485BPOS 1 affinityva.htm AFFINITY VA
As filed with the Securities and Exchange Commission on April 27, 2022
 
Registration Nos. 333-52290
and 811-08994

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-4
 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X

Pre-Effective Amendment No.
  
   
Post-Effective Amendment No. 28
X
 
and/or
 
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
X

Amendment No. 102
X

 
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
(Exact Name of Registrant)
 
KANSAS CITY LIFE INSURANCE COMPANY
(Name of Depositor)

3520 Broadway, Kansas City, Missouri 64111-2565
(Address of Depositor’s Principal Executive Offices)

Depositor’s Telephone Number, including Area Code:  (816) 753-7000

A. Craig Mason Jr.
Kansas City Life Insurance Company
3520 Broadway, Kansas City, Missouri 64111-2565
(Name and Address of Agent for Service)
 
Copy to:
Stephen E. Roth
Eversheds Sutherland (US) LLP
700 Sixth Street, NW, Suite 700, Washington, DC 20001-3980

It is proposed that this filing will become effective:
 
___ immediately upon filing pursuant to paragraph (b) of Rule 485
 
  X  on May 1, 2022 pursuant to paragraph (b) of Rule 485
 
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
 
___  on (date) pursuant to paragraph (a)(1) of Rule 485

Title of Securities Being Registered:  Units of interest in a separate account under individual flexible premium deferred variable annuity contracts.
CENTURY II AFFINITY VARIABLE ANNUITY PROSPECTUS
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT OF
KANSAS CITY LIFE INSURANCE COMPANY
Street Address:
Send correspondence to:
3520 Broadway
Variable Administration
Kansas City, Missouri 64111-2565
P.O. Box 219364
Telephone (816) 753-7000
Kansas City, Missouri 64121-9364
 
Telephone (800) 616-3670
This Prospectus describes an individual flexible premium deferred variable annuity contract ("Contract") offered by Kansas City Life Insurance Company ("Kansas City Life").  We have provided a definitions section at the beginning of this Prospectus for your reference as you read.
The Contract is designed to meet investors' long-term investment needs.  The Contract also provides you the opportunity to allocate your premiums to one or more divisions ("Subaccounts") of the Kansas City Life Variable Annuity Separate Account ("Variable Account") or the Fixed Account.  The assets of each Subaccount are invested in a corresponding portfolio ("Portfolio") of a designated mutual fund ("Fund").
Information about the Portfolio Companies of the Funds is set forth in Appendix A - Portfolio Companies available under the Contract in this prospectus.  The prospectuses for the Funds describe these Portfolios.  The value of amounts allocated to the Variable Account will vary according to the investment performance of the Funds in which they are invested.  You bear the entire investment risk of amounts allocated to the Variable Account.  Another investment option available for allocation of premiums is our Fixed Account.  The Fixed Account is part of Kansas City Life’s general account.  It pays interest at declared rates guaranteed to equal or exceed the guaranteed interest rate.  The minimum guaranteed interest rate is 1% for the Fixed Account.  (See “GUARANTEED AND CURRENT INTEREST RATES”)
The Securities and Exchange Commission maintains a website that contains the Statement of Additional Information, material incorporated by reference, and other information regarding registrants that file electronically with the Securities and Exchange Commission.  The address of the site is http://www.sec.gov.
If you already have a variable annuity contract, you should consider whether purchasing another contract as a replacement for your existing contract is advisable.
Additional information about certain investment products, including variable annuities, has been prepared by the Securities and Exchange Commission’s staff and is available at Investor.gov.
If you are a new investor in the Contract, you may cancel your Contract within 10 days of receiving it without paying fees or penalties.  In some states, this cancellation period may be longer.  Upon cancellation, you will receive either a full refund of the amount you paid with your application or your total contract value.  You should review the prospectus, or consult with your investment professional, for additional information about the specific cancellation terms that apply.
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Prospectus.  Any representation to the contrary is a criminal offense.
The Subaccounts and the Fixed Account are not deposits or obligations of, or guaranteed or endorsed by, any bank, nor are federally insured by the Federal Deposit Insurance Corporation or any other government agency.  An investment in the Contract involves certain risks including the loss of premium payments (principal).
The date of this Prospectus is May 1, 2022.



PROSPECTUS CONTENTS
1
IMPORTANT INFORMATION YOU SHOULD  CONSIDER ABOUT THE CONTRACT
3
OVERVIEW OF THE CONTRACT
5
5
5
5
7
7
7
8
8
9
10
10
10
11
12
12
13
13
CHARGES AND DEDUCTIONS 13
13
15
15
15
15
15
16
16
16
16
16
16
17
17
18
18
19
19
20
22
22
23
24
24
26
29
29
30
30
30
30


GLOSSARY

Many terms used within this Prospectus are described within the text where they appear.  The descriptions of those terms are not repeated in this section.

Annuitant
The person on whose life the Contract’s annuity benefit is based.
   
Beneficiary
The person you designate to receive any Proceeds payable under the Contract at your death or the death of the Annuitant.
   
Contract Anniversary
The same day and month as the Contract Date each year that the Contract remains in force.
   
Cash Surrender Value
The Contract Value less any applicable surrender charge, loan balance and premium taxes payable.
   
Contract Date
The date from which Contract months, Contract Years, and Contract Anniversaries are measured.
   
Contract Value
The sum of the Variable Account Value and the Fixed Account Value.
   
Contract Year
Any period of twelve months starting with the Contract Date or any Contract Anniversary.
   
Fixed Account
An account that is one option we offer for allocation of your premiums.  It is part of our general account and is not part of, or dependent on, the investment performance of the Variable Account.
   
Fixed Account Value
Measure of value accumulating in the Fixed Account.
   
Guaranteed Minimum Death
Benefit Option
This Contract provides for a Base Guaranteed Minimum Death Benefit.  In addition, there are two enhanced death benefit options available under the Contract.  The two options provide different levels of death benefit guarantees.  The two options have different issue requirements and expense charges associated with them.  These Guaranteed Minimum Death Benefit Options are available only in the states where we have received regulatory approval.
   
Home Office
When the term "Home Office" is used in this Prospectus in connection with transactions under the Contract, it means our Variable Administration office.  Transaction requests and other types of Written Notices should be sent to P.O. Box 219364, Kansas City, Missouri 64121-9364.  The telephone number at our Variable Administration office is 800-616-3670.
   
Issue Age
The Annuitant's age on his/her last birthday as of or on the Contract Date.
   
Life Payment Option
A payment option based upon the life of the Annuitant.
   
Maturity Date
The date when the Contract terminates and we either pay the Proceeds under a payment option or pay you the Cash Surrender Value in a lump sum.  The latest Maturity Date is the later of the Contract Anniversary following the Annuitant's 85th birthday and the tenth Contract Anniversary.  (Certain states and Qualified Contracts may place additional restrictions on the maximum Maturity Date.)
   
Monthly Anniversary Day
The same day of each month as the Contract Date, or the last day of the month for those months not having such a day.
   
Non-Life Payment Option
A payment option that is not based upon the life of the Annuitant.
   
Non-Qualified Contract
A Contract that is not a "Qualified Contract."
1

Owner
The person entitled to exercise all rights and privileges provided in the Contract.  The terms "you" and "your" refer to the Owner.
   
Premium Year
Refers to the 12-month period following the date we credit a particular premium to your Contract.  This measure of time is important in calculating the surrender charge applicable to the Contract.
   
Proceeds
The total amount we are obligated to pay under the terms of the Contract.
   
Qualified Contract
A Contract issued in connection with plans that qualify for special federal income tax treatment under sections 401, 403, 408 or 408A of the Internal Revenue Code of 1986, as amended.
   
Redetermination Dates
The first Contract Anniversary and each subsequent Contract Anniversary, upon which the guaranteed interest rate for the Fixed Account will be redetermined.  Redetermination Dates only apply to Contracts issued on or after May 31, 2011, if approved in your state.
   
Subaccount
The divisions of the Variable Account.  The assets of each Subaccount are invested in a Portfolio of a designated Fund.
   
Valuation Day
Each day the New York Stock Exchange is open for business.  Currently, the New York Stock Exchange is closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The New York Stock Exchange and Kansas City Life recognize holidays that fall on a Saturday on the previous Friday.  Kansas City Life will recognize holidays that fall on a Sunday on the following Monday.
   
Valuation Period
The interval of time beginning at the close of normal trading on the New York Stock Exchange on one Valuation Day and ending at the close of normal trading on the New York Stock Exchange on the next Valuation Day.  Currently, the close of normal trading is 3:00 p.m. Central Time.  The term "Valuation Period" is used in this Prospectus to specify, among other things, when a transaction order or request is deemed to be received by us at our Variable Administration office.
   
Variable Account Value
The Variable Account Value is equal to the sum of all Subaccount values of a Contract.
   
Written Notice/Written Request
A Written Notice or Written Request in a form satisfactory to us that is signed by the Owner and received at the Home Office.  Under certain circumstances as described in this Prospectus, Written Notice/Written Request may be satisfied by telephone, facsimile, electronic mail and Internet.
2
IMPORTANT INFORMATION YOU SHOULD CONSIDER ABOUT THE CONTRACT
FEES AND EXPENSES
CHARGES FOR EARLY
WITHDRAWALS
If you surrender or partially surrender (withdraw money from) your Contract, we may deduct a surrender charge when a premium is withdrawn or applied to certain annuity options during the first eight years following the payment of that premium. The surrender charge is calculated as a percentage of your premium payment being withdrawn or annuitized during the applicable Premium Year.  The amount of the surrender charge decreases over time, measured from the date the premium payment is credited to the Contract.

The maximum surrender charge is 8% of each premium payment withdrawn or Annuitized under a Non-Life Payment Option.

For example, if you purchased a Contract and were to partially surrender (withdraw) the initial premium of $100,000 during the first year since payment of the premium, you would be assessed a maximum charge of $8,000 on the amount surrendered.

Reference Surrender Charge.
TRANSACTION CHARGES
In addition to surrender charges, you may be charged for other transactions (such as when you complete more than six transfers during a Contract Year).
ONGOING FEES AND EXPENSES
(ANNUAL CHARGES)
 
Minimum and Maximum Annual Fee Table
The table below describes the fees and expenses that you may pay each year, depending on the options you choose.  Please refer to your Contract specifications page for information about the specific fees you will pay each year based on the options you have elected.
Annual Fee
Minimum
Maximum
Base Contract
1.40%1
1.40%1
Investment options
(Portfolio Company fees and expenses)
0.26%2
1.20%2
Optional benefits available for an additional charge (for a single optional benefit, if elected):
0.20%3
0.95%3
Lowest and Highest Annual Cost Table
Because your Contract is customizable, the choices you make affect how much you will pay.  To help you understand the cost of owning your Contract, the following table shows the lowest and highest cost you could pay each year, based on current charges.  This estimate assumes that you do not take withdrawals from the Contract, which could add surrender charges that substantially increase costs.
Lowest Annual Cost:
$1,959
Highest Annual Cost:
$4,304
Assumes:
• Investment of $100,000
• 5% annual appreciation
• Least expensive combination of Contract Classes and Portfolio Company fees and expenses
• No optional benefits
• No sales charges
• No additional purchase payments, transfers, or withdrawals
Assumes:
• Investment of $100,000
• 5% annual appreciation
• Most expensive combination of Contract Classes, optional benefits, and Portfolio Company fees and expenses
• No sales charges
• No additional purchase payments, transfers, or withdrawals
Reference Fee Table.

1 As a percentage of average annual Variable Account Value during the accumulation period.
2 As a percentage of Portfolio assets.
3 As a percentage of the Guaranteed Withdrawal Balance.
3
RISKS
RISK OF LOSS
You can lose money by investing in this Contract, including loss of principal.
NOT A SHORT-TERM INVESTMENT
This Contract is not designed for short-term investing and is not appropriate for an investor who needs ready access to cash.

Surrender charges apply for up to eight Contract years and will reduce the value of your Contract if surrenders are made during that time.

The tax deferral benefit is more beneficial to investors with a long-time horizon.
RISKS ASSOCIATED WITH INVESTMENT OPTIONS
Investment in the Contract is subject to the risk of poor investment performance and can vary depending on the performance of each Subaccount.  The Subaccounts and the Fixed Account each have their own unique risks.  You should review all of the investment options before making an investment decision.
INSURANCE COMPANY RISKS
Any obligations, guarantees, and benefits of the Contract, including the Fixed Account investment option, are subject to the claims-paying ability of Kansas City Life.  If Kansas City Life experiences financial distress, it may not be able to meet its obligations to you.  More information about the financial condition of Kansas City Life, including its financial strength rating, is available upon request by contacting the Home Office.
RESTRICTIONS ON DISTRIBUTIONS FROM CONTRACTS THAT FUND 403(B) RETIREMENT PLANS
The Internal Revenue Code restricts distributions from certain 403(b) annuity contracts, permitting such distributions only on the death of the employee, attainment of age 59 ½, severance from employment disability or financial hardship. If the Contract is a section 403(b) TSA Qualified Contract, you may have the option of taking a Contract loan after the first Contract Year. Such loan, whether or not repaid, will have a permanent effect on the death benefits and the Contract Values.
Reference Contract Loans.
RESTRICTIONS
INVESTMENTS
The first six transfers during each Contract Year are free.  We will assess a transfer processing fee of $25 for each additional transfer during such Contract Year.  If a pattern of excessive transfers occurs, we may suspend the transfer privilege or will apply limitations or modifications to transfers to or from one or more of the Subaccounts.

We reserve the right to remove or substitute Portfolio Companies as investment options. Please review the appendix for fund-specific restrictions.
OPTIONAL BENEFITS
The Contract offers a number of optional benefits. Each optional benefit is subject to an additional charge. Optional benefits may not be available for all Issue Ages and cannot be added after issue. Some optional benefits limit or restrict the Portfolio Companies in which you may invest under the Contract. We may change these restrictions in the future.  If you take withdrawals from your Contract Value, the amounts payable under the optional benefits may be reduced by more than the amount of the withdrawal. We may stop offering an optional benefit at any time.

Reference Optional Rider.

4

TAXES
TAX IMPLICATIONS
 
Earnings on your Contract are taxed at ordinary income tax rates when you withdraw them, and you may have to pay a penalty if you take a withdrawal before age 59 ½.  The tax advantages provided by a variable annuity are already available with tax-qualified plans, including IRAs and Roth IRAs.  You should purchase the Contract within a tax-qualified plan only for reasons other than tax deferral.  We encourage you to consult your own tax adviser before making a purchase of the Contract.
CONFLICTS OF INTEREST
INVESTMENT PROFESSIONAL COMPENSATION
Commissions are paid to broker-dealers for the sale of Contracts.  In addition, we may pay an asset-based commission or other amounts in certain circumstances.  All or some of the payments received from Funds under distribution plans pursuant to Rule 12b-1 may be passed on to selling firms.  This conflict of interest may influence your investment professional to recommend this Contract over another investment.
EXCHANGES
Some broker-dealers may have a financial incentive to offer a new contract in place of your existing insurance.  You should replace (exchange) your existing insurance only when you determine that the contract is better for you.
OVERVIEW OF THE CONTRACT
PURPOSE
The Contract is designed for investors seeking long‑term tax‑deferred accumulation of funds.  The goal for this accumulation is generally retirement, but may be for other long‑term investment purposes.  We offer the Contract as both a Qualified Contract and a Non‑Qualified Contract.  (See "FEDERAL TAX STATUS")
PHASES OF THE CONTRACT
Your Contract has two phases.
Phase 1: Accumulation and Investment Phase: During the first phase, you will have the opportunity to allocate premiums to the Subaccounts and the Fixed Account.  The Fixed Account has a minimum guaranteed interest rate of 1%.  The assets of each Subaccount are invested in a corresponding Fund.  More information about the Portfolio Companies of the Funds, including a list of Funds available Fund Portfolio Companies and the investment objective and investment adviser s of each Portfolio Fund, is provided in the Appendix A - Portfolio Companies Available Under the Contract, which is located at the back of this prospectus.
Phase 2: Payout of Proceeds Phase. The Contract offers a variety of ways, in addition to a lump sum, for you to receive Proceeds payable under the Contract.  During this phase, you will have the option to annuitize (receive a stream of income payments).  If you annuitize, you will be unable to make withdrawals, and death benefits and living benefits will terminate.
CONTRACT FEATURES
Death Benefit. A death benefit will be paid at the death of either the Annuitant or an Owner of the Contract.  Once a death benefit has been paid, the Contract is terminated.  If you are also the Annuitant, the death benefit Proceeds payable will be those payable on the death of the Annuitant.  However, if the Contract is issued with an Owner and an Annuitant who are not the same individual, the benefit will be paid at the first death.
FIVE PlusSM Guaranteed Minimum Withdrawal Benefit. If you are concerned that poor investment performance or market volatility in the Subaccounts may adversely impact the amount of money you can withdraw from the Contract, we offer for an additional charge an optional GMWB rider.  The GMWB provides alternative guarantees - which guarantee you receive depends on the amount of the withdrawals you take and the age of the Covered Person.  First, the GMWB guarantees the return of all of the amounts you have invested in the Contract, as long as you limit your withdrawals each
5
Contract Year to the Guaranteed Withdrawal Amount (this guarantee is available both before and after the Lifetime Income Date).  Second, on and after the Lifetime Income Date, as long as you limit your annual withdrawals to the Lifetime Income Amount, the GMWB guarantees you annual payments of that amount for the rest of the Covered Person’s life, no matter how long the Covered Person lives, even after you have recovered your investments in the Contract and even if your Contract Value reduces to zero.  However, the maximum amount you may be able to withdraw as a Lifetime Income Amount may be less than if you continued to take withdrawals as a Guaranteed Withdrawal Amount.  The GMWB has a maximum fee of 1.20%.
Nursing Home Waiver of Surrender Charge. Waives surrender charge if you are admitted to a nursing home and other conditions of the waiver are satisfied.
Dollar Cost Averaging Plan. If you elect this plan, it enables you to automatically transfer amounts from the Federated Hermes Government Money Fund II Subaccount to other Subaccounts.  The goal of the Dollar Cost Averaging Plan is to make you less susceptible to market fluctuations by allocating on a regularly scheduled basis instead of allocating the total amount all at one time.  We do not guarantee that the Dollar Cost Averaging Plan will result in a gain or prevent a loss.
Portfolio Rebalancing Plan. The Portfolio Rebalancing Plan is an optional feature available with the Contract.  Under this plan we will redistribute the accumulated balance of each Subaccount to equal a specified percentage of the Variable Account Value.  The purpose of the Fund Portfolio Company Rebalancing Plan is to automatically diversify your portfolio mix.  The plan automatically adjusts your portfolio mix to be consistent with your current premium allocation instructions.
Partial and Full Cash Surrenders. You may request a partial or full surrender of the Contract at any time before the Annuitant’s death and before the Maturity Date (although if you withdraw early, you may have to pay a surrender charge and/or income taxes, including a tax penalty if you are younger than age 59 ½).  You can also participate in the Systematic Partial Surrender Plan.  The Systematic Partial Surrender Plan enables you to authorize an automatic regular payment of a partial surrender amount.
Contract Loans. If your Contract is a section 403(b) TSA Qualified Contract, you may have the option of taking a Contract loan at any time after the first Contract Year if permitted by your employer’s section 403(b) plan.
Tax Treatment. You can transfer money between investment options without tax implications, and earnings (if any) on your investments are generally tax-deferred.  You are taxed only when: (1) you make a withdrawal; (2) you receive an income payment from the Contract; or (3) upon payment of a death benefit.
Annual Ratchet Guaranteed Minimum Death Benefit Option. The death benefit options provide protection in the event of a market downturn.  This option is only available at issue of the Contract and is only available to Annuitants with Issue Ages of 75 or below. There is an additional fee of 0.20% of the average annual Variable Account Value during the accumulation period if this Death Benefit is selected.
Enhanced Combination Guaranteed Minimum Death Benefit Option. The death benefit options provide protection in the event of a market downturn.  This option is only available at issue of the Contract and is only available to Annuitants with Issue Ages of 70 or below. There is an additional fee of 0.35% of the average annual Variable Account Value during the accumulation period if this Death Benefit is selected.
6
FEE TABLE
The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering or making withdrawals from the Contract. Please refer to your Contract specifications page for information about the specific fees you will pay each year based on the options you have elected.
The first table describes the fees and expenses that you will pay at the time that you buy the Contract, surrender or make withdrawals from the Contract, or transfer Contract value between investment options. State premium taxes may also be deducted.
TRANSACTION EXPENSES
Sales Load on Premium Payments
None
Maximum Surrender Charge (as a % of each premium payment withdrawn or Annuitized under a Non-Life Payment Option4)
8%
Transfer Processing Fee
After the first 6 transfers in a Contract Year, we will charge $25 for each additional transfer during that Contract Year.  There is no fee for the first 6 transfers during a Contract Year.
                                                                  
4 We do not deduct a charge for sales expenses from premiums at the time they are paid.  However, we may deduct a surrender charge when a premium is withdrawn upon a surrender or partial surrender or applied to certain annuity options during the first eight years following the payment of that premium.  The surrender charge is calculated as a percentage of the premium payment being withdrawn or annuitized during the applicable Premium Year.  The amount of the surrender charge decreases over time, measured from the date the premium payment is credited to the Contract. The surrender charge percentages are shown below.
Premium Years Since Payment of Premium
1
2
3
4
5
6
7
8
9+
Charge (%)
8
8
7
6
5
4
3
2
0

The next table describes the fees and expenses that you will pay each year during the time that you own the Contract (not including Portfolio Company fees and expenses).
If you choose to purchase an optional benefit, you will pay additional charges, as shown below.
ANNUAL CONTRACT EXPENSES
 
Maximum Charges
Administration Fee
$30 per Contract Year5
Variable Account Annual Expenses (as a % of average annual Variable Account Value during the accumulation period)
  
Base Contract Expenses
1.40%6
Optional Rider Charges
  
Guaranteed Minimum Death Benefit Expense Charge (as a percentage of average annual Variable Account Value)
  
Annual Ratchet Guaranteed Minimum Death Benefit Option (optional)
0.20%
Enhanced Combination Guaranteed Minimum Death Benefit Option (optional)
0.35%
FIVE PlusSM Guaranteed Minimum Withdrawal Benefit
1.20% multiplied by Guaranteed Withdrawal Balance7 (0.10% monthly)
Loan Interest Charge
5.00%8

                                                                 
5 We will waive the annual administration fee if Contract Value is equal to or greater than $50,000 at the beginning of the applicable Contract Year.
6 The Base Contract Expenses are comprised of a Mortality and Expense Risk Charge of 1.25% and an Asset Based Administrative Charge of 0.15%.
7 The current annual charge for the FIVE PlusSM Guaranteed Minimum Withdrawal Benefit is 0.95% multiplied by the Guaranteed Withdrawal Balance (assessed monthly; the monthly rate is 0.079%).  However, if you elected the FIVE PlusSM Guaranteed Minimum Withdrawal Benefit before January 1, 2009 and your GWB has not stepped-up since January 1, 2009, your current annual charge is 0.60% multiplied by the Guaranteed Withdrawal Balance (assessed monthly; the monthly rate is 0.05%).
8 The maximum guaranteed net cost of loans (available under section 403(b) TSA Qualified Contract) is 5% annually.  The net cost of a loan is the difference between the loan interest charged (8%) and the amount credited to the loan account (3%).
7
The next item shows the minimum and maximum total operating expenses charged by the Portfolio Companies that you may pay periodically during the time that you own the Contract. A complete list of Portfolio Companies available under the Contract, including their annual expenses, may be found at the back of this document.
ANNUAL FUND EXPENSES9
 
Minimum
  
Maximum
Range of Fund Expenses (expenses that are deducted from Fund assets, including management fees, distribution or service fees (12b-1 fees), and other expenses-before any contractual waiver of fees and expenses)
0.26%
  
1.20%

9 The portfolio expenses used to prepare this table were provided to Kansas City Life by the Fund(s) or their investment advisers.  The expenses shown are those incurred for the year ended December 31, 2021.  Current or future expenses may be greater or less than those shown.  If required by applicable law, Kansas City Life may deduct any redemption fees imposed by the Funds.

EXAMPLE OF CHARGES
This example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts.  The example shows the maximum costs of investing in the Contract, including Owner transaction expenses, the annual administration fee, Variable Account charges, the Enhanced Combination Guaranteed Minimum Death Benefit Option ("GMDB") charge, an annual Guaranteed Minimum Withdrawal Benefit ("GMWB") charge of 1.20% multiplied by the Guaranteed Withdrawal Balance, and highest annual portfolio operating expenses for the year ended December 31, 2021.
The example assumes that you invest $100,000 in the Contract for the time periods indicated.  The example also assumes that your investment has a 5% return each year.
(1)
If the Contract is surrendered or is annuitized under a Non-Life Payment Option at the end of the applicable time period:
Maximum Portfolio Expenses with the Enhanced Combination GMDB and with GMWB
1 year
3 years
5 years
10 years
$11,415
$19,018
$25,785
$43,037

(2)
If the Contract is not surrendered or is annuitized under a Life Payment Option at the end of the applicable time period:
Maximum Portfolio Expenses with the Enhanced Combination GMDB and with GMWB
1 year
3 years
5 years
10 years
$4,162
$12,578
$21,118
$43,037

The example does not reflect transfer fees or premium taxes (which may range up to 3.5%, depending on the jurisdiction).
Please remember that the example is an illustration and does not represent past or future expenses.  Your actual expenses may be higher or lower than those shown.  Similarly, your rate of return may be more or less than the 5% assumed in the example.
The annual administration fee is $30.00 for Contracts with a Contract Value less than $50,000 at the beginning of the Contract Year.  There is no administration fee for Contracts with a Contract Value greater than or equal to $50,000 at the beginning of the Contract Year. 
You should not consider the assumed expenses in the example to represent past or future expenses.  Actual expenses may be greater or less than those shown.  The assumed 5% annual rate of return is hypothetical and you should not view it as a representation of past or future annual returns.  Actual returns may be greater or less than the assumed amount.
The various Funds themselves or their investment advisers provided the expense information regarding the Funds.  The Funds and their investment advisers are not affiliated with us.  While we have no reason to doubt the accuracy of these figures provided by these non-affiliated Funds, we have not independently verified the figures.
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PRINCIPAL RISKS OF INVESTING IN THE CONTRACT
Not a Short-Term Investment.  The Contract is not suitable as a short-term investment and is not appropriate for an investor who needs ready access to cash. There might also be tax consequences.
Investment Risk. If you invest your Contract Value in one or more Subaccounts, then you will be subject to the risk that investment performance will be unfavorable and that the Contract Value will decrease.  There is no minimum guaranteed Contract Value.  The Contract Value may decrease if the investment performance of the Subaccounts (to which Contract Value is allocated) is negative or is not sufficiently positive to cover the charges deducted under the Contract.  During times of poor investment performance, these deductions will have an even greater impact on your Contract Value.  You could lose everything you invest.  If you allocate net Premiums to the Fixed Account, then we credit your Fixed Account Value with a declared rate of interest.  You assume the risk that the rate may decrease, although it will never be lower than a minimum guaranteed interest rate
Insurance Company Risks.  Any obligations, guarantees and benefits of the Contract, including the Fixed Account Investment Option, are subject to the claims paying ability of Kansas City Life Insurance Company. If the Company experiences financial distress, it may not be able to meet its obligations to you. More information about the financial condition of the Company is available upon request by contacting the Home Office.
Tax Risks. Under existing tax law there generally should be no federal income tax on increases in the Contract Value until a distribution under the Contract occurs.  A distribution includes an actual distribution of funds such as a surrender or annuity payment.  However, a distribution also includes a pledge or assignment of a Contract.  Generally, all or part of any distribution is taxable as ordinary income.  In addition, a penalty tax may apply to certain distributions made prior to the Owner reaching age 59½.  Special tax rules apply to Qualified Contracts, and distributions from Qualified Contracts may be subject to restrictions.  Governing federal tax statutes may be amended, revoked, or replaced by new legislation.  Changes in interpretation of these statutes may also occur.  We encourage you to consult your own tax adviser before making a purchase of the Contract.  (See “FEDERAL TAX STATUS”)
You should consult a qualified tax adviser for assistance in all Contract-related tax matters.
Surrender and Partial Surrender (withdrawal) Risks. During the first eight Contract Years, we will deduct a surrender charge from the Contract Value when you surrender the Contract, make a partial surrender (withdrawal), or if you elect a Non-Life Payment Option.  We will not deduct a surrender charge if the surrender occurs after seven full Contract Years, if the amount is not subject to a surrender charge, or if the requirements for the waiver are met.  (See “SURRENDER CHARGE”)  In no event will the total surrender charges we assess under a Contract exceed 8% of the total premiums paid.
You should purchase the Contract only if you have the financial ability to keep it in force for a substantial period of time.  You should not purchase the Contract if you intend to surrender all or part of the Contract Value in the near future.  We designed the Contract to meet long-term financial goals. The Contract is not suitable as a short-term investment.
A surrender or partial surrender may have tax consequences. (See "FEDERAL TAX STATUS")
Restrictions on Distributions from Contracts Used to Fund 403(b) retirement plans: The Internal Revenue Code of 1986 restricts surrenders and partial surrenders from 403(b) annuity contracts of elective contributions made in years after December 31, 1988, of earning on such contributions and of earning in such years on amounts held as of the year beginning before January 1, 1989. Distributions of such amounts may occur only upon the death of the employee, attainment of age 59 ½, severance from employment, disability or financial hardship.
Loan Risks. If your Contract is a section 403(b) TSA Qualified Contract, you may have the option of taking a Contract loan at any time after the first Contract Year if permitted by your employer’s section 403(b) plan.  A loan, whether or not repaid, will have a permanent effect on the death benefit and Contract Values because the investment results will apply only to the non-loaned portion of the Contract Value. Depending on the investment results of the Subaccounts or credited interest rates for the unloaned value in the Fixed Account while the loan is outstanding, the effect could be favorable or unfavorable.
A loan may have tax consequences. (See "FEDERAL TAX STATUS") In addition, allowing your contract to terminate due to indebtedness could have adverse tax consequences. (See “CONTRACT LOANS”)
Risk of Frequent Transfers. We have policies and procedures that attempt to detect frequent, large, programmed, or short-term transfers among the Subaccounts that may adversely affect other Owners and persons with rights under the Contracts. We employ various means to try to detect such transfer activity, but the detection and deterrence of harmful trading activity involves judgments that are inherently subjective. Our ability to detect such transfer activity may be limited
9
by operational and technological systems, as well as our ability to predict strategies employed by Owners to avoid such detection. Accordingly, there is no assurance that we will prevent all transfer activity that may adversely affect Owners and other persons with interests under the Contracts. In addition, we cannot guarantee that the Funds will not be harmed by transfer activity related to other insurance companies and/or retirement plans that may invest in the Funds.
Optional Benefits Risks. If you elect the Five PlusSM Guaranteed Minimum Withdrawal Benefit, you must allocate all premiums and Contract Value to the Designated Subaccounts on and after the Rider Effective Date. For certain Designated Subaccounts, risk and volatility mitigation is part of the Portfolio’s investment strategy, which investment strategy could reduce your investment return. The value of the GMWB rider may be significantly reduced if you take annual withdrawals that are greater than the Guaranteed Withdrawal Amount of the Lifetime Income Amount (after the Lifetime Income Date).
If you select the Annual Ratchet Guaranteed Minimum Death Benefit Option or Enhanced Combination Guaranteed Minimum Death Benefit Option, issue requirements and the Monthly Guaranteed Minimum Death Benefit Charge will vary for each Guaranteed Minimum Death Benefit Option.  Any amount we pay in excess of your Contract Value is subject to our financial strength and claims-paying ability. There may also be tax consequences. Please consult your financial professional.
Cybersecurity and Business Continuity Risks. We rely heavily on interconnected computer systems and digital data to conduct our variable product business activities. Because our variable product business is highly dependent upon the effective operation of our computer systems and those of our business partners, our business is vulnerable to disruptions from utility outages, and susceptible to operational and information security risks resulting from information systems failure (e.g., hardware and software malfunctions), and cyberattacks.  These risks include, among other things, the theft, misuse, corruption and destruction of data maintained online or digitally, interference with or denial of service, attacks on websites and other operational disruption and unauthorized release of confidential customer information.  Such systems failures and cyberattacks affecting us, any third-party administrator, the underlying funds, intermediaries and other affiliated or third-party service providers may adversely affect us and your Contract Value.  For instance, systems failures and cyberattacks may interfere with our processing of contract transactions, including the processing of orders from our website or with the underlying funds, impact our ability to calculate accumulation unit values, cause the release and possible destruction of confidential customer or business information, impede order processing, subject us and/or our service providers and intermediaries to regulatory fines and financial losses and/or cause reputational damage.  Cybersecurity risks may also impact the issuers of securities in which the underlying funds invest, which may cause the funds underlying your Contract to lose value.  There can be no assurance that we or the underlying funds or our service providers will avoid losses affecting your Contract due to cyberattacks or information security breaches in the future. The risk of cyberattacks may be higher during periods of geopolitical turmoil (such as the Russian invasion of Ukraine and the responses by the United States and other governments).
We are also exposed to risks related to natural and man-made disasters and catastrophes, such as storms, fires, earthquakes, epidemics and terrorist acts, which could adversely affect our ability to administer the Contracts. Natural and man-made disasters, such as the recent spread of COVID-19, may require a significant contingent of our employees to work from remote locations. During these periods, we could experience decreased productivity, and a significant number of our workforce or certain key personnel may be unable to fulfill their duties. In addition, system outages could impair our ability to operate effectively by preventing the workforce from working remotely and impair our ability to process Contract-related transactions or to calculate Contract values.
The Company outsources certain critical business functions to third parties and, in the event of a natural or man-made disaster, relies upon the successful implementation and execution of the business continuity planning of such entities. While the Company closely monitors the business continuity activities of these third parties, successful implementation and execution of their business continuity strategies are largely beyond the Company’s control. If one or more of the third parties to whom the Company outsources such critical business functions experience operational failures, the Company’s ability to administer the Contract could be impaired.
KANSAS CITY LIFE, THE VARIABLE ACCOUNT AND THE FUNDS
KANSAS CITY LIFE INSURANCE COMPANY
Kansas City Life Insurance Company is located at 3520 Broadway, Kansas City, Missouri 64111-2565.
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
We established the Variable Account as a separate investment account under Missouri law on January 23, 1995.  This Variable Account supports the Contracts and may be used to support other variable annuity insurance contracts and for
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other purposes as permitted by law.  The Variable Account is registered with the Securities and Exchange Commission ("SEC") as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") and is a "separate account" within the meaning of the federal securities laws.  We have established other separate investment accounts that may also be registered with the SEC.
The Variable Account is divided into Subaccounts.  The Subaccounts available under the Contract invest in shares of corresponding Fund Portfolios.  The Variable Account may include other Subaccounts not available under the Contracts and not otherwise discussed in this Prospectus.  We own the assets in the Variable Account.
We apply income, gains and losses of a Subaccount (realized or unrealized) without regard to any other income, gains or losses of Kansas City Life or any other separate account.  We cannot use Variable Account assets (reserves and other contract liabilities) to cover liabilities arising out of any other business we conduct.  We are obligated to pay all benefits provided under the Contracts.
THE FUNDS
Each of the Funds is registered with the SEC as an open-end management investment company under the 1940 Act.  However, the SEC does not supervise their management, investment practices or policies.  Each Fund is a series fund-type mutual fund made up of the Portfolios and other series that are not available under the Contracts.  The name, investment objectives, investment manager, sub-investment manager, current expenses and performance of each of the Portfolios are available in Appendix A - Portfolio Companies Available Under the Contract, which is located at the end of this prospectus.
Certain Subaccounts invest in Portfolios that have similar investment objectives and/or policies.  Therefore, before selecting a Subaccount, you should carefully read the prospectuses for the Funds along with this Prospectus.
Not all Funds may be available in all states.
See the current prospectus for each Fund as well as the current Statement of Additional Information for each Fund.  These important documents contain more detailed information regarding all aspects of the Funds and can be accessed online at https://pex.broadridge.com/funds.asp?cid=kclife.  You can receive a paper copy by submitting a request at the Home Office. Please read the prospectuses for the Funds carefully before making any decision concerning the allocation of premium payments or transfers among the Subaccounts.
We cannot guarantee that each Fund or Portfolio will always be available for the Contracts, but in the event that a Fund or Portfolio is not available, we will take reasonable steps to secure the availability of a comparable fund.  Shares of each Portfolio are purchased and redeemed at net asset value, without a sales charge.
We select the Funds offered through this Contract based on several criteria, including asset class coverage, the strength of the adviser’s or sub-adviser’s reputation and tenure, brand recognition, performance, and the capability and qualification of each investment firm.  Another factor we may consider during the selection process is whether the Fund, its adviser, its sub-adviser(s), or an affiliate will make payments to us or our affiliates.  We review the Funds periodically and may remove a Fund or limit its availability to new premiums and/or transfers of Variable Account Value if we determine that the Fund no longer meets one or more of the selection criteria, and/or if the Fund has not attracted significant allocations from Owners.
We do not provide any investment advice and do not recommend or endorse any particular Fund.  You bear the risk of any decline in the Variable Account Value of your Contract resulting from the performance of the Funds you have chosen.
We (or our affiliates) may receive payments from a Fund’s investment adviser (or its affiliates).  These payments may be used for any corporate purpose, including payment of expenses that Kansas City Life and/or its affiliates incur in promoting, marketing, and administering the Contracts and, in its role as an intermediary, the Funds.  Kansas City Life and its affiliates may profit from these payments.  These payments may be derived, in whole or in part, from the advisory fee deducted from Fund assets.  Owners, through their indirect investment in the Funds, bear the costs of these advisory fees. (See the Funds’ prospectuses for more information)  This compensation is not reflected in fees and expenses listed in the fee table set forth in each Fund's prospectus.  The amount of this compensation is generally based upon a percentage of the assets of the Fund attributable to the Contracts and other contracts we issue.  These percentages differ and some advisers (or affiliates) may pay us (or our affiliates) more than others.  Currently, these percentages range from 0.10% to 0.25%.
Additionally, an investment adviser or sub-adviser of a Fund or its affiliates may provide Kansas City Life with wholesaling services that assist in the distribution of the Contracts and may pay Kansas City Life and/or certain of our affiliates
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amounts to participate in sales meetings.  These amounts may be significant and may provide the adviser or sub-adviser (or their affiliate) with increased access to persons involved in the distribution of the Contracts.
Certain Funds have adopted a Distribution Plan under Rule 12b-1 of the 1940 Act.  The Distribution Plan is described in more detail in the underlying Fund’s prospectus.  (See "FEE TABLE – ANNUAL FUND EXPENSES" and "SALE OF THE CONTRACTS")  The payments are deducted from assets of the Funds and are paid to our distributor, Sunset Financial Services, Inc. ("Sunset Financial").  These payments decrease the Fund’s investment return.
We make certain payments to Sunset Financial, principal underwriter for the Contracts.  (See "SALE OF THE CONTRACTS")
Certain funds employ volatility management strategies.  Volatility management strategies are designed to reduce the overall volatility and provide risk-adjusted returns over time.  During rising markets, a volatility management strategy, however, could cause Contract Value to rise less than would have been the case had you been invested in a fund with substantially similar investment objectives, policies and strategies that does not utilize a volatility management strategy.  Conversely, investing in a fund that features a volatility management strategy may be helpful in a declining market when high market volatility triggers a reduction in the fund’s equity exposure, because during these periods of high volatility, the risk of losses from investing in equity securities may increase.  In these instances, your Contract Value may decline less than would have been the case had you not been invested in a fund that features a volatility management strategy.  The success of the volatility management strategy of a fund depends, in part, on the investment adviser’s ability to effectively and efficiently implement its risk forecasts and to manage the strategy for the fund’s benefit.  In addition, the cost of implementing a volatility management strategy may negatively impact performance.  There is no guarantee that a volatility management strategy can achieve or maintain the fund’s optimal risk targets, and the fund may not perform as expected.
You should be aware that we are subject to a conflict of interest with respect to the interests of contract owners insofar as, by requiring you to allocate your purchase payments and Contract Value to one or more subaccounts that invests in a fund that employs a volatility management strategy, this may reduce the risk to us that we will have to make guaranteed payments under a living benefit rider.  In addition, any negative impact to the performance of a fund due to a volatility management strategy may limit increases in your Contract Value, which may limit your ability to achieve step-ups of the benefit base under a living benefit rider.  For more information about the funds and the investment strategies they employ, please refer to the funds’ current prospectuses.
RESOLVING MATERIAL CONFLICTS
The Funds presently serve as the investment medium for the Contracts.  In addition, the Funds are available to registered separate accounts of other insurance companies offering variable annuity and variable life insurance contracts.
We do not currently foresee any disadvantages to you resulting from the Funds selling shares to fund products other than the Contracts.  However, there is a possibility that a material conflict of interest may arise between Contract Owners and the owners of variable contracts issued by other companies whose values are allocated to one of the Funds.  Shares of some of the Funds may also be sold to certain qualified pension and retirement plans qualifying under section 401 of the Internal Revenue Code ("Code").  As a result, there is a possibility that a material conflict may arise between the interests of Owners or owners of other contracts (including contracts issued by other companies), and such retirement plans or participants in such retirement plans.  In the event of a material conflict, we will take any necessary steps, including removing the Variable Account from that Fund, to resolve the matter.  The Board of Directors of each Fund will monitor events in order to identify any material conflicts that may arise and determine what action, if any, should be taken in response to those events or conflicts.  See the prospectuses of the Funds for more information.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Subject to applicable law, we may make additions to, deletions from, or substitutions of the shares that are held in the Variable Account or that the Variable Account may purchase.  If the shares of a Portfolio are no longer available for investment, or for any other reason in our sole discretion we decide that further investment in any Portfolio should become inappropriate in view of the purposes of the Variable Account, we may redeem the shares, if any, of that Portfolio and substitute shares of another registered open-end management investment company.  The substituted fund may have different fees and expenses.  Substitutions may be made with respect to existing investments or the investment of future premiums or both.  We will not substitute any shares attributable to a Contract's interest in a Subaccount of the Variable Account without notice and prior approval of the SEC and state insurance authorities, to the extent required by applicable law.
Subject to applicable law and any required SEC approval, we may establish new Subaccounts or eliminate one or more Subaccounts if marketing needs, tax considerations or investment conditions warrants or for any reason in our sole
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discretion.  We will determine on what basis we might make any new Subaccounts available to existing Contract Owners.  We may close Subaccounts to allocation of premiums or Contract Value, or both, at any time in our sole discretion.
If we make any of these substitutions or changes we may, by appropriate endorsement, change the Contract to reflect the substitution or change.  If we decide it is in the best interests of Contract Owners (subject to any approvals that may be required under applicable law), we may take the following actions with regard to the Variable Account:
•
operate the Variable Account as a management investment company under the 1940 Act;
•
de-register it under that Act if registration is no longer required;
•
combine it with other Kansas City Life separate accounts; or
•
make any changes required by the 1940 Act.
FINANCIAL CONDITION OF KANSAS CITY LIFE
Benefits payable under the Contract are paid out of your Contract Value allocated to the Variable Account or out of assets of Kansas City Life's general account. Any guarantees that exceed your Contract Value are paid from our general account assets and are subject to our financial strength and claims paying ability.
As an insurance company, we are required by state regulators to hold a specific amount of reserves to meet contractual obligations payable out of our general account. We monitor our reserves so that we hold sufficient amounts to cover actual or expected Contract and claims payments. State regulators also require Kansas City Life to maintain a minimum amount of capital, to act as a cushion in the event it suffers a financial impairment. But there is no guarantee we will always be able to meet our claims paying obligations, and there are risks associated with purchasing any insurance product.
We encourage both existing and prospective Owners to read and understand our financial statements.  Our financial statements. which are prepared in accordance with accounting principles generally accepted in the United States (GAAP), are included in the Statement of Additional Information. You may obtain a copy of the Statement of Additional Information without charge by sending a written request to Variable Administration, P.O. Box 219364, Kansas City, Missouri 64121-9364 or by calling us at 1-800-616-3670.
VOTING RIGHTS
We are the legal owner of shares held by the Subaccounts and we have the right to vote on all matters submitted to shareholders of the Funds.  As required by law, we will vote shares held in the Subaccounts in accordance with instructions received from Owners with Contract Value in the Subaccounts.  We may be permitted to vote shares of the Funds in our own right if the applicable federal securities laws, regulations or interpretations of those laws or regulations change.
We will solicit voting instructions from you, as required by applicable law or regulation, before any Fund shareholder meeting.  Your votes will be calculated separately for each Subaccount of the Variable Account, and may include fractional shares.  We will determine the number of votes attributable to a Subaccount by applying your percentage interest, if any, in a particular Subaccount to the total number of votes attributable to that Subaccount.  The number of votes for which you may give instructions will be determined as of the date established by the Fund for determining shareholders eligible to vote.  We will vote shares held by a Subaccount for which we have no instructions and any shares held in our General Account in the same proportion as those shares for which we do receive voting instructions.  This means that a small number of Owners may control the outcome of the vote.
CHARGES AND DEDUCTIONS
SURRENDER CHARGE
General.  We do not deduct a charge for sales expense from premiums at the time you pay them.  However, we may deduct a surrender charge when a premium is withdrawn upon a surrender or partial surrender or if you elect a Non-Life Payment Option during the first eight years following the payment of that premium.  The purpose of the surrender charge is to reimburse us for some of the expenses we incur in distributing the Contracts.  If the surrender charges are not enough to cover sales expenses, we will bear the loss.  If the amount of such charges proves more than enough, we will keep the excess.  We do not currently believe that the surrender charges imposed will cover the expected costs of distributing the Contracts.  We will make up any shortfall from our general assets, which may include amounts we derive from the mortality and expense risk charge.
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Charge for Partial Surrender or Surrender.  If you take a partial or full surrender of the Contract or elect a Non-Life Payment Option, the applicable surrender charge applicable to each premium withdrawn or annuitized will be as follows:
During Premium Year*
Year
1
2
3
4
5
6
7
8
9+
Percentage
8%
8%
7%
6%
5%
4%
3%
2%
0%
*Premium Year refers to the 12-month period following the date we credit a particular premium to your Contract.  After eight years following the date we credit a particular premium, there will be no surrender charge applicable to that premium payment.
The total surrender charge applicable will be the sum of the surrender charges applicable to each premium.  To determine the surrender charge we first assume that your surrender or Non-Life Payment Option election is from amounts (other than earnings) that can be withdrawn without a surrender charge, then from other amounts (other than earnings) and then from earnings, each on a "first-in-first-out" (oldest money first) basis.  Once we have calculated the total surrender charge amount we actually withdraw it from the Fixed Account and Subaccounts in the same proportion that the withdrawal is being made.  In calculating the surrender charge, we do not include earnings, although the actual withdrawal to pay the surrender charge may come from earnings.
If you surrender the Contract, we will deduct the surrender charge from the Contract Value in determining the Cash Surrender Value.  For a partial surrender, we will deduct the surrender charge from the amount surrendered or from the Contract Value remaining after the amount requested is surrendered, according to your instructions.
Amounts Not Subject to Surrender Charge.  Your first partial surrender during a Contract Year will not be subject to a surrender charge to the extent that the amount you surrender is not in excess of 10% of the Contract Value.  We limit this 10% free partial surrender to the first partial surrender per Contract Year, even if the amount you surrender is less than 10% of the Contract Value.  We will assess the applicable surrender charge on any amounts surrendered in excess of 10% and any additional surrenders, which occur after the first partial surrender in a Contract Year.  The 10% free partial surrender is not cumulative from year to year.
If you make a full surrender of the Contract the surrender charge does not apply to 10% of the Contract Value provided you have not already received credit for the 10% free partial surrender during that Contract Year.  If you have not already received the free 10% partial surrender in that Contract Year, then only 90% of the Contract Value is subject to a surrender charge upon a full surrender.
If you have elected to participate in the Systematic Partial Surrender Plan, your 10% free partial withdrawal may apply to payments under this plan as long as you have not already received your free partial withdrawal for that Contract Year.  (See "SYSTEMATIC PARTIAL SURRENDER PLAN")  You are limited to one election of the Systematic Partial Surrender Plan per Contract Year without being subject to the surrender charge.  (This limitation applies even if the amount surrendered during that Contract Year is less than 10% of the Contract Value.)  In the Contract Year in which you elect to participate in the Plan, we will calculate the 10% limitation based on the Contract Value at the time of election.  In each subsequent Contract Year in which you continue to participate in the Plan, we will calculate the 10% limitation based on the Contract Value as of the beginning of that year.  We will notify you if the total amount to be surrendered in a subsequent Contract Year will exceed 10% of the Contract Value as of the beginning of such Contract Year.  Unless you instruct us to reduce the surrender amount for that year so that it does not exceed the 10% limit, we will continue to process surrenders for the designated amount.  Once the amount of the surrender exceeds the 10% limit, we will deduct the applicable surrender charge from the remaining Contract Value.  Eight years after the final premium payment, when the surrender charge reaches zero, we will no longer apply a surrender charge, unless additional premium payments are received.
If you elect a Life Payment Option, we will not apply a surrender charge.
Nursing Home Waiver.  If you meet the requirements described below for the Nursing Home Waiver, we will pay out the full Contract Value without applying any surrender charges.  In order to be eligible for this waiver:
•
we must receive satisfactory proof that you are admitted to a licensed nursing home;
•
the Contract Value must be paid out in equal amounts over at least a three-year period; and
•
you must be confined for at least 90 days before we will waive the surrender charges.
This waiver may not be available in all states.
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TRANSFER PROCESSING FEE
The first six transfers during each Contract Year are free.  We will assess a transfer processing fee of $25 for each additional transfer during such Contract Year.  For the purpose of assessing the fee, we will consider each Written Request for a transfer to be one transfer, regardless of the number of accounts affected by the transfer.  We will deduct the transfer processing fee from the amount being transferred or from the remaining Contract Value, according to your instructions.
ADMINISTRATIVE CHARGES
Annual Administration Fee.  At the beginning of each Contract Year we will deduct an annual administration fee of $30 (or less if required by applicable state law) from the Contract Value.  The purpose of this fee is to reimburse us for administrative expenses relating to the Contract.  We will waive this fee for Contracts with Contract Values of $50,000 or more at the beginning of the applicable Contract Year.  We will deduct the charge from each Subaccount and the Fixed Account based on the proportion that the value in each account bears to the total Contract Value.  This fee does not apply after the Maturity Date.
BASE CONTRACT CHARGES
Asset-Based Administration Charge.  We will deduct a daily asset-based administration charge from the assets of the Variable Account equal to an annual rate of 0.15%.  The purpose of this charge is to reimburse us for costs associated with administration of the Contract amounts allocated to the Variable Account.  This charge does not apply after the Maturity Date.
Mortality and Expense Risk Charge. We will deduct a daily mortality and expense risk charge from the assets of the Variable Account.  This charge will be equal to an annual rate of 1.25%.  The purpose of this charge is to compensate us for assuming mortality and expense risks.  This charge does not apply after the Maturity Date.
The mortality risk we assume is that Annuitants may live for a longer period of time than estimated when we established the guarantees in the Contract.  Because of these guarantees, we provide each payee with the assurance that longevity will not have an adverse effect on the annuity payments received.  The mortality risk we assume also includes a guarantee to pay a death benefit if the Annuitant dies before the Maturity Date.  The expense risk we assume is the risk that the annual administration fee, asset-based administration charge, and transfer processing fee may be insufficient to cover actual future expenses.
If the mortality and expense risk charge is not enough to cover the actual cost of the mortality and expense risks we undertake, we will bear the loss.  If the amount of such charges proves more than enough, we will keep the excess and this amount will be available for any proper corporate purpose including financing of distribution expenses.
MONTHLY GUARANTEED MINIMUM DEATH BENEFIT EXPENSE CHARGE
If a Guaranteed Minimum Death Benefit Option other than the base provision is selected, there is an additional charge.  The amount of this charge varies depending on the Guaranteed Minimum Death Benefit Option you have elected, as follows:
•
Base Guaranteed Minimum Death Benefit Option:  no additional charge.
•
Annual Ratchet Guaranteed Minimum Death Benefit Option:  A monthly charge of 0.01665% of the Variable Account Value is deducted from the Variable Account Value on the Monthly Anniversary Date.  This charge equals 0.20% of the Variable Account Value on an annualized basis.
•
Enhanced Combination Guaranteed Minimum Death Benefit Option:  A monthly charge of 0.02912% of Variable Account Value is deducted from the Variable Account Value on the Monthly Anniversary Date.  This charge equals 0.35% of Variable Account Value on an annualized basis.
It is possible that the Internal Revenue Service may take a position that death benefit option charges are deemed to be taxable distributions to you.  Although we do not believe that a death benefit option charge under the Contract should be treated as a taxable withdrawal, you should consult your tax advisor prior to selecting such a death benefit option under the Contract.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT CHARGE
We charge an additional monthly charge on the Monthly Anniversary Day for the GMWB rider.  The GMWB rider charge is equal to 0.10%, 1.20% annually (currently 0.079%, 0.95% annually, for GMWB riders elected on and after January 1, 2009 and for GMWB riders elected before January 1, 2009 that have stepped-up since January 1, 2009) multiplied by the
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Guaranteed Withdrawal Balance.  We deduct the rider charge from each Subaccount in the same proportion that the value of each Subaccount is to the Contract Value.  We do not deduct the rider charge during the GMWB rider’s Settlement Phase.
PREMIUM TAXES
Various states and other governmental entities levy a premium tax, currently ranging up to 3.5%, on annuity contracts issued by insurance companies.  Premium tax rates may change from time to time by legislative and other governmental action.  In addition, other governmental units within a state may levy such taxes.
If premium taxes are applicable, we will deduct them upon surrender or when we apply the Contract Proceeds to a payment option or a lump sum payment.
REDUCED CHARGES FOR ELIGIBLE GROUPS
We may reduce the surrender charges and/or administration charges for Contracts issued to a class of associated individuals or to a trustee, employer or similar entity.  We may reduce these charges if we anticipate that the sales to the members of the class will result in lower than normal sales or administrative expenses.  We will make any reductions in accordance with our rules in effect at the time of the application.  The factors we will consider in determining the eligibility of a particular group and the level of the reduction are as follows:
•
nature of the association and its organizational framework;
•
method by which sales will be made to the members of the class;
•
facility with which premiums will be collected from the associated individuals;
•
association’s capabilities with respect to administrative tasks;
•
anticipated persistency of the Contract;
•
size of the class of associated individuals;
•
number of years the association has been in existence; and
•
any other such circumstances which justify a reduction in sales or administrative expenses.
Any reduction will be reasonable, will apply uniformly to all prospective Contract purchases in the class and will not be unfairly discriminatory to the interests of any Owner.
OTHER TAXES
We do not currently assess a charge against the Variable Account for federal income taxes.  We may make such a charge in the future if income or gains within the Variable Account result in any federal income tax liability to us.  We may also deduct charges for other taxes attributable to the Variable Account.
LOAN INTEREST CHARGE
If a Contract is a section 403(b) TSA Qualified Contract, Contract loans may be available if permitted by an employer’s section 403(b) plan.  A loan interest charge is assessed by crediting a lower rate on amounts held in the loan account as collateral than the rate charged on the loan amount.  The maximum amount of interest we charge on a loan is 8% annually of the loan amount.  The net loan interest charge, which is the difference between the amount charged on any loan amount and the amount credited to the loan account (3% annually), will not exceed 5%.
INVESTMENT ADVISORY FEES AND OTHER EXPENSES OF THE FUNDS
The funds deduct investment advisory fees and other expenses.  The value of the net assets of each Subaccount reflects the investment advisory fees and other expenses incurred by the corresponding Fund in which the Subaccount invests.  This means that these charges are deducted before we calculate Subaccount values.  These charges are not directly deducted from your Contract Value.  See the prospectuses for the Funds for more information about the investment advisory fees and other expenses.
DESCRIPTION OF THE CONTRACT
The Contract is a variable annuity that provides accumulation of Variable Account Value based on the performance of Subaccounts within the Kansas City Life Variable Annuity Separate Account.  You may also allocate a portion of your premiums to our Fixed Account.  We provide options such as the Dollar Cost Averaging Plan, the Portfolio Rebalancing Plan and the Systematic Partial Surrender Plan.  The Contract offers only fixed annuity payment options.
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Contracts issued in your state may provide different features and benefits from those described in this Prospectus.  Differences could include the length of the free-look period and the calculation of the free-look refund, maturity date and annuitization, and under payments or over payments due to misstatement of age or sex.  In addition, optional riders may not be available in all states.   Your registered representative may also provide you with additional information about state variations.  The Company may change or stop offering an optional rider at any time before it is elected.
The Nursing Home Waiver is not available in California, Massachusetts and Minnesota.  The free-look period by state is displayed below:
Free-Look Period
Replacement
State(s)
10 days
N/A
CT, DC, GA, IL, ME, MI, SD, VA
No
AK, AL, AR, AZ (issue age less than 65), CA (issue age less than 60), CO, DE, HI, IA, IN, KS, KY, LA, MA, MD, MN, MO, MS, MT, NC, NE, NH, NJ, NM, NV, OH, OK, OR, PA, TN, UT, WA, WI, WV, WY
20 days
Yes
DE, IN, KS, MA, MO, OK, TN, WA, WY
No
RI, TX
External
PA
21 days
N/A
FL
30 days
N/A
MN, AZ (issue age over 65)
Yes
AK, AL, AR, AZ (issue age less than 65), CA (issue age less than 60), CO, HI, IA, KY, LA, MD, MN, MS, MT, NC, NE, NH, NJ, NM, NV, OH, OR, RI, TX, UT, WI, WV
45 days
Internal
PA

PURCHASING A CONTRACT
The maximum Issue Age for which we issue a Contract is 80.  However, for Qualified Contracts with an Issue Age of 70½ or greater, tax laws may require that distributions begin immediately.  We may issue Contracts above the maximum Issue Age under certain circumstances.  We may issue Contracts in connection with retirement plans that may or may not qualify for special federal tax treatment under the Internal Revenue Code.
The Annual Ratchet and Enhanced Combination Guaranteed Minimum Death Benefit Options are only available at issue of the Contract.  The Annual Ratchet option is available for Annuitants with Issue Ages of 75 and below and the Enhanced Combination option is only available for Annuitants with Issue Ages of 70 and below.  The Guaranteed Minimum Death Benefit Options are offered only in the states where we have received regulatory approval.
The minimum initial premium that we accept is a single premium of $10,000.  You may pay additional premium payments at any time while the Annuitant is alive and before the Maturity Date.  These payments must be at least $50.  We may limit the number and amount of additional premium payments (where permitted).
REPLACEMENT OF CONTRACTS
It may not be in your best interest to surrender, lapse, change, or borrow from existing life insurance or annuity contracts in connection with the purchase of a Contract.  You should replace your existing insurance only when you determine that the Contract is better for you.  The charges and benefits of your existing insurance may be different from a Contract purchased from us.  You may have to pay a surrender charge on your existing insurance, and the Contract will impose a new surrender charge period.
You should talk to your financial professional or tax adviser to make sure the exchange will be tax-free.  If you surrender your existing contract for cash and then buy the Contract, you may have to pay a tax, including possibly a penalty tax, on the surrender.  Also, because we will not issue the Contract until we have received an initial premium from your existing insurance company, the issuance of the Contract may be delayed.
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FREE-LOOK PERIOD
You may cancel your Contract for a refund during your "free-look" period.  The free look period applies for the 10 days after you receive the Contract.  We must receive the returned Contract at our Home Office within 10 days if you wish to cancel your Contract.  When we receive the returned Contract at our Home Office, we will cancel the Contract.  The amount that we will refund will vary according to state requirements.  Most states allow us to refund Contract Value.  In those states, we will return an amount equal to the Contract Value.  We will determine the amount of the Contract Value as of the earlier of:
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the date the returned Contract is received by us at our Home Office; or
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the date the returned Contract is received by the registered representative who sold you the Contract.
A few states require a return of the greater of premium payments or Contract Value.  In these states, we will refund the greater of:
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the premiums paid under the Contract; and
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the Contract Value as of the earlier of:

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the date the returned Contract is received by us at our Home Office; or

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the date the returned Contract is received by the registered representative who sold you the Contract.
Some states permit only the return of premiums even if this amount is less than what we would have returned otherwise.  In all states, we will also refund the $30 annual administration fee, if it was deducted prior to the return of the Contract.
ALLOCATION OF PREMIUMS
At the time of application, you select how we will allocate premiums among the Subaccounts and the Fixed Account.  You can change the allocation percentages at any time by sending Written Notice to us.  You may also change your allocation by telephone, facsimile, and electronic mail if you have provided proper authorization.  (See "TELEPHONE, FACSIMILE, ELECTRONIC MAIL, AND INTERNET AUTHORIZATIONS")
Our procedures for allocation of premiums during the free-look period vary by state, based on the amount that each state requires to be refunded if the Contract is returned within the free-look period:
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for Contracts sold to residents of states that allow refund of Contract Value, we will immediately allocate premiums according to the allocation you requested; and
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for Contracts sold as an Individual Retirement Annuity or to residents of states that require either the refund of premiums paid or the refund of the greater of Contract Value or premiums paid, we will allocate premiums received during a 15-day period following the Contract Date to the Federated Hermes Government Money Fund II Subaccount for that 15-day period.  At the end of this 15-day period, we will allocate the amount in the Federated Hermes Government Money Fund II Subaccount according to your allocation instructions.
We will allocate the initial premium within two business days of when we receive the premium at our Home Office.  In order to allocate the premium in this time frame, you must properly complete the application and it must include all the information necessary to process it, including payment of the initial premium.  If the application is not properly completed, we will retain the premium for up to five business days while we attempt to complete the application.  If the application is not complete at the end of the 5-day period, we will inform you of the reason for the delay.  We will also return the initial premium immediately, unless you specifically consent to our keeping the premium until the application is complete.  Once the application is complete, we will allocate the initial premium within two business days.  There may be delays in our receipt of application that are outside of our control because of the failure of the registered representative to forward the application to us promptly, because the application was sent to the wrong address, or because of delays in determining that the Contract is suitable for you.  Any such delays will affect when your Contract is issued and when your premium is allocated among the Subaccounts and/or the Fixed Account.
We will allocate subsequent premiums at the end of the Valuation Period in which we receive the premium payment at our Home Office.  Premiums received at our Home Office before the New York Stock Exchange closes are priced using the Subaccount accumulation unit value determined at the close of that regular business session of the New York Stock Exchange (usually 3:00 p.m. Central Time).  If we receive a premium payment after the New York Stock Exchange closes, we will process the order using the Subaccount accumulation unit value determined at the close of the next regular session of the New York Stock Exchange.  We will credit amounts to the Subaccounts only on a Valuation Day, that is, on a date the New York Stock Exchange is open for trading.
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The values of the Subaccounts will vary with their investment experience, so that you bear the entire investment risk with respect to the Variable Account Value.  You should periodically review your premium allocation schedule in light of market conditions and your overall financial objectives.
If mandated under applicable law, we may be required to reject a premium payment.  We may also be required to provide additional information about you or your account to government regulators.  In addition, we may be required to block an Owner’s account and thereby refuse to pay any request for transfers, surrenders, loans, annuity payments, or death benefits, until instructions are received from the appropriate regulator.
DETERMINATION OF CONTRACT VALUE
The Contract Value is the sum of the Variable Account Value and the Fixed Account Value.
VARIABLE ACCOUNT VALUE
The Variable Account Value reflects the following:
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the investment experience of the selected Subaccounts;
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premiums paid;
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surrenders;
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transfers;
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charges assessed in connection with the Contract;
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Contract loan balance; and
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bonuses paid on the Monthly Anniversary Date.
There are two bonuses that will be credited to the Variable Account Value.  The first bonus is credited to Contracts on each Monthly Anniversary Date where the Contract Value is greater than or equal to $100,000 on that date.  The monthly amount of this bonus equals 0.0125% of the Variable Account Value, which equals 0.15% on an annualized basis.
The second bonus is credited to all Contracts, regardless of size.  After the eighth Contract Year, this bonus will be credited each Monthly Anniversary Date to the Variable Account Value.  The amount of this bonus equals 0.01665% of the Variable Account Value, which equals 0.20% on an annualized basis.
Both of the bonuses are guaranteed.  We will not attempt to recapture the bonus at any time, including upon surrender, death or election of an annuity option.  Each of the bonuses, if applicable, is paid on the Variable Account Value on the Monthly Anniversary Date.  Please note that because a bonus will increase Variable Account Value, charges that are based on a percentage of Variable Account Value also will increase.
There is no guaranteed minimum Variable Account Value.  Since a Contract's Variable Account Value on any future date depends upon a number of factors, it cannot be predetermined.
Calculation of Variable Account Value.  We calculate the Variable Account Value on each Valuation Date.  Its value will be the sum of the values attributable to the Contract in each of the Subaccounts.  We will determine the amount for each Subaccount by multiplying the Subaccount's unit value on the Valuation Date by the number of Subaccount accumulation units allocated to the Contract.  The unit value of a Subaccount may increase, decrease, or remain the same.
Determination of Number of Accumulation Units.  We will convert any amounts allocated to a Subaccount into accumulation units of that Subaccount.  We determine the number of accumulation units credited to the Contract by dividing the dollar amount allocated to the Subaccount by the unit value for that Subaccount at the end of the Valuation Period during which the amount was allocated.
We will increase the number of accumulation units in any Subaccount at the end of the Valuation Period by:
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any premiums allocated to the Subaccount during the current Valuation Period; and
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transfers to the Subaccount from another Subaccount or from the Fixed Account during the current Valuation Period; and
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bonuses credited on the Monthly Anniversary Date.
We will decrease the number of accumulation units in any Subaccount at the end of the Valuation Period by:
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amounts transferred from the Subaccount to another Subaccount or the Fixed Account including any applicable transfer fee;
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amounts surrendered (including applicable charges) during the current Valuation Period; and
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the pro rata portion of the monthly Guaranteed Minimum Death Benefit charge assessed on the Monthly Anniversary Day.
The number of units in any Subaccount will also be reduced at the beginning of each Contract Year by a pro rata share of the $30 annual administration fee.
Net Investment Factor.  We will calculate a net investment factor on each Valuation Day.  A Subaccount's net investment factor measures the investment performance of an accumulation unit in that Subaccount during a Valuation Period.  The formula for the net investment factor equals:
(X/Y) – Z
where "X" equals the sum of:
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the net asset value per accumulation unit held in the Subaccount at the end of the current Valuation Day; plus
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the per accumulation unit amount of any dividend or capital gain distribution on shares held in the Subaccount during the current Valuation Day; less
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the per accumulation unit amount of any capital loss distribution on shares held in the Subaccount during the current Valuation Day; less
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the per accumulation unit amount of any taxes or any amount set aside during the Valuation Day as a reserve for taxes.
"Y" equals the net asset value per accumulation unit held in the Subaccount as of the end of the immediately preceding Valuation Day; and
"Z" equals the charges we deduct from the Subaccount on a daily basis.  These charges equal the sum of the asset-based administration charge and the mortality and expense risk charge.  The asset-based administration charge equals 0.15% on an annual basis.  The mortality and expense risk charge equals 1.25% on an annual basis.
Determination of Unit Value.  We arbitrarily set the value of an accumulation unit for each of the Subaccounts at $10 when the first investments were bought.  The accumulation unit value for each subsequent Valuation Period is equal to:
A x B
"A" is equal to the Subaccount's accumulation unit value for the end of the immediately preceding Valuation Day; and
"B" is equal to the net investment factor for the current Valuation Day.
This accumulation unit value may increase or decrease from day to day based on investment results.
TRANSFER PRIVILEGE
After the free-look period and before the Maturity Date, you may transfer amounts among the Subaccounts and the Fixed Account.  Transfers are subject to the following restrictions:
• the minimum transfer amount is the lesser of $250 or the entire amount in that Subaccount or the Fixed Account;
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we will treat a transfer request that would reduce the amount in a Subaccount or the Fixed Account below $250 as a transfer request for the entire amount in that Subaccount or the Fixed Account;
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we currently have no limit on the number of transfers that you can make between Subaccounts or to the Fixed Account.  However, you can make only one transfer from the Fixed Account each Contract Year.  (See "TRANSFERS FROM FIXED ACCOUNT" for restrictions); and
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we have the right, where permitted, to suspend or modify this transfer privilege at any time.  Any suspension or modification of this privilege will be communicated in writing.
We will make a transfer on the date that we receive Written Notice requesting the transfer.  You may also make transfers by telephone, facsimile and electronic mail if you have provided proper authorization, unless, in accordance with our policies and procedures regarding frequent transfers among Subaccounts, we require you to provide us with a Written Request for transfers.  (See "TELEPHONE, FACSIMILE, ELECTRONIC MAIL, AND INTERNET AUTHORIZATIONS")  Transfer requests made in writing, by facsimile, or by electronic mail must be received, and transfer requests made by
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telephone must be completed, before 3:00 p.m. Central Time to receive same‑day pricing of the transaction.  Transfer requests received (or completed) before the New York Stock Exchange closes are priced using the Subaccount accumulation unit value determined at the close of that regular business session of the New York Stock Exchange (usually 3:00 p.m. Central Time).  If we receive a transfer request after the New York Stock Exchange closes, we will process the order using the Subaccount accumulation unit value determined at the close of the next regular business session of the New York Stock Exchange.
The first six transfers during each Contract Year are free.  We will charge a $25 transfer processing fee for all transfers during a Contract Year in addition to the six free ones.  For the purpose of charging the fee, we will consider each request to be one transfer, regardless of the number of Subaccounts or the Fixed Account affected by that request.  We will deduct the transfer processing fee from the amount being transferred or from the remaining Contract Value, according to your instructions.
Frequent Transfers Among Subaccounts. Frequent requests from Owners to transfer Contract Value between Subaccounts may dilute the value of a Portfolio's shares if the frequent trading involves an attempt to take advantage of pricing inefficiencies created by a lag between a change in the value of the securities held by a Portfolio and the reflection of that change in the Portfolio's share price.  Frequent transfers may also increase brokerage and administrative costs of the Portfolios, and may interfere with the efficient management of a Portfolio, requiring it to maintain a high cash position and possibly result in lost investment opportunities and forced liquidations.  Accordingly, frequent transfers may adversely affect the long-term performance of the Portfolios, which, in turn, may adversely affect other Owners and persons with interests under the Contracts (e.g., Annuitants or Beneficiaries).
We have policies and procedures that attempt to detect and deter frequent transfer activity among Subaccounts.  Our procedures for detecting frequent transfer activity involve examining the number of transfers made by an Owner within given periods of time.  Currently, we monitor for 12 or more transfers in a Contract within a calendar year.  For purposes of applying the parameters used to detect frequent transfer activity, we will aggregate transfers made on the same Valuation Day under multiple contracts owned by the same Owner.  However, we do not aggregate transfers made pursuant to the Dollar Cost Averaging Plan and the Portfolio Rebalancing Plan.
If transfer activity violates our established parameters for detecting frequent transfers, we review those transfers to determine if, in our judgment, the transfers are potentially harmful frequent transfer activity.  If, in our sole opinion, a pattern of excessive transfers develops or a transfer is not in the best interests of one or more Owners, we either will suspend the transfer privilege or will apply limitations or modifications to transfers to or from one or more of the Subaccounts.  We will communicate to Owners in writing any suspension or limitation or modification of the transfer privilege.  Our policies and procedures specify the following as limitations that will be applied to deter excessive transfers:
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the requirement of a minimum time period between each transfer;
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not accepting a transfer request from a third party acting under authorization on behalf of more than one Owner;
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limiting the dollar amount that may be transferred between the Subaccounts by an Owner at any one time;
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implementing and administering redemption fees imposed by one or more of the Funds in the future; and
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requiring that a Written Request be provided to us at our Home Office, signed by an Owner.
The detection and deterrence of harmful transfer activity involves judgments that are inherently subjective, including our judgment as to what parameters to use to detect potentially harmful frequent transfer activity and what particular limitation of the five possible limitations described above to apply to deter excessive transfers when a particular instance of potentially harmful transfer activity is detected.  Our ability to detect and apply specific limitations to such transfer activity may be limited by operational and technological systems, as well as by our ability to predict strategies employed by Owners to avoid such detection.  We apply our procedures consistently to Owners without special arrangement, waiver or exception.  However, we may vary our procedures from Subaccount to Subaccount, and may be more restrictive with regard to certain Subaccounts than others.  There is no assurance that we will prevent all transfer activity that may adversely affect Owners and other persons with interests in the Contracts.
In our sole discretion, we may at any time and without prior notice revise any procedures we follow as necessary:  to better detect and deter frequent, large, or short-term transfers that may adversely affect Owners and other persons with interests under the Contracts; to comply with state or federal regulatory requirements; or to impose additional or alternate restrictions (such as percentage limits on transfers) on Owners engaging in frequent transfer activity among the Subaccounts.  We also may not process a transfer request if the Subaccount affected by the transfer is unable to purchase or redeem shares of its corresponding Fund Portfolio because of actions taken or limitations imposed by the Fund.
The Funds with Portfolios available as investment options under the Contract may have adopted their own policies and procedures with respect to frequent purchases and redemptions of their respective shares.  The prospectuses for the
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Funds describe any such policies and procedures, which may be more or less restrictive than the frequent trading policies and procedures of other Funds and the policies and procedures we have adopted to discourage frequent transfers among Subaccounts.  You should read the prospectuses of the Funds for more details on their ability to refuse or restrict purchases or redemptions of their shares.  You should be aware that we have entered into a written agreement, as required by SEC regulation, with each Fund or its principal underwriter that obligates us (1) to provide the Fund promptly upon request certain information about the trading activity of individual Owners, and (2) to execute instructions from the Fund to restrict or prohibit further purchases or transfers by specific Owners who violate the frequent trading policies established by the Fund.
Owners and other persons with interests under the Contracts also should be aware that the purchase and redemption orders received by the Funds generally are "omnibus" orders from other insurance companies or from intermediaries such as retirement plans.  The omnibus orders reflect the aggregation and netting of multiple orders from individual retirement plan participants and/or individual owners of variable insurance contracts.  The omnibus nature of these orders may limit a Fund's ability to apply its respective frequent trading policies and procedures.  We cannot guarantee that the Funds will not be harmed by transfer activity relating to the retirement plans and/or other insurance companies that may invest in the Funds.
In accordance with applicable law, we reserve the right to modify or terminate the transfer privilege at any time.  We also reserve the right to defer or restrict the transfer privilege at any time that we are unable to purchase or redeem shares of any of the Portfolios, including any refusal or restriction on purchases or redemptions of Portfolio shares as a result of a Fund's own policies and procedures on frequent purchase and redemption of Fund shares (even if an entire omnibus order is rejected because or frequent transfer activity of a single Owner).  You should read the Fund prospectuses for more details.
DOLLAR COST AVERAGING PLAN
The Dollar Cost Averaging Plan is an optional feature available with the Contract.  If you elect this plan, it enables you to automatically transfer amounts from the Federated Hermes Government Money Fund II Subaccount to other Subaccounts.  The goal of the Dollar Cost Averaging Plan is to make you less susceptible to market fluctuations by allocating on a regularly scheduled basis instead of allocating the total amount all at one time.  We do not guarantee that the Dollar Cost Averaging Plan will result in a gain or prevent a loss.
Transfers under this plan occur on a monthly basis for a period you choose, ranging from 3 to 36 months.  To participate in this plan you must transfer at least $250 from the Federated Hermes Government Money Fund II Subaccount each month.  You may allocate the required amounts to the Federated Hermes Government Money Fund II Subaccount through initial and subsequent premium payments or by transferring amounts into the Federated Hermes Government Money Fund II Subaccount from the other Subaccounts.  Restrictions apply to transfers from the Fixed Account.
You may elect this plan at the time of application by completing the authorization.  You may also elect it at any time after the Contract is issued by completing the election form.  Dollar cost averaging transfers will start on the next Monthly Anniversary Day following the date we receive your request or on the date you request.  We do not impose a charge for participating in this plan.
Once elected, we will process transfers from the Federated Hermes Government Money Fund II Subaccount monthly until:
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we have completed the number of designated transfers;
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the value of the Federated Hermes Government Money Fund II Subaccount is completely depleted; or
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you send us Written Notice instructing us to cancel the monthly transfers.
There is no transfer charge for participation in the Dollar Cost Averaging Plan and transfers made under the Dollar Cost Averaging Plan will not count toward the six free transfers allowed each Contract Year.  We have the right to cancel this feature at any time with notice to you.
PORTFOLIO REBALANCING PLAN
The Portfolio Rebalancing Plan is an optional feature available with the Contract.  Under this plan, we will redistribute the accumulated balance of each Subaccount to equal a specified percentage of the Variable Account Value.  We will do this on a quarterly basis at three-month intervals from the Monthly Anniversary Day on which the Portfolio Rebalancing Plan begins.  The purpose of the Portfolio Rebalancing Plan is to automatically diversify your portfolio mix.  The plan automatically adjusts your portfolio mix to be consistent with your current premium allocation instructions.  If you make a
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change to your premium allocation, we will also automatically change the allocation used for portfolio rebalancing to be consistent with the new premium allocation.  We do not impose a charge for participating in this plan.
The redistribution will not count as a transfer permitted under the Contract each Contract Year.  If you also have elected the Dollar Cost Averaging Plan and it has not been completed, the Portfolio Rebalancing Plan will start on the Monthly Anniversary Day the Dollar Cost Averaging Plan ends.  If the Contract Value is negative at the time portfolio rebalancing is scheduled, we will not complete the redistribution.
You may elect this plan at the time of application by completing the authorization.  You may also elect it at any time after the Contract is issued by completing the election form.  Portfolio rebalancing will terminate when:
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you request any transfer unless you authorize a new allocation; or
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the day we receive Written Notice instructing us to cancel the plan.
PARTIAL AND FULL CASH SURRENDERS
Partial Surrenders. You may surrender part of the Cash Surrender Value at any time before your death, the Annuitant’s death and the Maturity Date.  You may submit a Written Notice to the Home Office or provide notice by telephone if you have provided proper authorization to us.  (See "TELEPHONE, FACSIMILE, ELECTRONIC MAIL, AND INTERNET AUTHORIZATIONS")  The minimum partial surrender requested must be at least $100.  We will surrender the amount requested from the Contract Value on the date we receive your Written Notice or notice by telephone for the surrender.  We will price a partial surrender request received in good order before the New York Stock Exchange closes using the Subaccount accumulation unit value determined at the close of that regular business session of the New York Stock Exchange (usually 3:00 p.m. Central Time).  For requests received in good order after the New York Stock Exchange closes, we will price such partial surrender request using the Subaccount accumulation unit value determined at the close of the next regular session of the New York Stock Exchange.  We will deduct any applicable surrender charge from the amount surrendered or from the remaining Contract Value, according to your instructions.  If you instruct us to deduct the surrender charge from the remaining Contract Value and the remaining Contract Value is insufficient to fully cover the surrender charge, we will deduct the unpaid portion of the surrender charge from the amount paid to you.  We will make the surrender from each Subaccount and the Fixed Account based on your instructions.  If the amount requested exceeds the Subaccount and/or Fixed Account Value, we will process the surrender for the amount available and then contact you for further instructions.
Subject to certain restrictions, we will not apply a surrender charge on the first partial surrender of up to 10% of the Contract Value per Contract Year.  (See "SURRENDER CHARGE")
Systematic Partial Surrender Plan.  The Systematic Partial Surrender Plan enables you to authorize an automatic regular payment of a partial surrender amount.  If you wish to participate in the plan, you should instruct us to surrender a particular dollar amount from the Contract on a monthly, quarterly, semi-annual or annual basis.  The minimum payment under this plan is $100.  We will make the surrender from each Subaccount and the Fixed Account based on your instructions.  If the amount requested exceeds the Subaccount and/or Fixed Account Value, we will process the surrender for the amount available and then contact you for further instructions.
Subject to certain restrictions, we will not apply a surrender charge on the first amounts paid out under the Systematic Partial Surrender Plan of up to 10% of the Contract Value each Contract Year.  (See "SURRENDER CHARGE")
You may discontinue participation in the Systematic Partial Surrender Plan at any time by sending us Written Notice.
Certain federal income tax consequences may apply to partial and systematic partial surrenders.  You should consult your tax adviser before requesting a partial or systematic partial surrender.  (See "FEDERAL TAX STATUS")
Full Surrender.  You may request a surrender of the Contract for its Cash Surrender Value at any time before the Annuitant’s death and before the Maturity Date.  The Cash Surrender Value will equal the Contract Value less:
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any applicable surrender charge;
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any loan balance;
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any premium taxes payable; and
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any withholding taxes.
We will determine the Cash Surrender Value on the date we receive Written Notice of surrender and the Contract.  We will price a surrender request received in good order before the New York Stock Exchange closes for normal trading using the
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Subaccount accumulation unit value determined at the close of that regular business session of the New York Stock Exchange (usually 3:00 p.m. Central Time).  For requests received in good order after the New York Stock Exchange closes, we will price such surrender request using the Subaccount accumulation unit value determined at the close of the next regular session of the New York Stock Exchange.
Subject to certain restrictions, we will not apply a surrender charge on up to 10% of the Contract Value when you surrender the Contract.  (See "SURRENDER CHARGE")
Certain federal income tax consequences may apply to a surrender of the Contract.  You should consult your tax adviser before requesting a surrender.  (See "FEDERAL TAX STATUS")
Restrictions on Distributions from Certain Contracts.  Certain restrictions apply to surrenders and partial surrenders from Contracts used as funding vehicles for Internal Revenue Code section 403(b) retirement plans.  Section 403(b)(11) of the Internal Revenue Code of 1986, as amended, restricts the distribution under section 403(b) annuity contracts of:
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elective contributions made in years beginning after December 31, 1988;
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earnings on those contributions; and
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earnings in such years on amounts held as of the last year beginning before January 1, 1989.
Distributions of those amounts may only occur upon:
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the death of the employee;
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attainment of age 59½;
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severance from employment;
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disability; or
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financial hardship.
In addition, income attributable to elective contributions may not be distributed in the case of hardship.  Amounts attributable to non-elective contributions may be subject to distribution restrictions specified in the employer’s section 403(b) plan.
Pursuant to tax regulations, we generally are required to confirm, with your section 403(b) plan sponsor or otherwise, that surrenders you request from a section 403(b) contract comply with applicable tax requirements before we process your request.
CONTRACT TERMINATION
We may terminate the Contract and pay you the Cash Surrender Value if all of these events simultaneously exist prior to the Maturity Date:
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you have not paid premiums for at least two years;
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the Contract Value is less than $2,000; and
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total premiums paid under the Contract, less any partial surrenders, is less than $2,000.
We will mail a termination notice to you and to the holder of any assignment of record at least six months before we terminate the Contract.  We have the right to automatically terminate the Contract on the date specified in the notice unless we receive an additional premium payment before the termination date specified or the Contract Value has increased to the amount required due to positive investment performance.  This additional premium payment must be for at least the required minimum amount.
If elected, the GMWB rider will terminate on the date the Contract terminates for any reason. Upon termination of the GMWB rider, your Guaranteed Withdrawal Balance will decline to zero, and we will not refund any GMWB rider charge that you previously paid.
CONTRACT LOANS
If your Contract is a section 403(b) TSA Qualified Contract, you may have the option of taking a Contract loan at any time after the first Contract Year if permitted by your employer’s section 403(b) plan.  Pursuant to new tax regulations, we generally are required to confirm, with your section 403(b) plan sponsor or otherwise, that loans you request from a section 403(b) contract comply with applicable tax requirements before we process your request.  You may obtain a loan
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by submitting Written Notice.  The only security we require is an assignment of the Contract to us.  We allow only one loan per Contract Year.
We will show the current loan amount and any withdrawals for unpaid interest on your annual report.
Amount of Loan Available.  You may borrow up to the least of:
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$50,000, reduced by the excess (if any) of the highest outstanding loan balance during the one-year period ending on the day before the loan is made over the outstanding loan balance on the day loan is made;
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the greater of 50% of the Cash Surrender Value of the Contract or $10,000; or
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the Cash Surrender Value less any outstanding loans, determined as of the date of the loan.
At any time you make a new loan the sum of all prior loans, loan interest outstanding, and the current loan applied for may not exceed the applicable limit described above.  Each loan must be at least $2,500.
Loan Account.  When you take a loan, we will withdraw an amount equal to the loan from the Fixed Account and Variable Account and transfer this amount to the loan account.  The loan account is part of the Fixed Account.  If you do not specify allocation instructions in your loan application, we will withdraw the loan pro rata from all Subaccounts having values and from the Fixed Account.  Amounts transferred to the loan account do not participate in the investment experience of the Fixed Account and the Subaccounts from which they were withdrawn.
Interest Credited on Loaned Amount.  We will pay interest on amounts in the loan account at the minimum guaranteed effective annual interest rate of 3% per year.  We may apply different interest rates to the loan account than the Fixed Account.  Any interest we credit on loaned amounts will remain in the Fixed Account.
Loan Interest Charged.  On each Contract Anniversary, we will charge accrued interest on a Contract loan at the maximum rate of 8% per year.  We may establish a lower rate for any period during which the Contract loan is outstanding. Interest is payable at the end of each Contract Year and on the date the loan is repaid.
If we do not receive the loan interest payment by the Contract Anniversary, we will transfer the accrued loan interest from the Fixed Account and Subaccounts to the loan account on a pro rata basis.
Repayment of Loan. You must specifically identify any loan repayment as such in order to ensure that it will be applied correctly.  Each loan repayment will result in a transfer of an amount equal to the loan repayment from the loan account to the Fixed Account and/or Subaccounts.  We will use your current premium allocation schedule to allocate the loan repayment, unless you provide specific instructions to allocate the loan repayment differently.  Each loan repayment must be at least $25.
You must repay principal and interest in substantially equal monthly payments over a five-year period.  You are allowed a 31-day grace period from the installment due date.  If a monthly installment is not received within the 31-day grace period, under federal tax law you will be treated as having a deemed distribution of the entire amount of the outstanding principal, interest due, and any applicable charges under this Contract, including any surrender charge.  This deemed distribution may be subject to income and penalty tax under the Code.
Loan Balance.  Loan balance means all unpaid Contract loans and loan interest.  We will deduct any outstanding loan balance from the Contract Proceeds.  We will terminate your Contract if your total loan balance exceeds the Cash Surrender Value of the Contract.  We will mail notice to you at least 31 days before such termination.
Allowing a Contract to terminate under these circumstances could have adverse tax consequences and may adversely affect the treatment of the Contract under Internal Revenue Code section 403(b).
Effect of Contract Loan. A loan, whether or not repaid, will have a permanent effect on the death benefit and Contract Values because the investment results will apply only to the non-loaned portion of the Contract Value. The longer the loan is outstanding, the greater the effect is likely to be. Depending on the investment results of the Subaccounts or credited interest rates for the unloaned value in the Fixed Account while the loan is outstanding, the effect could be favorable or unfavorable. Loans may increase the potential for lapse if investment results of the Subaccounts are less than anticipated. Loans can (particularly if not repaid) make it more likely than otherwise for a Contract to terminate.
ERISA Plans.  If your section 403(b) TSA Qualified Contract is part of a plan subject to the Employee Retirement Income Security Act of 1974 ("ERISA"), you should consult a qualified legal adviser about compliance with ERISA requirements prior to requesting a Contract loan.  Any loan under this Contract may also be subject to the rules of the plan it is part of. You are responsible for determining whether your plan is subject to, and complies with, ERISA and the Department of Labor regulations governing plan loans.
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DEATH BENEFIT BEFORE MATURITY DATE
A death benefit will be paid at the death of either the Annuitant or the Owner of the Contract.  We will determine the amount of and pay the death benefit Proceeds on an individual Contract upon receipt at our Home Office of satisfactory proof of the Owner's or the Annuitant's death before the Maturity Date, plus written direction (from each eligible recipient of death benefit Proceeds) regarding how to pay the death benefit payment, and any other documents, forms and information we need.  Once a death benefit has been paid, the Contract is terminated.  If you are also the Annuitant, the death benefit Proceeds payable will be those payable on the death of the Annuitant.  However, if the Contract is issued with an Owner and an Annuitant who is not the same individual, the benefit will be paid at the first death.  If the Owner predeceases the Annuitant, the Cash Surrender Value of the Contract will be paid to the Beneficiary.  If the Annuitant predeceases the Owner, the Guaranteed Minimum Death Benefit, as described below, will be paid to the Beneficiary.
Calculation of the Guaranteed Minimum Death Benefit.  The Contract provides a Base Guaranteed Minimum Death Benefit Option and also offers two enhanced Guaranteed Minimum Death Benefit Options that can be selected at issue for an additional charge.
The two options are:
•
The Annual Ratchet Guaranteed Minimum Death Benefit Option; and
•
The Enhanced Combination Guaranteed Minimum Death Benefit Option.
The issue requirements and the Monthly Guaranteed Minimum Death Benefit Charge will vary for each Guaranteed Minimum Death Benefit Option as described below.  Any amount we pay in excess of your Contract Value is subject to our financial strength and claims-paying ability.
The death benefit options provide protection in the event of a market downturn.  However, there are additional costs associated with the enhanced Guaranteed Minimum Death Benefits.  Those costs can limit the Contract’s participation in rising equity markets.  Please consult your financial professional.
Base Guaranteed Minimum Death Benefit Option
Under this option we guarantee that the death benefit will be the greater of:
•
premiums paid, proportionately adjusted for partial surrenders, less any loan balance; or
•
the Contract Value less any loan balance on the date we receive proof of the Annuitant's death.
There is no additional charge for the Base Guaranteed Minimum Death Benefit Option.  This option is available at issue and at any time after.
The example below demonstrates two calculations for the Base Guaranteed Minimum Death Benefit Option with a hypothetical increase in Contract Value and withdrawal amount and the second shows a hypothetical decrease in contract value and withdrawal amount. This example is hypothetical, and no annual fees are taken into account.
 
When Contract Value is greater than Premiums Paid
When Contract Value is less than Premiums Paid
Total Premiums Paid
$100,000
$100,000
Guaranteed Minimum Death Benefit immediately before Withdrawal
$100,000
$100,000
Contract Value at the time of Withdrawal
$200,000
$80,000
Withdrawal Amount
$40,000
$40,000
Proportionate Adjustment for Withdrawal
($40,000 / $200,000) x $100,000 = $20,000
($40,000 / $80,000) x $100,000 = $50,000
Percentage Reduction in Death Benefit
20%
50%
Guaranteed Minimum Death Benefit immediately after the Withdrawal
$100,000 - $20,000 = $80,000
$100,000 - $50,000 = $50,000
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Annual Ratchet Guaranteed Minimum Death Benefit Option
Under this option we guarantee that the death benefit for ages 80 and below will be the greater of:
•
the death benefit calculated under the Base Guaranteed Minimum Death Benefit Option; or
•
the highest Contract Value as of a Contract Anniversary during any point the Contract has been in effect on or before the Annuitant’s death.  Any loan balance will be deducted from such Contract Value and the Contract Value will also be proportionally adjusted for partial surrenders.
We guarantee that the death benefit for ages above 80 equal the greater of:
•
the Contract Value at the time of death; or
•
the death benefit calculated as described above for ages 80 and below plus any additional premiums paid.
If you elect the Annual Ratchet Guaranteed Minimum Death Benefit Option, the monthly Guaranteed Minimum Death Benefit charge will equal 0.01665% of Variable Account Value, which equals 0.20% of the Variable Account Value on an annualized basis.  This charge is deducted from the Variable Account Value every Monthly Anniversary Day.  (See "MONTHLY GUARANTEED MINIMUM DEATH BENEFIT EXPENSE CHARGE")  This option is only available at issue of the Contract and is only available to Annuitants with Issue Ages of 75 or below.
The example below demonstrates the calculation of the Annual Rachet Guaranteed Minimum Death Benefit Option, assuming an Annuitant younger than age 80, and an initial purchase payment of $100,000 with one additional premium payment of $50,000 and no withdrawals.
Contract Anniversary
Premium Payment at the Start of the Year
Contract Value on Anniversary
Annual Ratchet Guaranteed Minimum Death Benefit Option
First
$100,000
$110,000
$110,000
Second
$50,000
$160,000
$160,000
Third
$0
$120,000
$160,000
Enhanced Combination Guaranteed Minimum Death Benefit Option
Under this option we guarantee that the death benefit for ages 80 and below will be the greatest of:
•
the death benefit calculated under the Base Guaranteed Minimum Death Benefit Option; or
•
premiums paid, accumulated annually at 5% interest until the date of the Annuitant’s death, proportionately adjusted for partial surrenders and deducting any loan balance.  We place a maximum on the amount accumulated at 5% interest of two times the total premiums paid, less surrenders and any loan balance; or
•
the highest Contract Value as of a Contract Anniversary during any point the Contract has been in effect on or before the Annuitant’s death. Any loan balance will be deducted from and premiums paid since the last Contract Anniversary will be added to such Contract Value and the Contract Value will also be proportionately adjusted for partial surrenders.
We guarantee that the death benefit for ages above 80 equal the greater of:
•
the Contract Value at the time of death; or
•
the value of the Guaranteed Minimum Death Benefit on the Contract Anniversary following the Annuitant’s 80th birthday, calculated as described above, adjusted proportionately for partial surrenders, less any loan balance and plus any premiums paid since the Contract Anniversary following the Annuitant’s 80th birthday.
If you elect the Enhanced Combination Guaranteed Minimum Death Benefit Option, the monthly Guaranteed Minimum Death Benefit charge will equal 0.02912% of the Variable Account Value, which equals 0.35% of the Variable Account on an annualized basis.  This charge is deducted from the Variable Account Value every Monthly Anniversary Day.  (See "MONTHLY GUARANTEED MINIMUM DEATH BENEFIT EXPENSE CHARGE")  This option is only available at issue of the Contract and is only available to Annuitants with Issue Ages of 70 or below.
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The example below demonstrates the calculation of the Enhanced Combination Guaranteed Minimum Death Benefit Option, assuming an Annuitant younger than age 80, and an initial premium payment of $100,000 with one additional premium payment of $50,000 and no withdrawals.
Contract Anniversary
Premium Payment at the start of the Year
Contract Value on Anniversary
Premiums Paid Accumulated 5% Annually
Enhanced Combination Guaranteed Minimum Death Benefit Option
First
$100,000
$110,000
$100,000(1.05) = $105,000.00
$110,000
Second
$50,000
$160,000
$155,000(1.05) = $162,750.00
$162,750
Third
$0
$120,000
$162,750(1.05) = $170,887.50
$170,887.50
Adjustment to Guaranteed Minimum Death Benefit Calculation for Partial Surrenders
We will reduce the Guaranteed Minimum Death Benefit calculation by an amount equal to the percentage of the partial surrender as compared to the Contract Value as of the date of the withdrawal.
Changes in Guaranteed Minimum Death Benefit Options
If you have elected the Annual Ratchet or Enhanced Combination Guaranteed Minimum Death Benefit Options, you may change the option at any time to the Base Guaranteed Minimum Death Benefit Option.  The effective date of change will be the Monthly Anniversary Day on or following the date we receive Written Notice of the change.
Death of Annuitant.  If the Annuitant dies before the Maturity Date while the Owner is alive, we will pay the death benefit Proceeds under the Contract to the Beneficiary.
We will pay the Proceeds to the Beneficiary in a lump sum unless you or the Beneficiary elect a payment option.  If the Annuitant is an Owner, we are required to distribute the Proceeds in accordance with the rules described below in "Death of Owner" for the death of an Owner before the Maturity Date.
No death benefit is payable if the Annuitant dies on or after the Maturity Date.
Death of Owner.  If an Owner dies before the Maturity Date while the Annuitant is alive, federal tax law requires (for a Non-Qualified Contract) that we distribute the Cash Surrender Value (or if an Owner is the Annuitant, the Proceeds payable upon the Annuitant's death) to the Beneficiary within five years after the date of the Owner's death.  If an Owner dies on or after the Maturity Date, we must distribute any remaining payments at least as rapidly as under the payment option in effect on the date of such Owner's death.
These distribution requirements will be considered satisfied as to any portion payable to the benefit of the Beneficiary if:
•
the Proceeds are distributed over the life of that Beneficiary (or a period not exceeding the Beneficiary’s life expectancy);
•
the distributions begin within one year of the Owner’s death; and
•
the Beneficiary is a natural person, not a legal entity such as a corporation or trust.
If the deceased Owner's spouse is the designated Beneficiary, the Contract may be continued with such surviving spouse as the new Owner.  In this situation, if the Beneficiary wants to leave the Contract in force and the death benefit due to the Beneficiary is greater than the Contract Value; we will increase the Contract Value to equal the death benefit.  We will base this increase on the Contract Value on the date we are notified of the death of the Owner.  If the Contract has joint Owners, the surviving joint Owner will be the Beneficiary, unless otherwise specified in the application.  Joint Owners must be husband and wife as of the Contract Date.
The Contract provides that upon your death, a surviving spouse may have certain continuation rights that he or she may elect to exercise for the Contract’s death benefit. All Contract provisions relating to spousal continuation are available only to a person who meets the definition of "spouse" under federal law.  The U.S. Supreme Court has held that same-sex marriage must be permitted under state law and that marriages recognized under state law will be recognized for federal law purposes. Domestic partners and civil unions not recognized as legal marriages under state law, however, will not be treated as marriages under federal law.  Consult a tax advisor for more information on this subject.
If an Owner is not an individual, the Annuitant, as determined in accordance with section 72(s) of the Internal Revenue Code, will be treated as an Owner for purposes of these distribution requirements.  Any change in or death of the Annuitant will be treated as the death of an Owner.
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Other rules may apply to a Qualified Contract.
PROCEEDS ON MATURITY DATE
The Maturity Date is the latest date when Proceeds under the Contract are payable.  The Proceeds available on the Maturity Date vary depending upon how you elect to receive the Proceeds:
•
we will apply the Contract Value (less any loan balance and any applicable premium taxes) if you elect to receive the Proceeds under a Life Payment Option; and
•
we will apply the Cash Surrender Value (less any applicable premium taxes) if you elect to receive the Proceeds as a lump sum payment or as a Non-Life Payment Option.
You must apply 100% of the Contract Proceeds to a payment option. You may allocate your Contract Proceeds among a lump sum payment and one Life or Non-Life Payment Option.
You select the Maturity Date, subject to the following restrictions.  The latest Maturity Date is the later of:
•
the Contract Anniversary following the Annuitant's 85th birthday; or
•
the tenth Contract Anniversary.
For Qualified Contracts, distributions may be required to begin by April 1 of the calendar year following the calendar year you turn age 72 (or 70½ if you obtained that age before January 1, 2020).  Certain states limit the maximum Maturity Date.
You may change the Maturity Date subject to these limitations:
•
we must receive your Written Notice at least 30 days before the current Maturity Date;
•
you must request a Maturity Date that is at least 30 days after receipt of the Written Notice;
•
the requested Maturity Date must be not later than any earlier Maturity Date required by law; and
•
you submit your Contract if we require it.
On the Maturity Date, we will pay the maturity proceeds under the Life Income Option with a minimum guaranteed payment period of 120 months, unless you have chosen to receive the Proceeds under another payment option or in a lump sum.  (See "PAYMENT OPTIONS")
PAYMENTS
We will usually pay any partial surrender, full surrender, or death benefit within seven days of receipt of a Written Notice.  All documents received must be in good order.  This means that instructions are sufficiently clear so that we do not need to exercise any discretion to follow such instructions.  We must also receive due proof of death to pay a death benefit.  We may postpone payments if:
•
the New York Stock Exchange is closed, other than customary weekend and holiday closings or trading on the exchange is restricted as determined by the SEC; or
•
the SEC permits by an order the postponement for the protection of Owners; or
•
the SEC determines that an emergency exists that would make the disposal of securities held in the Variable Account or the determination of the value of the Variable Account's net assets not reasonably practical.
In addition, if, pursuant to SEC rules, the Federated Hermes Government Money Fund II suspends payment of redemption proceeds in connection with a liquidation of the Fund, we will delay payment of any transfer, partial surrender, surrender, loan, or death benefit from the Federated Hermes Government Money Fund II Subaccount until the Fund is liquidated.
If you have made a recent premium or loan payment by check or draft, we may defer payment until such check or draft has been honored.  We also reserve the right to defer payment of transfers, partial and full cash surrenders, loans or death benefit Proceeds from the Fixed Account for up to six months.
If mandated under applicable law, we may be required to block an Owner's account and thereby refuse to pay any request for transfers, surrenders, loans, annuity payments, or death benefit Proceeds until instructions are received from the appropriate regulator.  We also may be required to provide additional information about you or your account to government regulators.
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Legacy Account.  As described below, Kansas City Life will pay death benefit Proceeds through Kansas City Life's Legacy Accounts.  For each claim, which meets the criteria listed below, Kansas City Life will set up a Legacy Account.  Kansas City Life will forward a Legacy Account checkbook to the Owner or Beneficiary.  The individual Legacy Accounts are managed by a third party administrator and the checks are drawn on a bank separate from the Kansas City Life general account.  The Legacy Accounts pay interest and provide check-writing privileges, which are funded by Kansas City Life.  An Owner or Beneficiary (whichever applicable) has immediate and full access to Proceeds by writing a check on the account.  Kansas City Life pays interest on death benefit Proceeds from the date of death to the date the Legacy Account is closed, and holds reserves to fund disbursements.  However, the Legacy Accounts are subject to the claims of creditors of Kansas City Life.  In addition, any interest credited to the Legacy Account will be currently taxable to the Owner or Beneficiary in the year in which it is credited.  Kansas City Life may profit from amounts left in a Legacy Account.  Further, the Legacy Accounts are retained asset accounts and are not bank accounts and are not insured, nor guaranteed, by the FDIC or any other government agency.
Kansas City Life will pay death benefit Proceeds through the Legacy Account when:
•
the Proceeds are paid to an individual; and
•
the amount of Proceeds is $5,000 or more; and
•
the treatment is acceptable in the state in which the claim is made.
Any other use of the Legacy Account requires approval of the Company.
UNCLAIMED PROPERTY LAWS
Every state has unclaimed property laws which generally declare annuity contracts to be abandoned after a period of inactivity of three to five years from the contract’s maturity date or date the death benefit is due and payable.  For example, if we are obligated to pay the death benefit or return premiums, but, if after a thorough search, we are unable to locate the beneficiary, or the beneficiary does not come forward to claim the death benefit or the premiums in a timely manner, the death benefit or the premiums will be paid to the abandoned property division or unclaimed property office of the state in which the beneficiary or the policy owner last resided, as shown on our books and records, or to our state of domicile.  This "escheatment" is revocable, however, and the state is obligated to pay the death benefit or the premiums (without interest) if your beneficiary steps forward to claim it within the time required by the state with the proper documentation.  To prevent such escheatment, it is important that you update your Beneficiary designations, including addresses, if and as they change.  Please call 800-616-3670 to make such changes.
MODIFICATIONS
We may modify the Contract, subject to providing notice to you.  We may only make modification if it is necessary to:
•
make the Contract or the Variable Account comply with any law or regulation issued by a governmental agency to which we are subject;
•
assure continued qualification of the Contract under the Internal Revenue Code or other federal or state laws relating to retirement annuities or variable annuity contracts (except that your consent may be required by some states);
•
reflect a change in the operation of the Variable Account; or
•
provide additional Variable Account and/or fixed accumulation options.
We also have the right to modify the Contract as necessary to attempt to prevent the Contract Owner from being considered the owner of the assets of the Variable Account.
In the event of any such modification, we will issue an endorsement to the Contract (if required), which will reflect the changes.
REPORTS TO CONTRACT OWNER
We will mail you a report containing key information about the Contract at least annually.  The report will include the Contract Value and Cash Surrender Value of your Contract and any further information required by any applicable law or regulation.  We will show the information in the report as of a date no more than two months prior to the date of mailing.  We will send you a report at any other time during the year that you request for a reasonable charge.
TELEPHONE, FACSIMILE, ELECTRONIC MAIL, AND INTERNET AUTHORIZATIONS
You may request the following transactions by telephone, facsimile, electronic mail or via the Kansas City Life website, if you provided proper authorization to us:
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•
transfer of Contract Value;
•
change in premium allocation;
•
change in dollar cost averaging;
•
change in portfolio rebalancing; or
•
Contract loan.
In addition, you may make a partial surrender request by telephone if you provided proper authorization to us.  We may suspend these privileges at any time if we decide that such suspension is in the best interests of Owners.
We accept Written Requests transmitted by facsimile, but reserve the right to require you to send us the original Written Request.
Electronic mail requests that are received at customerservice@kclife.com before 3:00 Central Time on a Valuation Day will be processed on that Valuation Day.  If we receive a request after the New York Stock Exchange closes, we will process the order using the Subaccount accumulation unit value determined at the close of the next regular business session of the New York Stock Exchange.  If an incomplete request is received, we will notify you as soon as possible by return e-mail.  Your request will be honored as of the Valuation Day when all required information is received.
Requests can also be made by accessing your account on the Internet at http://www.kclife.com.  Requests received before 3:00 p.m. Central Time on a Valuation Day will be processed on that Valuation Day.  If we receive a request after the New York Stock Exchange closes, we will process the order using the Subaccount accumulation unit value determined at the close of the next regular business session of the New York Stock Exchange.  If any of the fields are left incomplete, the request will not be processed and you will receive an error message.  Your request will be honored as of the Valuation Day when all required information is received.  You will receive a confirmation in the mail of the changes made within 5 days of your request.
We will employ reasonable procedures to confirm that instructions communicated to us by telephone, facsimile, or email are genuine.  If we follow those procedures, we will not be liable for any losses due to unauthorized or fraudulent instructions.
The procedures we will follow for telephone privileges include requiring some form of personal identification prior to acting on instructions received by telephone, providing written confirmation of the transaction, and making a tape recording of the instructions given by telephone.  The procedures we will follow for facsimile and email communications include verification of Contract number, social security number and date of birth.
Telephone, facsimile, electronic mail systems and the website may not always be available.  Any telephone, facsimile, electronic mail system or Internet connection, whether it is yours, your service provider’s, your registered representative’s, or ours, can experience outages or slowdowns for a variety of reasons.  These outages may delay or prevent our processing of your request.  Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances.  If you are experiencing problems, you should make your request by writing to our Home Office.
BENEFITS AVAILABLE UNDER THE CONTRACT
The following table summarizes information about the benefits available under the contract.

Name of Benefit
Purpose
Is Benefit Standard or Optional
Maximum Fee
Brief Description or Restrictions / Limitations
Five PlusSM Guaranteed Minimum Withdrawal Benefit
Guarantees return of amounts invested in the Contract or minimum annual income payments provided that the conditions of the rider are satisfied
Optional
0.10% (monthly)  1.20% (annually) of the Guaranteed Withdrawal Balance
• In order to receive certain benefits, the Covered Person must attain age 65 and remain living;
• Must invest only in Designated Subaccounts, which may reduce investment return
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Name of Benefit
Purpose
Is Benefit Standard or Optional
Maximum Fee
Brief Description or Restrictions / Limitations
Guaranteed Minimum Death Benefit
Provide protection in the event of a market downturn
Standard
No Charge
• Available at issue and any time after
Annual Ratchet Guaranteed Minimum Death Benefit Option
Provide protection in the event of a market downturn
Optional
0.20% of the Variable Account Value on an annualized basis
• only available at issue of the Contract
• only available to Annuitants with Issue Ages of 75 or below
Enhanced Combination Guaranteed Minimum Death Benefit Option
Provide protection in the event of a market downturn
Optional
0.35% of the Variable Account Value on an annualized basis
• only available at issue of the Contract
• only available to Annuitants with Issue Ages of 70 or below
Nursing Home Waiver of Surrender Charge
Waiver of Surrender Charge if you are admitted to a nursing home
Standard
No Charge
• Must provide satisfactory proof of admission to licensed nursing home;
• Contract Value must be paid out in equal amounts over a period of at least three years; and
• Must be confined at least 90 days before waiver
OPTIONAL RIDER
FIVE PLUSSM GUARANTEED MINIMUM WITHDRAWAL BENEFIT
IMPORTANT TERMS
Covered Person means:  the person whose life we use to determine the duration of the Lifetime Income Amount payments.  You should carefully consider who will be the Covered Person under the Five PlusSM Guaranteed Minimum Withdrawal Benefit (the "GMWB") rider.  Under Qualified Contracts, the Covered Person must be the Owner.  Under Non-Qualified Contracts, the Covered Person must be the Owner, Annuitant, or Beneficiary.  Certain benefits under this rider depend on the age of the Covered Person and the relationship of the Owner to the Beneficiary.  (See "LIFETIME INCOME AMOUNT" and "DEATH BENEFITS")
Designated Subaccounts means:  the Designated Subaccounts to which you can allocate premiums and Contract Value under this rider.  The Designated Subaccounts available depend on the Rider Effective Date.
Excess Withdrawal means:  a withdrawal, and any subsequent withdrawals in that Contract Year, that causes total withdrawals during a Contract Year to exceed the Guaranteed Withdrawal Amount; or a withdrawal, and any subsequent withdrawals in that Contract Year, that causes total withdrawals during a Contract Year after the Lifetime Income Date to exceed the Lifetime Income Amount.
Guaranteed Withdrawal Balance means:  the total amount available for future periodic guaranteed withdrawals.
Guaranteed Withdrawal Amount means:  the amount we guarantee to be available each Contract Year for withdrawal until the Guaranteed Withdrawal Balance reduces to zero.
Investment Strategy means:  the currently available Designated Subaccounts to which you must allocate premiums and Contract Value for this rider to remain in effect.
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Rider Effective Date means:  the Contract Anniversary date that the Five PlusSM Guaranteed Minimum Withdrawal Benefit (the "GMWB") is effective from.
Lifetime Income Amount means:  the amount we guarantee to be available each Contract Year for withdrawal during the life of the Covered Person while this rider is in effect.  The Lifetime Income Amount reduces to zero upon the death of the Covered Person or upon a change in a Non-Qualified Contract that removes the Covered Person from the Contract as an Owner, Beneficiary, or Annuitant or upon a change in a Qualified Contract that removes the Covered Person from the Contract as an Owner.
Lifetime Income Date means:  the Contract Anniversary on or after the Covered Person reaches age 65, or the Rider Effective Date if the Covered Person is already age 65 or older at the time the rider is elected.
Withdrawal means:  the amounts partially surrendered as described in the Contract, including any applicable surrender charges.
Settlement Phase occurs:  when total withdrawals during the Contract Year are equal to or less than the Guaranteed Withdrawal Amount; and when the Contract Value reduces to zero; and either the Guaranteed Withdrawal Balance or the Lifetime Income Amount immediately after the withdrawal is greater than zero.
Note: Illustrations of how the Guaranteed Minimum Withdrawal Benefit rider works are provided in Appendix B to this Prospectus.
DESCRIPTION OF THE GMWB RIDER
If you are concerned that poor investment performance or market volatility in the Subaccounts may adversely impact the amount of money you can withdraw from the Contract, we offer for an additional charge an optional GMWB rider.  The GMWB provides alternative guarantees - which guarantee you receive depends on the amount of the withdrawals you take and the age of the Covered Person.  First, the GMWB guarantees the return of all of the amounts you have invested in the Contract, as long as you limit your withdrawals each Contract Year to the Guaranteed Withdrawal Amount (this guarantee is available both before and after the Lifetime Income Date).  Second, on and after the Lifetime Income Date, as long as you limit your annual withdrawals to the Lifetime Income Amount, the GMWB guarantees you annual payments of that amount for the rest of the Covered Person’s life, no matter how long the Covered Person lives, even after you have recovered your investments in the Contract and even if your Contract Value reduces to zero.  However, the maximum amount you may be able to withdraw as a Lifetime Income Amount may be less than if you continued to take withdrawals as a Guaranteed Withdrawal Amount.
Example:
Assume that you purchase a Contract with the GMWB when you are 55.  Your initial premium payment is $100,000.  You make annual withdrawals in each of the next ten years equal to the Guaranteed Withdrawal Amount, or $5,000 (5% of the initial premium payment of $100,000).  Assuming 0% net investment experience and no annual bonus amounts credited during each of the ten years, after the 10th Contract Year your Contract Value will be $50,000 and your Guaranteed Withdrawal Balance will be $50,000.  You are the Covered Person under the Contract and are now 65 years old.  You have reached the Lifetime Income Date.  If, in each Contract Year thereafter, you limited your annual withdrawals to the Lifetime Income Amount of $2,500 (5% of $50,000 on the Lifetime Income Date), you would be eligible to receive the Lifetime Income Amount of $2,500 annually for the rest of your life.  However, if you continued to withdraw $5,000 annually, you would be guaranteed to receive back your entire $100,000 initial premium payment because your annual withdrawals did not exceed the Guaranteed Withdrawal Amount.  You would then not be guaranteed to receive the Lifetime Income Amount annually for the rest of your life, because your annual withdrawals exceeded the Lifetime Income Amount of $2,500.
The GMWB does not guarantee Contract Value or the performance of any investment option.
IMPORTANT CONSIDERATIONS
•
If your annual withdrawals are greater than the Guaranteed Withdrawal Amount or the Lifetime Income Amount (after the Lifetime Income Date), the value of the GMWB rider may be significantly reduced.
•
You must allocate all premiums and Contract Value to the Investment Strategy (described below) on and after the Rider Effective Date.
•
  To maximize your potential to receive payments under the GMWB rider, you must limit your withdrawals to withdrawals that are not Excess Withdrawals each Contract Year and allocate your Contract Value according to the
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Investment Strategy options described below.  These restrictions are intended to minimize the risk that your Contract Value will be reduced to zero before death, thereby requiring us to make settlement payments.

 •
Accordingly, a significant risk against which the rider protects, i.e., that your Contract Value will reduce to zero (other than due to an Excess Withdrawal) while you are alive, may be minimal.

•
Moreover, because these restrictions lessen the risk that your Contract Value will be reduced to zero while you are still alive, they also significantly reduce the risk that we will make any settlement payments.

•
In fact, if your Contract’s investment performance over time is sufficient to generate gains that can sustain periodic withdrawals equal to or greater than the Guaranteed Withdrawal Balance, then your Contract Value will never be reduced to zero and we will never make settlement payments.
•
For certain Designated Subaccounts, risk and volatility mitigation is part of the Portfolio’s investment strategy.  That investment strategy could reduce your investment return.
•
The GMWB rider will end on the Maturity Date unless we are making payments under the Settlement Phase of the GMWB rider.
•
We do not automatically increase your Guaranteed Withdrawal Balance when your Contract appreciates in value.  We will only increase your Guaranteed Withdrawal Balance if you pay an additional premium or if there is a step-up or bonus.
•
Please remember that all withdrawals, including those made under the GMWB rider, reduce your Contract Value and death benefit, may result in receipt of taxable income to the Owner under federal and state law, and if made before the Owner attains age 59½, may be subject to a 10% penalty tax.
•
Withdrawals under the GMWB rider are not annuity payments.  Annuity payments generally receive more favorable tax treatment than withdrawals.  (See "FEDERAL TAX ISSUES")
•
You will begin paying the GMWB rider charge as of the Rider Effective Date, even if you do not begin taking withdrawals for many years.
•
If the Covered Person dies or is no longer an Owner, Beneficiary, or Annuitant of the Non-Qualified Contract or is no longer an Owner of the Qualified Contract, the Lifetime Income Amount reduces to zero.
•
To receive the full benefit of withdrawals for your lifetime, your Contract Value must be reduced to zero and the Annuitant must be living at that time.
•
You may not make additional premium payments during the GMWB rider’s Settlement Phase.
•
If you choose to not take withdrawals equal to or less than the Guaranteed Withdrawal Amount during each Contract Year, the remaining Guaranteed Withdrawal Amount may not be carried forward to any other Contract Year.
•
The GMWB rider may not be available in all states, and we may otherwise limit its availability.
•
If the Covered Person is the Owner and the Owner dies before the Settlement Phase, the Lifetime Income Amount will reduce to zero.  The benefits provided by this rider will only continue if the Beneficiary is the surviving spouse of the Owner, the death benefit or the Guaranteed Withdrawal Balance is greater than zero at the time the death benefit is determined, and the Beneficiary does not take the death benefit under the terms of the Contract.
•
Surrender charges will apply to the withdrawals you take.  (See "CHARGES AND DEDUCTIONS")
•
Inflation may impact the value of the GMWB rider.
•
The addition of the GMWB rider to your Contract will not automatically cancel any Systematic Partial Surrender Plan you have established.  Since withdrawals more than your Guaranteed Withdrawal Amount may significantly reduce or eliminate your ability to make withdrawals on and after the Lifetime Income Date, you should consider adjusting your existing Systematic Partial Surrender Plan.
•
Withdrawals for more than your Guaranteed Withdrawal Amount may eliminate your ability to make withdrawals on or after the Lifetime Income Date and, if certain conditions are met, may increase the likelihood that your Contract could be terminated.
•
Any amount we pay in excess of your Contract Value is subject to our financial strength and claims-paying ability.
You should not purchase the GMWB if:
•
you expect to take annual withdrawals in excess of the Guaranteed Withdrawal Amount or the Lifetime Income Amount (after the Lifetime Income Date) because such Excess Withdrawals may significantly reduce or eliminate the value of the benefit;
•
you are primarily interested in maximizing the Contract’s potential for long-term accumulation rather than building a Guaranteed Withdrawal Balance that will provide guaranteed withdrawals;
•
your Contract is a Qualified Contract that has withdrawal restrictions that prevent you from taking withdrawals; or
•
you do not expect to take withdrawals.
In considering whether to purchase the GMWB rider, you must consider your desire for protection and the cost of the rider versus the possibility that had you not purchased the GMWB rider, your Contract Value may have been higher.  The rider may not be appropriate for you if you plan to take Excess Withdrawals.  You should consult your financial professional to discuss whether the GMWB rider suits your needs.
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WHEN TO TAKE WITHDRAWALS
You should carefully consider when to begin taking withdrawals if you have elected the GMWB rider.  If you begin taking withdrawals too soon, you may limit the value of the GMWB rider.  For example, you may not be able to increase your Guaranteed Withdrawal Balance and you may lose the potential for increases though step-ups and bonuses.  If you delay taking withdrawals for too long, you may limit the number of years available for you to take withdrawals in the future (due to life expectancy) and you may be paying for a benefit you are not using.
PURCHASING THE GMWB RIDER
You may elect the GMWB rider at the time you purchase a Contract or the rider may be added to an existing Contract provided:
•
the rider is available for sale in the state where the Contract is sold;
•
you limit your investment of premiums and Contract Value to the Investment Strategy options we make available with the rider;
•
the Covered Person has attained age 20 and has not yet attained age 81; and
•
the Contract does not have a loan balance.
We reserve the right to refuse to issue the GMWB rider at our sole discretion.
GUARANTEED WITHDRAWAL BALANCE
The Guaranteed Withdrawal Balance is used to calculate the Guaranteed Withdrawal Amount and Lifetime Income Amount.  Your Guaranteed Withdrawal Balance is not permitted to exceed $5 million.  The initial Guaranteed Withdrawal Balance is equal to your initial premium, or if the GMWB rider is added after the Contract Date, the initial Guaranteed Withdrawal Balance is the Contract Value on the Rider Effective Date.  Each time an additional premium is paid, the Guaranteed Withdrawal Balance increases by the amount of the additional premium.  The Guaranteed Withdrawal Balance may also increase as a result of a bonus or step-up and it will decrease as a result of a withdrawal.  (See "BONUS," "STEP-UPS," and "Effect of Withdrawals on the Guaranteed Withdrawal Balance and the Guaranteed Withdrawal Amount")  The Guaranteed Withdrawal Balance is not a cash value or surrender value, is not available to the Owner, Annuitant or Beneficiary, is not a minimum return for any Subaccount, is not a guarantee of Contract Value, and may not be withdrawn as a lump sum.
GUARANTEED WITHDRAWAL AMOUNT
The Guaranteed Withdrawal Amount is the amount we guarantee to be available each Contract Year for withdrawal until the Guaranteed Withdrawal Balance reduces to zero while the GMWB rider is in effect.  The maximum Guaranteed Withdrawal Amount at any time is $250,000.  The initial Guaranteed Withdrawal Amount is equal to 5% of the initial Guaranteed Withdrawal Balance.
LIFETIME INCOME AMOUNT
The Lifetime Income Amount is the amount we guarantee to be available each Contract Year, on and after the Lifetime Income Date, for withdrawal during the life of the Covered Person while the GMWB rider is in effect.  We determine the initial Lifetime Income Amount on the Lifetime Income Date. The initial Lifetime Income Amount is equal to 5% of the Guaranteed Withdrawal Balance at the time we make our determination.  The Lifetime Income Amount reduces to zero upon the death of the Covered Person or upon a change on a Non-Qualified Contract that removes the Covered Person from the Contract as an Owner, Beneficiary, or Annuitant or upon a change on a Qualified Contract that removes the Covered Person from the Contract as an Owner.
Effect of Withdrawals on the Guaranteed Withdrawal Balance and the Guaranteed Withdrawal Amount. If your total withdrawals during a Contract Year are less than or equal to the Guaranteed Withdrawal Amount, we will decrease the Guaranteed Withdrawal Balance by the amount of the withdrawals.  If a withdrawal causes total withdrawals during a Contract Year to exceed the Guaranteed Withdrawal Amount or if total withdrawals during a Contract Year have already exceeded the Guaranteed Withdrawal Amount (referred to as "Excess Withdrawals"), we will automatically reset the Guaranteed Withdrawal Balance to equal the lesser of:
•
the Contract Value immediately after the Excess Withdrawal; or
•
the Guaranteed Withdrawal Balance immediately prior to the Excess Withdrawal minus the amount of the Excess Withdrawal.
Each time we reset the Guaranteed Withdrawal Balance, we also recalculate the Guaranteed Withdrawal Amount.
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The Guaranteed Withdrawal Amount will equal the lesser of:
•
the Guaranteed Withdrawal Amount immediately prior to the Excess Withdrawal; or
•
5% multiplied by the greater of:

•
the Contract Value immediately after the Excess Withdrawal; or

•
the Guaranteed Withdrawal Balance immediately after the Excess Withdrawal.
We do not recalculate your Guaranteed Withdrawal Amount when you make a withdrawal that is less than or equal to the Guaranteed Withdrawal Amount and total withdrawals during that Contract Year remain below or equal to the Guaranteed Withdrawal Amount.
Effect of Withdrawals on the Lifetime Income Amount.  On or after the Lifetime Income Date, we will recalculate the Lifetime Income Amount if a withdrawal causes total withdrawals during a Contract Year to exceed the Lifetime Income Amount or if total withdrawals during a Contract Year have already exceeded the Lifetime Income Amount (also referred to as "Excess Withdrawals").  The Lifetime Income Amount will be automatically reset to equal the lesser of:
•
the Lifetime Income Amount immediately prior to the Excess Withdrawal; or
•
5% multiplied by the greater of:

•
the Contract Value immediately after the Excess Withdrawal; or

•
the Guaranteed Withdrawal Balance immediately after the Excess Withdrawal.
We do not recalculate your Lifetime Income Amount when you make a withdrawal that is less than or equal to the Lifetime Income Amount and total withdrawals during that Contract Year remain below or equal to the Lifetime Income Amount.  In certain circumstances, however, we will not reset the Guaranteed Withdrawal Balance, Guaranteed Withdrawal Amount and/or the Lifetime Income Amount, even where a withdrawal would exceed the Guaranteed Withdrawal Amount and/or Lifetime Income Amount for a Contract Year.  These involve withdrawals taken as Required Minimum Distributions.  (See "REQUIRED MINIMUM DISTRIBUTIONS")
Please note if you take any withdrawals before the Lifetime Income Date, the initial amount of the Lifetime Income Amount may be less than the Guaranteed Withdrawal Amount.  Although you may continue to take withdrawals up to the Guaranteed Withdrawal Amount after the Lifetime Income Date without reduction of the Guaranteed Withdrawal Amount (as long as the Guaranteed Withdrawal Balance has not reduced to zero) your Lifetime Income Amount may be reduced if the amount you withdraw exceeds the Lifetime Income Amount.  You could eventually lose any benefit based on the Lifetime Income Amount if you continue to take withdrawals in excess of the Lifetime Income Amount.
Remember:
•
Excess Withdrawals could reduce your Guaranteed Withdrawal Balance by substantially more than the actual amount of the withdrawal.
•
Excess Withdrawals may significantly reduce or eliminate future Guaranteed Withdrawal Amounts and Lifetime Income Amounts.
BONUS
We will increase the Guaranteed Withdrawal Balance at the end of each Contract Year during the GMWB rider’s bonus period if you take no withdrawals during that Contract Year.  The bonus period is the first 10 Contract Years after the Rider Effective Date while the Covered Person is less than age 80.  Each time you qualify for a bonus:
If the Guaranteed Withdrawal Balance was not previously stepped-up or reset, we will increase the Guaranteed Withdrawal Balance by:
•
an amount equal to 5% of total premiums paid (subject to the applicable limits on additional premiums) to the Contract if the rider is issued on the Contract Date; or
•
an amount equal to 5% of the initial Guaranteed Withdrawal Balance, increased by any premiums paid (subject to the applicable limits on additional premiums) since the Rider Effective Date, if this rider is added after the Contract Date.
If the Guaranteed Withdrawal Balance was previously stepped-up or reset, we will increase the Guaranteed Withdrawal Balance by an amount equal to 5% of the sum of the Guaranteed Withdrawal Balance immediately after the latest step-up or reset, and any premiums received since such latest step-up or reset.
Each time we apply a bonus to the Guaranteed Withdrawal Balance, we will also recalculate the Guaranteed Withdrawal Amount and the Lifetime Income Amount as follows:
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•
The Guaranteed Withdrawal Amount will equal the greater of the Guaranteed Withdrawal Amount immediately prior to the bonus or 5% of the Guaranteed Withdrawal Balance immediately after the bonus; and
•
The Lifetime Income Amount will equal the greater of the Lifetime Income Amount immediately prior to the bonus or 5% of the Guaranteed Withdrawal Balance immediately after the bonus.
Bonuses, when applied, will increase the Guaranteed Withdrawal Balance and consequently, will increase the rider charges (because such charges are based on a greater Guaranteed Withdrawal Balance).  Further, bonuses may increase the Guaranteed Withdrawal Amount and the Lifetime Income Amount.  Bonuses do not increase the Contract Value of the Contract.
STEP-UPS
If the Contract Value on any step-up date is greater than the Guaranteed Withdrawal Balance on that date, we will automatically increase ("step-up") the Guaranteed Withdrawal Balance to equal the Contract Value (subject to the maximum Guaranteed Withdrawal Balance limit of $5 million). Upon a step-up, we will also recalculate the Guaranteed Withdrawal Amount, the Lifetime Income Amount, and the current monthly rider charge percentage.  (See “GMWB RIDER CHARGE”)
The Guaranteed Withdrawal Amount will equal the greater of:
•
the Guaranteed Withdrawal Amount immediately prior to the step-up; or
•
5% multiplied by the Guaranteed Withdrawal Balance immediately after the step-up.
The Lifetime Income Amount will equal the greater of:
•
the Lifetime Income Amount immediately prior to the step-up; or
•
5% multiplied by the Guaranteed Withdrawal Balance immediately after the step-up.
We reserve the right to increase the current monthly rider charge percentage up to 0.10%.  If we decide to increase the current monthly rider charge percentage at the time of a step-up, you will receive advance notice and be given the opportunity to decline the automatic step-up.  (See "GMWB RIDER CHARGE")
The step-up dates occur only while the GMWB rider is in effect.  For Contracts with a GMWB Rider with a Rider Effective Date before May 29, 2012, the step-up dates occur on each of the 3rd, 6th, and 9th Contract Anniversaries after the Rider Effective Date.  After the 9th Contract Anniversary, the step-up dates occur on each succeeding Contract Anniversary (e.g., the 10th, 11th, 12th etc.) up to and including the 30th Contract Anniversary after the Rider Effective Date.  For Contracts with a GMWB Rider with a Rider Effective Date of May 29, 2012 or after, the step-up dates occur on each Contract Anniversary after the Rider Effective Date up to and including the 30th Contract Anniversary after the Rider Effective Date.  If you decline an automatic step-up, you will have the option to elect to step-up the Guaranteed Withdrawal Balance (as well as the Guaranteed Withdrawal Amount and Lifetime Income Amount) within 30 days of subsequent step-up dates.  If you decide to step-up the Guaranteed Withdrawal Balance, we will thereafter resume automatic step-ups.
Please note that the automatic step-up may be of limited benefit if you intend to make premium payments that would cause your Contract Value to approach $5 million, since the Guaranteed Withdrawal Balance is not permitted to exceed $5 million.
Step-ups will increase the Guaranteed Withdrawal Balance and may increase the Guaranteed Withdrawal Amount and the Lifetime Income Amount.
ADDITIONAL PREMIUMS
We will increase the total Guaranteed Withdrawal Balance by the amount of each additional premium we accept (subject to the maximum Guaranteed Withdrawal Balance limit of $5 million). In addition, we will recalculate the Guaranteed Withdrawal Amount and the Lifetime Income Amount:
In the case of the Guaranteed Withdrawal Amount, to equal the greater of the:
•
Guaranteed Withdrawal Amount immediately prior to the premium; or
•
the lesser of:

•
5% of the Guaranteed Withdrawal Balance immediately after the premium; or
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 •
the Guaranteed Withdrawal Amount immediately prior to the premium plus an amount equal to 5% of the premium.
In the case of the Lifetime Income Amount, to equal the greater of the:
•
Lifetime Income Amount immediately prior to the premium; or
•
the lesser of:

•
5% of the Guaranteed Withdrawal Balance immediately after the premium; or

•
the Lifetime Income Amount immediately prior to the premium plus an amount equal to 5% of the premium.
We do not permit additional premiums during a GMWB rider’s "Settlement Phase," as described below.
Premium limits on Non-Qualified Contracts.   If we issue your Contract not in connection with an IRA or other tax-qualified retirement plan, we also impose the following limit on your ability to pay premiums.  On or after the first Contract Anniversary following the Rider Effective Date, we will not accept any additional premium without our prior approval that either:
•
exceeds $100,000; or
•
causes the total of all additional premiums paid since the first Contract Anniversary following the Rider Effective Date to exceed $100,000.
For Non-Qualified Contracts, we reserve the right to refuse to accept additional premiums at any time after the first Contract Anniversary following the Rider Effective Date.
Premium limits on Qualified Contracts.  If we issue your Contract in connection with a tax-qualified retirement plan, including an IRA, we also impose additional limits on your ability to make premium payments:
•
after the first Contract Anniversary after the Covered Person reaches age 65, we will not accept additional premium payments, without our prior approval, that exceed $100,000 or cause the total premiums paid after the first Contract Anniversary following the Rider Effective Date to exceed $100,000; and
•
we will not accept any premium after the Covered Person becomes age 81.
For Qualified Contracts, we reserve the right to refuse to accept additional premiums at any time after the first Contract Anniversary after the Covered Person reaches age 65.
You should consult with a qualified tax adviser prior to electing the GMWB rider for further information on tax rules affecting Qualified Contracts, including IRAs.
Please note that the premium limitations discussed in this section are in addition to the premium limitations discussed under "Purchasing a Contract" earlier in the Prospectus.
INVESTMENT STRATEGY
The Investment Strategy includes the Designated Subaccounts.  If you elect the GMWB rider, you must allocate your Contract Value to one or more of the Designated Subaccounts available to you.  As discussed below, the Designated Subaccounts that are available to you will vary based on your GMWB rider effective date.  (See "AVAILABLE DESIGNATED SUBACCOUNTS")  You must choose one of these available Designated Subaccounts and your initial premium payment (in the case of a new application) or Contract Value, as applicable, will be allocated to the Designated Subaccounts you select.  Subsequent premium payments will also be allocated accordingly.  Contract Value will be rebalanced quarterly to maintain the current allocations.  We selected the Designated Subaccounts to minimize the risk that your Contract Value will be reduced to zero because of guaranteed withdrawals before the Annuitant’s death, thereby requiring Kansas City Life to make settlement payments to you during the Settlement Phase.
This rider will remain in effect only if your premium payments and Contract Value are allocated at all times to one or more of the currently available Designated Subaccounts in accordance with the requirements of this rider.  Solely for the purposes of the Dollar Cost Averaging Plan, under our current administrative procedures, we deem the Federated Hermes Government Money Fund II Subaccount to be a Designated Subaccount.  (See "AVAILABLE DESIGNATED SUBACCOUNTS")
Unless you request otherwise, withdrawals will be taken in proportion to the Contract Value in the Subaccounts; you may specify the Subaccounts from which a withdrawal is to be made.
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You should consult with your financial professional to assist you in determining which Designated Subaccount available with the GMWB rider is best suited for your financial needs and risk tolerance.
AVAILABLE DESIGNATED SUBACCOUNTS
You must allocate your entire Contract Value to one or more of the Designated Subaccounts that are available to you.  Solely for the purposes of the Dollar Cost Averaging Plan, under our current administrative procedures, we deem the Federated Hermes Government Money Fund II Subaccount to be a Designated Subaccount.  On a quarterly basis, we will rebalance your entire Contract Value to the Subaccounts in accordance with the percentages specified in the Designated Subaccounts you elected.
Under our Dollar Cost Averaging Plan, you may elect to allocate your premiums and Contract Value over time to one or more of the Designated Subaccounts that you have selected.  If you elect the Dollar Cost Averaging Plan and you have elected the GMWB rider, transfers will occur on a monthly basis for a period you choose, ranging from 3 to 12 months.
We offer Designated Subaccounts with different risk profiles.  You need to determine which Designated Subaccounts are best for you.  You should consult with your financial adviser on this decision.  Your financial adviser can help you determine which Designated Subaccounts are best suited to your financial needs, investment time horizon, and willingness to accept investment risk.  You should periodically review these factors with your financial adviser to determine if you should change Designated Subaccounts to keep up with changes in your personal circumstances.  Your financial adviser can assist you in completing the proper forms to make a change to the Designated Subaccounts you have elected.  You should not regard the Designated Subaccounts as investment advice.  Kansas City Life bears no responsibility for your decision to select or change Designated Subaccounts.
For Contracts with a GMWB Rider with a Rider Effective Date before May 29, 2012
You may allocate your premiums and Contract Value among any of the Designated Subaccounts.  Allocation percentages must be whole percentages only and the total of allocation percentages in the Designated Subaccounts must equal 100%.
The available Designated Subaccounts are:
•
American Funds Insurance Series® Managed Risk Asset Allocation Fund – Class P2 Shares
•
American Funds Insurance Series® Managed Risk Washington Mutual Investors FundSM – Class P2 Shares
•
American Funds Insurance Series® Managed Risk Growth Fund – Class P2 Shares
•
American Funds Insurance Series® Managed Risk Growth-Income Fund – Class P2 Shares
•
American Funds Insurance Series® Managed Risk International Fund – Class P2 Shares
•
Fidelity® VIP Freedom 2010 PortfolioSM – Service Class 2
•
Fidelity® VIP Freedom 2015 PortfolioSM – Service Class 2
•
Fidelity® VIP Freedom 2020 PortfolioSM – Service Class 2
•
Fidelity® VIP Freedom Income PortfolioSM – Service Class 2
•
TOPS® Managed Risk Balanced ETF Portfolio – Class 2 Shares
•
TOPS® Managed Risk Moderate Growth ETF Portfolio – Class 2 Shares
•
TOPS® Managed Risk Growth ETF Portfolio – Class 2 Shares
For Contracts with a GMWB Rider with a Rider Effective Date of May 29, 2012 or after
You may allocate your premiums and Contract Value among any of the Designated Subaccounts.  Allocation percentages must be whole percentages only and the total of allocation percentages in the Designated Subaccounts must equal 100%.
The available Designated Subaccounts are:
•
American Funds Insurance Series® Managed Risk Asset Allocation Fund – Class P2 Shares
•
American Funds Insurance Series® Managed Risk Washington Mutual Investors FundSM – Class P2 Shares
•
American Funds Insurance Series® Managed Risk Growth Fund – Class P2 Shares
•
American Funds Insurance Series® Managed Risk Growth-Income Fund – Class P2 Shares
•
American Funds Insurance Series® Managed Risk International Fund – Class P2 Shares
•
TOPS® Managed Risk Balanced ETF Portfolio – Class 2 Shares
•
TOPS® Managed Risk Moderate Growth ETF Portfolio – Class 2 Shares
•
TOPS® Managed Risk Growth ETF Portfolio – Class 2 Shares
We periodically evaluate the Designated Subaccounts, and may add, remove, or substitute the Designated Subaccounts that are available to you.
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We will notify you at least 30 days in advance of any substitution, removal, or change to a Designated Subaccount that you have selected.  You should carefully review these notices.  If a Designated Subaccount to which you have allocated some or all of your Contract Value is no longer available under the GMWB rider, you must transfer that Contract Value to a Designated Subaccount that is currently available in order to keep the rider in effect.  If you do not wish to make such transfer, you may terminate the GMWB rider.
For more information regarding each Fund that we permit you to invest in through a Designated Subaccount, including information relating to that Fund’s investment objectives, policies and restrictions, and the risks of investing in that Fund, please see the "Kansas City Life, the Variable Account and the Funds" section of this Prospectus as well as the Fund’s prospectus.  You can obtain a Prospectus containing more complete information on each of the Funds by contacting Variable Administration at 1-800-616-3670.  You should read the Fund’s prospectus carefully before investing.
You may transfer your Contract Value among the Designated Subaccounts that are available to you, at any time, by Written Request.  Any change will be effective on the date we receive your Written Request.  You may not make transfers between the Designated Subaccounts and the Fixed Account.  We will waive the restrictions defined in "Transfer Privilege" if the applicable transfer is required under the terms of the GMWB rider.
A Designated Subaccount may not perform as intended.  Investment performance of your Contract Value could be better or worse than expected.  One purpose of requiring you to invest in a Designated Subaccount is to limit Kansas City Life’s exposure under the GMWB rider.  This is done by ensuring that your Contract Value is diversified and not concentrated in the riskiest Subaccounts.  You should not purchase the GMWB rider if you wish to allocate your Contract Value in a non-diversified or highly aggressive manner.
The timing of your investment and the frequency of automatic rebalancing may affect performance.  Your Contract Value will fluctuate, and when redeemed, may be worth more or less than the original cost.
If you elect to purchase the GMWB rider you may invest your Contract Value only in the Designated Subaccounts we make available with this benefit.
REQUIRED MINIMUM DISTRIBUTIONS
For purposes of the GMWB rider, withdrawals considered Required Minimum Distributions are distributions within a calendar year that are intended to be paid to you as required by section 401(a)(9), section 403(b)(10), section 408(b)(3), or section 408A(c) of the Internal Revenue Code.
Under our Required Minimum Distributions program, each withdrawal will be in an amount that we determine to be your Required Minimum Distribution under your Contract, considering only that Contract.  Our calculation will be based on information that you provide and our understanding of the Code.  We reserve the right to make any changes we deem necessary to comply with the Code and Treasury Regulations.
You should discuss these matters with your tax adviser prior to electing the GMWB rider.
Each withdrawal under our Required Minimum Distributions program will reduce your Contract Value and your Guaranteed Withdrawal Balance.  We will not, however, reset your Guaranteed Withdrawal Balance, Guaranteed Withdrawal Amount or Lifetime Income Amount if a withdrawal under our Required Minimum Distributions program (based on our current understanding and interpretation of the tax law) causes total withdrawals during a Contract Year to exceed the Guaranteed Withdrawal Amount or Lifetime Income Amount, as applicable.
We will not make any further withdrawals under our Required Minimum Distributions program if both the Contract Value and the Guaranteed Withdrawal Balance reduce to zero.  We will make distributions as part of the GMWB rider’s Settlement Phase, however, if the Lifetime Income Amount is greater than zero and the Covered Person is living at that time.
Required Minimum Distributions provide minimum lifetime distributions as described or as required under certain sections of the Code.  Withdrawals under our Required Minimum Distributions program will not be treated as Excess Withdrawals and will not reset the Guaranteed Withdrawal Balance, Guaranteed Withdrawal Amount or Lifetime Income Amount.
SETTLEMENT PHASE
We automatically make settlement payments during the GMWB rider’s Settlement Phase.  The Settlement Phase begins if total withdrawals during the Contract Year:
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•
are equal to or less than the Guaranteed Withdrawal Amount; and
•
the Contract Value reduces to zero and either the Guaranteed Withdrawal Balance or the Lifetime Income Amount immediately after the withdrawal is still greater than zero.
During this phase, the Contract will continue but all other rights and benefits under the Contract, including death benefits and any additional settlement payments under riders, terminate.  We will not accept additional premiums and we will not deduct any charge for the GMWB rider during the Settlement Phase.
At the beginning of the Settlement Phase, you generally may choose an annual settlement payment amount that we will automatically pay to you.  The settlement payment amount we permit you to choose varies:
•
You may choose an amount that is equal to, or no greater than, the Guaranteed Withdrawal Amount if the Guaranteed Withdrawal Balance is greater than zero at the beginning of the Settlement Phase.  We reduce any remaining Guaranteed Withdrawal Balance each time we make a settlement payment, and automatically pay the settlement amount to you each Contract Year while the Covered Person is alive until the Guaranteed Withdrawal Balance reduces to zero.  After that, we will make settlement payments to you each Contract Year during the Covered Person’s lifetime in an amount that is equal to any remaining Lifetime Income Amount.  Keep in mind that in certain circumstances the Lifetime Income Amount may be less than the Guaranteed Withdrawal Amount, and under those circumstances your choice of an amount in excess of the Lifetime Income Amount could result in a reduction of the Lifetime Income Amount.  (See "EFFECT OF WITHDRAWALS ON THE LIFETIME INCOME AMOUNT")
•
You may choose to continue to receive distribution payments under the Required Minimum Distribution program if the program is in effect and the Guaranteed Withdrawal Balance is greater than zero at the beginning of the Settlement Phase. If you do, we will reduce any remaining Guaranteed Withdrawal Balance each time we make a distribution payment and automatically make distribution payments each Contract Year while the Covered Person is alive until the Guaranteed Withdrawal Balance reduces to zero.  (See "REQUIRED MINIMUM DISTRIBUTIONS")  After that, we will make settlement payments to you each Contract Year during the Covered Person’s lifetime in an amount that is equal to any remaining Lifetime Income Amount.
•
We will make annual settlement payments to you each Contract Year during the Covered Person’s lifetime in an amount that is equal to the Lifetime Income Amount if there is no remaining Guaranteed Withdrawal Balance at the beginning of the Settlement Phase.
•
After the Lifetime Income Date, if you choose to receive a settlement payment that is in excess of the Lifetime Income Amount, we will recalculate the Lifetime Income Amount in the same manner as a withdrawal that exceeds the Lifetime Income Amount.  (See "EFFECT OF WITHDRAWALS ON THE LIFETIME INCOME AMOUNT")  We do not recalculate the Lifetime Income Amount, however, if you receive distribution payments under the Required Minimum Distribution program.
Any withdrawal you make under the GMWB rider before the Settlement Phase is a withdrawal from your Contract Value. We are only required to start using our own money to make payments when the GMWB rider Settlement Phase begins.
Withdrawals under the GMWB rider are not annuity payouts.  Annuity payouts generally receive a more favorable tax treatment than other withdrawals.
DEATH BENEFITS
Death benefits before the Settlement Phase
If you die while the GMWB rider is in effect but before the Settlement Phase, the GMWB rider generally will terminate.  This means Kansas City Life will make no more payments under this rider.
However, if (i) you die while the GMWB rider is in effect but before the Settlement Phase, (ii) the sole Beneficiary is your surviving spouse, and (iii) your surviving spouse does not elect to take the death benefit under the terms of the Contract, the following will apply:
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If:
Then the GMWB rider:
the Covered Person is no longer alive
• Does not continue with respect to the Lifetime Income Amount, but continues with respect to the Guaranteed Withdrawal Amount if the death benefit or the Guaranteed Withdrawal Balance is greater than zero. We will automatically step-up the Guaranteed Withdrawal Balance to equal the death benefit on the date it is determined, if the death benefit on that date is greater than the Guaranteed Withdrawal Balance.
• Enters the Settlement Phase if a withdrawal would reduce the Contract Value to zero, and the Guaranteed Withdrawal Balance is still greater than zero.
• Continues to impose the GMWB rider charge.
• Continues to be eligible for any remaining bonuses and step-ups. We will permit the spouse to opt out of the initial death benefit step-up, if any, and any future step-ups if we would increase the rate of the GMWB rider charge at that time.
the Covered Person is alive
(e.g.  if the Beneficiary is the Covered Person)
• Continues with respect to the Lifetime Income Amount for the Beneficiary. If the Lifetime Income Amount has not been determined prior to the payment of the death benefit, we will determine the initial Lifetime Income Amount on the first Contract Anniversary after the Covered Person has reached age 65.
• Continues with respect to the Guaranteed Withdrawal Amount if the death benefit or the Guaranteed Withdrawal Balance is greater than zero.  We will automatically step-up the Guaranteed Withdrawal Balance to equal the death benefit on the date it is determined, if the death benefit on that date is greater than the Guaranteed Withdrawal Balance.
• Enters the Settlement Phase if a withdrawal would reduce the Contract Value to zero, and either the Lifetime Income Amount or the Guaranteed Withdrawal Balance is still greater than zero.
• Continues to impose the GMWB rider charge.
• Continues to be eligible for any remaining bonuses and step-ups. We will permit the spouse to opt out of the initial death benefit step-up, if any, and any future step-ups if we would increase the rate of the GMWB rider charge at that time.

Note that under Qualified Contracts other than IRAs, spousal continuation will not satisfy Required Minimum Distributions. Consult a tax adviser.
Death benefit during the Settlement Phase
If the Covered Person dies during the Settlement Phase, no death benefit under the Contract will be payable.  The only death benefit we provide are the remaining settlement payments that may become due under the GMWB rider.  Those payments will be made at least as rapidly as they were being paid before the death of the Covered Person. Additional restrictions may apply to Qualified Contracts in order to satisfy Required Minimum Distributions.
TERMINATION
Although the GMWB rider provides that you may not terminate the rider for five years from the Rider Effective Date, we are currently waiving this provision.  Therefore, you may currently terminate your GMWB rider at any time.
In addition, there are circumstances under which your GMWB rider will terminate automatically.  The GMWB rider will terminate upon the earliest of:
•
the date the Contract terminates for any reason; or
•
the date this rider is cancelled by you; or
•
the date a death benefit is payable upon the death of any Owner, unless the surviving spouse is the sole Beneficiary; or
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the date a death benefit is payable upon the death of the Owner and the Beneficiary takes the death benefit under the terms of the Contract; or
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the date a death benefit is payable upon the death of the Annuitant who is not the Owner; or
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the date an annuity option under the Contract begins; or
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the date the Contract Value, the Guaranteed Withdrawal Balance, and the Lifetime Income Amount all equal zero; or
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the date you change the allocation of a subsequent premium payment or transfer Contract Value to an investment option other than to an Investment Strategy option.
Upon termination of the GMWB rider, your Guaranteed Withdrawal Balance will decline to zero, and we will not refund any GMWB rider charge that you previously paid. (See "GMWB RIDER CHARGE") Before cancelling the GMWB rider or taking any other action that would cause the rider to terminate, such as allocating Contract Value to an investment option
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other than an Investment Strategy option, you should carefully consider your current and future need for the benefits provided by the rider.
GMWB RIDER CHARGE
We charge an additional monthly charge on the Monthly Anniversary Day for the GMWB rider.  The current GMWB rider charge is equal to 0.079% (0.95% annually) multiplied by the Guaranteed Withdrawal Balance.  However, if you elected the GMWB rider before January 1, 2009 and your GWB has not stepped-up since January 1, 2009, the current charge for your GMWB rider is 0.05% (0.60% annually) multiplied by the Guaranteed Minimum Withdrawal Balance.  We deduct the rider charge from each Subaccount in the same proportion that the value of each Subaccount is to the Contract Value.  We do not deduct the rider charge during the GMWB rider’s Settlement Phase.
We reserve the right to increase the current monthly rider charge percentage on the effective date of each step-up.  However, the current monthly rider charge percentage will never exceed 0.10% (1.20% annually).
The addition of the GMWB rider to a Contract may not always be in your interest since an additional charge is deducted monthly for this benefit and the Covered Person must attain age 65 and remain living for you to receive certain benefits.  Furthermore, the GMWB rider limits the investment options otherwise available under the Contract, contains age caps and limitations on an Owner’s rights and benefits at certain ages and values, and provides no guaranteed withdrawal benefits once payments begin under any of the payment options described in this Prospectus.  You should carefully consider each of these factors before deciding if the GMWB rider is suitable for your needs, especially at older ages.
FEDERAL TAX ISSUES
The application of certain tax rules to the GMWB rider, particularly those rules relating to distributions from your Contract, are not entirely clear.  In this regard, we intend to treat any amounts received by you under the GMWB rider during the Settlement Phase as annuity payments for tax purposes.  However, we intend to treat the payments made to you prior to the Settlement Phase or to our establishing an annuity date, as withdrawals for tax purposes.  (See "FEDERAL TAX STATUS")  In view of this uncertainty, you should consult a tax adviser before purchasing a GMWB rider.
The value of the GMWB rider may need to be included in calculating Required Minimum Distributions under Qualified Contracts.  Consult a tax adviser.
THE FIXED ACCOUNT
You may allocate some or all of the premiums and transfer some or all of the Variable Account Value to the Fixed Account. You may also make transfers from the Fixed Account, but restrictions may apply.  (See "TRANSFERS FROM FIXED ACCOUNT")  The Fixed Account is part of our general account and pays interest at declared rates guaranteed for each calendar year.  We guarantee the amount of premiums paid plus guaranteed interest and less applicable deductions.
Our general account supports our insurance and annuity obligations.  Since the Fixed Account is part of our general account, we assume the risk of investment gain or loss on this amount.  All assets in the general account are subject to our general liabilities from business operations.
The Fixed Account is not registered under the Securities Act of 1933 and is not registered as an investment company under the Investment Company Act of 1940.  The Securities and Exchange Commission has not reviewed the disclosure in this Prospectus relating to the Fixed Account.  Certain general provisions of the Federal securities laws relating to the accuracy and completeness of statements made in prospectuses still apply.
GUARANTEED AND CURRENT INTEREST RATES
There are two interest rates that are applicable to the Fixed Account – the guaranteed interest rate and the current interest rate.  The actual rate credited to the Fixed Account Value is the greater of the guaranteed interest rate and the current interest rate.
Guaranteed interest rate for Contracts issued on or after May 31, 2011, if approved in your state.  The guaranteed interest rate is the minimum interest rate that we will credit to the Fixed Account Value.  We guarantee that this rate will be at least 1% but not more than 3% per year.
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We determine the guaranteed interest rate on your Contract Date and on each Redetermination Date thereafter.  The guaranteed interest rate will be in effect from the Contract Date until the first Redetermination Date, and thereafter, from each Redetermination Date until the next Redetermination Date.
The redetermined guaranteed interest rate for the Fixed Account is based on the 5-year Constant Treasury Maturity monthly average rate for November of the previous calendar year published by the Federal Reserve (the "Treasury Rate"). The redetermined guaranteed interest rate for the Fixed Account will be calculated as the Treasury Rate rounded to the nearest five-hundredths of one percent (0.05%) reduced by 1.25%, and will be at least 1% and not more than 3% annually. We will notify you when your guaranteed interest rate is redetermined.
Guaranteed interest rate for Contracts issued before May 31, 2011 and for Contracts issued on and after May 31, 2011 where the guaranteed interest rate described above has not been approved by your state.  The guaranteed interest rate is the minimum interest rate that we will credit to the Fixed Account Value.  The guaranteed interest rate is 3% per year.
Current Interest Rate.  We may credit a current interest rate in excess of the guaranteed interest rate. Current interest rates are influenced by, but do not necessarily correspond to, prevailing market interest rates.  We will determine current interest rates at our discretion.  You assume the risk that the interest rate we credit may not exceed the guaranteed interest rate.  Since we anticipate changing the current interest rate from time to time, we may credit different allocations with different current interest rates, based upon the date amounts are allocated to the Fixed Account.  We will not change the current interest rate credited to funds in the Fixed Account more often than once each year.
For the purpose of crediting interest, we currently account for amounts deducted from the Fixed Account on a last-in, first out ("LIFO") basis.  We may change the method of crediting interest from time to time, provided that such changes do not have the effect of reducing the guaranteed rate of interest.  We may also shorten the period for which the interest rate applies to less than a year (except for the year in which such amount is received or transferred).
CALCULATION OF FIXED ACCOUNT VALUE
On the Contract Date, the Fixed Account Value is equal to the portion of the premium allocated to the Fixed Account.
On each Valuation Day thereafter, the Fixed Account Value is equal to:
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Fixed Account Value on the preceding Valuation Day; plus
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amounts allocated or transferred to the Fixed Account; plus
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interest credited; less
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amounts deducted, transferred, or surrendered from the Fixed Account since the preceding Valuation Day, including any interest.
TRANSFERS FROM FIXED ACCOUNT
We allow one transfer each Contract Year from the Fixed Account.  During the first eight Contract Years, the amount transferred from the Fixed Account may not exceed the greatest of:
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25% of the unloaned Fixed Account Value in the Fixed Account on the date of transfer (unless the balance after the transfer is less than $250, in which case we will transfer the entire amount); or
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the amount transferred out of the Fixed Account in the prior Contract Year; or
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$2,000 (or the unloaned Fixed Account Value, if less).
Beginning in the 9th Contract Year, there is no limitation on the amount transferred from the Fixed Account.
Because of the transfer limitations during the first eight Contract Years, it may take you several years to transfer all your Fixed Account Contract Value to the Variable Account.  You should carefully consider whether the Fixed Account meets your investment criteria.
DELAY OF PAYMENT
We have the right to defer payment of any surrender, partial surrender, or transfer from the Fixed Account for up to six months from the date we receive Written Notice for a partial surrender, full surrender, or transfer.  If we do not make the payment within 30 days after we receive the documentation required to complete the transaction, we will add 3% interest to the amount paid from the date we receive documentation.  Some states may require that we pay interest on periods of delay less than 30 days and some states may require us to pay an interest rate higher than 3% when we delay payment Proceeds.
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PAYMENT OPTIONS
The Contract offers a variety of ways, in addition to a lump sum, for you to receive Proceeds payable under the Contract.  Payment options are available for use with various types of Proceeds, such as surrender, death or maturity.  We summarize these payment options below.  All of these options are forms of fixed-benefit annuities which do not vary with the investment performance of a separate account.
The Contract ends on the Maturity Date and we will pay the Proceeds to the payee under the payment option selected.  The amount we apply to the payment option will vary depending upon which payment option you select.  If you elect a Life Payment Option (Options 4 and 5 described below), we will apply the full Contract Value to that option.  If you elect a Non-Life Payment Option (Options 1, 2, and 3 described below) or you have elected to receive a lump sum payment, we will apply the Cash Surrender Value.  If you have not filed an election of a payment option with us on the Maturity Date, we will pay the Contract Proceeds as a life annuity with payments guaranteed for ten years.
You may also apply Contract Proceeds under a payment option prior to the Maturity Date.  If you elect a Life Payment Option, we will apply the full Contract Value.  If you elect a Non-Life Payment Option or a lump sum payment, we will apply the Cash Surrender Value.
You must apply 100% of the Contract Proceeds to a payment option. You may allocate your Contract Proceeds among a lump sum payment and one Life or Non-Life Payment Option.
The Beneficiary may also apply a death benefit (upon the Annuitant’s death) under a payment option.
Naming different persons as Owner and Annuitant can affect whether the death benefit is payable, the amount of the benefit, and who will receive it.  Use care when naming Owners, Annuitants and Beneficiaries, and consult your registered representative if you have questions.
We will deduct any premium tax applicable from Proceeds at the time payments start.  In order for us to pay Proceeds under a payment option or a lump sum, the Contract must be surrendered.
We describe the payment options available below.  The term "payee" means a person who is entitled to receive payment under that option.
If we have options or rates available on a more favorable basis than those guaranteed at the time a payment option is elected, the more favorable benefits will apply.
Annuity payments may be less than withdrawal amounts guaranteed under the GMWB rider, and the GMWB rider may not be suitable for Contract Owners who plan to annuitize.
ELECTION OF OPTIONS
You may elect, revoke or change an option at any time before the Maturity Date while the Annuitant is living.  If the payee is not the Owner, we must provide our consent for the election of a payment option.  If an election is not in effect at the Annuitant's death or if payment is to be made in one sum under an existing election, the Beneficiary may elect one of the options after the Annuitant’s death.
An election of a payment option and any revocation or change must be made by Written Notice.  Proceeds of at least $2,000 are required for all payment options.  You may not elect an option if any periodic payment under the election would be less than $50.  We may make payments less frequently so that each payment is at least $50.  Subject to this condition, we will make payments annually or monthly at the end of such period.
DESCRIPTION OF OPTIONS
Option 1: Interest Payments. We will make guaranteed interest payments to the payee annually or monthly as elected.  We will pay interest on the Proceeds at the guaranteed rate per year.  We may pay additional interest annually.  The Proceeds and any unpaid interest may be withdrawn in full at any time.
Option 2: Installments of a Specified Amount. We will make annual or monthly payments until the Proceeds plus interest are fully paid.  We will pay interest on the Proceeds at the guaranteed rate per year.  We may pay additional interest.  The present value of any unpaid installments may be withdrawn at any time.
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Option 3: Installments for a Specified Period. We will pay the Proceeds in equal annual or monthly payments for a specified number of years.  We will pay interest on the Proceeds at the guaranteed rate per year.  We may also pay additional interest.  The present value of any unpaid installments may be withdrawn at any time.
Option 4: Life Income. We will pay an income during the payee's lifetime.  A minimum guaranteed payment period may be chosen.  Another form of minimum guaranteed payment period is the installment refund option under which we will make payments until the total income payments received equal the Proceeds applied.  If no minimum guaranteed payment period is chosen, it is possible for an Annuitant who dies after the first payment to receive only one annuity payment.
Option 5: Joint and Survivor Income. We will pay an income during the lifetime of two persons and will continue to pay an income as long as either person is living.  A minimum guaranteed payment period of ten years may be chosen.
Choice of Options: You may choose an option by Written Notice during the Annuitant’s lifetime.  If an option for payment of Proceeds is not in effect at the Annuitant’s death, the Beneficiary may make a choice.
If you have a Qualified Contract, not all options will satisfy required minimum distribution requirements, particularly as those rules apply to your designated beneficiary after your death. For deaths occurring on or after January 1, 2020, subject to certain exceptions, most non-spouse beneficiaries must now complete their distributions within ten years of the death in order to satisfy required minimum distribution rules. Consult a tax advisor before electing an annuity income option under a Qualified Contract. If you elect Options 2 or 3 and withdraw the unpaid installments, our obligation under the payment option will end.
FEDERAL TAX STATUS
INTRODUCTION
The following discussion is general in nature and is not intended as tax advice.  Each person concerned should consult a competent tax adviser.  No attempt is made to consider any applicable state or other income tax laws, any state and local estate or inheritance tax, or other tax consequences of ownership or receipt of distributions under a Contract.
When you invest in an annuity contract, you usually do not pay taxes on your investment gains until you withdraw the money – generally for retirement purposes.  If you invest in a variable annuity as part of a pension plan or employer-sponsored retirement program, your Contract is called a Qualified Contract.  If your annuity is independent of any formal retirement or pension plan, it is termed a Non-Qualified Contract.  The tax rules applicable to Qualified Contracts vary according to the type of retirement plan and the terms and conditions of the plan.
TAXATION OF NON-QUALIFIED CONTRACTS
Non-Natural Person.  If a non-natural person (e.g., a corporation or a trust) owns a Non-Qualified Contract, the taxpayer generally must include in income any annual increases of the Contract Value.  There are some exceptions to this rule and a prospective Owner that is not a natural person should discuss these with a tax adviser.
The following discussion generally applies to Contracts owned by natural persons.
Withdrawals.  When a withdrawal from a Non-Qualified Contract occurs, the amount received will be treated as ordinary income subject to tax up to an amount equal to the excess (if any) of the Contract Value immediately before the distribution over the Owner’s investment in the Contract (generally, the premiums or other consideration paid for the Contract, reduced by any amount previously distributed from the Contract that was not subject to tax) at that time.  In the case of a surrender under a Non-Qualified Contract, the amount received generally will be taxable only to the extent it exceeds the Owner’s investment in the Contract.
Penalty Tax on Certain Withdrawals.  In the case of a distribution from a Non-Qualified Contract, there may be imposed a federal tax penalty equal to 10% of the amount treated as income.  In general, however, there is no penalty on distributions:
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made on or after the taxpayer reaches age 59½;
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made on or after the death of an Owner;
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attributable to the taxpayer’s becoming disabled; or
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made as part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and his or her designated Beneficiary.
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Other exceptions may be applicable under certain circumstances and special rules may be applicable in connection with the exceptions enumerated above.  You should consult a tax adviser with regard to exceptions from the penalty tax.  A similar penalty tax, and additional exceptions, may apply to Qualified Contracts.
Medicare Tax. Distributions from non-qualified annuity contracts will be considered "investment income" for purposes of the Medicare tax on investment income. Thus, in certain circumstances, a 3.8% tax may be applied to some or all of the taxable portion of distributions (e.g. earnings) to individuals whose income exceeds certain threshold amounts.  Please consult a tax advisor for more information.
Annuity Payments.  Although tax consequences may vary depending on the payment option elected under an annuity contract, a portion of each annuity payment is generally not taxed and the remainder is taxed as ordinary income.  The non-taxable portion of an annuity payment is generally determined in a manner that is designed to allow you to recover your investment in the Contract ratably on a tax-free basis over the expected stream of annuity payments, as determined when annuity payments start.  Once your investment in the Contract has been fully recovered, however, the full amount of each annuity payment is subject to tax as ordinary income.
Partial Annuitization.  If part of an annuity contract’s value is applied to an annuity option that provides payments for one or more lives and for a period of at least ten years, those payments may be taxed as annuity payments instead of withdrawals.  None of the payment options under the Contract is intended to qualify for this "partial annuitization" treatment and, if you apply only part of the value of the Contract to a payment option, we will treat those payments as withdrawals for tax purposes.
Death Benefit Options.  It is possible that the Internal Revenue Service may take a position that death benefit option charges are deemed to be taxable distributions to you.  Although we do not believe that a death benefit option charge under the Contract should be treated as a taxable withdrawal, you should consult your tax advisor prior to selecting such a death benefit option under the Contract.
Taxation of Death Benefit Proceeds.  Amounts may be distributed from a Contract because of your death or the death of the Annuitant.  Generally, such amounts are includible in the income of the recipient as follows:  (i) if distributed in a lump sum, they are taxed in the same manner as a surrender of the Contract, or (ii) if distributed under a payment option, they are taxed in the same way as annuity payments.
Transfers, Assignments or Exchanges of a Contract.  A transfer or assignment of ownership of a Contract, the designation of an Annuitant other than the owner, the selection of certain Maturity Dates, or the exchange of a Contract may result in certain tax consequences to you that are not discussed herein.  An Owner contemplating any such transfer, assignment or exchange should consult a tax adviser as to the tax consequences.
Withholding.  Annuity distributions are generally subject to withholding for the recipient’s federal income tax liability.  Recipients can generally elect, however, not to have tax withheld from distributions.
Multiple Contracts.  All non-qualified deferred annuity contracts that are issued by us (or our affiliates) to the same Owner during any calendar year are treated as one annuity contract for purposes of determining the amount includible in such Owner’s income when a taxable distribution occurs.
Further Information.  We believe that the Contracts will qualify as annuity contracts for federal income tax purposes and the above discussion is based on that assumption.  Further details can be found in the Statement of Additional Information under the heading "Tax Status of the Contracts."
TAXATION OF QUALIFIED CONTRACTS
The tax rules applicable to Qualified Contracts vary according to the type of retirement plan and the terms and conditions of the plan.  Your rights under a Qualified Contract may be subject to the terms of the retirement plan itself, regardless of the terms of the Qualified Contract.  Adverse tax consequences may result if you do not ensure that contributions, distributions and other transactions with respect to the Contract comply with the law.
In the case of a withdrawal under a Qualified Contract, a ratable portion of the amount received is taxable, generally based on the ratio of the "investment in the contract" to the individual’s total account balance or accrued benefit under the retirement plan.  The "investment in the contract" generally equals the amount of any non-deductible premiums paid by or on behalf of any individual.  In many cases, the "investment in the contract" under a Qualified Contract can be zero.
Individual Retirement Accounts (IRAs), as defined in sections 219 and 408 of the Code, permit individuals to make annual contributions in 2022 of up to the lesser of $6,000 (or $7,000 if you are age 50 or over) or the amount of compensation includible in the individual’s gross income for the year.  The contributions may be deductible in whole or in part, depending
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on the individual’s income.  Distributions from certain pension plans may be "rolled over" into an IRA on a tax-deferred basis without regard to these limits.  Amounts in the IRA (other than nondeductible contributions) are taxed when distributed from the IRA.  A 10% penalty tax generally applies to distributions made before age 59½, unless certain exceptions apply.
The Internal Revenue Service has not reviewed the Contract for qualification as an IRA, and has not addressed in a ruling of general applicability whether a death benefit provision such as the optional enhanced death benefit provisions in the Contract comports with IRA qualification requirements.  The value of the enhanced death benefits may need to be considered in calculating minimum required distributions.
SIMPLE IRAs permit certain small employers to establish SIMPLE plans as provided by section 408(p) of the Code, under which employees may elect to defer to a SIMPLE IRA a percentage of compensation, in 2022 up to $14,000 (or $17,000 if you are age 50 or over).  The sponsoring employer is required to make matching or non-elective contributions on behalf of employees.  Distributions from SIMPLE IRAs are subject to the same restrictions that apply to IRA distributions and are taxed as ordinary income.  Subject to certain exceptions, premature distributions prior to age 59½ are subject to a 10% penalty tax, which is increased to 25% if the distribution occurs within the first two years after the commencement of the employee’s participation in the plan.
Roth IRAs, as described in Code section 408A, permit certain eligible individuals to make non-deductible contributions to a Roth IRA in cash or as a rollover or transfer from another Roth IRA or other IRA.  A conversion of an IRA to a Roth IRA is generally subject to tax.  The Owner may wish to consult a tax adviser before combining any converted amounts with any other Roth IRA contributions, including any other conversion amounts from other tax years.  Distributions from a Roth IRA generally are not taxed, except that, once aggregate distributions exceed contributions to the Roth IRA, income tax and a 10% penalty tax may apply to distributions made (1) before age 59½ (subject to certain exceptions) or (2) during the five taxable years starting with the year in which the first contribution is made to any Roth IRA.
A 10% penalty tax may apply to amounts attributable to a conversion from an IRA if they are distributed during the five taxable years beginning in the year in which the conversion was made.
Corporate pension and profit-sharing plans under section 401(a) of the Code allow corporate employers to establish various types of retirement plans for employees, and self-employed individuals to establish qualified plans for themselves and their employees.  Adverse tax consequences to the retirement plan, the participant, or both, may result if the Contract is transferred to any individual as a means to provide benefit payments, unless the plan complies with all the requirements applicable to such benefits prior to transferring the Contract.  A 10% penalty tax generally applies to distributions made before age 59½, unless certain exceptions apply.  The Contract includes a death benefit that in some cases may exceed the greater of the premium payments or the Contract Value.  The death benefit could be characterized as an incidental benefit, the amount of which is limited in any pension or profit-sharing plan.  Because the death benefit may exceed this limitation, employers using the Contract in connection with such plans should contact their tax adviser.
Tax Sheltered Annuities under section 403(b) of the Code allow employees of certain section 501(c)(3) organizations and public schools to exclude from their gross income the premium payments made, within certain limits, on a Contract that will provide an annuity for the employee’s retirement.  These premium payments may be subject to FICA (social security) tax.  Distributions of (1) salary reduction contributions made in years beginning after December 31, 1988; (2) earnings on those contributions; and (3) earnings on amounts held as of the last year beginning before January 1, 1989, are not allowed prior to age 59½, severance from employment, death or disability.  Salary reduction contributions may also be distributed upon hardship, but would generally be subject to penalties.  For Contracts issued after 2008, amounts attributable to non-elective contributions may be subject to distribution restrictions specified in the employer’s section 403(b) plan.  A 10% penalty tax generally applies to distributions made before age 59½, unless certain exceptions apply.  The Contract includes a death benefit that in some cases may exceed the greater of the premium payments or the Contract Value.  The death benefit could be characterized as an incidental benefit, the amount of which is limited in any tax-sheltered annuity under section 403(b).  Because the death benefit may exceed this limitation, employers using the Contract in connection with such plans should contact their tax adviser.  If your Contract was issued pursuant to a section 403(b) plan, starting January 1, 2009 we generally are required to confirm, with your section 403(b) plan sponsor or otherwise, that surrenders, loans or transfers you request comply with applicable tax requirements and to decline requests that are not in compliance. We will defer such payments you request until all information required under the tax law has been received.  By requesting a surrender, loan or transfer, you consent to the sharing of confidential information about you, the policy, and transactions under the policy and any other section 403(b) contracts or accounts you have under the section 403(b) plan among us, your employer or plan sponsor, any plan administrator or recordkeeper, and other product providers.
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Other Tax Issues.  Qualified Contracts have minimum distribution rules that govern the timing and amount of distributions.  You should refer to your retirement plan, adoption agreement, or consult a tax adviser for more information about these distribution rules.
Distributions from Qualified Contracts generally are subject to withholding for the Owner’s federal income tax liability.  The withholding rate varies according to the type of distribution and the Owner’s tax status.  The Owner will be provided the opportunity to elect not to have tax withheld from distributions.
Taxable "eligible rollover distributions" from section 401(a) plans and section 403(b) annuities are subject to a mandatory federal income tax withholding of 20%.  An eligible rollover distribution is any distribution from such a plan, except certain distributions such as distributions required by the Code, to an employee (or employee’s spouse or former spouse as Beneficiary or alternate payee), distributions in a specified annuity form, or hardships distributions.  The 20% withholding does not apply, however, to nontaxable distributions or if (i) the employee (or employee’s spouse or former spouse as beneficiary or alternate payee) chooses a "direct rollover" from the plan to a tax-qualified plan, IRA, Roth IRA or tax sheltered annuity or to a governmental 457 plan that agrees to separately account for rollover contributions; or (ii) a non-spouse beneficiary chooses a "direct rollover" from the plan to an IRA established by the direct rollover.
Distributions that are rolled over from an IRA to another IRA within 60 days are not immediately taxable; however, only one such rollover is permitted each year.  Beginning in 2015, an individual can make only one rollover from an IRA to another (or the same) IRA in any 12-month period, regardless of the number of IRAs that are owned.  The limit will apply by aggregating all of an individual’s IRAs, including SEP and SIMPLE IRAs as well as traditional and Roth IRAs, effectively treating them as one IRA for purposes of the limit.  This limit does not apply to direct trustee-to-trustee transfers or conversions to Roth IRAs.
FEDERAL ESTATE, GIFT AND GENERATION-SKIPPING TAXES
While no attempt is being made to discuss in detail the federal estate tax implications of the Contract, a purchaser should keep in mind that the value of an annuity contract owned by a decedent and payable to a Beneficiary by virtue of surviving the decedent is included in the decedent’s gross estate.  Depending on the terms of the annuity contract, the value of the annuity included in the gross estate may be the value of the lump sum payment payable to the designated Beneficiary or the actuarial value of the payments to be received by the Beneficiary.  Consult an estate-planning adviser for more information.
Under certain circumstances, the Code may impose a generation-skipping transfer tax ("GST") when all or part of an annuity contract is transferred to, or a death benefit is paid to, an individual two or more generations younger than the Owner.  Regulations issued under the Code may require us to deduct the tax from your Contract, or from any applicable payment, and pay it directly to the IRS.
The potential application of these taxes underscores the importance of seeking guidance from a qualified adviser to help ensure that your estate plan adequately addresses your needs and those of your beneficiaries under all possible scenarios.
ANNUITY PURCHASES BY NONRESIDENT ALIENS AND FOREIGN CORPORATIONS
The discussion above provides general information regarding U.S. federal income tax consequences to annuity purchasers that are U.S. citizens or residents.  Purchasers that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies.  In addition, such purchasers may be subject to state and/or municipal taxes and taxes that may be imposed by the purchaser’s country of citizenship or residence.  Additional withholding may occur with respect to entity purchasers (including foreign corporations, partnerships, and trusts) that are not U.S. residents.  Prospective purchasers are advised to consult with a qualified tax adviser regarding U.S. state, and foreign taxation with respect to an annuity contract purchase.
ANNUITY PURCHASES BY RESIDENTS OF PUERTO RICO
In Rev. Rul. 2004-75, 2004-31 I.R.B. 109, the Internal Revenue Service announced that income received by residents of Puerto Rico under life insurance or annuity contracts issued by a Puerto Rico branch of a United States life insurance company is U.S.-source income that is generally subject to United States Federal income tax.
POSSIBLE TAX LAW CHANGES
Although the likelihood of legislative changes is uncertain, there is always the possibility that the tax treatment of the Contract could change by legislation or otherwise.  Consult a tax adviser with respect to legislative developments and
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their effect on the Contract.  We have the right to modify the Contract in response to legislative changes that could otherwise diminish the favorable tax treatment that Contract Owners currently receive.  We make no guarantee regarding the tax status of any Contract and do not intend the above discussion as tax advice.
FOREIGN TAX CREDITS
We may benefit from any foreign tax credits attributable to taxes paid by certain Funds to foreign jurisdictions to the extent permitted under federal tax law.
SALE OF THE CONTRACTS
We have entered into a Distribution Agreement with our affiliate, Sunset Financial Services, Inc., for the distribution and sale of the Contracts.  Sunset Financial will enter selling agreements with other broker-dealers ("selling firms") that in turn may sell the Contracts through their registered representatives.
We pay commissions to selling firms for the sale of the Contracts by registered representatives as well as selling firms.  Selling firms will receive commissions of up to 6.00% of premiums paid.  In addition, we may pay an asset-based commission of an amount up to 0.70% in years two and beyond.  Additional amounts may be paid in certain circumstances.  Sunset Financial does not retain any override as principal underwriter for the Contracts.
We and/or Sunset Financial may pay certain selling firms additional amounts for:  (1) “preferred product” treatment of the Contracts in their marketing programs, which may include marketing services and increased access to their registered representatives; (2) sales promotions relating to the Contracts; (3) costs associated with sales conferences and educational seminars for their registered representatives; and (4) other sales expenses incurred by them.  We and/or Sunset Financial may make bonus payments to certain selling firms based on aggregate sales of our variable insurance contracts (including the Contract).   These additional payments are not offered to all selling firms, and the terms of any particular agreement governing the payments may vary among selling firms.
Under the Distribution Agreement with Sunset Financial, we pay the following sales expenses:  deferred compensation and insurance benefits of registered persons of Sunset Financial; advertising expenses; and all other expenses of distributing the Contracts.  We also pay for Sunset Financial’s operating and other expenses.  Because they are also appointed insurance agents of Kansas City Life, some registered representatives may receive other payments from Kansas City Life for services that do not directly involve the sale of the Contracts, including payments made for the recruitment and training of personnel, production of promotional literature, and similar services.
Other selling firms may share commissions and additional amounts received for sales of the Contracts with their registered representatives in accordance with their programs for compensating registered representatives.  Ask your registered representative for further information about what your registered representative and the selling firm for which he or she works may receive in connection with your purchase of a Contract.
American Century Variable Portfolios II, Inc., American Funds Insurance Series®, Columbia Funds Variable Series Trust II, Federated Hermes Insurance Series, Fidelity® Variable Insurance Products, Franklin Templeton Variable Insurance Products Trust, and Northern Lights Variable Trust each have adopted a Distribution Plan in connection with its 12b-1 shares, and each, under its respective agreement with Sunset Financial, currently pays Sunset Financial fees in consideration of distribution services provided and expenses incurred in the performance of Sunset Financial’s obligations under such agreements.  All or some of these payments may be passed on to selling firms that have entered into a selling agreement with Sunset Financial.  The Distribution Plans have been adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940, which allows funds to pay fees to those who sell and distribute fund shares out of fund assets.  Under the Distribution Plan, fees ranging up to 0.25% of Variable Account assets invested in the Funds are paid to Sunset Financial for its distribution-related services and expenses under such agreement.
Commissions and other incentives or payment described above are not charged directly to Owners or the Variable Account.  However, commissions and other incentives or payments described above are reflected in the fees and charges that Owners do pay directly or indirectly.
LEGAL PROCEEDINGS
The life insurance industry, including Kansas City Life, has been subject to an increase in litigation in recent years.  Such litigation has been pursued on behalf of purported classes of policyholders and other claims and legal actions in jurisdictions where juries often award punitive damages, which are grossly disproportionate to actual damages.
50
Although no assurances can be given and no determinations can be made at this time, management believes that the ultimate liability, if any, with respect to these claims and actions, is not likely to have a material adverse effect on the Variable Account or the ability of the Company to meet its obligations under the Contract.
COMPANY HOLIDAYS
We are closed on the days that the New York Stock Exchange is closed.  Currently the New York Stock Exchange is closed on the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.  The New York Stock Exchange recognizes holidays that fall on a Saturday on the previous Friday.  We will recognize holidays that fall on a Sunday on the following Monday.
CHANGE OF ADDRESS NOTIFICATION
To protect you from fraud and theft, Kansas City Life may verify any changes you request by sending a confirmation of the change to both your old and new addresses.  Kansas City Life may also call you to verify the change of address.
FINANCIAL STATEMENTS
The following financial statements for Kansas City Life Insurance Company are included in the Statement of Additional Information:
•
consolidated balance sheets as of December 31, 2021 and 2020; and
•
related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021.
The following financial statements for the Variable Account are included in the Statement of Additional Information:
•
statement of net assets as of December 31, 2021; and
•
related statement of operations for the period or year ended December 31, 2021, statements of changes in net assets for each of the periods or years in the two-year period ended December 31, 2021, and financial highlights for each of the periods or years in the five-year period ended December 31, 2021.
Kansas City Life's financial statements should be distinguished from financial statements of the Variable Account. You should consider Kansas City Life's financial statements only as an indication of Kansas City Life's ability to meet its obligations under the Contracts.  Please note that in addition to Fixed Account allocations, general account assets are used to guarantee the payment of living and death benefits under the Contracts.  To the extent that Kansas City Life is required to pay you amounts in addition to your Contract Value under these benefits, such amounts will come from general account assets.  You should be aware that Kansas City Life’s invested assets, primarily including fixed income securities, are subject to customary risks of credit defaults and changes in fair value.  Factors that may affect the overall default rate on and fair value of  Kansas City Life’s invested assets include interest rate levels and changes, availability and cost of liquidity, financial market performance, and general economic conditions, as well as particular circumstances affecting the businesses of individual borrowers and tenants.  Kansas City Life’s financial statements include a further discussion of risks inherent within general account investments.  However, you should not consider Kansas City Life’s financial statements as having an effect on the investment performance of the assets held in the Variable Account.
51
APPENDIX A - PORTFOLIO COMPANIES AVAILABLE UNDER THE CONTRACT
The following is a list of Portfolio Companies available under the Contract.  Depending on the optional benefits you choose, you may not be able to invest in certain Portfolio Companies.  More information about the Portfolio Companies is available in the prospectuses for the Portfolio Companies, which may be amended from time to time and can be found online at https://pex.broadridge.com/funds.asp?cid=kclife.  You can also request this information at no cost by calling us at (800)-616-3670 or by sending an email request to statecompliance@kclife.com.
The current expenses and performance information below reflects the fees and expenses of the Portfolio Companies but do not reflect the other fees and charges that the Contract may charge. Expenses would be higher, and performance would be lower if these other charges were included.  Each Portfolio Company’s past performance is not necessarily an indication of future performance.
Investment Objective
Portfolio Company and Adviser/Subadvisor
Current Expenses
Average Annual Total Returns
(as of 12/31/2021)
1 year
5 year
10 year
Capital growth
AIM Variable Insurance Funds Invesco V.I. American Franchise Fund – Series I Shares (Manager: Invesco Advisers, Inc. ("Invesco")).
0.86%
11.92%
21.74%
17.37%
Long-term growth of capital
AIM Variable Insurance Funds Invesco V.I. Core Equity Fund – Series I Shares (Manager: Invesco Advisers, Inc. ("Invesco")).
0.80%
27.74%
13.97%
12.27%
Long-term growth of capital
AIM Variable Insurance Funds Invesco V.I. Technology Fund – Series I Shares (Manager: Invesco Advisers, Inc. ("Invesco")).
0.98%
14.41%
25.03%
17.48%
Capital growth
American Century Variable Portfolios, Inc. VP Capital Appreciation Fund – Class I (Manager: American Century Investment Management, Inc.).
0.91%10
11.16%
19.89%
15.64%
Capital growth by investing in common stocks (Income is a secondary objective)
American Century Variable Portfolios, Inc. VP Disciplined Core Value Fund – Class I (Manager: American Century Investment Management, Inc.).
0.70%
23.65%
13.96%
13.69%
Capital growth
American Century Variable Portfolios, Inc. VP International Fund – Class I (Manager: American Century Investment Management, Inc.).
0.99%10
8.75%
14.35%
10.06%
Long-term capital growth (Income is a secondary objective)
American Century Variable Portfolios, Inc. VP Mid Cap Value Fund – Class I (Manager: American Century Investment Management, Inc.).
0.75%10
23.20%
9.41%
12.82%
Long-term capital growth
American Century Variable Portfolios, Inc. VP Ultra®  Fund – Class I (Manager: American Century Investment Management, Inc.).
0.79%10
23.16%
27.02%
20.21%

52
Investment Objective
Portfolio Company and Adviser/Subadvisor
Current Expenses
Average Annual Total Returns
(as of 12/31/2021)
1 year
5 year
10 year
Long-term capital growth (Income is a secondary objective)
American Century Variable Portfolios, Inc. VP Value Fund – Class I (Manager: American Century Investment Management, Inc.).
0.73%10
24.51%
9.55%
12.03%
Long-term total return using a strategy that seeks to protect against U.S. inflation
American Century Variable Portfolios II, Inc. VP Inflation Protection Fund – Class II (Manager: American Century Investment Management, Inc.).
0.71%
6.27%
5.01%
2.82%
Provide high total return (including income and capital gains) consistent with preservation of capital over the long term
American Funds Insurance Series® Asset Allocation Fund – Class 2 Shares (Manager: Capital Research and Management CompanySM).
0.55%
15.10%
11.71%
11.33%
Provide a level of current income that exceeds the average yield on U.S. stocks generally and provide a growing stream of income over the years. Providing growth of capital is a secondary objective
American Funds Insurance Series® Capital Income Builder® – Class 2 Shares (Manager: Capital Research and Management CompanySM).
0.52%10
14.94%
8.26%
-
Provide, over the long term, a high level of total return consistent with prudent investment management
American Funds Insurance Series® Capital World Bond Fund®  – Class 2 Shares (Manager: Capital Research and Management CompanySM).
0.75%
-4.92%
3.49%
2.07%
Long-term growth of capital
American Funds Insurance Series® Global Growth Fund – Class 2 Shares (Manager: Capital Research and Management CompanySM).
0.67%10
16.42%
19.70%
15.66%
Achieve long-term growth of capital and income
American Funds Insurance Series® Growth-Income Fund – Class 2 Shares (Manager: Capital Research and Management CompanySM).
0.54%
24.10%
16.39%
15.42%
Long-term capital appreciation
American Funds Insurance Series® New World Fund® – Class 2 Shares (Manager: Capital Research and Management CompanySM) ).
0.82%10
4.92%
13.25%
8.67%
Provide high total return (including income and capital gains) consistent with preservation of capital over the long term while seeking to manage volatility and provide downside protection
American Funds Insurance Series® Managed Risk Funds, Managed Risk Asset Allocation Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC).
0.90%10
12.50%
8.94%
-
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Investment Objective
Portfolio Company and Adviser/Subadvisor
Current Expenses
Average Annual Total Returns
(as of 12/31/2021)
1 year
5 year
10 year
Produce income and to provide an opportunity for growth of principal consistent with sound common stock investing, in each case while seeking to manage volatility and provide downside protection
American Funds Insurance Series® Managed Risk Funds, Managed Risk Washington Mutual Investors FundSM – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC).
0.89%10
17.11%
7.01%
-
Growth of capital while seeking to manage volatility and provide downside protection
American Funds Insurance Series® Managed Risk Funds, Managed Risk Growth Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC).
0.94%10
12.89%
17.90%
-
Achieve long-term growth of capital and income while seeking to manage volatility and provide downside protection
American Funds Insurance Series® Managed Risk Funds, Managed Risk Growth-Income Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC).
0.88%10
15.05%
12.08%
-
Provide long-term growth of capital while seeking to manage volatility and provide downside protection
American Funds Insurance Series® Managed Risk Funds, Managed Risk International Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC).
1.10%10
-4.13%
5.95%
-
The fund seeks long-term capital growth consistent with the preservation of capital.  Its secondary goal is current income.
BNY Mellon Variable Investment Fund Appreciation Portfolio – Initial Shares (Manager: BNY Mellon Investment Adviser, Inc.; Sub-Investment Advisor: Fayez Sarofim & Co.).
0.80%
27.13%
20.48%
14.47%
The fund seeks capital growth.
BNY Mellon Variable Investment Fund Opportunistic Small Cap Portfolio – Initial Shares (Manager: BNY Mellon Investment Adviser, Inc.).; Sub-Investment Advisor: Newton Investment Management North America, LLC
0.82%
16.46%
11.40%
13.58%
The fund seeks to match the total return of the S&P 500® Index.
BNY Mellon Stock Index Fund, Inc. – Initial Shares (Manager: BNY Mellon Investment Adviser, Inc.).; Sub-Investment Advisor: Mellon Investments Corporation
0.26%
28.40%
18.17%
16.26%

54
Investment Objective
Portfolio Company and Adviser/Subadvisor
Current Expenses
Average Annual Total Returns
(as of 12/31/2021)
1 year
5 year
10 year
The fund seeks long-term capital appreciation.
 
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. – Initial Shares (Manager: BNY Mellon Investment Adviser, Inc.; Sub-Investment Advisor: Newton Investment Management Limited).
0.67%10
27.00%
18.49%
15.59%
High long-term total return through growth and current income
Calamos® Advisors Trust, Calamos Growth and Income Portfolio (Manager: Calamos Advisors LLC).
1.20%
21.40%
15.56%
11.57%
Growth of capital
Columbia Funds Variable Series Trust II, Columbia Variable Portfolio – Mid Cap Growth Fund (Class 2) (Manager: Columbia Management Investment Advisers, LLC.).
1.09%10
16.27%
19.81%
15.25%
Long-term capital appreciation
Columbia Funds Variable Series Trust II, Columbia Variable Portfolio – Seligman Global Technology Fund (Class 2) (Manager: Columbia Management Investment Advisers, LLC.).
1.23%10
38.68%
31.09%
23.86%
Long-term capital growth
Columbia Funds Variable Series Trust II, Columbia Variable Portfolio – Select Small Cap Value Fund (Class 2) (Manager: Columbia Management Investment Advisers, LLC.).
1.10%10
30.62%
10.30%
12.72%
Achieve high current income and moderate capital appreciation
Federated Hermes Insurance Series Federated Hermes Managed Volatility Fund II – P (Manager: Federated Hermes Global Investment Management Corp.; Sub-Adviser: Federated Hermes Investment Management Company).
0.98%
18.51%
9.22%
8.31%
Seek high current income
Federated Hermes Insurance Series Federated Hermes High Income Bond Fund II – P (Manager: Federated Hermes Investment Management Company).
0.82%10
4.85%
5.57%
6.34%
Provide current income consistent with stability of principal and liquidity
Federated Hermes Insurance Series Federated Hermes Government Money Fund II – S (Manager: Federated Hermes Investment Management Company).
0.63%10
0.00%
0.68%
0.34%
Long-term capital appreciation Fidelity® Variable Insurance Products Contrafund® Portfolio – Service Class 2 (Manager: Fidelity Management & Research Company (FMR); Sub-Advisors: FMR Co., Inc. (FMRC) and other investment advisers serve as sub-advisers for the fund).  0.85%  27.51%  19.87%  16.35%

55
Investment Objective
Portfolio Company and Adviser/Subadvisor
Current Expenses
Average Annual Total Returns
(as of 12/31/2021)
1 year
5 year
10 year
High total return (Principal preservation is a secondary objective)
Fidelity® Variable Insurance Products Freedom Income Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.60%
3.03%
6.08%
4.88%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2010 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.67%
5.60%
8.18%
7.40%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2015 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.71%
7.39%
9.36%
8.16%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2020 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.75%
9.26%
10.41%
8.98%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2025 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.78%
10.55%
11.24%
9.97%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2030 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.82%
12.07%
12.48%
10.81%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2035 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.87%
15.18%
13.98%
11.97%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2040 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.90%
17.50%
14.72%
12.39%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2045 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.90%
17.53%
14.72%
12.49%
High total return (Principal preservation as the Fund approaches its target date is a secondary objective)
Fidelity® Variable Insurance Products Freedom 2050 Portfolio – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).
0.90%
17.51%
14.72%
12.55%
High total return Franklin Templeton Variable Insurance Products Trust, Franklin Global Real Estate VIP Fund – Class 2 (Manager: Franklin Templeton Institutional, LLC).  1.20%10  26.79%  8.62%  8.65%

56
Investment Objective
Portfolio Company and Adviser/Subadvisor
Current Expenses
Average Annual Total Returns
(as of 12/31/2021)
1 year
5 year
10 year
Long-term capital growth
Franklin Templeton Variable Insurance Products Trust, Franklin Small-Mid Cap Growth VIP Fund – Class 2 (Manager: Franklin Advisers, Inc.).
1.08%
10.01%
20.84%
15.70%
Long-term capital appreciation
Franklin Templeton Variable Insurance Products Trust, Templeton Developing Markets VIP Fund – Class 2 (Manager: Templeton Asset Management Ltd.).
1.44%10
-5.74%
10.60%
4.84%
Long-term capital growth
Franklin Templeton Variable Insurance Products Trust, Templeton Foreign VIP Fund – Class 2 (Manager: Templeton Investment Counsel, LLC).
1.11%10
4.16%
2.71%
4.00%
Capital appreciation (Achieving current income by investing primarily in equity securities is a secondary objective)
JPMorgan Insurance Trust Mid Cap Value Portfolio – Class 1 Shares (Manager: J.P. Morgan Investment Management Inc.).
0.76%
29.88%
10.63%
12.99%
Capital growth over the long term
JPMorgan Insurance Trust Small Cap Core Portfolio – Class 1 Shares (Manager: J.P. Morgan Investment Management Inc.).
0.80%
21.38%
11.77%
14.01%
Provide high total return from a portfolio of selected equity securities
JPMorgan Insurance Trust U.S. Equity Portfolio – Class 1 Shares (Manager: J.P. Morgan Investment Management Inc.).
0.74%
29.34%
19.63%
17.47%
Capital appreciation
MFS® Variable Insurance Trust, MFS® Growth Series – Initial Class Shares (Manager: Massachusetts Financial Services Company).
0.71%10
23.53%
24.87%
19.33%
Capital appreciation
MFS® Variable Insurance Trust, MFS® Research Series – Initial Class Shares (Manager: Massachusetts Financial Services Company).
0.78%10
24.80%
17.94%
15.64%
Total return with an emphasis on current income, but also considering capital appreciation
MFS® Variable Insurance Trust, MFS® Total Return Bond Series – Initial Class Shares (Manager: Massachusetts Financial Services Company).
0.53%10
-0.81%
4.14%
3.65%
Total return MFS® Variable Insurance Trust, MFS® Total Return Series – Initial Class Shares (Manager: Massachusetts Financial Services Company).  0.61%10  14.12%  9.84%  9.59%
57
Investment Objective
Portfolio Company and Adviser/Subadvisor
Current Expenses
Average Annual Total Returns
(as of 12/31/2021)
1 year
5 year
10 year
Total return
MFS® Variable Insurance Trust, MFS® Utilities Series – Initial Class Shares (Manager: Massachusetts Financial Services Company).
0.78%10
14.09%
11.89%
9.93%
Total return with an emphasis on high current income, but also considering capital appreciation
MFS® Variable Insurance Trust II MFS® Income Portfolio – Initial Class Shares (Manager: Massachusetts Financial Services Company).
0.75%10
0.47%
5.01%
4.61%
Provide income and capital appreciation with less volatility than the fixed income and equity markets as a whole
Northern Lights Variable Trust, TOPS® Managed Risk Balanced ETF Portfolio – Class 2 Shares (Manager: ValMark Advisers, Inc.; Sub-Adviser Portfolio Manager: Milliman Financial Risk Management LLC).
0.75% 
8.57%
6.48%
5.29%
Capital appreciation with less volatility than the equity markets as a whole
Northern Lights Variable Trust, TOPS® Managed Risk Growth ETF Portfolio – Class 2 Shares (Manager: ValMark Advisers, Inc.; Sub-Adviser Portfolio Manager: Milliman Financial Risk Management LLC).
0.74%
12.59%
8.29%
6.15%
Capital appreciation with less volatility than the equity markets as a whole
Northern Lights Variable Trust, TOPS® Managed Risk Moderate Growth ETF Portfolio – Class 2 Shares (Manager: ValMark Advisers, Inc.; Sub-Adviser Portfolio Manager: Milliman Financial Risk Management LLC).
0.74%
11.06%
7.64%
6.09%
10 Denotes Fund Portfolio and their investment adviser have entered into temporary expense reimbursements and/or fee waivers. See the prospectus for the Fund Portfolio for further information.

58
If you elect the Five PlusSM Guaranteed Minimum Withdrawal Benefit you must allocate your premiums and Contract Value among the Designated Subaccounts on and after the rider effective date.  Allocation percentages must be whole percentages only and the total allocation percentages in the Designated Subaccounts must equal 100%.
The table below lists available Subaccounts by Rider Effective Date.
Designated Subaccount
GMWB Rider with a Rider Effective Date before May 29, 2012
GMWB Rider with a Rider Effective Date of May 29, 2012, or after
American Funds Insurance Series® Managed Risk Asset Allocation Fund – Class P2 Shares
✓
✓
American Funds Insurance Series® Managed Risk Washington Mutual Investors FundSM – Class P2 Shares
✓
✓
American Funds Insurance Series® Managed Risk Growth Fund – Class P2 Shares
✓
✓
American Funds Insurance Series® Managed Risk Growth-Income Fund – Class P2 Shares
✓
✓
American Funds Insurance Series® Managed Risk International Fund – Class P2 Shares
✓
✓
Fidelity® VIP Freedom 2010 PortfolioSM – Service Class 2
✓
  
Fidelity® VIP Freedom 2015 PortfolioSM – Service Class 2
✓
  
Fidelity® VIP Freedom 2020 PortfolioSM – Service Class 2
✓
  
Fidelity® VIP Freedom Income PortfolioSM – Service Class 2
✓
  
TOPS® Managed Risk Balanced ETF Portfolio – Class 2 Shares
✓
✓
TOPS® Managed Risk Moderate Growth ETF Portfolio – Class 2 Shares
✓
✓
TOPS® Managed Risk Growth ETF Portfolio – Class 2 Shares
✓
✓


 
59
APPENDIX B - GMWB RIDER EXAMPLES

The following examples provide hypothetical illustrations of the benefits provided under the GMWB rider. These illustrations are not representative of future performance under your Contract.  Actual values may be higher or lower than the amounts shown.

Example 1. Assume the rider was issued on the Contract Date, and assume a single premium of $100,000 at Covered Person’s age 55, no additional premiums are paid, and withdrawals equal to the Guaranteed Withdrawal Amount are taken beginning in year 11.  Also assume that the Contract Value is less than the Guaranteed Withdrawal Balance at the eligible step-up Dates, so there is no step-up and the Covered Person survives at least 31 years from the Rider Effective Date.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Bonus
Guaranteed Withdrawal Balance
1
$100,000
$5,000A
N/A
$0
$5,000B
$100,000A
2
0
5,250
N/A
0
5,000
105,000C
3
0
5,500
N/A
0
5,000
110,000
4
0
5,750
N/A
0
5,000
115,000
5
0
6,000
N/A
0
5,000
120,000
6
0
6,250
N/A
0
5,000
125,000
7
0
6,500
N/A
0
5,000
130,000
8
0
6,750
N/A
0
5,000
135,000
9
0
7,000
N/A
0
5,000
140,000
10
0
7,250
N/A
0
5,000
145,000
11
0
7,500
$7,500D
7,500
0
150,000
12
0
7,500
7,500
7,500
0
142,500
13
0
7,500
7,500
7,500
0
135,000
14
0
7,500
7,500
7,500
0
127,500
15
0
7,500
7,500
7,500
0
120,000
20
0
7,500
7,500
7,500
0
82,500
25
0
7,500
7,500
7,500
0
45,000
30
0
7,500
7,500
7,500
0
7,500
31
0
0
7,500
7,500
0
0

A The initial Guaranteed Withdrawal Balance is equal to the initial payment of $100,000.  The initial Guaranteed Withdrawal Amount is equal to 5% of the initial Guaranteed Withdrawal Balance (0.05 x $100,000 = $5,000).

B There is no withdrawal during the first Contract Year so a bonus will be added to the Guaranteed Withdrawal Balance. The bonus amount is equal to 5% of the total premiums to date (0.05 x $100,000 = $5,000).

C Following a bonus, the Guaranteed Withdrawal Balance and the Guaranteed Withdrawal Amount are recalculated.  The new Guaranteed Withdrawal Balance is equal to the Guaranteed Withdrawal Balance before the bonus increased by the amount of the bonus ($100,000 + $5,000 = $105,000).  The Guaranteed Withdrawal Amount is equal to the greater of (a) the Guaranteed Withdrawal Amount prior to the bonus ($5,000) or 5% of the Guaranteed Withdrawal Balance after the bonus (0.05 X $105,000 = $5,250).

D The Lifetime Income Amount is calculated on the Contract Anniversary after the Covered Person’s 65th birthday.  The Lifetime Income Amount is initially equal to 5% of the Guaranteed Withdrawal Balance at that time (0.05 X $150,000 = $7,500).  As long as you limit your future annual withdrawals to the Lifetime Income Amount of $7,500, the GMWB guarantees you annual payments of that amount for the rest of your life, no matter how long you live, even after you have recovered your investments in the Contract and even if your Contract Value reduces to zero.
60
Example 2. Assume the rider was issued on the Contract Date, and assume an initial premium of $100,000 at Covered Person’s age 65, an additional premium of $10,000 is made at the beginning of the Contract Year 2, a withdrawal equal to the Guaranteed Withdrawal Amount is taken in Contract Year 3, no withdrawals are taken in Contract Years 1, 2, 4, 5 (resulting in bonuses in those years). Also assume that the Contract Value is less than the Guaranteed Withdrawal Balance at the eligible step-up dates, so there is no step-up.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Bonus
Guaranteed Withdrawal Balance
1
$100,000
$5,000
$5,000
$0
$5,000
$100,000
2
10,000A
5,750A
5,750
0
5,500B
115,000
3
0
6,025
6,025
6,025C
0D
120,500
4
0
6,025
6,025
0
5,500
114,475C
5
0
6,025
6,025
0
5,500
119,975

A There is an additional premium at the beginning of the second Contract Year.  Prior to that premium, the Guaranteed Withdrawal Amount is $5,250, as in Example 1 above.  Following the additional premium, the Guaranteed Withdrawal Amount is calculated as the lesser of (a) 5% of the Guaranteed Withdrawal Balance immediately after the premium (.05 X (105,000 + 10,000) = $5,750) or (b) the Guaranteed Withdrawal Amount immediately prior to the premium plus 5% of the premium ($5,250 + (0.05 X $10,000)) = $5,750).

B There is no withdrawal during the second Contract Year so a bonus will be added to the Guaranteed Withdrawal Balance.  The bonus is equal to 5% of the total premiums paid to date (0.05 X $110,000 = $5,500).

C There is a withdrawal equal to the Guaranteed Withdrawal Amount $6,025 in year 3. This withdrawal does not exceed the Guaranteed Withdrawal Amount so the Guaranteed Withdrawal Amount is not reset, but the Guaranteed Withdrawal Balance is reduced by the amount of the withdrawal ($120,500 - $6,025 = $114,475).

D No bonus is payable in any year that a withdrawal is taken.
61
Example 3.  Assume a single premium of $100,000 at age 63 with a Rider Effective Date of June 1, 2011, no additional premiums are made, the Guaranteed Withdrawal Balance steps-up at the end of Contract Year 3, withdrawals equal to the Guaranteed Withdrawal Amount are taken in Contract Years 1, 2, 3 and 4 and a withdrawal exceeding the Guaranteed Withdrawal Amount is taken at the end of Contract Year 5 which results in a reset. Since withdrawals are taken every year, there are no bonuses.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Hypothetical Contract Value
Guaranteed Withdrawal Balance
1
$100,000
$5,000
N/A
$5,000
$102,000
$100,000
2
0
5,000
N/A
5,000
103,828
95,000
3
0
5,000
$4,500A
5,000
105,781B
90,000
4
0
5,289C
5,289C
5,289
94,946
105,781B
5
0
5,289
5,289
10,000D
79,898
100,492
6
0
3,995D
3,995D
3,995
75,213
79,898D

A The Lifetime Income Amount is calculated on the Contract Anniversary after the Covered Person’s 65th birthday. The Lifetime Income Amount is equal to 5% of the Guaranteed Withdrawal Balance on that Contract Anniversary (0.05 X $90,000 = $4,500). In this example, since withdrawals were taken prior to the Contract Anniversary following the Contract Year in which the Covered Person has reached age 65, the initial Lifetime Income Amount is less than the Guaranteed Withdrawal Amount.

B At the end of Contract Year 3, the Contract Value in this example, $105,781 is greater than the Guaranteed Withdrawal Balance ($90,000 - $5,000 = $85,000). The Guaranteed Withdrawal Balance will step-up to equal the Contract Value of $105,781.

C Following the Step-up of the Guaranteed Withdrawal Balance, the Guaranteed Withdrawal Amount is recalculated as the greater of (a) the Guaranteed Withdrawal Amount prior to the Step-up ($5,000) or (b) 5% of the Guaranteed Withdrawal Balance after the Step-up (0.05 X $105,781 = $5,289). The Lifetime Income Amount is also recalculated as the greater of (a) the Lifetime Income Amount prior to the Step-up ($4,500) or (b) 5% of the Guaranteed Withdrawal Balance after the Step-up (0.05 X $105,781 = $5,289).

D At the end of year 5, there is a withdrawal of $10,000, which is greater than both the Guaranteed Withdrawal Amount and the Lifetime Income Amount.  Since this is an Excess Withdrawal, the Guaranteed Withdrawal Balance will be reset to the lesser of (a) the Contract Value after the withdrawal ($79,898) or (b) the Guaranteed Withdrawal Balance prior to the withdrawal minus the amount of the withdrawal ($100,492 - $10,000 = $90,492). Since the Guaranteed Withdrawal Balance was reset, the Guaranteed Withdrawal Amount and the Lifetime Income Amount will both be reset.  The Guaranteed Withdrawal Amount will equal the lesser of (a) the Guaranteed Withdrawal Amount prior to the withdrawal ($5,289) or (b) 5% of the greater of the Contract Value after the withdrawal or the new Guaranteed Withdrawal Balance Value (0.05 X $79,898 = $3,995). The Lifetime Income Amount will equal the lesser of (a) the Lifetime Income Amount prior to the withdrawal ($5,289) or (b) 5% of the greater of the Contract Value after the withdrawal or the new Guaranteed Withdrawal Balance Value (0.05 X $79,898 = $3,995).
62
Example 4.  Assume the rider was issued on the Contract Date, June 1, 2011, and assume a single premium of $50,000 at Covered Person’s age 50, no additional premiums are paid, a withdrawal of $10,000 is taken at the end of Contract Year 5 and no other withdrawals are taken.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Bonus
Hypothetical Contract Value
Guaranteed Withdrawal Balance
1
$50,000
$2,500
N/A
$0
$2,500
$51,870
$50,000
2
0
2,625
N/A
0
2,500
50,003
52,500
3
0
2,750
N/A
0
2,500
52,961A
55,000
4
0
2,875
N/A
0
2,500
54,311
57,500
5
0
3,000
N/A
10,000B
0
46,748B
60,000
6
0
2,337B
N/A
0
2,337C
45,741A
46,748B
7
0
2,454
N/A
0
2,337
49,579
49,085
8
0
2,571
N/A
0
2,337
49,280
51,422
9
0
2,687
N/A
0
2,337
52,609A
53,759
10
0
2,804
N/A
0
2,337
55,031A
56,096

A The Contract Value on the eligible step-up dates shown (3rd, 6th, 9th, 10th Contract Anniversaries), is less than the Guaranteed Withdrawal Balance so no step-up occurs.

B At the end of year 5, there is a withdrawal of $10,000.  Since this is an Excess Withdrawal, the Guaranteed Withdrawal Balance will be reset to the lesser of (a) the Contract Value after the withdrawal ($46,748) or (b) the Guaranteed Withdrawal Balance prior to the withdrawal minus the amount of the withdrawal ($60,000 - $10,000 = $50,000). Since the Guaranteed Withdrawal Balance was reset, the Guaranteed Withdrawal Amount will be reset.  The Lifetime Income Amount has not been calculated yet so it will not be reset.  The Guaranteed Withdrawal Amount will equal the lesser of (a) the Guaranteed Withdrawal Amount prior to the withdrawal ($3,000) or (b) 5% of the greater of the Contract Value after the withdrawal or the new Guaranteed Withdrawal Balance (0.05 X $46,748 = $2,337).

C There is no withdrawal during the sixth Contract Year so a bonus will be added to the Guaranteed Withdrawal Balance.  Because a reset has occurred due to an Excess Withdrawal, the bonus will be 5% of the previously stepped-up or reset Guaranteed Withdrawal Balance (0.05 X $46,748 = $2,337).
63
Example 5.  Assume the rider was issued on the Contract Date, and assume a single premium of $200,000 at Covered Person’s age 75, no additional premiums are paid, and withdrawals equal to the Lifetime Income Amount begin in year 1.  Since withdrawals are taken every year, there are no bonuses.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Bonus
Hypothetical Contract Value
Guaranteed Withdrawal Balance
1
$200,000
$10,000
$10,000
$10,000
$0
$176,476
$200,000
2
0
10,000
10,000
10,000
0
151,890
190,000
3
0
10,000
10,000
10,000
0
126,478
180,000
4
0
10,000
10,000
10,000
0
100,396
170,000
5
0
10,000
10,000
10,000
0
84,307
160,000
6
0
10,000
10,000
10,000
0
61,597
150,000
7
0
10,000
10,000
10,000
0
49,438
140,000
8
0
10,000
10,000
10,000
0
31,299
130,000
9
0
10,000
10,000
10,000
0
19,448
120,000
10
0
10,000
10,000
10,000
0
17,308
110,000
11
0
10,000
10,000
10,000
0
6,529
100,000
12
0
10,000
10,000
10,000
0
0A
90,000A
13
0
10,000
10,000
10,000
0
0
80,000
14
0
10,000
10,000
10,000
0
0
70,000
15
0
10,000
10,000
10,000
0
0
60,000
16
0
10,000
10,000
10,000
0
0
50,000
17
0
10,000
10,000
10,000
0
0
40,000
18
0
10,000
10,000
10,000
0
0
30,000
19
0
10,000
10,000
10,000
0
0
20,000
20
0
10,000
10,000
10,000
0
0
10,000
21+
0
0B
10,000B
10,000
0
0
0B

A During year 12, the Lifetime Income Amount withdrawal causes the Contract Value to reduce to zero.  At that time, the Guaranteed Withdrawal Balance and the Lifetime Income Amount are both greater than zero and the Contract enters the Settlement Phase.  No additional premiums will be accepted and no rider charge will be deducted.  All other rights and benefits under the Contract terminate.

B The Lifetime Income Amount continues to be available as long as the Covered Person remains alive, even when the Guaranteed Withdrawal Balance reduces to zero.
64
Example 6.  Assume the rider was issued on the Contract Date, and assume a single premium of $100,000 at Covered Person’s age 55, no additional premiums are paid, and withdrawals equal to the Guaranteed Withdrawal Amount are taken beginning in year 5.  Also assume that the Contract Value is less than the Guaranteed Withdrawal Balance at the eligible step-up dates, so there is no step-up.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Bonus
Guaranteed Withdrawal Balance
1
$100,000
$5,000
N/A
$0
$5,000A
$100,000
2
0
5,250
N/A
0
5,000
105,000
3
0
5,500
N/A
0
5,000
110,000
4
0
5,750
N/A
0
5,000
115,000
5
0
6,000
N/A
6,000B
0
120,000
6
0
6,000
N/A
6,000
0
114,000B
7
0
6,000
N/A
6,000
0
108,000
8
0
6,000
N/A
6,000
0
102,000
9
0
6,000
N/A
6,000
0
96,000
10
0
6,000
N/A
6,000
0
90,000
11
0
6,000D
$4,200C
4,200D
0
84,000
12
0
6,000
4,200
4,200
0
79,800
13
0
6,000
4,200
4,200
0
75,600
14
0
6,000
4,200
4,200
0
71,400
15
0
6,000
4,200
4,200
0
67,200

A There is no withdrawal during the first five Contract Years so a bonus will be added to the Guaranteed Withdrawal Balance.  The bonus is equal to 5% of the total premiums paid to date (0.05 X $100,000 = $5,000).

B There are withdrawals equal to the Guaranteed Withdrawal Amount ($6,000) beginning in year 5. These withdrawals do not exceed the Guaranteed Withdrawal Amount so the Guaranteed Withdrawal Amount is not reset, but the Guaranteed Withdrawal Balance is reduced by the amount of the withdrawal ($120,000 - $6,000 = $114,000).

C The Lifetime Income Amount is calculated on the Contract Anniversary after the Covered Person’s 65th birthday. The Lifetime Income Amount is equal to 5% of the Guaranteed Withdrawal Balance on that Contract Anniversary (0.05 X $84,000 = $4,200). In this example, since withdrawals were taken prior to the Contract Anniversary following the Contract Year in which the Covered Person has reached age 65, the initial Lifetime Income Amount is less than the Guaranteed Withdrawal Amount.

D At the Covered Person’s age 65, the Guaranteed Withdrawal Amount and the Lifetime Income Amount are not equal.  The Guaranteed Withdrawal Amount of $6,000 can continue to be taken until the Guaranteed Withdrawal Balance reduces to zero.  Or the Lifetime Income Amount of $4,200 can be taken as long as the Covered Person is alive.  This example shows Lifetime Income Amount withdrawals beginning at age 65.
65
Example 7. Assume the rider was issued on the Contract Date, and assume premiums of $10,000 annually beginning at Covered Person’s age 53 and premiums ending at age 64, no withdrawals are taken until age 65, and the Contract Value is less than the Guaranteed Withdrawal Balance at the eligible step-up dates, so there is no step-up.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Bonus
Guaranteed Withdrawal Balance
1
$10,000
$500
N/A
$0
$500
$10,000
2
10,000
1,025
N/A
0
1,000A
20,500
3
10,000
1,575
N/A
0
1,500
31,500
4
10,000
2,150
N/A
0
2,000
43,000
5
10,000
2,750
N/A
0
2,500
55,000
6
10,000
3,375
N/A
0
3,000
67,500
7
10,000
4,025
N/A
0
3,500
80,500
8
10,000
4,700
N/A
0
4,000
94,000
9
10,000
5,400
N/A
0
4,500
108,000
10
10,000
6,125
N/A
0
5,000
122,500
11
10,000
6,875
N/A
0
0B
137,500
12
10,000
7,375
N/A
0
0
147,500
13
0
7,375
$7,375C
7,375
0
147,500

A There is no withdrawal during the second Contract Year so a bonus will be added to the Guaranteed Withdrawal Balance.  The bonus is equal to 5% of the total premiums paid to date (0.05 X $20,000 = $1,000).

B The bonus is applied in the first 10 years following the rider effective date (and up to age 80 of the covered person) so the bonus is 0 in years 11 and on.

C The Lifetime Income Amount is calculated on the Contract Anniversary after the Covered Person’s 65th birthday. The Lifetime Income Amount is equal to 5% of the Guaranteed Withdrawal Balance on that Contract Anniversary (0.05 X $147,500 = $7,375). At this point, the Lifetime Income Amount is payable until the death of the Covered Person.
66
Example 8.  Assume a single premium of $100,000 at age 64 with a Rider Effective Date of June 1, 2012, no additional premiums are made, the Guaranteed Withdrawal Balance steps-up at the end of Contract Year 2, withdrawals equal to the Guaranteed Withdrawal Amount are taken in Contract Years 1, 2, 3 and 4 and a withdrawal exceeding the Guaranteed Withdrawal Amount is taken at the end of Contract Year 5 which results in a reset. Since withdrawals are taken every year, there are no bonuses.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Hypothetical Contract Value
Guaranteed Withdrawal Balance
1
$100,000
$5,000
N/A
$5,000
$94,523
$100,000
2
0
5,000
$4,750A
5,000
102,971 B
95,000
3
0
5,148 C
5,148C
5,148
97,001
102,971B
4
0
5,148
5,148
5,148
91,854
97,823
5
0
5,148
5,148
10,000D
77,867
92,675
6
0
3,893D
3,893D
3,893
71,398
77,867D

A The Lifetime Income Amount is calculated on the Contract Anniversary after the Covered Person’s 65th birthday. The Lifetime Income Amount is equal to 5% of the Guaranteed Withdrawal Balance on that Contract Anniversary (0.05 X $95,000 = $4,750). In this example, since withdrawals were taken prior to the Contract Anniversary following the Contract Year in which the Covered Person has reached age 65, the initial Lifetime Income Amount is less than the Guaranteed Withdrawal Amount.

B At the end of Contract Year 2, the Contract Value in this example, $102,971 is greater than the Guaranteed Withdrawal Balance ($95,000 - $5,000 = $90,000). The Guaranteed Withdrawal Balance will step-up to equal the Contract Value of $102,971.

C Following the Step-up of the Guaranteed Withdrawal Balance, the Guaranteed Withdrawal Amount is recalculated as the greater of (a) the Guaranteed Withdrawal Amount prior to the Step-up ($5,000) or (b) 5% of the Guaranteed Withdrawal Balance after the Step-up (0.05 X $102,971 = $5,148). The Lifetime Income Amount is also recalculated as the greater of (a) the Lifetime Income Amount prior to the Step-up ($4,750) or (b) 5% of the Guaranteed Withdrawal Balance after the Step-up (0.05 X $102,971 = $5,148).

D At the end of year 5, there is a withdrawal of $10,000, which is greater than both the Guaranteed Withdrawal Amount and the Lifetime Income Amount.  Since this is an Excess Withdrawal, the Guaranteed Withdrawal Balance will be reset to the lesser of (a) the Contract Value after the withdrawal ($77,867) or (b) the Guaranteed Withdrawal Balance prior to the withdrawal minus the amount of the withdrawal ($92,675 - $10,000 = $82,675). Since the Guaranteed Withdrawal Balance was reset, the Guaranteed Withdrawal Amount and the Lifetime Income Amount will both be reset.  The Guaranteed Withdrawal Amount will equal the lesser of (a) the Guaranteed Withdrawal Amount prior to the withdrawal ($5,148) or (b) 5% of the greater of the Contract Value after the withdrawal or the new Guaranteed Withdrawal Balance Value (0.05 X $77,867 = $3,893). The Lifetime Income Amount will equal the lesser of (a) the Lifetime Income Amount prior to the withdrawal ($5,148) or (b) 5% of the greater of the Contract Value after the withdrawal or the new Guaranteed Withdrawal Balance Value (0.05 X $77,867 = $3,893).
67
Example 9.  Assume the rider was issued on the Contract Date, June 1, 2012, and assume a single premium of $50,000 at Covered Person’s age 50, no additional premiums are paid, a withdrawal of $10,000 is taken at the end of Contract Year 5 and no other withdrawals are taken.

Contract Year
Premiums
Guaranteed Withdrawal Amount
Lifetime Income Amount
Withdrawal Taken
Bonus
Hypothetical Contract Value
Guaranteed Withdrawal Balance
1
$50,000
$2,500
N/A
$0
$2,500
$47,300A
$50,000
2
0
2,625
N/A
0
2,500
49,671A
52,500
3
0
2,750
N/A
0
2,500
51,802A
55,000
4
0
2,875
N/A
0
2,500
52,711A
57,500
5
0
3,000
N/A
10,000B
0
45,326B
60,000
6
0
2,266B
N/A
0
2,266C
45,141A
45,326B
7
0
2,379
N/A
0
2,266
46,151 A
47,592
8
0
2,492
N/A
0
2,266
47,128 A
49,858
9
0
2,606
N/A
0
2,266
52,009A
52,124
10
0
2,719
N/A
0
2,266
53,982A
54,390

A The Contract Value on the contract anniversary is less than the Guaranteed Withdrawal Balance so no step-up occurs.

B At the end of year 5, there is a withdrawal of $10,000.  Since this is an Excess Withdrawal, the Guaranteed Withdrawal Balance will be reset to the lesser of (a) the Contract Value after the withdrawal ($45,326) or (b) the Guaranteed Withdrawal Balance prior to the withdrawal minus the amount of the withdrawal ($60,000 - $10,000 = $50,000). Since the Guaranteed Withdrawal Balance was reset, the Guaranteed Withdrawal Amount will be reset.  The Lifetime Income Amount has not been calculated yet so it will not be reset.  The Guaranteed Withdrawal Amount will equal the lesser of (a) the Guaranteed Withdrawal Amount prior to the withdrawal ($3,000) or (b) 5% of the greater of the Contract Value after the withdrawal or the new Guaranteed Withdrawal Balance (0.05 X $45,326 = $2,266).

C There is no withdrawal during the sixth Contract Year so a bonus will be added to the Guaranteed Withdrawal Balance. Because a reset has occurred due to an Excess Withdrawal, the bonus will be 5% of the previously stepped-up or reset Guaranteed Withdrawal Balance (0.05 X $45,326= $2,266).
68
To learn more about the Contract, you should read the Statement of Additional Information (SAI) dated the same date as this prospectus. For a free copy of the SAI and to request other information about the Contract, please write to Us at Our Variable Administration Department, P.O. Box 219364, Kansas City, Missouri, or call Us at (800)-616-3670.
The SAI has been filed with the SEC and is incorporated by reference into this prospectus.  The SEC maintains an Internet website (http://www.sec.gov) that contains the SAI and other information about Us and the Contract. Information about Us and the Contract (including the SAI) may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., or may be obtained, upon payment of a duplicating fee, by electronic request at the email address maintained by the SEC (publicinfo@sec.gov).  Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090.
Investment Company Act of 1940 Registration File No. 811-08994
Contract Identifier C000024865

3520 Broadway
Kansas City, Missouri 64111
Kansas City Life’s Century II Variable Product Series is distributed by Sunset Financial Services, Inc., a wholly owned subsidiary of Kansas City Life Insurance Company.

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Kansas City Life Insurance Company

3520 Broadway

P.O. Box 219364

Kansas City, Missouri 64121-9364

(800) 616-3670


Century II Affinity Variable Annuity

Statement of Additional Information

Individual Flexible Premium Deferred Variable Annuity Contract

Kansas City Life Variable Annuity Separate Account of

Kansas City Life Insurance Company


This Statement of Additional Information contains information in addition to the information described in the Prospectus for an individual flexible premium deferred variable annuity contract ("Contract") we offer.  This Statement of Additional Information is not a Prospectus and you should read it only in conjunction with the Prospectus for the Contract and the prospectuses for the Funds.  The Prospectus is dated the same as this Statement of Additional Information.  Terms defined in the Prospectus have the same meaning in this Statement of Additional Information.  You may obtain a copy of the Prospectus by writing or calling Kansas City Life at the address or phone number shown above.

The date of this Statement of Additional Information is May 1, 2022.
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS
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  KANSAS CITY LIFE INSURANCE COMPANY
1
  KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
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KANSAS CITY LIFE AND THE VARIABLE ACCOUNT
KANSAS CITY LIFE INSURANCE COMPANY
Kansas City Life Insurance Company is a stock life insurance company, which was organized under the laws of the State of Missouri on May 1, 1895.  Kansas City Life is currently licensed to transact life insurance business in 49 states and the District of Columbia.
We are regulated by the Department of Insurance of the State of Missouri as well as by the insurance departments of all other states and jurisdictions in which we do business.  We submit annual statements on our operations and finances to insurance officials in such states and jurisdictions.  We also file the forms for the Contract described in this Prospectus with insurance officials in each state and jurisdiction in which Contracts are sold.
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
We established the Variable Account as a separate investment account under Missouri law on January 23, 1995.  This Variable Account supports the Contracts and may be used to support other variable annuity insurance contracts and for other purposes as permitted by law.  The Variable Account is registered with the Securities and Exchange Commission ("SEC") as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act") and is a "separate account" within the meaning of the federal securities laws.  We have established other separate investment accounts that may also be registered with the SEC.
The Variable Account is divided into Subaccounts.  The Subaccounts available under the Contract invest in shares of corresponding Fund Portfolios.  The Variable Account may include other Subaccounts not available under the Contracts and not otherwise discussed in this Prospectus.  We own the assets in the Variable Account.
ADDITIONAL CONTRACT PROVISIONS
THE CONTRACT
The entire Contract is made up of the contract and the application.  The statements made in the application are deemed representations and not warranties.  We cannot use any statement to deny a claim or to void the Contract unless it is in the application and we attach a copy of the application to the Contract at issue.
INCONTESTABILITY
We will not contest the Contract after it has been in force during the Annuitant's lifetime for two years from the Contract Date of the Contract.
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, the amount that we will pay is the amount that the Proceeds would have purchased at the correct age and sex.
If we make an overpayment because of an error in age or sex, the overpayment plus interest at 3% (compounded annually) will be a debt against the Contract.  If you do not repay this amount, we will reduce future payments accordingly.
If an underpayment is made because of an error in age or sex, we will calculate any annuity payments at the correct age and sex and we will adjust future payments.  We will pay the underpayment with interest at 3% (compounded annually) in a single sum.
NON-PARTICIPATION
The Contract is not eligible for any dividends and will not participate in our surplus earnings.
TAX STATUS OF THE CONTRACTS
Tax law imposes several requirements that variable annuities must satisfy in order to receive the tax treatment normally accorded to annuity contracts.
1
Diversification Requirements.  The Internal Revenue Code (“Code”) requires that the investments of each investment division of the separate account underlying the Contracts be “adequately diversified” in order for the Contracts to be treated as annuity contracts for federal income tax purposes.  It is intended that the Variable Account, through each Portfolio of the Funds, will satisfy these diversification requirements.
Owner Control.  In certain circumstances, owners of variable annuity contracts have been considered, for federal income tax purposes, to be the owners of the assets of the separate account supporting their contracts due to their ability to exercise investment control over those assets.  When this is the case, the contract owners have been currently taxed on income and gains attributable to the variable account assets.  There is little guidance in this area, and some features of the Contract, such as the flexibility of an Owner to allocate premium payments and transfer amounts among the investment divisions of the separate account, have not been explicitly addressed in published rulings.  While we believe that the Contract does not give an Owner investment control over separate account assets, we reserve the right to modify the Contract as necessary to prevent an Owner from being treated as the owner of the separate account assets supporting the Contract.
Required Distributions. In order to be treated as an annuity contract for federal income tax purposes, section 72(s) of the Code requires any Non-Qualified Contract to contain certain provisions specifying how your interest in the Contract will be distributed in the event of the death of an Owner of the Contract.  Specifically, section 72(s) requires that:  (a) if any Owner dies on or after the annuity starting date, but prior to the time the entire interest in the Contract has been distributed, the entire interest in the Contract will be distributed at least as rapidly as under the method of distribution being used as of the date of such Owner’s death; and (b) if any Owner dies prior to the annuity starting date, the entire interest in the Contract will be distributed within five years after the date of such Owner’s death.  These requirements will be considered satisfied as to any portion of an Owner’s interest which is payable to or for the benefit of a designated Beneficiary and which is distributed over the life of such designated Beneficiary or over a period not extending beyond the life expectancy of that Beneficiary, provided that such distributions begin within one year of the Owner’s death.  The designated Beneficiary refers to a natural person designated by the Owner as a Beneficiary and to whom ownership of the Contract passes by reason of death.  However, if the designated Beneficiary is the surviving spouse of the deceased Owner, the Contract may be continued with the surviving spouse as the new Owner.
The Non-Qualified Contracts contain provisions that are intended to comply with these Code requirements, although no regulations interpreting these requirements have yet been issued.  We intend to review such provisions and modify them if necessary to assure that they comply with the applicable requirements when such requirements are clarified by regulation or otherwise.
Other rules may apply to Qualified Contracts.
CONTROL OF THE CONTRACT
OWNERSHIP
The Annuitant is the Owner unless otherwise provided in the application.  As Owner, you may exercise every right provided by your Contract.  These rights and privileges end at the Annuitant’s death.
The consent of the Beneficiary is required to exercise these rights if you have not reserved the right to change the Beneficiary.
CHANGE OF OWNERSHIP
You may change the ownership of this Contract by giving Written Notice to us.  The change will be effective on the date your Written Notice was signed but will have no effect on any payment made or other action taken by us before we receive it.  We may require that the Contract be submitted for endorsement to show the change.
Certain federal income tax consequences may apply to a change of ownership on Non-Qualified Contracts.  You should consult with your tax adviser before requesting any changes of ownership on a Non-Qualified Contract.
ASSIGNMENT
An assignment is a transfer of some or all of your rights under this Contract.  No assignment will be binding on us unless made in writing and filed at our Home Office.  We assume no responsibility for the validity or effect of any assignment.
Certain federal income tax consequences may apply to an assignment.  You should consult with your tax adviser before requesting an assignment.
2
BENEFICIARY
The Beneficiary is shown on the application or in the last Beneficiary designation filed with us.  Death benefit Proceeds will be paid to the Beneficiary except as provided in this section.
If any Beneficiary dies before the Annuitant, that Beneficiary’s interest will pass to any other Beneficiaries according to their respective interest.
If all Beneficiaries die before the Annuitant, we will pay death benefit Proceeds to you, if living, otherwise to your estate or legal successors.
Unless you have waived the right to do so, you may change the Beneficiary by filing a Written Notice in a form satisfactory to us.  In order to be effective, the Written Notice for change of Beneficiary must be signed while your Contract is in force and the Annuitant is living.  The change will be effective on the date your Written Notice was signed but will have no effect on any payment made or other action taken by us before we receive it.
The interest of any Beneficiary will be subject to:
•
any assignment of this Contract which is binding on us; and
•
any optional settlement agreement in effect at the Annuitant’s death.
SIMULTANEOUS DEATH OF BENEFICIARY AND ANNUITANT
We will pay death benefit Proceeds as though the Beneficiary died before the Annuitant if:
•
the Beneficiary dies at the same time as or within 15 days of the Annuitant’s death; and
•
we have not paid the Proceeds to the Beneficiary within this 15-day period.
SALE OF THE CONTRACTS
We offer the Contracts to the public on a continuous basis through Sunset Financial Services, Inc. (“Sunset Financial”).  We anticipate continuing to offer the Contracts, but reserve the right to discontinue the offering.
Sunset Financial is responsible for distributing the Contracts pursuant to an Underwriting Agreement with us.  Sunset Financial serves as principal underwriter for the Contracts.  Sunset Financial, incorporated in the state of Washington on April 23, 1964, is a wholly owned subsidiary of Kansas City Life Insurance Company, and has its principal business address at P.O. Box 219365, Kansas City, Missouri 64121-9365.  Sunset Financial is registered as a broker‑dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (“1934 Act”), and is a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”).  Sunset Financial is a member of the Securities Investor Protection Corporation.
Sunset Financial will enter into selling agreements with other broker-dealers for sales of the Contracts through their registered representatives.  Registered representatives must be licensed as insurance agents and appointed by us.
We pay commissions to Sunset Financial for sales of the Contracts, which Sunset Financial shares with broker-dealers who have entered into selling agreements.
Sunset Financial received sales compensation with respect to all variable contracts in the following amounts during the periods indicated:
Fiscal Year
Aggregate Amount of Commissions Paid to Sunset Financial*
Aggregate Amount of Commissions Retained by Sunset Financial After Payments to its Registered Persons and Other Broker-Dealers
2019
$141,023.45
$141,023.45
2020
$141,542.93
$141,542.93
2021
$171,955.97
$171,955.97
* Includes sales compensation paid to registered persons of Sunset Financial.
3
CALCULATION OF YEILDS AND TOTAL RETURNS
From time to time, we may disclose yields, total returns, and other performance data pertaining to the Contracts for a Subaccount.  Such performance data will be computed, or accompanied by performance data computed, in accordance with the standards defined by the Securities and Exchange Commission ("SEC").
Because of the charges and deductions imposed under a Contract, the yield for the Subaccounts will be lower than the yield for their respective Portfolios.  The calculations of yields, total returns, and other performance data do not reflect the effect of any premium tax that may be applicable to a particular Contract.  Premium taxes currently range from 0% to 3.5% of premium based on the state in which the Contract is sold.
FEDERATED HERMES GOVERNMENT MONEY FUND II SUBACCOUNT YIELDS
From time to time, advertisements and sales literature may quote the current annualized yield of the Federated Hermes Government Money Fund II Subaccount for a seven-day period in a manner that does not take into consideration any realized or unrealized gains or losses, or income other than investment income, on shares of the Federated Hermes Government Money Fund II or on its portfolio securities.
This current annualized yield is computed by determining the net change (exclusive of realized gains and losses on the sale of securities and unrealized appreciation and depreciation and exclusive of income other than investment income) at the end of the seven-day period in the value of a hypothetical account under a Contract having a balance of one unit of the Federated Hermes Government Money Fund II Subaccount at the beginning of the period, dividing such net change in account value by the value of the hypothetical account at the beginning of the period to determine the base period return, and annualizing this quotient on a 365-day basis.
The net change in account value reflects:
•
net income from the Federated Hermes Government Money Fund II attributable to the hypothetical account; and
•
charges and deductions imposed under the Contract which are attributable to the hypothetical account.
The charges and deductions include the per unit charges for the hypothetical account for:
•
the annual administration fee,
•
the asset-based administration charge, and
•
the mortality and expense risk charge.
For purposes of calculating current yields for a Contract, an average per unit administrative fee is used based on the $30 annual administration fee deducted at the beginning of each Contract Year and an assumed account size equal to the Subaccount’s average account size.
Because of the charges and deductions imposed under the Contract, the yield for the Federated Hermes Government Money Fund II Subaccount will be lower than the yield for the Federated Hermes Government Money Fund II.
The current and effective yields on amounts held in the Federated Hermes Government Money Fund II Subaccount normally will fluctuate on a daily basis.  Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return.  The Federated Hermes Government Money Fund II Subaccount's actual yield is affected by:
•
changes in interest rates on money market securities;
•
average portfolio maturity of the Federated Hermes Government Money Fund II;
•
the types and quality of portfolio securities held by the Federated Hermes Government Money Fund II; and
•
the Federated Hermes Government Money Fund II's operating expenses.
Yields on amounts held in the Federated Hermes Government Money Fund II Subaccount may also be presented for periods other than a seven-day period.
OTHER SUBACCOUNT YIELDS
From time to time, sales literature or advertisements may quote the current annualized yield of one or more of the Subaccounts (except the Federated Hermes Government Money Fund II Subaccount) for a Contract for 30-day or one-month periods. The annualized yield of a Subaccount refers to income generated by the Subaccount during a 30-day or one-month period that is assumed to be generated each period over a 12-month period.
The yield is computed by:
4
•
dividing the net investment income of the Portfolio attributable to the Subaccount units less Subaccount expenses for the period; by
•
the maximum offering price per unit on the last day of the period times the daily average number of units outstanding for the period; by
•
compounding that yield for a six-month period; and by
•
multiplying that result by two.  Expenses attributable to the Subaccount include the annual administration fee, asset-based administration charge, and mortality and expense risk charge.
The yield calculation assumes an annual administration fee of $30 per year per Contract deducted at the beginning of each Contract Year.  For purposes of calculating the 30-day or one-month yield, an average annual administration fee per dollar of Contract Value in the Account is used to determine the amount of the charge attributable to the Subaccount for the 30-day or one-month period.
Because of the charges and deductions imposed under the Contracts, the yield for the Subaccount will be lower than the yield for the corresponding Fund’s Portfolio.
The yield on the amounts held in the Subaccounts normally will fluctuate over time.  Therefore, the disclosed yield for any given past period is not an indication or representation of future yields or rates of return.  A Subaccount's actual yield is affected by the types and quality of portfolio securities held by the corresponding Portfolio and its operating expenses.
Yield calculations do not take into account the surrender charge under the Contract.  The surrender charge is calculated as a percentage of your premium payment being surrendered or withdrawn during the applicable Premium Year.  The amount of the surrender charge decreases over time, measured from the date the premium payment is applied.  The initial surrender charge is 8%, decreasing to 0 after the eight Premium Years.  Subject to certain restrictions, a surrender charge will not be imposed upon surrender or on the first partial surrender in any Contract Year on an amount up to 10% of the Contract Value as of the beginning of the Contract Year.
STANDARD SUBACCOUNT AVERAGE ANNUAL TOTAL RETURNS
From time to time, sales literature or advertisements may also quote standard subaccount average annual total returns for the Subaccounts for various periods of time.
When a Subaccount has been in operation for one, five and 10 years, respectively, the standard subaccount average annual total return for these periods will be provided.  Standard subaccount average annual total returns for other periods of time may, from time to time, also be disclosed.
Standard subaccount average annual total returns represent the average annual compounded rates of return that would equate an initial investment of $10,000 under a Contract to the redemption value of that investment as of the last day of each of the periods.  The ending date for each period for which total return quotations are provided will be for the most recent month-end practicable, considering the type and media of the communication that will be stated in the communication.
We will calculate standard subaccount average annual total returns using Subaccount unit values which we calculate on each valuation day based on:
•
the performance of the Subaccount's underlying Portfolio;
•
the deductions for the annual administration fee;
•
asset-based administration charge; and
•
mortality and expense risk charge.
The calculation assumes that the annual administration fee is $30 per year per Contract deducted at the beginning of each Contract Year.  For purposes of calculating average annual total return, an average per dollar annual administration fee attributable to the hypothetical account for the period is used based on an account size equal to the Subaccount’s average account size.  The calculation assumes the selection of the Base Guaranteed Minimum Death Benefit Option.  The calculation also assumes surrender of the Contract at the end of the period for the return quotation.  Standard subaccount average annual total returns will therefore reflect a deduction of the surrender charge for any period less than eight years.   The calculation does not reflect either of the guaranteed bonuses.
5
OTHER TOTAL RETURNS
Adjusted Historic Portfolio Average Annual Total Return.  From time to time, sales literature or advertisements may also quote total returns for periods prior to the date the Variable Account began operations.  Such performance information will be calculated based on the performance of the Portfolios and the assumption that the Subaccounts were in existence for the same periods as those indicated for the Portfolios, with the level of Contract charges currently in effect.
From time to time, sales literature or advertisements may also quote adjusted historic portfolio average annual total returns that do not reflect the surrender charge.  These are calculated in exactly the same way as the adjusted historic portfolio average annual total returns described above, except that the ending redeemable value of the hypothetical account for the period is replaced with an ending value for the period that does not take into account any charges on amounts surrendered.
We may disclose cumulative total returns in conjunction with the standard formats described above.
EFFECT OF THE ANNUAL ADMINISTRATION FEE ON PERFORMANCE DATA
The Contract provides for a $30 annual administration fee (waived for Contracts with a Contract Value of at least $50,000 at the beginning of the Contract Year) to be deducted annually at the beginning of each Contract Year, from the Subaccounts and the Fixed Account based on the proportion that the value of each such account bears to the total Contract Value. For purposes of reflecting the annual administration fee in yield and total return quotations, the annual charge is converted into a per-dollar per-day charge based on the average Contract Value in the Variable Account of all Contracts on the last day of the period for which quotations are provided. The per-dollar per-day average charge will then be adjusted to reflect the basis upon which the particular quotation is calculated.
SAFEKEEPING OF ACCOUNT ASSETS
We hold the title to the assets of the Variable Account.  The assets are kept physically segregated and held separate and apart from our Account assets and from the assets in any other separate account.
Records are maintained of all purchases and redemptions of Portfolio shares held by each of the Subaccounts.
Our officers and employees are covered by an insurance company blanket bond issued by Fidelity and Deposit Company of Maryland to Kansas City Life in the amount of $5,000,000.  The bond insures against dishonest and fraudulent acts of officers and employees.
STATE REGULATION
We are subject to regulation and supervision by the Department of Insurance of the State of Missouri, which periodically examines our affairs.  We are also subject to the insurance laws and regulations of all jurisdictions where we are authorized to do business.  A copy of the Contract form has been filed with, and where required approved by, insurance officials in each jurisdiction where the Contracts are sold.  We are required to submit annual statements of our operations, including financial statements, to the insurance departments of the various jurisdictions in which we do business for the purposes of determining solvency and compliance with local insurance laws and regulations.
RECORDS AND REPORTS
We will retain all records and accounts relating to the Variable Account.  As presently required by the Investment Company Act of 1940 and regulations promulgated thereunder, reports containing such information as may be required under the Act or by any other applicable law or regulation will be sent to Contract Owners semi-annually at the Owner's last known address of record.
LEGAL MATTERS
All matters relating to Missouri law pertaining to the Contracts, including the validity of the Contracts and Kansas City Life's authority to issue the Contracts, have been passed upon by A. Craig Mason Jr., General Counsel of Kansas City Life.  Eversheds Sutherland (US) LLP of Washington, D.C. has provided legal advice on certain matters relating to the federal securities laws.
6
EXPERTS
The consolidated financial statements of Kansas City Life Insurance Company as of December 31, 2021 and 2020 and for each of the years in the three-year period ended December 31, 2021; the statement of net assets of the Kansas City Life Variable Life Separate Account (Variable Account) as of December 31, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and financial highlights for each of the years in the five-year period then ended; have been included herein in reliance upon the report of BKD, LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of 1933, as amended, with respect to the Contracts discussed in this Statement of Additional Information.  Not all the information set forth in the registration statement, amendments and exhibits thereto has been included in this Statement of Additional Information.  Statements contained in this Statement of Additional Information concerning the content of the Contracts and other legal instruments are intended to be summaries.  For a complete statement of the terms of these documents, reference should be made to the instruments filed with the SEC.
FINANCIAL STATEMENTS
The following financial statements for Kansas City Life Insurance Company are included in this Statement of Additional Information:
•
consolidated balance sheets as of December 31, 2021 and 2020; and
•
related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021.
The following financial statements for the Variable Account are included in this Statement of Additional Information:
•
statement of net assets as of December 31, 2021; and
•
related statement of operations for the period or year ended December 31, 2021, statements of changes in net assets for each of the periods or years in the two-year period ended December 31, 2021, and financial highlights for each of the periods or years in the five-year period ended December 31, 2021.
Kansas City Life's financial statements should be distinguished from financial statements of the Variable Account. You should consider Kansas City Life's financial statements only as an indication of Kansas City Life's ability to meet its obligations under the Contracts.  Please note that in addition to Fixed Account allocations, general account assets are used to guarantee the payment of living and death benefits under the Contracts.  To the extent that Kansas City Life is required to pay you amounts in addition to your Contract Value under these benefits, such amounts will come from general account assets.  You should be aware that Kansas City Life’s invested assets, primarily including fixed income securities, are subject to customary risks of credit defaults and changes in fair value.  Factors that may affect the overall default rate on and fair value of  Kansas City Life’s invested assets include interest rate levels and changes, availability and cost of liquidity, financial market performance, and general economic conditions, as well as particular circumstances affecting the businesses of individual borrowers and tenants.  Kansas City Life’s financial statements include a further discussion of risks inherent within general account investments.  However, you should not consider Kansas City Life’s financial statements as having an effect on the investment performance of the assets held in the Variable Account.
7
Financial Information
Amounts in thousands, except share data, security counts, claim counts, or as otherwise noted.

Kansas City Life Insurance Company
Consolidated Balance Sheets

 
December 31,
 
2021
  
2020
ASSETS
      
Investments:
      
Fixed maturity securities available for sale, at fair value
    (amortized cost: 2021 - $2,894,877; 2020 - $2,797,990)
$
 3,088,197  
$
 3,118,980
Equity securities, at fair value
    (cost: 2021 - $3,097; 2020 - $5,933)
3,676
  
6,647
Mortgage loans
596,037
  
601,607
Real estate
142,278
  
165,403
Policy loans
82,060
  
84,447
Short-term investments
74,501
  
119,116
Other investments
12,840
  
10,838
Total investments
3,999,589
  
4,107,038
       
Cash
5,419
  
7,203
Accrued investment income
30,298
  
31,413
Deferred acquisition costs
292,027
  
276,425
Reinsurance recoverables
399,951
  
391,439
Other assets
201,170
  
186,453
Separate account assets
504,976
  
463,041
Total assets
$
  5,433,430  
$
 5,463,012
       
LIABILITIES
      
Future policy benefits
$
 1,397,111
  
$
 1,383,674
Policyholder account balances
2,247,392
  
2,231,640
Policy and contract claims
69,787
  
71,344
Other policyholder funds
185,713
  
175,131
Other liabilities
198,017
  
229,443
Separate account liabilities
504,976
  
463,041
Total liabilities
4,602,996
  
4,554,273
       
STOCKHOLDERS' EQUITY
      
Common stock, par value $1.25 per share
      
Authorized 36,000,000 shares, issued 18,496,680 shares
23,121
  
23,121
Additional paid in capital
41,025
  
41,025
Retained earnings
933,338
  
933,092
Accumulated other comprehensive income
74,251
  
152,802
Treasury stock, at cost (2021 and 2020 - 8,813,266 shares)
(241,301)
  
(241,301)
Total stockholders’ equity
830,434
  
908,739
Total liabilities and stockholders’ equity
$
 5,433,430  
$
  5,463,012
See accompanying Notes to Consolidated Financial Statements
1
Kansas City Life Insurance Company
Consolidated Statements of Comprehensive Income

 
Year Ended December 31,
 
2021
  
2020
  
2019
REVENUES
            
Insurance revenues:
            
Net premiums
$ 
 208,864    
$ 
 223,756    
$ 
  223,227  
Contract charges
121,803
    
126,722
    
125,886
  
Total insurance revenues
330,667
    
350,478
    
349,113
  
Investment revenues:
                
Net investment income
142,468
    
145,684
    
148,349
  
Net investment gains
25,417
    
21,835
    
9,133
  
Total investment revenues
167,885
    
167,519
    
157,482
  
Other revenues
12,760
    
5,913
    
6,098
  
Total revenues
511,312
    
523,910
    
512,693
  
                 
BENEFITS AND EXPENSES
                
Policyholder benefits
280,886
    
280,970
    
257,621
  
Interest credited to policyholder account balances
79,725
    
78,792
    
78,520
  
Amortization of deferred acquisition costs
33,217
    
42,141
    
35,948
  
Operating expenses
104,564
    
106,093
    
111,154
  
Total benefits and expenses
498,392
    
507,996
    
483,243
  
                 
Income before income tax expense
12,920
    
15,914
    
29,450
  
                 
Income tax expense
2,216
    
744
    
5,023
  
                 
NET INCOME
$ 
  10,704    
$ 
  15,170    
$ 
  24,427  
                 
COMPREHENSIVE INCOME (LOSS),
     NET OF TAXES
                
Changes in:
                
Net unrealized gains (losses) on
     securities available for sale
$ 
  (100,859 )
 
$ 
  115,900    
$ 
  129,609  
Effect on deferred acquisition costs, value of business
     acquired, and deferred revenue liabilities
7,946
    
(7,809
 )
 
(11,608
 )
Policyholder liabilities
9,247
    
(15,882
 )
 
(15,987
 )
Benefit plan obligations
5,115
    
1,087
    
3,042
  
Other comprehensive income (loss)
(78,551
 )  
93,296
    
105,056
  
                 
COMPREHENSIVE INCOME (LOSS)
$ 
  (67,847 )
 
$ 
  108,466    
$ 
  129,483  
                 
Basic and diluted earnings per share:
                
Net income
$ 
  1.11    
$ 
  1.57    
$ 
  2.52  
See accompanying Notes to Consolidated Financial Statements
2

Kansas City Life Insurance Company
Consolidated Statements of Stockholders’ Equity

 
Year Ended December 31,
 
2021
  
2020
  
2019
           
COMMON STOCK, beginning and end of year
$ 
 23,121    
$
  23,121    
$
  23,121  
                 
ADDITIONAL PAID IN CAPITAL, beginning and end of year
41,025
    
41,025
    
41,025
  
                 
RETAINED EARNINGS
                
Beginning of year
933,092
    
928,380
    
914,411
  
Net income
10,704
    
15,170
    
24,427
  
Stockholder dividends (2021, 2020, and 2019 - $1.08 per share)
(10,458
 )
 
(10,458
 )
 
(10,458
 )
                 
End of year
933,338
    
933,092
    
928,380
  
                 
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
                
Beginning of year
152,802
    
59,506
    
(45,550
 )
Other comprehensive income (loss)
(78,551
 )
 
93,296
    
105,056
  
                 
End of year
74,251
    
152,802
    
59,506
  
                 
TREASURY STOCK, at cost, beginning and end of year
(241,301
 )
 
(241,301
 )
 
(241,301
 )
                 
TOTAL STOCKHOLDERS’ EQUITY
$ 
  830,434    
$
  908,739    
$
  810,731  
See accompanying Notes to Consolidated Financial Statements
3
Kansas City Life Insurance Company
Consolidated Statements of Cash Flows

 
Year Ended December 31,
 
2021
  
2020
  
2019
OPERATING ACTIVITIES
          
Net income
$ 
 10,704
   
$
  15,170    
$ 
  24,427  
Adjustments to reconcile net income to net cash
     provided by (used from) operating activities:
                
Amortization of investment premium and discount
1,669
    
1,978
    
3,321
  
Depreciation and amortization
7,967
    
8,538
    
8,367
  
Acquisition costs capitalized
(38,239
 )
 
(44,151
 ) 
 
(48,443
 )  
Amortization of deferred acquisition costs
33,217
    
42,141
    
35,948
  
Net investment gains
(25,417
 )
 
(21,835
 ) 
 
(9,133
 )  
Gain on sale of subsidiary
(5,500
 )
 
—
    
—
  
Changes in assets and liabilities:
                
Reinsurance recoverables
(8,513
 )
 
(12,667
 ) 
 
(12,576
 )  
Future policy benefits
24,761
    
33,050
    
32,274
  
Policyholder account balances
(42,995
 )
 
(34,520
 ) 
 
(43,516
 )  
Income taxes payable and deferred
(4,983
 )
 
(2,923
 ) 
 
5,960
  
Other, net
1,010
    
21,113
    
3,503
  
Net cash provided (used)
(46,319
 )
 
5,894
    
132
  
                 
INVESTING ACTIVITIES
                
Purchases:
                
Fixed maturity securities
(434,696
 )
 
(344,098
 ) 
 
(342,477
 )  
Equity securities
(259
 )
 
(380
 ) 
 
—
  
Mortgage loans
(103,942
 )
 
(109,060
 ) 
 
(25,036
 )  
Real estate
(36,994
 )
 
(2,610
 ) 
 
(1,975
 )  
Policy loans
(8,754
 )
 
(8,706
 ) 
 
(10,969
 )  
Other investments
(5,828
 )
 
(3,702
 ) 
 
(2,712
 )  
Property and equipment
(628
 )
 
(1,844
 ) 
 
(2,379
 )  
Sales or maturities, calls, and principal paydowns:
                
Fixed maturity securities
308,361
    
344,071
    
263,411
  
Equity securities
3,000
    
5,000
    
4,000
  
Mortgage loans
109,546
    
85,111
    
87,157
  
Real estate
72,439
    
29,898
    
3,084
  
Policy loans
11,141
    
11,758
    
11,535
  
Other investments
8,599
    
4,204
    
2,176
  
Property and equipment
71
    
25
    
5,572
  
Net sales (purchases) of short-term investments
41,616
    
(43,690
 ) 
 
(16,714
 )  
Proceeds from sale of subsidiary
28,468
    
—
    
—
  
Post-acquisition purchase price adjustments
—
    
—
    
1,663
  
Net cash used
(7,860
 )
 
(34,023
 ) 
 
(23,664
 )  

4
Kansas City Life Insurance Company
Consolidated Statements of Cash Flows

 
Year Ended December 31,
 
2021
  
2020
  
2019
FINANCING ACTIVITIES
            
Policyholder account balances - deposits
$
  215,598    
$
  220,549    
$
  223,058  
Policyholder account balances - receipts from funding
     agreement
30,000
    
—
    
—
  
Withdrawals from policyholder account balances
(192,709
 )
 
(200,717
 )
 
(207,242
 )
Net transfers from separate accounts
7,320
    
8,794
    
3,500
  
Change in other deposits
2,644
    
2,930
    
(2,666
 )
Cash dividends to stockholders
(10,458
 )
 
(10,458
 )
 
(10,458
 )
Post-acquisition contingent liability fulfillment
—
    
—
    
(115
 )
Net cash provided
52,395
    
21,098
    
6,077
  
                 
Decrease in cash
(1,784
 )
 
(7,031
 )
 
(17,455
 )
Cash at beginning of year
7,203
    
14,234
    
31,689
  
Cash at end of year
$
 5,419    
$
  7,203    
$
  14,234  
See accompanying Notes to Consolidated Financial Statements
5
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements


1. Nature of Operations and Significant Accounting Policies
Business
Kansas City Life Insurance Company is a Missouri domiciled stock life insurance company which, with its subsidiaries, is licensed to sell insurance products in 49 states and the District of Columbia.  The consolidated entity (the Company) offers a diversified portfolio of individual insurance, annuity, and group life and health products through its life insurance companies.  Kansas City Life Insurance Company (Kansas City Life) is the parent company.  Old American Insurance Company (Old American) and Grange Life Insurance Company (Grange Life) are wholly-owned insurance subsidiaries.  Sunset Life Insurance Company of America (Sunset Life) is an insurance subsidiary that was wholly-owned by the Company until it was sold on November 1, 2021 - see Business Changes section below.  The Company also has non-insurance subsidiaries that individually and collectively are not material.  The terms "the Company," "we," "us," and "our" are used in these consolidated financial statements to refer to Kansas City Life Insurance Company and its subsidiaries.
We have three reportable business segments, which are defined based on the nature of the products and services offered:  Individual Insurance, Group Insurance, and Old American.  For additional information on our segments, please see Note 17 - Segment Information.
Basis of Presentation
The consolidated financial statements and the accompanying notes to the consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of Kansas City Life and its subsidiaries.  Significant intercompany transactions have been eliminated in consolidation and certain immaterial reclassifications have been made to prior period results to conform with the current period’s presentation.
COVID-19 Pandemic
The global outbreak of COVID-19 was classified as a pandemic during the first quarter of 2020.  The impact of the COVID-19 pandemic on our financial condition and results of operations continues to evolve.  The duration and the severity depend on certain developments, including the effect of the pandemic on financial markets.  Certain negative financial impacts occurred in 2020 as a result of the COVID-19 pandemic.  These included increased policyholder benefit payments, largely from death benefits; deferrals of interest and principal on certain investments; reduced investment income from lower available interest rates; and increases in certain operating expenses.  Impacts from the pandemic have continued into 2021, including increased policyholder benefits and reduced investment income from lower available interest rates.  Other negative financial impacts could occur including, but not limited to: asset impairments; defaults, delinquencies or additional deferrals on the Company’s mortgage loan and real estate portfolios; a reduction in sales; additional increases in policyholder benefits; and continued increases in certain expenses.
The United States Federal Government has provided multiple relief packages and support aimed at protecting individuals and businesses from the health and economic impacts of the COVID-19 pandemic.  Please refer to Note 11 - Income Taxes for additional information on how certain relief impacted the Company during 2020.  We continue to evaluate the full impact of this relief on our business, as well as other relief packages approved by the government.  All other relief packages issued through the date of this filing were not anticipated to impact the Company at this time or were not expected to have a material impact to the consolidated financial statements.
Business Changes
On November 1, 2021, Kansas City Life sold 100% of the capital and surplus of Sunset Life to Bona Holdings, LLC for $29.5 million.  The Missouri Department of Commerce and Insurance granted regulatory approval for the transaction.  The sale resulted in a net gain of approximately $5.5 million, which is included in Other Revenues in the Consolidated Statements of Comprehensive Income.  In addition, we received $1.0 million for providing certain transition support associated with this transaction.  Further, we are providing additional administrative support for a period of up to one year.  We will be reimbursed for those expenses as they occur.  Further, the Company completed a 100% reinsurance assumption of the insurance business prior to the sale of Sunset Life on December 31, 2020.  Please see Note 14 - Reinsurance for additional information.
There were no business changes during 2020.
Use of Estimates
The preparation of the consolidated financial statements requires management of the Company to make estimates and assumptions relating to the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the
6
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements

date of the consolidated financial statements, and the reported amounts of revenue and expenses during the period.  These estimates are inherently subject to change and actual results could differ from these estimates.  Significant estimates required in the preparation of the consolidated financial statements include the fair value of invested assets, deferred acquisition costs (DAC), deferred income taxes, goodwill and other intangibles, value of business acquired (VOBA), deferred revenue liability (DRL), policyholder account balances, future policy benefits, policy and contract claim liabilities, reinsurance, and pension and other postemployment benefits.
Significant Accounting Policies
Investments
Valuation of Investments and Other-than-Temporary Impairments
Our principal investments are in fixed maturity securities, mortgage loans, and real estate; all of which are exposed to at least three primary sources of investment risk, including: credit, interest rate, and liquidity.
Fixed maturity securities, which are all classified as available for sale, are carried at fair value in the Consolidated Balance Sheets, with unrealized gains or losses recorded in Accumulated Other Comprehensive Income (Loss).  The unrealized gains or losses are recorded net of the adjustment to policyholder liabilities, DAC, VOBA, and DRL to reflect what would have been earned had those gains or losses been realized and the proceeds reinvested.  The adjustments to DAC, VOBA, and DRL represent changes in the amortization that would have been required as a charge or credit to income had such unrealized amounts been realized.  The adjustments to policyholder liabilities represent the increase from using a discount rate that would have been required if such unrealized gains or losses had been realized and the proceeds reinvested at current market interest rates, which were different from the then-current effective portfolio rate.
The amortized cost of a security is adjusted for declines in value that are determined to be other-than-temporary.  Other-than-temporary impairment losses are reported as a component of investment revenues in the Consolidated Statements of Comprehensive Income, which also presents the amount of non-credit impairment losses for certain fixed maturity securities that are reported in Accumulated Other Comprehensive Income (Loss).  See Note 3 - Investments for additional discussion of our considerations related to other-than-temporary impairments.  For additional information regarding fair value, please see Note 4 - Fair Value Measurements.
Equity securities are carried at fair value.  Changes in the fair value of equity securities are recognized through net investment gains in the Consolidated Statements of Comprehensive Income.
Mortgage loans are stated at cost, adjusted for amortization of premium and accrual of discount, less an allowance for loan losses.  A loan is considered impaired if it is probable that all contractual amounts due will not be collected.  The allowance for loan losses is maintained at a level believed by management to be adequate to absorb potential future incurred credit losses.  Management’s periodic evaluation and assessment of the adequacy of the allowance is based on known and inherent risks in the portfolio, historical and industry data, current economic conditions, and other relevant factors, along with specific risks related to specific loans.  Loans in foreclosure, loans considered to be impaired, and loans with amounts past due 90 days or more are placed on non-accrual status.

Real estate consists of directly owned investments and real estate joint ventures.  Real estate that is directly owned is carried at depreciated cost.  Real estate joint ventures consist primarily of office buildings, industrial warehouses, unimproved land for future development, and affordable housing real estate joint ventures.  Real estate joint ventures are consolidated when required.  The initial cost of the non-consolidated affordable housing real estate joint ventures is amortized in proportion to the tax credits and other tax benefits received and the net investment performance is recognized in the Consolidated Statements of Comprehensive Income as a component of Income Tax Expense.  The investments in other non-consolidated real estate joint ventures are recorded using the equity method of accounting, in which the initial cost of the investment is adjusted for earnings and cash contributions or distributions.
Policy loans are carried at their outstanding principal amount.
Short-term investments include highly-liquid investments in institutional money market funds that are carried at net asset value (NAV).
The Company has hedge positions classified as derivatives that are included in Other Investments in the Consolidated Balance Sheets.  These derivative assets are recorded at fair value and are established in relation to the Company's indexed universal life portfolio.  The index credit portion of the reserves associated with the indexed universal life products are considered to be embedded derivatives and are accounted for at fair value and are included in Policyholder Account Balances in the
7
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Consolidated Balance Sheets.  The value of the reserves will fluctuate depending on market conditions.  However, this fluctuation is largely offset by a corresponding change in the realized gains or losses on these derivatives.  Changes in market values can result in significant fluctuations to realized gains and losses in the Consolidated Statements of Comprehensive Income.
Investment Income
Investment income is recognized when earned.  Premiums and discounts on fixed maturity securities are amortized over the life of the related security as an adjustment to yield using the effective interest method, with the exception of premiums on callable fixed maturity securities, which are amortized to the earliest call date.  Realized gains and losses on the sale of investments are determined on the basis of specific security identification recorded on the trade date.
Future Policy Benefits
We establish liabilities for amounts payable under insurance policies, including traditional life insurance, immediate annuities with life contingencies, supplementary contracts with life contingencies, group life insurance, and accident and health insurance.  These liabilities originate from new premiums and conversions from other products and are generally payable over an extended period of time.
Liabilities for future policy benefits of traditional life insurance have been computed by a net level premium method based upon estimates at the time of issue or at the time of acquisition for investment yields, mortality, and withdrawals.  These estimates include provisions for experience less favorable than initially expected.  Mortality assumptions are based on Company experience expressed as a percentage of standard mortality tables.  The 2008 Valuation Basic Table, the 2001 Valuation Basic Table, and the 1975-1980 Select and Ultimate Basic Table serve as the bases for most mortality assumptions.
Liabilities for future policy benefits of immediate annuities and supplementary contracts with life contingencies are computed by calculating an actuarial present value of future policy benefits, based upon estimates for investment yields and mortality at the time of issue or at the time of acquisition.  The 2012 Individual Annuity Reserving Table, the Annuity 2000 Table, the 1983 Individual Annuity Mortality Table, and the 1971 Individual Annuity Mortality Table serve as the bases for most immediate annuity and supplementary contract mortality assumptions.
Liabilities for future policy benefits of accident and health insurance represent estimates of payments to be made on reported insurance claims, as well as claims incurred-but-not-reported (IBNR).  These liabilities are estimated using actuarial analyses and case basis evaluations that are based upon past claims experience, claim trends, and industry experience.
The following table provides detail about the composition of future policy benefits at December 31. 
 
2021
  
2020
Life insurance
$ 
 1,073,503
   
$ 
 1,036,898
 
Immediate annuities and supplementary
      contracts with life contingencies
293,972
    
314,417
  
Accident and health insurance
29,636
    
32,359
  
Future policy benefits
$ 
  1,397,111    
$ 
 1,383,674
 
Policyholder Account Balances
Policyholder account balances are deposit-type contracts, including universal life insurance and fixed annuity contracts, and investment-type contracts.  Liabilities for policyholder account balances are included without reduction for potential surrender charges.  These liabilities originate from new deposits and conversions from other products.  Policyholder account balances are equal to cumulative deposits, less contract charges and withdrawals, plus interest credited.  Deferred front-end contract charges reduce policyholder account balance liabilities and increase the other policyholder funds liability, and are amortized over the term of the policies in a manner similar to DAC, as discussed below.  Interest on policyholder account balances is credited as earned.
On an ongoing basis, we perform testing and analysis on our blocks of business to ensure the assumptions made remain viable.  We also periodically perform sensitivity testing on these blocks of business to ensure we maintain the capacity to meet an increase in policyholder benefits, namely increased surrenders, policy loans, or other policyholder elective withdrawals.  If it is determined that our established reserves are not adequate, additional reserves will be added.
The Company has a collateralized advance funding agreement with the Federal Home Loan Bank of Des Moines (FHLB).  Total obligations outstanding under this agreement were $30.0 million at December 31, 2021.  These obligations are also
8
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
reported as Policyholder Account Balances in the Consolidated Balance Sheets.  Interest is credited based on variable rates set by the FHLB.  For additional information, please see Note 10 - Debt.
Crediting rates for universal life insurance and fixed annuity products ranged from 1.00% to 5.50% in 2021, 2020, and 2019.
The following table provides detail about the composition of policyholder account balances at December 31.  
 
2021
  
2020
Universal life insurance
$ 
  1,086,429    
$ 
  1,089,556  
Fixed annuities
1,076,041
    
1,089,134
  
Immediate annuities and supplementary
    contracts without life contingencies
54,899
    
52,950
  
Funding agreement
30,023
    
—
  
Policyholder account balances
$ 
  2,247,392    
$ 
  2,231,640  
Deferred Acquisition Costs
DAC, principally agent commissions and other selling, selection, and issue costs, which are related directly to the successful acquisition of new or renewal insurance contracts, are capitalized as incurred.  At least annually, we review our DAC capitalization policy and the specific items which are capitalized under existing guidance.
Policy acquisition costs associated with traditional life products are deferred and amortized over the premium paying period.  Assumptions related to DAC on traditional life insurance products are typically determined at inception and remain unchanged with any future premium deficiency recorded first as a reduction of DAC.
Policy acquisition costs that relate to interest sensitive and variable insurance products are deferred and amortized in relation to the estimated gross profits to be realized over the lives of the contracts.  Estimated gross profits for interest sensitive and variable insurance products are projected using assumptions as to net interest income, net realized investment gains and losses, fees, surrender charges, expenses, and mortality gains and losses, net of reinsurance.  At the issuance of policies, projections of estimated gross profits are made.  These projections are then replaced by actual gross profits over the lives of the policies. In addition to other factors, emerging experience may lead to a revised outlook for the remaining estimated gross profits.  Accordingly, DAC may be recalculated (unlocked) using these new assumptions and any resulting adjustment is included in income in the period such an unlocking is deemed appropriate.  See the Unlocking and Refinements in Estimates section below for additional information.
The DAC asset is adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available for sale, as described in the Investments section above.
DAC is reviewed on an ongoing basis to evaluate whether the unamortized portion exceeds the expected recoverable amounts.  If it is determined from emerging experience that the premium margins or expected gross profits are insufficient to amortize DAC, the asset will be adjusted downward with the adjustment recorded as an expense in the current period.
The following table provides information about DAC at December 31. 
 
2021
  
2020
Balance at beginning of year
$ 
  276,425    
$ 
  286,682  
Capitalization of commissions and expenses
38,239
    
44,151
  
Gross amortization
(44,785
 )
 
(54,069
 )
Accrual of interest
11,568
    
11,928
  
Change in DAC due to the change in unrealized
     investment gains or (losses)
10,580
    
(12,267
 )
Balance at end of year
$ 
  292,027    
$ 
  276,425  
Value of Business Acquired
Under current guidance for business combinations, all assets and liabilities are reported at fair value at acquisition and an intangible asset or liability may result due to differences between fair value and consideration paid.  However, prior to the adoption of Accounting Standards Codification (ASC) No. 805 Business Combinations, a portion of the purchase price was allocated to a separately identifiable intangible asset, VOBA, when a new block of business was acquired or when an insurance
9
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
company was purchased.  VOBA is established as the actuarially determined present value of future gross profits of the business acquired and is amortized with interest in proportion to future premium revenues or the expected future profits, depending on the type of business acquired.  VOBA is reported as a component of Other Assets with related amortization included in Operating Expenses.  Amortization of VOBA occurs with interest over the anticipated life of the underlying business to which it relates, initially 15 to 30 years.  The assumptions regarding future experience on interest sensitive business can affect the carrying value of VOBA, similar to DAC.  These assumptions include interest spreads, mortality, expense margins, and policy and premium persistency experience.
The VOBA asset is adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available for sale, as described in the Investments section above.
VOBA is reviewed on an ongoing basis to evaluate whether the unamortized portion exceeds the expected recoverable amounts.  If it is determined from emerging experience that the premium margins or expected gross profits are insufficient to amortize VOBA, the asset will be adjusted downward with an expense recorded in the current period.
The following table provides information about VOBA at December 31.
 
2021
  
2020
Balance at beginning of year
 $
 7,249     $
  12,530  
Gross amortization
(3,045
 )
 
(4,623
 )
Accrual of interest
735
    
929
  
Change in VOBA due to the change in unrealized
     investment gains or losses
2,235
    
(1,587
 )
Balance at end of year
$
 7,174     $
  7,249  
Interest accrued on the VOBA of one block of business was at the rates of 4.20% on the interest sensitive life block and 5.25% on the traditional life block, based upon the credited rates of the VOBA policies.  The VOBA on a separate acquired block of business used a 7.00% interest rate on the traditional life portion and a 5.40% interest rate on the interest sensitive portion, based upon rates appropriate at the time of acquisition.
Goodwill and Intangible Asset
We established goodwill for the future economic benefits arising from the acquisition of Grange Life.  Goodwill was initially valued at $43.0 million at December 31, 2018.  Subsequent to December 31, 2018, certain post-acquisition adjustments, as defined under the contract, were made that resulted in a decrease of $0.7 million in goodwill.  The goodwill balance was $42.3 million at both December 31, 2021 and December 31, 2020.  Goodwill is included in Other Assets in the Consolidated Balance Sheets.  Under GAAP, goodwill is assessed at least annually for impairment rather than being amortized.  As a result of our impairment assessment, we determined that goodwill was not impaired at December 31, 2021 or December 31, 2020.
The acquisition of Grange Life generated an amortizable intangible asset, which is the difference between the fair value and book value of the net reserve liabilities acquired.  We evaluated the fair value and book value of all other assets and liabilities acquired and no other intangible assets were recognized at acquisition.  The intangible asset was valued at $18.4 million at December 31, 2021 and $19.2 million at December 31, 2020 and is included in Other Assets in the Consolidated Balance Sheets.
Deferred Revenue Liabilities
Deferred revenue liabilities represent the capitalization of revenues received from contracts as compensation for services to be provided by the Company in future periods.  Deferred revenue liabilities are included in Other Policyholder Funds in the Consolidated Balance Sheets and totaled $45.1 million at December 31, 2021 and $35.2 million at December 31, 2020.  Such loads and charges are reported as unearned revenue in the period received and are subsequently recognized as income over the policy benefit period, using the same assumptions and factors used to amortize DAC.  Similar to DAC, these amounts are amortized in relation to estimated gross profits for interest sensitive and variable insurance products.  However, unlike DAC, the amortization of the DRL results in the recognition of revenue rather than expense.  The DRL can be impacted by unlocking and refinements in estimates, as discussed in the following section.
Unlocking and Refinements in Estimates
Models and assumptions used to develop expected gross profits for interest sensitive and variable insurance products are reviewed at least annually based upon management’s current view of future events.  Key assumptions analyzed include net interest income, net realized investments gains and losses, fees, surrender charges, expenses, and mortality gains and losses, net
10
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

of reinsurance.  Management’s view primarily reflects Company experience but can also reflect emerging trends within the industry.  Short-term deviations in experience affect the amortization of DAC, VOBA, and DRL in the period, but do not necessarily indicate that a change to the long-term assumptions of future experience is warranted.  If it is determined that it is appropriate to change the assumptions related to future experience, then an unlocking adjustment is recognized for the block of business being evaluated.  Certain assumptions, such as interest spreads and surrender rates, may be interrelated.  As such, unlocking adjustments often reflect revisions to multiple assumptions.  The DAC, VOBA, or DRL balance is immediately impacted by any assumption changes, with the change reflected through the Consolidated Statements of Comprehensive Income as an unlocking adjustment.  These adjustments can be positive or negative, and adjustments increasing the DAC asset are limited to amounts previously deferred plus interest accrued through the date of the adjustment.
We also consider refinements in estimates due to improved capabilities resulting from administrative or actuarial system enhancements.  We consider such enhancements to determine whether and to what extent they are associated with prior periods or simply improvements in the projection of future expected gross profits due to improved functionality.  To the extent they represent such improvements, these items are applied to DAC, VOBA, and DRL in a manner similar to unlocking adjustments.
The following tables summarize the effects of the refinements in estimates on all products and unlocking of assumptions on interest sensitive products in the Consolidated Statements of Comprehensive Income for the years ended December 31.  Positive numbers are increases to income and negative numbers are reductions to income.   
 
DAC Amortization
  
VOBA Amortization
  
DRL Contract Charges
  
Net Impact to Pre-Tax Income
2021:
              
Unlocking
$ 
  380    
$
  (822 )
 
$
  1,137    
$
  695  
Refinement in estimate
—
    
—
    
—
    
—
  
 
$ 
  380    
$
  (822 )
 
$
  1,137    
$
  695  
                       
2020:
                      
Unlocking
$ 
  (5,219 )
 
$
  (1,593 )
 
$
  3,838    
$
  (2,974 )
Refinement in estimate
—
    
—
    
—
    
—
  
 
$ 
  (5,219 )
 
$
  (1,593 )
 
$
  3,838    
$
  (2,974 )
                       
2019:
                      
Unlocking
$ 
  (350 )
 
$
  (538 )
 
$
  763    
$
  (125 )
Refinement in estimate
708
    
—
    
17
    
725
  
 
$ 
  358    
$
  (538 )
 
$
  780    
$
  600  
The unlocking in 2021 primarily resulted from interest rate fluctuations and the impact of management actions in the low interest rate environment during the period.  The unlocking in 2020 primarily resulted from interest rate fluctuations.  The unlocking in 2019 primarily resulted from unlocking surrender rates and reinsurance as well as refinements of expense loads.  These were partially offset by interest rate fluctuations.  In addition, we recorded a $0.7 million reserve decrease in 2021, a $0.4 million reserve increase in 2020, and a $0.2 million reserve decrease in 2019 related to the impacts of unlocking.
Additional refinements were made in 2019 as a result of the completed review of Grange Life valuation models.  Most refinements were the result of replacing simpler, more aggregate type calculations or assumptions with more detailed plan specifications or assumptions.  We recorded a $3.2 million reserve decrease in 2019 related to the Grange Life model refinements.  In addition, these refinements resulted in a $0.4 million increase in DAC included in the table above.
The impact to pre-tax income of all adjustments related to unlocking and refinements in estimates, including insurance revenues, amortization of DAC and VOBA, and policyholder benefits, was an increase of $1.4 million in 2021, a decrease of $3.4 million in 2020, and an increase of $4.1 million in 2019.
11
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Pensions and Other Postemployment Benefits (OPEB)
The measurement of pension and other postemployment benefit obligations and costs depends on a variety of assumptions.  Changes in the valuation of pension obligations and assets supporting this obligation can significantly impact the funded status.  Assumptions are made regarding the discount rate, expected long-term rate of return on plan assets, health care claim costs, health care cost trends, retirement rates, and mortality.  Generally, the discount rate, expected return on plan assets, and mortality tables have the most significant impact on the cost.  The components of benefit cost are included in Operating Expenses in the Consolidated Statements of Comprehensive Income.  See Note 12 - Pensions and Other Postemployment Benefits for further details.
Separate Accounts and Guaranteed Minimum Withdrawal Benefits (GMWB)
Separate account assets and liabilities arise from the sale of variable universal life insurance and variable annuity products.  The separate account represents funds segregated for the benefit of certain policyholders who bear the investment risk.  The assets are legally segregated and are not subject to claims which may arise from any other business of the Company.  The separate account assets and liabilities, which are equal, are recorded at fair value based upon the NAV of the underlying investment holdings as derived from closing prices on a national exchange or as provided by the issuer.  Policyholder account deposits and withdrawals, investment income, and realized investment gains and losses are excluded from the amounts reported in the Consolidated Statements of Comprehensive Income.  Revenues to the Company from separate accounts are derived from directly-issued policies and contracts, as well as reinsurance assumed business.  These revenues consist principally of contract charges, which include maintenance charges, administrative fees, and mortality and expense charges.  See Note 7 - Separate Accounts for further details.
We offer a GMWB rider that can be added to new or existing variable annuity contracts.  The rider provides an enhanced withdrawal benefit that guarantees a stream of income payments to an owner or annuitant, regardless of the contract account value.  The GMWB rider is included in Other Policyholder Funds in the Consolidated Balance Sheets.  The rider is considered to be a financial derivative and, as such, is accounted for at fair value.  The value of the rider will fluctuate depending on market conditions, but is principally impacted by stock market volatility, interest rates, and equity market returns.  The change in value could have a material impact on earnings.  See Note 4 - Fair Value Measurements and Note 7 - Separate Accounts for further details.
Reinsurance
Consistent with the general practice of the life insurance industry, we enter into traditional indemnity reinsurance agreements with other insurance companies to support sales of selected new products and the in force business.  We cede reinsurance in force on all of the following bases: automatic and facultative; yearly renewable term (YRT) and coinsurance; and excess and quota share basis.  See Note 14 - Reinsurance for additional information pertaining to our significant reinsurers, along with additional information pertaining to reinsurance.
Future Policy Benefits are not reduced for reinsurance ceded in the Consolidated Balance Sheets.  A reinsurance recoverable is established for these items.  Reinsurance recoverables include amounts related to paid benefits and estimated amounts related to unpaid policy and contract claims, future policy benefits, and policyholder account balances.  All insurance related revenues, benefits, and expenses are reported net of reinsurance ceded in the Consolidated Statements of Comprehensive Income.
We have three large reinsurance assumed arrangements.  We acquired a block of traditional life and universal life products in 1997 through a 100% coinsurance and servicing arrangement.  These assumed policies and contracts are accounted for in a manner similar to that used for direct business.  We also acquired a block of variable universal life insurance policies and variable annuity contracts in 2013.  We receive fees based upon both specific transactions and the fund value of the block of policies, as provided under modified coinsurance transactions.  Also, as required under modified coinsurance transaction accounting, the separate account fund balances are not recorded as separate accounts on our financial statements.  The coinsurance portion of the transaction, which is invested in our fixed funds, is included in Future Policy Benefits in the Consolidated Balance Sheets.  We record these fixed fund accounts as a separate block under our general accounts.  We receive fees on both the separate accounts and the fixed fund accounts.  In addition, we completed a 100% assumption reinsurance transaction in 2020 with Sunset Life.  Under GAAP guidance, this transaction was realized at the conclusion of the close of the sale of Sunset Life on November 1, 2021.
12
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Property and Equipment
Property and equipment are stated at cost, depreciated over estimated useful lives using the straight-line method, and are included in Other Assets in the Consolidated Balance Sheets.  The home office complex is depreciated over 10 years to 50 years and furniture and equipment is depreciated over 3 years to 10 years.  The following table provides information about property and equipment at December 31.
 
2021
  
2020
Land
$
  766    
$
  766  
Home office complex
21,798
    
21,591
  
Furniture and equipment
36,313
    
35,962
  
 
58,877
    
58,319
  
Accumulated depreciation
(42,528
 )
  
(38,936
 )
Property and equipment
$
  16,349    
$
  19,383  
Depreciation expense totaled $3.7 million during both 2021 and 2020 and $2.5 million during 2019.
Recognition of Revenues
Premiums
Premiums for traditional life insurance products are reported as revenue when due.  Premiums for immediate annuities with life contingencies are reported as revenue when received.  Premiums on accident and health, disability, and dental insurance are reported as earned ratably over the contract period in proportion to the amount of insurance protection provided.  Premiums are reported net of reinsurance, as applicable.
Contract Charges
Contract charges consist of cost of insurance, expense loads, the amortization of unearned revenues, and surrender charges on policyholder account balances.  Cost of insurance relates to charges for mortality.  These charges are applied to the excess of the mortality benefit over the account value for universal life policies.  Expense loads are amounts that are assessed against the policyholder balance as consideration for origination and maintenance of the contract.  Surrender charges are fees on policyholder account balances upon cancellation or withdrawal of policyholder account balances consistent with policy terms.
An additional component of contract charges is the recognition over time of the DRL for certain fixed and variable universal life policies.  This liability arises from front-end loads on such policies and is recognized into the Consolidated Statements of Comprehensive Income in a manner similar to the amortization of DAC.  If it is determined that it is appropriate to change the assumptions of future experience, then an unlocking adjustment is recognized for the block of business being evaluated.  See the Unlocking and Refinements in Estimates section above for additional information.
Deposits
Deposits related to universal life, fixed annuity contracts, and investment-type products are credited to policyholder account balances.  Deposits are not recorded as revenue and are shown as a Financing Activity in the Consolidated Statements of Cash Flows.  Revenues from such contracts consist of amounts assessed against policyholder account balances for mortality, policy administration, and surrender charges, and are recognized in the period in which the benefits and services are provided as Contract Charges in the Consolidated Statements of Comprehensive Income.
Revenues from Contracts with Customers
We have certain types of non-insurance and non-investment revenue from contracts with customers.  These revenues are recognized when obligations under the terms of the contract are satisfied.  The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those services.  For these revenues, the performance obligation is fulfilled as services are rendered.  These revenues equaled less than 1% of our total revenues for the years ended December 31, 2021 and December 31, 2020 and are not material to our consolidated financial statements.
Realized Gains (Losses)
We realize investment gains and losses from several sources, including write-downs of investments, the change in the allowance for mortgage loan losses, sales of investment securities and real estate, and the change in fair value of equity securities and derivative instruments.
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return that includes Kansas City Life, Sunset Life, Old American, and non-life insurance companies.  Grange Life files a separate federal income tax return.
13
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Deferred income taxes are recorded based on the differences between the tax bases of assets and liabilities and the amounts at which they are reported in the consolidated financial statements.  Recorded amounts are adjusted to reflect changes in income tax rates and other tax law provisions as they become enacted.
Deferred income tax assets are subject to ongoing evaluation of whether such assets will be realized.  The ultimate realization of deferred income tax assets generally depends on the reversal of deferred tax liabilities and the generation of future taxable income and realized gains during the periods in which temporary differences become deductible.  Deferred income taxes include future deductible differences relating to unrealized losses on investment securities.  We evaluate the character and timing of unrealized gains and losses to determine whether future taxable amounts are sufficient to offset future deductible amounts.  A valuation allowance against deferred income tax assets may be required if future taxable income of an appropriate amount and character is not expected.
2. New Accounting Pronouncements
Accounting Pronouncements Issued, Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13 Measurement of Credit Losses on Financial Instruments.  Under this guidance, the incurred loss impairment methodology currently used for loans and other financial instruments will be replaced by a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information concerning credit loss estimates.  The measurement of expected credit losses will be based on current, historical, and forecasted information that impacts the collectability of the reported amount.  Any credit losses related to available for sale debt securities will be recorded through a valuation allowance that is established and adjusted over time.  The valuation allowance will be based on the probability of loss over the life of the instrument.  Our assets subject to this guidance include, but are not limited to, fixed maturity securities available for sale, mortgage loans, and reinsurance recoverables.  Additional disclosures will be required to provide information regarding significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization's portfolio.  The original effective date for this guidance, including subsequently issued amendments, for public business entities that are not U.S. Securities and Exchange Commission (SEC) filers was for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years.  The FASB deferred the effective date of this guidance for public business entities that do not meet the definition of an SEC filer to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.  We are currently evaluating this guidance.
In August 2018, the FASB issued ASU No. 2018-12 Targeted Improvements to the Accounting for Long-Duration Contracts.  This update modifies the existing recognition, measurement, presentation, and disclosure requirements in ASC 944 Financial Services - Insurance (Topic 944).
•
It requires insurance entities to (1) review and update the assumptions used to measure cash flows at least annually and (2) update the discount rate assumption at each reporting date.  The change in the liability estimate as a result of updating cash flow assumptions is required to be recognized in net income.  The change in the liability estimate as a result of updating the discount rate assumption is required to be recognized in other comprehensive income.  Expected future cash flows are required to be discounted at an upper-medium grade (low-credit-risk) fixed income instrument yield that maximizes the use of observable market inputs.
•
It simplifies the accounting for certain market-based options or guarantees associated with deposit contracts by requiring insurance entities to measure them at fair value.  The portion of any change in fair value attributable to a change in the instrument-specific credit risk is required to be recognized in other comprehensive income.
•
It simplifies the amortization of deferred acquisition costs by requiring amortization on a constant level basis over the expected term of the related contracts.  Deferred acquisition costs are required to be written off for unexpected contract terminations but are not subject to an impairment test.
•
It improves the effectiveness of the required disclosures.  It requires an insurance entity to provide disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs.  It also requires disclosures regarding significant inputs, judgments, assumptions, and methods used in measurement, including changes in those inputs, judgments, and assumptions, and the effect of those changes on measurement.
The original effective date for this guidance was for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.  The FASB deferred the effective date of this guidance to fiscal years beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2025.  We are currently evaluating this guidance.
14
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

All other new accounting standards and updates of existing standards issued through the date of this filing were considered by management and did not relate to accounting policies and procedures pertinent to us at this time or were not expected to have a material impact to the consolidated financial statements.
3. Investments
Fixed Maturity Securities
Securities by Asset Class
The following table provides amortized cost and fair value of fixed maturity securities by asset class at December 31, 2021.   
 
Amortized Cost
  
Gross
Unrealized
  
Fair
Value
   
Gains
  
Losses
  
U.S. Treasury securities and
     obligations of U.S. Government
$
 147,884    
$
  12,696    
$
  140    
$
  160,440  
Federal agency issued residential
      mortgage-backed securities 1
70,838
    
4,873
    
13
    
75,698
  
Subtotal
218,722
    
17,569
    
153
    
236,138
  
Corporate obligations:
                      
Industrial
414,391
    
24,897
    
1,570
    
437,718
  
Energy
146,181
    
10,049
    
39
    
156,191
  
Communications and technology
233,390
    
17,208
    
1,046
    
249,552
  
Financial
461,740
    
27,974
    
1,372
    
488,342
  
Consumer
647,861
    
39,707
    
3,107
    
684,461
  
Public utilities
348,164
    
26,765
    
1,578
    
373,351
  
Subtotal
2,251,727
    
146,600
    
8,712
    
2,389,615
  
Corporate private-labeled residential
      mortgage-backed securities
10,641
    
1,403
    
—
    
12,044
  
Municipal securities
232,470
    
36,913
    
428
    
268,955
  
Other
175,317
    
1,162
    
1,082
    
175,397
  
Redeemable preferred stocks
6,000
    
48
    
—
    
6,048
  
Total
$
  2,894,877    
$
  203,695    
$
  10,375    
$
  3,088,197  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
15
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides amortized cost and fair value of fixed maturity securities by asset class at December 31, 2020. 
 
Amortized Cost
  
Gross
Unrealized
  
Fair
Value
   
Gains
  
Losses
  
U.S. Treasury securities and
     obligations of U.S. Government
$
  161,524    
$
  19,910    
$
  5    
$
  181,429  
Federal agency issued residential
      mortgage-backed securities 1
95,934
    
9,976
    
—
    
105,910
  
Subtotal
257,458
    
29,886
    
5
    
287,339
  
Corporate obligations:
                      
Industrial
431,133
    
42,211
    
72
    
473,272
  
Energy
157,735
    
16,128
    
252
    
173,611
  
Communications and technology
221,551
    
28,844
    
16
    
250,379
  
Financial
420,577
    
46,226
    
572
    
466,231
  
Consumer
641,557
    
66,517
    
528
    
707,546
  
Public utilities
327,993
    
44,958
    
174
    
372,777
  
Subtotal
2,200,546
    
244,884
    
1,614
    
2,443,816
  
Corporate private-labeled residential
      mortgage-backed securities
14,568
    
1,670
    
—
    
16,238
  
Municipal securities
218,709
    
45,014
    
5
    
263,718
  
Other
103,709
    
2,288
    
1,334
    
104,663
  
Redeemable preferred stocks
3,000
    
206
    
—
    
3,206
  
Total
$
  2,797,990    
$
  323,948    
$
  2,958    
$
  3,118,980  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
The following table provides information on fixed maturity securities available for sale by actual or equivalent Standard & Poor’s rating at December 31, 2021 with the percent of total unrealized gains (losses) identified.
 
Amortized Cost
  
Fair Value
  
 Unrealized Gains (Losses)
  
%
of Total
AAA
$
 183,920
   
$
  197,319    
$
  13,399    
7
 %
AA
588,506
    
641,837
    
53,331
    
28
 %
A
1,043,384
    
1,114,086
    
70,702
    
37
 %
BBB
1,046,200
    
1,100,183
    
53,983
    
27
 %
Total investment grade
2,862,010
    
3,053,425
    
191,415
    
99
 %
BB
18,424
    
18,720
    
296
    
—
 %
B and below
14,443
    
16,052
    
1,609
    
1
 %
Total below investment grade
32,867
    
34,772
    
1,905
    
1
 %
Total
$
  2,894,877    
$
  3,088,197    
$
  193,320    
100
 %
16
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides information on fixed maturity securities available for sale by actual or equivalent Standard & Poor’s rating at December 31, 2020 with the percent of total unrealized gains (losses) identified.
 
Amortized Cost
  
Fair Value
  
Unrealized Gains (Losses)
  
%
of Total
AAA
$
  168,052    
$
  187,593    
$
  19,541    
6
  %
AA
582,056
    
659,777
    
77,721
    
24
  %
A
998,062
    
1,121,714
    
123,652
    
39
  %
BBB
997,275
    
1,094,842
    
97,567
    
31
  %
Total investment grade
2,745,445
    
3,063,926
    
318,481
    
100
  %
BB
33,508
    
34,652
    
1,144
    
—
  %
B and below
19,037
    
20,402
    
1,365
    
—
  %
Total below investment grade
52,545
    
55,054
    
2,509
    
—
  %
Total
$
  2,797,990    
$
  3,118,980    
$
  320,990    
100
  %
Contractual Maturities
The following table provides the distribution of maturities for fixed maturity securities available for sale.  Expected maturities may differ from these contractual maturities since issuers or borrowers may have the right to call or prepay obligations. 
 
December 31, 2021
  
December 31, 2020
 
Amortized Cost
  
Fair Value
  
Amortized Cost
  
Fair Value
Due in one year or less
$
  121,297    
$
  122,979    
$
  119,638    
$
  121,163  
Due after one year through five years
843,382
    
893,131
    
852,605
    
924,353
  
Due after five years through ten years
851,116
    
904,165
    
930,841
    
1,048,706
  
Due after ten years
918,209
    
994,023
    
704,520
    
812,915
  
Securities with variable principal payments
154,873
    
167,851
    
187,386
    
208,637
  
Redeemable preferred stocks
6,000
    
6,048
    
3,000
    
3,206
  
Total
$
  2,894,877    
$
  3,088,197    
$
  2,797,990    
$
  3,118,980  

17
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Unrealized Losses on Investments
At the end of each quarter, all fixed maturity securities are reviewed to determine whether impairments exist and whether other-than-temporary impairments should be recorded.  This quarterly process includes an assessment of the credit quality of each investment in the entire securities portfolio.  Additional reporting and review procedures are conducted for those securities where fair value is less than 90% of amortized cost.  A formal review document is prepared no less often than quarterly of all investments where fair value is less than 80% of amortized cost for six months or more and selected investments that have changed significantly from a previous period and that have a decline in fair value greater than 10% of amortized cost.
We consider relevant facts and circumstances in evaluating whether the impairment of a security is other-than-temporary.  Relevant facts and circumstances considered include but are not limited to:
•
The current fair value of the security as compared to amortized cost;
•
The credit rating of the security;
•
The extent and the length of time the fair value has been below amortized cost;
•
The financial position of the issuer, including the current and future impact of any specific events, material declines in the issuer’s revenues, margins, cash positions, liquidity issues, asset quality, debt levels, and income results;
•
Significant management or organizational changes of the issuer;
•
Significant uncertainty regarding the issuer’s industry;
•
Violation of financial covenants;
•
Consideration of information or evidence that supports timely recovery;
•
The intent and ability to hold a security until it recovers in value;
•
Whether we intend to sell a fixed maturity security and whether it is more likely than not that we will be required to sell a fixed maturity security before recovery of the amortized cost basis; and
•
Other business factors related to the issuer’s industry.
To the extent we determine that a fixed maturity security is deemed to be other-than-temporarily impaired, the portion of the impairment that is deemed to be due to credit is charged to earnings in the Consolidated Statements of Comprehensive Income and the cost basis of the underlying investment is reduced.  The portion of such impairment that is determined to be non-credit-related is reflected in Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss).
There are a number of significant risks and uncertainties inherent in the process of monitoring impairments, determining if an impairment is other-than-temporary, and determining the portion of an other-than-temporary impairment that is due to credit.  These risks and uncertainties include but are not limited to:
•
The risk that our assessment of an issuer’s ability to meet all of its contractual obligations will change based on changes in the credit characteristics of that issuer;
•
The risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated;
•
The risk that the performance of the underlying collateral for securities could deteriorate in the future and credit enhancement levels and recovery values do not provide sufficient protection to contractual principal and interest;
•
The risk that fraudulent, inaccurate, or misleading information could be provided to our credit, investment, and accounting professionals who determine the fair value estimates and accounting treatment for securities;
•
The risk that actions of trustees, custodians, or other parties with interests in the security may have an unforeseen adverse impact on our investments;
•
The risk that new information obtained or changes in other facts and circumstances may lead us to change our intent to sell the security before it recovers in value;
•
The risk that facts and circumstances change such that it becomes more likely than not that we will be required to sell the investment before recovery of the amortized cost basis; and
•
The risk that the methodology or assumptions used to develop estimates of the portion of impairments due to credit prove, over time, to be inaccurate or insufficient.
Any of these situations could result in a charge to income in a future period.
Once a security is determined to have met certain of the criteria for consideration as being other-than-temporarily impaired, further information is gathered and evaluated pertaining to the particular security.  If the security is an unsecured obligation, the additional research is a top-down approach with particular emphasis on the likelihood of the issuer to meet the contractual terms of the obligation.  If the security is secured by an asset or guaranteed by another party, the value of the underlying secured asset or the financial ability of the third-party guarantor is evaluated as a secondary source of repayment.  Such research is based
18
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
upon a top-down approach, narrowing to the specific estimates of value and cash flow of the underlying secured asset or guarantor.  If the security is a collateralized obligation, such as a mortgage-backed or other asset-backed instrument, research is also conducted to obtain and analyze the performance of the collateral relative to expectations at the time of acquisition and with regard to projections for the future.  Such analyses are based upon historical results, trends, comparisons to collateral performance of similar securities, and analyses performed by third parties.  This information is used to develop projected cash flows that are compared to the amortized cost of the security.
We may selectively determine that we no longer intend to hold a specific issue to its maturity.  If we make this determination and the fair value is less than the cost basis, the investment is written down to the fair value and an other-than-temporary impairment is recorded.  Subsequently, we seek to obtain the best possible outcome available for this specific issue and record an investment gain or loss at the disposal date.  The Company recorded a $0.5 million impairment of this kind in the year ended December 31, 2021.  No impairments of this kind were recorded in the year ended December 31, 2020.  The Company recorded a $0.6 million impairment of this kind in the year ended December 31, 2019.
A discounted future cash flow calculation becomes the primary determinant of whether any portion and to what extent an unrealized loss is due to credit on loan-backed and similar asset-backed securities.  Such indications typically include below investment grade ratings and significant unrealized losses for an extended period of time, among other factors.  If an impairment is deemed necessary, it is recognized as a realized loss in the Consolidated Statements of Comprehensive Income and the carrying value of the security is written down by the same amount.  The portion of an impairment that is determined not to be due to credit is recorded as a component of Accumulated Other Comprehensive Income (Loss) in the Consolidated Balance Sheets.  We identified 10 non-U.S. agency mortgage-backed securities that were determined to have such indications at both December 31, 2021 and December 31, 2020.  A discounted future cash flow analysis was performed for each of these securities to determine if any portion of the impairment was due to credit and deemed to be other-than-temporary.  The discount rate used in calculating the present value of future cash flows was the investment yield at the time of purchase for each security.  The initial default rates were assumed to remain constant or grade down over time, reflecting our estimate of stabilized collateral performance in the future for such securities.  Impairments of this kind totaling less than $0.1 million were recorded in the years ended December 31, 2021 and December 31, 2020.  No impairments of this kind were recorded in the year ended December 31, 2019.
Significant unrealized losses on securities can continue for extended periods of time, particularly for certain individual securities.  While this can be an indication of potential credit impairments, it can also be an indication of illiquidity in a particular sector or security.  In addition, the fair value of an individual security can be heavily influenced by the complexities of varying market sentiment or uncertainty regarding the prospects for an individual security.  Based upon the process described above, we are best able to determine if and to what extent credit impairment may exist in these securities by performing present value calculations of projected future cash flows at the conclusion of each reporting period.  By reviewing the most recent data available regarding the security and other relevant industry and market factors, we can modify assumptions used in the cash flow projections and determine the best estimate of the portion of any impairment that is due to credit at the conclusion of each period.
19
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides information regarding fixed maturity securities available for sale with unrealized losses by asset class and by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2021.
 
Less Than 12 Months
    
12 Months or Longer
    
Total
  
 
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
  
U.S. Treasury securities and
      obligations of U.S. Government
$
2,973
    
$
60
    
$
1,843
    
$
80
    
$
4,816
    
$
140
  
Federal agency issued residential
      mortgage-backed securities 1
  
2,828
      
13
      
3
      
—
      
2,831
      
13
  
Subtotal
  
5,801
      
73
      
1,846
      
80
      
7,647
      
153
  
Corporate obligations:
                                              
Industrial
  
56,250
      
1,146
      
7,070
      
424
      
63,320
      
1,570
  
Energy
  
1,045
      
39
      
—
      
—
      
1,045
      
39
  
Communications and technology
  
30,492
      
909
      
2,297
      
137
      
32,789
      
1,046
  
Financial
  
46,844
      
727
      
19,592
      
645
      
66,436
      
1,372
  
Consumer
  
80,069
      
2,535
      
9,722
      
572
      
89,791
      
3,107
  
Public utilities
  
35,473
      
969
      
11,702
      
609
      
47,175
      
1,578
  
Subtotal
  
250,173
      
6,325
      
50,383
      
2,387
      
300,556
      
8,712
  
Municipal securities
  
16,300
      
308
      
2,258
      
120
      
18,558
      
428
  
Other
  
26,604
      
135
      
13,278
      
947
      
39,882
      
1,082
  
Total
$
298,878
    
$
6,841
    
$
67,765
    
$
3,534
    
$
366,643
    
$
10,375
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
The following table provides information regarding fixed maturity securities available for sale with unrealized losses by asset class and by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2020.
 
Less Than 12 Months
    
12 Months or Longer
    
Total
  
 
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
    
Fair
Value
    
Unrealized
Losses
  
U.S. Treasury securities and
      obligations of U.S. Government
$
1,917
    
$
5
    
$
—
    
$
—
    
$
1,917
    
$
5
  
Federal agency issued residential
      mortgage-backed securities 1
  
—
      
—
      
8
      
—
      
8
      
—
  
Subtotal
  
1,917
      
5
      
8
      
—
      
1,925
      
5
  
Corporate obligations:
                                              
Industrial
  
10,613
      
72
      
—
      
—
      
10,613
      
72
  
Energy
  
4,277
      
252
      
—
      
—
      
4,277
      
252
  
Communications and technology
  
2,442
      
16
      
—
      
—
      
2,442
      
16
  
Financial
  
15,023
      
324
      
5,643
      
248
      
20,666
      
572
  
Consumer
  
12,819
      
528
      
—
      
—
      
12,819
      
528
  
Public utilities
  
12,202
      
174
      
—
      
—
      
12,202
      
174
  
Subtotal
  
57,376
      
1,366
      
5,643
      
248
      
63,019
      
1,614
  
Municipal securities
  
1,218
      
5
      
—
      
—
      
1,218
      
5
  
Other
  
6,935
      
21
      
16,188
      
1,313
      
23,123
      
1,334
  
Total
$
67,446
    
$
1,397
    
$
21,839
    
$
1,561
    
$
89,285
    
$
2,958
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
20
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides information regarding the number of fixed maturity securities with unrealized losses at December 31.
 
2021
  
2020
Below cost for less than one year
185
    
41
  
Below cost for one year or more and less than three years
36
    
4
  
Below cost for three years or more
—
    
—
  
Total
221
    
45
  
We do not consider the unrealized losses related to these securities to be credit-related.  The unrealized losses at both December 31, 2021 and December 31, 2020 primarily related to changes in interest rates and market spreads subsequent to purchase.  A substantial portion of investment securities that have unrealized losses are either corporate debt issued with investment grade credit ratings or other investment securities.  Included in other investment securities are commercial mortgage-backed securities and asset-backed securities.
The following table summarizes investments in fixed maturity securities available for sale with unrealized losses at December 31, 2021.
 
Amortized
Cost
  
Fair
Value
  
Gross Unrealized
Losses
Securities owned without realized impairment:
                
Unrealized losses of 10% or less
$
375,032
    
$
364,870
    
$
10,162
  
Unrealized losses of 20% or less and greater than 10%
  
1,986
      
1,773
      
213
  
Subtotal
  
377,018
      
366,643
      
10,375
  
Unrealized losses greater than 20%:
                      
Investment grade
  
—
      
—
      
—
  
Below investment grade
  
—
      
—
      
—
  
Total securities owned without realized impairment
  
377,018
      
366,643
      
10,375
  
                       
Securities owned with realized impairment:
                      
Unrealized losses of 10% or less
  
—
      
—
      
—
  
Unrealized losses of 20% or less and greater than 10%
  
—
      
—
      
—
  
Unrealized losses greater than 20%
  
—
      
—
      
—
  
Total securities owned with realized impairment
  
—
      
—
      
—
  
Total
$
377,018
    
$
366,643
    
$
10,375
  
21
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table summarizes investments in fixed maturity securities available for sale with unrealized losses at December 31, 2020.
 
Amortized
Cost
  
Fair
Value
  
Gross Unrealized
Losses
Securities owned without realized impairment:
                
Unrealized losses of 10% or less
$
88,214
    
$
85,919
    
$
2,295
  
Unrealized losses of 20% or less and greater than 10%
  
1,983
      
1,780
      
203
  
Subtotal
  
90,197
      
87,699
      
2,498
  
Unrealized losses greater than 20%:
                      
Investment grade
  
2,046
      
1,586
      
460
  
Below investment grade
  
—
      
—
      
—
  
Total securities owned without realized impairment
  
92,243
      
89,285
      
2,958
  
                       
Securities owned with realized impairment:
                      
Unrealized losses of 10% or less
  
—
      
—
      
—
  
Unrealized losses of 20% or less and greater than 10%
  
—
      
—
      
—
  
Unrealized losses greater than 20%
  
—
      
—
      
—
  
Total securities owned with realized impairment
  
—
      
—
      
—
  
Total
$
92,243
    
$
89,285
    
$
2,958
  
The following table provides information on fixed maturity securities available for sale with unrealized losses by actual or equivalent Standard & Poor’s rating at December 31, 2021.
 
Fair
Value
 		  
%
of Total
 		  
Gross Unrealized
Losses
 		  
%
of Total
 
AAA
$
11,121
      
3
%
  
$
326
      
3
%
AA
  
51,904
      
14
%
    
1,537
      
15
%
A
  
145,334
      
40
%
    
4,308
      
41
%
BBB
  
156,235
      
42
%
    
4,134
      
40
%
Total investment grade
  
364,594
      
99
%
    
10,305
      
99
%
BB
  
2,049
      
1
%
    
70
      
1
%
B and below
  
—
      
—
%
    
—
      
—
%
Total below investment grade
  
2,049
      
1
%
    
70
      
1
%
 
$
366,643
      
100
%
  
$
10,375
      
100
%
22
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides information on fixed maturity securities available for sale with unrealized losses by actual or equivalent Standard & Poor’s rating at December 31, 2020.
 
Fair
Value
  
%
of Total
  
Gross Unrealized
Losses
  
%
of Total
AAA
$
4,997
      
6
%
  
$
—
      
—
%
AA
  
26,847
      
30
%
    
1,609
      
54
%
A
  
23,219
      
26
%
    
263
      
9
%
BBB
  
29,407
      
33
%
    
408
      
14
%
Total investment grade
  
84,470
      
95
%
    
2,280
      
77
%
BB
  
3,229
      
3
%
    
218
      
7
%
B and below
  
1,586
      
2
%
    
460
      
16
%
Total below investment grade
  
4,815
      
5
%
    
678
      
23
%
 
$
89,285
      
100
%
  
$
2,958
      
100
%
Our residential mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities that were rated below investment grade represented 30% of the fair value of the total below investment grade securities as of December 31, 2021, compared to 27% at December 31, 2020.
We held no non-income producing securities at December 31, 2021 or December 31, 2020.
We did not hold securities of any corporation and its affiliates that exceeded 10% of stockholders' equity at December 31, 2021 or December 31, 2020.
23
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
We monitor structured securities through a combination of an analysis of vintage, credit ratings, and other factors.  Structured securities include asset-backed, residential mortgage-backed securities, collateralized debt obligations, and other collateralized obligations.
The following tables identify structured securities by credit ratings for all vintages owned at December 31.
 
2021
  
 
Fair
Value
    
Amortized
Cost
    
Unrealized Gains (Losses)
  
Corporate private-labeled residential mortgage-backed securities:
                
Investment grade
$
1,506
    
$
1,498
    
$
8
  
Below investment grade
  
10,538
      
9,143
      
1,395
  
Total residential & non-agency mortgage-backed securities
  
12,044
      
10,641
      
1,403
  
Other structured securities:
                      
Investment grade
  
175,397
      
175,317
      
80
  
Below investment grade
  
—
      
—
      
—
  
Total other structured securities
  
175,397
      
175,317
      
80
  
Total structured securities
$
187,441
    
$
185,958
    
$
1,483
  

 
2020
  
 
Fair
Value
  
Amortized
Cost
  
Unrealized
Gains (Losses)
Corporate private-labeled residential mortgage-backed securities:
                
Investment grade
$
1,575
    
$
1,573
    
$
2
  
Below investment grade
  
14,663
      
12,995
      
1,668
  
Total residential & non-agency mortgage-backed securities
  
16,238
      
14,568
      
1,670
  
Other structured securities:
                      
Investment grade
  
104,663
      
103,709
      
954
  
Below investment grade
  
—
      
—
      
—
  
Total other structured securities
  
104,663
      
103,709
      
954
  
Total structured securities
$
120,901
    
$
118,277
    
$
2,624
  
The following table provides a reconciliation of credit losses recognized in earnings on fixed maturity securities for which a portion of the other-than-temporary impairment loss was recognized in Other Comprehensive Income (Loss) for the years ended December 31.
 
2021
  
2020
  
2019
Credit losses on securities held at the beginning of the year
$
3,884
    
$
4,445
    
$
4,381
  
Additional credit losses on securities for which an other-than-
     temporary impairment was recognized
  
482
      
19
      
584
  
Reductions for securities sold
  
(370
)
    
(580
)
    
(520
)
Credit losses on securities held at the end of the year
$
3,996
    
$
3,884
    
$
4,445
  
24
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides the net unrealized gains (losses) reported in Accumulated Other Comprehensive Income (Loss) on our investments in securities available for sale, at December 31.
   
2021
  
2020
  
2019
Net unrealized gains
  
$
193,320
    
$
320,990
    
$
174,281
  
Amounts resulting from:
                        
DAC, VOBA, and DRL
    
(15,924
)
    
(25,982
)
    
(16,096
)
Policyholder liabilities
    
(33,877
)
    
(45,582
)
    
(25,480
)
Deferred income taxes
    
(30,139
)
    
(52,380
)
    
(27,866
)
Total
  
$
113,380
    
$
197,046
    
$
104,839
  

Investment Revenues
The following table provides investment revenues by major category for the years ended December 31.
   
2021
  
2020
  
2019
Gross investment income:
                  
Fixed maturity securities
  
$
103,697
    
$
107,125
    
$
108,421
  
Equity securities
    
433
      
612
      
1,019
  
Mortgage loans
    
28,661
      
26,804
      
28,257
  
Real estate
    
21,202
      
22,586
      
20,919
  
Policy loans
    
5,625
      
5,758
      
5,974
  
Short-term investments
    
9
      
318
      
1,345
  
Other investments
    
220
      
160
      
118
  
Total
    
159,847
      
163,363
      
166,053
  
Less investment expenses
    
(17,379
)
    
(17,679
)
    
(17,704
)
Net investment income
  
$
142,468
    
$
145,684
    
$
148,349
  

Investment Gains (Losses)
The following table provides net investment gains (losses) by major category for the years ended December 31.
   
2021
  
2020
  
2019
Fixed maturity securities
  
$
4,216
    
$
4,955
    
$
2,139
  
Equity securities
    
(232
)
    
66
      
847
  
Mortgage loans
    
62
      
(18
)
    
293
  
Real estate
    
16,597
      
14,649
      
2,589
  
Other investments
    
4,774
      
2,183
      
3,265
  
Net investment gains
  
$
25,417
    
$
21,835
    
$
9,133
  
25
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides detail concerning investment gains and losses for the years ended December 31. 
   
2021
  
2020
  
2019
Gross gains resulting from:
                  
Sales of investment securities
  
$
631
    
$
283
    
$
138
  
Investment securities called and other
    
4,510
      
4,776
      
2,654
  
Sale of real estate and joint ventures
    
16,647
      
14,889
      
2,589
  
Total gross gains
    
21,788
      
19,948
      
5,381
  
Gross losses resulting from:
                        
Sales of investment securities
    
(118
)
    
(5
)
    
(62
)
Investment securities called and other
    
(325
)
    
(80
)
    
(7
)
Sale of real estate and joint ventures
    
(50
)
    
(240
)
    
—
  
Total gross losses
    
(493
)
    
(325
)
    
(69
)
Change in allowance for loan losses
    
62
      
(18
)
    
293
  
Change in fair value:
                        
Equity securities
    
(232
)
    
66
      
847
  
Derivative instruments
    
4,774
      
2,183
      
3,265
  
Total change in fair value
    
4,542
      
2,249
      
4,112
  
Net realized investment gains, excluding
      other-than-temporary impairment losses
    
25,899
      
21,854
      
9,717
  
Net impairment losses recognized in earnings:
                        
Other-than-temporary impairment losses on
  fixed maturity securities
    
(467
)
    
—
      
(580
)
Portion of loss recognized in other
  comprehensive income (loss)
    
(15
)
    
(19
)
    
(4
)
Net other-than-temporary impairment losses
     recognized in earnings
    
(482
)
    
(19
)
    
(584
)
Net investment gains
  
$
25,417
    
$
21,835
    
$
9,133
  
The portion of loss recognized in Other Comprehensive Income (Loss) represents the non-credit portion of current or prior other-than-temporary impairment.  Other-than-temporary impairments of $0.5 million were recorded in earnings during the year ended December 31, 2021.  Other-than-temporary impairments of less than $0.1 million were recorded in earnings during the year ended December 31, 2020.  Other-than-temporary impairments of $0.6 million were recorded in earnings during the year ended December 31, 2019.
Proceeds from Sales of Investment Securities
The following table provides proceeds from the sale of fixed maturity and equity securities, excluding maturities and calls, for the years ended December 31.
   
2021
  
2020
  
2019
Proceeds
  
$
42,779
    
$
18,899
    
$
9,615
  

26
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Mortgage Loans
Investments in mortgage loans totaled $596.0 million at December 31, 2021, compared to $601.6 million at December 31, 2020.  Our mortgage loans are secured by commercial real estate and are stated at cost, adjusted for premium amortization and discount accretion, less an allowance for loan losses.  We believe this allowance is at a level adequate to absorb estimated credit losses and was $2.8 million at December 31, 2021 and $2.9 million at December 31, 2020.  Our periodic evaluation and assessment of the adequacy of the allowance is based on known and inherent risks in the portfolio, historical and industry data, current economic conditions, and other relevant factors.  Please see Note 5 - Financing Receivables for additional information.  We do not hold mortgage loans from any single borrower that exceed 5% of stockholders' equity.
Commercial mortgage loans represented 15% of our total investments at both December 31, 2021 and December 31, 2020.  New commercial loans, including refinanced loans, totaled $118.5 million during 2021 and $116.6 million during 2020.  The level of new commercial mortgage loans in any year is influenced by market conditions, as we respond to changes in interest rates, available spreads, borrower demand, and opportunities to acquire loans that meet our yield and quality thresholds.  The average loan balance was $1.9 million at both December 31, 2021 and December 31, 2020.
In addition to the subject collateral underlying the mortgage, we may require some amount of recourse from borrowers as another potential source of repayment should the loan default.  Any recourse requirement deemed necessary is determined as part of the underwriting requirements of each loan.  We added 42 new loans to the portfolio during 2021, and 95% of the total balance of these loans had some amount of recourse requirement.  The average loan-to-value ratio for the overall portfolio was 46% at both December 31, 2021 and December 31, 2020.  This ratio is based upon the current balance of loans relative to the appraisal of value at the time the loan was originated or acquired.  Additionally, we may receive fees when borrowers prepay their mortgage loans.  We have certain mortgage loans that have an unamortized premium, totaling less than $0.1 million at December 31, 2021 and $0.1 million at December 31, 2020.
The following table identifies the gross mortgage loan principal outstanding and the allowance for loan losses at December 31.
   
2021
  
2020
Principal outstanding
  
$
598,829
    
$
604,461
  
Allowance for loan losses
    
(2,792
)
    
(2,854
)
Carrying value
  
$
596,037
    
$
601,607
  
The following table summarizes the amount of mortgage loans at December 31, segregated by year of origination.  Purchased loans are shown in the year acquired by the Company, although the individual loans may have been initially originated in prior years. 
 
2021
  
%
of Total
  
2020
  
%
of Total
Prior to 2013
$
38,361
     6
%
  
$
58,503
    
10
%
2013
  
17,663
     3
%
    
24,691
    
4
%
2014
  
12,409
    
2
%
    
23,100
    
4
%
2015
  
64,001
    
11
%
    
85,634
    
14
%
2016
  
89,144
    
15
%
    
123,992
    
21
%
2017
  
74,107
    
12
%
    
83,921
    
14
%
2018
  
46,809
    
8
%
    
60,198
    
10
%
2019
  
27,930
    
5
%
    
28,729
    
5
%
2020
  
111,596
    
19
%
    
115,693
    
18
%
2021
  
116,809
    
19
%
    
—
    
—
%
Principal outstanding
$
598,829
    
100
%
  
$
604,461
    
100
%
27
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table identifies mortgage loans by geographic location at December 31. 
 
2021
  
%
of Total
  
2020
  
%
of Total
Pacific
$
125,167
    
21
%
  
$
115,867
    
19
%
East north central
  
102,759
    
17
%
    
91,255
    
15
%
West south central
  
81,083
    
14
%
    
84,346
    
14
%
South Atlantic
  
72,021
    
12
%
    
92,688
    
15
%
Mountain
  
70,415
    
12
%
    
47,787
    
8
%
West north central
  
64,416
    
11
%
    
64,368
    
11
%
Middle Atlantic
  
42,691
    
7
%
    
58,146
    
10
%
East south central
  
29,108
    
5
%
    
41,928
    
7
%
New England
  
11,169
    
1
%
    
8,076
    
1
%
Principal outstanding
$
598,829
    
100
%
  
$
604,461
    
100
%
The following table identifies the concentration of mortgage loans by state greater than 5% of total at December 31. 
 
2021
  
%
of Total
  
2020
  
%
of Total
Texas
$
80,716
    
13
%
  
$
83,655
    
14
%
California
  
80,037
    
13
%
    
85,805
    
14
%
Ohio
  
52,651
    
9
%
    
50,293
    
8
%
Minnesota
  
45,787
    
8
%
    
44,063
    
7
%
Florida
  
36,796
    
6
%
    
41,847
    
7
%
Arizona
  
27,592
    
5
%
    
24,201
    
4
%
New Jersey
  
18,378
    
3
%
    
31,667
    
5
%
All others
  
256,872
    
43
%
    
242,930
    
41
%
Principal outstanding
$
598,829
    
100
%
  
$
604,461
    
100
%
The following table identifies mortgage loans by property type at December 31.   
 
2021
  
%
of Total
  
2020
  
%
of Total
Industrial
$
424,553
    
71
%
  
$
421,181
    
70
%
Office
  
102,547
    
17
%
    
115,610
    
19
%
Retail
  
33,019
    
6
%
    
36,498
    
6
%
Other 1
  
38,710
    
6
%
    
31,172
    
5
%
Principal outstanding
$
598,829
    
100
%
  
$
604,461
    
100
%
1  The Other category consists principally of medical properties and apartments.
The following table identifies mortgage loans by maturity at December 31.
 
2021
  
%
of Total
  
2020
  
%
of Total
Due in one year or less
$
11,120
    
2
%
  
$
7,749
    
1
%
Due after one year through five years
  
16,347
    
3
%
    
26,370
    
4
%
Due after five years through ten years
  
315,404
    
53
%
    
234,786
    
39
%
Due after ten years
  
255,958
    
42
%
    
335,556
    
56
%
Principal outstanding
$
598,829
    
100
%
  
$
604,461
    
100
%
28
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table identifies the commercial mortgage portfolio by current loan balance as a percentage of the appraised value at the time of origination at December 31. 
 
2021
  
%
of Total
  
2020
  
%
of Total
70% or greater
$
70,951
    
12
%
  
$
72,403
    
12
%
50% to 69%
  
339,120
    
57
%
    
337,336
    
56
%
Less than 50%
  
188,758
    
31
%
    
194,722
    
32
%
Principal outstanding
$
598,829
    
100
%
  
$
604,461
    
100
%
We diversify our commercial mortgage loan portfolio both geographically and by property type to reduce certain risks, including local and regional physical and economic exposures.  However, diversification may not always sufficiently mitigate these risks.  Concentration risk exposes us to potential losses from an economic downturn, certain catastrophes, and natural disasters that may affect geographic locations where we have mortgage loans.  We would not expect an occurrence in any of these geographic locations to have a material adverse effect on our business, financial position, or financial statements.  However, we cannot provide assurance that such risks could not have such material adverse effects.
Under the laws of certain states, environmental contamination of a property may result in a lien on the property to secure recovery of the costs of cleanup.  In some states, such a lien has priority over the lien of an existing mortgage against such property.  As a commercial mortgage lender, we customarily conduct environmental assessments prior to making commercial mortgage loans secured by real estate and before taking title on real estate.  Based on our environmental assessments, we believe that any compliance costs associated with environmental laws and regulations or any remediation of affected properties would not have a material adverse effect on our business, financial position, or financial statements.  However, we cannot provide assurance that material compliance costs will not be incurred.
We may refinance commercial mortgage loans prior to contractual maturity as a means of retaining loans that meet our underwriting and pricing parameters.  We refinanced eight loans with a total outstanding balance of $14.5 million during the year ended December 31, 2021.  We refinanced seven loans with a total outstanding balance of $7.6 million during the year ended December 31, 2020.  None of these refinancings were the result of troubled debt restructuring.
At December 31, 2021, we did not have any loan defaults.  However, we continue to work with our borrowers to understand the potential strain resulting from the current economic environment.  As of December 31, 2021, no material contract modifications, deferrals, or forbearance agreements had been executed.  However, certain short-term deferrals of principal and interest on a small portion of the mortgage loan portfolio were granted during 2020 related to the COVID-19 pandemic and the associated economic impacts.  The mortgage loan deferrals that were granted in 2020 concluded and were fully repaid in 2021.  We continue to closely monitor our mortgage loan portfolio and work closely with borrowers who are negatively impacted by the COVID-19 pandemic.
In the normal course of business, we commit to fund commercial mortgage loans generally up to 120 days in advance.  These commitments typically have fixed expiration dates.  A small percentage of commitments expire due to the borrower's failure to deliver the requirements of the commitment by the expiration date.  In these cases, the commitment fee is retained.  For additional information, please see Note 20 - Commitments, Contingent Liabilities, Guarantees, and Indemnifications.
29
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Real Estate
The following table provides information concerning real estate investments by major category at December 31.
 
2021
  
2020
Land
$
56,075
    
$
30,356
  
Buildings
  
131,919
      
159,322
  
Less accumulated depreciation
  
(48,690
)
    
(48,325
)
Real estate, commercial
  
139,304
      
141,353
  
Real estate, joint ventures
  
2,974
      
24,050
  
Total
$
142,278
    
$
165,403
  
Investment real estate is depreciated on a straight-line basis over periods ranging from 3 years to 60 years.  We had real estate sales of $51.0 million during 2021, $29.7 million during 2020, and $2.7 million during 2019.  In the fourth quarter of 2021, we completed the acquisition of 100% membership interests of certain land and buildings in three separate limited liability companies in Urbandale, Iowa for $36.0 million.  This acquisition terminated an arrangement previously identified as a real estate joint venture in 2020 discussed in the following paragraph.
We had $3.0 million in real estate joint ventures at December 31, 2021, compared with $24.1 million at December 31, 2020.  At December 31, 2020, we were the holder of all shares in three subsidiary real estate joint ventures with a combined carrying value of $20.3 million.  Each of the three subsidiary real estate limited liability companies held a 50% interest in three separate joint ventures, all based in Urbandale, Iowa.  Our position in these joint ventures was terminated during 2021.
The Company periodically reviews its real estate and real estate joint ventures for impairment and tests for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable and exceeds its estimated fair value.  For equity method investees, we consider financial and other information provided by the investee as well as other known information, including recent market activity and prospects for future activity, in determining whether an impairment has occurred.  Based on our reviews performed, we concluded that no impairment existed as of December 31, 2021 or 2020.
During 2020, certain tenants were granted real estate rent deferrals.  These tenants were brought current within the agreed-upon terms and returned to the original payment schedules during 2021.  We continue to monitor our real estate portfolio regarding additional strain resulting from the current economic environment.
We had non-income producing commercial real estate, consisting of vacant properties and properties under development, of $41.0 million at December 31, 2021, compared to $10.6 million at December 31, 2020.  None of our real estate joint ventures were non-income producing at December 31, 2021 compared to $11.8 million at December 31, 2020.
30
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
4. Fair Value Measurements
Under GAAP, fair value represents the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date.  We maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.
We categorize our financial assets and liabilities measured at fair value in three levels, based on the inputs and assumptions used to determine the fair value.  These levels are as follows:
Level 1 - Valuations are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 - Valuations are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.  Valuations are obtained from a third-party pricing service or inputs that are observable or derived principally from or corroborated by observable market data.
Level 3 - Valuations are generated from techniques that use significant assumptions not observable in the market.  These unobservable assumptions reflect our assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include the use of discounted cash flow models, spread-based models, and similar techniques, using the best information available in the circumstances.
Following is a description of valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value for financial instruments not recorded at fair value but for which fair value is disclosed.
Assets
Fixed Maturity and Equity Securities
Fixed maturity securities available for sale and equity securities are recorded at fair value on a recurring basis.  Fair value measurement is based upon unadjusted quoted prices, if available, except as described in the subsequent paragraphs.
Short-Term Investments
Short-term investments include highly-liquid investments in institutional money market funds that are carried at NAV.  The carrying value of short-term investments approximates the fair value and are categorized as Level 1.  Fair value is provided for disclosure purposes only.
Other Investments
Other investments include hedge positions classified as derivatives that are established in relation to the Company's indexed universal life portfolio.  These positions are recorded at fair value and are classified as Level 3.

Separate Accounts
The separate account assets and liabilities, which are equal, are recorded at fair value based upon NAV of the underlying investment holdings as derived from closing prices on a national exchange or as provided by the issuer.  This is the value at which a policyholder could transact with the issuer on that date.  Separate accounts are categorized as Level 2.
Liabilities
Investment-Type Liabilities Included in Policyholder Account Balances and Other Policyholder Funds
The fair values of supplementary contracts and annuities without life contingencies are estimated to be the present value of payments at a market yield.  The fair values of deposits with no stated maturity are estimated to be the amount payable on demand at the measurement date.  These liabilities are categorized as Level 3.  We have not estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts.  Insurance contracts are excluded from financial instruments that require disclosures of fair value.
Reserves established in relation to the Company's hedge positions on its indexed universal life portfolio are considered to be financial derivatives and are accounted for at fair value.  These reserves are classified as level 3.
Guaranteed Minimum Withdrawal Benefits Included in Other Policyholder Funds
Fair value for GMWB rider contracts is a Level 3 valuation, as it is based on models which utilize significant unobservable inputs.  These models require actuarial and financial market assumptions, which reflect the assumptions market participants would use in pricing the contract, including adjustments for volatility, risk, and issuer non-performance.
31
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Determination of Fair Value
We utilized external third-party pricing services at both December 31, 2021 and December 31, 2020 to determine the majority of our fair values on fixed maturity and equity securities.  At December 31, 2021, approximately 90% of the carrying value of these investments was from an external pricing service, 10% was from brokers, and less than 1% was derived from internal matrices and calculations.  At December 31, 2020, approximately 92% of the carrying value of these investments was from an external pricing service, 5% was from brokers, and 3% was derived from internal matrices and calculations.  We review prices received from service providers for reasonableness and unusual fluctuations but generally accept the price identified from the pricing service.  In the event a price is not available from the third-party pricing service, we pursue external pricing from brokers.  Generally, we pursue and utilize only one broker quote per security.  In doing so, we solicit only brokers which have previously demonstrated knowledge and experience of the subject security.  If a broker price is not available, we determine a fair value through various valuation techniques that may include discounted cash flows, spread-based models, or similar techniques, depending upon the specific security to be priced.  These techniques are primarily applied to private placement securities.  We utilize available market information, wherever possible, to identify inputs into the fair value determination, primarily prices and spreads on comparable securities.
Each quarter, we evaluate the prices received from the third-party pricing service and independent brokers to ensure that the prices represent a reasonable estimate of the fair value within the macro-economic environment, sector factors, and overall pricing trends and expectations.  We corroborate and validate the pricing source through a variety of procedures that include but are not limited to: comparison to brokers, where possible; a review of third-party pricing service methodologies; back testing; in-depth specific analytics on randomly selected issues; and comparison of prices to actual trades for specific securities where observable data exists.  In addition, we analyze the third-party pricing service's methodologies and related inputs and also evaluate the various types of securities in our investment portfolio to determine an appropriate fair value hierarchy.  Finally, we also perform additional evaluations when individual prices fall outside tolerance levels when comparing prices received from the third-party pricing service.
Fair value measurements for assets and liabilities where limited or no observable market data exists are calculated using our own estimates and are categorized as Level 3.  These estimates are based on current interest rates, credit spreads, liquidity premium or discount, the economic and competitive environment, unique characteristics of the asset or liability, and other pertinent factors.  Therefore, these estimates cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability.  Further, changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the results of current or future values.
Our own estimates of fair value of fixed maturity and equity securities may be derived in a number of ways, including but not limited to: 1) pricing provided by brokers, where the price indicates reliability as to value; 2) fair values of comparable securities, incorporating a spread adjustment for maturity differences, collateralization, credit quality, liquidity, and other items, if applicable; 3) discounted cash flow models and margin spreads; 4) bond yield curves; 5) observable market prices and exchange transaction information not provided by external pricing services; and 6) statement values provided to us by fund managers.
The fair value of the GMWB embedded derivative is calculated using a discounted cash flow valuation model that projects future cash flows under multiple risk neutral stochastic equity scenarios.  The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations.  The equity correlations are based on historical price observations.  For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience.  The mortality assumption uses the 2012 Individual Annuity Reserving Table.  The present value of cash flows is determined using the discount rate curve, based upon London Interbank Offered Rate (LIBOR) plus a credit spread.
32
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Categories Reported at Fair Value
The following tables present the fair value hierarchy for those assets and liabilities reported at fair value on a recurring basis at December 31. 
 
2021
 
Level 1
  
Level 2
  
Level 3
  
Total
Assets:
                      
U.S. Treasury securities and
    obligations of U.S. Government
$
9,489
    
$
150,951
    
$
—
    
$
160,440
  
Federal agency issued residential
    mortgage-backed securities 1
  
—
      
75,698
      
—
      
75,698
  
Subtotal
  
9,489
      
226,649
      
—
      
236,138
  
Corporate obligations:
                              
Industrial
  
—
      
437,718
      
—
      
437,718
  
Energy
  
—
      
156,191
      
—
      
156,191
  
Communications and technology
  
—
      
249,552
      
—
      
249,552
  
Financial
  
—
      
488,342
      
—
      
488,342
  
Consumer
  
—
      
684,461
      
—
      
684,461
  
Public utilities
  
—
      
373,351
      
—
      
373,351
  
Subtotal
  
—
      
2,389,615
      
—
      
2,389,615
  
Corporate private-labeled residential
     mortgage-backed securities
  
—
      
12,044
      
—
      
12,044
  
Municipal securities
  
—
      
268,955
      
—
      
268,955
  
Other
  
—
      
175,397
      
—
      
175,397
  
Redeemable preferred stocks
  
—
      
6,048
      
—
      
6,048
  
Fixed maturity securities
  
9,489
      
3,078,708
      
—
      
3,088,197
  
Equity securities
  
406
      
3,270
      
—
      
3,676
  
Short-term investments
  
74,501
      
—
      
—
      
74,501
  
Other investments
  
—
      
6,688
      
—
      
6,688
  
Separate account assets
  
—
      
504,976
      
—
      
504,976
  
Total
$
84,396
    
$
3,593,642
    
$
—
    
$
3,678,038
  
                               
Percent of total
  
2
%
    
98
%
    
—
%
    
100
%
                               
Liabilities:
                              
Policyholder account balances:
                              
Indexed universal life
$
—
    
$
—
    
$
6,264
    
$
6,264
  
Funding agreement
  
—
      
—
      
30,023
      
30,023
  
Other policyholder funds:
                              
Guaranteed minimum withdrawal benefits
  
—
      
—
      
(149
)
    
(149
)
Separate account liabilities
  
—
      
504,976
      
—
      
504,976
  
Total
$
—
    
$
504,976
    
$
36,138
    
$
541,114
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
33
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
 
2020
 
Level 1
  
Level 2
  
Level 3
  
Total
Assets:
                      
U.S. Treasury securities and
     obligations of U.S. Government
$
16,192
    
$
165,237
    
$
—
    
$
181,429
  
Federal agency issued residential
      mortgage-backed securities 1
  
—
      
105,910
      
—
      
105,910
  
Subtotal
  
16,192
      
271,147
      
—
      
287,339
  
Corporate obligations:
                              
Industrial
  
—
      
473,272
      
—
      
473,272
  
Energy
  
—
      
173,611
      
—
      
173,611
  
Communications and technology
  
—
      
250,379
      
—
      
250,379
  
Financial
  
—
      
466,231
      
—
      
466,231
  
Consumer
  
—
      
707,546
      
—
      
707,546
  
Public utilities
  
—
      
372,777
      
—
      
372,777
  
Subtotal
  
—
      
2,443,816
      
—
      
2,443,816
  
Corporate private-labeled residential
     mortgage-backed securities
  
—
      
16,238
      
—
      
16,238
  
Municipal securities
  
—
      
263,718
      
—
      
263,718
  
Other
  
—
      
104,663
      
—
      
104,663
  
Redeemable preferred stocks
  
—
      
3,206
      
—
      
3,206
  
Fixed maturity securities
  
16,192
      
3,102,788
      
—
      
3,118,980
  
Equity securities
  
396
      
6,251
      
—
      
6,647
  
Short-term investments
  
119,116
      
—
      
—
      
119,116
  
Other investments
  
—
      
5,946
      
—
      
5,946
  
Separate account assets
  
—
      
463,041
      
—
      
463,041
  
Total
$
135,704
    
$
3,578,026
    
$
—
    
$
3,713,730
  
                               
Percent of total
  
4
%
    
96
%
    
—
%
    
100
%
                               
Liabilities:
                              
Policyholder account balances:
                              
Indexed universal life
$
—
    
$
—
    
$
5,402
    
$
5,402
  
Other policyholder funds:
                              
Guaranteed minimum withdrawal benefits
  
—
      
—
      
2,201
      
2,201
  
Separate account liabilities
  
—
      
463,041
      
—
      
463,041
  
Total
$
—
    
$
463,041
    
$
7,603
    
$
470,644
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
34
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31 are summarized below.
 
2021
 
Assets
  
Liabilities
 
Other Investments
  
Indexed Universal Life
  
Funding Agreement
  
GMWB
Beginning balance
$
—
    
$
5,402
    
$
—
    
$
2,201
  
Included in earnings
  
—
      
862
      
—
      
(3,208
)
Included in other comprehensive
     income (loss)
  
—
      
—
      
—
      
—
  
Purchases, issuances, sales and
     other dispositions:
                              
Purchases
  
—
      
—
      
30,023
      
—
  
Issuances
  
—
      
—
      
—
      
1,018
  
Sales
  
—
      
—
      
—
      
—
  
Other dispositions
  
—
      
—
      
—
      
(160
)
Transfers out of Level 3
  
—
      
—
      
—
      
—
  
Ending balance
$
—
    
$
6,264
    
$
30,023
    
$
(149
)

 
2020
   Assets   
Liabilities
 
Other Investments
  
Indexed Universal Life
  
GMWB
Beginning balance
$
4,363
    
$
3,603
    
$
(959
)
Included in earnings
  
(3,483
)
    
1,799
      
3,221
  
Included in other comprehensive
     income (loss)
  
—
      
—
      
—
  
Purchases, issuances, sales and
     other dispositions:
                      
Purchases
  
807
      
—
      
—
  
Issuances
  
—
      
—
      
1,398
  
Sales
  
(894
)
    
—
      
—
  
Other dispositions
  
—
      
—
      
(1,459
)
Transfers out of Level 3
  
(793
)
    
—
      
—
  
Ending balance
$
—
    
$
5,402
    
$
2,201
  
Broker pricing for our derivatives uses observable inputs for similar publicly traded instruments.  During 2020, they were transferred from Level 3 to Level 2.  We did not have any transfers between any levels during the years ended December 31, 2021 or December 31, 2019.
We use the Black Scholes valuation method, including parameters for market volatility, risk-free rate, and index level, for the  indexed universal life liabilities categorized as Level 3.  We also use a 100% persistency assumption.  Persistency of the business is an unobservable input.
35
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table presents the valuation method for the GMWB liability categorized as Level 3, as well as the unobservable inputs used in the valuation of those financial instruments at December 31, 2021.
 
Fair Value
  
Valuation Technique
  
Unobservable Inputs
  
Range
Embedded Derivative - GMWB
$ 
  (149 )
 
Actuarial cash flow model
  
Mortality
  
85% of the 2012 IAR Table
         
Lapse
  
0%-12% depending on product/duration/funded status of guarantee
         
Benefit Utilization
  
0%-80% depending on age/duration/funded status of guarantee
         
Nonperformance Risk
  
0.27%-1.13%
The following table presents the valuation method for the GMWB liability categorized as Level 3, as well as the unobservable inputs used in the valuation of those financial instruments at December 31, 2020.
 
Fair Value
  
Valuation Technique
  
Unobservable Inputs
  
Range
Embedded Derivative - GMWB
$ 
  2,201    
Actuarial cash flow model
  
Mortality
  
85% of the 2012 IAR Table
         
Lapse
  
0%-12% depending on product/duration/funded status of guarantee
         
Benefit Utilization
  
0%-80% depending on age/duration/funded status of guarantee
         
Nonperformance Risk
  
0.20%-1.11%
The GMWB liability is sensitive to changes in observable and unobservable inputs.  Observable inputs include risk-free rates, index returns, volatilities, and correlations.  Increases in risk-free rates and equity returns reduce the liability, while increases in volatilities increase the liability.  Unobservable inputs include mortality, lapse, benefit utilization, and nonperformance risk adjustments.  Increases in mortality, lapses, and credit spreads used for nonperformance risk reduce the liability, while increases in benefit utilization increase the liability.
Following are estimates of the impact from changes in unobservable inputs on the GMWB liability at December 31.
 
2021
  

 2020 
 
Increase/(Decrease)
 
in millions
A 10% increase in the mortality assumption
$
(0.2
)
  
(0.2
)
A 10% decrease in the lapse assumption
  
0.3
    
0.4
  
A 10% increase in the benefit utilization
  
1.1
    
1.3
  
A 10 basis point increase in the credit spreads used for non-performance
  
(0.4
)
  
(0.5
)
The following tables present a summary of fair value estimates for financial instruments at December 31.  Assets and liabilities that are not financial instruments are not included in this disclosure.  The total of the fair value calculations presented below may not be indicative of the value that can be obtained.
36
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
 
2021
 
Fair Value
  
Carrying
Value
 
Level 1
  
Level 2
  
Level 3
  
Total
Assets:
                            
Investments:
                            
Fixed maturity securities
$
9,489
    
$
3,078,708
    
$
—
    
$
3,088,197
    
$
3,088,197
  
Equity securities
  
406
      
3,270
      
—
      
3,676
      
3,676
  
Mortgage loans
  
—
      
—
      
613,829
      
613,829
      
596,037
  
Policy loans
  
—
      
—
      
82,060
      
82,060
      
82,060
  
Short-term investments
  
74,501
      
—
      
—
      
74,501
      
74,501
  
Other investments
  
—
      
6,688
      
—
      
6,688
      
6,688
  
Separate account assets
  
—
      
504,976
      
—
      
504,976
      
504,976
  
                                       
Liabilities:
                                      
Individual and group annuities
  
—
      
—
      
1,088,328
      
1,088,328
      
1,106,065
  
Supplementary contracts and annuities
    without life contingencies
  
—
      
—
      
54,248
      
54,248
      
54,899
  
Policyholder account balances:
                                      
Indexed universal life
  
—
      
—
      
6,264
      
6,264
      
6,264
  
Funding agreement
  
—
      
—
      
30,023
      
30,023
      
30,023
  
Other policyholder funds - GMWB
  
—
      
—
      
(149
)
    
(149
)
    
(149
)
Separate account liabilities
  
—
      
504,976
      
—
      
504,976
      
504,976
  

 
2020
 
Fair Value
  
Carrying
Value
 
Level 1
  
Level 2
  
Level 3
  
Total
Assets:
                            
Investments:
                            
Fixed maturity securities
$
16,192
    
$
3,102,788
    
$
—
    
$
3,118,980
    
$
3,118,980
  
Equity securities
  
396
      
6,251
      
—
      
6,647
      
6,647
  
Mortgage loans
  
—
      
—
      
634,336
      
634,336
      
601,607
  
Policy loans
  
—
      
—
      
84,447
      
84,447
      
84,447
  
Short-term investments
  
119,116
      
—
      
—
      
119,116
      
119,116
  
Other investments
  
—
      
5,946
      
—
      
5,946
      
5,946
  
Separate account assets
  
—
      
463,041
      
—
      
463,041
      
463,041
  
                                       
Liabilities:
                                      
Individual and group annuities
  
—
      
—
      
1,071,186
      
1,071,186
      
1,089,134
  
Supplementary contracts and annuities
    without life contingencies
  
—
      
—
      
52,547
      
52,547
      
52,950
  
Policyholder account balances:
                                      
 Indexed  universal life
  
—
      
—
      
5,402
      
5,402
      
5,402
  
Other policyholder funds - GMWB
  
—
      
—
      
2,201
      
2,201
      
2,201
  
Separate account liabilities
  
—
      
463,041
      
—
      
463,041
      
463,041
  

37
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
5. Financing Receivables
We have financing receivables with specific maturity dates that are recognized as assets in the Consolidated Balance Sheets.
The following table identifies financing receivables by classification amount at December 31. 
 
2021
  
2020
Agent receivables, net
      (allowance $912; 2020 - $1,084)
$
1,819
    
$
2,184
  
Investment-related financing receivables:
              
Mortgage loans, net
      (allowance $2,792; 2020 - $2,854)
  
596,037
      
601,607
  
Total financing receivables
$
597,856
    
$
603,791
  
Agent Receivables
We have certain agent receivables that are classified as financing receivables.  These receivables from agents are specifically assessed for collectibility and are reduced by an allowance for doubtful accounts.
The following table details the gross receivables, allowance, and net receivables for the two types of agent receivables at December 31.
 
2021
  
2020
 
Gross Receivables
  
Allowance
  
Net Receivables
  
Gross Receivables
  
Allowance
  
Net Receivables
Agent specific loans
$
833
    
$
266
    
$
567
    
$
914
    
$
289
    
$
625
  
Other agent receivables
  
1,898
      
646
      
1,252
      
2,354
      
795
      
1,559
  
Total
$
2,731
    
$
912
    
$
1,819
    
$
3,268
    
$
1,084
    
$
2,184
  
The following table details the activity of the allowance for doubtful accounts on agent receivables at December 31.  Any recoveries are included as deductions.
 
2021
  
2020
Beginning of year
$
1,084
    
$
1,482
  
Additions
  
58
      
44
  
Deductions
  
(230
)
    
(442
)
End of year
$
912
    
$
1,084
  
Mortgage Loans
We classify our mortgage loan portfolio as long-term financing receivables.  Mortgage loans are stated at cost, adjusted for amortization of premium and accretion of discount, less an allowance for loan losses.  Mortgage loan interest income is recognized on an accrual basis with any premium or discount amortized over the life of the loan.  Prepayment and late fees are recorded on the date of collection.  Loans in foreclosure, loans considered impaired, or loans past due 90 days or more are placed on non-accrual status.  Payments received on loans on non-accrual status for these reasons are applied first to interest income not collected while on non-accrual status, followed by fees, accrued and past-due interest, and principal.
If a mortgage loan is placed on non-accrual status, we do not accrue interest income in the financial statements.  The loan is independently monitored and evaluated as to potential impairment or foreclosure.  This evaluation includes assessing the probability of receiving future cash flows, along with consideration of many of the factors described below.  If delinquent payments are made and the loan is brought current, then we return the loan to active status and accrue income accordingly.
38
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table details the mortgage loan portfolio as collectively or individually evaluated for impairment at December 31.
 
2021
  
2020
Mortgage loans collectively evaluated
      for impairment
$
563,196
    
$
551,240
  
Mortgage loans individually evaluated
      for impairment
  
35,633
      
53,221
  
Allowance for loan losses
  
(2,792
)
    
(2,854
)
Carrying value
$
596,037
    
$
601,607
  
Generally, we consider our mortgage loans to be a portfolio segment.  We consider our primary class to be property type.  We primarily use loan-to-value as our credit risk quality indicator but also monitor additional secondary risk factors, such as geographic distribution both on a regional and specific state basis.  The mortgage loan portfolio segment is presented by property type in a table in Note 3 - Investments, as are geographic distributions by both region and state.  These measures are also supplemented with various other analytics to provide additional information concerning potential impairment of mortgage loans and management's assessment of financing receivables.
There were no  mortgage loans that were past due at December 31, 2021.  There was one mortgage loan that was past due at December 31, 2020.  This mortgage loan was paid off during the first quarter of 2021.  The following table presents an aging schedule for delinquent payments for both principal and interest by property type at December 31, 2020.
       
Amount of Payments Past Due
 
Book Value
  
30-59 Days
  
60-89 Days
  
> 90 Days
  
Total
Industrial
$
3,903
    
$
83
    
$
83
    
$
165
    
$
331
  
Office
  
—
      
—
      
—
      
—
      
—
  
Retail
  
—
      
—
      
—
      
—
      
—
  
Other
  
—
      
—
      
—
      
—
      
—
  
Total
$
3,903
    
$
83
    
$
83
    
$
165
    
$
331
  
We had no troubled loans that were restructured or modified during 2021 or 2020.
The following table details the activity within the allowance for mortgage loan losses at December 31.  Any recoveries are reflected as deductions.
 
2021
  
2020
Beginning of year
$
2,854
    
$
2,836
  
Provision
  
539
      
542
  
Deductions
  
(601
)
    
(524
)
End of year
$
2,792
    
$
2,854
  
The allowance for loan losses is monitored and evaluated at multiple levels with a process that includes, but is not limited to, the factors presented below.  Generally, we establish the allowance for loan losses using the collectively evaluated impairment methodology at an overall portfolio level and then specifically identify an allowance for loan losses on loans that contain elevated risk profiles.  If we determine through our evaluation that a loan has an elevated specific risk profile, we then individually assess the loan’s risk profile and may assign a specific allowance value based on many factors, including those identified below.
39
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Macro-environmental and elevated risk profile considerations:
•
Current industry conditions, inclusive of the COVID-19 pandemic, that are affecting the market, including rental and vacancy rates;
•
Perceived market liquidity;
•
Analysis of the markets and sub-markets in which we have mortgage loans;
•
Analysis of industry historical loss and delinquency experience;
•
Other factors that we may perceive as important or critical given our portfolio; and
•
Analysis of our loan portfolio based on loan size concentrations, geographic concentrations, property type concentrations, maturity concentrations, origination loan-to-value concentrations, and borrower concentrations.
Specific mortgage loan level considerations:
•
The payment history of each borrower;
•
Negative reports from property inspectors; and
•
Each loan’s property financial statement including net operating income, debt service coverage, and occupancy level.
We have not acquired any mortgage loans with deteriorated credit quality during the years presented.
As part of our process of monitoring impairments on loans, there are a number of significant risks and uncertainties inherent in this process.  These risks include, but are not limited to:
•
The risk that our assessment of a borrower's ability to meet all of its contractual obligations will change based on changes in the credit characteristics of the borrower or property;
•
The risk that the economic outlook will be worse than expected or have more of an impact on the borrower than anticipated;
•
The risk that the performance of the underlying property could deteriorate in the future;
•
The risk that fraudulent, inaccurate, or misleading information could be provided to us;
•
The risk that the methodology or assumptions used to develop estimates of the portion of the impairment of the loan prove over time to be inaccurate; and
•
The risk that other facts and circumstances change such that it becomes more likely than not that we will not obtain all of the contractual payments.
To the extent our review and evaluation determines a loan is impaired, that amount is charged to the allowance for loan losses and the loan balance is reduced.  In the event that a property is foreclosed upon, the carrying value is recorded at fair value, less costs to sell the property at the time of foreclosure, with a charge to the allowance and a corresponding reduction to the mortgage loan asset.  The property is then transferred to real estate where we have the ability and intent to manage these properties on an ongoing basis.
6. Variable Interest Entities (VIEs)
We invest in certain affordable housing and real estate joint ventures.  These VIEs are included in Real Estate in the Consolidated Balance Sheets.
The assets held in affordable housing real estate joint venture VIEs are primarily residential real estate properties that are restricted to provide affordable housing under federal or state programs for varying periods of time.  The restrictions primarily apply to the rents that may be paid by tenants residing in the properties during the term of an agreement to remain in the affordable housing program.  Investments in these joint ventures are equity interests in partnerships or limited liability companies that may or may not participate in profits or residual value.  Our investments in these entities generate a return primarily through the realization of federal and state income tax credits and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods.  We amortize the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognize the net investment performance in the Consolidated Statements of Comprehensive Income as a component of Income Tax Expense.  The tax credits reduce tax expense while the amortization increases tax expense.
40
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides information regarding our VIEs that generate tax credits and related amortization for the years ended December 31.
 
2021
  
2020
  
2019
Federal income tax credits realized
$
  920    
$
  1,697    
$
  2,608  
Amortization
672
    
1,093
    
1,421
  
Our investments in other real estate VIEs are recorded using the equity method.  Cash distributions from the VIE and cash contributions to the VIE are recorded as decreases or increases, respectively, in the carrying value of the VIE.  Certain other equity investments in VIEs, where permitted, are recorded on an amortized cost basis.  The operating performance of investments in the VIE is recorded in the Consolidated Statements of Comprehensive Income as investment income or as a component of Income Tax Expense, depending upon the nature and primary design of the investment.  We evaluate the carrying value of VIEs for impairment on an ongoing basis to assess whether the carrying value is expected to be realized during the anticipated life of the investment.  No impairments were recorded during the years ended December 31, 2021, December 31, 2020, or December 31, 2019.
Investments in the affordable housing and real estate joint ventures are interests that absorb portions of the VIE's expected losses.  These investments also receive portions of expected residual returns of the VIE's net assets exclusive of variable interests.  We make an assessment of whether we are the primary beneficiary of a VIE at the time of the initial investment and on an ongoing basis thereafter.  We consider many factors when making this determination based upon a review of the underlying investment agreement and other information related to the specific investment.  The first factor is whether we have the ability to direct the activities of a VIE that most significantly impact the VIE's economic performance.  The power to direct the activities of the VIE is generally vested in the managing general partner or managing member of the VIE, which is not the position held by us in these investments.  Other factors include the entity's equity investment at risk, decision-making abilities, obligations to absorb economic risks, the right to receive economic rewards of the entity, and the extent to which we share in the VIE's expected losses and residual returns.
The following table presents the carrying amount and maximum exposure to loss relating to VIEs for which we hold a variable interest, but are not the primary beneficiary, and which had not been consolidated at December 31, 2021 and December 31, 2020.  The table includes investments in two real estate joint ventures and seven affordable housing real estate joint ventures at December 31, 2021 and five real estate joint ventures and eight affordable housing real estate joint ventures at December 31, 2020.  In 2021, we sold our membership in three real estate joint ventures for $20.2 million.
 
2021
  
2020
 
Carrying
Amount
  
Maximum
Exposure
to Loss
  
Carrying
Amount
  
Maximum
Exposure
to Loss
Real estate joint ventures
$
978
    
$
978
    
$
21,327
    
$
21,327
  
Affordable housing real estate joint ventures
  
1,996
      
10,223
      
2,723
      
27,512
  
Total
$
2,974
    
$
11,201
    
$
24,050
    
$
48,839
  
The maximum exposure to loss relating to the real estate joint ventures and affordable housing real estate joint ventures is equal to the carrying amounts plus any unfunded equity commitments, exposure to potential recapture of tax credits, guarantees of debt, or other obligations of the VIE with recourse.  Unfunded equity and loan commitments typically require financial or operating performance by other parties and have not yet become due or payable, but which may become due in the future.
At December 31, 2021 and December 31, 2020, we had no equity commitments outstanding to the real estate joint venture VIEs.  At December 31, 2021 and December 31, 2020, we had no contingent commitments to fund additional equity contributions for operating support to real estate joint venture VIEs.
In addition, the maximum exposure to loss on affordable housing joint ventures included $6.2 million of losses which could be realized if the tax credits received by the VIEs were recaptured at December 31, 2021, compared to $22.1 million at December 31, 2020.  Recapture events would cause us to reverse some or all of the benefit previously recognized by us or third parties to whom the tax credit interests were transferred.  A recapture event can occur at any time during a 15-year required compliance period.  The principal causes of recapture include financial default and non-compliance with affordable housing program requirements by the properties controlled by the VIE.  Guarantees from the managing member or managing partner in
41
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
the VIE, insurance contracts, or changes in the residual value accruing to our interests in the VIE may mitigate the potential exposure due to recapture.
During 2020, one tenant was granted rent deferral as a result of strains from the current economic environment.  This tenant was brought current within the agreed-upon terms and was returned to the original payment schedule during 2021.  We continue to monitor our real estate joint venture portfolio regarding additional strain resulting from the current economic environment.
7. Separate Accounts
Separate account assets and liabilities arise from the sale of variable universal life insurance and variable annuity products.  The separate account represents funds segregated for the benefit of certain policyholders who bear the investment risk.  The assets are legally segregated and are not subject to claims which may arise from any other business of the Company.  The separate account assets and liabilities, which are equal, are recorded at fair value based upon the NAV of the underlying investment holdings as derived from closing prices on a national exchange or as provided by the issuer.  Policyholder account deposits and withdrawals, investment income, and realized investment gains and losses are excluded from the amounts reported in the Consolidated Statements of Comprehensive Income.  Revenues from separate accounts consist principally of contract charges, which include maintenance charges, administrative fees, and mortality and expense charges.
The total separate account assets were $505.0 million at December 31, 2021 and $463.0 million at December 31, 2020.  Variable universal life and variable annuity assets comprised 31% and 69% of total separate account assets in 2021, compared to 30% and 70% of the total in 2020.
The following table provides a reconciliation of activity within separate account liabilities at December 31.
 
2021
  
2020
Balance at beginning of year
$
463,041
    
$
431,201
  
Deposits on variable policyholder contracts
  
29,108
      
26,320
  
Transfers to general account
  
(5,271
)
    
(6,376
)
Investment performance
  
77,678
      
62,550
  
Policyholder benefits and withdrawals
  
(46,453
)
    
(38,222
)
Contract charges
  
(13,127
)
    
(12,432
)
Balance at end of year
$
504,976
    
$
463,041
  
We offer a GMWB rider that can be added to new or existing variable annuity contracts.  The value of the separate accounts with the GMWB rider was recorded at fair value of $122.5 million at December 31, 2021.  The fair value of the separate accounts with the GMWB rider was $118.5 million at December 31, 2020.  The GMWB guarantee liability was $(0.1) million at December 31, 2021 and $2.2 million at December 31, 2020.  The change in this value is included in Policyholder Benefits in the Consolidated Statements of Comprehensive Income.  The value of variable annuity separate accounts with the GMWB rider is recorded in Separate Account Liabilities, and the value of the rider is included in Other Policyholder Funds in the Consolidated Balance Sheets.
We have two blocks of variable universal life policies and variable annuity contracts from which fees are received.  The fees are based upon both specific transactions and the fund value of the blocks of policies.  We have a direct block of ongoing business identified in the Consolidated Balance Sheets as Separate Account Assets, totaling $505.0 million at December 31, 2021 and $463.0 million at December 31, 2020, and corresponding Separate Account Liabilities of an equal amount.  The fixed-rate funds for these policies are included in our general account as policyholder account balances.  The future policy benefits for the direct block approximated $0.4 million at December 31, 2021 and $0.5 million at December 31, 2020.
In addition, we have an assumed closed block of variable universal life and variable annuity business that totaled $392.7 million at December 31, 2021 and $369.9 million at December 31, 2020.  As required under modified coinsurance transaction accounting, the assumed separate account fund balances are not recorded as separate accounts on our consolidated financial statements.  Rather, the assumed fixed-rate funds for these policies of $34.1 million at December 31, 2021 and $32.8 million at December 31, 2020 are included in our general account as policyholder account balances.  The future policy benefits for the assumed block approximated $0.5 million at both December 31, 2021 and December 31, 2020.
Guarantees are offered under variable universal life and variable annuity contracts: a guaranteed minimum death benefit (GMDB) rider is available on certain variable universal life contracts and on all variable annuities.  The GMDB rider for
42
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
variable universal life contracts guarantees the death benefit for specified periods of time, regardless of investment performance, provided cumulative premium requirements are met.  The GMDB rider for variable annuity contracts guarantees the death benefit for specified periods of time, regardless of investment performance.
Separate account balances for variable annuity contracts were $347.0 million at December 31, 2021 and $323.5 million at December 31, 2020.  The total reserve held for variable annuity GMDB was less than $0.1 million at both December 31, 2021 and December 31, 2020.  Additional information related to the GMDB and related separate account balances and net amount at risk (the amount by which the GMDB exceeds the account balance) as of December 31, 2021 and 2020 is provided below:
 
2021
  
2020
 
Separate
Account
Balance
  
Net
Amount
at Risk
  
Weighted Average Attained Age
  
Separate
Account
Balance
  
Net
Amount
at Risk
  
Weighted Average Attained Age
Return of net deposits
$
264,983
    
$
96
    
63.5
  
$
246,060
    
$
119
    
62.9
Return of the greater of the highest
      anniversary contract value or net
      deposits
  
11,712
      
7
    
71.2
    
9,737
      
—
    
72.1
Return of the greater of every fifth
      year highest anniversary contract
      value or net deposits
  
7,077
      
19
    
69.2
    
7,115
      
17
    
70.5
Return of the greater of net deposits
     accumulated annually at 5% or the
     highest anniversary contract value
  
63,227
      
1,460
    
64.8
    
60,600
      
2,197
    
64.4
Total
$
346,999
    
$
1,582
    
64.1
  
$
323,512
    
$
2,333
    
63.6
The following table presents the aggregate fair value of assets by major investment asset category supporting the variable annuity separate accounts with guaranteed benefits at December 31.  
   
2021
    
2020
  
Money market
  
$
2,154
    
$
4,037
  
Fixed income
    
14,941
      
15,240
  
Balanced
    
91,029
      
86,654
  
International equity
    
21,238
      
21,769
  
Intermediate equity
    
180,005
      
161,628
  
Aggressive equity
    
37,632
      
34,184
  
Total
  
$
346,999
    
$
323,512
  

43
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
8. Unpaid Claims Liability and Short-Duration Contracts
The liability for unpaid claims is included with Policy and Contract Claims and Future Policy Benefits in the Consolidated Balance Sheets.  Claim adjustment expenditures are expensed as incurred and were not material in any year presented.
The following tables present activity in the accident and health portion of the unpaid claims liability by segment for the years ended December 31.  Classified as policy and contract claims, but excluded from these tables due to immateriality, are amounts recorded for group life, individual life, and deferred annuities.
 
2021
 
Individual Insurance
  
Group Insurance
  
Old American
  
Consolidated
Gross liability at beginning of year
$
606
    
$
31,572
    
$
2,595
    
$
34,773
  
Less reinsurance recoverable
  
(412
)
    
(23,565
)
    
(2,565
)
    
(26,542
)
Net liability at beginning of year
  
194
      
8,007
      
30
      
8,231
  
Incurred benefits related to:
                              
Current year
  
240
      
27,851
      
31
      
28,122
  
Prior years 1
  
(1
)
    
(817
)
    
(25
)
    
(843
)
Total incurred benefits
  
239
      
27,034
      
6
      
27,279
  
Paid benefits related to:
                              
Current year
  
46
      
22,437
      
1
      
22,484
  
Prior years
  
71
      
3,925
      
5
      
4,001
  
Total paid benefits
  
117
      
26,362
      
6
      
26,485
  
Net liability at end of year
  
316
      
8,679
      
30
      
9,025
  
Reinsurance recoverable
  
353
      
21,991
      
2,263
      
24,607
  
Gross liability at end of year
$
669
    
$
30,670
    
$
2,293
    
$
33,632
  
1  The incurred benefits related to prior years’ unpaid accident and health claims reflect the change in these liabilities.
 
2020
 
Individual Insurance
  
Group Insurance
  
Old American
  
Consolidated
Gross liability at beginning of year
$
659
    
$
32,169
    
$
3,952
    
$
36,780
  
Less reinsurance recoverable
  
(455
)
    
(23,983
)
    
(3,921
)
    
(28,359
)
Net liability at beginning of year
  
204
      
8,186
      
31
      
8,421
  
Incurred benefits related to:
                              
Current year
  
66
      
24,148
      
31
      
24,245
  
Prior years 1
  
22
      
(802
)
    
11
      
(769
)
Total incurred benefits
  
88
      
23,346
      
42
      
23,476
  
Paid benefits related to:
                              
Current year
  
35
      
20,013
      
1
      
20,049
  
Prior years
  
63
      
3,512
      
42
      
3,617
  
Total paid benefits
  
98
      
23,525
      
43
      
23,666
  
Net liability at end of year
  
194
      
8,007
      
30
      
8,231
  
Reinsurance recoverable
  
412
      
23,565
      
2,565
      
26,542
  
Gross liability at end of year
$
606
    
$
31,572
    
$
2,595
    
$
34,773
  
1  The incurred benefits related to prior years’ unpaid accident and health claims reflect the change in these liabilities.
44
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
 
2019
 
Individual Insurance
  
Group Insurance
  
Old American
  
Consolidated
Gross liability at beginning of year
$
831
    
$
31,188
    
$
4,434
    
$
36,453
  
Less reinsurance recoverable
  
(541
)
    
(23,796
)
    
(4,402
)
    
(28,739
)
Net liability at beginning of year
  
290
      
7,392
      
32
      
7,714
  
Incurred benefits related to:
                              
Current year
  
31
      
28,201
      
48
      
28,280
  
Prior years 1
  
(70
)
    
(398
)
    
(5
)
    
(473
)
Total incurred benefits
  
(39
)
    
27,803
      
43
      
27,807
  
Paid benefits related to:
                              
Current year
  
15
      
23,557
      
17
      
23,589
  
Prior years
  
32
      
3,452
      
27
      
3,511
  
Total paid benefits
  
47
      
27,009
      
44
      
27,100
  
Net liability at end of year
  
204
      
8,186
      
31
      
8,421
  
Reinsurance recoverable
  
455
      
23,983
      
3,921
      
28,359
  
Gross liability at end of year
$
659
    
$
32,169
    
$
3,952
    
$
36,780
  
1  The incurred benefits related to prior years’ unpaid accident and health claims reflect the change in these liabilities.
The following table presents the reconciliation of amounts in the above tables to Policy and Contract Claims and claim reserves that are included in Future Policy Benefits as presented in the Consolidated Balance Sheets at December 31.
 
2021
  
2020
  
2019
Individual Insurance Segment:
                
Individual accident and health
$
669
    
$
606
    
$
659
  
Individual life
  
42,915
      
42,860
      
33,252
  
Deferred annuity
  
4,306
      
5,743
      
5,286
  
Subtotal
  
47,890
      
49,209
      
39,197
  
                       
Group Insurance Segment:
                      
Group accident and health
  
30,670
      
31,572
      
32,169
  
Group life
  
3,978
      
3,573
      
3,256
  
Subtotal
  
34,648
      
35,145
      
35,425
  
                       
Old American Segment:
                      
Individual accident and health
  
2,293
      
2,595
      
3,952
  
Individual life
  
11,050
      
12,105
      
7,273
  
Subtotal
  
13,343
      
14,700
      
11,225
  
Total
$
95,881
    
$
99,054
    
$
85,847
  
For short-duration contracts, IBNR liabilities for the group long-term disability product that were included in the liability for unpaid claims and claim adjustment expenses, net of reinsurance, totaled $0.6 million at December 31, 2021 and $0.7 million at December 31, 2020.  These liabilities were calculated by the reinsurers of the various blocks of group long-term disability business, using percent of premium methodologies with varying factors.  Claim frequencies were calculated for the long-term disability product using information that includes paid and pending claims at the claimant level.  Thus, frequency is measured by individual claimant.  Claims that are counted in a particular year as a liability but do not result in a liability in future years are not included once the claim is settled.  There have been no significant changes to the methodologies for calculating claim frequencies, incurred-but-not-reported liabilities, or any other unpaid claims liabilities for the long-term disability product during the years presented.
45
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The liabilities in the following table for group long-term disability claims involve present value of future benefits calculations.  The carrying amount of liabilities at December 31, 2021 was $4.9 million, consisting of an undiscounted amount of $6.0 million and an aggregated discount amount deducted of $1.1 million.  Discount rates ranged from 3.00% to 8.00% for the various blocks of group long-term disability business included in the totals.
The following table provides incurred claims and allocated claim adjustment expenses, net of reinsurance, for the group long-term disability product at December 31, 2021.  The information about incurred claims development for the years ended December 31, 2012 to December 31, 2020 is presented as unaudited supplementary information.
 
For the Years Ended December 31,
Total of IBNR Liabilities Plus Expected Development on Reported Claims
Cumulative Number of Reported Claims
Year Incurred
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2012
$
1,132
  
$
1,087
  
$
999
  
$
993
  
$
1,116
  
$
1,104
  
$
1,118
  
$
1,130
  
$
1,138
  
$
1,141
  
$
—
  
631
  
2013
      
806
    
836
    
815
    
838
    
838
    
822
    
854
    
869
    
863
    
—
  
236
  
2014
              
868
    
955
    
799
    
768
    
770
    
728
    
735
    
729
    
—
  
186
  
2015
                    
989
    
918
    
701
    
697
    
643
    
646
    
641
    
—
  
230
  
2016
                          
1,694
    
1,552
    
1,382
    
1,412
    
1,284
    
962
    
—
  
244
  
2017
                                
2,038
    
1,727
    
1,513
    
1,436
    
1,431
    
—
  
256
  
2018
                                      
2,473
    
2,192
    
2,135
    
1,745
    
—
  
295
  
2019
                                            
2,056
    
2,036
    
1,879
    
—
  
326
  
2020
                                                  
1,483
    
1,094
    
—
  
196
  
2021
                                                        
1,873
    
598
  
157
  
                                                       
$
12,358
            

The following table provides cumulative paid claims and allocated claim adjustment expenses, net of reinsurance, for the group long-term disability product at December 31, 2021.  The information about paid claims development for the years ended December 31, 2012 to December 31, 2020 is presented as unaudited supplementary information.
   
For the Years Ended December 31,
Year Incurred
  
2012
  
2013
  
2014
  
2015
  
2016
  
2017
  
2018
  
2019
  
2020
  
2021
2012
  
$
91
    
$
373
    
$
499
    
$
605
    
$
675
    
$
733
    
$
797
    
$
856
    
$
910
    
$
940
  
2013
          
91
      
336
      
449
      
501
      
537
      
564
      
600
      
630
      
657
  
2014
                  
71
      
276
      
411
      
481
      
499
      
517
      
550
      
579
  
2015
                          
100
      
390
      
491
      
531
      
545
      
561
      
573
  
2016
                                  
164
      
505
      
626
      
690
      
736
      
783
  
2017
                                          
162
      
549
      
703
      
785
      
867
  
2018
                                                    
208
      
681
      
869
      
1,012
  
2019
                                                            
251
      
752
      
980
  
2020
                                                                    
162
      
469
  
2021
                                                                            
237
  
                                                                   
Total
  
$
7,097
  
All outstanding liabilities before 2012, net of reinsurance
        
$
788
  
Liabilities for claims and claim adjustment expenses, net of reinsurance
        
$
6,049
  
46
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides a reconciliation of incurred and paid claims development information to the aggregate carrying amount of the liability for unpaid claims and claim adjustment expenses at December 31.  Included in other short-duration contracts are group life, group short-term disability, group dental, group vision, and individual accident and health for the Individual Insurance and Old American segments, none of which are individually significant.
 
2021
  
2020
Net outstanding liabilities:
          
Group long-term disability
$
6,049
    
$
6,633
  
Other short-duration contracts
  
7,549
      
5,472
  
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance
  
13,598
      
12,105
  
               
Reinsurance recoverable on unpaid claims:
              
Group long-term disability
  
26,214
      
28,762
  
Other short-duration contracts
  
3,294
      
4,280
  
Total reinsurance recoverable on unpaid claims
  
29,508
      
33,042
  
               
Insurance lines other than short-duration
  
58,289
      
60,723
  
Unallocated claims adjustment expenses
  
—
      
—
  
Impact of discounting
  
(5,514
)
    
(6,816
)
Other
  
—
      
—
  
   
52,775
      
53,907
  
               
Total gross liability for unpaid claims and claim adjustment expenses
$
95,881
    
$
99,054
  
The following table provides the historical average annual percentage payout of incurred claims by age, net of reinsurance, at December 31, 2021.
   
Years
   
1
  
2
  
3
  
4
  
5
Group long-term disability
  
12.50  %
  
30.10  %
  
13.10  %
  
7.40  %
  
4.20  %
47
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
9. Participating Policies
We have insurance contracts where the policyholder is entitled to share in the earnings through dividends, which reflect the difference between the premium charged and the actual experience.  These insurance contracts were directly issued by the Company or were acquired through the purchase of participating blocks of business, largely through reinsurance assumption transactions.  Participating business approximated 6% of total statutory premiums in 2021 and 4% in 2020.  Assumed participating business from the acquisition of closed blocks of business accounted for 98% of total participating statutory premiums in 2021 and 95% in 2020.   Participating business equaled 5% of total life insurance in force at both December 31, 2021 and December 31, 2020.  Assumed participating business accounted for 97% of total participating life insurance in force at both December 31, 2021 and December 31, 2020.
The amount of dividends to be paid is determined annually by our Board of Directors.  Provision has been made in the liability for future policy benefits to allocate amounts to participating policyholders on the basis of dividend scales contemplated at the time the policies were issued, as well as for policyholder dividends having been declared by the Board of Directors in excess of the original scale.
10. Debt
Notes Payable
We had no notes payable outstanding at December 31, 2021 or December 31, 2020.
As a member of the FHLB, we have the ability to borrow on a collateralized basis from the FHLB.  Through this membership, we will have a specific borrowing capacity based upon the amount of collateral we establish.  At December 31, 2021, securities and mortgages in the amount of $254.5 million, with a fair value of $254.6 million, were pledged to the FHLB, providing a borrowing capacity of $196.3 million.  The rates of interest are variable and set by the FHLB at the time of the advance.  The Company's capital investment totaled $6.2 million at December 31, 2021 and is included in Other Investments in the Consolidated Balance Sheets.  Dividends received on the capital investment totaled $0.2 million for the year ended December 31, 2021, $0.1 million for the year ended December 31, 2020, and $0.2 million for the year ended December 31, 2019.
We had unsecured revolving lines of credit with three major commercial banks that totaled $70.0 million at December 31, 2021 and $80.0 million at December 31, 2020, with no balances outstanding.  The lines of credit are at variable interest rates based upon short-term indices with $10.0 million maturing in July of 2022 and $60.0 million maturing in June of 2022.  We anticipate renewing these lines of credit as they come due.  One line of credit includes a $20.0 million portion that can be unconditionally canceled by the lending institution at its discretion at any time.
The Company has access to secured borrowings through repurchase agreements with two major financial counterparties.  The Company had no transactions that occurred under these agreements during 2021 and had no outstanding borrowings as of December 31, 2021.  The Company had no transactions that occurred under these agreements during the year ended December 31, 2020 and had no outstanding borrowings as of December 31, 2020.  Any borrowings drawn under these agreements require a variable interest rate based upon short-term indices and approval from the counterparty at the time of the transaction.  No securities are currently pledged under these agreements.
Funding Agreement
During 2021, the Company entered into advance funding agreements with the FHLB.  Under the agreements, which mature in August of 2026, the Company pledges fixed maturity security and commercial mortgage loan collateral and receives cash, which is then reinvested, primarily into other fixed maturity securities.  Securities pledged as collateral may not be sold or re-pledged by the Company.  The investments pledged and outstanding advance agreements are included in the overall borrowing capacity established with the FHLB.  At December 31, 2021, total obligations outstanding under these agreements were $30.0 million and are reported as Policyholder Account Balances in the Consolidated Balance Sheets.  Interest is credited based on variable rates set by the FHLB.  Interest payments during the year ended December 31, 2021 were less than $0.1 million.
48
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
11. Income Taxes
The following table provides information about income taxes for the years ended December 31.
 
2021
  
2020
  
2019
Current income tax expense
$
7,587
    
$
6,695
    
$
4,597
  
Deferred income tax expense (benefit)
  
(5,371
)
    
(5,951
)
    
426
  
Total income tax expense
$
2,216
    
$
744
    
$
5,023
  
The following table provides information about taxes paid for the years ended December 31.
 
2021
  
2020
  
2019
Cash paid (refund) for income taxes
$
7,273
    
$
3,667
    
$
(938
)
The following table provides a reconciliation of the federal income tax rate to our effective income tax rate for the years ended December 31.
 
2021
  
2020
  
2019
Federal income tax rate
21
%
  
21
%
  
21
%
Tax credits, net of equity adjustment
(5
) %
  
(6
) %
  
(8
) %
Impact of CARES Act
—
%
  
(7
) %
  
—
%
Permanent differences and other
1
%
  
(3
) %
  
4
%
Effective income tax rate
17
%
  
5
%
  
17
%
Presented below are tax effects of temporary differences that result in significant deferred tax assets and liabilities at December 31.  
 
2021
  
2020
Deferred tax assets:
          
Future policy benefits
$
23,691
    
$
26,040
  
Employee retirement benefits
  
6,855
      
6,774
  
Tax carryovers
  
831
      
400
  
Other
  
1,788
      
2,523
  
Deferred tax assets
  
33,165
      
35,737
  
Deferred tax liabilities:
              
Basis differences between tax and
              
GAAP accounting for investments
  
2,683
      
4,268
  
Unrealized investment gains
  
40,597
      
67,408
  
Capitalization of DAC, net of amortization
  
28,814
      
28,549
  
VOBA
  
1,507
      
1,522
  
Property and equipment
  
2,876
      
3,558
  
Deferred tax liabilities
  
76,477
      
105,305
  
Net deferred tax liability
  
43,312
      
69,568
  
Current tax liability
  
1,510
      
1,790
  
Income taxes payable
$
44,822
    
$
71,358
  
A valuation allowance must be established for any portion of the deferred tax asset which is believed not to be realizable.  Management reviews the need for a valuation allowance based on our anticipated future earnings, reversal of future taxable differences, the available carryback and carryforward periods, and tax planning strategies that are prudent and feasible.  In management’s opinion, it is more likely than not that we will realize the benefit of our deferred taxes.
49
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions.  In general, we are no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years prior to 2018.  We are not currently under examination by the Internal Revenue Service (IRS).
Our policy is to recognize interest and penalties accrued related to unrecognized tax benefits in Income Tax Expense.  The Company recognized no tax benefit related to tax penalty and interest expense in 2021, 2020, or 2019.
We had no material uncertain tax positions at December 31, 2021 or December 31, 2020.
Income tax expense (benefit) is recorded in various places in our financial statements, as detailed below, for the years ended December 31. 
 
2021
  
2020
  
2019
Income tax expense
$
2,216
    
$
744
    
$
5,023
  
Stockholders’ equity:
                      
Related to:
                      
Change in net unrealized gains on securities available
 for sale
  
(26,811
)
    
30,809
      
34,453
  
Effect on DAC, VOBA, and DRL
  
2,112
      
(2,076
)
    
(3,086
)
Change in policyholder liabilities
  
2,458
      
(4,222
)
    
(4,249
)
Change in benefit plan obligations
  
1,360
      
289
      
809
  
Total income tax expense (benefit) included in financial statements
$
(18,665
)
  
$
25,544
    
$
32,950
  
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law on March 27, 2020 in an effort to provide fast and direct economic assistance to Americans during the COVID-19 health crisis.  The CARES Act had several income tax provisions that were utilized, which had a direct impact on our effective tax rate and income tax expense for 2020.  The benefits that applied to us included, but were not limited to, the ability to carry back net operating losses and the acceleration of the recovery of Alternative Minimum Tax (AMT) credits.  The 7% decrease in the effective tax rate noted above for 2020 was primarily the result of our ability to carry back net operating losses from the taxable years 2018 through 2020, which were taxed at a federal income tax rate of 21%, to the taxable years 2013 through 2017, which were taxed at a federal income tax rate of 35%.

50
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
12. Pensions and Other Postemployment Benefits
We have pension and other postemployment benefit plans covering substantially all of our employees for which the annual measurement date is December 31.
The Kansas City Life Cash Balance Pension Plan (pension plan) was amended effective December 31, 2010 to provide that participants’ accrued benefits will be frozen, and that no further benefits or accruals will be earned after December 31, 2010.  Although participants will no longer accrue additional benefits under the pension plan at December 31, 2010, participants will continue to earn years of service for vesting purposes under the pension plan with respect to their benefits accrued through December 31, 2010.  In addition, the cash balance account will continue to earn annual interest.  Pension plan benefits are based on a cash balance account consisting of credits to the account based upon an employee’s years of service, compensation and interest credits on account balances calculated using the greater of the average 30-year U.S. Treasury bond rate for November of each year or 5.00%.  Annual interest was calculated using 5.00% for 2021 and 2020.
The benefits expected to be paid in each year from 2022 through 2026 are as follows: $9.9 million in 2022; $10.3 million in 2023; $8.6 million in 2024; $8.3 million in 2025; and $7.9 million in 2026.  The aggregate benefits expected to be paid in the five years from 2027 through 2031 are $37.2 million.  The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2021 and are the actuarial present value of the vested benefits to which the employee is currently entitled but based upon the expected date of separation or retirement.  The 2022 contribution for the pension plan has not been determined.
The asset allocation of the fair value of pension plan assets compared to the target allocation range at December 31 was: 
 
2021
  
Target Allocation
  
2020
  
Target Allocation
                   
Equity securities
39
%
  
28% - 48%
  
41
%
  
28% - 48%
Asset allocation and alternative assets
15
%
  
10% - 20%
  
14
%
  
10% - 20%
Debt securities
46
%
  
30% - 60%
  
45
%
  
30% - 60%
Cash and cash equivalents
—
%
  
0% - 10%
  
—
%
  
0% - 10%
Certain of our pension plan assets consist of investments in pooled separate accounts.  The NAV of the separate accounts is calculated in a manner consistent with GAAP for investment companies and is determinative of their fair value.  Several of the separate accounts invest in publicly quoted mutual funds or actively managed stocks.  The fair value of the underlying mutual funds or stock is used to determine the NAV of the separate account, which is not publicly quoted.  Some of the separate accounts also invest in fixed income securities.  The fair value of the underlying securities is based on quoted prices of similar assets and used to determine the NAV of the separate account.  Sale of plan assets may be at values less than NAV.  Certain redemption restrictions may apply to specific stock and bond funds, including written notices prior to the withdrawal of funds and a potential redemption fee on certain withdrawals.
Plan fiduciaries set investment policies and strategies and oversee its investment allocation, which includes selecting investment managers, commissioning periodic asset-liability studies, and setting long-term strategic targets.  Long-term strategic investment objectives include preserving the funded status of the pension plan and balancing risk and return.  Target allocation ranges are guidelines, not limitations, and occasionally plan fiduciaries will approve allocations above or below a target range.
The current assumption for the expected long-term rate of return on plan assets is 5.77%.  This assumption is determined by analyzing: 1) historical average returns achieved by asset allocation and active management; 2) historical data on the volatility of returns; 3) current yields available in the marketplace; 4) actual returns on plan assets; and 5) current and anticipated future allocation among asset classes.  The asset classes used for this analysis are domestic and international equities, investment grade corporate bonds, alternative assets, and cash.  The overall rate is derived as a weighted average of the estimated long-term returns on the asset classes represented in the investment portfolio of the pension plan.  Effective January 1, 2022, the assumption for the expected long-term rate of return on plan assets was 5.80%.
The assumed discount rate used to determine the benefit obligation was 2.47% for pension benefits and was 2.68% for postemployment benefits.  The discount rates were determined by reference to the FTSC Pension Discount Curve (formerly the Citigroup Pension Liability Yield Curve) on December 31, 2021.  Specifically, the spot rate curve represents the rates on zero coupon securities of the quality and type included in the pension index at various maturities.  By discounting benefit cash flows at these rates, a notional amount equal to the fair value of a cash flow defeasing portfolio of bonds was determined.  The discount rate for benefits was calculated as a single rate giving the same discounted value as the notional amount.
51
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The postemployment medical plans for eligible employees and their dependents are contributory with contributions adjusted annually.  The benefits expected to be paid in each year from 2022 through 2026 are as follows: $0.9 million in 2022; $0.9 million in 2023; $0.9 million in 2024; $1.0 million in 2025; and $0.9 million in 2026.  The aggregate benefits expected to be paid in the five years from 2027 through 2031 are $4.3 million.  The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2021.  The 2022 contribution for the postemployment medical plans is estimated to be $0.9 million.  The Company pays these medical costs as they become due and the postemployment plan incorporates cost-sharing features.  The postemployment plan disclosures included herein do not include the potential impact from the Medicare Act (the Act) that became law in December 2003.  The Act introduced a new federal subsidy to sponsors of certain retiree health care plans that provide a benefit that is at least actuarially equivalent to Medicare.  Since the Company does not provide benefits that are actuarially equivalent to Medicare, the Act did not impact our disclosures.
Non-contributory defined contribution retirement plans for eligible general agents and sales agents provide supplemental payments based upon earned agency first year individual life and annuity commissions.  Contributions to these plans were $0.1 million in 2021 and $0.2 million in 2020 and 2019.  Non-contributory deferred compensation plans for eligible agents based upon earned first year commissions are also offered.  Contributions to these plans were $0.2 million in 2021 and $0.3 million in 2020 and 2019.
Savings plans for eligible employees and agents match employee and agent contributions up to 8.00% of salary and 2.50% of agents’ prior year paid commissions.  Contributions to the savings plans were $2.5 million in 2021, $2.6 million in 2020, and $2.5 million in 2019.  We may contribute an additional profit sharing amount up to 4% of salary for eligible employees, depending upon corporate profits.  The Company did not make a profit sharing contribution in 2021, 2020, or 2019.
We recognize the funded status of our pension and postemployment plans, measured as the difference between plan assets at fair value and the projected benefit obligation, in the Consolidated Balance Sheets.  Changes in the funded status that arise during the period, but are not recognized as components of net periodic benefit cost, are recognized within Other Comprehensive Income (Loss), net of taxes.
Significant sources of actuarial gains and losses for the pension plan included the impact of changes to the discount rate resulting in gains of $5.8 million during 2021 and losses of $10.5 million during 2020.  The pension plan included gains from asset returns compared to expected returns of $5.5 million in 2021 and $9.7 million in 2020.  The mortality assumption and lump sum interest changes resulted in losses of $0.7 million in 2021 and gains of $1.9 million in 2020.  The pension plan included losses from census change of $3.9 million and future cost of living adjustment of $2.4 million in 2021 with no significant changes in 2020.  The significant sources of actuarial gains and losses for other postretirement benefits included the impact of changes to the discount rate resulting in gains of $0.9 million in 2021 and losses of $2.1 million in 2020 and losses from updated claims costs of $0.6 million in 2021 and gains of $1.1 million in 2020.  The postretirement benefits included gains from spouse participation assumption of $0.6 million in 2021 with no significant change in 2020.
52
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following tables provide information regarding pension benefits and other postemployment benefits (OPEB) for the years ended December 31.
 
Pension Benefits
  
OPEB
 
2021
  
2020
  
2021
  
2020
Change in projected benefit obligation:
                      
Benefit obligation at beginning of year
$
130,242
    
$
125,931
    
$
20,105
    
$
18,942
  
Service cost
  
—
      
—
      
181
      
184
  
Interest cost
  
2,505
      
3,494
      
460
      
576
  
Plan participants' contributions
  
—
      
—
      
547
      
486
  
Actuarial (gain) loss
  
1,222
      
8,828
      
(781
)
    
876
  
Benefits paid
  
(9,862
)
    
(8,011
)
    
(1,506
)
    
(959
)
Benefit obligation at end of year
$
124,107
    
$
130,242
    
$
19,006
    
$
20,105
  
                               
Change in plan assets:
                              
Fair value of plan assets at beginning of year
$
165,647
    
$
151,704
    
$
—
    
$
—
  
Return on plan assets
  
14,749
      
18,926
      
—
      
—
  
Plan participants' contributions
  
—
      
—
      
547
      
486
  
Company contributions
  
1,028
      
3,028
      
959
      
473
  
Benefits paid
  
(9,862
)
    
(8,011
)
    
(1,506
)
    
(959
)
Fair value of net plan assets at end of year
$
171,562
    
$
165,647
    
$
—
    
$
—
  
                               
Under/(over) funded status at end of year
$
(47,455
)
  
$
(35,405
)
  
$
19,006
    
$
20,105
  

 
Pension Benefits
  
OPEB
 
2021
  
2020
  
2021
  
2020
Amounts recognized in accumulated other
    comprehensive income (loss):
                      
Net loss (gain)
$
59,413
    
$
66,035
    
$
(8,672
)
  
$
(8,755
)
Prior service credit
  
(1,208
)
    
(1,274
)
    
—
      
—
  
Total accumulated other comprehensive
    income (loss)
$
58,205
    
$
64,761
    
$
(8,672
)
  
$
(8,755
)

 
Pension Benefits
  
OPEB
 
2021
  
2020
  
2021
  
2020
Other changes in plan assets and benefit
     obligations recognized in other
     comprehensive income (loss):
                      
Unrecognized actuarial net (gain) loss
$
(4,248
)
  
$
(843
)
  
$
(781
)
  
$
876
  
Amortization of net gain (loss)
  
(2,374
)
    
(2,514
)
    
864
      
1,039
  
Amortization of prior service credit
  
66
      
66
      
—
      
—
  
Total (gain) loss recognized in other
      comprehensive income (loss)
$
(6,556
)
  
$
(3,291
)
  
$
83
    
$
1,915
  
53
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
 
Pension Benefits
  
OPEB
 
2021
  
2020
  
2021
  
2020
Weighted average assumptions used to determine
     benefit obligations at December 31:
                      
Discount rate
2.47
%
  
2.00
%
  
2.68
%
  
2.33
%
                       
Weighted average assumptions used to determine
     net periodic benefit cost for years ended
     December 31:
                      
Discount rate
2.00
%
  
2.88
%
  
2.33
%
  
3.10
%
Expected return on plan assets
5.77
%
  
6.29
%
  
—
%
  
—
  
The following table presents the fair value of each major category of pension plan assets at December 31. 
 
2021
  
2020
Fixed maturity securities:
          
U.S. Government
$
85
    
$
159
  
Industrial and public utility
  
6,615
      
8,206
  
Investment funds:
              
Mutual funds
  
41,092
      
30,844
  
Collective trust
  
120,301
      
114,177
  
Limited partnerships
  
3,375
      
11,852
  
Other invested assets
  
31
      
10
  
Cash and cash equivalents
  
6
      
334
  
Receivables
  
57
      
65
  
Fair value of assets at end of year
$
171,562
    
$
165,647
  
54
The following tables provide the fair value hierarchy, as described in Note 4 - Fair Value Measurements, for pension plan assets at December 31.
 
2021
 
Level 1
  
Level 2
  
Level 3
  
Total
Fixed maturity securities:
                      
U.S. Government
$
—
    
$
85
    
$
—
    
$
85
  
Industrial and public utility
  
—
      
6,615
      
—
      
6,615
  
Mutual funds
  
41,092
      
—
      
—
      
41,092
  
Other invested assets
  
—
      
—
      
31
      
31
  
Total assets in the fair value hierarchy
  
41,092
      
6,700
      
31
      
47,823
  
                               
Investments measured at net asset value: 1
                              
Collective trust
                          
120,301
  
Limited partnerships
                          
3,375
  
Investments at fair value
                        
$
171,499
  
                               
  2020  
 
Level 1
  
Level 2
  
Level 3
  
Total
Fixed maturity securities:
                              
U.S. Government
$
—
    
$
159
    
$
—
    
$
159
  
Industrial and public utility
  
—
      
8,206
      
—
      
8,206
  
Mutual funds
  
30,844
      
—
      
—
      
30,844
  
Other invested assets
  
—
      
—
      
10
      
10
  
Total assets in the fair value hierarchy
  
30,844
      
8,365
      
10
      
39,219
  
                               
Investments measured at net asset value: 1
                              
Collective trust
                          
114,177
  
Limited partnerships
                          
11,852
  
Investments at fair value
                        
$
165,248
  
1 These investments are valued based on net asset value per unit.  These values are provided by the fund as a practical expedient and have not been classified in the fair value hierarchy.
The following table discloses the changes in Level 3 pension plan assets measured at fair value on a recurring basis for the years ended December 31.
 
2021
  
2020
Beginning balance
$
10
    
$
13
  
Losses realized and unrealized
  
21
      
(3
)
Ending balance
$
31
    
$
10
  
55
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides the components of net periodic benefit cost (credit) for the years ended December 31.
 
Pension Benefits
  
OPEB
 
2021
  
2020
  
2019
  
2021
  
2020
  
2019
Service cost
$
—
    
$
—
    
$
—
    
$
181
    
$
184
    
$
169
  
Interest cost
  
2,505
      
3,494
      
4,615
      
460
      
576
      
663
  
Expected return on plan assets
  
(9,279
)
    
(9,255
)
    
(9,223
)
    
—
      
—
      
—
  
Amortization of:
                                              
Unrecognized actuarial net (gain)
    loss
  
2,374
      
2,514
      
2,874
      
(864
)
    
(1,039
)
    
(1,458
)
Unrecognized prior service credit
  
(66
)
    
(66
)
    
(66
)
    
—
      
—
      
—
  
Net periodic benefit credit
  
(4,466
)
    
(3,313
)
    
(1,800
)
    
(223
)
    
(279
)
    
(626
)
Total recognized in other
      comprehensive income (loss)
  
(6,556
)
    
(3,291
)
    
(7,517
)
    
83
      
1,915
      
3,666
  
Total recognized in net periodic
      benefit cost (credit) and other
      comprehensive income (loss)
$
(11,022
)
  
$
(6,604
)
  
$
(9,317
)
  
$
(140
)
  
$
1,636
    
$
3,040
  
For measurement purposes, the annual increase in the per capita cost of covered health care benefits was assumed to be 6.25%, decreasing gradually to 5.00% in 2027 and thereafter.
56
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
13. Share-Based Payment
The Kansas City Life Insurance Company Omnibus Incentive Plan (long-term incentive plan) includes a long-term incentive benefit for senior management.  The long-term incentive plan design includes a cash award to participants that may be paid, in part, based on the increase in the share price of our common stock through units (phantom shares) assigned by the Board of Directors.  The cash award is calculated over a three-year interval on a calendar year basis.  At the conclusion of each three-year interval, participants will receive a cash award based on the increase in the share price during a defined measurement period, multiplied by the number of units attributable to each participant.  The increase in the share price is determined based on the change in the share price from the beginning to the end of the three-year interval.  Amounts representing dividends are accrued and paid at the end of each three-year interval to the extent that they exceed negative stock price appreciation.  Plan payments are contingent on the continued employment of the participant unless termination is due to a qualifying event such as death, disability, or retirement.  In addition, all payments are lump sum with no deferrals allowed.  The Company does not make payments in shares, warrants, or options.
The following table provides information about the outstanding three-year intervals at December 31, 2021. 
Defined
Measurement
Period
  
Number
of Units
  
Grant
Price
2019-2021
  
126,898
  
$35.12
2020-2022
  
129,114
  
$32.70
2021-2023
  
114,167
  
$37.39
2022-2024*
  
116,859
  
$42.03
*  Effective January 1, 2022
The Company did not make any cash payments under the long-term incentive plan during 2021 for the three-year interval ended December 31, 2020.  The Company did not make any cash payments under the long-term incentive plan during 2020 for the three-year interval ended December 31, 2019.  The Company did not make any cash payments under the long-term incentive plan during 2019 for the three-year interval ended December 31, 2018.  The cost of share-based compensation accrued as an operating expense during 2021 was $1.5 million, net of tax.  The cost of share-based compensation accrued as an operating expense during 2020 was $0.6 million, net of tax.  The cost of share-based compensation accrued as an operating expense during 2019 was less than $0.1 million, net of tax.
57
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
14. Reinsurance
The following table provides information about reinsurance for the years ended December 31. 
 
2021
  
2020
  
2019
Life insurance in force (in millions) :
                
Direct
$
50,757
    
$
52,334
    
$
52,752
  
Ceded
  
(32,269
)
    
(32,884
)
    
(32,889
)
Assumed
  
5,082
      
4,121
      
4,337
  
Net
$
23,570
    
$
23,571
    
$
24,200
  
                       
Premiums:
                      
Life insurance:
                      
Direct
$
253,348
    
$
265,564
    
$
266,345
  
Ceded
  
(98,507
)
    
(94,074
)
    
(96,263
)
Assumed
  
7,030
      
4,855
      
4,717
  
Net
$
161,871
    
$
176,345
    
$
174,799
  
                       
Accident and health:
                      
Direct
$
57,043
    
$
58,131
    
$
59,681
  
Ceded
  
(10,050
)
    
(10,720
)
    
(11,253
)
Net
$
46,993
    
$
47,411
    
$
48,428
  
Ceded Reinsurance Arrangements
Old American has a coinsurance agreement that reinsures certain whole life policies issued by Old American prior to December 1, 1986.  These policies had a face value of $10.6 million at December 31, 2021 and $11.9 million at December 31, 2020.  The reserve for future policy benefits ceded under this agreement was $6.5 million at December 31, 2021 and $7.3 million at December 31, 2020.
Sunset Life entered into a yearly renewable term reinsurance agreement January 1, 2002, whereby it ceded 80% of its retained mortality risk on traditional and universal life policies.  In June 2012, Sunset Life recaptured approximately 9% of the outstanding bulk reinsurance agreement.  Effective with the sale of Sunset Life on November 1, 2021, Kansas City Life assumed the responsibility for this agreement.  The insurance in force ceded approximated $531.6 million at December 31, 2021 and $577.8 million at December 31, 2020.  Premiums totaled $5.4 million during 2021, $5.6 million during 2020, and $5.7 million during 2019.
Reinsurance recoverables were $400.0 million at year-end 2021, consisting of reserves ceded of $353.1 million and claims ceded of $46.9 million.  Reinsurance recoverables were $391.4 million at year-end 2020, consisting of reserves ceded of $351.4 million and claims ceded of $40.0 million.
The maximum retention on any one life during 2021 and 2020 was $0.5 million for ordinary life plans and $0.1 million for group coverage.
The following table reflects our reinsurance partners whose reinsurance recoverable was 5% or greater of our total reinsurance recoverable at December 31, 2021, along with their A.M. Best credit rating.
 
A.M. Best
Rating
  
Reinsurance
Recoverable
  
% of
Recoverable
Transamerica Life Insurance Company
 A
 
$
132,224
    
33
%
RGA Reinsurance Company
A+
    
110,024
    
27
%
Swiss Re Life & Health America, Inc
A+
    
30,455
    
8
%
Other (25 Companies)
      
127,248
    
32
%
Total
    
$
399,951
    
100
%
58
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
A contingent liability exists with respect to reinsurance, which may become a liability of the Company in the unlikely event that the reinsurers should be unable to meet obligations assumed under reinsurance contracts.  The solvency of reinsurers is reviewed annually.
We monitor several factors that we consider relevant as to the ongoing ability of a reinsurer to meet the obligations of the reinsurance agreements.  These factors include the credit rating of the reinsurer and significant changes or events of the reinsurer.  If we believe that any reinsurer would not be able to satisfy its obligations with us, a separate contingency reserve may be established.  At year-end 2021 and 2020, no reinsurer met these conditions.  In addition, we review the credit rating and financial statements of a reinsurer before entering into any new agreements.
Assumed Reinsurance Arrangements
We acquired a block of traditional life and universal life products in 1997 through a 100% coinsurance and servicing arrangement.  Investments equal to the statutory policy reserves are held in a trust to secure payment of the estimated liabilities relating to the policies.  This block had $559.1 million of life insurance in force at December 31, 2021 and $606.2 million of life insurance in force at December 31, 2020.  This block generated life insurance premiums of $1.7 million in 2021, $1.9 million in 2020, and $2.0 million in 2019.
We acquired a block of variable universal life insurance policies and variable annuity contracts from American Family Life Insurance Company in 2013.  The transfer was comprised of a 100% modified coinsurance transaction on the separate account business and a 100% coinsurance transaction for the corresponding fixed account business.  Included in the transaction are ongoing servicing arrangements for this business.  This block consisted of $392.7 million of separate account balances at December 31, 2021, which are included in the financial statements of American Family, compared to $369.9 million at December 31, 2020.  This block consisted of $0.5 million of future policy benefits and $34.1 million in fixed fund balances that are included in Policyholder Account Balances in the Company’s Consolidated Balance Sheets at December 31, 2021.  This block consisted of $0.5 million of future policy benefits and $32.8 million in fixed fund balances at December 31, 2020.
Effective November 1, 2021, Kansas City Life recognized 100% of the future policy benefits and policyholder account balances as well as other related liabilities in the reinsurance assumption that occurred December 31, 2020.  Effective December 31, 2020, Kansas City Life entered into a 100% assumption reinsurance agreement with Sunset Life of all direct policyholder liabilities written by Sunset Life.  As Sunset Life was still part of the consolidated entity prior to November 1, 2021, this agreement had no impact on consolidated reporting.  Effective with the sale of Sunset Life on November 1, 2021, the treaty is now accounted for as an assumption reinsurance agreement from an unaffiliated third party.  This block had $1.1 billion of life insurance in force at December 31, 2021 and generated life insurance premiums of $2.4 million in 2021.  This block consisted of $33.6 million of future policy benefits and $210.1 million of policyholder account balances at December 31, 2021.
59
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
15. Comprehensive Income (Loss)
Comprehensive Income (Loss) is comprised of Net Income and Other Comprehensive Income (Loss).  Other Comprehensive Income (Loss) includes the unrealized investment gains or losses on securities available for sale (net of reclassifications for realized investment gains or losses), net of adjustments to DAC, VOBA, DRL, future policy benefits, and policyholder account balances.  In addition, Other Comprehensive Income (Loss) includes the change in the liability for benefit plan obligations.  Other Comprehensive Income (Loss) reflects these items net of tax.
The following tables provide information about Comprehensive Income (Loss).
 
Year Ended December 31, 2021
 
Pre-Tax
Amount
  
Tax Expense (Benefit)
  
Net-of-Tax
Amount
                 
Net unrealized losses arising during the year:
                
Fixed maturity securities
$
(123,342
)
  
$
(25,902
)
  
$
(97,440
)
Less reclassification adjustments:
                      
Net realized investment gains, excluding impairment
    losses
  
4,810
      
1,010
      
3,800
  
Other-than-temporary impairment losses recognized in
    earnings
  
(467
)
    
(98
)
    
(369
)
Other-than-temporary impairment losses recognized in
    other comprehensive loss
  
(15
)
    
(3
)
    
(12
)
Net unrealized losses excluding impairment losses
  
(127,670
)
    
(26,811
)
    
(100,859
)
Effect on DAC, VOBA, and DRL
  
10,058
      
2,112
      
7,946
  
Change in policyholder liabilities
  
11,705
      
2,458
      
9,247
  
Change in benefit plan obligations
  
6,475
      
1,360
      
5,115
  
Other comprehensive loss
$
(99,432
)
  
$
(20,881
)
  
$
(78,551
)
Net income
                  
10,704
  
Comprehensive loss
                
$
(67,847
)
60
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
 
Year Ended December 31, 2020
 
Pre-Tax
Amount
  
Tax Expense (Benefit)
  
Net-of-Tax
Amount
                 
                 
Net unrealized gains arising during the year:
                
Fixed maturity securities
$
151,735
    
$
31,864
    
$
119,871
  
Less reclassification adjustments:
                      
Net realized investment gains, excluding impairment
    losses
  
5,045
      
1,059
      
3,986
  
Other-than-temporary impairment losses recognized in
    earnings
  
—
      
—
      
—
  
Other-than-temporary impairment losses recognized in
    other comprehensive income
  
(19
)
    
(4
)
    
(15
)
Net unrealized gains excluding impairment losses
  
146,709
      
30,809
      
115,900
  
Effect on DAC, VOBA, and DRL
  
(9,885
)
    
(2,076
)
    
(7,809
)
Change in policyholder liabilities
  
(20,104
)
    
(4,222
)
    
(15,882
)
Change in benefit plan obligations
  
1,376
      
289
      
1,087
  
Other comprehensive income
$
118,096
    
$
24,800
    
$
93,296
  
Net income
                  
15,170
  
Comprehensive income
                
$
108,466
  
 
 
Year Ended December 31, 2019
 
Pre-Tax
Amount
  
Tax Expense (Benefit)
  
Net-of-Tax
Amount
                 
Net unrealized gains arising during the year:
                
Fixed maturity securities
$
166,201
    
$
34,902
    
$
131,299
  
Less reclassification adjustments:
                      
Net realized investment gains, excluding impairment
    losses
  
2,723
      
572
      
2,151
  
Other-than-temporary impairment losses recognized in
    earnings
  
(580
)
    
(122
)
    
(458
)
Other-than-temporary impairment losses recognized in
    other comprehensive income
  
(4
)
    
(1
)
    
(3
)
Net unrealized gains excluding impairment losses
  
164,062
      
34,453
      
129,609
  
Effect on DAC, VOBA, and DRL
  
(14,694
)
    
(3,086
)
    
(11,608
)
Change in policyholder liabilities
  
(20,236
)
    
(4,249
)
    
(15,987
)
Change in benefit plan obligations
  
3,851
      
809
      
3,042
  
Other comprehensive income
$
132,983
    
$
27,927
    
$
105,056
  
Net income
                  
24,427
  
Comprehensive income
                
$
129,483
  
61
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides accumulated balances related to each component of Accumulated Other Comprehensive Income (Loss) at December 31, 2021, net of tax.
 
Unrealized
Gain on
Non-Impaired
Securities
  
Unrealized
Gain on
Impaired
Securities
  
Benefit
Plan
Obligations
  
DAC/
VOBA/DRL
Impact
  
Policyholder
Liabilities
  
Total
                                   
Beginning of year
$
252,334
    
$
1,247
    
$
(44,243
)
  
$
(20,524
)
  
$
(36,012
)
  
$
152,802
  
Other comprehensive
     income (loss) before
     reclassification
  
(96,874
)
    
(566
)
    
5,115
      
7,946
      
9,247
      
(75,132
)
Amounts reclassified
     from accumulated
     other comprehensive
     income (loss)
  
(3,800
)
    
381
      
—
      
—
      
—
      
(3,419
)
Net current-period other
     comprehensive income
     (loss)
  
(100,674
)
    
(185
)
    
5,115
      
7,946
      
9,247
      
(78,551
)
End of year
$
151,660
    
$
1,062
    
$
(39,128
)
  
$
(12,578
)
  
$
(26,765
)
  
$
74,251
  
The following table provides accumulated balances related to each component of Accumulated Other Comprehensive Income (Loss) at December 31, 2020, net of tax.
 
Unrealized
Gain on
Non-Impaired
Securities
  
Unrealized
Gain on
Impaired
Securities
  
Benefit
Plan
Obligations
  
DAC/
VOBA/DRL
Impact
  
Policyholder
Liabilities
  
Total
                                   
Beginning of year
$
136,264
    
$
1,417
    
$
(45,330
)
  
$
(12,715
)
  
$
(20,130
)
  
$
59,506
  
Other comprehensive
     income (loss) before
     reclassification
  
120,056
      
(185
)
    
1,087
      
(7,809
)
    
(15,882
)
    
97,267
  
Amounts reclassified
     from accumulated
     other comprehensive
     income (loss)
  
(3,986
)
    
15
      
—
      
—
      
—
      
(3,971
)
Net current-period other
     comprehensive income
     (loss)
  
116,070
      
(170
)
    
1,087
      
(7,809
)
    
(15,882
)
    
93,296
  
End of year
$
252,334
    
$
1,247
    
$
(44,243
)
  
$
(20,524
)
  
$
(36,012
)
  
$
152,802
  
62
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table presents the pre-tax and the related Income Tax Benefit (Expense) components of the amounts reclassified from Accumulated Other Comprehensive Income (Loss) to the Consolidated Statements of Comprehensive Income for the years ended December 31.
 
2021
  
2020
  
2019
Reclassification adjustments related to unrealized gains (losses)
     on investment securities:
                
Net realized investment gains, excluding impairment losses 1
$
4,810
    
$
5,045
    
$
2,723
  
Income tax expense (2)
  
(1,010
)
    
(1,059
)
    
(572
)
Net of taxes
  
3,800
      
3,986
      
2,151
  
                       
Other-than-temporary impairment losses 1
  
(482
)
    
(19
)
    
(584
)
Income tax benefit 2
  
101
      
4
      
123
  
Net of taxes
  
(381
)
    
(15
)
    
(461
)
                       
Total pre-tax reclassifications
  
4,328
      
5,026
      
2,139
  
Total income tax expense
  
(909
)
    
(1,055
)
    
(449
)
Total reclassification, net taxes
$
3,419
    
$
3,971
    
$
1,690
  
1  (Increases) decreases Net Investment Gains in the Consolidated Statements of Comprehensive Income.
2  (Increases) decreases Income Tax Expense in the Consolidated Statements of Comprehensive Income.
16. Earnings per Share
Due to our capital structure and the absence of other potentially dilutive securities, there is no difference between basic and diluted earnings per common share for any of the years reported.  The average number of shares outstanding was 9,683,414 shares during 2021, 2020, and 2019.  The number of shares outstanding at both December 31, 2021 and December 31, 2020 was 9,683,414.
17. Segment Information
We have three reportable business segments, which are defined based on the nature of the products and services offered:  Individual Insurance, Group Insurance, and Old American.  The Individual Insurance segment consists of individual insurance products for Kansas City Life, Grange Life, and the assumed reinsurance transactions.  Sunset Life was also included in the Individual Insurance segment until its sale on November 1, 2021.  The results of Sunset Life operations are included in the Individual Insurance segment for the first ten months of 2021 and the years ended December 31, 2020 and December 31, 2019.  For additional information on the sale of Sunset Life, please see the Business Changes section of Note 1 - Nature of Operations and Significant Accounting Policies.  The Group Insurance segment consists of sales of group life, dental, vision, disability, accident, and critical illness products.  The Old American segment consists of individual insurance products designed largely as final expense products.
Insurance revenues, as shown in the Consolidated Statements of Comprehensive Income, consist of premiums and contract charges, less reinsurance ceded.  Separate investment portfolios are maintained for Kansas City Life, Old American, and Grange Life for segment reporting purposes.  Investment assets and income are allocated to the Group Insurance segment based upon its cash flows and future policy benefit liabilities.  Policyholder benefits are specifically identified to the respective segment.  Most home office functions are fully integrated for all segments in order to maximize economies of scale.  Therefore, operating expenses are allocated to the segments based upon internal cost studies, which are consistent with industry cost methodologies.
Inter-segment revenues are not material.  We operate solely in the United States of America and no individual customer accounts for 10% or more of our revenue.
63
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following tables provide selected financial statement items of each of the operating segments for the years ended December 31.  Intercompany transactions have been eliminated to arrive at Consolidated Statements of Comprehensive Income.
 
2021
  
 
Individual
Insurance
  
Group
Insurance
  
Old
American
  
Consolidated
                       
Insurance revenues
$
168,675
    
$
62,145
    
$
99,847
    
$
330,667
  
Interest credited to policyholder
      account balances
  
79,725
      
—
      
—
      
79,725
  
Amortization of deferred
      acquisition costs
  
12,520
      
—
      
20,697
      
33,217
  
Income tax expense (benefit)
  
3,537
      
(106
)
    
(1,215
)
    
2,216
  
Net income (loss)
  
15,698
      
(401
)
    
(4,593
)
    
10,704
  
Assets
  
4,959,634
      
10,030
      
463,766
      
5,433,430
  

 
2020
  
 
Individual
Insurance
  
Group
Insurance
  
Old
American
  
Consolidated
                       
Insurance revenues
$
189,081
    
$
62,695
    
$
98,702
    
$
350,478
  
Interest credited to policyholder
      account balances
  
78,792
      
—
      
—
      
78,792
  
Amortization of deferred
      acquisition costs
  
21,444
      
—
      
20,697
      
42,141
  
Income tax expense (benefit)
  
793
      
904
      
(953
)
    
744
  
Net income (loss)
  
15,327
      
3,405
      
(3,562
)
    
15,170
  
Assets
  
4,989,424
      
11,438
      
462,150
      
5,463,012
  

 
2019
  
 
Individual
Insurance
  
Group
Insurance
  
Old
American
  
Consolidated
                       
Insurance revenues
$
190,041
    
$
63,091
    
$
95,981
    
$
349,113
  
Interest credited to policyholder
      account balances
  
78,520
      
—
      
—
      
78,520
  
Amortization of deferred
      acquisition costs
  
15,506
      
—
      
20,442
      
35,948
  
Income tax expense
  
4,163
      
558
      
302
      
5,023
  
Net income
  
21,191
      
2,099
      
1,137
      
24,427
  
Assets
  
4,772,243
      
12,006
      
435,616
      
5,219,865
  

64
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
18. Quarterly Consolidated Financial Data (unaudited)
The unaudited quarterly results of operations for the years ended December 31 are summarized in the following table.
 
2021
 
First
  
Second
  
Third
  
Fourth
                       
Total revenues
$
122,331
    
$
124,804
    
$
121,282
    
$
142,895
  
Total benefits and expenses
  
122,974
      
119,537
      
128,271
      
127,610
  
Net income (loss)
  
(668
)
    
4,286
      
(6,006
)
    
13,092
  
Per common share,
     basic and diluted
  
(0.07
)
    
0.44
      
(0.62
)
    
1.36
  
                               
  2020
 
First
  
Second
  
Third
  
Fourth
                               
Total revenues
$
123,035
    
$
146,772
    
$
128,005
    
$
126,098
  
Total benefits and expenses
  
123,446
      
125,464
      
129,033
      
130,053
  
Net income (loss)
  
150
      
16,969
      
(1,199
)
    
(750
)
Per common share,
     basic and diluted
  
0.02
      
1.75
      
(0.13
)
    
(0.07
)

19. Statutory Information and Stockholder Dividends Restriction
The following table provides Kansas City Life’s net gain (loss) from operations, net income, and capital and surplus (stockholders' equity) on the statutory basis used to report to regulatory authorities for the years ended December 31.
 
2021
  
2020
  
2019
                 
Net gain (loss) from operations
$
(5,494
)
  
$
(1,287
)
  
$
5,965
  
Net income
  
24,165
      
11,554
      
6,929
  
Capital and surplus
  
245,300
      
265,341
      
260,804
  
Kansas City Life recognizes its 100% ownership in Old American and Grange Life under the equity method with subsidiary earnings recorded through surplus on a statutory accounting basis.  Capital and surplus at December 31, 2021 in the above table includes capital and surplus of $18.3 million for Old American and $29.9 million for Grange Life.
Stockholder dividends may not exceed statutory unassigned surplus.  Additionally, under Missouri law, a company must have the prior approval of the Missouri Director of Insurance to pay dividends in any consecutive twelve-month period exceeding the greater of statutory net gain from operations for the preceding year or 10% of statutory stockholders' equity at the end of the preceding year.  Both Kansas City Life and Old American are Missouri-domiciled insurance companies.  The maximum stockholder dividends payable by Kansas City Life without prior approval in 2022 is $24.5 million, 10% of December 31, 2021 capital and surplus.  The maximum stockholder dividends payable by Old American without prior approval in 2022 is $1.8 million, 10% of December 31, 2021 capital and surplus.
Grange Life is subject to the laws in Ohio, its state of domicile.  The maximum stockholder dividends payable by Grange Life without prior approval in 2022 is $3.0 million, 10% of December 31, 2021 capital and surplus.
We believe that the statutory limitations described above impose no practical restrictions on the declaration and subsequent payment of any dividend that may be declared on any of our three insurance companies.
Insurance companies are monitored and evaluated by state insurance departments as to the financial adequacy of statutory capital and surplus in relation to each company's risks.  One such measure is through the risk-based capital (RBC) guidelines.  RBC requirements are intended to be used by insurance regulators as an early warning tool to identify deteriorating or weakly
65
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
capitalized insurance companies for the purpose of initiating regulatory action.  RBC guidelines consist of target statutory surplus levels based on the relationship of statutory capital and surplus to the sum of weighted risk exposures.  The RBC calculation determines both an authorized control level and a total adjusted capital prepared on the RBC basis.  Generally, regulatory action is at 150% of the authorized control level.  Each of the insurance companies was within the range of approximately 530% to 720%, well in excess of the control level at December 31, 2021.
We are required to deposit a defined amount of assets with state regulatory authorities.  Such assets had a statutory carrying value of $9.5 million at December 31, 2021, $16.2 million at December 31, 2020, and $16.3 million at December 31, 2019.

20. Commitments, Contingent Liabilities, Guarantees, and Indemnifications
Commitments
In the normal course of business, we have open purchase and sale commitments.  At December 31, 2021, we had purchase commitments to fund mortgage loans of $24.2 million.
Subsequent to December 31, 2021, we entered into commitments to fund additional mortgage loans of $24.5 million.
Contingent Liabilities
On March 1, 2019, the Delaware Department of Insurance requested Scottish Re (US) be placed in rehabilitation. Kansas City Life has ceded some of its business to Scottish Re (US), a subsidiary of Scottish Re Group.  Based on the information currently available, the Company does not have sufficient information to make an assessment of the likelihood of any loss related to this matter. The Company will continue to closely monitor developments related to the rehabilitation proceeding.
Kansas City Life is involved in various pending or threatened legal proceedings, including purported class actions, arising from the conduct of business both in the ordinary course and otherwise.  In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought.
Due to the unpredictable nature of litigation, the probable outcome of a litigation matter and the amount or range of potential loss can be difficult to ascertain.  We establish liabilities for litigation and other loss contingencies when available information indicates both that a loss is probable and the amount of the loss can be reasonably estimated.  Some matters could require us to pay damages or make other expenditures or establish accruals in amounts that cannot be estimated as of December 31, 2021.  Based on information currently known by management, management does not believe any such expenditures are likely to have a material adverse effect on Kansas City Life’s financial condition.
Cost of Insurance Litigation
We are the defendant in three related litigation matters (including two class actions and one putative class action) that allege that we determined cost of insurance rates in excess of amounts permitted by the terms of certain life insurance policies.
The three matters are:
•
Meek v. KCL, which is a class action filed in the U.S. District Court for the Western District of Missouri, including current and former policyholders who purchased certain universal life policies originally issued in the State of Kansas.  As discussed below, the Court in the Meek case has certified a class of policyholders for the action and identified the policies at issue.
•
Karr v. KCL, which is a class action filed in the 16th Circuit Court for the State of Missouri (Jackson County), including current Missouri residents who purchased certain universal life policies in the State of Missouri.  As discussed below, the Court in Karr has certified a class of policyholders for the action, identified the policies at issue, and issued partial summary judgment on three of the five counts.
•
Sheldon v. KCL, which is a putative class action filed in the 16th Circuit Court for the State of Missouri (Jackson County), where plaintiff seeks to represent all similar current and former policyholders who purchased certain variable universal life products in any state where the policies were issued.  The plaintiff is seeking damages and declaratory relief on behalf of all such policyholders.  The Court in Sheldon has not certified a class or identified the variable universal life products at issue.
The certain universal life insurance policies at issue in both the Meek v. KCL and the Karr v. KCL matters are the Better Life Plan, Better Life Plan Qualified, LifeTrack, AGP, MGP, PGP, Chapter One, Classic, Rightrack (89), Performer (88), Performer (91), Prime Performer, Competitor (88), Competitor (91), Executive (88), Executive (91), Protector 50, LewerMax, Ultra 20 (93), Competitor II, Executive II, Performer II, or Ultra 20 (96).
66
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The Court in Karr v. KCL certified a class of policyholders to be represented by the named plaintiff on July 12, 2021.  The class in the Karr lawsuit includes current Missouri citizens whose life insurance policies were issued in Missouri and were active on or after January 1, 2002.  On February 22, 2022, the Court granted partial Summary Judgment to plaintiffs on three of the five counts at issue in the class action.  The three counts will be submitted to a jury to determine what damages, if any, have been incurred by the Class.  The remaining two counts have not yet been adjudicated.  KCL has moved to decertify the class, will vigorously defend the damages claims and remaining claims at trial, and intends to pursue any appeals that may be available at the appropriate times.
The Court in Meek v. KCL certified a class of policyholders to be represented by the named plaintiff on February 7, 2022, for four of the five counts at issue in the class action.  The Court also limited the class to Kansas policyholders rather than the multi-state class sought by plaintiff.  The Kansas-only class that was certified in the Meek lawsuit includes current and former policyholders whose life insurance policies were issued in Kansas and whose policies were active on or after January 1, 2002. The Court’s decision means that the class of policyholders certified in the Meek v. KCL lawsuit meets the requirements of Federal Rule of Civil Procedure 23(b)(3), which governs class actions in federal courts.  While the ruling establishes a class at this stage of the litigation and permits the future issuance of a notice to class members, the Court has not decided who will win this case.
We believe we have meritorious defenses to all of the claims asserted in the Meek and Sheldon cases described above and to the unadjudicated claims and damages claims asserted in the Karr case.  We are vigorously defending each of these matters. However, there can be no assurances as to the outcome of these matters.  In the event of an unfavorable outcome, the amount that may be required to be paid to discharge or settle the matters could have a material adverse impact on our business and financial statements.
We have not concluded that a loss related the Meek or Sheldon matters is probable, nor have we accrued any liability relating to those two matters.
With respect to the damages claims related to the three Counts subject to the partial summary judgment ruling in Karr, the circumstances of our defenses and the potential damages claims by plaintiff, including the potential for compensatory damages, interest and punitive damages, as well as our intent to pursue any available appeals, make it impossible to estimate a potential range of potential losses in this matter.  As a result, we have not accrued a liability for this loss contingency at this time.
Regulatory Matters
We are subject to regular reviews and inspections by state and federal regulatory authorities.  State insurance examiners - or independent audit firms engaged by such examiners - may, from time to time, conduct examinations or investigations into industry practices and into customer complaints.  A regulatory violation discovered during a review, inspection, or investigation could result in a wide range of remedies that could include the imposition of sanctions against us or our employees, which could have a material adverse effect on our financial statements.
The life insurance industry has been the subject of significant regulatory and legal activities regarding the use of the U.S. Social Security Administration's Death Master File (“Death Master File”) in the claims process.  Certain states have proposed, and many other states are considering, new legislation and regulations related to unclaimed life insurance benefits and the use of the Death Master File in the claims process.  Based on our analysis to date, we believe that we have adequately reserved for contingencies from a change in statute or regulation.  Ongoing regulatory developments and other future requirements related to this matter may result in additional payments or costs that could be significant and could have a material adverse effect on our financial statements.
Guarantees and Indemnifications
We are subject to various indemnification obligations issued in conjunction with certain transactions, primarily assumption reinsurance agreements, stock purchase agreements, mortgage servicing agreements, tax credit assignment agreements, construction and lease guarantees, and borrowing agreements whose terms range in duration and often are not explicitly defined.  Generally, a maximum obligation is not explicitly stated.  Therefore, the overall maximum amount of the obligation under the indemnifications cannot be reasonably estimated.  We are unable to estimate with certainty the ultimate legal and financial liability with respect to these indemnifications.  We believe that the likelihood is remote that material payments would be required under such indemnifications and, therefore, such indemnifications would not result in a material adverse effect on our financial position or financial statements.
67
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
21. Subsequent Events
We evaluated events that occurred subsequent to December 31, 2021 through March 4, 2022, the date the consolidated financial statements were issued and have identified the following subsequent event.
On January 24, 2022, the Kansas City Life Board of Directors declared a quarterly dividend of $0.27 per share, paid on February 9, 2022 to stockholders of record on February 3, 2022.
There have been no other subsequent events that occurred during such period that require disclosure in, or adjustment to, the consolidated financial statements as of and for the year ended December 31, 2021.
68
Independent Auditor’s Report
The Audit Committee and Stockholders
Kansas City Life Insurance Company
Kansas City, Missouri
Opinion
We have audited the consolidated financial statements of Kansas City Life Insurance Company and subsidiaries, which comprise the consolidated balance sheets as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Kansas City Life Insurance Company and subsidiaries as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2021 in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements” section of our report. We are required to be independent of Kansas City Life Insurance Company and subsidiaries and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Kansas City Life Insurance Company and subsidiaries’ ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence judgment made by a reasonable user based on the consolidated financial statements.
In performing an audit in accordance with GAAS, we:
•
Exercise professional judgment and maintain professional skepticism throughout the audit.
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Kansas City Life Insurance Company and subsidiaries’ internal control. Accordingly, no such opinion is expressed.

•
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.
69
•
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Kansas City Life Insurance Company and subsidiaries’ ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the incurred and paid claims development information for the years 2012 through 2020 in Note 8 be presented to supplement the basic consolidated financial statements. Such information is the responsibility of management and, although not a part of the basic consolidated financial statements, is required by the Financial Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic consolidated financial statements, and other knowledge we obtained during our audit of the basic consolidated financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
/s/ BKD, LLP
Kansas City, Missouri
March 4, 2022


70


 







KANSAS CITY LIFE
VARIABLE ANNUITY
SEPARATE ACCOUNT

FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2021 AND 2020






















TABLE OF CONTENTS

Statement of Net Assets
Statement of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Registered Public Accounting Firm


 
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 2021

           
Century II
  
Century II
          
           
Variable Annuity
  
Freedom Variable Annuity
          
    
Number of
      
Number
  
Unit
  
Number
  
Unit
  
Fair
      
Net Assets
  
Shares
  
NAV
  
of Units
  
Value
  
of Units
  
Value
  
Value
  
Cost
  
                           
(in thousands)
  
Federated Hermes Insurance Series
                                  
Managed Volatility Fund II - P
    
243,007
  
$
12.90
    
131,360
  
$
23.851
    
110
  
$
15.795
  
$
3,135
  
$
3,130
  
High Income Bond Fund II - P
    
630,940
     6.39
    
99,849
    
36.387
    
13,856
    
28.760
    
4,032
    
4,034
  
Government Money Fund II - S
    
2,153,536
     1.00
    
168,285
    
11.506
    
24,428
    
8.896
    
2,154
    
2,154
  
                                                   
MFS® Variable Insurance Trust
                                                  
Research Series - Initial Class Shares
    
240,429
    
38.59
    
123,366
    
74.316
    
1,824
    
60.362
    
9,278
     6,053
  
Growth Series - Initial Class Shares
    
213,388
    
79.36
    
155,679
     108.076
    
1,218
    
89.718
     16,934
     10,209
  
Total Return Series - Initial Class Shares
    
244,747
    
27.78
    
112,496
     51.681
    
33,134
    
29.732
     6,799
     5,512
  
Total Return Bond Series - Initial Class Shares
    
306,240
    
13.63
    
155,149
     25.935
    
8,664
    
17.337
     4,174
     4,065
  
Utilities Series - Initial Class Shares
    
343,300
    
38.31
    
125,290
     99.854
    
9,751
    
65.756
     13,152
     10,189
  
                                                   
MFS® Variable Insurance Trust II
                                                  
Income Portfolio - Initial Class Shares
     196,507
     9.81
     73,358
     24.251
     7,657
     19.424
     1,928
     1,976
  
                                                   
American Century Variable Portfolios, Inc.
                                            
VP Capital Appreciation Fund - Class I
    
373,953
     18.70
     104,849
    
66.360
     444
     79.155
     6,993
     5,484
  
VP International Fund - Class I
    
434,721
     14.86
     159,597
    
40.205
     1,236
     35.147
     6,460
     4,376
  
VP Value Fund - Class I
    
546,514
     13.67
     265,430
     27.588
     3,584
     41.353
     7,471
     4,918
  
VP Disciplined Core Value Fund - Class I
    
197,344
     10.72
     89,770
    
22.608
     1,943
     44.278
     2,116
     1,732
  
VP Ultra® Fund - Class I
    
145,106
     31.38
     65,674
    
68.833
     501
     65.699
     4,553
     3,253
  
VP Mid Cap Value Fund - Class I
    
32,147
     25.02
     23,043
    
34.078
     581
     32.769
     804
     616
  
                                                   
American Century Variable Portfolios II, Inc.
                                            
VP Inflation Protection Fund - Class II
     187,880
     11.42
     127,238
     15.739
     9,521
     15.024
     2,146
     1,992
  
                                                   
BNY Mellon Variable Investment Fund
                                                  
Appreciation Portfolio - Initial Shares
     97,135
     53.72
     87,994
     59.301
     -
     52.658
     5,218
     3,768
  
Opportunistic Small Cap Portfolio - Initial Shares
     156,551
     57.77
     235,474
     38.199
     1,453
     33.765
     9,044
     6,577
  
                                                   
BNY Mellon Stock Index Fund, Inc. - Initial Shares
     305,758
     77.81
     387,220
     59.626
     12,344
     56.921
     23,791
     13,943
  
                                                   
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
     32,927
     58.08
     18,716
     101.793
     136
     53.150
     1,912
     1,307
  
                                                   
JPMorgan Insurance Trust
                                                  
Insurance Trust U.S. Equity Portfolio - Class 1 Shares
     38,279
     45.86
    
25,590
    
65.789
     1,166
    
61.698
    
1,755
    
1,036
  
Insurance Trust Small Cap Core Portfolio - Class 1 Shares
     226,859
     28.40
    
109,286
    
57.832
     2,234
    
54.897
    
6,443
     4,702
  
Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
     308,812
     13.34
     75,764
    
53.414
     1,426
    
50.981
    
4,120
     3,035
  
                                                   
Franklin Templeton Variable Insurance Products Trust
                                      
Franklin Global Real Estate VIP Fund - Class 2
     135,592
     17.47
     76,396
    
30.467
     1,578
    
26.145
    
2,369
     2,029
  
Franklin Small-Mid Cap Growth VIP Fund - Class 2
     93,016
     22.39
     70,652
    
29.258
     248
    
62.692
    
2,083
     1,765
  
Templeton Developing Markets VIP Fund - Class 2
     316,256
     10.67
     112,199
    
29.548
     1,536
    
38.526
    
3,374
     2,984
  
Templeton Foreign VIP Fund - Class 2
     234,310
     13.59
     102,522
    
30.532
     2,536
    
21.322
    
3,184
     3,188
  
                                                   

See accompanying Notes to Financial Statements
Page 1
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 2021

           
Century II
  
Century II
          
           
Variable Annuity
  
Freedom Variable Annuity
          
    
Number
      
Number
  
Unit
  
Number
  
Unit
  
Fair
      
Net Assets
  
Shares
  
NAV
  
of Units
  
Value
  
of Units
  
Value
  
Value
  
Cost
  
                           
(in thousands)
  
Calamos® Advisors Trust
                                  
Calamos Growth and Income Portfolio
    
949,604
    
22.85
    
445,988
    
48.074
    
6,415
    
40.226
    
21,698
    
15,158
  
                                                   
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
                          
V.I. American Franchise Fund - Series I Shares
    
17,943
    
88.63
    
89,474
    
17.437
    
591
    
50.936
    
1,590
    
1,316
  
V.I. Technology Fund - Series I Shares
     38,505
    
38.08
    
117,328
    
12.203
    
488
    
70.905
    
1,466
    
1,089
  
V.I. Core Equity Fund - Series I Shares
    
19,775
    
37.79
    
36,326
    
20.572
     -
    
40.710
     747
     628
  
                                                   
Columbia Funds Variable Series Trust II
                                                  
Mid-Cap Growth Fund (Class 2)
    
45,261
    
50.95
    
86,948
    
25.733
    
1,169
    
58.648
    
2,306
    
1,082
  
Seligman Global Technology Fund (Class 2)
    
163,902
    
34.73
    
78,185
    
69.366
    
1,562
    
172.143
    
5,692
    
3,570
  
Select Small Cap Value Fund (Class 2)
    
35,559
    
34.77
     26,057
    
46.391
    
623
    
44.278
    
1,236
     690
  
                                                   
Fidelity® Variable Insurance Products
                                                  
VIP ContrafundSM Portfolio - Service Class 2
    
103,801
    
52.51
    
141,374
    
36.452
    
8,458
    
35.139
    
5,451
    
4,034
  
VIP Freedom Income PortfolioSM - Service Class 2
    
101,212
    
12.69
    
78,260
    
15.037
    
7,424
    
14.495
    
1,284
    
1,148
  
VIP Freedom 2010 PortfolioSM - Service Class 2
    
13,720
    
14.33
    
1,906
    
17.905
    
9,414
    
17.260
     197
    
170
  
VIP Freedom 2015 PortfolioSM - Service Class 2
    
54,613
    
14.33
    
32,817
    
18.901
    
8,911
    
18.220
     783
    
655
  
VIP Freedom 2020 PortfolioSM - Service Class 2
    
293,607
    
15.31
    
225,181
    
19.523
    
5,250
    
18.820
     4,495
    
3,583
  
VIP Freedom 2025 PortfolioSM - Service Class 2
    
50,233
    
17.65
    
42,065
    
21.077
     -
    
20.318
     887
    
652
  
VIP Freedom 2030 PortfolioSM - Service Class 2
    
120,205
    
17.81
    
97,402
    
21.645
    
1,561
    
20.865
     2,141
    
1,577
  
VIP Freedom 2035 PortfolioSM - Service Class 2
    
30,762
    
29.78
    
33,364
    
27.211
     311
    
26.428
     916
    
658
  
VIP Freedom 2040 PortfolioSM - Service Class 2
    
30,554
    
28.83
    
31,197
    
28.236
     -
    
27.424
     881
    
606
  
VIP Freedom 2045 PortfolioSM - Service Class 2
    
20,338
    
29.07
    
20,811
    
28.409
     -
    
27.592
     591
    
404
  
VIP Freedom 2050 PortfolioSM - Service Class 2
    
35,377
    
26.18
    
31,303
    
28.457
    
1,281
    
27.638
     926
     721
  
                                                   
Northern Lights Variable Trust
                                                  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
    
610,380
     12.67
    
551,175
    
13.875
    
6,355
    
13.543
    
7,734
    
6,968
  
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
    
1,404,416
     13.45
     1,261,243
    
14.923
    
4,630
    
14.567
    
18,890
    
16,497
  
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
    
812,095
     13.10
    
696,824
    
15.016
    
11,928
    
14.657
    
10,638
    
9,192
  
                                                   
American Funds Insurance Series®
                                                  
Capital World Bond Fund - Class 2 Shares
    
34,053
    
11.70
    
36,996
    
10.532
    
846
    
10.384
    
398
     407
  
Global Growth Fund - Class 2 Shares
    
56,325
    
44.94
    
106,936
    
23.537
    
614
    
23.206
     2,531
     2,010
  
New World Fund® - Class 2 Shares
    
9,978
    
31.48
    
17,500
    
17.905
    
43
    
17.653
    
315
     242
  
Growth-Income Fund - Class 2 Shares
    
26,643
    
66.44
    
77,097
    
21.458
    
5,475
    
21.156
    
1,770
     1,393
  
Capital Income Builder® - Class 2 Shares
    
30,700
    
12.16
    
26,539
    
13.745
    
629
    
13.552
     373
     316
  
Asset Allocation Fund - Class 2 Shares
    
18,031
    
28.74
    
25,411
    
17.115
    
4,938
    
16.874
    
518
     430
  
                                                   
American Funds Insurance Series® Managed Risk Funds
                                
Managed Risk Growth Fund - Class P2 Shares
     2,058,522
     18.42
    
1,717,237
    
22.011
    
5,524
    
21.701
    
37,918
    
29,246
  
Managed Risk International Fund - Class P2 Shares
     542,745
     10.48
     465,262
    
12.178
    
1,835
    
12.007
    
5,688
    
5,482
  
Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
     1,294,231
     12.88
     1,209,186
    
13.765
    
1,882
    
13.571
    
16,670
    
14,927
  
Managed Risk Growth-Income Fund - Class P2 Shares
     1,154,173
     15.64
     1,050,605
    
17.144
    
2,360
    
16.903
    
18,051
    
14,264
  
Managed Risk Asset Allocation Fund - Class P2 Shares
     1,124,961
     14.93
     1,104,777
    
14.975
    
17,033
    
14.764
    
16,796
    
14,110
  
Total Net Assets
                                      
$
346,999
  
$
267,252
  

See accompanying Notes to Financial Statements
Page 2
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
  STATEMENT OF OPERATIONS 
YEAR ENDED DECEMBER 31, 2021 
(in thousands)

    Federated Hermes Insurance Series     MFS® Variable Insurance Trust    MFS® Variable Insurance Trust II 
    Managed Volatility Fund II - P     High Income Bond Fund II - P     Government Money Fund II - S     Research Series - Initial Class Shares     Growth Series - Initial Class Shares     Total Return Series - Initial Class Shares     Total Return Bond Series - Initial Class Shares     Utilities Series - Initial Class Shares     Income Portfolio - Initial Class Shares 
                                                       
Investment Income:                                                      
Income:                                                      
Dividend Distributions   $ 55
       205


-


48


-


118


114


219


61
Expenses:    
     





























Mortality and Expense Risk Fees and    
     





























Administrative Charges     43
       59


40


125


226


96


60


177


28
Net Investment Income (Loss)     12
       146


(40
 )

(77
 )

(226
 )

22


54


42


33
Realized and Unrealized Gain (Loss) on Investments:    
     





























Net Realized Gain (Loss)     (29
 )

(8
 )

-


485


1,087


163


31


377


4
Capital Gains Distributions     -


-


-


505


2,199


315


-


426


79
Unrealized Appreciation (Depreciation)     492


(1
 )

-


922


136


275


(174
 )

647


(133
 )
Net Gain (Loss) on Investments     463


(9
 )

-


1,912


3,422


753


(143
 )

1,450


(50
 )
     

































Change in Net Assets from Operations   $ 475


137


(40
 )

1,835


3,196


775


(89
 )

1,492


(17
 )
                                                                         

See accompanying Notes to Financial Statements
Page 3
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2021
(in thousands)

 
  
American Century Variable Portfolios, Inc.
  
American Century Variable Portfolios II, Inc.
  
BNY Mellon Variable Investment Fund
 
  
VP Capital Appreciation Fund - Class I
    
VP International Fund - Class I
    
VP Value Fund - Class I
    
VP Disciplined Core Value Fund - Class I
    
VP Ultra® Fund - Class I
    
VP Mid Cap Value Fund - Class I
    
VP Inflation Protection Fund - Class II
  
Appreciation Portfolio - Initial Shares
    
Opportunistic Small Cap Portfolio - Initial Shares
  
 
                                                      
Investment Income:
                                                      
Income:
                                                      
Dividend Distributions
  
$
 -


11


129


22


-


9


69


22


10
Expenses:
    

































Mortality and Expense Risk Fees and
    

































Administrative Charges
     96


94


105


29


57


11


31


69


126
Net Investment Income (Loss)
     (96
 )

(83
 )

24


(7
 )

(57
 )

(2
 )

38


(47
 )

(116
 )
Realized and Unrealized Gain (Loss) on Investments:
    

































Net Realized Gain (Loss)
     305


401


544


121


250


21


28


185


481
Capital Gains Distributions
     804


191


-


300


257


-


-


464


-
Unrealized Appreciation (Depreciation)
     (384
 )

(29
 )

948


(2)


352


124


41


514


874
Net Gain (Loss) on Investments
     725


563


1,492


419


859


145


69


1,163


1,355
 
    

































Change in Net Assets from Operations
  
$
 629


480


1,516


412


802


143


107


1,116


1,239
 
                                                                        

See accompanying Notes to Financial Statements
Page 4
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2021
(in thousands)

 
              
JPMorgan Insurance Trust
  
Franklin Templeton Variable Insurance Products Trust
 
  
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
Insurance Trust Small Cap Core Portfolio - Class 1 Shares
  
Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
Franklin Global Real Estate VIP Fund - Class 2
    
Franklin Small-Mid Cap Growth VIP Fund - Class 2
    
Templeton Developing Markets VIP Fund - Class 2
    
Templeton Foreign VIP Fund - Class 2
  
 
                                                      
Investment Income:
                                                      
Income:
                                                      
Dividend Distributions
  
$
 247


12


12


32


37


21


-


32


62
Expenses:
    

































Mortality and Expense Risk Fees and
    

































Administrative Charges
     306


24


24


89


57


32


30


51


48
Net Investment Income (Loss)
     (59
 )

(12
 )

(12
 )

(57 )

(20
 )

(11
 )

(30
 )

(19
 )

14
Realized and Unrealized Gain (Loss) on Investments:
    

































Net Realized Gain (Loss)
     1,177


98


172


446


233


36


81


171


30
Capital Gains Distributions
     938


37


74


153


204


53


265


73


-
Unrealized Appreciation (Depreciation)
     3,048


255


176


589


586


442


(133
 )

(457
 )

63
Net Gain (Loss) on Investments
     5,163


390


422


1,188


1,023


531


213


(213
 )

93
 
    

































Change in Net Assets from Operations
  
$
 5,104


378


410


1,131


1,003


520


183


(232)


107
 
                                                                        

See accompanying Notes to Financial Statements
Page 5
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2021
(in thousands)

 
  
Calamos® Advisors Trust
  
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
  
Columbia Funds Variable Series Trust II
  
Fidelity® Variable Insurance Products
 
  
Calamos Growth and Income Portfolio
  
V.I. American Franchise Fund - Series I Shares
  
V.I. Technology Fund - Series I Shares
  
V.I. Core Equity Fund - Series I Shares
  
Mid-Cap Growth Fund (Class 2)
  
Seligman Global Technology Fund (Class 2)
  
Select Small Cap Value Fund (Class 2)
  
VIP ContrafundSM Portfolio - Service Class 2
  
VIP Freedom Income PortfolioSM - Service Class 2
 
                                                      
Investment Income:
                                                      
Income:
                                                      
Dividend Distributions
  
$
 80


-


-


5


-


14


-


1


10
  
Expenses:
    
































 
Mortality and Expense Risk Fees and
    
































 
Administrative Charges
     295


22


20


9


33


71


16


67


19
  
Net Investment Income (Loss)
     (215
 )

(22
 )

(20
 )

(4
 )

(33
 )

(57
 )

(16
 )

(66
 )

(9
)
Realized and Unrealized Gain (Loss) on Investments:
    
































 
Net Realized Gain (Loss)
     1,114


87


109


5


291


270


99


319


26
  
Capital Gains Distributions
     1,636


184


135


16


-


569


-


614


28
  
Unrealized Appreciation (Depreciation)
     1,211


(99
 )

(53
 )

134


73


792


205


229


(23
 )
Net Gain (Loss) on Investments
     3,961


172


191


155


364


1,631


304


1,162


31
  
 
    
































 
Change in Net Assets from Operations
  
$
 3,746


150


171


151


331


1,574


288


1,096


22
  
 
                                                                        

See accompanying Notes to Financial Statements
Page 6
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2021
(in thousands)

 
  
Fidelity® Variable Insurance Products
 
  
VIP Freedom 2010 PortfolioSM - Service Class 2
  
VIP Freedom 2015 PortfolioSM - Service Class 2
  
VIP Freedom 2020 PortfolioSM - Service Class 2
  
VIP Freedom 2025 PortfolioSM - Service Class 2
  
VIP Freedom 2030 PortfolioSM - Service Class 2
  
VIP Freedom 2035 PortfolioSM - Service Class 2
  
VIP Freedom 2040 PortfolioSM - Service Class 2
  
VIP Freedom 2045 PortfolioSM - Service Class 2
  
VIP Freedom 2050 PortfolioSM - Service Class 2
 
                                                      
Investment Income:
                                                      
Income:
                                                      
Dividend Distributions
  
$
 2


7


38


7


18


7


6


4


6
  
Expenses:
    
































 
Mortality and Expense Risk Fees and
    
































 
Administrative Charges
     4


11


66


13


30


12


13


8


10
  
Net Investment Income (Loss)
     (2
 )

(4
 )

(28
 )

(6
 )

(12
 )

(5
 )

(7
 )

(4
 )

(4
)
Realized and Unrealized Gain (Loss) on Investments:
    
































 
Net Realized Gain (Loss)
     19


7


155


44


74


14


133


5


40
  
Capital Gains Distributions
     10


32


256


33


90


33


45


21


28
  
Unrealized Appreciation (Depreciation)
     (17
 )

9


(28
 )

10


63


61


(21
 )

58


38
  
Net Gain (Loss) on Investments
     12


48


383


87


227


108


157


84


106
  
 
    
































 
Change in Net Assets from Operations
  
$
 10


44


355


81


215


103


150


80


102
  
 
                                                                        

See accompanying Notes to Financial Statements
Page 7
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2021
(in thousands)

 
  
Northern Lights Variable Trust
  
American Funds Insurance Series®
 
  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
  
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
Capital World Bond Fund - Class 2 Shares
  
Global Growth Fund - Class 2 Shares
  
New World Fund® - Class 2 Shares
  
Growth-Income Fund - Class 2 Shares
  
Capital Income Builder® - Class 2 Shares
  
Asset Allocation Fund - Class 2 Shares
 
                                                      
Investment Income:
                                                      
Income:
                                                      
Dividend Distributions
  
$
 84


213


110


7


7


3


18


9


7
Expenses:
    

































Mortality and Expense Risk Fees and
    

































Administrative Charges
     109


263


155


6


30


4


21


5


7
Net Investment Income (Loss)
     (25
 )

(50
 )

(45
 )

1


(23
 )

(1
 )

(3
 )

4


-
Realized and Unrealized Gain (Loss) on Investments:
    

































Net Realized Gain (Loss)
     110


199


241


-


85


4


28


2


9
Capital Gains Distributions
     -


-


-


11


103


9


14


-


16
Unrealized Appreciation (Depreciation)
     446


1,547


977


(39
 )

117


(3
 )

247


34


34
Net Gain (Loss) on Investments
     556


1,746


1,218


(28
 )

305


10


289


36


59
 
    

































Change in Net Assets from Operations
  
$
531


1,696


1,173


(27 )

282


9


286


40


59
 
                                                                        

See accompanying Notes to Financial Statements
Page 8
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2021
(in thousands)

 
  
American Funds Insurance Series® Managed Risk Funds
      
 
  
Managed Risk Growth Fund - Class P2 Shares
  
Managed Risk International Fund - Class P2 Shares
  
Managed Risk Washington Mutual Investors FundSM- Class P2 Shares
  
Managed Risk Growth-Income Fund - Class P2 Shares
  
Managed Risk Asset Allocation Fund - Class P2 Shares
  
Total
  
 
                                    
Investment Income:
                                    
Income:
                                    
Dividend Distributions
  
$
 201


31


267


203


230
    
$
3,142
  
Expenses:
    
















     
 
Mortality and Expense Risk Fees and
    
















     
 
Administrative Charges
     499


80


228


252


241
      
4,752
  
Net Investment Income (Loss)
     (298
 )

(49
 )

39


(49
 )

(11
 )
   
(1,610
 )
Realized and Unrealized Gain (Loss) on Investments:
    
















     
 
Net Realized Gain (Loss)
     1,380


156


142


629


460
      
13,146
  
Capital Gains Distributions
     1,464


-


-


239


-
      
12,923
  
Unrealized Appreciation (Depreciation)
     1,295


(408
 )

2,176


1,460


1,331
   
21,027
  
Net Gain (Loss) on Investments
     4,139


(252
 )

2,318


2,328


1,791
      
47,096
  
 
    
















     
 
Change in Net Assets from Operations
  
$
 3,841


(301)


2,357


2,279


1,780
    
$
45,486
  
 
                                                

See accompanying Notes to Financial Statements
Page 9
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT 
STATEMENT OF CHANGES IN NET ASSETS 
YEARS ENDED DECEMBER 31, 2021 and 2020 
(in thousands)

   
Federated Hermes Insurance Series
  
MFS® Variable Insurance Trust
   
Managed Volatility Fund II - P
  
High Income Bond Fund II - P
  
Government Money Fund II - S
  
Research Series - Initial Class Shares
  
Growth Series - Initial Class Shares
  
Total Return Series - Initial Class Shares
   
2021
  
2020
  
2021
   2020  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
                                                                         
Change in Net Assets from Operations:
                                                                        
Net Investment Income (Loss)
  
$
 12


31


146


179


(40
 )

(33
 )

(77
 )

(52
 )

(226
 )

(185
 )

22


48
Net Realized Gain (Loss) and Capital Gains Distributions
     (29
 )

(90
 )

(8
 )

(68
 )

-


-


990


507


3,286


1,841


478


203
Unrealized Appreciation (Depreciation)
     492


44


(1
 )

40


-


-


922


616


136


1,846


275


211
Change in Net Assets from Operations
     475


(15
 )

137


151


(40
 )

(33
 )

1,835


1,071


3,196


3,502


775


462
     













































Deposits
     48


41


84


75


12,973


9,568


284


160


313


555


153


94
     













































Payments and Withdrawals:
    













































Death Benefits
     43


11


13


8


-


3


92


35


114


19


152


35
Withdrawals
     211


129


460


483


1,325


745


980


637


1,375


1,030


390


268
Administrative Fees
     1


1


2


3


6


7


3


3


11


10


2


3
Net Transfers to (from) Fixed Account
     17


(118
 )

(108
 )

(50
 )

13,485


6,435


104


229


236


546


(88
 )

(148
 )
Payments and Withdrawals
     272


23


367


444


14,816


7,190


1,179


904


1,736


1,605


456


158
     













































Net Assets:
    













































Net Increase (Decrease)
     251


3


(146
 )

(218
 )

(1,883
 )

2,345


940


327


1,773


2,452


472


398
Beginning of Year
     2,884


2,881


4,178


4,396


4,037


1,692


8,338


8,011


15,161


12,709


6,327


5,929
     













































End of Year
  
$
 3,135


2,884


4,032


4,178


2,154


4,037


9,278


8,338


16,934


15,161


6,799


6,327
                                                                                                 

See accompanying Notes to Financial Statements
Page 10
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)

 
  
MFS® Variable Insurance Trust
  
MFS® Variable Insurance Trust II
  
American Century Variable Portfolios, Inc.
 
  
Total Return Bond Series - Initial Class Shares
  
Utilities Series - Initial Class Shares
  
Income Portfolio - Initial Class Shares
  
VP Capital Appreciation Fund - Class I
  
VP International Fund - Class I
  
VP Value Fund - Class I
 
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
   2021  
2020
  
2021
  
2020
  
2021
  
2020
 
                                                                        
Change in Net Assets from Operations:
                                                                        
Net Investment Income (Loss)
  
$
 54


80


42


131


33


45


(96
 )

(74
 )

(83
 )

(53
 )

24


58
Net Realized Gain (Loss) and Capital Gains Distributions
     31


36


803


614


83


-


1,109


750


592


264


544


342
Unrealized Appreciation (Depreciation)
     (174
 )

129


647


(299
 )

(133
 )

88


(384
 )

1,293


(29
 )

1,129


948


(475
 )
Change in Net Assets from Operations
     (89
 )

245


1,492


446


(17
 )

133


629


1,969


480


1,340


1,516


(75
 )
 
    













































Deposits
     79


71


310


405


22


20


294


278


92


174


221


128
 
    













































Payments and Withdrawals:
    













































Death Benefits
     70


16


124


37


1


8


122


7


200


15


16


8
Withdrawals
     474


264


1,115


1,077


178


103


638


584


753


456


1,053


529
Administrative Fees
     2


2


7


8


2


2


8


6


5


5


4


5
Net Transfers to (from) Fixed Account
     (610
 )

57


50


635


(180
 )

85


(441
 )

318


(135
 )

376


221


146
Payments and Withdrawals
     (64
 )

339


1,296


1,757


1


198


327


915


823


852


1,294


688
 
    













































Net Assets:
    













































Net Increase (Decrease)
     54


(23
 )

506


(906
 )

4


(45
 )

596


1,332


(251
 )

662


443


(635
 )
Beginning of Year
     4,120


4,143


12,646


13,552


1,924


1,969


6,397


5,065


6,711


6,049


7,028


7,663
 
    













































End of Year
  
$
 4,174


4,120


13,152


12,646


1,928


1,924


6,993


6,397


6,460


6,711


7,471


7,028
 
                                                                                                

See accompanying Notes to Financial Statements
Page 11
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)
 
 
  
American Century Variable Portfolios, Inc.
  
American Century Variable Portfolios II, Inc.
  
BNY Mellon Variable Investment Fund
 
  
VP Disciplined Core Value Fund - Class I
  
VP Ultra® Fund - Class I
  
VP Mid Cap Value Fund - Class I
  
VP Inflation Protection Fund - Class II
  
Appreciation Portfolio - Initial Shares
  
Opportunistic Small Cap Portfolio - Initial Shares
 
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
 
                                                                        
Change in Net Assets from Operations:
                                                                        
Net Investment Income (Loss)
  
$
(7
 )
   
11
      
(57
)
    
(35
)
     (2
 )
   
2
       38
   
(2
 )
    (47
 )
     (25
)
     (116
 )
     (52
)
Net Realized Gain (Loss) and Capital Gains Distributions
    
421
       110      
507
       425       21
   
(15
 )
    28
   
(12
)
     649
       403
       481
    (71
 )
Unrealized Appreciation (Depreciation)
     (2
 )
   
96
      
352
       613       124
   
(26
 )
    41
    160       514
       476
       874
    1,571
  
Change in Net Assets from Operations
    
412
       217      
802
      
1,003
      
143
   
(39
 )
    107
   
146
       1,116
       854
       1,239
    1,448
  
 
            
             
     

   
     

   
     
     
     

   
 
Deposits
    
39
       160      
410
       419       26
       23
       25
   
27
       57
       150
       245
    343
  
 
            
             
             
     

   
     
     
     

   
 
Payments and Withdrawals:
            
             
             
     

   
     
     
     

   
 
Death Benefits
     52
      
12
       -
      
-
      
-
       -
       5
    7
       40
       1
       128
    5
  
Withdrawals
    
191
       124      
537
       326       65
      
207
       373
    120
       419
       351
       707
    544
  
Administrative Fees
    
2
       2       8
      
4
       1
      
1
       1
    1
       3
       3
       9
    7
  
Net Transfers to (from) Fixed Account
    
320
       2

   
(522
)
    
(226
)
    
(34
 )
    75       (284
 )
     96

    134
       328
       108
    (138
)
Payments and Withdrawals
     565
      
140

   
23
      
104

   
32
       283       95
    224
       596
       683
       952
    418

 
            
             
             
     

   
     
     
     

   
 
Net Assets:
            
             
             
     

   
     
     
     

   
 
Net Increase (Decrease)
    
(114
 )
    237       1,189
      
1,318
       137

   
(299
 )
    37
    (51
)
     577
       321
       532
    1,373
  
Beginning of Year
    
2,230
      
1,993
      
3,364
      
2,046
      
667
      
966
       2,109
    2,160
       4,641
       4,320
       8,512
    7,139
  
 
            
             
             
     

   
     
     
     

   
 
End of Year
  
$
2,116
      
2,230
      
4,553
      
3,364
      
804
       667       2,146
    2,109
       5,218
       4,641
       9,044
    8,512
  
 
                                                                                                

See accompanying Notes to Financial Statements
Page 12
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)

               

 
JPMorgan Insurance Trust
  
Franklin Templeton Variable Insurance Products Trust
   
BNY Mellon Stock Index Fund, Inc. - Initial Shares
    BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares  
Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
Insurance Trust Small Cap Core Portfolio - Class 1 Shares
  
Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
Franklin Global Real Estate VIP Fund - Class 2
   
2021
  
2020
   2021  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
                                                                         
Change in Net Assets from Operations:
                                                                    
Net Investment Income (Loss)
  
$
 (59
 )

28


(12
 )

(4
 )

(12
 )

(9
 )

(57
 )

(21
 )

(20
 )

3


(11
 )

39
Net Realized Gain (Loss) and Capital Gains Distributions
     2,115


1,801


135


26


246


158


599


278


437


227


89


185
Unrealized Appreciation (Depreciation)
     3,048


859


255


227


176


190


589


594


586


(264
 )

442


(379
 )
Change in Net Assets from Operations
     5,104


2,688


378


249


410


339


1,131


851


1,003


(34
 )

520


(155
 )
     













































Deposits
     754


559


61


47


22


114


207


431


73


89


43


48
     













































Payments and Withdrawals:
    













































Death Benefits
     245


28


-


17


32


12


74


3


10


2


1


-
Withdrawals
     1,701


1,426


184


161


143


79


632


374


547


180


338


131
Administrative Fees
     13


11


2


1


2


2


8


6


2


2


1


1
Net Transfers to (from) Fixed Account
     (205
 )

281


(223
 )

(143
 )

223


148


129


113


177


140


13


(32
 )
Payments and Withdrawals
     1,754


1,746


(37
 )

36


400


241


843


496


736


324


353


100
     













































Net Assets:
    













































Net Increase (Decrease)
     4,104


1,504


476


260


32


212


495


786


340


(269
 )

210


(207
 )
Beginning of Year
     19,687


18,186


1,436


1,176


1,723


1,511


5,948


5,162


3,780


4,049


2,159


2,366
     













































End of Year
  
$
 23,791


19,687


1,912


1,436


1,755


1,723


6,443


5,948


4,120


3,780


2,369


2,159
                                                                                                 

See accompanying Notes to Financial Statements
Page 13
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)

   
Franklin Templeton Variable Insurance Products Trust
  
Calamos® Advisors Trust
  
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
       
   
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
Templeton Developing Markets VIP Fund - Class 2
  
Templeton Foreign VIP Fund - Class 2
  
Calamos Growth and Income Portfolio
  
V.I. American Franchise Fund - Series I Shares
  
V.I. Technology Fund - Series I Shares
   
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
                                                                         
Change in Net Assets from Operations:
                                                                    
Net Investment Income (Loss)
  
$
 (30
 )

(24
 )

(19
 )

94


14


64


(215
 )

(153
 )

(22
 )

(15
 )

(20
 )

(16
 )
Net Realized Gain (Loss) and Capital Gains Distributions
     346


228


244


141


30


(131
 )

2,750


516


271


161


244


233
Unrealized Appreciation (Depreciation)
     (133
 )

507


(457
 )

286


63


(27
 )

1,211


2,949


(99
 )

264


(53
 )

195
Change in Net Assets from Operations
     183


711


(232
 )

521


107


(94
 )

3,746


3,312


150


410


171


412
     













































Deposits
     102


23


31


56


38


45


521


895


70


113


96


18
     













































Payments and Withdrawals:
    













































Death Benefits
     31


-


91


-


88


3


1,127


22


-


4


-


-
Withdrawals
     230


197


387


273


425


346


1,832


1,519


151


171


168


272
Administrative Fees
     2


2


5


5


4


4


46


36


2


2


1


1
Net Transfers to (from) Fixed Account
     (73
 )

237


(324
 )

141


(118
 )

(149
 )

(675
 )

(450
 )

(82
 )

(56
 )

7


(116
 )
Payments and Withdrawals
     190


436


159


419


399


204


2,330


1,127


71


121


176


157
     













































Net Assets:
    













































Net Increase (Decrease)
     95


298


(360
 )

158


(254
 )

(253
 )

1,937


3,080


149


402


91


273
Beginning of Year
     1,988


1,690


3,734


3,576


3,438


3,691


19,761


16,681


1.441


1,039


1,375


1,102
     













































End of Year
  
$
 2,083


1,988


3,374


3,734


3,184


3,438


21,698


19,761


1.590


1,441


1,466


1,375
                                                                                                 

See accompanying Notes to Financial Statements
Page 14
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)

   
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
  
Columbia Funds Variable Series Trust II
  
Fidelity® Variable Insurance Products
   
V.I. Core Equity Fund - Series I Shares
  
Mid-Cap Growth Fund (Class 2)
  
Seligman Global Technology Fund (Class 2)
  
Select Small Cap Value Fund (Class 2)
  
VIP ContrafundSM Portfolio - Service Class 2
  
VIP Freedom Income PortfolioSM - Service Class 2
   
2021
  
2020
  
2021
  
2020
  
2021
   2020  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
                                                                         
Change in Net Assets from Operations:
                                                                        
Net Investment Income (Loss)
  
$
 (4
 )

(1
 )

(33
 )

(28
 )

(57
 )

(53
 )

(16
 )

(13
 )

(66
 )

(45
 )

(9
 )

(6
 )
Net Realized Gain (Loss) and Capital Gains Distributions
     21


125


291


240


839


472


99


51


933


207


54


86
Unrealized Appreciation (Depreciation)
     134


(64
 )

73


374


792


1,037


205


78


229


709


(23
 )

42
Change in Net Assets from Operations
     151


60


331


586


1,574


1,456


288


116


1,096


871


22


122
     













































Deposits
     5


6


35


33


152


261


15


28


519


120


5


5
     













































Payments and Withdrawals:
    













































Death Benefits
     -


-


-


2


55


-


35


-


94


2


-


445
Withdrawals
     18


70


284


179


256


436


58


115


448


320


181


267
Administrative Fees
     -


-


1


1


7


6


2


1


8


5


12


14
Net Transfers to (from) Fixed Account
     (11
 )

(4
 )

75


280


185


549


8


(14
 )

(478
 )

8


(54
 )

166
Payments and Withdrawals
     7


66


360


462


503


991


103


102


72


335


139


892
                                                                                                 
Net Assets:
                                                                                                
Net Increase (Decrease)
     149


-


6


157


1,223


726


200


42


1,543


656


(112
 )

(765
 )
Beginning of Year
     598


598


2,300


2,143


4,469


3,743


1,036


994


3,908


3,252


1,396


2,161
     













































End of Year
  
$
 747


598


2,306


2,300


5,692


4,469


1,236


1,036


5,451


3,908


1,284


1,396
                                                                                                 

See accompanying Notes to Financial Statements
Page 15
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)

   
Fidelity® Variable Insurance Products
   
VIP Freedom 2010 PortfolioSM - Service Class 2
  
VIP Freedom 2015 PortfolioSM - Service Class 2
  
VIP Freedom 2020 PortfolioSM - Service Class 2
  
VIP Freedom 2025 PortfolioSM - Service Class 2
  
VIP Freedom 2030 PortfolioSM - Service Class 2
  
VIP Freedom 2035 PortfolioSM - Service Class 2
   
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
                                                                         
Change in Net Assets from Operations:
                                                                        
Net Investment Income (Loss)
  
$
 (2
 )

(2
 )

(4
 )

(2
 )

(28
 )

(17
 )

(6
 )

(4
 )

(12
 )

(7
 )

(5
 )

(3
 )
Net Realized Gain (Loss) and Capital Gains Distributions
     29


17


39


44


411


318


77


42


164


110


47


31
Unrealized Appreciation (Depreciation)
     (17
 )

17


9


42


(28
 )

257


10


68


63


171


61


68
Change in Net Assets from Operations
     10


32


44


84


355


558


81


106


215


274


103


96
     













































Deposits
     1


3


6


6


13


21


13


15


49


66


89


32
     













































Payments and Withdrawals:
    













































Death Benefits
     108


-


-


20


-


26


-


-


-


-


17


-
Withdrawals
     31


24


29


13


648


373


93


45


98


73


19


25
Administrative Fees
     -


1


3


3


29


26


1


1


1


1


1


1
Net Transfers to (from) Fixed Account
     2


12


(3
 )

27


5


41


65


(33
 )

84


(11
 )

(65
 )

-
Payments and Withdrawals
     141


37


29


63


682


466


159


13


183


63


(28
 )

26
     













































Net Assets:
    













































Net Increase (Decrease)
     (130
 )

(2
 )

21


27


(314
 )

113


(65
 )

108


81


277


220


102
Beginning of Year
     327


329


762


735


4,809


4,696


952


844


2,060


1,783


696


594
     













































End of Year
  
$
 197


327


783


762


4,495


4,809


887


952


2,141


2,060


916


696
                                                                                                 

See accompanying Notes to Financial Statements
Page 16
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)

   
Fidelity® Variable Insurance Products
  
Northern Lights Variable Trust
   
VIP Freedom 2040 PortfolioSM - Service Class 2
  
VIP Freedom 2045 PortfolioSM - Service Class 2
  
VIP Freedom 2050 PortfolioSM - Service Class 2
  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
  
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
   
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
                                                                         
Change in Net Assets from Operations:
                                                                        
Net Investment Income (Loss)
  
$
 (7
 )

(6
 )

(4
 )

(3
 )

(4
 )

(3
 )

(25
 )

64


(50
 )

150


(45
 )

67
Net Realized Gain (Loss) and Capital Gains Distributions
     178


68


26


20


68


27


110


81


199


134


241


(141
 )
Unrealized Appreciation (Depreciation)
     (21
 )

121


58


57


38


72


446


142


1,547


432


977


304
Change in Net Assets from Operations
     150


183


80


74


102


96


531


287


1,696


716


1,173


230
     













































Deposits
     36


48


16


20


219


56


34


126


75


100


119


83
     













































Payments and Withdrawals:
    













































Death Benefits
     -


-


-


-


-


-


-


-


-


226


-


-
Withdrawals
     417


53


8


3


82


15


644


823


1,420


2,613


1,364


1,798
Administrative Fees
     1


1


-


-


1


1


67


73


178


190


108


124
Net Transfers to (from) Fixed Account
     27


(21
 )

-


-


(52
 )

-


(49
 )

238


(304
 )

555


252


480
Payments and Withdrawals
     445


33


8


3


31


16


662


1,134


1,276


3,584


1,724


2,402
     













































Net Assets:
    













































Net Increase (Decrease)
     (259
 )

198


88


91


290


136


(97
 )

(721
 )

495


(2,768
 )

(432
 )

(2,089
 )
Beginning of Year
     1,140


942


503


412


636


500


7,831


8,552


18,395


21,163


11,070


13,159
     













































End of Year
  
$
 881


1,140


591


503


926


636


7,734


7,831


18,890


18,395


10,638


11,070
                                                                                                 

See accompanying Notes to Financial Statements
Page 17

KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2020 and 2019
(in thousands)

   
American Funds Insurance Series®
   
Capital World Bond Fund - Class 2 Shares
  
Global Growth Fund - Class 2 Shares
  
New World Fund® - Class 2 Shares
  
Growth-Income Fund - Class 2 Shares
  
Capital Income Builder® - Class 2 Shares
  
Asset Allocation Fund - Class 2 Shares
   
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
         
         
         
                     
         
 
Change in Net Assets from Operations:
        
         
         
         
         
         
 
Net Investment Income (Loss)
  
$
 1
  (1 )
    (23
)
  
(12
 )
    (1
 )
  
(3
)
     (3
 )
  
(1
 )
    4
 
4
       -
 
1
  
Net Realized Gain (Loss) and Capital Gains Distributions
     11
  9
       188
    
58
       13
 
10
       42
 
28
       2
 
-
       25
 
3
  
Unrealized Appreciation (Depreciation)
     (39
 )
   25
       117
    
313
       (3
 )
  
58
       247
 
78
       34
 
5
       34
 
35
  
Change in Net Assets from Operations
     (27
 )
   33
       282
    
359
       9
 
65
       286
 
105
       40
 
9
       59
 
39
  
     

 
     
   

     

 

     

 

     

 

     

 

 
Deposits
     3
  1
       231
    
302
       14
 
82
       119
 
36
       44
 
1
       20
 
5
  
     

 
     
   

     

 

     

 

     

 

     

 

 
Payments and Withdrawals:
    

 
     
   

     

 

     

 

     

 

     

 

 
Death Benefits
     9
  -
       -
    
-
       -
 
-
       -
 
-
       -
 
-
       -
 
-
  
Withdrawals
     21
  18
       207
    
48
       6
 
28
       84
 
178
       4
 
10
       30
 
39
  
Administrative Fees
     1
  1
       5
    
3
       -
 
-
       2
 
1
       1
 
-
       1
 
1
  
Net Transfers to (from) Fixed Account
     (28
 )
   10

    (466
)
  
(172
)
     (22
 )
  
15

    (258
 )
  
40

    2
 
(12
 )
    (49
 )
  
(36
 )
Payments and Withdrawals
     3
  29

    (254
)
  
(121
)
     (16
 )
  
43
       (172
 )
  
219

    7
 
(2
 )
    (18
 )
  
4
  
     

 
     
   

     

 

     

 

     

 

     

 

 
Net Assets:
    

 
     
   

     

 

     

 

     

 

     

 

 
Net Increase (Decrease)
     (27
 )
   5
       767
    
782
       39
 
104
       577
 
(78
 )
    77
 
12
       97
 
40
  
Beginning of Year
     425
  420
       1,764
    
982
       276
 
172
       1,193
 
1,271
       296
 
284
       421
 
381
  
     

 
     
   

     

 

     

 

     

 

     

 

 
End of Year
  
$
 398
  425
       2,531
    
1,764
       315
 
276
       1,770
 
1,193
       373
 
296
       518
 
421
  
                                                                                               

See accompanying Notes to Financial Statements
Page 18
KANSAS CITY LIFE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2021 and 2020
(in thousands)

   
American Funds Insurance Series® Managed Risk Funds
            
   
Managed Risk Growth Fund - Class P2 Shares
  
Managed Risk International Fund - Class P2 Shares
  
Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
  
Managed Risk Growth-Income Fund - Class P2 Shares
  
Managed Risk Asset Allocation Fund - Class P2 Shares
  
Total
   
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
  
2021
  
2020
                                                                         
Change in Net Assets from Operations:
                                                                        
Net Investment Income (Loss)
  
$
 (298
 )

(177
 )

(49
 )

(11
 )

39


52


(49
 )

45


(11
 )

16
    
$
 (1,610
 )

61
  
Net Realized Gain (Loss) and Capital Gains Distributions
     2,844


1,913


156


45


142


280


686


1,197


460


769
       26,069


15,306
  
Unrealized Appreciation (Depreciation)
     1,295


5,054


(408
 )

104


2,176


(827
 )

1,460


41


1,331


(129
 )
    21,027


21,597
  
Change in Net Assets from Operations
     3,841


6,790


(301
 )

138


2,357


(495
 )

2,279


1,283


1,780


656
       45,486


36,964
  
     




































     




 
Deposits
     895


813


104


21


103


114


218


620


57


142
       20,902


18,295
  
     




































     




 
Payments and Withdrawals:
    




































     




 
Death Benefits
     98


75


78


71


321


102


503


103


365


97
       4,554


1,487
  
Withdrawals
     2,744


2,175


524


332


1,198


1,351


1,512


1,694


1,512


1,764
       31,904


27,988
  
Administrative Fees
     295


220


57


60


155


167


168


170


155


174
       1,425


1,392
  
Net Transfers to (from) Fixed Account
     (5,058
 )

(3,575
 )

(422
 )

(578
 )

489


(1,061
 )

(500
 )

(809
 )

521


(210
 )
     5,018


4,647
  
Payments and Withdrawals
     (1,921
 )

(1,105
 )

237


(115
 )

2,163


559


1,683


1,158


2,553


1,825
       42,901


35,514
  
     




































     




 
Net Assets:
    




































     




 
Net Increase (Decrease)
     6,657


8,708


(434
 )

274


297


(940
 )

814


745


(716
 )

(1,027
 )
    23,487


19,745
  
Beginning of Year
     31,261


22,553


6,122


5,848


16,373


17,313


17,237


16,492


17,512


18,539
       323,512


303,767
  
     




































     




 
End of Year
  
$
 37,918


31,261


5,688


6,122


16,670


16,373


18,051


17,237


16,796


17,512
    
$
 346,999


323,512
  
                                                                                                 

See accompanying Notes to Financial Statements
Page 19
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements

1.
 Organization and Significant Accounting Policies

Organization
Kansas City Life Variable Annuity Separate Account (the Account) is a separate account of Kansas City Life Insurance Company (KCL).  This account is marketed and presented herein as follows:
•
Century II Variable Annuity;
•
Century II Affinity Variable Annuity (presented herein with Century II Variable Annuity);
•
Century II Single Premium Affinity Variable Annuity (presented herein with Century II Variable Annuity); and,
•
Century II Freedom Variable Annuity.

All products are distributed by Sunset Financial Services, Inc. (SFS), a wholly-owned subsidiary of KCL.  SFS has entered into a series of selling agreements with third-party broker-dealers that sell the contracts through their registered representatives who are licensed as insurance agents at KCL.
The Account is registered as a unit investment trust under the Investment Company Act of 1940, as amended, that follows the accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946, Financial Services Investment Companies.  Under applicable insurance law, the assets and liabilities of the Account are clearly identified and distinguished from KCL’s other assets and liabilities.  The portion of the Account’s assets applicable to the variable annuity contracts is only available to service these liabilities.  All deposits received by the Account have been directed by the contract owners into subaccounts that invest in 59 series-type mutual funds, as listed below, or into KCL’s Fixed Account.  The underlying mutual fund options are not directly available to the general public. The underlying mutual funds are available as investment options in variable annuity contracts issued by KCL.  The Fixed Account represents a portion of the general account assets of KCL and is not included in this report.  KCL’s Fixed Account may be charged with liabilities arising out of other business conducted by KCL.
Some of the underlying mutual funds have been established by investment advisers which manage publicly traded mutual funds having similar names and investment objectives. While some of the underlying mutual funds may be similar to, and may in fact be modeled after, publicly traded mutual funds, the underlying mutual funds are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and any corresponding underlying mutual funds may differ.


Page 20
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

The following Series-Type Mutual Funds are available in the Account:
   
Federated Hermes Insurance Series
Calamos® Advisors Trust
Managed Volatility Fund II - P
Calamos Growth and Income Portfolio
High Income Bond Fund II - P
  
Government Money Fund II - S
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
 
V.I. American Franchise Fund - Series I Shares
MFS® Variable Insurance Trust
V.I. Technology Fund - Series I Shares
Research Series - Initial Class Shares
V.I. Core Equity Fund - Series I Shares
Growth Series - Initial Class Shares
  
Total Return Series - Initial Class Shares
Columbia Funds Variable Series Trust II
Total Return Bond Series - Initial Class Shares
Mid-Cap Growth Fund (Class 2)
Utilities Series - Initial Class Shares
Seligman Global Technology Fund (Class 2)
 
Select Small Cap Value Fund (Class 2)
MFS® Variable Insurance Trust II
  
Income Portfolio - Initial Class Shares
Fidelity® Variable Insurance Products
 
VIP ContrafundSM Portfolio - Service Class 2
American Century Variable Portfolios, Inc.
VIP Freedom Income PortfolioSM - Service Class 2
VP Capital Appreciation Fund - Class I
VIP Freedom 2010 PortfolioSM - Service Class 2
VP International Fund - Class I
VIP Freedom 2015 PortfolioSM - Service Class 2
VP Value Fund - Class I
VIP Freedom 2020 PortfolioSM - Service Class 2
VP Disciplined Core Value Fund - Class I
VIP Freedom 2025 PortfolioSM - Service Class 2
VP Ultra® Fund - Class I
VIP Freedom 2030 PortfolioSM - Service Class 2
VP Mid Cap Value Fund - Class I
VIP Freedom 2035 PortfolioSM - Service Class 2
 
VIP Freedom 2040 PortfolioSM - Service Class 2
American Century Variable Portfolios II, Inc.
VIP Freedom 2045 PortfolioSM - Service Class 2
VP Inflation Protection Fund - Class II
VIP Freedom 2050 PortfolioSM - Service Class 2
   
BNY Mellon Variable Investment Fund
Northern Lights Variable Trust
Appreciation Portfolio - Initial Shares
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
Opportunistic Small Cap Portfolio - Initial Shares
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
 
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
 
American Funds Insurance Series®
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
Capital World Bond Fund - Class 2 Shares
 
Global Growth Fund - Class 2 Shares
JPMorgan Insurance Trust
New World Fund® - Class 2 Shares
Insurance Trust U.S. Equity Portfolio - Class 1 Shares
Growth-Income Fund - Class 2 Shares
Insurance Trust Small Cap Core Portfolio - Class 1 Shares
Capital Income Builder® - Class 2 Shares
Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
Asset Allocation Fund - Class 2 Shares
   
Franklin Templeton Variable Insurance Products Trust
American Funds Insurance Series® Managed Risk Funds
Franklin Global Real Estate VIP Fund - Class 2
Managed Risk Growth Fund - Class P2 Shares
Franklin Small-Mid Cap Growth VIP Fund - Class 2
Managed Risk International Fund - Class P2 Shares
Templeton Developing Markets VIP Fund - Class 2
Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
Templeton Foreign VIP Fund - Class 2
Managed Risk Growth-Income Fund - Class P2 Shares
 
Managed Risk Asset Allocation Fund - Class P2 Shares

Page 21
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)
Fund Changes
During the years ended December 31, 2021 and 2020, the following portfolios changed their names as summarized, with the effective date of the change, in the following table:
Prior Portfolio Name
Current Portfolio Name
Effective Date
American Funds Managed Risk Blue Chip Income & Growth Fund – Class P2 Shares
 American Funds Managed Risk Washington Mutual Investors Fund - Class P2 Shares
 		May 1, 2021
American Century VP Income & Growth Fund – Class I
American Century VP Disciplined Core Value Fund – Class I
September 25, 2020
MFS Strategic Income Portfolio – Initial Class Shares
MFS Income Portfolio – Initial Class Shares
September 1, 2020
American Funds Global Bond Fund – Class 2 Shares
American Funds Capital World Bond Fund – Class 2 Shares
May 1, 2020
Federated Managed Volatility Fund II - P
Federated Hermes Managed Volatility Fund II - P
May 1, 2020
Federated High Income Bond Fund II - P
 Federated Hermes High Income Bond Fund II - P
May 1, 2020
Federated Government Money Fund II - P
 Federated Hermes Government Money Fund II - P
May 1, 2020

There were no funds that merged during the years ended December 31, 2021 and 2020.
Financial Statements
The preparation of financial statements on the basis of U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions related to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the period.  These estimates are inherently subject to change and actual results could differ from these estimates.
Risks and Uncertainties
Certain risks and uncertainties are inherent to the Account’s day-to-day operations and to the process of preparing its financial statements.  The more significant of those risks and uncertainties, as well as the Account’s method for attempting to mitigate the risks, are presented below and throughout the notes to the financial statements.
Investments - The market value of the investments and their investment performance, including the realization of gains or losses, may vary depending on economic, issuer, and market conditions.  While such risks are borne by the contract holder, management attempts to mitigate these risks by offering the investor a variety of investment options, fund prospectuses, quarterly personal investment statements and annual financial statements.

COVID-19 Pandemic – During the first quarter of 2020, there was a global outbreak of COVID-19.  The pandemic classification has remained during 2021 and the domestic response to this pandemic continues to evolve.  The extent of the impact of COVID-19 on the operational and financial performance of the Separate Account will depend on certain ongoing developments many of which are uncertain and cannot be predicted at this time.  The impact to such things as the financial markets, which have been volatile during the periods presented, include the creation and administration of vaccines, the responses by governments at both the federal and state level, and the duration of the pandemic itself.  The full extent to which the COVID-19 pandemic may impact the financial condition and ongoing results of operations is uncertain and unpredictable.     
Page 22
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)
Reinvestment of Dividends
Interest and dividend income and capital gain distributions paid by the mutual funds to the Account are reinvested in additional shares of each respective fund.
Federal Income Taxes
The Account is treated as part of KCL for federal income tax purposes.  Under current interpretations of existing federal income tax law, no income taxes are payable on investment income or capital gain distributions received by the Account from the underlying funds.  Any applicable taxes will be the responsibility of contract holders or beneficiaries upon termination or withdrawal.
Investment Valuation
Investments in mutual fund shares are reported in the statement of net assets at fair value using the quoted net asset value (NAV) as provided by the mutual fund sponsors at the end of each trading day.  See Note 3 for additional fair value disclosures.
Security Transactions
The average cost method is used to determine realized gains and losses.  Transactions are recorded on a trade date basis. 
Distributions Received
Income from dividends and capital gain distributions are recorded on the ex-dividend date.
Recently Issued Accounting Standards
In August 2018, the FASB issued ASU No. 2018-13 Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.  This update modifies the disclosure requirements for fair value measurements in ASC Topic 820 Fair Value Measurement.  Specific fair value measurement disclosure requirements are removed, modified, or added.  This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.  Effective January 1, 2020, the Company adopted this FASB with no impact to these financial statements as the FASB is related to disclosure only items.
All other new accounting standards and updates of existing standards issued in 2021 and 2020 were considered by management and did not relate to accounting policies and procedures pertinent to the Account at this time or were not expected to have a material impact to the financial statements.
Subsequent Events
Subsequent events have been evaluated through April 27, 2022, the date that the financial statements have been issued.
Page 23
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

2.  Cost of Purchases and Proceeds from Sales
          
The aggregate cost of purchases and proceeds from sales of investments for the years ended December 31 were as follows:
           
2021:
  
Cost of
Purchases
  
Proceeds
from Sales
   
(in thousands)
  
           
Federated Hermes Managed Volatility Fund II - P
  
 $              187
  
 $              399
  
Federated Hermes High Income Bond Fund II - P
  
                 584
  
                 721
  
Federated Hermes Government Money Fund II - S
  
            19,323
  
            21,206
  
MFS® Research Series - Initial Class Shares
  
              1,028
  
              1,495
  
MFS® Growth Series - Initial Class Shares
  
              3,048
  
              2,498
  
MFS® Total Return Series - Initial Class Shares
  
                 863
  
                 829
  
MFS® Total Return Bond Series - Initial Class Shares
  
                 862
  
                 665
  
MFS® Utilities Series - Initial Class Shares
  
              1,466
  
              1,984
  
MFS® Income Portfolio - Initial Class Shares
  
                 382
  
                 249
  
American Century VP Capital Appreciation Fund - Class I
  
              1,923
  
              1,248
  
American Century VP International Fund - Class I
  
                 611
  
              1,234
  
American Century VP Value Fund - Class I
  
                 653
  
              1,702
  
American Century VP Disciplined Core Value Fund - Class I
  
                 411
  
                 644
  
American Century VP Ultra® Fund - Class I
  
              1,531
  
                 944
  
American Century VP Mid Cap Value Fund - Class I
  
                   93
  
                 101
  
American Century VP Inflation Protection Fund - Class II
  
                 419
  
                 451
  
BNY Mellon Appreciation Portfolio - Initial Shares
  
                 702
  
                 824
  
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
  
                 962
  
              1,785
  
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
              3,056
  
              3,177
  
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
                 469
  
                 346
  
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
                 184
  
                 500
  
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
  
              1,067
  
              1,607
  
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
                 504
  
                 983
  
Franklin Global Real Estate VIP Fund - Class 2
  
                 232
  
                 500
  
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
                 580
  
                 433
  
Templeton Developing Markets VIP Fund - Class 2
  
                 666
  
                 740
  
Templeton Foreign VIP Fund - Class 2
  
                 413
  
                 760
  
Calamos Growth and Income Portfolio
  
              3,867
  
              4,255
  
Invesco V.I. American Franchise Fund - Series I Shares
  
                 487
  
                 326
  
Invesco V.I. Technology Fund - Series I Shares
  
                 364
  
                 329
  
Invesco V.I. Core Equity Fund - Series I Shares
  
                   95
  
                   85
  
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
  
                 184
  
                 542
  
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
                 938
  
                 777
  
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
  
                 128
  
                 232
  
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
  
              2,031
  
              1,036
  
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
  
                   98
  
                 213
  
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
  
                   13
  
                 145
  
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
  
                   48
  
                   43
  
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
  
                 341
  
                 782
  
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
  
                   55
  
                 174
  
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
  
                 221
  
                 277
  
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
  
                 194
  
                   49
  
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
  
                   91
  
                 462
  
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
  
                   41
  
                   16
  
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
  
                 361
  
                 149
  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
                 998
  
              1,651
  
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
                 784
  
              2,035
  
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
                 397
  
              2,047
  
American Funds Capital World Bond Fund - Class 2 Shares
  
                   49
  
                   37
  
American Funds Global Growth Fund - Class 2 Shares
  
                 927
  
                 362
  
American Funds New World Fund® - Class 2 Shares
  
                   52
  
                   14
  
American Funds Growth-Income Fund - Class 2 Shares
  
                 464
  
                 162
  
American Funds Capital Income Builder® - Class 2 Shares
  
                   60
  
                   19
  
American Funds Asset Allocation Fund - Class 2 Shares
  
                 113
  
                   59
  
American Funds Managed Risk Growth Fund - Class P2 Shares
  
              9,943
  
              5,961
  
American Funds Managed Risk International Fund - Class P2 Shares
  
              1,292
  
              1,474
  
American Funds Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
              1,263
  
              3,284
  
American Funds Managed Risk Growth-Income Fund - Class P2 Shares
              2,267
  
              3,542
  
American Funds Managed Risk Asset Allocation Fund - Class P2 Shares
              1,270
  
              3,777
  
Total
  
 $         71,655
  
 $         82,341
  
Page 24
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

2020:
  
Cost of
Purchases
  
Proceeds
from Sales
   
( in thousands)
  
           
Federated Hermes Managed Volatility Fund II - P
  
 $              355
  
 $              306
  
Federated Hermes High Income Bond Fund II - P
  
                 726
  
                 916
  
Federated Hermes Government Money Fund II - S
  
            18,789
  
            16,444
  
MFS® Research Series - Initial Class Shares
  
                 651
  
              1,143
  
MFS® Growth Series - Initial Class Shares
  
              2,240
  
              2,637
  
MFS® Total Return Series - Initial Class Shares
  
                 678
  
                 544
  
MFS® Total Return Bond Series - Initial Class Shares
  
                 795
  
                 983
  
MFS® Utilities Series - Initial Class Shares
  
              1,770
  
              2,675
  
MFS® Income Portfolio - Initial Class Shares
  
                 347
  
                 480
  
American Century VP Capital Appreciation Fund - Class I
  
              1,273
  
              1,415
  
American Century VP International Fund - Class I
  
                 470
  
              1,115
  
American Century VP Value Fund - Class I
  
              1,122
  
              1,460
  
American Century VP Disciplined Core Value Fund - Class I
  
                 383
  
                 257
  
American Century VP Ultra® Fund - Class I
  
              1,658
  
              1,167
  
American Century VP Mid Cap Value Fund - Class I
  
                 116
  
                 374
  
American Century VP Inflation Protection Fund - Class II
  
                 374
  
                 573
  
BNY Mellon Appreciation Portfolio - Initial Shares
  
                 610
  
                 827
  
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
  
              1,118
  
              1,245
  
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
              2,850
  
              2,949
  
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
                 267
  
                 246
  
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
                 278
  
                 318
  
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
  
              1,573
  
              1,350
  
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
                 639
  
                 660
  
Franklin Global Real Estate VIP Fund - Class 2
  
                 530
  
                 324
  
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
                 517
  
                 736
  
Templeton Developing Markets VIP Fund - Class 2
  
                 457
  
                 638
  
Templeton Foreign VIP Fund - Class 2
  
                 625
  
                 720
  
Calamos Growth and Income Portfolio
  
              2,697
  
              2,984
  
Invesco V.I. American Franchise Fund - Series I Shares
  
                 454
  
                 390
  
Invesco V.I. Technology Fund - Series I Shares
  
                 424
  
                 479
  
Invesco V.I. Core Equity Fund - Series I Shares
  
                 146
  
                   82
  
Columbia Variable Portfolio - Mid Cap Growth Fund (Class 2)
  
                 157
  
                 614
  
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
              1,000
  
              1,469
  
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
  
                 162
  
                 249
  
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
  
                 684
  
                 926
  
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
  
                   87
  
                 943
  
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
  
                   22
  
                   44
  
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
  
                   65
  
                   88
  
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
  
                 337
  
                 533
  
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
  
                 138
  
                 103
  
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
  
                 224
  
                 142
  
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
  
                   83
  
                   54
  
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
  
                 148
  
                   91
  
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
  
                   42
  
                     9
  
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
  
                   90
  
                   31
  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
              1,096
  
              1,933
  
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
                 879
  
              4,060
  
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
                 359
  
              2,611
  
American Funds Capital World Bond Fund - Class 2 Shares
  
                   59
  
                   81
  
American Funds Global Growth Fund - Class 2 Shares
  
                 676
  
                 232
  
American Funds New World Fund® - Class 2 Shares
  
                   88
  
                   49
  
American Funds Growth-Income Fund - Class 2 Shares
  
                 249
  
                 403
  
American Funds Capital Income Builder® - Class 2 Shares
  
                   23
  
                   16
  
American Funds Asset Allocation Fund - Class 2 Shares
  
                   57
  
                   53
  
American Funds Managed Risk Growth Fund - Class P2 Shares
  
              8,523
  
              5,732
  
American Funds Managed Risk International Fund - Class P2 Shares
  
              1,057
  
                 886
  
American Funds Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
              2,681
  
              2,576
  
American Funds Managed Risk Growth-Income Fund - Class P2 Shares
              3,464
  
              3,100
  
American Funds Managed Risk Asset Allocation Fund - Class P2 Shares
              2,666
  
              3,662
  
Total
  
 $         70,048
  
 $         77,127
  

Page 25
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

3.  Fair Value Measurement
Under GAAP, fair value represents the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. It is the Account’s practice to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements.
The Account categorizes its financial assets and liabilities measured at fair value in three levels, based on the inputs and assumptions used to determine the fair value. These levels are as follows:
Level 1 – Valuations are based upon quoted prices for identical instruments traded in active markets.
Level 2 – Valuations are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.  Valuations are obtained from inputs that are observable or derived principally from or corroborated by observable market data.
Level 3 – Valuations are generated from techniques that use significant assumptions not observable in the market.  These unobservable assumptions reflect the Account’s assumptions that market participants would use in pricing the asset or liability.  Valuation techniques include the use of discounted cash flow models, spread-based models, and similar techniques, using the best information available in the circumstances.
As of December 31, 2021 and 2020, all assets were classified as Level 2 and were measured at fair value on a recurring basis totaling $346,999,000 (2020 - $323,512,000).  The Account did not have any transfers between levels during the years ended December 31, 2021 and 2020.
The NAV of the investments in mutual funds is calculated in a manner consistent with GAAP for investment companies and is determinative of their fair value.  The fair value of the underlying mutual funds or stocks is used to determine the NAV of the separate account, which is not publicly quoted.  The fair values of the underlying securities are based on quoted prices for similar assets or other valuation methods using market observable inputs, and are used to determine the NAV of the investments in mutual funds.  Sales of separate account assets may be at asset values less than NAV and certain redemption restrictions may apply.
4.   Expenses and Deductions
Century II Variable Annuity
During 2021, $155,000 (2020 - $177,000) was assessed in surrender charges.  Other fees and charges are primarily comprised of mortality and expense risk charges, administration fees and charges.  In 2021, other fees and charges totaled $6,054,000 (2020 - $5,361,000) and the largest component was the mortality and expense risk charge.  Contract charges are assessed based on the table below.

FEE TABLE
Fee
When Fee is Deducted
Amount Deducted
Sales Load on Premium Payments
No fee assessed
$0
Maximum Surrender Charge
When surrender occurs, declining over time
Century II – 7% - 0% in contract year 8
Affinity – 8% - 0% in contract year 9
Transfer Processing Fee
7th transfer in a contract year
$25 for each additional transfer after six transfers during a contract year
Mortality and Expense Risk Charge
Daily
Annual rate of 1.25% of the average daily net asset value of each subaccount
Asset-Based Administration Charge
Daily
Annual rate of 0.15%
Annual Administration Fee
Annually for contracts less than $50,000
$30 per contract year


Page 26
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

Century II Freedom Annuity
During 2021, $123,000 (2020 - $117,000) was assessed in other contract charges composed of mortality and expense risk charges and administration charge.  The largest component is the mortality and expense risk charge.  Contract charges are assessed based on the table below.

FEE TABLE
Fee
When Fee is Deducted
Amount Deducted
Sales Load on Premium Payments
No fee assessed
$0
Maximum Surrender Charge
No fee assessed
$0
Transfer Processing Fee
7th transfer in a contract year
$25 for each additional transfer after six transfers during a contract year
Mortality and Expense Risk Charge
Daily
Annual rate of 1.40% of  the average daily net asset value of each subaccount
Asset-Based Administration Charge
Daily
Annual rate of 0.25%


Page 27
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)
                         
The Mortality and Expense Risk Fees and other Administrative Charges for the year ended December 31 were as follows:
                         
2021:
  
 Century II
Variable
Annuity
    
 Century II Freedom
Variable Annuity
      
 Total
Variable Annuity
   
 (in thousands)
  
                         
Federated Hermes Managed Volatility Fund II - P
  
$
            43
    
$
               -
      
 $       43
  
Federated Hermes High Income Bond Fund II - P
    
            52
      
              7
      
          59
  
Federated Hermes Government Money Fund II - S
    
            36
      
              4
      
          40
  
MFS® Research Series - Initial Class Shares
    
          123
      
              2
      
        125
  
MFS® Growth Series - Initial Class Shares
    
          224
      
              2
      
        226
  
MFS® Total Return Series - Initial Class Shares
    
            80
      
            16
      
          96
  
MFS® Total Return Bond Series - Initial Class Shares
    
            57
      
              3
      
          60
  
MFS® Utilities Series - Initial Class Shares
    
          166
      
            11
      
        177
  
MFS® Income Portfolio - Initial Class Shares
    
            25
      
              3
      
          28
  
American Century VP Capital Appreciation Fund - Class I
    
            95
      
              1
      
          96
  
American Century VP International Fund - Class I
    
            93
      
              1
      
          94
  
American Century VP Value Fund - Class I
    
          103
      
              2
      
        105
  
American Century VP Disciplined Core Value Fund - Class I
    
            28
      
              1
      
          29
  
American Century VP Ultra® Fund - Class I
    
            57
      
               -
      
          57
  
American Century VP Mid Cap Value Fund - Class I
    
            11
      
               -
      
          11
  
American Century VP Inflation Protection Fund - Class II
    
            29
      
              2
      
          31
  
BNY Mellon Appreciation Portfolio - Initial Shares
    
            69
      
               -
      
          69
  
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
    
          125
      
              1
      
        126
  
BNY Mellon Stock Index Fund, Inc. - Initial Shares
    
          295
      
            11
      
        306
  
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
            24
      
               -
      
          24
  
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
    
            23
      
              1
      
          24
  
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
            87
      
              2
      
          89
  
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
            56
      
              1
      
          57
  
Franklin Global Real Estate VIP Fund - Class 2
    
            31
      
              1
      
          32
  
Franklin Small-Mid Cap Growth VIP Fund - Class 2
    
            30
      
               -
      
          30
  
Templeton Developing Markets VIP Fund - Class 2
    
            50
      
              1
      
          51
  
Templeton Foreign VIP Fund - Class 2
    
            47
      
              1
      
          48
  
Calamos Growth and Income Portfolio
    
          288
      
              7
      
        295
  
Invesco V.I. American Franchise Fund - Series I Shares
    
            22
      
               -
      
          22
  
Invesco V.I. Technology Fund - Series I Shares
    
            19
      
              1
      
          20
  
Invesco V.I. Core Equity Fund - Series I Shares
    
              9
      
               -
      
            9
  
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
    
            32
      
              1
      
          33
  
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
            67
      
              4
      
          71
  
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
  
            16
      
               -
      
          16
  
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
    
            63
      
              4
      
          67
  
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
    
            17
      
              2
      
          19
  
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
    
              1
      
              3
      
            4
  
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
    
              8
      
              3
      
          11
  
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
    
            64
      
              2
      
          66
  
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
    
            13
      
               -
      
          13
  
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
    
            29
      
              1
      
          30
  
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
    
            12
      
               -
      
          12
  
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
    
            13
      
               -
      
          13
  
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
    
              8
      
               -
      
            8
  
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
    
            10
      
               -
      
          10
  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
    
          108
      
              1
      
        109
  
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
          262
      
              1
      
        263
  
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
    
          152
      
              3
      
        155
  
American Funds Capital World Bond Fund - Class 2 Shares
    
              6
      
               -
      
            6
  
American Funds Global Growth Fund - Class 2 Shares
    
            30
      
               -
      
          30
  
American Funds New World Fund® - Class 2 Shares
    
              4
      
               -
      
            4
  
American Funds Growth-Income Fund - Class 2 Shares
    
            19
      
              2
      
          21
  
American Funds Capital Income Builder® - Class 2 Shares
    
              5
      
               -
      
            5
  
American Funds Asset Allocation Fund - Class 2 Shares
    
              6
      
              1
      
            7
  
American Funds Managed Risk Growth Fund - Class P2 Shares
    
          497
      
              2
      
        499
  
American Funds Managed Risk International Fund - Class P2 Shares
            80
      
               -
      
          80
  
American Funds Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
          228
      
               -
      
        228
  
American Funds Managed Risk Growth-Income Fund - Class P2 Shares
          251
      
              1
      
        252
  
American Funds Managed Risk Asset Allocation Fund - Class P2 Shares
          237
      
              4
      
        241
  
                         
     
 $    4,635
      
 $       117
      
 $  4,752
  

Page 28
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)
                         
5.  Change in Units Outstanding
                        
                         
The changes in units outstanding for the year ended December 31 were as follows:
                        
                         
2021:
  
 Units
Issued
  
 Units
Redeemed
  
 Net Increase
(Decrease)
          
 (in thousands)
         
                      
Federated Hermes Managed Volatility Fund II - P
    
             6
      
                      16
      
                 (10
 )
Federated Hermes High Income Bond Fund II - P
    
           11
      
                      19
      
                   (8
 )
Federated Hermes Government Money Fund II - S
    
      1,682
      
                 1,843
      
               (161
 )
MFS® Research Series - Initial Class Shares
    
             7
      
                      20
      
                 (13
 )
MFS® Growth Series - Initial Class Shares
    
             9
      
                      23
      
                 (14
 )
MFS® Total Return Series - Initial Class Shares
    
           10
      
                      17
      
                   (7
 )
MFS® Total Return Bond Series - Initial Class Shares
    
           30
      
                      25
      
                    5
  
MFS® Utilities Series - Initial Class Shares
    
             9
      
                      21
      
                 (12
 )
MFS® Income Portfolio - Initial Class Shares
    
           10
      
                        9
      
                    1
  
American Century VP Capital Appreciation Fund - Class I
    
           17
      
                      18
      
                   (1
 )
American Century VP International Fund - Class I
    
           10
      
                      28
      
                 (18
 )
American Century VP Value Fund - Class I
    
           20
      
                      62
      
                 (42
 )
American Century VP Disciplined Core Value Fund - Class I
    
             4
      
                      30
      
                 (26
 )
American Century VP Ultra® Fund - Class I
    
           21
      
                      14
      
                    7
  
American Century VP Mid Cap Value Fund - Class I
    
             3
      
                        3
      
                   -
  
American Century VP Inflation Protection Fund - Class II
    
           23
      
                      27
      
                   (4
 )
BNY Mellon Appreciation Portfolio - Initial Shares
    
             4
      
                      14
      
                 (10
 )
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
    
           25
      
                      44
      
                 (19
 )
BNY Mellon Stock Index Fund, Inc. - Initial Shares
    
           35
      
                      54
      
                 (19
 )
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
    
             5
      
                        4
      
                    1
  
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
    
             2
      
                        8
      
                   (6
 )
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
    
           16
      
                      27
      
                 (11
 )
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
    
             5
      
                      19
      
                 (14
 )
Franklin Global Real Estate VIP Fund - Class 2
    
             6
      
                      17
      
                 (11
 )
Franklin Small-Mid Cap Growth VIP Fund - Class 2
    
           11
      
                      14
      
                   (3
 )
Templeton Developing Markets VIP Fund - Class 2
    
           18
      
                      21
      
                   (3
 )
Templeton Foreign VIP Fund - Class 2
    
           11
      
                      22
      
                 (11
 )
Calamos Growth and Income Portfolio
    
           50
      
                      92
      
                 (42
 )
Invesco V.I. American Franchise Fund - Series I Shares
    
           18
      
                      18
      
                   -
  
Invesco V.I. Technology Fund - Series I Shares
    
           20
      
                      27
      
                   (7
 )
Invesco V.I. Core Equity Fund - Series I Shares
    
             4
      
                        5
      
                   (1
 )
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
    
             7
      
                      20
      
                 (13
 )
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
    
             6
      
                      11
      
                   (5
 )
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
    
             3
      
                        5
      
                   (2
 )
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
    
           44
      
                      29
      
                  15
  
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
    
             4
      
                      13
      
                   (9
 )
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
    
              -
      
                        8
      
                   (8
 )
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
    
              -
      
                        1
      
                   (1
 )
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
    
             3
      
                      39
      
                 (36
 )
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
    
             1
      
                        8
      
                   (7
 )
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
    
             5
      
                      11
      
                   (6
 )
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
    
             6
      
                        1
      
                    5
  
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
    
             1
      
                      17
      
                 (16
 )
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
    
             1
      
                        1
      
                   -
  
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
    
           12
      
                        5
      
                    7
  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
    
           69
      
                    115
      
                 (46
 )
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
    
           39
      
                    123
      
                 (84
 )
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
    
           20
      
                    130
      
               (110
 )
American Funds Capital World Bond Fund - Class 2 Shares
    
             3
      
                        3
      
                   -
  
American Funds Global Growth Fund - Class 2 Shares
    
           36
      
                      14
      
                  22
  
American Funds New World Fund® - Class 2 Shares
    
             2
      
                         -
      
                    2
  
American Funds Growth-Income Fund - Class 2 Shares
    
           22
      
                        7
      
                  15
  
American Funds Capital Income Builder® - Class 2 Shares
    
             4
      
                        1
      
                    3
  
American Funds Asset Allocation Fund - Class 2 Shares
    
             6
      
                        4
      
                    2
  
American Funds Managed Risk Growth Fund - Class P2 Shares
    
         401
      
                    259
      
                142
  
American Funds Managed Risk International Fund - Class P2 Shares
    
           99
      
                    107
      
                   (8
 )
American Funds Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
           76
      
                    239
      
               (163
 )
American Funds Managed Risk Growth-Income Fund - Class P2 Shares
    
         115
      
                    203
      
                 (88
 )
American Funds Managed Risk Asset Allocation Fund - Class P2 Shares
    
           73
      
                    249
      
               (176
 )

Page 29
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)
                         
2020:
  
 Units
Issued
  
Units
Redeemed
  
 Net Increase
(Decrease)
          
 (in thousands)
         
                      
Federated Hermes Managed Volatility Fund II - P
    
           15
      
                      15
      
                   -
  
Federated Hermes High Income Bond Fund II - P
    
           15
      
                      26
      
                 (11
 )
Federated Hermes Government Money Fund II - S
    
      1,634
      
                 1,426
      
                208
  
MFS® Research Series - Initial Class Shares
    
             6
      
                      21
      
                 (15
 )
MFS® Growth Series - Initial Class Shares
    
           19
      
                      35
      
                 (16
 )
MFS® Total Return Series - Initial Class Shares
    
             9
      
                      11
      
                   (2
 )
MFS® Total Return Bond Series - Initial Class Shares
    
           26
      
                      39
      
                 (13
 )
MFS® Utilities Series - Initial Class Shares
    
           15
      
                      32
      
                 (17
 )
MFS® Income Portfolio - Initial Class Shares
    
           12
      
                      20
      
                   (8
 )
American Century VP Capital Appreciation Fund - Class I
    
           16
      
                      27
      
                 (11
 )
American Century VP International Fund - Class I
    
           13
      
                      35
      
                 (22
 )
American Century VP Value Fund - Class I
    
           44
      
                      70
      
                 (26
 )
American Century VP Disciplined Core Value Fund - Class I
    
           16
      
                      14
      
                    2
  
American Century VP Ultra® Fund - Class I
    
           30
      
                      24
      
                    6
  
American Century VP Mid Cap Value Fund - Class I
    
             4
      
                      14
      
                 (10
 )
American Century VP Inflation Protection Fund - Class II
    
           25
      
                      40
      
                 (15
 )
BNY Mellon Appreciation Portfolio - Initial Shares
    
             6
      
                      19
      
                 (13
 )
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
    
           47
      
                      45
      
                    2
  
BNY Mellon Stock Index Fund, Inc. - Initial Shares
    
           38
      
                      69
      
                 (31
 )
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
    
             4
      
                        4
      
                     -
  
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
    
             4
      
                        7
      
                   (3
 )
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
    
           37
      
                      34
      
                    3
  
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
    
           11
      
                      16
      
                   (5
 )
Franklin Global Real Estate VIP Fund - Class 2
    
           11
      
                      13
      
                   (2
 )
Franklin Small-Mid Cap Growth VIP Fund - Class 2
    
           14
      
                      36
      
                 (22
 )
Templeton Developing Markets VIP Fund - Class 2
    
           10
      
                      22
      
                 (12
 )
Templeton Foreign VIP Fund - Class 2
    
           21
      
                      27
      
                   (6
 )
Calamos Growth and Income Portfolio
    
           74
      
                      84
      
                 (10
 )
Invesco V.I. American Franchise Fund - Series I Shares
    
           27
      
                      28
      
                   (1
 )
Invesco V.I. Technology Fund - Series I Shares
    
           33
      
                      53
      
                 (20
 )
Invesco V.I. Core Equity Fund - Series I Shares
    
             1
      
                        5
      
                   (4
 )
Columbia Variable Portfolio - Mid Cap Growth Fund (Class 2)
    
             8
      
                      32
      
                 (24
 )
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
    
           19
      
                      34
      
                 (15
 )
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
    
             7
      
                        8
      
                   (1
 )
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
    
           27
      
                      36
      
                   (9
 )
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
    
             3
      
                      67
      
                 (64
 )
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
    
            -
      
                        3
      
                   (3
 )
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
    
             1
      
                        4
      
                   (3
 )
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
    
             2
      
                      29
      
                 (27
 )
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
    
             5
      
                        6
      
                   (1
 )
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
    
             7
      
                        7
      
                   -
  
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
    
             3
      
                        3
      
                   -
  
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
    
             5
      
                        3
      
                    2
  
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
    
             1
      
                         -
      
                    1
  
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
    
             3
      
                        1
      
                    2
  
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
    
           67
      
                    152
      
                 (85
 )
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
    
           26
      
                    298
      
               (272
 )
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
    
           11
      
                    201
      
               (190
 )
American Funds Capital World Bond Fund - Class 2 Shares
    
             4
      
                        7
      
                   (3
 )
American Funds Global Growth Fund - Class 2 Shares
    
           37
      
                      13
      
                  24
  
American Funds New World Fund® - Class 2 Shares
    
             7
      
                        3
      
                    4
  
American Funds Growth-Income Fund - Class 2 Shares
    
           12
      
                      25
      
                 (13
 )
American Funds Capital Income Builder® - Class 2 Shares
    
             1
      
                        1
      
                   -
  
American Funds Asset Allocation Fund - Class 2 Shares
    
             4
      
                        4
      
                   -
  
American Funds Managed Risk Growth Fund - Class P2 Shares
    
         416
      
                    320
      
                  96
  
American Funds Managed Risk International Fund - Class P2 Shares
    
           85
      
                      70
      
                  15
  
American Funds Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
         169
      
                    209
      
                 (40
 )
American Funds Managed Risk Growth-Income Fund - Class P2 Shares
    
         164
      
                    202
      
                 (38
 )
American Funds Managed Risk Asset Allocation Fund - Class P2 Shares
    
         137
      
                    273
      
               (136
 )

Page 30
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

6.  Financial Highlights
                                    
                                           
A summary of unit values and units outstanding for variable annuity contracts, net assets, investment income ratios, the expense ratios, and total return ratios, excluding expenses of the underlying funds and expenses charged through the redemption of units, for each of the periods or years in the five-year period ended December 31, 2021, follows:
                                           
             
Unit Fair Value a
  
Net
  
Investment b
  
Expense Ratio c
  
Total Return d
         
Units
  
Lowest to
  
Assets
  
Income
  
Lowest to
  
Lowest to
         
(000's)
  
Highest
  
(000's)
  
Ratio
  
Highest
  
Highest
                                           
Federated Hermes Managed Volatility Fund II - P
                                
2021
        
               131
  
 $ 15.795
to
 $   23.851
  
 $    3,135
  
1.79%
  
1.40%
to
1.65%
  
16.57%
to
16.86%
2020
        
               141
  
 $ 13.550
to
 $   20.409
  
 $    2,884
  
2.54%
  
1.40%
to
1.65%
  
-0.73%
to
-0.48%
2019
        
               141
  
 $ 13.649
to
 $   20.507
  
 $    2,881
  
2.13%
  
1.40%
to
1.65%
  
18.27%
to
18.56%
2018
        
               158
  
 $ 11.541
to
 $   17.297
  
 $    2,711
  
3.51%
  
1.40%
to
1.65%
  
-10.69%
to
-10.46%
2017
        
               158
  
 $ 12.922
to
 $   19.317
  
 $    3,039
  
1.60%
  
1.40%
to
1.65%
  
9.13%
to
9.41%
                                           
Federated Hermes High Income Bond Fund II - P
                                
2021
        
               114
  
 $ 28.760
to
 $   36.387
  
 $    4,032
  
4.96%
  
1.40%
to
1.65%
  
3.13%
to
3.39%
2020
        
               122
  
 $ 27.886
to
 $   35.194
  
 $    4,178
  
5.77%
  
1.40%
to
1.65%
  
3.86%
to
4.12%
2019
        
               133
  
 $ 26.851
to
 $   33.802
  
 $    4,396
  
6.03%
  
1.40%
to
1.65%
  
12.67%
to
12.95%
2018
        
               140
  
 $ 23.832
to
 $   29.926
  
 $    4,073
  
7.94%
  
1.40%
to
1.65%
  
-4.88%
to
-4.64%
2017
        
               145
  
 $ 25.054
to
 $   31.382
  
 $    4,454
  
6.64%
  
1.40%
to
1.65%
  
5.20%
to
5.46%
                                           
Federated Hermes Government Money Fund II - S
                                
2021
        
               193
  
 $   8.896
to
 $   11.506
  
 $    2,154
  
0.00%
  
1.40%
to
1.65%
  
-1.63%
to
-1.39%
2020
        
               354
  
 $   9.044
to
 $   11.668
  
 $    4,037
  
0.15%
  
1.40%
to
1.65%
  
-1.44%
to
-1.19%
2019
        
               146
  
 $   9.176
to
 $   11.808
  
 $    1,692
  
1.65%
  
1.40%
to
1.65%
  
-0.02%
to
0.23%
2018
        
               230
  
 $   9.178
to
 $   11.781
  
 $    2,683
  
1.25%
  
1.40%
to
1.65%
  
-0.40%
to
-0.16%
2017
        
               208
  
 $   9.215
to
 $   11.800
  
 $    2,426
  
0.32%
  
1.40%
to
1.65%
  
-1.32%
to
-1.08%
                                           
MFS® Research Series - Initial Class Shares
                                
2021
        
               125
  
 $ 60.362
to
 $   74.316
  
 $    9,278
  
0.54%
  
1.40%
to
1.65%
  
22.76%
to
23.07%
2020
        
               138
  
 $ 49.171
to
 $   60.386
  
 $    8,338
  
0.72%
  
1.40%
to
1.65%
  
14.68%
to
14.97%
2019
        
               153
  
 $ 42.876
to
 $   52.524
  
 $    8,011
  
0.79%
  
1.40%
to
1.65%
  
30.77%
to
31.10%
2018
        
               161
  
 $ 32.787
to
 $   40.064
  
 $    6,424
  
0.69%
  
1.40%
to
1.65%
  
-5.94%
to
-5.71%
2017
        
               167
  
 $ 34.858
to
 $   42.488
  
 $    7,087
  
1.34%
  
1.40%
to
1.65%
  
21.36%
to
21.66%
                                           
MFS® Growth Series - Initial Class Shares
                                
2021
        
               157
  
 $ 89.718
to
 $ 108.076
  
 $  16,934
  
0.00%
  
1.40%
to
1.65%
  
21.51%
to
21.82%
2020
        
               171
  
 $ 73.834
to
 $   88.721
  
 $  15,161
  
0.00%
  
1.40%
to
1.65%
  
29.69%
to
30.02%
2019
        
               187
  
 $ 56.930
to
 $   68.236
  
 $  12,709
  
0.00%
  
1.40%
to
1.65%
  
35.89%
to
36.23%
2018
        
               193
  
 $ 41.894
to
 $   50.089
  
 $    9,633
  
0.09%
  
1.40%
to
1.65%
  
0.98%
to
1.23%
2017
        
               198
  
 $ 41.487
to
 $   49.478
  
 $    9,806
  
0.10%
  
1.40%
to
1.65%
  
29.26%
to
29.58%
                                           
MFS® Total Return Series - Initial Class Shares
                                
2021
        
               146
  
 $ 29.732
to
 $   51.681
  
 $    6,799
  
1.78%
  
1.40%
to
1.65%
  
12.25%
to
12.53%
2020
        
               153
  
 $ 26.487
to
 $   45.927
  
 $    6,327
  
2.28%
  
1.40%
to
1.65%
  
8.01%
to
8.28%
2019
        
               155
  
 $ 24.523
to
 $   42.414
  
 $    5,929
  
2.31%
  
1.40%
to
1.65%
  
18.42%
to
18.71%
2018
        
               171
  
 $ 20.709
to
 $   35.729
  
 $    5,545
  
2.17%
  
1.40%
to
1.65%
  
-7.17%
to
-6.93%
2017
        
               188
  
 $ 22.308
to
 $   38.389
  
 $    6,596
  
2.32%
  
1.40%
to
1.65%
  
10.47%
to
10.74%
                                           
MFS® Total Return Bond Series - Initial Class Shares
                                
2021
        
               164
  
 $ 17.337
to
 $   25.935
  
 $    4,174
  
2.69%
  
1.40%
to
1.65%
  
-2.44%
to
-2.19%
2020
        
               159
  
 $ 17.770
to
 $   26.517
  
 $    4,120
  
3.44%
  
1.40%
to
1.65%
  
6.69%
to
6.96%
2019
        
               172
  
 $ 16.656
to
 $   24.792
  
 $    4,143
  
3.20%
  
1.40%
to
1.65%
  
8.40%
to
8.67%
2018
        
               207
  
 $ 15.365
to
 $   22.813
  
 $    4,581
  
3.29%
  
1.40%
to
1.65%
  
-2.72%
to
-2.47%
2017
        
               207
  
 $ 15.794
to
 $   23.391
  
 $    4,698
  
3.30%
  
1.40%
to
1.65%
  
2.75%
to
3.01%
                                           
MFS® Utilities Series - Initial Class Shares
                                
2021
        
               135
  
 $ 65.756
to
 $   99.854
  
 $  13,152
  
1.74%
  
1.40%
to
1.65%
  
12.23%
to
12.51%
2020
        
               147
  
 $ 58.593
to
 $   88.754
  
 $  12,646
  
2.50%
  
1.40%
to
1.65%
  
4.17%
to
4.43%
2019
        
               164
  
 $ 56.250
to
 $   84.992
  
 $  13,552
  
3.99%
  
1.40%
to
1.65%
  
23.02%
to
23.33%
2018
        
               177
  
 $ 45.723
to
 $   68.914
  
 $  11,864
  
1.09%
  
1.40%
to
1.65%
  
-0.60%
to
-0.35%
2017
        
               193
  
 $ 46.001
to
 $   69.159
  
 $  13,009
  
4.25%
  
1.40%
to
1.65%
  
12.96%
to
13.24%
                                           
MFS® Income Portfolio - Initial Class Shares
                                
2021
        
                 81
  
 $ 19.424
to
 $   24.251
  
 $    1,928
  
3.11%
  
1.40%
to
1.65%
  
-1.18%
to
-0.93%
2020
        
                 80
  
 $ 19.656
to
 $   24.479
  
 $    1,924
  
3.78%
  
1.40%
to
1.65%
  
7.56%
to
7.83%
2019
        
                 88
  
 $ 18.275
to
 $   22.702
  
 $    1,969
  
3.32%
  
1.40%
to
1.65%
  
9.77%
to
10.05%
2018
        
               113
  
 $ 16.648
to
 $   20.629
  
 $    2,295
  
4.00%
  
1.40%
to
1.65%
  
-3.60%
to
-3.36%
2017
        
               100
  
 $ 17.270
to
 $   21.346
  
 $    2,096
  
4.63%
  
1.40%
to
1.65%
  
4.51%
to
4.76%
                                           
American Century VP Capital Appreciation Fund - Class I
                            
2021
        
               105
  
 $ 66.360
to
 $   79.155
  
 $    6,993
  
0.00%
  
1.40%
to
1.65%
  
9.34%
to
9.61%
2020
        
               106
  
 $ 60.541
to
 $   72.395
  
 $    6,397
  
0.00%
  
1.40%
to
1.65%
  
40.12%
to
40.47%
2019
        
               117
  
 $ 43.099
to
 $   51.667
  
 $    5,065
  
0.00%
  
1.40%
to
1.65%
  
33.35%
to
33.68%
2018
        
               128
  
 $ 32.240
to
 $   38.746
  
 $    4,141
  
0.00%
  
1.40%
to
1.65%
  
-6.76%
to
-6.52%
2017
        
               133
  
 $ 34.489
to
 $   41.533
  
 $    4,583
  
0.00%
  
1.40%
to
1.65%
  
19.81%
to
20.10%




Page 31
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

             
Unit Fair Value a
  
Net
  
Investment b
  
Expense Ratio c
  
Total Return d
         
Units
  
Lowest to
  
Assets
  
Income
  
Lowest to
  
Lowest to
         
(000's)
  
Highest
  
(000's)
  
Ratio
  
Highest
  
Highest
                                           
American Century VP International Fund - Class I
                            
2021
        
               161
  
 $ 35.147
to
 $   40.205
  
 $    6,460
  
0.16%
  
1.40%
to
1.65%
  
6.97%
to
7.24%
2020
        
               179
  
 $ 32.857
to
 $   37.491
  
 $    6,711
  
0.49%
  
1.40%
to
1.65%
  
23.81%
to
24.13%
2019
        
               201
  
 $ 26.537
to
 $   30.204
  
 $    6,049
  
0.88%
  
1.40%
to
1.65%
  
26.32%
to
26.64%
2018
        
               218
  
 $ 21.008
to
 $   23.851
  
 $    4,276
  
1.26%
  
1.40%
to
1.65%
  
-16.62%
to
-16.41%
2017
        
               214
  
 $ 25.194
to
 $   28.532
  
 $    6,092
  
0.89%
  
1.40%
to
1.65%
  
29.07%
to
29.38%
                                           
American Century VP Value Fund - Class I
                                
2021
        
               269
  
 $ 27.588
to
 $   41.353
  
 $    7,471
  
1.73%
  
1.40%
to
1.65%
  
22.47%
to
22.78%
2020
        
               311
  
 $ 22.469
to
 $   33.765
  
 $    7,028
  
2.31%
  
1.40%
to
1.65%
  
-0.57%
to
-0.43%
2019
        
               337
  
 $ 22.567
to
 $   33.960
  
 $    7,663
  
2.12%
  
1.40%
to
1.65%
  
24.82%
to
25.27%
2018
        
               356
  
 $ 18.015
to
 $   27.207
  
 $    5,373
  
1.65%
  
1.40%
to
1.65%
  
-10.64%
to
-10.42%
2017
        
               374
  
 $ 20.110
to
 $   30.448
  
 $    7,587
  
1.66%
  
1.40%
to
1.65%
  
6.97%
to
7.24%
                                           
American Century VP Disciplined Core Value Fund - Class I
                            
2021
        
                 92
  
 $ 22.608
to
 $   44.278
  
 $    2,116
  
1.06%
  
1.40%
to
1.65%
  
21.63%
to
21.93%
2020
        
               118
  
 $ 18.541
to
 $   36.405
  
 $    2,230
  
2.01%
  
1.40%
to
1.65%
  
9.97%
to
10.25%
2019
        
               116
  
 $ 16.818
to
 $   33.103
  
 $    1,993
  
2.11%
  
1.40%
to
1.65%
  
21.92%
to
22.23%
2018
        
               109
  
 $ 13.759
to
 $   27.151
  
 $    1,393
  
1.92%
  
1.40%
to
1.65%
  
-8.40%
to
-8.17%
2017
        
               109
  
 $ 14.983
to
 $   29.641
  
 $    1,678
  
2.37%
  
1.40%
to
1.65%
  
18.52%
to
18.81%
                                           
American Century VP Ultra® Fund - Class I
                                
2021
        
                 66
  
 $ 65.699
to
 $   68.833
  
 $    4,553
  
0.00%
  
1.40%
to
1.65%
  
21.15%
to
21.45%
2020
        
                 59
  
 $ 54.232
to
 $   56.677
  
 $    3,364
  
0.00%
  
1.40%
to
1.65%
  
47.40%
to
47.77%
2019
        
                 53
  
 $ 36.793
to
 $   38.356
  
 $    2,046
  
0.00%
  
1.40%
to
1.65%
  
32.38%
to
32.71%
2018
        
                 40
  
 $ 27.794
to
 $   28.902
  
 $    1,266
  
0.24%
  
1.40%
to
1.65%
  
-0.90%
to
-0.65%
2017
        
                 36
  
 $ 28.046
to
 $   29.091
  
 $    1,048
  
0.37%
  
1.40%
to
1.65%
  
30.07%
to
30.40%
                                           
American Century VP Mid Cap Value Fund - Class I
                                
2021
        
                 24
  
 $ 32.769
to
 $   34.078
  
 $       804
  
1.16%
  
1.40%
to
1.65%
  
21.19%
to
21.49%
2020
        
                 24
  
 $ 27.040
to
 $   28.050
  
 $       667
  
1.71%
  
1.40%
to
1.65%
  
-0.45%
to
-0.20%
2019
        
                 34
  
 $ 27.162
to
 $   28.106
  
 $       966
  
2.08%
  
1.40%
to
1.65%
  
27.04%
to
27.36%
2018
        
                 41
  
 $ 21.381
to
 $   22.069
  
 $       698
  
1.40%
  
1.40%
to
1.65%
  
-14.27%
to
-14.05%
2017
        
                 42
  
 $ 24.940
to
 $   25.678
  
 $    1,090
  
1.56%
  
1.40%
to
1.65%
  
9.87%
to
10.15%
                                           
American Century VP Inflation Protection Fund - Class II
                            
2021
        
               137
  
 $ 15.024
to
 $   15.739
  
 $    2,146
  
3.14%
  
1.40%
to
1.65%
  
4.53%
to
4.79%
2020
        
               141
  
 $ 14.373
to
 $   15.019
  
 $    2,109
  
1.33%
  
1.40%
to
1.65%
  
7.76%
to
8.03%
2019
        
               156
  
 $ 13.338
to
 $   13.903
  
 $    2,160
  
2.26%
  
1.40%
to
1.65%
  
7.12%
to
7.39%
2018
        
               181
  
 $ 12.452
to
 $   12.946
  
 $    2,347
  
2.87%
  
1.40%
to
1.65%
  
-4.41%
to
-4.18%
2017
        
               172
  
 $ 13.027
to
 $   13.511
  
 $    2,321
  
2.64%
  
1.40%
to
1.65%
  
1.98%
to
2.24%
                                           
BNY Mellon Appreciation Portfolio - Initial Shares
                                
2021
        
                 88
  
 $ 52.658
to
 $   59.301
  
 $    5,218
  
0.44%
  
1.40%
to
1.65%
  
25.05%
to
25.36%
2020
        
                 98
  
 $ 42.109
to
 $   47.303
  
 $    4,641
  
0.79%
  
1.40%
to
1.65%
  
21.66%
to
21.96%
2019
        
               111
  
 $ 34.612
to
 $   38.784
  
 $    4,320
  
1.16%
  
1.40%
to
1.65%
  
33.87%
to
34.21%
2018
        
               125
  
 $ 25.855
to
 $   28.899
  
 $    3,102
  
1.25%
  
1.40%
to
1.65%
  
-8.38%
to
-8.15%
2017
        
               131
  
 $ 28.221
to
 $   31.464
  
 $    4,112
  
1.34%
  
1.40%
to
1.65%
  
25.26%
to
25.57%
                                           
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
                            
2021
        
               237
  
 $ 33.765
to
 $   38.199
  
 $    9,044
  
0.11%
  
1.40%
to
1.65%
  
14.56%
to
14.84%
2020
        
               256
  
 $ 29.475
to
 $   33.262
  
 $    8,512
  
0.64%
  
1.40%
to
1.65%
  
17.93%
to
18.22%
2019
        
               254
  
 $ 24.994
to
 $   28.136
  
 $    7,139
  
0.00%
  
1.40%
to
1.65%
  
19.78%
to
20.09%
2018
        
               245
  
 $ 20.866
to
 $   23.430
  
 $    4,177
  
0.00%
  
1.40%
to
1.65%
  
-20.41%
to
-20.21%
2017
        
               249
  
 $ 26.216
to
 $   29.363
  
 $    7,301
  
0.00%
  
1.40%
to
1.65%
  
22.65%
to
22.95%
                                           
BNY Mellon Stock Index Fund, Inc. - Initial Shares
                                
2021
        
               400
  
 $ 56.921
to
 $   59.626
  
 $  23,791
  
1.14%
  
1.40%
to
1.65%
  
26.31%
to
26.63%
2020
        
               419
  
 $ 45.064
to
 $   47.088
  
 $  19,687
  
1.57%
  
1.40%
to
1.65%
  
16.07%
to
16.36%
2019
        
               450
  
 $ 38.824
to
 $   40.466
  
 $  18,186
  
1.71%
  
1.40%
to
1.65%
  
29.03%
to
29.36%
2018
        
               488
  
 $ 30.088
to
 $   31.282
  
 $  13,363
  
1.65%
  
1.40%
to
1.65%
  
-6.20%
to
-5.97%
2017
        
               515
  
 $ 32.078
to
 $   33.267
  
 $  17,096
  
1.70%
  
1.40%
to
1.65%
  
19.55%
to
19.86%
                                           
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
                        
2021
        
                 19
  
 $ 53.150
to
 $ 101.793
  
 $    1,912
  
0.74%
  
1.40%
to
1.65%
  
24.92%
to
25.23%
2020
        
                 18
  
 $ 42.548
to
 $   81.283
  
 $    1,436
  
1.10%
  
1.40%
to
1.65%
  
22.11%
to
22.41%
2019
        
                 18
  
 $ 34.845
to
 $   66.401
  
 $    1,176
  
1.42%
  
1.40%
to
1.65%
  
32.16%
to
32.49%
2018
        
                 18
  
 $ 26.365
to
 $   50.117
  
 $       874
  
1.73%
  
1.40%
to
1.65%
  
-5.98%
to
-5.74%
2017
        
                 17
  
 $ 28.041
to
 $   53.168
  
 $       882
  
1.10%
  
1.40%
to
1.65%
  
13.45%
to
13.74%
                                           
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
                          
2021
        
                 27
  
 $ 61.698
to
 $   65.789
  
 $    1,755
  
0.74%
  
1.40%
to
1.65%
  
27.23%
to
27.54%
2020
        
                 33
  
 $ 48.495
to
 $   51.581
  
 $    1,723
  
0.79%
  
1.40%
to
1.65%
  
23.21%
to
23.52%
2019
        
                 36
  
 $ 39.361
to
 $   41.761
  
 $    1,511
  
0.87%
  
1.40%
to
1.65%
  
29.60%
to
29.92%
2018
        
                 43
  
 $ 30.371
to
 $   32.143
  
 $    1,166
  
0.83%
  
1.40%
to
1.65%
  
-7.71%
to
-7.48%
2017
        
                 45
  
 $ 32.908
to
 $   34.740
  
 $    1,570
  
0.84%
  
1.40%
to
1.65%
  
20.33%
to
20.63%


Page 32
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

             
Unit Fair Value a
  
Net
  
Investment b
  
Expense Ratio c
  
Total Return d
         
Units
  
Lowest to
  
Assets
  
Income
  
Lowest to
  
Lowest to
         
(000's)
  
Highest
  
(000's)
  
Ratio
  
Highest
  
Highest
                                           
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
                        
2021
        
               112
  
 $ 54.897
to
 $   57.832
  
 $    6,443
  
0.50%
  
1.40%
to
1.65%
  
19.40%
to
19.70%
2020
        
               123
  
 $ 45.978
to
 $   48.315
  
 $    5,948
  
0.99%
  
1.40%
to
1.65%
  
11.82%
to
12.10%
2019
        
               120
  
 $ 41.118
to
 $   43.100
  
 $    5,162
  
0.39%
  
1.40%
to
1.65%
  
22.54%
to
22.85%
2018
        
               113
  
 $ 33.555
to
 $   35.084
  
 $    3,967
  
0.38%
  
1.40%
to
1.65%
  
-13.38%
to
-13.16%
2017
        
               112
  
 $ 38.737
to
 $   40.401
  
 $    4,530
  
0.32%
  
1.40%
to
1.65%
  
13.35%
to
13.63%
                                           
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
                        
2021
        
                 77
  
 $ 50.981
to
 $   53.414
  
 $    4,120
  
0.91%
  
1.40%
to
1.65%
  
27.76%
to
28.08%
2020
        
                 91
  
 $ 39.904
to
 $   41.703
  
 $    3,780
  
1.47%
  
1.40%
to
1.65%
  
-1.28%
to
-1.03%
2019
        
                 96
  
 $ 40.420
to
 $   42.137
  
 $    4,049
  
1.61%
  
1.40%
to
1.65%
  
24.69%
to
25.00%
2018
        
               103
  
 $ 32.417
to
 $   33.710
  
 $    3,474
  
0.96%
  
1.40%
to
1.65%
  
-13.29%
to
-13.07%
2017
        
               105
  
 $ 37.384
to
 $   38.778
  
 $    4,078
  
0.80%
  
1.40%
to
1.65%
  
11.91%
to
12.19%
                                           
Franklin Global Real Estate VIP Fund - Class 2
                                
2021
        
                 78
  
 $ 26.145
to
 $   30.467
  
 $    2,369
  
0.90%
  
1.40%
to
1.65%
  
24.72%
to
25.03%
2020
        
                 89
  
 $ 20.964
to
 $   24.368
  
 $    2,159
  
3.30%
  
1.40%
to
1.65%
  
-6.94%
to
-6.70%
2019
        
                 91
  
 $ 22.527
to
 $   26.119
  
 $    2,366
  
2.61%
  
1.40%
to
1.65%
  
20.37%
to
20.67%
2018
        
                 94
  
 $ 18.715
to
 $   21.645
  
 $    2,026
  
2.65%
  
1.40%
to
1.65%
  
-8.31%
to
-8.08%
2017
        
                 92
  
 $ 20.411
to
 $   23.547
  
 $    2,159
  
3.02%
  
1.40%
to
1.65%
  
8.67%
to
8.94%
                                           
Franklin Small-Mid Cap Growth VIP Fund - Class 2
                                
2021
        
                 71
  
 $ 29.258
to
 $   62.692
  
 $    2,083
  
0.00%
  
1.40%
to
1.65%
  
8.21%
to
8.48%
2020
        
                 74
  
 $ 26.969
to
 $   57.934
  
 $    1,988
  
0.00%
  
1.40%
to
1.65%
  
52.55%
to
52.93%
2019
        
                 96
  
 $ 17.635
to
 $   37.977
  
 $    1,690
  
0.00%
  
1.40%
to
1.65%
  
29.28%
to
29.61%
2018
        
                 98
  
 $ 13.606
to
 $   29.375
  
 $    1,334
  
0.00%
  
1.40%
to
1.65%
  
-6.93%
to
-6.69%
2017
        
                 94
  
 $ 14.582
to
 $   31.561
  
 $    1,384
  
0.00%
  
1.40%
to
1.65%
  
19.42%
to
19.71%
                                           
Templeton Developing Markets VIP Fund - Class 2
                                
2021
        
               114
  
 $ 29.548
to
 $   38.526
  
 $    3,374
  
0.87%
  
1.40%
to
1.65%
  
-7.28%
to
-7.05%
2020
        
               117
  
 $ 31.790
to
 $   41.553
  
 $    3,734
  
4.30%
  
1.40%
to
1.65%
  
15.26%
to
15.55%
2019
        
               129
  
 $ 27.511
to
 $   36.050
  
 $    3,576
  
0.99%
  
1.40%
to
1.65%
  
24.62%
to
24.94%
2018
        
               141
  
 $ 22.020
to
 $   28.927
  
 $    3,123
  
0.86%
  
1.40%
to
1.65%
  
-17.18%
to
-16.97%
2017
        
               135
  
 $ 26.522
to
 $   34.928
  
 $    3,610
  
0.96%
  
1.40%
to
1.65%
  
38.12%
to
38.46%
                                           
Templeton Foreign VIP Fund - Class 2
                                  
2021
        
               105
  
 $ 21.322
to
 $   30.532
  
 $    3,184
  
1.83%
  
1.40%
to
1.65%
  
2.45%
to
2.71%
2020
        
               116
  
 $ 20.811
to
 $   29.726
  
 $    3,438
  
3.45%
  
1.40%
to
1.65%
  
-2.78%
to
-2.54%
2019
        
               122
  
 $ 21.406
to
 $   30.500
  
 $    3,691
  
1.72%
  
1.40%
to
1.65%
  
10.69%
to
10.97%
2018
        
               128
  
 $ 19.339
to
 $   27.486
  
 $    3,477
  
2.65%
  
1.40%
to
1.65%
  
-16.84%
to
-16.62%
2017
        
               124
  
 $ 23.254
to
 $   32.966
  
 $    4,007
  
2.60%
  
1.40%
to
1.65%
  
14.79%
to
15.08%
                                           
Calamos Growth and Income Portfolio
                                  
2021
        
               452
  
 $ 40.226
to
 $   48.074
  
 $  21,698
  
0.38%
  
1.40%
to
1.65%
  
19.41%
to
19.71%
2020
        
               494
  
 $ 33.687
to
 $   40.159
  
 $  19,761
  
0.49%
  
1.40%
to
1.65%
  
20.42%
to
20.72%
2019
        
               504
  
 $ 27.974
to
 $   33.265
  
 $  16,681
  
1.66%
  
1.40%
to
1.65%
  
23.51%
to
23.82%
2018
        
               517
  
 $ 22.650
to
 $   26.866
  
 $  13,837
  
1.27%
  
1.40%
to
1.65%
  
-5.96%
to
-5.72%
2017
        
               536
  
 $ 24.085
to
 $   28.497
  
 $  15,217
  
0.85%
  
1.40%
to
1.65%
  
13.63%
to
13.91%
                                           
Invesco V.I. American Franchise Fund - Series I Shares
                              
2021
        
                 90
  
 $ 17.437
to
 $   50.936
  
 $    1,590
  
0.00%
  
1.40%
to
1.65%
  
10.10%
to
10.37%
2020
        
                 90
  
 $ 15.799
to
 $   46.265
  
 $    1,441
  
0.07%
  
1.40%
to
1.65%
  
40.02%
to
40.37%
2019
        
                 91
  
 $ 11.255
to
 $   33.042
  
 $    1,039
  
0.00%
  
1.40%
to
1.65%
  
34.52%
to
34.86%
2018
        
                 75
  
 $   8.346
to
 $   24.563
  
 $       630
  
0.00%
  
1.40%
to
1.65%
  
-5.21%
to
-4.98%
2017
        
                 48
  
 $   8.783
to
 $   25.913
  
 $       427
  
0.08%
  
1.40%
to
1.65%
  
25.26%
to
25.57%
                                           
Invesco V.I. Technology Fund - Series I Shares
                                
2021
        
               118
  
 $ 12.203
to
 $   70.905
  
 $    1,466
  
0.00%
  
1.40%
to
1.65%
  
12.54%
to
12.82%
2020
        
               125
  
 $ 10.816
to
 $   63.005
  
 $    1,375
  
0.00%
  
1.40%
to
1.65%
  
43.72%
to
44.08%
2019
        
               145
  
 $   7.507
to
 $   43.839
  
 $    1,102
  
0.00%
  
1.40%
to
1.65%
  
33.66%
to
33.98%
2018
        
               145
  
 $   5.603
to
 $   32.799
  
 $       821
  
0.00%
  
1.40%
to
1.65%
  
-2.09%
to
-1.84%
2017
        
               132
  
 $   5.708
to
 $   33.500
  
 $       765
  
0.00%
  
1.40%
to
1.65%
  
32.93%
to
33.27%
                                           
Invesco V.I. Core Equity Fund - Series I Shares
                                
2021
        
                 36
  
 $ 20.572
to
 $   40.710
  
 $       747
  
0.70%
  
1.40%
to
1.65%
  
25.65%
to
25.96%
2020
        
                 37
  
 $ 16.332
to
 $   32.400
  
 $       598
  
1.32%
  
1.40%
to
1.65%
  
11.98%
to
12.26%
2019
        
                 41
  
 $ 14.548
to
 $   28.933
  
 $       598
  
0.96%
  
1.40%
to
1.65%
  
26.85%
to
27.18%
2018
        
                 43
  
 $ 11.439
to
 $   22.808
  
 $       492
  
0.91%
  
1.40%
to
1.65%
  
-10.89%
to
-10.67%
2017
        
                 45
  
 $ 12.805
to
 $   25.594
  
 $       572
  
1.03%
  
1.40%
to
1.65%
  
11.33%
to
11.61%
                                           
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
                            
2021
        
                 88
  
 $ 25.733
to
 $   58.648
  
 $    2,306
  
0.00%
  
1.40%
to
1.65%
  
14.37%
to
14.66%
2020
        
               101
  
 $ 22.444
to
 $   51.280
  
 $    2,300
  
0.00%
  
1.40%
to
1.65%
  
32.87%
to
33.20%
2019
        
               125
  
 $ 16.850
to
 $   38.595
  
 $    2,143
  
0.00%
  
1.40%
to
1.65%
  
32.62%
to
32.96%
2018
        
               131
  
 $ 12.673
to
 $   29.101
  
 $    1,692
  
0.00%
  
1.40%
to
1.65%
  
-6.54%
to
-6.31%
2017
        
               144
  
 $ 13.526
to
 $   31.138
  
 $    1,980
  
0.00%
  
1.40%
to
1.65%
  
20.67%
to
20.97%


Page 33
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

             
Unit Fair Value a
  
Net
  
Investment b
  
Expense Ratio c
  
Total Return d
         
Units
  
Lowest to
  
Assets
  
Income
  
Lowest to
  
Lowest to
         
(000's)
  
Highest
  
(000's)
  
Ratio
  
Highest
  
Highest
                                           
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
                        
2021
        
                 80
  
 $ 69.366
to
 $ 172.143
  
 $    5,692
  
0.28%
  
1.40%
to
1.65%
  
36.42%
to
36.76%
2020
        
                 85
  
 $ 50.721
to
 $ 126.189
  
 $    4,469
  
0.00%
  
1.40%
to
1.65%
  
43.41%
to
43.77%
2019
        
               100
  
 $ 35.280
to
 $   87.992
  
 $    3,743
  
0.00%
  
1.40%
to
1.65%
  
52.44%
to
52.82%
2018
        
               111
  
 $ 23.086
to
 $   57.724
  
 $    2,703
  
0.00%
  
1.40%
to
1.65%
  
-9.96%
to
-9.73%
2017
        
               114
  
 $ 25.574
to
 $   64.106
  
 $    3,069
  
0.00%
  
1.40%
to
1.65%
  
32.72%
to
33.05%
                                           
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
                        
2021
        
                 27
  
 $ 44.278
to
 $   46.391
  
 $    1,236
  
0.00%
  
1.40%
to
1.65%
  
28.48%
to
28.80%
2020
        
                 29
  
 $ 34.463
to
 $   36.017
  
 $    1,036
  
0.00%
  
1.40%
to
1.65%
  
7.13%
to
7.40%
2019
        
                 30
  
 $ 32.169
to
 $   33.535
  
 $       994
  
0.00%
  
1.40%
to
1.65%
  
15.52%
to
15.81%
2018
        
                 32
  
 $ 27.846
to
 $   28.957
  
 $       924
  
0.00%
  
1.40%
to
1.65%
  
-14.26%
to
-14.04%
2017
        
                 33
  
 $ 32.476
to
 $   33.686
  
 $    1,110
  
0.00%
  
1.40%
to
1.65%
  
10.24%
to
10.51%
                                           
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
                            
2021
        
               150
  
 $ 35.139
to
 $   36.452
  
 $    5,451
  
0.03%
  
1.40%
to
1.65%
  
25.43%
to
25.74%
2020
        
               135
  
 $ 28.016
to
 $   28.990
  
 $    3,908
  
0.08%
  
1.40%
to
1.65%
  
28.10%
to
28.42%
2019
        
               144
  
 $ 21.871
to
 $   22.575
  
 $    3,252
  
0.22%
  
1.40%
to
1.65%
  
29.13%
to
29.45%
2018
        
               145
  
 $ 16.937
to
 $   17.439
  
 $    2,531
  
0.43%
  
1.40%
to
1.65%
  
-8.18%
to
-7.94%
2017
        
               152
  
 $ 18.445
to
 $   18.944
  
 $    2,869
  
0.80%
  
1.40%
to
1.65%
  
19.60%
to
19.90%
                                           
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
                            
2021
        
                 86
  
 $ 14.495
to
 $   15.037
  
 $    1,284
  
0.75%
  
1.40%
to
1.65%
  
1.34%
to
1.59%
2020
        
                 95
  
 $ 14.303
to
 $   14.800
  
 $    1,396
  
0.97%
  
1.40%
to
1.65%
  
8.48%
to
8.75%
2019
        
               159
  
 $ 13.185
to
 $   13.610
  
 $    2,161
  
1.84%
  
1.40%
to
1.65%
  
9.80%
to
10.09%
2018
        
               184
  
 $ 12.008
to
 $   12.363
  
 $    2,275
  
1.24%
  
1.40%
to
1.65%
  
-3.88%
to
-3.64%
2017
        
               253
  
 $ 12.493
to
 $   12.830
  
 $    3,242
  
1.20%
  
1.40%
to
1.65%
  
6.59%
to
6.86%
                                           
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
                            
2021
        
                 11
  
 $ 17.260
to
 $   17.905
  
 $       197
  
0.65%
  
1.40%
to
1.65%
  
3.87%
to
4.13%
2020
        
                 19
  
 $ 16.617
to
 $   17.195
  
 $       327
  
1.03%
  
1.40%
to
1.65%
  
10.40%
to
10.67%
2019
        
                 22
  
 $ 15.052
to
 $   15.537
  
 $       329
  
1.36%
  
1.40%
to
1.65%
  
13.86%
to
14.14%
2018
        
                 42
  
 $ 13.220
to
 $   13.612
  
 $       572
  
1.27%
  
1.40%
to
1.65%
  
-5.84%
to
-5.60%
2017
        
                 50
  
 $ 14.040
to
 $   14.419
  
 $       708
  
1.34%
  
1.40%
to
1.65%
  
10.96%
to
11.23%
                                           
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
                            
2021
        
                 42
  
 $ 18.220
to
 $   18.901
  
 $       783
  
0.85%
  
1.40%
to
1.65%
  
5.64%
to
5.90%
2020
        
                 43
  
 $ 17.248
to
 $   17.848
  
 $       762
  
1.06%
  
1.40%
to
1.65%
  
11.70%
to
11.98%
2019
        
                 46
  
 $ 15.441
to
 $   15.938
  
 $       735
  
1.82%
  
1.40%
to
1.65%
  
16.05%
to
16.34%
2018
        
                 47
  
 $ 13.306
to
 $   13.700
  
 $       642
  
1.32%
  
1.40%
to
1.65%
  
-6.84%
to
-6.61%
2017
        
                 72
  
 $ 14.283
to
 $   14.669
  
 $    1,060
  
1.26%
  
1.40%
to
1.65%
  
12.93%
to
13.21%
                                           
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
                            
2021
        
               230
  
 $ 18.820
to
 $   19.523
  
 $    4,495
  
0.80%
  
1.40%
to
1.65%
  
7.48%
to
7.74%
2020
        
               266
  
 $ 17.511
to
 $   18.120
  
 $    4,809
  
1.02%
  
1.40%
to
1.65%
  
12.84%
to
13.12%
2019
        
               293
  
 $ 15.519
to
 $   16.018
  
 $    4,696
  
1.34%
  
1.40%
to
1.65%
  
17.93%
to
18.21%
2018
        
               459
  
 $ 13.160
to
 $   13.550
  
 $    6,215
  
1.21%
  
1.40%
to
1.65%
  
-7.63%
to
-7.39%
2017
        
               553
  
 $ 14.247
to
 $   14.632
  
 $    8,081
  
1.23%
  
1.40%
to
1.65%
  
14.37%
to
14.65%
                                           
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
                            
2021
        
                 42
  
 $ 20.318
to
 $   21.077
  
 $       887
  
0.78%
  
1.40%
to
1.65%
  
8.74%
to
9.01%
2020
        
                 49
  
 $ 18.684
to
 $   19.335
  
 $       952
  
1.02%
  
1.40%
to
1.65%
  
13.78%
to
14.07%
2019
        
                 50
  
 $ 16.422
to
 $   16.950
  
 $       844
  
1.77%
  
1.40%
to
1.65%
  
19.53%
to
19.82%
2018
        
                 54
  
 $ 13.739
to
 $   14.146
  
 $       764
  
1.21%
  
1.40%
to
1.65%
  
-8.31%
to
-8.08%
2017
        
                 54
  
 $ 14.984
to
 $   15.390
  
 $       834
  
1.27%
  
1.40%
to
1.65%
  
15.65%
to
15.94%
                                           
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
                            
2021
        
                 99
  
 $ 20.865
to
 $   21.645
  
 $    2,141
  
0.83%
  
1.40%
to
1.65%
  
10.24%
to
10.51%
2020
        
               105
  
 $ 18.928
to
 $   19.586
  
 $    2,060
  
1.02%
  
1.40%
to
1.65%
  
14.73%
to
15.02%
2019
        
               105
  
 $ 16.498
to
 $   17.029
  
 $    1,783
  
1.77%
  
1.40%
to
1.65%
  
22.08%
to
22.39%
2018
        
               104
  
 $ 13.514
to
 $   13.914
  
 $    1,440
  
1.04%
  
1.40%
to
1.65%
  
-9.56%
to
-9.34%
2017
        
               137
  
 $ 14.943
to
 $   15.347
  
 $    2,108
  
1.16%
  
1.40%
to
1.65%
  
18.73%
to
19.02%
                                           
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
                            
2021
        
                 34
  
 $ 26.428
to
 $   27.211
  
 $       916
  
0.84%
  
1.40%
to
1.65%
  
13.29%
to
13.58%
2020
        
                 29
  
 $ 23.328
to
 $   23.958
  
 $       696
  
0.90%
  
1.40%
to
1.65%
  
16.02%
to
16.31%
2019
        
                 29
  
 $ 20.106
to
 $   20.599
  
 $       594
  
1.58%
  
1.40%
to
1.65%
  
25.05%
to
25.37%
2018
        
                 35
  
 $ 16.078
to
 $   16.431
  
 $       577
  
0.92%
  
1.40%
to
1.65%
  
-10.99%
to
-10.76%
2017
        
                 42
  
 $ 18.063
to
 $   18.412
  
 $       765
  
1.03%
  
1.40%
to
1.65%
  
21.07%
to
21.37%
                                           
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
                            
2021
        
                 31
  
 $ 27.424
to
 $   28.236
  
 $       881
  
0.63%
  
1.40%
to
1.65%
  
15.57%
to
15.86%
2020
        
                 47
  
 $ 23.729
to
 $   24.370
  
 $    1,140
  
0.78%
  
1.40%
to
1.65%
  
17.04%
to
17.33%
2019
        
                 45
  
 $ 20.274
to
 $   20.770
  
 $       942
  
1.61%
  
1.40%
to
1.65%
  
26.14%
to
26.45%
2018
        
                 45
  
 $ 16.073
to
 $   16.425
  
 $       734
  
0.91%
  
1.40%
to
1.65%
  
-11.60%
to
-11.38%
2017
        
                 44
  
 $ 18.183
to
 $   18.534
  
 $       815
  
0.99%
  
1.40%
to
1.65%
  
21.28%
to
21.58%


Page 34
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

             
Unit Fair Value a
  
Net
  
Investment b
  
Expense Ratio c
  
Total Return d
         
Units
  
Lowest to
  
Assets
  
Income
  
Lowest to
  
Lowest to
         
(000's)
  
Highest
  
(000's)
  
Ratio
  
Highest
  
Highest
                                           
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
                            
2021
        
                 21
  
 $ 27.592
to
 $   28.409
  
 $       591
  
0.71%
  
1.40%
to
1.65%
  
15.61%
to
15.90%
2020
        
                 21
  
 $ 23.867
to
 $   24.513
  
 $       503
  
0.80%
  
1.40%
to
1.65%
  
17.01%
to
17.31%
2019
        
                 20
  
 $ 20.397
to
 $   20.896
  
 $       412
  
1.55%
  
1.40%
to
1.65%
  
26.16%
to
26.47%
2018
        
                 20
  
 $ 16.168
to
 $   16.523
  
 $       328
  
0.94%
  
1.40%
to
1.65%
  
-11.61%
to
-11.39%
2017
        
                 21
  
 $ 18.292
to
 $   18.646
  
 $       384
  
1.50%
  
1.40%
to
1.65%
  
21.29%
to
21.59%
                                           
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
                            
2021
        
                 33
  
 $ 27.638
to
 $   28.457
  
 $       926
  
0.85%
  
1.40%
to
1.65%
  
15.59%
to
15.88%
2020
        
                 26
  
 $ 23.910
to
 $   24.557
  
 $       636
  
0.78%
  
1.40%
to
1.65%
  
17.05%
to
17.33%
2019
        
                 24
  
 $ 20.428
to
 $   20.929
  
 $       500
  
1.50%
  
1.40%
to
1.65%
  
26.11%
to
26.44%
2018
        
                 26
  
 $ 16.198
to
 $   16.553
  
 $       428
  
0.95%
  
1.40%
to
1.65%
  
-11.60%
to
-11.38%
2017
        
                 24
  
 $ 18.324
to
 $   18.679
  
 $       456
  
1.00%
  
1.40%
to
1.65%
  
21.29%
to
21.59%
                                           
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
                          
2021
        
               558
  
 $ 13.543
to
 $   13.875
  
 $    7,734
  
1.09%
  
1.40%
to
1.65%
  
6.80%
to
7.06%
2020
        
               604
  
 $ 12.681
to
 $   12.959
  
 $    7,831
  
2.23%
  
1.40%
to
1.65%
  
4.16%
to
4.42%
2019
        
               689
  
 $ 12.175
to
 $   12.411
  
 $    8,552
  
2.28%
  
1.40%
to
1.65%
  
12.68%
to
12.96%
2018
        
               780
  
 $ 10.805
to
 $   10.987
  
 $    8,562
  
1.62%
  
1.40%
to
1.65%
  
-7.59%
to
-7.35%
2017
        
               885
  
 $ 11.692
to
 $   11.858
  
 $  10,491
  
1.49%
  
1.40%
to
1.65%
  
8.78%
to
9.05%
                                           
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
                        
2021
        
            1,266
  
 $ 14.567
to
 $   14.923
  
 $  18,890
  
1.14%
  
1.40%
to
1.65%
  
9.24%
to
9.52%
2020
        
            1,350
  
 $ 13.334
to
 $   13.627
  
 $  18,395
  
2.23%
  
1.40%
to
1.65%
  
4.17%
to
4.43%
2019
        
            1,622
  
 $ 12.800
to
 $   13.048
  
 $  21,163
  
2.13%
  
1.40%
to
1.65%
  
14.40%
to
14.68%
2018
        
            1,767
  
 $ 11.189
to
 $   11.378
  
 $  20,101
  
1.56%
  
1.40%
to
1.65%
  
-8.74%
to
-8.51%
2017
        
            2,067
  
 $ 12.261
to
 $   12.436
  
 $  25,708
  
1.57%
  
1.40%
to
1.65%
  
11.99%
to
12.27%
                                           
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
                            
2021
        
               709
  
 $ 14.657
to
 $   15.016
  
 $  10,638
  
1.00%
  
1.40%
to
1.65%
  
10.75%
to
11.03%
2020
        
               819
  
 $ 13.235
to
 $   13.525
  
 $  11,070
  
2.02%
  
1.40%
to
1.65%
  
3.46%
to
3.72%
2019
        
            1,009
  
 $ 12.792
to
 $   13.040
  
 $  13,159
  
1.86%
  
1.40%
to
1.65%
  
15.16%
to
15.45%
2018
        
            1,369
  
 $ 11.108
to
 $   11.295
  
 $  15,457
  
1.45%
  
1.40%
to
1.65%
  
-10.22%
to
-10.00%
2017
        
            1,809
  
 $ 12.373
to
 $   12.550
  
 $  22,698
  
1.40%
  
1.40%
to
1.65%
  
15.73%
to
16.03%
                                           
American Funds Capital World Bond Fund - Class 2 Shares
                            
2021
        
                 38
  
 $ 10.384
to
 $   10.532
  
 $       398
  
1.69%
  
1.40%
to
1.65%
  
-6.48%
to
-6.24%
2020
        
                 38
  
 $ 11.103
to
 $   11.233
  
 $       425
  
1.19%
  
1.40%
to
1.65%
  
8.10%
to
8.36%
2019
        
                 41
  
 $ 10.271
to
 $   10.366
  
 $       420
  
1.65%
  
1.40%
to
1.65%
  
6.01%
to
6.27%
2018
        
                 37
  
 $   9.689
to
 $     9.754
  
 $       362
  
2.40%
  
1.40%
to
1.65%
  
-2.95%
to
-2.71%
2017
        
                 10
  
 $   9.984
to
 $   10.026
  
 $         95
  
0.44%
  
1.40%
to
1.65%
  
5.11%
to
5.37%
                                           
American Funds Global Growth Fund - Class 2 Shares
                              
2021
        
               108
  
 $ 23.206
to
 $   23.537
  
 $    2,531
  
0.34%
  
1.40%
to
1.65%
  
14.52%
to
14.80%
2020
        
                 86
  
 $ 20.264
to
 $   20.502
  
 $    1,764
  
0.39%
  
1.40%
to
1.65%
  
28.33%
to
28.65%
2019
        
                 62
  
 $ 15.791
to
 $   15.937
  
 $       982
  
1.61%
  
1.40%
to
1.65%
  
33.06%
to
33.40%
2018
        
                 28
  
 $ 11.868
to
 $   11.947
  
 $       329
  
0.88%
  
1.40%
to
1.65%
  
-10.54%
to
-10.31%
2017
        
                 11
  
 $ 13.266
to
 $   13.321
  
 $       153
  
0.97%
  
1.40%
to
1.65%
  
29.32%
to
29.64%
                                           
American Funds New World Fund® - Class 2 Shares
                                
2021
        
                 18
  
 $ 17.653
to
 $   17.905
  
 $       315
  
0.89%
  
1.40%
to
1.65%
  
3.20%
to
3.46%
2020
        
                 16
  
 $ 17.105
to
 $   17.306
  
 $       276
  
0.09%
  
1.40%
to
1.65%
  
21.56%
to
21.86%
2019
        
                 12
  
 $ 14.072
to
 $   14.202
  
 $       172
  
1.03%
  
1.40%
to
1.65%
  
27.03%
to
27.35%
2018
        
                 12
  
 $ 11.078
to
 $   11.152
  
 $       138
  
0.94%
  
1.40%
to
1.65%
  
-15.45%
to
-15.24%
2017
        
                   8
  
 $ 13.102
to
 $   13.157
  
 $       103
  
1.18%
  
1.40%
to
1.65%
  
27.33%
to
27.65%
                                           
American Funds Growth-Income Fund - Class 2 Shares
                            
2021
        
                 83
  
 $ 21.156
to
 $   21.458
  
 $    1,770
  
1.22%
  
1.40%
to
1.65%
  
22.07%
to
22.37%
2020
        
                 68
  
 $ 17.332
to
 $   17.535
  
 $    1,193
  
1.33%
  
1.40%
to
1.65%
  
11.68%
to
11.96%
2019
        
                 81
  
 $ 15.519
to
 $   15.662
  
 $    1,271
  
1.90%
  
1.40%
to
1.65%
  
24.07%
to
24.39%
2018
        
                 52
  
 $ 12.508
to
 $   12.591
  
 $       653
  
1.59%
  
1.40%
to
1.65%
  
-3.40%
to
-3.16%
2017
        
                 34
  
 $ 12.948
to
 $   13.002
  
 $       447
  
1.92%
  
1.40%
to
1.65%
  
20.38%
to
20.68%
                                           
American Funds Capital Income Builder® - Class 2 Shares
                            
2021
        
                 27
  
 $ 13.552
to
 $   13.745
  
 $       373
  
2.80%
  
1.40%
to
1.65%
  
13.06%
to
13.35%
2020
        
                 24
  
 $ 11.986
to
 $   12.127
  
 $       296
  
2.92%
  
1.40%
to
1.65%
  
2.77%
to
3.02%
2019
        
                 24
  
 $ 11.663
to
 $   11.771
  
 $       284
  
2.64%
  
1.40%
to
1.65%
  
15.96%
to
16.25%
2018
        
                 27
  
 $ 10.058
to
 $   10.126
  
 $       273
  
3.04%
  
1.40%
to
1.65%
  
-8.61%
to
-8.38%
2017
        
                 23
  
 $ 11.006
to
 $   11.052
  
 $       256
  
2.91%
  
1.40%
to
1.65%
  
11.20%
to
11.47%
                                           
American Funds Asset Allocation Fund - Class 2 Shares
                            
2021
        
                 30
  
 $ 16.874
to
 $   17.115
  
 $       518
  
1.58%
  
1.40%
to
1.65%
  
13.22%
to
13.50%
2020
        
                 28
  
 $ 14.904
to
 $   15.079
  
 $       421
  
1.76%
  
1.40%
to
1.65%
  
10.61%
to
10.89%
2019
        
                 28
  
 $ 13.474
to
 $   13.598
  
 $       381
  
1.98%
  
1.40%
to
1.65%
  
19.25%
to
19.54%
2018
        
                 30
  
 $ 11.299
to
 $   11.375
  
 $       339
  
1.79%
  
1.40%
to
1.65%
  
-6.18%
to
-5.94%
2017
        
                 14
  
 $ 12.043
to
 $   12.093
  
 $       165
  
1.68%
  
1.40%
to
1.65%
  
14.33%
to
14.61%



Page 35
Kansas City Life Variable Annuity Separate Account
Notes to Financial Statements (Continued)

             
Unit Fair Value a
  
Net
  
Investment b
  
Expense Ratio c
  
Total Return d
         
Units
  
Lowest to
Highest
  
Assets
  
Income
  
Lowest to
  
Lowest to
         
(000's)
    
(000's)
  
Ratio
  
Highest
  
Highest
                                           
American Funds Managed Risk Growth Fund - Class P2 Shares
                        
2021
        
            1,723
  
 $ 21.701
to
 $   22.011
  
 $  37,918
  
0.56%
  
1.40%
to
1.65%
  
11.04%
to
11.32%
2020
        
            1,581
  
 $ 19.543
to
 $   19.773
  
 $  31,261
  
0.69%
  
1.40%
to
1.65%
  
29.86%
to
30.19%
2019
        
            1,485
  
 $ 15.049
to
 $   15.187
  
 $  22,553
  
0.87%
  
1.40%
to
1.65%
  
19.75%
to
20.05%
2018
        
            1,394
  
 $ 12.567
to
 $   12.651
  
 $  17,630
  
0.42%
  
1.40%
to
1.65%
  
-2.01%
to
-1.76%
2017
        
               953
  
 $ 12.825
to
 $   12.878
  
 $  12,271
  
0.28%
  
1.40%
to
1.65%
  
23.94%
to
24.25%
                                           
American Funds Managed Risk International Fund - Class P2 Shares
                        
2021
        
               467
  
 $ 12.007
to
 $   12.178
  
 $    5,688
  
0.55%
  
1.40%
to
1.65%
  
-5.70%
to
-5.46%
2020
        
               475
  
 $ 12.732
to
 $   12.881
  
 $    6,122
  
1.22%
  
1.40%
to
1.65%
  
1.11%
to
1.36%
2019
        
               460
  
 $ 12.592
to
 $   12.708
  
 $    5,848
  
1.68%
  
1.40%
to
1.65%
  
15.71%
to
16.00%
2018
        
               486
  
 $ 10.882
to
 $   10.955
  
 $    5,319
  
1.75%
  
1.40%
to
1.65%
  
-11.97%
to
-11.75%
2017
        
               399
  
 $ 12.362
to
 $   12.414
  
 $    4,951
  
0.70%
  
1.40%
to
1.65%
  
26.60%
to
26.90%
                                           
American Funds Managed Risk Washington Mutual Investors FundSM - Class P2 Shares
                
2021
        
            1,211
  
 $ 13.571
to
 $   13.765
  
 $  16,670
  
1.64%
  
1.40%
to
1.65%
  
15.20%
to
15.49%
2020
        
            1,374
  
 $ 11.781
to
 $   11.919
  
 $  16,373
  
1.73%
  
1.40%
to
1.65%
  
-2.86%
to
-2.62%
2019
        
            1,414
  
 $ 12.128
to
 $   12.240
  
 $  17,313
  
1.59%
  
1.40%
to
1.65%
  
12.02%
to
12.30%
2018
        
            1,446
  
 $ 10.827
to
 $   10.899
  
 $  15,759
  
3.22%
  
1.40%
to
1.65%
  
-8.89%
to
-8.67%
2017
        
            1,507
  
 $ 11.884
to
 $   11.934
  
 $  17,984
  
1.48%
  
1.40%
to
1.65%
  
13.15%
to
13.44%
                                           
American Funds Managed Risk Growth-Income Fund - Class P2 Shares
                        
2021
        
            1,053
  
 $ 16.903
to
 $   17.144
  
 $  18,051
  
1.13%
  
1.40%
to
1.65%
  
13.17%
to
13.45%
2020
        
            1,141
  
 $ 14.936
to
 $   15.111
  
 $  17,237
  
1.68%
  
1.40%
to
1.65%
  
7.78%
to
8.05%
2019
        
            1,179
  
 $ 13.857
to
 $   13.985
  
 $  16,492
  
0.36%
  
1.40%
to
1.65%
  
16.90%
to
17.20%
2018
        
            1,219
  
 $ 11.854
to
 $   11.933
  
 $  14,551
  
1.05%
  
1.40%
to
1.65%
  
-3.58%
to
-3.35%
2017
        
            1,147
  
 $ 12.294
to
 $   12.346
  
 $  14,160
  
0.99%
  
1.40%
to
1.65%
  
18.43%
to
18.73%
                                           
American Funds Managed Risk Asset Allocation Fund - Class P2 Shares
                        
2021
        
            1,122
  
 $ 14.764
to
 $   14.975
  
 $  16,796
  
1.34%
  
1.40%
to
1.65%
  
10.66%
to
10.94%
2020
        
            1,298
  
 $ 13.342
to
 $   13.498
  
 $  17,512
  
1.50%
  
1.40%
to
1.65%
  
4.14%
to
4.40%
2019
        
            1,434
  
 $ 12.811
to
 $   12.929
  
 $  18,539
  
2.33%
  
1.40%
to
1.65%
  
16.06%
to
16.35%
2018
        
            1,539
  
 $ 11.038
to
 $   11.112
  
 $  17,095
  
1.35%
  
1.40%
to
1.65%
  
-6.47%
to
-6.23%
2017
        
            1,644
  
 $ 11.801
to
 $   11.850
  
 $  19,484
  
0.77%
  
1.40%
to
1.65%
  
12.93%
to
13.21%

a  The lowest to highest unit fair values disclosed herein may or may not have units invested in the respective products as of year end.
b   The investment income ratio represents the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average daily net assets.  These ratios exclude those expenses, such as mortality and expense charges, that are assessed against contract owner accounts either through reductions in the unit values or the redemption of units.  The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest.  This ratio has been annualized for partial years.
c  These amounts represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated.  The ratios include only those expenses that result in a direct reduction to unit values.  Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund have been excluded.
d  These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and expenses assessed through the reduction of unit values. These ratios do not include any expenses assessed through the redemption of units. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract total returns are not within the ranges presented.  The ratio has not been annualized for partial years.
Page 36
Report of Independent Registered Public Accounting Firm



The Contract Owners
Kansas City Life Variable Annuity Separate Account
and
The Board of Directors and Stockholders
Kansas City Life Insurance Company


Opinion on the Financial Statements
We have audited the accompanying statement of net assets of Kansas City Life Variable Annuity Separate Account (comprised of the individual subaccounts as listed in Note 1 to the financial statements, collectively (“the Accounts”)), as of December 31, 2021, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and related notes (collectively, the “financial statements”) and the financial highlights in Note 6 for each of the years in the five-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Accounts as of December 31, 2021, the results of their operations for the year then ended, the changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Accounts’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Accounts in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of December 31, 2021, by correspondence with the transfer agents of the underlying mutual funds or by other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.

Page 37
The Contract Owners
Kansas City Life Variable Annuity Separate Account
and
The Board of Directors and Stockholders
Kansas City Life Insurance Company
Page 2
We have served as the Accounts’ auditor since 2016.
/s/ BKD, LLP

Kansas City, Missouri
April 27, 2022

Page 38


PART C
OTHER INFORMATION
Item 27.  Exhibits
(a)  Board of Directors Resolutions.
Resolutions of the board of directors of Kansas City Life Insurance Company ("Kansas City Life") establishing Kansas City Life Variable Annuity Separate Account (the "Variable Account"). (1)
(b)  Custodian Agreements.
Not Applicable.
(c)  Underwriting Contracts.
(d)  Contracts.
(e)  Applications.
(1)
 Contract Application. (3)
(2)
 ICC17A165. (14)
(3)
 A182. (14)
(4)
 ICC21A200. (14)
(f)  Depositor’s Certificate of Incorporation and By-Laws.

(1)
Restated Articles of Incorporation of Kansas City Life. (1)

(2)
(g)  Reinsurance Contracts.
Not Applicable.
(h)  Participation Agreements.
1

 (2)

a.

b.

c.

d.
2
3
(i)  Administrative Contracts.
(j)  Other Material Contracts.
(k)  Legal Opinion.
(l)   Other Opinions.
(m) Omitted Financial Statements.
Not Applicable.
4
(n)  Initial Capital Agreements.
      Not Applicable
----------------
(1)  Incorporated by reference to the Registrant's registration statement filed with the Securities and Exchange Commission on March 3, 1995 (File No. 33-89984).
5
Item 28.  Directors and Officers of the Depositor
Name and Principal Business Address*
Position and Offices with Depositor
Kevin G. Barth
Director
R. Philip Bixby
President, CEO, Chairman of the Board and Director
Walter E. Bixby
Executive Vice President, Vice Chairman of the Board and Director
Nancy Bixby Hudson
Director
William R. Blessing
Director
Michael Braude
Director
James T. Carr
Director
John C. Cozad
Director
Howard E. Cohen
Director
Bryce A. Johnson
Assistant Vice President, Treasurer and Assistant Controller
David S. Kimmel
Director
Donald E. Krebs
Senior Vice President, Sales and Marketing
Elishia P. Sibbing
Vice President and Controller
A. Craig Mason Jr.
Senior Vice President, General Counsel, Secretary and Director
Cecil R. Miller
Director
Mark A. Milton
Senior Vice President, Actuary and Director
Stephen E. Ropp
Senior Vice President, Operations
William A. Schalekamp
Director
David A. Laird
Senior Vice President, Finance, CFO and Director
* The principal business address of all the persons listed above is 3520 Broadway, Kansas City, Missouri 64111-2565.
Item 29.  Persons Controlled by or Under Common Control with the Depositor or Registrant
Name
Jurisdiction
Percent of Voting Securities Owned
Sunset Financial Services, Inc.
Washington
Ownership of all voting securities by Sunset Life Insurance Company of America
KCL Service Company
Missouri
Ownership of all voting securities by depositor
Old American Insurance Company
Missouri
Ownership of all voting securities by depositor
Kansas City Life Financial Group, Inc.
Missouri
Ownership of all voting securities by depositor
Grange Life Insurance Company
Ohio
Ownership of all voting securities by depositor
Item 30.  Indemnification
The By-Laws of Kansas City Life Insurance Company provide, in part, in Article XII:
1.  The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the Company, by reason of the fact that he or she is or was a Director, Officer or employee of the Company, or is or was serving at the request of the Company as a Director, Officer or employee of another company, partner ship, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contend ere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
2.  The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the company to procure a judgment in its favor by reason of the
6
fact that he or she is or was a director, officer or employee of the company, or is or was serving at the request of the company as a director, officer or employee of another company, partnership, joint venture, trust or other enterprise against expenses, including attorneys' fees, actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the company; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the company unless and only to the extent that the court in which the action or suit was brought determines upon application that, despite the adjudication of liability and in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
3.  To the extent that a Director, Officer or employee of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses, including attorneys' fees, actually and reasonably incurred by him or her in connection with the action, suit or proceeding.
4.  Any indemnification under Sections 1 and 2 of this Article, unless ordered by a court, shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the director, Officer or employee is proper in the circumstances because he or she has met the applicable standard of conduct set forth in this Article. The determination shall be made by the Board of Directors of the Company by a majority vote of a quorum consisting of Directors who were not parties to the action, suit or proceeding, or, if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or by the Stockholders of the Company.
5.  Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of the action, suit or proceeding as authorized by the Board of Directors in the specific case up on receipt of an undertaking by or on behalf of the Director, Officer or employee to repay such amount unless it shall ultimately be determined that he or she is entitled to be indemnified by the Company as authorized in this Article.
6.  The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under the Articles of Incorporation or Bylaws, or any agreement, vote of Stockholders or disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of the heirs, executors and administrators of such a person.
7.  The Company shall have the power to give any further indemnity, in addition to the indemnity authorized or contemplated under this Article, including subsection 6, to any person who is or was a Director, Officer, employee or agent of the Company, or to any person who is or was serving at the request of the Company as a Director, Officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, provided such further indemnity is either (i) authorized, directed, or provided for in the Articles of Incorporation of the Company or any duly adopted amendment thereof or (ii) is authorized, directed, or provided for in any bylaw or agreement of the Company which has been adopted by a vote of the Stockholders of the Company, and provided further that no such indemnity shall indemnify any person from or on account of such person's conduct which was finally adjudged to have been knowingly fraudulent, deliberately dishonest, or willful misconduct . Nothing in this paragraph shall be deemed to limit the power of the Company under subsection 6 of this Bylaw to enact Bylaws or to enter into agreement without Stockholder adoption of the same.
8.  The Company may purchase and maintain insurance on behalf of any person who is or was a Director, Officer, employee or agent of the Company, or is or was serving at the request of the Company as a Director, Officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Company would have the power to indemnify him or her against such liability under the provisions of this Article.
9.  For the purpose of this Article, references to "the Company" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a Director, Officer, employee or agent of such constituent corporation or is or was serving at the request of such constituent corporation as a Director, Officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he or she would if he or she had served the resulting or surviving corporation in the same capacity.
7
10.  For purposes of this Article, the term "other enterprise" shall include employee benefit plans; the term "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and the term "serving at the request of the Company" shall include any service as a Director, Officer or employee of the Company which imposes duties on, or involves services by, such Director, Officer or employee with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonable believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Article.
11.  Any Director, Officer or employee of the Company shall be indemnified under this Article for any act taken in good faith and upon reliance upon the books and records of the Company, upon financial statements or other reports prepared by the Officers of the Company, or on financial statements prepared by the Company's independent accountants, or on information or documents prepared or provided by legal counsel to the Company.
12.  To the extent that the indemnification of Officers, Directors or employees as permitted under Section 351.355 (as amended or superseded) of The General and Business Corporation Law of Missouri, as in effect from time to time, provides for greater indemnification of those individuals than the provisions of this Article XII, then the Company shall indemnify its Directors, Officers, employees as provided in and to the full extent allowed by Section 351.355.
13.  The indemnification provided by this Article shall continue as to a person who has ceased to be a Director or Officer of the Company and shall inure to the benefit of the heirs, executors, and administrators of such a person. All rights to indemnification under this Article shall be deemed to be provided by a contract between the Company and the person who serves in such capacity at any time while these Bylaws and other relevant provisions of the applicable law, if any, are in effect. Any repeal or modification thereof shall not affect any rights or obligations then existing.
14.  If this Article or any portion or provision hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify each person entitled to indemnification pursuant too this Article to the full extent permitted by any applicable portion of this Article that shall not have been invalidated, or to the fullest extent provided by any other applicable law.
Missouri law authorizes Missouri corporations to provide indemnification to directors, officers and other persons.
Kansas City Life owns a directors and officers liability insurance policy covering liabilities that directors and officers of Kansas City Life and its subsidiaries and affiliates may incur in acting as directors and officers.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 31.  Principal Underwriter
(a)  Sunset Financial Services, Inc. is the registrant's principal underwriter.
(b)  Officers and Directors of Sunset Financial:
Name and Principal Business Address*
Positions and Offices with Sunset Financial Services, Inc.
R. Philip Bixby
Chairman of the Board and Director
Walter E. Bixby
Director
Janice L. Brandt
Vice President and Chief Compliance Officer
Susanna J. Denney
Vice President, Chief Operations Officer
Donald E. Krebs
Director
Elishia P. Sibbing
Treasurer
A. Craig Mason Jr.
Secretary and Director
Mark A. Milton
Director
Kristen Peil
Assistant Vice President
Kelly T. Ullom
President and Director
David A. Laird
Director

8
* The principal business address of all of the persons listed above is P.O. Box 219365, Kansas City, Missouri, 64121-9365.
(c)  Compensation from the Registrant. The following commissions and other compensation were received by each principal underwriter, directly or indirectly, from the Registrant during the Registrant's last fiscal year:
(1)
Name of Principal Underwriter
(2)
Net Underwriting Discounts and Commissions
(3)
Compensation on Redemption
(4)
Brokerage Commissions
(5)
Other Compensation
Sunset Financial Services, Inc.
$171,955.97
None
N/A
N/A
Item 32.  Location of Accounts and Records
All of the accounts, books, records or other documents required to be kept by Section 31(a) of the Investment Company Act of 1940 and rules thereunder, are maintained by Kansas City Life at 3520 Broadway, Kansas City, Missouri 64111-2565.
Item 33.  Management Services
All management contracts are discussed in Part A or Part B of this registration statement.
Item 34.  Fee Representation
Kansas City Life Insurance Company represents that the aggregate charges under the Contracts are reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by Kansas City Life Insurance Company.
Representation Required in Connection with Offering the Contract as Funding Vehicles for 403(b) Retirement Plans
Kansas City Life represents that in connection with its offering of the Contracts as funding vehicles for retirement plans meeting the requirements of Section 403(b) of the Internal Revenue Code of 1986, it is relying on no-action letters dated November 28, 1988, to the American Council of Life Insurance (Ref. No. IP-6-88)(the “ACLI Letter”), and dated August 30, 2012, to ING Life and Annuity Company (the “ING Letter”), regarding Sections 22(e), 27(c)(1), and 27(d) of the Investment Company Act of 1940, and that it has complied with  paragraphs numbered (1) through (4) of the ACLI Letter, as modified by the ING Letter, and the additional terms of the ING Letter.
9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Kansas City Life Variable Annuity Separate Account, certifies that it meets all of the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has duly caused this Post-Effective Amendment No. 28 to the Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Kansas City and the State of Missouri on the 25th day of April, 2022.
 
Kansas City Life Variable Annuity Separate Account
 
(Registrant)
   
   
 
(SEAL)
By: /s/ R. Philip Bixby
R. Philip Bixby, President, CEO, Chairman of the Board and Director
   
   
 
Kansas City Life Insurance Company
 
(Depositor)
   
   
Attest:  /s/ A. Craig Mason Jr.
A. Craig Mason Jr., Secretary and Director
By:  /s/ R. Philip Bixby
R. Philip Bixby, President, CEO, Chairman of the Board and Director
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 28 to the Registration Statement has been signed below by the following persons in the capacities and on the date(s) indicated.
Signature
Title
Date
     
/s/ R. Philip Bixby
R. Philip Bixby
President, CEO, Chairman of the Board and Director
(Principal Executive Officer)
April 25, 2022
     
/s/ David A. Laird
David A. Laird
Senior Vice President, Finance, CFO and Director
(Principal Financial Officer)
April 25, 2022
     
/s/ Elishia P. Sibbing
Elishia P. Sibbing
Vice President and Controller
(Principal Accounting Officer)
April 25, 2022
     
/s/ Walter E. Bixby
Walter E. Bixby
Executive Vice President, Vice Chairman of the Board and Director
April 25, 2022
     
/s/ A. Craig Mason Jr.
A. Craig Mason Jr.
Secretary and Director
April 25, 2022
     
/s/ Kevin G. Barth
Kevin G. Barth
Director
April 25, 2022
     
/s/ Nancy Bixby Hudson
Nancy Bixby Hudson
Director
April 25, 2022
     
/s/ William R. Blessing
William R. Blessing
Director
April 25, 2022
     
/s/ Michael Braude
Michael Braude
Director
April 25, 2022
     
/s/ James T. Carr
James T. Carr
Director
April 25, 2022
     

10
/s/ John C. Cozad
John C. Cozad
Director
April 25, 2022
     
/s/ Howard E. Cohen
Howard E. Cohen
Director
April 25, 2022
     
/s/ David S. Kimmel
David S. Kimmel
Director
April 25, 2022
     
/s/ Cecil R. Miller
Cecil R. Miller
Director
April 25, 2022
     
/s/ Mark A. Milton
Mark A. Milton
Director
April 25, 2022
     
/s/ William A. Schalekamp
William A. Schalekamp
Director
April 25, 2022




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