A.M. Best has affirmed the financial strength rating (FSR) of A (Superior) and the issuer credit rating (ICR) of “a” of Kansas City Life Insurance Company (Kansas City Life) [NASDAQ: KCLI]. Concurrently, A.M. Best has affirmed the FSR of A- (Excellent) and the ICR of “a-” of Kansas City Life’s wholly-owned subsidiary, Sunset Life Insurance Company of America (Sunset Life) . The outlook for all ratings is stable. Additionally, A.M. Best has upgraded the FSR to A- (Excellent) from B++ (Good) and the ICR to “a-” from “bbb+” of Kansas City Life’s final expense life insurance subsidiary, Old American Insurance Company (Old American). A.M. Best has also revised the outlook to stable from positive. All companies are domiciled in Kansas City, MO . The ratings of Kansas City Life reflect its more than adequate risk-adjusted capitalization, favorable business profile and statutory profitability. The company maintains a diversified product portfolio consisting of ordinary life insurance, fixed and variable annuities and group health and life products. Kansas City Life continues to focus on the growth of its ordinary life insurance products, primarily universal life insurance, utilizing its core general agencies, along with a complementary distribution system. While its consistent ordinary life business has enabled the company to maintain its statutory profitability, earnings continue to be impacted by fluctuating mortality performance and tightening credit spreads. Furthermore, A.M. Best notes that statutory profitability in the most recent year was lower due to a one-time ceding commission associated with the execution of a reinsurance transaction with American Family Life Insurance Company, which resulted in the acquisition of a closed block of variable life and annuities. Going forward, the transaction is expected to be accretive to earnings while adding scale to its fee-based businesses. Despite the 2013 statutory earnings decline, Kansas City Life’s ability to deliver a consistently profitable operating performance, together with a reduction in the level of stockholder dividends, has enabled the company to maintain a more-than adequate level of risk-adjusted capitalization. Moreover, A.M. Best believes that the organization’s capital is of high quality as full reserves related to regulation XXX and Guideline AXXX (AG38) are held by Kansas City Life, with limited use of financial or operating leverage. Partially offsetting these positive factors is Kansas City Life’s ongoing exposure to disintermediation risk in a rising interest rate environment, as fixed annuities account for approximately 40% of general account reserves, a sizeable portion of which is not subject to surrender charges. In addition, a large portion of reserves are subject to high minimum interest rate guarantees, which could result in further spread compression in future periods should interest rates remain at current levels. A.M. Best also remains concerned with the inconsistent premium growth of its ordinary life business. Although sales have modestly improved in recent years, the uncertainty over the economy and intense competition continue to represent a headwind as the company continues to seek higher ordinary life sales growth.