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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

----------------------------------------

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

COMMISSION FILE NUMBER 001-15166

AMERUS GROUP CO.
(Exact name of Registrant as specified in its charter)

IOWA 42-1458424
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

699 WALNUT STREET
DES MOINES, IOWA 50309-3948
(Address of principal executive offices)

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

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The number of shares outstanding of each of the Registrant's classes of common
stock on May 4, 2004 was as follows:

Common Stock 39,321,389 shares



INDEX



Page No.
--------

PART I - FINANCIAL INFORMATION.................................................. 4

Item 1. Financial Statements................................................. 4

Consolidated Balance Sheets
March 31, 2004 (Unaudited) and December 31, 2003..................... 4

Consolidated Statements of Income (Unaudited)
For the Three Months Ended March 31, 2004 and 2003................... 6

Consolidated Statements of Comprehensive Income (Unaudited)
For the Three Months Ended March 31, 2004 and 2003................... 7

Consolidated Statements of Stockholders' Equity
For the Three Months Ended March 31, 2004 (Unaudited) and
the Year Ended December 31, 2003..................................... 8

Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2004 and 2003................... 9

Notes to Consolidated Financial Statements
(Unaudited) ......................................................... 11

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................... 22

Item 3. Quantitative and Qualitative Disclosures About Market Risk........... 34

Item 4. Controls and Procedures.............................................. 36

PART II - OTHER INFORMATION..................................................... 37

Item 1. Legal Proceedings.................................................... 37

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases
of Equity Securities................................................. 37

Item 6. Exhibits and Reports on Form 8-K..................................... 37

Signatures...................................................................... 39

Index to Exhibits............................................................... 40


2


SAFE HARBOR STATEMENT

This Quarterly Report on Form 10-Q, including the Management's Discussion
and Analysis of Financial Condition and Results of Operations, contains
statements which constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements relating
to trends in operations and financial results and the business and the products
of the Registrant and its subsidiaries, as well as other statements including
words such as "anticipate", "believe", "plan", "estimate", "expect", "intend",
and other similar expressions. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future developments and
their potential effects on the Company. Such forward-looking statements are not
guarantees of future performance. Factors that may cause our actual results to
differ materially from those contemplated by these forward-looking statements
include, among others, the following possibilities: (a) general economic
conditions and other factors, including prevailing interest rate levels and
stock and bond market performance, which may affect our ability to sell our
products, the market value of our investments and the lapse rate and
profitability of policies; (b) our ability to achieve anticipated levels of
operational efficiencies and cost-saving initiatives and to meet cash
requirements based upon projected liquidity sources; (c) customer response to
new products, distribution channels and marketing initiatives; (d) mortality,
morbidity, and other factors which may affect the profitability of our insurance
products; (e) our ability to develop and maintain effective risk management
policies and procedures and to maintain adequate reserves for future policy
benefits and claims; (f) changes in the federal income tax and other federal
laws, regulations, and interpretations, including currently proposed federal
measures that may significantly affect the insurance business including
limitations on antitrust immunity, minimum solvency requirements, and changes to
the tax advantages of life insurance and annuity products or programs with which
they are used; (g) increasing competition in the sale of insurance and annuities
and the recruitment of sales representatives; (h) regulatory changes,
interpretations or pronouncements, including those relating to the regulation of
insurance companies and the regulation and sale of their products; (i) our
ratings and those of our subsidiaries by independent rating organizations which
we believe are particularly important to the sale of our products; (j) the
performance of our investment portfolios; (k) the impact of changes in standards
of accounting; (l) our ability to integrate the business and operations of
acquired entities; (m) expected protection products and accumulation products
margins; (n) the impact of anticipated investment transactions; and (o)
unanticipated litigation or regulatory investigations or examinations.

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

3


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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



March 31, December 31,
2004 2003
------------ ------------
(unaudited)

Assets
Investments:
Securities available-for-sale at fair value:
Fixed maturity securities $ 14,642,276 $ 13,944,961
Equity securities 76,201 74,890
Short-term investments 25,207 28,556
Securities held for trading purposes at fair value:
Fixed maturity securities 2,022,366 2,089,502
Equity securities 5,722 1,652
Short-term investments 586 591
Mortgage loans 849,776 968,572
Real estate 33 33
Policy loans 490,245 494,646
Other investments 460,897 339,436
------------ ------------

Total investments 18,573,309 17,942,839

Cash and cash equivalents 409,529 274,150
Accrued investment income 215,058 205,492
Premiums, fees and other receivables 44,066 42,761
Reinsurance receivables 681,822 663,452
Deferred policy acquisition costs 960,935 1,005,934
Capitalized bonus interest 120,844 114,196
Value of business acquired 391,139 419,582
Goodwill 226,291 224,075
Property and equipment 49,237 48,849
Other assets 298,015 311,305
Separate account assets 262,031 261,657
Assets of discontinued operations - 27,950
------------ ------------

Total assets $ 22,232,276 $ 21,542,242
============ ============


See accompanying notes to consolidated financial statements.

4


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



March 31, December 31,
2004 2003
----------- ------------
(unaudited)

Liabilities and Stockholders' Equity

Liabilities:
Policy reserves and policyowner funds:

Future life and annuity policy benefits $ 17,162,955 $ 16,994,255
Policyowner funds 1,337,180 1,306,160
------------ ------------
18,500,135 18,300,415

Accrued expenses and other liabilities 809,242 443,589
Dividends payable to policyowners 365,655 321,233
Policy and contract claims 66,827 58,880
Income taxes payable 73,907 50,274
Deferred income taxes 100,433 80,861
Notes payable 545,601 596,101
Separate account liabilities 262,031 261,657
Liabilities of discontinued operations - 19,421
------------ ------------
Total liabilities 20,723,831 20,132,431

Stockholders' equity:
Preferred Stock, no par value, 20,000,000 shares
authorized, none issued - -
Common Stock, no par value, 230,000,000 shares
authorized; 43,909,617 shares issued and
39,318,135 shares outstanding in 2004;
43,836,608 shares issued and 39,194,602 shares
outstanding in 2003 43,910 43,836
Additional paid-in capital 1,186,917 1,184,237
Accumulated other comprehensive income (loss) 153,635 84,519
Unearned compensation (1,697) (1,361)
Retained earnings 281,360 255,006
Treasury stock, at cost (4,591,482 shares in 2004
and 4,642,006 shares in 2003) (155,680) (156,426)
------------ ------------

Total stockholders' equity 1,508,445 1,409,811
------------ ------------

Total liabilities and stockholders' equity $ 22,232,276 $ 21,542,242
============ ============


See accompanying notes to consolidated financial statements.

5


AMERUS GROUP CO.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share data)



For The Three Months Ended March 31,
2004 2003
-----------------------------------
(unaudited)

Revenues:
Insurance premiums $ 70,737 $ 81,605
Product charges 49,562 46,831
Net investment income 256,875 255,113
Realized/unrealized capital gains (losses) (85) 7,855
Other income 19,603 16,356
----------- -----------
396,692 407,760
----------- -----------

Benefits and expenses:
Policyowner benefits 238,429 223,361
Underwriting, acquisition and other expenses 40,601 40,356
Restructuring costs - 3,193
Amortization of deferred policy acquisition costs
and value of business acquired 47,911 47,074
Dividends to policyowners 25,484 34,574
----------- -----------
352,425 348,558
----------- -----------
Income from continuing operations 44,267 59,202

Interest expense 8,398 6,799
----------- -----------

Income before income tax expense 35,869 52,403

Income tax expense 6,129 17,101
----------- -----------

Net income from continuing operations 29,740 35,302

Income from discontinued operations, net of tax 3,899 487
----------- -----------

Net income before cumulative effect of change in accounting 33,639 35,789

Cumulative effect of change in accounting, net of tax (7,285) -
----------- -----------

Net income $ 26,354 $ 35,789
=========== ===========

Net income from continuing operations per common share:
Basic $ 0.76 $ 0.91
=========== ===========
Diluted $ 0.74 $ 0.90
=========== ===========

Net income per common share:
Basic $ 0.67 $ 0.92
=========== ===========
Diluted $ 0.65 $ 0.91
=========== ===========

Weighted average common shares outstanding:
Basic 39,263,367 38,984,807
=========== ===========
Diluted 40,434,902 39,217,951
=========== ===========


See accompanying notes to consolidated financial statements.

6


AMERUS GROUP CO.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)



For The Three Months Ended March 31,
2004 2003
------------------------------------
(unaudited)

Net income $ 26,354 $ 35,789

Other comprehensive income (loss), before tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during period 88,879 29,859
Less: Reclassification adjustment for gains (losses)
included in net income (17,453) 12,376
-------- ---------

Other comprehensive income (loss), before tax 106,332 17,483
Income tax expense related to items of other
comprehensive income (37,216) (6,119)
-------- ---------
Other comprehensive income (loss), net of taxes 69,116 11,364
-------- ---------

Comprehensive income $ 95,470 $ 47,153
======== =========


See accompanying notes to consolidated financial statements.

7


AMERUS GROUP CO.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2004 and the Year Ended December 31, 2003
($ in thousands)



Accumulated
Additional Other Unallocated
Paid-In Comprehensive Unearned ESOP
Common Stock Capital Income (Loss) Compensation Shares
------------ ------------- ------------- ------------ -----------

Balance at December 31, 2002 $ 43,656 $ 1,179,646 $ 88,522 $ (458) $ (1,443)

2003:
Net income - - - - -
Net unrealized gain (loss) on securities - - 1,971 - -
Net unrealized gain (loss) on derivatives
designated as cash flow hedges - - 2,476 - -
Change in accounting transfer of unrealized gain
on available-for-sale securities to trading - - (5,204) - -
Stock issued under various incentive
plans, net of forfeitures 180 11,717 - (903) -
PRIDES purchase contract adjustments
and allocated fees and expenses - (7,280) - - -
Dividends declared on common stock - - - - -
Allocation of shares in leveraged ESOP - 154 - - 1,443
Minimum pension liability adjustment - - (3,246) - -
-------- ----------- ----------- ------- --------

Balance at December 31, 2003 43,836 1,184,237 84,519 (1,361) -

2004 (unaudited):
Net income - - - - -
Net unrealized gain (loss) on securities - - 68,970 - -
Net unrealized gain (loss) on derivatives
designated as cash flow hedges - - 146 - -
Stock issued under various incentive
plans, net of forfeitures 74 2,680 - (336) -
-------- ----------- ----------- ------- --------

Balance at March 31, 2004 $ 43,910 $ 1,186,917 $ 153,635 $(1,697) $ -
======== =========== =========== ======= ========


Total
Retained Treasury Stockholders'
Earnings Stock Equity
--------- ----------- -------------

Balance at December 31, 2002 $ 109,517 $ (156,492) $ 1,262,948

2003:
Net income 161,147 - 161,147
Net unrealized gain (loss) on securities - - 1,971
Net unrealized gain (loss) on derivatives
designated as cash flow hedges - - 2,476
Change in accounting transfer of unrealized gain
on available-for-sale securities to trading - - (5,204)
Stock issued under various incentive
plans, net of forfeitures - 66 11,060
PRIDES purchase contract adjustments
and allocated fees and expenses - - (7,280)
Dividends declared on common stock (15,658) - (15,658)
Allocation of shares in leveraged ESOP - - 1,597
Minimum pension liability adjustment - - (3,246)
--------- ---------- -----------

Balance at December 31, 2003 255,006 (156,426) 1,409,811

2004 (unaudited):
Net income 26,354 - 26,354
Net unrealized gain (loss) on securities - - 68,970
Net unrealized gain (loss) on derivatives
designated as cash flow hedges - - 146
Stock issued under various incentive
plans, net of forfeitures - 746 3,164
--------- ---------- -----------

Balance at March 31, 2004 $ 281,360 $ (155,680) $ 1,508,445
========= ========== ===========


See accompanying notes to consolidated financial statements.

8


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



For The Three Months Ended March 31,
2004 2003
------------------------------------
(unaudited)

Cash flows from operating activities
Net income $ 26,354 $ 35,789
Adjustments to reconcile net income to net cash
provided by operating activities:
Cumulative effect of change in accounting
for derivatives 7,285 -
Gain on sale of discontinued operations (3,899) -
Product charges on universal life
and annuity products (40,433) (54,225)
Interest credited to policyowner account
balances 120,594 126,940
Change in option value of equity-indexed products
and market value adjustments on total
return strategy annuities 23,733 (8,602)
Realized/unrealized capital (gains) losses 85 (7,855)
DAC and VOBA amortization 47,911 47,074
DAC and VOBA capitalized (88,790) (91,769)
Change in:
Accrued investment income (9,566) (2,012)
Reinsurance receivables (18,370) (61,190)
Securities held for trading purposes:
Fixed maturities 82,999 83,691
Equity securities (4,029) -
Short-term investments - (2,779)
Liabilities for future policy benefits (41,764) 4,693
Accrued expenses and other liabilities 161,338 97,185
Policy and contract claims and other
policyowner funds 48,237 17,692
Income taxes:
Current 24,953 (1,687)
Deferred (17,710) (3,580)
Other, net (18,003) 16,196
----------- -----------

Net cash provided by operating activities 300,925 195,561
----------- -----------

Cash flows from investing activities:
Purchase of fixed maturities available-for-sale (1,491,077) (2,073,313)
Proceeds from sale of fixed maturities available-for-sale 892,538 2,093,786
Maturities, calls and principal reductions of
fixed maturities available-for-sale 293,607 448,308
Purchase of equity securities (37,116) (9,258)
Proceeds from sale of equity securities 35,962 9,498
Change in short-term investments, net 10,503 14,267
Purchase of mortgage loans (24,268) (26,717)


9


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



For The Three Months Ended March 31,
2004 2003
------------------------------------
(unaudited)

Proceeds from repayment and sale of mortgage loans 148,101 22,696
Purchase of real estate and other invested assets (80,971) (83,562)
Proceeds from sale of real estate and other
invested assets 31,942 11,998
Change in policy loans, net 4,402 3,668
Proceeds from sale of discontinued operations 15,000 -
Other assets, net 3,793 (6,251)
----------- -----------

Net cash (used in) provided by investing activities (197,584) 405,120
----------- -----------

Cash flows from financing activities:
Deposits to policyowner account balances 508,716 508,643
Withdrawals from policyowner account balances (429,342) (313,947)
Change in debt, net (50,500) 22,240
Stock issued under various incentive plans, net of
forfeitures 3,164 728
Adoption and allocation of shares in leveraged ESOP - 37
Other, net - 60
----------- -----------

Net cash provided by financing activities 32,038 217,761
----------- -----------

Net increase in cash 135,379 818,442

Cash and cash equivalents at beginning of period 274,150 102,612
----------- -----------

Cash and cash equivalents at end of period $ 409,529 $ 921,054
=========== ===========

Supplemental disclosure of cash activities:

Interest paid $ 7,818 $ 9,332
=========== ===========
Income taxes paid $ 78 $ 13,602
=========== ===========


See accompanying notes to consolidated financial statements.

10


AMERUS GROUP CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States (GAAP) for interim financial information and the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by GAAP for annual financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. All adjustments were of a normal
recurring nature, unless otherwise noted in the Notes to Consolidated Financial
Statements. Operating results for the three months ended March 31, 2004 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2004. The consolidated balance sheet at December 31, 2003 has been
derived from the audited financial statements at that date but does not include
all of the information and footnotes required by GAAP for complete financial
statements. For further information and for capitalized terms not defined in
this Form 10-Q, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2003.

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

The Company has certain stock-based employee compensation plans which are
accounted for under the recognition and measurement principles of APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
The plans are stock option plans for which no stock-based employee compensation
cost is reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value recognition
provisions of Statement of Financial Accounting Standards (SFAS) 123,
"Accounting for Stock-Based Compensation," to stock-based employee compensation:



For The Three Months Ended March 31,
2004 2003
-------- --------
($ in thousands, except share data)

Net income, as reported $ 26,354 $ 35,789
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects (1,162) (1,098)
-------- --------
Pro forma net income $ 25,192 $ 34,691
======== ========

Earnings per share:
Basic - as reported $ 0.67 $ 0.92
======== ========
Basic - pro forma $ 0.64 $ 0.89
======== ========
Diluted - as reported $ 0.65 $ 0.91
======== ========
Diluted - pro forma $ 0.62 $ 0.88
======== ========


11


Certain amounts in the 2003 financial statements have been reclassified to
conform to the 2004 financial statement presentation.

(2) EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net
income by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share assumes the issuance of common shares
applicable to stock options calculated using the treasury stock method.

Diluted earnings per share applicable to the Company's Optionally
Convertible Equity-linked Accreting Notes (OCEANs(SM)) are determined using the
if-converted method for the number of days in the period in which the common
stock price conversion condition is met. The common stock price conversion
condition was not met for the three months ended March 31, 2004 and 2003. No
undistributed net income has been allocated to the convertible securities
holders since their participation in dividends with common stockholders is
limited to the amount of the annual regular dividend.

Diluted earnings per share applicable to the Company's PRIDES(SM)
securities are determined using the treasury stock method as it is currently
anticipated that holders of the PRIDES are more likely to tender cash in the
future for the securities' forward contract. The PRIDES added 523,539 shares to
the diluted earnings per share calculation for the three months ended March 31,
2004.

(3) CLOSED BLOCK

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

Summarized financial information of the Closed Block as of March 31, 2004
and December 31, 2003 and for the three months ended March 31, 2004 and 2003 are
as follows:

12




March 31, December 31,
2004 2003
------------------------------
($ in thousands)

LIABILITIES:
Future life and annuity policy benefits $ 2,827,434 $ 2,845,365
Policyowner funds 8,978 9,232
Accrued expenses and other liabilities 34,634 44,473
Dividends payable to policyowners 171,662 173,703
Policy and contract claims 25,606 22,694
Policyowner dividend obligation 182,729 134,386
----------- ------------

Total Liabilities 3,251,043 3,229,853
----------- ------------

ASSETS:
Fixed maturity securities available-for-sale at fair value 2,038,035 2,027,177
Mortgage loans 78,645 80,170
Policy loans 342,398 346,823
Other investments 300 -
Cash and cash equivalents 4,843 3,492
Accrued investment income 32,447 32,629
Premiums and fees receivable 80,771 55,134
Other assets 17 17
----------- ------------

Total Assets 2,577,456 2,545,442
----------- ------------

Maximum future earnings to be recognized from assets and
liabilities of the Closed Block $ 673,587 $ 684,411
=========== ============


13




For The Three Months Ended March 31,
------------------------------------
2004 2003
------------------------------------
($ in thousands)

OPERATIONS:
Insurance premiums $ 52,596 $ 62,808
Product charges 90 3,538
Net investment income 35,734 39,739
Realized gains (losses) on investments 830 7,069
Policyowner benefits (55,170) (71,829)
Underwriting, acquisition and other expenses (1,089) (1,131)
Dividends to policyowners (23,399) (29,912)
-------- --------
Contribution from the Closed Block before income taxes $ 9,592 $ 10,282
======== ========


14


(4) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company accounts for derivatives, including certain derivative
instruments embedded in other contracts, at fair value. Accounting for gains and
losses resulting from changes in the values of derivatives is dependent upon the
use of the derivative and its qualification for special hedge accounting. During
the first three months of 2004 and 2003, realized/unrealized gains (losses) on
investments included an unrealized gain of $17.7 million and an unrealized gain
of $2.3 million, respectively, from the change in fair value on the trading
securities primarily backing the total return strategy products. Additionally,
the first three months of 2004 and 2003 included an unrealized gain of $6.2
million and an unrealized loss of $9.6 million, respectively, from the change in
fair value on call options used as a natural hedge of embedded options within
equity-indexed products. Policyowner benefits included an offsetting adjustment
to contract liabilities for fair value changes in options embedded within the
equity-indexed products and fair value changes on total return strategy annuity
contracts amounting to an increase in expense of $22.0 million and reduction in
expense of $8.6 million for the first three months of 2004 and 2003,
respectively. In 2002, the Company undesignated a cash flow hedge and is now
amortizing the amount in AOCI to earnings over the remaining life of the swap,
which amounted to $0.5 and $1.4 million in expense in the first three months of
2004 and 2003, respectively. The Company estimates that $0.3 million of
after-tax derivative losses, included in AOCI, will be reclassified into
earnings within the next twelve months. Accumulated Other Comprehensive Income
(AOCI) included an unrealized gain of $0.1 million and $0.9 million from the
fair value change in interest rate swaps used to hedge the floating rate funding
agreement liability during the first three months of 2004 and 2003,
respectively.

The following table summarizes the income (loss) impact of the market
value adjustments on trading securities and derivatives and the cash flow hedge
amortization for the three months ended March 31, 2004 and 2003:



For the Three Months Ended March 31, 2004
-----------------------------------------------
Total Return Equity Linked
Products Products Other Total
------------ ------------- ------- --------
($ in thousands)

Fixed maturity securities held for trading $ 14,606 $ - $ 3,046 $ 17,652
Options on equity-indexed and other products - 7,148 (985) 6,163
Market value adjustment to liabilities (12,772) (9,166) (1,795) (23,733)
Cash flow hedge amortization (462) (462)
DAC amortization impact of
net adjustments above 694 1,635 331 2,660
-------- --------- ------- --------

Pre-tax total 2,528 (383) 135 2,280
Income taxes (885) 134 (47) (798)
-------- --------- ------- --------

After-tax total $ 1,643 $ (249) $ 88 $ 1,482
======== ========= ======= ========




For the Three Months Ended March 31, 2003
-----------------------------------------------
Total Return Equity Linked
Products Products Other Total
------------ ------------- ------- --------
($ in thousands)

Fixed maturity securities held for trading $ 2,281 $ - $ 38 $ 2,319
Options on equity-indexed and other products - (10,705) 1,093 (9,612)
Market value adjustment to liabilities (1,678) 10,280 - 8,602
Cash flow hedge amortization - - (1,412) (1,412)
DAC amortization impact of
net adjustments above (157) 256 (21) 78
-------- --------- ------- --------

Pre-tax total 446 (169) (302) (25)
Income taxes (157) 60 106 9
-------- --------- ------- --------

After-tax total $ 289 $ (109) $ (196) $ (16)
======== ========= ======= ========


15


(5) FEDERAL INCOME TAXES

The effective income tax rate for the three months ending March 31, 2004
varied from the prevailing corporate rate primarily as a result of a reduction
in the income tax accrual. The accrual reduction, amounting to $5.2 million, was
for the release of provisions originally established for potential tax
adjustments which have been settled or eliminated.

(6) COMMITMENTS AND CONTINGENCIES

In recent years, the life insurance industry, including the Company and
its subsidiaries, have been subject to an increase in litigation pursued on
behalf of purported classes of insurance purchasers, questioning the conduct of
insurers in the marketing of their products. The Company is routinely involved
in litigation and other proceedings, including class actions, reinsurance claims
and regulatory proceedings, arising in the ordinary course of its business. Some
of these claims and legal actions are in jurisdictions where juries are given
substantial latitude in assessing damages, including punitive damages. Although
no assurances can be given and no determinations can be made at this time, the
Company believes that the ultimate liability, if any, with respect to these
claims and legal actions, would have no material effect on its results of
operations and financial position.

(7) EMPLOYEE BENEFIT PLANS

The Company has a frozen defined benefit pension plan and also has defined
benefit plans which provide supplemental retirement benefits to certain agents
and executives. In addition to pension benefits, the Company also provides
certain health care and life insurance benefits for retired employees. The
following is a summary of net periodic benefit cost for these plans for the
three months ended March 31, 2004 and 2003:



Three Months Ended March 31,
----------------------------
2004 2003
---------- ----------
($ in thousands)

Components of net periodic benefit cost:
Service cost $ 82 $ 71
Interest cost 1,550 1,550
Expected return on plan assets (1,214) (1,226)
Amortization of prior service cost 22 10
Amortization of actuarial loss 62 11
------ --------

Net periodic benefit cost 502 416
Curtailment (951) -
Settlement - 393
------ --------

Total (income) expense $ (449) $ 809
====== ========


During the first three months of 2004, a gain of $0.9 million was
recognized as a result of curtailing health care and life insurance benefits
associated with the sale of the discontinued operations in January 2004.

16


(8) ASSETS HELD FOR SALE

The Company listed its office building located in Indianapolis, Indiana,
with a real estate broker during the second quarter of 2003. On June 30, 2003,
the Company determined that the plan of sale criteria in SFAS 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," had been met. Accordingly,
the carrying value of the building was adjusted to its estimated fair value less
costs to sell, amounting to $15.5 million, which was based upon comparable
properties marketed in Indianapolis at that time. The resulting $7.7 million
pre-tax impairment loss was recorded as a restructuring cost in the consolidated
statement of income in the second quarter of 2003.

As provided by SFAS 144, the Company determined in the first quarter of
2004 that the fair value of the building required further adjustment based on
current offering prices for the property, resulting in an additional $12.2
million pre-tax impairment loss, which has been recorded in realized/unrealized
capital losses in the consolidated statement of income. The carrying value of
the building that is held for sale is included in the other assets line item of
the consolidated balance sheet and amounted to $3.3 million at March 31, 2004
and $15.5 million at December 31, 2003.

(9) DISCONTINUED OPERATIONS

In November 2003, the Company entered into an agreement to sell a
wholly-owned subsidiary which conducts residential financing operations. The
assets, liabilities and results of the residential financing operations have
been classified as discontinued operations. The sale was completed in January
2004, resulting in an after-tax gain of $3.9 million. Income from discontinued
operations net of tax was as follows:



For The Three Months Ended March 31,
------------------------------------
2004 2003
----------- -----------
($ in thousands, except share data)

Operating income from discontinued operations, net of
income taxes of $325 in 2003 $ - $ 487
Gain on sale of discontinued operations, net of
income taxes of $2,571 in 2004 3,899 -
----------- -----------
$ 3,899 $ 487
=========== ===========

Net income from discontinued operations per common share:
Basic $ 0.10 $ 0.01
Diluted $ 0.10 $ 0.01

Weighted average common shares outstanding:
Basic 39,263,367 38,984,807
Diluted 40,434,902 39,217,951


17


(10) ADOPTION OF SOP 03-1

Effective January 1, 2004, the Company adopted Statement of Position 03-1
(SOP 03-1), "Accounting and Reporting by Insurance Enterprises for Certain
Non-Traditional Long-Duration Insurance Contracts and for Separate Accounts,"
issued by the Accounting Standards Executive Committee of the American Institute
of Certified Public Accountants. The adoption of SOP 03-1 resulted in
establishing additional policy reserve liabilities for fees charged for
insurance benefit features which are assessed in a manner that is expected to
result in profits in earlier years and losses in subsequent years. The
additional policy reserve liabilities provided by SOP 03-1 as of January 1,
2004, amounted to a decrease of $11.2 million ($7.3 million after-tax) in net
income which has been reflected as a cumulative effect of a change in
accounting.

In addition, the adoption of SOP 03-1 established guidance for the
accounting and presentation of costs related to sales inducements. There was no
change to the Company's method of accounting for sales inducements; however, the
capitalized costs are now separately disclosed in the consolidated balance sheet
and the related amortization expense is included in policyowner benefits in the
consolidated statement of income. Prior to 2004, the capitalized costs were
included in deferred policy acquisition costs and the amortization expense was
included in the amortization of deferred policy acquisition costs. The 2003
amounts have been reclassified to conform with the 2004 presentation.

(11) OPERATING SEGMENTS

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

Protection Products. The primary product offerings consist of
interest-sensitive whole life, term life, universal life and equity-indexed life
insurance policies. These products are marketed on a national basis primarily
through a Preferred Producer agency system, a Personal Producing General Agent
(PPGA) distribution system and Independent Marketing Organizations (IMOs).

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

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

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

18


1) Realized gains and losses on open block assets.

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

- Unrealized gains and losses on open block options and
securities held for trading.

- Change in option value of equity-indexed products and market
value adjustments on total return strategy annuities.

- Cash flow hedge amortization.

3) Amortization of deferred policy acquisition costs (DAC) and value of
business acquired (VOBA) related to the realized gains and losses on
the open block investments and the derivative adjustments.

4) Restructuring costs.

5) Other income from non-insurance operations.

6) Interest expense.

7) Income tax expense.

8) Income from discontinued operations.

9) Cumulative effect of change in accounting.

These items will fluctuate from period to period depending on the
prevailing interest rate and economic environment, or are not continuing in
nature, or are not part of the core insurance operations. As a result,
management believes they do not reflect the ongoing earnings capacity of the
Company's operating segments.

Premiums, product charges, policyowner benefits, insurance expenses,
amortization of DAC and VOBA and dividends to policyowners are attributed
directly to each operating segment. Net investment income and closed block
realized gains and losses on investments are allocated based on directly-related
assets required for transacting the business of that segment. Other revenues and
benefits and expenses which are deemed not to be associated with any specific
segment are grouped together in the All Other category. These items primarily
consist of holding company revenues and expenses, operations of the Company's
real estate management subsidiary, and accident and health insurance.

Assets are segmented based on policy liabilities directly attributable to
each segment. There are no significant intersegment transactions. Depreciation
and amortization, excluding amortization of DAC and VOBA as previously
discussed, are not significant. There have been no material changes in segment
assets since December 31, 2003.

19


Operating Segment Income
($ in thousands)



Three Months Ended March 31, 2004
--------------------------------------------------
Protection Accumulation Total
Products Products All Other Consolidated
---------- ------------ --------- ------------

Revenues:
Insurance premiums $ 69,716 $ 723 $ 298 $ 70,737
Product charges 35,459 14,103 - 49,562
Net investment income 81,258 174,263 1,354 256,875
Realized gains (losses) on closed block investments 830 - - 830
Other income 906 17,388 1,508 19,802
---------- -------- --------- ----------

188,169 206,477 3,160 397,806

Benefits and expenses:
Policyowner benefits 93,395 120,818 21 214,234
Underwriting, acquisition, and other expenses 16,958 18,729 4,914 40,601
Amortization of DAC and VOBA, net of
open block loss adjustment of $1,260 19,241 29,930 - 49,171
Dividends to policyowners 25,484 - - 25,484
---------- -------- --------- ----------

155,078 169,477 4,935 329,490
---------- -------- --------- ----------

Segment pre-tax operating income $ 33,091 $ 37,000 $ (1,775) 68,316
========== ======== =========

Realized gains (losses) on open block assets (24,730)

Unealized gains (losses) on open block options and
trading investments 23,815

Change in option value of equity-indexed
products and market value adjustments on
total return strategy annuities (23,733)

Cash flow hedge amortization (462)

Amortization of DAC and VOBA due to open
block gains and losses 1,260

Other income from non-insurance operations (199)
----------

Income from continuing operations 44,267

Interest (expense) (8,398)

Income tax (expense) (6,129)

Income from discontinued operations, net of tax 3,899

Cumulative effect of change in accounting, net of tax (7,285)
----------

Net income $ 26,354
==========


20


Operating Segment Income
($ in thousands)
(unaudited)



Three Months Ended March 31, 2003
--------------------------------------------------
Protection Accumulation Total
Products Products All Other Consolidated
---------- ------------ --------- ------------

Revenues:
Insurance premiums $ 80,161 $ 1,183 $ 261 $ 81,605
Product charges 36,338 10,493 - 46,831
Net investment income 83,746 169,673 1,694 255,113
Realized gains (losses) on closed block investments 7,069 - - 7,069
Other income 1,053 14,766 140 15,959
---------- ---------- --------- ----------

208,367 196,115 2,095 406,577

Benefits and expenses:
Policyowner benefits 100,668 129,863 20 230,551
Underwriting, acquisition, and other expenses 20,441 15,935 3,980 40,356
Amortization of DAC and VOBA, net of
open block gain adjustment of $6,545 19,565 20,964 - 40,529
Dividends to policyowners 34,574 - - 34,574
---------- ---------- --------- ----------

175,248 166,762 4,000 346,010
---------- ---------- --------- ----------

Segment pre-tax operating income $ 33,119 $ 29,353 $ (1,905) 60,567
========== ========== =========

Realized gains (losses) on open block assets 8,079

Unealized gains (losses) on open block options and
trading investments (7,293)

Change in option value of equity-indexed
products and market value adjustments on
total return strategy annuities 8,602

Cash flow hedge amortization (1,412)

Amortization of DAC and VOBA due to open
block gains and losses (6,545)

Restructuring costs (3,193)

Other income from non-insurance operations 397
----------

Income from continuing operations 59,202

Interest (expense) (6,799)

Income tax (expense) (17,101)

Income from discontinued operations, net of tax 487
----------

Net income $ 35,789
==========


21


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following analysis of the consolidated results of operations and
financial condition of AmerUs Group Co. should be read in conjunction with the
Consolidated Financial Statements and related notes.

NATURE OF OPERATIONS

We are a holding company whose subsidiaries are primarily engaged in the
business of marketing, underwriting and distributing a broad range of individual
life, annuity and insurance deposit products to individuals and businesses in 50
states, the District of Columbia and the U.S. Virgin Islands. We have two
reportable operating segments: protection products and accumulation products.
The primary offerings of the protection products segment are interest-sensitive
whole life, term life, universal life and equity-indexed life insurance
policies. The primary offerings of the accumulation products segment are
individual fixed annuities (comprised of traditional fixed annuities and
equity-indexed annuities) and funding agreements.

FINANCIAL HIGHLIGHTS

Our financial highlights are as follows:



For The Three Months Ended March 31,
2004 2003
---------- ----------
($ in thousands, except per share data)

Segment pre-tax operating income:
Protection Products $ 33,091 $ 33,119
Accumulation Products 37,000 29,353
Other operations (1,775) (1,905)
---------- ----------
Total segment pre-tax operating income 68,316 60,567

Non-segment expense, net (A) 41,962 24,778
---------- ----------

Net income $ 26,354 $ 35,789
========== ==========

Diluted earnings per share $ 0.65 $ 0.91




March 31, December 31,
2004 2003
------------ ------------

Total assets $ 22,232,276 $ 21,542,242

Stockholders' equity $ 1,508,445 $ 1,409,811


(A) Non-segment expense, net consists primarily of open block realized gains
and losses, derivative related market value adjustments, non-insurance
operations, restructuring costs, interest expense, income taxes,
discontinued operations and cumulative effect of change in accounting.

22


Operating segment income in the first quarter of 2004 for the protection
products segment was comparable to that of 2003. Operating segment income for
the accumulation products segment increased in the first quarter of 2004 as
compared to the same period in 2003. Protection products earnings were primarily
impacted by decreased net investment income in the first quarter of 2004 due to
lower investment yields and the current quarter impact of SOP 03-1 following
adoption on January 1, 2004. This was partially offset by lower operating
expenses. Our accumulation products pre-tax operating segment income increased
primarily due to the continued shift in our business from traditional fixed
annuities to higher margin equity-indexed annuities and higher assets under
management.

Net income decreased in the first quarter of 2004 compared to the first
quarter of 2003 primarily as a result of an impairment loss on our Indianapolis,
Indiana office building and the cumulative effect of change in accounting for
the adoption of SOP 03-1. The decrease was partially reduced by the gain on the
sale of our residential financing subsidiary.

Total assets increased $690.0 million during the first quarter of 2004
primarily as a result of the utilization of securities lending and borrowing
arrangements and dollar-roll repurchase investment transactions. Stockholders'
equity increased $98.6 million for the first quarter of 2004 primarily as a
result of unrealized gains on available-for-sale investments which amounted to
$69.0 million and year-to-date net income of $26.4 million.

PROTECTION PRODUCTS

Our protection products segment primarily consists of interest-sensitive
whole life, term life, universal life and equity-indexed life insurance
policies. These products are marketed on a national basis primarily through a
Preferred Producer agency system, PPGA distribution system and IMOs. Included in
protection products is the closed block of ALIC and the closed block of ILIC
established when the companies reorganized from mutual companies to stock
companies. When protection products are sold, we invest the premiums we receive
in our investment portfolio and establish a liability representing our
commitment to the policyowner. We manage investment spread by seeking to
maximize the return on these invested assets, consistent with our
asset/liability and credit quality needs. We enter into reinsurance arrangements
in order to reduce the effects of mortality risk and the statutory capital
strain from writing new business. All income statement line items are presented
net of reinsurance amounts. Protection products in force totaled $99.0 billion
at March 31, 2004 and $98.6 billion at December 31, 2003. Protection products in
force is a performance measure utilized by investors, analysts and the Company
to assess the Company's position in the industry. A summary of our protection
products segment operations follows:

23




For The Three Months Ended March 31,
2004 2003
----------- ---------
($ in thousands)

Revenues:
Insurance premiums $ 69,716 $ 80,161
Product charges 35,459 36,338
Net investment income 81,258 83,746
Realized gains (losses) on closed block investments 830 7,069
Other income 906 1,053
----------- ---------
Total revenues 188,169 208,367
----------- ---------

Benefits and expenses:
Policyowner benefits 93,395 100,668
Underwriting, acquisition and other expenses 16,958 20,441
Amortization of DAC and VOBA, net of open block
gain/loss adjustment 19,241 19,565
Dividends to policyowners 25,484 34,574
----------- ---------
Total benefits and expenses 155,078 175,248
----------- ---------
Pre-tax operating income - Protection Products segment $ 33,091 $ 33,119
=========== =========


Pre-tax operating income from our protection products was at nearly the
same level in the first quarter of 2004 as that of 2003. Net investment income
was lower in the first quarter of 2004 due to lower investment yields. Operating
income was also lower in the first quarter of 2004 as a result of the accounting
for policyowner liabilities under SOP 03-1 following its adoption on January 1,
2004. These decreases were offset by lower operating expenses. The key drivers
of our protection products business include sales, persistency, net investment
income, mortality and expenses.

SALES. Sales are a key driver of our business as they are a leading
indicator of future revenue trends to emerge in segment operating income. Sales
are presented as annualized premium, which is in accordance with industry
practice, and represent the amount of new business sold during the period. Sales
are a performance metric which we use to measure the productivity of our
distribution network and for compensation of sales and marketing employees and
agents. The following table summarizes annualized premium by life insurance
product:

24




Sales Activity by Product
For The Three Months Ended March 31,
2004 2003
----------- ---------
($ in thousands)

Traditional life insurance:
Whole life $ 5 $ 203
Interest-sensitive whole life 3,418 7,020
Term life 3,570 3,712
Universal life 7,534 6,940
Equity-indexed life 17,303 13,477
----------- ---------

Direct 31,830 31,352
Private label term life premiums - 1,937
----------- ---------
Total $ 31,830 $ 33,289
=========== =========


Direct first year annualized premiums increased 1.5% in the first quarter
of 2004 compared to 2003. We continue to focus our marketing efforts on
equity-indexed life products. In the first three months of 2004, sales of
equity-indexed life products were $17.3 million as compared to $13.5 million for
2003 and comprised 54% of total direct sales in the first quarter of 2004
compared to 43% in the first quarter of 2003. We are a leading writer of
equity-indexed life products in the United States.

PREMIUMS AND PRODUCT CHARGES. We recognize premiums on traditional life
insurance policies as revenues when the premiums are due. Amounts received as
payments for universal life and equity-indexed life insurance policies are not
recorded as premium revenue, but are instead recorded as a policyowner
liability. Revenues from the universal life and equity-indexed life policies
consist of charges for the cost of insurance, policy administration and policy
surrender and are included on the line item product charges. All revenue is
reported net of reinsurance ceded.

Insurance premium revenue was lower in the first quarter of 2004 as
compared to the first quarter of 2003 primarily due to lower sales of
traditional products and the continued decline in closed block in force
business. Product charge revenue was slightly lower in 2004 as compared to 2003
due to additional reinsurance.

PERSISTENCY. Persistency is a key driver of our business because it shows
the policies which remain in our block of business and is measured by the lapse
rate. A low lapse rate means higher persistency indicating more business is
remaining in force to generate future revenues. Annualized lapse rates, based on
a rolling four quarter period, were 6.3% in the first quarter of 2004 compared
to 7.2% in the first quarter of 2003. Our persistency experience remained within
our pricing assumptions.

NET INVESTMENT INCOME. Net investment income is a key driver of our
business as it reflects earnings on our invested assets. Net investment income
decreased for the first three months of 2004 as compared to the same period a
year ago. The decrease for the quarter was primarily due to lower effective
yields as compared to 2003. The earned rate of the investment portfolio was
6.48% compared to 6.98% a year ago. The decrease in net investment income caused
by the lower yields was partially offset by the growth in protection products
assets of approximately $215 million from 2003.

MORTALITY AND BENEFIT EXPENSE. Mortality is a key driver of our business
as it is a component of benefit expense. We utilize reinsurance to reduce the
effects of mortality risk. We experienced unfavorable open block

25


mortality in the first quarter of 2004 which was primarily offset by
reinsurance. We experienced favorable closed block mortality in the first
quarter of 2004 as compared to the same period a year ago which increased the
policyowner dividend obligation liability.

UNDERWRITING, ACQUISITION AND OTHER EXPENSES. Underwriting, acquisition
and other expenses are a key driver of our business as they are costs of our
operations. Expenses decreased for the first quarter of 2004 compared to the
first quarter of 2003 primarily due to lower operating expenses resulting from
the restructuring activities that took place in 2003 and in prior years to
integrate the ILICO life operations.

DIVIDENDS TO POLICYOWNERS. In addition to basic policyowner dividends,
dividend expense includes increases or decreases to the closed block policyowner
dividend obligation liability carried on the consolidated balance sheet. The
actual results of the closed block are adjusted to equal the expected earnings
based on the actuarial calculation at the time of formation of the closed block
(which we refer to as the closed block glide path). The adjustment to have the
closed block operating results equal the closed block glide path is made to
dividend expense. If the actual results for the period exceed the closed block
glide path, increased dividend expense is recorded as a policyowner dividend
obligation to reduce the actual closed block results. For actual results less
than the closed block glide path, dividend expense is reduced to increase the
actual closed block results. As a result of this accounting treatment, operating
earnings only include the predetermined closed block glide path.

Dividend expense decreased for the first quarter of 2004 compared to the
first quarter of 2003. This reduction was primarily the result of lower realized
gains on closed block investments in 2004 as compared to 2003, decreasing closed
block earnings.

OUTLOOK. We expect to continue to shift our sales to higher return
products, in particular the equity-indexed life products. We also expect to
continue to realize operating efficiencies created by the restructuring of the
protection products operations and centralization of our administrative
functions.

ACCUMULATION PRODUCTS

Our accumulation products segment primary offerings consist of individual
fixed annuities and funding agreements. The fixed annuities are marketed on a
national basis primarily through IMOs and independent brokers. Similar to our
protection products segment, we invest the premiums we receive from accumulation
product deposits in our investment portfolio and establish a liability
representing our commitment to our policyowner. We manage investment spread by
seeking to maximize the return on our invested assets consistent with our
asset/liability management and credit quality needs. When appropriate, we
periodically reset the interest rates credited to our policyowner liability.
Accumulation products reserves totaled $11.8 billion at March 31, 2004 and $11.7
billion at December 31, 2003. A summary of our accumulation products segment
operations follows:

26




For The Three Months Ended March 31,
2004 2003
----------- ---------
($ in thousands)

Revenues:
Immediate annuity and supplementary contract premiums $ 723 $ 1,183
Product charges 14,103 10,493
Net investment income 174,263 169,673
Other income 2,751 3,075
----------- ---------
Total revenues 191,840 184,424
----------- ---------

Benefits and expenses:
Policyowner benefits 120,818 129,863
Underwriting, acquisition and other expenses 7,232 6,469
Amortization of DAC and VOBA 29,930 20,964
----------- ---------
Total benefits and expenses 157,980 157,296
----------- ---------

IMO Operations:
Other income 14,637 11,691
Other expenses 11,497 9,466
----------- ---------
Net IMO operating income 3,140 2,225
----------- ---------
Pre-tax operating income - Accumulation Products segment $ 37,000 $ 29,353
=========== =========


Pre-tax operating income from our accumulation products operations
increased 26% in the first quarter of 2004 compared to 2003 primarily due to
higher assets under management and increased product spreads from our higher
margin products. The drivers of profitability in our accumulation products
business are deposits, persistency, product spread, expenses and IMO operations.

DEPOSITS. Deposits are a key driver of our business as this is a measure
which represents collected premiums to be deposited to policyowner accounts for
which we will earn a future product spread. Deposits are presented as collected
premiums, which are measured in accordance with industry practice, and represent
the amount of new business sold during the period. Deposits are a performance
metric which we use to measure the productivity of our distribution network and
for compensation of sales and marketing employees and agents. The following
table summarizes our accumulation products segment deposits:

27




Deposits by Product
For The Three Months Ended March 31,
2004 2003
----------- ---------
($ in thousands)

Annuities
Deferred fixed annuities:
Traditional fixed annuities $ 82,170 $ 142,662
Equity-indexed annuities 296,875 233,190
Variable annuities 852 987
----------- ---------
Total annuities 379,897 376,839
Reinsurance ceded (3,196) (8,068)
----------- ---------
Total deposits, net of reinsurance $ 376,701 $ 368,771
=========== =========


Direct annuity deposits increased 0.8% for the first quarter of 2004
compared to the same quarter a year ago. Deposits increased in the first quarter
of 2004 as compared to 2003 as we had slowed annuity production in the first
quarter of 2003 due to the low interest rate environment. We also have shifted
our product mix towards our higher returning equity-indexed annuities resulting
in equity-indexed annuities comprising 78% of total direct annuity deposits in
the first quarter of 2004 compared to 62% in the first quarter of 2003. Our
wholly-owned and proprietary organizations accounted for approximately 75% of
our annuity deposits in the first quarter of 2004 compared to 71% in the first
quarter of 2003.

PRODUCT CHARGES. The deposits we receive on accumulation products are not
recorded as revenue but instead as a policyowner liability. Surrender charges
are recorded as revenue as a product charge. Product charges increased in the
first quarter of 2004 as compared to 2003 due to the growth in the business.

PERSISTENCY. Persistency is a key driver of our business as it refers to
the policies which remain in our block of business and is measured by a
withdrawal rate. A low withdrawal rate means higher persistency indicating more
business is remaining in force to generate future revenues. Withdrawals
represent funds taken out of accumulation products by policyowners not including
those due to the death of policyowners. Annuity withdrawal rates without
internal replacements, based on a rolling four quarter period, continued to
improve in 2004 and amounted to 9.0% and 10.2% for the first three months of
2004 and 2003, respectively. Annuity withdrawals without internal replacements
totaled $295.8 million and $341.8 million for the first three months of 2004 and
2003, respectively. Our withdrawal experience remained within our pricing
assumptions. Withdrawal rates declined for the first quarter of 2004 as compared
to 2003 as our annuity products provide a favorable investment return in this
current low interest environment.

PRODUCT SPREAD. Product spread is a key driver of our business as it
measures the difference between the income earned on our invested assets and the
rate which we credit to policyowners, the difference is reflected as segment
operating income. Asset earned rates and liability crediting rates, based on a
rolling four quarter period, were as follows for accumulation segment products:

28




For The Three Months Ended March 31,
2004 2003
---- -----

Asset earned rate 5.82% 6.46%
Liability credited rate 3.81% 4.40%
---- -----
Product spread 2.01% 2.06%
==== ====


The product spread, based on a rolling four quarter period, decreased five
basis points to 201 basis points in the first quarter of 2004 compared to the
first quarter of 2003. Liability crediting rates were lowered throughout 2003
and the first quarter of 2004 to correspond with the decline in investment
yields caused by lower rates on new and reinvested funds.

At March 31, 2004, the account value of traditional annuities totaled $6.9
billion of which approximately 97% have minimum guarantee rates ranging from 3%
to 4%. For annuities with an account value of $5.0 billion, the credited rate
was equal to the minimum guarantee rate, and as a result, the credited rate
cannot be lowered. We also offer an interest rate crediting strategy that
credits the policy with a return generally based upon the interest rates it
earns on assets supporting the respective policies less management fees.
Traditional annuities with an account value of $5.4 billion had a one-year
interest guarantee period while annuities with an account value of $1.2 billion
had a multi-year guarantee for which the credited rate cannot be decreased until
the end of the multi-year period. At the end of the multi-year period, we will
have the ability to lower the crediting rate to the minimum guaranteed rate by
an average of approximately 300 basis points. The remaining multi-year period is
generally either one or two years. Due to these limitations on the ability to
lower interest crediting rates and the potential for additional credit defaults
and lower reinvestment rates on investments, we could experience spread
compression in future periods.

AMORTIZATION OF DAC AND VOBA. The amortization of DAC and VOBA increased
for the first quarter of 2004 compared to the first quarter of 2003. DAC and
VOBA are generally amortized in proportion to policy gross margins which
increased in 2004, resulting in higher amortization expense.

IMO OPERATIONS. IMO Operations are a key driver of our business as the
earnings from the IMOs are a significant component of the accumulation products
segment operating income. IMOs have contractual arrangements to promote our
insurance products to their networks of agents and brokers. Additionally, they
also contract with third party insurance companies. We own five such IMOs. The
income from IMO operations primarily represents annuity commissions received by
our IMOs from those third party insurance companies. Net IMO operating income
increased $0.9 million in 2004 compared to 2003.

OUTLOOK. We anticipate increased product sales from our IMOs but decreased
product sales from other distribution channels as we manage our sales in this
current low interest rate environment. We also expect to continue the shift of
our product mix to higher return products, in particular the equity-indexed
annuity products. We will continue to manage our spreads as we strive for our
desired profitability in this economic environment.

OTHER

The other segment is our non-core lines of business outside of protection
and accumulation products. These lines of business include holding company
revenues and expenses, operations of our real estate management subsidiary, and
accident and health insurance. The pre-tax operating loss in the first quarter
of 2004 was comparable with the first quarter of 2003.

29


INCOME STATEMENT RECONCILIATION

A reconciliation of our segment pre-tax operating income to net income as
shown in our consolidated statements of income follows:



For The Three Months Ended March 31,
2004 2003
--------- --------

Segment pre-tax operating income:
Protection Products $ 33,091 $ 33,119
Accumulation Products 37,000 29,353
Other operations (1,775) (1,905)
--------- --------
Total segment pre-tax operating income 68,316 60,567

Non-segment items - increases (decreases) to income:
Realized and unrealized losses on assets and liabilities:
Realized/unrealized gains (losses) on open block assets (24,730) 8,079
Unrealized gains (losses) on open block options and
trading investments 23,815 (7,293)
Change in option value of equity-indexed products
and market value adjustments on total return
strategy annuities (23,733) 8,602
Cash flow hedge amortization (462) (1,412)
Amortization of DAC & VOBA due to open block
realized gains and losses 1,260 (6,545)
Restructuring costs - (3,193)
Other income from non-insurance operations (199) 397
--------- --------

Income from continuing operations 44,267 59,202

Interest expense (8,398) (6,799)
Income tax expense (6,129) (17,101)
--------- --------

Net income from continuing operations 29,740 35,302

Income from discontinued operations, net of tax 3,899 487
Cumulative effect of change in accounting, net of tax (7,285) -
--------- --------

Net income $ 26,354 $ 35,789
========= ========


30


REALIZED AND UNREALIZED GAINS (LOSSES) ON ASSETS AND LIABILITIES. Realized
gains (losses) on open block assets will fluctuate from period to period
depending on the prevailing interest rate, the economic environment and the
timing of investment sales and credit events. As part of managing our invested
assets, we routinely sell securities and realize gains and losses. In addition,
in the first quarter of 2004, we had a pre-tax impairment loss on our
Indianapolis, Indiana office building of $12.2 million. We listed this office
building with a real estate broker during the second quarter of 2003 as part of
our restructuring plan and recorded a pre-tax impairment loss of $7.7 million at
that time. As provided by SFAS 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," we determined in the first quarter of 2004 that the fair
value of the building required further adjustment based on current offering
prices for the property. The result was an additional $12.2 million pre-tax
impairment loss which has been recorded in realized/unrealized capital losses on
open block assets. The carrying value of the building that is held for sale is
included in the other assets line item of the consolidated balance sheet and
amounted to $3.3 million at March 31, 2004 and $15.5 million at December 31,
2003.

Unrealized gains (losses) on open block options and trading investments
also will fluctuate from period to period depending on the prevailing interest
rate, the economic environment, the timing of investment sales and credit
events. We use options to hedge our equity-indexed products. In accounting for
derivatives, we adjusted our options to market value, which, due to the economic
environment and stock market conditions, resulted in an unrealized gain of $6.2
million in the first quarter of 2004 and a loss of $9.6 million in the first
quarter of 2003. In addition, we also have trading securities that back our
total return strategy traditional annuity products. The market value adjustment
on the trading securities resulted in a gain of $17.7 million in the first
quarter of 2004 and a gain of $2.3 million in the first quarter of 2003. Most of
the unrealized gains and losses on the options and trading securities are offset
by similar adjustments to the option portion of the equity-indexed product
reserves and to the total return strategy annuity reserves. The reserve
adjustments are reflected in policyowner benefits expense in the consolidated
statements of income and are included in the fair value change as additional
expense of $23.7 million in the first quarter of 2004 and a reduction of expense
of $8.6 million in the first quarter of 2003 explained in the following
paragraph.

The fair value change in options embedded within our equity-indexed
products and the fair value changes on our total return strategy fixed annuity
contracts are being recorded at fair value. As previously discussed, these fair
value changes are offset by similar adjustments to unrealized gains (losses) on
investments related to the fair value changes on the options that hedge the
equity-indexed products and on the trading securities that back the total return
strategy products. The reduction in such contract expense is less than the
change in investment income primarily due to the inability to lower crediting
rates below minimum guaranteed rates.

RESTRUCTURING COSTS. Restructuring costs relate to our consolidation of
various functions in connection with a restructuring of our protection products
and accumulation products operations and investment activities which began in
the third quarter of 2001. The restructuring charges expensed in the first
quarter of 2003 included pre-tax severance and termination benefits of $0.7
million for severance accrual adjustments and other pre-tax costs of $2.5
million primarily related to systems conversion and relocation of employees.
Charges for all restructuring activities were completed in 2003.

INCOME TAX EXPENSE. The effective income tax rate for the first quarter of
2004 varied from the prevailing corporate rate primarily as a result of a
reduction in the income tax accrual. The accrual reduction, amounting to $5.2
million, was for the release of provisions originally established for potential
tax adjustments which have been settled or eliminated.

DISCONTINUED OPERATIONS. In November 2003, we entered into an agreement to
sell our residential financing operations. The results of the residential
financing operations have been classified as discontinued operations. The sale
was completed in January 2004, resulting in an after-tax gain of $3.9 million.

CHANGE IN ACCOUNTING. Effective January 1, 2004, the Company adopted SOP
03-1 resulting in the establishment of additional policy reserve liabilities for
fees charged for insurance benefit features which are assessed in a manner that
is expected to result in profits in earlier years and losses in subsequent
years. The additional policy

31


reserve liabilities provided by SOP 03-1 as of January 1, 2004, amounted to a
decrease of $11.2 million ($7.3 million after-tax) in net income which has been
reflected as a cumulative effect of a change in accounting.

LIQUIDITY AND CAPITAL RESOURCES

AMERUS GROUP CO.

As a holding company, AmerUs Group Co.'s cash flows from operations
consist of dividends from subsidiaries, if declared and paid, interest from
income on loans and advances to subsidiaries (including a surplus note issued to
us by ALIC), investment income on our assets and fees which we charge our
subsidiaries, offset by the expenses incurred for debt service, salaries and
other expenses.

We intend to rely primarily on dividends and interest income from our
insurance subsidiaries in order to make dividend payments to our shareholders.
The payment of dividends by our insurance subsidiaries is regulated under
various state laws. Generally, under the various state statutes, our insurance
subsidiaries' dividends may be paid only from the earned surplus arising from
their respective businesses and must receive the prior approval of the
respective state regulator to pay any dividend that would exceed certain
statutory limitations. The current statutes generally limit any dividend,
together with dividends paid out within the preceding 12 months, to the greater
of (i) 10% of the respective company's policyowners' statutory surplus as of the
preceding year end or (ii) the statutory net gain from operations for the
previous calendar year. Generally, the various state laws give the state
regulators discretion to approve or disapprove requests for dividends in excess
of these limits. Based on these limitations and 2003 results, our life insurance
subsidiaries could pay us an estimated $50 million in dividends in 2004 without
obtaining regulatory approval. Our subsidiaries paid no dividends in the first
quarter of 2004. We also consider risk-based capital levels, capital and
liquidity operating needs, and other factors prior to paying dividends from the
insurance subsidiaries.

We have a $200 million revolving credit facility with a syndicate of
lenders (which we refer to as the Revolving Credit Agreement). As of March 31,
2004, there was no outstanding loan balance under the facility. The Revolving
Credit Agreement provides for typical events of default and covenants with
respect to the conduct of business and requires the maintenance of various
financial levels and ratios. Among other covenants, we (a) cannot have a
leverage ratio greater than 0.35:1.0, (b) cannot have an interest coverage ratio
less than 2.50:1.0, (c) are prohibited from paying cash dividends on common
stock in excess of an amount equal to 3% of consolidated net worth as of the
last day of the preceding fiscal year, (d) must cause our insurance subsidiaries
to maintain certain levels of risk-based capital, and (e) are prohibited from
incurring additional indebtedness for borrowed money in excess of certain limits
typical for such lines of credit. We closely monitor all of these covenants to
ensure continued compliance.

The Company has several options for deploying excess capital, including
supporting higher sales growth, reducing debt levels, pursuing acquisitions and
buying back common stock. We may resume purchasing shares of our common stock
pursuant to the repurchase program previously approved by the Company's Board of
Directors. Our Board of Directors approved a stock purchase program effective
August 9, 2002, under which we may purchase up to three million shares of our
common stock at such times and under such conditions, as we deem advisable. The
purchases may be made in the open market or by such other means as we determine
to be appropriate, including privately negotiated purchases. The purchase
program supercedes all prior purchase programs. We plan to fund the purchase
program from a combination of our internal sources, dividends from insurance
subsidiaries and the Revolving Credit Agreement. Approximately 2.3 million
shares remain available for repurchase under this program. There were no shares
purchased in the first quarter of 2004.

We manage liquidity on a continuing basis. One way is to minimize our need
for capital. We accomplish this by attempting to use our capital as efficiently
as possible and by developing capital-efficient products in our insurance
subsidiaries. We also manage our mix of sales by focusing on the more
capital-efficient products. In addition, we use reinsurance agreements, where
cost-effective, to reduce capital strain in the insurance subsidiaries. We also
focus on

32


optimizing the consolidated capital structure to properly balance the levels and
sources of borrowing and the issuance of equity securities.

INSURANCE SUBSIDIARIES

The cash flows of our insurance subsidiaries consist primarily of premium
receipts; deposits to policyowner account balances; income from investments,
sales, maturities and calls of investments and repayments of investment
principal. Cash outflows are primarily related to withdrawals of policyowner
account balances, investment purchases, payment of policy acquisition costs,
payment of policyowner benefits, payment of debt, income taxes and current
operating expenses. Insurance companies generally produce a positive cash flow
from operations, as measured by the amount by which cash flows are adequate to
meet benefit obligations to policyowners and normal operating expenses as they
are incurred. The remaining cash flow is generally used to increase the asset
base to provide funds to meet the need for future policy benefit payments and
for writing new business.

Management believes that the current level of cash and available-for-sale,
held for trading and short-term securities, combined with expected net cash
inflows from operations, maturities of fixed maturity investments, principal
payments on mortgage-backed securities and sales of its insurance products, will
be adequate to meet the anticipated short-term cash obligations of the life
insurance subsidiaries.

Matching the investment portfolio maturities to the cash flow demands of
the type of insurance being provided is an important consideration for each type
of protection product and accumulation product. We continuously monitor benefits
and surrenders to provide projections of future cash requirements. As part of
this monitoring process, we perform cash flow testing of assets and liabilities
under various scenarios to evaluate the adequacy of reserves. In developing our
investment strategy, we establish a level of cash and securities which, combined
with expected net cash inflows from operations and maturities and principal
payments on fixed maturity investment securities, are believed adequate to meet
anticipated short-term and long-term benefit and expense payment obligations.
There can be no assurance that future experience regarding benefits and
surrenders will be similar to historic experience since withdrawal and surrender
levels are influenced by such factors as the interest rate environment and
general economic conditions and the claims-paying and financial strength ratings
of the insurance subsidiaries.

We take into account asset/liability management considerations in the
product development and design process. Contract terms for the
interest-sensitive products include surrender and withdrawal provisions which
mitigate the risk of losses due to early withdrawals. These provisions generally
do one or more of the following: limit the amount of penalty-free withdrawals,
limit the circumstances under which withdrawals are permitted, or assess a
surrender charge or market value adjustment relating to the underlying assets.

In addition to the interest-sensitive products, our insurance subsidiaries
have issued funding agreements totaling $875 million outstanding as of March 31,
2004, consisting primarily in six to ten year fixed rate insurance contracts.
The assets backing the funding agreements are legally segregated and are not
subject to claims that arise out of any other business of the insurance
subsidiaries. The funding agreements are further backed by the general account
assets of the insurance subsidiaries. The segregated assets and liabilities are
included with general account assets in the financial statements. The funding
agreements may not be cancelled unless there is a default under the agreement,
but the insurance subsidiaries may terminate the agreement at any time.

We also have variable separate account assets and liabilities representing
funds that are separately administered, principally for variable annuity
contracts, and for which the contractholder bears the investment risk. Separate
account assets and liabilities are reported at fair value and amounted to $262
million at March 31, 2004. Separate account contractholders have no claim
against the assets of the general account. The operations of the separate
accounts are not included in the accompanying consolidated financial statements.

33


Through their respective memberships in the Federal Home Loan Banks (FHLB)
of Des Moines and Topeka, ALIC and American are eligible to borrow under
variable-rate short term federal funds arrangements to provide additional
liquidity. These borrowings are secured and interest is payable at the current
rate at the time of each advance. There were no borrowings under these
arrangements outstanding at March 31, 2004. In addition, ALIC has long-term
fixed rate advances from FHLB outstanding of $13 million at March 31, 2004.

The insurance subsidiaries may also obtain liquidity through sales of
investments. The investment portfolio as of March 31, 2004 had a carrying value
of $19 billion, including closed block investments.

The level of capital in the insurance companies is regulated by risk-based
capital formulas and is monitored by rating agencies. In order to maintain
appropriate capital levels, it may be necessary from time to time for AmerUs
Group Co. to provide additional capital to the insurance companies.

We participate in dollar-roll repurchase agreement transactions. Such
transactions involve the lending of a mortgage-backed security to a holding
institution and a simultaneous agreement to purchase a substantially similar
security for forward settlement at a lower dollar price. The proceeds are
invested in short-term investments at a positive spread until the settlement
date of the similar security. During this same time period, we will reflect the
mortgage-backed security sold to the holding institution as a fixed maturity
security, the cash received for such security as cash and short-term
investments, and our repurchase obligation as an other liability. The amount
outstanding to repurchase securities under dollar-roll repurchase agreements was
$63.7 million at March 31, 2004 and none at December 31, 2003.

We also participate in a securities lending program whereby certain fixed
maturity securities from the investment portfolio are loaned to other
institutions for a short period of time. We receive a fee in exchange for the
loan of securities and require initial collateral equal to 102 percent of the
market value of the loaned securities to be separately maintained. Securities
with a market value of approximately $292.4 million and $154.6 million were on
loan under the program and we were liable for cash collateral under our control
of approximately $298.8 million and $158.8 million at March 31, 2004 and
December 31, 2003, respectively. The collateral held under the securities
lending program has been included in cash and cash equivalents in the
consolidated balance sheet and the obligation to return the collateral upon the
return of the loaned securities has been included in accrued expenses and other
liabilities.

We may also enter into securities borrowing arrangements from time to time
whereby we borrow securities from other institutions and pay a fee. Securities
borrowed amounted to $141 million and none at March 31, 2004, and December 31,
2003, respectively, and are also included in accrued expenses and other
liabilities in the consolidated balance sheet.

At March 31, 2004, the statutory surplus of the insurance subsidiaries was
approximately $772 million. Management believes that each life insurance company
has statutory capital which provides adequate risk based capital that exceeds
required levels.

In the future, in addition to cash flows from operations and borrowing
capacity, the insurance subsidiaries may obtain their required capital from
AmerUs Group Co.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The main objectives in managing our investment portfolios and our
insurance subsidiaries are to maximize investment income and total investment
returns while minimizing credit risks in order to provide maximum support to the
insurance underwriting operations. Investment strategies are developed based on
many factors including asset liability management, regulatory requirements,
fluctuations in interest rates and consideration of other market risks.
Investment decisions are centrally managed by investment professionals based on
guidelines established by management and approved by the board of directors.

34


Market risk represents the potential for loss due to adverse changes in
the fair value of financial instruments. The market risks related to our
financial instruments primarily relate to the investment portfolio, which
exposes us to risks related to interest rates, credit quality and prepayment
variation. Analytical tools and monitoring systems are in place to assess each
of these elements of market risk.

Interest rate risk is the price sensitivity of a fixed income security to
changes in interest rates. Management views these potential changes in price
within the overall context of asset and liability management. Actuarial
professionals estimate the payout pattern of our liabilities, primarily lapses,
to determine duration, which is the present value of the fixed income investment
portfolios after consideration of the duration of these liabilities and other
factors, which management believes mitigates the overall effect of interest rate
risk.

For variable and equity-indexed products, profitability on the portion of
the policyowner's account balance invested in the fixed general account option,
if any, is also affected by the spreads between interest yields on investments
and rates credited to the policies. For the variable products, the policyowner
assumes essentially all the investment earnings risk for the portion of the
account balance invested in the separate accounts. For the equity-indexed
products, we purchase primarily call options that are designed to match the
return owed to contract holders who elect to participate in one or more market
indices. Profitability on the portion of the equity-indexed products tied to
market indices is significantly impacted by the spread on interest earned on
investments and the sum of (1) the cost of underlying call options purchased to
match the returns owed to contract holders and (2) the minimum interest
guarantees owed to the contract holder, if any. Profitability on the
equity-indexed products is also impacted by changes in the fair value of the
embedded option which provides the contract holder the right to participate in
market index returns after the next anniversary date of the contract. This
impacts profitability as we only purchase one-year call options to fund the
returns owed to the contract holders at the inception of each contract year.
This practice matches with the contract holders' rights to switch to different
indices on each anniversary date. The value of the forward starting options
embedded in the equity-indexed products can fluctuate with changes in
assumptions as to future volatility of the market indices, risk free interest
rates, market returns and the lives of the contracts.

The following table provides information about our fixed maturity
investments and mortgage loans for both our trading and other than trading
portfolios at March 31, 2004. The table presents amortized cost and related
weighted average interest rates by expected maturity dates. The amortized cost
approximates the cash flows of principal amounts in each of the periods. The
cash flows are based on the earlier of the call date or the maturity date or,
for mortgage-backed securities, expected payment patterns. Actual cash flows
could differ from the expected amounts.



Expected Cash Flows
9 months Expected
2004 2005 2006 2007 2008 2009 Thereafter Cash Flows Fair Value
-------------------------------------------------------------------------------------------
($ in millions)

Fixed maturity securities
available-for-sale $ 882 $1,155 $ 947 $1,125 $1,200 $ 956 $ 7,625 $ 13,890 $ 14,642
Average interest rate 6.8% 5.9% 7.2% 7.3% 5.4% 5.4% 5.7%

Fixed maturity securities
held for trading purposes $ 96 $ 262 $ 183 $ 200 $ 359 $ 170 $ 752 $ 2,022 $ 2,022
Average interest rate 4.8% 3.3% 3.0% 4.4% 3.8% 3.2% 4.4%

Mortgage loans $ 44 $ 67 $ 60 $ 57 $ 68 $ 65 $ 489 $ 850 $ 927
Average interest rate 6.9% 7.7% 7.7% 7.6% 7.6% 7.6% 7.4%

Total $ 1,022 $1,484 $1,190 $1,382 $1,627 $1,191 $ 8,866 $ 16,762 $ 17,591
======== ====== ====== ====== ====== ====== ========== ========== ==========


35


In accordance with our strategy of minimizing credit quality risk, we
consistently invest in high quality marketable securities. Fixed maturity
securities are comprised of U.S. Treasury, government agency, mortgage-backed
and corporate securities. Approximately 64% of fixed maturity securities are
issued by the U.S. Treasury or U.S. government agencies or are rated A or better
by Moody's, Standard and Poor's, or the NAIC. Less than 7.7% of the bond
portfolio is below investment grade. Fixed maturity securities have an average
life of approximately 7.76 years.

Prepayment risk refers to the changes in prepayment patterns that can
either shorten or lengthen the expected timing of the principal repayments and
thus the average life and the effective yield of a security. Such risk exists
primarily within the portfolio of mortgage-backed securities. Management
monitors such risk regularly. We invest primarily in those classes of
mortgage-backed securities that have average or lower prepayment risk.

Our use of derivatives is generally limited to hedging purposes and has
principally consisted of using interest rate swaps and options. These
instruments, viewed separately, subject us to varying degrees of market and
credit risk. However when used for hedging, the expectation is that these
instruments would reduce overall market risk. Credit risk arises from the
possibility that counterparties may fail to perform under the terms of the
contracts.

Equity price risk is the potential loss arising from changes in the value
of equity securities. In general, equities have more year-to-year price
variability than intermediate term grade bonds. However, returns over longer
time frames have been consistently higher.

All of the above risks are monitored on an ongoing basis. A combination of
in-house systems and proprietary models and externally licensed software are
used to analyze individual securities as well as each portfolio. These tools
provide the portfolio managers with information to assist them in the evaluation
of the market risks of the portfolio.

ITEM 4. CONTROLS AND PROCEDURES

(a) Based upon their evaluation as of the end of the period covered by this
Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, are
effective for recording, processing, summarizing and reporting the information
we are required to disclose in our reports filed under such act.

(b) There was no change in our internal control over financial reporting
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

36


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In recent years, the life insurance industry, including the Company and
its subsidiaries, have been subject to an increase in litigation pursued on
behalf of purported classes of insurance purchasers, questioning the conduct of
insurers in the marketing of their products. The Company is routinely involved
in litigation and other proceedings, including class actions, reinsurance claims
and regulatory proceedings, arising in the ordinary course of its business. Some
of these claims and legal actions are in jurisdictions where juries are given
substantial latitude in assessing damages, including punitive damages. Although
no assurances can be given and no determinations can be made at this time, the
Company believes that the ultimate liability, if any, with respect to these
claims and legal actions, would have no material effect on its results of
operations and financial position.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES

The following table sets forth information regarding purchases of equity
securities for the three months ended March 31, 2004:



(c) Total number (d) Maximum number
of shares (or (or approximate dollar
(a) Total (b) Average units) purchased value) of shares
number of price paid as part of publicly (or units) that may
shares (or units) per share announced plans yet be purchased under
Period purchased (or units) or programs the plans or programs
- --------------------- ----------------- ----------- ------------------ ----------------------

01/01/2004-01/31/2004 198(1) $ 36.81 - -
02/01/2004-02/29/2004 17,126(1) 37.16 - -
03/01/2004-03/31/2004 - - - -
------ ----------- ------ -----
Total 17,324 $ 37.16 - -
====== =========== ====== =====



(1) Represents shares withheld from employee stock awards on the exercise
thereof to satisfy applicable tax withholding obligations of the Company.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

A list of exhibits included as part of this report is set forth in the
Exhibit Index which immediately precedes such exhibits and is hereby
incorporated by reference herein.

(b) The following reports on Form 8-K were filed during the quarter
ended March 31, 2004:

Form 8-K dated January 12, 2004 announcing adjusted net operating
income guidance.

Form 8-K dated January 27, 2004 furnishing certain information
presented by Roger K. Brooks, Chairman and CEO of the Company, at
the Citigroup Smith Barney Financial Services conference.


37

Form 8-K dated February 12, 2004 announcing the release of fourth
quarter 2004 earnings and furnishing supplemental financial
information of AmerUs Group Co.

Form 8-K dated February 25, 2004 furnishing materials used in
connection with the Company's investor conference held and also
presented via webcast on February 25, 2004.


38

SIGNATURES

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

DATED: May 7, 2004 AMERUS GROUP CO.

By /s/ Melinda S. Urion
------------------------------------------
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)

By /s/ Brenda J. Cushing
------------------------------------------
Senior Vice President and Controller
(Principal Accounting Officer)



AMERUS GROUP CO. AND SUBSIDIARIES

INDEX TO EXHIBITS



Exhibit
No. Description
--- -----------

2.1 Combination and Investment Agreement, dated February 18, 2000, among American Mutual
Holding Company, AmerUs Life Holdings, Inc., Indianapolis Life Insurance Company and
The Indianapolis Life Group of Companies, Inc., filed as Exhibit 2.1 to AmerUs Life
Holdings, Inc.'s report on Form 8-K/A on March 6, 2000, is hereby incorporated by
reference.

2.2 Purchase Agreement, dated as of February 18, 2000, by and between American Mutual
Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.5 on Form 10-K,
dated March 8, 2000, is hereby incorporated by reference.

2.3 Agreement and Plan of Merger, dated December 17, 1999, by and between American Mutual
Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.6 on Form 10-K,
dated March 8, 2000, is hereby incorporated by reference.

2.4 Amendment No. 1 to Agreement and Plan of Merger, dated February 18, 2000, by and
between American Mutual Holding Company and AmerUs Life Holdings, Inc., filed as
Exhibit 2.7 on Form 10-K, dated March 8, 2000, is hereby incorporated by reference.

2.5 Letter Agreement, dated December 17, 1999, by and between American Mutual Holding
Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.8 on Form 10-K, dated March
8, 2000, is hereby incorporated by reference.

2.6 Notification Agreement, dated as of February 18, 2000, by and among American Mutual
Holding Company, AmerUs Life Holdings, Inc. and Bankers Trust Company, filed as Exhibit
2.9 on Form 10-K, dated March 8, 2000, is hereby incorporated by reference.

2.7 Amendment No. 2 to Agreement and Plan of Merger, dated April 3, 2000, by and between
American Mutual Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.10
on Form 10-Q, dated May 15, 2000, is hereby incorporated by reference.

2.8 Amendment No. 1 to the Purchase Agreement, dated April 3, 2000, by and between American
Mutual Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.11 on Form
10-Q, dated May 15, 2000, is hereby incorporated by reference.

2.9 Amendment to Combination and Investment Agreement dated February 18, 2000 among
American Mutual Holding Company, AmerUs Life Holdings, Inc., Indianapolis Life
Insurance Company and The Indianapolis Life Group of Companies, Inc., dated September
18, 2000, filed as Exhibit 2.2 to Form 8-K12G3 of the Registrant dated September 21,
2000, is hereby incorporated by reference.

2.10 Stock Purchase Agreement, dated January 1, 2002, by and among AmerUs Annuity Group Co.,
and the Stockholders of Family First Advanced Estate Planning and Family First
Insurance Services, filed as Exhibit 2.13 on Form 10-Q dated August 12, 2002, is hereby
incorporated by reference.

3.1 Amended and Restated Articles of Incorporation of the Registrant filed as Exhibit 3.1
on Form 10-Q, dated November 14, 2000 is hereby incorporated by reference.

3.2 Amended and Restated Bylaws of the Registrant, filed as Exhibit 3.2 on Form 10-K, dated
March 15, 2002, is hereby incorporated by reference.

4.1 Amended and Restated Trust Agreement dated as of February 3, 1997 among AmerUs Life
Holdings, Inc., Wilmington Trust Company, as property trustee, and the administrative
trustees named therein (AmerUs Capital I business trust), filed as Exhibit 3.6 to the
registration statement of AmerUs Life Holdings, Inc. and AmerUs Capital I on Form S-1,
Registration Number 333-13713, is hereby incorporated by reference.

4.2 Indenture dated as of February 3, 1997 between AmerUs Life Holdings, Inc. and
Wilmington Trust Company relating to the Company's 8.85% Junior Subordinated
Debentures, Series A, filed as Exhibit 4.1 to the registration statement of AmerUs Life
Holdings, Inc. and AmerUs Capital I on Form S-1, Registration Number, 333-13713, is
hereby incorporated by reference.

4.3 Guaranty Agreement dated as of February 3, 1997 between AmerUs Life Holdings, Inc., as
guarantor, and Wilmington Trust Company, as trustee, relating to the 8.85% Capital
Securities, Series A, issued by AmerUs Capital I, filed as Exhibit 4.4 to the
registration statement on Form S-1, Registration Number, 333-13713, is hereby
incorporated by reference.


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4.4 Certificate of Trust of AmerUs Capital III filed as Exhibit 4.7 to the registration
statement of AmerUs Life Holdings, Inc., AmerUs Capital II and AmerUs Capital III, on
Form S-3 (No. 333-50249), is hereby incorporated by reference.

4.5 Senior Indenture, dated as of June 16, 1998, by and between AmerUs Life Holdings, Inc.
and First Union National Bank, as Indenture Trustee, relating to the AmerUs Life
Holdings, Inc.'s 6.95% Senior Notes, filed as Exhibit 4.14 on Form 10-Q, dated August
13, 1998, is hereby incorporated by reference.

4.6 Subordinated Indenture, dated as of July 27, 1998, by and between AmerUs Life Holdings,
Inc. and First Union National Bank, as Indenture Trustee, relating to AmerUs Life
Holdings, Inc.'s 6.86% Junior Subordinated Deferrable Interest Debentures, filed as
Exhibit 4.15 on Form 10-Q, dated August 13, 1998, is hereby incorporated by reference.

4.7 First Supplement to Indenture dated February 3, 1997 among American Mutual Holding
Company, AmerUs Life Holdings, Inc. and Wilmington Trust Company as Trustee, relating
to the Company's 8.85% Junior Subordinated Debentures, Series A, dated September 20,
2000, filed as Exhibit 4.14 on Form 10-Q dated November 14, 2000, is hereby
incorporated by reference.

4.8 Assignment and Assumption Agreement to Amended and Restated Trust Agreement, dated
February 3, 1997 between American Mutual Holding Company and AmerUs Life Holdings,
Inc., dated September 20, 2000, filed as Exhibit 4.15 on Form 10-Q dated November 14,
2000, is hereby incorporated by reference.

4.9 Assignment and Assumption to Guaranty Agreement, dated February 3, 1997 between
American Mutual Holding Company and AmerUs Life Holdings, Inc., dated September 20,
2000, filed as Exhibit 4.16 on Form 10-Q, dated November 14, 2000, is hereby
incorporated by reference.

4.10 First Supplement to Senior Indenture dated June 16, 1998, relating to AmerUs Life
Holdings, Inc.'s 6.95% Senior Notes, among American Mutual Holding Company, AmerUs Life
Holdings, Inc. and First Union National Bank, as Trustee, dated September 20, 2000,
filed as Exhibit 4.23 on Form 10-Q, dated November 14, 2000, is hereby incorporated by
reference.

4.11 Indenture dated as of March 6, 2002 between AmerUs Group Co. and BNY Midwest Trust
Company, as Trustee, filed as Exhibit 4.1 on form 8-K/A, dated February 28, 2002, is
hereby incorporated by reference.

4.12 Form of Purchase Contract Agreement between AmerUs Group Co. and Wachovia Bank,
National Association (formerly known as First Union National Bank), as Purchase
Contract Agent, filed as Exhibit 4.1 on Form 8-A12B, dated May 22, 2003, is hereby
incorporated by reference.

4.13 Form of Pledge Agreement among AmerUs Group Co., BNY Midwest Trust Company, as
Collateral Agent, Custodial Agent and Securities Intermediary and Wachovia Bank,
National Association (formerly known as First union National Bank), as Purchase
Contract Agent, filed as Exhibit 4.2 on Form 8-A12B dated May 22, 2003, is hereby
incorporated by reference.

4.14 Form of Remarketing Agreement among AmerUs Group Co., Wachovia Bank, National
Association (formerly known as First Union National Bank), as Purchase Contract Agent,
and the Remarketing Agent named therein, filed as Exhibit 4.3 on Form 8-A12B dated May
22, 2003, is hereby incorporated by reference.

4.15 Form of Income PRIDES (included in Exhibit 4.1 as Exhibit A thereto), filed as Exhibit
4.1 on Form 8-A12B, dated May 22, 2003, is hereby incorporated by reference.

4.16 Officer's Certificate attaching form of Senior Notes initially due 2008, filed as
Exhibit 4.7 on Form 8-A12B, dated May 22, 2003, is hereby incorporated by reference.

4.17 Form of Purchase Agreement between AmerUs Group Co. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, filed as Exhibit 1.1 on For 8-K, dated as of May 28, 2003, is
hereby incorporated by reference.

11* Statement Re: Computation of Earnings Per Share.

12* Computation of Ratios of Earnings to Fixed Charges.

31.1* Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(e)
or Rule 15d-15(e).

31.2* Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(e)
or Rule 15d-15(e).

32.1* Certification of Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.

32.2* Certification of Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C.
Section 1350.


* Included herein

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