485BPOS 1 heritagesvul2020.htm HERITAGE SVUL
As filed with the Securities and Exchange Commission on April 28, 2020
 
Registration Nos. 333-69508
and 811-09080

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-6
 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X

Pre-Effective Amendment No.
  
   
Post-Effective Amendment No. 20
X
 
and/or
 
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
X

Amendment No. 97
X

 
KANSAS CITY LIFE VARIABLE LIFE 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, 2020 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 flexible premium survivorship variable life insurance contracts.


CENTURY II HERITAGE SURVIVORSHIP VARIABLE UNIVERSAL LIFE PROSPECTUS
FLEXIBLE PREMIUM SURVIVORSHIP VARIABLE UNIVERSAL LIFE INSURANCE CONTRACT
KANSAS CITY LIFE VARIABLE LIFE 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 a flexible premium survivorship variable universal life insurance contract ("Contract") offered by Kansas City Life Insurance Company ("Kansas City Life").  We have provided a definitions section at the end of this Prospectus for your reference as you read.
The Contract is designed to provide insurance protection upon the death of the second of the two Insureds named in the Contract.  The Contract also provides you the opportunity to allocate net Premiums and Contract Value to one or more Subaccounts of the Kansas City Life Variable Life Separate Account ("Variable Account") or to the Fixed Account.  The assets of each Subaccount are invested in a corresponding portfolio of a designated mutual fund ("Fund") as follows:
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
Invesco V.I. American Franchise Fund – Series I Shares
Invesco V.I. Core Equity Fund – Series I Shares
Invesco V.I. Technology Fund – Series I Shares
American Century Variable Portfolios, Inc.
VP Capital Appreciation Fund – Class I
VP Income & Growth Fund – Class I
VP International Fund – Class I
VP Mid Cap Value Fund – Class I
VP Ultra® Fund – Class I
VP Value Fund – Class I
American Century Variable Portfolios II, Inc.
VP Inflation Protection Fund – Class II
American Funds Insurance Series®
Asset Allocation Fund – Class 2 Shares
Capital Income Builder® – Class 2 Shares
Capital World Bond Fund – Class 2 Shares (formerly Global Bond Fund – Class 2 Shares)
Global Growth Fund – Class 2 Shares
Growth-Income Fund – Class 2 Shares
New World Fund® – Class 2 Shares
American Funds Insurance Series® Managed Risk Funds
Managed Risk Asset Allocation Fund – Class P2 Shares
Managed Risk Blue Chip Income and Growth Fund – Class P2 Shares
Managed Risk Growth Fund – Class P2 Shares
Managed Risk Growth-Income Fund – Class P2 Shares
Managed Risk International Fund – Class P2 Shares
BNY Mellon Variable Investment Fund (formerly Dreyfus Variable Investment Fund)
Appreciation Portfolio – Initial Shares
Opportunistic Small Cap Portfolio – Initial Shares
BNY Mellon Stock Index Fund, Inc. – Initial Shares (formerly Dreyfus Stock Index Fund, Inc – Initial Shares)
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. – Initial Shares (formerly Dreyfus Sustainable U.S. Equity Portfolio, Inc – Initial Shares)
Calamos® Advisors Trust
Calamos Growth and Income Portfolio
Columbia Funds Variable Series Trust II
Columbia Variable Portfolio – Mid Cap Growth Fund (Class 2)
Columbia Variable Portfolio – Seligman Global Technology Fund (Class 2)
Columbia Variable Portfolio – Select Small Cap Value Fund (Class 2)
Federated Hermes Insurance Series (formerly Federated Insurance Series)
Federated Hermes Managed Volatility Fund II – P (formerly Federated Managed Volatility Fund II – P)
Federated Hermes High Income Bond Fund II – P (formerly Federated High Income Bond Fund II – P)
Federated Hermes Government Money Fund II – S (formerly Federated Government Money Fund II – S)

Fidelity® Variable Insurance Products
VIP ContrafundSM Portfolio – Service Class 2
VIP Freedom Income PortfolioSM – Service Class 2
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
Franklin Templeton Variable Insurance Products Trust
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
JPMorgan Insurance Trust
JPMorgan Insurance Trust Mid Cap Value Portfolio – Class 1 Shares
JPMorgan Insurance Trust Small Cap Core Portfolio – Class 1 Shares
JPMorgan Insurance Trust U.S. Equity Portfolio – Class 1 Shares
MFS® Variable Insurance Trust
MFS® Growth Series – Initial Class Shares
MFS® Research Series – Initial Class Shares
MFS® Total Return Bond Series – Initial Class Shares
MFS® Total Return Series – Initial Class Shares
MFS® Utilities Series – Initial Class Shares
MFS® Variable Insurance Trust II
MFS® Strategic Income Portfolio – Initial Class Shares
Northern Lights Variable Trust
TOPS® Managed Risk Balanced ETF Portfolio – Class 2 Shares
TOPS® Managed Risk Growth ETF Portfolio – Class 2 Shares
TOPS® Managed Risk Moderate Growth ETF Portfolio – Class 2 Shares
The accompanying 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 Portfolios of the Funds.  You bear the entire investment risk of amounts allocated to the Variable Account.  Another choice available for allocation of net 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 4%.
The Contract also offers you the flexibility to vary the amount and timing of Premiums and to change the amount of death benefit payable.  This flexibility allows you to provide for your changing insurance needs under a single insurance contract.
You can select from three Coverage Options available under the Contract:
•
Option A:  a level death benefit;
•
Option B:  a death benefit that fluctuates with the value of the Contract; and
•
Option L:  provides a death benefit pattern that can be level for several years and then can increase at a particular time that you choose.
We also offer a Guaranteed Minimum Death Benefit Option, which guarantees payment of the Specified Amount (less the Loan Balance and past due charges) upon the death of the last surviving Insured provided that you meet the Guaranteed Minimum Death Benefit Option Premium requirements.
The Contract provides for a value that you can receive by surrendering the Contract.  There is no guaranteed minimum value and there may be no cash surrender value on early surrenders.  If the value is insufficient to cover the charges due under the Contract, the Contract will lapse without value.  It may not be advantageous to replace existing insurance.  Within certain limits, you may return the Contract or exercise a no-fee transfer right.
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the shareholder reports for Funds and Portfolios available under your Contract will no longer be sent by mail, unless you specifically request paper copies of the reports from Kansas City Life. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

You may elect to receive all future reports in paper free of charge. You can inform Kansas City Life that you wish to continue receiving paper copies of your shareholder reports by calling Variable Administration at (800) 616-3670. Your election to receive reports in paper will apply to all Funds and Portfolios available under your Contract.
This Prospectus and the accompanying Fund prospectuses provide important information you should have before deciding to purchase a Contract.  Please keep these for future reference.
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 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 date of this Prospectus is May 1, 2020.


[PAGE INTENTIONALLY LEFT BLANK]
PROSPECTUS CONTENTS
        RANGE OF PORTFOLIO OPERATING EXPENSES  8
          ANNUAL PORTFOLIO OPERATING EXPENSES  8

 



 

SUMMARY OF THE CONTRACT
The Contract is a flexible premium survivorship variable universal life insurance contract.  As long as it remains in force it provides lifetime insurance protection on the death of the second of the two Insureds.  You pay Premiums for insurance coverage.  The Contract also provides for accumulation of net Premiums and a Cash Surrender Value if the Contract terminates.  The Cash Surrender Value, if any, during the early years of the Contract is likely to be much lower than the net Premiums paid.
The death benefit may and the Contract Value will increase or decrease to reflect the investment performance of the Subaccounts to which you allocate net Premiums.  There is no guaranteed minimum value.  You could lose some or all of your money.  However, there is a Guaranteed Minimum Death Benefit Option.  Under this option we guarantee that we will pay the Specified Amount (less any Loan Balance and past due charges) upon the death of the last surviving Insured (regardless of the Contract's investment performance) as long as you have met the Guaranteed Minimum Death Benefit Option Premium requirement.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")  If this option is not in effect and the value is not enough to pay charges due, then the Contract will terminate without value after a Grace Period.  (See "PREMIUMS TO PREVENT LAPSE")  We do guarantee to keep the Contract in force during the first three years of the Contract as long as you meet certain Premium requirements.  (See "GUARANTEED PAYMENT PERIOD AND GUARANTEED MONTHLY PREMIUM")  If a Contract lapses while loans are outstanding, adverse tax consequences may result.  (See "TAX CONSIDERATIONS")  The Contract also permits loans and partial surrenders, within limits.
This summary describes the Contract’s important benefits and risks.  The sections in the Prospectus following this summary discuss the Contract’s benefits and other provisions in more detail.  The "Definitions" section at the end of the Prospectus defines certain words and phrases used in this Prospectus.
The Contract is not available in all states.  This Prospectus does not offer the Contracts in any jurisdiction where they cannot be lawfully sold.  You should rely only on the information contained in this Prospectus or that we have referred you to.  We have not authorized anyone to provide you with information that is different.
We may offer other variable life insurance contracts that have different death benefits, contract features and optional programs.  These contracts would also have different charges that would affect your Subaccount performance and Contract Value.  To obtain more information about these other contracts, contact your registered representative.
NOTE:  Because this is a summary, it does not contain all the information that may be important to you.  You should read this entire Prospectus and the Funds’ prospectuses carefully before investing.
CONTRACT BENEFITS
Death Benefits.  We pay a death benefit to the Beneficiary if the Insured dies while the Contract is in force and prior to the Contract’s Maturity Date.  We pay the death benefit when we receive satisfactory proof at our Home Office of the Insured’s death.
•
Death benefits are available as lump sum or under a variety of payment options.
•
The minimum initial Total Sum Insured is $200,000, which may be made up of a combination of Specified Amount and Additional Insurance Amount.  The Specified Amount must be at least $100,000.  We may allow these minimum limits to be reduced.  (See "APPLYING FOR A CONTRACT")
•
There are three Coverage Options available:

•
Option A–at least equal to the Total Sum Insured on the date of the death of the last surviving Insured;

•
Option B–at least equal to the Total Sum Insured on the date of the death of the last surviving Insured plus Contract Value on the date of such death; and

•
Option L–at least equal to the sum of the Total Sum Insured on the date of the death of the last surviving Insured and an amount equal to the Contract Value on the Contract Anniversary preceding the death of the last surviving Insured multiplied by the applicable Option L death benefit percentage less the Total Sum Insured on that Contract Anniversary.  (See "COVERAGE OPTIONS")
Guaranteed Minimum Death Benefit Option available at issue (restrictions may apply).  If elected, the Guaranteed Minimum Death Benefit Premium requirement must be met to keep the option in effect.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")

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•
There is flexibility to change the Coverage Option and Specified Amount.  (See "CHANGES IN COVERAGE OPTION" for rules and limits)  Changing the Coverage Option or Specified Amount may have tax consequences.
•
We deduct any Loan Balance from the amount payable.
Cash Benefits
•
Contract Loans.  You may take loans for amounts up to the Cash Surrender Value less loan interest to the next Contract Anniversary.  A 6% annual effective interest rate applies.  Currently, a preferred loan is available in the 11th Contract Year.  Loans reduce the amount available for allocations and transfers.  Loans may have tax consequences. (See "TAX CONSIDERATIONS")
•
Full Surrender.  You may surrender your Contract at any time for its Cash Surrender Value.  Surrendering the Contract may have tax consequences.  (See "TAX CONSIDERATIONS")
•
Partial Surrender.  Partial surrenders generally are available provided you have enough remaining Cash Surrender Value.  A partial surrender fee applies.  Partial surrenders may have adverse tax consequences.  (See "TAX CONSIDERATIONS")
•
Transfers.  You may transfer amounts among the Subaccounts and the Fixed Account, subject to certain restrictions.  There is no limit on the number of transfers you can make between the Subaccounts or to the Fixed Account.  The first six transfers during each Contract Year are free.  After the first six transfers, we will assess a $25 transfer processing fee.  Unused free transfers do not carry over to the next Contract Year.  We will deduct any transfer processing fee from the remaining Contract Value.
Tax Benefits.  While guidance is limited for Survivorship Life Contracts, we intend for the Contract to satisfy the definition of life insurance under the Internal Revenue Code.  Assuming the Contract satisfies the definition, the death benefit generally should be excludable from the gross income of its recipient.  Similarly, you should not be deemed to be in constructive receipt of the Contract Value, and therefore should not be taxed on increases in the Contract Value, until you take out a loan or partial surrender, surrender the Contract, or we pay the maturity benefit.  In addition, transfers of Contract Value among the Subaccounts and/or the Fixed Account are not taxable transactions.  (See "TAX CONSIDERATIONS")
Free Look Right to Cancel.  For a limited time, you have the right to cancel your Contract and receive a refund.  (See "FREE LOOK RIGHT TO CANCEL CONTRACT")  During this "free-look" period, we will allocate Premiums to the Federated Government Money Fund II Subaccount for 30 days.  (See "PREMIUM ALLOCATIONS AND CREDITING")  For a limited time after requesting an increase in the Contract's amount of insurance coverage, you may cancel the increase and you may be entitled to a refund of certain charges.
Guaranteed Payment Period and Guaranteed Monthly Premium.  We guarantee to keep the Contract in force during the first three years of the Contract and during the three years following the effective date of an increase in the Specified Amount as long as you meet a Premium requirement.  (See "GUARANTEED PAYMENT PERIOD AND GUARANTEED MONTHLY PREMIUM")  If the value is not enough to pay charges due, the Contract will terminate without value after a Grace Period.  (See "PREMIUMS TO PREVENT LAPSE")
Supplemental Benefits.  The following supplemental and/or rider benefits are available and may be added to your Contract.  We will deduct monthly charges for these benefits and/or riders from your Contract Value as part of the Monthly Deduction.  Each is subject to its own requirements as to eligibility and additional cost.
•
Contract Split Option Rider
•
Joint First to Die Term Life Insurance Rider
•
Joint Survivorship Four-Year Term Life Insurance Rider
All of these riders may not be available in all states.  Additional rules and limits apply to these supplemental and/or rider benefits.  Please ask your registered representative for further information or contact the Home Office.
Illustrations.  We may prepare for use in marketing and other materials tables to illustrate hypothetically how certain values under a Contract change with investment performance over an extended period of time.  Such tables illustrate how Contract Values, Cash Surrender Values and death benefits under a Contract covering an Insured of a given Age would vary over time if Planned Premiums were paid annually and the return on the assets in each of the Funds were an assumed uniform gross annual rate(s).

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Actual returns will fluctuate over time and will be both positive and negative.  The actual values under the Contract could be significantly different from those shown even if actual returns averaged the rates used in the illustrations, but fluctuated over and under those averages throughout the years shown.  Depending on the timing and degree of fluctuation, the actual values could be substantially less than those shown, and may, under certain circumstances, result in the lapse of the Contract unless the Owner pays more than the stated Premium.
Such illustrations show Contract Values based on both current charges and guaranteed charges.
CONTRACT RISKS
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.  In addition, we deduct Contract fees and charges from your Contract Value.  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 you 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 guaranteed minimum annual effective rate of 4%.
Risk of Lapse.  If the Contract Value is not enough to pay the Monthly Deduction when due, the Contract will terminate without value after a Grace Period.  The purpose of the Grace Period is to give you the chance to pay enough Premiums to keep your Contract in force.  If your Contract does lapse you must pay the required amount before the end of the Grace Period.  The Grace Period is 61 days and starts when we send the notice.  Since the value of amounts allocated to the Variable Account will vary according to the investment performance of the Funds, the specific amount of Premiums required to prevent termination will also vary.  A lapse could result in adverse tax consequences.
Tax Risks.  In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Contract must satisfy certain requirements which are set forth in the Internal Revenue Code.  Guidance as to how these requirements are to be applied to Contracts insuring the lives of two or more individuals is limited.  Nevertheless, we believe it is reasonable to conclude that the Contract should satisfy the applicable requirements.  There is necessarily some uncertainty, however, particularly if you pay the full amount of Premiums permitted under the Contract.
Depending on the total amount of Premiums you pay, the Contract may be treated as a modified endowment contract under Federal tax laws.  If a Contract is treated as a modified endowment contract, then surrenders, withdrawals, and loans under the Contract will be taxable as ordinary income to the extent there are earnings in the Contract.  In addition, a 10% penalty tax may be imposed on surrenders, withdrawals, and loans taken before you reach Age 59½.  If the Contract is not a modified endowment contract, then distributions generally will be treated first as a return of basis or investment in the contract and then as taxable income.  Moreover, loans will generally not be treated as distributions although the tax treatment of preferred loans is unclear.  Finally, neither distributions nor loans from a Contract that is not a modified endowment contract are subject to the 10% penalty tax.  (See "TAX CONSIDERATIONS")
You should consult a qualified tax adviser for assistance in all Contract-related tax matters.
Risk of Increase in Current Fees and Expenses.  Certain fees and expenses are currently assessed at less than their maximum levels.  We may increase these current charges in the future up to the guaranteed maximum levels.  If fees and expenses are increased, you may need to increase the amount and/or frequency of Premiums to keep the Contract in force.
Surrender and Partial Surrender Risks.  During the first ten Contract Years, we will deduct a surrender charge from the Contract Value if the Contract is completely surrendered or lapses.  Under some circumstances, the amount of the surrender charge during the first few Contract Years could result in a Cash Surrender Value of zero.
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 "TAX CONSIDERATIONS")
Loan Risks.  A Contract loan will affect your Contract in several ways over time, whether or not it is repaid, because the investment results of the Subaccounts may be less than (or greater than) the net interest rate credited on the amount transferred to the Loan Account securing the loan.

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Your Contract Value, by comparison to a Contract under which no loan has been made, will be less if the Fixed Account interest rate is less than the investment return of the applicable Subaccounts (and greater if the Fixed Account interest rate is higher than the investment return of the applicable Subaccounts).
A Contract loan increases the risk that the Contract will terminate, since a loan decreases the Cash Surrender Value.
If the death benefit becomes payable while a Contract loan is outstanding, the Loan Balance will be deducted in calculating the Death Proceeds.
A loan may have tax consequences.  In addition, if you surrender the Contract or allow it to lapse while a Contract loan is outstanding, the amount of the loan, to the extent it has not previously been taxed, will be added to any amount you receive and taxed accordingly.
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 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.
PORTFOLIO RISKS
A comprehensive discussion of the risks of each Fund Portfolio may be found in each Portfolio’s prospectus.  Please refer to the Portfolios’ prospectuses for more information.
There is no assurance that any Portfolio will achieve its stated investment objective.

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FEE TABLE
The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Contract.
The first table describes transaction fees that you will pay at the time that you pay Premiums, make partial surrenders, transfer Contract account value among the Subaccounts and the Fixed Account, completely surrender the Contract, or the Contract lapses.  If the amount of a charge depends on the personal characteristics of the Insured under the Contract, the fee table lists the minimum and maximum charges we assess under the Contract and the fees and charges of a representative Contract with an Insured having the characteristics described for that charge.  These minimum, maximum and representative charges may assist you in understanding the range of possible charges, as well as the charge an Owner may typically pay, but these charges may not be representative of the amount you will actually pay under the Contract.
Transaction Fees
Charge
When Charge is Deducted
Amount Deducted
Guaranteed Charge1
Current Charge1
Premium Expense Charges
      
Premium Tax Charge
Upon receipt of each Premium payment
2.25% of each Premium Payment
2.25% of each Premium Payment
Sale Charge
Upon receipt of each Premium payment
6.00% of each Premium Payment
6.00% of each Premium Payment
Surrender Charge2
      
Minimum and Maximum Charge
Upon complete surrender or lapse during the first 10 Contract Years
$0.00- $50.00 per thousand of the Specified Amount at issue
$0.00- $50.00 per thousand of the Specified Amount at issue
Charge for a 45 year-old male Preferred Non-Tobacco and a 45 year-old female Preferred Non-Tobacco with a $590,000 Specified Amount during the first Contract Year
Upon complete surrender or lapse during the first 10 Contract Years
$7.84 per $1,000 of the Specified Amount at issue
$7.84 per $1,000 of the Specified Amount at issue
Partial Surrender Fee
Upon each partial surrender
The lesser of 2% of the amount surrendered or $25
The lesser of 2% of the amount surrendered or $25
Transfer Processing Fee
Upon each transfer over 6 in a Contract Year
$25 per transfer
$25 per transfer

1 For each type of charge, the guaranteed charge and the current charge are shown. The guaranteed charge is the maximum amount permitted by the Contract while the current charge is the amount currently charged.
2 The surrender charge is based on the Specified Amount when the Contract is issued and varies depending on the Insured’s Age and sex. The surrender charge as shown in the table may not be typical of the charges you will pay.  Information about the surrender charge you could pay is available from your registered representative.  In Appendix A, we list the surrender charge percentages of the initial surrender charge factor.

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The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including Portfolio fees and expenses.  If the amount of a charge depends on the personal characteristics of the Insured under the Contract, the fee table lists the minimum and maximum charges we assess under the Contract depending on whether the Insured had the most favorable or least favorable characteristics, respectively.  The table also lists the fees and charges of a typical Contract with a Specified Amount and with an Insured having the characteristics described for that charge.  These charges may not be typical of the charges you will pay.
Periodic Charges Other Than Portfolio Operating Expenses
Charge
When Charge is Deducted
Amount Deducted
Guaranteed Charge1
Current Charge1
Cost of Insurance3
      
Minimum and Maximum Charge
On the Allocation Date and each Monthly Anniversary Day
$0.00 - $1,000 per $1,000 of net amount at risk4 annually
$0.00 - $358.81 per $1,000 of net amount at risk4 annually
Charge for a 45 year-old male Preferred Non-Tobacco and a 45 year-old female Preferred Non-Tobacco with a $590,000 Specified Amount during the first Contract Year
On the Allocation Date and each Monthly Anniversary Day
$0.01 per $1,000 of net amount at risk4 annually
$0.01 per $1,000 of net amount at risk4 annually
Monthly Expense Charge5
      
Monthly Charge
On the Allocation Date and on each Monthly Anniversary Day
$7.50
$7.50
 
Monthly Per Thousand of Specified Amount
On the Allocation Date and on each Monthly Anniversary Day for the first 10 Contract Years
$0.35 per $1,000 of the Specified Amount
See table below6
Mortality and Expense Risk Charge
Daily
Annual rate of 0.625% of the average daily net assets of each Subaccount you are invested in
Annual rate of 0.625% of the average daily net assets of each Subaccount you are invested in
Net Loan Interest Charge7
At the end of each Contract Year
2%
2%
Optional Rider Charges8
      
Guaranteed Minimum Death Benefit Option
During the first 10 Contract Years
No Charge
No Charge
 
On each Monthly Anniversary Day after the first 10 Contract Years
$0.03 per $1,000 of Specified Amount
$0.01 per $1,000 of Specified Amount
Contract Split Option Rider
On rider’s effective date and on each Monthly Anniversary Day
$0.03 per $1,000 of rider coverage amount
$0.03 per $1,000 of rider coverage amount
Joint First to Die Term Life Insurance Rider
      
Minimum and Maximum Charge
On rider’s effective date and on each Monthly Anniversary Day
$0.06 - $83.33 per $1,000 of rider coverage amount
$0.04 - $56.07 per $1,000 of rider coverage amount
Charge for a 45 year-old male Preferred Non-Tobacco and a 45 year-old female Preferred Non-Tobacco with a $590,000 Specified Amount during the first Contract Year
On rider’s effective date and on each Monthly Anniversary Day
$0.29 per $1,000 of rider coverage amount for a male, $0.26 per $1,000 of rider coverage amount for a female
$0.15 per $1,000 of rider coverage amount for a male, $0.11 per $1,000 of rider coverage amount for a female


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Periodic Charges Other Than Portfolio Operating Expenses
Charge
When Charge is Deducted
Amount Deducted
Guaranteed Charge1
Current Charge1
Joint Survivorship Four-Year Term Life Insurance Rider
      
Minimum and Maximum Charge
On rider’s effective date and on each Monthly Anniversary Day
 
$0.00 - $1,000 per $1,000 of rider coverage amount annually
$0.00 - $589.59 per $1,000 of rider coverage amount annually
Charge for a 45 year-old male Preferred Non-Tobacco and a 45 year-old female Preferred Non-Tobacco with a $590,000 Specified Amount during the first Contract Year
On rider’s effective date and on each Monthly Anniversary Day
$0.10 per $1,000 of rider coverage amount annually
$0.08 per $1,000 of rider coverage amount annually

3 Cost of insurance charges vary based on the Insured’s Age, sex, number of completed Contract Years, Total Sum Insured, risk class, and other factors.  The charge generally increases as the Insureds Age.  The cost of insurance charges shown in the table may not be typical of the charges you will pay. We guarantee that the cost of insurance rates will not exceed the maximum cost of insurance rates set forth in your Contract.  More detailed information concerning your cost of insurance charges is available on request from our Home Office.
4 The net amount at risk on a Monthly Anniversary is the difference between the death benefit and the Contract Value.
5 The Monthly Expense Charge is the sum of the Monthly Charge and the Monthly Per Thousand of the Specified Amount Charge.
6 The Monthly Per Thousand of Specified Amount Charge is based on the issue age of the youngest Insured and is only assessed in Contract Years 1-10.

Contract Years 1-10
Youngest Insured Issue Age
Monthly Per Thousand of Specified Amount
20-29
$0.07
30-39
$0.09
40-49
$0.14
50-59
$0.18
60-69
$0.28
70+
$0.35


7 The maximum guaranteed net cost of loans is 2% annually.  The net cost of a loan is the difference between the rate of interest charged on any Loan Balance (6%) and the amount credited to the Loan Account (4%). Preferred loans are available beginning in the eleventh Contract Year.  We credit the amount in the Loan Account securing a preferred loan with interest at an effective annual rate of 6%.  Therefore, the net cost of a preferred loan is 0% per year.
8 Charges for most of the riders vary based on individual characteristics such as the Insureds’ issue or actual Age, sex, and risk class, and may vary based on Contract year and base Total Sum Insured or net amount at risk.  Charges based on actual Age may increase as the Insureds’ age.  The rider charges shown in the table may not be typical of the charges you will pay.  Your Contract’s specifications page will indicate the rider charges applicable to your Contract, and more detailed information concerning these rider charges is available on request from our Home Office.

For information concerning compensation paid in connection with the sale of the Contracts, see "SALE OF THE CONTRACTS."

Page 7
The next table shows the lowest and highest total operating expenses deducted from Portfolio assets during the fiscal year ended December 31, 2019.  Expenses of the Portfolios may be higher or lower in the future.  More detail concerning each Portfolio’s fees and expenses is contained in the prospectus for each Portfolio.
RANGE OF PORTFOLIO OPERATING EXPENSES9
 
Minimum
  
Maximum
Total Annual Portfolio Operating Expenses (total of all expenses that are deducted from Portfolio assets, including management fees, distribution or service fees (12b-1 fees), and other expenses-before any contractual waiver of fees and expenses)
0.27%
  
1.42%10

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, 2019.  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.
10 The table showing the range of expenses of the Portfolios takes into account the expenses of several fund asset allocation portfolios that are “fund of funds.”  A “fund of funds” portfolio typically allocates its assets, within predetermined percentage ranges, among certain other fund portfolios (each such portfolio an “acquired fund.”)  Each “fund of funds” has its own set of operating expenses, as does each of the portfolios in which it invests.  In determining the range of portfolio expenses, Kansas City Life took into account the information received from the Fund on the combined actual expenses for each of the “fund of funds” and the portfolios in which it invests.  See the Fund prospectuses for more information

The following table shows the fees and expenses charged (after contractual waiver or reimbursement) by each Portfolio for the fiscal year ended December 31, 2019.
ANNUAL PORTFOLIO OPERATING EXPENSES11
(expenses that are deducted from Portfolio assets, as a percentage of net assets of the Portfolio):
Portfolio
Management Fees
12b-1/ Service Fees
Other Expenses
Acquired Fund Fees and Expenses
Total Portfolio Annual Operating Expenses
Contractual Fee Waiver or Expense Reimbursement
Total Portfolio Annual Operating Expenses After Reimbursement
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
              
Invesco V.I. American Franchise Fund – Series I Shares
0.68%
NA
0.19%
NA
0.87%
NA
NA
Invesco V.I. Core Equity Fund – Series I Shares
0.61%
NA
0.17%
NA
0.78%
NA
N/A
Invesco V.I. Technology Fund – Series I Shares
0.75%
NA
0.24%
NA
0.99%
NA
NA
American Century Variable Portfolios, Inc.
              
VP Capital Appreciation Fund – Class I
1.00%
NA
0.00%
NA
1.00%
0.13%
0.87%
VP Income & Growth Fund – Class I
0.70%
NA
0.00%
NA
0.70%
NA
NA
VP International Fund – Class I
1.36%
NA
0.01%
NA
1.37%
0.37%
1.00%
VP Mid Cap Value Fund –
Class I
1.00%
NA
0.01%
NA
1.01%
0.14%
0.87%
VP Ultra® Fund – Class I
1.00%
NA
0.01%
NA
1.01%
0.20%
0.81%
VP Value Fund – Class I
0.97%
NA
0.01%
NA
0.98%
0.22%
0.76%
American Century Variable Portfolios II, Inc.
              
VP Inflation Protection Fund – Class II
0.46%
0.25%
0.01%
NA
0.72%
NA
NA
American Funds Insurance Series®
              
Asset Allocation Fund – Class 2 Shares
0.27%
0.25%
0.04%
NA
0.56%
NA
NA


Page 8

Portfolio
Management Fees
12b-1/ Service Fees
Other Expenses
Acquired Fund Fees and Expenses
Total Portfolio Annual Operating Expenses
Contractual Fee Waiver or Expense Reimbursement
Total Portfolio Annual Operating Expenses After Reimbursement
Capital Income Builder® – Class 2 Shares
0.49%
0.25%
0.05%
NA
0.79%
0.26%12
0.53%
Capital World Bond Fund – Class 2 Shares (formerly Global Bond Fund – Class 2 Shares)
0.53%
0.25%
0.06%
NA
0.84%
0.10%4
0.74%
Global Growth Fund – Class 2 Shares
0.52%
0.25%
0.05%
NA
0.82%
NA
NA
Growth-Income Fund – Class 2 Shares
0.26%
0.25%
0.04%
NA
0.55%
NA
NA
New World Fund® – Class 2 Shares
0.70%
0.25%
0.07%
NA
1.02%
0.18%4
0.84%
American Funds Insurance Series® Managed Risk Funds
              
Managed Risk Asset Allocation Fund – Class P2 Shares
0.15%
0.25%
0.26%
0.30%13
0.96%
0.05%14
0.91%
Managed Risk Blue Chip Income and Growth Fund – Class P2 Shares
0.15%
0.25%
0.28%
0.41%5
1.09%
0.05%6
1.04%
Managed Risk Growth Fund – Class P2 Shares
0.15%
0.25%
0.28%
0.36%5
1.04%
0.05%6
0.99%
Managed Risk Growth-Income Fund – Class P2 Shares
0.15%
0.25%
0.27%
0.31%5
0.98%
0.05%6
0.93%
Managed Risk International Fund – Class P2 Shares – Class P2 Shares
0.15%
0.25%
0.31%
0.51%5
1.22%
0.08%4
1.14%
BNY Mellon Variable Investment Fund (formerly Dreyfus Variable Investment Fund)
              
Appreciation Portfolio – Initial Shares
0.75%
NA
0.06%
NA
0.81%
NA
NA
Opportunistic Small Cap Portfolio – Initial Shares
0.75%
NA
0.09%
NA
0.84%
NA
NA
BNY Mellon Stock Index Fund, Inc. – Initial Shares (formerly Dreyfus Stock Index Fund, Inc – Initial Shares)
0.25%
NA
0.02%
NA
0.27%
NA
NA
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. – Initial Shares (formerly Dreyfus Sustainable U.S. Equity Portfolio, Inc – Initial Shares)
0.60%
NA
0.08%
NA
0.68%
0.00%
0.68%15
Calamos® Advisors Trust
              
Calamos Growth and Income Portfolio
0.75%
NA
0.60%
0.01%16
1.36%
NA
NA


Page 9

Portfolio
Management Fees
12b-1/ Service Fees
Other Expenses
Acquired Fund Fees and Expenses
Total Portfolio Annual Operating Expenses
Contractual Fee Waiver or Expense Reimbursement
Total Portfolio Annual Operating Expenses After Reimbursement
Columbia Funds Variable Series Trust II
              
Columbia Variable Portfolio – Mid Cap Growth Fund (Class 2)
0.82%
0.25%
0.06%
NA
1.13%
0.09%17
1.04%
Columbia Variable Portfolio – Seligman Global Technology Fund (Class 2)
0.92%
0.25%
0.25%18
NA
1.42%
0.18%19
1.24%
Columbia Variable Portfolio – Select Small Cap Value Fund (Class 2)
0.87%
0.25%
0.18%
NA
1.30%
0.20%20
1.10%
Federated Hermes Insurance Series (formerly Federated Insurance Series)
              
Federated Hermes Managed Volatility Fund II – P (formerly Federated Managed Volatility Fund II – P)
0.75%
NA
0.17%21
0.05%
0.97%
0.00%22
0.97%
Federated Hermes High Income Bond Fund II – P (formerly Federated High Income Bond Fund II – P)
0.60%
NA
0.23%23
NA
0.83%
0.02%24
0.81%
Federated Hermes Government Money Fund II – S (formerly Federated Government Money FundI – S)
0.20%
NA
0.52%25
NA
0.72%
0.09%26
0.63%
Fidelity® Variable Insurance Products
              
VIP ContrafundSM Portfolio – Service Class 2
0.54%
0.25%
0.07%
NA
0.86%
NA
NA
VIP Freedom Income PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.39%
0.64%27
NA
NA
VIP Freedom 2010 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.45%
0.70%19
NA
NA
VIP Freedom 2015 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.49%
0.74%19
NA
NA
VIP Freedom 2020 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.52%
0.77%19
NA
NA
VIP Freedom 2025 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.54%
0.79%19
NA
NA
VIP Freedom 2030 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.59%
0.84%19
NA
NA
VIP Freedom 2035 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.63%
0.88%19
NA
NA
VIP Freedom 2040 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.65%
0.90%19
NA
NA
VIP Freedom 2045 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.66%
0.91%19
NA
NA
VIP Freedom 2050 PortfolioSM – Service Class 2
NA
0.25%
0.00%
0.66%
0.91%19
NA
NA


Page 10

Portfolio
Management Fees
12b-1/ Service Fees
Other Expenses
Acquired Fund Fees and Expenses
Total Portfolio Annual Operating Expenses
Contractual Fee Waiver or Expense Reimbursement
Total Portfolio Annual Operating Expenses After Reimbursement
Franklin Templeton Variable Insurance Products Trust
              
Franklin Global Real Estate VIP Fund – Class 228
1.05%
0.25%
0.09%
NA
1.39%
0.14%
1.25%
Franklin Small-Mid Cap Growth VIP Fund – Class 229
0.80%
0.25%
0.04%
0.01%
1.10%
0.01%
1.09%
Templeton Developing Markets VIP Fund – Class 2
1.05%
0.25%
0.10%
0.01%
1.41%
NA
NA
Templeton Foreign VIP Fund – Class 221
0.80%
0.25%
0.05%
0.02%
1.12%
0.02%
1.10%
JPMorgan Insurance Trust
              
JPMorgan Insurance Trust Mid Cap Value Portfolio – Class 1 Shares
0.65%
NA
0.12%
0.00%
0.77%
NA30
0.77%22
JPMorgan Insurance Trust Small Cap Core Portfolio – Class 1 Shares
0.65%
NA
0.19%
0.01%
0.85%
0.01%31
0.84%23
JPMorgan Insurance Trust U.S. Equity Portfolio – Class 1 Shares
0.55%
NA
0.24%
0.00%
0.79%
NA24
0.79%32
MFS® Variable Insurance Trust
              
MFS® Growth Series – Initial Class Shares
0.71%
NA
0.04%
NA
0.75%
NA
NA
MFS® Research Series – Initial Class Shares
0.75%
NA
0.08%
NA
0.83%
0.03%33
0.80%
MFS® Total Return Bond Series – Initial Class Shares
0.50%
NA
0.04%
NA
0.54%
NA
NA
MFS® Total Return Series – Initial Class Shares
0.67%
NA
0.03%
NA
0.70%
0.09%34
0.61%
MFS® Utilities Series – Initial Class Shares
0.74%
NA
0.05%
NA
0.79%
NA
NA
MFS® Variable Insurance Trust II
              
MFS® Strategic Income Portfolio – Initial Class Shares
0.50%
NA
0.36%
NA
0.86%
0.10%35
0.76%
Northern Lights Variable Trust
              
TOPS® Managed Risk Balanced ETF Portfolio – Class 2 Shares
0.30%
0.25%
0.10%
0.11%
0.76%
NA
NA
TOPS® Managed Risk Growth ETF Portfolio – Class 2 Shares
0.30%
0.25%
0.10%
0.10%
0.75%
NA
NA
TOPS® Managed Risk Moderate Growth ETF Portfolio – Class 2 Shares
0.30%
0.25%
0.10%
0.11%
0.76%
NA
NA


11 These expenses are deducted directly from the assets of the Portfolios and therefore reduce their net asset value.  The investment adviser of each Fund or the Fund provided the information, and Kansas City Life has not independently verified it.  The expenses shown are those incurred for the year ended December 31, 2019.  Current or future expenses may be greater or less than those shown.  See the Portfolios' prospectuses for more complete information.
12 The investment adviser is currently reimbursing a portion of the other expenses. This waiver will be in effect through at least May 1, 2021.  The waiver may only be modified or terminated with the approval of the fund's board.
13 Restated to reflect current fees
14 The investment adviser is currently waiving a portion of its management fee equal to .05% of the fund's net assets.  This waiver will be in effect through at least May 1, 2021.  The waiver may only be modified or terminated with the approval of the fund's board.
15 The fund's investment adviser, BNY Mellon Investment Adviser, Inc., has contractually agreed, until May 1, 2020, to waive receipt of its fees and/or assume the direct expenses of the fund so that the expenses of neither class (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .70%. On or after May 1, 2020, BNY Mellon Investment Adviser, Inc. may terminate this expense limitation at any time.

Page 11

16 “Acquired Fund Fees and Expenses” include certain expenses incurred in connection with the Portfolio’s investment in various money market funds.
17 Columbia Management Investment Advisers, LLC and certain of its affiliates have contractually agreed to waive fees and/or to reimburse expenses (excluding transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) through April 30, 2021, unless sooner terminated at the sole discretion of the Fund’s Board of Trustees. Under this agreement, the Fund’s net operating expenses, subject to applicable exclusions, will not exceed the annual rates of 0.79% for Class 1, 1.04% for Class 2 and 0.915% for Class 3.
18 Other expenses have been restated to reflect current fees paid by the Fund.
19 Columbia Management Investment Advisers, LLC and certain of its affiliates have contractually agreed to waive fees and/or to reimburse expenses (excluding transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) through April 30, 2021, unless sooner terminated at the sole discretion of the Fund’s Board of Trustees. Under this agreement, the Fund’s net operating expenses, subject to applicable exclusions, will not exceed the annual rates of 0.99% for Class 1 and 1.24% for Class 2.
20 Columbia Management Investment Advisers, LLC and certain of its affiliates have contractually agreed to waive fees and/or to reimburse expenses (excluding transaction costs and certain other investment related expenses, interest, taxes, acquired fund fees and expenses, and infrequent and/or unusual expenses) through April 30, 2021, unless sooner terminated at the sole discretion of the Fund’s Board of Trustees. Under this agreement, the Fund’s net operating expenses, subject to applicable exclusions, will not exceed the annual rates of 0.85% for Class 1, 1.10% for Class 2 and 0.975% for Class 3.
21 The Fund may incur or charge administrative service fees on its P class up to a maximum amount of 0.25%. No such fees are currently incurred or charged by the P class Fund. The P class of the Fund will not incur or charge such fees until such time as approved by the Fund’s Board of Trustees (the “Trustees”).
22 The Co-Advisers and certain of their affiliates, on their own initiative, have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (excluding Acquired Fund Fees and Expenses, interest expense, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund’s P class (after the voluntary waivers and/or reimbursements) will not exceed 0.95% (the “Fee Limit”) up to but not including the later of (the “Termination Date”): (a) May 1, 2021; or (b) the date of the Fund’s next effective Prospectus. While the Co-Advisers and their affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
23 The Fund may incur or charge administrative service fees on its P class up to a maximum amount of 0.25%. No such fees are currently incurred or charged by the P class of the Fund. The P class of the Fund will not incur or charge such fees until such time as approved by the Board of Trustees.
24 The Adviser and certain of its affiliates, on their own initiative, have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (excluding acquired fund fees and expenses, interest expense, extraordinary expenses, and proxy-related expenses paid by the Fund, if any) paid by the Fund’s P class (after the voluntary waivers and/or reimbursements) will not exceed 0.81% (the “Fee Limit”) up to but not including the later of (the “Termination Date”): (a) May 1, 2021; or (b) the date of the Fund’s next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
25 The Fund may pay Administrative Service Fees up to 0.25% of average net assets to insurance companies for providing recordkeeping, shareholder and administrative services.
26 The Adviser and certain of its affiliates, on their own initiative, have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (excluding acquired fund fees and expenses, interest expense, extraordinary expenses, and proxy-related expenses paid by the Fund, if any) paid by the Fund’s S class (after the voluntary waivers and/or reimbursements) will not exceed 0.63% (the “Fee Limit”) up to but not including the later of (the “Termination Date”): (a) May 1, 2021; or (b) the date of the Fund’s next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
27 Differs from the ratios of expenses to average net assets in the Financial Highlights section of the Prospectus because of acquired fund fees and expenses.
28 The investment manager has contractually agreed to waive or assume certain expenses so that common expenses (excluding Rule 12b-1 fees, acquired fund fees and expenses, and certain non-routine expenses) do not exceed 1.00% until April 30, 2021.
29 The investment manager has contractually agreed in advance to reduce its fees as a result of the fund's investment in a Franklin Templeton money market fund (the "acquired fund") until April 30, 2021.
30 The Portfolio’s adviser and/or its affiliates have contractually agreed to waive fees and/or reimburse expenses to the extent Total
Annual Fund Operating Expenses (excluding Acquired Fund Fees and Expenses other than certain money market fund fees as described below, dividend and interest expenses related to short sales, interest, taxes, expenses related to litigation and potential litigation, expenses related to trustee elections, and extraordinary expenses) exceed 0.90% of the average daily net assets of Class 1 Shares. The Portfolio may invest in one or more money market funds advised by the adviser or its affiliates (affiliated money market funds). The Portfolio's adviser, shareholder servicing agent and/or administrator have contractually agreed to waive fees and/or reimburse expenses in an amount sufficient to offset the respective net fees each collects from the affiliated money market funds on the Fund’s investment in such money market funds. These waivers are in effect through 4/30/21, at which time it will be determined whether such waivers will be renewed or revised. To the extent that the Portfolio engages in securities lending, affiliated money market fund fees and expenses resulting from the Portfolio’s investment of cash received from securities lending borrowers are not included in Total Annual Fund Operating Expenses and therefore, the above waivers do not apply to such investments.
31 The Portfolio’s adviser and/or its affiliates have contractually agreed to waive fees and/or reimburse expenses to the extent Total

Page 12

Annual Fund Operating Expenses (excluding Acquired Fund Fees and Expenses other than certain money market fund fees as described below, dividend and interest expenses related to short sales, interest, taxes, expenses related to litigation and potential litigation, expenses related to trustee elections, and extraordinary expenses) exceed 1.03% of the average daily net assets of Class 1 Shares. The Portfolio may invest in one or more money market funds advised by the adviser or its affiliates (affiliated money market funds). The Portfolio's adviser, shareholder servicing agent and/or administrator have contractually agreed to waive fees and/or reimburse expenses in an amount sufficient to offset the respective net fees each collects from the affiliated money market funds on the Fund’s investment in such money market funds. These waivers are in effect through 4/30/21, at which time it will be determined whether such waivers will be renewed or revised. To the extent that the Portfolio engages in securities lending, affiliated money market fund fees and expenses resulting from the Portfolio’s investment of cash received from securities lending borrowers are not included in Total Annual Fund Operating Expenses and therefore, the above waivers do not apply to such investments.
32 The Portfolio’s adviser and/or its affiliates have contractually agreed to waive fees and/or reimburse expenses to the extent Total
Annual Fund Operating Expenses (excluding Acquired Fund Fees and Expenses other than certain money market fund fees as described below, dividend and interest expenses related to short sales, interest, taxes, expenses related to litigation and potential litigation, expenses related to trustee elections, and extraordinary expenses) exceed 0.80% of the average daily net assets of Class 1 Shares. The Portfolio may invest in one or more money market funds advised by the adviser or its affiliates (affiliated money market funds). The Portfolio's adviser, shareholder servicing agent and/or administrator have contractually agreed to waive fees and/or reimburse expenses in an amount sufficient to offset the respective net fees each collects from the affiliated money market funds on the Fund’s investment in such money market funds. These waivers are in effect through 4/30/21, at which time it will be determined whether such waivers will be renewed or revised. To the extent that the Portfolio engages in securities lending, affiliated money market fund fees and expenses resulting from the Portfolio’s investment of cash received from securities lending borrowers are not included in Total Annual Fund Operating Expenses and therefore, the above waivers do not apply to such investments.
33 Massachusetts Financial Services Company has agreed in writing to bear the fund's expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses (such as interest and borrowing expenses incurred in connection with the fund's investment activity), such that "Total Annual Fund Operating Expenses" do not exceed 0.77% of the class' average daily net assets annually for Initial Class shares and 1.02% of the class' average daily net assets annually for Service Class shares. ("Other Expenses" include 0.03% of interest and/or investment-related expenses incurred in connection with the fund's investment activity which are excluded from the expense limitation described in the prior sentence.) This written agreement will continue until modified by the fund's Board of Trustees, but such agreement will continue until at least April 30, 2021.
34 Massachusetts Financial Services Company has agreed in writing to bear the fund’s expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses (such as interest and borrowing expenses incurred in connection with the fund's investment activity), such that “Total Annual Fund Operating Expenses” do not exceed 0.61% of the class' average daily net assets annually for Initial Class shares and 0.86% of the class' average daily net assets annually for Service Class shares. This written agreement will continue until modified by the fund’s Board of Trustees, but such agreement will continue until at least April 30, 2021.
35 Massachusetts Financial Services Company has agreed in writing to bear the fund’s expenses, excluding interest, taxes, extraordinary expenses, brokerage and transaction costs, and investment-related expenses (such as interest and borrowing expenses incurred in connection with the fund's investment activity), such that “Total Annual Fund Operating Expenses” do not exceed 0.75% of the class' average daily net assets annually for Initial Class shares and 1.00% of the class' average daily net assets annually for Service Class shares. ("Other Expenses" include 0.01% of interest and/or investment-related expenses incurred in connection with the fund's investment activity which are excluded from the expense limitation described in the prior sentence.) This written agreement will continue until modified by the fund's Board of Trustees, but such agreement will continue until at least April 30, 2021.
GENERAL INFORMATION ABOUT KANSAS CITY LIFE
KANSAS CITY LIFE INSURANCE COMPANY
Kansas City Life Insurance Company is a stock life insurance company organized under the laws of the State of Missouri in 1895, and is located at 3520 Broadway, Kansas City, Missouri 64111-2565.  Kansas City Life is currently licensed to transact life insurance business in 49 states and the District of Columbia.
FIXED ACCOUNT
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 may still apply.
You may allocate some or all of your 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 "TRANSFER PRIVILEGE")  Because of those transfer limitations, 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

Page 13
criteria.  The Fixed Account is part of our general account and pays interest at declared rates guaranteed for each calendar year.  We guarantee that this rate will be at least 4%.
Our general account supports our insurance and annuity obligations.  Because 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 VARIABLE ACCOUNT AND THE FUNDS
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
We established the Kansas City Life Variable Life Separate Account as a separate investment account under Missouri law on April 24, 1995.  This Variable Account supports the Contracts and may be used to support other variable life insurance contracts as well as for other purposes 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 Contracts invest in shares of Portfolios of the Funds.  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 a diversified 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 investment objectives of each of the Portfolios are described below.
The investment objectives and policies of certain Portfolios are similar to the investment objectives and policies of other mutual fund portfolios that may be managed by the same investment adviser or manager.  The investment results of the Portfolios, however, may be higher or lower than the results of such other portfolios.  There can be no assurance that the investment results of any of the Portfolios will be comparable to the investment results of any other portfolios, even if the other portfolio has the same investment adviser or manager.
Certain Portfolios may employ hedging strategies to provide for downside protection during a sharp decline in the equity markets.  The cost of those hedging strategies could limit the upside participation by such Portfolios in rising equity markets relative to other Portfolios.  Please consult your financial professional.
The American Century VP Mid Cap Value Fund Subaccount was closed to new investors beginning May 1, 2015. You may continue to allocate premium payments and transfer amounts from the other Subaccounts and the Fixed Account to the American Century VP Mid Cap Value Fund Subaccount only if you were invested in the Subaccount on May 1, 2015 and have not subsequently transferred all Contract Value out of the Subaccount.
Not all Funds may be available in all states.
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
Invesco V.I. American Franchise Fund – Series I Shares (Manager: Invesco Advisers, Inc. ("Invesco")).  The Fund’s investment objective is to seek capital growth.  The Fund invests, under normal circumstances, at least 80% of its net assets (plus any borrowings for investment purposes) in securities of U.S. issuers.
Invesco V.I. Core Equity Fund – Series I Shares (Manager: Invesco Advisers, Inc. ("Invesco")).  The Fund’s investment objective is long-term growth of capital.  The portfolio management team seeks to construct a portfolio of issuers that have high or improving return on invested capital (ROIC), quality management, a strong competitive position and which are trading at compelling valuations.  The Fund invests, under normal circumstances, at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities and in derivatives and other instruments that have economic characteristics similar to such securities.

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Invesco V.I. Technology Fund – Series I Shares (Manager: Invesco Advisers, Inc. ("Invesco")).  The Fund’s investment objective is long-term growth of capital.  The Fund invests, under normal circumstances, at least 80% of its net assets (plus any borrowings for investment purposes) in securities of issuers engaged in technology-related industries and in derivatives and other instruments that have economic characteristics similar to such securities.
American Century Variable Portfolios, Inc.
VP Capital Appreciation Fund – Class I (Manager: American Century Investment Management, Inc.).  The investment objective of American Century VP Capital Appreciation Fund is to seek capital growth.
VP Income & Growth Fund – Class I (Manager: American Century Investment Management, Inc.).  The investment objective of American Century VP Income & Growth Fund is to seek capital growth by investing in common stocks.  Income is a secondary objective.
VP International Fund – Class I (Manager: American Century Investment Management, Inc.).  The investment objective of American Century VP International Fund is to seek capital growth.
VP Mid Cap Value Fund – Class I (Manager: American Century Investment Management, Inc.).  The investment objective of American Century VP Mid Cap Value Fund is to seek long-term capital growth, with income as secondary objective.
VP Ultra® Fund – Class I (Manager: American Century Investment Management, Inc.).  The investment objective of American Century VP Ultra® Fund is to seek long-term capital growth.
VP Value Fund – Class I (Manager: American Century Investment Management, Inc.).  The investment objective of American Century VP Value Fund is to seek long-term capital growth, with income as secondary objective.
American Century Variable Portfolios II, Inc.
VP Inflation Protection Fund – Class II (Manager: American Century Investment Management, Inc.).  The investment objective of American Century VP Inflation Protection Fund is to pursue long-term total return using a strategy that seeks to protect against U.S. inflation.
American Funds Insurance Series®
Asset Allocation Fund – Class 2 Shares (Manager: Capital Research and Management CompanySM). The Fund’s investment objective is to provide high total return (including income and capital gains) consistent with preservation of capital over the long term.
Capital Income Builder® – Class 2 Shares (Manager: Capital Research and Management CompanySM). The Fund has two primary investment objectives. It seeks (1) to provide a level of current income that exceeds the average yield on U.S. stocks generally and (2) to provide a growing stream of income over the years. The Fund’s secondary objective is to provide growth of capital.
Capital World Bond Fund – Class 2 Shares (formerly Global Bond Fund – Class 2 Shares) (Manager: Capital Research and Management CompanySM). The Fund’s investment objective is to provide, over the long term, a high level of total return consistent with prudent investment management. Total return comprises the income generated by the fund and the changes in the market value of the fund’s investments.
Global Growth Fund – Class 2 Shares (Manager: Capital Research and Management CompanySM). The Fund’s investment objective is to provide long-term growth of capital.
Growth-Income Fund – Class 2 Shares (Manager: Capital Research and Management CompanySM). The Fund’s investment objectives are to achieve long-term growth of capital and income.
New World Fund® – Class 2 Shares (Manager: Capital Research and Management CompanySM). The Fund’s investment objective is long-term capital appreciation.
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). The Fund’s investment objective is to 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.

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Managed Risk Blue Chip Income and Growth Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC). The Fund’s investment objectives are to produce income exceeding the average yield on U.S. stocks generally 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.
Managed Risk Growth Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC). The Fund’s investment objective is to provide growth of capital while seeking to manage volatility and provide downside protection.
Managed Risk Growth-Income Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC). The Fund’s investment objectives are to achieve long-term growth of capital and income while seeking to manage volatility and provide downside protection.
Managed Risk International Fund – Class P2 Shares (Manager: Capital Research and Management CompanySM; Subadvisor: Milliman Financial Risk Management LLC). The Fund’s investment objective is to provide long-term growth of capital while seeking to manage volatility and provide downside protection.
BNY Mellon Variable Investment Fund (formerly Dreyfus Variable Investment Fund)
Appreciation Portfolio – Initial Shares (Manager: BNY Mellon Investment Adviser, Inc.; Sub-Investment Advisor: Fayez Sarofim & Co.).  The Fund seeks long-term capital growth consistent with the preservation of capital. Its secondary goal is current income.
Opportunistic Small Cap Portfolio – Initial Shares (Manager: BNY Mellon Investment Adviser, Inc.).  The Fund seeks capital growth.
BNY Mellon Stock Index Fund, Inc. – Initial Shares (formerly Dreyfus Stock Index Fund, Inc – Initial Shares) (Manager: BNY Mellon Investment Adviser, Inc.).  The Fund seeks to match the total return of the S&P 500® Index.
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. – Initial Shares (formerly Dreyfus Sustainable U.S. Equity Portfolio, Inc – Initial Shares) (Manager: BNY Mellon Investment Adviser, Inc.; Sub-Investment Advisor: Newton Investment Management Limited).  The Fund seeks long-term capital appreciation.
Calamos® Advisors Trust
Calamos Growth and Income Portfolio (Manager: Calamos Advisors LLC).  The Calamos Growth and Income Portfolio’s investment objective is high long-term total return through growth and current income.
Columbia Funds Variable Series Trust II
Columbia Variable Portfolio – Mid Cap Growth Fund (Class 2) (Manager: Columbia Management Investment Advisers, LLC.).  The Fund’s investment objective is to seek to provide shareholders with growth of capital.
Columbia Variable Portfolio – Seligman Global Technology Fund (Class 2) (Manager: Columbia Management Investment Advisers, LLC.).  The Fund’s investment objective is to seek to provide shareholders with long-term capital appreciation.
Columbia Variable Portfolio – Select Small Cap Value Fund (Class 2) (Manager: Columbia Management Investment Advisers, LLC.).  The Fund’s investment objective is to seek to provide shareholders with long-term capital growth.
Federated Hermes Insurance Series (formerly Federated Insurance Series)
Federated Hermes Managed Volatility Fund II – P (formerly Federated Managed Volatility Fund II – P) (Manager: Federated Global Investment Management Corp.; Sub-Adviser: Federated Investment Management Company).  The investment objective of the Federated Managed Volatility Fund II is to achieve high current income and moderate capital appreciation.
Federated Hermes High Income Bond Fund II – P (formerly Federated High Income Bond Fund II – P) (Manager: Federated Investment Management Company).  The investment objective of the Federated High Income

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Bond Fund II is to seek high current income.  The Fund pursues its investment objective by investing primarily in a diversified portfolio of high quality, lower-rated corporate bonds (also known as "junk bonds").
Federated Hermes Government Money Fund II – S (formerly Federated Government Money Fund II – S) (Manager: Federated Investment Management Company).  The investment objective of the Federated Government Money Fund II is to provide current income consistent with stability of principal and liquidity.  The Fund invests primarily in a portfolio of US Treasuries and government securities maturing in 397 days or less.
Fidelity® Variable Insurance Products
VIP ContrafundSM 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).  The investment objective of the VIP ContrafundSM Portfolio is to seek long-term capital appreciation.
VIP Freedom Income PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom Income PortfolioSM is to seek high total return with a secondary objective of principal preservation.
VIP Freedom 2010 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom 2010 Portfolio is to seek high total return with a secondary objective of principal preservation as the fund approaches its target date and beyond.
VIP Freedom 2015 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)). The investment objective of the VIP Freedom 2015 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
VIP Freedom 2020 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom 2020 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
VIP Freedom 2025 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)). The investment objective of the VIP Freedom 2025 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
VIP Freedom 2030 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom 2030 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
VIP Freedom 2035 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom 2035 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
VIP Freedom 2040 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom 2040 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
VIP Freedom 2045 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom 2045 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
VIP Freedom 2050 PortfolioSM – Service Class 2 (Manager: FMR Co., Inc. (FMRC)).  The investment objective of the VIP Freedom 2050 PortfolioSM is to seek high total return with a secondary objective of principal preservation as the Fund approaches its target date and beyond.
Franklin Templeton Variable Insurance Products Trust
Franklin Global Real Estate VIP Fund – Class 2 (Manager: Franklin Templeton Institutional, LLC).  The investment goal of the Franklin Global Real Estate VIP Fund is to seek high total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of companies located anywhere in the world that operate in the real estate sector.
Franklin Small-Mid Cap Growth VIP Fund – Class 2 (Manager: Franklin Advisers, Inc.).  The investment goal of the Franklin Small-Mid Cap Growth VIP Fund is to seek long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small-capitalization and mid-capitalization companies.

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Templeton Developing Markets VIP Fund – Class 2 (Manager: Templeton Asset Management Ltd.).  The investment goal of the Templeton Developing Markets VIP Fund is to seek long-term capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in emerging markets investments.
Templeton Foreign VIP Fund – Class 2 (Manager: Templeton Investment Counsel, LLC).  The investment goal of the Templeton Foreign VIP Fund is to seek long-term capital growth.  Under normal market conditions, the Fund invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets.
JPMorgan Insurance Trust
JPMorgan Insurance Trust Mid Cap Value Portfolio – Class 1 Shares (Manager: J.P. Morgan Investment Management Inc.).  The Portfolio seeks capital appreciation with the secondary goal of achieving current income by investing primarily in equity securities.  Under normal circumstances, at least 80% of the Portfolio’s Assets will be invested in equity securities of mid cap companies, including common stock and debt securities and preferred stocks both of which are convertible into common stock.  "Assets" means net assets, plus the amount of borrowings for investment purposes.
JPMorgan Insurance Trust Small Cap Core Portfolio – Class 1 Shares (Manager: J.P. Morgan Investment Management Inc.).  The Portfolio seeks capital growth over the long term. Under normal circumstances, the Portfolio invests at least 80% of its Assets in equity securities of small cap companies.  "Assets" means net assets, plus the amount of borrowings for investment purposes.
JPMorgan Insurance Trust U.S. Equity Portfolio – Class 1 Shares (Manager: J.P. Morgan Investment Management Inc.).  The Portfolio seeks to provide high total return from a portfolio of selected equity securities.  Under normal circumstances, the Portfolio invests at least 80% of its Assets in equity securities of U.S. companies.  "Assets" means net assets, plus the amount of borrowings for investment purposes.
MFS® Variable Insurance Trust
MFS® Growth Series – Initial Class Shares (Manager:  Massachusetts Financial Services Company).  The Fund's investment objective is to seek capital appreciation.
MFS® Research Series – Initial Class Shares (Manager:  Massachusetts Financial Services Company).  The Fund's investment objective is to seek capital appreciation.
MFS® Total Return Bond Series – Initial Class Shares (Manager:  Massachusetts Financial Services Company).  The Fund's investment objective is to seek total return with an emphasis on current income, but also considering capital appreciation.
MFS® Total Return Series – Initial Class Shares (Manager:  Massachusetts Financial Services Company).  The Fund's investment objective is to seek total return.
MFS® Utilities Series – Initial Class Shares (Manager:  Massachusetts Financial Services Company). The Fund's investment objective is to seek total return.
MFS® Variable Insurance Trust II
MFS® Strategic Income Portfolio – Initial Class Shares (Manager:  Massachusetts Financial Services Company).  The Fund's investment objective is to seek total return with an emphasis on high current income, but also considering capital appreciation.
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).  The Portfolio seeks to provide income and capital appreciation with less volatility than the fixed income and equity markets as a whole.
TOPS® Managed Risk Growth ETF Portfolio – Class 2 Shares (Manager:  ValMark Advisers, Inc.; Sub-Adviser Portfolio Manager:  Milliman Financial Risk Management LLC). The Portfolio seeks capital appreciation with less volatility than the equity markets as a whole.
TOPS® Managed Risk Moderate Growth ETF Portfolio – Class 2 Shares (Manager:  ValMark Advisers, Inc.; Sub-Adviser Portfolio Manager:  Milliman Financial Risk Management LLC).  The Portfolio seeks capital appreciation with less volatility than the equity markets as a whole.

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There is no assurance that the Funds will achieve their stated objectives and policies.
See the current prospectus for each Fund that accompanies this Prospectus 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.  Please read the prospectuses for the Funds carefully before making any decision concerning the allocation of Premium Payments or transfers among the Subaccounts.  There is no assurance that the Federated Government Money Fund II Subaccount will be able to maintain a stable net asset value per share.  You should know that during extended periods of low interest rates, and partly as a result of insurance charges, the yields of the Federated Government Money Fund II Subaccount may also become extremely low and possibly negative.
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 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 PORTFOLIO OPERATING 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 Services, Inc., 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.

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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.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
Subject to applicable law, we may make additions to, deletions from, or substitutions for 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, if further investment in any portfolio should become inappropriate (in our judgment) in view of the purposes of the Variable Account, or for any other reason in our sole discretion, 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 than the replaced Fund.  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 warrant, or for any other reason in our sole discretion.  We will determine on what basis we might make any new Subaccounts available to existing Contract Owners.  Furthermore, 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; or
•
combine it with other Kansas City Life separate accounts.
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.  Like many businesses, insurance companies are facing challenges due to COVID-19 and its impact on economic conditions and the financial markets. 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 owners 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.

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We will solicit voting instructions from you, as required by applicable law or regulation, before any Fund shareholder meeting.  Your number of votes will be calculated separately for each Subaccount of the Variable Account, and may include fractional shares.  The number of votes attributable to a Subaccount will be determined 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.
If required by state insurance officials, we may disregard voting instructions if such instructions would require us to vote shares in a manner that would:
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cause a change in sub-classification or investment objectives of one or more of the Portfolios;
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approve or disapprove an investment advisory agreement; or
•
require changes in the investment advisory contract or investment adviser of one or more of the Portfolios, if we reasonably disapprove of such changes in accordance with applicable federal regulations.
If we ever disregard voting instructions, we will advise you of that action and of the reasons for it in the next semiannual report.  We may also modify the manner in which we calculate the weight to be given to pass-through voting instructions when such a change is necessary to comply with current federal regulations or the current interpretation of them.
CHARGES AND DEDUCTIONS
We may realize a profit on any charges and deductions under the Contract.  We may use this profit for any purpose, including payment of distribution charges.  Below is a listing and description of the applicable charges and deductions under the Contract.
PREMIUM EXPENSE CHARGES
Sales Charge.  We deduct a 6.00% Sales Charge from each Premium.  This charge reimburses us for administrative expenses associated with the Contracts.  We apply Premiums to your Contract net of the Sales Charge.
Premium Tax Charge.  We deduct a 2.25% Premium Tax Charge from each Premium.  This charge reimburses us for state and local Premium taxes.  We apply Premiums to your Contract net of the Premium Tax Charge.  State premium tax rates vary by state and currently range between 0.5% and 3.5%.  We may be subject to retaliatory tax in some states so that the effective premium tax ranges from 2% to 3.5%.  The Premium Tax Charge that we deduct from each of your Premiums may not necessarily reflect the tax charged in your state, and will be deducted even if we are not subject to a premium or retaliatory tax in your state.
MONTHLY DEDUCTION
We will make a Monthly Deduction to collect various charges under your Contract.  We will make these Monthly Deductions on each Monthly Anniversary following the Allocation Date. On the Allocation Date, we will deduct a Monthly Deduction for the Contract Day and each Monthly Anniversary Day that has occurred prior to the Allocation Date.  (See "PREMIUM ALLOCATIONS AND CREDITING")  The Monthly Deduction consists of:
•
monthly expense charges;
•
cost of insurance charges; and
•
any optional benefit and/or rider charges, as described below.
We deduct the Monthly Deduction pro rata on the basis of the portion of Contract Value in each Subaccount and/or the Fixed Account.
Monthly Expense Charge
•
The monthly expense charge is $7.50 in all Contract Years, plus
•
A Monthly Per Thousand of Specified Amount Charge based on the issue age of the youngest Insured. (See chart below)
Current

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Years 1-10
Youngest Insured Issue Age
Monthly Per Thousand of Specified Amount
Youngest Insured Issue Age
Monthly Per Thousand of Specified Amount
20-29
$0.07
50-59
$0.18
30-39
$0.09
60-69
$0.28
40-49
$0.14
70+
$0.35
Years 11+ $0.00

The guaranteed maximum charge is $0.35 Monthly Per Thousand of Specified Amount for all ages and durations.
The monthly expense charge reimburses us for expenses incurred in the administration of the Contracts and the Variable Account.  Such expenses include but are not limited to: underwriting and issuing the Contract, confirmations, annual reports and account statements, maintenance of Contract records, maintenance of Variable Account records, administrative personnel costs, mailing costs, data processing costs, legal fees, accounting fees, filing fees, the costs of other services necessary for Contract Owner servicing and all accounting, valuation, regulatory and updating requirements.
We guarantee that the monthly expense charge will not increase above the guaranteed maximum charge.  Even if the guaranteed charges prove to be insufficient, we will not increase the charges above such guaranteed levels and will incur the loss.
Cost of Insurance Charge.  This charge compensates us for the expense of providing insurance coverage.  The charge depends on a number of variables and will vary from Contract to Contract and from month to month.  For any Contract, we calculate the cost of insurance on a Monthly Anniversary Day by multiplying the current cost of insurance rate for the Insureds by the net amount at risk for that Monthly Anniversary Day.  The cost of insurance rate for a Contract on a Monthly Anniversary Day is based on the Insureds' Age, sex, and number of completed Contract Years, Total Sum Insured, risk class, and other factors.  We currently place each Insured in one of the following classes, based on underwriting:
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Standard Tobacco User;
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Standard Nontobacco User;
•
Preferred Nontobacco User; and
•
Preferred Tobacco User.
We may place an Insured in a substandard risk class, which involves a higher mortality risk than the Standard Tobacco User or Standard Nontobacco User classes.
The net amount at risk on a Monthly Anniversary Day is the difference between the death benefit (discounted at an interest rate which is the monthly equivalent of 4% per year) and the Contract Value (as calculated on that Monthly Anniversary Day before we deduct the cost of insurance charge).  If you have chosen Option A for your death benefit, the net amount at risk generally will decrease as the Contract Value increases and increase as Contract Value decreases (assuming you do not decrease or increase the Total Sum Insured).  (See "HOW YOUR CONTRACT VALUES VARY" for explanation of the factors that affect Contract Value.)  If you have chosen Option B or Coverage Option L for your death benefit, the net amount at risk generally remains constant.  For purposes of determining cost of insurance rates, we allocate Contract Value first to Specified Amount and then to the Additional Insurance Amount coverage in the order in which those coverages were issued.  Then we allocate Contract Value to any additional coverage amount applicable under Coverage Option L.
We place the Insureds in risk classes when we approve the Contract, based on our underwriting of the application.  When you request an increase in Additional Insurance Amount, we do additional underwriting before approving the increase to determine the risk class that will apply to the increase.  If the risk class for the increase has lower cost of insurance rates than the existing risk class, we apply the lower rates to the entire Total Sum Insured.  If the risk class for the increase has higher cost of insurance rates than the existing class, we apply the higher rates only to the increase in Total Sum Insured and the existing risk class will continue to apply to the existing Total Sum Insured.
We guarantee that the cost of insurance rates will not exceed the maximum cost of insurance rates set forth in the Contract.  The guaranteed rates for standard and preferred risk classes are based on the 1980 Commissioners' Standard Ordinary Mortality Tables, Male or Female, Smoker or Nonsmoker Mortality Rates ("1980 CSO Tables").  The guaranteed rates for substandard classes are based on multiples of or additives to the 1980 CSO Tables.

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Our current cost of insurance rates may be less than the guaranteed rates that are set forth in the Contract.  We will determine current cost of insurance rates based on our expectations as to future mortality experience.  We may change these rates from time to time.
Cost of insurance rates (whether guaranteed or current) for one or both Insureds in a nontobacco user standard class are lower than rates for one or both Insureds of the same Age and sex in a tobacco user standard class.  Cost of insurance rates (whether guaranteed or current) for one or both Insureds in a nontobacco user or tobacco user standard risk class are lower than rates for one or both Insureds of the same Age, sex and tobacco user class in a substandard risk class.
We may make a profit from this charge.  Any profit may be used to finance distribution expenses.
Guaranteed Minimum Death Benefit Option Charge.  There is no charge for the Guaranteed Minimum Death Benefit Option in the first ten Contract Years.  Beginning in Contract Year 11, the charge is $0.01 per $1,000 on a current basis, and $0.03 per $1,000 on a guaranteed basis.  This charge is based on the Specified Amount and we will deduct it monthly.
Cost of Additional Benefits Provided by Riders.  These charges are part of the Monthly Deduction and vary by the benefit.
•
Guaranteed Minimum Death Benefit Option.  We do not charge for this option during the first 10 Contract Years.  Beginning in Contract Year 11, we will apply a monthly charge per $1,000 of Specified Amount at issue.
•
Contract Split Option Rider.  We will assess a monthly charge per $1,000 of rider coverage amount.
•
Joint First to Die Term Life Insurance Rider.  We will assess a monthly charge per $1,000 of rider coverage amount.  The charge can vary, based on the Insured's Age, sex, and number of completed Contract Years, Specified Amount, and risk class.
•
Joint Survivorship Four-Year Term Life Insurance Rider.  We will assess a monthly charge per $1,000 of rider coverage amount.  The charge can vary, based on the Insured's Age, sex, and number of completed Contract Years, Specified Amount, and risk class.
DAILY MORTALITY AND EXPENSE RISK CHARGE
We deduct a daily charge from assets in the Subaccounts attributable to the Contracts.  This charge does not apply to Fixed Account assets. The current and guaranteed charge is at an annual rate of 0.625% of net assets.
The mortality risk we assume is that the Insureds may die sooner than anticipated and we have to pay death benefits greater than we anticipated.  The expense risk we assume is that expenses incurred in issuing and administering the Contracts and the Variable Account will exceed the administrative charges we assess.  We may make a profit from this charge.  Any profit may be used to finance distribution expenses.
TRANSFER PROCESSING FEE
The first six transfers during each Contract Year are free.  We will assess a $25 transfer processing fee for each additional transfer.  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.
SURRENDER CHARGE
During the first ten Contract Years, we will deduct a surrender charge from the Contract Value if the Contract is completely surrendered or lapses.  The surrender charge is based on the Specified Amount at issue.  We calculate this charge by multiplying the surrender charge factor for the applicable Ages and sex of each Insured by the surrender charge percentages (as shown in Appendix A).  The surrender charge factor will vary by each Insured's individual Age, risk class, and sex, but will never exceed $50 per thousand of Specified Amount.  We then multiply this amount by the Specified Amount, divided by 1,000 to reach the actual charge.
The total surrender charge will not exceed the maximum surrender charge shown in your Contract.  We credit any surrender charge deducted upon lapse back to the Contract Value upon reinstatement.  The surrender charge on the date of reinstatement will be the same as it was on the date of lapse. For purposes of determining the surrender charge on any date after reinstatement, the period during which the Contract was lapsed will not count.
Under some circumstances the amount of the surrender charge during the first few Contract Years could result in a Cash Surrender Value of zero.  This will depend upon a number of factors, but is more likely if:

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•
Premiums paid are equal to or only a little higher than the Guaranteed Monthly Premium shown in your Contract; or
•
if investment performance of the Subaccounts is too low.
The surrender charges calculated are applicable at the end of each Contract Year.  After the first Contract Year, we will prorate the surrender charges between Contract Years.  However, after the end of the 10th Contract Year, there will be no surrender charge.
PARTIAL SURRENDER FEE
We deduct an administrative charge upon a partial surrender.  This charge is the lesser of 2% of the amount surrendered or $25.  We will deduct this charge from the Contract Value in addition to the amount requested to be surrendered and it will be considered as part of the partial surrender amount.
NET LOAN INTEREST CHARGE
A net 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 Balance.  The maximum amount of interest we charge on a loan is 6% annually of the Loan Balance.  The net loan interest charge, which is the difference between the amount charged on any Loan Balance and the amount credited to the Loan Account (4% annually), will not exceed 2%.  Preferred loans are available beginning in the eleventh Contract Year.  We credit 6% annually to amounts held in the Loan Account as collateral for a preferred loan.  Therefore, there is no net loan interest charge for a preferred loan.
FUND EXPENSES
The Funds deduct investment advisory fees and other expenses from Portfolio assets.  The value of the net assets of each Subaccount already reflects the investment advisory fees and other expenses incurred by the corresponding Portfolio 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.  For information about the investment advisory fees and other expenses incurred by the Portfolios, see the "Fee Table" of this Prospectus and the accompanying prospectuses for the Funds.
OTHER TAX CHARGE
We do not currently assess a charge for any taxes other than state and local premium taxes incurred as a result of the operations of the Subaccounts.  We reserve the right to assess a charge for such taxes against the Subaccounts if we determine that such taxes will be incurred.
THE CONTRACT
Effective January 1, 2009, the Contract is no longer offered for sale.
PURCHASING A CONTRACT
The terms of certain features of the Contracts issued in your state may differ from those described in this Prospectus.  These variations are described in the Prospectus and Statement of Additional Information.  In addition, optional riders may not be available in all states.  Your registered representative may also provide you with additional information about state variations.
WHO SHOULD PURCHASE A CONTRACT
The Contract is designed to provide long-term insurance benefits on the two Insureds and may also provide long-term accumulation of value.  You should evaluate the Contract in conjunction with other insurance policies that you own and you should consider your insurance needs and the Contract's long-term investment potential.  It may not be an advantage to you to replace existing insurance coverage with this Contract.  You should carefully consider replacement especially if the decision to replace existing coverage is based solely on a comparison of illustrations.
APPLYING FOR A CONTRACT
To purchase a Contract, you must complete an application and submit it through an authorized registered representative.  If you are eligible for temporary life insurance coverage, a temporary insurance agreement ("TIA") should also accompany the application.  As long as the initial Premium Payment accompanies the TIA, the TIA provides insurance coverage from the date we receive the required Premium at our Home Office to the date we approve your application.  In accordance with our underwriting rules, temporary life insurance coverage may not exceed $500,000.  The TIA may not be in effect for


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more than 60 days.  At the end of the 60 days, the TIA coverage terminates and we will return the initial Premium to the applicant.
For coverage under the TIA, you must pay an initial Premium that is at least equal to two Guaranteed Monthly Premiums.  We require only one Guaranteed Monthly Premium for Contracts when Premium payments will be made under a pre-authorized check payment or combined billing arrangement.  (See "PREMIUMS")
We require satisfactory evidence of both proposed Insureds’ insurability, which may include a medical examination.  The available issue ages are 20 through 85.  Age is determined on the Contract Date based on each Insured’s Age last birthday.  The minimum Total Sum Insured is $200,000, with a minimum Specified Amount of $100,000.  Acceptance of an application depends on our underwriting rules and we have the right to reject an application.
OWNERSHIP
As the Owner of the Contract, you may exercise all rights provided under the Contract.  The Insureds are the Owner, unless a different Owner is named in the application.  While at least one of the Insureds is living, the Owner may name a contingent Owner or a new Owner by Written Notice.  If a contingent Owner has not been named, on the death of the last surviving Owner, ownership of the Contract passes to the estate of the last Owner to die.  The Owner may also be changed prior to the last surviving Insured's death by Written Notice satisfactory to us.
CHANGE OF OWNERSHIP
You may change the ownership of the 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 at our Home Office. 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.  You should consult with your tax advisor before requesting any changes of ownership.  (See "TAX CONSIDERATIONS")
DETERMINATION OF CONTRACT DATE
In general, when applications are submitted with the required Premium the Contract Date will be the same as that of the TIA.  For Contracts where the required Premium is not accepted at the time of application or Contracts where values are applied to the new Contract from another contract, the Contract Date will be the approval date plus up to seven days.  There are several exceptions to these rules as described below.
Contract Date Calculated to be 29th, 30th or 31st of Month
No Contracts will be given a Contract Date of the 29th, 30th or 31st of the month.  When values are applied to the new Contract from another contract and the Contract Date would be calculated to be one of these dates, the Contract Date will be the 28th of the month. In all other situations in which the Contract Date would be calculated to be the 29th, 30th or 31st of the month, the Contract Date will be the 1st of the next month.
Pre-Authorized Check Payment Plan (PAC) or Combined Billing (CB)-Premium with Application.
If you request PAC or CB and provide the initial Premium with the application, the Contract Date will be the date of approval.  Combined Billing is a billing where multiple Kansas City Life contracts are billed together.
Combined Billing (CB)-No Premium with Application.
If you request CB and do not provide the initial Premium with the application, the Contract Date will be the earlier of the first of the month after the Contract is approved or the date the initial Premium is received.  However, if approval occurs between the first and fifth of the month the Contract Date will be the first of the same month that we approve the Contract.  In addition, if the Contract Date is calculated to be the 29th, 30th or 31st of the month then the Contract Date will be the first of the following month.
Government Allotment (GA) and Federal Allotment (FA).
If you request GA or FA on the application and provide an initial Premium with the application, the Contract Date will be the date of approval.  If you request GA or FA and we do not receive the required initial Premium, the Contract Date will be the date we receive a full monthly allotment.

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The Contract Date is determined by these guidelines except, as provided for under state insurance law, the Owner may be permitted to backdate the Contract to preserve insurance Age (and receive a lower cost of insurance rate).  In no case may the Contract Date be more than six months prior to the date the application was completed.  We will charge a Monthly Deduction from the Contract Date.
If coverage under an existing Kansas City Life insurance contract is being replaced, that contract will be terminated and values will be transferred on the date when you have met all underwriting and other requirements and we have approved your application.  We will deduct Contract charges as of the Contract Date.
REPLACEMENT OF EXISTING INSURANCE
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 sales charge and 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.
FREE LOOK RIGHT TO CANCEL CONTRACT
You may cancel your Contract for a refund during your "free‑look" period.  You may also cancel an increase in Specified Amount that you have requested during the "free-look" period for the increase.  The free look period expires on the latest of:
•
10 days after you receive your Contract or for an increase, your adjusted Contract;
•
45 days after your application for either the Contract or the increase in Specified Amount is signed; or
•
10 days after we mail or deliver a cancellation notice.
If you decide to cancel the Contract or an increase in Specified Amount, you must return the Contract to the Home Office or to the authorized registered representative who sold it.  Immediately after mailing or delivery within the "free-look" period, the Contract or the increase will be deemed void from the beginning.  If you cancel the Contract, we will refund Premiums paid within seven calendar days after we receive the returned Contract.  (This means that the amount we refund will not reflect either gains or losses resulting from Subaccount performance.)  If you cancel an increase in the Specified Amount, we will return any charges attributable to the increase to your Contract Value.
ALLOCATION AND TRANSFERS
PREMIUM ALLOCATIONS AND CREDITING
In the Contract application, you select how we will allocate Premiums (Premium less Premium Expense Charges) among the Subaccounts and the Fixed Account.  The sum of your allocations must equal 100%.  We may limit the number of Subaccounts to which you allocate net Premiums (not applicable to Texas Contracts).  We will never limit the number to less than 15.  You may change the allocation percentages at any time by sending Written Notice.  You may make changes in your allocation by telephone, facsimile or electronic mail if you have provided proper authorization.  (See "TELEPHONE, FACSIMILE, ELECTRONIC MAIL AND INTERNET AUTHORIZATIONS")  The change will apply to the net Premiums received with or after receipt of your notice.
On the Allocation Date, we will allocate the initial net Premium to the Federated Government Money Fund II Subaccount.  If we receive any additional Premiums before the Reallocation Date, we will also allocate the corresponding net Premiums to the Federated Government Money Fund II Subaccount.
On the Reallocation Date (30 days after the Allocation Date), we will allocate the amount in the Federated Government Money Fund II Subaccount as directed in your application.
We will credit Premiums received on or after the Reallocation Date as directed by you.  The Premiums will be invested within the Valuation Period during which we receive them at our Home Office unless we require additional underwriting.  Premiums received at our Home Office before the New York Stock Exchange closes for normal trading 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
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for normal trading, we will process the order using the 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.  We will not credit Premiums requiring additional underwriting until we have completed underwriting and accept the Premium.  If we reject the additional Premium, we will return the Premium promptly, without any adjustment for investment experience.
We may be delayed in processing your Contract application and/or Premiums due to submission delays by your registered representative.  We will not apply any Premium until we have received the Contract application and/or Premium from your registered representative.
TRANSFER PRIVILEGE
After the Reallocation Date and prior to the Maturity Date, you may transfer amounts among the Subaccounts and the Fixed Account, subject to the following restrictions:
•
beginning May 1, 2015, we will no longer allow transfers to the American Century VP Mid Cap Value Fund Subaccount subject to the following exception.  If you are invested in the American Century VP Mid Cap Value Fund Subaccount on May 1, 2015, you may continue to allocate premium payments and transfer amounts from the other Subaccounts and the Fixed Account to that Subaccount;
•
the minimum transfer amount is the lesser of $250 or the entire amount in that Subaccount or the Fixed Account;
•
we will treat a transfer request that reduces 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;
•
we allow only one transfer each Contract Year from the Fixed Account;
•
the amount transferred from the Fixed Account may not exceed the greatest of:  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 the amount transferred out of the Fixed Account in the prior year, or $2,000 (or the unloaned Fixed Account Value, if less);
•
we may, where permitted, suspend or modify this transfer privilege at any time with notice to you.
There is no limit on the number of transfers you can make between the Subaccounts or to the Fixed Account.  The first six transfers during each Contract Year are free.  After the first six transfers, we will assess a $25 transfer processing fee.  Unused free transfers do not carry over to the next Contract Year.  For the purpose of assessing the fee, we consider each Written Notice or telephone, facsimile, or electronic mail request to be one transfer, regardless of the number of Subaccounts or the Fixed Account affected by that transfer.  We will deduct the processing fee from the remaining Contract Value.
We will make the transfer on the Valuation Day 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 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 for normal trading are priced using the 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 for normal trading, we will process the order using the Accumulation Unit value determined at the close of the next regular business session of the New York Stock Exchange.
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., 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
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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:
•
the requirement of a minimum time period between each transfer;
•
not accepting a transfer request from a third party acting under authorization on behalf of more than one Owner;
•
limiting the dollar amount that may be transferred between the Subaccounts by an Owner at any one time;
•
implementing and administering redemption fees imposed by one or more of the Funds in the future; and
•
requiring that a Written Request, signed by the Owner, be provided to us at our Home Office.
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.  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 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 of frequent transfer activity of a single Owner).  You should read the Fund prospectuses for more details.
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DOLLAR COST AVERAGING PLAN
The Dollar Cost Averaging Plan is an optional feature available with the Contract.  If elected, it enables you to automatically transfer amounts from the Federated 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 cannot guarantee that the Dollar Cost Averaging Plan will result in a gain.
Transfers under this plan occur on a monthly basis for a period you choose, ranging from three to 36 months.  To participate in the plan you must transfer at least $250 from the Federated Government Money Fund II Subaccount each month.  You may allocate the required amounts to the Federated Government Money Fund II Subaccount through initial or subsequent Premiums or by transferring amounts into the Federated Government Money Fund II Subaccount from the other Subaccounts or from the Fixed Account.  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. You may make changes in dollar cost averaging by telephone, facsimile or electronic mail if you have provided proper authorization.
Dollar cost averaging transfers will start on the next Monthly Anniversary Day on or following the Reallocation Date or the date you request.  Once elected, we will process transfers from the Federated Government Money Fund II monthly until:
•
we have completed the designated number of transfers;
•
the value of the Federated Government Money Fund II Subaccount is completely depleted; or
•
you send Written Notice instructing us to cancel the monthly transfers.
Transfers made under the Dollar Cost Averaging Plan will not count toward the six free transfers allowed each Contract Year.  We may cancel this feature at any time with notice to you.  We do not impose a charge for participation in this plan.
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 portfolio rebalancing begins.
The purpose of the Portfolio Rebalancing Plan is to automatically diversify your portfolio mix.  This plan automatically adjusts your Portfolio mix to be consistent with your current allocation instructions.  If you make a change to your Premium allocation, we will also automatically change the allocation used for portfolio rebalancing to be consistent with the new Premium allocation unless you instruct us otherwise.
The redistribution occurring under this plan will not count toward the six free transfers permitted 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 after the Dollar Cost Averaging Plan ends.
You may elect this plan at the time of application by completing the authorization on the application.  You may also elect it after the Contract is issued by completing the election form.  You may make changes in portfolio rebalancing by telephone, facsimile or electronic mail if you have provided proper authorization.  Portfolio rebalancing will terminate when:
•
you request any transfer unless you authorize a change in allocation at that time; or
•
the day we receive Written Notice instructing us to cancel the plan.
If the Contract Value is negative at the time portfolio rebalancing is scheduled, we will not complete the redistribution.  We may cancel the Portfolio Rebalancing Plan at any time with notice to you.  We do not impose a charge for participation in this plan.
CHANGES IN THE CONTRACT OR BENEFITS
Upon notice to you, we may modify the Contract.  We can only do so if such modification is necessary to:
•
make the Contract or the Variable Account comply with any applicable 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 variable life contracts;


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•
reflect a change in the operation of the Variable Account; or
•
provide additional Variable Account and/or Fixed Account options.
We have the right to modify the Contract as necessary to attempt to prevent you from being considered the owner of the assets of the Variable Account.  In the event of any such modification, we will issue an appropriate amendment to the Contract, if required.  We will exercise these changes in accordance with applicable law, including approval of Contract Owners if required.
SUPPLEMENTAL AND/OR RIDER BENEFITS
The following optional riders are currently available and may be added to your Contract.  We will deduct monthly charges for these optional riders from your Contract Value as part of the Monthly Deduction.  All of these riders may not be available in all states.  The Company may change or stop offering a supplemental and/or rider benefit at any time before it is elected.
Contract Split Option Rider
Issue ages: 20-75
This rider allows you to split the Contract equally (based on Total Sum Insured) into two individual Contracts, one on the life of each Insured.  This split option will be offered without evidence of insurability under the condition that you make the request as the result of either:

 •
the divorce of the two Insureds; or

•
as a result of a change in the Unlimited Federal Estate Tax marital deduction or a reduction in the maximum Federal Estate Tax bracket rate to a rate below 25%.
You must also meet specific other conditions in order to qualify.  When you exercise this option, we will terminate the existing Contract. (In Pennsylvania, this option may not be exercised in the event of divorce.)
The new contracts will be based on the Insureds' Age and sex, and is based on the risk class at the time of issue of the original Contract.
This rider will terminate at the earlier of the death of the first Insured to die or the older Insured's Age 80.  The rider will also terminate if you elect to keep the Guaranteed Minimum Death Benefit Option in effect after it is determined that funding is not adequate to cover these rider charges.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")
The tax consequences of a contract split are uncertain.  (See "TAX TREATMENT OF CONTRACT BENEFITS")  A significant unresolved federal tax issue affecting a Contract is whether the issuance of two individual life insurance contracts in exchange for a survivorship life insurance contract will be treated as a nontaxable exchange.  If you are considering a contract split, you should be aware that it is possible that such a contract split may not be treated as a nontaxable exchange, in which case the tax treatment of the Contract could be significantly less favorable than that described in this discussion.  In addition, it is not clear whether two individual contracts received in exchange for a survivorship contract in a Contract split transaction will be classified as modified endowment contracts.  Before proceeding with a contract split, you should consult a competent tax adviser as to the possible tax consequences of such a split.
Joint First to Die Term Life Insurance Rider
Issue ages: 20-85
This rider covers the Insureds under the Contract and provides yearly renewable term coverage on the first Insured to die on or before the older Insured's Age 100 and while this rider is in force.  Coverage amounts may differ between the two Insureds, but the maximum coverage equals the Total Sum Insured and the minimum non-zero coverage equals $10,000.  You may increase (subject to insurability) or decrease the coverage under this rider.  You may also choose at issue a schedule for the coverage to decrease annually.  The scheduled decreases may be based on the percentage of the coverage amount ranging up to 25% of the rider coverage amount or may be a flat dollar amount.  If this rider is elected, the Guaranteed Minimum Death Benefit Option is not available on the Contract.
Joint Survivorship Four-Year Term Life Insurance Rider
Issue ages: 20-85
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This rider provides renewable one-year level term insurance and expires at the end of the fourth Contract Year.  The term insurance provides a death benefit payable at the death of the last surviving Insured.  The minimum coverage is $100,000 and the maximum coverage is equal to the Total Sum Insured.  This rider is available at issue only.
The rider will also terminate if you elect to keep the Guaranteed Minimum Death Benefit Option in effect after it is determined that funding is not adequate to cover these rider charges.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")
Additional rules and limits apply to these optional riders.  Not all such benefits may be available at any time, and optional benefits or riders in addition to those listed above may be made available. Please ask your registered representative for further information, or contact the Home Office.
PREMIUMS
PREMIUMS
The Contract is flexible with regard to the amount of Premiums you pay.  When we issue the Contract we establish a Planned Premium set by you.  This amount is only an indication of your preference in paying Premiums.  You may change this amount at any time.  You may pay additional Unscheduled Premiums at any time while the Contract is in force.  We have the right to limit the number (except in Texas) and amount of such Premiums.  We do have requirements regarding the minimum and maximum Premium amounts that you can pay.
We deduct Premium Expense Charges from all Premiums prior to allocating them to your Contract.  (See "CHARGES AND DEDUCTIONS")
Minimum Premium Amounts.  The minimum initial Premium required is the least amount for which we will issue a Contract. This amount depends on a number of factors.  These factors include Age, sex, and risk class of the proposed Insureds, the Specified Amount, any supplemental and/or rider benefits, and the Planned Premium you propose to make. (See "PLANNED PREMIUMS")  Consult your registered representative for information about the initial Premium required for the coverage you desire.
Each Premium payment after the initial Premium payment must be at least $25.
Maximum Premium Information.  Total Premiums paid may not exceed Premium limitations for life insurance set forth in the Internal Revenue Code.  We will monitor Contracts and will notify you if a Premium exceeds this limit and will cause the Contract to violate the definition of insurance.  You may choose to take a refund of the portion of the Premium that we determine is in excess of the Premium limitations or you may submit an application to increase the Additional Insurance Amount, subject to our underwriting approval.  If you choose to increase the Additional Insurance Amount and the Insured fails to meet our underwriting requirements for the required increase in coverage, we have the right to refund, with interest, any Premium that we determine is in excess of the guideline premium limit.  (See "TAX CONSIDERATIONS")
Your Contract may become a modified endowment contract if Premiums exceed the "7-Pay Test" as set forth in the Internal Revenue Code.  We will monitor Contracts and will attempt to notify you on a timely basis if, based on our interpretation of the relevant tax rules, your Contract is in jeopardy of becoming a modified endowment contract.  (See "TAX CONSIDERATIONS")
We have the right to require satisfactory evidence of insurability prior to accepting Unscheduled Premiums.  (See "PREMIUM ALLOCATIONS AND CREDITING")
General Premium Information.  You must pay Premiums by check payable to Kansas City Life Insurance Company or by any other method that we deem acceptable.  You must clearly mark a loan repayment as such or we will credit it as a Premium.  (See "CONTRACT LOANS")
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.
Planned Premiums. When applying for a Contract, you select a plan for paying Premiums.  Failure to pay Planned Premiums will not necessarily cause a Contract to lapse.  Conversely, paying all Planned Premiums will not guarantee that a Contract will not lapse.  You may elect to pay level Premiums quarterly, semi-annually or annually.  You may also arrange to pay Planned Premiums on a special monthly or quarterly basis under a pre-authorized payment arrangement.
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You are not required to pay Premiums in accordance with your plan.  You can pay more or less than planned or skip a Planned Premium entirely.  (See "PREMIUMS TO PREVENT LAPSE" and "GUARANTEED MINIMUM DEATH BENEFIT OPTION")  Subject to the minimum and maximum limits described above, you can change the amount and frequency of Planned Premiums at any time.
Premiums Upon an Increase in Additional Insurance Amount. Depending upon the Contract Value at the time of an increase and the amount of the increase requested, you may need to pay an additional Premium or change the amount of Planned Premiums.  (See "INCREASES IN THE ADDITIONAL INSURANCE AMOUNT")
Guaranteed Payment Period and Guaranteed Monthly Premium.  During the Guaranteed Payment Period, we guarantee that your Contract will not lapse if your Premiums meet the Guaranteed Monthly Premium requirement.  For this guarantee to apply, the total Premiums must be at least equal to the sum of:
•
the amount of accumulated Guaranteed Monthly Premiums in effect; and
•
additional Premium amounts to cover the total amount of any partial surrenders or Contract Loans you have made.
The Guaranteed Payment Period applies for three years after the Contract Date.  The Contract shows the Guaranteed Monthly Premium.
The factors we use to determine the Guaranteed Monthly Premium vary by risk class, issue age, and sex.  In calculating the Guaranteed Monthly Premium, we include additional amounts for substandard ratings and optional benefits and/or riders.  If you make a change to your Contract, we will:
•
re-calculate the Guaranteed Monthly Premium;
•
notify you of the new Guaranteed Monthly Premium; and
•
amend your Contract to reflect the change.
PREMIUMS TO PREVENT LAPSE
Your Contract will terminate if there is insufficient value remaining in the Contract at the end of the Grace Period.  Because the value of amounts allocated to the Variable Account will vary according to the investment performance of the Funds, the specific amount of Premiums required to prevent lapse will also vary.
On each Monthly Anniversary Day we will check your Contract to determine if there is enough value to prevent lapse.  If your Contract does lapse you must pay the required amount before the end of the Grace Period to prevent your Contract from terminating.
Under the Guaranteed Payment Period.  The conditions to prevent lapse will depend on whether a Guaranteed Payment Period is in effect as follows:
During the Guaranteed Payment Period.  The Contract lapses and a Grace Period starts if:
•
there is not enough Cash Surrender Value in your Contract to cover the Monthly Deduction; and
•
the Premiums paid are less than required to guarantee lapse will not occur during the Guaranteed Payment Period.
If lapse occurs, the Premium you must pay to keep the Contract in force will be equal to the lesser of:
•
the amount to guarantee the Contract will not lapse during the Guaranteed Payment Period less the accumulated Premiums you have paid; and
•
enough Premium to increase the Cash Surrender Value to at least the amount of three Monthly Deductions.
After the Guaranteed Payment Period.  The Contract lapses and a Grace Period starts if the Cash Surrender Value is not enough to cover the Monthly Deduction.  To prevent the Contract from terminating at the end of the Grace Period you must pay enough Premium to increase the Cash Surrender Value to at least the amount of three Monthly Deductions.  You must make this payment before the end of the Grace Period.
Under the Guaranteed Minimum Death Benefit Option.  If you elect the Guaranteed Minimum Death Benefit Option we guarantee that the Specified Amount will remain in force as long as you meet the Guaranteed Minimum Death Benefit Option Premium requirement.  If you fail to meet the Guaranteed Minimum Death Benefit Option Premium requirement, the Guaranteed Minimum Death Benefit Option will terminate and the Premiums required to prevent lapse will be determined just as for a Contract without a Guaranteed Minimum Death Benefit Option.  The Guaranteed Minimum Death Benefit Option does not guarantee riders, and any riders will terminate if the Cash Surrender Value of your Contract becomes negative.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")
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If you did not elect this option or if you do not pay the Premium required to keep the option in effect, your Contract will lapse at the end of the Grace Period if there is insufficient value remaining in the Contract.  Because the value of amounts allocated to the Variable Account will vary according to the investment performance of the Funds, the specific amount of Premiums required to prevent lapse will also vary.
For Contracts That Do Not Have the Guaranteed Minimum Death Benefit Option.  On each Monthly Anniversary Day we will check your Contract to determine if there is enough value to prevent lapse.  If your Contract does lapse you must pay the required amount before the end of the Grace Period.  The amount required is enough Premium to increase the Cash Surrender Value to at least the amount of three Monthly Deductions.
For Contracts That Do Have the Guaranteed Minimum Death Benefit Option.  We will check your Contract on each Monthly Anniversary Day to determine if you have met the Guaranteed Minimum Death Benefit Option Premium requirement.  If you have met the requirement, then we guarantee that the Contract will not lapse.  If you have not met the requirement then you have 61 days to keep the option in force by paying the amount that will satisfy the Guaranteed Minimum Death Benefit Option Premium requirement.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")
Effect of Insufficient Premium Levels.  While paying Premiums at the levels described above will prevent Contract lapse, paying only the level of Premium required may forego advantages of building up significant Contract Value.  Premium payments less than those described above will not further erode the build-up of Contract value, but will mean the future Premium required to keep the Contract in force must be sufficient to maintain a positive Cash Surrender Value.  This Premium could be significantly higher or lower than the Premium required to keep the Contract in force during the Guaranteed Payment Period or under the Guaranteed Minimum Death Benefit Option.
Grace Period.  The purpose of the Grace Period is to give you the chance to pay enough Premiums to keep your Contract in force.  We will send you notice of the amount required to be paid.  The Grace Period is 61 days and starts when we send the notice.  Your Contract remains in force during the Grace Period.  If the last surviving Insured dies during the Grace Period, we will pay the Death Proceeds, but we will deduct any Monthly Deduction due.  (See "AMOUNT OF DEATH PROCEEDS")  If you do not pay adequate Premiums before the Grace Period ends, your Contract will terminate and your Cash Surrender Value, if any, will be returned.  (See "REINSTATEMENT OF CONTRACT")
In general, the grace period under your Policy is 61 days and your Policy will lapse or terminate without value if you do not pay sufficient premium before the end of the grace period to keep your Policy inforce. However, if your Policy enters the grace period after March 1, 2020, the state in which your Policy was issued or delivered may require a longer grace period, allow for the deferral of premium payments or impose restrictions against Policy lapse or termination in recognition of financial challenges posed by the current public health (COVID-19) crisis. Some states may also impose restrictions against Policy lapse or termination during the COVID-19 crisis where the Policy entered the grace period prior to March 1, 2020.  Additional extensions of your Policy's grace period, deferrals of premium payments and restrictions on Policy lapse may apply in the future but are not guaranteed. Please contact the Company at 1-800-616-3670 for further information.
HOW YOUR CONTRACT VALUES VARY
Your Contract does not provide a minimum guaranteed Contract Value or Cash Surrender Value.  Values will vary with the investment experience of the Subaccounts and/or the crediting of interest in the Fixed Account, and will depend on the allocation of Contract Value.  If the Cash Surrender Value on a Monthly Anniversary Day is less than the amount of the
Monthly Deduction on that date and the Guaranteed Payment Period is not then in effect, the Contract will be in default and a Grace Period will begin.  (See "PREMIUMS TO PREVENT LAPSE," "GUARANTEED PAYMENT PERIOD AND GUARANTEED MONTHLY PREMIUM" and "GRACE PERIOD")  However, we also offer an optional Guaranteed Minimum Death Benefit Option, which guarantees the death benefit provided certain requirements are met.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")
BONUS ON CONTRACT VALUE IN THE VARIABLE ACCOUNT
We may credit a bonus to the Contract on each Monthly Anniversary Day beginning on the first Monthly Anniversary Day following the Contract Date.  The monthly bonus applies to Contracts with a Total Sum Insured of $5,000,000 and above and equals an annual rate of 0.125% of the Contract Value in each Subaccount of the Variable Account.  We pay these bonus amounts out of savings we derive from the higher values of the contract.  We do not guarantee that we will pay the bonus.

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DETERMINING THE CONTRACT VALUE
On the Allocation Date, the Contract Value is equal to the initial Premium less the Premium Expense Charges and Monthly Deduction deducted from the Contract Date.  On each Valuation Day thereafter, the Contract Value is the aggregate of the Subaccount Values and the Fixed Account Value (including the Loan Account Value).  The Contract Value will vary to reflect the following:
•
Premiums paid;
•
performance of the selected Subaccounts;
•
interest credited on amounts allocated to the Fixed Account;
•
interest credited on amounts in the Loan Account;
•
charges assessed under the Contract;
•
transfers;
•
partial surrenders;
•
loans and loan repayments; and
•
any bonuses paid on the Monthly Anniversary Day.
Subaccount Values.  When you allocate an amount to a Subaccount, either by Premium or transfer, we credit your Contract with Accumulation Units in that Subaccount.  The number of Accumulation Units in the Subaccount is determined by dividing the amount allocated to the Subaccount by the Accumulation Unit value for the Valuation Day when the allocation is made.
The number of Accumulation Units credited to a Subaccount will increase when you allocate Premiums to the Subaccount and when you transfer amounts to the Subaccount.  The number of Accumulation Units credited to a Subaccount will decrease when:
•
we take the allocated portion of the Monthly Deduction from the Subaccount;
•
you make a loan;
•
you transfer an amount from the Subaccount; or
•
you take a partial surrender (including the Partial Surrender Fee) from the Subaccount.
Accumulation Unit Values.  Accumulation Unit value varies to reflect the investment experience of the underlying Portfolio.  It may increase or decrease from one Valuation Day to the next.  We arbitrarily set the Accumulation Unit value for each Subaccount at $10 when we established the Subaccount.  For each Valuation Period after establishment of the Subaccount, the Accumulation Unit value is determined by multiplying the value of an Accumulation Unit for a Subaccount for the prior Valuation Period by the Net Investment Factor for the Subaccount for the current Valuation Period.
Net Investment Factor.  The Net Investment Factor is an index used to measure the investment performance of a Subaccount from one Valuation Day to the next.  It is based on the change in net asset value of the Fund shares held by the Subaccount and reflects any gains or losses in the Subaccounts, dividends paid, any capital gains or losses, any taxes and the daily mortality and expense risk charge.
Fixed Account Value.  On any Valuation Day, the Fixed Account Value of a Contract will be equal to:
•
the Fixed Account Value on the preceding Valuation Day; plus
•
all Premiums allocated to the Fixed Account since the preceding Valuation Day; plus
•
any amounts transferred to the Fixed Account since the preceding Valuation Day (including amounts transferred in connection with Contract loans); plus
•
interest credited on such Premiums and amounts transferred from the preceding Valuation Day to the date of calculation; less
•
the amount of any transfers from the Fixed Account to the Subaccounts since the preceding Valuation Day; less
•
the amount of any partial surrenders (including the Partial Surrender Fee) taken from the Fixed Account since the preceding Valuation Day; less
•
interest on such transferred and withdrawn amounts from the effective dates of such transfers or withdrawals to the date of calculation; less
•
the pro rata portion of the Monthly Deduction deducted from the Fixed Account.
Loan Account Value.  On any Valuation Day, if there have been any Contract loans, the Loan Account Value is equal to:
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•
amounts transferred to the Loan Account from the Subaccounts and from the unloaned value in the Fixed Account as collateral for Contract loans and for due and unpaid loan interest; less
•
amounts transferred from the Loan Account to the Subaccounts and the unloaned value in the Fixed Account as the Loan Balance is repaid.
CASH SURRENDER VALUE
The Cash Surrender Value is the amount you have available in cash if you fully surrender the Contract.  We use this amount to determine whether a partial surrender may be taken, whether Contract loans may be taken, and whether a Grace Period starts.  (See "PREMIUMS TO PREVENT LAPSE")  The Cash Surrender Value on the Valuation Day is equal to the Contract Value less any applicable surrender charges and any Loan Balance.  (See "SURRENDERING THE CONTRACT FOR CASH SURRENDER VALUE")
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, 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.
DEATH BENEFIT
As long as the Contract remains in force, we will pay the Death Proceeds upon receipt at the Home Office of satisfactory proof of death of the last surviving Insured plus written direction (from each eligible recipient of Death Proceeds) regarding how to make the death benefit payment, and any other documents, forms and information we need.  We may also require proof of the death of the Insured who died first and may require return of the Contract.  We will pay Death Proceeds in a lump sum, or if you prefer, under a payment option.  (See "PAYMENT OF PROCEEDS" and "PAYMENT OPTIONS")  We will pay Death Proceeds to the Beneficiary.  (See "SELECTING AND CHANGING THE BENEFICIARY")
AMOUNT OF DEATH PROCEEDS
The Death Proceeds payable upon the death of the last surviving Insured is equal to the following:
the greater of (1) the death benefit under the Coverage Option selected (calculated as of the date of the last surviving Insured's death) or (2) the Corridor Death Benefit; plus
•
an amount equal to any benefits provided by any optional benefits or riders; plus
•
any Premiums received after the date of death; minus
•
any Loan Balance on that date; minus
•
any past due Monthly Deduction if the death occurred during a Grace Period.
Under certain circumstances, the amount of the death benefit may be further adjusted or the death benefit may not be payable.
The Guaranteed Minimum Death Benefit Option, if in effect, provides a minimum death benefit.  If all or part of the Death Proceeds is paid in one sum, we will pay interest on this sum (as required by applicable state law) from the date of receipt of due proof of the last surviving Insured's death to the date of payment.
TOTAL SUM INSURED, SPECIFIED AMOUNT, ADDITIONAL INSURANCE AMOUNT
The Total Sum Insured, Specified Amount and the Additional Insurance Amount are set at the time the Contract is issued.  The Specified Amount plus the Additional Insurance Amount equals the Total Sum Insured.  The minimum Total Sum Insured is $200,000.  Within the Total Sum Insured minimum, we also require that the minimum Specified Amount be $100,000, while the minimum Additional Insurance Amount is required to be $10,000.  The maximum amount of initial Additional Insurance Amount coverage is four times the Specified Amount at issue.
You may decrease the Total Sum Insured or increase the Additional Insurance Amount as described below.  The Guaranteed Minimum Death Benefit Option only applies to the Specified Amount and not to the Additional Insurance Amount.  Therefore, even if the Guaranteed Minimum Death Benefit Option is in effect, if the Contract Value is insufficient to pay the Monthly Deduction, the Additional Insurance Amount may lapse.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")
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COVERAGE OPTIONS
When you apply for the Contract, you may choose one of three Coverage Options, which will be used to determine the death benefit:
•
Option A: death benefit is equal to the Total Sum Insured on the date of death of the last surviving Insured.
•
Option B: death benefit is equal to the Total Sum Insured on the date of death of the last surviving Insured, plus the Contract Value on the date of such death.
•
Option L: death benefit will be the sum of: (1) the Total Sum Insured on the date of death of the last surviving Insured; and (2) the Contract Value on the Contract Anniversary preceding the death of the last surviving Insured multiplied by the applicable Option L death benefit percentage less the Total Sum Insured on that Contract Anniversary. If the amount in (2) of the Option L death benefit calculation is less than zero, then the Option L death benefit will be the amount calculated in (1).
You may also change the Coverage Option, as described below.  However, Coverage Option L is only available at issue.  If a Coverage Option is not specified at the time of application, we will contact your representative to find out which Coverage Option you have selected.
We will increase death benefits under any Coverage Option by any additional benefits provided by riders in force on the date of death of the last surviving Insured, and any Premiums received after the date of death.  We will also refund any cost of insurance charge deducted for the period beyond the date of death.  We will reduce the Death Proceeds by any Loan Balance.
CORRIDOR DEATH BENEFIT
The purpose of the Corridor Death Benefit is to ensure that the amount of insurance we provide meets the definition of life insurance under the Internal Revenue Code.  We calculate the Corridor Death Benefit by multiplying the Contract Value by the appropriate corridor percentage.  The corridor percentages vary by Age, sex, risk class, Specified Amount, Additional Insurance Amount, the number of years coverage has been in effect and any applicable optional benefits or riders.  Please refer to your Contract for further information regarding corridor percentages.
GUARANTEED MINIMUM DEATH BENEFIT OPTION
An optional Guaranteed Minimum Death Benefit Option is available only at issue.  This option is not available if you elect Coverage Option B or if the Joint First to Die Rider is issued.  If you choose this option, it guarantees that we will pay the Specified Amount (less Loan Balance and any past due charges) upon the death of the last surviving Insured, regardless of the Contract's investment performance, if you meet the Guaranteed Minimum Death Benefit Option Premium requirement.  The Guaranteed Minimum Death Benefit Option does not guarantee any Additional Insurance Amount.
The Guaranteed Minimum Death Benefit Option Premium is the amount, which guarantees that the Guaranteed Minimum Death Benefit Option will remain in effect.  Your Contract shows the Guaranteed Minimum Death Benefit Option Premium.  You satisfy the Guaranteed Minimum Death Benefit Option Premium requirement if, on each Monthly Anniversary Day, the cumulative Premiums that you have paid equal or exceed the cumulative Guaranteed Minimum Death Benefit Option Premiums plus any Loan Balance.
"Cumulative Premiums that you have paid" means the amount that is equal to:
•
the sum of all Premiums paid; less
•
the sum of all partial surrenders; with
•
each accumulated at an annual effective interest rate of 4% from the date your Contract is issued to the Monthly Anniversary Day on which the Guaranteed Minimum Death Benefit Option Premium requirement is calculated.
"Cumulative Guaranteed Minimum Death Benefit Option Premiums" is equal to the sum of the Guaranteed Minimum Death Benefit Option Premiums.  Each such Premium is accumulated at an annual effective interest rate of 4% to the Monthly Anniversary Day on which the Guaranteed Minimum Death Benefit Option Premium requirement is calculated.
If you do not meet the Guaranteed Minimum Death Benefit Option Premium requirement, the Guaranteed Minimum Death Benefit Option is in default.  A 61-day notice period begins on the day we mail the notice that the option is in default and informs you of the amount of Premium required to maintain the Guaranteed Minimum Death Benefit Option.  The Premium amount required to prevent default of the option is equal to:
•
the cumulative Guaranteed Minimum Death Benefit Option Premium plus any Loan Balance; less

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•
the cumulative paid Premium.
The Guaranteed Minimum Death Benefit Option will terminate if you do not pay sufficient Premium by the end of the notice period.
If the Contract contains any Additional Insurance Amount coverage or any optional benefit riders, then we will also test the Contract to ensure that you have funded the Contract at a sufficient level to support the Additional Insurance Amount or other optional riders.  On each Monthly Anniversary Day we will test the Cash Surrender Value to determine if it is sufficient to cover the Monthly Deduction.  If not, a 61-day notice period begins on the day we mail notice of the amount of Premium required to keep the Additional Insurance Amount and/or any optional riders in effect.  The Premium required to keep the Additional Insurance Amount is equal to the amount, which would provide a Cash Surrender Value equal to three Monthly Deductions.  If we do not receive payment at least equal to the default Premium by the end of the notice period, we will terminate the Additional Insurance Amount and other optional benefit riders.
We do not charge for this option during the first 10 Contract Years.  Beginning in Contract Year 11 we will apply a monthly charge per $1,000 of Specified Amount at issue.  The Guaranteed Minimum Death Benefit Option is not available for:
•
Coverage Option B Contracts;
•
Contracts on which the Additional Insurance Amount exceeds or is scheduled to exceed the Specified Amount; or
•
Contracts which include the Joint First to Die Rider.
The Guaranteed Minimum Death Benefit Option will terminate:
•
upon your request;
•
if you change the Coverage Option to B; or
•
if you increase the Additional Insurance Amount to more than the Specified Amount.
You may apply to have the Guaranteed Minimum Death Benefit Option reactivated within two years of termination of such option.  Re-activation requires:
•
Written Notice to restore the option;
•
evidence of insurability of the Insureds satisfactory to us, unless you request re-activation within one year after the beginning of the notice period; and
•
payment of the amount by which the cumulative Guaranteed Minimum Death Benefit Option Premium plus the Loan Balance exceeds the cumulative paid Premiums on the date of re-activation.
On the Monthly Anniversary Day on which the re-activation takes effect, we will deduct from the Contract Value any unpaid Guaranteed Minimum Death Benefit Option charges.  We have the right to deny re-activation of the Guaranteed Minimum Death Benefit Option more than once during the life of the Contract.
EFFECT OF COMBINATIONS OF SPECIFIED AMOUNT AND ADDITIONAL INSURANCE AMOUNT
You should consider the following factors in determining how to allocate coverage in the form of the Specified Amount or in the form of an Additional Insurance Amount:
•
The Specified Amount cannot be increased after issue, while the Additional Insurance Amount may be increased after issue, subject to application and evidence of insurability.
•
The Additional Insurance Amount does not increase the Guaranteed Monthly Premium under a Contract. Accordingly, the amount of compensation paid to the registered representative may be less if coverage is included as Additional Insurance Amount, rather than as Specified Amount.
•
The monthly per thousand charges are only charged on the Specified Amount, not on the Additional Insurance Amount. Therefore, contracts with higher amounts of Additional Insurance Amounts may have greater Contract Values.
•
The Guaranteed Minimum Death Benefit Option covers only the Specified Amount and does not cover the Additional Insurance Amount.  If the Contract Value is insufficient to pay the monthly expenses (including charges for the Additional Insurance Amount) the Additional Insurance Amount and rider coverage will terminate, even though the Specified Amount may stay in effect under the Guaranteed Minimum Death Benefit Option.
Generally, you will incur lower Contract Year charges and have more flexible coverage with respect to the Additional Insurance Amount than with the Specified Amount.  On the other hand, if you wish to take advantage of the Guaranteed Minimum Death Benefit Option, the proportion of the Total Sum Insured that is guaranteed can be increased by taking out a larger part of the coverage as Specified Amount at the time of issue.  The Guaranteed Minimum Death Benefit Option is
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not available at all if the Additional Insurance Amount exceeds or is scheduled to exceed the Specified Amount at any time.  In such case, it could be to your advantage to increase the amount of coverage applied for at issue as Specified Amount in order that the Guaranteed Minimum Death Benefit Option will be available.  However, if this guarantee is not important to you, you could choose to maximize the proportion of the Additional Insurance Amount.
SIMULTANEOUS DEATH OF BENEFICIARY AND THE LAST SURVIVING INSURED
We will pay Death Proceeds as though the Beneficiary died before the death of the last surviving Insured if:
•
the Beneficiary dies at the same time as or within 15 days of the death of the last surviving Insured; and
•
we have not paid the Death Proceeds to the Beneficiary within this 15-day period.
CHANGES IN DEATH BENEFIT
EFFECT OF INVESTMENT PERFORMANCE ON DEATH BENEFIT
If investment performance is favorable, the amount of the Death Proceeds may increase.  The impact of investment performance will vary depending upon which Coverage Option applies.
•
Under Option A, the Death Proceeds will not usually change for several years to reflect any favorable investment performance and may not change at all.
•
Option B provides a death benefit that varies directly with the investment performance of the Contract Value.
•
Option L provides a death benefit pattern that can be level for several years and then can increase at a particular time that you choose.
CHANGES IN COVERAGE OPTION
We have the right to require that no change in Coverage Option occurs during the first Contract Year and that you make no more than one change in Coverage Option in any 12-month period.  After any change, we require the Total Sum Insured be at least $200,000 and the Specified Amount to be at least $100,000.  The effective date of the change will be the Monthly Anniversary Day that coincides with or next follows the day that we receive and accept the request.  We may require satisfactory evidence of insurability.
If the Coverage Option is Option B or Option L, it may be changed to Option A.  The Total Sum Insured will not change.  The effective date of change will be the Monthly Anniversary Day following the date we receive and approve your application for change.
If the Coverage Option is Option A or Option B you may not change it to Option L. Coverage Option L is only available at issue, so no changes to Option L are allowed.
If the Coverage Option is Option A or Option L, you may change it to Option B subject to satisfactory evidence of insurability.  This change will decrease the Total Sum Insured.  The new Total Sum Insured will be the greater of the Total Sum Insured less the Contract Value as of the date of change or $25,000.
If the Coverage Option is changed to B, the Guaranteed Minimum Death Benefit Option, if in effect, will terminate.
We have the right to decline any Coverage Option change that we determine would cause the Contract to not qualify as life insurance under applicable tax laws.
Changes in the Coverage Option may have tax consequences.  You should consult a tax adviser before changing the Coverage Option.
INCREASES IN THE ADDITIONAL INSURANCE AMOUNT
You may make increases to the Additional Insurance Amount through either scheduled annual increases requested at issue or unscheduled increases you request.  The maximum Additional Insurance Amount coverage at issue is four times the Specified Amount.  This coverage may increase to a maximum of eight times the Specified Amount after issue under scheduled annual increases.
Scheduled Increases.  Scheduled increases to the Additional Insurance Amount, subject to our approval, may be based on a flat amount annual increase or a percentage annual increase.  Available percentage increases range from 0-25% of the Additional Insurance Amount.  We will base the percentage increase on the specified percentage of the Additional Insurance Amount at the time the scheduled increase occurs.  Available amounts for a flat amount increase
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range from 0 - 25% of the Additional Insurance Amount at issue.  The Guaranteed Minimum Death Benefit Option is not available if the Additional Insurance Amount is, or is scheduled to, exceed the Specified Amount.
Unscheduled Increases.  You may request increases to the Additional Insurance Amount other than the scheduled annual increases available at issue.  We have the right to not allow increases in Additional Insurance Amount during the first Contract Year and to allow only one increase in any 12-month period.  The following requirements apply for an unscheduled increase:
•
you must submit an application for the increase;
•
we may require satisfactory evidence of insurability;
•
any requested, unscheduled increase in the Additional Insurance Amount must be at least $10,000;
•
the Insureds' attained Age must be less than the current maximum issue age for the Contracts, as we determine from time to time;
•
a change in Planned Premiums may be advisable;
•
the increase in the Additional Insurance Amount will become effective on the Monthly Anniversary Day on or following the date we approve the request for the increase;
•
if the Additional Insurance Amount is increased to be greater than the Specified Amount, the Guaranteed Minimum Death Benefit Option, if applicable, will terminate.
For both a scheduled and unscheduled increase, if the Cash Surrender Value is at any time insufficient to pay the Monthly Deduction for the Contract, the Additional Insurance Amount and riders will terminate in order to preserve the Guaranteed Minimum Death Benefit Option.  (See "GUARANTEED MINIMUM DEATH BENEFIT OPTION")  Any increase in the Additional Insurance Amount will not affect the surrender charge or the Guaranteed Monthly Premium.  Increases in the Additional Insurance Amount may have tax consequences.  You should consult a tax adviser before increasing the Additional Insurance Amount.
DECREASES IN TOTAL SUM INSURED
You may request a decrease in the Total Sum Insured.  When you make a decrease in Total Sum Insured, we will first reduce any amount of Additional Insurance Amount remaining.  Then we will reduce the Specified Amount.  If the Specified Amount is decreased, the Guaranteed Minimum Death Benefit Option coverage amount will be decreased by the same amount.  Under certain circumstances, a partial surrender will result in a decrease in the Total Sum Insured. (See "PARTIAL SURRENDERS")
We have the right to require that no decreases occur during the first Contract Year and that you make no more than one decrease in any 12-month period.
We require that the Total Sum Insured after any decrease be at least $200,000 and that the Specified Amount be $100,000.  You must provide Written Notice of your request to decrease your Total Sum Insured.  The effective date of the decrease will be the Monthly Anniversary Day following the date we receive your application.
Decreasing the Total Sum Insured may have the effect of decreasing monthly cost of insurance charges.  A decrease in the Total Sum Insured will not affect the surrender charge and will not decrease the Guaranteed Monthly Premium or Guaranteed Minimum Death Benefit Option Premium.  (See "SURRENDER CHARGE")
A decrease in the Total Sum Insured may have adverse tax consequences.  You should consult a tax adviser before decreasing the Total Sum Insured.
SELECTING AND CHANGING THE BENEFICIARY
You select the Beneficiary in your application.  You may change the Beneficiary in accordance with the terms of the Contract.  If you designate a Beneficiary as irrevocable, then you must obtain the Beneficiary's consent to change the Beneficiary.  The Primary Beneficiary is the person entitled to receive the Death Proceeds under the Contract.  If the Primary Beneficiary is not living, the Contingent Beneficiary is entitled to receive the Death Proceeds.  If both Insureds die and there is no surviving Beneficiary, the Owner will be the Beneficiary.
CASH BENEFITS
CONTRACT LOANS
You may borrow from your Contract while the Insured is living by submitting a Written Request to us.  You may also make loans by telephone, facsimile and electronic mail if you have provided proper authorization to us.  (See "TELEPHONE,
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FACSIMILE, ELECTRONIC MAIL AND INTERNET AUTHORIZATIONS")  The maximum loan amount available is the Contract’s Cash Surrender Value on the effective date of the loan less loan interest to the next Contract Anniversary.  We will process Contract loans as of the date your request is received and approved.  We will send loan Proceeds to you, usually within seven calendar days.  (See "PAYMENT OF PROCEEDS")
Interest.  We will charge interest on any Loan Balance at an annual rate of 6%.  Interest is due and payable at the end of each Contract Year while a loan is outstanding.  If you don't pay interest when due, we add the interest to the loan and it becomes part of the Loan Balance.
Loan Collateral.  When you take a Contract loan, we transfer an amount sufficient to secure the loan out of the Subaccounts and the unloaned value in the Fixed Account and into the Contract's Loan Account.  We will reduce the Cash Surrender Value by the amount transferred to the Loan Account.  The loan does not have an immediate effect on the Contract Value.  You can specify the Variable Accounts and/or Fixed Account from which we transfer collateral.  If you do not specify, we will transfer collateral in the same proportion that the Contract Value in each Subaccount and the unloaned value in the Fixed Account bears to the total Contract Value in those accounts on the date you make the loan.  On each Contract Anniversary, we will transfer an amount of Cash Surrender Value equal to any due and unpaid loan interest to the Loan Account.  We will transfer due and unpaid interest in the same proportion that each Subaccount Value and the unloaned value in the Fixed Account Value bears to the total unloaned Contract Value.
We will credit the Loan Account with interest at an effective annual rate of not less than 4%.  Thus, the maximum net cost of a loan is 2% per year.  (The net cost of a loan is the difference between the rate of interest charged on Loan Balance and the amount credited to the Loan Account).  We will add the interest earned on the Loan Account to the Fixed Account.
Preferred Loan Provision.  Beginning in the eleventh Contract Year, an additional type of loan is available.  It is called a preferred loan.  For a preferred loan we will credit the amount in the Loan Account securing the preferred loan with interest at an effective annual rate of 6%.  Thus, the net cost of the preferred loan is 0% per year.  The maximum amount available for a preferred loan is the Contract Value fewer Premiums paid.  This amount may not exceed the maximum loan amount.  The preferred loan provision is not guaranteed.
Loan Repayment.  You may repay all or part of your Loan Balance at any time while the Insured is living and the Contract is in force.  Each loan repayment must be at least $10.00.  Loan repayments must be sent to the Home Office and we will credit them as of the date received.  You should clearly mark a loan repayment as such or we will credit it as a Premium.  (Premium Expense Charges do not apply to loan repayments, unlike Unscheduled Premiums.)  When you make a loan repayment, we transfer Contract Value in the Loan Account in an amount equal to the repayment from the Loan Account to the Subaccounts and the unloaned value in the Fixed Account.  Thus, a loan repayment will immediately increase the Cash Surrender Value by the amount transferred from the Loan Account.  A loan repayment does not have an immediate effect on the Contract Value.  Unless you specify otherwise, we will transfer loan repayment amounts to the Subaccounts and the unloaned value in the Fixed Account according to the premium allocation instructions in effect at that time.
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.
Contract Loans may have tax consequences.  In particular, if your Contract is a "modified endowment contract," Contract loans may be currently taxable and subject to a 10% penalty tax.  Moreover, the tax consequences of preferred loans taken from a Contract that is not a modified endowment contract are uncertain.  In addition, interest paid on Contract loans is generally not deductible.  For a discussion of the tax treatment of Contract loans and the adverse tax consequences if a Contract lapses with loans outstanding, see "TAX CONSIDERATIONS."  You should consult a tax adviser before taking out a Contract Loan.
We will deduct any Loan Balance from any Death Proceeds.  (See "AMOUNT OF DEATH PROCEEDS")
Your Contract will be in default if the Loan Account Value on any Valuation Day exceeds the Contract Value less any applicable surrender charge.  We will send you notice of the default.  You will have a 61-day Grace Period to submit a sufficient payment to avoid termination.  The notice will specify the amount that must be repaid to prevent termination. (See "PREMIUMS TO PREVENT LAPSE")
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SURRENDERING THE CONTRACT FOR CASH SURRENDER VALUE
You may surrender your Contract at any time for its Cash Surrender Value by submitting a Written Request.  A surrender charge may apply.  (See "SURRENDER CHARGE")  We may require return of the Contract.  We will process a surrender request as of the date we receive your Written Request and all required documents.  We will price a surrender request received in good order before the New York Stock Exchange closes for normal trading using the Accumulation Unit values 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 Accumulation Unit values determined at the close of the next regular session of the New York Stock Exchange.  Generally we will make payment within seven calendar days.  (See "PAYMENT OF PROCEEDS")  You may receive the Cash Surrender Value in one lump sum or you may apply it to a payment option.  (See "PAYMENT OPTIONS")  Your Contract will terminate and cease to be in force if you surrender it for one lump sum.  You will not be able to reinstate it later.  Surrenders may have adverse tax consequences.  (See "TAX CONSIDERATIONS")
(In Texas, if you request a surrender within 31 days after a Contract Anniversary, the Cash Surrender Value applicable to the Fixed Account Value will not be less than the Cash Surrender Value applicable to the Fixed Account on that Contract Anniversary, less any Contract loans or partial surrenders made on or after such Anniversary.)
PARTIAL SURRENDERS
You may make partial surrenders under your Contract at any time subject to the conditions below.  You may submit a Written Request or make your request by telephone if you have provided proper authorization to us, and we will assess a partial surrender fee.  (See "PARTIAL SURRENDER FEE" and "TELEPHONE, FACSIMILE, ELECTRONIC MAIL AND INTERNET AUTHORIZATIONS")  We will deduct this charge from your Contract Value along with the amount requested to be surrendered.  Each partial surrender (other than by telephone) must be at least $500 and the partial surrender amount (including the partial surrender fee) may not exceed the Cash Surrender Value less $300.  If you make your request by telephone, the partial surrender amount (including the partial surrender fee) must be at least $500 and may not exceed the lesser of the Cash Surrender Value less $300, or the maximum amount we permit to be withdrawn by telephone.
When you request a partial surrender, you can direct how we deduct the partial surrender amount (including the partial surrender fee) from your Contract Value in the Subaccounts and Fixed Account.  If you provide no directions, we will deduct the partial surrender amount (including the partial surrender fee) from your Contract Value in the Subaccounts and Fixed Account on a pro rata basis.  Partial surrenders may have adverse tax consequences.  (See "TAX CONSIDERATIONS")
If Coverage Option A or L is in effect, we will reduce the Contract Value by the partial surrender amount.  We will reduce the Total Sum Insured by the partial surrender amount (including the partial surrender fee) minus the excess, if any, of the death benefit over the Total Sum Insured at the time you make the partial surrender.  If the partial surrender amount (including the partial surrender fee) is less than the excess of the death benefit over the Total Sum Insured, we will not reduce the Total Sum Insured.  If Coverage Option B is in effect, we will reduce the Contract Value by the partial surrender amount and the partial surrender fee.
We have the right to reject a partial surrender request if the partial surrender would reduce the Total Sum Insured below the minimum amount for which the Contract would be issued under our then-current rules.
We will process partial surrender requests as of the date we receive your Written Request or request by telephone.  Generally we will make payment within seven calendar days.  (See "PAYMENT OF PROCEEDS")
PAYMENT OPTIONS
The Contract offers a variety of ways, in addition to a lump sum, for you to receive Proceeds payable.  Payment options are available for use with various types of Proceeds, such as surrender or death.  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.
You may apply Proceeds of $2,000 (this minimum may not apply in some states) or more which are payable under this Contract to any of the following options:
Option 1: Interest Payments.  We will make interest payments to the payee annually or monthly as elected.  We will pay interest on the Proceeds at the guaranteed rate of 3% per year and we may increase this by additional interest paid annually.  You may withdraw the Proceeds and any unpaid interest in full at any time.
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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 of 3% per year and we may increase this by additional interest.  You may withdraw the present value of any unpaid installments at any time.
Option 3: Installments For a Specified Period.  We pay Proceeds in equal annual or monthly payments for a specified number of years.  We will pay interest on the Proceeds at the guaranteed rate of 3% per year and we may increase this by additional interest.  You may withdraw the present value of any unpaid installments at any time.
Option 4: Life Income.  We will pay an income during the payee's lifetime.  You may choose a minimum guaranteed payment period.  One 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.
Option 5: Joint and Survivor Income.  We will pay an income during the lifetime of two persons and will continue to pay the same income as long as either person is living.  The minimum guaranteed payment period will be ten years.
Minimum Amounts.  We have the right to pay the total amount of the Contract in one lump sum, if less than $2,000.  If payments under the payment option selected are less than $50, payments may be made less frequently at our option.
Choice of Options You may choose an option by Written Notice during the Insureds' lifetimes.  If a payment option is not in effect at the last surviving Insured’s death, the Beneficiary may make a choice.
Even if the death benefit under the Contract is excludible from income, payments under payment options may not be excludible in full.  This is because earnings on the death benefit after the last surviving insured’s death are taxable and payments under the payment options generally include such earnings.  You should consult a tax adviser as to the tax treatment of payments under payment options.
If we have options or rates available on a more favorable basis at the time you elect a payment option, we will apply the more favorable benefits.
PAYMENT OF PROCEEDS
We will usually pay Proceeds within seven calendar days after we receive all the documents required for such a payment.  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 determine the amount of the Death Proceeds as of the date of the last surviving Insured's death.  But, we determine the amount of all other Proceeds as of the date we receive the required documents.  We may delay a payment or a transfer request if:
•
The New York Stock Exchange is closed for other than a regular holiday or weekend;
•
trading is restricted by the SEC or the SEC declares that an emergency exists as a result of which the disposal or valuation of Variable Account assets is not reasonably practicable; or
•
the SEC, by order, permits postponement of payment to protect Kansas City Life's Contract Owners.
In addition, if, pursuant to SEC rules, the Federated 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 Government Money Fund II Subaccount until the Fund is liquidated.
If you have submitted a recent check or draft, we have the right to defer payment of partial surrenders, surrenders, Death Proceeds, or payments under a payment option until such check or draft has been honored.  We also reserve the right to defer payment of transfers, partial surrenders, surrenders, loans or Death Proceeds from the Fixed Account for up to six months.  If payment from the Fixed Account is not made within 30 days after receipt of documentation necessary to complete the transaction (or such shorter period required by a particular jurisdiction), we will add interest to the amount paid from the date of receipt of documentation.  The annual rate of interest never will be less than the rate required by the state in which your Contract was delivered.
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 of Death 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.
If payment is not made within 30 days after receipt of all documents required for such a payment, we will add interest to the amount paid from the date of receipt of all required documents at 4% or such higher rate required for a particular state.
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Legacy Account.  As described below, Kansas City Life will pay Death 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 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 Proceeds through the Legacy Account when:
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the Proceeds are paid to an individual; and
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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 a life contract to be abandoned after a period of inactivity of three to five years from its limiting age 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 and 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.
REINSTATEMENT OF CONTRACT
If your Contract lapses, you may reinstate it within two years (three years in Arkansas, Kentucky, Minnesota, New Hampshire, Oklahoma, Utah, Virginia, and West Virginia; five years in Missouri and North Carolina) after lapse.  This reinstatement must meet certain conditions, including the payment of the required Premium and proof of insurability.  See your Contract for further information.
TAX CONSIDERATIONS
INTRODUCTION
The following summary provides a general description of the Federal income tax considerations associated with the Contract and does not purport to be complete or to cover all tax situations.  This discussion is not intended as tax advice.  You should consult counsel or other competent tax advisers for more complete information.  This discussion is based upon our understanding of the present Federal income tax laws.  We make no representation as to the likelihood of continuation of the present Federal income tax laws or as to how they may be interpreted by the Internal Revenue Service.
TAX STATUS OF THE CONTRACT
In order to qualify as a life insurance contract for Federal income tax purposes and to receive the tax treatment normally accorded life insurance contracts under Federal tax law, a Contract must satisfy certain requirements which are set forth in the Internal Revenue Code.  Guidance as to how these requirements are to be applied to Contracts insuring the lives of two or more individuals is limited.  Nevertheless, we believe it is reasonable to conclude that the Contracts should satisfy the applicable requirements.  There is necessarily some uncertainty, however, particularly if you pay the full amount of Premiums permitted under the Contract.  If it is subsequently determined that a Contract does not satisfy the applicable requirements, we may take appropriate steps to bring the Contract into compliance with such requirements and we have the right to restrict Contract transactions as necessary in order to do so.
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In some circumstances, owners of variable contracts who retain excessive control over the investment of the underlying separate account assets may be treated as the owners of those assets and may be subject to tax currently on income and gains produced by those assets.  Although published guidance does not address certain aspects of the Contracts, Kansas City Life believes that the Owner of a Contract should not be treated as the owner of the underlying assets of the Variable Account.  Kansas City Life reserves the right to modify the Contracts to bring them into conformity with applicable standards should such modification be necessary to prevent owners of the Contracts from being treated as the owners of the underlying assets of the Variable Account.
In addition, the Code requires that the investments of each of the Subaccounts must be "adequately diversified" in order for the Contract to be treated as a life insurance contract for Federal income tax purposes.  It is intended that the Subaccounts, through the Portfolios, will satisfy these diversification requirements.
The following discussion assumes that the Contract will qualify as a life insurance contract for Federal income tax purposes.
TAX TREATMENT OF CONTRACT BENEFITS
In General.  We believe that the death benefit under a Contract should be excludable from the gross income of the Beneficiary.  Federal, state and local transfer, and other tax consequences of ownership or receipt of Contract Proceeds depend on the circumstances of each Contract Owner or Beneficiary.  A tax advisor should be consulted on these consequences.
Generally, the Owner will not be deemed to be in constructive receipt of the Contract Value until there is a distribution.  When distributions from a Contract occur, or when loans are taken out from or secured by a Contract, the tax consequences depend on whether the Contract is classified as a "Modified Endowment Contract".
Modified Endowment Contracts.  Under the Internal Revenue Code, certain life insurance contracts are classified as "Modified Endowment Contracts," with less favorable tax treatment than other life insurance contracts.  Due to the flexibility of the Contracts as to Premiums and benefits, the individual circumstances of each Contract will determine whether it is classified as a MEC.  In general a Contract will be classified as a MEC if the amount of Premiums paid into the Contract causes the Contract to fail the "7-Pay Test."  A Contract will fail the 7-Pay Test if at any time in the first seven Contract years, the amount paid in the Contract exceeds the sum of the level Premiums that would have been paid at that point under a Contract that provided for paid-up future benefits after the payment of seven level annual payments.  In addition, a Contract received in a tax-free exchange for another life insurance contract that was a Modified Endowment Contract will also be classified as a Modified Endowment Contract.
If there is a reduction in the benefits under the Contract at any time, for example, as a result of a partial surrender, the 7-Pay Test will have to be reapplied as if the Contract had originally been issued at the reduced face amount.  If there is a "material change" in the Contract’s benefits or other terms, the Contract may have to be retested as if it were a newly issued Contract.  A material change may occur, for example, when there is an increase in the death benefit which is due to the payment of an unnecessary Premium.  Unnecessary Premiums are Premiums paid into the Contract which are not needed in order to provide a death benefit equal to the lowest death benefit that was payable in the first seven Contract years.  To prevent your Contract from becoming a MEC, it may be necessary to limit Premium Payments or to limit reductions in benefits.  A current or prospective Contract Owner should consult a tax advisor to determine whether a Contract transaction will cause the Contract to be classified as a MEC.
Distributions (Other Than Death Benefits) from Modified Endowment Contracts.  Contracts classified as Modified Endowment Contracts are subject to the following tax rules:
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All distributions other than death benefits, including distributions upon surrender and withdrawals, from a Modified Endowment Contract will be treated first as distributions of gain taxable as ordinary income and as tax-free recovery of the Owner's investment in the Contract only after all gain has been distributed.
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Loans taken from or secured by a Contract classified as a Modified Endowment Contract are treated as distributions and taxed accordingly.
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A 10 percent additional income tax is imposed on the amount subject to tax except where the distribution or loan is made when the Owner has attained Age 59½ or is disabled, or where the distribution is part of a series of substantially equal periodic payments for the life (or life expectancy) of the Owner or the joint lives (or joint life expectancies) of the Owner and the Owner's Beneficiary or designated Beneficiary.
If the Contract becomes a Modified Endowment Contract, distributions that occur during the Contract year will be taxed as distributions from a Modified Endowment Contract.  In addition, distributions from a Contract within two years before it becomes a Modified Endowment Contract may be taxed in this manner.  This means that a distribution made from a
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Contract that is not a modified endowment contract could later become taxable as a distribution from a modified endowment contract.
Distributions (Other Than Death Benefits) From Contracts That Are Not Modified Endowment Contracts.  Distributions (other than death benefits) from a Contract that is not classified as a Modified Endowment Contract are generally treated first as a recovery of the Owner's investment in the Contract and only after the recovery of all investment in the Contract as taxable income.  However, certain distributions which must be made in order to enable the Contract to continue to qualify as a life insurance contract for Federal income tax purposes if Contract benefits are reduced during the first 15 Contract years may be treated in whole or in part as ordinary income subject to tax.
Loans from or secured by a Contract that is not a Modified Endowment Contract are generally not treated as distributions.  However, the tax consequences associated with preferred loans are less clear and you should consult a tax adviser about such loans.
Finally, neither distributions from nor loans from or secured by a Contract that is not a Modified Endowment Contract are subject to the 10 percent additional income tax.
Investment in the Contract.  Your investment in the Contract is generally your aggregate Premiums.  When a distribution is taken from the Contract, your investment in the Contract is reduced by the amount of the distribution that is tax-free.
Contract Loans.  In general, interest on a Contract loan will not be deductible.  If a Contract loan is outstanding when a Contract is canceled or lapses, the amount of the outstanding Loan Balance will be added to the amount distributed and will be taxed accordingly.  Before taking out a Contract loan, you should consult a tax adviser as to the tax consequences.
Withholding.  To the extent that Contract distributions are taxable, they are generally subject to withholding for the recipient’s federal tax liability.  Recipients can generally elect, however, not to have tax withheld from distributions.
Life Insurance Purchases by Nonresident Aliens and Foreign Corporations.  The discussion above provides general information regarding U.S. federal income tax consequences to life insurance 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 life insurance policies 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 a life insurance policy purchase.
Life Insurance 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.
Multiple Contracts.  All Modified Endowment Contracts that are issued by Kansas City Life (or its affiliates) to the same Owner during any calendar year are treated as one Modified Endowment Contract for purposes of determining the amount includable in the Owner's income when a taxable distribution occurs.
Continuation of the Contract Beyond Age 100.  The tax consequences of continuing the Contract beyond the younger Insured’s 100th year are unclear.  You should consult a tax adviser if you intend to keep the Contract in force beyond the younger Insured’s 100th year.
Business Uses of the Contracts.  The Contracts can be used in various arrangements, including nonqualified deferred compensation or salary continuance plans, split dollar insurance plans, executive bonus plans, tax exempt and nonexempt welfare benefit plans, retiree medical benefit plans and others.  The tax consequences of such arrangements may vary depending on the particular facts and circumstances.  If you are purchasing the Contract for any arrangement the value of which depends in part on its tax consequences, you should consult a qualified tax adviser.  Moreover, Congress has over the years adopted new rules relating to life insurance owned by businesses.  Any business contemplating the purchase of a new Contract or a change in an existing Contract should consult a tax adviser.
Employer-owned Life Insurance Contracts.  Pursuant to section 101(j) of the Code, unless certain eligibility, notice and consent requirements are satisfied, the amount excludible as a death benefit payment under an employer-owned life insurance contract will generally be limited to the Premiums paid for such contract (although certain exceptions may apply in specific circumstances).  An employer-owned life insurance contract is a life insurance contract owned by an employer that insures an employee of the employer and where the employer is a direct or indirect Beneficiary under such contract.
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It is the employer’s responsibility to verify the eligibility of the intended insured under employer-owned life insurance contracts and to provide the notices and obtain the consents required by section 101(j).  These requirements generally apply to employer-owned life insurance contracts issued or materially modified after August 17, 2006.  A tax adviser should be consulted by anyone considering the purchase or modification of an employer-owned life insurance contract.
Non-Individual Owners and Business Beneficiaries of Contracts.  If a Contract is owned or held by a corporation, trust or other non-natural person, this could jeopardize some (or all) of such entity’s interest deduction under Code section 264, even where such entity’s indebtedness is in no way connected to the Contract.  In addition, under section 264(f)(5), if a business (other than a sole proprietorship) is directly or indirectly a Beneficiary of a Contract, this Contract could be treated as held by the business for purposes of the section 264(f) entity-holder rules.  Therefore, it would be advisable to consult with a qualified tax advisor before any non-natural person is made an Owner or holder of a Contract, or before a business (other than a sole proprietorship) is made a Beneficiary of a Contract.
Contract Split Option.  The Contract split option rider permits a Contract to split into two individual Contracts.  It is not clear whether exercising the Contract split rider will be treated as a taxable transaction or whether the individual Contracts that result would be classified as Modified Endowment Contracts.  A tax advisor should be consulted before exercising the Contract Split Option.
Split-Dollar Arrangements.  The IRS and the Treasury Department have issued guidance that substantially affects split-dollar arrangements.  Consult a qualified tax adviser before entering into or paying additional Premiums with respect to such arrangements.
Additionally, the Sarbanes-Oxley Act of 2002 (the "Act"), prohibits, with limited exceptions, publicly-traded companies, including non-U.S. companies that have securities listed on exchanges in the United States, from extending, directly or through a subsidiary, many types of personal loans to their directors or executive officers.  It is possible that this prohibition may be interpreted as applying to split-dollar life insurance policies for directors and executive officers of such companies, since such insurance arguably can be viewed as involving a loan from the employer for at least some purposes.
Although the prohibition on loans is generally effective as of July 30, 2002, there is an exception for loans outstanding as of the date of enactment, so long as there is no material modification to the loan terms and the loan is not renewed after July 30, 2002.  Any affected business contemplating the payment of a Premium on an existing Contract, or the purchase of a new Contract, in connection with a split-dollar life insurance arrangement should consult legal counsel.
Tax Shelter Regulations.  Prospective owners that are corporations should consult a tax advisor about the treatment of the Contract under the Treasury Regulations applicable to corporate tax shelters.
Estate, Gift and Generation-Skipping Transfer Taxes.  The transfer of the Contract or designation of a Beneficiary may have federal, state, and/or local transfer and inheritance tax consequences, including the imposition of gift, estate, and generation-skipping transfer taxes.  For example, when the Insured dies, the Death Proceeds will generally be includable in the Owner’s estate for purposes of federal estate tax if the Insured owned the Contract.  If the Owner was not the Insured, the fair market value of the Contract would be included in the Owner’s estate upon the Owner’s death.  The Contract would not be includable in the Insured’s estate if the Insured neither retained incidents of ownership at death nor had given up ownership within three years before death.
Moreover, under certain circumstances, the Code may impose a "generation skipping transfer tax" when all or part of a life insurance 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.
Qualified tax advisers should be consulted concerning the estate and gift tax consequences of Contract ownership and distributions under federal, state and local law.  The individual situation of each Owner or Beneficiary will determine the extent, if any, to which federal, state, and local transfer and inheritance taxes may be imposed and how ownership or receipt of Contract Proceeds will be treated for purposes of federal, state and local estate, inheritance, generation skipping and other taxes.
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.
Medicare Tax on Investment Income. A 3.8% tax may be applied to some or all of the taxable portion of some distributions from life insurance contracts (such as payments under certain settlement options) to individuals whose
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income exceeds certain threshold amounts ($200,000 for filing single, $250,000 for married filing jointly and $125,000 for married filing separately.)  Please consult a tax advisor for more information.
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.
OUR INCOME TAXES
Under current Federal income tax law, we are not taxed on the Separate Account’s operations. Thus, currently we do not deduct a charge from the Separate Account for Federal income taxes.  We reserve the right to charge the Separate Account for any future Federal income taxes we may incur.
Under current laws in several states, we may incur state and local taxes (in addition to premium taxes).  These taxes are not now significant and we are not currently charging for them.  If they increase, we may deduct charges for such taxes.
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 their effect on the Contract.
OTHER INFORMATION ABOUT THE CONTRACTS AND KANSAS CITY LIFE
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 into selling agreements with other broker-dealers ("selling firms") that in turn may sell the Contracts through their registered representatives.  We pay commissions to broker-dealers for the sale of the Contracts by registered representatives as well as selling firms.  The maximum commissions payable for sales by Sunset Financial are:  120% of Premiums up to one target Premium and 3% of Premiums above that amount paid in the first Contract Year; 3% of target Premium in Contract Years 2 through 7; and 0% of target Premium paid in Contract Years thereafter.  There is an asset based trail commission of 0.20% of the account value in years eight and beyond.  When policies are sold through other selling firms, the commissions paid to such selling firms do not exceed the amounts described above.  For Premiums received following an increase in Specified Amount, commissions on such Premiums are paid based on the target Premium for the increase in accordance with the commission rates described above.  We also pay commissions for substandard risk and rider Premiums based on our rules at the time of payment.
Under the Distribution Agreement with Sunset Financial, we pay the following sales expenses:  deferred compensation and insurance benefits of registered persons; 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 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 Contract Owners or the Variable Account.  However, commissions and other incentives or payments described above are reflected in the fees and charges that Contract Owners do pay directly or indirectly.

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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:
•
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 Contract 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 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 for normal trading (currently, 3:00 p.m. Central Time), 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 for normal trading, 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 five 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.
LITIGATION
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.
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.
CYBER SECURITY AND BUSINESS CONTINUITY RISKS

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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 cyber-attacks.  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 cyber-attacks 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 cyber-attacks 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.  Cyber security 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 cyber-attacks or information security breaches in the future.
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.

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
Kansas City Life's financial statements and the financial statements for the Variable Account are included in the Statement of Additional Information.
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.

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DEFINITIONS

Accumulation Unit
An accounting unit used to measure the net investment results of each of the Subaccounts.
   
Additional Insurance Amount
The amount of insurance coverage under the Contract which is not part of the Specified Amount.  The Guaranteed Minimum Death Benefit Option, if elected, does not guarantee the Additional Insurance Amount.
   
Age
The Age of each Insured on their last birthday as of each Contract Anniversary.  The Contract is issued at the Age shown in the Contract.
   
Allocation Date
The date we apply the initial Premium to your Contract.  We allocate this Premium to the Federated Government Money Fund II Subaccount where it remains until the Reallocation Date.  The Allocation Date is the later of the date we approve your application or the date we receive the initial Premium at our Home Office.
   
Beneficiary
The person you have designated to receive any Proceeds payable at the death of the last surviving Insured.
   
Cash Surrender Value
The Contract Value less any applicable surrender charge and any Loan Balance.
   
Contract Anniversary
The same day and month as the Contract Date each year that the Contract remains in force.
   
Contract Date
The date on which coverage takes effect.  Contract Months, Years and Anniversaries are measured from the Contract Date.
   
Contract Value
Measure of the value in your Contract.  It is the sum of the Variable Account Value and the Fixed Account Value which includes the Loan Account Value.
   
Contract Year
Any period of twelve months starting with the Contract Date or any Contract Anniversary.
   
Corridor Death Benefit
A death benefit under the Contract designed to ensure that in certain situations the Contract will not be disqualified as a life insurance contract under section 7702 of the Internal Revenue Code, as amended.  The Corridor Death Benefit is calculated by multiplying the Contract Value by the applicable corridor percentage.
   
Coverage Options
Death benefit options available which affect the calculation of the death benefit.  Three Coverage Options (A, B or L) are available.
   
Death Proceeds
The amount of Proceeds payable upon the death of the last surviving Insured.
   
Fixed Account Value
Measure of value accumulating in the Fixed Account.
   
Grace Period
A 61-day period we provide when there is insufficient value in your Contract and at the end of which the Contract will terminate unless you pay sufficient additional Premium.  This period of time gives you the chance to pay enough Premiums to keep your Contract in force.
   
Guaranteed Minimum Death Benefit Option
An optional benefit, available only at issue of the Contract.  If elected, it guarantees payment of the Specified Amount less the Loan Balance and any past due charges upon the death of the last surviving Insured, provided you meet the Guaranteed Minimum Death Benefit Option Premium requirement.
   
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Guaranteed Minimum Death Benefit Option Premium
The amount we require to guarantee that the Guaranteed Minimum Death Benefit Option remains in effect.
   
Guaranteed Monthly Premium
A Premium amount which when paid guarantees that your Contract will not lapse during the Guaranteed Payment Period.
   
Guaranteed Payment Period
The period of time during which we guarantee that your Contract will not lapse if you pay the Guaranteed Monthly Premiums.
   
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.
   
Insureds
The two persons whose lives we insure under the Contract.
   
Loan Account
The Loan Account is used to track loan amounts and accrued interest on the loan.  It is part of the Fixed Account.
   
Loan Account Value
Measure of the amount of Contract Value assigned to the Loan Account.
   
Loan Balance
The sum of all outstanding Contract loans plus accrued interest.
   
Maturity Date
The date when death benefit coverage terminates and we pay you any Cash Surrender Value.
   
Monthly Anniversary Day
The day of each month as of which we make the Monthly Deduction.  It is 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.
   
Monthly Deduction
The amount we deduct from the Contract Value to pay the cost of insurance charge, monthly expense charges, any applicable Guaranteed Minimum Death Benefit Option charge, and any charges for optional benefits and/or riders.  We make the Monthly Deduction as of each Monthly Anniversary Day.
   
Net Investment Factor
An index used to measure Subaccount performance.
   
Owner, You, Your
The person entitled to exercise all rights and privileges of the Contract.
   
Planned Premiums
The amount and frequency of Premiums you chose to pay in your last instructions to us.  This is the amount we will bill you.  It is only an indication of your preferences of future Premiums.
   
Premium Expense Charges
The amounts we deduct from each Premium which include the Sales Charge and the Premium Tax Charge.
   
Premium(s)/Premium Payment(s)
The amount you pay to purchase the Contract.  It includes both Planned Premiums and Unscheduled Premiums.
   
Proceeds
The total amount we are obligated to pay.
   
Reallocation Date
The date as of which the Contract Value we initially allocated to the Federated Government Money Fund II Subaccount on the Allocation Date is re-allocated to the Subaccounts and/or to the Fixed Account.  We re-allocate the Contract Value based on the premium allocation percentages you specify in the application.  The Reallocation Date is 30 days after the Allocation Date.
   
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Specified Amount
The Total Sum Insured less any Additional Insurance Amount provided under the Contract.
   
Subaccounts
The divisions of the Variable Account.  The assets of each Subaccount are invested in a corresponding portfolio of a designated mutual fund.
   
Subaccount Value
Measure of the value in a particular Subaccount.
   
Total Sum Insured
The sum of the Specified Amount and any Additional Insurance Amount provided under the Contract.  This amount does not include any additional benefits provided by riders.
   
Unscheduled Premium
Any Premium other than a Planned Premium.
   
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 at 3 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.
   
We, Our, Us, Kansas City Life
Kansas City Life Insurance Company
   
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.
 
 
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APPENDIX A

Surrender Charge Percentages of Initial Surrender Charge Factor

Surrender Charge Percentages of Initial Surrender Charge Factors End of Contract Year
Do not grade between Years 10-11
   
Year
Percentage
   
1
100%
2
87%
3
79%
4
70%
5
60%
6
50%
7
40%
8
30%
9
20%
10
10%
11+
0%


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STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


The Statement of Additional Information contains additional information about the Variable Account and Kansas City Life, including more information concerning compensation paid for the sale of Contracts.  To learn more about the Contract, you should read the Statement of Additional Information dated the same date as this Prospectus.  You may obtain a copy of the Statement of Additional Information, personalized illustrations of death benefits, net cash surrender values and cash values, without charge, by calling 1-800-616-3670 or by writing to us at Kansas City Life Insurance Company, 3520 Broadway, P.O. Box 219364, Kansas City, Missouri 64121-9364.

The Statement of Additional Information has been filed with the SEC and is incorporated by reference into this Prospectus and is legally a part of this Prospectus.  The SEC maintains an Internet website (http://www.sec.gov) that contains the Statement of Additional Information and other information about us and the Contract.

Investment Company Act of 1940 Registration File No. 811-09080

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Kansas City Life Insurance Company

3520 Broadway

P.O. Box 219364

Kansas City, Missouri 64121-9364

(800) 616-3670


Statement of Additional Information

Kansas City Life Variable Life Separate Account

Flexible Premium Survivorship Variable Universal Life Insurance Contract

This Statement of Additional Information contains information in addition to the information described in the Prospectus for the flexible premium survivorship variable universal life insurance contract (the "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. 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, 2020.
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

GENERAL INFORMATION AND HISTORY ABOUT KANSAS CITY LIFE
Established in 1895 in Kansas City, Missouri, Kansas City Life Insurance Company serves policyholders in 49 states (New York is excluded) and the District of Columbia.  Kansas City Life offers a wide variety of product lines that include universal life, term life, whole life, annuities, and group products.  The company and its subsidiaries reach a wide range of markets with financial services that include insurance and investments.
ADDITIONAL CONTRACT INFORMATION
SPECIALIZED USES OF THE CONTRACT
Because the Contract provides for an accumulation of cash value as well as a death benefit, the Contract can be used for various individual and business financial planning purposes. Purchasing the Contract in part for such purposes entails certain risks. For example, if the investment performance of Subaccounts to which Variable Account Value is allocated is poorer than expected or if sufficient Premiums are not paid, the Contract may lapse or may not accumulate enough value to fund the purpose for which you purchased the Contract. Partial surrenders and Contract loans may significantly affect current and future values and Proceeds. A loan may cause a Contract to lapse, depending upon Subaccount investment performance and the amount of the loan. Before purchasing a Contract for a specialized purpose, you should consider whether the long-term nature of the Contract is consistent with the purpose for which you are considering it. Using a Contract for a specialized purpose may have tax consequences. (See “TAX CONSIDERATIONS” in the Prospectus.)
INCONTESTABILITY
After the Contract has been in force during the Insureds’ lifetime for two years from the Contract Date, we may not contest it unless it lapses.
We will not contest any increase in the Additional Insurance Amount after the increase has been in force during the Insureds’ lifetime for two years following the effective date of the increase (we will not contest any increase in the Specified Amount in Wyoming) unless the Contract lapses.
If a Contract lapses and is reinstated, we cannot contest the reinstated Contract after it has been in force during the Insureds’ lifetime for two years from the date of the reinstatement application unless the Contract lapses.
SUICIDE EXCLUSION
If either Insured dies by suicide, while sane or insane, within two years of the Contract Date (one year in Colorado, Missouri, and North Dakota), the amount payable will be equal to the Contract Value less any Loan Balance.
If either Insured dies by suicide, while sane or insane, within two years after the effective date of any increase in the Additional Insurance Amount (one year in Colorado, Missouri, and North Dakota), the amount payable associated with such increase will be limited to the cost of insurance charges associated with the increase.
MISSTATEMENT OF AGE OR SEX
If it is determined that the Age or sex of the Insured as stated in the Contract is not correct, while the Contract is in force and either or both the Insureds’ are alive, we will adjust the Contract Value. The adjustment will be the difference between the following amounts accumulated at 4% interest annually (unless otherwise required by state law). The two amounts are:
•
the cost of insurance deductions that have been made; and
•
the cost of insurance deductions that should have been made.
If after the death of the last surviving Insured while this Contract is in force, it is determined the Age or sex of either Insured as stated in the Contract is not correct, the death benefit will be the net amount at risk that the most recent cost of insurance deductions at the correct Age and sex would have provided plus the Contract Value on the date of death (not applicable in Indiana).
ASSIGNMENT
You may assign the Contract in accordance with its terms. In order for any assignment to bind us, it must be in writing and filed at the Home Office. When we receive a signed copy of the assignment, your rights and the interest of any Beneficiary (or any other person) will be subject to the assignment. We assume no responsibility for the validity or sufficiency of any assignment. An assignment is subject to any Loan Balance. We will send notices to any assignee we have on record
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concerning amounts required to be paid during a Grace Period in addition to sending these notices to you. An assignment may have tax consequences.
REDUCED CHARGES FOR ELIGIBLE GROUPS
We may reduce the sales and 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 Contract holder.
ADDITIONAL PREMIUM INFORMATION
GENERALLY
Premium Payments must be made by check payable to Kansas City Life Insurance Company or by any other method that Kansas City Life deems acceptable. Kansas City Life may specify the form in which a Premium Payment must be made in order for the Premium to be in “good order.” Ordinarily, a check will be deemed to be in good order upon receipt, although Kansas City Life may require that the check first be converted into federal funds. In addition, for a Premium to be received in “good order,” it must be accompanied by all required supporting documentation, in whatever form required.
PLANNED PREMIUM PAYMENTS
Each Premium after the initial Premium must be at least $25. Kansas City Life may increase this minimum limit 90 days after sending the Owner a Written Notice of such increase. Subject to the limits described in the Prospectus, the Owner can change the amount and frequency of Planned Premium Payments by sending Written Notice to the Home Office. Kansas City Life, however, reserves the right to limit the amount of a Premium Payment or the total Premiums paid, as discussed in the Prospectus.
PREMIUM PAYMENTS TO PREVENT LAPSE
Failure to pay Planned Premium Payments will not necessarily cause a Contract to lapse. Conversely, paying all Planned Premium Payments will not guarantee that a Contract will not lapse. The conditions that will result in the Owner’s Contract lapsing will vary, as follows, depending on whether a Guaranteed Payment Period is in effect.
•
During the Guaranteed Payment Period. A grace period starts if on any Monthly Anniversary Day the Cash Surrender Value is less than the amount of the Monthly Deduction and the accumulated Premiums paid as of the Monthly Anniversary Day are less than required to guarantee the Contract will not lapse during the Guaranteed Payment Period.  The Premium required to keep the Contract in force will be an amount equal to the lesser of:  (1) the amount to guarantee the Contract will not lapse during the Guaranteed Payment Period less the accumulated Premiums paid; and (2) an amount sufficient to provide a cash surrender value equal to three Monthly Deductions.
•
After the Guaranteed Payment Period. A grace period starts if the Cash Surrender Value on a Monthly Anniversary Day will not cover the Monthly Deduction. A Premium sufficient to provide a cash surrender value equal to three Monthly Deductions must be paid during the grace period to keep the Contract in force.
UNDERWRITING REQUIREMENTS
Kansas City Life currently places Insureds into one of the four risk classes, based on underwriting:  Preferred Tobacco, Standard Tobacco, Standard Non-tobacco, or Preferred Non-tobacco.  An Insured may be placed in a substandard risk class, which involves a higher mortality risk than the Standard Tobacco or Standard Non-tobacco classes.  In an
Page 2
otherwise identical Contract, an Insured in the standard risk class will have a lower cost of insurance rate than an Insured in a substandard risk class.  The available Issue Ages are 20-85 for all rate classes.
•
Non-Tobacco Insureds will generally incur lower cost of insurance rates than Insureds who are classified as Preferred Tobacco or Standard Tobacco.  If an Insured does not qualify as a non-tobacco cost of insurance rates will remain as shown in the Contract. However, if the Insured does qualify as a non-tobacco, the cost of insurance rates will be changed to reflect the non-tobacco classification.
•
We may place an Insured into a substandard risk class for a temporary period of time, due to occupation, avocation or certain types of health conditions.  We also may place an Insured into a substandard risk class permanently.  These permanent ratings can be reviewed after the policy has been inforce for 2 years.
SALE OF THE CONTRACT
Effective January 1, 2009, the Contract is no longer offered for sale.
We offer the Contracts to the public through Sunset Financial Services, Inc. (“Sunset Financial”).
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  64121-9364.  Sunset Financial is registered as a broker-dealer with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the “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
2017
$133,640.78
$133,640.78
2018
$138,852.99
$138,852.99
2019
$141,023.45
$141,023.45
* Includes sales compensation paid to registered persons of Sunset Financial.
PERFORMANCE DATA
YIELDS AND TOTAL RETURNS
From time to time, we may advertise or include in sales literature historical performance data, including yields, effective yields, and annual total returns for the Subaccounts. These figures are based on historical earnings and do not indicate or project future performance.  Effective yields and total returns for a Subaccount are based on the investment performance of the corresponding Portfolio of a Fund. A Portfolio’s performance reflects the Portfolio’s expenses. See the prospectuses for the Funds.
In advertising and sales literature, the performance of each Subaccount may be compared to the performance of other variable life insurance issuers in general or to the performance of particular types of variable life insurance investing in mutual funds, or investment series of mutual funds with investment objectives similar to each of the Subaccounts. Advertising and sales literature may also compare the performance of each Subaccount to the Standard & Poor’s Composite Index of 500 stocks, a widely used measure of stock performance. We may also report other information, including the effect of tax-deferred compounding on a Subaccount’s investment returns, or returns in general, which may be illustrated by tables, graphs, or charts. All income and capital gains derived from Subaccount investments are reinvested and can lead to substantial long-term accumulation of assets, provided that the underlying Portfolio’s investment experience is positive.
Page 3
Performance information reflects only the performance of a hypothetical investment during the particular time period on which the calculations are based. Average annual total return figures are based on historical earnings and are not intended to indicate future performance. Performance information should be considered in light of the investment objectives and policies, characteristics and quality of the underlying Portfolio in which a Subaccount invests and the market conditions during the given time period, and should not be considered as a representation of what may be achieved in the future.
You also should refer to your personalized illustrations, which illustrate variations of Contract Values, Cash Surrender Values and death benefits under your Contract.
MONEY MARKET SUBACCOUNT YIELDS
The current yield of the Federated Government Money Fund II (“Money Market Subaccount”) refers to the annualized investment income generated by an investment in the Money Market Subaccount over a specified seven-day period. The yield is calculated by assuming that the income generated for that seven-day period is generated each seven-day period over a 52-week period and is shown as a percentage of the investment; it is calculated in a manner which does not take into consideration any realized or unrealized gains or losses or income other than investment income on shares of the underlying Portfolio 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 Accumulation Unit in the Money Market Subaccount at the beginning of the period, dividing the net change in Money Market Subaccount 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: (1) net investment income of the Portfolio attributable to the hypothetical account; and (2) “common” charges and deductions (as explained below) imposed under the Contract which are attributable to the hypothetical account.
The effective yield of the Money Market Subaccount determined on a compounded basis for the same seven-day period may also be quoted.  The effective yield is calculated similarly but, when annualized, the income earned by an investment in the Subaccount is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment.
The Money Market Subaccount’s yield is affected by changes in interest rates on money market securities, the average portfolio maturity of the underlying Portfolio, the types of quality of portfolio securities held by the underlying Portfolio, and the underlying Portfolio’s operating expenses. During extended periods of low interest rates, the yields of the Money Market Subaccount (or any Subaccount investing in a money market portfolio) may also become extremely low and possibly negative. Yields on amounts held in the Money Market Subaccount may also be presented for periods other than a seven-day period.
TOTAL RETURNS
The total return of a Subaccount refers to return quotations assuming an investment under a Contract has been held in the Subaccount for various periods of time including, but not limited to, a period measured from the date the Subaccount commenced operations. For periods prior to the date a Subaccount commenced operations, performance information for Contracts funded by that Subaccount may also be calculated based on the performance of the corresponding Portfolio and the assumption that the Subaccount was in existence for the same periods as those indicated for the Portfolio, with the current level of Contract charges.  The average annual total return quotations represent the average annual compounded rates of return that would equate an initial investment of $1,000 under a Contract to the value of that investment (reflecting only Common Charges, as described below) as of the last day of each of the periods for which total return quotations are provided. The ending date for each period for which total return quotations are provided will normally be for the most recent calendar quarter, considering the type and media of the communication and will be stated in the communication. Average annual total return information shows the average percentage change in the value of an investment in the Subaccount from the beginning date of the measuring period to the end of that period.
Until a Subaccount has been in operation for 1, 5, and 10 years, respectively, we will include quotes of average annual total return for the period measured from the Subaccount’s inception. When a Subaccount has been in operation for 1, 5, and 10 years, respectively, the average annual total return for these periods will be provided. Average annual total returns for other periods of time may, from time to time, also be disclosed. Average annual total return for the Subaccounts may include information for the period before any policies were registered under the Securities Act of 1933, from the inception of the Subaccounts, with the level of Contract charges currently in effect.
Page 4
Average annual total returns reflect total underlying Portfolio expenses and certain Contract fees and charges assumed to apply to all Contract owners, including the mortality and expense risk charge (“Common Charges”).  However, charges such as cost of insurance charges, which are based on certain factors, such as the Insureds' age, sex, number of completed Contract years, Total Sum Insured, and risk class, and which therefore vary with each Contract, are not reflected in average annual total returns, nor are the Premium expense charge or any charges assessed on surrender, partial surrender, or transfer (“Non-Common Charges”). If Non-Common Charges were deducted, performance would be significantly lower.
Because of the charges and deductions imposed under a Contract, performance data for the Subaccounts will be lower than performance data for their corresponding Portfolios. The performance of a Subaccount will be affected by expense reimbursements and fee waivers applicable to the corresponding Portfolio. Without these reimbursements and waivers, performance would be lower.
Performance for any given past period is not an indication or representation of future performance. The performance of each Subaccount will fluctuate on a daily basis.
From time to time, sales literature or advertisements may also quote average annual total returns for periods prior to the date a Subaccount commenced operations. This performance information for the Subaccounts 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 average annual total returns for the underlying Funds that reflect all underlying Fund fees and expenses, but do not reflect the deduction of Contract-level expenses (either Common Charges or Non-Common Charges).  Because of the charges and deductions imposed under the Contract, performance data for the Subaccounts will be lower than performance data for their corresponding Funds.
OTHER INFORMATION
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 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 accompanying prospectuses of the Funds for more information.
MINIMUM GUARANTEED AND CURRENT INTEREST RATES
We guarantee to credit the Fixed Account Value with a minimum 4% effective annual interest rate. We intend to credit the Fixed Account Value with current interest rates in excess of the 4% minimum, but we are not obligated to do so. Current interest rates are influenced by, but don’t necessarily correspond to, prevailing general market interest rates. We will determine current interest rates. You assume the risk that the interest we credit may not exceed the guaranteed rate. Since we anticipate changing the current interest rate from time to time, we will credit different allocations with different interest rates, based upon the date amounts are allocated to the Fixed Account. We may change the interest rate credited to allocations from Premiums or new transfers at any time. We will not change the interest rate more than once a year on amounts in the Fixed Account.
For the purpose of crediting interest, we currently account for amounts deducted from the Fixed Account on a last-in, first-out (“LIFO”) method. We may change the method of crediting from time to time, provided that such changes do not have the effect of reducing the guaranteed rate of interest below 4%.  We may also shorten the period for which the interest rate applies to less than a year (except for the year in which an amount is received or transferred).
Page 5
LEGAL CONSIDERATIONS RELATING TO SEX-DISTINCT PREMIUMS AND BENEFITS.
Cost of insurance rates for Contracts generally distinguish between males and females. Thus, Premiums and benefits under Contracts covering males and females of the same Age will generally differ. (In some states, the cost of insurance rates don't vary by sex.)
We also offer Contracts that don’t distinguish between male and female rates where required by state law. Employers and employee organizations considering purchase of a Contract should consult with their legal advisers to determine whether purchase of a Contract based on sex-distinct cost of insurance rates is consistent with Title VII of the Civil Rights Act of 1964 or other applicable law. We will make available to such prospective purchasers Contracts with cost of insurance rates that don’t distinguish between males and females.
REPORTS TO CONTRACT OWNERS
At least once each Contract Year, we will send you a report showing updated information about the Contract since the last report, including any information required by law. We will also send you an annual and semi-annual report for each Fund or Portfolio underlying a Subaccount to which you have allocated Contract Value. This will include a list of the securities held in each Fund, as required by the 1940 Act. In addition, we will send you written confirmation of all Contract transactions.
EXPERTS
The consolidated financial statements of Kansas City Life Insurance Company as of December 31, 2019 and 2018 and for each of the years in the four-year period ended December 31, 2019; the statement of net assets of the Kansas City Life Variable Life Separate Account (Variable Account) as of December 31, 2019, 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 four-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.
LEGAL MATTERS
Eversheds Sutherland (US) LLP of Washington, D.C. has provided legal advice on certain matters relating to the federal securities laws. A. Craig Mason Jr., General Counsel of Kansas City Life has passed on matters of Missouri law pertaining to the Contracts, including our right to issue the Contracts and our qualification to do so under applicable laws and regulations.
ADDITIONAL INFORMATION
We have filed a registration statement under the Securities Act of 1933 with the SEC relating to the offering described in this prospectus. This Prospectus does not include all the information set forth in the registration statement. The omitted information may be obtained at the SEC's principal office in Washington, D.C. by paying the SEC's prescribed fees.
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, 2019 and 2018; 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, 2019.
The following financial statements for the Variable Account are included in this Statement of Additional Information:
•
statement of net assets as of December 31, 2019; and
•
related statement of operations for the period or year ended December 31, 2019, statements of changes in net assets for each of the periods or years in the two-year period ended December 31, 2019, and financial highlights for each of the periods or years in the five-year period ended December 31, 2019.
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
Page 6
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.
Page 7
Financial Information
Amounts in thousands, except share data, security counts, claims counts, or as otherwise noted.

Kansas City Life Insurance Company
Consolidated Balance Sheets
   
December 31
  
   
2019
    
2018
  
ASSETS
            
Investments:
            
Fixed maturity securities available for sale, at fair value
    (amortized cost: 2019 - $2,776,856; 2018 - $2,693,860)
  
$
2,951,137
    
$
2,704,079
  
Equity securities, at fair value
    (cost: 2019 - $10,614; 2018 - $14,614)
    
11,272
      
14,424
  
Mortgage loans
    
577,699
      
639,559
  
Real estate
    
183,016
      
186,994
  
Policy loans
    
87,499
      
88,066
  
Short-term investments
    
75,426
       58,172
  
Other investments
    
9,156
       5,355
  
Total investments
    
3,895,205
      
3,697,189
  
                 
Cash
     14,234
       31,689
  
Accrued investment income
    
32,142
      
31,535
  
Deferred acquisition costs
    
286,682
      
291,168
  
Reinsurance recoverables
    
378,772
       366,196
  
Other assets
     181,629
       179,975
  
Separate account assets
     431.201
       373,734
  
Total assets
  
$
 5,219,865
    
$
4,971,486
  
                 
LIABILITIES
                
Future policy benefits
  
$
1,331,215
    
$
1,279,034
  
Policyholder account balances
    
2,237,700
      
2,261,860
  
Policy and contract claims
    
55,997
      
47,274
  
Other policyholder funds
    
170,776
      
174,984
  
Other liabilities
    
182,245
      
142,894
  
Separate account liabilities
    
431,201
      
373,734
  
Total liabilities
    
4,409,134
      
4,279,780
  
                 
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
    
928,380
      
914,411
  
Accumulated other comprehensive income (loss)
    
59,506
   
(45,550
 )
Treasury stock, at cost (2018 and 2017 - 8,813,266 shares)
     (241,301
)
    
(241,301
)
Total stockholders’ equity
    
810,731
      
691,706
  
Total liabilities and stockholders’ equity
  
$
5,219,865
    
$
4,971,486
  

See accompanying Notes to Consolidated Financial Statements

Page 1
Kansas City Life Insurance Company
Consolidated Statements of Comprehensive Income

   
Year Ended December 31
   
2019
 
2018
    
2017
REVENUES
    
         
Insurance revenues:
        
       
Net premiums
  
$
223,227
   
$
193,593
      
$
179,936
  
Contract charges
  
125,886
   
116,916
      
114,028
  
Total insurance revenues
  
349,113
   
310,509
      
293,964
  
Investment revenues:
                
Net investment income
  
148,349
   
141,315
      
145,825
  
Net investment gains
  
9,133
   
2,840
      
4,555
  
Total investment revenues
  
157,482
   
144,155
      
150,380
  
Other revenues
  
6,098
   
6,368
      
6,413
  
Total revenues
  
512,693
   
461,032
      
450,757
  
                 
BENEFITS AND EXPENSES
                
Policyholder benefits
  
257,621
   
227,202
      
210,799
  
Interest credited to policyholder account balances
  
78,520
   
74,308
      
72,921
  
Amortization of deferred acquisition costs
  
35,948
   
40,616
      
34,770
  
Operating expenses
  
111,154
   
101,720
      
102,898
  
Total benefits and expenses
  
483,243
   
443,846
      
421,388
  
Income before income tax expense (benefit)
  
29,450
   
17,186
      
29,369
  
Income tax expense (benefit)
  
5,023
   
1,514
      
(22,172
)
NET INCOME
  
$
24,427
   
$
15,672
      
$
51,541
  
                 
COMPREHENSIVE INCOME (LOSS),
    NET OF TAXES
                
Changes in:
                
Net unrealized gains (losses) on
     securities available for sale
  
$
129,609
   
$
(65,062
)
    
$
788
  
Effect on deferred acquisition costs, value of business
     acquired, and deferred revenue liabilities
  
(11,608
 )
    
8,867
      
1,254
  
Policyholder liabilities
  
(15,987
 )
    
11,354
      
2,008
  
Benefit plan obligations
  
3,042
   
(5,823
)
    
6,439
  
Other comprehensive income (loss)
  
105,056
   
(50,664
)
    
10,489
  
                 
COMPREHENSIVE INCOME (LOSS)
  
$
129,483
   
$
(34,992
)
    
$
62,030
  
                 
Basic and diluted earnings per share:
                
Net income
  
$
2.52
   
$
1.62
      
$
5.32
  

See accompanying Notes to Consolidated Financial Statements

Page 2
Kansas City Life Insurance Company
Consolidated Statements of Stockholders’ Equity

 
Year Ended December 31
 
2019
  
2018
  
2017
           
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
914,411
    
908,022
    
868,054
  
Net income
24,427
    
15,672
    
51,541
  
Stockholder dividends (2019, 2018, and 2017 - $1.08 per share)
(10,458
)
  
(10,457
)
  
(10,458
)
Cumulative effect of adoption of new accounting principle
—
    
1,174
    
(1,115
)
End of year
928,380
    
914,411
    
908,022
  
           
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
          
Beginning of year
(45,550
)
  
6,288
    
(5,316
)
Other comprehensive income (loss)
105,056
    
(50,664
)
  
10,489
  
Cumulative effect of adoption of new accounting principle
—
    
(1,174
)
  
1,115
  
End of year
59,506
    
(45,550
)
  
6,288
  
           
TREASURY STOCK, at cost, beginning and end of year
(241,301
)
  
(241,301
)
  
(241,301
)
           
TOTAL STOCKHOLDERS’ EQUITY
$
810,731
    
$
691,706
    
$
737,155
  
See accompanying Notes to Consolidated Financial Statements

Page 3
Kansas City Life Insurance Company
Consolidated Statements of Cash Flows

 
Year Ended December 31
 
2019
  
2018
  
2017
OPERATING ACTIVITIES
          
Net income
$
24,427
    
$
15,672
    
$
51,541
  
Adjustments to reconcile net income to net cash provide
    by operating activities:
          
Amortization of investment premium and discount
3,321
    
3,453
    
3,026
  
Depreciation and amortization
8,367
    
5,802
    
5,727
  
Acquisition costs capitalized
(48,443
)
  
(43,389
)
  
(41,845
)
Amortization of deferred acquisition costs
35,948
    
40,616
    
34,770
  
Net investment gains
(9,133
)
  
(2,840
)
  
(4,555
)
Changes in assets and liabilities:
          
Reinsurance recoverables
(12,576
)
  
52,937
    
2,294
  
Future policy benefits
32,274
    
26,248
    
12,583
  
Policyholder account balances
(43,516
)
  
(32,096
)
  
(28,338
)
Income taxes payable and deferred
5,960
    
2,477
    
(25,741
)
Other, net
3,503
    
(3,798
)
  
5,054
  
Net cash provided
132
    
65,082
    
14,516
  
           
INVESTING ACTIVITIES
          
Purchases:
          
Fixed maturity securities
(342,477
)
  
(275,591
)
  
(332,552
)
Equity securities
—
    
(58
)
  
(45
)
Mortgage loans
(25,036
)
  
(65,557
)
  
(105,354
)
Real estate
(1,975
)
  
(7,282
)
  
(5,304
)
Policy loans
(10,969
)
  
(9,469
)
  
(11,006
)
Other investments
(2,712
)
  
(2,074
)
  
(1,242
)
Property and equipment
(2,379
)
  
(20,448
)
  
(2,289
)
Sales or maturities, calls, and principal paydowns:
          
Fixed maturity securities
263,411
    
307,167
    
326,923
  
Equity securities
4,000
    
824
    
4,075
  
Mortgage loans
87,157
    
75,636
    
85,891
  
Real estate
3,084
    
12,734
    
2,205
  
Policy loans
11,535
    
11,685
    
12,722
  
Other investments
2,176
    
2,712
    
1,786
  
Property and equipment
5,572
    
932
    
415
  
Net purchases of short-term investments
(16,714
)
  
(12,930
)
  
(4,669
)
Acquisition of Grange Life, net of cash acquired
—
    
(62,447
)
  
—
  
Receipts from post-acquisition purchase price adjustments
1,663
    
—
    
—
  
Net cash used
(23,664
)
  
(44,166
)
  
(28,444
)

Page 4
Kansas City Life Insurance Company
Consolidated Statements of Cash Flows (Continued)

 
Year Ended December 31
 
2019
  
2018
  
2017
FINANCING ACTIVITIES
          
Deposits on policyholder account balances
$
223,058
    
$
217,344
    
$
226,313
  
Withdrawals from policyholder account balances
(207,242
)
  
(206,444
)
  
(203,249
)
Net transfers from separate accounts
3,500
    
4,386
    
5,625
  
Change in other deposits
(2,666
)
  
(3,560
)
  
(4,429
)
Cash dividends to stockholders
(10,458
)
  
(10,457
)
  
(10,458
)
Post-acquisition contingent liability fulfillment
(115
)
  
—
    
—
  
Net cash provided
6,077
    
1,269
    
13,802
  
           
Increase (decrease) in cash
(17,455
)
  
22,185
    
(126
)
Cash at beginning of year
31,689
    
9,504
    
9,630
  
Cash at end of year
$
14,234
    
$
31,689
    
$
9,504
  

See accompanying Notes to Consolidated Financial Statements
Page 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 four life insurance companies.  Kansas City Life Insurance Company (Kansas City Life) is the parent company.  Sunset Life Insurance Company of America (Sunset Life), Old American Insurance Company (Old American), and Grange Life Insurance Company (Grange Life) are wholly-owned insurance subsidiaries.  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 18 - 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, principally Sunset Life, Old American, and Grange Life.  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.
Business Changes
There were no business changes during 2019.
In October 2018, the Company acquired all of the issued and outstanding stock of Grange Life Insurance Company from Grange Mutual Casualty Company, for approximately $75 million, subject to certain adjustments under the terms of the agreement.  For additional information regarding the acquisition of Grange Life, please see Note 2 - Acquisition.

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 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.

Page 6
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
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 4 - Investments for additional discussion of our considerations related to other-than-temporary impairments.  For additional information regarding fair value, please see Note 5 - Fair Value Measurements.
Equity securities are carried at fair value.  Beginning with the adoption of Accounting Standards Update (ASU) No. 2016-01 on January 1, 2018, changes in the fair value of equity securities are recognized through net income.  Prior to January 1, 2018, unrealized gains or losses were recorded in accumulated other comprehensive income (loss).
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 Consolidated Balance Sheets.  The value of the reserves will fluctuate depending on market conditions.  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.

Page 7
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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.
 
2019
  
2018
Life insurance
$
1,004,148
    
$
976,310
  
Immediate annuities and supplementary
   contracts with life contingencies
292,590
    
267,343
  
Accident and health insurance
34,477
    
35,381
  
Future policy benefits
$
1,331,215
    
$
1,279,034
  
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.
Crediting rates for universal life insurance and fixed annuity products ranged from 1.00% to 5.50% in 2019, 2018, and 2017.
The following table provides detail about the composition of policyholder account balances at December 31.
 
2019
  
2018
Universal life insurance
$
1,087,984
    
$
1,086,286
  
Fixed annuities
1,096,588
    
1,122,776
  
Immediate annuities and supplementary
   contracts without life contingencies
53,128
    
52,798
  
Policyholder account balances
$
2,237,700
    
$
2,261,860
  

Page 8
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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.
 
2019
  
2018
Balance at beginning of year
$
291,168
    
$
277,182
  
Capitalization of commissions and expenses
48,443
    
43,389
  
Gross amortization
(48,375
)
  
(53,251
)
Accrual of interest
12,427
    
12,635
  
Change in DAC due to the change in unrealized
    investment gains or losses
(16,981
)
  
11,213
  
Balance at end of year
$
286,682
    
$
291,168
  
Value of Business Acquired
The concept of VOBA is no longer applied to business combinations.  Rather, 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 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.

Page 9
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

The following table provides information about VOBA at December 31.
 
2019
  
2018
Balance at beginning of year
$
20,306
    
$
20,297
  
Gross amortization
(4,230
)
  
(4,875
)
Accrual of interest
1,097
    
1,286
  
Change in VOBA due to the change in unrealized
    investment gains or losses
(4,643
)
  
3,598
  
Balance at end of year
$
12,530
    
$
20,306
  
Interest accrued on the VOBA of one block of business was at the rates of 4.21% 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 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 at December 31, 2019 was $42.3 million.  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, 2019.
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 $20.0 million at December 31, 2019 and $21.1 million at December 31, 2018 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 totaled $37.7 million at December 31, 2019 and $41.6 million at December 31, 2018.  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 could 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 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.

Page 10
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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
2019:
              
          Unlocking
$
(350
)
  
$
(538
)
  
$
763
    
$
(125
)
          Refinement in estimate
708
    
—
    
17
    
725
  
 
$
358
    
$
(538
)
  
$
780
    
$
600
  
               
 
DAC Amortization
  
VOBA Amortization
  
DRL Contract Charges
  
Net Impact to Pre-Tax Income
2018:
              
          Unlocking
$
(884
)
  
$
(644
)
  
$
920
    
$
(608
)
          Refinement in estimate
71
    
—
    
—
    
71
  
 
$
(813
)
  
$
(644
)
  
$
920
    
$
(537
)
               
 
DAC Amortization
  
VOBA Amortization
  
DRL Contract Charges
  
Net Impact to Pre-Tax Income
2017:
              
          Unlocking
$
(344
)
  
$
(1,246
)
  
$
(46
)
  
$
(1,636
)
          Refinement in estimate
(1,378
)
  
—
    
2,004
    
626
  
 
$
(1,722
)
  
$
(1,246
)
  
$
1,958
    
$
(1,010
)
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.  The unlocking in 2018 primarily resulted from interest rate fluctuations.  The unlocking and refinements in 2017 were primarily driven by low interest rates and the implementation of specific cost of insurance charges for certain plans.  In addition, we recorded a $0.2 million reserve decrease in 2019, a $0.2 million reserve increase in 2018, and a $0.3 million reserve increase in 2017 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 policy holder benefits, was an increase of $4.1 million in 2019, a decrease of $0.7 million in 2018, and a decrease of $1.3 million in 2017.
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 13 - 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

Page 11
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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.
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 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 5 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 15 - 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 two 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.
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 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.
 
2019
  
2018
Land
$
766
    
$
766
  
Home office complex
21,562
    
21,126
  
Furniture and equipment
35,373
    
38,050
  
 
57,701
    
59,942
  
Accumulated depreciation
(35,198
)
  
(31,958
)
Property and equipment
$
22,503
    
$
27,984
  
Depreciation expense totaled $2.5 million during 2019, $1.8 million during 2018, and $1.5 million during 2017.

Page 12
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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.  Certain assumptions, such as interest spreads and surrender rates, may be interrelated, and unlocking adjustments often reflect revisions to multiple assumptions.  In addition, we may also consider refinements in estimates for other unusual or one-time occurrences, such as administrative or actuarial system upgrades.  These items are applied to the appropriate financial statement line items, similar to unlocking adjustments.
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, 2019 and December 31, 2018 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.
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.
On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (TCJA), which significantly changed the existing U.S. tax laws, including a reduction in the corporate tax rate from 35% to 21%, as well as other changes.  As a result of enactment of the legislation, the Company incurred an additional one-time tax expense increase during the fourth quarter of 2018, primarily related to the remeasurement of certain deferred tax assets and liabilities.  The change in tax as a result of tax reform was a $30.5 million benefit and a $0.3 million expense as of December 31, 2017 and December 31, 2018, respectively.  For additional information, please see Note 12 - Income Taxes.
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


Page 13
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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. Acquisition
On October 1, 2018, the Company acquired all of the issued and outstanding stock of Grange Life Insurance Company (Grange Life) from Grange Mutual Casualty Company, for approximately $75 million, subject to certain adjustments under the terms of the agreement.  Additionally, the agreement provides for performance-related contingent consideration based on certain future revenues of both Grange Life and the Company over a three-year period from the closing date.
The purchase price was reduced $1.7 million during 2019 to settle certain items under the terms of the agreement.  Management established a contingent commission expense liability of $1.0 million during 2019, resulting in a total purchase price of approximately $74 million.
The acquisition resulted in goodwill, which is included in Other Assets in the Consolidated Balance Sheets.  Goodwill was valued at  $43.0 million at December 31, 2018.  During 2019, goodwill was reduced $0.7 million, the net of the purchase price adjustments mentioned above, resulting in a balance of $42.3 million at December 31, 2019.  None of the goodwill is expected to be deductible for tax purposes.
The acquisition 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 $20.0 million at December 31, 2019 and $21.1 million at December 31, 2018 and is included in Other Assets in the Consolidated Balance Sheets.
Grange Life is domiciled in the state of Ohio and is licensed in 15 states to sell traditional life insurance, universal life products, and fixed annuities.  The Ohio Department of Insurance approved the transaction.  The acquisition of Grange Life expanded our existing block of business and our insurance sales through access to a wider distribution network of independent agents.

Page 14
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

Grange Life is included in the Individual Insurance segment.  The following table presents the Grange Life assets and liabilities acquired on October 1, 2018.  The pro forma combined revenue and earnings of the Company and Grange Life, and other disclosures as may be required, for the current reporting periods as though the acquisition date had been as of January 1, 2018 are not disclosed in this Annual Report.  The disclosure of this information is impracticable because Grange Life has not historically prepared GAAP financial statements.
Investments:
  
Fixed maturity securities available for sale, at fair value
$
288,150
  
Policy loans
12,106
  
Short-term investments
13,587
  
Total investments
313,843
  
   
Cash
12,073
  
Reinsurance recoverables
233,486
  
Other assets
39,658
  
Total assets
599,060
  
   
Future policy benefits:
  
Life insurance
311,351
  
Immediate annuities
1,368
  
Accident and health insurance
1,017
  
Policyholder account balances:
  
Universal life insurance
172,449
  
Fixed annuities
54,593
  
Policy and contract claims
8,849
  
Other liabilities
17,933
  
Total liabilities
567,560
  
   
Net assets acquired
$
31,500
  

The operating results of Grange Life were combined with our operating results subsequent to the acquisition date. Approximately $15.5 million of total revenues and $15.2 million of total benefits, expenses, and income taxes from Grange Life were included in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2018.

3. New Accounting Pronouncements
Accounting Pronouncements Adopted During 2019
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02 Leases (Topic 842).  Topic 842 includes a lessee model that requires most leases to be reported on the balance sheet.  This guidance, including subsequently issued amendments, became effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years.  We adopted this guidance effective January 1, 2019 with no material impact to our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04 Simplifying the Test for Goodwill Impairment.  This update simplified the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test.  Under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.  This update also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment.  This guidance is effective for fiscal years beginning after December 15, 2020, with early adoption allowed.  We early-adopted this guidance effective January 1, 2019 with no material impact to our consolidated financial statements.

Page 15
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

In March 2017, the FASB issued ASU No. 2017-08 Premium Amortization on Purchased Callable Debt Securities.  The amortization period for premiums is being shortened to the earliest call date.  This guidance became effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.  We adopted this guidance effective January 1, 2019 with no material impact to our consolidated financial statements.
Accounting Pronouncements Issued, Not Yet Adopted
In June 2016, the FASB issued 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 our 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 investments 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, was for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years.  In November 2019, the FASB deferred the effective date of this guidance 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 focuses on improving the timeliness of recognizing changes in the liability for future policy benefits and requires that the discount rate assumption be updated at each reporting date.  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.  It also simplifies the amortization of deferred acquisition costs by requiring amortization on a constant level basis over the expected term of the related contracts.  The original effective date for this guidance was for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.  In November 2019, the FASB deferred the effective date of this guidance to fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.  We are currently evaluating this guidance.
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.  The Company adopted this guidance effective January 1, 2020.  The guidance will not impact our earnings or financial position as the modifications only impact disclosures.
In August 2018, the FASB issued ASU No. 2018-14 Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.  This update modifies the disclosure requirements in ASC Subtopic 715-20 Compensation - Retirement Benefits - Defined Benefit Plans for employers that sponsor defined benefit pension or other postretirement plans.  Specific fair value measurement disclosure requirements are removed, added, or clarified.  This guidance is effective for fiscal years ending after December 15, 2020.  We are currently evaluating this guidance.  However, it will not impact our earnings or financial position as the modifications only impact disclosures.
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.

Page 16
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

4. 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, 2019.
     
Amortized Cost
    
Gross
Unrealized
    
Fair
Value
  
       
Gains
    
Losses
      
U.S. Treasury securities and                                
obligations of U.S. Government
  
$
180,659
    
$
 11,666
    
$
 19
    
$
192,306
  
Federal agencies 1
     1,379
       107
      
—
       1,486
  
Federal agency issued residential                                
mortgage-backed securities 1
    
107,865
       8,491
       53
      
116,303
  
Subtotal
    
289,903
       20,264
       72
       310,095
  
Corporate obligations:
                                
Industrial
    
438,868
       22,366
      
79
      
461,155
  
Energy
    
162,863
       11,627
       6
      
174,484
  
Communications and technology
    
231,255
       17,265
       5
      
248,515
  
Financial
     365,621
       21,775
       454
       386,942
  
Consumer
     653,215
       31,352
       348
       684,219
  
Public utilities
    
288,736
       20,807
       383
       309,160
  
Subtotal
    
2,140,558
       125,192
       1,275
      
2,264,475
  
Corporate private-labeled residential                                
mortgage-backed securities
     18,420
      
1,844
      
—
      
20,264
  
Municipal securities
    
240,057
       28,303
      
165
      
268,195
  
Other
     76,417
       1,059
       1,444
       76,032
  
Redeemable preferred stocks
    
11,501
       575
       —       12,076
  
Total
    $
2,776,856
      $ 177,237
     $
2,956
      $
2,951,137
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.

Page 17
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, 2018.
     
Amortized Cost
    
Gross
Unrealized
    
Fair
Value
  
       
Gains
    
Losses
      
U.S. Treasury securities and                                
obligations of U.S. Government
  
$
179,208
    
$
4,320
    
$
382
    
$
183,146
  
Federal agencies 1
    
2,326
      
64
      
—
      
2,390
  
Federal agency issued residential                                
mortgage-backed securities 1
    
108,943
      
4,120
      
146
      
112,917
  
Subtotal
    
290,477
      
8,504
      
528
      
298,453
  
Corporate obligations:
                                
Industrial
    
479,823
      
6,978
      
7,110
      
479,691
  
Energy
    
166,231
      
4,461
      
4,362
      
166,330
  
Communications and technology
    
247,487
      
5,655
      
3,810
      
249,332
  
Financial
    
293,089
      
3,731
      
7,446
      
289,374
  
Consumer
    
594,892
      
4,717
      
13,963
      
585,646
  
Public utilities
    
266,358
      
6,265
      
6,728
      
265,895
  
Subtotal
    
2,047,880
      
31,807
      
43,419
      
2,036,268
  
Corporate private-labeled residential                                
mortgage-backed securities
    
26,849
      
1,993
      
—
      
28,842
  
Municipal securities
    
246,815
      
16,557
      
1,693
      
261,679
  
Other
    
67,338
      
169
      
2,080
      
65,427
  
Redeemable preferred stocks
    
14,501
      
—
      
1,091
      
13,410
  
Total
    $
2,693,860
      $
59,030
     $
48,811
      $
2,704,079
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
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, 2019
  
December 31, 2018
 
Amortized Cost
  
Fair Value
  
Amortized Cost
  
Fair Value
Due in one year or less
$
131,443
    
$
132,475
    
$
118,311
    
$
119,083
  
Due after one year through five years
771,772
    
802,526
    
777,498
    
779,903
  
Due after five years through ten years
1,061,818
    
1,131,759
    
1,088,868
    
1,080,109
  
Due after ten years
593,664
    
649,790
    
493,252
    
502,078
  
Securities with variable principal payments
206,658
    
222,511
    
201,430
    
209,496
  
Redeemable preferred stocks
11,501
    
12,076
    
14,501
    
13,410
  
Total
$
2,776,856
    
$
2,951,137
    
$
2,693,860
    
$
2,704,079
  
Page 18
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 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

Page 19
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
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 $0.6 million impairment of this kind in the year ended December 31, 2019.  No impairments of this kind were recorded in the years ended December 31, 2018 or December 31, 2017.
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.  We identified 10 non-U.S. agency mortgage-backed securities that were determined to have such indications at December 31, 2019.  We identified 13 non-U.S. agency mortgage-backed securities that were determined to have such indications at December 31, 2018.  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.  An impairment 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.  No impairments of this kind were recorded in the years ended December 31, 2019 or December 31, 2018.  Impairments of this kind totaling less than $0.1 million were recorded in the year ended December 31, 2017.
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.
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.

Page 20
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, 2019.
 
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
$
6,249
      
$
10
    
$
8,778
    
$
9
    
$
15,027
    
$
19
  
Federal agency issued residential
    mortgage-backed securities 1
2,304
      
53
    
15
    
—
    
2,319
    
53
  
Subtotal
8,553
      
63
    
8,793
    
9
    
17,346
    
72
  
Corporate obligations:
                        
Industrial
6,116
      
54
    
3,066
    
25
    
9,182
    
79
  
Energy
3,078
      
6
    
—
    
—
    
3,078
    
6
  
Communications and technology
1,074
      
4
    
1,999
    
1
    
3,073
    
5
  
Financial
12,327
      
84
    
5,520
    
370
    
17,847
    
454
  
Consumer
22,540
      
273
    
8,975
    
75
    
31,515
    
348
  
Public utilities
21,795
      
249
    
5,224
    
134
    
27,019
    
383
  
Subtotal
66,930
      
670
    
24,784
    
605
    
91,714
    
1,275
  
                         
Municipal securities
12,328
      
165
    
—
    
—
    
12,328
    
165
  
Other
10,298
      
44
    
16,100
    
1,400
    
26,398
    
1,444
  
Total
$
98,109
      
$
942
    
$
49,677
    
$
2,014
    
$
147,786
    
$
2,956
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.

Page 21
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, 2018.
 
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
$
14,705
    
$
32
    
$
27,854
    
$
350
    
$
42,559
    
$
382
  
Federal agency issued residential
    mortgage-backed securities 1
922
    
5
    
7,135
    
141
    
8,057
    
146
  
Subtotal
15,627
    
37
    
34,989
    
491
    
50,616
    
528
  
Corporate obligations:
                      
Industrial
111,282
    
2,274
    
120,592
    
4,836
    
231,874
    
7,110
  
Energy
45,514
    
815
    
60,229
    
3,547
    
105,743
    
4,362
  
Communications and technology
65,157
    
1,057
    
51,688
    
2,753
    
116,845
    
3,810
  
Financial
59,036
    
1,122
    
115,355
    
6,324
    
174,391
    
7,446
  
Consumer
157,293
    
2,723
    
200,584
    
11,240
    
357,877
    
13,963
  
Public utilities
39,772
    
1,289
    
96,603
    
5,439
    
136,375
    
6,728
  
Subtotal
478,054
    
9,280
    
645,051
    
34,139
    
1,123,105
    
43,419
  
Municipal securities
9,329
    
78
    
46,655
    
1,615
    
55,984
    
1,693
  
Other
10,908
    
110
    
38,856
    
1,970
    
49,764
    
2,080
  
Redeemable preferred stocks
7,202
    
299
    
6,208
    
792
    
13,410
    
1,091
  
Total
$
521,120
    
$
9,804
    
$
771,759
    
$
39,007
    
$
1,292,879
    
$
48,811
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.
The following table provides information regarding the number of fixed maturity securities with unrealized losses at December 31.
 
2019
  
2018
Below cost for less than one year
63
    
258
  
Below cost for one year or more and less than three years
6
    
287
  
Below cost for three years or more
14
    
13
  
Total
83
    
558
  
We do not consider the unrealized losses related to these securities to be credit-related.  The unrealized losses at both December 31, 2019 and December 31, 2018 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.

Page 22
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, 2019.
 
Amortized
Cost
  
Fair
Value
  
Gross Unrealized
Losses
Securities owned without realized impairment:
          
Unrealized losses of 10% or less
$
149,834
    
$
147,016
    
$
2,818
  
   Unrealized losses of 20% or less and greater than 10%
908
    
770
    
138
  
          Subtotal
150,742
    
147,786
    
2,956
  
   Unrealized losses greater than 20%:
          
      Investment grade:
          
         Less than twelve months
—
    
—
    
—
  
         Twelve months or greater
—
    
—
    
—
  
Total investment grade
—
    
—
    
—
  
       Below investment grade:
          
          Less than twelve months
—
    
—
    
—
  
          Twelve months or greater
—
    
—
    
—
  
Total below investment grade
—
    
—
    
—
  
Unrealized losses greater than 20%
—
    
—
    
—
  
      Subtotal
150,742
    
147,786
    
2,956
  
           
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%
—
    
—
    
—
  
       Subtotal
—
    
—
    
—
  
              Total
$
150,742
    
$
147,786
    
$
2,956
  

Page 23
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, 2018.
 
Amortized
Cost
  
Fair
Value
  
Gross Unrealized
Losses
Securities owned without realized impairment:
          
Unrealized losses of 10% or less
$
1,287,248
    
$
1,245,754
    
$
41,494
  
Unrealized losses of 20% or less and greater than 10%
48,260
    
42,248
    
6,012
  
Subtotal
1,335,508
    
1,288,002
    
47,506
  
Unrealized losses greater than 20%:
          
Investment grade:
          
Less than twelve months
908
    
678
    
230
  
Twelve months or greater
—
    
—
    
—
  
Total investment grade
908
    
678
    
230
  
Below investment grade:
          
Less than twelve months
3,987
    
2,960
    
1,027
  
Twelve months or greater
—
    
—
    
—
  
Total below investment grade
3,987
    
2,960
    
1,027
  
Unrealized losses greater than 20%
4,895
    
3,638
    
1,257
  
Subtotal
1,340,403
    
1,291,640
    
48,763
  
           
Securities owned with realized impairment:
          
Unrealized losses of 10% or less
1,287
    
1,239
    
48
  
Unrealized losses of 20% or less and greater than 10%
—
    
—
    
—
  
Unrealized losses greater than 20%
—
    
—
    
—
  
Subtotal
1,287
    
1,239
    
48
  
Total
$
1,341,690
    
$
1,292,879
    
$
48,811
  
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, 2019.
 
Fair
Value
  
%
of Total
  
Gross Unrealized
Losses
  
%
of Total
AAA
$
5,946
    
4
%
  
$
56
    
2
%
AA
50,797
    
34
%
  
1,755
    
59
%
A
50,612
    
34
%
  
398
    
14
%
BBB
39,446
    
27
%
  
733
    
25
%
Total investment grade
146,801
    
99
%
  
2,942
    
100
%
BB
—
    
—
%
  
—
    
—
%
B and below
985
    
1
%
  
14
    
—
%
Total below investment grade
985
    
1
%
  
14
    
—
%
 
$
147,786
    
100
%
  
$
2,956
    
100
%


Page 24
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, 2018.
 
Fair
Value
  
%
of Total
  
Gross Unrealized
Losses
  
%
of Total
AAA
$
66,034
    
5
%
  
$
1,929
    
4
%
AA
189,896
    
15
%
  
5,885
    
12
%
A
484,822
    
38
%
  
18,201
    
37
%
BBB
536,458
    
41
%
  
20,696
    
42
%
Total investment grade
1,277,210
    
99
%
  
46,711
    
95
%
BB
6,263
    
—
%
  
733
    
2
%
B and below
9,406
    
1
%
  
1,367
    
3
%
Total below investment grade
15,669
    
1
%
  
2,100
    
5
%
 
$
1,292,879
    
100
%
  
$
48,811
    
100
%
Our residential mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities that were rated below investment grade represented 43% of the fair value of the total below investment grade securities as of December 31, 2019, compared to 61% at December 31, 2018.
We held no non-income producing securities at December 31, 2019 or December 31, 2018.
We did not hold securities of any corporation and its affiliates that exceeded 10% of stockholders' equity at December 31, 2019 or 2018.

Page 25
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following tables identify structured securities by credit ratings for all vintages owned at December 31.
 
2019
 
Fair
Value
  
Amortized
Cost
  
Unrealized Gains (Losses)
Corporate Private-Labeled Residential MBS:
          
Investment Grade
$
1,626
    
$
1,583
    
$
43
  
Below Investment Grade
18,638
    
16,837
    
1,801
  
Total residential & non-agency MBS
20,264
    
18,420
    
1,844
  
Other structured securities:
          
Investment grade
76,032
    
76,417
    
(385
)
Below investment grade
—
    
—
    
—
  
Total other structured securities
76,032
    
76,417
    
(385
)
Total structured securities
$
96,296
    
$
94,837
    
$
1,459
  
 
2018
 
Fair
Value
  
Amortized
Cost
  
Unrealized
Gains (Losses)
Corporate Private-Labeled Residential MBS:
          
Investment Grade
$
1,707
    
$
1,704
    
$
3
  
Below Investment Grade
27,135
    
25,145
    
1,990
  
Total residential & non-agency MBS
28,842
    
26,849
    
1,993
  
Other structured securities:
          
Investment grade
64,188
    
66,052
    
(1,864
)
Below investment grade
1,239
    
1,286
    
(47
)
Total other structured securities
65,427
    
67,338
    
(1,911
)
Total structured securities
$
94,269
    
$
94,187
    
$
82
  
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.
 
2019
  
2018
  
2017
Credit losses on securities held at the beginning of the year
$
4,381
    
$
4,399
    
$
13,224
  
Additions for increases (decreases) in the credit loss for which
     an other-than-temporary impairment was previously
     recognized when there was no intent to sell the security
     before recovery of its amortized cost basis
584
    
—
    
7
  
Reductions for securities sold
(520
)
  
(18
)
  
(8,819
)
Reductions for increases in cash flows expected to be
      collected that are recognized over the remaining
      life of the security
—
    
—
    
(13
)
Credit losses on securities held at the end of the year
$
4,445
    
$
4,381
    
$
4,399
  

Page 26
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.
 
2019
  
2018
  
2017
Net unrealized gains
$
174,281
    
$
10,219
    
$
94,110
  
Amounts resulting from:
          
DAC, VOBA, and DRL
(16,096
)
  
(1,402
)
  
(12,674
)
Policyholder liabilities
(25,480
)
  
(5,244
)
  
(19,616
)
Deferred income taxes
(27,866
)
  
(748
)
  
(12,980
)
Total
$
104,839
    
$
2,825
    
$
48,840
  

Investment Revenues
The following table provides investment revenues by major category for the years ended December 31.
 
2019
  
2018
  
2017
Gross investment income:
          
Fixed maturity securities
$
108,421
    
$
100,162
    
$
103,438
  
Equity securities
1,019
    
1,013
    
928
  
Mortgage loans
28,257
    
29,260
    
30,686
  
Real estate
20,919
    
21,760
    
21,669
  
Policy loans
5,974
    
5,667
    
5,421
  
Short-term investments
1,345
    
878
    
296
  
Other investments
118
    
120
    
105
  
Total
166,053
    
158,860
    
162,543
  
Less investment expenses
(17,704
)
  
(17,545
)
  
(16,718
)
Net investment income
$
148,349
    
$
141,315
    
$
145,825
  
Investment Gains (Losses)
The following table provides net investment gains (losses) by major category for the years ended December 31.
 
2019
  
2018
  
2017
Fixed maturity securities
$
2,139
    
$
(367
)
  
$
2,470
  
Equity securities
4,112
    
(2,005
)
  
1,608
  
Mortgage loans
293
    
143
    
(758
)
Real estate
2,589
    
5,069
    
1,235
  
Net investment gains
$
9,133
    
$
2,840
    
$
4,555
  
Page 27
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides detail concerning investment gains and losses for the year ended December 31.
 
2019
  
2018
  
2017
Gross gains resulting from:
          
Sales of investment securities
$
138
    
$
228
    
$
837
  
Investment securities called and other
2,654
    
1,282
    
2,127
  
Real estate
2,589
    
4,754
    
1,236
  
Disposal of affordable housing real estate joint venture
—
    
315
    
—
  
Total gross gains
5,381
    
6,579
    
4,200
  
Gross losses resulting from:
          
Sales of investment securities
(62
)
  
(1,839
)
  
(449
)
Investment securities called and other
(7
)
  
(70
)
  
(5
)
Sale of real estate and joint ventures
—
    
—
    
(1
)
Mortgage loans
—
    
(807
)
  
(12
)
Total gross losses
(69
)
  
(2,716
)
  
(467
)
Change in allowance for loan losses
293
    
950
    
(746
)
Change in fair value:
          
Equity securities
847
    
(735
)
  
—
  
Derivative instruments
3,265
    
(1,238
)
  
1,575
  
Total change in fair value
4,112
    
(1,973
)
  
1,575
  
Net realized investment gains, excluding
    other-than-temporary impairment losses
9,717
    
2,840
    
4,562
  
Net impairment losses recognized in earnings:
          
Other-than-temporary impairment losses on
  fixed maturity securities
(580
)
  
—
    
—
  
Portion of loss recognized in other
  comprehensive income (loss)
(4
)
  
—
    
(7
)
Net other-than-temporary impairment losses
     recognized in earnings
(584
)
  
—
    
(7
)
Net investment gains
$
9,133
    
$
2,840
    
$
4,555
  

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 $0.6 million were recorded in earnings during the year ended December 31, 2019.  No other-than-temporary impairments were recorded in earnings during the year ended December 31, 2018.  Corporate private-labeled residential mortgage-backed and other securities had impairments recorded in earnings of less than $0.1 million during the year ended December 31, 2017.
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.  The increase in proceeds in 2018 primarily reflected the sale of fixed maturity securities to fund the acquisition of Grange Life.
 
2019
  
2018
  
2017
Proceeds
$
9,615
    
$
83,145
    
$
35,655
  
Mortgage Loans
Investments in mortgage loans totaled $577.7 million at December 31, 2019, compared to $639.6 million at December 31, 2018.  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, 2019 and $3.1 million at December 31, 2018.  The decrease in the allowance for loan losses reflects a reduction in the mortgage loan portfolio.  Our periodic evaluation and assessment of the adequacy of the allowance is
Page 28
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
based on known and inherent risks in the portfolio, historical and industry data, current economic conditions, and other relevant factors.  Please see Note 6 - Financing Receivables for additional information.  We do not hold mortgage loans from any single borrower that exceed 5% of stockholders' equity.
We had 15% of our total investments in commercial mortgage loans at December 31, 2019 compared to 17% at December 31, 2018.  New commercial loans, including refinanced loans, totaled $29.7 million during 2019 and $69.7 million during 2018.  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.
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 14 new loans to the portfolio during 2019, and 69% of the total balance of these loans had some amount of recourse requirement.  The average loan-to-value ratio for the overall portfolio was 47% at December 31, 2019, up from 45% at December 31, 2018.  These ratios are 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.  The average loan balance was $1.7 million at December 31, 2019 and $1.8 million at December 31, 2018.  We have certain mortgage loans that have an unamortized premium, totaling $0.1 million at both December 31, 2019 and December 31, 2018.
The following table identifies the gross mortgage loan principal outstanding and the allowance for loan losses at December 31.
 
2019
  
2018
Principal outstanding
$
580,535
    
$
642,688
  
Allowance for loan losses
(2,836
)
  
(3,129
)
Carrying value
$
577,699
    
$
639,559
  
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.
 
2019
  
%
of Total
  
2018
  
%
of Total
Prior to 2011
$
16,131
    
3
%
  
$
34,664
    
5
%
2011
23,347
    
4
%
  
28,691
    
4
%
2012
42,054
    
7
%
  
57,854
    
9
%
2013
31,109
    
5
%
  
36,720
    
6
%
2014
33,954
    
6
%
  
42,340
    
7
%
2015
98,288
    
17
%
  
116,628
    
18
%
2016
136,019
    
23
%
  
148,803
    
23
%
2017
104,592
    
18
%
  
108,127
    
17
%
2018
65,560
    
11
%
  
68,861
    
11
%
2019
29,481
    
6
%
  
—
    
—
%
Principal outstanding
$
580,535
    
100
%
  
$
642,688
    
100
%

Page 29
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table identifies mortgage loans by geographic location at December 31.
 
2019
  
%
of Total
  
2018
  
%
of Total
Pacific
$
115,868
    
20
%
  
$
131,594
    
20
%
South Atlantic
88,154
    
15
%
  
98,430
    
15
%
East north central
83,758
    
14
%
  
86,487
    
13
%
West south central
82,542
    
14
%
  
105,927
    
17
%
West north central
67,408
    
12
%
  
71,833
    
11
%
Middle Atlantic
59,610
    
10
%
  
61,219
    
10
%
Mountain
45,552
    
8
%
  
53,697
    
8
%
East south central
29,258
    
5
%
  
29,758
    
5
%
New England
8,385
    
2
%
  
3,743
    
1
%
Principal outstanding
$
580,535
    
100
%
  
$
642,688
    
100
%
The following table identifies the concentration of mortgage loans by state greater than 5% of total at December 31.
 
2019
  
%
of Total
  
2018
  
%
of Total
  
California
$
92,618
    
16
%
  
$
105,735
    
16
%
  
Texas
81,741
    
14
%
  
102,638
    
16
%
  
Minnesota
50,966
    
9
%
  
54,652
    
9
%
  
Ohio
38,983
    
7
%
  
39,028
    
6
%
  
New Jersey
33,883
    
6
%
  
36,247
    
6
%
  
Georgia
24,513
    
4
%
  
30,760
    
5
%
  
All others
257,831
    
44
%
  
273,628
    
42
%
  
Principal outstanding
$
580,535
    
100
%
  
$
642,688
    
100
%
  
The following table identifies mortgage loans by property type at December 31.
 
2019
  
%
of Total
  
2018
  
%
of Total
Industrial
$
386,688
    
67
%
  
$
414,076
    
64
%
Office
125,013
    
22
%
  
149,898
    
23
%
Medical
19,497
    
3
%
  
19,775
    
3
%
Other 1
49,337
    
8
%
  
58,939
    
10
%
Principal outstanding
$
580,535
    
100
%
  
$
642,688
    
100
%
1  The Other category consists principally of apartments and retail properties.
The following table identifies mortgage loans by maturity at December 31.
 
2019
  
%
of Total
  
2018
  
%
of Total
Due in one year or less
$
3,184
    
1
%
  
$
21,397
    
3
%
Due after one year through five years
41,566
    
7
%
  
54,671
    
9
%
Due after five years through ten years
166,175
    
29
%
  
128,713
    
20
%
Due after ten years
369,610
    
63
%
  
437,907
    
68
%
Principal outstanding
$
580,535
    
100
%
  
$
642,688
    
100
%


Page 30
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.
 
2019
  
%
of Total
  
2018
  
%
of Total
70% or greater
$
87,776
    
15
%
  
$
70,347
    
11
%
50% to 69%
292,982
    
50
%
  
348,033
    
54
%
Less than 50%
199,777
    
35
%
  
224,308
    
35
%
Principal outstanding
$
580,535
    
100
%
  
$
642,688
    
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 four loans with a total outstanding balance of $4.7 million during the year ended December 31, 2019.  We refinanced one loan with an outstanding balance of $4.2 million during the year ended December 31, 2018.  None of these refinancings were the result of troubled debt restructuring.
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 21 - Commitments, Contingent Liabilities, Guarantees, and Indemnifications.

Real Estate
The following table provides information concerning real estate investments by major category at December 31.
 
2019
  
2018
Land
$
33,955
    
$
34,063
  
Buildings
170,055
    
168,365
  
Less accumulated depreciation
(46,431
)
  
(42,766
)
Real estate, commercial
157,579
    
159,662
  
Real estate, joint ventures
25,437
    
27,332
  
Total
$
183,016
    
$
186,994
  
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 $2.7 million during 2019, $12.5 million during 2018, and $2.1 million during 2017.
We had $25.4 million in real estate joint ventures at December 31, 2019, compared with $27.3 million at December 31, 2018.  We are the holder of all shares in three subsidiary real estate joint ventures with a combined carrying value of $20.3 million at December 31, 2019 and $20.7 million at December 31, 2018.  Each of the three subsidiaries holds a 50% interest in these separate joint ventures and all are based in Urbandale, Iowa.  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

Page 31
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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, 2019 or 2018.
We had non-income producing commercial real estate, consisting of vacant properties and properties under development, of $10.0 million at December 31, 2019, compared to $14.7 million at December 31, 2018.  In addition, $11.6 million of our real estate joint ventures were non-income producing at December 31, 2019 compared to $12.0 million at December 31, 2018.

Page 32
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

5. 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.

Page 33
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, 2019 and December 31, 2018 to determine the majority of our fair values on fixed maturity and equity securities.  At December 31, 2019, approximately 96% of the carrying value of these investments was from an external pricing service, 3% was from brokers, and 1% was derived from internal matrices and calculations.   At December 31, 2018, approximately 97% of the carrying value of these investments was from an external pricing service, 2% was from brokers, and 1% 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.

Page 34
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.
 
2019
 
Level 1
  
Level 2
  
Level 3
  
Total
Assets:
              
U.S. Treasury securities and
   obligations of U.S. Government
$
15,745
    
$
176,561
    
$
—
    
$
192,306
  
Federal agencies 1
—
    
1,486
    
—
    
1,486
  
Federal agency issued residential
     mortgage-backed securities 1
—
    
116,303
    
—
    
116,303
  
Subtotal
15,745
    
294,350
    
—
    
310,095
  
Corporate obligations:
              
Industrial
—
    
461,155
    
—
    
461,155
  
Energy
—
    
174,484
    
—
    
174,484
  
Communications and technology
—
    
248,515
    
—
    
248,515
  
Financial
—
    
386,942
    
—
    
386,942
  
Consumer
—
    
684,219
    
—
    
684,219
  
Public utilities
—
    
309,160
    
—
    
309,160
  
Subtotal
—
    
2,264,475
    
—
    
2,264,475
  
Corporate private-labeled residential
       mortgage-backed securities
—
    
20,264
    
—
    
20,264
  
Municipal securities
—
    
268,195
    
—
    
268,195
  
Other
—
    
76,032
    
—
    
76,032
  
Redeemable preferred stocks
—
    
12,076
    
—
    
12,076
  
Fixed maturity securities
15,745
    
2,935,392
    
—
    
2,951,137
  
Equity securities
483
    
10,789
    
—
    
11,272
  
Short-term investments
75,426
    
—
    
—
    
75,426
  
Other investments
—
    
—
    
4,363
    
4,363
  
Separate account assets
—
    
431,201
    
—
    
431,201
  
Total
$
91,654
    
$
3,377,382
    
$
4,363
    
$
3,473,399
  
               
Percent of total
3
%
  
97
%
  
—
%
  
100
%
               
Liabilities:
              
Policyholder account balances:
              
   Indexed universal life
$
—
    
$
—
    
$
3,603
    
$
3,603
  
Other policyholder funds:
              
   Guaranteed minimum withdrawal benefits
—
    
—
    
(959
)
  
(959
)
Separate account liabilities
—
    
431,201
    
—
    
431,201
  
Total
$
—
    
$
431,201
    
$
2,644
    
$
433,845
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.

Page 35

Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

 
2018
 
Level 1
  
Level 2
  
Level 3
  
Total
Assets:
              
U.S. Treasury securities and
      obligations of U.S. Government
$
25,251
    
$
157,895
    
$
—
    
$
183,146
  
Federal agencies 1
—
    
2,390
    
—
    
2,390
  
Federal agency issued residential
      mortgage-backed securities 1
—
    
112,917
    
—
    
112,917
  
Subtotal
25,251
    
273,202
    
—
    
298,453
  
Corporate obligations:
              
Industrial
—
    
479,691
    
—
    
479,691
  
Energy
—
    
166,330
    
—
    
166,330
  
Communications and technology
—
    
249,332
    
—
    
249,332
  
Financial
—
    
289,374
    
—
    
289,374
  
Consumer
—
    
585,646
    
—
    
585,646
  
Public utilities
—
    
265,895
    
—
    
265,895
  
Subtotal
—
    
2,036,268
    
—
    
2,036,268
  
Corporate private-labeled residential
    mortgage-backed securities
—
    
28,842
    
—
    
28,842
  
Municipal securities
—
    
261,679
    
—
    
261,679
  
Other
—
    
65,427
    
—
    
65,427
  
Redeemable preferred stocks
—
    
13,410
    
—
    
13,410
  
Fixed maturity securities
25,251
    
2,678,828
    
—
    
2,704,079
  
Equity securities
4,264
    
10,160
    
—
    
14,424
  
Short-term investments
58,712
    
—
    
—
    
58,712
  
Separate account assets
—
    
373,734
    
—
    
373,734
  
Total
$
88,227
    
$
3,062,722
    
$
—
    
$
3,150,949
  
               
Percent of total
3
%
  
97
%
  
—
%
  
100
%
               
Liabilities:
              
Other policyholder funds:
              
  Guaranteed minimum withdrawal benefits
$
—
    
$
—
    
$
(3,648
)
  
$
(3,648
)
Separate account liabilities
—
    
373,734
    
—
    
373,734
  
Total
$
—
    
$
373,734
    
$
(3,648
)
  
$
370,086
  
1  Federal agency securities are not backed by the full faith and credit of the U.S. Government.

Page 36
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.  The fair value of the derivatives included in Other Investments and the related reserves in relation to our indexed universal life portfolio were insignificant at December 31, 2018.
 
2019
 
Assets
  
Liabilities
 
Other Investments
  
Indexed Universal Life
  
GMWB
Beginning balance at January 1, 2019
$
498
    
$
352
    
$
(3,648
)
Included in earnings
3,265
    
3,251
    
1,338
  
Included in other comprehensive
     income (loss)
—
    
—
    
—
  
Purchases, issuances, sales and
   other dispositions:
          
Purchases
2,702
    
—
    
—
  
Issuances
—
    
—
    
412
  
Sales
(2,102
)
  
—
    
—
  
Other dispositions
—
    
—
    
939
  
Ending balance
$
4,363
    
$
3,603
    
$
(959
)

   
2018
   
Liabilities
   
GMWB
Beginning balance
  
$
(3,252
)
Included in earnings
  
(921
)
Included in other comprehensive
   income (loss)
  
—
  
Purchases, issuances, sales and
   other dispositions:
    
Purchases
  
—
  
Issuances
  
235
  
Sales
  
—
  
Other dispositions
  
290
  
Ending balance
  
$
(3,648
)
We did not have any transfers between any levels during the years ended December 31, 2019, 2018, or 2017.
The $4.4 million of other investments categorized as Level 3  were valued with broker prices using both observable inputs along with unobservable inputs of implied volatility and other inputs in the broker proprietary model.  We use the Black Scholes valuation method, including parameters for market volatility, risk-free rate, and index level, for the $3.6 million indexed universal life liabilities categorized as Level 3.  We also use a 100% persistency assumption.  Persistency of the business is an unobservable input.

Page 37
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, 2019.
 
Fair Value
  
Valuation Technique
  
Unobservable Inputs
  
Range
Embedded Derivative - GMWB
$
(959
)
  
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
  
0.42%-1.16%
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, 2018.
 
Fair Value
  
Valuation Technique
  
Unobservable Inputs
  
Range
Embedded Derivative - GMWB
$
(3,648
)
  
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
  
0.40%-1.60%
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.
 
2019
  
2018
 
Increase/(Decrease)
 
in millions
A 10% increase in the mortality assumption
$
(0.1
)
  
(0.1
)
A 10% decrease in the lapse assumption
0.2
    
—
  
A 10% increase in the benefit utilization
1.0
    
—
  
A 10 basis point increase in the credit spreads used for non-performance
(0.4
)
  
(0.3
)

Page 38
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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.
 
2019
 
Fair Value
  
Carrying
Value
 
Level 1
  
Level 2
  
Level 3
  
Total
  
Assets:
                  
Investments:
                  
Fixed maturity securities available for sale
$
15,745
    
$
2,935,392
    
$
—
    
$
2,951,137
    
$
2,951,137
  
Equity securities
483
    
10,789
    
—
    
11,272
    
11,272
  
Mortgage loans
—
    
—
    
597,577
    
597,577
    
577,699
  
Policy loans
—
    
—
    
87,499
    
87,499
    
87,499
  
Other investments
—
    
—
    
4,363
    
4,363
    
4,363
  
Short-term investments
75,426
    
—
    
—
    
75,426
    
75,426
  
Separate account assets
—
    
431,201
    
—
    
431,201
    
431,201
  
                   
Liabilities:
                  
Individual and group annuities
—
    
—
    
1,077,538
    
1,077,538
    
1,096,588
  
Supplementary contracts and annuities
   without life contingencies
—
    
—
    
52,186
    
52,186
    
53,128
  
Separate account liabilities
—
    
431,201
    
—
    
431,201
    
431,201
  
Policyholder account balances - indexed
   universal life
—
    
—
    
3,603
    
3,603
    
3,603
  
Other policyholder funds - GMWB
—
    
—
    
(959
)
  
(959
)
  
(959
)

 
2018
 
Fair Value
  
Carrying
Value
 
Level 1
  
Level 2
  
Level 3
  
Total
  
Assets:
                  
Investments:
                  
Fixed maturity securities available for sale
$
25,251
    
$
2,678,828
    
$
—
    
$
2,704,079
    
$
2,704,079
  
Equity securities
4,264
    
10,160
    
—
    
14,424
    
14,424
  
Mortgage loans
—
    
—
    
640,796
    
640,796
    
639,559
  
Policy loans
—
    
—
    
88,066
    
88,066
    
88,066
  
Short-term investments
58,712
    
—
    
—
    
58,712
    
58,712
  
Separate account assets
—
    
373,734
    
—
    
373,734
    
373,734
  
                   
Liabilities:
                  
Individual and group annuities
—
    
—
    
1,049,195
    
1,049,195
    
1,068,577
  
Supplementary contracts and annuities
    without life contingencies
—
    
—
    
50,805
    
50,805
    
52,798
  
Separate account liabilities
—
    
373,734
    
—
    
373,734
    
373,734
  
Other policyholder funds - GMWB
—
    
—
    
(3,648
)
  
(3,648
)
  
(3,648
)

Page 39
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

6. 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.
 
2019
  
2018
Receivables:
      
Agent receivables, net
      (allowance $1,482; 2018 - $1,496)
$
2,432
    
$
2,078
  
Investment-related financing receivables:
      
Mortgage loans, net
      (allowance $2,836; 2018 - $3,129)
577,699
    
639,559
  
Total financing receivables
$
580,131
    
$
641,637
  
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.
 
2019
  
2018
 
Gross Receivables
  
Allowance
  
Net Receivables
  
Gross Receivables
  
Allowance
  
Net Receivables
Agent specific loans
$
1,245
    
$
600
    
$
645
    
$
1,210
    
$
600
    
$
610
  
Other agent receivables
2,669
    
882
    
1,787
    
2,364
    
896
    
1,468
  
Total
$
3,914
    
$
1,482
    
$
2,432
    
$
3,574
    
$
1,496
    
$
2,078
  
The following table details the activity of the allowance for doubtful accounts on agent receivables at December 31.  Any recoveries are included as deductions.
 
2019
  
2018
Beginning of year
$
1,496
    
$
817
  
Additions
50
    
812
  
Deductions
(64
)
  
(133
)
End of year
$
1,482
    
$
1,496
  
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.

Page 40
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.
 
2019
  
2018
Mortgage loans collectively evaluated
      for impairment
$
508,501
    
$
568,521
  
Mortgage loans individually evaluated
      for impairment
72,034
    
74,167
  
Allowance for loan losses
(2,836
)
  
(3,129
)
Carrying value
$
577,699
    
$
639,559
  
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 4, 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, 2019 or at December 31, 2018.  We had no troubled loans that were restructured or modified during 2019 or 2018.
The following table details the activity within the allowance for mortgage loan losses at December 31.  Any recoveries are reflected as deductions.
 
2019
  
2018
Beginning of year
$
3,129
    
$
4,079
  
Provision
139
    
323
  
Deductions
(432
)
  
(1,273
)
End of year
$
2,836
    
$
3,129
  
The Company decreased the allowance for mortgage loan losses $0.3 million in 2019, primarily due to the lower volume of loans. The Company decreased the allowance for mortgage loan losses $1.0 million in 2018, largely due to the settlement of a loan in 2018 that was in the process of foreclosure at December 31, 2017.  In addition, the allowance for loan losses decreased due to the lower volume of loans at December 31, 2018.
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.
Macro-environmental and elevated risk profile considerations:
•
Current industry conditions 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.

Page 41
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
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.

Page 42
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

7. 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.  On December 22, 2017, the newly enacted TCJA changed the expected statutory tax rate for tax years beginning January 1, 2018.  The change in tax rate from 35% to 21% required a remeasurement of the unamortized asset related to affordable housing investments.  This remeasurement resulted in a decrease to the asset and a nonrecurring increase in amortization of $0.8 million in 2017 that is included in income tax benefit in the Consolidated Statements of Comprehensive Income and the table below.  The tax credits reduce tax expense while the amortization increases tax expense.
The following table provides information regarding our VIEs that generate tax credits and related amortization for the years ended December 31.
 
2019
  
2018
  
2017
Federal income tax credits realized
$
2,608
    
$
2,752
    
$
2,752
  
Amortization
1,421
    
1,452
    
1,592
  
Amortization related to tax rate change
—
    
—
    
768
  
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, 2019, 2018, or 2017.
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.

Page 43
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

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, 2019 and December 31, 2018.  The table includes investments in five real estate joint ventures and 16 affordable housing real estate joint ventures at both December 31, 2019 and December 31, 2018.
 
2019
  
2018
 
Carrying
Amount
  
Maximum
Exposure
to Loss
  
Carrying
Amount
  
Maximum
Exposure
to Loss
Real estate joint ventures
$
21,224
    
$
21,224
    
$
21,689
    
$
21,689
  
Affordable housing real estate joint ventures
4,213
    
29,818
    
5,643
    
30,950
  
Total
$
25,437
    
$
51,042
    
$
27,332
    
$
52,639
  
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, 2019 and December 31, 2018, we had no equity commitments outstanding to the real estate joint venture VIEs.  We have contingent commitments to fund additional equity contributions for operating support to certain real estate joint venture VIEs, which could result in additional exposure to loss.  However, we are unable to quantify the amount of these contingent commitments.
In addition, the maximum exposure to loss on affordable housing joint ventures included $21.4 million of losses which could be realized if the tax credits received by the VIEs were recaptured at December 31, 2019, compared to $19.7 million at December 31, 2018.  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 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.

8. 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 $431.2 million at December 31, 2019 and $373.7 million at December 31, 2018.  Variable universal life and variable annuity assets comprised 30% and 70% of total separate account assets in 2019, compared to 28% and 72% of the total in 2018.

Page 44
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
The following table provides a reconciliation of activity within separate account liabilities at December 31.
 
2019
  
2018
Balance at beginning of year
$
373,734
    
$
419,812
  
Deposits on variable policyholder contracts
21,654
    
25,722
  
Transfers to general account
(884
)
  
(1,989
)
Investment performance
86,897
    
(24,035
)
Policyholder benefits and withdrawals
(37,677
)
  
(32,909
)
Contract charges
(12,523
)
  
(12,867
)
Balance at end of year
$
431,201
    
$
373,734
  

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 $120.2 million at December 31, 2019.  The fair value of the separate accounts with the GMWB rider was $115.2 million at December 31, 2018.  The GMWB guarantee liability was $(1.0) million at December 31, 2019 and $(3.6) million at December 31, 2018.  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 $431.2 million at December 31, 2019 and $373.7 million at December 31, 2018, 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 $0.5 million at both December 31, 2019 and December 31, 2018.
In addition, we have an assumed closed block of variable universal life and variable annuity business that totaled $327.7 million at December 31, 2019 and $285.6 million at December 31, 2018.  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 $31.6 million at December 31, 2019 and $30.6 million at December 31, 2018 are included in our general account as Policyholder Account Balances.  The Future Policy Benefits for the assumed block approximated $0.6 million at both December 31, 2019 and December 31, 2018.
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 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.

Page 45
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
Separate account balances for variable annuity contracts were $303.8 million at December 31, 2019 and $269.9 million at December 31, 2018.  The total reserve held for variable annuity GMDB was less than $0.1 million at December 31, 2019 and $0.1 million at December 31, 2018.  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, 2019 and 2018 is provided below:
 
2019
  
2018
 
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
$
234,373
    
$
166
    
62.2
  
$
210,889
    
$
2,184
    
61.8
Return of the greater of the highest
      anniversary contract value or net
      deposits
9,387
    
49
    
71.1
  
8,151
    
749
    
70.2
Return of the greater of every fifth
      year highest anniversary contract
      value or net deposits
6,983
    
23
    
68.9
  
6,723
    
59
    
68.8
Return of the greater of net deposits
     accumulated annually at 5% or the
     highest anniversary contract value
53,024
    
2,768
    
64.6
  
44,168
    
7,433
    
64.1
Total
$
303,767
    
$
3,006
    
63.0
  
$
269,931
    
$
10,425
    
62.6

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.
 
2019
  
2018
Money market
$
1,692
    
$
2,683
  
Fixed income
16,314
    
17,134
  
Balanced
84,734
    
77,981
  
International equity
20,146
    
17,432
  
Intermediate equity
151,476
    
131,355
  
Aggressive equity
29,405
    
23,346
  
Total
$
303,767
    
$
269,931
  

Page 46
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

9. 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.
 
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.
 
2018
 
Individual Insurance
  
Group Insurance
  
Old American
  
Consolidated
Gross liability at beginning of year
$
657
    
$
27,945
    
$
5,438
    
$
34,040
  
Less reinsurance recoverable
(372
)
  
(21,231
)
  
(5,346
)
  
(26,949
)
Net liability at beginning of year
285
    
6,714
    
92
    
7,091
  
Incurred benefits related to:
              
Current year
32
    
27,526
    
48
    
27,606
  
Prior years 1
75
    
(647
)
  
(68
)
  
(640
)
Total incurred benefits
107
    
26,879
    
(20
)
  
26,966
  
Paid benefits related to:
              
Current year
11
    
23,150
    
18
    
23,179
  
Prior years
91
    
3,051
    
22
    
3,164
  
Total paid benefits
102
    
26,201
    
40
    
26,343
  
Net liability at end of year
290
    
7,392
    
32
    
7,714
  
Reinsurance recoverable
541
    
23,796
    
4,402
    
28,739
  
Gross liability at end of year
$
831
    
$
31,188
    
$
4,434
    
$
36,453
  
1  The incurred benefits related to prior years’ unpaid accident and health claims reflect the change in these liabilities.

Page 47
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

 
2017
 
Individual Insurance
  
Group Insurance
  
Old American
  
Consolidated
Gross liability at beginning of year
$
785
    
$
26,020
    
$
5,341
    
$
32,146
  
Less reinsurance recoverable
(445
)
  
(19,850
)
  
(5,260
)
  
(25,555
)
Net liability at beginning of year
340
    
6,170
    
81
    
6,591
  
Incurred benefits related to:
              
Current year
27
    
26,836
    
87
    
26,950
  
Prior years 1
57
    
(430
)
  
(53
)
  
(426
)
Total incurred benefits
84
    
26,406
    
34
    
26,524
  
Paid benefits related to:
              
Current year
3
    
22,758
    
12
    
22,773
  
Prior years
136
    
3,104
    
11
    
3,251
  
Total paid benefits
139
    
25,862
    
23
    
26,024
  
Net liability at end of year
285
    
6,714
    
92
    
7,091
  
Reinsurance recoverable
372
    
21,231
    
5,346
    
26,949
  
Gross liability at end of year
$
657
    
$
27,945
    
$
5,438
    
$
34,040
  
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.
 
2019
  
2018
  
2017
Individual Insurance Segment:
          
Individual accident and health
$
659
    
$
831
    
$
657
  
Group life
—
    
30
    
—
  
Individual life
33,252
    
27,141
    
18,506
  
Deferred annuity
5,286
    
4,289
    
3,047
  
Subtotal
39,197
    
32,291
    
22,210
  
           
Group Insurance Segment:
          
Group accident and health
32,169
    
31,188
    
27,945
  
Group life
3,256
    
1,994
    
1,846
  
Subtotal
35,425
    
33,182
    
29,791
  
           
Old American Segment:
          
Individual accident and health
3,952
    
4,434
    
5,438
  
Individual life
7,273
    
6,814
    
6,240
  
Subtotal
11,225
    
11,248
    
11,678
  
           
Total
$
85,847
    
$
76,721
    
$
63,679
  
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, 2019 and $0.7 million at December 31, 2018.  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.

Page 48
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, 2019 was $5.2 million, consisting of an undiscounted amount of $6.5 million and an aggregated discount amount deducted of $1.3 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, 2019.  The amounts for 2016 through 2019 are audited while the amounts for 2015 and earlier are unaudited.
 
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
2012
$
1,132
  
$
1,087
  
$
999
  
$
993
  
$
1,116
  
$
1,104
  
$
1,118
  
$
1,130
  
$
—
  
626
  
2013
  
806
  
836
  
815
  
838
  
838
  
822
  
854
  
—
  
234
  
2014
    
868
  
955
  
799
  
768
  
770
  
728
  
—
  
182
  
2015
      
989
  
918
  
701
  
697
  
643
  
—
  
227
  
2016
        
1,694
  
1,552
  
1,382
  
1,412
  
—
  
235
  
2017
          
2,038
  
1,727
  
1,513
  
—
  
244
  
2018
            
2,473
  
2,192
  
—
  
260
  
2019
              
2,056
  
561
  
185
  
             
Total
$
10,528
      
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, 2019.  The amounts for 2016 through 2019 are audited while the amounts for 2015 and earlier are unaudited.
   
For the Years Ended December 31,
Year Incurred
  
2012
  
2013
  
2014
  
2015
  
2016
  
2017
  
2018
  
2019
2012
  
$
91
    
$
373
    
$
499
    
$
605
    
$
675
    
$
733
    
$
797
    
$
856
  
2013
      
91
    
336
    
449
    
501
    
537
    
564
    
600
  
2014
          
71
    
276
    
411
    
481
    
499
    
517
  
2015
              
100
    
390
    
491
    
531
    
545
  
2016
                  
164
    
505
    
626
    
690
  
2017
                      
162
    
549
    
703
  
2018
                          
208
    
681
  
2019
                              
251
  
                           
Total
  
$
4,843
  
All outstanding liabilities before 2012, net of reinsurance
      
$
853
  
Liabilities for claims and claim adjustment expenses, net of reinsurance
      
$
6,538
  

Page 49
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 and Old American segments, none of which are individually significant.
 
2019
  
2018
Net outstanding liabilities:
      
Group long-term disability
$
6,538
    
$
6,172
  
Other short-duration contracts
5,535
    
4,282
  
Liabilities for unpaid claims and claim adjustment
    expenses, net of reinsurance
12,073
    
10,454
  
       
Reinsurance recoverable on unpaid claims:
      
Group long-term disability
28,631
    
28,750
  
Other short-duration contracts
5,532
    
5,571
  
Total reinsurance recoverable on unpaid claims
34,163
    
34,321
  
       
Insurance lines other than short-duration
45,832
    
38,338
  
Unallocated claims adjustment expenses
—
    
—
  
Impact of discounting
(6,221
)
  
(6,392
)
Other
—
    
—
  
 
39,611
    
31,946
  
Total gross liability for unpaid claims and claim
    adjustment expenses
$
85,847
    
$
76,721
  
The following table provides the historical average annual percentage payout of incurred claims by age, net of reinsurance, at December 31, 2019.
   
Years
   
1
  
2
  
3
  
4
  
5
Group long-term disability
  
11.00
%
  
28.30
%
  
12.90
%
  
7.19
%
  
3.74
%

Page 50
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

10. 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 both 2019 and 2018.  Assumed participating business from the acquisition of closed blocks of business accounted for 99% of total participating statutory premiums in both 2019 and 2018.   Participating business equaled 5% of total life insurance in force at both December 31, 2019 and December 31, 2018.  Assumed participating business accounted for 97% of total participating life insurance in force at both December 31, 2019 and December 31, 2018.
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.

11. Debt
We had no notes payable outstanding at December 31, 2019 or December 31, 2018.
As a member of the Federal Home Loan Bank of Des Moines (FHLB) with a capital investment of $4.8 million at December 31, 2019, we have the ability to borrow on a collateralized basis from the FHLB.  We received an insignificant amount of dividends on the capital investment in 2019, 2018, and 2017.
We had unsecured revolving lines of credit with three major commercial banks that totaled $80.0 million at December 31, 2019, with no balances outstanding.  We had unsecured revolving lines of credit with two major commercial banks that totaled $70.0 million at December 31, 2018, with no balances outstanding.  The lines of credit are at variable interest rates based upon short-term indices and will mature in June of 2020.  We anticipate renewing these lines of credit as they come due.  One line of credit includes a $10.0 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 financial counterparties.  The Company had no transactions that occurred under these agreements during 2019 and had no outstanding borrowings as of December 31, 2019.  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.

12. Income Taxes
The following table provides information about income taxes for the years ended December 31.
 
2019
  
2018
  
2017
Current income tax expense (benefit)
$
4,597
    
$
(505
)
  
$
4,784
  
Deferred income tax expense
426
    
1,743
    
3,531
  
Adjustment to deferred taxes for enacted
     changes in tax laws
—
    
276
    
(30,487
)
Total income tax expense (benefit)
$
5,023
    
$
1,514
    
$
(22,172
)
The following table provides information about taxes paid for the years ended December 31.
 
2019
  
2018
  
2017
Cash paid (refund) for income taxes
$
(938
)
  
$
(963
)
  
$
3,569
 

Page 51
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

The following table provides a reconciliation of the federal income tax rate to our effective income tax rate for the years ended December 31.
 
2019
  
2018
  
2017
Federal income tax rate
21
%
  
21
%
  
35
%
Tax credits, net of equity adjustment
(8
)%
  
(10
)%
  
(2
)%
Permanent differences and other
4
%
  
(4
)%
  
(2
)%
Remeasurement of deferred taxes for enacted
    changes in tax laws
—
%
  
2
%
  
(106
)%
Effective income tax rate
17
%
  
9
%
  
(75
)%
Presented below are tax effects of temporary differences that result in significant deferred tax assets and liabilities at December 31.
 
2019
  
2018
Deferred tax assets:
      
Future policy benefits
$
18,781
    
$
15,752
  
Employee retirement benefits
6,468
    
6,465
  
Tax carryovers
1,124
    
3,791
  
Other
2,581
    
2,259
  
Deferred tax assets
28,954
    
28,267
  
Deferred tax liabilities:
      
Basis differences between tax and
      
GAAP accounting for investments
3,673
    
2,712
  
Unrealized investment gains
36,600
    
2,146
  
Capitalization of DAC, net of amortization
33,431
    
36,410
  
VOBA
2,631
    
4,264
  
Property and equipment
3,338
    
5,102
  
Deferred tax liabilities
79,673
    
50,634
  
Net deferred tax liability
50,719
    
22,367
  
Current tax asset
(145
)
  
(4,259
)
Income taxes payable
$
50,574
    
$
18,108
  
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.
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 2016.  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 2019, 2018, or 2017.
We had no material uncertain tax positions at December 31, 2019 or December 31, 2018.

Page 52
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

Income tax expense (benefit) is recorded in various places in our financial statements, as detailed below, for the years ended December 31.
 
2019
  
2018
  
2017
Income tax expense (benefit)
$
5,023
    
$
1,514
    
$
(22,172
)
Stockholders’ equity:
          
Related to:
          
Change in net unrealized gains on securities available
 for sale
34,453
    
(17,295
)
  
426
  
Effect on DAC, VOBA, and DRL
(3,086
)
  
2,357
    
675
  
Change in policyholder liabilities
(4,249
)
  
3,018
    
1,081
  
Change in benefit plan obligations
809
    
(1,548
)
  
3,467
  
Total income tax expense (benefit) included in financial statements
$
32,950
    
$
(11,954
)
  
$
(16,523
)
Beginning January 1, 2018, the TCJA imposes a limitation on life insurance tax reserves based upon the greater of net surrender value or 92.81% of the reserve method prescribed by the National Association of Insurance Commissioners (NAIC) which covers such contracts as of the date the reserve is determined.  The Company adopted SEC Staff Accounting Bulletin No. 118 (SAB 118) as permitted by the FASB in 2017.  SAB 118 allows companies to use provisional amounts to record the effects of the TCJA and also provides a measurement period (not to exceed one year from the date of enactment) to complete the accounting of the impacts of the TCJA.  During 2017, the Company recognized the provisional tax impacts related to the change in the methodology employed to calculate tax reserves by recording a deferred tax asset and offsetting deferred tax liability of $7.4 million in its consolidated financial statements.  The Company completed and finalized the tax impact of the life insurance tax reserves limitation in 2018 and recorded a decrease to the deferred tax asset and offsetting deferred tax liability of $0.7 million in the consolidated financial statements at December 31, 2018.  This results in a final deferred tax asset and offsetting deferred tax liability of $6.7 million at December 31, 2018.  The deferred tax liability was amortized into income in the amount of $3.6 million during 2018 per the 8-year inclusion described in the TCJA.  During 2019, the Company made final adjustments to the Grange Life tax reserves as of January 1, 2018 and recorded an additional deferred tax asset and offsetting deferred tax liability of $1.3 million.  This changed the consolidated deferred tax asset and offsetting deferred tax liability to $5.4 million.  The amortization of this liability is $0.7 million annually over 8 years, including 2019.

Page 53
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

13. Pensions and Other Postemployment Benefits
We have pension and other postemployment benefit plans covering substantially all of our employees for which the measurement date is annually on 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%.
The benefits expected to be paid in each year from 2020 through 2024 are as follows: $9.2 million in 2020; $8.8 million in 2021; $8.4 million in 2022; $9.4 million in 2023; and $8.6 million in 2024.  The aggregate benefits expected to be paid in the five years from 2025 through 2029 are $39.4 million.  The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2019 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 2020 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:
 
2019
  
Target Allocation
  
2018
  
Target Allocation
               
Equity securities
38
%
  
28% - 48%
  
38
%
  
28% - 48%
Asset allocation and alternative assets
14
%
  
10% - 20%
  
16
%
  
10% - 20%
Debt securities
48
%
  
30% - 60%
  
46
%
  
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.
Hedge fund investments are recorded at NAV.  The pension plan's hedge funds invest primarily in other investment funds.  The valuation policies of the hedge funds provide that the value of investments in other investment funds be stated at fair value based on the NAV of the other investment funds and certain redemption restrictions may apply, including a 45 day prior written notice to withdraw funds.
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 pension plan does not expect to return any plan assets to the Company during 2020.
The current assumption for the expected long-term rate of return on plan assets is 7.15%.  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, 2020, the assumption for the expected long-term rate of return on plan assets was reduced to 6.29%.

Page 54
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

The assumed discount rate used to determine the benefit obligation was 2.88% for pension benefits and was 3.10% 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, 2019.  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.

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 2020 through 2024 are as follows: $0.7 million in 2020; $0.8 million in 2021; $0.8 million in 2022; $0.8 million in 2023; and $0.9 million in 2024.  The aggregate benefits expected to be paid in the five years from 2025 through 2029 are $4.5 million.  The expected benefits to be paid are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2019.  The 2020 contribution for the postemployment medical plans is estimated to be $0.7 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 $0.2 million in  2019, 2018, and 2017.  Non-contributory deferred compensation plans for eligible agents based upon earned first year commissions are also offered.  Contributions to these plans were $0.3 million in 2019, 2018, and 2017.
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 2019, $2.3 million in 2018, and $2.2 million in 2017.  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 2019, 2018, or 2017.
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.

Page 55
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
 
2019
  
2018
  
2019
  
2018
Change in projected benefit obligation:
              
Benefit obligation at beginning of year
$
121,586
    
$
134,232
    
$
16,389
    
$
18,232
  
Service cost
—
    
—
    
169
    
223
  
Interest cost
4,615
    
4,274
    
663
    
631
  
Plan participants' contributions
—
    
—
    
462
    
445
  
Actuarial (gain) loss
10,803
    
(7,128
)
  
2,208
    
(1,970
)
Benefits paid
(11,073
)
  
(9,792
)
  
(949
)
  
(1,172
)
Benefit obligation at end of year
$
125,931
    
$
121,586
    
$
18,942
    
$
16,389
  
               
Change in plan assets:
              
Fair value of plan assets at beginning of year
$
134,014
    
$
147,007
    
$
—
    
$
—
  
Return on plan assets
24,735
    
(7,229
)
  
—
    
—
  
Plan participants' contributions
—
    
—
    
462
    
445
  
Company contributions
4,028
    
4,028
    
487
    
727
  
Benefits paid
(11,073
)
  
(9,792
)
  
(949
)
  
(1,172
)
Fair value of net plan assets at end of year
$
151,704
    
$
134,014
    
$
—
    
$
—
  
               
Under/(over) funded status at end of year
$
(25,773
)
  
$
(12,428
)
  
$
18,942
    
$
16,389
  


 
Pension Benefits
  
OPEB
 
2019
  
2018
  
2019
  
2018
Amounts recognized in accumulated other
    comprehensive income (loss):
              
Net loss (gain)
$
69,392
    
$
76,975
    
$
(10,670
)
  
$
(14,336
)
Prior service credit
(1,340
)
  
(1,406
)
  
—
    
—
  
Total accumulated other comprehensive
    income (loss)
$
68,052
    
$
75,569
    
$
(10,670
)
  
$
(14,336
)


 
Pension Benefits
  
OPEB
 
2019
  
2018
  
2019
  
2018
Other changes in plan assets and benefit     
    obligations recognized in other
    comprehensive income (loss):
              
Unrecognized actuarial net (gain) loss
$
(4,709
)
  
$
10,278
    
$
2,208
    
$
(1,971
)
Amortization of net gain (loss)
(2,874
)
  
(2,394
)
  
1,458
    
1,292
  
Amortization of prior service credit
66
    
66
    
—
    
100
  
Total (gain) loss recognized in other
      comprehensive income (loss)
$
(7,517
)
  
$
7,950
    
$
3,666
    
$
(579
)

Page 56
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

 
Pension Benefits
  
OPEB
 
2019
  
2018
  
2019
  
2018
Weighted average assumptions used to determine benefit obligations at December 31:
              
Discount rate
2.88
%
  
3.96
%
  
3.10
%
  
4.13
%
               
Weighted average assumptions used to determine net periodic benefit cost for years ended December 31:
              
Discount rate
3.96
%
  
3.30
%
  
4.13
%
  
3.52
%
Expected return on plan assets
7.15
%
  
7.15
%
  
—
%
  
—
  
The following table presents the fair value of each major category of pension plan assets at December 31.
 
2019
  
2018
Fixed maturity securities:
      
U.S. Government
$
248
    
$
346
  
Industrial and public utility
9,698
    
9,922
  
Investment funds:
      
Mutual funds
29,650
    
24,535
  
Hedge fund
—
    
326
  
Collective trust
102,147
    
86,889
  
Limited partnerships
9,858
    
9,361
  
Other invested assets
13
    
25
  
Cash and cash equivalents
11
    
25
  
Receivables
79
    
2,585
  
Fair value of assets at end of year
151,704
    
134,014
  
Liabilities:
      
Accrued liabilities
—
    
—
  
Total liabilities
—
    
—
  
Fair value of net plan assets at end of year
$
151,704
    
$
134,014
  

Page 57
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

The following tables provide the fair value hierarchy, as described in Note 5, for pension plan assets at December 31.
 
2019
 
Level 1
  
Level 2
  
Level 3
  
Total
Fixed maturity securities:
              
U.S. Government
$
—
    
$
248
    
$
—
    
$
248
  
Industrial and public utility
—
    
9,698
    
—
    
9,698
  
Mutual funds
29,650
    
—
    
—
    
29,650
  
Other invested assets
—
    
—
    
13
    
13
  
Total assets in the fair value hierarchy
29,650
    
9,946
    
13
    
39,609
  
               
Investments measured at net asset value: 1
              
Hedge fund
            
—
  
Collective trust
            
102,147
  
Limited partnerships
            
9,858
  
Investments at fair value
            
$
151,614
  
               
 
2018
 
Level 1
  
Level 2
  
Level 3
  
Total
Fixed maturity securities:
              
U.S. Government
$
—
    
$
346
    
$
—
    
$
346
  
Industrial and public utility
—
    
9,922
    
—
    
9,922
  
Mutual funds
24,535
    
—
    
—
    
24,535
  
Other invested assets
—
    
—
    
25
    
25
  
Total assets in the fair value hierarchy
24,535
    
10,268
    
25
    
34,828
  
               
Investments measured at net asset value: 1
              
Hedge fund
            
326
  
Collective trust
            
86,889
  
Limited partnerships
            
9,361
  
Investments at fair value
            
$
131,404
  
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.
 
2019
  
2018
Beginning balance
$
25
    
$
25
  
Losses realized and unrealized
(12
)
  
—
  
Ending balance
$
13
    
$
25
  

Page 58
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
 
2019
  
2018
  
2017
  
2019
  
2018
  
2017
Service cost
$
—
    
$
—
    
$
—
    
$
169
    
$
223
    
$
307
  
Interest cost
4,615
    
4,274
    
4,725
    
663
    
631
    
910
  
Expected return on plan assets
(9,223
)
  
(10,177
)
  
(9,638
)
  
—
    
—
    
—
  
Amortization of:
                      
Unrecognized actuarial net (gain)
    loss
2,874
    
2,394
    
2,638
    
(1,458
)
  
(1,292
)
  
(833
)
Unrecognized prior service credit
(66
)
  
(66
)
  
(66
)
  
—
    
(100
)
  
(825
)
Net periodic benefit credit
(1,800
)
  
(3,575
)
  
(2,341
)
  
(626
)
  
(538
)
  
(441
)
Total recognized in other
      comprehensive income (loss)
(7,517
)
  
7,950
    
(5,951
)
  
3,666
    
(579
)
  
(3,955
)
Total recognized in net periodic
      benefit cost (credit) and other
      comprehensive income (loss)
$
(9,317
)
  
$
4,375
    
$
(8,292
)
  
$
3,040
    
$
(1,117
)
  
$
(4,396
)
The following table provides the estimated net loss (gain) and prior service credit for the pension plan and other postemployment plans that will be amortized from accumulated other comprehensive income (loss) into net periodic benefit cost in 2019.
 
Pension
Benefits
  
OPEB
Actuarial net loss (gain)
$
2,514
    
$
(1,039
)
Prior service credit
(66
)
  
—
  
The assumed growth rate of health care costs has a significant effect on the benefit amounts reported, as the following table demonstrates.
 
One Percentage Point
Change in the Growth Rate
 
Increase
  
Decrease
Service and interest cost components
$
136
    
$
(108
)
Postemployment benefit obligation
2,848
    
(2,311
)
For measurement purposes, the annual increase in the per capita cost of covered health care benefits was assumed to be 6.75%, decreasing gradually to 5.00% in 2030 and thereafter.

Page 59
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

14. 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, 2019.
Defined
Measurement
Period
  
Number
of Units
  
Grant
Price
2017-2019
  
130,017
  
$48.01
2018-2020
  
155,297
  
$45.62
2019-2021
  
126,898
  
$35.12
2020-2022*
  
129,114
  
$32.70
*  Effective January 1, 2020
The long-term incentive plan did not make a cash payment during 2019 for the three-year interval ended December 31, 2018.  The long-term incentive plan made a payment of $0.2 million during 2018 for the three-year interval ended December 31, 2017 and a payment of $0.5 million during 2017 for the three-year interval ended December 31, 2016.  The cost of share-based compensation accrued as operating expense during 2019 was less than $0.1 million, net of tax.  The change in accrual that reduced operating expense during 2018 was $0.4 million, net of tax.  The change in accrual that reduced operating expense during 2017 was $0.1 million, net of tax.

Page 60
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

15. Reinsurance
The following table provides information about reinsurance for the years ended December 31.
 
2019
  
2018
  
2017
Life insurance in force (in millions) :
          
Direct
$
52,752
    
$
53,084
    
$
28,592
  
Ceded
(32,889
)
  
(33,265
)
  
(13,357
)
Assumed
4,337
    
4,601
    
3,217
  
Net
$
24,200
    
$
24,420
    
$
18,452
  
           
Premiums:
          
Life insurance:
          
Direct
$
266,345
    
$
201,823
    
$
178,318
  
Ceded
(96,263
)
  
(59,134
)
  
(47,306
)
Assumed
4,717
    
2,992
    
2,232
  
Net
$
174,799
    
$
145,681
    
$
133,244
  
           
Accident and health:
          
Direct
$
59,681
    
$
58,884
    
$
57,324
  
Ceded
(11,253
)
  
(10,972
)
  
(10,632
)
Net
$
48,428
    
$
47,912
    
$
46,692
  
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 $13.4 million at December 31, 2019 and $15.2 million at December 31, 2018.  The reserve for future policy benefits ceded under this agreement was $8.1 million at December 31, 2019 and $9.1 million at December 31, 2018.
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.  The insurance in force ceded approximated $628.4 million at December 31, 2019 and $692.0 million at December 31, 2018.  Premiums totaled $5.7 million during 2019, $6.2 million during 2018, and $6.5 million during 2017.
Reinsurance recoverables were $378.8 million at year-end 2019, consisting of reserves ceded of $347.7 million and claims ceded of $31.1 million.  Reinsurance recoverables were $366.2 million at year-end 2018, consisting of reserves ceded of $342.3 million and claims ceded of $23.9 million.
In the fourth quarter of 2018, Grange Life completed a 100% recapture of a block of business previously ceded to Colorado Bankers Life Insurance Company.  The block of business recaptured approximated $54.5 million of deferred annuity reserves.
The maximum retention on any one life during 2019 and 2018 was $0.5 million for ordinary life plans and $0.1 million for group coverage.

Page 61
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

The following table reflects our reinsurance partners whose reinsurance recoverable was 5% or greater of our total reinsurance recoverable at December 31, 2019, along with their A.M. Best credit rating.
 
A.M. Best
Rating
  
Reinsurance
Recoverable
  
% of
Recoverable
SCOR Global Life USA Reinsurance Company
A+
  
97,834
    
26
%
RGA Reinsurance Company
A+
  
90,782
    
24
%
Transamerica Life Insurance Company
A
  
$
45,191
    
12
%
Other (30 Companies)
    
144,965
    
38
%
Total
    
$
378,772
    
100
%
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 2019 and 2018, 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 $660.8 million of life insurance in force at December 31, 2019 and $725.5 million of life insurance in force at December 31, 2018.  This block generated life insurance premiums of $2.0 million in both 2019 and 2018 and $2.1 million in 2017.
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 $327.7 million of separate account balances at December 31, 2019, which are included in the financial statements of American Family, compared to $285.6 million at December 31, 2018.  This block consisted of $0.6 million of future policy benefits and $31.6 million in fixed fund balances that are included in Policyholder Account Balances in the Company’s Consolidated Balance Sheets at December 31, 2019.  This block consisted of $0.6 million of future policy benefits and $30.6 million in fixed fund balances at December 31, 2018.

Page 62
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

16. 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, 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
  

Page 63
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

 
Year Ended December 31, 2018
 
Pre-Tax
Amount
  
Tax Expense (Benefit)
  
Net-of-Tax
Amount
           
           
Net unrealized losses arising during the year:
          
Fixed maturity securities
$
(82,724
)
  
$
(17,372
)
  
$
(65,352
)
Less reclassification adjustments:
          
Net realized investment losses, excluding impairment
    losses
(367
)
  
(77
)
  
(290
)
Other-than-temporary impairment losses recognized in
    earnings
—
    
—
    
—
  
Other-than-temporary impairment losses recognized in
    other comprehensive loss
—
    
—
    
—
  
Net unrealized losses excluding impairment losses
(82,357
)
  
(17,295
)
  
(65,062
)
Effect on DAC, VOBA, and DRL
11,224
    
2,357
    
8,867
  
Change in policyholder liabilities
14,372
    
3,018
    
11,354
  
Change in benefit plan obligations
(7,371
)
  
(1,548
)
  
(5,823
)
Other comprehensive loss
$
(64,132
)
  
$
(13,468
)
  
$
(50,664
)
Net income
        
15,672
  
Comprehensive loss
        
$
(34,992
)

 
Year Ended December 31, 2017
 
Pre-Tax
Amount
  
Tax Expense (Benefit)
  
Net-of-Tax
Amount
           
Net unrealized gains arising during the year:
          
Fixed maturity securities
$
2,854
    
$
1,001
    
$
1,853
  
Equity securities
827
    
289
    
538
  
Less reclassification adjustments:
          
Net realized investment gains, excluding impairment
    losses
2,474
    
866
    
1,608
  
Other-than-temporary impairment losses recognized in
    earnings
—
    
—
    
—
  
Other-than-temporary impairment losses recognized in
    other comprehensive income
(7
)
  
(2
)
  
(5
)
Net unrealized gains excluding impairment losses
1,214
    
426
    
788
  
Effect on DAC, VOBA, and DRL
1,929
    
675
    
1,254
  
Change in policyholder liabilities
3,089
    
1,081
    
2,008
  
Change in benefit plan obligations
9,906
    
3,467
    
6,439
  
Other comprehensive income
$
16,138
    
$
5,649
    
$
10,489
  
Net income
        
51,541
  
Comprehensive income
        
$
62,030
  

Page 64
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, 2019, 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
$
6,555
    
$
1,517
    
$
(48,372
)
  
$
(1,107
)
  
$
(4,143
)
  
$
(45,550
)
Other comprehensive
     income (loss) before
     reclassification
131,860
    
(561
)
  
3,042
    
(11,608
)
  
(15,987
)
  
106,746
  
Amounts reclassified
     from accumulated
     other comprehensive
     income (loss)
(2,151
)
  
461
    
—
    
—
    
—
    
(1,690
)
Net current-period other
     comprehensive income
     (loss)
129,709
    
(100
)
  
3,042
    
(11,608
)
  
(15,987
)
  
105,056
  
End of year
$
136,264
    
$
1,417
    
$
(45,330
)
  
$
(12,715
)
  
$
(20,130
)
  
$
59,506
  
The following table provides accumulated balances related to each component of accumulated other comprehensive income (loss) at December 31, 2018, 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
$
72,172
    
$
2,174
    
$
(42,549
)
  
$
(10,012
)
  
$
(15,497
)
  
$
6,288
  
Cumulative effect of
     adoption of new
     accounting principle
    (ASU No. 2016-01)
(1,212
)
  
—
    
—
    
38
    
—
    
(1,174
)
Adjusted beginning
      of year
70,960
    
2,174
    
(42,549
)
  
(9,974
)
  
(15,497
)
  
5,114
  
Other comprehensive
     income (loss) before
     reclassification
(64,695
)
  
(657
)
  
(5,823
)
  
8,867
    
11,354
    
(50,954
)
Amounts reclassified
     from accumulated
     other comprehensive
     income (loss)
290
    
—
    
—
    
—
    
—
    
290
  
Net current-period other
     comprehensive income
     (loss)
(64,405
)
  
(657
)
  
(5,823
)
  
8,867
    
11,354
    
(50,664
)
End of year
$
6,555
    
$
1,517
    
$
(48,372
)
  
$
(1,107
)
  
$
(4,143
)
  
$
(45,550
)

Page 65
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.
 
2019
  
2018
  
2017
Reclassification adjustments related to unrealized gains (losses)
     on investment securities:
          
Net realized investment gains (losses), excluding impairment
     losses 1
$
2,723
    
$
(367
)
  
$
2,474
  
Income tax benefit (expense) 2
(572
)
  
77
    
(866
)
Net of taxes
2,151
    
(290
)
  
1,608
  
           
Other-than-temporary impairment losses 1
(584
)
  
—
    
(7
)
Income tax benefit 2
123
    
—
    
2
  
Net of taxes
(461
)
  
—
    
(5
)
           
Total pre-tax reclassifications
2,139
    
(367
)
  
2,467
  
Total income tax benefit (expense)
(449
)
  
77
    
(864
)
Total reclassification, net taxes
$
1,690
    
$
(290
)
  
$
1,603
  
1  (Increases) decreases net realized investment gains (losses) on the Consolidated Statements of Comprehensive Income.
2  (Increases) decreases income tax expense on the Consolidated Statements of Comprehensive Income.

17. 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 2019, 2018, and 2017.  The number of shares outstanding at both December 31, 2019 and December 31, 2018 was 9,683,414.
18. 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, Sunset Life, Grange Life, and the assumed reinsurance transactions.  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, Sunset 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.

Page 66
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.
 
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
  

 
2018
 
Individual
Insurance
  
Group
Insurance
  
Old
American
  
Consolidated
               
Insurance revenues
$
156,604
    
$
61,632
    
$
92,273
    
$
310,509
  
Interest credited to policyholder
      account balances
74,308
    
—
    
—
    
74,308
  
Amortization of deferred
      acquisition costs
20,916
    
—
    
19,700
    
40,616
  
Income tax expense
854
    
574
    
86
    
1,514
  
Net income
12,198
    
2,160
    
1,314
    
15,672
  
Assets
4,552,270
    
10,550
    
408,666
    
4,971,486
  

 
2017
 
Individual
Insurance
  
Group
Insurance
  
Old
American
  
Consolidated
               
Insurance revenues
$
145,460
    
$
59,569
    
$
88,935
    
$
293,964
  
Interest credited to policyholder
      account balances
72,921
    
—
    
—
    
72,921
  
Amortization of deferred
      acquisition costs
15,965
    
—
    
18,805
    
34,770
  
Income tax expense (benefit)
(16,687
)
  
910
    
(6,395
)
  
(22,172
)
Net income
41,005
    
1,690
    
8,846
    
51,541
  
Assets
4,120,410
    
9,710
    
400,550
    
4,530,670
  

Page 67
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

19. Quarterly Consolidated Financial Data (unaudited)
The unaudited quarterly results of operations for the years ended December 31 are summarized in the following table.
 
First
  
Second
  
Third
  
Fourth
2019:
              
Total revenues
$
130,103
    
$
129,884
    
$
126,441
    
$
126,265
  
               
Total benefits and expenses
125,154
    
123,455
    
120,983
    
113,651
  
               
Net income
4,035
    
5,281
    
4,522
    
10,589
  
               
Per common share,
              
basic and diluted
0.42
    
0.54
    
0.47
    
1.09
  
               
2018:
              
Total revenues
$
109,511
    
$
112,331
    
$
115,372
    
$
123,818
  
               
Total benefits and expenses
107,768
    
107,386
    
107,698
    
120,994
  
               
Net income
1,462
    
4,108
    
6,275
    
3,827
  
               
Per common share,
              
basic and diluted
0.15
    
0.43
    
0.64
    
0.40
  

Page 68
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

20. Statutory Information and Stockholder Dividends Restriction
The following table provides Kansas City Life’s net gain 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.
 
2019
  
2018
  
2017
           
Net gain from operations
$
5,965
    
$
11,529
    
$
14,440
  
           
Net income
6,929
    
15,510
    
15,977
  
           
Capital and surplus
260,804
    
278,157
    
307,501
  
The decrease in capital and surplus in 2019 compared to 2018 was largely attributable to changes in nonadmitted assets of $11.7 million, change in asset valuation reserve of $3.5 million, and change in net unrealized capital gains (losses) of $4.9 million.  These changes were partially offset by net income of $6.9 million, a $3.7 million change in the liability for pension and OPEB, and change in net deferred taxes of $3.0 million.  The decrease in capital and surplus in 2018 compared to 2017 was largely attributable to changes in nonadmitted assets of $28.0 million, change in net unrealized capital losses of $8.5 million, and a $7.5 million increase in the liability for pension and OPEB.  These changes were partially offset by net income of $15.5 million, change in asset valuation reserve of $4.6 million, and change in net deferred taxes of $4.8 million.
Kansas City Life recognizes its 100% ownership in Old American, Sunset Life, and Grange Life under the equity method with subsidiary earnings recorded through surplus on a statutory accounting basis.  Capital and surplus at December 31, 2019 in the above table includes capital and surplus of $19.7 million for Old American, $24.9 million for Sunset Life, and $34.2 million for Grange Life.
Stockholder dividends may not exceed statutory unassigned surplus.  Additionally, under Missouri law, the 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.  We believe that Kansas City Life, as the parent company, has sufficient cash resources, independent of dividends paid by its affiliates, to satisfy its own stockholder dividend payments.  In addition, we believe that individually each of the insurance enterprises has sufficient cash flows to satisfy the anticipated cash dividends that are expected to be declared.
The maximum stockholder dividends payable by Kansas City Life without prior approval in 2020 is $26.1 million, 10% of December 31, 2019 capital and surplus.  The maximum stockholder dividends payable by Old American without prior approval in 2020 is $2.0 million, 10% of December 31, 2019 capital and surplus.  The maximum stockholder dividends payable by Sunset Life without prior approval in 2020 is $2.5 million, 10% of December 31, 2019 capital and surplus.
Grange Life is subject to the laws in Ohio, its state of domicile.  Grange Life did not pay any stockholder dividends during 2019.
We believe that the statutory limitations impose no practical restrictions on the dividend payment plans 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 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 four insurance companies was within the range of approximately 600% to 900%, well in excess of the control level at December 31, 2019.
We are required to deposit a defined amount of assets with state regulatory authorities.  Such assets had a statutory carrying value of $16.3 million at December 31, 2019, $14.7 million at December 31, 2018, and $12.3 million at December 31, 2017.

Page 69
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)

21. Commitments, Contingent Liabilities, Guarantees, and Indemnifications
Commitments
In the normal course of business, we have open purchase and sale commitments.  At December 31, 2019, we had purchase commitments to fund mortgage loans of $20.6 million.
Subsequent to December 31, 2019 we entered into commitments to fund additional mortgage loans of $13.9 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 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, 2019.  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 a defendant in three very similar putative class actions that allege that we applied cost of insurance rates in excess of amounts permitted by the terms of certain universal life insurance policies.
The three cases are:
•
Meek v. KCL, filed in the U.S. District Court for the Western District of Missouri, in which the plaintiff seeks to represent all similar universal life policyholders residing outside of the State of Missouri and seeks damages on behalf of all such policyholders.
•
Karr v. KCL, filed in the 16th District Court for the State of Missouri (Jackson County), in which plaintiff seeks to represent all similar universal life policyholders residing in the State of Missouri and seeks damages on behalf of all such policyholders.
•
Sheldon v KCL, filed in the 16th District Court for the State of Missouri (Jackson County), in which plaintiff seeks to represent all similar variable universal life policyholders and seeks damages on behalf of all such policyholders.
We are vigorously defending each of these 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 Missouri Department of Insurance most recently completed an examination based upon our statutory financial statements for the year ended December 31, 2014 for Kansas City Life, Sunset Life, and Old American.  No recommendations or financial adjustments were required as a result of that examination.  The Ohio Department of Insurance most recently completed an examination of Grange Life for the year ended December 31, 2014.  A periodic examination by the Missouri Department of Insurance and the Ohio Department of Insurance based upon the year ended December 31, 2019 began during the first quarter of 2020.
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

Page 70
Kansas City Life Insurance Company
Notes to Consolidated Financial Statements – (Continued)
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.
22. Subsequent Events
We evaluated events that occurred subsequent to December 31, 2019 through March 12, 2020, the date the consolidated financial statements were issued and have identified the following subsequent event.
On January 27, 2020, the Kansas City Life Board of Directors declared a quarterly dividend of $0.27 per share, paid on February 12, 2020 to stockholders of record on February 6, 2020.
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, 2019.

Page 71
Independent Auditor's Report

The Audit Committee and Stockholders
Kansas City Life Insurance Company
We have audited the accompanying consolidated financial statements of Kansas City Life Insurance Company and subsidiaries, which comprise the consolidated balance sheets as of December 31, 2019 and 2018, 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, 2019, and the related notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.  The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error.  In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements 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 the entity’s internal control.  Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kansas City Life Insurance Company and its subsidiaries as of December 31, 2019 and 2018, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2019, in accordance with accounting principles generally accepted in the United States of America.
/s/ BKD, LLP
Kansas City, Missouri
March 12, 2020

Page 72










KANSAS CITY LIFE
VARIABLE LIFE
SEPARATE ACCOUNT

FINANCIAL STATEMENTS
Years ended December 31, 2019 and 2018























TABLE OF CONTENTS

KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF NET ASSETS
DECEMBER 31, 2019

            
Century II Variable Universal Life
  
Century II Survivorship Variable Universal Life
  
Century II Alliance Variable Universal Life
        
Net Assets
 
Number of
Shares
NAV
  
Number
of Units
  
Unit
Value
  
Number
of Units
  
Unit
Value
  
Number
of Units
  
Unit
Value
  
Fair
Value
  
 Cost
                                   
(in thousands)
Federated Insurance Series
                                 
Managed Volatility Fund II - P
         205,614
 $     11.30
  
           84,558
  
 $        21.766
  
             5,935
  
 $        15.990
  
           32,919
  
 $        11.789
  
 $            2,322
  
 $            2,547
High Income Bond Fund II - P
          217,604
          6.53
  
           30,099
  
           36.749
  
             2,169
  
           32.349
  
             7,543
  
           32.440
  
               1,422
  
               1,429
Government Money Fund II - S
       1,265,682
          1.00
  
           75,628
  
           13.129
  
                     -
  
           13.148
  
           23,932
  
           11.400
  
               1,264
  
               1,266
                                          
MFS® Variable Insurance Trust
                                 
Research Series - Initial Class Shares
          219,045
        29.49
  
           97,700
  
           56.565
  
           11,808
  
           42.252
  
           13,301
  
           32.654
  
               6,460
  
               5,261
Growth Series - Initial Class Shares
           210,766
        59.40
  
         152,927
  
           72.262
  
           14,729
  
           55.981
  
           17,314
  
           37.204
  
             12,520
  
               7,505
Total Return Series - Initial Class Shares
           137,998
        24.90
  
           53,620
  
           45.446
  
             7,081
  
           37.550
  
           27,218
  
           26.946
  
               3,436
  
               3,008
Total Return Bond Series - Initial Class Shares
           137,509
        13.48
  
           52,890
  
           27.282
  
                299
  
           27.459
  
           17,602
  
           22.866
  
               1,853
  
               1,792
Utilities Series - Initial Class Shares
           264,569
        35.18
  
           79,043
  
           90.384
  
             8,756
  
           72.358
  
           36,198
  
           42.260
  
               9,309
  
               7,405
                                          
MFS® Variable Insurance Trust II
                                    
Strategic Income Portfolio - Initial Class Shares
        115,958
          9.98
  
           39,389
  
           25.302
  
                553
  
           25.295
  
             5,891
  
           24.900
  
               1,157
  
               1,160
                                          
American Century Variable Portfolios, Inc.
                                    
VP Capital Appreciation Fund - Class I
          240,539
        15.96
  
           62,298
  
           50.809
  
             1,646
  
           52.031
  
           14,970
  
           39.283
  
               3,839
  
               3,369
VP International Fund - Class
          402,063
        11.50
  
         116,251
  
           33.531
  
             4,323
  
           26.807
  
           29,240
  
           20.855
  
               4,624
  
               3,895
VP Value Fund - Class I
          507,304
        11.72
  
         149,838
  
           25.020
  
           14,239
  
           26.482
  
           50,438
  
           36.075
  
               5,947
  
               4,320
VP Income & Growth Fund - Class I
           152,388
        10.02
  
           60,716
  
           18.631
  
             7,759
  
           19.736
  
             8,467
  
           28.651
  
               1,528
  
               1,298
VP Ultra® Fund - Class I
             96,511
        20.93
  
           25,932
  
           41.684
  
             3,619
  
           43.636
  
           17,533
  
           44.553
  
               2,019
  
               1,458
VP Mid Cap Value Fund - Class I
             10,975
        20.68
  
             6,431
  
           30.095
  
                508
  
           31.249
  
                551
  
           31.787
  
                  225
  
                  203
                                          
American Century Variable Portfolios II, Inc.
                                    
VP Inflation Protection Fund - Class II
             68,135
        10.26
  
           33,197
  
           15.106
  
             2,853
  
           15.813
  
             9,444
  
           16.146
  
                  700
  
                  708
                                          
BNY Mellon Variable Investment Fund
                                    
Appreciation Portfolio - Initial Shares
           116,496
        42.76
  
           98,359
  
           43.432
  
             1,511
  
           43.628
  
           20,703
  
           31.082
  
               4,980
  
               4,501
Opportunistic Small Cap Portfolio - Initial Shares
           140,822
        41.78
  
         141,153
  
           31.508
  
           14,826
  
           29.247
  
           43,744
  
           22.916
  
               5,884
  
               5,672
                                         
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
           368,453
        59.95
  
         399,394
  
           45.317
  
           40,951
  
           44.353
  
           67,607
  
           32.145
  
             22,088
  
             14,621
                                          
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
             22,394
        39.30
  
             8,924
  
           73.621
  
             2,032
  
           77.921
  
             2,619
  
           24.733
  
                  881
  
                  765
                                          
JPMorgan Insurance Trust
                                    
Insurance Trust U.S. Equity Portfolio - Class 1 Shares
             40,295
        32.27
  
           17,122
  
           46.302
  
             6,214
  
           49.006
  
             6,493
  
           31.268
  
               1,300
  
                  915
Insurance Trust Small Cap Core Portfolio - Class 1 Shares
           185,916
        23.04
  
           58,295
  
           47.786
  
             4,107
  
           50.577
  
           36,982
  
           34.884
  
               4,285
  
               3,783
Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
           192,961
        11.81
  
           34,409
  
           45.793
  
             1,361
  
           47.937
  
           13,034
  
           48.945
  
               2,278
  
               1,873
                                        
Franklin Templeton Variable Insurance Products Trust
                                
Franklin Global Real Estate VIP Fund - Class 2
           163,633
        17.50
  
           63,190
  
           28.773
  
             2,666
  
           30.345
  
           34,211
  
           28.194
  
               2,864
  
               2,528
Franklin Small-Mid Cap Growth VIP Fund - Class 2
             58,790
        17.29
  
           35,358
  
           19.426
  
             1,398
  
           20.488
  
           10,284
  
           29.266
  
               1,016
  
               1,083
Templeton Developing Markets VIP Fund - Class 2
           218,457
        10.71
  
           50,586
  
           30.306
  
             2,028
  
           31.962
  
           18,812
  
           39.433
  
               2,340
  
               1,958
Templeton Foreign VIP Fund - Class 2
           208,161
        13.93
  
           54,619
  
           33.816
  
             2,423
  
           35.791
  
           52,894
  
           18.262
  
               2,900
  
               2,940

See accompanying Notes to Financial Statements
Page 1
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF NET ASSETS (CONTINUED)
DECEMBER 31, 2019

         
Century II
  
Century II Survivorship
  
Century II Alliance
        
         
Variable Universal Life
  
Variable Universal Life
  
Variable Universal Life
        
Net Assets
Number of
Shares
NAV
  
Number
of Units
  
Unit
Value
  
Number
of Units
  
Unit
Value
  
Number
of Units
  
Unit
Value
  
 Fair
Value
  
 Cost
                                 
(in thousands)
Calamos® Advisors Trust
                                    
Calamos Growth and Income Portfolio
           226,508
        17.01
  
           57,915
  
           36.880
  
             9,622
  
           39.033
  
           42,556
  
           31.522
  
               3,854
  
               3,277
                                       
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
                            
V.I. American Franchise Fund - Series I Shares
             12,936
        67.15
  
           41,548
  
           12.398
  
           17,721
  
           13.076
  
             5,350
  
           22.766
  
                  869
  
                  685
V.I. Technology Fund - Series I Shares
             22,720
        27.23
  
           46,741
  
             8.270
  
           11,957
  
             8.721
  
             5,346
  
           23.912
  
                  619
  
                  475
V.I. Core Equity Fund - Series I Shares
             49,517
        34.95
  
           72,561
  
           16.026
  
             2,666
  
           16.901
  
           24,390
  
           21.432
  
               1,731
  
               1,637
                                       
Columbia Funds Variable Series Trust II
                                    
Mid-Cap Growth Fund (Class 2)
             64,888
        32.44
  
           81,169
  
           18.562
  
             1,269
  
           19.576
  
           21,561
  
           26.598
  
               2,105
  
               1,310
Seligman Global Technology Fund (Class 2)
           132,261
        21.12
  
           60,829
  
           38.864
  
                558
  
           40.988
  
             6,924
  
           58.697
  
               2,793
  
               2,489
Select Small Cap Value Fund (Class 2)
           102,779
        24.44
  
           43,056
  
           36.445
  
             1,125
  
           38.152
  
           23,100
  
           38.954
  
               2,511
  
               1,830
                                       
Fidelity® Variable Insurance Products
                                    
VIP ContrafundSM Portfolio - Service Class 2
             36,290
        36.10
  
           45,010
  
           24.052
  
             1,065
  
           24.905
  
             7,942
  
           25.303
  
               1,310
  
               1,111
VIP Freedom Income PortfolioSM - Service Class 2
               5,883
        11.83
  
             1,357
  
           14.500
  
             3,325
  
           15.015
  
                     -
  
           15.255
  
                    68
  
                    64
VIP Freedom 2010 PortfolioSM - Service Class 2
                  170
        13.32
  
                137
  
           16.553
  
                     -
  
           17.140
  
                     -
  
           17.414
  
                      2
  
                      2
VIP Freedom 2015 PortfolioSM - Service Class 2
                  362
        13.12
  
                279
  
           16.981
  
                     -
  
           17.583
  
                     -
  
           17.864
  
                      5
  
                      4
VIP Freedom 2020 PortfolioSM - Service Class 2
               9,776
        13.92
  
             7,298
  
           17.066
  
                     -
  
           17.672
  
                642
  
           17.954
  
                  135
  
                  117
VIP Freedom 2025 PortfolioSM - Service Class 2
               9,308
        15.21
  
             1,614
  
           18.060
  
             5,500
  
           18.700
  
                503
  
           18.999
  
                  142
  
                    99
VIP Freedom 2030 PortfolioSM - Service Class 2
             12,681
        15.19
  
             9,675
  
           18.143
  
                     -
  
           18.786
  
                896
  
           19.087
  
                  190
  
                  154
VIP Freedom 2035 PortfolioSM - Service Class 2
                  476
        24.17
  
                532
  
           21.619
  
                     -
  
           22.202
  
                     -
  
           22.472
  
                    11
  
                      9
VIP Freedom 2040 PortfolioSM - Service Class 2
               1,553
        22.95
  
             1,635
  
           21.800
  
                     -
  
           22.387
  
                     -
  
           22.660
  
                    37
  
                    30
VIP Freedom 2045 PortfolioSM - Service Class 2
               4,333
        22.93
  
             4,531
  
           21.931
  
                     -
  
           22.522
  
                     -
  
           22.796
  
                    99
  
                    84
VIP Freedom 2050 PortfolioSM - Service Class 2
               5,798
        20.57
  
             5,429
  
           21.966
  
                     -
  
           22.558
  
                     -
  
           22.832
  
                  120
  
                  101
                                       
Northern Lights Variable Trust
                                    
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
               7,068
        11.57
  
             6,341
  
           12.896
  
                     -
  
           13.171
  
                     -
  
           13.298
  
                    82
  
                    80
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
               4,985
        11.95
  
             3,088
  
           13.558
  
                     -
  
           13.847
  
             1,267
  
           13.981
  
                    60
  
                    56
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
             12,336
        11.43
  
             9,991
  
           13.550
  
                     -
  
           13.838
  
                403
  
           13.972
  
                  141
  
                  140
                                       
American Funds Insurance Series®
                                    
Global Bond Fund - Class 2 Shares
                  285
        12.03
  
                325
  
           10.557
  
                     -
  
           10.665
  
                     -
  
           10.714
  
                      4
  
                      3
Global Growth Fund - Class 2 Shares
                  985
        32.24
  
             1,060
  
           16.232
  
                518
  
           16.396
  
                367
  
           16.472
  
                    32
  
                    28
New World Fund® - Class 2 Shares
               4,591
        25.59
  
             6,832
  
           14.465
  
                573
  
           14.611
  
                702
  
           14.678
  
                  118
  
                  111
Growth-Income Fund - Class 2 Shares
               3,001
        50.08
  
             7,578
  
           15.951
  
                339
  
           16.113
  
             1,479
  
           16.187
  
                  149
  
                  141
Capital Income Builder® - Class 2 Shares
                  232
        10.72
  
                207
  
           11.989
  
                     -
  
           12.110
  
                     -
  
           12.166
  
                      3
  
                      2
Asset Allocation Fund - Class 2 Shares
                  780
        23.79
  
             1,340
  
           13.850
  
                     -
  
           13.990
  
                     -
  
           14.055
  
                    19
  
                    18
                                       
American Funds Insurance Series® Managed Risk Funds
                                
Managed Risk Growth Fund - Class P2 Shares
               1,468
        13.71
  
             1,245
  
           15.468
  
                     -
  
           15.625
  
                  55
  
           15.697
  
                    20
  
                    19
Managed Risk International Fund - Class P2 Shares
               3,056
        10.92
  
             2,546
  
           12.943
  
                     -
  
           13.074
  
                  32
  
           13.135
  
                    34
  
                    32
Managed Risk Blue Chip Income & Growth Fund - Class P2 Shares
                  788
        11.91
  
                686
  
           12.466
  
                     -
  
           12.593
  
                  66
  
           12.651
  
                      9
  
                      9
Managed Risk Growth-Income Fund - Class P2 Shares
               2,823
        13.69
  
             1,489
  
           14.244
  
                     -
  
           14.388
  
             1,206
  
           14.454
  
                    39
  
                    37
Managed Risk Asset Allocation Fund - Class P2 Shares
             50,629
        13.46
  
           51,657
  
           13.168
  
                     -
  
           13.301
  
                  94
  
           13.363
  
                  682
  
                  623
Total Net Assets
                              
 $        127,434
  
 $        102,040

See accompanying Notes to Financial Statements
Page 2
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2019
(in thousands)

           
Federated 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
Strategic Income Portfolio - Initial Class Shares
                                 
Investment Income:
                        
 
Income:
                        
 
  Dividend Distributions
$
                44
            82
             20
  
                     47
                      -
                    75
                            61
                  354
  
                          40
 
Expenses:
                        
 
  Mortality and Expense Risk Fees and
                        
 
    Administrative Charges
  
                18
            11
             10
  
                     52
                    98
                    26
                            15
                    72
  
                          10
       
Net Investment Income (Loss)
  
                26
            71
             10
  
                      (5)
                  (98)
                    49
                            46
                  282
  
                          30
 
Realized and Unrealized Gain (Loss) on Investments:
                    
 
  Net Realized Gain (Loss)
  
              (83)
             (8)
                -
  
                   168
                  563
                    52
                              6
                  228
  
                           (3)
 
  Capital Gains Distributions
  
                  -
               -
                -
  
                   615
                  997
                    85
                              -
                    26
  
                             -
 
  Unrealized Appreciation (Depreciation)
  
              434
          109
                -
  
                   865
               2,014
                  380
                          106
               1,327
  
                          85
       
Net Gain (Loss) on Investments
  
              351
          101
                -
  
                1,648
               3,574
                  517
                          112
               1,581
  
                          82
                                 
       
    Change in Net Assets from Operations
 $
              377
          172
             10
  
                1,643
               3,476
                  566
                          158
               1,863
  
                        112

See accompanying Notes to Financial Statements
Page 3
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2019
(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 Income & Growth 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
$
                      -
                    37
                  115
                    29
                      -
                      4
  
                          16
  
                  53
                     -
 
Expenses:
                        
 
  Mortality and Expense Risk Fees and
                        
 
    Administrative Charges
  
                    30
                    36
                    41
                    11
                    14
                      2
  
                            5
  
                  39
                   45
       
Net Investment Income (Loss)
  
                  (30)
                      1
                    74
                    18
                  (14)
                      2
  
                          11
  
                  14
                 (45)
 
Realized and Unrealized Gain (Loss) on Investments:
                    
 
  Net Realized Gain (Loss)
  
                    40
                    56
                  170
                    20
                    60
                      2
  
                          (6)
  
                    7
                     5
 
  Capital Gains Distributions
  
                  595
                  220
                  313
                  117
                  196
                    22
  
                             -
  
                508
                 973
 
  Unrealized Appreciation (Depreciation)
  
                  412
                  736
                  683
                  134
                  286
                    24
  
                          48
  
                822
                 107
       
Net Gain (Loss) on Investments
  
               1,047
               1,012
               1,166
                  271
                  542
                    48
  
                          42
  
             1,337
              1,085
                                 
       
Change in Net Assets from Operations
$
               1,017
               1,013
               1,240
                  289
                  528
                    50
  
                          53
  
             1,351
              1,040

See accompanying Notes to Financial Statements
Page 4
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2019
(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
$
                  347
  
                             12
  
                    10
                    16
                    33
  
                    72
                     -
                    21
                    48
 
Expenses:
                          
 
  Mortality and Expense Risk Fees and
                          
 
    Administrative Charges
  
                  169
  
                               7
  
                      9
                    31
                    16
  
                    20
                    7
                    16
                    21
       
Net Investment Income (Loss)
  
                  178
  
                               5
  
                      1
                   (15)
                    17
  
                    52
                   (7)
                      5
                    27
 
Realized and Unrealized Gain (Loss) on Investments:
                      
 
  Net Realized Gain (Loss)
  
                  714
  
                               3
  
                    29
                    49
                    43
  
                    44
                 (10)
                    23
                  (38)
 
  Capital Gains Distributions
  
               1,009
  
                             26
  
                    83
                  460
                  138
  
                    56
                131
                      -
                    28
 
  Unrealized Appreciation (Depreciation)
  
               3,316
  
                           193
  
                  199
                  328
                  264
  
                  360
                127
                  459
                  281
       
Net Gain (Loss) on Investments
  
               5,039
  
                           222
  
                  311
                  837
                  445
  
                  460
                248
                  482
                  271
                                   
       
Change in Net Assets from Operations
 $
               5,217
  
                           227
  
                  312
                  822
                  462
  
                  512
                241
                  487
                  298

See accompanying Notes to Financial Statements
Page 5
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2019
(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
$
                    59
  
                       -
                  -
                15
  
                              -
                      -
                      -
  
                               3
                          1
 
Expenses:
                          
 
  Mortality and Expense Risk Fees and
                          
 
    Administrative Charges
  
                    26
  
                      6
                  4
                12
  
                           15
                    20
                    17
  
                             10
                           -
       
Net Investment Income (Loss)
  
                    33
  
                    (6)
                (4)
                  3
  
                         (15)
                  (20)
                  (17)
  
                             (7)
                          1
 
Realized and Unrealized Gain (Loss) on Investments:
                      
 
  Net Realized Gain (Loss)
  
                    43
  
                    17
                19
                13
  
                         105
                      5
                    60
  
                             13
                           -
 
  Capital Gains Distributions
  
                    63
  
                  112
                48
              177
  
                              -
                  387
                      -
  
                           134
                          1
 
  Unrealized Appreciation (Depreciation)
  
                  633
  
                  109
              103
              177
  
                         446
                  642
                  291
  
                           168
                          4
       
Net Gain (Loss) on Investments
  
                  739
  
                  238
              170
              367
  
                         551
               1,034
                  351
  
                           315
                          5
                                   
       
    Change in Net Assets from Operations
 $
                  772
  
                  232
              166
              370
  
                         536
               1,014
                  334
  
                           308
                          6

See accompanying Notes to Financial Statements
Page 6
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2019
(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
                         2
                         3
                           -
                          1
                           1
                         2
 
Expenses:
                    
 
  Mortality and Expense Risk Fees and
                    
 
    Administrative Charges
  
                           -
                        -
                          1
                         1
                         2
                           -
                          -
                           1
                         1
       
Net Investment Income (Loss)
  
                           -
                        -
                          1
                         1
                         1
                           -
                          1
                           -
                         1
 
Realized and Unrealized Gain (Loss) on Investments:
                
 
  Net Realized Gain (Loss)
  
                           -
                        -
                          2
                         2
                         8
                           2
                          -
                           -
                         1
 
  Capital Gains Distributions
  
                           -
                       1
                          7
                         4
                         7
                           1
                          1
                           3
                         3
 
  Unrealized Appreciation (Depreciation)
  
                           -
                        -
                        12
                       17
                       23
                           1
                          5
                         16
                       20
       
Net Gain (Loss) on Investments
  
                           -
                       1
                        21
                       23
                       38
                           4
                          6
                         19
                       24
                             
       
    Change in Net Assets from Operations
 $
                           -
                       1
                        22
                       24
                       39
                           4
                          7
                         19
                       25

See accompanying Notes to Financial Statements
Page 7
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2019
(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
  
Global 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
$
                                    2
                                      1
                                           3
  
               -
               -
              1
                  2
               -
                      -
 
Expenses:
                      
 
  Mortality and Expense Risk Fees and
                      
 
    Administrative Charges
  
                                    1
                                      1
                                           1
  
               -
               -
              1
                  1
               -
                      -
       
Net Investment Income (Loss)
  
                                    1
                                       -
                                           2
  
               -
               -
               -
                  1
               -
                      -
 
Realized and Unrealized Gain (Loss) on Investments:
                  
 
  Net Realized Gain (Loss)
  
                                    -
                                      1
                                           -
  
               -
               -
            (1)
                 (1)
               -
                      -
 
  Capital Gains Distributions
  
                                    2
                                      3
                                           9
  
               -
              1
              4
                  7
               -
                      1
 
  Unrealized Appreciation (Depreciation)
  
                                    4
                                      6
                                         10
  
               -
              4
            21
                14
               -
                      1
       
Net Gain (Loss) on Investments
  
                                    6
                                    10
                                         19
  
               -
              5
            24
                20
               -
                      2
                               
       
    Change in Net Assets from Operations
 $
                                    7
                                    10
                                         21
  
               -
              5
            24
                21
               -
                      2

See accompanying Notes to Financial Statements
Page 8
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 2019
(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 Blue Chip Income & Growth Fund - 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
$
                                 -
                     -
                          -
                    -
                     14
  
        1,648
 
Expenses:
                
 
  Mortality and Expense Risk Fees and
                
 
    Administrative Charges
  
                                 -
                     -
                          -
                    -
                       5
  
           957
       
Net Investment Income (Loss)
  
                                 -
                     -
                          -
                    -
                       9
  
           691
 
Realized and Unrealized Gain (Loss) on Investments:
            
 
  Net Realized Gain (Loss)
  
                                 -
                     -
                          -
                    -
                       1
  
        2,424
 
  Capital Gains Distributions
  
                                 1
                     -
                          -
                    -
                     26
  
        7,601
 
  Unrealized Appreciation (Depreciation)
  
                                 2
                    2
                          1
                   3
                     59
  
      16,893
       
Net Gain (Loss) on Investments
  
                                 3
                    2
                          1
                   3
                     86
  
      26,918
                         
       
    Change in Net Assets from Operations
$
                                 3
                    2
                          1
                   3
                     95
  
      27,609

See accompanying Notes to Financial Statements
Page 9
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
YEARS ENDED DECEMBER 31, 2019 and 2018
(in thousands)

            Federated 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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
           26
  
           59
  
          71
  
           103
  
            10
  
               4
  
           (5)
  
             (9)
  
        (98)
  
           (83)
  
             49
  
             45
 
Net Realized Gain (Loss) and Capital Gains Distributions
         (83)
  
         (94)
  
          (8)
  
           (12)
  
              -
  
               -
  
         783
  
           894
  
     1,560
  
        1,427
  
           137
  
           196
 
Unrealized Appreciation (Depreciation)
  
         434
  
       (190)
  
        109
  
         (146)
  
              -
  
               -
  
         865
  
      (1,158)
  
     2,014
  
      (1,102)
  
           380
  
         (446)
     
Change in Net Assets from Operations
         377
  
       (225)
  
        172
  
           (55)
  
            10
  
               4
  
      1,643
  
         (273)
  
     3,476
  
           242
  
           566
  
         (205)
                                                         
Deposits
    
         201
  
         207
  
          91
  
             97
  
          339
  
           129
  
         286
  
           307
  
        459
  
           494
  
           226
  
           224
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
              -
  
              -
  
            -
  
                -
  
          369
  
           701
  
              -
  
                -
  
            -
  
                -
  
                -
  
                -
 
Withdrawals
    
         125
  
         165
  
          47
  
             59
  
            40
  
             89
  
         361
  
           367
  
        517
  
           684
  
           178
  
           145
 
Administrative Fees
    
         142
  
         144
  
          81
  
             82
  
            97
  
             88
  
         283
  
           280
  
        503
  
           504
  
           211
  
           212
 
Net Transfers to (from) Fixed Account
  
             7
  
         (35)
  
          (2)
  
             78
  
        (278)
  
         (730)
  
         156
  
           125
  
          21
  
           158
  
           (59)
  
             36
     
Payments and Withdrawals
    
         274
  
         274
  
        126
  
           219
  
          228
  
           148
  
         800
  
           772
  
     1,041
  
        1,346
  
           330
  
           393
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
         304
  
       (292)
  
        137
  
         (177)
  
          121
  
           (15)
  
      1,129
  
         (738)
  
     2,894
  
         (610)
  
           462
  
         (374)
 
Beginning of Year
    
      2,018
  
      2,310
  
     1,285
  
        1,462
  
       1,143
  
        1,158
  
      5,331
  
        6,069
  
     9,626
  
      10,236
  
        2,974
  
        3,348
                                                         
     
End of Year
  
 $
      2,322
  
      2,018
  
     1,422
  
        1,285
  
       1,264
  
        1,143
  
      6,460
  
        5,331
  
   12,520
  
        9,626
  
        3,436
  
        2,974

See accompanying Notes to Financial Statements
Page 10
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(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
  
Strategic Income Portfolio - Initial Class Shares
  
VP Capital Appreciation Fund - Class I
  
VP International Fund - Class I
  
VP Value Fund - Class I
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
          46
  
             44
  
            282
  
             24
  
             30
  
             34
  
           (30)
  
           (29)
  
             1
  
             18
  
             74
  
             49
 
Net Realized Gain (Loss) and Capital Gains Distributions
            6
  
             (6)
  
            254
  
           167
  
             (3)
  
           (12)
  
           635
  
             85
  
         276
  
           435
  
           483
  
           249
 
Unrealized Appreciation (Depreciation)
  
        106
  
           (73)
  
         1,327
  
         (158)
  
             85
  
           (54)
  
           412
  
         (234)
  
         736
  
      (1,159)
  
           683
  
         (825)
     
Change in Net Assets from Operations
        158
  
           (35)
  
         1,863
  
             33
  
           112
  
           (32)
  
        1,017
  
         (178)
  
      1,013
  
         (706)
  
        1,240
  
         (527)
                                                         
Deposits
    
        188
  
           198
  
            532
  
           555
  
           111
  
           124
  
           185
  
           206
  
         361
  
           386
  
           445
  
           437
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
            -
  
                -
  
                 -
  
                -
  
                -
  
                -
  
               -
  
                -
  
              -
  
               -
  
               -
  
               -
 
Withdrawals
    
          99
  
             86
  
            430
  
           490
  
             42
  
             39
  
           196
  
           243
  
         250
  
           314
  
           280
  
           339
 
Administrative Fees
    
        108
  
           123
  
            453
  
           462
  
             72
  
             69
  
           157
  
           158
  
         220
  
           235
  
           282
  
           283
 
Net Transfers to (from) Fixed Account
  
          10
  
             42
  
            143
  
           284
  
             18
  
             68
  
               7
  
             38
  
           29
  
           (27)
  
           (15)
  
             85
     
Payments and Withdrawals
    
        217
  
           251
  
         1,026
  
        1,236
  
           132
  
           176
  
           360
  
           439
  
         499
  
           522
  
           547
  
           707
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
        129
  
           (88)
  
         1,369
  
         (648)
  
             91
  
           (84)
  
           842
  
         (411)
  
         875
  
         (842)
  
        1,138
  
         (797)
 
Beginning of Year
    
     1,724
  
        1,812
  
         7,940
  
        8,588
  
        1,066
  
        1,150
  
        2,997
  
        3,408
  
      3,749
  
        4,591
  
        4,809
  
        5,606
                                                         
     
End of Year
  
 $
     1,853
  
        1,724
  
         9,309
  
        7,940
  
        1,157
  
        1,066
  
        3,839
  
        2,997
  
      4,624
  
        3,749
  
        5,947
  
        4,809


See accompanying Notes to Financial Statements
Page 11
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(in thousands)

            American Century Variable Portfolios, Inc.    American Century Variable Portfolios II, Inc   BNY Mellon Variable Investment Fund
                                 
           
VP Income & Growth 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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
            18
  
            16
  
           (14)
  
             (8)
  
               2
  
               1
  
             11
  
             14
  
             14
  
             18
  
           (45)
  
           (53)
 
Net Realized Gain (Loss) and Capital Gains Distributions
          137
  
          149
  
           256
  
           277
  
             24
  
             25
  
             (6)
  
             (8)
  
           515
  
           610
  
           978
  
        1,355
 
Unrealized Appreciation (Depreciation)
  
          134
  
        (269)
  
           286
  
         (263)
  
             24
  
           (55)
  
             48
  
           (32)
  
           822
  
         (947)
  
           107
  
      (2,525)
     
Change in Net Assets from Operations
          289
  
        (104)
  
           528
  
               6
  
             50
  
           (29)
  
             53
  
           (26)
  
        1,351
  
         (319)
  
        1,040
  
      (1,223)
                                                         
Deposits
    
          111
  
          111
  
           143
  
           153
  
             22
  
             24
  
             78
  
             83
  
           260
  
           248
  
           365
  
           376
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
               -
  
               -
  
                -
  
               -
  
               -
  
               -
  
               -
  
               -
  
               -
  
               -
  
               -
  
               -
 
Withdrawals
    
            64
  
            89
  
           111
  
           115
  
             22
  
             14
  
             25
  
             47
  
           349
  
           278
  
           328
  
           345
 
Administrative Fees
    
            82
  
            84
  
             88
  
             85
  
             18
  
             20
  
             39
  
             42
  
           226
  
           234
  
           287
  
           329
 
Net Transfers to (from) Fixed Account
  
             (6)
  
            11
  
             40
  
             26
  
             (4)
  
             18
  
             53
  
             (5)
  
             24
  
             99
  
           (54)
  
             71
     
Payments and Withdrawals
    
          140
  
          184
  
           239
  
           226
  
             36
  
             52
  
           117
  
             84
  
           599
  
           611
  
           561
  
           745
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
          260
  
        (177)
  
           432
  
           (67)
  
             36
  
           (57)
  
             14
  
           (27)
  
        1,012
  
         (682)
  
           844
  
      (1,592)
 
Beginning of Year
    
       1,268
  
       1,445
  
        1,587
  
        1,654
  
           189
  
           246
  
           686
  
           713
  
        3,968
  
        4,650
  
        5,040
  
        6,632
                                                         
     
End of Year
  
 $
       1,528
  
       1,268
  
        2,019
  
        1,587
  
           225
  
           189
  
           700
  
           686
  
        4,980
  
        3,968
  
        5,884
  
        5,040
 
 
See accompanying Notes to Financial Statements
Page 12
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
          178
  
          162
  
           5
  
           7
  
            1
  
           -
  
      (15)
  
           (16)
  
             17
  
               4
  
             52
  
             50
 
Net Realized Gain (Loss) and Capital Gains Distributions
       1,723
  
       1,386
  
         29
  
       153
  
        112
  
      216
  
      509
  
           427
  
           181
  
           129
  
           100
  
             21
 
  Unrealized Appreciation (Depreciation)
  
       3,316
  
      (2,511)
  
       193
  
     (195)
  
        199
  
    (287)
  
      328
  
         (908)
  
           264
  
         (390)
  
           360
  
         (270)
     
Change in Net Assets from Operations
       5,217
  
         (963)
  
       227
  
       (35)
  
        312
  
      (71)
  
      822
  
         (497)
  
           462
  
         (257)
  
           512
  
         (199)
                                                         
Deposits
    
       1,129
  
       1,152
  
         66
  
         75
  
          58
  
        76
  
      320
  
           346
  
           177
  
           199
  
           249
  
           248
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
               -
  
               -
  
           -
  
            -
  
            -
  
           -
  
           -
  
                -
  
               -
  
               -
  
               -
  
               -
 
Withdrawals
    
          941
  
       1,198
  
         60
  
         44
  
          23
  
        25
  
      206
  
           211
  
           130
  
           198
  
           167
  
           141
 
Administrative Fees
    
       1,046
  
       1,057
  
         45
  
         65
  
          75
  
        73
  
      194
  
           200
  
           106
  
           111
  
           148
  
           146
 
 Net Transfers to (from) Fixed Account
  
            39
  
          254
  
         10
  
         51
  
            5
  
      114
  
      (79)
  
           (12)
  
           (75)
  
           110
  
               9
  
             24
     
Payments and Withdrawals
    
       2,026
  
       2,509
  
       115
  
       160
  
        103
  
      212
  
      321
  
           399
  
           161
  
           419
  
           324
  
           311
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
       4,320
  
      (2,320)
  
       178
  
     (120)
  
        267
  
    (207)
  
      821
  
         (550)
  
           478
  
         (477)
  
           437
  
         (262)
 
Beginning of Year
    
     17,768
  
     20,088
  
       703
  
       823
  
     1,033
  
   1,240
  
   3,464
  
        4,014
  
        1,800
  
        2,277
  
        2,427
  
        2,689
                                                         
     
End of Year
  
 $
     22,088
  
     17,768
  
       881
  
       703
  
     1,300
  
   1,033
  
   4,285
  
        3,464
  
        2,278
  
        1,800
  
        2,864
  
        2,427

See accompanying Notes to Financial Statements
Page 13
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
           (7)
  
          (7)
  
               5
  
               3
  
             27
  
             55
  
         33
  
              19
  
              (6)
  
              (6)
  
              (4)
  
              (4)
 
Net Realized Gain (Loss) and Capital Gains Distributions
         121
  
          81
  
             23
  
             26
  
           (10)
  
               7
  
       106
  
            212
  
            129
  
              87
  
              67
  
              47
 
  Unrealized Appreciation (Depreciation)
  
         127
  
      (125)
  
           459
  
         (412)
  
           281
  
         (555)
  
       633
  
          (393)
  
            109
  
          (115)
  
            103
  
            (60)
     
Change in Net Assets from Operations
         241
  
        (51)
  
           487
  
         (383)
  
           298
  
         (493)
  
       772
  
          (162)
  
            232
  
            (34)
  
            166
  
            (17)
                                                         
Deposits
    
           55
  
          57
  
           196
  
           206
  
           260
  
           270
  
       198
  
            210
  
              38
  
              50
  
              25
  
              26
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
              -
  
             -
  
               -
  
               -
  
               -
  
                -
  
            -
  
                -
  
                -
  
                 -
  
                 -
  
                 -
 
Withdrawals
    
           20
  
          64
  
           110
  
           126
  
           150
  
           173
  
       174
  
            165
  
              14
  
              21
  
                9
  
              23
 
Administrative Fees
    
           42
  
          41
  
           107
  
           112
  
           138
  
           147
  
       173
  
            182
  
              34
  
              34
  
              28
  
              26
 
 Net Transfers to (from) Fixed Account
  
           15
  
        (19)
  
             44
  
         (103)
  
           (77)
  
           (28)
  
        (30)
  
            156
  
                6
  
            (34)
  
              26
  
            (96)
     
Payments and Withdrawals
    
           77
  
          86
  
           261
  
           135
  
           211
  
           292
  
       317
  
            503
  
              54
  
              21
  
              63
  
            (47)
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
         219
  
        (80)
  
           422
  
         (312)
  
           347
  
         (515)
  
       653
  
          (455)
  
            216
  
              (5)
  
            128
  
              56
 
Beginning of Year
    
         797
  
        877
  
        1,918
  
        2,230
  
        2,553
  
        3,068
  
    3,201
  
         3,656
  
            653
  
            658
  
            491
  
            435
                                                         
     
End of Year
  
 $
      1,016
  
        797
  
        2,340
  
        1,918
  
        2,900
  
        2,553
  
    3,854
  
         3,201
  
            869
  
            653
  
            619
  
            491
 
See accompanying Notes to Financial Statements
Page 14
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
             3
  
              2
  
           (15)
  
           (14)
  
        (20)
  
           (20)
  
           (17)
  
           (18)
  
             (7)
  
             (5)
  
               1
  
               1
 
Net Realized Gain (Loss) and Capital Gains Distributions
         190
  
          122
  
           105
  
             75
  
        392
  
           270
  
             60
  
           150
  
           147
  
           138
  
               1
  
               1
 
  Unrealized Appreciation (Depreciation)
  
         177
  
        (275)
  
           446
  
         (157)
  
        642
  
         (436)
  
           291
  
         (439)
  
           168
  
         (210)
  
               4
  
             (3)
     
Change in Net Assets from Operations
         370
  
        (151)
  
           536
  
           (96)
  
     1,014
  
         (186)
  
           334
  
         (307)
  
           308
  
           (77)
  
               6
  
             (1)
                                                         
Deposits
    
         142
  
          142
  
           141
  
           136
  
        109
  
           154
  
           210
  
           212
  
             99
  
           109
  
               2
  
               2
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
              -
  
               -
  
               -
  
               -
  
             -
  
               -
  
               -
  
               -
  
               -
  
               -
  
               -
  
               -
 
Withdrawals
    
           72
  
          101
  
           113
  
           105
  
        187
  
           174
  
             70
  
           148
  
             63
  
             94
  
               -
  
               -
 
Administrative Fees
    
           76
  
            78
  
             88
  
             86
  
          89
  
             95
  
           106
  
           108
  
             55
  
             57
  
               3
  
               3
 
 Net Transfers to (from) Fixed Account
  
         (32)
  
            27
  
           (10)
  
             (7)
  
          40
  
           126
  
         (149)
  
             91
  
               -
  
             49
  
               -
  
             (1)
     
Payments and Withdrawals
    
         116
  
          206
  
           191
  
           184
  
        316
  
           395
  
             27
  
           347
  
           118
  
           200
  
               3
  
               2
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
         396
  
        (215)
  
           486
  
         (144)
  
        807
  
         (427)
  
           517
  
         (442)
  
           289
  
         (168)
  
               5
  
             (1)
 
Beginning of Year
    
      1,335
  
       1,550
  
        1,619
  
        1,763
  
     1,986
  
        2,413
  
        1,994
  
        2,436
  
        1,021
  
        1,189
  
             63
  
             64
                                                         
     
End of Year
  
 $
      1,731
  
       1,335
  
        2,105
  
        1,619
  
     2,793
  
        1,986
  
        2,511
  
        1,994
  
        1,310
  
        1,021
  
             68
  
             63

See accompanying Notes to Financial Statements
Page 15
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
               -
  
               -
  
                -
  
                -
  
               1
  
               1
  
               1
  
                1
  
              1
  
                 -
  
                 -
  
                 -
 
Net Realized Gain (Loss) and Capital Gains Distributions
               -
  
               -
  
               1
  
               1
  
               9
  
               9
  
               6
  
                4
  
            15
  
                 9
  
                 3
  
                 -
 
  Unrealized Appreciation (Depreciation)
  
               -
  
               -
  
                -
  
             (1)
  
             12
  
            (19)
  
             17
  
             (14)
  
            23
  
             (28)
  
                 1
  
               (3)
     
Change in Net Assets from Operations
               -
  
               -
  
               1
  
                -
  
             22
  
              (9)
  
             24
  
               (9)
  
            39
  
             (19)
  
                 4
  
               (3)
                                                         
Deposits
    
               -
  
               -
  
               2
  
               4
  
               6
  
               7
  
               2
  
                1
  
            19
  
               24
  
                 2
  
                 2
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
               -
  
               -
  
                -
  
                -
  
                -
  
                -
  
               -
  
                 -
  
               -
  
                 -
  
                 -
  
                 -
 
Withdrawals
    
               -
  
               -
  
               3
  
               3
  
               1
  
             18
  
               -
  
                 -
  
            35
  
                 2
  
               13
  
                 -
 
Administrative Fees
    
              1
  
               1
  
               2
  
               4
  
               8
  
               9
  
               7
  
                6
  
              9
  
               11
  
                 1
  
                 1
 
 Net Transfers to (from) Fixed Account
  
               -
  
             (1)
  
                -
  
                -
  
             11
  
               1
  
             (9)
  
               (1)
  
              9
  
                 7
  
                 -
  
               (1)
     
Payments and Withdrawals
    
              1
  
               -
  
               5
  
               7
  
             20
  
             28
  
             (2)
  
                5
  
            53
  
               20
  
               14
  
                 -
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
            (1)
  
               -
  
             (2)
  
             (3)
  
               8
  
            (30)
  
             28
  
             (13)
  
              5
  
             (15)
  
               (8)
  
               (1)
 
Beginning of Year
    
              3
  
               3
  
               7
  
             10
  
           127
  
           157
  
           114
  
            127
  
          185
  
             200
  
               19
  
               20
                                                         
     
End of Year
  
 $
              2
  
               3
  
               5
  
               7
  
           135
  
           127
  
           142
  
            114
  
          190
  
             185
  
               11
  
               19

See accompanying Notes to Financial Statements
Page 16
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
               1
  
                 -
  
               -
  
                -
  
               1
  
               -
  
                  1
  
                -
  
                  -
  
                 -
  
                2
  
               1
 
Net Realized Gain (Loss) and Capital Gains Distributions
               1
  
                1
  
               3
  
               1
  
               4
  
               3
  
                  2
  
               1
  
                 4
  
                3
  
                9
  
               9
 
  Unrealized Appreciation (Depreciation)
  
               5
  
               (4)
  
             16
  
            (10)
  
             20
  
           (13)
  
                  4
  
              (3)
  
                 6
  
             (10)
  
              10
  
           (22)
     
Change in Net Assets from Operations
               7
  
               (3)
  
             19
  
              (9)
  
             25
  
           (10)
  
                  7
  
              (2)
  
               10
  
               (7)
  
              21
  
           (12)
                                                         
Deposits
    
               6
  
                6
  
             13
  
             13
  
             17
  
             17
  
                  4
  
             15
  
                 6
  
                7
  
              19
  
             22
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
               -
  
                 -
  
               -
  
                -
  
                -
  
               -
  
                  -
  
                -
  
                  -
  
                 -
  
                 -
  
               -
 
Withdrawals
    
               -
  
                 -
  
               -
  
                -
  
                -
  
               1
  
                  -
  
                -
  
               17
  
                 -
  
                4
  
               3
 
Administrative Fees
    
               1
  
                1
  
               3
  
               3
  
               6
  
               6
  
                  2
  
               2
  
                 3
  
                3
  
              15
  
             14
 
 Net Transfers to (from) Fixed Account
  
               -
  
                 -
  
               -
  
                -
  
                -
  
               -
  
              (25)
  
            (26)
  
                  -
  
                 -
  
                2
  
             (1)
     
Payments and Withdrawals
    
               1
  
                1
  
               3
  
               3
  
               6
  
               7
  
              (23)
  
            (24)
  
               20
  
                3
  
              21
  
             16
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
             12
  
                2
  
             29
  
               1
  
             36
  
               -
  
                34
  
             37
  
                (4)
  
               (3)
  
              19
  
             (6)
 
Beginning of Year
    
             25
  
              23
  
             70
  
             69
  
             84
  
             84
  
                48
  
             11
  
               64
  
              67
  
            122
  
           128
                                                         
     
End of Year
  
 $
             37
  
              25
  
             99
  
             70
  
           120
  
             84
  
                82
  
             48
  
               60
  
              64
  
            141
  
           122

See accompanying Notes to Financial Statements
Page 17
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(in thousands)

            American Funds Insurance Series®
                                 
           
Global 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
           
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                         
Change in Net Assets from Operations:
                                                
 
Net Investment Income (Loss)
  
 $
               -
  
               -
  
                -
  
                -
  
                -
  
                 -
  
                1
  
                1
  
                -
  
                   -
  
                   -
  
                   -
 
Net Realized Gain (Loss) and Capital Gains Distributions
               -
  
               -
  
               1
  
               2
  
               3
  
                 -
  
                6
  
                2
  
                -
  
                   -
  
                  1
  
                   -
 
  Unrealized Appreciation (Depreciation)
  
               -
  
               -
  
               4
  
             (2)
  
             21
  
             (15)
  
              14
  
              (6)
  
                -
  
                   -
  
                  1
  
                   -
     
Change in Net Assets from Operations
               -
  
               -
  
               5
  
                -
  
             24
  
             (15)
  
              21
  
              (3)
  
                -
  
                   -
  
                  2
  
                   -
                                                         
Deposits
    
              1
  
               1
  
               4
  
               7
  
               6
  
              11
  
              31
  
              15
  
                1
  
                  1
  
                13
  
                  1
                                                         
Payments and Withdrawals:
                                                  
 
Death Benefits
    
               -
  
               -
  
                -
  
                -
  
                -
  
                 -
  
                -
  
                -
  
                -
  
                   -
  
                   -
  
                   -
 
Withdrawals
    
               -
  
               -
  
               2
  
             14
  
                -
  
                 -
  
                -
  
                1
  
                -
  
                   -
  
                   -
  
                  1
 
Administrative Fees
    
               -
  
               -
  
               2
  
               3
  
               4
  
                4
  
                9
  
                5
  
                -
  
                   -
  
                  2
  
                  1
 
 Net Transfers to (from) Fixed Account
  
            (1)
  
               -
  
           (21)
  
             17
  
           (16)
  
             (67)
  
            (55)
  
            (27)
  
                -
  
                   -
  
                 (3)
  
                 (1)
     
Payments and Withdrawals
    
            (1)
  
               -
  
           (17)
  
             34
  
           (12)
  
             (63)
  
            (46)
  
            (21)
  
                -
  
                   -
  
                 (1)
  
                  1
                                                         
Net Assets:
                                                  
 
Net Increase (Decrease)
    
              2
  
               1
  
             26
  
           (27)
  
             42
  
              59
  
              98
  
              33
  
                1
  
                  1
  
                16
  
                   -
 
Beginning of Year
    
              2
  
               1
  
               6
  
             33
  
             76
  
              17
  
              51
  
              18
  
                2
  
                  1
  
                  3
  
                  3
                                                         
     
End of Year
  
 $
              4
  
               2
  
             32
  
               6
  
           118
  
              76
  
            149
  
              51
  
                3
  
                  2
  
                19
  
                  3

See accompanying Notes to Financial Statements
Page 18
KANSAS CITY LIFE VARIABLE LIFE SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS (CONTINUED)
YEARS ENDED DECEMBER 31, 2019 and 2018
(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 Blue Chip Income & Growth Fund - Class P2 Shares
  
Managed Risk Growth-Income Fund - Class P2 Shares
  
Managed Risk Asset Allocation Fund - Class P2 Shares
  
Total
   
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
                                                 
Change in Net Assets from Operations:
                                                
Net Investment Income (Loss)
  $
                  -
  
                 -
  
                  -
  
                  -
  
             -
  
             -
  
              -
  
             -
  
                           9
  
                2
  
            691
  
            466
Net Realized Gain (Loss) and Capital Gains Distributions
  
                 1
  
                 2
  
                  -
  
                  -
  
             -
  
             -
  
              -
  
             -
  
                         27
  
              22
  
       10,025
  
         9,354
  Unrealized Appreciation (Depreciation)
  
                 2
  
               (2)
  
                 2
  
               (1)
  
             1
  
           (1)
  
             3
  
          (1)
  
                         59
  
             (56)
  
       16,893
  
     (17,588)
Change in Net Assets from Operations
  
                 3
  
                 -
  
                 2
  
               (1)
  
             1
  
           (1)
  
             3
  
          (1)
  
                         95
  
             (32)
  
       27,609
  
       (7,768)
                                                 
Deposits
  
                 9
  
                 8
  
                 4
  
                 3
  
             4
  
             3
  
           10
  
            2
  
                         77
  
              91
  
         8,133
  
         8,290
                                                 
Payments and Withdrawals:
                                                
Death Benefits
  
                  -
  
                 -
  
                  -
  
                  -
  
             -
  
             -
  
              -
  
             -
  
                           -
  
                 -
  
            369
  
            701
Withdrawals
  
                  -
  
                 -
  
                  -
  
                  -
  
             -
  
             1
  
              -
  
             -
  
                           2
  
                3
  
         6,050
  
         6,966
Administrative Fees
  
                 5
  
                 3
  
                 3
  
                 1
  
             4
  
             2
  
             4
  
            1
  
                         30
  
              24
  
         6,023
  
         6,160
 Net Transfers to (from) Fixed Account
  
                  -
  
                 2
  
             (26)
  
                 8
  
             -
  
           (1)
  
          (20)
  
        (10)
  
                         (9)
  
               (6)
  
          (331)
  
            937
Payments and Withdrawals
  
                 5
  
                 5
  
             (23)
  
                 9
  
             4
  
             2
  
          (16)
  
          (9)
  
                         23
  
              21
  
       12,111
  
       14,764
                                                 
Net Assets:
                                                
Net Increase (Decrease)
  
                 7
  
                 3
  
               29
  
               (7)
  
             1
  
             -
  
           29
  
          10
  
                       149
  
              38
  
       23,631
  
     (14,242)
Beginning of Year
  
               13
  
               10
  
                 5
  
               12
  
             8
  
             8
  
           10
  
             -
  
                       533
  
            495
  
     103,803
  
     118,045
                                                 
End of Year
  $
               20
  
               13
  
               34
  
                 5
  
             9
  
             8
  
           39
  
          10
  
                       682
  
            533
  
     127,434
  
     103,803

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

1. Organization and Significant Accounting Policies

Organization

Kansas City Life Variable Life 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 Universal Life (sales discontinued effective January 1, 2009);
•
Century II Accumulator Variable Universal Life (presented herein with Century II Variable Universal Life);
•
Century II Survivorship Variable Universal Life (sales discontinued effective January 1, 2009);
•
Century II Heritage Survivorship Variable Universal Life (presented herein with Century II Survivorship Variable Universal Life and sales discontinued effective January 1, 2009); and,
•
Century II Alliance Variable Universal Life (sales discontinued effective January 1, 2009).

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 with 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 life 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 life insurance policies 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 Life Separate Account
Notes to Financial Statements (continued)
 
The following Series-Type Mutual Funds are available in the Account:
   
Federated 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
  
Strategic 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 Income & Growth 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
Global 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 Blue Chip Income & Growth Fund - 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 Life Separate Account
Notes to Financial Statements (continued)

Fund Changes

During the year ended December 31, 2019, the following portfolio changed its name as summarized, with the effective date of the change, in the following table:

Prior Portfolio Name
Current Portfolio Name
Effective Date
Columbia Variable Portfolio – Select Smaller-Cap Value Fund (Class 2)
Columbia Variable Portfolio – Select Small Cap Value Fund (Class 2)
May 1, 2019
Dreyfus Stock Index Fund, Inc. – Initial Shares
BNY Mellon Stock Index Fund, Inc. - Initial Shares
June 3, 2019
Dreyfus Sustainable U.S. Equity Portfolio, Inc. – Initial Shares
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. – Initial Shares
June 3, 2019
Dreyfus Variable Investment Fund – Appreciation Portfolio – Initial Shares
BNY Mellon Variable Investment Fund - Appreciation Portfolio – Initial Shares
June 3, 2019
Dreyfus Variable Investment Fund – Opportunistic Small Cap Portfolio – Initial Shares
BNY Mellon Variable Investment Fund - Opportunistic Small Cap Portfolio – Initial Shares
June 3, 2019

There were no funds that merged during the year ended December 31, 2019.  The Federated Managed Tail Risk Fund II was reorganized as Federated Managed Volatility Fund II on August 17, 2018.

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.

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.
 
Page 22
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)

 
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 2019 and 2018 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 28, 2020, the date that the financial statements have been issued.

Subsequent to December 31, 2019, there was a global outbreak of COVID-19. The global and domestic response to the COVID-19 outbreak continues to rapidly evolve. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the impact on financial markets, which is uncertain and cannot be predicted at this time. At this point, the full extent to which COVID-19 may impact our financial condition or results of operations is uncertain.
Page 23
Kansas City Life Variable Life 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:
         
2019:
  
Cost of
Purchases
  
Proceeds
from Sales
   
(in thousands)
         
Federated Managed Volatility Fund II - P
  
 $                355
  
 $               402
Federated High Income Bond Fund II - P
  
                   215
  
                  179
Federated Government Money Fund II - S
  
                1,000
  
                  879
MFS® Research Series - Initial Class Shares
  
                1,027
  
                  931
MFS® Growth Series - Initial Class Shares
  
                1,709
  
               1,392
MFS® Total Return Series - Initial Class Shares
  
                   550
  
                  520
MFS® Total Return Bond Series - Initial Class Shares
  
                   307
  
                  290
MFS® Utilities Series - Initial Class Shares
  
                1,144
  
               1,330
MFS® Strategic Income Portfolio - Initial Class Shares
  
                   186
  
                  177
American Century VP Capital Appreciation Fund - Class I
  
                   886
  
                  496
American Century VP International Fund - Class I
  
                   748
  
                  665
American Century VP Value Fund - Class I
  
                1,052
  
                  767
American Century VP Income & Growth Fund - Class I
  
                   276
  
                  170
American Century VP Ultra® Fund - Class I
  
                   359
  
                  273
American Century VP Mid Cap Value Fund - Class I
  
                     55
  
                    45
American Century VP Inflation Protection Fund - Class II
  
                   121
  
                  149
BNY Mellon Appreciation Portfolio - Initial Shares
  
                   926
  
                  743
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
  
                1,497
  
                  765
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
                2,747
  
               2,457
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
                   111
  
                  129
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
                   160
  
                  121
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
                   978
  
                  534
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
                   460
  
                  289
Franklin Global Real Estate VIP Fund - Class 2
  
                   507
  
                  474
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
                   215
  
                  113
Templeton Developing Markets VIP Fund - Class 2
  
                   283
  
                  343
Templeton Foreign VIP Fund - Class 2
  
                   556
  
                  452
Calamos Growth and Income Portfolio
  
                   424
  
                  447
Invesco V.I. American Franchise Fund - Series I Shares
  
                   158
  
                    68
Invesco V.I. Technology Fund - Series I Shares
  
                     94
  
                    88
Invesco V.I. Core Equity Fund - Series I Shares
  
                   418
  
                  212
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
  
                   243
  
                  308
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
                   619
  
                  459
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
                   412
  
                  246
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
  
                   278
  
                  170
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
  
                       6
  
                      5
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
  
                        -
  
                      1
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
  
                       2
  
                      4
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
  
                     16
  
                    22
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
  
                     44
  
                    35
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
  
                     28
  
                    54
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
  
                       3
  
                    14
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
  
                       8
  
                      1
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
  
                     16
  
                      3
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
  
                     21
  
                      6
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
                     33
  
                      3
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
                     11
  
                    22
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
                     38
  
                    29
American Funds Global Bond Fund - Class 2
  
                       2
  
                      -
American Funds Global Growth Fund - Class 2
  
                     27
  
                      5
American Funds New World Fund - Class 2
  
                     42
  
                    20
American Funds Growth-Income Fund - Class 2
  
                   109
  
                    24
American Funds Capital Income Builder - Class 2
  
                       1
  
                      -
American Funds Asset Allocation Fund - Class 2
  
                     17
  
                      2
American Funds Managed Risk Growth Fund - Class P2
  
                     10
  
                      5
American Funds Managed Risk International Fund - Class P2
  
                     30
  
                      3
American Funds Managed Risk Blue Chip Income & Growth Fund - Class P2
                       4
  
                      4
American Funds Managed Risk Growth-Income Fund - Class P2
  
                     30
  
                      4
American Funds Managed Risk Asset Allocation Fund - Class P2
  
                   124
  
                    35
Total
  
 $           21,698
  
 $          17,384

Page 24
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)

2018:
  
Cost of
Purchases
  
Proceeds
from Sales
   
(in thousands)
         
         
Federated Managed Volatility Fund II - P

$                   409
  
$               417
Federated High Income Bond Fund II - P
  
                   246
  
                  265
Federated Government Money Fund II - S
  
                1,780
  
               1,795
MFS® Research Series - Initial Class Shares
  
                1,115
  
                  887
MFS® Growth Series - Initial Class Shares
  
                1,449
  
               1,663
MFS® Total Return Series - Initial Class Shares
  
                   488
  
                  467
MFS® Total Return Bond Series - Initial Class Shares
  
                   324
  
                  333
MFS® Utilities Series - Initial Class Shares
  
                   862
  
               1,487
MFS® Strategic Income Portfolio - Initial Class Shares
  
                   188
  
                  206
American Century VP Capital Appreciation Fund - Class I
  
                   290
  
                  533
American Century VP International Fund - Class I
  
                   979
  
                  805
American Century VP Value Fund - Class I
  
                   631
  
                  852
American Century VP Income & Growth Fund - Class I
  
                   268
  
                  217
American Century VP Ultra® Fund - Class I
  
                   457
  
                  363
American Century VP Mid Cap Value Fund - Class I
  
                     44
  
                    55
American Century VP Inflation Protection Fund - Class II
  
                   154
  
                  141
Dreyfus Appreciation Portfolio - Initial Shares
  
                   944
  
                  727
Dreyfus Opportunistic Small Cap Portfolio - Initial Shares
  
                1,635
  
                  980
Dreyfus Stock Index Fund, Inc. - Initial Shares
  
                2,157
  
               2,901
The Dreyfus Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
                   249
  
                  175
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
                   249
  
                  238
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
                   884
  
                  687
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
                   306
  
                  486
Franklin Global Real Estate VIP Fund - Class 2
  
                   432
  
                  445
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
                   190
  
                  133
Templeton Developing Markets VIP Fund - Class 2
  
                   532
  
                  458
Templeton Foreign VIP Fund - Class 2
  
                   514
  
                  481
Calamos Growth and Income Portfolio
  
                   486
  
                  618
Invesco V.I. American Franchise Fund - Series I Shares
  
                   195
  
                  125
Invesco V.I. Technology Fund - Series I Shares
  
                   171
  
                    78
Invesco V.I. Core Equity Fund - Series I Shares
  
                   291
  
                  253
Columbia Variable Portfolio - Mid Cap Growth Fund (Class 2)
  
                   180
  
                  242
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
                   504
  
                  500
Columbia Variable Portfolio - Select Smaller-Cap Value Fund (Class 2)
                   308
  
                  461
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
  
                   235
  
                  226
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
  
                       6
  
                      4
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
  
                        -
  
                      -
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
  
                       4
  
                      7
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
  
                     13
  
                    29
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
  
                       7
  
                      8
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
  
                     34
  
                    25
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
  
                       3
  
                      1
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
  
                       7
  
                      1
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
  
                     14
  
                      3
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
  
                     19
  
                      7
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
                     42
  
                      2
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
                     11
  
                      4
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
                     39
  
                    25
American Funds Global Bond Fund - Class 2
  
                       1
  
  -
American Funds Global Growth Fund - Class 2
  
                     13
  
                    37
American Funds New World Fund - Class 2
  
                     98
  
                    22
American Funds Growth-Income Fund - Class 2
  
                     47
  
                      8
American Funds Capital Income Builder - Class 2
  
                       1
  
  -
American Funds Asset Allocation Fund - Class 2
  
                       2
  
                      2
American Funds Managed Risk Growth Fund - Class P2
  
                     16
  
                    12
American Funds Managed Risk International Fund - Class P2
  
                       5
  
                    11
American Funds Managed Risk Blue Chip Income & Growth Fund - Class P2
                       6
  
                      5
American Funds Managed Risk Growth-Income Fund - Class P2
  
                     12
  
                      1
American Funds Managed Risk Asset Allocation Fund - Class P2
  
                   120
  
                    28
Total
  
 $           20,666
  
$          20,942

Page 25
Kansas City Life Variable Life 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, 2019 and 2018, all assets are measured at fair value on a recurring basis totaling $127,434,000 and $103,803,000, respectively, were Level 2 assets. The Account did not have any transfers between levels during the years ended December 31, 2019 and 2018.
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

Variable Universal Life
Contract charges are assessed for variable universal life policies based on the tables below.  Mortality and expense risk, administrative fees, and cost of insurance are assessed through the reduction of units and unit values.

Century II Variable Universal Life

FEE TABLE
Fee
When Fee is Deducted
Current Amount Deducted
Premium Expense Charge
Upon receipt of each premium payment
2.25% of each premium payment
Surrender Charge (Deferred Sales Load)
Upon surrender, lapse or decrease in contract amount during the first 15 contract years
30% - 0% of actual premiums paid
Surrender Charge (Deferred Administrative Expense)
Upon surrender, lapse or decrease in contract amount during the first 15 contract years
$5 per $1,000 of the amount insured
Partial Surrender
Upon each partial surrender
The lesser of 2.00% of the amount surrendered or $25
Transfer Processing Fee
7th transfer in a contract year
$25 for each additional transfer after six transfers during a contract year
 
Page 26
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)

FEE TABLE (Continued)
Fee
When Fee is Deducted
Current Amount Deducted
Mortality and Expense Risk Charge
Daily
Annual rate of 0.90% of the average daily net asset value of each subaccount
Administrative Fee
On the contract date and monthly anniversary day
 
$6 for maintenance
 
$20 additional fee for first 12 months of contract and first 12 months after an increase in total amount insured
Cost of insurance
On the allocation date and monthly anniversary day
$0.05 - $26.63 per $1,000 of the net amount at risk
 

Century II Accumulator Variable Universal Life
FEE TABLE
Fee
When Fee is Deducted
Current Amount Deducted
Premium Expense Charge
Upon receipt of each premium payment
5.00% of each premium payment
Surrender Charge
Upon surrender or lapse during the first 15 contract years
$6 - $48 per $1,000 of the total amount insured
Partial Surrender Fee
Upon each partial surrender
The lesser of 2.00% of the amount surrendered or $25
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 0.90% of the average daily net asset value of each subaccount
Administrative Fee
On the contract date and monthly anniversary day
$10 for maintenance
 
$0 - $1.36 per $1,000 of the total amount insured
Cost of insurance
On the allocation date and monthly anniversary day
$0.01 - $25.83 per $1,000 of the net amount at risk
 

Century II Alliance Variable Universal Life

FEE TABLE
Fee
When Fee is Deducted
Current Amount Deducted
Premium Expense Charge
Upon receipt of each premium payment
6.35% of each premium payment
Surrender Charge
Upon complete surrender or lapse during the first 15 contract years
$6.02 - $45.34 per $1,000 of the total amount insured
Partial Surrender Fee
Upon each partial surrender
The lesser of 2.00% of the amount surrendered or $25
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 0.50% of the average daily net asset value of each subaccount
Administrative Fee
On the contract date and monthly anniversary day
$7.50 monthly fee
 
 
Page 27
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)

FEE TABLE (Continued)
Fee
When Fee is Deducted
Current Amount Deducted
Cost of insurance
On the allocation date and monthly anniversary day
$0.06 - $38.50 per $1,000 of the net amount at risk
 

Surrender charges
During the year ended 2019, $10,000 (2018 - $31,000) was assessed in surrender charges for Century II Variable Universal Life, $80,000 (2018 - $101,000) for Century II Accumulator Variable Universal Life and $7,000 (2018 - $52,000) for Century II Alliance Variable Universal Life.

Other fees and charges
Other fees and charges are primarily comprised of premium expense charges, mortality and expense risk charges, administrative fees, and cost of insurance.  During the year ended 2019, other fees and charges, primarily cost of insurance, totaled $5,525,000 (2018 - $5,624,000) for the combined Century II Variable Universal Life and Century II Accumulator Variable Universal Life products.  Currently, KCL is not charging the per thousand portion of the monthly administrative fee for Century II Alliance Variable Universal Life, but other contract charges, primarily cost of insurance, totaled $915,000 (2018 - $908,000) in 2019.

Survivorship Variable Universal Life

Contract charges are assessed for survivorship variable universal life policies based on the tables below.  Mortality and expense risk, administrative fees, and cost of insurance are assessed through the reduction of units and unit values.

Century II Heritage Survivorship Variable Universal Life

FEE TABLE
Fee
When Fee is Deducted
Current Amount Deducted
Premium Tax Charge
Upon receipt of each premium payment
2.25% of each premium payment
 
 
Sales Charge
Upon receipt of each premium payment
6.00% of each premium payment
Surrender Charge
Upon complete surrender or lapse during the first 10 contract years
$0 - $50 per $1,000 of the total amount insured at issue
Partial Surrender Fee
Upon each partial surrender
The lesser of 2.00% of the amount surrendered or $25
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 0.625% of the average daily net asset value of each subaccount
Administrative Fee
On the allocation date and monthly anniversary day
$7.50 monthly fee
 
$0.07 - $0.35 per $1,000 of the total amount insured (1st 10 contract years only)
Cost of insurance
On the allocation date and monthly anniversary day
$0 - $358.81 per $1,000 of the net amount at risk
 

Page 28
Kansas City Life Variable Life Separate Account
  Notes to Financial Statements (continued)

Century II Survivorship Variable Universal Life

FEE TABLE
Fee
When Fee is Deducted
Current Amount Deducted
Premium Processing Charge
Upon receipt of each premium payment
4.85% of each premium payment
 
 
Sales Charge
Upon receipt of each premium payment
50.00% - 2.00% (first 20 years)
Surrender Charge
Upon partial surrender only
Lesser of 2.00% of the amount surrendered or $25
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 0.625% of the average daily net asset value of each subaccount
Administrative Fee
On the contract date and monthly anniversary day
$7.50 monthly fee
 
$0.02 per $1,000 of the total amount insured
 
$12.50 for the first 5 contract years
 
Cost of insurance
On the allocation date and monthly anniversary day
$0 - $358.81 per $1,000 of the net amount at risk annually
 

Surrender charges
During the year ended 2019, ($4,000) (2018 - ($1,000)) was assessed in surrender charges for the combined, Century II Heritage Survivorship Variable Universal Life and Century II Survivorship Variable Universal, products.

Other fees and charges
Other fees and charges are primarily comprised of mortality and expense risk charges, administrative fees and cost of insurance. During the year ended 2019, other fees and charges, primarily cost of insurance, totaled $540,000 (2018 - $589,000) for the combined, Century II Heritage Survivorship Variable Universal Life and Century II Survivorship Variable Universal Life, products.
Page 29
Kansas City Life Variable Life 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:
                 
2019:
  
 Century II Variable Universal Life
  
 Century II
Survivorship
Variable Universal Life
  
 Century II
Alliance
Variable Universal Life
  
 Total
Variable Universal Life
   
(in thousands)
                 
Federated Managed Volatility Fund II - P

 $                   15
  
                      1
  
                      2
  
 $               18
Federated High Income Bond Fund II - P
  
                    10
  
                       -
  
                      1
  
                  11
Federated Government Money Fund II - S
  
                      9
  
                       -
  
                      1
  
                  10
MFS® Research Series - Initial Class Shares
  
                    47
  
                      3
  
                      2
  
                  52
MFS® Growth Series - Initial Class Shares
  
                    90
  
                      5
  
                      3
  
                  98
MFS® Total Return Series - Initial Class Shares
  
                    21
  
                      2
  
                      3
  
                  26
MFS® Total Return Bond Series - Initial Class Shares
  
                    13
  
                       -
  
                      2
  
                  15
MFS® Utilities Series - Initial Class Shares
  
                    61
  
                      4
  
                      7
  
                  72
MFS® Strategic Income Portfolio - Initial Class Shares
  
                      9
  
                       -
  
                      1
  
                  10
American Century VP Capital Appreciation Fund - Class I
  
                    27
  
                       -
  
                      3
  
                  30
American Century VP International Fund - Class I
  
                    32
  
                      1
  
                      3
  
                  36
American Century VP Value Fund - Class I
  
                    31
  
                      2
  
                      8
  
                  41
American Century VP Income & Growth Fund - Class I
  
                      9
  
                      1
  
                      1
  
                  11
American Century VP Ultra® Fund - Class I
  
                      9
  
                      1
  
                      4
  
                  14
American Century VP Mid Cap Value Fund - Class I
  
                      2
  
                       -
  
                       -
  
                    2
American Century VP Inflation Protection Fund - Class II
  
                      4
  
                       -
  
                      1
  
                    5
BNY Mellon Appreciation Portfolio - Initial Shares
  
                    36
  
                       -
  
                      3
  
                  39
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
  
                    37
  
                      3
  
                      5
  
                  45
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
                  149
  
                    10
  
                    10
  
                169
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
                      6
  
                      1
  
                       -
  
                    7
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
                      6
  
                      2
  
                      1
  
                    9
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
                    24
  
                      1
  
                      6
  
                  31
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
                    13
  
                       -
  
                      3
  
                  16
Franklin Global Real Estate VIP Fund - Class 2
  
                    15
  
                       -
  
                      5
  
                  20
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
                      6
  
                       -
  
                      1
  
                    7
Templeton Developing Markets VIP Fund - Class 2
  
                    13
  
                       -
  
                      3
  
                  16
Templeton Foreign VIP Fund - Class 2
  
                    16
  
                      1
  
                      4
  
                  21
Calamos Growth and Income Portfolio
  
                    18
  
                      2
  
                      6
  
                  26
Invesco V.I. American Franchise Fund - Series I Shares
  
                      4
  
                      1
  
                      1
  
                    6
Invesco V.I. Technology Fund - Series I Shares
  
                      2
  
                      1
  
                      1
  
                    4
Invesco V.I. Core Equity Fund - Series I Shares
  
                    10
  
                       -
  
                      2
  
                  12
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
  
                    12
  
                       -
  
                      3
  
                  15
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
                    18
  
                       -
  
                      2
  
                  20
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
  
                    13
  
                       -
  
                      4
  
                  17
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
  
                      9
  
                       -
  
                      1
  
                  10
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
  
                       -
  
                       -
  
                       -
  
                    -
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
  
                       -
  
                       -
  
                       -
  
                    -
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
  
                       -
  
                       -
  
                       -
  
                    -
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
  
                      1
  
                       -
  
                       -
  
                    1
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
  
                       -
  
                      1
  
                       -
  
                    1
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
  
                      2
  
                       -
  
                       -
  
                    2
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
  
                       -
  
                       -
  
                       -
  
                    -
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
  
                       -
  
                       -
  
                       -
  
                    -
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
  
                      1
  
                       -
  
                       -
  
                    1
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
  
                      1
  
                       -
  
                       -
  
                    1
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
                      1
  
                       -
  
                       -
  
                    1
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
                      1
  
                       -
  
                       -
  
                    1
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
                      1
  
                       -
  
                       -
  
                    1
American Funds Global Bond Fund - Class 2
  
                       -
  
                       -
  
                       -
  
                    -
American Funds Global Growth Fund - Class 2
  
                       -
  
                       -
  
                       -
  
                    -
American Funds New World Fund - Class 2
  
                      1
  
                       -
  
                       -
  
                    1
American Funds Growth-Income Fund - Class 2
  
                      1
  
                       -
  
                       -
  
                    1
American Funds Capital Income Builder - Class 2
  
                       -
  
                       -
  
                       -
  
                    -
American Funds Asset Allocation Fund - Class 2
  
                       -
  
                       -
  
                       -
  
                    -
American Funds Managed Risk Growth Fund - Class P2
  
                       -
  
                       -
  
                       -
  
                    -
American Funds Managed Risk International Fund - Class P2
  
                       -
  
                       -
  
                       -
  
                    -
American Funds Managed Risk Blue Chip Income & Growth Fund - Class P2
                       -
  
                       -
  
                       -
  
                    -
American Funds Managed Risk Growth-Income Fund - Class P2
  
                       -
  
                       -
  
                       -
  
                    -
American Funds Managed Risk Asset Allocation Fund - Class P2
  
                      5
  
                       -
  
                       -
  
                    5
   
 $               811
  
 $                 43
  
 $               103
  
 $             957

Page 30
Kansas City Life Variable Life 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:
        
             
2019:
  
 Units
Issued
  
 Units
Redeemed
  
 Net Increase
(Decrease)
       
 (in thousands)
    
             
Federated Managed Volatility Fund II - P
  
                18
  
                     23
  
                            (5)
Federated High Income Bond Fund II - P
  
                  4
  
                       5
  
                            (1)
Federated Government Money Fund II - S
  
                76
  
                     66
  
                            10
MFS® Research Series - Initial Class Shares
  
                  8
  
                     18
  
                          (10)
MFS® Growth Series - Initial Class Shares
  
                12
  
                     22
  
                          (10)
MFS® Total Return Series - Initial Class Shares
  
                10
  
                     13
  
                            (3)
MFS® Total Return Bond Series - Initial Class Shares
  
                10
  
                     11
  
                            (1)
MFS® Utilities Series - Initial Class Shares
  
                11
  
                     17
  
                            (6)
MFS® Strategic Income Portfolio - Initial Class Shares
  
                  6
  
                       7
  
                            (1)
American Century VP Capital Appreciation Fund - Class I
  
                  7
  
                     11
  
                            (4)
American Century VP International Fund - Class I
  
                18
  
                     22
  
                            (4)
American Century VP Value Fund - Class I
  
                26
  
                     30
  
                            (4)
American Century VP Income & Growth Fund - Class I
  
                  8
  
                     10
  
                            (2)
American Century VP Ultra® Fund - Class I
  
                  4
  
                       6
  
                            (2)
American Century VP Mid Cap Value Fund - Class I
  
                  1
  
                       2
  
                            (1)
American Century VP Inflation Protection Fund - Class II
  
                  7
  
                     10
  
                            (3)
BNY Mellon Appreciation Portfolio - Initial Shares
  
                10
  
                     18
  
                            (8)
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
  
                19
  
                     26
  
                            (7)
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
                35
  
                     60
  
                          (25)
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
                  1
  
                       1
  
                              -
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
                  2
  
                       3
  
                            (1)
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
  
                13
  
                     13
  
                              -
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
                  7
  
                       7
  
                              -
Franklin Global Real Estate VIP Fund - Class 2
  
                14
  
                     17
  
                            (3)
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
                  4
  
                       5
  
                            (1)
Templeton Developing Markets VIP Fund - Class 2
  
                  9
  
                     12
  
                            (3)
Templeton Foreign VIP Fund - Class 2
  
                19
  
                     16
  
                              3
Calamos Growth and Income Portfolio
  
                  9
  
                     13
  
                            (4)
Invesco V.I. American Franchise Fund - Series I Shares
  
                  4
  
                       5
  
                            (1)
Invesco V.I. Technology Fund - Series I Shares
  
                  6
  
                     10
  
                            (4)
Invesco V.I. Core Equity Fund - Series I Shares
  
                15
  
                     13
  
                              2
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
  
                13
  
                     16
  
                            (3)
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
  
                  7
  
                     13
  
                            (6)
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
  
                12
  
                       7
  
                              5
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
  
                  6
  
                       7
  
                            (1)
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
  
                  -
  
                       1
  
                            (1)
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
  
                  2
  
                       1
  
                              1
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
  
                  1
  
                       3
  
                            (2)
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
  
                  1
  
                       -
  
                              1
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
  
                  1
  
                       -
  
                              1
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
                  2
  
                       -
  
                              2
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
  
                  1
  
                       2
  
                            (1)
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
                  2
  
                       2
  
                              -
American Funds Global Bond Fund - Class 2
  
                  -
  
                       -
  
                              -
American Funds Global Growth Fund - Class 2
  
                  1
  
                       -
  
                              1
American Funds New World Fund - Class 2
  
                  2
  
                       1
  
                              1
American Funds Growth-Income Fund - Class 2
  
                  7
  
                       2
  
                              5
American Funds Capital Income Builder - Class 2
  
                  -
  
                       -
  
                              -
American Funds Asset Allocation Fund - Class 2
  
                  1
  
                       -
  
                              1
American Funds Managed Risk Growth Fund - Class P2
  
                  -
  
                       -
  
                              -
American Funds Managed Risk International Fund - Class P2
  
                  3
  
                       -
  
                              3
American Funds Managed Risk Blue Chip Income & Growth Fund - Class P2
                  -
  
                       -
  
                              -
American Funds Managed Risk Growth-Income Fund - Class P2
  
                  2
  
                       -
  
                              2
American Funds Managed Risk Asset Allocation Fund - Class P2
  
                  7
  
                       2
  
                              5
Page 31
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)

2018:
  
 Units
Issued
  
 Units
Redeemed
  
 Net Increase
(Decrease)
       
 (in thousands)
    
             
Federated Managed Volatility Fund II - P
  
                21
  
                     23
  
                            (2)
Federated High Income Bond Fund II - P
  
                  5
  
                       8
  
                            (3)
Federated Government Money Fund II - S
  
              138
  
                   140
  
                            (2)
MFS® Research Series - Initial Class Shares
  
                  8
  
                     19
  
                          (11)
MFS® Growth Series - Initial Class Shares
  
                14
  
                     29
  
                          (15)
MFS® Total Return Series - Initial Class Shares
  
                  7
  
                     12
  
                            (5)
MFS® Total Return Bond Series - Initial Class Shares
  
                11
  
                     13
  
                            (2)
MFS® Utilities Series - Initial Class Shares
  
                12
  
                     23
  
                          (11)
MFS® Strategic Income Portfolio - Initial Class Shares
  
                  7
  
                       9
  
                            (2)
American Century VP Capital Appreciation Fund - Class I
  
                  7
  
                     12
  
                            (5)
American Century VP International Fund - Class I
  
                22
  
                     27
  
                            (5)
American Century VP Value Fund - Class I
  
                22
  
                     34
  
                          (12)
American Century VP Income & Growth Fund - Class I
  
                  8
  
                     12
  
                            (4)
American Century VP Ultra® Fund - Class I
  
                  7
  
                     10
  
                            (3)
American Century VP Mid Cap Value Fund - Class I
  
                  1
  
                       2
  
                            (1)
American Century VP Inflation Protection Fund - Class II
  
                  9
  
                       9
  
                              -
BNY Mellon Appreciation Portfolio - Initial Shares
  
                  9
  
                     20
  
                          (11)
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
  
                18
  
                     29
  
                          (11)
BNY Mellon Stock Index Fund, Inc. - Initial Shares
  
                38
  
                     75
  
                          (37)
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
  
                  1
  
                       3
  
                            (2)
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
  
                  3
  
                       6
  
                            (3)
JPMorgan Insurance Trust Small Cap Core Portfolio - Class 1 Shares
  
                13
  
                     15
  
                            (2)
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
  
                  6
  
                     11
  
                            (5)
Franklin Global Real Estate VIP Fund - Class 2
  
                14
  
                     17
  
                            (3)
Franklin Small-Mid Cap Growth VIP Fund - Class 2
  
                  5
  
                       7
  
                            (2)
Templeton Developing Markets VIP Fund - Class 2
  
                18
  
                     15
  
                              3
Templeton Foreign VIP Fund - Class 2
  
                16
  
                     16
  
                              -
Calamos Growth and Income Portfolio
  
                10
  
                     19
  
                            (9)
Invesco V.I. American Franchise Fund - Series I Shares
  
                13
  
                     10
  
                              3
Invesco V.I. Technology Fund - Series I Shares
  
                18
  
                       9
  
                              9
Invesco V.I. Core Equity Fund - Series I Shares
  
                12
  
                     16
  
                            (4)
Columbia Variable Portfolio - Mid Cap Growth Fund (Class 2)
  
                11
  
                     14
  
                            (3)
Columbia Variable Portfolio - Seligman Global Technology Fund (Class 2)
  
                  7
  
                     15
  
                            (8)
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
  
                  8
  
                     12
  
                            (4)
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
  
                  6
  
                     10
  
                            (4)
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
  
                  -
  
                       1
  
                            (1)
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
  
                  -
  
                       1
  
                            (1)
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
  
                  -
  
                       1
  
                            (1)
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
  
                  2
  
                       1
  
                              1
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
  
                  -
  
                       -
  
                              -
Fidelity® VIP Freedom 2045 PortfolioSM - Service Class 2
  
                  1
  
                       1
  
                              -
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
  
                  1
  
                       -
  
                              1
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
  
                  3
  
                       -
  
                              3
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
  
                  1
  
                       1
  
                              -
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
  
                  2
  
                       2
  
                              -
American Funds Global Bond Fund - Class 2
  
                  -
  
                       -
  
                              -
American Funds Global Growth Fund - Class 2
  
                  1
  
                       2
  
                            (1)
American Funds New World Fund - Class 2
  
                  7
  
                       1
  
                              6
American Funds Growth-Income Fund - Class 2
  
                  3
  
                       -
  
                              3
American Funds Capital Income Builder - Class 2
  
                  -
  
                       -
  
                              -
American Funds Asset Allocation Fund - Class 2
  
                  -
  
                       -
  
                              -
American Funds Managed Risk Growth Fund - Class P2
  
                  1
  
                       1
  
                              -
American Funds Managed Risk International Fund - Class P2
  
                  -
  
                       1
  
                            (1)
American Funds Managed Risk Blue Chip Income & Growth Fund - Class P2
                  -
  
                       -
  
                              -
American Funds Managed Risk Growth-Income Fund - Class P2
  
                  1
  
                       -
  
                              1
American Funds Managed Risk Asset Allocation Fund - Class P2
  
                  8
  
                       2
  
                              6
Page 32
 
Kansas City Life Variable Life Separate Account
Notes to Financial Statements (continued)

6.  Financial Highlights
                                    
                                           
A summary of unit values and units outstanding for variable universal life 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, 2019 as 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 Managed Volatility Fund II - P
                                
2019
          
123
  
 $ 11.789
to
 $ 21.766
  
 $    2,322
  
2.04%
  
   0.50% to 0.90%
  
19.15%
to
19.62%
2018
          
128
  
 $   9.855
to
 $ 18.267
  
 $    2,018
  
3.47%
  
   0.50% to 0.90%
  
-10.01%
to
-9.64%
2017
          
130
  
 $ 10.906
to
 $ 20.298
  
 $    2,310
  
1.61%
  
   0.50% to 0.90%
  
9.96%
to
10.40%
2016
          
133
  
 $   9.879
to
 $ 18.460
  
 $    2,156
  
1.77%
  
   0.50% to 0.90%
  
-5.06%
to
-4.68%
2015
          
142
  
 $ 10.364
to
 $ 19.443
  
 $    2,444
  
1.68%
  
   0.50% to 0.90%
  
-7.13%
to
-6.76%
                                           
Federated High Income Bond Fund II - P
                                
2019
          
40
  
 $ 32.349
to
 $ 36.749
  
 $    1,422
  
6.04%
  
   0.50% to 0.90%
  
13.52%
to
13.97%
2018
          
41
  
 $ 28.419
to
 $ 32.373
  
 $    1,285
  
8.13%
  
   0.50% to 0.90%
  
-4.16%
to
-3.77%
2017
          
44
  
 $ 29.570
to
 $ 33.777
  
 $    1,462
  
6.66%
  
   0.50% to 0.90%
  
5.98%
to
6.41%
2016
          
46
  
 $ 27.797
to
 $ 31.870
  
 $    1,421
  
6.17%
  
   0.50% to 0.90%
  
13.79%
to
14.25%
2015
          
49
  
 $ 24.331
to
 $ 28.007
  
 $    1,327
  
5.85%
  
   0.50% to 0.90%
  
-3.45%
to
-3.06%
                                           
Federated Government Money Fund II - S
                                
2019
          
100
  
 $ 11.400
to
 $ 13.148
  
 $    1,264
  
1.61%
  
   0.50% to 0.90%
  
0.73%
to
1.14%
2018
          
90
  
 $ 11.272
to
 $ 13.034
  
 $    1,143
  
1.23%
  
   0.50% to 0.90%
  
0.35%
to
0.75%
2017
          
92
  
 $ 11.188
to
 $ 12.989
  
 $    1,158
  
0.31%
  
   0.50% to 0.90%
  
-0.59%
to
-0.19%
2016
          
96
  
 $ 11.209
to
 $ 13.066
  
 $    1,216
  
0.00%
  
   0.50% to 0.90%
  
-0.90%
to
-0.50%
2015
          
108
  
 $ 11.265
to
 $ 13.184
  
 $    1,372
  
0.00%
  
   0.50% to 0.90%
  
-0.90%
to
-0.50%
                                           
MFS® Research Series - Initial Class Shares
                                
2019
          
123
  
 $ 32.654
to
 $ 56.565
  
 $    6,460
  
0.77%
  
   0.50% to 0.90%
  
31.76%
to
32.28%
2018
          
133
  
 $ 24.685
to
 $ 42.931
  
 $    5,331
  
0.70%
  
   0.50% to 0.90%
  
-5.23%
to
-4.85%
2017
          
144
  
 $ 25.943
to
 $ 45.301
  
 $    6,069
  
1.35%
  
   0.50% to 0.90%
  
22.27%
to
22.75%
2016
          
153
  
 $ 21.134
to
 $ 37.051
  
 $    5,278
  
0.79%
  
   0.50% to 0.90%
  
7.76%
to
8.20%
2015
          
165
  
 $ 19.533
to
 $ 34.382
  
 $    5,288
  
0.73%
  
   0.50% to 0.90%
  
-0.10%
to
0.30%
                                           
MFS® Growth Series - Initial Class Shares
                                
2019
          
185
  
 $ 37.204
to
 $ 72.262
  
 $  12,520
  
0.00%
  
   0.50% to 0.90%
  
36.91%
to
37.46%
2018
          
195
  
 $ 27.065
to
 $ 52.780
  
 $    9,626
  
0.09%
  
   0.50% to 0.90%
  
1.74%
to
2.16%
2017
          
210
  
 $ 26.494
to
 $ 51.875
  
 $  10,236
  
0.10%
  
   0.50% to 0.90%
  
30.23%
to
30.75%
2016
          
230
  
 $ 20.263
to
 $ 39.833
  
 $    8,620
  
0.04%
  
   0.50% to 0.90%
  
1.52%
to
1.93%
2015
          
251
  
 $ 19.879
to
 $ 39.235
  
 $    9,298
  
0.16%
  
   0.50% to 0.90%
  
6.60%
to
7.02%
                                           
MFS® Total Return Series - Initial Class Shares
                              
2019
          
88
  
 $ 26.946
to
 $ 45.446
  
 $    3,436
  
2.31%
  
   0.50% to 0.90%
  
19.31%
to
19.78%
2018
          
91
  
 $ 22.496
to
 $ 38.092
  
 $    2,974
  
2.19%
  
   0.50% to 0.90%
  
-6.46%
to
-6.08%
2017
          
96
  
 $ 23.953
to
 $ 40.723
  
 $    3,348
  
2.36%
  
   0.50% to 0.90%
  
11.30%
to
11.74%
2016
          
99
  
 $ 21.437
to
 $ 36.590
  
 $    3,123
  
2.90%
  
   0.50% to 0.90%
  
8.12%
to
8.55%
2015
          
106
  
 $ 19.748
to
 $ 33.843
  
 $    3,082
  
2.61%
  
   0.50% to 0.90%
  
-1.26%
to
-0.87%
                                           
MFS® Total Return Bond Series - Initial Class Shares
                          
2019
          
71
  
 $ 22.866
to
 $ 27.459
  
 $    1,853
  
3.41%
  
   0.50% to 0.90%
  
9.22%
to
9.66%
2018
          
72
  
 $ 20.852
to
 $ 25.072
  
 $    1,724
  
3.28%
  
   0.50% to 0.90%
  
-1.98%
to
-1.59%
2017
          
74
  
 $ 21.188
to
 $ 25.507
  
 $    1,812
  
3.35%
  
   0.50% to 0.90%
  
3.52%
to
3.94%
2016
          
76
  
 $ 20.385
to
 $ 24.615
  
 $    1,795
  
3.49%
  
   0.50% to 0.90%
  
3.30%
to
3.71%
2015
          
75
  
 $ 19.655
to
 $ 23.829
  
 $    1,724
  
3.43%
  
   0.50% to 0.90%
  
-1.19%
to
-0.80%
                                           
MFS® Utilities Series - Initial Class Shares
                                
2019
          
124
  
 $ 42.260
to
 $ 90.384
  
 $    9,309
  
3.99%
  
   0.50% to 0.90%
  
23.95%
to
24.44%
2018
          
130
  
 $ 33.959
to
 $ 72.921
  
 $    7,940
  
1.10%
  
   0.50% to 0.90%
  
0.15%
to
0.55%
2017
          
141
  
 $ 33.772
to
 $ 72.813
  
 $    8,588
  
4.29%
  
   0.50% to 0.90%
  
13.81%
to
14.26%
2016
          
149
  
 $ 29.557
to
 $ 63.980
  
 $    8,056
  
3.86%
  
   0.50% to 0.90%
  
10.47%
to
10.92%
2015
          
159
  
 $ 26.648
to
 $ 57.915
  
 $    7,767
  
4.22%
  
   0.50% to 0.90%
  
-15.28%
to
-14.95%
                                           
MFS® Strategic Income Portfolio - Initial Class Shares
                          
2019
          
46
  
 $ 24.900
to
 $ 25.302
  
 $    1,157
  
3.54%
  
   0.50% to 0.90%
  
10.61%
to
11.05%
2018
          
47
  
 $ 22.423
to
 $ 22.876
  
 $    1,066
  
3.96%
  
   0.50% to 0.90%
  
-2.87%
to
-2.48%
2017
          
49
  
 $ 22.994
to
 $ 23.553
  
 $    1,150
  
4.69%
  
   0.50% to 0.90%
  
5.29%
to
5.71%
2016
          
48
  
 $ 21.752
to
 $ 22.370
  
 $    1,074
  
3.11%
  
   0.50% to 0.90%
  
7.27%
to
7.70%
2015
          
50
  
 $ 20.197
to
 $ 20.854
  
 $    1,029
  
5.87%
  
   0.50% to 0.90%
  
-2.73%
to
-2.34%
                                           
American Century VP Capital Appreciation Fund - Class I
                          
2019
          
79
  
 $ 39.283
to
 $ 52.031
  
 $    3,839
  
0.00%
  
   0.50% to 0.90%
  
34.35%
to
34.89%
2018
          
83
  
 $ 29.123
to
 $ 38.622
  
 $    2,997
  
0.00%
  
   0.50% to 0.90%
  
-6.05%
to
-5.67%
2017
          
88
  
 $ 30.874
to
 $ 40.995
  
 $    3,408
  
0.00%
  
   0.50% to 0.90%
  
20.70%
to
21.19%
2016
          
92
  
 $ 25.476
to
 $ 33.871
  
 $    2,937
  
0.00%
  
   0.50% to 0.90%
  
2.30%
to
2.71%
2015
          
96
  
 $ 24.803
to
 $ 33.017
  
 $    2,997
  
0.00%
  
   0.50% to 0.90%
  
1.02%
to
1.42%

Page 33
Kansas City Life Variable Life 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
                          
2019
          
150
  
 $ 20.855
to
 $ 33.531
  
 $    4,624
  
0.86%
  
   0.50% to 0.90%
  
27.27%
to
27.78%
2018
          
154
  
 $ 16.321
to
 $ 26.347
  
 $    3,749
  
1.27%
  
   0.50% to 0.90%
  
-15.98%
to
-15.65%
2017
          
159
  
 $ 19.348
to
 $ 31.359
  
 $    4,591
  
0.89%
  
   0.50% to 0.90%
  
30.03%
to
30.55%
2016
          
170
  
 $ 14.820
to
 $ 24.116
  
 $    3,772
  
1.05%
  
   0.50% to 0.90%
  
-6.35%
to
-5.97%
2015
          
172
  
 $ 15.761
to
 $ 25.750
  
 $    4,044
  
0.37%
  
   0.50% to 0.90%
  
-0.14%
to
0.25%
                                           
American Century VP Value Fund - Class I
                                
2019
          
215
  
 $ 25.020
to
 $ 36.075
  
 $    5,947
  
2.13%
  
   0.50% to 0.90%
  
25.89%
to
26.40%
2018
          
219
  
 $ 19.874
to
 $ 28.541
  
 $    4,809
  
1.65%
  
   0.50% to 0.90%
  
-9.97%
to
-9.61%
2017
          
231
  
 $ 22.074
to
 $ 31.574
  
 $    5,606
  
1.66%
  
   0.50% to 0.90%
  
7.77%
to
8.21%
2016
          
240
  
 $ 20.482
to
 $ 29.179
  
 $    5,411
  
1.74%
  
   0.50% to 0.90%
  
19.40%
to
19.88%
2015
          
259
  
 $ 17.154
to
 $ 24.340
  
 $    4,889
  
2.13%
  
   0.50% to 0.90%
  
-4.74%
to
-4.37%
                                           
American Century VP Income & Growth Fund - Class I
                          
2019
          
77
  
 $ 18.631
to
 $ 28.651
  
 $    1,528
  
2.08%
  
   0.50% to 0.90%
  
22.84%
to
23.33%
2018
          
79
  
 $ 15.167
to
 $ 23.231
  
 $    1,268
  
1.91%
  
   0.50% to 0.90%
  
-7.70%
to
-7.34%
2017
          
83
  
 $ 16.433
to
 $ 25.070
  
 $    1,445
  
2.38%
  
   0.50% to 0.90%
  
19.41%
to
19.89%
2016
          
90
  
 $ 13.762
to
 $ 20.911
  
 $    1,312
  
2.38%
  
   0.50% to 0.90%
  
12.46%
to
12.92%
2015
          
99
  
 $ 12.237
to
 $ 18.519
  
 $    1,279
  
2.08%
  
   0.50% to 0.90%
  
-6.47%
to
-6.09%
                                           
American Century VP Ultra® Fund - Class I
                                
2019
          
47
  
 $ 41.684
to
 $ 44.553
  
 $    2,019
  
0.00%
  
   0.50% to 0.90%
  
33.38%
to
33.91%
2018
          
49
  
 $ 31.253
to
 $ 33.271
  
 $    1,587
  
0.25%
  
   0.50% to 0.90%
  
-0.15%
to
0.25%
2017
          
52
  
 $ 31.300
to
 $ 33.187
  
 $    1,654
  
0.36%
  
   0.50% to 0.90%
  
31.04%
to
31.57%
2016
          
52
  
 $ 23.885
to
 $ 25.224
  
 $    1,261
  
0.34%
  
   0.50% to 0.90%
  
3.51%
to
3.92%
2015
          
53
  
 $ 23.075
to
 $ 24.272
  
 $    1,247
  
0.44%
  
   0.50% to 0.90%
  
5.32%
to
5.74%
                                           
American Century VP Mid Cap Value Fund - Class I
                              
2019
          
7
  
 $ 30.095
to
 $ 31.787
  
 $       225
  
2.06%
  
   0.50% to 0.90%
  
27.99%
to
28.51%
2018
          
8
  
 $ 23.513
to
 $ 24.736
  
 $       189
  
1.41%
  
   0.50% to 0.90%
  
-13.62%
to
-13.27%
2017
          
9
  
 $ 27.221
to
 $ 28.522
  
 $       246
  
1.55%
  
   0.50% to 0.90%
  
10.69%
to
11.14%
2016
          
9
  
 $ 24.591
to
 $ 25.663
  
 $       224
  
1.67%
  
   0.50% to 0.90%
  
21.76%
to
22.24%
2015
          
11
  
 $ 20.197
to
 $ 20.994
  
 $       215
  
1.62%
  
   0.50% to 0.90%
  
-2.32%
to
-1.92%
                                           
American Century VP Inflation Protection Fund - Class II
                          
2019
          
45
  
 $ 15.106
to
 $ 16.146
  
 $       700
  
2.31%
  
   0.50% to 0.90%
  
7.93%
to
8.36%
2018
          
48
  
 $ 13.996
to
 $ 14.900
  
 $       686
  
2.85%
  
   0.50% to 0.90%
  
-3.70%
to
-3.31%
2017
          
48
  
 $ 14.533
to
 $ 15.410
  
 $       713
  
2.64%
  
   0.50% to 0.90%
  
2.74%
to
3.16%
2016
          
47
  
 $ 14.145
to
 $ 14.938
  
 $       682
  
1.81%
  
   0.50% to 0.90%
  
3.45%
to
3.87%
2015
          
44
  
 $ 13.673
to
 $ 14.382
  
 $       603
  
1.91%
  
   0.50% to 0.90%
  
-3.34%
to
-2.96%
                                           
BNY Mellon Appreciation Portfolio - Initial Shares
                              
2019
          
121
  
 $ 31.082
to
 $ 43.628
  
 $    4,980
  
1.17%
  
   0.50% to 0.90%
  
34.88%
to
35.42%
2018
          
129
  
 $ 22.953
to
 $ 32.258
  
 $    3,968
  
1.25%
  
   0.50% to 0.90%
  
-7.69%
to
-7.32%
2017
          
140
  
 $ 24.765
to
 $ 34.884
  
 $    4,650
  
1.34%
  
   0.50% to 0.90%
  
26.19%
to
26.70%
2016
          
148
  
 $ 19.547
to
 $ 27.643
  
 $    3,886
  
1.64%
  
   0.50% to 0.90%
  
6.94%
to
7.37%
2015
          
158
  
 $ 18.206
to
 $ 25.850
  
 $    3,883
  
1.69%
  
   0.50% to 0.90%
  
-3.34%
to
-2.95%
                                           
BNY Mellon Opportunistic Small Cap Portfolio - Initial Shares
                      
2019
          
200
  
 $ 22.916
to
 $ 31.508
  
 $    5,884
  
0.00%
  
   0.50% to 0.90%
  
20.69%
to
21.17%
2018
          
207
  
 $ 18.912
to
 $ 26.107
  
 $    5,040
  
0.00%
  
   0.50% to 0.90%
  
-19.81%
to
-19.48%
2017
          
218
  
 $ 23.488
to
 $ 32.555
  
 $    6,632
  
0.00%
  
   0.50% to 0.90%
  
23.57%
to
24.06%
2016
          
229
  
 $ 18.933
to
 $ 26.346
  
 $    5,652
  
0.00%
  
   0.50% to 0.90%
  
16.02%
to
16.49%
2015
          
244
  
 $ 16.253
to
 $ 22.708
  
 $    5,176
  
0.00%
  
   0.50% to 0.90%
  
-3.15%
to
-2.76%
                                           
BNY Mellon Stock Index Fund, Inc. - Initial Shares
                              
2019
          
508
  
 $ 32.145
to
 $ 45.317
  
 $  22,088
  
1.72%
  
   0.50% to 0.90%
  
30.01%
to
30.53%
2018
          
533
  
 $ 24.626
to
 $ 34.857
  
 $  17,768
  
1.65%
  
   0.50% to 0.90%
  
-5.49%
to
-5.12%
2017
          
570
  
 $ 25.954
to
 $ 36.883
  
 $  20,088
  
1.71%
  
   0.50% to 0.90%
  
20.45%
to
20.93%
2016
          
605
  
 $ 21.461
to
 $ 30.620
  
 $  17,683
  
2.02%
  
   0.50% to 0.90%
  
10.71%
to
11.15%
2015
          
646
  
 $ 19.308
to
 $ 27.659
  
 $  17,003
  
1.81%
  
   0.50% to 0.90%
  
0.20%
to
0.60%
                                           
BNY Mellon Sustainable U.S. Equity Portfolio, Inc. - Initial Shares
                      
2019
          
14
  
 $ 24.733
to
 $ 77.921
  
 $       881
  
1.45%
  
   0.50% to 0.90%
  
33.16%
to
33.69%
2018
          
14
  
 $ 18.500
to
 $ 58.358
  
 $       703
  
1.77%
  
   0.50% to 0.90%
  
-5.26%
to
-4.88%
2017
          
16
  
 $ 19.450
to
 $ 61.430
  
 $       823
  
1.14%
  
   0.50% to 0.90%
  
14.30%
to
14.76%
2016
          
17
  
 $ 16.948
to
 $ 53.596
  
 $       774
  
1.31%
  
   0.50% to 0.90%
  
9.38%
to
9.82%
2015
          
19
  
 $ 15.432
to
 $ 48.864
  
 $       787
  
1.05%
  
   0.50% to 0.90%
  
-4.06%
to
-3.68%
                                           
JPMorgan Insurance Trust U.S. Equity Portfolio - Class 1 Shares
                      
2019
          
30
  
 $ 31.268
to
 $ 49.006
  
 $    1,300
  
0.85%
  
   0.50% to 0.90%
  
30.58%
to
31.10%
2018
          
31
  
 $ 23.851
to
 $ 37.428
  
 $    1,033
  
0.84%
  
   0.50% to 0.90%
  
-7.01%
to
-6.64%
2017
          
34
  
 $ 25.546
to
 $ 40.139
  
 $    1,240
  
0.88%
  
   0.50% to 0.90%
  
21.24%
to
21.72%
2016
          
37
  
 $ 20.987
to
 $ 33.017
  
 $    1,088
  
1.00%
  
   0.50% to 0.90%
  
9.94%
to
10.38%
2015
          
41
  
 $ 19.013
to
 $ 29.948
  
 $    1,119
  
1.13%
  
   0.50% to 0.90%
  
-0.04%
to
0.36%

Page 34
Kansas City Life Variable Life 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
                  
2019
          
99
  
 $ 34.884
to
 $ 50.577
  
 $    4,285
  
0.40%
  
   0.50% to 0.90%
  
23.46%
to
23.95%
2018
          
99
  
 $ 28.143
to
 $ 40.854
  
 $    3,464
  
0.37%
  
   0.50% to 0.90%
  
-12.72%
to
-12.37%
2017
          
101
  
 $ 32.115
to
 $ 46.680
  
 $    4,014
  
0.32%
  
   0.50% to 0.90%
  
14.20%
to
14.65%
2016
          
108
  
 $ 28.011
to
 $ 40.765
  
 $    3,737
  
0.54%
  
   0.50% to 0.90%
  
19.14%
to
19.61%
2015
          
116
  
 $ 23.418
to
 $ 34.123
  
 $    3,362
  
0.14%
  
   0.50% to 0.90%
  
-6.13%
to
-5.75%
                                           
JPMorgan Insurance Trust Mid Cap Value Portfolio - Class 1 Shares
                      
2019
          
49
  
 $ 45.793
to
 $ 48.945
  
 $    2,278
  
1.60%
  
   0.50% to 0.90%
  
25.63%
to
26.13%
2018
          
49
  
 $ 36.452
to
 $ 38.805
  
 $    1,800
  
0.99%
  
   0.50% to 0.90%
  
-12.63%
to
-12.28%
2017
          
54
  
 $ 41.722
to
 $ 44.237
  
 $    2,277
  
0.79%
  
   0.50% to 0.90%
  
12.75%
to
13.20%
2016
          
53
  
 $ 37.004
to
 $ 39.079
  
 $    1,977
  
0.85%
  
   0.50% to 0.90%
  
13.67%
to
14.12%
2015
          
55
  
 $ 32.555
to
 $ 34.243
  
 $    1,803
  
0.98%
  
   0.50% to 0.90%
  
-3.53%
to
-3.14%
                                           
Franklin Global Real Estate VIP Fund - Class 2
                              
2019
          
100
  
 $ 28.194
to
 $ 30.345
  
 $    2,864
  
2.65%
  
   0.50% to 0.90%
  
21.28%
to
21.77%
2018
          
103
  
 $ 23.154
to
 $ 24.952
  
 $    2,427
  
2.66%
  
   0.50% to 0.90%
  
-7.62%
to
-7.24%
2017
          
106
  
 $ 24.962
to
 $ 26.934
  
 $    2,689
  
3.06%
  
   0.50% to 0.90%
  
9.49%
to
9.93%
2016
          
106
  
 $ 22.708
to
 $ 24.533
  
 $    2,465
  
1.19%
  
   0.50% to 0.90%
  
-0.36%
to
0.04%
2015
          
108
  
 $ 22.700
to
 $ 24.554
  
 $    2,517
  
3.21%
  
   0.50% to 0.90%
  
-0.33%
to
0.07%
                                           
Franklin Small-Mid Cap Growth VIP Fund - Class 2
                              
2019
          
47
  
 $ 19.426
to
 $ 29.266
  
 $    1,016
  
0.00%
  
   0.50% to 0.90%
  
30.25%
to
30.78%
2018
          
48
  
 $ 14.914
to
 $ 22.378
  
 $       797
  
0.00%
  
   0.50% to 0.90%
  
-6.22%
to
-5.84%
2017
          
50
  
 $ 15.903
to
 $ 23.767
  
 $       877
  
0.00%
  
   0.50% to 0.90%
  
20.32%
to
20.79%
2016
          
53
  
 $ 13.218
to
 $ 19.676
  
 $       766
  
0.00%
  
   0.50% to 0.90%
  
3.23%
to
3.65%
2015
          
54
  
 $ 12.804
to
 $ 18.983
  
 $       748
  
0.00%
  
   0.50% to 0.90%
  
-3.53%
to
-3.14%
                                           
Templeton Developing Markets VIP Fund - Class 2
                              
2019
          
71
  
 $ 30.306
to
 $ 39.433
  
 $    2,340
  
0.99%
  
   0.50% to 0.90%
  
25.56%
to
26.06%
2018
          
74
  
 $ 24.136
to
 $ 31.280
  
 $    1,918
  
0.87%
  
   0.50% to 0.90%
  
-16.55%
to
-16.22%
2017
          
71
  
 $ 28.924
to
 $ 37.334
  
 $    2,230
  
0.97%
  
   0.50% to 0.90%
  
39.15%
to
39.71%
2016
          
78
  
 $ 20.786
to
 $ 26.723
  
 $    1,756
  
0.83%
  
   0.50% to 0.90%
  
16.39%
to
16.86%
2015
          
81
  
 $ 17.859
to
 $ 22.868
  
 $    1,581
  
2.04%
  
   0.50% to 0.90%
  
-20.32%
to
-20.01%
                                           
Templeton Foreign VIP Fund - Class 2
                                  
2019
          
110
  
 $ 18.262
to
 $ 35.791
  
 $    2,900
  
1.73%
  
   0.50% to 0.90%
  
11.52%
to
11.97%
2018
          
107
  
 $ 16.310
to
 $ 32.006
  
 $    2,553
  
2.65%
  
   0.50% to 0.90%
  
-16.20%
to
-15.87%
2017
          
107
  
 $ 19.386
to
 $ 38.089
  
 $    3,068
  
2.54%
  
   0.50% to 0.90%
  
15.65%
to
16.11%
2016
          
109
  
 $ 16.696
to
 $ 32.845
  
 $    2,688
  
1.95%
  
   0.50% to 0.90%
  
6.22%
to
6.64%
2015
          
112
  
 $ 15.656
to
 $ 30.838
  
 $    2,567
  
3.19%
  
   0.50% to 0.90%
  
-7.33%
to
-6.96%
                                           
Calamos Growth and Income Portfolio
                                
2019
          
110
  
 $ 31.522
to
 $ 39.033
  
 $    3,854
  
1.65%
  
   0.50% to 0.90%
  
24.44%
to
24.94%
2018
          
114
  
 $ 25.230
to
 $ 31.282
  
 $    3,201
  
1.26%
  
   0.50% to 0.90%
  
-5.25%
to
-4.87%
2017
          
123
  
 $ 26.521
to
 $ 32.923
  
 $    3,656
  
0.86%
  
   0.50% to 0.90%
  
14.48%
to
14.94%
2016
          
136
  
 $ 23.074
to
 $ 28.680
  
 $    3,522
  
2.42%
  
   0.50% to 0.90%
  
5.37%
to
5.79%
2015
          
141
  
 $ 21.811
to
 $ 27.144
  
 $    3,473
  
2.71%
  
   0.50% to 0.90%
  
0.22%
to
0.61%
                                           
Invesco V.I. American Franchise Fund - Series I Shares
                          
2019
          
65
  
 $ 12.398
to
 $ 22.766
  
 $       869
  
0.00%
  
   0.50% to 0.90%
  
35.53%
to
36.08%
2018
          
66
  
 $   9.148
to
 $ 16.730
  
 $       653
  
0.00%
  
   0.50% to 0.90%
  
-4.49%
to
-4.11%
2017
          
63
  
 $   9.578
to
 $ 17.447
  
 $       658
  
0.08%
  
   0.50% to 0.90%
  
26.21%
to
26.70%
2016
          
61
  
 $   7.589
to
 $ 13.770
  
 $       503
  
0.00%
  
   0.50% to 0.90%
  
1.35%
to
1.76%
2015
          
61
  
 $   7.488
to
 $ 13.532
  
 $       500
  
0.00%
  
   0.50% to 0.90%
  
4.06%
to
4.49%
                                           
Invesco V.I. Technology Fund - Series I Shares
                              
2019
          
64
  
 $   8.270
to
 $ 23.912
  
 $       619
  
0.00%
  
   0.50% to 0.90%
  
34.67%
to
35.20%
2018
          
68
  
 $   6.141
to
 $ 17.686
  
 $       491
  
0.00%
  
   0.50% to 0.90%
  
-1.35%
to
-0.96%
2017
          
59
  
 $   6.225
to
 $ 17.857
  
 $       435
  
0.00%
  
   0.50% to 0.90%
  
33.93%
to
34.46%
2016
          
65
  
 $   4.648
to
 $ 13.280
  
 $       358
  
0.00%
  
   0.50% to 0.90%
  
-1.65%
to
-1.26%
2015
          
74
  
 $   4.726
to
 $ 13.449
  
 $       412
  
0.00%
  
   0.50% to 0.90%
  
5.87%
to
6.28%
                                           
Invesco V.I. Core Equity Fund - Series I Shares
                              
2019
          
100
  
 $ 16.026
to
 $ 21.432
  
 $    1,731
  
0.95%
  
   0.50% to 0.90%
  
27.81%
to
28.32%
2018
          
98
  
 $ 12.539
to
 $ 16.702
  
 $    1,335
  
0.91%
  
   0.50% to 0.90%
  
-10.21%
to
-9.85%
2017
          
102
  
 $ 13.965
to
 $ 18.526
  
 $    1,550
  
1.03%
  
   0.50% to 0.90%
  
12.17%
to
12.61%
2016
          
106
  
 $ 12.450
to
 $ 16.452
  
 $    1,441
  
0.77%
  
   0.50% to 0.90%
  
9.27%
to
9.72%
2015
          
106
  
 $ 11.394
to
 $ 14.995
  
 $    1,321
  
1.15%
  
   0.50% to 0.90%
  
-6.61%
to
-6.24%
                                           
Columbia Variable Portfolio - Mid-Cap Growth Fund (Class 2)
                        
2019
          
104
  
 $ 18.562
to
 $ 26.598
  
 $    2,105
  
0.00%
  
   0.50% to 0.90%
  
33.63%
to
34.16%
2018
          
107
  
 $ 13.891
to
 $ 19.826
  
 $    1,619
  
0.00%
  
   0.50% to 0.90%
  
-5.84%
to
-5.45%
2017
          
110
  
 $ 14.752
to
 $ 20.969
  
 $    1,763
  
0.00%
  
   0.50% to 0.90%
  
21.58%
to
22.06%
2016
          
114
  
 $ 12.133
to
 $ 17.179
  
 $    1,493
  
0.00%
  
   0.50% to 0.90%
  
1.11%
to
1.52%
2015
          
116
  
 $ 12.000
to
 $ 16.922
  
 $    1,514
  
0.00%
  
   0.50% to 0.90%
  
4.42%
to
4.84%

Page 35
Kansas City Life Variable Life 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)
              
2019
          
68
  
 $ 38.864
to
 $ 58.697
  
 $    2,793
  
0.00%
  
   0.50% to 0.90%
53.58%
to
54.20%
2018
          
74
  
 $ 25.305
to
 $ 38.066
  
 $    1,986
  
0.00%
  
   0.50% to 0.90%
-9.27%
to
-8.91%
2017
          
82
  
 $ 27.891
to
 $ 41.788
  
 $    2,413
  
0.00%
  
   0.50% to 0.90%
33.71%
to
34.25%
2016
          
80
  
 $ 20.859
to
 $ 31.127
  
 $    1,781
  
0.00%
  
   0.50% to 0.90%
17.95%
to
18.42%
2015
          
87
  
 $ 17.685
to
 $ 26.286
  
 $    1,649
  
0.00%
  
   0.50% to 0.90%
8.83%
to
9.27%
                                         
Columbia Variable Portfolio - Select Small Cap Value Fund (Class 2)
                    
2019
          
67
  
 $ 36.445
to
 $ 38.954
  
 $    2,511
  
0.00%
  
   0.50% to 0.90%
16.39%
to
16.86%
2018
          
62
  
 $ 31.313
to
 $ 33.334
  
 $    1,994
  
0.00%
  
   0.50% to 0.90%
-13.60%
to
-13.26%
2017
          
66
  
 $ 36.243
to
 $ 38.429
  
 $    2,436
  
0.00%
  
   0.50% to 0.90%
11.06%
to
11.51%
2016
          
68
  
 $ 32.633
to
 $ 34.463
  
 $    2,255
  
0.00%
  
   0.50% to 0.90%
12.64%
to
13.09%
2015
          
68
  
 $ 28.970
to
 $ 30.473
  
 $    2,016
  
0.00%
  
   0.50% to 0.90%
-4.17%
to
-3.78%
                                         
Fidelity® VIP ContrafundSM Portfolio - Service Class 2
                        
2019
          
54
  
 $ 24.052
to
 $ 25.303
  
 $    1,310
  
0.22%
  
   0.50% to 0.90%
30.10%
to
30.62%
2018
          
55
  
 $ 18.487
to
 $ 19.371
  
 $    1,021
  
0.43%
  
   0.50% to 0.90%
-7.48%
to
-7.11%
2017
          
59
  
 $ 19.982
to
 $ 20.853
  
 $    1,189
  
0.79%
  
   0.50% to 0.90%
20.50%
to
20.98%
2016
          
58
  
 $ 16.582
to
 $ 17.237
  
 $       969
  
0.66%
  
   0.50% to 0.90%
6.76%
to
7.20%
2015
          
54
  
 $ 15.532
to
 $ 16.080
  
 $       849
  
0.82%
  
   0.50% to 0.90%
-0.48%
to
-0.09%
                                         
Fidelity® VIP Freedom Income PortfolioSM - Service Class 2
                      
2019
          
5
  
 $ 14.500
to
 $ 15.255
  
 $         68
  
1.88%
  
   0.50% to 0.90%
10.63%
to
11.08%
2018
          
5
  
 $ 13.107
to
 $ 13.733
  
 $         63
  
1.50%
  
   0.50% to 0.90%
-3.15%
to
-2.77%
2017
          
5
  
 $ 13.533
to
 $ 14.124
  
 $         64
  
1.35%
  
   0.50% to 0.90%
7.39%
to
7.82%
2016
          
5
  
 $ 12.602
to
 $ 13.099
  
 $         61
  
1.31%
  
   0.50% to 0.90%
3.24%
to
3.65%
2015
          
5
  
 $         -
to
 $ 12.502
  
 $         56
  
1.62%
  
   0.50% to 0.90%
-1.46%
to
0.00%
                                         
Fidelity® VIP Freedom 2010 PortfolioSM - Service Class 2
                        
2019
          
0
  
 $ 16.553
to
 $ 17.414
  
 $           2
  
1.68%
  
   0.50% to 0.90%
14.71%
to
15.17%
2018
          
0
  
 $ 14.430
to
 $ 15.120
  
 $           3
  
1.31%
  
   0.50% to 0.90%
-5.12%
to
-4.74%
2017
          
0
  
 $ 15.209
to
 $ 15.873
  
 $           3
  
0.06%
  
   0.50% to 0.90%
11.79%
to
12.24%
2016
          
10
  
 $ 13.605
to
 $ 14.142
  
 $       133
  
1.29%
  
   0.50% to 0.90%
4.28%
to
4.70%
2015
          
10
  
 $         -
to
 $ 13.361
  
 $       130
  
1.60%
  
   0.50% to 0.90%
-1.42%
to
0.00%
                                         
Fidelity® VIP Freedom 2015 PortfolioSM - Service Class 2
                    
2019
          
0
  
 $ 16.981
to
 $ 17.864
  
 $           5
  
1.48%
  
   0.50% to 0.90%
16.92%
to
17.39%
2018
          
0
  
 $ 14.524
to
 $ 15.218
  
 $           7
  
1.18%
  
   0.50% to 0.90%
-6.13%
to
-5.76%
2017
          
1
  
 $ 15.473
to
 $ 16.148
  
 $         10
  
1.14%
  
   0.50% to 0.90%
13.77%
to
14.23%
2016
          
1
  
 $ 13.600
to
 $ 14.136
  
 $         16
  
1.06%
  
   0.50% to 0.90%
4.63%
to
5.05%
2015
          
2
  
 $         -
to
 $ 13.312
  
 $         32
  
1.56%
  
   0.50% to 0.90%
-1.40%
to
0.00%
                                         
Fidelity® VIP Freedom 2020 PortfolioSM - Service Class 2
                        
2019
          
8
  
 $ 17.066
to
 $ 17.954
  
 $       135
  
1.75%
  
   0.50% to 0.90%
18.80%
to
19.28%
2018
          
9
  
 $ 14.365
to
 $ 15.052
  
 $       127
  
1.28%
  
   0.50% to 0.90%
-6.93%
to
-6.55%
2017
          
10
  
 $ 15.434
to
 $ 16.107
  
 $       157
  
1.30%
  
   0.50% to 0.90%
15.22%
to
15.68%
2016
          
10
  
 $ 13.395
to
 $ 13.923
  
 $       137
  
1.27%
  
   0.50% to 0.90%
4.85%
to
5.27%
2015
          
11
  
 $         -
to
 $ 13.226
  
 $       140
  
1.60%
  
   0.50% to 0.90%
-1.34%
to
0.00%
                                         
Fidelity® VIP Freedom 2025 PortfolioSM - Service Class 2
                        
2019
          
8
  
 $ 18.060
to
 $ 18.999
  
 $       142
  
1.86%
  
   0.50% to 0.90%
20.42%
to
20.90%
2018
          
7
  
 $ 14.997
to
 $ 15.714
  
 $       114
  
1.21%
  
   0.50% to 0.90%
-7.61%
to
-7.24%
2017
          
8
  
 $ 16.233
to
 $ 16.941
  
 $       127
  
1.24%
  
   0.50% to 0.90%
16.51%
to
16.99%
2016
          
8
  
 $ 13.932
to
 $ 14.481
  
 $       114
  
1.20%
  
   0.50% to 0.90%
5.04%
to
5.45%
2015
          
9
  
 $ 13.264
to
 $ 13.732
  
 $       126
  
1.41%
  
   0.50% to 0.90%
-1.40%
to
-1.00%
                                         
Fidelity® VIP Freedom 2030 PortfolioSM - Service Class 2
                        
2019
          
11
  
 $ 18.143
to
 $ 19.087
  
 $       190
  
1.62%
  
   0.50% to 0.90%
23.00%
to
23.49%
2018
          
13
  
 $ 14.750
to
 $ 15.456
  
 $       185
  
1.13%
  
   0.50% to 0.90%
-8.88%
to
-8.51%
2017
          
12
  
 $ 16.188
to
 $ 16.894
  
 $       200
  
1.20%
  
   0.50% to 0.90%
19.61%
to
20.10%
2016
          
12
  
 $ 13.534
to
 $ 14.067
  
 $       158
  
1.20%
  
   0.50% to 0.90%
5.42%
to
5.84%
2015
          
12
  
 $         -
to
 $ 13.291
  
 $       160
  
1.51%
  
   0.50% to 0.90%
-1.42%
to
0.00%
                                         
Fidelity® VIP Freedom 2035 PortfolioSM - Service Class 2
                        
2019
          
1
  
 $ 21.619
to
 $ 22.472
  
 $         11
  
1.05%
  
   0.50% to 0.90%
25.99%
to
26.50%
2018
          
1
  
 $ 17.159
to
 $ 17.765
  
 $         19
  
0.98%
  
   0.50% to 0.90%
-10.31%
to
-9.95%
2017
          
1
  
 $ 19.132
to
 $ 19.728
  
 $         20
  
1.04%
  
   0.50% to 0.90%
2.97%
to
22.46%
2016
          
1
  
 $ 15.685
to
 $ 16.109
  
 $         15
  
1.18%
  
   0.50% to 0.90%
5.57%
to
5.99%
2015
          
1
  
 $         -
to
 $ 14.858
  
 $         14
  
1.43%
  
   0.50% to 0.90%
-1.40%
to
0.00%
                                         
Fidelity® VIP Freedom 2040 PortfolioSM - Service Class 2
                        
2019
          
2
  
 $ 21.800
to
 $ 22.660
  
 $         37
  
1.71%
  
   0.50% to 0.90%
27.08%
to
27.60%
2018
          
1
  
 $ 17.154
to
 $ 17.759
  
 $         25
  
1.01%
  
   0.50% to 0.90%
-10.93%
to
-10.57%
2017
          
1
  
 $ 19.259
to
 $ 19.859
  
 $         23
  
1.05%
  
   0.50% to 0.90%
22.19%
to
22.68%
2016
          
1
  
 $ 15.761
to
 $ 16.187
  
 $         15
  
1.35%
  
   0.50% to 0.90%
5.57%
to
5.99%
2015
          
1
  
 $         -
to
 $ 14.929
  
 $         10
  
1.01%
  
   0.50% to 0.90%
-1.38%
to
0.00%
Page 36
Kansas City Life Variable Life 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
                          
2019
          
5
  
 $ 21.931
to
 $ 22.796
  
 $         99
  
1.63%
  
   0.50% to 0.90%
  
27.10%
to
27.61%
2018
          
4
  
 $ 17.255
to
 $ 17.864
  
 $         70
  
0.99%
  
   0.50% to 0.90%
  
-10.94%
to
-10.58%
2017
          
4
  
 $ 19.375
to
 $ 19.978
  
 $         69
  
1.08%
  
   0.50% to 0.90%
  
22.20%
to
22.69%
2016
          
3
  
 $ 15.855
to
 $ 16.283
  
 $         53
  
1.28%
  
   0.50% to 0.90%
  
5.61%
to
6.02%
2015
          
3
  
 $         -
to
 $ 15.013
  
 $         40
  
1.72%
  
   0.50% to 0.90%
  
-1.42%
to
0.00%
                                           
Fidelity® VIP Freedom 2050 PortfolioSM - Service Class 2
                          
2019
          
5
  
 $ 21.966
to
 $ 22.832
  
 $       120
  
1.65%
  
   0.50% to 0.90%
  
27.07%
to
27.58%
2018
          
5
  
 $ 17.286
to
 $ 17.896
  
 $         84
  
0.99%
  
   0.50% to 0.90%
  
-10.94%
to
-10.58%
2017
          
4
  
 $ 19.409
to
 $ 20.013
  
 $         84
  
1.12%
  
   0.50% to 0.90%
  
22.20%
to
22.69%
2016
          
3
  
 $ 15.883
to
 $ 16.312
  
 $         54
  
1.41%
  
   0.50% to 0.90%
  
5.61%
to
6.03%
2015
          
3
  
 $         -
to
 $ 15.040
  
 $         41
  
1.41%
  
   0.50% to 0.90%
  
-1.47%
to
0.00%
                                           
TOPS® Managed Risk Balanced ETF Portfolio - Class 2 Shares
                      
2019
          
6
  
 $ 12.896
to
 $ 13.298
  
 $         82
  
2.74%
  
   0.50% to 0.90%
  
13.52%
to
13.98%
2018
          
4
  
 $ 11.360
to
 $ 11.667
  
 $         48
  
1.68%
  
   0.50% to 0.90%
  
-6.88%
to
-6.51%
2017
          
1
  
 $ 12.199
to
 $ 12.479
  
 $         11
  
1.60%
  
   0.50% to 0.90%
  
9.60%
to
10.03%
2016
          
1
  
 $ 11.131
to
 $ 11.341
  
 $           9
  
1.30%
  
   0.50% to 0.90%
  
5.27%
to
5.69%
2015
          
2
  
 $         -
to
 $ 10.574
  
 $         16
  
1.03%
  
   0.50% to 0.90%
  
-5.35%
to
0.00%
                                           
TOPS® Managed Risk Moderate Growth ETF Portfolio - Class 2 Shares
                  
2019
          
4
  
 $ 13.558
to
 $ 13.981
  
 $         60
  
2.08%
  
   0.50% to 0.90%
  
15.26%
to
15.72%
2018
          
5
  
 $ 11.763
to
 $ 12.082
  
 $         64
  
1.65%
  
   0.50% to 0.90%
  
-8.06%
to
-7.68%
2017
          
5
  
 $ 12.794
to
 $ 13.087
  
 $         67
  
1.64%
  
   0.50% to 0.90%
  
12.83%
to
13.28%
2016
          
5
  
 $ 11.339
to
 $ 11.553
  
 $         54
  
1.57%
  
   0.50% to 0.90%
  
5.36%
to
5.79%
2015
          
18
  
 $         -
to
 $ 10.921
  
 $       194
  
1.48%
  
   0.50% to 0.90%
  
-7.20%
to
0.00%
                                           
TOPS® Managed Risk Growth ETF Portfolio - Class 2 Shares
                        
2019
          
10
  
 $ 13.550
to
 $ 13.972
  
 $       141
  
1.92%
  
   0.50% to 0.90%
  
16.03%
to
16.49%
2018
          
10
  
 $ 11.678
to
 $ 11.994
  
 $       122
  
1.57%
  
   0.50% to 0.90%
  
-9.54%
to
-9.18%
2017
          
10
  
 $ 12.910
to
 $ 13.206
  
 $       128
  
1.64%
  
   0.50% to 0.90%
  
16.60%
to
17.08%
2016
          
9
  
 $ 11.072
to
 $ 11.280
  
 $         95
  
1.92%
  
   0.50% to 0.90%
  
4.62%
to
5.04%
2015
          
41
  
 $         -
to
 $ 10.739
  
 $       429
  
1.37%
  
   0.50% to 0.90%
  
-9.95%
to
0.00%
                                           
American Funds Global Bond Fund - Class 2e
                                
2019
          
0
  
 $ 10.557
to
 $ 10.714
  
 $           4
  
1.77%
  
   0.50% to 0.90%
  
6.80%
to
7.24%
2018
          
0
  
 $   9.885
to
 $   9.991
  
 $           2
  
2.52%
  
   0.50% to 0.90%
  
-2.22%
to
-1.86%
2017
          
0
  
 $ 10.109
to
 $ 10.180
  
$           1
  
1.10%
  
   0.50% to 0.90%
  
5.90%
to
6.35%
2016
          
0
  
 $   9.546
to
 $   9.572
  
 $          -
  
0.00%
  
   0.50% to 0.90%
  
-4.54%
to
-4.28%
                                           
American Funds Global Growth Fund - Class 2e
                              
2019
          
2
  
 $ 16.232
to
 $ 16.472
  
 $         32
  
1.24%
  
   0.50% to 0.90%
  
34.07%
to
34.61%
2018
          
1
  
 $ 12.107
to
 $ 12.237
  
 $           6
  
0.28%
  
   0.50% to 0.90%
  
-9.86%
to
-9.50%
2017
          
2
  
 $ 13.432
to
 $ 13.522
  
 $         33
  
0.94%
  
   0.50% to 0.90%
  
30.29%
to
30.82%
2016
          
1
  
 $ 10.309
to
 $ 10.336
  
 $         11
  
1.81%
  
   0.50% to 0.90%
  
3.09%
to
3.36%
                                           
American Funds New World Fund - Class 2e
                                
2019
          
8
  
 $ 14.465
to
 $ 14.678
  
 $       118
  
0.99%
  
   0.50% to 0.90%
  
27.99%
to
28.50%
2018
          
7
  
 $ 11.302
to
 $ 11.423
  
 $         76
  
0.98%
  
   0.50% to 0.90%
  
-14.80%
to
-14.47%
2017
          
1
  
 $ 13.266
to
 $ 13.355
  
 $         17
  
0.98%
  
   0.50% to 0.90%
  
28.29%
to
28.80%
2016
          
0
  
 $ 10.341
to
 $ 10.369
  
 $           1
  
3.78%
  
   0.50% to 0.90%
  
3.41%
to
3.69%
                                           
American Funds Growth-Income Fund - Class 2e
                              
2019
          
9
  
 $ 15.951
to
 $ 16.187
  
 $       149
  
2.15%
  
   0.50% to 0.90%
  
25.01%
to
25.51%
2018
          
4
  
 $ 12.760
to
 $ 12.897
  
 $         51
  
1.59%
  
   0.50% to 0.90%
  
-2.68%
to
-2.28%
2017
          
1
  
 $ 13.111
to
 $ 13.198
  
 $         18
  
2.31%
  
   0.50% to 0.90%
  
21.29%
to
21.78%
2016
          
0
  
 $ 10.809
to
 $ 10.838
  
 $           5
  
8.18%
  
   0.50% to 0.90%
  
8.09%
to
8.38%
                                           
American Funds Capital Income Builder - Class 2e
                              
2019
          
0
  
 $ 11.989
to
 $ 12.166
  
 $           3
  
2.92%
  
   0.50% to 0.90%
  
16.83%
to
17.30%
2018
          
0
  
 $ 10.262
to
 $ 10.372
  
 $           2
  
3.06%
  
   0.50% to 0.90%
  
-7.91%
to
-7.55%
2017
          
0
  
 $ 11.144
to
 $ 11.219
  
 $           1
  
3.62%
  
   0.50% to 0.90%
  
12.03%
to
12.48%
2016
          
0
  
 $   9.948
to
 $   9.974
  
 $          -
  
0.00%
  
   0.50% to 0.90%
  
-0.52%
to
-0.26%
                                           
American Funds Asset Allocation Fund - Class 2e
                              
2019
          
1
  
 $ 13.850
to
 $ 14.055
  
 $         19
  
3.16%
  
   0.50% to 0.90%
  
20.14%
to
20.63%
2018
          
0
  
 $ 11.528
to
 $ 11.651
  
 $           3
  
1.58%
  
   0.50% to 0.90%
  
-5.46%
to
-5.08%
2017
          
0
  
 $ 12.194
to
 $ 12.275
  
 $           3
  
1.77%
  
   0.50% to 0.90%
  
15.19%
to
15.65%
2016
          
0
  
 $ 10.586
to
 $ 10.614
  
 $          -
  
0.00%
  
   0.50% to 0.90%
  
5.86%
to
6.14%
                                           
American Funds Managed Risk Growth Fund - Class P2e
                          
2019
          
1
  
 $ 15.468
to
 $ 15.697
  
 $         20
  
0.88%
  
   0.50% to 0.90%
  
20.65%
to
21.13%
2018
          
1
  
 $ 12.821
to
 $ 12.959
  
 $         13
  
0.48%
  
   0.50% to 0.90%
  
-1.27%
to
-0.86%
2017
          
1
  
 $ 12.986
to
 $ 13.072
  
 $         10
  
0.21%
  
   0.50% to 0.90%
  
24.86%
to
25.37%
2016
          
0
  
 $ 10.400
to
 $ 10.427
  
 $           4
  
0.76%
  
   0.50% to 0.90%
  
4.00%
to
4.27%
                                           
American Funds Managed Risk International Fund - Class P2e
                        
2019
          
3
  
 $ 12.943
to
 $ 13.135
  
 $         34
  
0.57%
  
   0.50% to 0.90%
  
16.58%
to
17.06%
2018
          
0
  
 $ 11.102
to
 $ 11.221
  
 $           5
  
1.55%
  
   0.50% to 0.90%
  
-11.30%
to
-10.95%
2017
          
1
  
 $ 12.517
to
 $ 12.601
  
 $         12
  
0.40%
  
   0.50% to 0.90%
  
27.55%
to
28.06%
2016
          
1
  
 $   9.814
to
 $   9.840
  
 $           7
  
1.22%
  
   0.50% to 0.90%
  
-1.86%
to
-1.60%
Page 37
Kansas City Life Variable Life 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 Funds Managed Risk Blue Chip Income & Growth Fund - Class P2e
              
2019
          
1
  
 $ 12.466
to
 $ 12.651
  
 $           9
  
1.61%
  
   0.50% to 0.90%
  
12.86%
to
13.32%
2018
          
1
  
 $ 11.046
to
 $ 11.164
  
 $           8
  
3.37%
  
   0.50% to 0.90%
  
-8.20%
to
-7.84%
2017
          
1
  
 $ 12.033
to
 $ 12.114
  
 $           8
  
2.01%
  
   0.50% to 0.90%
  
14.01%
to
14.46%
2016
          
3
  
 $ 10.555
to
 $ 10.583
  
 $         32
  
2.29%
  
   0.50% to 0.90%
  
5.55%
to
5.83%
                                           
American Funds Managed Risk Growth-Income Fund - Class P2e
                      
2019
          
3
  
 $ 14.244
to
 $ 14.454
  
 $         39
  
0.34%
  
   0.50% to 0.90%
  
17.79%
to
18.25%
2018
          
1
  
 $ 12.093
to
 $ 12.223
  
 $         10
  
0.40%
  
   0.50% to 0.90%
  
-2.86%
to
-2.47%
2017
          
0
  
 $ 12.449
to
 $ 12.532
  
 $          -
  
1.86%
  
   0.50% to 0.90%
  
19.32%
to
19.79%
2016
          
3
  
 $ 10.433
to
 $ 10.461
  
 $         29
  
1.84%
  
   0.50% to 0.90%
  
4.33%
to
4.61%
                                           
American Funds Managed Risk Asset Allocation Fund - Class P2e
                      
2019
          
52
  
 $ 13.168
to
 $ 13.363
  
 $       682
  
2.29%
  
   0.50% to 0.90%
  
16.92%
to
17.40%
2018
          
47
  
 $ 11.262
to
 $ 11.382
  
 $       533
  
1.35%
  
   0.50% to 0.90%
  
-5.75%
to
-5.38%
2017
          
41
  
 $ 11.949
to
 $ 12.029
  
 $       495
  
0.77%
  
   0.50% to 0.90%
  
13.78%
to
14.23%
2016
          
38
  
 $ 10.502
to
 $ 10.530
  
 $       398
  
0.37%
  
   0.50% to 0.90%
  
5.02%
to
5.30%
                                           
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.
e  This portfolio was added effective May 1, 2016.
                                  

Page 38
Report of Independent Registered Public Accounting Firm



The Contract Owners
Kansas City Life Variable Life 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 Life Separate Account (comprised of the individual subaccounts as listed in Note 1 to the financial statements, collectively (“the Accounts”)), as of December 31, 2019, 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 four-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, 2019, 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 four-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, 2019, 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 39
The Contract Owners
Kansas City Life Variable Life 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 28, 2020
 
Page 40
PART C
OTHER INFORMATION
Item 26.  Exhibits
(a)  Board of Directors Resolution.
Resolution of the Board of Directors of Kansas City Life Insurance Company establishing the Kansas City Life Variable Life Separate Account. (1)
(b)  Custodian Agreements.
Not Applicable.
(c)  Underwriting Contracts.

 (1)
Distribution Agreement between Kansas City Life Insurance Company and Sunset Financial Services, Inc. (7)

(2)
Amendment to Distribution Agreement between Kansas City Life Insurance Company and Sunset Financial Services, Inc. (7)
(d)  Contracts.

 (1)
Specimen Contract Form. (4)

(2)
Contract Split Option Rider. (2)

(3)
Joint First to Die Term Life Insurance Rider. (2)

(4)
Joint Survivorship Four-Year Term Life Insurance Rider. (2)
(e)  Applications.
Application Form. (1)
(f)  Depositor’s Certificate of Incorporation and By-Laws.

 (1)
Articles of Incorporation of Bankers Life Association of Kansas City. (1)

(2)
Restated Articles of Incorporation of Kansas City Life Insurance Company. (1)

(3)
By-Laws of Kansas City Life Insurance Company. (1)
(g)  Reinsurance Contracts. (5)
(h)  Participation Agreements.

 (1)
Participation Agreement between AIM Variable Insurance Funds, Inc., A I M Distributors Inc., Kansas City Life Insurance Company, and Sunset Financial Services, Inc. (7)

a.
Amendment to Participation Agreement between AIM Variable Insurance Funds, Inc., A I M Distributors Inc., Kansas City Life Insurance Company, and Sunset Financial Services, Inc. (7)

b.
Amendment to Participation Agreement between AIM Variable Insurance Funds, Inc., A I M Distributors Inc., Kansas City Life Insurance Company, and Sunset Financial Services, Inc. (7)

(2)
Participation Agreement between Kansas City Life Insurance Company, TCI Portfolios, Inc., and Investors Research Corporation. (7)

a.
Amendment to Participation Agreement between Kansas City Life Insurance Company, TCI Portfolios, Inc., and Investors Research Corporation. (7)

Page 1

 b.
Amendment to Participation Agreement between Kansas City Life Insurance Company, TCI Portfolios, Inc., and Investors Research Corporation. (7)

c.
Amendment to Participation Agreement between Kansas City Life Insurance Company, TCI Portfolios, Inc., and Investors Research Corporation. (7)

d.
Novation Agreement between American Century Investment Services, Inc., American Century Services, LLC., and Kansas City Life Insurance Company. (8)

e.
Amendment to Fund Participation Agreement between Kansas City Life Insurance Company, American Century Investment Services, Inc., and American Century Services, LLC. (12)

(3)
Amended and Restated Participation Agreement between Calmos Advisors Trust, Calamos Asset Management, Inc., Calamos Financial Services, Inc., and Kansas City Life Insurance Company. (7)

a.
Amendment to Amended and Restated Participation Agreement between Calmos Advisors Trust, Calamos Asset Management, Inc., Calamos Financial Services, Inc., and Kansas City Life Insurance Company. (7)

(4)
Participation Agreement between Kansas City Life Insurance Company and each of Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund). (7)

a.
Amendment to Participation Agreement between Kansas City Life Insurance Company and each of Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund). (7)

b.
Amendment to Fund Participation Agreement between Kansas City Life Insurance Company and each of Dreyfus Variable Investment Fund, The Dreyfus Socially Responsible Growth Fund, Inc. and Dreyfus Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund). (9)

(5)
Participation Agreement between Federated Securities Corp., Federated Insurance Series, and Kansas City Life Insurance Company. (8)

a.
Amendment to Participation Agreement between Federated Securities Corp., Federated Insurance Series, and Kansas City Life Insurance Company. (8)

(6)
Participation Agreement between Variable Insurance Products Funds, Fidelity Distributors Corporation, and Kansas City Life Insurance Company. (7)

a.
Amendment to Participation Agreement between Variable Insurance Products Funds, Fidelity Distributors Corporation, and Kansas City Life Insurance Company. (7)

b.
Amendment to Participation Agreement between Variable Insurance Products Funds, Fidelity Distributors Corporation, and Kansas City Life Insurance Company. (7)

c.
Amendment to Participation Agreement between Variable Insurance Products Funds, Fidelity Distributors Corporation, and Kansas City Life Insurance Company. (8)

e.
Amendment to Participation Agreement between Variable Insurance Products Funds, Fidelity Distributors Corporation, and Kansas City Life Insurance Company. (13)

(7)
Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Kansas City Life Insurance Company, and Sunset Financial Services, Inc. (8)

a.
Amendment to Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Kansas City Life Insurance Company, and Sunset Financial Services, Inc. (9)

b.
Amendment to Participation Agreement between Franklin Templeton Variable Insurance Products Trust, Franklin/Templeton Distributors, Inc., Kansas City Life Insurance Company, and Sunset Financial Services, Inc. (11)
Page 2

 (8)
Participation Agreement between Kansas City Life Insurance Company, JPMorgan Insurance Trust, JPMorgan Investment Advisors Inc., J. P. Morgan Investment Management Inc., and JPMorgan Funds Management, Inc. (7)

(9)
Participation Agreement between MFS Variable Insurance Trust, Kansas City Life Insurance Company, and Massachusetts Financial Services Company. (7)

a.
Amendment to Participation Agreement between MFS Variable Insurance Trust, Kansas City Life Insurance Company, and Massachusetts Financial Services Company. (7)

b.
Amendment to Participation Agreement between MFS Variable Insurance Trust, Kansas City Life Insurance Company, and Massachusetts Financial Services Company. (7)

c.
Amendment to Participation Agreement between MFS Variable Insurance Trust, Kansas City Life Insurance Company, and Massachusetts Financial Services Company. (7)

d.
Amendment to Participation Agreement between MFS Variable Insurance Trust, Kansas City Life Insurance Company, and Massachusetts Financial Services Company. (7)

(10)
Participation Agreement between Seligman Portfolios, Inc., Seligman Advisors, Inc., and Kansas City Life Insurance Company. (7)

a.
Amendment to Participation Agreement between Seligman Portfolios, Inc., Seligman Advisors, Inc., and Kansas City Life Insurance Company. (7)

b.
Amendment to Participation Agreement between Seligman Portfolios, Inc., Seligman Advisors, Inc., and Kansas City Life Insurance Company. (7)

c.
Assignment and Assumption Agreement between Kansas City Life Insurance Company (“Kansas City Life”), Seligman Portfolios, Inc., Columbia Management Investment Advisers, LLC (formerly named RiverSource Investments, LLC, and successor to Seligman Advisors, Inc.) (“Columbia”), and Columbia Funds Variable Insurance Trust. (9)

d.
Assignment and Assumption Agreement between Kansas City Life Insurance Company (“Kansas City Life”), Columbia Management Investment Advisers, LLC (formerly named RiverSource Investments, LLC, and successor to Seligman Advisors, Inc.) (“Columbia”), Seligman Portfolios, Inc. and RiverSource Variable Series Trust. (9)

(11)
Participation Agreement between Northern Lights Variable Trust and Kansas City Life Insurance Company. (10)

(12)
Fund Participation and Service Agreement between Kansas City Life Insurance Company, American Funds Distributors, Inc., American Funds Service Company, Capital Research and Management Company, and the American Funds Insurance Series. (12)
(i)  Administrative Contracts.

 (1)
Administrative Services Agreement between Kansas City Life Insurance Company and A I M Advisors, Inc. (7)

(2)
Administrative Services Agreement between Calamos Asset Management, Inc. and Kansas City Life Insurance Company. (7)

(3)
Administrative Agreement between Federated Securities Corp. and Kansas City Life Insurance Company. (7)
(j)  Other Material Contracts.

 (1)
Rule 22c-2 Agreement between AIM Investment Services, Inc. and Kansas City Life Insurance Company dated June 2, 2006. (6)

(2)
Rule 22c-2 Agreement between American Century Investment Services, Inc. and Kansas City Life Insurance Company dated June 28, 2006. (6)

(3)
Rule 22c-2 Agreement between Calamos Financial Services, LLC. and Kansas City Life Insurance Company dated April 16, 2007. (6)
Page 3

 (4)
Rule 22c-2 Agreement between Dreyfus Service Corporation and Kansas City Life Insurance Company dated September 19, 2006. (6)

(5)
Rule 22c-2 Agreement between MFS Fund Distributors, Inc.("MFD") and Kansas City Life Insurance Company dated September 19, 2006. (6)

(6)
Rule 22c-2 Agreement between Seligman Group of Funds and Kansas City Life Insurance Company dated April 3, 2007. (6)

(7)
Supplemental Payment Agreement between Kansas City Life Insurance Company, JPMorgan Investment Advisors Inc., and J.P. Morgan Investment Management Inc. (7)

(8)
Indemnification Agreement between Massachusetts Financial Services Company and Kansas City Life Insurance Company. (7)

(9)
Shareholder Servicing Agreement between Seligman Advisors, Inc. and Kansas City Life Insurance Company. (7)

(10)
Distribution and Shareholder Services Agreement between Kansas City Life Insurance Company and Northern Lights Variable Trust. (10)

(11)
Rule 22c-2 Agreement between American Funds Service Company and Kansas City Life Insurance Company dated April 13, 2016. (12)

(12)
Business Agreement between Kansas City Life Insurance Company, Sunset Financial Services, Inc., American Funds Distributors, Inc., and Capital Research and Management Company. (12)
(k)  Legal Opinion.
Opinion and Consent of A. Craig Mason Jr., Esq. as to the legality of the securities being registered (14)
(l)  Actuarial Opinion.
Not Applicable.
(m)  Calculations.
Not Applicable.
(n)  Other Opinions.

 (1)
Consent of Eversheds Sutherland (US) LLP. (14)

(2)
Consent of BKD, LLP. (14)
(o)  Omitted Financial Statements.
Not Applicable.
(p)  Initial Capital Agreements.
Not Applicable.
(q)  Redeemability Exemption.
Memorandum describing issuance, transfer and redemption procedures. (3)
__________
(1)  Incorporated herein by reference to the Registration Statement on Form S-6 for Kansas City Life Variable Life Separate Account filed with the Securities and Exchange Commission on August 2, 1995 (File No. 033-95354).
Page 4
(2)  Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6 for Kansas City Life Variable Life Separate Account filed on July 15, 1997 (File No. 333-25443).
(3)  Incorporated herein by reference to Post-Effective Amendment No. 5 to the Registration Statement on Form S-6 for Kansas City Life Variable Life Separate Account filed with the Securities and Exchange Commission on April 19, 1999 (File No. 033-95354).
(4)  Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form S-6 for Kansas City Life Variable Life Separate Account filed with the Securities and Exchange Commission on September 17, 2001 (File No. 333-69508).
(5)  Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registration Statement on Form N-6 for Kansas City Life Variable Life Separate Account filed with the Securities and Exchange Commission on April 28, 2003 (File No. 033-95354).
(6)  Incorporated herein by reference to Post-Effective Amendment No. 17 to the Registration Statement on Form N-6 for Kansas City Life Variable Life Separate Account filed with the Securities and Exchange Commission on April 30, 2007 (File No. 033-95354).
(7)  Incorporated herein by reference to Post-Effective Amendment No. 1 to the Registration Statement on Form N-6 for Kansas City Life Variable Life Separate Account filed with the Securities and Exchange Commission on April 28, 2009 (File No. 333-150926).
(8)  Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 for Kansas City Life Variable Annuity Separate Account filed with the Securities and Exchange Commission on April 27, 2010 (File No. 333-165116).
(9)  Incorporated herein by reference to Post-Effective Amendment No. 21 to the Registration Statement on Form N-4 for Kansas City Life Variable Annuity Separate Account filed with the Securities and Exchange Commission on April 29, 2011 (File No. 033-89984).
(10)  Incorporated herein by reference to Post-Effective Amendment No. 22 to the Registration Statement on Form N-4 for Kansas City Life Variable Annuity Separate Account filed with the Securities and Exchange Commission on April 27, 2012 (File No. 033-89984).
(11) Incorporated herein by reference to Post-Effective Amendment No. 24 to the Registration Statement on Form N-4 for Kansas City Life Variable Annuity Separate Account filed with the Securities and Exchange Commission on May 1, 2014 (File No. 033-89984).
(12)  Incorporated herein by reference to Post-Effective Amendment No. 27 to the Registration Statement on Form N-4 for Kansas City Life Variable Annuity Separate Account filed with the Securities and Exchange Commission on April 26, 2016 (File No. 033-89984).
(13)  Incorporated herein by reference to Post-Effective Amendment No. 29 to the Registration Statement on Form N-4 for Kansas City Life Variable Annuity Separate Account filed with the Securities and Exchange Commission on April 27, 2018 (File No.033-89984).
(14)  Filed herewith.
Page 5
Item 27.  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
Thomas M. Hoenig
Director
Bryce A. Johnson
Assistant Vice President, Treasurer and Assistant Controller
David S. Kimmel
Director
Donald E. Krebs
Senior Vice President, Sales and Marketing
David A. Laird
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
Philip A. Williams
Senior Vice President, Finance, CFO and Director
* The principal business address for each officer and director is 3520 Broadway, Kansas City, Missouri 64111-2565.
Item 28.  Persons Controlled by or Under Common Control with the Depositor or Registrant
Name
Jurisdiction
Percent of Voting Securities Owned
Sunset Life Insurance Company of America
Missouri
Ownership of all voting securities by depositor
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 29.  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, partnership, 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 contendere 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.
Page 6
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 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.
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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 30.  Principal Underwriter
(a)  Other Activity.
In addition to Kansas City Life Variable Life Separate Account, Sunset Financial Services, Inc. is the principal underwriter for policies offered by Kansas City Life Insurance Company through Kansas City Life Variable Annuity Separate Account.
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(b)  Management.
The directors and principal officers of Sunset Financial Services, Inc. are as follows:
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
David A. Laird
Treasurer
A. Craig Mason Jr.
Secretary and Director
Mark A. Milton
Director
Kristen Peil
Assistant Vice President
Kelly T. Ullom
President and Director
Philip A. Williams
Director
* 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.
$141,023.45
None
N/A
N/A
Item 31.  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 Insurance Company at 3520 Broadway, Kansas City, Missouri 64111-2565.
Item 32.  Management Services
All management contracts are discussed in Part A or Part B.
Item 33.  Fee Representation
Kansas City Life Insurance Company represents that the aggregate charges under the Policies are reasonable in relation to the services rendered, the expenses expected to be incurred and the risks assumed by Kansas City Life Insurance Company.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Kansas City Life Variable Life Separate Account, certifies that it meets all of the requirements for effectiveness of this Registration Statement under Securities Act Rule 485(b) and has duly caused this Post-Effective Amendment No. 20 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 27th day of April, 2020.
 
Kansas City Life Variable Life 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. 20 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 27, 2020
     
           /s/ Philip A. Williams         
Philip A. Williams
Senior Vice President, Finance, CFO and Director
(Principal Financial Officer)
April 27, 2020
     
              /s/ David A. Laird            
David A. Laird
Vice President and Controller
(Principal Accounting Officer)
April 27, 2020
     
              /s/ Walter E. Bixby         
Walter E. Bixby
Vice Chairman of the Board and Director
April 27, 2020
     
           /s/ A. Craig Mason Jr.         
A. Craig Mason Jr.
Secretary and Director
April 27, 2020
     
______________________________
Kevin G. Barth
Director
April 27, 2020
     
______________________________
Nancy Bixby Hudson
Director
April 27, 2020
     
______________________________
William R. Blessing
Director
April 27, 2020
     
             /s/ Michael Braude           
Michael Braude
Director
April 27, 2020
     
             /s/ James T. Carr             
James T. Carr
Director
April 27, 2020
     
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______________________________
John C. Cozad
Director
April 27, 2020
     
______________________________
Thomas M. Hoenig
Director
April 27, 2020
     
______________________________
David S. Kimmel
Director
April 27, 2020
     
______________________________
Cecil R. Miller
Director
April 27, 2020
     
             /s/ Mark A. Milton            
Mark A. Milton
Director
April 27, 2020
     
      /s/ William A. Schalekamp      
William A. Schalekamp
Director
April 27, 2020

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Exhibit Index
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