING SEGMENTS

     The Company has two operating segments: Protection Products and Accumulation Products. Products generally distinguish a segment. A brief description of each segment follows:

     Protection Products. The primary product offerings consist of term life, universal life and indexed life insurance policies. Indexed life is a type of universal life or interest-sensitive whole life product. These products are marketed on a national basis primarily through Independent Marketing Organizations (IMOs), a Career Marketing Organization (CMO) system, a Personal Producing General Agent (PPGA) system, and a New York distribution system.

     Accumulation Products. The primary product offerings consist of individual fixed annuities (comprised of traditional fixed annuities and indexed annuities), marketed on a national basis primarily through IMOs and independent brokers, and insurance contracts issued through funding agreements.

     The product offerings within each segment are of a very similar nature. Insurance premiums of the protection products segment are primarily from term life products. Product charges of the protection products segment are from interest-sensitive whole life, universal life and indexed life insurance products. Product charges of the accumulation products segment are from traditional fixed and indexed annuities. Due to the similarity of products within each segment, premiums and product charges are shown by segment and not by specific product type.

     The Company uses the same accounting policies and procedures to measure operating segment income and assets as it uses to measure its consolidated income from operations and assets with the exception of the elimination of certain items which management believes are not necessarily indicative of overall operating trends. These items are shown between segment pre-tax operating income and net income on the following operating segment tables and are as follows:

1)

Realized/unrealized gains and losses on open block assets.

2)

Market value changes and amortization of assets and liabilities associated with the accounting for derivatives, such as: