10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[  √  ]          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2004
[        ]           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: 2-17039
NATIONAL WESTERN LIFE INSURANCE COMPANY
(Exact name of Registrant as specified in its charter)
COLORADO	84-0467208
(State of Incorporation)	(I.R.S. Employer Identification Number)
850 EAST ANDERSON LANE, AUSTIN, TEXAS 78752-1602
(Address of Principal Executive Offices)
(512) 836-1010
(Telephone Number)
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
None
(Title of Class)
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 [ √ ]   No  [    ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ √ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ √ ]   No  [    ]
The aggregate market value of the common stock (based upon the closing price) held by non-affiliates of the Registrant on June 30, 2004 was $338,646,080.
As of March 9, 2005, the number of shares of Registrant's common stock outstanding was:   Class A - 3,392,065 and Class B - 200,000.
DOCUMENTS INCORPORATED BY REFERENCE
None

	TABLE OF CONTENTS
	PART I	Page
Item 1.	Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
	PART II
Item 5.	Market for Registrant's Common Equity and Related Stockholder Matters
Item 6.	Selected Consolidated Financial Data
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Item 9B.	Other Information
	PART III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accountant Fees and Services
	PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K
	Signatures

PART I

ITEM 1. BUSINESS

National Western Life Insurance Company (hereinafter referred to as "National Western", "Company", or "Registrant") is a stock life insurance company, chartered in the State of Colorado in 1956, and doing business in forty-nine states, the District of Columbia, and four U.S. territories or possessions. National Western is also licensed in Haiti, and although not otherwise licensed, accepts applications from and issues policies to residents of various countries in Central and South America, the Caribbean, the Pacific Rim, and Eastern Europe. Such policies are underwritten, accepted, and issued in the United States upon applications submitted by independent contractor broker-agents. The Company provides life insurance products for the savings and protection needs of approximately 152,000 policyholders and for the asset accumulation and retirement needs of 123,000 annuity contractholders.

During 2004, the Company's total assets increased 13% to $6.0 billion at December 31, 2004 from $5.3 billion at December 31, 2003. The Company generated revenues of $434.1 million, $399.3 million, and $317.4 million in 2004, 2003, and 2002, respectively. In addition, National Western generated net income of $122.2 million, $55.8 million, and $42.1 million in 2004, 2003, and 2002, respectively. The Company had approximately 290 employees supporting its business operations at December 31, 2004.

The Company's financial information, including information in this report filed on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to the above reports, are accessible free of charge through the Company's Internet site at www.nationalwesternlife.com or may be viewed at the United States Securities and Exchange Commission ("SEC") Public Reference Room in Washington, D.C. or at the SEC's Internet site at www.sec.gov.

Products

National Western offers a broad portfolio of individual whole life, universal life and term insurance plans, and annuities, including supplementary riders.

Life Products. The Company's life products provide protection for the life of the insured and, in some cases, allow for cash value accumulation. These product offerings include universal life insurance ("UL"), interest-sensitive whole life, and traditional products such as term insurance coverage. Interest sensitive products such as UL accept premiums that are applied to an account value. Deducted from the account value are cost of insurance charges which vary by age, gender, plan, and class of insurance, as well as various expense charges. Interest is credited to account values at an interest rate generally determined in advance and guaranteed for a policy year at a time, subject to minimum guaranteed rates specified in the policy contract. A slight variation to this general interest crediting practice involves equity-indexed universal life ("EIUL") policies whose credited interest may be tied to an outside index such as the S&P 500Ò Composite Stock Price Index ("S&P 500 IndexÒ ") at the election of the policyholder. These products offer both flexible and fixed premium modes and provide policyholders with flexibility in the available coverage, the timing and amount of premium payments and the amount of the death benefit, provided there are sufficient policy funds to cover all policy charges for the coming year. Traditional products generally provide for a fixed death benefit payable in exchange for regular premium payments.

Annuity Products. Annuity products sold include flexible premium and single premium deferred annuities, equity-indexed annuities, and single premium immediate annuities. These products can be tax qualified or nonqualified annuities. A fixed single premium deferred annuity ("SPDA") provides for a single premium payment at time of issue, an accumulation period, and an annuity payout period commencing at some future date. A flexible premium deferred annuity ("FPDA") provides the same features but allows, generally with some conditions, additional payments into the contract. Interest is credited to the account value of the annuity initially at a current rate of interest which is guaranteed for a period of time, typically the first year. After this period, the interest credited is subject to change based upon market rates and product profitability subject to a minimum guaranteed rate specified in the contract. Interest accrues during the accumulation period generally on a tax-deferred ba sis to the contractholder. After a number of years specified in the annuity contract, the owner may elect to have the proceeds paid as a single payment or as a series of payments over a period of time. The owner is permitted at any time during the accumulation period to withdraw all or part of the annuity account balance subject to contract provisions such as surrender charges and market value adjustments. An equity-indexed deferred annuity ("EIA") performs essentially in the same manner as SPDAs and FPDAs with the exception that, in addition to a fixed interest crediting option, the contractholder has the ability to elect an interest crediting mechanism that is linked, in part, to an outside index such as the S&P 500 IndexÒ .. A single premium immediate annuity ("SPIA") foregoes the accumulation period and immediately commences an annuity payout period.

Distributions of the Company's direct premium revenues and deposits by product type are provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Annuities:
Single premium deferred	$	8,156	108,855	135,547
Flexible premium deferred		342,509	565,503	219,981
Equity-indexed deferred		512,709	479,535	58,431
Single premium immediate		28,653	41,250	20,483
Total annuities		892,027	1,195,143	434,442
Universal life insurance		119,554	101,376	87,984
Traditional life and other		15,830	15,568	14,867
Total direct premiums and deposits collected	$	1,027,411	1,312,087	537,293

Operating Segments

The Company manages its business between Domestic Insurance Operations and International Insurance Operations. For segment reporting purposes, the Company's annuity business, which is predominantly domestic, is separately identified.

Domestic Insurance Operations. The Company is currently licensed to do business in all states and the District of Columbia, except for New York. Products marketed are annuities, universal life insurance, and traditional life insurance, which include both term and whole life products. The majority of domestic sales are the Company's annuities. National Western markets and distributes its domestic products primarily through independent national marketing organizations ("NMO"). These NMOs assist the Company in recruiting, contracting, and managing independent agents. The Company's agents are independent contractors who are compensated on a commission basis. At December 31, 2004, the Company's NMO relationships had contracted nearly 10,000 independent agents with the Company. Approximately 30% of these contracted agents have submitted policy applications to the Company in the past twelve months.

International Insurance Operations. National Western's international operations focus on foreign nationals in upper socioeconomic classes. Insurance products are issued primarily to residents of countries in Central and South America, the Caribbean, the Pacific Rim, and beginning in 2003 Eastern Europe. Issuing policies to residents of countries in these different regions provides diversification that helps to minimize large fluctuations that could arise due to various economic, political, and competitive pressures that may occur from one country to another. Products issued to international residents are almost entirely universal life and traditional life insurance products. However, certain investment contracts are also available. At December 31, 2004, the Company had nearly 63,000 international life insurance policies in force representing approximately $11.3 billion in face amount of coverage.

International applications are submitted by independent contractor broker-agents, many of whom have been submitting policy applications to National Western for 20 or more years. The Company had approximately 3,500 independent international broker-agents contracted at December 31, 2004, nearly 54% of which have submitted policy applications to the Company in the past twelve months.

There are some inherent risks of accepting international applications which are not present within the domestic market that are reduced substantially by the Company in several ways. As previously described, the Company accepts applications from foreign nationals in upper socioeconomic classes who have substantial financial resources. This targeted customer base coupled with National Western's conservative underwriting practices have historically resulted in claims experience, due to natural causes, similar to that in the United States. The Company minimizes exposure to foreign currency risks by requiring payment of premiums and claims in United States dollars. Finally, over thirty-eight years of experience with the international products and the Company's longstanding independent broker-agent relationships further serve to minimize risks.

Geographical Distribution of Business. The following table depicts the distribution of the Company's premium revenues and deposits.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
United States domestic products:
Annuities	$	882,530	1,186,160	423,746
Life insurance		31,501	24,424	25,147
Total domestic products		914,031	1,210,584	448,893
International products:
Annuities		9,497	8,983	10,696
Life insurance		103,883	92,520	77,704
Total international products		113,380	101,503	88,400
Total direct premiums and deposits collected	$	1,027,411	1,312,087	537,293

Although many agents sell National Western's products, a sizable portion of the Company's annuity sales were sold through agents of two independent marketing organizations in recent years. These two organizations combined accounted for 38% of domestic annuity sales in 2004. Life insurance sales in 2004 were geographically most concentrated to residents of Brazil (30%), Taiwan (13%), and Venezuela (10%).

Segment Financial Information. A summary of financial information for the Company's segments is as follows:

		Domestic	International
		Life	Life		All
		Insurance	Insurance	Annuities	Others	Totals
		(In thousands)
Revenues, excluding
realized gains (losses):
2004	$	44,116	87,850	283,827	14,847	430,640
2003		43,444	79,061	264,831	13,579	400,915
2002		45,812	71,597	203,687	12,435	333,531
Segment earnings: (A)
2004	$	2,522	12,133	45,473	5,066	65,194
2003		1,366	13,249	37,121	5,116	56,852
2002		2,568	11,141	34,183	4,668	52,560
Segment assets: (B)
2004	$	361,176	568,723	4,960,837	84,481	5,975,217
2003		358,697	516,604	4,329,777	77,524	5,282,602
2002		367,767	472,198	3,214,823	69,126	4,123,914

Notes to Table:

(A) Amounts exclude realized gains and losses on investments, net of taxes.
(B) Amounts exclude other unallocated assets.

Additional information concerning these industry segments is included in Note 13, Segment and Other Operating Information, of the accompanying consolidated financial statements.

Competition

National Western competes with over 1,000 life insurers in the United States, as well as other financial intermediaries such as banks and securities firms who market insurance products. Competitive factors are primarily the breadth and quality of products offered, established positions in niche markets, pricing, relationships with distribution, commission structures, perceived stability of the insurer, quality of underwriting and customer service, and cost efficiency. Operating results of life insurers are subject to fluctuations not only from this competitive environment but also due to economic conditions, interest rate levels and changes, performance of investments, and the maintenance of strong insurance ratings from independent rating agencies.

In order to compete successfully, life insurers have turned their attention toward distribution, technology, defined end market targets, speed to the market in terms of product development, and customer relationship management as ways of gaining a competitive edge. The Company's management believes that it competes primarily on the basis of its longstanding reputation for commitment in serving international markets, its financial strength and stability, and its ability to attract and retain distribution based upon product and compensation.

Risk Management

The Company's product designs, underwriting standards and risk management techniques are utilized to protect against disintermediation risk and greater than expected mortality and morbidity risk. Disintermediation risk is limited through the use of surrender charges, certain provisions not allowing surrender of the policy, and market value adjustment features. Investment guidelines including duration targets, asset allocation tolerances and return objectives help to ensure that disintermediation risk is managed within the constraints of profitability criteria. Prudent underwriting is applied to select and price insurance risks and the Company regularly monitors mortality experience relative to its product pricing assumptions. Enforcement of disciplined claims management serves to further protect against greater than expected mortality.

A significant aspect of the Company's business is managing the linkage of its asset characteristics with the anticipated behavior of its policy obligations and liabilities, a process commonly referred to as asset-liability matching. The Company maintains an Asset-Liability Committee ("ALCO") consisting of senior level members of the Company who assist and advise the Company's Board of Directors in monitoring the level of risk the Company is exposed to in managing its assets and liabilities in order to attain the risk-return profile desired.

Substantially all international products contain a currency clause stating that premium and claim "dollars" refer to lawful currency of the United States. Policy applications submitted by international insurance brokers are generally associated with individuals in upper socioeconomic classes who desire the stability and inflationary hedge of dollar denominated insurance products issued by the Company. The favorable demographics of this group typically results in a higher average policy size, and persistency and claims experience (from natural causes) similar to that in the United States. By accepting applications submitted on residents outside the United States, the Company is able to further diversify its revenue, earnings, and insurance risk.

The Company follows the industry practice of reinsuring (ceding) portions of its insurance risks with a variety of reinsurance companies. The use of reinsurance allows the Company to underwrite policies larger than the risk it is willing to retain on any single life and to continue writing a larger volume of new business. The maximum amount of life insurance the Company normally retains is $250,000 on any one life subject to a minimum reinsurance session of $50,000. However, the use of reinsurance does not relieve the Company of its primary liability to pay the full amount of the insurance benefit in the event of the failure of a reinsurer to honor its contractual obligation. Consequently, the Company avoids concentrating reinsurance risk with any one reinsurer and only participates in reinsurance treaties with reputable carriers.

The Company maintains a system of disclosure controls and procedures, including internal controls designed to provide reasonable assurance that assets are safeguarded and transactions are properly authorized, executed and recorded. The Company recognizes the importance of full and open presentation of its financial position and operating results and to this end maintains a Disclosure Controls and Procedures Committee comprised of senior executives who possess comprehensive knowledge of the Company's business and operations. This Committee is responsible for evaluating disclosure controls and procedures and for the gathering, analyzing, and disclosing of information as required to be disclosed under the securities laws. It assists the CEO and CFO in their responsibilities of making the certifications required under the securities laws regarding the Company's disclosure controls and procedures. It ensures that material financial information is properly communicated up the Company's hierar chy to the appropriate person or persons and that all disclosures are made in a timely fashion. This Committee reports directly to the Audit Committee of the Company.

Regulatory and Other Issues

Regulation. The Company's insurance business is subject to comprehensive state regulation in each of the states it is licensed to conduct business. The laws enforced by the various state insurance departments provide broad administrative powers with respect to licensing to transact business, licensing and appointing agents, approving policy forms, regulating unfair trade and claims practices, establishing solvency standards, fixing minimum interest rates for the accumulation of surrender values, and regulating the type, amounts, and valuations of permitted investments, among other things. The Company is required to file detailed annual statements with each of the state insurance supervisory departments in which it does business. The Company's operations and financial records are subject to examination by these departments at regular intervals. Statutory financial statements are prepared in accordance with accounting practices prescribed or permitted by the Colorado Division of Insur ance, the Company's principal insurance regulator. Prescribed statutory accounting practices are largely dictated by the Codification of Statutory Accounting Principles ("Codification") adopted by the National Association of Insurance Commissioners ("NAIC"), which were effective January 1, 2001.

The NAIC, as well as state regulators, continually evaluates existing laws and regulations pertaining to the operations of life insurers. To the extent that initiatives result as a part of this process, they may be adopted in the various states in which the Company is licensed to do business. It is not possible to predict the ultimate content and timing of new statutes and regulations adopted by state insurance departments and the related impact upon the Company's operations although it is conceivable that they may be more restrictive.

Although the federal government does not directly regulate the life insurance industry, federal measures previously considered or enacted by Congress, if revisited, could affect the insurance industry and the Company's business. These measures include the tax treatment of life insurance companies and life insurance products, as well as changes in individual income tax structures and rates. Even though the ultimate impact of any of these changes, if implemented, is uncertain, the persistency of the Company's existing products and the ability to sell products could be materially affected.

Risk-Based Capital Requirements. The NAIC established risk-based capital ("RBC") requirements to help state regulators monitor the financial strength and stability of life insurers by identifying those companies that may be inadequately capitalized. Under the NAIC's requirements, each insurer must maintain its total capital above a calculated threshold or take corrective measures to achieve the threshold. The threshold of adequate capital is based on a formula that takes into account the amount of risk each company faces on its products and investments. The RBC formula takes into consideration four major areas of risk which are: (i) asset risk which primarily focuses on the quality of investments; (ii) insurance risk which encompasses mortality and morbidity risk; (iii) interest rate risk which involves asset-liability matching issues; and (iv) other business risks. For each category, the RBC requirements are determined by applying specified factors to various assets, premiums, r eserves, and other items, with the factor being higher for items with greater underlying risk and lower for items with less risk. The Company's statutory capital and surplus at December 31, 2004, was significantly in excess of the threshold RBC requirements.

Financial Strength Ratings. Ratings with respect to financial strength are an important factor in establishing the competitive position of insurance companies. Ratings are important to maintaining public confidence and impact the ability to market products. The following summarizes the Company's financial strength ratings.

Rating Agency	Rating
Standard & Poor's	A+ (Strong)
A.M. Best	A- (Excellent)

The rating agencies generally review the Company's rating on an annual basis. The Company's "A+" rating from Standard & Poor's was affirmed on April 23, 2004. A.M. Best affirmed the Company's "A-" rating on May 17, 2004. There is no assurance that the Company's ratings will continue for a certain period of time or that they will not be changed. In the event the Company's ratings are downgraded, the Company's business may be negatively impacted.

Effects of Inflation. The rate of inflation as measured by the change in the average consumer price index has not had a material effect on the revenues or operating results of the Company during the three most recent fiscal years.

ITEM 2. PROPERTIES

The Company leases approximately 72,000 square feet of office space in Austin, Texas. This lease expires in 2010 and specifies lease payments that gradually increase over the term of the lease. Currently, lease payments are $0.6 million per year plus taxes, insurance, maintenance, and other operating costs. Additionally, the Company's wholly owned subsidiary, The Westcap Corporation, owns two buildings adjacent to the Company's principal office space totaling approximately 21,000 square feet that are leased and utilized by the Company. The Company's affiliate, Regent Care Building, Limited Partnership, owns a 46,000 square foot building in Reno, Nevada, which is leased and utilized by another of the Company's affiliates, Regent Care Operations, Limited Partnership, for use in its nursing home operations. Lease costs and related operating expenses for facilities of the Company's subsidiaries are currently not significant in relation to the Company's consolidated financial statements. The intercompany lease costs related to The Westcap Corporation and the nursing home have been eliminated for consolidated reporting purposes.

ITEM 3. LEGAL PROCEEDINGS

The Company reached a settlement agreement with a class of plaintiffs who had challenged bonus interest rates on certain Company annuity products. The Company vigorously defended the case and denied liability for the claims asserted by the plaintiff in reaching the settlement. The fairness of the settlement agreement was granted final approval by the Court on February 18, 2004. There were no objectors and the order approving the settlement is final and non-appealable. The settlement resulted in a $9.7 million pre-tax charge against 2003 earnings from operations, which represented the maximum settlement fund liability. During 2004, final payments were made to policyholders that opted to participate in this settlement resulting in cash payments totaling $3.2 million pre-tax and an increase of $2.3 million to existing contractholder account balances. Thus, final settlement totaled approximately $5.5 million pre-tax compared to the $9.7 million initially recorded.

On August 26, 2004, the Company entered into an agreement to settle a lawsuit concerning an investment made by the Company more than ten years ago. The investment was sold in 1997. As the result of this settlement, the Company received $2.2 million and the lawsuit was dismissed with prejudice. The lawsuit was pending for several years, and the costs incurred by the Company in prosecuting the lawsuit were previously included in the Company's consolidated financial statements as such costs were incurred under the category "other operating expenses".

In the course of an audit of a charitable tax-exempt foundation, the Internal Revenue Service ("IRS") raised an issue under the special provisions of the Internal Revenue Code ("IRC") governing tax-exempt private foundations as to certain interest-bearing loans from the Company to another corporation in which the tax-exempt foundation owns stock. The issue is whether such transactions constitute indirect self-dealing by the foundation, the result of which would be excise taxes on the Company by virtue of its participation in such transactions. By letter to the Company dated August 21, 2003, the IRS proposed an initial excise tax liability in the total amount approximating one million dollars as a result of such transactions. The Company disagrees with the IRS analysis and is contesting the matter and expects to prevail on the merits. On October 14, 2003, in response to the IRS letter, the Company requested that this issue instead be referred to the IRS National Office for technical adv ice. The IRS audit team by letter dated November 13, 2003, did refer this issue to the IRS National Office for technical advice. The IRS National Office has not yet issued such advice. Upon issuance by the IRS National Office, such technical advice will be in the form of a memorandum analyzing the issue which will be binding on the IRS audit team. Although there can be no assurances, at the present time, the Company does not anticipate that the ultimate liability, if any, associated with this matter will have a material adverse effect on the financial condition or operating results of the Company.

The Company is involved or may become involved in various legal actions, in the normal course of business, in which claims for alleged economic and punitive damages have been or may be asserted, some for substantial amounts. Although there can be no assurances, at the present time, the Company does not anticipate that the ultimate liability arising from potential, pending or threatened legal actions, after consideration of amounts provided for in the Company's consolidated financial statements, will have a material adverse effect on the financial condition or operating results of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during the fourth quarter of 2004.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS

Market Information

The principal market on which the common stock of the Company trades is The NASDAQ Stock Market^® under the symbol "NWLIA". The high and low sales prices for the common stock for each quarter during the last two years are shown in the following table.

			High		Low
2004:	First Quarter	$	158	.77	143	.50
	Second Quarter		156	.72	136	.38
	Third Quarter		164	.01	153	.50
	Fourth Quarter		169	.98	149	.01
2003:	First Quarter	$	102	.65	93	.61
	Second Quarter		114	.05	92	.77
	Third Quarter		146	.00	112	.00
	Fourth Quarter		156	.95	138	.05

Equity Security Holders

The number of stockholders of record on March 9, 2005 was as follows:

Class A Common Stock	4,989
Class B Common Stock	2

Dividends

The Company has never paid cash dividends on its common stock. Payment of dividends is within the discretion of the Company's Board of Directors. Presently, the Company's policy is to reinvest earnings internally to finance the development of new business. There are no plans to pay cash dividends to stockholders in the foreseeable future.

Securities Authorized For Issuance Under Equity Compensation Plans

The Company has one equity compensation plan that was approved by security holders. Under the plan, 186,863 shares of the Company's Class A common stock may be issued upon exercise of the outstanding options at December 31, 2004. The weighted average exercise price of the outstanding options is $109.86 per option. Excluding the outstanding options, 20,287 shares of the common stock remain available for future issuance under the plan at December 31, 2004. The Company has no equity compensation plans that have not been approved by security holders.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following five-year financial summary includes comparative amounts derived from the audited consolidated financial statements.

	Years Ended December 31,
		2004	2003	2002	2001	2000
	(In thousands except per share amounts)
Earnings Information:
Revenues:
Life and annuity premiums	$	14,025	13,916	13,918	14,013	17,615
Universal life and annuity
contract revenues		89,513	80,964	76,173	75,026	82,742
Net investment income		315,843	298,974	236,714	234,866	210,654
Other income		11,259	7,061	6,726	6,247	946
Realized gains (losses)
on investments		3,506	(1,647)	(16,144)	(27,046)	(19,242)
Total revenues		434,146	399,268	317,387	303,106	292,715
Benefits and expenses:
Life and other policy benefits		34,613	37,180	31,299	31,715	35,078
Amortization of deferred
policy acquisition costs		88,733	53,829	35,799	27,424	47,948
Universal life and investment
annuity contract interest		173,315	176,374	150,479	144,516	137,711
Other operating expenses		35,441	48,776	36,938	31,681	29,427
Total expenses		332,102	316,159	254,515	235,336	250,164
Earnings before Federal income
taxes and cumulative effect of change
in accounting principle		102,044	83,109	62,872	67,770	42,551
Federal income taxes		34,572	27,327	20,806	23,185	14,011
Earnings before cumulative effect of
change in accounting principle		67,472	55,782	42,066	44,585	28,540
Cumulative effect of change in
accounting principle		54,697	-	-	2,134	-
Net earnings	$	122,169	55,782	42,066	46,719	28,540
Diluted Earnings Per Share:
Earnings from operations	$	18.73	15.64	11.84	12.59	8.11
Cumulative effect of change in
accounting principle		15.18	-	-	0.60	-
Net earnings	$	33.91	15.64	11.84	13.19	8.11
Balance Sheet Information:
Total assets	$	5,991,685	5,297,720	4,137,247	3,808,000	3,691,760
Total liabilities	$	5,183,013	4,617,862	3,530,041	3,248,612	3,191,654
Stockholders' equity	$	808,672	679,858	607,206	559,388	500,106

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information contained herein or in other written or oral statements made by or on behalf of National Western Life Insurance Company or its subsidiaries are or may be viewed as forward-looking. Although the Company has taken appropriate care in developing any such information, forward-looking information involves risks and uncertainties that could significantly impact actual results. These risks and uncertainties include, but are not limited to, matters described in the Company's SEC filings such as exposure to market risks, anticipated cash flows or operating performance, future capital needs, and statutory or regulatory related issues. However, National Western, as a matter of policy, does not make any specific projections as to future earnings, nor does it endorse any projections regarding future performance that may be made by others. Whether or not actual results d iffer materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments. Also, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise.

Management's discussion and analysis of financial condition and results of operations ("MD&A") of National Western Life Insurance Company for the three years ended December 31, 2004 follows. This discussion should be read in conjunction with the Company's consolidated financial statements and related notes beginning on page __ of this report.

Overview

The Company provides life insurance products for the savings and protection needs of policyholders and annuity contracts for the asset accumulation and retirement needs of contractholders both domestically and internationally. The Company accepts funds from policyholders or contractholders and establishes a liability representing future obligations to pay the policy or contract holders and their beneficiaries. To ensure the Company will be able to pay these future commitments, the funds received as premium payments and deposits are invested in high quality investments, primarily fixed income securities.

Due to the business of accepting funds to pay future obligations in later years, the underlying economics and relevant factors affecting the life insurance industry include the following:

   -  level of premium revenues collected
   -  persistency of policies and contracts
   -  returns on investments
   -  investment credit quality
   -  levels of policy benefits and costs to acquire business
   -  effect of interest rate changes on revenues and investments including asset and liability matching
   -  adequate levels of capital and surplus

The Company monitors these factors continually as key business indicators. The discussion below includes these indicators and presents information useful to an overall understanding of the Company's business performance in 2004, incorporating required disclosures in accordance with the rules and regulations of the Securities and Exchange Commission.

The Company has experienced record sales both with its annuity products domestically and internationally with its life products over the past several years. The increase in sales has come at a challenging time for the insurance industry with low interest rate levels and increased regulatory requirements. Despite these obstacles, business levels have increased and the Company has effectively managed investment performance, not by taking on additional risks, but with improved overall credit quality of its portfolio of fixed income securities. The Company's financial performance is determined by the execution of its business model, which includes distribution and sale of its products through independent distributors, while maintaining invested values in order to meet future commitments to its policyholders and their beneficiaries.

Critical Accounting Policies

Accounting policies discussed below are those considered critical to an understanding of the Company's financial statements.

Impairment of Investment Securities. The Company's accounting policy requires that a decline in the value of a security below its amortized cost basis be evaluated to determine if the decline is other-than-temporary. The primary factors considered in evaluating whether a decline in value for fixed income and equity securities is other-than-temporary include: (a) the length of time and the extent to which the fair value has been less than cost, (b) the financial conditions and near-term prospects of the issuer, (c) whether the debtor is current on contractually obligated principal and interest payments, and (d) the intent and ability of the Company to retain the investment for a period of time sufficient to allow for any anticipated recovery. In addition, certain securitized financial assets with contractual cash flows are evaluated periodically by the Company to update the estimated cash flows over the life of the security. If the Company determines that the fair value of the sec uritized financial asset is less than its carrying amount and there has been a decrease in the present value of the estimated cash flows since the previous estimate, then an other-than-temporary impairment charge is recognized. When a security is deemed to be impaired a charge is recorded as net realized losses equal to the difference between the fair value and amortized cost basis of the security. Once an impairment charge has been recorded, the fair value of the impaired investment becomes its new cost basis and the Company continues to review the other-than-temporarily impaired security for appropriate valuation on an ongoing basis. Under accounting principles generally accepted in the United States of America, the Company is not permitted to increase the basis of impaired securities for subsequent recoveries in value.

Deferred Acquisition Costs ("DAC").  The Company is required to defer certain policy acquisition costs and amortize them over future periods. These costs include commissions and certain other expenses that vary with and are primarily associated with acquiring new business. The deferred costs are recorded as an asset commonly referred to as deferred policy acquisition costs. The DAC asset balance is subsequently charged to income over the lives of the underlying contracts in relation to the anticipated emergence of revenue or profits. Actual revenue or profits can vary from Company estimates resulting in increases or decreases in the rate of amortization. The Company regularly evaluates to determine if actual experience or other evidence suggests that earlier estimates should be revised. Assumptions considered significant include surrender and lapse rates, mortality, expense levels, investment performance, and estimated interest spread. Should actual experience dictate that the Company change its assumptions regarding the emergence of future revenues or profits (commonly referred to as "unlocking"), the Company would record a charge or credit to bring its DAC balance to the level it would have been if using the new assumptions from the inception date of each policy.

DAC is also subject to periodic recoverability and loss recognition testing. These tests ensure that the present value of future contract-related cash flows will support the capitalized DAC balance to be amortized in the future. The present value of these cash flows, less the benefit reserve, is compared with the unamortized DAC balance and if the DAC balance is greater, the deficiency is charged to expense as a component of amortization and the asset balance is reduced to the recoverable amount. For more information about accounting for DAC see Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements.

Deferred Sales Inducements. Costs related to sales inducements offered on sales to new customers, principally on investment type contracts and primarily in the form of additional credits to the customer's account value or enhancements to interest credited for a specified period, which are beyond amounts currently being credited to existing contracts, are deferred and recorded as other assets. All other sales inducements are expensed as incurred and included in interest credited to contract holders' funds. Deferred sales inducements are amortized to income using the same methodology and assumptions as DAC, and are included in interest credited to contract holders' funds. Deferred sales inducements are periodically reviewed for recoverability.

Future Policy Benefits.  Because of the long-term nature of insurance contracts, the Company is liable for policy benefit payments many years into the future. The liability for future policy benefits represents estimates of the present value of the Company's expected benefit payments, net of the related present value of future net premium collections. For traditional life insurance contracts, this is determined by standard actuarial procedures, using assumptions as to mortality (life expectancy), morbidity (health expectancy), persistency, and interest rates, which are based on the Company's experience with similar products. The assumptions used are those considered to be appropriate at the time the policies are issued. An additional provision is made on most products to allow for possible adverse deviation from the assumptions assumed. For universal life and annuity products, the Company's liability is the amount of the contract's account balance. Account balances a re also subject to minimum liability calculations as a result of minimum guaranteed interest rates in the policies. While management and Company actuaries have used their best judgment in determining the assumptions and in calculating the liability for future policy benefits, there is no assurance that the estimate of the liabilities reflected in the financial statements represents the Company's ultimate obligation. In addition, significantly different assumptions could result in materially different reported amounts. A discussion of the assumptions used to calculate the liability for future policy benefits is reported in Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements.

Revenue Recognition.  Premium income for the Company's traditional life insurance contracts is generally recognized as the premium becomes due from policyholders. For annuity and universal life contracts, the amounts collected from policyholders are considered deposits and are not included in revenue. For these contracts, fee income consists of policy charges for policy administration, cost of insurance charges and surrender charges assessed against policyholders' account balances which are recognized in the period the services are provided.

Investment activities of the Company are integral to its insurance operations. Since life insurance benefits may not be paid until many years into the future, the accumulation of cash flows from premium receipts are invested with income reported as revenue when earned. Anticipated yields on investments are reflected in premium rates, contract liabilities, and other product contract features. These anticipated yields are implied in the interest required on the Company's net insurance liabilities (future policy benefits less deferred acquisition costs) and contractual interest obligations in its insurance and annuity products. The Company benefits to the extent actual net investment income exceeds the required interest on net insurance liabilities and manages the rates it credits on its products to maintain the targeted excess or "spread" of investment earnings over interest credited. The Company will continue to be required to provide for future contractual obligations in the event of a decline in investment yield. For more information concerning revenue recognition, investment accounting, and interest sensitivity, please refer to Note 1, Summary of Significant Accounting Policies, and Note 3, Investments, in the Notes to Consolidated Financial Statements and the discussions under Investments in Item 7 of this report.

Pension Plans and Other Postretirement Benefits.  The Company sponsors a qualified defined benefit pension plan covering substantially all full-time employees and a nonqualified defined benefit plan primarily for senior officers. In addition, the Company also has postretirement health care benefits for certain senior officers. In accordance with prescribed accounting standards, the Company annually reviews plan asssumptions.

The Company annually reviews its pension benefit plan assumptions which include the discount rate, the expected long-term rate of return on plan assets, and the compensation increase rate. The assumed discount rate is set based on the rates of return on high quality long-term fixed income investments currently available and expected to be available during the period to maturity of the pension benefits. The assumed long-term rate of return on plan assets is generally set at the rate expected to be earned based on long-term investment policy of the plans and the various classes of the invested funds. The compensation rate increase assumption is generally set at a rate consistent with current and expected long-term compensation and salary policy, including inflation. These assumptions involve uncertainties and judgment and therefore actual performance may not be reflective of the assumptions.

Other postretirement benefit assumptions include future events affecting retirement age, mortality, dependency status, per capita claims costs by age, health care trend rates, and discount rates. Per capita claims cost by age is the current cost of providing postretirement health care benefits for one year at each age from the youngest age to the oldest age at which plan participants are expected to receive benefits under the plan. Health care trend rates involve assumptions about the annual rate(s) of change in the cost of health care benefits currently provided by the plan, due to factors other than changes in the composition of the plan population by age and dependency status. These rates implicitly consider estimates of health care inflation, changes in utilization, technological advances and changes in health status of the participants. These assumptions involve uncertainties and judgment, and therefore actual performance may not be reflective of the assumptions.

Other significant accounting policies, although not involving the same level of measurement uncertainties as those discussed above but nonetheless important to an understanding of the financial statements, are described in Note 1, Summary of Significant Accounting Policies, in the Notes to Consolidated Financial Statements.

RESULTS OF OPERATIONS

The Company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). In addition, the Company regularly evaluates operating performance using non-GAAP financial measures which exclude or segregate derivative and realized investment gains and losses from operating revenues and earnings. Similar measures are commonly used in the insurance industry in order to assess profitability and results from ongoing operations. The Company believes that the presentation of these non-GAAP financial measures enhances the understanding of the Company's results of operations by highlighting the results from ongoing operations and the underlying profitability factors of the Company's business. The Company excludes or segregates derivative and realized investment gains and losses because such items are often the result of events which may or may not be at the Company's discretion and the fluctuating effects of these items could distort trends in the underlying profitability of the Company's business. Therefore, in the following sections discussing consolidated operations and segment operations, appropriate reconciliations have been included to report information management considers useful in enhancing an understanding of the Company's operations to reportable GAAP balances reflected in the consolidated financial statements.

Consolidated Operations

Revenues. The following details Company revenues.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Universal life and annuity contract revenues	$	89,513	80,964	76,173
Traditional life and annuity premiums		14,025	13,916	13,918
Net investment income (excluding derivatives)		303,855	273,175	249,726
Other income		11,259	7,061	6,726
Operating revenues		418,652	375,116	346,543
Derivative gains (losses)		11,988	25,799	(13,012)
Realized gains (losses) on investments		3,506	(1,647)	(16,144)
Total revenues	$	434,146	399,268	317,387

Revenues for universal life and annuity products consist of policy charges for the cost of insurance, administration charges, and surrender charges assessed against policyholder account balances. The Company has experienced strong sales growth with its universal life and annuity products, most notably in international universal life products. These sales contribute to higher revenues in the form of cost of insurance charges which were $60.1 million compared to $55.6 million in 2004 and 2003, respectively, and $49.7 million in 2002. Surrender charges assessed against policyholder account balances upon withdrawal were $23.4 million in 2004 compared to $21.6 million in 2003 and $23.1 million in 2002.

Traditional life insurance premiums for products such as whole life and term life are recognized as revenues over the premium-paying period. These are product lines that the Company has not put as much emphasis on relative to interest sensitive products, particularly in its international life insurance operations.

A detail of net investment income is provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Gross investment income:
Debt securities	$	276,624	239,243	218,443
Mortgage loans		12,510	15,115	15,382
Policy loans		6,483	6,932	7,343
Other investment income		10,351	13,794	10,342
Total investment income		305,968	275,084	251,510
Investment expenses		2,113	1,909	1,784
Net investment income
(excluding derivatives)		303,855	273,175	249,726
Derivative gains (losses)		11,988	25,799	(13,012)
Net investment income	$	315,843	298,974	236,714

Net investable cash flow is primarily invested in investment grade debt securities generating approximately 90% of total investment income, excluding derivatives in 2004. With the decline in interest rate levels over the past several years, mortgage loan income has declined as prepayments of principal balances have continued and new loan funding opportunities with interest rates at or above the Company's required yield levels for this type of investment have decreased. Other investment income for 2004 includes $1.5 million related to income received on various profit participation arrangements compared to $3.3 million reported in 2003 and insignificant amounts recorded in 2002. Despite the drop in interest rate levels, the Company generated comparable higher net investment earnings due to increasing invested asset balances. In addition, investment expenses have remained relatively level during this time frame.

Net investment income performance is summarized as follows:

		Years Ended December 31,
		2004	2003	2002
		(In thousands except percentages)
Excluding derivatives:
Net investment income	$	303,855	273,175	249,726
Average invested assets, at amortized cost	$	4,692,988	3,911,595	3,368,332
Yield on average invested assets		6.47%	6.98%	7.41%
Including derivatives:
Net investment income	$	315,843	298,974	236,714
Average invested assets, at amortized cost	$	4,730,497	3,923,725	3,380,587
Yield on average invested assets		6.68%	7.62%	7.00%

The yield on average invested assets declined from 7.41% in 2002 to 6.98% in 2003 and down to 6.47% in 2004, excluding derivatives. This decline in yield is due to the overall interest rate declines in the market and the Company obtaining lower yields on newly invested funds. In addition, prepayments, calls, and maturities of debt securities have added to the yield decrease as funds in higher yielding securities are reinvested at lower yields. Net investment income performance is analyzed excluding the derivative income which is a common practice in the insurance industry in order to assess underlying profitability and results from ongoing operations. Refer to the Derivatives discussion following this section for a more detailed explanation.

Other income consists primarily of revenues associated with nursing home operations which recorded revenues of $8.3 million, $6.9 million, and $6.1 million in 2004, 2003, and 2002, respectively. A lawsuit settlement of $2.2 million was awarded to the Company relating to an investment previously owned and is included in other income for 2004.

Derivatives. Index options are derivative financial instruments used to fully hedge the equity return component of the Company's equity-indexed products, which were first introduced for sale in 1997. In 2002, the Company began selling an equity-indexed universal life product in addition to its equity-indexed annuities. Any gains or losses from the sale or expiration of the options, as well as period-to-period changes in fair values, are reflected as a component of net investment income. However, increases or decreases in income from these options are substantially offset by corresponding increases or decreases in amounts credited to equity-indexed annuity and life policyholders.

The gains and losses from index options are due to stock market conditions, specifically the performance of the S&P 500 Index^®. Index options are intended to act as hedges to match the returns on the S&P 500 Index^®. With the rise or decline in this index, the index option values likewise rose or declined. While income from index options fluctuates with the index, the contract interest expense for the Company's equity-indexed products also fluctuates in a similar manner and direction relative to policyholder accounts. In 2004 and 2003, the stock market increased and the Company recorded gains from index options and consequently increased contract interest expenses. However, in 2002, the S&P 500 Index^® decreased resulting in index option losses and a reduction in contract interest expenses. Note the performance of the S&P 500 Index^® relative to the index options gains and losses in the table below.

	Years Ended December 31,
	2004	2003	2002
S&P 500 Index® performance:
Year end closing value	1,212	1,112	880
Daily average value	1,131	965	995
Derivative gains (losses)	11,988	25,799	(13,012)

Realized Gains (Losses) on Investments. The net gains reported in 2004 consisted of gross gains of $7.9 million primarily from calls and sales of debt securities during the year and gross losses of $4.4 million resulting from most notably an impairment writedown on Delta Airline debt securities of $3.6 million. In past years, the losses on investments have primarily resulted from impairment writedowns on investments in debt securities. The Company records impairment writedowns when a decline in value is considered other-than-temporary and full recovery of the investment is not expected. Total impairment writedowns in 2004, 2003, and 2002 totaled $3.6 million, $7.2 million, and $17.4 million, respectively. In 2003, the Company recorded impairment writedowns on holdings of American Airlines ($3.1 million), Lukens ($0.8 million) and collaterialized bond obligation ("CBO") investments ($3.3 million). Writedowns in 2002 included WorldCom ($9.6 million), United Airlines ($4.0 million) and CBO investments ($3.8 million).

Benefits and Expenses. The following details benefits and expenses.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Life and other policy benefits	$	34,613	37,180	31,299
Amortization of deferred policy acquisition costs		88,733	53,829	35,799
Universal life and annuity contract interest		173,315	176,374	150,479
Other operating expenses		35,441	48,776	36,938
Totals	$	332,102	316,159	254,515

The Company's mortality experience over the past five years has generally been consistent with its product pricing assumptions. Life and other policy benefits reflect death claims of $24.7 million, $26.8 million, and $22.8 million for 2004, 2003, and 2002, respectively.

Life insurance companies are required to defer certain expenses associated with acquiring new business. The majority of these acquisition expenses consist of commissions paid to agents, underwriting costs, and certain marketing expenses and sales inducements. The Company defers sales inducements in the form of first year interest bonuses on annuity and universal life products that are directly related to the production of new business. These charges are deferred and amortized using the same methodology and assumptions used to amortize other capitalized acquisition costs and the amortization is included in contract interest. Recognition of these deferred policy acquisition costs in the consolidated financial statements is to occur over future periods in relation to the expected emergence of profits priced into the products sold. This emergence of profits is based upon assumptions regarding premium payment patterns, mortality, persistency, investment performance, and expense patterns. C ompanies are required to review these assumptions periodically to ascertain whether actual experience has deviated significantly from that assumed. If it is determined that a significant deviation has occurred, the emergence of profit patterns is to be "unlocked" and reset based upon the actual experience.

Amortization of deferred policy acquisition costs increased in 2004 to $88.7 million from $53.8 million and $35.8 million in 2003 and 2002, respectively. Increased amortization in the current year is due in part to the deferral of sales inducement costs of $28.2 million and $43.9 million in 2004 and 2003, respectively, as noted above. This results in increasing gross profits as well as the substantial increase in the Company's business over the past couple of years. In addition to the deferral of sales inducements, an "unlocking" adjustment was made during 2003 and 2004 pertaining to the annuity line of business and the expected emergence of future profits which also resulted in increased deferred policy acquisition costs amortization. No expected changes were made related to the amortization of these costs in 2002. While the Company is required to continually evaluate its emergence of profits, management believes that the current amortization patterns of deferred policy acquisition c osts are reflective of actual experience. See additional discussions of amortization relative to the Company's lines of business included in the segment discussion following this section.

The Company closely monitors its credited interest rates on interest sensitive policies, taking into consideration such factors as profitability goals, policyholder benefits, product marketability, and economic market conditions. As long-term interest rates change, the Company's credited interest rates are often adjusted accordingly, taking into consideration the factors described above. The difference between yields earned on investments over policy credited rates is often referred to as the "interest spread". Raising policy credited rates can typically have an impact sooner than higher market rates on the Company's investment portfolio yield, making it more difficult to maintain the current interest spread.

The Company's approximated average credited rates are as follows:

	December 31,					December 31,
	2004	2003	2002		2004		2003	2002
	(Excluding equity-indexed products)					(Including equity-indexed products)
Annuity	3.91%	4.25%	5.53%	3.60%			4.58%	4.67%
Interest sensitive life	4.75%	4.95%	5.40%	4.97%			5.19%	5.37%

Contract interest also includes the performance of the derivative component of the Company's equity-indexed products. As previously noted, the recent market performance of these derivative features increased contract interest expense while also increasing the Company's investment income given the hedge nature of the options. During 2002, the reverse was noted, as the S&P 500 Index was down resulting in lower investment income and contract interest expense. With these credited rates, the Company generally realized its targeted interest spread on its products.

Other operating expenses consist of general administrative expenses, licenses and fees, commissions not subject to deferral, and expenses of nursing home operations. Nursing home expenses amounted to $7.2 million, $6.0 million, and $5.4 million in 2004, 2003, and 2002, respectively. The Company's operating expenses for the years reported include increases associated with its significant upturn in business levels. In addition, a charge was recorded during 2003 in the amount of $9.7 million relating to a litigation claim where the Company had reached a settlement agreement that had been approved by the court. A reduction in expenses of $6.5 million due to the final accounting related to this lawsuit settlement is reflected in 2004 amounts. In addition, contractholder account balances were increased $2.3 million based on this final settlement.

Federal Income Taxes. Federal income taxes on earnings from continuing operations for 2004, 2003, and 2002 reflect effective tax rates of 33.9%, 32.9%, and 33.1%, respectively, which are lower than the expected Federal rate of 35% primarily due to tax-exempt investment income related to investments in municipal securities and dividends-received deductions on income from stock investments.

Segment Operations

Summary of Segment Earnings

A summary of segment earnings from continuing operations for the years ended December 31, 2004, 2003, and 2002 is provided below. The segment earnings exclude realized gains and losses on investments, net of taxes.

		Domestic	International
		Life	Life		All
		Insurance	Insurance	Annuities	Others	Totals
		(In thousands)
Segment earnings:
2004	$	2,522	12,133	45,473	5,066	65,194
2003		1,366	13,249	37,121	5,116	56,852
2002		2,568	11,141	34,183	4,668	52,560

Domestic Life Insurance Operations

A comparative analysis of results of operations for the Company's domestic life insurance segment is detailed below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Premiums and other revenue:
Premiums and contract revenues	$	23,324	21,725	22,716
Net investment income		20,283	21,688	23,078
Other income		509	31	18
Total premiums and other revenue		44,116	43,444	45,812
Benefits and expenses:
Life and other policy benefits		15,141	16,000	14,585
Amortization of deferred policy acquisition costs		9,098	8,983	8,081
Universal life insurance contract interest		8,585	8,896	9,625
Other operating expenses		7,479	7,526	9,660
Total benefits and expenses		40,303	41,405	41,951
Segment earnings before Federal income taxes		3,813	2,039	3,861
Federal income taxes		1,291	673	1,293
Segment earnings	$	2,522	1,366	2,568

Revenues from domestic life insurance operations include life insurance premiums on traditional type products and revenues from universal life insurance. Revenues from traditional products are simply premiums collected, while revenues from universal life insurance consist of policy charges for the cost of insurance, policy administration fees, and surrender charges assessed during the period. A comparative detail of premiums and contract revenues is provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Universal life insurance revenues	$	16,807	15,842	15,656
Traditional life insurance premiums		7,638	7,488	8,232
Reinsurance premiums		(1,121)	(1,605)	(1,172)
Totals	$	23,324	21,725	22,716

The Company's U.S. operations have typically emphasized annuity product sales over life product sales but recent efforts have been made to attract new independent agents and to promote life products to improve domestic sales. It is the Company's goal to increase domestic life product sales through increased recruiting of new distribution and the development of new life insurance products. The Company had nearly 10,000 contracted agents as of December 31, 2004.

Policy benefits totaled $15.1 million, $16.0 million, and $14.6 million in 2004, 2003, and 2002, respectively, which are consistent with Company expectations. The face amount of domestic life insurance in force has declined from $2.8 billion at December 31, 2002 to $2.7 billion at December 31, 2003 and to $2.5 billion at December 31, 2004. Absent the growth rates targeted by management, the block of business will continue to contract due to the normal incidence of terminations from death or surrender with lower earnings resulting. Net investment income declined reporting $20.3 million, $21.7 million, and $23.1 million for 2004, 2003, and 2002, respectively, as investment assets for the block of business decrease as the amount of business in force decreases.

International Life Insurance Operations

A comparative analysis of results of operations for the Company's international life insurance segment is detailed below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Premiums and other revenue:
Premiums and contract revenues	$	64,239	55,041	48,403
Net investment income		22,821	23,983	23,163
Other income		790	37	31
Total premiums and other revenue		87,850	79,061	71,597
Benefits and expenses:
Life and other policy benefits		16,626	17,937	14,959
Amortization of deferred policy acquisition costs		21,837	12,109	10,467
Universal life insurance contract interest		18,631	17,775	16,452
Other operating expenses		12,418	11,489	12,972
Total benefits and expenses		69,512	59,310	54,850
Segment earnings before Federal income taxes		18,338	19,751	16,747
Federal income taxes		6,205	6,502	5,606
Segment earnings	$	12,133	13,249	11,141

As with domestic operations, revenues from the international life insurance segment include both premiums on traditional type products and revenues from universal life insurance. A comparative detail of premiums and contract revenues is provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Universal life insurance revenues	$	67,059	58,799	51,008
Traditional life insurance premiums		8,228	7,609	6,617
Reinsurance premiums		(11,048)	(11,367)	(9,222)
Totals	$	64,239	55,041	48,403

International operations have emphasized universal life policies over traditional life insurance products. In accordance with generally accepted accounting principles, premiums collected on universal life products are not reflected as revenues in the Company's consolidated statements of earnings. Actual international universal life premiums collected are detailed below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Universal life insurance:
First year and single premiums	$	35,681	37,069	33,636
Renewal premiums		59,981	47,907	37,447
Totals	$	95,662	84,976	71,083

The Company's international life operations have been a significant contributor to the Company's overall growth and represent a market niche where the Company feels it has a competitive advantage. A productive agency force has been developed given the Company's longstanding reputation for supporting its international life products coupled with the instability of competing companies in international markets. In particular, the Company has experienced sizable growth with its equity-indexed universal life products and has collected premiums of $37.2 million, $21.0 million, and $10.0 million for the years ended 2004, 2003, and 2002, respectively.

A detail of net investment income for international life insurance operations is provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Net investment income
(excluding derivatives)	$	23,260	23,063	23,163
Derivative gains (losses)		(439)	920	-
Net investment income	$	22,821	23,983	23,163

Derivative gains and losses fluctuate from period to period based on the S&P 500 Index^® performance.

Life and other policy benefits totaled $16.6 million in 2004, $17.9 million in 2003, and $15.0 million in 2002, which are consistent with Company expectations. Amortization of deferred policy acquisition costs was $21.8 million, $12.1 million, and $10.5 million for 2004, 2003, and 2002, respectively. Increased amortization in 2004 is due to increased gross profits incurred from greater than expected capital gains, reduced credited rates, and higher costs of insurance charges in 2004 compared to 2003. In addition, the increase in amortization in 2003 over 2002 was a result of a change in expected emergence of profits given the increased sales related to equity-indexed universal life products. The increased sales of this product generated higher gross profits due to the stock market performance. The increase in universal life contract interest is the result of the increased sales of the equity-indexed universal life products and the associated stock market gains which increased the amoun ts the Company in turn credits to policyholders. Contract interest expense was $18.6 million, $17.8 million, and $16.5 million in 2004, 2003, and 2002, respectively.

International sales continued at a strong pace during 2004 with Brazil, Argentina, and Chile reflecting the top three international countries based on premiums and contract revenues recorded. Management expects sales growth internationally to trend at a steadier pace from the levels reported in recent years. As the international life insurance in force continues to grow, the Company anticipates operating earnings to similarly increase. The amount of international life insurance in force has grown from $8.8 billion at December 31, 2002 to $10.2 billion at December 31, 2003 and to $11.3 billion at December 31, 2004.

Annuity Operations

The Company's annuity operations are almost exclusively in the United States. Although some of the Company's investment contracts are available to international residents, current sales are small relative to total annuity sales. A comparative analysis of results of operations for the Company's annuity segment is detailed below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Premiums and other revenue:
Premiums and contract revenues	$	15,975	18,114	18,972
Net investment income		266,151	246,622	184,109
Other income		1,701	95	606
Total premiums and other revenue		283,827	264,831	203,687
Benefits and expenses:
Life and other policy benefits		2,846	3,243	1,755
Amortization of deferred policy acquisition costs		57,798	32,737	17,251
Annuity contract interest		146,099	149,703	124,402
Other operating expenses		8,353	23,809	8,889
Total benefits and expenses		215,096	209,492	152,297
Segment earnings before Federal income taxes		68,731	55,339	51,390
Federal income taxes		23,258	18,218	17,207
Segment earnings	$	45,473	37,121	34,183

Revenues from annuity operations include primarily surrender charges and recognition of deferred revenues relating to immediate or payout annuities. A comparative detail of the components of premiums and annuity contract revenues is provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Surrender charges	$	13,031	12,803	13,488
Payout annuity and other revenues		2,906	5,268	5,435
Traditional annuity premiums		38	43	49
Totals	$	15,975	18,114	18,972

As previously noted, the Company's earnings are dependent upon annuity contracts persisting or remaining in force. While revenues decline with a reduction in surrender charges, the Company's earnings benefit. A mandated change in accounting for two-tier annuities in 2004 had the effect of eliminating payout annuity revenues pertaining to this product. This change explains the sharp reduction in these revenues in 2004 compared to 2003 and 2002.

In accordance with generally accepted accounting principles, deposits collected on annuity contracts are not reflected as revenues in the Company's consolidated statements of earnings. Actual annuity deposits collected are detailed below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Equity-indexed annuities	$	512,709	479,535	58,431
Other deferred annuities		350,665	674,358	355,528
Immediate annuities		28,653	41,250	20,483
Totals	$	892,027	1,195,143	434,442

Equity-indexed products sales typically follow the stock market in that sales are higher when confidence is high in the stock market and low if the stock market is performing poorly. The Company experienced a tremendous increase in sales relating to equity-indexed annuities as the stock market rebounded in 2003 and held steady in 2004. These indexed products are more attractive for consumers when interest rate levels remain low as has been the market environment the past few years. Equity-indexed annuity deposits as a percentage of total annuity deposits recorded were 57.5%, 40.1%, and 13.4% for the years ended December 31, 2004, 2003, and 2002, respectively. Since the Company does not offer variable products or mutual funds, equity-indexed products provide an important alternative to the Company's existing fixed interest rate annuity products.

A detail of net investment income for annuity operations is provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Net investment income
(excluding derivatives)	$	253,724	221,743	197,121
Derivative gains (losses)		12,427	24,879	(13,012)
Net investment income	$	266,151	246,622	184,109

Derivative gains and losses fluctuate from period to period based on the S&P 500 Index^® performance.

As previously described, derivatives are used to hedge the equity return component of the Company's equity-indexed annuity products with any gains or losses from the sale or expiration of the options, as well as period-to-period changes in fair values, reflected in net investment income. The significant increase in net investment income, excluding derivatives from 2002 to 2004, is due to the increase in the overall size of the asset portfolio as a result of higher sales volume.

Other deferred annuity deposits decreased significantly in 2004 compared to 2003 with $350.7 million recorded in collected deposits compared to $674.4 million, respectively. Fixed-rate annuity products became popular with consumers during 2003 as these products yielded a stable and competitive interest rate. As a selling inducement, many of these products include a first year interest bonus in addition to the base interest rate. These bonus rates are credited to the policyholder account but are deferred by the Company and amortized over future periods. The amount deferred was approximately $28.2 million and $43.9 million for the years ended December 31, 2004 and 2003, respectively. No sales inducements were deferred in 2002.

Increased amortization of deferred policy acquisition costs in 2003 and more notably in 2004 is due, in part, to the deferral of sales inducement costs. Also contributing to increased amortization is the increased sales of the equity-indexed products and the related increase in the stock market which resulted in higher current gross profits than expected. Consequently, the Company recognized a greater level of amortization expense corresponding with the higher profit level. In addition, higher capital gains in 2004 as compared to 2003, and reductions in credited rates over the same period, resulted in increased amortization. The Company unlocked its deferred policy acquisition costs amortization factors on other annuity products for assumption changes during 2003 and 2004 due to an anticipated decrease in future profit streams. The decrease in expected future profits results from the low interest rate environment which causes a tightening of expected future spreads. No changes were m ade in amortization factors in 2002. The Company is required to periodically adjust these factors for actual experience that varies from that assumed. While management does not currently anticipate any impact from unlocking in 2005, facts and circumstances may arise in the future which require that the factors be reexamined.

Annuity contract interest includes the equity component return associated with the Company's equity-indexed annuities. The detail of equity-indexed annuity contract interest compared to contract interest for all other annuities is as follows:

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Equity-indexed annuities	$	38,942	44,201	(275)
All other annuities		129,392	148,108	124,677
Gross contract interest		168,334	192,309	124,402
Bonus interest deferred and capitalized		(27,491)	(43,867)	-
Bonus interest amortization		5,256	1,261	-
Total contract interest	$	146,099	149,703	124,402

The 2004 and 2003 increase in contract interest for equity-indexed annuities is due to increased sales and the effect of the positive performance of the stock market on option values as noted previously. The 2004 contract interest figures include an increase of $2.3 million for certain contractholder account balances as part of a lawsuit settlement. All other annuity contract interest includes sales inducement expenses not deferred of approximately $12 million for 2002. The Company currently defers these sales costs as previously noted.

Other operating expenses for 2004 reflect a reduction of $6.5 million for a charge recorded in the prior year. A $9.7 million charge was initially recorded in 2003 relating to a litigation claim which involved certain annuity products, and actual settlement payments made were $3.2 million during 2004. The increase in other operating expenses, excluding this litigation claim, is due to the overall increase in annuity business and the allocation of corporate expenses to this line of business due to annuity operations becoming a greater portion of the Company's overall business volumes.

Other Operations

National Western's primary business encompasses its domestic and international life insurance operations and its annuity operations. However, the Company also has small real estate, nursing home, and other investment operations through its wholly owned subsidiaries. Most of the income from the Company's subsidiaries is from a life interest in a trust. Gross income distributions from the trust totaled $3.7 million, pre-tax, annually in 2004, 2003, and 2002.

The Company acquired a nursing home facility, which opened in late July, 2000 and is operated by an affiliated limited partnership, whose financial operating results are consolidated with those of the Company. Daily operations and management of the nursing home are performed by an experienced management company through a contract with the limited partnership. Nursing home operations generated $1.1 million, $0.9 million, and $0.7 million of operating earnings in 2004, 2003, and 2002, respectively.

INVESTMENTS

General

The Company's investment philosophy emphasizes the careful handling of policyowners' and stockholders' funds to achieve security of principal, to obtain the maximum possible yield while maintaining security of principal, and to maintain liquidity in a measure consistent with current and long-term requirements of the Company.

The Company's overall conservative investment philosophy is reflected in the allocation of its investments, which is detailed below as of December 31, 2004 and 2003. The Company emphasizes investment grade debt securities, with smaller holdings in mortgage loans and policy loans.

		2004			2003
		Carrying			Carrying
		Value	%		Value	%
		(In thousands)			(In thousands)
Debt securities	$	4,889,330	93.8	$	4,190,253	92.2
Mortgage loans		124,712	2.4		152,035	3.3
Policy loans		88,448	1.7		89,757	2.0
Derivatives		42,156	0.8		44,849	1.0
Equity securities		20,051	0.4		18,177	0.4
Real estate		17,224	0.3		20,187	0.4
Other		28,478	0.6		29,725	0.7
Totals	$	5,210,399	100.0	$	4,544,983	100.0

Debt and Equity Securities

The Company maintains a diversified portfolio which consists primarily of corporate, mortgage-backed, and public utilities fixed income securities. Investments in mortgage-backed securities include primarily U.S. government agency pass-through securities and collateralized mortgage obligations ("CMO"). As of December 31, 2004 and 2003, the Company's debt securities portfolio consisted of the following:

		2004			2003
		Carrying			Carrying
		Value	%		Value	%
		(In thousands)			(In thousands)
Corporate	$	2,208,003	45.2	$	1,876,984	44.8
Mortgage-backed securities		1,548,937	31.7		1,239,784	29.6
Public utilities		627,706	12.8		551,511	13.2
U.S. government/agencies		219,845	4.5		208,799	5.0
Asset-backed securities		210,976	4.3		222,351	5.3
States & political subdivisions		42,335	0.9		38,610	0.9
Foreign governments		31,528	0.6		52,214	1.2
Totals	$	4,889,330	100.0	$	4,190,253	100.0

The Company's investment guidelines prescribe limitations as a percent of the total investment portfolio by type of security and all holdings were within these threshold limits at December 31, 2004 and 2003. During 2003 and continuing into 2004, the Company expanded its holdings of U.S. government and private mortgage-backed securities given attractive yields and spreads. Because the Company's holdings of mortgage-backed securities are subject to prepayment and extension risk, the Company has substantially reduced these risks by investing primarily in collateralized mortgage obligations, which have more predictable cash flow patterns than pass-through securities. These securities, known as planned amortization class I ("PAC I"), very accurately defined maturity ("VADM") and sequential tranches are designed to amortize in a more predictable manner than other CMO classes or pass-throughs. Using this strategy, the Company can more effectively manage and reduce prepayment and extension risk s, thereby helping to maintain the appropriate matching of the Company's assets and liabilities.

In addition to diversification, an important aspect of the Company's investment approach is managing the credit quality of its investments in debt securities. Thorough credit analysis is performed on potential corporate investments including examination of a company's credit and industry outlook, financial ratios and trends, and event risks. This emphasis is reflected in the high average credit rating of the Company's portfolio with 97.2% held in investment grade securities. In the table below, investments in debt securities are classified according to credit ratings by Standard and Poor's ("S&P^®"), or other nationally recognized statistical rating organizations if securities were not rated by S&P^®.

		2004			2003
		Carrying			Carrying
		Value	%		Value	%
		(In thousands)			(In thousands)
AAA and U.S. government	$	2,028,055	41.5	$	1,682,168	40.1
AA		179,397	3.7		79,629	1.9
A		1,383,176	28.3		1,141,831	27.3
BBB		1,160,772	23.7		1,121,327	26.8
BB and other below investment grade		137,930	2.8		165,298	3.9
Totals	$	4,889,330	100.0	$	4,190,253	100.0

National Western does not purchase below investment grade securities. Investments held in debt securities below investment grade are the result of subsequent downgrades of the securities. During 2004, the Company's percentage of below investment grade securities compared to total invested assets decreased from 3.6% to 2.6% as of December 31, 2003 and 2004, respectively. The decrease from year to year is primarily due to upgrades and reductions in issuer exposure through sales. Fair value of the below investment grade securities improved from December 31, 2003 to 2004 with over 89% of the fair values greater than 94% of amortized cost at December 31, 2004. The Company's holdings of below investment grade securities is a relatively small percentage of total invested assets. These holdings are summarized below.

		Below Investment Grade Debt Securities
					% of
		Amortized	Carrying	Fair	Invested
		Cost	Value	Value	Assets
		(In thousands except percentages)
December 31, 2004	$	132,617	137,930	137,503	2.6%
December 31, 2003	$	162,237	165,298	164,531	3.6%

The investment environment improved during 2003 and continuing into 2004 compared to 2002. The market showed signs of improvement which was reflected in several industries that had been experiencing problems during recent years, such as the airline, energy and telecommunications industries. The Company is continually monitoring developments in these industries that would affect security valuations. Holdings in below investment grade securities by category as of December 31, 2004 are summarized below, including 2003 fair values for comparison.

Below Investment Grade Debt Securities
		Amortized	Carrying	Fair	Fair
		Cost	Value	Value	Value
Category		2004	2004	2004	2003
Utilities/Energy	$	40,345	42,206	42,862	41,316
Retail		23,448	24,747	24,747	24,703
Manufacturing		16,306	15,865	15,865	16,360
Transportation		14,178	15,386	15,386	16,863
CBOs/Asset-backed		11,690	13,338	11,820	11,087
Telecommunications		9,990	9,900	9,900	9,700
Healthcare		8,995	9,365	9,365	9,340
Other		7,665	7,123	7,558	7,115
Totals
	$	132,617	137,930	137,503	136,484

Generally accepted accounting principles require that investments in debt securities be written down to fair value when declines in value are judged to be other-than-temporary. Since quoted market prices are readily available and understood by investors and creditors, they are the mandated source for fair value estimation when available. In some instances, quoted market prices may not be available for securities that have limited buyer demand. When the quoted market price is not available other valuation techniques such as discounted cash flow analysis and fundamental analysis may be used. Although the Company is required to write down securities deemed to be impaired on an other-than-temporary basis to quoted market prices, the estimated ultimate recovery value of the impaired security is often anticipated to be an amount in excess of the quoted market price. This is due to the influence that "distressed bond" traders may have in depressing market prices in order to generate a yield commensurate with the investment risk of such securities. Consequently, financial results can significantly vary from period to period for securities written down to quoted market prices which may be subsequently redeemed at levels consistent with expected recovery value.

As part of the Company's review for other-than-temporary impairments of investments, the Company determined during 2004 and 2003 that it held investments in several issuers whose decline in value was considered other-than-temporary and these holdings were written down to fair value and included as realized losses on investments as follows:

			2004	2003
		Par Holdings	Writedown	Writedown
		(In thousands)
Issuer:
Delta 10.125%	$	4,000	2,471	-
Delta 9.300%		4,200	1,090	-
AMR		4,000	-	3,100
BEA CBO		2,726	-	2,129
Nomura CBO		-	-	1,051
Lukens		-	-	765
Northstar CBO		5,084	-	121
Rhyno CBO		5,000	-	34
Totals	$	25,010	3,561	7,200

The Company is closely monitoring its other below investment grade holdings by reviewing investment performance indicators including information such as issuer operating performance, debt ratings, analyst reports and other economic factors that may affect these specific investments. While additional losses are not currently anticipated based on the existing status and condition of these securities, continued credit deterioration of some securities is possible, which may result in further writedowns. In addition, the future adoption of pending guidance from EITF Issue No. 03-1 could result in the recognition of additional other-than-temporary impairments based upon the ultimate guidance in this standard. No estimates or judgements can be made at his time; however, the Company is monitoring the progress relative to this proposed accounting standard.

The Company is required to classify its investments in debt and equity securities into one of three categories: (a) trading securities, (b) securities available for sale, or (c) securities held to maturity. The Company purchases securities with the intent to hold to maturity and accordingly does not maintain a portfolio of trading securities. Of the remaining two categories, available for sale and held to maturity, the Company makes a determination as to which category based on various factors including the type and quality of the particular security and how it will be incorporated into the Company's overall asset/liability management strategy. As shown in the table below, at December 31, 2004, approximately 33% of the Company's total debt and equity securities, based on fair values, were classified as securities available for sale. These holdings provide flexibility to the Company to react to market opportunities and conditions and to practice active management within the portfolio to provide adequate liquidity to meet policyholder obligations and other cash needs.

		Fair	Amortized	Unrealized
		Value	Cost	Gains
		(In thousands)
Securities held to maturity:
Debt securities	$	3,367,112	3,274,134	92,978
Securities available for sale:
Debt securities		1,615,196	1,554,957	60,239
Equity securities		20,051	12,487	7,564
Totals	$	5,002,359	4,841,578	160,781

During 2004 and 2003, the Company transferred securities with an amortized cost of $35.9 million and $12.8 million from held to maturity to available for sale due to credit deterioration resulting in $0.2 million and $0.1 million, respectively, of net unrealized gains reported as a separate component in accumulated other comprehensive income. No transfers were made in 2002 from the held to maturity category.

Mortgage Loans and Real Estate

In general, the Company originates loans on high quality, income-producing properties such as shopping centers, freestanding retail stores, office buildings, industrial and sales or service facilities, selected apartment buildings, motels, and health care facilities. The location of these properties is typically in major metropolitan areas that offer a potential for property value appreciation. Credit and default risk is minimized through strict underwriting guidelines and diversification of underlying property types and geographic locations. In addition to being secured by the property, mortgage loans with leases on the underlying property are often guaranteed by the lessee. This approach has proven to result in higher quality mortgage loans with fewer defaults.

The Company requires a minimum specified yield on mortgage loan investments. In the loan interest rate environment of the past few years, fewer loan opportunities have been available which met the Company's required rate of return. As a result, the Company's portfolio has declined.

The Company's direct investments in real estate are not a significant portion of its total investment portfolio as many of these investments were acquired through mortgage loan foreclosures. The Company also participates in several real estate joint ventures and limited partnerships that invest primarily in income-producing retail properties. These investments have enhanced the Company's overall investment portfolio returns.

The Company held net investments in mortgage loans totaling $124.7 million and $152.0 million at December 31, 2004 and 2003, respectively. The diversification of the portfolio by geographic region and by property type was as follows:

		2004			2003
Geographic Region:		Amount	%		Amount	%
		(In thousands)			(In thousands)
West South Central	$	74,765	59.9	$	83,363	54.8
Mountain		19,020	15.3		33,772	22.2
Pacific		11,954	9.6		16,432	10.8
South Atlantic		5,284	4.2		6,125	4.0
East South Central		3,686	3.0		4,921	3.3
All other		10,003	8.0		7,422	4.9
Totals	$	124,712	100.0	$	152,035	100.0

		2004			2003
Property Type:		Amount	%		Amount	%
		(In thousands)			(In thousands)
Retail	$	87,941	70.5	$	115,984	76.3
Office		24,740	19.8		27,165	17.9
Land/Lots		7,017	5.6		7,100	4.7
Hotel/Motel		4,974	4.0		827	0.5
Apartment		-	-		756	0.5
All other		40	0.1		203	0.1
Totals	$	124,712	100.0	$	152,035	100.0

The Company does not recognize interest income on loans past due six months or more. At December 31, 2004 and 2003 the Company had no mortgage loan principal balances past due six months or more. Interest income not recognized for past due loans totaled approximately $54,000 in 2004; there was none in 2003.

The contractual maturities of mortgage loan principal balances at December 31, 2004 are as follows:

		Principal
		Due
		(In thousands)
Due in one year or less	$	2,598
Due after one year through five years		39,695
Due after five years through ten years		66,789
Due after ten years through fifteen years		15,976
Due after fifteen years		-
Total	$	125,058

In the fourth quarter of 2004, an impairment loss of $0.6 million and an additional allowance of $0.4 million was recorded related to a mortgage loan based on information which indicates that the Company may not collect all amounts in accordance with the mortgage agreement. As of December 31, 2003, an allowance for possible losses on mortgage loans was $0.7 million. During the first quarter of 2004, this allowance was released due to a review of anticipated cash flows showing that all principal would be recovered. Management believes that the allowance for possible losses is adequate. While the Company closely manages its mortgage loan portfolio, future changes in economic conditions can result in impairments beyond those currently identified.

The Company's real estate investments totaled approximately $17.2 million and $20.2 million at December 31, 2004 and 2003, respectively, and consist primarily of income-producing properties which are being operated by a wholly owned subsidiary of the Company. The Company recognized operating income on these properties of approximately $1.6 million, $1.8 million, and $1.5 million for the years ended December 31, 2004, 2003, and 2002, respectively. The Company monitors the conditions and market values of these properties on a regular basis and makes repairs and capital improvements to keep the properties in good condition. The Company recorded net realized investment gains of $2.2 million and $0.9 million in 2004 and 2003, respectively and net losses of $0.1 million in 2002 associated with these properties.

Market Risk

Market risk is the risk of change in market values of financial instruments due to changes in interest rates, currency exchange rates, commodity prices, or equity prices. The most significant market risk exposure for National Western is interest rate risk. The fair values of fixed income debt securities correlate to external market interest rate conditions. Because interest rates are fixed on almost all of the Company's debt securities, market values typically increase when market interest rates decline, and decrease when market interest rates rise. However, market values may fluctuate for other reasons, such as changing economic conditions or increasing event-risk concerns.

The correlation between fair values and interest rates for debt securities is reflected in the tables below.

		December 31,
		2004		2003
		(In thousands except percentages)
Debt securities - fair value	$	4,982,308		4,293,584
Debt securities - amortized cost	$	4,829,091		4,132,453
Fair value as a percentage of amortized cost		103.17	%	103.90	%
Unrealized gains at year-end	$	153,217		161,131
Ten-year U.S. Treasury bond - increase (decrease)
in yield for the year		(0.03)	%	0.4	%

		Unrealized Gains (Losses)
			Net Balance at	Net Balance at	Change in
			December 31,	December 31,	Unrealized
			2004	2003	Gains (Losses)
			(In thousands)
Debt securities held to maturity	$		92,978	103,331	(10,353)
Debt securities available for sale			60,239	57,800	2,439
Totals	$		153,217	161,131	(7,914)

Changes in interest rates typically have a significant impact on the fair values of the Company's debt securities. However, during 2004 market interest rates of the ten-year U.S. Treasury bond decreased only 3 basis points from year end 2003 causing an insignificant change in the market value. The change in value was an unrealized loss of only $7.9 million on a portfolio of approximately $5 billion. The Company would expect more dramatic results in the future from a significant upward or downward movement in market rates. However, since the majority of the Company's debt securities are classified as held to maturity, which are recorded at amortized cost, changes in fair values have relatively small effects on the Company's financial results.

The Company analyzes interest rate risk through ongoing cash flow testing required for insurance regulatory purposes. Computer models are used to perform cash flow testing under various commonly used stress test interest rate scenarios to determine if existing assets would be sufficient to meet projected liability outflows. Sensitivity analysis allows the Company to measure the potential gain or loss in fair value of its interest-sensitive instruments and to protect its economic value and achieve a predictable spread between what is earned on invested assets and what is paid on liabilities. The Company seeks to minimize the impact of interest rate risk through surrender charges that are imposed to discourage policy surrenders and to offset unamortized acquisition costs. Interest rate changes can be anticipated in the computer models and the corresponding risk addressed by management actions affecting asset and liability instruments. However, potential changes in the values of financial instruments indicated by hypothetical interest rate changes will likely be different from actual changes experienced, and the differences could be significant.

The following table illustrates the market risk sensitivity of the Company's interest rate-sensitive assets. The table shows the effect of a change in interest rates on the fair value of the portfolio using models that measure the change in fair value arising from an immediate and sustained change in interest rates in increments of 100 basis points.

		Fair Values of Assets
		Changes in Interest Rates in Basis Points
		-100	0	+ 100	+ 200	+ 300
		(In thousands)
Debt and equity securities	$	5,243,571	5,002,359	4,734,486	4,464,510	4,207,111
Mortgage loans		135,252	129,963	124,973	120,259	115,803
Policy loans		125,316	115,107	106,181	98,336	91,407
Other loans		21,473	20,655	19,889	19,170	18,494
Derivatives		41,152	42,156	42,817	43,763	44,563

Expected maturities of debt securities may differ from contractual maturities due to call or prepayment provisions. The models assume that prepayments on mortgage-backed securities are influenced by agency and pool types, the level of interest rates, loan age, refinancing incentive, month of the year, and underlying coupon. During periods of declining interest rates, principal payments on mortgage-backed securities and collateralized mortgage obligations increase as the underlying mortgages are prepaid. Conversely, during periods of rising interest rates, the rate of prepayment slows. Both of these situations can expose the Company to the possibility of asset-liability cash flow and yield mismatch. The model uses a proprietary method of sampling interest rate paths along with a mortgage prepayment model to derive future cash flows. The initial interest rates used are based on the current U.S. Treasury yield curve as well as current mortgage rates for the various types of collateral in the portfolio.

Mortgage and other loans were modeled by discounting scheduled cash flows through the scheduled maturities of the loans, starting with interest rates currently being offered for similar loans to borrowers with similar credit ratings. Policy loans were modeled by discounting estimated cash flows using U.S. Treasury Bill interest rates as the base rates at December 31, 2004. The estimated cash flows include assumptions as to whether such loans will be repaid by the policyholders or settled upon payment of death or surrender benefits on the underlying insurance contracts and incorporate both Company experience and mortality assumptions associated with such contracts.

In addition to the securities analyzed above, the Company invests in index options which are derivative financial instruments used to hedge the equity return component of the Company's equity-indexed annuity and life products. The values of these options are primarily impacted by equity price risk, as the options' fair values are dependent on the performance of the S&P 500 Index^®. However, increases or decreases in investment returns from these options are substantially offset by corresponding increases or decreases in amounts paid to equity-indexed policyholders, subject to minimum guaranteed policy interest rates.

The Company's market risk liabilities, which include policy liabilities for annuity and supplemental contracts, are managed for interest rate risk through cash flow testing as previously described. As part of this cash flow testing, the Company has analyzed the potential impact on net earnings of a 100 basis point decrease and increases in increments of 100 basis points in the U.S. Treasury yield curve as of December 31, 2004. The potential impact on net earnings from these interest rate changes are summarized below.

		Changes in Interest Rates in Basis Points
		-100	+100	+200	+300
		(In thousands)
Impact on Net earnings	$	(469)	348	660	958

These estimated impacts in earnings are net of tax effects and the estimated effects of deferred policy acquisition costs.

The above described scenarios produce estimated changes in cash flows as well as cash flow reinvestment projections. Estimated cash flows in the Company's model assume cash flow reinvestments which are representative of the Company's current investment strategy. Calls and prepayments include scheduled maturities and those expected to occur which would benefit the security issuers. Assumed policy surrenders consider differences and relationships between credited interest rates and market interest rates as well as surrender charges on individual policies. The impact to earnings also includes the expected effects on amortization of deferred policy acquisition costs. The model considers only annuity and supplemental contracts in force at December 31, 2004, and does not consider new product sales or the possible impact of interest rate changes on sales.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity requirements are met primarily by funds provided from operations. Premium deposits and annuity considerations, investment income, and investment maturities and prepayments are the primary sources of funds while investment purchases, policy benefits in the form of claims, and payments to policyholders and contract holders in connection with surrenders and withdrawals as well as operating expenses are the primary uses of funds. To ensure the Company will be able to pay future commitments, the funds received as premium payments and deposits are invested in high quality investments, primarily fixed income securities. Funds are invested with the intent that the income from investments, plus proceeds from maturities, will meet the ongoing cash flow needs of the Company. The approach of matching asset and liability durations and yields requires an appropriate mix of investments. Although the Company historically has not been put in the position of liquidating invested assets to prov ide cash flow, its investments consist primarily of marketable debt securities that could be readily converted to cash for liquidity needs. The Company may also borrow up to $40 million on its bank line of credit for short-term cash needs.

A primary liquidity concern is the risk of an extraordinary level of early policyholder withdrawals. The Company includes provisions within its annuity and universal life insurance policies, such as surrender and market value adjustment charges, that help limit and discourage early withdrawals. The following table sets forth withdrawal characteristics of the Company's annuity reserves and deposit liabilities (based on statutory liability values) as of the dates indicated.

		December 31, 2004			December 31, 2003
			% of			% of
		Amount	Total		Amount	Total
		($ Amounts in thousands)
Not subject to discretionary
withdrawal provisions	$	261,009	6.50	$	238,283	6.92
Subject to discretionary withdrawal,
with adjustment:
With market value adjustment		1,203,525	29.99		947,893	27.54
At contract value less current
surrender charge of 5% or more		2,056,145	51.24		1,819,713	52.87
Subtotal		3,520,679	87.73		3,005,889	87.33
Subject to discretionary withdrawal
at contract value with no surrender
charge or surrender charge of less
than 5%		492,410	12.27		435,891	12.67
Total annuity reserves and deposit
liabilities	$	4,013,089	100.00	$	3,441,780	100.00

The actual amounts paid by product line in connection with surrenders and withdrawals for the years ended December 31 are noted in the table below.

		2004	2003	2002
		(In thousands)
Product Line:
Traditional Life	$	6,774	7,344	7,856
Universal Life		30,409	27,548	30,249
Annuities		296,039	256,551	195,383
Total	$	333,222	291,443	233,488

The above contractual withdrawals, as well as the level of surrenders experienced, were consistent with the Company's assumptions in asset-liability management, and the associated cash outflows did not have an adverse impact on overall liquidity. Individual life insurance policies are less susceptible to withdrawal than annuity reserves and deposit liabilities because policyholders may incur surrender charges and undergo a new underwriting process in order to obtain a new insurance policy. Cash flow projections and tests under various market interest rate scenarios are also performed to assist in evaluating liquidity needs and adequacy. The Company currently expects available liquidity sources and future cash flows to be more than adequate to meet the demand for funds.

In the past, cash flows from the Company's insurance operations have been sufficient to meet current needs. Cash flows from operating activities were $146 million, $69 million, and $127 million in 2004, 2003, and 2002, respectively. Operating cash flows are lower in 2003 due to increased commission payments on annuity deposits which are included in financing activities on the consolidated statements of cash flows. The Company also has significant cash flows from both scheduled and unscheduled investment security maturities, redemptions, and prepayments. These cash flows totaled $440 million, $668 million, and $349 million in 2004, 2003, and 2002, respectively. Cash flows from security maturities, redemptions, and prepayments were relatively higher over the last three years due to the decline in interest rates. These cash flow items could be reduced if interest rates rise in 2005. Net cash flows from the Company's universal life and annuity deposit product operations totaled inflows of $497 million, $839 million and $142 million in 2004, 2003, and 2002, respectively. The net inflows are expected to continue in 2005.

Capital Resources

The Company relies on the accumulated earnings in stockholders' equity for its capital resources as it has no long-term debt outstanding and does not anticipate the need for any long-term debt in the near future. There are also no current or anticipated material commitments for capital expenditures in 2005.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

It is not Company practice to enter into off-balance sheet arrangements nor is it Company policy to issue guarantees to third parties, other than in the normal course of issuing insurance contracts. Commitments related to insurance products sold are reflected as liabilities for future policy benefits. Insurance contracts guarantee certain performances by the Company.

Insurance reserves are the means by which life insurance companies determine the liabilities that must be established to assure that future policy benefits are provided for and can be paid. These reserves are required by law and based upon standard actuarial methodologies to ensure fulfillment of commitments guaranteed to policyholders and their beneficiaries, even though the obligations may not be due for many years. Refer to Note (1) in the Notes to Consolidated Financial Statements for a discussion of reserving methods.

The table below summarizes future estimated cash payments under existing contractual obligations.

		Payment due by Period
			Less Than	1 - 3	3 - 5	More Than
		Total	1 Year	Years	Years	5 Years
		(In thousands)
Long-term debt obligations	$	-	-	-	-	-
Capital lease obligations		-	-	-	-	-
Operating lease obligations (1)		3,960	817	1,626	1,300	217
Purchase obligations		-	-	-	-	-
Life claims payable (2)		36,039	36,039	-	-	-
Other long-term reserve liabilities
reflected on the balance sheet
under GAAP (3)		333,007	64,410	122,221	34,509	111,867
Total	$	373,006	101,266	123,847	35,809	112,084

(1)  Refer to Note 9 in the Notes to Consolidated Financial Statements relating to Company leases.
(2)  Life claims payable include benefit and claim liabilities for which the Company believes the amount and timing of the payment is essentially fixed and determinable. Such amounts generally relate to incurred and reported death and critical illness claims including an estimate of claims incurred but not reported.
(3)  Other long-term liabilities includes obligations that are reported within the Company's reserve liabilities that reflect determinable payout patterns related to immediate annuities. The above amounts are undiscounted whereas the amounts included in future policy benefit liabilities are discounted in accordance with GAAP. Liabilities for future policy benefits and other policyholder liabilities of approximately $4.8 billion as of December 31, 2004 have been excluded from the contractual obligations table. These excluded liabilities include future policy benefits relating to life insurance products, deferred annuities, and universal life products. Amounts excluded from the table are comprised of policies or contracts where (a) the Company is not currently making payments and will not make payments in the future until the occurrence of a payment triggering event, such as death or (b) the occurrence of a payment triggering event, such as a surrender of a policy or contract, which is outside of the control of the Company. The timing of these payments is not reasonably fixed and determinable. These uncertainties are considered in the Company's asset-liability management program as previously noted.

ACCOUNTING STANDARDS AND CHANGES IN ACCOUNTING

Recently Issued Accounting Standards

In March 2004, the Emerging Issues Task Force ("EITF") reached a final consensus on Issue 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This Issue establishes impairment models for determining whether to record impairment losses associated with investments in certain equity and debt securities. It also requires income to be accrued on a level-yield basis following an impairment of debt securities, where reasonable estimates of the timing and amount of future cash flows can be made. The Company's current policy has generally been to record income only as cash is received following an impairment of a debt security. The application of this Issue was required for reporting periods beginning after June 15, 2004. In September 2004, the FASB approved FASB Staff Position EITF 03-1-1, which defers the effective date for the recognition and measurement guidance contained in EITF 03-1 until certain issues are resolved. The Compan y is not able to assess the impact of the adoption of EITF 03-1 until final guidance is issued. However, the Company has adopted the disclosure provisions of this pronouncement which are currently effective.

In December of 2003, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer ("SOP 03-3"). SOP 03-3 addresses revenue recognition and impairment assessments for certain loans and debt securities that were purchased at a discount that was at least in part due to credit quality. SOP 03-3 states that where expected cash flows from the loan or debt security can be reasonably estimated, the difference between the purchase price and the expected cash flows (i.e., the "accretable yield") should be accreted into income. In addition, the SOP prohibits the recognition of a reserve for impairment on the purchase date. Further, the SOP requires that the allowance for loan losses be supported through a cash flow analysis, on either an individual or on a pooled basis, for all loans that fall within the scope of the guidance. This SOP is effective for loans acquired in fiscal years b eginning after December 15, 2004. The Company will adopt SOP 03-3 as of the beginning of fiscal year 2005 but does not expect this SOP to have a material impact on the consolidated financial statements.

In December 2004, the FASB issued Statement No. 123(R), Share-Based Payment which is a revision of Statement No. 123. Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. We currently use the Black-Scholes-Merton option pricing model to estimate the value of employee stock options and expect to continue to use this acceptable option pricing model upon adoption of Statement No. 123(R). Statement No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow rather than as an operating cash flow, as currently required. The adoption of Statement No. 123(R) is not expected to have a material impact on the consolidated financial statements of the Company.

Change in Accounting

In July 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"). SOP 03-1 provides guidance relating to the reporting by insurance enterprises for certain contracts and insurance specific accounting issues and is effective for financial statements for fiscal years beginning after December 15, 2003. In the first quarter of 2004, the Company adopted the reserving method for its two-tier annuity products, which were issued from 1984 until 1992, in accordance with the SOP 03-1 guidance. The new reserving method under SOP 03-1 requires that the Company hold a reserve equal to the cash surrender value and establish an additional liability for expected annuitizations. The Company previously maintained reserves for two-tier annuities at the account balance value which is substantially higher than the cash valu e reserve. This reserving change resulted in an adjustment decreasing reserves, less deferred acquisition costs written off, by $54.7 million, net of taxes. The amount is reflected as a change in accounting principle as of January 1, 2004. Components of the accounting change are detailed below.

		Amounts
Accounting change related to two-tier annuities:		(In thousands)
Reduction in reserve for future policy benefits	$	119,205
Write off of deferred acquisition costs		(35,056)
Total change, pre-tax		84,149
Federal income taxes		(29,452)
Cumulative effect of change in accounting for
two-tier annuities, net of tax	$	54,697

At December 31, 2004, the Company held a reserve relating to two-tier annuities in the amount of $22.7 million as an additional liability relating to annuitization benefits. The expected annuitizations were determined based upon actual experience relating to this block of business, which is relatively seasoned and the policies are no longer issued by the Company. The issuance of this SOP did not impact the Company's accounting relating to sales inducements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

The information called for by Item 7A is set forth in the Investments section of the Management's Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Attachment A, Index to Financial Statements and Schedules, on page __.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE

On April 15, 2004, the Board of Directors of the Company notified Deloitte & Touche LLP that their contractual appointment as independent auditors had not been renewed, as recommended by the Audit Committee of the Board of Directors. The reports of Deloitte & Touche LLP on the consolidated financial statements of the Company for either of the two most recent fiscal years did not contain any adverse opinion or disclaimer of opinion. Such reports were not qualified or modified as to uncertainty, audit scope, or accounting principles. During the immediately preceding two most recent fiscal years ended December 31, 2003 and 2002 and during the interim period through April 15, 2004, there were no reportable events as described in Item 304(a)(1)(v) of Regulation S-K or disagreements between Deloitte & Touche LLP and the Company on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolv ed to the satisfaction of Deloitte & Touche LLP, would have caused that firm to make reference to the subject matter of such disagreement in connection with its report on the Company's financial statements. By letter dated June 21, 2004 addressed to the Securities and Exchange Commission, Deloitte & Touche LLP indicated their concurrence with the foregoing statements.

On April 20, 2004, the Board of Directors of the Company approved the engagement of KPMG LLP as its new principal accountants, as recommended by the Audit Committee of the Board of Directors. During the two most recent fiscal years ended December 31, 2003 and 2002 and during the interim period through April 20, 2004, the Company did not consult with KPMG LLP regarding the application of accounting principles to a specified transaction, either completed or proposed, nor the type of audit opinion that might be rendered on the Company's financial statements, nor any matter that was either subject of a disagreement or a reportable event.

ITEM 9A. CONTROLS AND PROCEDURES

In accordance with an exemptive order dated November 30, 2004 by the SEC under Section 36 granting an Exemption from specified provisions of Exchange Act Rules 13a-1 and 15d-1, the Company has not included management's annual report on internal control over financial reporting, required by Item 308(a) of Regulation S-K nor the related attestation report of KPMG LLP, required by Item 308(b) of Regulation S-K at this time. The Company has elected to use this exemption and will file the required reports within the period specified in the exemptive order. There have been no material weaknesses identified related to internal control over financial reporting as of the date of this filing.

There have been no changes in the Company's internal controls over financial reporting (as defined in Rules 13a - 15(f) and 15d - 15(f) under the Exchange Act) during the quarter ended December 31, 2004 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

On December 15, 2004 the Company's Board of Directors approved amendments to the Employee Health Plan and the Excess Benefit Plan to grant lifetime health benefits to Robert L. Moody, Chairman of the Board, Harry L. Edwards, retired Company President and Chief Operating Officer, and Ross R. Moody, current President and Chief Operating Officer. Included in the amendments are Eligible Dependents as defined in the Excess Benefit Plan. The Company recorded a liability in the amount of $0.2 million as of December 31, 2004 relative to these lifetime health benefits.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Identification of Directors

The following information as of January 31, 2005, is furnished with respect to each director. All terms expire in June of 2005.

	Principal Occupation During Last Five	First
Name of Director	Years and Directorships	Elected	Age
Robert L. Moody	Chairman of the Board and Chief Executive	1963	69
(1) (3)	Officer of the Company
Ross R. Moody	President and Chief Operating Officer of the	1981	42
(1) (3)	Company
Harry L. Edwards	Retired; Former President and Chief	1969	83
(4)	Operating Officer of the Company,
	Austin, Texas
Stephen E. Glasgow	Partner, Tangent Development	2004	42
(2) (4)	Austin, Texas
E. Douglas McLeod	Director of Development, The Moody	1979	63
	Foundation, Galveston, Texas
Charles D. Milos	Senior Vice President of the Company	1981	59
(1) (3)
Frances A. Moody-Dahlberg	Executive Director,	1990	35
	The Moody Foundation,
	Dallas, Texas
Russell S. Moody	Investments, League City, Texas	1988	43
Louis E. Pauls, Jr.	President, Louis Pauls & Company;	1971	69
(2)	Investments, Galveston, Texas
E. J. Pederson	Executive Vice President,	1992	57
(2) (4)	The University of Texas
	Medical Branch, Galveston, Texas

(1)  Member of Executive Committee;  (2) Member of Audit Committee;  (3) Member of Investment Committee;  (4) Member of Compensation and Stock Option Committee.

Identification of Executive Officers

The following is a list of the Company's executive officers, their ages, and their positions and offices as of January 31, 2005.

Name of Officer	Age	Position (Year elected to position)
Robert L. Moody	69	Chairman of the Board and Chief Executive
		Officer (1963-1968, 1971-1980, 1981), Director
Ross R. Moody	42	President and Chief Operating Officer (1992), Director
Jay C. Bugg	49	Senior Vice President - Chief Marketing Officer (2002)
Richard M. Edwards	52	Senior Vice President - International Marketing (1990)
Paul D. Facey	53	Senior Vice President - Chief Actuary (1992)
Charles D. Milos	59	Senior Vice President - Mortgage Loan and Real Estate (1990), Director
James P. Payne	60	Senior Vice President - Secretary (1998)
Brian M. Pribyl	46	Senior Vice President - Chief Financial & Administrative
		Officer and Treasurer (2001)
Patricia L. Scheuer	53	Senior Vice President - Chief Investment Officer (1992)

There are no arrangements or understandings pursuant to which any officer was elected. All officers hold office for a term of one year or until their successors are elected and qualified, unless otherwise specified by the Board of Directors.

Identification of Certain Significant Employees

In addition to the Executive Officers identified above, the Company considers James R. Naiser to be a significant employee. Mr. Naiser was a Senior Programmer Analyst with Electronic Data Systems from 1967 to 1972 and a Senior Systems Analyst with TCC, Inc., from 1972 to 1977. He joined the Company in 1977 as a programmer, was made an Assistant Vice President in 1980, Vice President in 1984, and was promoted to his current position of Vice President-Chief Information Officer effective August 25, 2003.

Family Relationships

Robert L. Moody is the father of Frances A. Moody-Dahlberg, Ross R. Moody, and Russell S. Moody, and the brother-in-law of E. Douglas McLeod. Harry L. Edwards is the father of Richard M. Edwards.

Business Experience

All of the Executive Officers listed above have served in various executive capacities with the Company for more than five years, with the exception of the following:

Mr. Pribyl was an audit manager for Price Waterhouse from 1983 to 1990. He was Executive Vice President-Chief Financial Officer, Treasurer & Secretary of Interstate Assurance Company from July, 1990 until April, 2001.

Mr. Bugg was Vice President-Sales of Southland Life from 1986 to 1994; Vice President-Sales of Jefferson Pilot Financial from 1994 to 1998; and Managing Director of Allmerica Financial from 1998 to 2001. He joined the Company in 2001 as a Marketing Vice President and was promoted to the position shown during 2002.

Involvement in Certain Legal Proceedings

During the past five years there have been no criminal proceedings, judgments, injunctions or bankruptcy petitions material to an evaluation of the ability or integrity of any of the Company's directors or executive officers.

Audit Committee Financial Expert

The Company has at least one person that it believes is qualified to be the Audit Committee Financial Expert. However, the Company has not designated anyone as an Audit Committee Financial Expert at this time as the Company's Board of Directors has concluded that the ability of the Audit Committee to perform its duties would not be impaired by the failure to designate one of the committee members as an "Audit Committee Financial Expert" if it's members otherwise satisfied the NASDAQ standards and rules and regulations of the SEC.

Identification of Audit Committee

The Audit Committee of the Board of Directors consists of three non-employee directors named below. The committee is primarily responsible for oversight of the Company's financial statements and controls; assessing and ensuring the independence, qualifications and performance of the independent auditors; approving the independent auditors services and fees; reviewing the Company's financial risk assessment process, and ethical, legal, and regulatory compliance programs; and reviewing and approving the annual audited financial statements for the Company before issuance.

Audit Committee Members:

Louis E. Pauls, Jr., Chairman

Stephen E. Glasgow

E. J. Pederson

Code of Ethics

The Company has adopted a Code of Ethics and Conduct for all directors, officers, and employees. This Code is intended to comply with the requirement of the Federal Securities Laws and the requirements of NASDAQ. The Code of Ethics and Conduct has been posted to the Company's website at www.nationalwesternlife.com and is available upon request.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

				Annual Compensation
								Other Annual	Long-Term		All Other
	Name and			Salary		Bonus		Compensation	Compensation		Compensation
	Principal Position	Year		(A)		(B)		(C)	(D)		(E)
1	Robert L. Moody	2004	$	1,496,364	$	-	$	-	20,000	$	611,101
	Chairman of the Board	2003		1,390,453		-		90,152	-		530,517
	and Chief Executive Officer	2002		1,336,385		-		-	-		485,860
2	Ross R. Moody	2004		540,322		128,270		-	10,000		31,147
	President and Chief	2003		500,619		45,432		-	-		31,558
	Operating Officer	2002		479,015		-		-	-		47,913
3	Jay C. Bugg	2004		191,260		190,784		-	2,000		11,459
	Senior Vice President -	2003		183,431		364,667		-	-		24,094
	Chief Marketing Officer	2002		125,638		118,500		-	-		11,307
4	Richard M. Edwards	2004		188,335		156,524		-	2,000		11,271
	Senior Vice President -	2003		180,616		147,293		-	-		17,847
	International Marketing	2002		179,047		177,161		-	-		21,348
5	Brian M. Pribyl	2004		221,805		67,075		-	2,000		12,057
	Senior Vice President -	2003		207,310		36,419		-	-		13,500
	Chief Financial and	2002		192,304		24,192		-	-		12,709
	Administrative Officer
	and Treasurer

Notes to Summary Compensation Table:

(A) Salary includes directors' fees from National Western Life Insurance Company and its subsidiaries.

(B) Bonuses include employment and performance related bonuses.

(C) Other annual compensation in 2003 includes claims paid by the Company's Group Excess Benefit Plan on the behalf of Robert L. Moody, totaling $90,152.

(D) Represents number of securities underlying stock options granted under the National Western Life Insurance Company 1995 Stock and Incentive Plan.

(E) All other compensation includes primarily employer contributions made to the Company's 401(k) Plan and Non-Qualified Deferred Compensation Plan on behalf of the employee. In addition, this item also includes taxable income for Robert L. Moody of approximately $581,000, $503,000, and $459,000 in 2004, 2003, and 2002, respectively, related to life insurance benefits under policies owned by the Company on Mr. Moody's life which have been assigned to Mr. Moody by the Company. Further included are various expense allowances for Ross R. Moody in 2002 of approximately $19,000.

Option/SAR Grants Table

During 1995 the Company adopted the National Western Life Insurance Company 1995 Stock and Incentive Plan ("Plan"). The purpose of the Plan is to align the personal financial incentives of key personnel with the long-term growth of the Company and the interests of the Company's stockholders through the ownership and performance of the Company's Class A, $1.00 par value, common stock, to enhance the Company's ability to retain key personnel, and to attract outstanding prospective employees and directors. The Plan was effective as of April 21, 1995, and had a termination date of April 20, 2005. The plan was amended on June 25, 2004 to extend the termination date to April 20, 2010. The number of shares of Class A, $1.00 par value, common stock which may be issued under the Plan, or as to which stock appreciation rights or other awards may be granted, may not exceed 300,000. These shares may be authorized and unissued shares or treasury shares.

All of the employees of the Company and its subsidiaries are eligible to participate in the Plan. In addition, directors of the Company, other than Compensation and Stock Option Committee members, are eligible for restricted stock awards, incentive awards, and performance awards.

The Committee approved the issuance of nonqualified stock options to selected officers of the Company during 2004 totaling 56,750. Additionally, during 2004 the Committee granted 10,000 nonqualified, nondiscretionary stock options to Company directors. The directors' stock options vest 20% annually following one full year of service to the Company from the date of grant. The officers' stock options vest 20% annually following three full years of service to the Company from the date of grant. The exercise prices of the stock options were set at the fair market values of the common stock on the dates of grant. Nonqualified stock options were not issued in 2003 or 2002.

		% of Total						Potential Realizable
		Options						Value at Assumed Annual
	Number of	Granted to						Rates of Stock
	Securities	Employees						Price Appreciation for
	Underlying	and Directors						Option Term
	Options	in Fiscal			Exercise	Expiration
Name	Granted	Year			Price	Date		5%		10%
1  Robert L. Moody	20,000	30.0	%	$	150	4-22-2014	$	1,885,705	$	4,778,182
	1,000	1.5			150	6-25-2014		94,318		239,011
2  Ross R. Moody	10,000	15.0			150	4-22-2014		942,852		2,389,091
	1,000	1.5			150	6-25-2014		94,319		239,011
3  Jay C. Bugg	2,000	3.0			150	4-22-2014		188,570		477,818
4  Richard M. Edwards	2,000	3.0			150	4-22-2014		188,570		477,818
5  Brian M. Pribyl	2,000	3.0			150	4-22-2014		188,570		477,818

Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table

Detailed below is stock option information for the Company's named executive officers for the year ended December 31, 2004.

				Number of
	Shares			Securities Underlying			Value of Unexercised
	Acquired			Unexercised Options			In-The-Money Options
	On		Value
Name	Exercise		Realized	Exercisable	Unexercisable		Exercisable		Unexercisable
1  Robert L. Moody	13,000	$	1,571,949	46,900	33,000	$	4,286,801	$	1,206,304
2  Ross R. Moody	8,000		610,111	10,600	22,100		727,326		975,683
3  Jay C. Bugg	-		-	-	2,000		-		33,000
4  Richard M. Edwards	1,060		65,140	-	3,540		-		140,970
5  Brian M. Pribyl	280		14,467	-	3,120		-		116,294

Long-Term Incentive Plan Awards Table

None.

Defined Benefit or Actuarial Plan Disclosure

The Company currently sponsors two employee defined benefit plans for the benefit of its employees and officers. A brief description and formulas by which benefits are determined for each of the plans are detailed as follows.

Qualified Defined Benefit Plan - This plan covers all full-time employees and officers of the Company and provides benefits based on the participant's years of service and compensation. The Company makes annual contributions to the plan that comply with the minimum funding provisions of the Employee Retirement Income Security Act.

Annual pension benefits for those employees who became eligible participants prior to January 1, 1991, are calculated as the sum of the following:

(1) 50% of the participant's final 5-year average annual eligible compensation at December 31, 1990, less 50% of their primary social security benefit determined at December 31, 1990; this net amount is then prorated for less than 15 years of benefit service at normal retirement date. This result is multiplied by a fraction which is the participant's years of benefit service at December 31, 1990, divided by the participant's years of benefit service at normal retirement date.

(2) 1.5% of the participant's eligible compensation earned during each year of benefit service after December 31, 1990.

Annual pension benefits for those employees who become eligible participants on or subsequent to January 1, 1991, are calculated as 1.5% of their compensation earned during each year of benefit service.

Non-Qualified Defined Benefit Plan - This plan covers the Chairman of the Company, the President of the Company, those officers who were in the position of senior vice president or above prior to 1991, and other employees who have been designated by the President of the Company as being in the class of persons who are eligible to participate in the plan. This plan provides benefits based on the participant's years of service and compensation. However, no minimum funding standards are required.

The benefit to be paid pursuant to this plan to a participant who retires at his normal retirement date other than the current Chairman of the Company shall be equal to (a) minus (b) minus (c), but the benefit may not exceed (d) minus (b) where:

(a) is the benefit which would have been payable at the participant's normal retirement date under the terms of the Qualified Defined Benefit Plan as of December 31, 1990, as if that plan had continued without change and without regard to Internal Revenue Code Section 401(a) (17) and 415 limits, and,

(b) is the benefit which actually becomes payable under the terms of the Qualified Defined Benefit Plan at the participant's normal retirement date, and,

(c) is the actuarially equivalent life annuity which may be provided by an accumulation of 2% of the participant's compensation for each year of service on and after January 1, 1991, accumulated at an assumed interest rate of 8.5% to the participant's normal retirement date, and,

(d) is the benefit which would have been payable at the participant's normal retirement date under the terms of the Qualified Defined Benefit Plan a of December 31, 1990, as if that plan had continued without change and without regard to Internal Revenue Code Section 401(a)(17) and 415 limits, except that the proration over 15 years shall instead be calculated over 30 years.

For the current President of the Company, the above provisions are applied by substituting April 1, 1991 for January 1, 1991 and by calculating a benefit under the terms of the Qualified Defined Benefit Plan as in effect as of December 31, 1990 (using his service and compensation from and after April 1, 1991) even though he did not participate in the Qualified Defined Benefit Plan until after December 31, 1990.

The Chairman of the Company, Robert L. Moody, is currently receiving in-service benefits from this plan. The benefit that Mr. Moody began receiving as of his normal retirement date pursuant to the plan was equal to (a) minus (b) minus (c) where:

(a) was his years of service (up to 45), multiplied by 1.66667%, and then multiplied by the excess of his eligible compensation over his primary social security benefit under the terms of the Qualified Defined Benefit Plan as of December 31, 1990, as if that plan had continued without change and without regard to Internal Revenue Code Section 401(a) (17) and 415 limits, and,

(b) was the benefit actually payable to him under the terms of the Qualified Defined Benefit Plan, and,

(c) was the actuarially equivalent life annuity provided by an accumulation of 2% of his compensation for each year of service on and after January 1, 1991, accumulated at an assumed interest rate of 8.5% to his normal retirement date.

This benefit was increased for additional service and changes in eligible compensation through December 31, 2004. The benefit was frozen as of December 31, 2004 in connection with plan changes required by the American Jobs Creation Act of 2004. However, the Company expects that a new nonqualified defined benefit plan will be adopted in 2005 to provide for additional benefit accruals and payments to Mr. Moody in connection with his continued employment after December 31, 2004.

To comply with the American Jobs Creation Act of 2004, the Company expects that it will freeze benefit accruals as of December 31, 2004 for all other participants in this plan. However, the Company also expects that it will adopt a new nonqualifed defined benefit plan to provide for substantially similar benefit accruals with respect to service and compensation after December 31, 2004.

The estimated annual benefits payable to the named executive officers upon retirement, at normal retirement age, or, in the case of Robert L. Moody, currently being paid, for the Company's defined benefit plans are as follows:

		Estimated Annual Benefits
		Qualified	Non-Qualified
		Defined	Defined
Name		Benefit Plan	Benefit Plan	Totals
1  Robert L. Moody	$	143,684	713,258	856,942
2  Ross R. Moody		112,118	-	112,118
3  Jay C. Bugg		56,890	-	56,890
4  Richard M. Edwards		75,225	-	75,225
5  Brian M. Pribyl		70,902	-	70,902

Compensation of Directors

All directors of the Company currently receive $22,200 a year and $500 for each board meeting attended. They are also reimbursed for actual travel expenses incurred in performing services as directors. An additional $500 is paid for each committee meeting attended. However, a director attending multiple meetings on the same day receives only one meeting fee. The amounts paid pursuant to these arrangements are included in the summary compensation table of this item. The directors and their dependents are also eligible to participate in the Company's group insurance program.

Directors of the Company, other than Compensation and Stock Option Committee members, are eligible for restricted stock awards, incentive awards, and performance awards under the National Western Life Insurance Company 1995 Stock and Incentive Plan. Company directors, including members of the Compensation and Stock Option Committee, are eligible for nondiscretionary stock options. On June 25, 2004, the stockholders approved the issuance of 10,000 nonqualified stock options to Company directors, with each director receiving 1,000 stock options.

Directors of the Company's subsidiary, NWL Investments, Inc., receive $250 annually. Nonemployee directors of the Company's subsidiary, NWL Services, Inc., receive $1,000 per board meeting attended. Directors of the Company's downstream subsidiaries, Regent Care General Partner, Inc., and Regent Care Operations General Partner, Inc., receive $250 per board meeting attended. Directors of the Company's downstream subsidiary, Regent Care Limited Partner, Inc. receive $500 per board meeting attended.

Employment Contracts and Termination of Employment and Change-in-Control Arrangements

Robert L. Moody, Ross R. Moody, and Brian M. Pribyl, all named executive officers, had a bonus compensation agreement with the Company during 2004. The contract consisted of several components in which certain levels of Company performance related to life insurance premiums, annuity contract deposits, expense management, and overall profitability were required in order to earn the bonus. The compensation bonus related to this agreement will be paid in 2005.

Jay C. Bugg, also a named executive officer, had a bonus compensation agreement with the Company during 2004. The agreement consisted of several components in which certain levels of Company performance relating to domestic life insurance and annuity contract persistency rates, domestic life insurance premiums, domestic annuity contract deposits, and related expenses were required in order to earn bonuses. Substantially all of the compensation bonus related to this agreement was paid in 2004 and is disclosed in the summary compensation table of this item.

Richard M. Edwards, also a named executive officer, had a bonus compensation contract with the Company during 2004. The contract consisted of several components in which certain levels of Company performance relating to international life insurance persistency rates, international life insurance premiums, and related expenses were required in order to earn bonuses. The compensation bonus related to this agreement will be paid in 2005.

Report on Repricing of Options/SARs

None.

Compensation Committee Interlocks and Insider Participation

The Company's Board of Directors performs the functions of an executive compensation committee. The Board is responsible for developing and administering the policies that determine executive compensation. Additionally, a separate Compensation and Stock Option Committee, comprised of outside directors, is charged with the responsibility of establishing and reviewing appropriate Company policy relating to the compensation of the three highest compensated executive officers of the Company. The Committee has a mandate to recommend salaries for the three highest compensated executive officers of the Company for the ensuing year, and also performs various projects relating to executive compensation at the request of the Board of Directors. Those directors serving on the Committee include Harry L. Edwards, Stephen E. Glasgow, and E. J. Pederson.

Mr. Robert Moody, Mr. Ross Moody, and Mr. Charles Milos served as directors and also served as officers and employees of National Western Life Insurance Company. Mr. Ross Moody served as an officer and director of the Company's wholly owned subsidiaries, The Westcap Corporation, NWL Investments, Inc., NWL Financial, Inc., NWL Services, Inc., Regent Care Limited Partner, Inc., and Regent Care Operations Limited Partner, Inc., and served as an officer of Westcap Holdings, LLC, a limited liability company whose sole member is The Westcap Corporation. Mr. Charles Milos served as an officer and director of The Westcap Corporation, Regent Care General Partner, Inc., and Regent Care Operations General Partner, Inc. and as an officer of NWL Investments, Inc., NWL Financial, Inc., NWL Services, Inc., Regent Care Limited Partner, Inc., and Regent Care Operations Limited Partner, Inc., and served as an officer of Westcap Holdings, LLC, a limited liability company whose sole member is The Westcap C orporation. Mr. Robert Moody was an officer of NWL Services, Inc. and Regent Care Limited Partner, Inc. Mr. Harry Edwards served as a director and was formerly an officer of National Western Life Insurance Company. Mr. Arthur Dummer was previously an officer and director of NWL Services, Inc., and Regent Care Operations General Partner, Inc., and a director of Regent Care General Partner, Inc. The Donner Company, 100% owned by Mr. Dummer, was paid $93,000 in 2004 pursuant to an agreement between The Donner Company and a reinsurance intermediary relating to a reinsurance contract between the Company and certain life insurance insurers.

No compensation committee interlocks exists with other unaffiliated companies.

Board Compensation Committee Report on Executive Compensation

The Company's Board of Directors determines and approves executive compensation, along with developing and administering the policies that determine executive compensation.

Executive compensation, including that of the chief executive officer, is comprised primarily of a base salary. The salary is adjusted annually based on a performance review of the individual as well as the performance of the Company as a whole. The president and chief executive officer make recommendations annually to the Board of Directors regarding such salary adjustments. The review encompasses the following factors: (1) contributions to the Company's short and long-term strategic goals, including financial goals such as Company revenues and earnings, (2) achievement of specific goals within the individual's realm of responsibility, (3) development of management and employees within the Company, and (4) performance of leadership within the industry. These policies are reviewed periodically by the Board of Directors to ensure the support of the Company's overall business strategy and to attract and retain key executives.

As previously described, a separate Compensation and Stock Option Committee, comprised of outside directors, determines compensation for the three highest-paid Company executives. The policies used by the Compensation and Stock Option Committee in determining compensation are similar to those described above for all other Company executives.

Performance Graph

The following graph compares the change in the Company's cumulative total stockholder return on its common stock with the NASDAQ - U.S. Companies Index and the NASDAQ Insurance Stock Index. The graph assumes that the value of the Company's common stock and each index was $100 at December 31, 1999, and that all dividends were reinvested.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

Set forth below is certain financial information concerning persons who are known by the Company to own beneficially more than 5% of any class of the Company's common stock on December 31, 2004.

Name and Address	Title	Amount and Nature	Percent
of	of	of	of
Beneficial Owners	Class	Beneficial Ownership	Class
Robert L. Moody	Class A Common	1,159,096	34.25	%
2302 Post Office Street, Suite 702	Class B Common	198,074	99.04	%
Galveston, Texas
Tweedy Browne Company	Class A Common	280,482	8.29	%
350 Park Avenue
New York, New York
Westport Asset Management, Inc.	Class A Common	266,040	7.86	%
253 Riverside Avenue
Westport, Connecticut
FMR Corp.	Class A Common	241,927	7.15	%
82 Devonshire Street
Boston, Massachusetts

Article Four of the Articles of Incorporation of the Company provides that the Class A stockholders have the exclusive right to elect one-third (1/3) of the members of the Board of Directors, plus one director for any remaining fraction, and the Class B stockholders have the exclusive right to elect the remaining members of the Board of Directors. In view of Robert L. Moody's ownership of more than 99% of the Class B stock outstanding, as well as Mr. Moody's ownership of approximately 35% of the Class A stock outstanding (see Security Ownership table above), Mr. Moody holds the voting power to elect a majority of the members of the Board of Directors. The Company is considered to be a controlled company, and Mr. Moody is the controlling stockholder.

Security Ownership of Management

The following table sets forth as of December 31, 2004, information concerning the beneficial ownership of the Company's common stock by all directors, named executive officers, and all directors and executive officers of the Company as a group.

	Title	Amount and Nature	Percent
Directors	of	of	of
and Officers	Class	Beneficial Ownership	Class
Directors and Named Executive Officers:
Robert L. Moody	Class A Common	1,159,096	34.25	%
	Class B Common	198,074	99.04	%
Ross R. Moody	Class A Common*	625	.02	%
	Class B Common*	482	.04	%
Charles D. Milos	Class A Common	528	.02	%
	Class B Common	-	-
Directors:
Harry L. Edwards	Class A Common	20	-
	Class B Common	-	-
Stephen E. Glasgow	Class A Common	-	-
	Class B Common	-	-
E. Douglas McLeod	Class A Common	10	-
	Class B Common	-	-
Frances A. Moody-Dahlberg	Class A Common	1,850	.05	%
	Class A Common*	625	.02	%
	Class B Common*	482	.24	%
Russell S. Moody	Class A Common	1,850	.05	%
	Class A Common*	625	.02	%
	Class B Common*	482	.24	%
Louis E. Pauls, Jr.	Class A Common	10	-
	Class B Common	-	-
E. J. Pederson	Class A Common	100	-
	Class B Common	-	-
Named Executive Officers:
Jay C. Bugg	Class A Common	-	-
	Class B Common	-	-
Richard M. Edwards	Class A Common	-	-
	Class B Common	-	-
Brian M. Pribyl	Class A Common	-	-
	Class B Common	-	-
Directors and Executive	Class A Common	1,165,601	34.44	%
Officers as a Group	Class B Common	199,520	99.76	%

* Shares are owned indirectly through the Three R Trusts. The Three R Trusts are four Texas trusts for the benefit of the children of Mr. Robert L. Moody (Robert L. Moody, Jr., Ross R. Moody, Russell S. Moody, and Frances A. Moody-Dahlberg). The Three R Trusts own a total of 2,500 Class A common stock shares and 1,926 Class B common stock shares.

Changes in Control

None.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others

Robert L. Moody, Jr. ("Mr. Moody, Jr.") is the son of Robert L. Moody, the Company's Chairman and Chief Executive Officer, and is the brother of Ross R. Moody, the Company's President and Chief Operating Officer, and of Russell S. Moody and Frances A. Moody-Dahlberg who serve as directors of National Western. Mr. Moody, Jr. is employed by the Company in an agency marketing position for which he is paid an annual salary of $14,000 and is eligible to participate in the Company's benefit plans.. In addition, Mr. Moody, Jr. wholly owns an insurance marketing organization that maintains agency contracts with National Western pursuant to which agency commissions are paid in accordance with the Company's standard commission schedules. Mr. Moody, Jr. also maintains an independent agent contract with National Western for policies personally sold under which commissions are paid in accordance with standard commission schedules. In 2004, commissions paid under these agency contracts aggregated appro ximately $166,000. In conjunction with these agency contracts, Mr. Moody, Jr. may be eligible to attend Company sales conferences and functions based upon meeting published minimum levels of qualifying sales production. In his capacity as an insurance marketing organization with the Company, Mr. Moody also receives product development fees associated with a product line of the Company which amounted to $82,000 in 2004.

Mr. Moody, Jr. further serves as the agent of record for several of the Company's benefit plans including the self-insured health plan for which Mr. Moody provides utilization review services through a wholly owned utilization review company. In 2004, amounts paid to Mr. Moody, Jr. as commissions and service fees pertaining to the Company's benefit plans approximated $45,000.

Arthur O. Dummer, who was a director of National Western during part of 2004, wholly owns The Donner Company. During 2004, The Donner Company was paid $93,000 pursuant to an agreement with a reinsurance intermediary relating to a reinsurance contract between the Company and certain life insurance reinsurers.

During 2004, management fees totaling $330,000 were paid to Regent Management Services, Limited Partnership ("RMS") for services provided to a downstream nursing home subsidiary of National Western. RMS is 1% owned by general partner RCC Management Services, Inc. ("RCC"), and 99% owned by limited partner, Three R Trusts. RCC is 100% owned by the Three R Trusts. The Three R Trusts are four Texas trusts for the benefit of the children of Robert L. Moody (Robert L. Moody, Jr., Ross R. Moody, Russell S. Moody, and Frances A. Moody-Dahlberg). Charles D. Milos, Senior Vice President-Mortgage Loans and Real Estate, and Director of the Company, is a Director and Vice President of RCC. Ellen C. Otte, Assistant Secretary of the Company, is a Director and Secretary of RCC.

The Company holds a common stock investment of approximately 9.4% of the issued and outstanding shares of Moody Bancshares, Inc. at December 31, 2004. Moody Bancshares, Inc. owns 100% of the outstanding shares of Moody Bank Holding Company, Inc., which owns approximately 98% of the outstanding shares of The Moody National Bank of Galveston ("MNB"). The Company utilizes MNB for certain bank custodian services as well as for certain administrative services with respect to the Company's defined benefit and contribution plans. Robert L. Moody serves as Chairman of the Board and Chief Executive Officer of MNB. The ultimate controlling person of MNB is the Three R Trusts. During 2004, fees totaling $147,000 were paid to MNB with respect to these services.

Indebtedness of Management

The Company holds a loan in the amount of $3.7 million with a contractual interest rate of 7% at December 31, 2004 issued to TMNY, LLC. As of the reporting date, Robert L. Moody owned 20.5% of TMNY, LLC. The stated maturity on this loan is December 29, 2006.

NWL Services, Inc., a wholly owned subsidiary of the Company, is the beneficial owner of a life interest (1/8 share) in the net income of the trust estate of Libbie Shearn Moody. The trustee of this estate is MNB.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table represents aggregate fees approved by the Audit Committee for the audits of the fiscal years ended December 31, 2004 and 2003 by KPMG LLP and Deloitte & Touche LLP, the Company's principal accounting firms, respectively.

		Fiscal Year Ended
		2004	2003
		(In thousands)
Financial statement audit fees(a)	$	205	151
Benefit plans audit fee		18	10
Tax fees (b)		15	8
All other fees (c)		-	-
Total fees	$	238	169

(a)  In addition to the approved fees, the Company also paid Deloitte & Touche LLP audit fees of $24,000 in 2004 for first quarter review services prior to retaining KPMG LLP as the Company's principal accountants. Further, through the date of this filing, the Company has been billed approximately $407,000 related to attestation services and the independent audit of the Company's internal controls over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002 (Item 308(a) of Regulation S-K). Of this amount, $170,000 was incurred and expensed in the Company's financial statements for the year ended December 31, 2004.
(b)  Primarily tax reviews and advice
(c)  Advisory services relating to reporting compliance

Audit Fees Pre-approval Policy

The Audit Committee has adopted a formal policy concerning approval of audit and non-audit services to be provided by the independent auditor to the Company. The policy requires that all services the Company's independent auditor may provide to the Company, including audit services and permitted audit-related and non-auditor services, be pre-approved by the Committee. The Committee approved all audit and non-audit services provided by Deloitte & Touche LLP and KPMG LLP during 2004.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K

(a) 1.  Listing of Financial Statements

See Attachment A, Index to Financial Statements and Schedules, on page __ for a list of financial statements included in this report.

(a) 2.  Listing of Financial Statement Schedules

See Attachment A, Index to Financial Statements and Schedules, on page __ for a list of financial statement schedules included in this report.

All other schedules are omitted because they are not applicable, not required, or because the information required by the schedule is included elsewhere in the financial statements or notes.

(a) 3.  Listing of Exhibits

The exhibits listed below, as part of Form 10-K, are numbered in accordance with the numbering used in Item 601 of regulation S-K of The Securities and Exchange Commission.

Exhibit 2	-	Order Confirming Third Amended Joint Consensual Plan Of Reorganization Proposed By The Debtors And The Official Committee Of Unsecured Creditors (As Modified As Of August 28, 1998) (incorporated by reference to Exhibit 2 to the Company's Form 8-K dated August 28, 1998).
Exhibit 3(a)	-	Restated Articles of Incorporation of National Western Life Insurance Company dated April 10, 1968 (incorporated by reference to Exhibit 3(a) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 3(b)	-	Amendment to the Articles of Incorporation of National Western Life Insurance Company dated July 29, 1971 (incorporated by reference to Exhibit 3(b) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 3(c)	-	Amendment to the Articles of Incorporation of National Western Life Insurance Company dated May 10, 1976 (incorporated by reference to Exhibit 3(c) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 3(d)	-	Amendment to the Articles of Incorporation of National Western Life Insurance Company dated April 28, 1978 (incorporated by reference to Exhibit 3(d) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 3(e)	-	Amendment to the Articles of Incorporation of National Western Life Insurance Company dated May 1, 1979 (incorporated by reference to Exhibit 3(e) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 3(f)	-	Bylaws of National Western Life Insurance Company as amended through April 24, 1987 (incorporated by reference to Exhibit 3(f) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 10(a)	-	National Western Life Insurance Company Non-Qualified Defined Benefit Plan dated July 26, 1991 (incorporated by reference to Exhibit 10(a) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 10(c)	-	National Western Life Insurance Company Non-Qualified Deferred Compensation Plan, as amended and restated, dated March 27, 1995 (incorporated by reference to Exhibit 10(c) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 10(d)	-	First Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective July 1, 1995 (incorporated by reference to Exhibit 10(d) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 10(e)	-	National Western Life Insurance Company 1995 Stock and Incentive Plan (incorporated by reference to Exhibit 10(e) to the Company's Form 10-K for the year ended December 31, 1995).
Exhibit 10(f)	-	First Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective December 17, 1996 (incorporated by reference to Exhibit 10(f) to the Company's Form 10-K for the year ended December 31, 1996).
Exhibit 10(g)	-	Second Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective December 17, 1996 (incorporated by reference to Exhibit 10(g) to the Company's Form 10-K for the year ended December 31, 1996).
Exhibit 10(h)	-	Second Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective December 17, 1996 (incorporated by reference to Exhibit 10(h) to the Company's Form 10-K for the year ended December 31, 1996).
Exhibit 10(i)	-	Third Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective December 17, 1996 (incorporated by reference to Exhibit 10(i) to the Company's Form 10-K for the year ended December 31, 1996).
Exhibit 10(j)	-	Fourth Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective June 20, 1997 (incorporated by reference to Exhibit 10(j) to the Company's Form 10-K for the year ended December 31, 1997).
Exhibit 10(k)	-	First Amendment to the National Western Life Insurance Company 1995 Stock and Incentive Plan effective June 19, 1998 (incorporated by reference to Exhibit 10(k) to the Company's Form 10-Q for the quarter ended June 30, 1998).
Exhibit 10(m)	-	Fifth Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective July 1, 1998 (incorporated by reference to Exhibit 10(m) to the Company's Form 10-Q for the quarter ended September 30, 1998).
Exhibit 10(n)	-	Sixth Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective August 7, 1998 (incorporated by reference to Exhibit 10(n) to the Company's Form 10-K for the year ended December 31, 1998).
Exhibit 10(o)	-	Third Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective August 7, 1998 (incorporated by reference to Exhibit 10(o) to the Company's Form 10-K for the year ended December 31, 1998).
Exhibit 10(p)	-	Exchange Agreement by and among National Western Life Insurance Company, NWL Services, Inc., Alternative Benefit Management, Inc., and American National Insurance Company effective November 23, 1998 (incorporated by reference to Exhibit 10(p) to the Company's Form 10-K for the year ended December 31, 1998).
Exhibit 10(s)	-	Seventh Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective August 7, 1998 (incorporated by reference to Exhibit 10(s) to the Company's Form 10-K for the year ended December 31, 2000).
Exhibit 10(u)	-	Eighth Amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective December 1, 2000 (incorporated by reference to Exhibit 10(u) to the Company's Form 10-K for the year ended December 31, 2000).
Exhibit 10(v)	-	Fourth Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective December 1, 2000 (incorporated by reference to Exhibit 10(v) to the Company's Form 10-K for the year ended December 31, 2000).
Exhibit 10(w)	-	Second Amendment to the National Western Life Insurance Company 1995 Stock and Incentive Plan (incorporated by reference to Exhibit 10(w) to the Company's Form 10-Q for the quarter ended September 30, 2001).
Exhibit 10(z)	-	Fifth Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective January 1, 2001 (incorporated by reference to Exhibit 10(z) to the Company's Form 10-K for the year ended December 31, 2001).
Exhibit 10(ad)	-	Supplement to exchange agreement by and between National Western Life Insurance Company and Alternative Benefit Management, Inc., executed on April 12, 2002 (incorporated by reference to Exhibit 10(ad) to the Company's Form 10-Q for the quarter ended September 30, 2002).
Exhibit 10(ae)	-	Sixth Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective August 23, 2002 (incorporated by reference to Exhibit 10(ae) to the Company's Form 10-Q for the quarter ended September 30, 2002).
Exhibit 10(af)	-	Seventh Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective October 18, 2002 (incorporated by reference to Exhibit 10(af) to the Company's Form 10-Q for the quarter ended September 30, 2002).
Exhibit 10(ai)	-	Eighth Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective January 1, 2003 (incorporated by reference to Exhibit 10(ai) to the Company's Form 10-K for the year ended December 31, 2002).
Exhibit 10(aj)	-	Bonus program by and between National Western Life Insurance Company and Domestic Marketing officers of National Western Life Insurance Company for the year ending December 31, 2003 (incorporated by reference to Exhibit 10(aj) to the Company's Form 10-Q for the quarter ended March 31, 2003).
Exhibit 10(ak)	-	Bonus program by and between National Western Life Insurance Company and International Marketing Officers of National Western Life Insurance Company for the year ending December 31, 2003 (incorporated by reference to Exhibit 10(ak) to the Company's Form 10-Q for the quarter ended March 31, 2003).
Exhibit 10(al)	-	Bonus program by and between National Western Life Insurance Company and certain Executive Officers of National Western Life Insurance Company for the year ending December 31, 2003 (incorporated by reference to Exhibit 10(al) to the Company's Form 10-Q for the quarter ended June 30, 2003).
Exhibit 10(am)	-	Ninth amendment to the National Western Life Insurance Company Non-Qualified Deferred Compensation Plan effective November 1, 2003 (incorporated by reference to Exhibit 10(am) to the Company's Form 10-K for the year ended December 31, 2003).
Exhibit 10(an)	-	Ninth amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective December 5, 2003 (incorporated by reference to Exhibit 10(an) to the Company's Form 10-K for the year ended December 31, 2003.)
Exhibit 10(ao)	-	Bonus program by and between National Western Life Insurance Company and Domestic Marketing officers of National Western Life Insurance Company for the year ending December 31, 2004 (incorporated by reference to Exhibit 10(ao) to the Company's Form 10-Q for the quarter ended March 31, 2004).
Exhibit 10(ap)	-	Bonus program by and between National Western Life Insurance Company and International Marketing Officers of National Western Life Insurance Company for the year ending December 31, 2004 (incorporated by reference to Exhibit 10(ap) to the Company's Form 10-Q for the quarter ended March 31, 2004).
Exhibit 10(aq)	-	Bonus program by and between National Western Life Insurance Company and certain Executive officers of National Western Life Insurance Company for the year ending December 31, 2004 (incorporated by reference to Exhibit 10(aq) to the Company's Form 10-Q for the quarter ended June 30, 2004).
Exhibit 10(ar)	-	Third Amendment to the National Western Life Insurance Company 1995 Stock and Incentive Plan (incorporated by reference to Exhibit 10(ar) to the Company's Form 10-Q for the quarter ended September 30, 2004).
Exhibit 10(as)	-	Amendment to the National Western Life Insurance Company Group Excess Benefit Plan effective December 15, 2004.
Exhibit 10(at)	-	The National Western Life Insurance Company Employee Health Plan was amended and restated effective August 20, 2004.
Exhibit 10(au)	-	Tenth Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan effective December 31, 2004.
Exhibit 16	-	Letter Regarding Change in Certifying Accountant (incorporated by reference to Exhibit 16 to the Company's Form 8-KA dated May 14, 2004).
Exhibit 21	-	Subsidiaries of the Registrant.
Exhibit 23(a)	-	Consent of KPMG LLP, for the year ended December 31, 2004.
Exhibit 23(b)	-	Consent of Deloitte & Touche LLP, for the years ended December 31, 2003 and 2002.
Exhibit 31(a)	-	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31(b)	-	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32(a)	-	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K

On November 8, 2004, the Company filed a Current Report on Form 8-K dated November 5, 2004 under Items 2.02 and 9.01 thereof in connection with a news release reporting National Western Life Insurance Company's operating and financial results for the third quarter of 2004. A copy of the news release was furnished with the Form 8-K.

(c) Exhibits

Exhibits required by Regulation S-K are listed as to location in the Listing of Exhibits in Item 15.(a)3. above. Exhibits not referred to have been omitted as inapplicable or not required.

(d) Financial Statement Schedules

The financial statement schedules required by Regulation S-K are listed as to location in Attachment A, Index to Financial Statements and Schedules, on page __ of this report.

ATTACHMENT A
Index to Financial Statements and Schedules
	Page
Report of Independent Registered Public Accounting Firm - KPMG LLP
Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP
Consolidated Balance Sheets, December 31, 2004 and 2003
Consolidated Statements of Earnings for the years ended December 31, 2004, 2003, and 2002
Consolidated Statements of Comprehensive Income for the years ended December 31, 2004, 2003, and 2002
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2004, 2003, and 2002
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003, and 2002
Notes to Consolidated Financial Statements
Schedule I - Summary of Investments Other Than Investments in Related Parties, December 31, 2004
Schedule V - Valuation and Qualifying Accounts for the years ended December 31, 2004, 2003, and 2002

All other schedules are omitted because they are not applicable, not required, or because the information required by the schedule is included elsewhere in the consolidated financial statements or notes.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
National Western Life Insurance Company
Austin, Texas

We have audited the accompanying consolidated balance sheet of National Western Life Insurance Company and subsidiaries (the "Company") as of December 31, 2004 and the related consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for the year then ended. In connection with our audits of the consolidated finanical statements, we have also audited the 2004 financial statement schedules I and V. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of National Western Life Insurance Company and subsidiaries as of December 31, 2004 and the results of their operations and their cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for two-tiered annuity products in 2004.

KPMG LLP

March 15, 2005
Austin, Texas

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
National Western Life Insurance Company
Austin, Texas

We have audited the accompanying consolidated balance sheet of National Western Life Insurance Company and subsidiaries (the "Company") as of December 31, 2003, and the related consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2003. Our audits also included the financial statement schedules listed in the accompanying Index as of and for the years ended December 31, 2003 and 2002. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of National Western Life Insurance Company and subsidiaries as of December 31, 2003, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for stock-based compensation in 2003.

DELOITTE & TOUCHE LLP

March 9, 2004
Dallas, Texas

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2003
(In thousands)
ASSETS		2004	2003
Investments:
Securities held to maturity, at amortized cost
(fair value: $3,367,112 and $2,924,347)	$	3,274,134	2,821,016
Securities available for sale, at fair value
(cost: $1,567,444 and $1,322,729)		1,635,247	1,387,414
Mortgage loans, net of allowance for possible
losses ($368 and $660)		124,712	152,035
Policy loans		88,448	89,757
Derivatives		42,156	44,849
Other long-term investments		45,702	49,912
Total Investments		5,210,399	4,544,983
Cash and short-term investments		50,194	68,210
Deferred policy acquisition costs		582,218	558,455
Deferred sales inducements		62,240	40,940
Accrued investment income		58,272	53,979
Other assets		28,362	31,153
	$	5,991,685	5,297,720
See accompanying notes to consolidated financial statements.

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2003
(In thousands except share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY		2004	2003
LIABILITIES:
Future policy benefits:
Traditional life and annuity contracts	$	141,049	142,056
Universal life and annuity contracts		4,885,809	4,338,035
Other policyholder liabilities		75,237	62,499
Federal income tax liability:
Current		4,303	3,757
Deferred		38,754	8,409
Other liabilities		37,861	63,106
Total liabilities		5,183,013	4,617,862
COMMITMENTS AND CONTINGENCIES (Notes 4, 7, and 9)
STOCKHOLDERS' EQUITY:
Common stock:
Class A - $1 par value; 7,500,000 shares authorized; 3,384,215
and 3,346,685 shares issued and outstanding in 2004 and 2003		3,384	3,347
Class B - $1 par value; 200,000 shares authorized, issued,
and outstanding in 2004 and 2003		200	200
Additional paid-in capital		33,834	29,192
Accumulated other comprehensive income		25,419	23,453
Retained earnings		745,835	623,666
Total stockholders' equity		808,672	679,858
	$	5,991,685	5,297,720
See accompanying notes to consolidated financial statements.

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended December 31, 2004, 2003, and 2002
(In thousands except per share amounts)
		2004	2003	2002
Premiums and other revenue:
Life and annuity premiums	$	14,025	13,916	13,918
Universal life and annuity
contract revenues		89,513	80,964	76,173
Net investment income		315,843	298,974	236,714
Other income		11,259	7,061	6,726
Realized gains (losses) on investments		3,506	(1,647)	(16,144)
Total premiums and other revenue		434,146	399,268	317,387
Benefits and expenses:
Life and other policy benefits		34,613	37,180	31,299
Amortization of deferred policy acquisition costs		88,733	53,829	35,799
Universal life and annuity contract interest		173,315	176,374	150,479
Other operating expenses		35,441	48,776	36,938
Total benefits and expenses		332,102	316,159	254,515
Earnings before Federal income taxes and cumulative
effect of change in accounting principle		102,044	83,109	62,872
Federal income taxes		34,572	27,327	20,806
Earnings before cumulative effect of change in
accounting principle		67,472	55,782	42,066
Cumulative effect of change in accounting
principle, net of $29,452
of Federal income taxes		54,697	-	-
Net earnings	$	122,169	55,782	42,066
Basic Earnings Per Share:
Earnings before cumulative effect of change
in accounting principle	$	18.93	15.78	11.94
Cumulative effect of change in accounting principle		15.34	-	-
Net earnings	$	34.27	15.78	11.94
Diluted Earnings Per Share:
Earnings before cumulative effect of change
in accounting principle	$	18.73	15.64	11.84
Cumulative effect of change in accounting principle		15.18	-	-
Net earnings	$	33.91	15.64	11.84

See accompanying notes to consolidated financial statements.

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended December 31, 2004, 2003, and 2002
(In thousands)
		2004	2003	2002
Net earnings	$	122,169	55,782	42,066
Other comprehensive income, net of effects of
deferred costs and taxes:
Unrealized gains (losses) on securities:
Net unrealized holding gains (losses) arising
during period		1,603	11,677	(3,977)
Reclassification adjustment for net losses
included in net earnings		550	2,197	11,165
Amortization of net unrealized losses
related to transferred securities		245	173	85
Unrealized gains (losses) on securities
transferred during period from held to
maturity to available for sale		167	96	(1,358)
Net unrealized gains on securities		2,565	14,143	5,915
Foreign currency translation adjustments		(127)	48	212
Minimum pension liability adjustment		(472)	224	(1,223)
Other comprehensive income		1,966	14,415	4,904
Comprehensive income	$	124,135	70,197	46,970

See accompanying notes to consolidated financial statements.

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2004, 2003, and 2002
(In thousands)
		2004	2003	2002
Common stock:
Balance at beginning of year	$	3,547	3,525	3,515
Shares exercised under stock option plan		37	22	10
Balance at end of year		3,584	3,547	3,525
Additional paid-in capital:
Balance at beginning of year		29,192	26,759	25,921
Shares exercised under stock option plan,
net of tax benefits		3,663	1,833	838
Stock option expense		979	600	-
Balance at end of year		33,834	29,192	26,759
Accumulated other comprehensive income:
Unrealized gains on securities:
Balance at beginning of year		22,467	8,324	2,409
Change in unrealized gains during period		2,565	14,143	5,915
Balance at end of year		25,032	22,467	8,324
Foreign currency translation adjustments:
Balance at beginning of year		3,297	3,249	3,037
Change in translation adjustments during period		(127)	48	212
Balance at end of year		3,170	3,297	3,249
Minimum pension liability adjustment:
Balance at beginning of year		(2,311)	(2,535)	(1,312)
Change in minimum pension liability
adjustment during period		(472)	224	(1,223)
Balance at end of year		(2,783)	(2,311)	(2,535)
Accumulated other comprehensive
income at end of year		25,419	23,453	9,038
Retained earnings:
Balance at beginning of year		623,666	567,884	525,818
Net earnings		122,169	55,782	42,066
Balance at end of year		745,835	623,666	567,884
Total stockholders' equity	$	808,672	679,858	607,206
See accompanying notes to consolidated financial statements.

NATIONAL WESTERN LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2004, 2003, and 2002
(In thousands)
		2004	2003	2002
Cash flows from operating activities:
Net earnings	$	122,169	55,782	42,066
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Universal life and annuity contract interest		173,315	176,374	150,479
Surrender charges and other policy revenues		(26,024)	(27,026)	(29,073)
Realized losses (gains) on investments		(3,506)	1,647	16,144
Accrual and amortization of investment income		(8,373)	(11,481)	(7,510)
Depreciation and amortization		1,665	1,935	1,482
Decrease (increase) in value of derivatives		13,262	(31,878)	(1,448)
Increase in deferred policy acquisition
and sales inducement costs		(57,278)	(138,280)	(54,409)
Decrease (increase) in accrued investment income		(4,293)	(4,494)	52
Decrease (increase) in other assets		2,438	(5,214)	(6,506)
Decrease in liabilities for future policy benefits		(1,523)	(1,646)	(2,339)
Increase in other policyholder liabilities		12,738	18,847	4,997
Increase (decrease) in Federal income tax liability		30,554	625	(2,044)
Increase (decrease) in other liabilities		(15,793)	21,830	12,448
Lawsuit settlement payable		(9,700)	9,700	-
Cumulative effect of change in accounting
principle, before taxes		(84,149)	-	-
Other		515	2,244	2,372
Net cash provided by operating activities		146,017	68,965	126,711
Cash flows from investing activities:
Proceeds from sales of:
Securities held to maturity		8,749	4,175	-
Securities available for sale		49,801	53,368	40,485
Other investments		5,427	15,558	1,756
Proceeds from maturities and redemptions of:
Securities held to maturity		322,956	488,306	278,537
Securities available for sale		97,507	167,613	55,544
Derivatives		19,186	12,558	15,086
Purchases of:
Securities held to maturity		(813,489)	(1,155,138)	(404,524)
Securities available for sale		(352,638)	(512,009)	(172,330)
Other investments		(30,128)	(20,667)	(26,663)
Principal payments on mortgage loans		41,780	40,938	28,708
Cost of mortgage loans acquired		(13,116)	(23,960)	(14,045)
Decrease in policy loans		1,309	2,957	4,305
Other		(673)	(952)	(760)
Net cash used in investing activities		(663,329)	(927,253)	(193,901)
		(Continued on next page)

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
For the Years Ended December 31, 2004, 2003, and 2002
(In thousands)
		2004	2003	2002
Cash flows from financing activities:
Deposits to account balances for universal life
and annuity contracts	$	936,425	1,228,456	464,147
Return of account balances on universal life
and annuity contracts		(439,667)	(388,963)	(322,224)
Issuance of common stock under stock option plan		2,514	1,473	686
Net cash provided by financing activities		499,272	840,966	142,609
Effect of foreign exchange		24	(12)	(78)
Net increase (decrease) in cash and
short-term investments		(18,016)	(17,334)	75,341
Cash and short-term investments at
beginning of year		68,210	85,544	10,203
Cash and short-term investments at end of year	$	50,194	68,210	85,544

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest	$	48	42	52
Income taxes		33,078	26,840	20,902
Noncash investing activities:
Foreclosed mortgage loans	$	-	-	2,531
Mortgage loans originated to facilitate
the sale of real estate		1,360	-	-

See accompanying notes to consolidated financial statements.

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(A) Principles of Consolidation. The accompanying consolidated financial statements include the accounts of National Western Life Insurance Company and its wholly owned subsidiaries ("Company"), The Westcap Corporation, NWL Investments, Inc., NWL Services, Inc., and NWL Financial, Inc. All significant intercorporate transactions and accounts have been eliminated in consolidation.

(B) Basis of Presentation. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates in the accompanying consolidated financial statements include (1) liabilities for future policy benefits, (2) valuation of derivative instruments, (3) recoverability of deferred policy acquisition costs, (4) valuation allowances for deferred tax assets, (5) other-than-temporary impairment losses on debt securities, and (6) valuation allowances for mortgage loans and real estate.

The Company also files financial statements with insurance regulatory authorities which are prepared on the basis of statutory accounting practices prescribed or permitted by the Colorado Division of Insurance which are significantly different from consolidated financial statements prepared in accordance with GAAP. These differences are described in detail in the statutory information section of this note.

(C) Investments. Investments in debt securities the Company purchases with the intent to hold to maturity are classified as securities held to maturity. The Company has the ability to hold the securities, as it would be unlikely that forced sales of securities would be required prior to maturity to cover payments of liabilities. As a result, securities held to maturity are carried at amortized cost less declines in fair value that are deemed other-than-temporary.

Investments in debt and equity securities that are not classified as securities held to maturity are reported as securities available for sale. Securities available for sale are reported in the accompanying consolidated financial statements at fair value. Any valuation changes resulting from changes in the fair value of the securities are reflected as a component of stockholders' equity in accumulated other comprehensive income or loss. These unrealized gains or losses in stockholders' equity are reported net of taxes and adjustments to deferred policy acquisition costs.

Transfers of securities between categories are recorded at fair value at the date of transfer. The unrealized holding gains or losses for securities transferred from available for sale to held to maturity are included in accumulated other comprehensive income or loss and amortized into earnings over the remaining life of the security as an adjustment to yield in a manner consistent with the amortization or accretion of premium or discount on the associated security.

Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. For mortgage-backed and asset-backed securities, the effective interest method is used based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments. The net investment in the securities is adjusted to the amount that would have existed had the new effective yield been applied at the time of acquisition. This adjustment is reflected in net investment income. Refer to Emerging Issues Task Force ("EITF") 99-20 under (L) of this section for accounting guidance related to certain asset-backed securities.

Realized gains and losses for securities available for sale and securities held to maturity are included in earnings and are derived using the specific identification method for determining the cost of securities sold. A decline in the fair value below cost that is deemed other-than-temporary is charged to earnings, resulting in the establishment of a new cost basis for the security.

Mortgage loans and other long-term investments are stated at cost, less unamortized discounts, deferred fees, and allowances for possible losses. Policy loans are stated at their aggregate unpaid balances. Real estate is stated at the lower of cost or fair value less estimated costs to sell.

Impaired loans are those loans where it is probable that all amounts due according to contractual terms of the loan agreement will not be collected. The Company has identified these loans through its normal loan review procedures. Impaired loans include (1) nonaccrual loans, (2) loans which are 90 days or more past due, unless they are well secured and are in the process of collection, and (3) other loans which management believes are impaired. Impaired loans are measured based on (1) the present value of expected future cash flows discounted at the loan's effective interest rate, (2) the loan's observable market price, or (3) the fair value of the collateral if the loan is collateral dependent. Substantially all of the Company's impaired loans are measured at the fair value of the collateral. In limited cases, the Company may use other methods to determine the level of impairment of a loan if such loan is not collateral dependent.

(D) Cash and Short-Term Investments. For purposes of the consolidated statements of cash flows, the Company considers all short-term investments with a maturity at the date of purchase of three months or less to be cash equivalents.

(E) Derivatives. The Company purchases over-the-counter indexed options, which are derivative financial instruments, to hedge the equity return component of its equity-indexed annuity and life products. The indexed options act as hedges to match closely the returns on the S&P 500^® Composite Stock Price Index which may be credited to policyholders. As a result, changes to policyholders' liabilities are substantially offset by changes in the value of the options. Cash is exchanged upon purchase of the indexed options and no principal or interest payments are made by either party during the option periods. Upon maturity or expiration of the options, cash is paid to the Company based on the S&P 500^® performance and terms of the contract.

The derivatives are reported at fair value in the accompanying consolidated financial statements. The changes in the values of the indexed options and the changes in the policyholder liabilities are both reflected in the statement of earnings. Any gains or losses from the sale or expiration of the options, as well as period-to-period changes in values, are reflected as net investment income in the statement of earnings.

Although there is credit risk in the event of nonperformance by counterparties to the indexed options, the Company does not expect any counterparties to fail to meet their obligations, given their high credit ratings. In addition, credit support agreements are in place with all counterparties for option holdings in excess of specific limits, which may further reduce the Company's credit exposure. At December 31, 2004 and 2003, the fair values of indexed options owned by the Company totaled $42.2 million and $44.8 million, respectively.

(F) Insurance Revenues and Expenses. Premiums on traditional life insurance products are recognized as revenues as they become due from policyholders. Benefits and expenses are matched with premiums in arriving at profits by providing for policy benefits over the lives of the policies and by amortizing acquisition costs over the premium-paying periods of the policies. For universal life and annuity contracts, revenues consist of policy charges for the cost of insurance, policy administration, and surrender charges assessed during the period. Expenses for these policies include interest credited to policy account balances and benefit claims incurred in excess of policy account balances. The related deferred policy acquisition and sales inducement costs are amortized in relation to the present value of expected gross profits on the policies.

(G) Deferred Federal Income Taxes. Federal income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance for deferred tax assets is provided if all or some portion of the deferred tax asset may not be realized. An increase or decrease in a valuation allowance that results from a change in circumstances that affects the realizability of the related deferred tax asset is included in income in the period the change occurs.

(H) Depreciation of Property, Equipment, and Leasehold Improvements. Depreciation is based on the estimated useful lives of the assets and is calculated on the straight-line and accelerated methods. Leasehold improvements are amortized over the lesser of the economic useful life of the improvement or the term of the lease.

(I) Classification. Certain reclassifications have been made to the prior years to conform to the reporting categories used in 2004.

(J) Statutory Information. Domiciled in Colorado, the Company prepares its statutory financial statements in accordance with accounting practices prescribed or permitted by the Colorado Division of Insurance. The Colorado Division of Insurance has adopted the provisions of the National Association of Insurance Commissioners' ("NAIC") Statutory Accounting Practices as the basis for its statutory practices.

The following are major differences between GAAP and accounting practices prescribed or permitted by the Colorado Division of Insurance.

1.  The Company accounts for universal life and annuity contracts based on the provisions of Statement of Financial Accounting Standards ("SFAS") No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments. The basic effect of the statement with respect to certain long-duration contracts is that deposits for universal life and annuity contracts are not reflected as revenues, and surrenders and certain other benefit payments are not reflected as expenses. However, only those contracts with no insurance risk qualify for such treatment under statutory accounting practices. For all other contracts, statutory accounting practices do reflect such items as revenues and expenses.

A summary of direct premiums and deposits collected is provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Annuity deposits	$	892,027	1,195,143	434,442
Universal life insurance deposits		119,554	101,376	87,984
Traditional life and other premiums		15,830	15,568	14,867
Totals	$	1,027,411	1,312,087	537,293

2.  Under GAAP, commissions, sales inducements, and certain expenses related to policy issuance and underwriting, all of which generally vary with and are related to the production of new business, are deferred. For traditional products, these costs are amortized over the premium-paying period of the related policies in proportion to the ratio of the premium earned to the total premium revenue anticipated, using the same assumptions as to interest, mortality, and withdrawals as were used in calculating the liability for future policy benefits. For universal life and annuity contracts, these costs are amortized in relation to the present value of expected gross profits on these policies. The Company evaluates the recoverability of deferred policy acquisition and sales inducement costs on a quarterly basis. In this evaluation, the Company considers estimated future gross profits or future premiums, as applicable for the type of contract. The Company also considers expected morta lity, interest earned and credited rates, persistency, and expenses. Statutory accounting practices require commissions and related costs to be expensed as incurred.

A summary of information relative to deferred policy acquisition costs is provided in the table below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Deferred policy acquisition costs, beginning of year	$	558,455	442,266	401,380
Policy acquisition costs deferred:
Agents' commissions		139,095	184,415	85,398
Other		6,916	7,695	4,507
Total costs deferred		146,011	192,110	89,905
Amortization of deferred policy acquisition costs		(88,733)	(53,829)	(35,799)
Adjustments for unrealized gains and
losses on investment securities		1,541	(22,092)	(13,220)
Deferred costs written off due to change in
accounting principle		(35,056)	-	-
Deferred policy acquisition costs, end of year	$	582,218	558,455	442,266

A summary of information relative to deferred sales inducement costs is provided in the table below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Deferred sales inducement costs, beginning of year	$	40,940	-	-
Sales inducement costs deferred		28,189	43,867	-
Amortization of sales inducement		(5,256)	(1,261)	-
Adjustments for unrealized gains and
losses on investment securities		(1,633)	(1,666)	-
Deferred sales inducement costs, end of year	$	62,240	40,940	-

3.  Under GAAP, the liability for future policy benefits on traditional products has been calculated by the net level method using assumptions as to future mortality (based on the 1965-1970 and 1975-1980 Select and Ultimate mortality tables), interest ranging from 4% to 8%, and withdrawals based on Company experience. For universal life and annuity contracts, the liability for future policy benefits represents the account balance. Equity-indexed products combine features associated with traditional fixed annuities and universal life contracts, with the option to have interest rates linked in part to an equity index like the S&P 500 Index^®. In accordance with SFAS No. 133, the equity return component of such policy contracts must be identified separately and accounted for as embedded derivatives. The remaining portions of these policy contracts are considered the host contracts and are recorded separately as fixed annuity or universal life contracts. The host contracts are accounted for under provisions of SFAS No. 97 that requires debt instrument type accounting. The host contracts are recorded as discounted debt instruments that are accreted, using the effective yield method, to their minimum account values at their projected maturities or termination dates. The embedded derivatives are recorded at fair values. For statutory accounting purposes, liabilities for future policy benefits for life insurance policies are calculated by the net level premium method or the commissioners reserve valuation method. Future policy benefit liabilities for annuities are calculated based on the continuous commissioners annuity reserve valuation method and provisions of Actuarial Guidelines 33 and 35.

4. Deferred Federal income taxes are provided for temporary differences which are recognized in the consolidated financial statements in a different period than for Federal income tax purposes. Deferred taxes are also recognized in statutory accounting practices; however, there are limitations as to the amount of deferred tax assets that may be reported as admitted assets. The change in the deferred taxes is recorded in surplus, rather than as a component of income tax expense.

5.  For statutory accounting purposes, debt securities are recorded at amortized cost, except for securities in or near default, which are reported at fair value. Under GAAP, they are carried at amortized cost or fair value based on their classification as either held to maturity or available for sale.

6.  Investments in subsidiaries are recorded at admitted asset value for statutory purposes, whereas the financial statements of the subsidiaries have been consolidated with those of the Company under GAAP.

7.  The asset valuation reserve and interest maintenance reserve, which are investment valuation reserves prescribed by statutory accounting practices, have been eliminated, as they are not required under GAAP.

8.  The recorded value of the life interest in the Libbie Shearn Moody Trust ("Trust") is reported at its initial valuation, net of accumulated amortization, under GAAP. The initial valuation was based on the assumption that the Trust would provide certain income to the Company at an assumed interest rate and is being amortized over 53 years, the life expectancy of Mr. Robert L. Moody at the date he contributed the life interest to the Company. For statutory accounting purposes, the life interest has been valued at $26.4 million, which was computed as the present value of the estimated future income to be received from the Trust. However, this amount was amortized to a valuation of $12.8 million over a seven-year period ended December 31, 1999, in accordance with Colorado Division of Insurance permitted accounting requirements. Prescribed statutory accounting practices provide no accounting guidance for such asset. The statutory admitted value of this life interest at December 3 1, 2004, is $12.8 million in comparison to a carrying value of $2.6 million in the accompanying consolidated financial statements.

9.  Reconciliations of statutory capital and surplus, as included in the annual statements filed with the Colorado Division of Insurance, to total stockholders' equity as reported in the accompanying consolidated financial statements prepared under GAAP are as follows:

		Stockholders' Equity
		as of December 31,
		2004	2003	2002
		(In thousands)
Statutory equity	$	526,084	478,003	452,529
Adjustments:
Difference in valuation of investment in
the Libbie Shearn Moody Trust		(10,220)	(9,914)	(9,611)
Deferral of policy acquisition costs and
sales inducements		644,458	599,395	442,266
Adjustment of future policy benefits		(434,304)	(477,225)	(315,107)
Difference in deferred Federal income taxes		(49,038)	(22,520)	(9,268)
Adjustment of securities available for sale to fair value		60,596	57,798	14,221
Reversal of asset valuation reserve		47,471	39,738	21,643
Reversal of interest maintenance reserve		10,003	9,122	7,974
Reinstatement of other nonadmitted assets		14,047	8,602	6,498
Valuation allowances on investments		(975)	(3,164)	(2,986)
Other, net		550	23	(953)
GAAP equity	$	808,672	679,858	607,206

10.  Reconciliations of statutory net earnings, as included in the annual statements filed with the Colorado Division of Insurance, to the respective amounts as reported in the accompanying consolidated financial statements prepared under GAAP are as follows:

		Net Earnings for the
		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Statutory net earnings	$	54,216	23,246	14,749
Adjustments:
Subsidiary earnings before deferred
Federal income taxes and intercompany eliminations		8,264	6,671	5,513
Net deferral of policy acquisition and
sales inducement costs		45,239	181,114	54,409
Adjustment of future policy benefits		42,921	(161,440)	(40,593)
Benefit (provision) for deferred Federal income taxes		(29,583)	4,165	(1,529)
Valuation allowances and other-than-temporary
impairment writedowns on investments		1,022	(1,827)	10,271
Increase (decrease) in interest maintenance reserve		881	1,148	(1,249)
Stock option compensation expense		(979)	(600)	-
Asset-backed securities amortization adjustment		2,739	3,969	1,383
Deferred tax from capital loss carryforward
recognized for statutory accounting		(3,096)	-	-
Other, net		545	(664)	(888)
GAAP net earnings	$	122,169	55,782	42,066

(K) Stock Compensation. SFAS No. 123, Accounting for Stock-Based Compensation established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value based method of accounting for employee stock options or similar equity instruments. However, it also allows an entity to continue to measure compensation cost for plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees."

In December, 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. This statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. SFAS No. 148 is effective for fiscal years ending after December 15, 2002.

Under the fair value based method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. For stock options, fair value is determined using an option pricing model that takes into account various information and assumptions regarding the Company's stock and options. Under the intrinsic value based method, compensation cost is the excess, if any, of the quoted market price of the stock at grant date or other measurement date over the amount an employee must pay to acquire the stock.

As of December 31, 2004, the Company has one stock-based employee compensation plan, as more fully described in Note 10. The Company historically applied APB 25 to stock option grants which resulted in no compensation expense being recognized. Effective January 1, 2003, the Company adopted the fair value recognition provisions of SFAS No. 123 utilizing the modified prospective method of adoption provided under SFAS No. 148. Under this method, stock-based employee compensation cost recognized in 2004 and 2003 is the same as that which would have been recognized had the fair value recognition provisions of SFAS No. 123 been applied to all awards granted by the Company. The following table illustrates the effect on net income and earnings per share as if the fair value based method had been applied to all outstanding and unvested awards in each period.

		Years Ended December 31,
		2004	2003	2002
		(In thousands except per share amounts)
Net earnings:
As reported	$	122,169	55,782	42,066
Add: Stock-based compensation expense included
in reported net income, net of related tax effects		637	390	-
Less: Total stock-based compensation expense
determined under fair value based method for all
awards, net of related tax effects		(637)	(390)	(527)
Pro forma	$	122,169	55,782	41,539
Basic earnings per share:
As reported	$	34.27	15.78	11.94
Pro forma	$	34.27	15.78	11.79
Diluted earnings per share:
As reported	$	33.91	15.64	11.84
Pro forma	$	33.91	15.64	11.72

(L) Changes in Accounting Principles. SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure was issued December 2002 and is effective for fiscal years ending after December 15, 2002. This Statement amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This Statement also amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company did implement the accounting provisions of SFAS No. 148 in the first quarter of 2003 and did not report a material effect on the Company's consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. The statement amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133. The statement is generally effective for contracts entered into or modified after June 30, 2003. This statement did not have a significant impact on the Company's consolidated financial statements during 2004.

In July 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts ("SOP 03-1"). SOP 03-1 provides guidance relating to the reporting by insurance enterprises for certain contracts and insurance specific accounting issues and is effective for financial statements for fiscal years beginning after December 15, 2003. In the first quarter of 2004 the Company adopted the reserving method for its two-tier annuity products, which were issued from 1984 until 1992, in accordance with the SOP 03-1 guidance. The new reserving method under SOP 03-1 requires that the Company hold a reserve equal to the cash surrender value and establish an additional liability for expected annuitizations. The Company previously maintained reserves for two-tier annuities at the account balance value which is substantially higher than the cash value reserve. This reserving change resulted in an adjustment decreasing reserves, less deferred acquisition costs written off, by $54.7 million, net of taxes. The amount is reflected as a change in accounting principle as of January 1, 2004. Components of the accounting change are detailed below.

		Amounts
Accounting change related to two-tier annuities:		(In thousands)
Reduction in reserve for future policy benefits	$	119,205
Write off of deferred acquisition costs		(35,056)
Total change, pre-tax		84,149
Federal income taxes		(29,452)
Cumulative effect of change in accounting for
two-tier annuities, net of tax	$	54,697

At December 31, 2004, the Company held a reserve relating to two-tier annuities in the amount of $22.7 million as an additional liability relating to annuitization benefits. The expected annuitizations were determined based upon actual experience relating to this block of business, which is relatively seasoned and the policies are no longer issued by the Company. The issuance of this SOP did not impact the Company's accounting relating to sales inducements.

FASB Interpretation No. 46 ("FIN" 46) Consolidation of Variable Interest Entities was issued January 2003; in December 2003, the FASB issued Revised Interpretation No. 46, ("FIN 46R"). FIN 46R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support. FIN 46R separates entities into two groups: (1) those for which voting interests are used to determine consolidation and (2) those for which variable interests are used to determine consolidation. FIN 46R clarifies how to identify a variable interest entity ("VIE") and how to determine when a business enterprise should include the assets, liabilities, non-controlling interests, and results of activities of a VIE in its consolidated financial statements. A company that absorbs a majority of a VIE's expected losses, receives a majority of a VIE's expected residual returns, or both, is the primary beneficiary and is required to consolidate the VIE into its financial statements. FIN 46R also requires disclosure of certain information where the reporting company is the primary beneficiary or holds a significant variable interest in a VIE (but is not the primary beneficiary). FIN 46R was effective for public companies that have interests in VIE's or potential VIE's that are special-purpose entities for periods ending after December 15, 2003. Application by public companies for all other types of entities is required for periods ending after March 15, 2004. The adoption of FIN 46R in the first quarter of 2004 did not have a significant impact on the Company's consolidated financial statements.

In March 2004, the Emerging Issues Task Force ("EITF") reached a final consensus on Issue 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. This Issue establishes impairment models for determining whether to record impairment losses associated with investments in certain equity and debt securities and requires expanded disclosures related to securities with unrealized losses. It also requires income to be accrued on a level-yield basis following an impairment of debt securities, where reasonable estimates of the timing and amount of future cash flows can be made. The Company's current policy has generally been to record income only as cash is received following an impairment of a debt security. The application of this Issue was required for reporting periods beginning after June 15, 2004. In September 2004, the FASB approved FASB Staff Position EITF 03-1-1, which defers the effective date for the recognition and measurement guid ance contained in EITF 03-1 until certain issues are resolved. The Company is not able to assess the impact of the adoption of EITF 03-1 until final guidance is issued. The Company adopted the disclosure provisions and has included the required disclosures for 2003 and 2004.

In December of 2003, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer ("SOP 03-3"). SOP 03-3 addresses revenue recognition and impairment assessments for certain loans and debt securities that were purchased at a discount that was at least in part due to credit quality. SOP 03-3 states that where expected cash flows from the loan or debt security can be reasonably estimated, the difference between the purchase price and the expected cash flows (i.e., the "accretable yield") should be accreted into income. In addition, the SOP prohibits the recognition of a reserve for impairment on the purchase date. Further, the SOP requires that the allowance for loan losses be supported through a cash flow analysis, on either an individual or on a pooled basis, for all loans that fall within the scope of the guidance. This SOP is effective for loans acquired in fiscal years b eginning after December 15, 2004. The Company will adopt SOP 03-3 as of the beginning of fiscal year 2005 but does not expect this SOP to have a material impact on the consolidated financial statements.

In December 2004, the FASB issued Statement No. 123(R), Share-Based Payment which is a revision of Statement No. 123. Statement No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. We currently use the Black-Scholes-Merton option pricing model to estimate the value of employee stock options and expect to continue to use this acceptable option pricing model upon adoption of Statement No. 123(R). Statement No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow rather than as an operating cash flow, as currently required. The adoption of Statement No. 123(R) is not expected to have a material impact on the consolidated financial statements of the Company.

(2) DEPOSITS WITH REGULATORY AUTHORITIES

The following assets were on deposit with state and other regulatory authorities as required by law at the end of each year.

		December 31,
		2004	2003
		(In thousands)
Debt securities	$	16,243	19,730
Short term investments		400	400
Totals	$	16,643	20,130

(3) INVESTMENTS

(A) Investment Income

The major components of net investment income are as follows:

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Gross investment income:
Debt securities	$	276,624	239,243	218,443
Mortgage loans		12,510	15,115	15,382
Policy loans		6,483	6,932	7,343
Derivative gains (losses)		11,988	25,799	(13,012)
Other investment income		10,351	13,794	10,342
Total investment income		317,956	300,883	238,498
Investment expenses		2,113	1,909	1,784
Net investment income	$	315,843	298,974	236,714

The Company had real estate investments that were non-income producing for the preceding twelve months totaling $2.1 million and $3.4 million at December 31, 2004 and 2003, respectively. The Company had mortgage loans totaling $0.6 million and $6.9 million that were on nonaccrual status as of December 31, 2004 and 2002, respectively and none as of December 31, 2003. Reductions in interest income associated with nonperforming mortgage loans totaled $54,000 and $0.3 million in 2004 and 2002, respectively.

The Company had investments in debt securities with carrying values totaling $4.1 million and $3.9 million that have not produced income for the preceding 12 months as of December 31, 2004 and 2003, respectively. Reductions in interest income associated with nonperforming investments in debt securities totaled $1.1 million, $2.4 million, and $3.8 million in 2004, 2003, and 2002, respectively.

(B) Mortgage Loans and Real Estate

Concentrations of credit risk arising from mortgage loans exist in relation to certain groups of borrowers. A group concentration arises when a number of counterparties have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. The Company does not have a significant exposure to any individual customer or counterparty. The major concentrations of mortgage loan credit risk for the Company arise by geographic location in the United States and by property type as detailed below.

		December 31, 2004			December 31, 2003
		Amount	%		Amount	%
		(In thousands)			(In thousands)
Geographic Region:
West South Central	$	74,765	59.9	$	83,363	54.8
Mountain		19,020	15.3		33,772	22.2
Pacific		11,954	9.6		16,432	10.8
South Atlantic		5,284	4.2		6,125	4.0
East South Central		3,686	3.0		4,921	3.3
All other		10,003	8.0		7,422	4.9
Totals	$	124,712	100.0	$	152,035	100.0

		December 31, 2004			December 31, 2003
		Amount	%		Amount	%
		(In thousands)			(In thousands)
Property Type:
Retail	$	87,941	70.5	$	115,984	76.3
Office		24,740	19.8		27,165	17.9
Land/Lots		7,017	5.6		7,100	4.7
Hotel/Motel		4,974	4.0		827	0.5
Apartments		-	-		756	0.5
All other		40	0.1		203	0.1
Totals	$	124,712	100.0	$	152,035	100.0

As of December 31, 2004 and 2003, mortgage loans with carrying values totaling $0.6 million and $11.8 million, respectively, were considered impaired. For the years ended December 31, 2004, 2003, and 2002, average investments in impaired mortgage loans were $4.7 million, $4.1 million, and $5.0 million, respectively. Interest income recognized on impaired loans for the years ended December 31, 2004, 2003, and 2002, was $0.9 million, $0.7 million, and $0.3 million, respectively. Impaired loans are typically placed on nonaccrual status, and no interest income is recognized. However, if cash is received on the impaired loan, it is applied to principal and interest on past due payments, beginning with the most delinquent payment.

Detailed below are changes in the allowance for mortgage loan losses for 2004 and 2003.

		Years Ended December 31,
		2004	2003
		(In thousands)
Balance at beginning of year	$	660	660
Net changes recorded as realized
investment gains		(292)	-
Balance at end of year	$	368	660

At December 31, 2004 and 2003, the Company owned investment real estate totaling $17.2 million and $20.2 million, respectively, which is reflected in other long-term investments in the accompanying consolidated financial statements. The Company records real estate at the lower of cost or fair value less estimated costs to sell. Real estate values are monitored and evaluated at least annually by the use of independent appraisals or internal evaluations. Changes in market values affecting carrying values are recorded as a valuation allowance which is reflected in realized gains or losses on investments. For the year ended December 31, 2004, the Company recorded a net gain on real estate due to increases in market values totaling $0.8 million. Impairment losses on real estate due to decreases in market values totaled $0.1 million and $0.2 million for 2003 and 2002, respectively. Additional gains totaling $0.6 million were recorded for the year ended December 31, 2004, as a result of rele asing allowances related to properties sold during 2004.

(C) Investment Gains and Losses

The table below presents realized gains and losses and changes in unrealized gains and losses on investments for 2004, 2003, and 2002. Changes in unrealized gains and losses on investment securities available for sale are net of the effects of deferred policy acquisition costs and taxes.

			Changes in
		Realized	Unrealized
		Investment	Investment
		Gains	Gains (Losses)
		(Losses)	From Prior Year
	(In thousands)
Year Ended December 31, 2004:
Securities held to maturity	$	2,490	(10,353)
Securities available for sale		(846)	2,565
Other		1,862	-
Totals	$	3,506	(7,788)
Year Ended December 31, 2003:
Securities held to maturity	$	835	(38,014)
Securities available for sale		(3,380)	14,143
Other		898	-
Totals	$	(1,647)	(23,871)
Year Ended December 31, 2002:
Securities held to maturity	$	309	71,905
Securities available for sale		(16,855)	5,915
Other		402	-
Totals	$	(16,144)	77,820

(D) Debt and Equity Securities

The tables below present amortized cost and fair values of securities held to maturity and securities available for sale at December 31, 2004.

		Securities Held to Maturity
			Gross	Gross
		Amortized	Unrealized	Unrealized	Fair
		Cost	Gains	Losses	Value
		(In thousands)
Debt securities:
U.S. Treasury and other U.S.
government corporations
and agencies	$	219,845	941	2,356	218,430
States and political subdivisions		10,000	126	-	10,126
Foreign governments		20,314	1,318	-	21,632
Public utilities		457,286	27,943	683	484,546
Corporate		1,134,186	52,560	5,772	1,180,974
Mortgage-backed		1,271,570	21,492	4,607	1,288,455
Asset-backed		160,933	4,620	2,604	162,949
Totals	$	3,274,134	109,000	16,022	3,367,112
		Securities Available for Sale
			Gross	Gross
		Amortized	Unrealized	Unrealized	Fair
		Cost	Gains	Losses	Value
		(In thousands)
Debt securities:
States and political subdivisions	$	31,220	1,657	542	32,335
Foreign governments		10,622	592	-	11,214
Public utilities		164,548	6,235	363	170,420
Corporate		1,027,128	54,040	7,351	1,073,817
Mortgage-backed		274,126	6,276	3,035	277,367
Asset-backed		47,313	2,733	3	50,043
Equity securities		12,487	7,738	174	20,051
Totals	$	1,567,444	79,271	11,468	1,635,247

The tables below present amortized cost and fair values of securities held to maturity and securities available for sale at December 31, 2003.

		Securities Held to Maturity
			Gross	Gross
		Amortized	Unrealized	Unrealized	Fair
		Cost	Gains	Losses	Value
		(In thousands)
Debt securities:
U.S. Treasury and other U.S.
government corporations
and agencies	$	208,532	410	4,327	204,615
States and political subdivisions		10,000	168	-	10,168
Foreign governments		41,148	1,899	-	43,047
Public utilities		426,391	34,552	1,066	459,877
Corporate		990,309	69,019	6,386	1,052,942
Mortgage-backed		967,036	14,547	9,976	971,607
Asset-backed		177,600	8,298	3,807	182,091
Totals	$	2,821,016	128,893	25,562	2,924,347
		Securities Available for Sale
			Gross	Gross
		Amortized	Unrealized	Unrealized	Fair
		Cost	Gains	Losses	Value
		(In thousands)
Debt securities:
U.S. Treasury and other U.S.
government corporations
and agencies	$	265	2	-	267
States and political subdivisions		27,698	1,597	685	28,610
Foreign governments		10,666	400	-	11,066
Public utilities		120,788	5,082	750	125,120
Corporate		836,480	57,651	7,456	886,675
Mortgage-backed		272,272	4,279	3,803	272,748
Asset-backed		43,268	1,483	-	44,751
Equity securities		11,292	6,885	-	18,177
Totals	$	1,322,729	77,379	12,694	1,387,414

Due to the Company's investment policy of investing in high quality securities with the intention of holding these securities until the stated maturity, the portfolio does have exposure to interest rate risk. Interest rate risk is the risk that funds are invested today at a market interest rate and in the future interest rates rise causing the current market price on that investment to be lower. This risk is not a significant factor relative to the Company's buy and hold portfolio, since the original intention was to receive the stated interest rate and principal at maturity to match liability requirements of policyholders. Also, the Company takes steps to manage these risks. For example, the Company purchases the type of mortgage backed securities that have more predictable cash flow patterns.

In addition the Company is exposed to credit risk which is continually monitored relating to security holdings. Credit risk is the risk that an issuer of a security will not be able to fulfill their obligations relative to a security payment schedule. The Company has reviewed relative information for all issuers in an unrealized loss position at December 31, 2004 including market pricing history, credit ratings, analyst reports as well as data provided by issuers themselves to conclude on each specific issuer and make the determination relating to other-than-temporary impairment. For the securities that have not been impaired at December 31, 2004, the Company has the ability and intent to hold these securities until recovery in fair value and expects to receive all amounts due relative to principal and interest.

The following table shows the gross unrealized losses and fair values of the Company's investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2004.

		Less than 12 Months		12 Months or Greater		Total
		Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
		Value	Losses	Value	Losses	Value	Losses
		(In thousands)
Debt securities:
U.S. government
agencies	$	5,349	88	128,161	2,268	133,510	2,356
State and political
subdivisions		-	-	1,958	542	1,958	542
Public utilities		37,165	282	38,485	764	75,650	1,046
Corporate		193,183	3,862	240,849	9,261	434,032	13,123
Mortgage-backed		177,606	2,098	262,925	5,544	440,531	7,642
Asset-backed		9,856	123	23,467	2,484	33,323	2,607
Debt securities		423,159	6,453	695,845	20,863	1,119,004	27,316
Equity securities		3,047	106	499	68	3,546	174
Total temporarily
impaired securities	$	426,206	6,559	696,344	20,931	1,122,550	27,490

Debt securities. The gross unrealized losses for debt securities are made up of 139 individual issues, or 20% of the total debt securities held by the Company. The market value of these bonds as a percent of amortized cost averages above 97.5%. Of the 139 securities, eighty-two, or approximately 60%, fall in the 12 months or greater aging category; however, of these securities, seventy-two were rated investment grade at December 31, 2004. Additional information on debt securities by investment category is summarized below.

U.S. treasury and U.S. government corporations and agencies. The unrealized losses on these investments were caused by interest rate volatility. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than amortized cost, and the Company has the ability and intent to hold these investments until a recovery of fair value, which may be maturity. All of these securities are rated AAA. The Company does not consider these investments to be other than temporarily impaired at December 31, 2004.

State and political subdivisions. The unrealized losses on these investments are the result of holdings in two securities. Over the past year, the prices of these securities have increased an average of 7.8%. In addition to this fact and the Company's intent to hold, no other-than-temporary loss was recognized as of December 31, 2004.

Public utilities. The market value as a percent of the amortized cost is above 95% for each individual security. All the securities are rated BBB or above except one, which, though rated below investment grade, is priced at $99.00. At this time, the Company does not consider any of these unrealized losses as other-than-temporary.

Corporate bonds. A total of sixty-six securities fall into this category with only six rated below investment grade. Of the sixty that are investment grade, all have a market value as a percent of amortized cost of at least 93%. Of those rated below investment grade, two securities have been written down due to other-than-temporary impairment. Two of the remaining securities are priced above $95.00 and the final two securities remaining have been reviewed based on the monitoring procedures described previously including review of credit ratings, analyst reports, and issuer information and are not considered other-than-temporarily impaired at December 31, 2004.

Mortgage-backed securities. These securities are all rated AAA and priced at $94.50 or above. The Company purchased these investments at a discount relative to their face amount and it is expected that the securities will not be settled at a price less than the stated par. Because the decline in market value is attributable to changes in interest rates and not credit quality, and because the Company has the ability and intent to hold these securities until a recovery of fair value, which may be maturity, the Company does not consider these investments to be other than temporarily impaired at December 31, 2004.

Asset-backed securities. Of these securities, three are priced above $98.50 and not considered other than temporarily impaired. The other five securities are all monitored under EITF 99-20 and based on the cash flow analysis, no impairment exists as of December 31, 2004.

Equity securities. The gross unrealized losses for equity securities are made up of ten individual issues. These holdings are reviewed for impairment quarterly. As of December 31, 2004, no impairment is deemed necessary.

The following table shows the gross unrealized losses and fair values of the Company's investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2003.

		Less than 12 Months		12 Months or Greater		Total
		Fair	Unrealized	Fair	Unrealized	Fair	Unrealized
		Value	Losses	Value	Losses	Value	Losses
Debt Securities:		(In thousands)
U.S. government
agencies	$	171,737	3,845	10,399	483	182,136	4,328
State and political
subdivisions		-	-	1,815	685	1,815	685
Public utilities		48,464	1,448	13,703	349	62,167	1,797
Corporate		258,858	8,029	53,105	5,235	311,963	13,264
Mortgage-backed		566,999	13,506	-	-	566,999	13,506
Asset-backed		38,223	1,299	15,797	2,407	54,020	3,706
Debt securities		1,084,281	28,127	94,819	9,159	1,179,100	37,286
Equity securities		552	16	534	16	1,086	32
Total temporarily
impaired securities	$	1,084,833	28,143	95,353	9,175	1,180,186	37,318

Of the debt securities that had temporary declines in fair value 82%, or $30.6 million, are investment grade securities. The securities reporting temporary declines in fair value for greater than 12 months had typically experienced a change in credit risk but were not deemed other-than-temporarily impaired at December 31, 2003 based on further review. Credit risk is the risk that an issuer of a security will not be able to fulfill their obligation relative to a security payment schedule. The amounts reported relative to corporate bonds in the 12 month or greater category are comprised of airline and energy issues, which suffered credit rating downgrades in 2002. These securities had shown marked improvement from 2002 to 2003 in market values and consumer confidence. The asset-backed category of securities 12 months or greater was comprised of one collaterialized bond obligation and securities backed by manufactured housing loans. The manufactured housing industry had experienced collate ral performance issues during 2002 and 2003. A total of $1.7 million of the unrealized losses in this category related to investment grade securities, or 71% of the $2.4 million total.

The amortized cost and fair value of investments in debt securities at December 31, 2004, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Debt Securities		Debt Securities
		Available for Sale		Held to Maturity
		Amortized	Fair	Amortized	Fair
		Cost	Value	Cost	Value
		(In thousands)
Due in 1 year or less	$	94,121	96,896	164,970	167,876
Due after 1 year through 5 years		317,374	337,788	477,333	514,200
Due after 5 years through 10 years		643,436	670,399	641,136	673,779
Due after 10 years		178,587	182,703	558,192	559,853
		1,233,518	1,287,786	1,841,631	1,915,708
Mortgage and asset-backed securities		321,439	327,410	1,432,503	1,451,404
Total	$	1,554,957	1,615,196	3,274,134	3,367,112

The Company uses the specific identification method in computing realized gains and losses. Proceeds from sales of securities available for sale during 2004, 2003, and 2002 totaled $49.8 million, $53.4 million, and $40.5 million, respectively. Gross gains and losses realized on those sales are detailed below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Gross realized gains	$	2,600	3,209	1,985
Gross realized losses		(451)	(2,494)	(1,951)
Net realized gains	$	2,149	715	34

Due to a significant decline in credit quality, the Company transferred debt securities totaling $35.9 million in 2004 and $12.8 million in 2003 from held to maturity to the available for sale portfolio. Net unrealized gains of $0.2 million and $0.1 million in 2004 and 2003, respectively, related to these transferred securities are included as a separate component of accumulated other comprehensive income. Due to significant credit deterioration, bonds from the held to maturity portfolio were sold during 2004 and 2003. The amortized cost of these bonds sold totaled $8.1 million and $4.0 million, which resulted in realized gains of $0.6 million and $0.2 million for 2004 and 2003, respectively. The Company did not sell any held to maturity securities in 2002.

The Company held in its investment portfolio below investment grade debt securities totaling $137.9 million and $165.3 million at December 31, 2004 and 2003, respectively. These amounts represent 2.6% and 3.6% of total invested assets for December 31, 2004 and 2003, respectively. Below investment grade holdings are the result of downgrades subsequent to purchase, as the Company only invests in high quality securities with ratings quoted as investment grade. Below investment grade securities generally have greater default risk than higher rated corporate debt. The issuers of these securities are usually more sensitive to adverse industry or economic conditions than are investment grade issuers. For the years ended December 31, 2004, 2003, and 2002, the Company recorded realized losses totaling $3.6 million, $7.2 million, and $17.4 million, respectively, for other-than-temporary impairment writedowns on investments in debt securities.

Except for U.S. government agency mortgage-backed securities, the Company had no other investments in any entity in excess of 10% of stockholders' equity at December 31, 2004 or 2003.

(E) Transfers of Securities

On January 1, 2001, the Company made transfers totaling $112 million to the held to maturity category from securities available for sale. Lower holdings of securities available for sale significantly reduce the Company's exposure to equity volatility while still providing securities for liquidity and asset/liability management purposes. The transfers of securities were recorded at fair values in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. This Statement requires that the unrealized holding gain or loss at the date of the transfer continue to be reported in a separate component of stockholders' equity and be amortized over the remaining life of the security as an adjustment of yield in a manner consistent with the amortization of any premium or discount. The amortization of an unrealized holding gain or loss reported in equity will offset or mitigate the effect on interest income of the amortization of the premium or discount fo r the held to maturity securities. The transfer of securities from available for sale to held to maturity had no effect on net earnings of the Company. However, stockholders' equity was adjusted as follows:

		Net Unrealized Gains (Losses)
		as of December 31,
		2004	2003	2002
		(In thousands)
Beginning unamortized losses from transfers	$	(367)	(540)	(625)
Amortization of net unrealized losses related
to transferred securities, net of effects of
deferred costs and taxes		245	173	85
Ending unamortized losses from transfers	$	(122)	(367)	(540)

(F) Net Unrealized Gains on Available for Sale Securities

Net unrealized gains and losses on investment securities included in stockholders' equity at December 31, 2004 and 2003, are as follows:

		December 31,
		2004	2003
		(In thousands)
Gross unrealized gains	$	79,271	77,379
Gross unrealized losses		(11,468)	(12,694)
Adjustments for:
Deferred costs		(29,105)	(29,555)
Deferred Federal income tax expense		(13,544)	(12,296)
		25,154	22,834
Net unrealized losses related to securities
transferred to held to maturity		(122)	(367)
Net unrealized gains on investment securities	$	25,032	22,467

(4) REINSURANCE

Effective January 1, 2004, the Company began reinsuring any risk on any one life in excess of $250,000, subject to a minimum session of $50,000. The Company's general policy prior to December 31, 2003 was to reinsure that portion of any risk in excess of $200,000 on the life of any one individual. The Company is party to several reinsurance agreements. Total life insurance in force was $13.8 billion and $12.9 billion at December 31, 2004 and 2003, respectively. Of these amounts, life insurance in force totaling $3.0 billion and $2.6 billion was ceded to reinsurance companies, primarily on a yearly renewable term basis, at December 31, 2004 and 2003, respectively. In accordance with the reinsurance contracts, reinsurance receivables including amounts related to claims incurred but not reported and liabilities for future policy benefits totaled $7.2 million and $11.2 million at December 31, 2004 and 2003, respectively. Premiums and contract revenues were reduced by $12.2 million, $13.0 m illion, and $10.4 million for reinsurance premiums incurred during 2004, 2003, and 2002, respectively. Benefit expenses were reduced by $6.4 million, $8.6 million, and $7.1 million, for reinsurance recoveries during 2004, 2003, and 2002, respectively. A contingent liability exists with respect to reinsurance, as the Company remains liable if the reinsurance companies are unable to meet their obligations under the existing agreements. The Company does not assume reinsurance.

(5) FEDERAL INCOME TAXES

Total Federal income taxes for 2004, 2003, and 2002 were allocated as follows:

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Taxes (benefits) on earnings from continuing operations:
Current	$	34,441	31,492	19,277
Deferred		131	(4,165)	1,529
Taxes on earnings before cumulative effect of
change in accounting principle		34,572	27,327	20,806
Taxes on cumulative effect of change in accounting
principle		29,452	-	-
Taxes on earnings		64,024	27,327	20,806
Taxes (benefits) on components of stockholders' equity:
Net unrealized gains and losses on
securities available for sale		1,381	7,615	3,185
Foreign currency translation adjustments		(69)	26	114
Minimum pension liability adjustment		(254)	120	(657)
Tax benefit from exercise of stock options		(1,186)	(382)	(162)
Total Federal income taxes	$	63,896	34,706	23,286

The provisions for Federal income taxes attributable to earnings from continuing operations vary from amounts computed by applying the statutory income tax rate to earnings before Federal income taxes. The reasons for the differences and the corresponding tax effects are as follows:

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Income tax expense at statutory rate	$	35,715	29,088	22,005
Tax-exempt income		(1,594)	(1,539)	(1,479)
Amortization of life interest in the
Libbie Shearn Moody Trust		107	106	105
Non-deductible travel and entertainment		146	78	89
Other		198	(406)	86
Taxes on earnings from continuing operations	$	34,572	27,327	20,806

There were no deferred taxes attributable to enacted tax rate changes for the years ended December 31, 2004, 2003, and 2002.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2004 and 2003 are presented below.

		December 31,
		2004	2003
	(In thousands)
Deferred tax assets:
Future policy benefits, excess of financial
accounting liabilities over tax liabilities	$	179,914	191,079
Debt securities writedowns for financial
accounting purposes		8,831	13,985
Capital loss carryforward		3,512	-
Minimum pension liability adjustment		1,498	1,244
Real estate, principally due to writedowns
for financial accounting purposes		1,209	1,466
Accrued operating expenses recorded for financial
accounting purposes not currently tax deductible		458	1,215
Mortgage loans, principally due to valuation
allowances for financial accounting purposes		307	186
Accrued and unearned investment income
recognized for tax purposes and deferred for
financial accounting purposes		298	430
Lawsuit settlement payable		-	3,395
Other		468	937
Total gross deferred tax assets		196,495	213,937
Deferred tax liabilities:
Deferred policy acquisition and sales inducement
costs, principally expensed for tax purposes		(215,009)	(202,104)
Net unrealized gains on securities available for sale		(13,479)	(12,098)
Debt securities, principally due to deferred
market discount for tax		(4,138)	(4,943)
Foreign currency translation adjustments		(1,706)	(1,775)
Real estate, principally due to differences in tax and
financial accounting for depreciation		(529)	(641)
Other		(388)	(785)
Total gross deferred tax liabilities		(235,249)	(222,346)
Net deferred tax liabilities	$	(38,754)	(8,409)

There was no valuation allowance for deferred tax assets at December 31, 2004 and 2003. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

Prior to the Tax Reform Act of 1984 ("1984 Act"), a portion of a life insurance company's income was not subject to tax until it was distributed to stockholders, at which time it was taxed at the regular corporate tax rate. In accordance with the 1984 Act, this income, referred to as policyholders' surplus, would not increase, yet any amounts distributed would be taxable at the regular corporate rate. The balance of this account as of December 31, 2004 is approximately $2.4 million. No provision for income taxes has been made on this untaxed income, as management is of the opinion that no distribution to stockholders will be made from policyholders' surplus in the foreseeable future. Should the balance in the policyholders' surplus account at December 31, 2004 become taxable, the Federal income taxes computed at present rates would be approximately $0.9 million. However, a provision of the Jobs Creation Act of 2004 would allow tax free distribution from the policyholders' surplus acco unt during 2005 and 2006. The Company does not anticipate making distributions from the policyholders' surplus account to take advantage of this provision.

The Company files a consolidated Federal income tax return with its subsidiaries. Allocation of the consolidated tax liability is based on separate return calculations pursuant to the "wait-and-see" method as described in sections 1.1552-1(a)(1) and 1.1502-33(d)(2) of the current Treasury Regulations. Under this method, consolidated group members are not given current credit for net losses until future net taxable income is generated to realize such credits.

(6) TRANSACTIONS WITH CONTROLLING STOCKHOLDER AND AFFILIATES

(A) Life Interest in Libbie Shearn Moody Trust

The Company's wholly owned subsidiary, NWL Services, Inc., is the beneficial owner of a life interest (1/8 share) in the net income of the trust estate of Libbie Shearn Moody ("Trust") which was previously owned by Robert L. Moody, Chairman of the Board of Directors of the Company. The Company has issued term insurance policies on the life of Mr. Moody which are reinsured through agreements with unaffiliated insurance companies. The Company is the beneficiary of these policies for an amount equal to the statutory admitted value of the Trust, which was $12.8 million at December 31, 2004. The excess of the $27.0 million face amount of the reinsured policies over the statutory admitted value of the Trust has been assigned to Mr. Moody. The recorded net asset values in the accompanying consolidated financial statements for the life interest in the Trust are as follows:

		December 31,
		2004	2003
		(In thousands)
Original valuation of life interest at February 26, 1960	$	13,793	13,793
Less accumulated amortization		(11,238)	(10,932)
Carrying basis at year end	$	2,555	2,861

Income from the Trust and related expenses reflected in the accompanying consolidated statements of earnings are summarized as follows:

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Income distributions	$	3,738	3,735	3,741
Deduct:
Amortization		(306)	(303)	(300)
Reinsurance premiums		(701)	(606)	(522)
Net income from life interest in the Trust	$	2,731	2,826	2,919

(B) Common Stock

Robert L. Moody, Chairman of the Board of Directors, owns 198,074 of the total outstanding shares of the Company's Class B common stock and 1,159,096 of the Class A common stock.

Holders of the Company's Class A common stock elect one-third of the Board of Directors of the Company, and holders of the Class B common stock elect the remainder. Any cash or in-kind dividends paid on each share of Class B common stock shall be only one-half of the cash or in-kind dividends paid on each share of Class A common stock. Also, in the event of liquidation of the Company, the Class A stockholders shall first receive the par value of their shares; then the Class B stockholders shall receive the par value of their shares; and the remaining net assets of the Company shall be divided between the stockholders of both Class A and Class B common stock, based on the number of shares held.

(7) PENSION AND OTHER POSTRETIREMENT PLANS

(A) Defined Benefit Pension Plans

The Company sponsors a qualified defined benefit pension plan covering substantially all employees. The plan provides benefits based on the participants' years of service and compensation. The Company makes annual contributions to the plan that comply with the minimum funding provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Fair values of plan assets and liabilities are measured as of December 31 for the respective year. A detail of plan disclosures is provided below.

Obligations and Funded Status

		December 31,
		2004	2003
		(In thousands)
Changes in projected benefit obligations:
Projected benefit obligations at beginning of year	$	14,808	13,140
Service cost		591	486
Interest cost		925	875
Plan amendments		(26)	79
Actuarial loss		941	1,038
Benefits paid		(841)	(810)
Projected benefit obligations at end of year	$	16,398	14,808
Changes in plan assets:
Fair value of plan assets at beginning of year	$	11,266		8,760
Actual return on plan assets		594		1,516
Contributions		760		1,800
Benefits paid		(841)		(810)
Fair value of plan assets at end of year	$	11,779		11,266

		December 31,
		2004	2003
		(In thousands)
Funded Status:
As of the end of year	$	(4,619)	(3,542)
Unrecognized net actuarial loss		5,615	4,717
Unrecognized prior service cost		43	73
Net amount recognized	$	1,039	1,248
Amounts recognized in the company's consolidated
financial statements:
Prepaid benefit cost	$	1,039	1,248
Additional minimum liability		(4,324)	(3,609)
Intangible asset		43	73
Accumulated other comprehensive income		4,281	3,536
Net amount recognized	$	1,039	1,248

The accumulated benefit obligation was $15.1 million and $13.6 million at December 31, 2004 and 2003, respectively.

Components of Net Periodic Benefit Cost

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Components of net periodic benefit costs:
Service cost	$	591	486	417
Interest cost		925	875	831
Expected return on plan assets		(834)	(689)	(717)
Amortization of prior service cost		4	(19)	(30)
Amortization of net loss		283	274	150
Net periodic benefit cost	$	969	927	651

Assumptions

	December 31,
	2004		2003
Weighted-average assumptions used to determine
benefit obligations:
Discount rate	6.00	%	6.25	%
Rate of compensation increase	4.50	%	4.50	%

	December 31,
	2004		2003		2002
Weighted-average assumptions used to determine
net periodic benefit cost:
Discount rate	6.25	%	6.75	%	7.00	%
Expected long-term return on plan assets	7.50	%	7.50	%	7.50	%
Rate of compensation increase	4.50	%	4.50	%	4.50	%

The expected long-term return on plan assets assumption utilizes a historical approach. As of December 31, 2004, the plan's average 10-year and inception-to-date returns were 8.50% and 8.10%, respectively.

Plan Assets

The plan's weighted-average asset allocations by asset category are as follows:

	December 31,
	2004	2003	2002
Asset Category
Equity securities	58%	57%	52%
Debt securities	34%	36%	36%
Cash and cash equivalents	8%	7%	12%
Total	100%	100%	100%

The Company has established and maintains an investment policy statement for the assets held in the plan's trust. The investment strategies are of a long-term nature and are designed to meet the following objectives:

         - ensure that funds are available to pay benefits as they become due
         - set forth an investment structure detailing permitted assets and expected allocation ranges among classes
         - insure that plan assets are managed in accordance with ERISA

The investment policy statement sets forth the following acceptable ranges for each asset's class.

Asset Category	Acceptable Range
Equity securities	55-65%
Debt securities	30-40%
Cash	0-15%

Deviations from these ranges are permitted if such deviations are consistent with the duty of prudence under ERISA. Investments in natural resources, venture capital, precious metals, futures and options, real estate, and other vehicles which do not have readily available objective valuations are not permitted. Short sales, use of margin or leverage, and investment in commodities and art objects are also prohibited.

The investment policy statement is reviewed annually to insure that the objectives are met considering any changes in benefit plan design, market conditions, or other material considerations.

Contributions

The Company expects to contribute $1.6 million to the plan in 2005.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

2005	$	853
2006		882
2007		884
2008		964
2009		1,032
2010-2014		6,167

The Company also sponsors a nonqualified defined benefit pension plan primarily for senior officers. The plan provides benefits based on the participants' years of service and compensation. The pension obligations and administrative responsibilities of the plan are maintained by a pension administration firm, which is a subsidiary of American National Insurance Company ("ANICO"). ANICO has guaranteed the payment of pension obligations under the plan. However, the Company has a contingent liability with respect to the pension plan should these entities be unable to meet their obligations under the existing agreements. Also, the Company has a contingent liability with respect to the plan in the event that a plan participant continues employment with the Company beyond age seventy, the aggregate average annual participant salary increases exceed 10% per year, or any additional employees become eligible to participate in the plan. If any of these conditions are met, the Company would be res ponsible for any additional pension obligations resulting from these items.

In 2002, amendments were made to the plan to allow an additional employee to participate and to change the benefit formula for the Chairman of the Company. As previously mentioned, any additional obligations are a liability to the Company. A detail of plan disclosures related to these amendments is provided below:

Obligations and Funded Status

		December 31,
		2004	2003
		(In thousands)
Changes in projected benefit obligations:
Projected benefit obligations at beginning of year	$	2,626	2,269
Service cost		422	393
Interest cost		178	137
Actuarial loss		535	15
Benefits paid		(236)	(188)
Projected benefit obligations at end of year	$	3,525	2,626
Change in plan assets:
Fair value of plan assets at beginning of year	$	-	-
Contributions		236	188
Benefits paid		(236)	(188)
Fair value of plan assets at end of year	$	-	-
Funded status:
As of the end of year	$	(3,525)	(2,626)
Unrecognized prior service cost		1,688	1,979
Unrecognized net actuarial loss		545	15
Net amount recognized	$	(1,292)	(632)
Amounts recognized in the Company's consolidated
financial statements:
Accrued benefit cost	$	(1,292)	(632)
Additional minimum liability		(1,377)	(1,290)
Intangible asset		1,377	1,290
Net amount recognized	$	(1,292)	(632)

The accumulated benefit obligation was $2.6 million and $1.9 million at December 31, 2004 and 2003, respectively.

Components of Net Periodic Benefit Cost

		Years Ended December 31,
		2004	2003
		(In thousands)
Components of net periodic benefit cost:
Service cost	$	422	393
Interest cost		178	137
Amortization of prior service cost		291	290
Amortization of net loss		5	-
Net periodic benefit cost	$	896	820

Assumptions

	December 31,
	2004		2003
Weighted-average assumptions used to determine
benefit obligations:
Discount rate	6.00	%	6.25	%
Rate of compensation increase	4.00	%	4.00	%
Weighted-average assumptions used to determine
net periodic benefit costs:
Discount rate	6.25	%	6.75	%
Expected long-term return on plan assets	n/a		n/a
Rate of compensation increase	4.00	%	4.00	%

The plan is unfunded and therefore no assumption has been made related to the expected long-term return on plan assets.

Plan Assets

The plan is unfunded and therefore had no assets at December 31, 2004 or 2003.

Contributions

The Company expects to contribute $266,000 to the plan in 2005.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

2005	$	266
2006		299
2007		330
2008		358
2009		377
2010-2014		1,773

(B) Defined Contribution Pension Plans

In addition to the defined benefit pension plans, the Company sponsors a qualified 401(k) plan for substantially all employees and a nonqualified deferred compensation plan primarily for senior officers. The Company makes annual contributions to the 401(k) plan of two percent of each employee's compensation. Additional Company matching contributions of up to two percent of each employee's compensation are also made each year based on the employee's personal level of salary deferrals to the plan. All Company contributions are subject to a vesting schedule based on the employee's years of service. For the years ended December 31, 2004, 2003, and 2002, Company contributions totaled $398,000, $394,000, and $348,000, respectively.

The nonqualified deferred compensation plan was established to allow eligible employees to defer the payment of a percentage of their compensation and to provide for additional Company contributions. Company contributions are subject to a vesting schedule based on the employee's years of service. For the years ended December 31, 2004, 2003, and 2002, Company contributions totaled $78,000, $96,000, and $110,000, respectively.

(C)  Defined Benefit Postretirement Plans

The Company sponsors two health care plans that were amended in 2004 to provide postretirement benefits to certain fully-vested individuals. The plans are unfunded. The Company uses a December 31 measurement date for the plans. A detail of plan disclosures related to these plans is provided below:

Obligations and Funded Status

		December 31, 2004
		(In thousands)
Changes in projected benefit obligations:
Projected benefit obligations at beginning of year	$	1,598
Interest cost		95
Actuarial gain		(15)
Benefits paid		(7)
Projected benefit obligations at end of year	$	1,671
Changes in plan assets:
Fair value of plan assets at beginning of year	$	-
Contributions		7
Benefits paid		(7)
Fair value of plan assets at end of year	$	-
Funded status:
As of the end of year	$	(1,671)
Unrecognized prior service cost		1,495
Unrecognized net actuarial gain		(15)
Net amount recognized	$	(191)

Components of Net Periodic Benefit Cost

		Year Ended
		December 31, 2004
		(In thousands)
Components of net periodic benefit cost:
Interest cost	$	95
Amortization of transition obligation		103
Net periodic benefit cost	$	198

Assumptions

A weighted-average discount rate assumption of 6% was used to determine benefit obligations and net periodic benefit cost as of and for the year ended December 31, 2004. No assumption was made related to the expected long-term return on plan assets as the plan is unfunded.

For measurement purposes, an 8% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2005 and future years.

Assumed health care trend rates have a significant effect on the amounts reported for the health care plans. A 1% point change in assumed health care cost trend rates would have the following effects:

		1% Point	1% Point
		Increase	Decrease
		(In thousands)
Effect on total of service and interest cost components	$	27	(20)
Effect on postretirement benefit obligation	$	477	(353)

Plan Assets

The plans are unfunded and therefore had no assets at December 31, 2004.

Contributions

The Company expects to contribute $23,000 to the plans in 2005 and future years.

(8) SHORT-TERM BORROWINGS

The Company has available a $40 million bank line of credit primarily for cash management purposes relating to investment transactions. The Company is required to maintain a collateral security deposit in trust with the sponsoring bank equal to 120% of any outstanding liability. The Company had no outstanding liabilities or collateral security deposits with the bank at December 31, 2004 or 2003.

(9) COMMITMENTS AND CONTINGENCIES

(A) Legal Proceedings

The Company reached a settlement agreement with a class of plaintiffs who had challenged bonus interest rates on certain Company annuity products. The Company vigorously defended the case and denied liability for the claims asserted by the plaintiff in reaching the settlement. The fairness of the settlement agreement was granted final approval by the Court on February 18, 2004. There were no objectors and the order approving the settlement is final and non-appealable. The settlement resulted in a $9.7 million pre-tax charge against 2003 earnings from operations, which represented the maximum settlement fund liability. During 2004, final payments were made to policyholders that opted to participate in this settlement resulting in cash payments totaling $3.2 million pre-tax and an increase of $2.3 million to existing contractholder account balances. Thus, final settlement totaled approximately $5.5 million pre-tax compared to the $9.7 million initially recorded.

On August 26, 2004, the Company entered into an agreement to settle a lawsuit concerning an investment made by the Company more than ten years ago. The investment was sold in 1997. As the result of this settlement, the Company received $2.2 million, which is included in the Company's revenues and pre-tax earnings for the quarter ending September 30, 2004; the lawsuit has been dismissed with prejudice. The lawsuit had been pending for several years, and the costs incurred by the Company in prosecuting the lawsuit have previously been included in the Company's financial statements as such costs were incurred under the category "other operating expenses".

In the course of an audit of a charitable tax-exempt foundation, the Internal Revenue Service ("IRS") raised an issue under the special provisions of the Internal Revenue Code ("IRC") governing tax-exempt private foundations as to certain interest-bearing loans from the Company to another corporation in which the tax-exempt foundation owns stock. The issue is whether such transactions constitute indirect self-dealing by the foundation, the result of which would be excise taxes on the Company by virtue of its participation in such transactions. By letter to the Company dated August 21, 2003, the IRS proposed an initial excise tax liability in the total amount approximating one million dollars as a result of such transactions. The Company disagrees with the IRS analysis. The Company is contesting the matter and expects to prevail on the merits. On October 14, 2003, in response to the IRS letter, the Company requested that this issue instead be referred to the IRS National Office for tec hnical advice. The IRS audit team, by letter dated November 13, 2003, did refer this issue to the IRS National Office for technical advice. The IRS National Office has not yet issued such advice. Upon issuance by the IRS National Office, such technical advise will be in the form of a memorandum analyzing the issue which will be binding on the IRS audit team.

The Company is involved or may become involved in various legal actions, in the normal course of business, in which claims for alleged economic and punitive damages have been or may be asserted, some for substantial amounts. Although there can be no assurances, at the present time, the Company does not anticipate that the ultimate liability arising from potential, pending or threatened legal actions, after consideration of amounts provided for in the Company's consolidated financial statements, will have a material adverse effect on the financial condition or operating results of the Company.

(B) Financial Instruments

In order to meet the financing needs of its customers in the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments are commitments to extend credit which involve elements of credit and interest rate risk in excess of the amounts recognized in the consolidated balance sheet.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amounts, assuming that the amounts are fully advanced and that collateral or other security is of no value. Commitments to extend credit are legally binding agreements to lend to a customer that generally have fixed expiration dates or other termination clauses and may require payment of a fee. Commitments do not necessarily represent future liquidity requirements, as some could expire without being drawn upon. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company controls the credit risk of these transactions through credit approvals, limits, and monitoring procedures. The Company had commitments to extend credit relating to mortgage loans totaling $0.7 million at December 31, 2004. The Company evaluates each custo mer's creditworthiness on a case-by-case basis.

(C) Guaranty Association Assessments

The Company is subject to state guaranty association assessments in all states in which it is licensed to do business. These associations generally guarantee certain levels of benefits payable to resident policyholders of insolvent insurance companies. Many states allow premium tax credits for all or a portion of such assessments, thereby allowing potential recovery of these payments over a period of years. However, several states do not allow such credits.

The Company estimates its liabilities for guaranty association assessments by using the latest information available from the National Organization of Life and Health Insurance Guaranty Associations. The Company monitors and revises its estimates for assessments as additional information becomes available which could result in changes to the estimated liabilities. As of December 31, 2004 and 2003, liabilities for guaranty association assessments totaled $2.2 million and $2.5 million, respectively. Other operating expenses related to state guaranty association assessments were minimal for the years ended December 31, 2004, 2003, and 2002.

(D) Leases

The Company leases its executive office building and various computer and other office related equipment under operating leases. Rental expenses for these leases for the years ended December 31, 2004, 2003, and 2002 were $1.0 million, $1.2 million, and $1.2 million, respectively. Total future annual lease obligations as of December 31, 2004, are as follows (in thousands):

2005	$	817
2006		817
2007		808
2008		650
2009		650
2010 and thereafter, in aggregate		217
Total	$	3,959

(10) STOCKHOLDERS' EQUITY

(A) Changes in Common Stock Shares Outstanding

Details of changes in shares of common stock outstanding are provided below.

	Years Ended December 31,
	2004	2003	2002
	(In thousands)
Common stock shares outstanding:
Shares outstanding at beginning of year	3,547	3,525	3,515
Shares exercised under stock option plan	37	22	10
Shares outstanding at end of year	3,584	3,547	3,525

(B) Dividend Restrictions

The Company is restricted by state insurance laws as to dividend amounts which may be paid to stockholders without prior approval from the Colorado Division of Insurance. The restrictions are based on statutory earnings and surplus levels of the Company. The maximum dividend payment which may be made without prior approval in 2005 is $54.6 million. The Company has never paid cash dividends on its common stock, as it follows a policy of retaining any earnings in order to finance the development of business and to meet regulatory requirements for capital.

(C) Regulatory Capital Requirements

The Colorado Division of Insurance imposes minimum risk-based capital requirements on insurance companies that were developed by the National Association of Insurance Commissioners ("NAIC"). The formulas for determining the amount of risk-based capital ("RBC") specify various weighting factors that are applied to statutory financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of the Company's regulatory total adjusted capital to its authorized control level RBC, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. The Company's current statutory capital and surplus is significantly in excess of all RBC requirements.

(D) Stock and Incentive Plan

The Company has a stock and incentive plan which provides for the grant of any or all of the following types of awards to eligible employees: (1) stock options, including incentive stock options and nonqualified stock options; (2) stock appreciation rights, in tandem with stock options or freestanding; (3) restricted stock; (4) incentive awards; and (5) performance awards. The plan began on April 21, 1995, and was to terminate on April 20, 2005, unless terminated earlier by the Board of Directors. The plan was amended on June 25, 2004 to extend the termination date to April 20, 2010. The number of shares of Class A, $1.00 par value, common stock which may be issued under the plan, or as to which stock appreciation rights or other awards may be granted, may not exceed 300,000. These shares may be authorized and unissued shares or treasury shares.

All of the employees of the Company and its subsidiaries are eligible to participate in the plan. In addition, directors of the Company, other than Compensation and Stock Option Committee members, are eligible for restricted stock awards, incentive awards, and performance awards. Company directors, including members of the Compensation and Stock Option Committee, are eligible for nondiscretionary stock options.

Nonqualified stock options were not issued in 2003 and 2002. The Committee approved the issuance of nonqualified stock options to selected officers of the Company during 2004 totaling 56,750. Additionally, during 2004 the Committee granted 10,000 nonqualified, nondiscretionary stock options to Company directors. The directors' stock options vest 20% annually following one full year of service to the Company from the date of grant. The officers' stock options vest 20% annually following three full years of service to the Company from the date of grant. The exercise prices of the stock options were set at the fair market values of the common stock on the dates of grant. A summary of shares available for grant and stock option activity is detailed below.

		Options Outstanding
	Shares			Weighted-
	Available			Average
	For Grant	Shares		Exercise Price
Balance at December 31, 2001	81,557	194,861	$	80.50
Stock Options:
Exercised	-	(9,990)		68.65
Forfeited	3,100	(3,100)		92.22
Balance at December 31, 2002	84,657	181,771		80.95
Stock Options:
Exercised	-	(21,748)		67.75
Forfeited	850	(850)		95.99
Balance at December 31, 2003	85,507	159,173		82.67
Stock Options:
Granted	(66,750)	66,750		150.00
Exercised	-	(37,530)		66.55
Forfeited	1,530	(1,530)		94.83
Balance at December 31, 2004	20,287	186,863	$	109.86

A summary of vested and exercisable options and weighted-average exercise prices is detailed below.

	Years Ended December 31,
	2004	2003	2002
Vested and exercisable options	77,489	91,790	91,618
Weighted-average exercise prices	83.55	73.44	67.97

The following table summarizes information about stock options outstanding at December 31, 2004.

			Options Outstanding
				Weighted-
			Number	Average	Options
			Outstanding	Remaining Life	Exercisable
Exercise prices:
$	38	.13	10,000	0.4	10,000
$	65	.00	17,039	1.3	17,039
$	85	.13	11,931	2.3	11,931
$	105	.25	28,280	3.3	20,330
$	112	.38	7,000	3.5	7,000
$	92	.13	37,863	6.3	6,789
$	95	.00	8,000	6.5	4,400
$	150	.00	66,750	9.4	-
Totals			186,863		77,489

Compensation cost related to stock options of $637,000 and $390,000, net of taxes, was recognized in the Company's financial statements for the years ended December 31, 2004 and 2003, respectively, under the fair value based method of accounting for stock-based employee compensation. Prior to 2003, the Company utilized the intrinsic value based method of accounting for stock-based employee compensation, which resulted in no compensation cost for the year ended December 31, 2002. In estimating the fair value of the options granted in 2004, the Company employed the Black-Scholes option pricing model with weighted-average assumptions as detailed below.

Risk-free interest rates	3.9%
Dividend yields	-
Volatility factors	26.0%
Weighted-average expected life	6.7 years
Weighted-average fair value per share	$54.48

(11) EARNINGS PER SHARE

Earnings per share amounts for the Company are presented using two different computations. Basic earnings per share excludes dilutive effects of certain securities or contracts, such as stock options, and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Stock options not included in the weighted average number of diluted shares because such shares would have been anti-dilutive were immaterial. The following table sets forth the computations of basic and diluted earnings per share.

		Years Ended December 31,
		2004	2003	2002
		(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:
Earnings from continuing operations
available to common stockholders
before and after assumed conversions:
Earnings before cumulative effect of change
in accounting principle	$	67,472	55,782	42,066
Cumulative effect of change in accounting principle		54,697	-	-
Net earnings	$	122,169	55,782	42,066
Denominator:
Basic earnings per share -
weighted-average shares		3,565	3,535	3,522
Effect of dilutive stock options		38	30	30
Diluted earnings per share -
adjusted weighted-average shares
for assumed conversions		3,603	3,565	3,552
Basic Earnings Per Share:
Earnings before cumulative effect of change
in accounting principle	$	18.93	15.78	11.94
Cumulative effect of change in accounting principle		15.34	-	-
Net earnings	$	34.27	15.78	11.94
Diluted Earnings Per Share:
Earnings before cumulative effect of change
in accounting principle	$	18.73	15.64	11.84
Cumulative effect of change in accounting principle		15.18	-	-
Net earnings	$	33.91	15.64	11.84

(12) COMPREHENSIVE INCOME

SFAS No. 130, Reporting Comprehensive Income establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. This Statement requires that all items required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This statement requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position.

SFAS No. 130 affects the Company's reporting presentation of certain items such as foreign currency translation adjustments, unrealized gains and losses on investment securities, and minimum pension liabilities. These items are reflected as components of other comprehensive income, as reported in the accompanying consolidated financial statements. Components of other comprehensive income and the related tax effect are provided below for 2004, 2003, and 2002.

		Amounts	Tax	Amounts
		Before	(Expense)	Net of
		Taxes	Benefit	Taxes
		(In thousands)
2004:
Unrealized gains (losses) on securities, net of effects
of deferred costs of $92:
Net unrealized holding gains
arising during period	$	2,467	(864)	1,603
Reclassification adjustment for net
losses included in net earnings		846	(296)	550
Amortization of net unrealized losses
related to transferred securities		377	(132)	245
Unrealized gains on securities transferred
during period from held to maturity
to available for sale		256	(89)	167
Net unrealized gains on securities		3,946	(1,381)	2,565
Foreign currency translation adjustments		(196)	69	(127)
Minimum pension liability adjustment		(726)	254	(472)
Other comprehensive income	$	3,024	(1,058)	1,966
2003:
Unrealized gains (losses) on securities, net of effects
of deferred costs of $23,758:
Net unrealized holding gains
arising during period	$	17,964	(6,287)	11,677
Reclassification adjustment for net
losses included in net earnings		3,380	(1,183)	2,197
Amortization of net unrealized losses
related to transferred securities		266	(93)	173
Unrealized gains on securities transferred
during period from held to maturity
to available for sale		148	(52)	96
Net unrealized gains on securities		21,758	(7,615)	14,143
Foreign currency translation adjustments		74	(26)	48
Minimum pension liability adjustment		344	(120)	224
Other comprehensive income	$	22,176	(7,761)	14,415
		Amounts	Tax	Amounts
		Before	(Expense)	Net of
		Taxes	Benefit	Taxes
		(In thousands)
2002:
Unrealized gains (losses) on securities, net of effects
of deferred costs of $13,220:
Net unrealized holding gains
arising during period	$	(6,119)	2,142	(3,977)
Reclassification adjustment for net
losses included in net earnings		17,177	(6,012)	11,165
Amortization of net unrealized losses
related to transferred securities		131	(46)	85
Unrealized losses on securities transferred
during period from held to maturity
to available for sale		(2,089)	731	(1,358)
Net unrealized gains on securities		9,100	(3,185)	5,915
Foreign currency translation adjustments		326	(114)	212
Minimum pension liability adjustment		(1,880)	657	(1,223)
Other comprehensive income	$	7,546	(2,642)	4,904

(13) SEGMENT AND OTHER OPERATING INFORMATION

(A) Operating Segment Information

Under SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, the Company defines its reportable operating segments as domestic life insurance, international life insurance, and annuities. The Company's segments are organized based on product types and geographic marketing areas. In addition, the Company regularly evaluates operating performance using non-GAAP financial measures which exclude or segregate realized investment gains and losses from operating revenues and earnings. The Company believes that the presentation of these non-GAAP financial measures enhances the understanding of the Company's results of operations by highlighting the results from ongoing operations and the underlying profitability factors of the Company's business. The Company excludes or segregates realized investment gains and losses because such items are often the result of events which may or may not be at the Company's discretion and the fluctuating effects of these items could distort trends in the underlying profitability of the Company's business.

A summary of segment information, prepared in accordance with SFAS No. 131, is provided below.

		Domestic	International
		Life	Life		All
		Insurance	Insurance	Annuities	Others	Totals
		(In thousands)
2004:
Selected Balance Sheet Items:
Deferred policy acquisition
costs and sales inducements	$	46,007	145,756	452,695	-	644,458
Total segment assets		361,176	568,723	4,960,837	84,481	5,975,217
Future policy benefits		301,552	405,490	4,319,816	-	5,026,858
Other policyholder liabilities		10,139	9,748	55,350	-	75,237
Condensed Income Statements:
Premiums and contract
revenues	$	23,324	64,239	15,975	-	103,538
Net investment income		20,283	22,821	266,151	6,588	315,843
Other income		509	790	1,701	8,259	11,259
Total revenues		44,116	87,850	283,827	14,847	430,640
Life and other policy benefits		15,141	16,626	2,846	-	34,613
Amortization of deferred
policy acquisition costs		9,098	21,837	57,798	-	88,733
Universal life and investment
annuity contract interest		8,585	18,631	146,099	-	173,315
Other operating expenses		7,479	12,418	8,353	7,191	35,441
Federal income taxes		1,291	6,205	23,258	2,590	33,344
Total expenses		41,594	75,717	238,354	9,781	365,446
Segment earnings	$	2,522	12,133	45,473	5,066	65,194
2003:
Selected Balance Sheet Items:
Deferred policy acquisition
costs and sales inducements	$	51,165	131,002	417,228	-	599,395
Total segment assets		358,697	516,604	4,329,777	77,524	5,282,602
Future policy benefits		299,560	369,947	3,810,584	-	4,480,091
Other policyholder liabilities		9,986	12,420	40,093	-	62,499
Condensed Income Statements:
Premiums and contract
revenues	$	21,725	55,041	18,114	-	94,880
Net investment income		21,688	23,983	246,622	6,681	298,974
Other income		31	37	95	6,898	7,061
Total revenues		43,444	79,061	264,831	13,579	400,915
Life and other policy benefits		16,000	17,937	3,243	-	37,180
Amortization of deferred
policy acquisition costs		8,983	12,109	32,737	-	53,829
Universal life and investment
annuity contract interest		8,896	17,775	149,703	-	176,374
Other operating expenses		7,526	11,489	23,809	5,952	48,776
Federal income taxes		673	6,502	18,218	2,511	27,904
Total expenses		42,078	65,812	227,710	8,463	344,063
Segment earnings	$	1,366	13,249	37,121	5,116	56,852
		Domestic	International
		Life	Life		All
		Insurance	Insurance	Annuities	Others	Totals
		(In thousands)
2002:
Selected Balance Sheet Items:
Deferred policy acquisition
costs and sale inducements	$	57,750	107,554	276,962	-	442,266
Total segment assets		367,767	472,198	3,214,823	69,126	4,123,914
Future policy benefits		296,478	343,652	2,808,835	-	3,448,965
Other policyholder liabilities		9,811	12,648	21,193	-	43,652
Condensed Income Statements:
Premiums and contract
revenues	$	22,716	48,403	18,972	-	90,091
Net investment income		23,078	23,163	184,109	6,364	236,714
Other income		18	31	606	6,071	6,726
Total revenues		45,812	71,597	203,687	12,435	333,531
Life and other policy benefits		14,585	14,959	1,755	-	31,299
Amortization of deferred
policy acquisition costs		8,081	10,467	17,251	-	35,799
Universal life and investment
annuity contract interest		9,625	16,452	124,402	-	150,479
Other operating expenses		9,660	12,972	8,889	5,417	36,938
Federal income taxes		1,293	5,606	17,207	2,350	26,456
Total expenses		43,244	60,456	169,504	7,767	280,971
Segment earnings	$	2,568	11,141	34,183	4,668	52,560

Reconciliations of segment information to the Company's consolidated financial statements are provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Premiums and Other Revenue:
Premiums and contract revenues	$	103,538	94,880	90,091
Net investment income		315,843	298,974	236,714
Other income		11,259	7,061	6,726
Realized gains (losses) on investments		3,506	(1,647)	(16,144)
Total consolidated premiums and other revenue	$	434,146	399,268	317,387
		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Federal Income Taxes:
Total segment Federal income taxes	$	33,344	27,904	26,456
Taxes on realized gains (losses) on investments		1,228	(577)	(5,650)
Taxes on cumulative effect of change in
accounting principle		29,452	-	-
Total taxes on consolidated net earnings	$	64,024	27,327	20,806
		Years Ended December 31,
		2004	2003	2002
		(In thousands)
Net Earnings:
Total segment earnings	$	65,194	56,852	52,560
Realized gains (losses) on investments,
net of taxes		2,278	(1,070)	(10,494)
Cumulative effect of change in accounting
principle, net of taxes		54,697	-	-
Total consolidated net earnings	$	122,169	55,782	42,066
		December 31,
		2004	2003	2002
		(In thousands)
Assets:
Total segment assets	$	5,975,217	5,282,602	4,123,914
Other unallocated assets		16,468	15,118	13,333
Total consolidated assets	$	5,991,685	5,297,720	4,137,247

(B) Geographic Information

A significant portion of the Company's premiums and contract revenues are from countries other than the United States. Premiums and contract revenues detailed by country are provided below.

		Years Ended December 31,
		2004	2003	2002
		(In thousands)
United States	$	40,420	41,444	42,860
Brazil		10,125	7,238	3,147
Argentina		9,067	8,421	9,505
Chile		7,973	7,368	7,436
Peru		7,953	7,606	7,265
Taiwan		7,240	5,925	4,950
Other foreign countries		32,929	29,850	25,322
Revenues, excluding reinsurance premiums		115,707	107,852	100,485
Reinsurance premiums		(12,169)	(12,972)	(10,394)
Total premiums and contract revenues	$	103,538	94,880	90,091

Premiums and contract revenues are attributed to countries based on the location of the policyholder. The Company has no significant assets, other than financial instruments, located in countries other than the United States.

(C) Major Agency Relationships

A significant portion of the Company's premiums and deposits were sold through two independent marketing agencies in recent years. Combined business from these agencies accounted for approximately 32%, 35%, and 30% of total direct premium revenues and universal life and annuity contract deposits in 2004, 2003, and 2002, respectively.

(14) FAIR VALUES OF FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosures About Fair Values Of Financial Instruments, requires disclosures of fair value information about financial instruments, whether or not recognized in a company's balance sheet, for which it is practicable to estimate a value. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:

Investment securities. Fair values for investments in debt and equity securities are based on quoted market prices, where available. For securities not actively traded, fair values are estimated using values obtained from various independent pricing services. In the cases where prices are unavailable from these sources, values are estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality, and maturity of the investments.

Cash and short-term investments. The carrying amounts reported in the balance sheet for these instruments approximate their fair values.

Mortgage and other loans. The fair values of performing mortgage and other loans are estimated by discounting scheduled cash flows through the scheduled maturities of the loans, using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Fair values for significant nonperforming loans are based on recent internal or external appraisals. If appraisals are not available, estimated cash flows are discounted using a rate commensurate with the risk associated with the estimated cash flows. Assumptions regarding credit risk, cash flows, and discount rates are judgmentally determined using available market information and specific borrower information.

Policy loans. The fair values for policy loans are calculated by discounting estimated cash flows using U.S. Treasury bill rates as of December 31, 2004 and 2003. The estimated cash flows include assumptions as to whether such loans will be repaid by the policyholders or settled upon payment of death or surrender benefits on the underlying insurance contracts. As a result, these assumptions incorporate both Company experience and mortality assumptions associated with such contracts.

Derivatives. Fair values for indexed options are based on independent counterparty market prices.

Life interest in Libbie Shearn Moody Trust. The fair value of the life interest is estimated based on assumptions as to future distributions from the Trust over the life expectancy of Mr. Robert L. Moody. These estimated cash flows were discounted at a rate consistent with uncertainties relating to the amount and timing of future cash distributions. However, the Company has limited the fair value to the statutory admitted value of the Trust, as this is the maximum amount to be received from insurance proceeds in the event of Mr. Moody's premature death.

Annuity and supplemental contracts. Fair values of the Company's liabilities for deferred annuity contracts are estimated to be the cash surrender values of each contract. The cash surrender value represents the policyholder's account balance less applicable surrender charges. The fair values of liabilities for immediate annuity contracts and supplemental contracts with and without life contingencies are estimated by discounting estimated cash flows using U.S. Treasury bill rates as of December 31, 2004 and 2003.

Fair values for the Company's insurance contracts other than annuity contracts are not required to be disclosed. This includes the Company's traditional and universal life products. However, the fair values of liabilities under all insurance contracts are taken into consideration in the Company's overall management of interest rate risk, which minimizes exposure to changing interest rates through the matching of investment maturities with amounts due under insurance and annuity contracts.

The carrying amounts and fair values of the Company's financial instruments are as follows:

		December 31, 2004		December 31, 2003
		Carrying	Fair	Carrying	Fair
		Values	Values	Values	Values
		(In thousands)
ASSETS
Investments in debt and equity securities:
Securities held to maturity	$	3,274,134	3,367,112	2,821,016	2,924,347
Securities available for sale		1,635,247	1,635,247	1,387,414	1,387,414
Cash and short-term investments		50,194	50,194	68,210	68,210
Mortgage loans		124,712	129,963	152,035	161,717
Policy loans		88,448	115,107	89,757	114,187
Other loans		19,066	20,655	23,763	25,529
Derivatives		42,156	42,156	44,849	44,849
Life interest in Libbie Shearn
Moody Trust		2,555	12,775	2,861	12,775
LIABILITIES
Deferred annuity contracts	$	4,078,589	3,414,888	3,566,956	3,090,101
Immediate annuity and
supplemental contracts		271,470	270,110	261,037	256,732

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(15) RELATED PARTY TRANSACTIONS

Robert L. Moody, Jr. ("Mr. Moody, Jr.") is the son of Robert L. Moody, the Company's Chairman and Chief Executive Officer, and is the brother of Ross R. Moody, the Company's President and Chief Operating Officer, and of Russell S. Moody and Frances A. Moody-Dahlberg who serve as directors of National Western. Mr. Moody, Jr. is employed by the Company in an agency marketing position for which he is paid an annual salary of $14,000 and is eligible to participate in the Company's benefit plans.. In addition, Mr. Moody, Jr. wholly owns an insurance marketing organization that maintains agency contracts with National Western pursuant to which agency commissions are paid in accordance with the Company's standard commission schedules. Mr. Moody, Jr. also maintains an independent agent contract with National Western for policies personally sold under which commissions are paid in accordance with standard commission schedules. In 2004, commissions paid under these agency contracts aggregated appro ximately $166,000. In conjunction with these agency contracts, Mr. Moody, Jr. may be eligible to attend Company sales conferences and functions based upon meeting published minimum levels of qualifying sales production. In his capacity as an insurance marketing organization with the Company, Mr. Moody also receives product development fees associated with a product line of the Company which amounted to $82,000 in 2004.

Mr. Moody, Jr. further serves as the agent of record for several of the Company's benefit plans including the self-insured health plan for which Mr. Moody provides utilization review services through a wholly owned utilization review company. In 2004, amounts paid to Mr. Moody, Jr. as commissions and service fees pertaining to the Company's benefit plans approximated $45,000.

Arthur O. Dummer, a former director of National Western, who resigned in early 2004, wholly owns The Donner Company. The Donner Company was paid $93,000, $59,000, and $116,000 in 2004, 2003, and 2002, respectively, pursuant to an agreement with a reinsurance intermediary relating to a reinsurance contract between the Company and certain life insurance reinsurers.

During 2004, management fees totaling $330,000 were paid to Regent Management Services, Limited Partnership ("RMS") for services provided to a downstream nursing home subsidiary of National Western. RMS is 1% owned by general partner RCC management Services, Inc. ("RCC"), and 99% owned by limited partner, Three R Trusts. RCC is 100% owned by the Three R Trusts. The Three R Trusts are four Texas trusts for the benefit of the children of Robert L. Moody (Robert L. Moody, Jr., Ross R. Moody, Russell S. Moody, and Frances A. Moody-Dahlberg). Charles D. Milos, Senior Vice President-Mortgage Loans and Real Estate, and Director of the Company, is a Director and Vice President of RCC. Ellen C. Otte, Assistant Secretary of the Company, is a Director and Secretary of RCC.

The Company holds a loan in the amount of $3.7 million at December 31, 2004 issued to TMNY, LLC. As of the reporting date, Robert L. Moody owned 20.5% of TMNY, LLC. The stated maturity on this loan is December 29, 2006.

The Company holds a common stock investment of approximately 9.4% of the issued and outstanding shares of Moody Bancshares, Inc. at December 31, 2004, the latest available financial information. Moody Bancshares, Inc. owns 100% of the outstanding shares of Moody Bank Holding Company, Inc., which owns approximately 98% of the outstanding shares of The Moody National Bank of Galveston ("MNB"). The Company utilizes MNB for certain bank custodian services as well as for certain administrative services with respect to the Company's defined benefit and contribution plans. Robert L. Moody serves as Chairman of the Board and Chief Executive Officer of MNB. The ultimate owner of MNB is the Three R Trusts. Fees totaling $147,000, $147,000, and $139,000 were paid to MNB with respect to these services in 2004, 2003, and 2002, respectively.

(16) UNAUDITED QUARTERLY FINANCIAL DATA

Quarterly results of operations for 2004 are summarized as follows:

		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter
		(In thousands except per share data)
2004:
Revenues	$	100,464	107,479	94,092	132,111
Earnings	$	69,313	19,712	14,295	18,849
Basic earnings per share	$	19.50	5.54	4.01	5.27
Diluted earnings per share	$	19.27	5.47	3.96	5.22

Quarterly results of operations for 2003 are summarized as follows:

		First	Second	Third	Fourth
		Quarter	Quarter	Quarter	Quarter
		(In thousands except per share data)
2003:
Revenues	$	77,452	101,244	96,164	124,408
Earnings	$	9,726	17,085	10,437	18,534
Basic earnings per share	$	2.76	4.84	2.95	5.23
Diluted earnings per share	$	2.74	4.82	2.91	5.17

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
December 31, 2004
(In thousands)
		(1)	Fair	Balance Sheet
Type of Investment		Cost	Value	Amount
Fixed maturity bonds:
Securities held to maturity:
United States government and government
agencies and authorities	$	219,845	218,430	219,845
States, municipalities, and political subdivisions		10,000	10,126	10,000
Foreign governments		20,314	21,632	20,314
Public utilities		457,286	484,546	457,286
Corporate		1,134,186	1,180,974	1,134,186
Mortgage-backed		1,271,570	1,288,455	1,271,570
Asset-backed		160,933	162,949	160,933
Total securities held to maturity		3,274,134	3,367,112	3,274,134
Securities available for sale:
United States government and government
agencies and authorities		-	-	-
States, municipalities, and political subdivisions		31,220	32,335	32,335
Foreign Government		10,622	11,214	11,214
Public utilities		164,548	170,420	170,420
Corporate		1,027,128	1,073,817	1,073,817
Mortgage-backed		274,126	277,367	277,367
Asset-backed		47,313	50,043	50,043
Total securities available for sale		1,554,957	1,615,196	1,615,196
Total fixed maturity bonds		4,829,091	4,982,308	4,889,330
Equity securities:
Securities available for sale:
Common stocks:
Public utilities		744	994	994
Banks, trust and insurance companies (2)		338	453	453
Corporate		2,552	3,447	3,447
Preferred stocks		8,658	8,948	8,948
Total equity securities		12,292	13,842	13,842
Derivatives		30,889		42,156
Mortgage loans (3)		116,718		116,350
Policy loans		88,448		88,448
Other long-term investments (4)		47,099		45,702
Total investments other than
investments in related parties	$	5,124,537		5,195,828

Notes:

(1) Bonds are shown at amortized cost, mortgage loans are shown at unpaid principal balances before allowances for possible losses of $368,000, and real estate is stated at cost before allowances for possible losses of $1.4 million.

(2) Equity securities with related parties having a cost of $195,000 and balance sheet amount of $6.2 million have been excluded.

(3) Mortgage loans with related parties totaling $8.4 million have been excluded.

(4) Real estate acquired by foreclosure included in other long-term investments is as follows: cost $4.6 million; balance sheet amount $4.1 million.

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES
SCHEDULE V
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2004, 2003, and 2002
(In thousands)
			(1)
		Balance at	Charged to			Balance at
		Beginning	Costs and			End of
Description		of Period	Expenses	Reductions	Transfers	Period
Valuation accounts deducted
from applicable assets:
Allowance for possible
losses on mortgage loans:
December 31, 2004	$	660	(292)	-	-	368
December 31, 2003	$	660	-	-	-	660
December 31, 2002	$	2,115	(1,455)	-	-	660
Allowance for possible
losses on real estate:
December 31, 2004	$	2,785	(1,388)	-	-	1,397
December 31, 2003	$	2,713	72	-	-	2,785
December 31, 2002	$	2,513	200	-	-	2,713

Notes:

(1) These amounts were recorded to realized (gains) losses on investments.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

NATIONAL WESTERN LIFE INSURANCE COMPANY
(Registrant)

Date: March 10, 2005	/S/ Robert L. Moody
	By: Robert L. Moody, Chairman of the Board and
	Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title (Capacity)	Date
/S/ Robert L. Moody	Chairman of the Board and	March 10, 2005
Robert L. Moody	Chief Executive Officer, and Director
	(Principal Executive Officer)
/S/ Ross R. Moody	President and Chief Operating Officer, and Director	March 10, 2005
Ross R. Moody
/S/ Brian M. Pribyl	Senior Vice President - Chief Financial &	March 10, 2005
Brian M. Pribyl	Administrative Officer, and Treasurer
	(Principal Financial Officer)
/S/ Kay E. Osbourn	Vice President, Controller & Assistant Treasurer	March 10, 2005
Kay E. Osbourn	(Principal Accounting Officer)
/S/ Harry L. Edwards	Director	March 10, 2005
Harry L. Edwards
/S/ Stephen E. Glasgow	Director	March 10, 2005
Stephen E. Glasgow
/S/ E. Douglas McLeod	Director	March 10, 2005
E. Douglas McLeod
/S/ Charles D. Milos	Director	March 10, 2005
Charles D. Milos
/S/ Frances A. Moody-Dahlberg	Director	March 10, 2005
Frances A. Moody-Dahlberg
/S/ Russell S. Moody	Director	March 10, 2005
Russell S. Moody
/S/ Louis E. Pauls, Jr.	Director	March 10, 2005
Louis E. Pauls, Jr.
/S/ E.J. Pederson	Director	March 10, 2005
E.J. Pederson

EX-10

EXHIBIT 10(as)

GROUP EXCESS BENEFIT PLAN


CONTENTS

Section	Page	Description
I.	1	Schedule of Benefits
II.	1	Definitions
III.	2	Premiums
IV.	3	Eligibility and Effective Date
V.	4	Benefits
VI.	4 & 5	Coordination of Benefits
VII.	6 & 7	Payment of Benefits
VIII.	8	Termination of Insurance
IX.	9	General Provisions
X	10 & 11	Continuation

I.      SCHEDULE OF BENEFITS
BENEFITS:     100% of all Covered Expenses
MAXIMUM BENEFIT FOR EACH CLASS OF EMPLOYEES: The Maximum Annual Benefit for each Benefit Year as specified in the application of the Policyholder and as approved by the Company.
LIMITATION.  This Schedule of Benefits is subject to all of the provisions contained in this policy.
II. DEFINITIONS
Benefit Year: The twelve month period which:
1.	Begins on the Effective Date of this policy, and the same date each calendar year thereafter; and
2.	Ends on the day before that date each calendar year thereafter (herein called the Anniversary Date).
Class: A classification of its Employees by the Policyholder, which is determined by salary, position, length of service or other conditions of employment. The amount of Coverage under this Policy will be identical for each covered Unit of the same class.
Coverage: The Benefits granted by the Company with respect to each Class. The maximum amount of such Benefits for each Benefit Year is as specified in the application of the Policy and as approved by the Company.
Covered Expenses: Any bona fide medical or dental expense which is:
1.	Incurred while this Policy is in force and while the Insured Person is covered hereunder; and
2.	Recognized as a covered expense in accordance with the provision of Section 213 of the Internal Revenue Code of 1954, as amended, and of the Regulations and rulings promulgated thereunder; and
3.	Cosmetic Surgery as any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness;
4.	Not an expense which is payable under any other Plan, regardless of whether claim for such payment has been made; and
5.	Not an expense due to an injury or illness which is covered by Workers' Compensation, maritime, or any occupational disease law.
Covered Unit: An Insured Employee or an Insured Employee and his Dependents. The terms "Insured Employee", "Insured Dependent", and "Insured Person" are used in this Policy to denote the individuals so covered where applicable.
Plan: Refer to definition provided in Section VI. Coordination of Benefits
III. PREMIUM
3.1	Premium Payment Agreement. The amount and manner of payment of premiums due under this Policy is specified in the Premium Payment Agreement between the Policyholder and the Company
3.2	Grace Period. Unless the Policyholder has given notice of termination, a grace period of 31 days shall apply during which coverage under this Policy shall remain in force. This Policy shall automatically terminate at the end of the Grace Period if the Policyholder has failed to pay the full amount of any premium due within the time required by the Premium Payment Agreement. This provision does not apply to the initial (advance) premium.
3.3	Limitation of Liability for Premium. The maximum liability of the Policyholder for the payment of Reimbursement Premiums, as defined in the Premium Payment Agreement, for each Benefit Year shall be equal to 85% of the Aggregate Liability applicable to such year as provided below.
	a.	Maximum Annual Aggregate Liability. The Maximum Annual Aggregate Liability (Aggregate Liability) for each Benefit Year is the sum of the Maximum Annual Benefits for each Covered Unit which is insured under this Policy at any time during the Benefit Year.
	b.	Initial Amount. The initial amount of the Aggregate Liability is the sum of such Maximum Annual Benefits specified in the Policyholder's application, as approved by the Company.
	c.	Increases. A Policyholder may, at any time, increase the amount of the Aggregate Liability for any Benefit Year by applying to the Company for the addition of Covered Units or for an increase in the amount of Coverage applicable to a Class of Covered Units. The increase in the amount of Aggregate Liability will take effect upon the Company's approval of a written notice from the Policyholder which includes the name of the persons to be added and the amount of coverage for each.
	d.	Decreases. In no event will the amount of the Aggregate Liability for a Benefit Year be decreased during such year. Termination of a Covered Unit's coverage will not operate to decrease the amount of the Aggregate Liability during that Benefit Year.
	e.	Renewal Aggregate Liability. A Policyholder may establish a new Aggregate Liability to take effect as of the Anniversary date for the next Benefit Year. The amount of such Aggregate Liability may be more or less than the amount applicable to the prior year, and will take effect for the next Benefit Year, provided the Company approves a written notice from the Policyholder which includes the names of all persons to be covered and the amounts of coverage for each. All such applications must be received at the Company prior to such Anniversary.
3.4	Liability Not Limited. The limitation of liability for the payment of Reimbursement Premiums for each Benefit Year shall not apply with respect to each and every one of the following:
	a.	The amount of any Benefits which are not actually paid by the Company during a Benefit Year, regardless of whether the expenses were incurred during such year. Any claim for Benefits on which a completed proof of loss, which does not require any additional information or follow-up, has been received by the Company and which has been date stamped at the Home Office of the Company at least 10 days before the end of a benefit year will be considered "paid" during such Benefit Year, if subsequently approved by the Company for payment; and
	b.	The amount of any medical expense incurred prior to the Effective Date of coverage; and
	c.	The amount of any medical expense incurred after the date coverage terminates; and
	d.	The amount of any Benefits paid with respect to an Insured Person, if such payment is made during a Benefit Year in which the person is not covered under this Policy; and
	e.	The amount by which the Coverage applicable to an Insured person during the Benefit Year in which Benefits have been paid is less than the amount of such person's coverage during the immediately preceding Benefit Year; and
	f.	The amount of any and all costs, expenses, and damages, as provided in the Indemnification Section of the Premium Payment Agreement.
IV. ELIGIBILITY AND EFFECTIVE DATE
4.1	Eligible Employee. Any person who is:
	a.	I.	Chairman of the Board or his	$300,000.
			surviving Dependents
		II.	Retired Chairman of the Board	$300,000.
			And his Dependents or surviving Dependents
			of Same (who has served 7 or more years
			since 1980)
		III.	President	$100,000.
		IV.	Retired President
			(who has served 7 or more years since 1980 and
			was employed on January 1, 2004)	$100,000.
		V.	Retired President
			(who has served 7 or more years since 1980 and
			was employed prior to January 1, 2004)	$50,000.
		VI.	Executive Vice President	$50,000.
		VII.	Senior Vice Presidents	$50,000.
		VIII.	Vice Presidents	$50,000.
		IX.	Members of the Board	$50,000.
		X.	General Counsel	$50,000.
		and
	b.	Covered as an Insured Person under the Policyholder's Group Health plan named in the application, or such other Health Plan, which is accepted by the Company.
4.2	Eligible Dependent.
	a.	A dependent of an Insured Employee who is covered as an Insured Dependent under the Policyholder's Group Health Plan or other accepted Health Plan, as stated above; or
	b.	A child of the Insured Employee who is incapable of self-support and maintenance because of mental disability or physical handicap and is chiefly dependent upon the Insured Employee for support and maintenance. The Insured Employee must furnish proof of such incapacity and dependency that is satisfactory to the Group. Coverage will be continued as long as the child is incapacitated and dependent, unless otherwise terminated in accordance with the terms of the Contract.
4.3	Effective Date. The insurance of an Employee or an Employee and his Dependent will take effect as of the date, and for the amount of Coverage, which is specified in the Application, upon approval by the Company. In no event may such date be prior to the beginning date of the current fiscal year.
4.4	Changes. The amount of Coverage may be increased or decreased with respect to each Class of Covered Units, and additional Covered Units may become insured at any time during a Benefit Year, by written notice from the Policyholder, which includes the name of the persons and the amount of Coverage for each. Such increases and additions shall take effect as specified in the Application, upon approval by the Company
V. BENEFITS
5.1	Benefits Payable. Subject to all of the provisions of this Policy, the Company will pay, as Benefits, 100% of the Covered Expenses as follows:
	a.	During the First Benefit Year of a Covered Unit's Coverage under this Policy, all such Covered Expenses must be Incurred during such Benefit Year. As used in this Policy, the date a medical expense in "Incurred" is the date treatment or services were actually rendered, or the date an item was actually purchased, and
	b.	During subsequent Benefit Years, all such Covered Expenses must have been Incurred while the Covered Unit's insurance under this Policy is in effect. Accordingly, Covered Expenses Incurred in one Benefit Year which are not paid during such year will be paid in the subsequent Benefit Year, subject to all of the provisions of this policy.
5.2	Maximum Benefit. The maximum amount of Benefits payable under this Policy for each Covered Unit during each Benefit Year is the amount of the Maximum Annual Benefit in effect for such Covered Unit, as specified in the Application, as approved by the Company.
VI. COORDINATION OF BENEFITS
6.1	Benefits Subject to this Provision. This provision shall be applicable to all Benefits under this Policy.
6.2	Definition of "Plan". Any group Plan providing benefits or services for or by reason of medical or dental care or treatment by:
	a.	Group, blanket, or franchise insurance coverage;
	b.	Blue Cross, Blue Shield, group practice and other pre-payment coverage; and
	c.	Any self-funded or self-insured coverage established or maintained by an employer for his employees; and
	d.	Any coverage under governmental programs; and
	e.	Any coverage required or provided by statute.
	In particular, but not by way of limitation, "Plan" shall mean any of the Plans described above with respect to which an Insured Employee or Dependent, or both, meets the eligibility requirements to be an Insured Person at any time while insured under this Policy. The term "Plan" shall be construed separately with respect to each policy, contract or other arrangement for benefits or services and separately with respect to that portion of any such policy, contract or other arrangement which reserves the right to take the benefits or services of other Plans into consideration in determining its benefits and that portion which does not.
6.3	Effect on Benefits. The amount of Benefits payable under this Policy shall be reduced to the extent that the sum of such reduced Benefits and the amount of the benefits payable under all other Plans as defined in 6.2 of this Section shall not exceed the total amount of the Covered Expenses.
6.4	Order of Benefit Determination. The benefits of all other Plans as defined in 6.2 of this Section shall be determined before the Benefits of this Policy, except in the case of a governmental plan which is required by law to be secondary.
6.5	Right to Receive and Release Necessary Information. For the purpose of determining the applicability of, and implementing the terms of, this provision or any provision or similar purpose of any other Plan, the Company may, without the consent of, or notice to, any person, release to or obtain from any other insurance company or other organization or individual, any information with respect to any person, which the Company deems to be necessary for such purposes. Any person claiming benefits under this policy shall furnish to the Company such information as may be necessary to implement this provision.
6.6	Right of Recovery. Whenever payments have been made under this Policy with respect to Covered Expenses in a total amount, at any time, in excess of the maximum amount of payment necessary at that time to satisfy the interest of this provision, the Company shall have the right to recover such payments, to the extent of such excess, from among one or more of the following, as the Company shall determine:
	a.	Any persons to or for or with respect to whom payments were made;
	b.	Any other insurance companies; and
	c	Any other organizations.
VII. PAYMENT OF BENEFITS
7.1	Claims Procedure. The following procedure must be followed by Insured Employees to obtain payment of Benefits under this Policy for themselves and for their Insured Dependents.
	a.	Notice of Claim. Within 20 days after the date a Covered Expense is incurred, written notice must be submitted to the Company, identifying the person whose condition, illness, or injury is the basis of a claim.
	b.	Claim Forms. Claim forms for submitting proof of loss will be furnished by the Company upon receipt of notice of a claim. If such forms are not furnished within 15 days after receipt of notice of a claim, an Insured Employee may use any written form as a claim form to submit a proof of loss which includes information indicating the occurrence, character, and extent of the Covered Expense for which a claim is made, and the identity of the insured Person incurring such expenses.
	c.	Proof of Loss. A completed claim form together with the original bills for medical expenses incurred, a statement from the attending physician and a proof of settlement from all other Plans pursuant to paragraph 6.4 above, must be submitted to the Home Office of the Company within 90 days after the date a Covered Expense is incurred. The Policyholder's statement on each such claim for shall be a representation that the person with respect to whom claim is made was an Insured Person on the date the Covered Expense was incurred.
7.2	Payment of Benefits. All Benefits under this Policy will be paid to the Insured Employee for Covered Expenses incurred by him or his Insured Dependent. Such payment shall be made immediately upon receipt of due proof of loss.
	In the event of the death or incapacity of the Insured Employee, Benefits will be paid to his estate or legally appointed guardian, respectively.
	No assignment of all or any portion of any Benefit payable under this Policy shall be binding or enforceable against the Company, regardless of whether the Company has prior notice of such assignment.
7.3	Rights of Company. The Company reserves the right to have a physician of its own choosing examine any Insured Person whose condition, illness, or injury is the basis of a claim. All such examinations shall be at the expense of the Company. This right may be exercised when and as often as the Company may reasonable require during the pendency of a claim. The opportunity to exercise this right shall be a condition for obtaining payment of benefits for the claim.
	The Company reserves the right to have an autopsy performed upon any deceased Insured Person whose condition, illness, or injury is the basis of a claim. This right may be exercised only where not prohibited by law.
	The Company reserves the right to deduct from any benefits payable under thisPolicy to an Insured Employee, the amount of any prior payment which has been made to such Insured Employee:
	a.	In error; or
	b.	Pursuant to a misstatement contained in a proof of loss; or
	c.	Pursuant to a misstatement made to obtain coverage under this Policy within 2 years after the date such coverage begins; or
	d.	With respect to an ineligible person or
	e.	Pursuant to a claim for which benefits are recoverable under any Plan or act of law providing for coverage for occupational or maritime injury or disease.
	This provision shall not be deemed to require the Company to pay benefits under this Policy in any such instance. Such deduction may be made against any claim for benefits under this Policy by the Insured Employee or by any of his Insured Dependents, if such payment is made with respect to such Insured Employee or any person covered or asserting coverage as a Dependent of such Insured Employee.
7.4	Discharge of Liability. Any payment made in accordance with the provisions of this Section shall fully discharge the liability of the Company to the extent of such payment.
7.5	Legal Action. No action at law or in equity shall be brought under this Policy prior to the expiration of 60 days after proper written proof of loss has been furnished in accordance with the requirements of this Policy. No such action shall be brought after the expiration of 3 years after the time written proof of loss is required to be furnished in accordance with the requirements of this Policy.
VIII. TERMINATION OF INSURANCE
8.1	Termination of Policy. This policy may be terminated at any time by written agreement between the Policyholder and the Company.
	The Policyholder may terminate this policy by written notice to the Company on or before any Premium Due Date, effective on said Premium Due Date.
	The Company may cancel this policy on any Premium Due Date after it has been in effect for 12 months. Written notice will be given to the Policyholder at least 31 days in advance of the termination date.
	This policy will terminate for non-payment of premiums as stated under Grace Period.
	When this policy terminates:
	1.	The Company shall promptly return any unearned premium paid; and
	2.	The Policyholder agrees to pay, and shall be liable for, any earned premium which has not been paid.
8.2	Termination of Employee Insurance. An Insured Employee's insurance will end on the date:
	a.	This Policy terminates; or
	b.	Such Employee ceases to be as Eligible Employee (as defined in section 4.1); whichever is earlier.
8.3	Termination of Dependent Insurance. The Dependent insurance of any Insured Employee will end on the date:
	a.	The Insured Employee's insurance ends; or
	b.	All Dependent Insurance under this policy is deleted; whichever is earlier.
Insurance for each Dependent will end on the date he ceases to be an Eligible Dependent (as defined in section 4.2).
IX. GENERAL PROVISIONS
9.1	Entire Contract. This policy, the Premium Payment Agreement, and the Application of the Policyholder, which is attached hereto, constitute the entire contract between the Policyholder and the Company.
	All statements made by:
	a.	The Policyholder; or
	b.	An Insured Person.
	shall be deemed representations and not warranties. No such statement shall be used in any contest unless a written copy of the statement is, or has been, furnished to the Insured Person or his beneficiary.
9.2	Certificates. The Company shall furnish to the Policyholder, for distribution to his Insured Employees, Certificates of Insurance describing the essential provisions of this policy.
9.3	Conformity With Law. If any provision of this policy is in conflict with any law to which it is subject, such provision is hereby amended to conform with the law.
9.4	Clerical Error. No clerical error (by the Policyholder or the Company) shall:
	a.	Provide insurance to which a person is not entitled; nor
	b	Prevent insurance to which he is entitled; under the terms of this policy.
	Premiums will be adjusted (retro-active for no more than 12 months) when such an error is found.
9.5	Workers' Compensation. This policy is not a Workers' Compensation policy. It does not replace nor satisfy any requirement for such insurance.
9.6	Use of Pronouns. A masculine pronoun, when used herein shall include the feminine, unless the context clearly indicates otherwise.
X. CONTINUATION
Continuation of Coverage. Insurance may be continued for an Insured Employee and his Insured Dependents for up to 18 months after it would otherwise end due to:
1.	Termination of employment; or
2.	Reduction in hours of work.
If such Employee or his Insured Dependent is determined under The Social Security act to have been disabled at the time of the Qualifying Event named above, this Coverage may be continued for up to 29 months. Proof of this determination must be sent to the Company:
1.	Within 60 days after such determination is made; and
2.	Before the 18 month continuation ends.
If an Insured Employee who is on the 18 month continuation dies, or becomes entitled to benefits under Medicare, his Insured Dependents will be entitled to a total of 36 months of continued coverage. This shall be counted from the date of the original Qualifying Event.
Insurance may be continued for Insured Dependents only for up to 36 months after it would otherwise end due to:
1.	Death of the Insured Employee; or
2.	Divorce or legal separation; or
3.	The Insured Employee becoming eligible for Medicare; or
4.	An Insured Dependent child ceasing to satisfy the definition of an Eligible Dependent.
Requirements. The Insured Person who wants to continue his coverage must:
1.	Elect this continue coverage within 60 days of the later of
	a.	The date his insurance would otherwise end; or
	b	The date he received notice from the Plan Administrator of the right to continue his coverage; and
2.	Pay the required premium to his Employer. The first premium must be paid within 45 days after he elects this Continuation. It shall include the time from the date insurance would have ended to one month past the date Continuation was elected. Subsequent premiums must be paid monthly, in advance. For the first 18 months of Continuation the required premium shall be 102% of the group premium. For an Employee who qualifies for the 29 months continuation due to disability, the premium for the additional 11 months of coverage shall be increased to 150%.
No Evidence of Insurability is required for this Continuation.
Notice. The Insured Employee is required to notify the Plan Administrator within 30 days after a Dependent's insurance would end due to:
1.	Divorce or legal separation; or
2.	A Dependent child no longer being eligible.
Termination of Continued Coverage. This continued coverage will end on the earliest of the following dates:
1.	The end of the last period for which the required premium was paid; or
2.	The date this policy terminates (The Employee or Dependent may be entitled to coverage under another health plan the Employer provides for his employees); or
3.	The date the Insured Person becomes covered under another group health plan which does not contain any exclusion or limitation with respect to any pre-existing condition of such Insured Person; o
4.	The date the Insured Person becomes entitled to benefits under Medicare; or
5.	For a Continuation due to termination of employment or reduction in hours, the end of a period of 18 months following the date insurance would have otherwise ended, unless extended to 29 months due to determination of disability; or
6.	For a Continuation for any reason except termination of employment or reduction in hours, the end of a period of 36 months following the date insurance would have otherwise ended
COMPLAINT NOTICE:    Should any dispute arise about your premium or about a claim that you have filed, write to:
		American National Insurance Company
		Health Claims Department
		One Moody Plaza
		Galveston, Texas 77550
	If the Problem is not resolved, you may also write to the:
		State Board of Insurance
		Department C
		1110 San Jacinto
		Austin, Texas 78786.
This notice of complaint procedure is for information only, and does not become a part or condition of this policy.

EX-10

EXHIBIT 10(at)
PLAN DOCUMENT
AND
SUMMARY PLAN DESCRIPTION
FOR
NATIONAL WESTERN LIFE
INSURANCE COMPANY
NATIONAL WESTERN LIFE INSURANCE COMPANY EMPLOYEE HEALTH PLAN
It is the intention of the Plan sponsor, National Western Life Insurance Company, to hereby amend and restate the National Western Life Insurance Company Employee Health Plan, a program of benefits constituting a self-funded "Employee Welfare Benefit Plan" under the Employee Retirement Income Security Act of 1974 (ERISA) and any amendments thereto.
IN WITNESS WHEREOF, the Plan Sponsor has executed, and the Claims Administrator has acknowledged, this Plan Document as of the Plan effective date shown herein.
Original effective date of the Plan:  November 1, 1993; as hereby amended and restated effective:
April 1, 2004.
/S/Carol Jackson			/S/Kathy Enochs
Date		Date
For Plan Sponsor:		For Claims Administrator:
Carol Jackson, Vice President Human Resources		Kathy Enochs, Chief Operating Officer
National Western Life Insurance Company		Group & Pension Administrators, Inc.
TABLE OF CONTENTS
					PAGE
GENERAL INFORMATION					3
INTRODUCTION					4-7
STATEMENT OF ERISA RIGHTS					8-9
SCHEDULE OF BENEFITS					10-15
OUT-OF-AREA-BENEFIT					16
PRESCRIPTION DRUG PLAN					17-19
UTILIZATION REVIEW (UR) PROGRAM					20
CASE MANAGEMENT					21
NEWBORNS' AND MOTHERS' HEALTH PROTECTION ACT					21
VOLUNTARY SECOND SURGICAL OPINION					21
PRE-EXISTING CONDITION EXCLUSION LIMITATION					22
PORTABILITY AND CREDITABLE COVERAGE					23
COMPREHENSIVE MEDICAL BENEFITS					24-26
MAJOR MEDICAL EXPENSE BENEFITS					27-32
MAJOR MEDICAL PLAN EXCLUSIONS AND LIMITATIONS					33-36
ORGAN TRANSPLANT PROGRAM					37-39
COORDINATION OF BENEFITS					40
COORDINATION PROCEDURES					41
COORDINATION WITH MEDICARE					42
COORDINATION WITH AUTOMOBILE INSURANCE COVERAGE					42-43
SUBROGATION					44-45
CLAIM FILING PROCEDURES					46-49
GENERAL PROVISIONS					50-52
ELIGIBILITY FOR COVERAGE					53-54
QUALIFIED MEDICAL CHILD SUPPORT ORDERS/PLACEMENT FOR ADOPTION					55
EFFECTIVE DATE OF COVERAGE					56
EMPLOYEE AND DEPENDENT SPECIAL ENROLLMENT PERIODS					56-57
ANNUAL OPEN ENROLLMENT PERIOD FOR THE EMPLOYEE HEALTH PLAN					58
LATE ENROLLEE					58
COVERAGE CHANGES					59
TERMINATION OF COVERAGE					60
COVERAGE DURING LEAVE OF ABSENCE					61
REINSTATEMENT OF COVERAGE / REHIRES					61
FAMILY AND MEDICAL LEAVE					62
CONTINUATION OF GROUP HEALTH COVERAGE (COBRA)					63-66
DEFINITIONS					67-81
GENERAL INFORMATION
This Plan Document describes the benefits for the Employees of National Western Life Insurance Company and its subsidiaries. National Western Life Insurance Companies affiliates. This statement is required by the Employee Retirement Income Security Act of 1974 (ERISA) and provides important information regarding your rights under this law.
Name of the Plan National Western Life Insurance Company Employee Health Plan Plan Sponsor National Western Life Insurance Company 850 E. Anderson Lane Austin, Texas 78752-1602 (512) 836-1010 Plan Administrator National Western Life Insurance Company 850 E. Anderson Lane Austin, Texas 78752-1602 (512) 836-1010 Type of Plan Self-Funded Welfare Benefit Plan Agent for Service of Legal Process Legal Process may also be served on the Plan Administrator Ross R. Moody, COO/President National Western Life Insurance Company 850 E. Anderson Lane Austin, Texas 78752-1602 (512) 836-1010 Claims Administrator Group & Pension Administrators, Inc. 5803 Sebastian Place San Antonio, Texas 78249 (210) 691-0500 The Plan Administrator has retained the services of the Claims Administrator to administer claims under the Plan. Regional Office of Employee Benefits Security Administration Employee Benefits Security Administration (EBSA) Department of Labor Dallas Regional Office 525 Griffin Street, Rm 707 Dallas, Texas 75202-5025 214-767-6831 w 866-444-EBSA (3272) www.askebsa.dol.gov for electronic inquiries w www.dol.gov/ebsa Plan Year The twelve (12) month period beginning January 1 and ending December 31 of the same Calendar Year Employer Tax ID Number 84-0467208 IRS Plan ID Number 501
INTRODUCTION
National Western Life Insurance Company, hereinafter referred to as "Company," hereby amends and restates the National Western Life Insurance Company Employee Health Plan, a self-funded Employee Welfare Benefit Plan hereinafter referred to as the "Plan" pursuant to which Plan benefits and administration expenses are paid directly from the Employer's general assets, and the rights and privileges of which shall pertain to Employees and their Dependents with respect to such Plan. The Plan is not insured. Contributions received from Covered Persons are used to cover Plan costs and are expended immediately.
GENERAL AUTHORITY OF THE PLAN ADMINISTRATOR
Subject to the claims administration duties delegated to the Claim Administrator, the Plan Administrator reserves the unilateral right and power to administer and to interpret, construe and construct the terms and provisions of the Plan, including, without limitation, correcting any error or defect, supplying any omission, reconciling any inconsistency and making factual determinations.
The Plan will be interpreted by the Plan Administrator in accordance with the terms of the Plan and their intended meanings. However, the Plan Administrator shall have the discretion to interpret or construe ambiguous, unclear or implied (but omitted) terms in any fashion it deems to be appropriate in its sole judgment. The validity of any such finding of fact, interpretation, construction or decision shall be upheld in any legal action and shall be binding and conclusive on all interested parties unless clearly arbitrary and capricious.
To the extent the Plan Administrator has been granted discretionary authority under the Plan, the prior exercise of such authority by the Plan Administrator shall not obligate it to exercise its authority in a like fashion thereafter.
If due to errors in drafting, any Plan provision does not accurately reflect its intended meaning, as demonstrated by prior interpretations or other evidence of intent, or as determined by the Plan Administrator in its sole and exclusive judgment, the provision shall be considered ambiguous and shall be interpreted by the Plan Administrator in a fashion consistent with its intent, as determined by the Plan Administrator. The Plan may be amended retroactively to cure any such ambiguity, notwithstanding anything in the Plan to the contrary.
The foregoing provisions of this Plan may not be invoked by any person to require the Plan to be interpreted in a manner which is inconsistent with its interpretations by the Plan Administrator. All actions taken and all determinations by the Plan Administrator shall be final and binding upon all persons claiming any interest under the Plan subject only to the claims appeal procedures of the Plan.
ADMINISTRATION OF THE PLAN
The Plan Administrator has full charge of the operation and management of the Plan. The Plan Administrator has retained the services of the Claims Administrator, an independent claims processor experienced in claims review.
The Plan Administrator is the named fiduciary of the Plan except as noted herein. The Plan Administrator maintains discretionary authority to interpret the terms of the Plan, including but not limited to, determination of eligibility for and entitlement to Plan benefits in accordance with the terms of the Plan; any interpretation or determination made pursuant to such discretionary authority shall be given full force and effect and shall be binding on all persons, unless it can be shown that the interpretation or determination was arbitrary and capricious.
PHYSICIAN-PATIENT RELATIONSHIP
The Plan is not intended to disturb the Physician-Patient relationship. Physicians and other healthcare providers are not agents or delegates of the Plan Sponsor, Company, Plan Administrator, Employer or Benefit Services Manager. The delivery of medical and other healthcare services on behalf of any Covered Person remains the sole prerogative and responsibility of the attending Physician or other healthcare provider.
FREE CHOICE OF HOSPITAL AND PHYSICIAN
Nothing contained in this Plan shall in any way or manner restrict or interfere with the right of any person entitled to benefits hereunder to select a Hospital or to make a free choice of the attending Physician or professional provider. However, benefits will be paid in accordance with the provisions of this Plan, and the Covered Person may have higher Out-of-Pocket expenses if the Covered Person uses the services of a Non-preferred Provider.
PREFERRED PROVIDER INFORMATION
This Plan contains provisions under which a Plan Participant may receive more benefits by using certain providers. These providers are individuals and entities that have contracted with the Plan to provide services to Plan Participants at pre-negotiated rates. A list of these Preferred Providers will be periodically provided automatically and free of charge by the Plan Administrator. In addition, a Plan Participant may request a Preferred Provider list by contacting the Plan Administrator. The Preferred Provider list changes frequently; therefore, it is recommended that a Plan Participant verify with the provider that the provider is still a Preferred Provider before receiving services.
PURPOSE
The purpose of the Plan Document is to set forth the provisions of the Plan which provide for the payment or reimbursement of all or a portion of Covered Medical Expenses.
EFFECTIVE DATE
Original effective date of the Plan: November 1, 1993; as hereby amended and restated effective: April 1, 2004.
CLAIMS ADMINISTRATOR
The Claims Administrator of the Plan is shown in the General Information Section.
NAMED FIDUCIARY
The named Fiduciary for purposes of applying the provisions of ERISA to the Plan is National Western Life Insurance Company, who, as Plan Administrator, shall have the authority to control and manage the operation and administration of the Plan. The Company may delegate responsibilities for the operation and administration of the Plan. The Company shall have the authority to amend or terminate the Plan, to determine its policies, to appoint and remove service providers, adjust their compensation (if any), and exercise general administrative authority over them. The Company has the sole authority and responsibility to review and make final decisions on all claims to benefits hereunder.
CONTRIBUTIONS TO THE PLAN
The amount of contributions to the Plan are to be made on the following basis:
The Company shall from time to time evaluate the costs of the Plan and determine the amount to be contributed by the Employer and the amount to be contributed by each Covered Employee.
Notwithstanding any other provision of the Plan, the Company's obligation to pay claims otherwise allowable under the terms of the Plan shall be limited to its obligation to make contributions to the Plan as set forth in the preceding paragraph. Payment of said claims in accordance with these procedures shall discharge completely the Company's obligation with respect to such payments.
In the event that the Company or Board of Directors of the Company terminates the Plan, then as of the effective date of termination, the Employer and Covered Employees shall have no further obligation to make additional contributions to the Plan and the Plan shall have no obligation to pay claims incurred after the termination date of the Plan.
CLAIMS PROCEDURE
In accordance with Section 503 of ERISA, the Plan Administrator shall provide adequate notice in writing to any covered Plan Participant whose claim for benefits under this Plan has been denied, setting forth the specific reasons for such denial and written in a manner calculated to be understood by the Plan Participant. Further, the Plan Administrator shall afford a reasonable opportunity to any Plan Participant, whose claim for benefits has been denied, for a fair review of the decision denying the claim by the person designated by the Plan Administrator for that purpose. Details of the claims procedure, which are in compliance with ERISA regulations, are found in this Plan Document under the section entitled "Claim Filing Procedures."
PROTECTION AGAINST CREDITORS
No benefit payment under this Plan shall be subject in any way to alienation, sale, transfer, pledge, attachment, garnishment, execution or encumbrance of any kind, and any attempt to accomplish the same shall be void. If the Plan Administrator shall find that such an attempt has been made with respect to any payment due or to become due to any Plan Participant, the Plan Administrator in its sole discretion may terminate the interest of such Plan Participant or former Plan Participant in such payment. And in such case the Plan Administrator shall apply the amount of such payment to or for the benefit of such Plan Participant or former Plan Participant, his/her spouse, parent, adult child, guardian of a minor child, brother or sister, or other relative of a Dependent of such Plan Participant or former Plan Participant, as the Plan Administrator may determine, and any such application shall be a complete discharge of all liability with respect to such benefit paym ent. However, at the discretion of the Plan Administrator, benefit payments may be assigned to health care providers.
PLAN AMENDMENTS
This Document contains all the terms of the Plan and may be amended by the Plan Sponsor from time to time. Any such Plan Amendment shall become effective as of the date specified in the enabling resolution. A copy of any Plan Amendment shall be furnished to the Plan Administrator, the Trustees (if any) and any outside provider of plan administrative services.
MATERIAL MODIFICATIONS
The Plan Administrator shall notify all Covered Employees of any Plan Amendment considered a Material Reduction in covered services or benefits provided by the Plan as soon as administratively feasible after its adoption, but no later than sixty (60) days after the date of adoption of the modification or change. Covered Employee and beneficiaries must be furnished a Summary of such modifications or changes, and any changes so made shall be binding on each Covered Person. The sixty (60) day period for furnishing a summary of Material Modifications or changes does not apply to any Employee covered by the Plan who would reasonably expect to receive a summary through other means within the next ninety (90) days.
Material Reductions disclosure provisions are subject to the requirements of ERISA and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and any related amendments.
TERMINATION OF PLAN
The Plan Sponsorreserves the right at any time to terminate the Plan or any benefit under the Plan by a written resolution of the Board of Directors of the Employer to that effect. Previous contributions by the Employer and Employees shall continue to be used for the purpose of paying benefits under the provisions of this Plan with respect to claims arising before such termination.
PLAN IS NOT A CONTRACT
This Plan Document constitutes the entire Plan. The Plan will not be deemed to constitute a contract of employment or give any Covered Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge or otherwise terminate the employment of any Covered Employee.
STATEMENT OF ERISA RIGHTS
As a Plan Participant in the National Western Life Insurance Company Employee Welfare Benefit Plan you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan Participants shall be entitled to:
RECEIVE INFORMATION ABOUT YOUR PLAN AND BENEFITS
Examine, without charge, at the Plan Administrator's office and at other specified locations, such as worksites and union halls, all documents governing the Plan, including insurance contracts and collective bargaining agreements, and a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.
Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including insurance contracts and collective bargaining agreements, and copies of the latest annual report (Form 5500 Series) and updated Summary Plan Description. The Plan Administrator may make a reasonable charge for the copies.
Receive a summary of the Plan's annual report. The Plan Administrator is required by law to furnish each Plan Participant with a copy of this summary annual report.
CONTINUE GROUP HEALTH PLAN COVERAGE
Continue health care coverage for yourself, spouse or Dependents if there is a loss of coverage under the Plan as a result of a Qualifying Event. You or your Dependents may have to pay for such coverage. Review this Summary Plan Description and the documents governing the Plan on the rules governing your COBRA continuation coverage rights.
Reduction or elimination of exclusionary periods of coverage for Pre-existing Conditions under your group health Plan, if you have creditable coverage from another plan. You should be provided a Certificate of Coverage (COC), free of charge, from your group health Plan or health insurance issuer when you lose coverage under the Plan, when you become entitled to elect COBRA continuation coverage, when your COBRA continuation coverage ceases, if you request it before losing coverage, or if you request it up to 24 months after losing coverage. Without evidence of Creditable Coverage, you may be subject to a Pre-existing Condition exclusion for twelve (12) months (18 months for Late Enrollees) after your Enrollment Date in your coverage.
PRUDENT ACTIONS BY PLAN FIDUCIARIES
In addition to creating rights for Plan Participants ERISA imposes duties upon the people who are responsible for the operation of the Employee Benefit Plan. The people who operate your Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in the interest of you and other Plan Participants and beneficiaries. No one, including your Employer, your union, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your rights under ERISA.
ENFORCE YOUR RIGHTS
If your claim for a welfare benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the Plan's decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court. If it should happen that Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, you may seek assistance f rom the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.
ASSISTANCE WITH YOUR QUESTIONS
If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.
SCHEDULE OF BENEFITS
Major Medical Benefits for Covered Persons
Benefit Levels for services rendered in the geographical zip code area serviced by the Preferred Provider Organization (PPO):
The "PPO Benefit" applies to services rendered by Preferred Providers in the designated PPO Network (In-Network); the "Non-PPO Benefit" applies to services rendered by providers other than Preferred Providers (Out-of-Network). In addition, the "PPO Benefit" also applies to the following situations:
1.	If a PPO Provider refers a Covered Person to a facility which is not in the PPO Network because no appropriate PPO facility is available;
2.	If a PPO Provider refers a Covered Person to a Physician who is not in the PPO Network because there is no appropriate specialist available among PPO Providers;
3.	If a Covered Person has no choice of PPO Providers in the specialty that the Covered Person is seeking within the PPO service area; or
4.	If a Medical Emergency or initial treatment of an Accidental Injury requires immediate care and services are rendered by Non-PPO Providers.
			PPO Benefit	Non-PPO Benefit
Lifetime Major Medical Maximum Benefit
Per Covered Person			$1,000,000	$1,000,000
Calendar Year Deductible
Per Covered Person			$500	$1,000
Family Member Limit			X2	X2
Last Quarter Deductible Carry-over applies
Benefit Percentage after Deductible			80%	60%
(Unless otherwise noted)
Annual Out-of-Pocket Maximum
(In addition to Deductible and Copays)
Per Covered Person			$2,000	$3,000
Family Limit*			$4,000	$6,000
Inpatient Hospital Services			80% after	60% after
(All related charges)			Deductible	Deductible
UR Notification required
Room and Board Limit			Semi-Private	Average Semi-Private
Intensive Care Limit			Negotiated PPO Fee	Usual and Customary
			Usual and Customary
Additional Deductible Penalty
Per Admission / Outpatient Surgery			$300	$300
(Failure to notify Utilization Review (UR) Company
of Hospital admission/Outpatient Surgery,
see Utilization Review Program section)

NOTE:

The Calendar Year Deductible and Annual Out-of-Pocket Maximum are determined by combining both PPO and Non-PPO Covered Charges. Upon reaching the Annual Out-of-Pocket Maximum, Covered Medical Expenses are payable at 100% for the remainder of the Calendar Year. The Lifetime and Calendar Year Maximum Benefits are determined by combining the PPO and Non-PPO Covered Charges.

*Applies collectively to all Covered Persons in the same Family

SCHEDULE OF BENEFITS (Cont'd.)

PPO Benefit

Non-PPO Benefit

Hospital Emergency Room

(All related charges)

Medical Emergency

80% after

80% after

(See page 75 of definitions)

$25 Copay

$25 Copay

Copay waived if admitted Inpatient

Deductible waived

Deductible waived

Non-Medical Emergency

50% after

50% after

Deductible

Deductible

Ambulance Service

80% after

60% after

Deductible

Deductible

Outpatient Surgery/Ambulatory

80% after

60% after

Surgical Center

Deductible

Deductible

(All related charges)

UR Notification required or penalty applies

Outpatient Hospital Lab/X-ray

80% after

60% after

(All related charges)

Deductible

Deductible

Outpatient Independent Lab/X-ray

80% after

60% after

(All related charges)

Deductible

Deductible

All Other Lab/X-ray in conjunction with

100% after

60% after

PPO Office Visit

Deductible waived

Deductible

(not billed by Physician)

Physician Services

Office Visit

100% after

60% after

(Includes examination, treatment, Surgery,

$25 Copay*

Deductible

lab, x-ray, tests and supplies provided by

Physician at the time of the office visit, except

chemotherapy/radiation therapy, infusion therapy,

and physical therapy.

*If charges are less than $25, Copay is actual charge.

Allergy Injections (Including vials/allergens)

100%

60% after

Deductible waived

Deductible

Other In-Office Services

100% after

60% after

(without Office Visit billed)

$25 Copay

Deductible

Voluntary Second Surgical Opinion

80% after

60% after

Deductible

Deductible

All Other Physician Services

80% after

60% after

Deductible

Deductible

SCHEDULE OF BENEFITS (Cont'd.)

PPO Benefit

Non-PPO Benefit

Maternity

80% after

60% after

(Including prenatal, delivery and postnatal care)

Deductible

Deductible

Office Visit Copay does not apply.

Sonogram - Maximum allowable per Pregnancy

1 (one)

1 (one)

Additional allowed ONLY with medical

80% after

60% after

Necessity

Deductible

Deductible

Birthing Center

80% after

60% after

Deductible

Deductible

Routine Newborn Care

80% after

60% after

Inpatient Hospital nursery charges and

Deductible

Deductible

pediatric care to date of baby's discharge

Payable under covered mother's claim.

Contraceptive Implant

80% after

60% after

Deductible

Deductible

Maximum benefit payable per five (5) yr. period

$1,200

$1,200

Chemotherapy/Radiation Therapy/

80% after

60% after

Dialysis/Infusion Therapy

Deductible

Deductible

Notify the Utilization Review Company

for coordination of care.

Physical Therapy

80% after

60% after

Deductible

Deductible

Occupational Therapy

80% after

60% after

Deductible

Deductible

Speech Therapy

80% after

60% after

Restorative on the same basis as an Illness

Deductible

Deductible

Durable Medical Equipment (DME)/

80% after

60% after

Medical Supplies

Deductible

Deductible

Orthotics

80% after

60% after

Deductible

Deductible

Diabetic Self-Management Training

80% after

60% after

Deductible

Deductible

Temporomandibular Joint Syndrome (TMJ)

100% after

60% after

Office Visit

$25 Copay

Deductible

All Other Covered Services

80% after

60% after

Deductible

Deductible

Sleep Disorders

Notify Utilization Review Company for

coordination of care.

100% after

60% after

Office Visit

$25 Copay

Deductible

SCHEDULE OF BENEFITS (Cont'd.)

PPO Benefit

Non-PPO Benefit

Sleep Studies/Diagnostic Testing and

80% after

60% after

All Other Covered Services

Deductible

Deductible

Chiropractic Expense Benefits

50% after

50% after

Office Visit Copay does not apply

Deductible

Deductible

Calendar Year Maximum Benefit

$1,000

$1,000

(Includes x-rays)

Rehabilitation Facility

80% after

60% after

UR Notification required*

Deductible

Deductible

Skilled Nursing Facility

80% after

60% after

UR Notification required*

Deductible

Deductible

Calendar Year Maximum Benefit

$8,000

$8,000

*  Notification to the Utilization Review (UR)

Company is required within forty-eight (48)

hours following admission.

Home Health Care

80% after

60% after

(Applies to part-time or intermittent nursing

Deductible

Deductible

care visits and therapy services)

Notify the Utilization Review Company

for coordination of care.

Calendar Year Maximum Benefit

$10,000

$10,000

Home Infusion Therapy

80% after

60% after

Notify the Utilization Review Company

Deductible

Deductible

for coordination of care.

Hospice

80% after

60% after

Notify the Utilization Review Company

Deductible

Deductible

for coordination of care.

Private Duty Nursing

80% after

60% after

Notify the Utilization Review Company

Deductible

Deductible

for coordination of care.

Lifetime Maximum Benefit

$10,000

$10,000

Organ And Tissue Transplants

(Non-experimental transplants only)

Notify Utilization Review Company upon

transplant evaluation for coordination of care.

See Organ Transplant Program for how to access

Organ Transplant Network and Schedule of Benefits.

Network Benefit

Non-Network Benefit

Organ Transplant Travel/Lodging Benefit

$10,000

Not Covered

See Organ Transplant Program, page 38 item #5.

Maximum Donor Benefit

No Limit

$10,000

Donor expenses covered if recipient is covered

by this Plan. Payable under recipient's claim.

See Organ Transplant Program, Donor Expenses.

SCHEDULE OF BENEFITS (Cont'd.)

PPO Benefit

Non-PPO Benefit

Mental and Nervous Disorders

Inpatient/Outpatient Psychiatric

50% after

50% after

Day Treatment Facility

Deductible

Deductible

UR Notification required

Inpatient Maximum Number of Covered Days

Per Calendar Year

10

10

Outpatient Psychiatric Day Treatment

Facility Maximum Number of Covered Days

Per Calendar Year

20

20

Office Visit

50% after

50% after

Office Visit Copay does not apply

Deductible

Deductible

Maximum Benefit Payable Per Visit

$30

$30

Maximum Number of Covered Office Visits

Per Calendar Year

20

20

Chemical Dependency, Drug and

Substance Abuse

Lifetime Maximum Benefit

$5,000

$5,000

Inpatient

50% after

50% after

UR Notification required

Deductible

Deductible

Inpatient Maximum Number of Covered Days

Per Calendar Year

10

10

Outpatient Day Treatment Facility

50% after

50% after

UR Notification required

Deductible

Deductible

Outpatient Day Treatment Facility Maximum Number

of Covered Days per Calendar Year

20

20

Office Visit

50% after

50% after

Office Visit Copay does not apply

Deductible

Deductible

Maximum Number of Covered Office Visits

Per Calendar Year

20

20

Maximum Benefit Payable Per Visit

$30

$30

SCHEDULE OF BENEFITS (Cont'd.)

PPO Benefit

Non-PPO Benefits

Preventive and Wellness Care Benefits

This benefit is payable for Covered Procedures

incurred as part of a Preventive and Wellness

Care Program and is not payable for treatment

of a diagnosed Illness or Injury.

Calendar Year Maximum Wellness Benefit

Per Covered Person for numbered procedures

listed below

$750

$750

Preventive and Wellness Expenses in

excess of Calendar Year Maximum Benefit

Not covered

Not covered

Covered Wellness Procedures subject to

$750 Calendar Year Maximum:

1.

Annual Routine Physical Exam

100% after

Not Covered

(Including lab, x-ray and routine diagnostic

$25 Copay

testing and other medical screenings not to

include surgical procedures such as colonoscopy)

2.

Annual Well Woman Exam

100% after

Not Covered

(Including pap smear and other routine lab)

$25 Copay

3.

Annual Mammography (routine)

100%; Copay and

Not Covered

Age thirty-five (35) and older

Deductible waived

4.

Annual PSA test (routine)

100%; Copay and

Not Covered

Age thirty-five (35) and older

Deductible waived

5.

Well-Baby Care/Well-Child Care Exam

100% after

Not Covered

(other than Routine Newborn Care)

$25 Copay

6.

Routine Immunizations

100%; Copay and

Not Covered

Deductible waived

7.

Annual Routine Vision Exam

100% after

Not Covered

$25 Copay

8.

Osteoporosis Screening

100%; Copay and

Not Covered

Deductible Waived

All Other Covered Medical Expenses, not

80% after

60% after

listed in the Schedule of Benefits (subject

Deductible

Deductible

to Plan Maximums and Limitations), are

payable at applicable Benefit Percentage

after satisfying the Calendar Year Deductible.

OUT-OF-AREA BENEFIT

The "Out-of-Area Benefit" applies if a Covered Person receives services from a Non-PPO Provider because the Covered Person is living or traveling outside of the geographical zip code area serviced by the Preferred Provider Organization (PPO).

Out-of-Area Benefit

Calendar Year Deductible

Per Covered Person

$1,000

Family Member Limit

X2

Benefit Percentage

60%

(unless otherwise noted)

Annual Out-of-Pocket Maximum

(In Addition to Deductible)

Per Covered Person

$3,000

Family Limit*

$6,000

Physician Office Visit

60% after

Deductible

Voluntary Second Surgical Opinion

60% after Deductible

Hospital Emergency Room

60% after Deductible

Medical Emergency

Hospital Emergency Room

50% after Deductible

Non-Medical Emergency

Mental and Nervous Disorders, Chemical

Dependency, Drug and Substance Abuse

(See Page 14)

Chiropractic Care

(See Page 13)

Preventive and Wellness Care

60% after Deductible

Calendar Year Maximum Wellness Benefit

$750

(see page 15 for Covered Procedures)

Other Out-of-Area Covered Expenses are listed in the Plan's Schedule of Benefits. Out-of-Area Covered Charges are subject to all Plan Maximums and Limitations as previously outlined in the Schedule of Benefits.

*Applies collectively to all Covered Persons in the same Family.

NOTE:

The Calendar Year Deductible and Annual Out-of-Pocket Maximum, are determined by combining PPO, Non-PPO and Out-of-Area Covered Charges. The Lifetime and Calendar Year Maximum Benefits are combined for PPO, Non-PPO and Out-of-Area Covered Charges.

PRESCRIPTION DRUG EXPENSE BENEFIT

Benefit

Prescription Drug Benefit

Benefit Percentage

Generic Drugs

80%

Brand Name Drugs

80%

1.

Separate Calendar Year Drug Deductible applies

$50

2.

Includes oral contraceptives

3.

Includes prenatal vitamins

MAIL ORDER PRESCRIPTION DRUG PLAN

Mail Order Service

100% after applicable Copay

Supply Limit

90 days

Generic Drugs

$15 Copay

Brand Name Drugs

$30 Copay

Generic and Brand Name Copayments apply separately to each prescription and refill and do not apply to the Calendar Year Deductible or Annual Out-of-Pocket Maximum. To be covered, prescription drugs must be Dispensed to the Covered Person for whom they are prescribed.

DEFINITIONS

Brand Name Drugs

Trademark drugs or substances marketed by the original manufacturer whose patent rights are still in effect.

Generic Drugs

Drugs or Substances which:

1.    Are not trademark drugs or substances;

2.    Are legally substituted for trademark drugs or substances; and

3.    Are legally prescribed by a Qualified Prescriber.

Prescription Drugs

Drugs or medicines which are prescribed by a Qualified Prescriber for the treatment of Illness, Injury, or Pregnancy.

Qualified Prescriber

A licensed Physician, Dentist, or other health care Practitioner who may, in the legal scope of his/ her practice, prescribe drugs or medicines.

Prescription Drug Plan - Drugs Covered

1.

Legend drugs (drugs requiring a prescription either by federal or state law) prescribed for FDA-approved indications. See Exclusion list below for exceptions.

2.

Insulin on prescription.

3.

Disposable insulin needles/syringes, test strips and lancets on prescription.

4.

Tretinoin, all dosage forms (e.g. Retin-A), for individuals to the age of twenty-five (25) years.

5.

Compounded medication of which at least one ingredient is a prescription legend drug.

6.

Legend oral contraceptives.

7.

Seasonale

8.

Prenatal vitamins

9.

Prescription vitamins.

10.

Injectable form of covered legend drugs.

11.

ADD (Attention Deficit Disorder)/ADHD (Attention Deficit Hyperactivity Disorder) drugs for individuals to the age of nineteen (19) years.

12.

Imitrex.

13.

Tegaserod (covered for female Participants only).

14.

Gleevec.

Prescription Drug Plan - Exclusions

1.

OxyContin.

2.

Stadol.

3.

Contraceptive devices (unless listed as covered).

4.

Fertility drugs.

5.

Drugs prescribed for impotence/sexual dysfunction.

6.

Levonorgestrel (Norplant).

7.

Abortifacients/RU-486.

8.

Anorectics (any drug used for the purpose of weight loss).

9.

Growth hormones.

10.

Immunization agents, biological sera, blood or blood plasma.

11.

Drugs for the treatment of alopecia (baldness).

12.

Non-legend drugs other than those listed above.

13.

Smoking deterrent medications or any other smoking cessation aids, all dosage forms.

14.

Tretinoin, all dosage forms (e.g. Retin-A), for individuals twenty-five (25) years of age or older.

15.

ADD/ADHD drugs for individuals nineteen (19) years of age or older.

16.

Therapeutic devices or appliances, including needles, syringes, support garments and other non-medical substances, regardless of intended use, except those listed above.

17.

Charges for the administration or injection of any drug.

18.

Prescriptions which a Covered Person is entitled to receive without charge from any Worker's Compensation laws.

19.

Drugs labeled "Caution-limited by federal law to investigational use," or experimental drugs, even though a charge is made to the individual.

20.

Medication which is to be taken by or administered to an individual, in whole or in part, while he/she is a patient in a licensed Hospital, rest home, sanitarium, extended care facility, convalescent Hospital, nursing home or similar institution which operates on its premises, or allows to be operated on its premises, a facility for dispensing pharmaceutical.

21.

Any prescription refilled in excess of the number specified by the Physician, or any refill dispensed after one year from the Physician's original order.

NOTE:

Prescription drugs covered under the Mail Order Prescription Drug Plan are not subject to the Pre-existing Condition Exclusion Limitation of the Plan.

A Prescription drug dispensed by Mail Order Service for which a Copay applies is not considered a Claim for Benefits under this Plan and therefore is not subject to the Plan's Claim Filing Procedures.

The Plan reserves the right, in its sole discretion, to authorize alternate care and treatment.

PRESCRIPTION DRUG UTILIZATION REVIEW

Prescription Drug use does not have unlimited coverage. As with all medical and Hospital services, Prescription Drug Utilization is subject to determinations of Medical Necessity and appropriate use. Drug Utilization Review may be concurrent, retrospective or prospective.

Concurrent Drug Utilization Review generally occurs at the time of service and may include electronic claim audits which may help to protect patients from potential drug interactions or drug-therapy conflicts or overuse/under use of medications.

Retrospective Drug Utilization Review generally involves claim review and may include communication by the Prescription Drug Plan and/or the Utilization Review Company with the prescribing Physician to coordinate care and verify diagnoses and Medical Necessity. It may include a peer review by a Physician of like specialty to the prescribing Physician reviewing the medical and pharmacy records to determine Medical Necessity.

Should Medical Necessity not be determined by the peer review Physician, the treating Physician and Plan Participant will be notified and provided with the peer review results. The Plan Participant and Physician will be forwarded information on the appeal process as outlined in this Plan.

Prospective Drug Utilization Review may include, among other things, Physician or pharmacy assignment in which one Physician and/or one pharmacy is selected to serve as the coordinator of prescription drug services and benefits for the eligible Plan Participant. The Plan Participant will be notified in writing of this and will be required to designate a Physician and pharmacy as his/her providers.

UTILIZATION REVIEW (UR) PROGRAM

The Utilization Review program is designed to help all Plan Participants receive Medically Necessary and appropriate health care. Review for Medical Necessity, Concurrent Review and Retrospective Review are provided by the Utilization Review Company. Services provided will be reviewed to ensure treatment meets the Utilization Review Company's criteria for Medical Necessity. Notification must be provided to the Utilization Review Company of all Inpatient Hospital/Facility admissions and confinements and all Outpatient Surgical Procedures (other than those performed in a Physician's office) as detailed below.

HOSPITAL/FACILITY ADMISSION VARI AND OUTPATIENT SURGERY NOTIFICATION

Notification of all Hospital/Facility admissions (including admissions for treatment of Mental and Nervous Disorders or Substance Abuse) and admissions to Outpatient surgical facilities and rehabilitation facilities is required. Notification to the Utilization Review Company must be made within forty-eight (48) hours following any Hospital/Facility admission or Outpatient Surgery (or the next business day if holiday or weekend admission).

The Utilization Review Company nurse may discuss with the Physician and/or Hospital/Facility the diagnosis, the need for hospitalization versus alternative treatment, and length of any Hospital/Facility confinement. The Utilization Review Company will notify the Physician and/or Hospital/Facility verbally or electronically of the outcome of the Utilization Review Company's review.

Failure to notify the Utilization Review Company or comply with these requirements will result in an additional $300 Deductible applied to all Covered Hospital/Facility Expenses for that confinement or Surgical Procedure.

NOTE:

Please refer to the Participant identification card for name and phone number of Utilization Review Company. Notification of a Hospital/Facility admission or Outpatient Surgery is required under the Plan and constitutes a Claim for Benefits; however, any such action taken by the Utilization Review Company does not constitute a benefit determination. All claims are subject to all Plan requirements, such as Medical Necessity, Pre-existing Condition Exclusion Limitations, Major Medical Expense Benefits, Plan Exclusions and Limitations and Eligibility provisions at the time care and services are provided.

CONCURRENT REVIEW

Following notification of a Hospital/Facility admission, a concurrent review of treatment will be conducted by the Utilization Review Company. "Concurrent Review" means the Utilization Review Company will monitor the Covered Person's Hospital stay and periodically evaluate the need for continued hospitalization. In addition, the Utilization Review Company may assist with discharge planning and address the health care needs of the patient upon release. This may involve consultation with the Covered Person's Physician and comparison of clinical information to nationally accepted criteria.

If a penalty is imposed for failure to use the Utilization Review Company, that amount will never be included as part of the Calendar Year Deductible or Annual Out-of-Pocket Maximum.

CASE MANAGEMENT

During the Utilization Review process, catastrophic cases such as transplants, burns, spinal cord Injuries, cancer and other large cases will be identified and the Utilization Review Company may initiate Case Management. Case Management is provided by nurses with specialized training and/or advanced national certification. The nurse may monitor the medical care, consult with the Physicians, coordinate with the health care providers and facilities, and communicate with the patient and family to promote receipt of appropriate, cost effective care to expedite the recovery process. Referrals to Centers of Excellence and Out-of-Network fee negotiations may be included in the Case Management process.

When Out-of-Network fees are negotiated by Case Management and/or the Utilization Review Company on behalf of the Plan, Out-of-Network Covered Charges will be payable at the PPO benefit level.

ALTERNATIVE CARE

Through alternative care and treatment suggestions, Case Management can help the patient and the Plan Administrator control the costs related to a serious Injury or Illness.

When alternative care and treatment are recommended by Case Management and approved by this Plan, the Plan may pay for all or part of the charge for a service or supply not shown as a Covered Expense in this Plan Document. These expenses will be considered on the same basis as the care and treatment for which they are substituted. This Plan reserves the right at its sole discretion to authorize alternative care and treatment. In exercising its authority, this Plan will act in a way as not to discriminate against any Plan Participant. In addition, charges not covered by the Plan or Covered Charges exceeding the Plan's internal Maximums, but recommended by Case Management and approved by the Plan, may be considered Covered Medical Expenses.

All benefits provided under this section are subject to Medical Necessity and Usual and Customary.

NEWBORNS' AND MOTHERS' HEALTH PROTECTION ACT

The Plan will not restrict benefits for any Hospital length of stay in connection with childbirth for the mother or the newborn child to less than forty-eight (48) hours following a normal vaginal delivery, or less than ninety-six (96) hours following a cesarean section. However, the Plan will pay for a shorter stay if the attending Physician, after consultation with the mother, discharges the mother or newborn earlier. The Plan will not require that a provider obtain authorization from the Plan prescribing a length of stay less than forty-eight (48) hours or ninety-six (96) hours, as applicable.

This provision is subject to the requirements of the Newborns' and Mothers' Health Protection Act of 1996 (NMHPA).

VOLUNTARY SECOND SURGICAL OPINION

When a Physician recommends surgery for a Covered Person, it is not required that the Covered Person obtain a Second Surgical Opinion. It is voluntary and no penalty will apply if a Second Surgical Opinion is not obtained.

PRE-EXISTING CONDITION EXCLUSION LIMITATION

A Pre-existing Condition is any physical or mental Illness or Injury (regardless of the cause) for which medical advice, diagnosis, care or treatment was recommended or received, for which drugs were prescribed, for which a Physician was consulted or for which medical expenses were incurred during the six (6) month period immediately prior to the Covered Person's Enrollment Date in the Plan. Medical advice, diagnosis, care or treatment is taken into account only if it is recommended by, or received from, an individual licensed or similarly authorized to provide such services under State law and operating within the scope of practice authorized by State law.

Coverage for that condition will be provided on the date on which the Covered Person completes a twelve (12) month exclusion period beginning with the Covered Person's Enrollment Date in the Plan.

ENROLLMENT DATE FOR DETERMINING PRE-EXISTING CONDITION EXCLUSION PERIOD

The Enrollment Date determines when the six (6) month Pre-existing Condition look-back period begins and when the twelve (12) month Pre-existing Condition exclusion period begins and ends.

The Enrollment Date for an eligible Employee who enrolls in the Plan during his/her initial eligibility period is the first day of the Employee's Waiting Period in the Plan (Employee's Date of Hire). The Enrollment Date for a Special Enrollee or a Late Enrollee is the first day of coverage in the Plan.

See Effective Date of Coverage sections of this Plan for Special Enrollment qualifications, enrollment limitations and requirements for Late Enrollees.

EXCEPTIONS

The Pre-existing Condition Exclusion Limitation will not apply to those Covered Persons covered on the restated date of this Plan, who were also covered by the terms of the prior Plan and who would not be subject to an exclusion or reduction of benefits because of such prior plan's Pre-existing Condition limitation.

The Pre-existing Condition Exclusion Limitation will not apply to prescription drugs covered under the Mail Order Prescription Drug Plan.

The Pre-existing Condition Exclusion Limitation is waived for a newborn child of a Covered Employee or newly adopted child of a Covered Employee if adopted or placed for adoption with the Employee while the Employee is covered under this Plan. The newborn and/or adopted child must be enrolled in the Plan within thirty (30) days after the date of birth, adoption or placement for adoption for the exception to apply.

Pregnancy and Genetic Information will not be considered a Pre-existing Condition even if medical advice, diagnosis, care or treatment was recommended or received prior to the Covered Person's Enrollment Date in the Plan.

The Pre-existing Condition Exclusion Limitation may be reduced or eliminated by periods of Creditable Coverage. See Portability and Creditable Coverage section.

The Pre-existing Condition Exclusion Limitation is subject to the requirements of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and any related amendments.

PORTABILITY AND CREDITABLE COVERAGE

The Plan shall reduce the Pre-existing Condition Exclusion period for a Covered Person by any periods of Creditable Coverage that an individual proves he/she had without a significant break in coverage. A Certificate of Coverage from prior plan(s), must be provided to the Plan Administrator at the time of enrollment in this Plan.

SIGNIFICANT BREAK IN COVERAGE

Sixty-three (63) days or more without health care coverage is considered a significant break in coverage. Waiting Periods are not considered breaks in coverage.

WAITING PERIOD

A Waiting Period is the time between the first day of employment and the first day of coverage under the Plan. Any period of time before a Special Enrollment or Late Enrollment is not considered a Waiting Period.

The Waiting Period is counted when determining the Pre-existing Condition Exclusion Period, but days in a Waiting Period do not count for Creditable Coverage or for a significant break in coverage.

See Effective Date of Coverage sections of this Plan for requirements on Special Enrollment and Late Enrollment.

CERTIFICATE OF COVERAGE

To verify Creditable Coverage, a Certificate of Coverage (COC) will be issued without charge to an individual who terminates coverage with a group health plan or individual plan.

The Plan will assist an Employee in obtaining a Certificate of Coverage from a prior plan if requested. If, upon review of the Certificate of Coverage, a Pre-existing Condition Exclusion will still be imposed on an individual, the person will be notified in writing of this decision.

AUTOMATIC CERTIFICATE OF COVERAGE

A Certificate of Coverage should be provided automatically by group health plans and health insurance issuers under these circumstances:

1.

If termination of coverage is a result of a COBRA Qualifying Event and the individual is a qualified beneficiary, a Certificate of Coverage must be provided within the same period of time as the notice of COBRA rights;

2.

If an individual has elected COBRA continuation coverage or the Plan has provided continued coverage after the COBRA Qualifying Event, the Plan must provide another Certificate of Coverage automatically within a reasonable period of time after COBRA continuation coverage ceases; and

3.

If the termination of coverage is not a COBRA Qualifying Event, the Certificate of Coverage must be provided within a reasonable time period.

CERTIFICATE OF COVERAGE UPON REQUEST

Plans and issuers will furnish a Certificate of Coverage within a reasonable period of time if the request is made by or on behalf of an individual within twenty-four (24) months after health coverage ceases. A Certificate of Coverage will also be issued upon request even if health coverage remains in force.

COMPREHENSIVE MEDICAL BENEFITS

COVERED MEDICAL EXPENSES (COVERED EXPENSES)

Covered Medical Expenses mean the Usual and Customary (U&C) charges and/or contracted PPO charges incurred by or on behalf of a Covered Person for the Hospital or other medical services listed below which are:

1.   Ordered by a Physician or licensed Practitioner;

2.   Medically Necessary for the treatment of an Illness or Injury;

3.   Not of a luxury or personal nature; and

4.   Not excluded under Major Medical Exclusions and Limitations section of this Plan.

COVERED CHARGES

If a Covered Person incurs Covered Medical Expenses as the result of an Illness or Injury, the Plan will pay benefits as shown in the Schedule of Benefits.

DEDUCTIBLE AMOUNT

The Deductible amount for each Covered Person is the amount of Covered Expenses which must be incurred each Calendar Year before benefits are payable for Covered Medical Expenses incurred during the remainder of that year. It is the amount shown in the Schedule of Benefits as the Calendar Year Deductible.

DEDUCTIBLE FAMILY LIMIT

The Maximum Deductible amounts to be applied each Calendar Year to a Covered Employee and his/her covered Dependents will not be more than the Family Limit shown in the Schedule of Benefits. As soon as two (2) Family members have each satisfied their Deductible in the same Calendar Year, no further Deductibles will be applied to Covered Medical Expenses for any covered Family member during the remainder of that Calendar Year. To satisfy the Deductible Family Limit, each covered Family member can contribute no more than his/her own individual Deductible.

DEDUCTIBLE CARRY-OVER PROVISIONS

Covered Medical Expenses incurred and applied to the Calendar Year Deductible during the last three (3) months (October, November and December) of a Calendar Year will be carried over and credited toward satisfaction of the next year's Calendar Year Deductible. The carry-over provision applies to both the individual Deductible and Family Deductible Limit.

COINSURANCE

The portion of Covered Medical Expenses that is shared by the Plan and the Covered Person in a specific ratio (i.e., 80%/20% and/or 60%/40%) after the Calendar Year Deductible has been satisfied. The amount of Coinsurance paid by the Covered Person is applied to satisfy the Covered Person's Annual Out-of-Pocket Maximum.

ANNUAL OUT-OF-POCKET MAXIMUM

The Annual Out-of-Pocket Maximum is the maximum dollar amount a Covered Person will pay for Covered Medical Expenses each Calendar Year, excluding:

-    The Calendar Year Deductible;

-    Benefit reductions;

-    Copays (Office Visit, Hospital Emergency Room);

-    Prescription Copays;

-    Any Covered Charges already paid at 100% in any one Calendar Year period, unless otherwise

specified in the Schedule of Benefits;

-    Charges in excess of Usual and Customary (U&C);

-    Any non-compliance penalty applied when a Covered Person fails to notify the Utilization Review

Company of a Hospital admission/Outpatient Surgery; and

Upon reaching the Annual Out-of-Pocket Maximum, Covered Medical Expense are payable at 100% for the remainder of the Calendar Year.

HOSPITAL EMERGENCY ROOM COPAY (PER VISIT)

The portion of Covered Medical Expenses, a flat dollar amount, payable by the Covered Person for Covered Charges each time the Covered Person is treated in a Hospital Emergency Room for a medical emergency. The Calendar Year Deductible is waived and only applies if the Covered Person is admitted Inpatient. The Copay is waived if admitted Inpatient. The Emergency Room Copay cannot be used to satisfy the Calendar Year Deductible or Annual Out-of-Pocket Maximum.

PPO OFFICE VISIT COPAY (PER VISIT)

The portion of Covered Medical Expenses, a flat dollar amount, payable by the Covered Person for Covered Charges provided by and billed by the Physician at the time of each PPO Physician office visit. Whenever an Office Visit Copay applies, the Calendar Year Deductible is waived for that visit except for procedures listed below which are not subject to the Office Visit Copay. The Office Visit Copay cannot be used to satisfy the Calendar Year Deductible or Annual Out-of-Pocket Maximum.

The Office Visit Copay applies to all billed office services and supplies except:

-    Chemotherapy; - -    Radiation therapy; - -    Infusion therapy; - -    Physical therapy; - -    Orthotics; - -    Chiropractic care; - -    Mental and Nervous Disorders; - -    Chemical Dependency, Drug and Substance Abuse; - -    Maternity, prenatal/postnatal visits; and - -    Second Surgical Opinion.

Benefits for items listed above are payable as specified in the Schedule of Benefits.

IN-NETWORK CARE (PPO)

In-Network Care (PPO) is health care provided by a Physician, Hospital or other provider in the designated PPO with whom the Plan has contracted to provide services at specified fees. In-Network Covered Charges will be payable at the PPO benefit level.

OUT-OF-NETWORK CARE (NON-PPO)

Out-of-Network Care (Non-PPO) is health care provided by a Physician, Hospital or other provider who is not in the Plan's designated PPO network. Out-of-Network Covered Charges will be payable at the Non-PPO benefit level unless the Plan has a direct contract for discounting fees with the Out-of-Network Provider in which case, the PPO benefit level will apply.

CALENDAR YEAR MAXIMUM BENEFIT

The Maximum Amount payable for Covered Expenses during a Calendar Year Benefit Period for each Covered Person is limited to a specific dollar amount, number of days or visits as specified in the Schedule of Benefits. The Calendar Year is from January 1 through December 31 of the same year. The initial Calendar Year Benefit Period is from a Covered Person's effective date through December 31 of the same year. The Calendar Year Maximum Benefits are combined for PPO, Non-PPO and Out-of-Area Covered Charges.

LIFETIME MAXIMUM BENEFIT

The Maximum Amount payable for all Covered Expenses incurred during each Covered Person's lifetime is as specified in the Schedule of Benefits. The word "Lifetime" as used herein, means the duration of participation in this Plan. The Lifetime Maximum Benefits are combined for PPO, Non-PPO and Out-of-Area Covered Charges.

MAJOR MEDICAL EXPENSE BENEFITS

The following are Covered Expenses under this Plan, unless specifically excluded under the Major Medical Plan Exclusions and Limitations. Benefits for these Covered Expenses will be payable as shown in the Schedule of Benefits. Charges are subject to Usual and Customary (U&C), which is the usual amount accepted as payment for the same service within a geographical area, and/or the negotiated fee schedule of the Preferred Provider Organization (PPO).

1.

The Hospital charges for:

a.

The actual room and board expenses incurred for a ward or Semi-Private room up to the limits as shown in the Schedule of Benefits, or 90% of the most common private room rate for a Hospital that does not have Semi-private accommodations.

b.

The actual expense incurred for confinement in an Intensive Care Unit, Cardiac Care Unit or Burn Unit, up to the limit shown in the Schedule of Benefits.

c.

Miscellaneous Hospital services and supplies during Hospital confinement.

d.

Inpatient Charges for nursery room and board.

e.

Outpatient Hospital services and supplies and Emergency Room treatment.

2.

The charges incurred for confinement in a Rehabilitation Facility.

3.

The charges incurred for confinement in a Skilled Nursing Facility/Extended Care Facility subject to the Maximum and the Benefit Percentage specified in the Schedule of Benefits; however, such expenses are limited as follows:

a.

The attending Physician certifies that confinement is Medically Necessary. Only charges incurred in connection with care related to the Injury or Illness for which the Covered Person was confined will be eligible.

b.

Semi-Private daily room and board limit.

4.

The charges by a Home Health Care Agency for care in accordance with a Home Health Care Plan subject to the Maximum and the Benefit Percentage specified in the Schedule of Benefits. Home Health Care Visit means a visit by a member of a home health care team. Each visit that lasts for a period of four (4) hours or less is treated as one home health care visit. If the visit exceeds four (4) hours, each period of four (4) hours is treated as one visit and any part of a four (4) hour period that remains is treated as one home health care visit.

Home Health Care Plan Covered Benefits:

a.

Part-time or intermittent nursing care visits by a Registered Nurse (R.N.), a Licensed Practical Nurse (L.P.N.), a Licensed Vocational Nurse (L.V.N.), or Public Health Nurse who is under the direct supervision of a Registered Nurse;

b.

Part-time or intermittent Home Health Aide services which consist primarily of caring for the patient;

c.

Physical, occupational, speech and respiratory therapy services by licensed therapists;

d.

Services of a Certified Social Worker (C.S.W. - A.C.P.); and

e.

Medical supplies, drugs and medications prescribed by a Physician, and laboratory services provided by or on behalf of a Hospital, but only to the extent that they would have been covered under this Plan if the patient had remained in the Hospital.

Home Health Care Plan Exclusions:

a.

Services and supplies not included in the Home Health Care Plan;

b.

Services of a person who ordinarily resides in the home of the Covered Person, or is a Close Relative of the Covered Person;

c.

Services of any social worker unless designated C.S.W. - A.C.P.;

d.

Transportation services;

e.

Food or home delivered meals;

f.

Custodial Care and housekeeping; and

g.

Charges for services in excess of the Maximum Benefit specified in the Schedule of Benefits.

5.

The fees of Registered Nurses (R.N.'s) or Licensed Practical Nurses (L.P.N.'s) for Private Duty Nursing, subject to the Lifetime Maximum Benefit specified in the Schedule of Benefits.

6.

The charges for Home Infusion Therapy by a licensed provider to include intravenous infusion or injection of fluids, nutrition or medication done in the home setting.

7.

The charges relating to Hospice care provided that the Covered Person has a life expectancy of six (6) months or less. Covered Hospice expenses are limited to:

a.

Room and board for confinement in a Hospice.

b.

Ancillary charges furnished by the Hospice while the Covered Person is confined therein, including rental of Durable Medical Equipment which is used solely for treating an Injury or Illness.

c.

Medical supplies, drugs and medicines prescribed by the attending Physician, but only to the extent such items are necessary for pain control and management of the terminal condition.

d.

Physician services and/or nursing care by a Registered Nurse (R.N.), a Licensed Practical Nurse (L.P.N.) or a Licensed Vocational Nurse (L.V.N.).

e.

Home health aide services.

f.

Home care charges for home care furnished by a Hospital or Home Health Care Agency, under the direction of a Hospice, including custodial care if it is provided during a regular visit by a Registered Nurse, a Licensed Practical Nurse, or a home health aide.

g.

Medical social services by licensed or trained social workers, psychologists or counselors.

h.

Nutrition services provided by a licensed Dietitian.

i.

Bereavement counseling not to exceed a period of six (6) months following the death of patient for members of immediate Family.

8.

The charges incurred for a Medically Necessary Surgical Procedure.

9.

When two or more Surgical Procedures occur during the same operation, the Covered Expenses for all charges are as follows:

a.

When multiple or bilateral Surgical Procedures that increase the time and amount of patient care are performed, the covered expense is the allowable fee for the major procedure plus 50% of the allowable fee for each of the lesser ones or the actual fee charged, whichever is less. This provision will not apply to those procedures which are not subject to the Multiple Procedures Reduction Rules per Medicare.

b.

When an incidental procedure is performed through the same incision, the covered expense is the fee for the major Surgical Procedure only. Examples of incidental procedures are: excision of a scar, appendectomy, lysis of adhesions, etc.

10.

When services of an assistant surgeon and/or licensed surgical assistant are required to render technical assistance at an operation, the Covered Expense for such services shall be limited to 25% of the allowable surgical fee. See definition of Practitioner for covered providers.

11.

The charges for the following Dental expenses and Oral Surgical Procedures:

a.

Cutting procedures in the oral cavity for tumors or cysts of the jawbone;

b.

Open or closed reduction of a fracture or dislocation of the jaw; and

c.

Treatment necessitated by Accidental Injury to sound natural teeth rendered within twelve (12) months after the date of the accident unless Medically Necessary to delay treatment.

For Dental work or Oral Surgery requiring hospitalization, only Hospital charges are Covered Charges.

12.

The charges for Cosmetic Surgery only in the following situations:

a.

Reconstructive surgery as a result of an accidental bodily Injury;

b.

The surgical correction required as a result of a congenital disease or anomaly;

c.

Reconstructive surgery following neoplastic (cancer) surgery;

d.

Reconstruction of the breast following mastectomy;

e.

Surgery and reconstruction of the other breast to produce symmetrical appearance;

f.

Coverage for prostheses and physical complications related to all stages of covered mastectomy including lymphedemas, in a manner determined in consultation with the attending Physician and patient; and

g.

Removal of breast implants if deemed to be Medically Necessary and reconstructive breast surgery after implant removal. Breast reconstruction is not covered if the original implants were for cosmetic reasons. However, the removal of the implants is covered, if Medically Necessary, even if the original implant was for cosmetic reasons.

NOTE:

The Plan's breast reconstruction surgery benefits are subject to the requirements of the Mastectomy Provision of the Women's Health and Cancer Rights Act of 1998.

13.

The charges for the services of a legally qualified Physician for medical care and/or surgical treatments including office, home visits, Hospital Inpatient care, Hospital Outpatient visits/exams, clinic care, and surgical opinion consultations.

14.

The charges for cardiac rehabilitation as deemed Medically Necessary provided services are rendered:

a.

Under the supervision of a Physician;

b.

In connection with a myocardial infarction, coronary occlusion or coronary bypass surgery;

c.

Initiated within twelve (12) weeks after other treatment for the medical condition ends; and

d.

In a facility whose primary purpose is to provide medical care for an Illness or Injury.

15.

The charges for Physical Therapy for the treatment or services rendered by a licensed Physical Therapist under direct supervision of a Physician at a facility or institution whose primary purpose is to provide medical care for an Illness or Injury.

16.

The charges for Occupational Therapy for treatment rendered by a licensed Occupational Therapist under supervision of a Physician at a facility whose primary purpose is to provide medical care for an Injury or Illness.

17.

The charges of a legally qualified Speech Language Pathologist under direct supervision of a Physician for restorative Speech Therapy for speech loss or speech impairment due to an Illness, Injury or Congenital Anomaly or due to surgery performed because of an Illness or Injury, other than a functional nervous disorder (i.e., stuttering, repetitive speech).

18.

The charges for services of a licensed Dietitian when recommended by a licensed M.D. or D.O. except for services which are otherwise excluded by the Plan.

19.

The charges for professional licensed Ambulance service as follows:

a.

Ground transportation when Medically Necessary and used locally to or from the nearest Hospital qualified to render treatment;

b.

Air ambulance where air transportation is medically indicated to transport a Covered Person to the nearest facility qualified to render treatment (excluding commercial flights); or

c.

"CARE" and "LIFE" flights in a life-threatening situation.

20.

The charges for Drugs requiring the written prescription of a licensed Physician; such drugs must be Medically Necessary for the treatment of an Illness or Injury.

21.

The charges for insulin, insulin syringes, other necessary diabetic supplies and glucometers when ordered by a Physician.

22.

The charges for glucometers, dextrometers, destrostix and infusion pumps/supplies when ordered by a Physician.

23.

The charges for clinical and pathological laboratory tests and examinations including fees for professional interpretation of their results.

24.

The charges for radiation services including diagnostic x-rays and interpretation, x-ray therapy and treatment.

25.

The charges for Radiation Therapy, Chemotherapy, Infusion Therapy and Dialysis.

26.

The charges for the processing and administration of blood or blood components, but not for the cost of the actual blood or blood components if facility receives any replacement of blood used for which the patient is not financially responsible.

27.

The charges for Chiropractic treatment excluding maintenance therapy subject to the Calendar Year Maximum Benefit specified in the Schedule of Benefits to include x-rays.

28.

The charges for oxygen and other gases and their administration.

29.

The charges for electrocardiograms, electroencephalograms, pneumoencephalograms, basal metabolism tests, or similar well established diagnostic tests generally approved by Physicians throughout the United States.

30.

The charges for the cost and administration of an anesthesia and/or anesthetic.

31.

The charges for dressings, sutures, casts, splints, trusses, crutches, braces (except dental braces), corrective shoes and other necessary medical supplies.

32.

The charges for rental of a wheelchair, Hospital bed and other Durable Medical Equipment prescribed by a Physician and required for temporary therapeutic use, or the purchase of this equipment if economically justified, whichever is less. Benefits will be provided for the repair, adjustment or replacement of purchased Durable Medical Equipment or components only within a reasonable time period of purchase subject to the lifetime expectancy of the equipment.

33.

The charges for Jobst elastic stockings when ordered by a Physician limited to three (3) pairs per Calendar Year.

34.

The charges for custom bras for prostheses following a mastectomy limited to six (6) per Calendar Year.

35.

The charges for Orthotics/Orthosis when Medically Necessary (after or in lieu of surgery) when prescribed by a Physician, medically designed for a given patient and used to support, align, prevent or correct deformities or to improve the function of movable parts of the body.

36.

The charges for artificial limbs and eyes to replace natural limbs and eyes and other necessary prosthetic devices, but not the replacement thereof, unless the replacement is necessary because of physiological changes.

37.

The charges for testing for the initial diagnosis of infertility. This is limited to procedures for diagnostic purposes only.

38.

The charges for Genetic testing when there is a history of a genetic disorder in the Family.

39.

The charges for formulas necessary for the treatment of phenylketonuria or other heritable diseases. The benefits will be paid on the same basis that benefits would be paid for drugs ordered by a Physician. Phenylketonuria means an inherited condition that may cause severe mental retardation if not treated.

40.

The charges for Maternity care, on the same basis as any Illness covered under this Plan, for Covered Employees and covered Dependent spouses only. Other Dependents are not eligible for benefits under this provision. Plan coverage for a Hospital stay in connection with childbirth for both the mother and the newborn child will be no less than: forty-eight (48) hours following a normal vaginal delivery; or ninety-six (96) hours following a cesarean section, unless a shorter stay is agreed to by both the mother and her attending Physician.

41.

The charges for one (1) sonogram per pregnancy if medically necessary.

42.

The charges for Routine Newborn Care for a well newborn child for Nursery room and board and routine Inpatient services required for the healthy newborn following birth. Covered Expenses will also include charges for pediatric services, newborn hearing exams and circumcision. Benefits will be payable from the date of birth until the date the child is discharged. Covered Charges are not subject to a separate Calendar Year Deductible and are payable under covered mother's claim.

43.

The charges for injectable contraceptive serum administered in a Physician's office.

44.

The charges for contraceptive implants as a surgical procedure in a Physician's office to a maximum of $1,200 per five (5) year period including insertion or removal.

45.

The charges for services for voluntary Sterilization for Covered Employees and covered Dependent spouses.

46.

The charges made by an Ambulatory Surgical Center, Minor Emergency Medical Clinic and Birthing Center.

47.

The charges for the services of a Licensed State-Certified Midwife who is a Registered Nurse (R.N.).

48.

The charges for services and supplies in connection with non-experimental human Organ and Tissue Transplant procedures subject to special conditions and provisions. When a Hospital's or a Physician's medical care and services are required for any type of human organ or tissue transplant from a living donor (to a transplant recipient), which requires surgical removal of the donated organ or tissue, coverage under the Plan is available only under the following circumstances:

a.

When only the transplant recipient is a Covered Person, the benefits of the Plan will be provided to the donor to the extent that benefits are not provided to the donor under any other available coverage; or

b.

When only the donor is a Covered Person, the donor will receive benefits for care and services necessary to the extent such benefits are not provided to the donor under any other coverage available. Benefits will not be provided to any recipient who is not a Covered Person; or

c.

When the transplant recipient and the donor are both Covered Persons, benefits will be provided for both in accordance with the recipient's Covered Expenses.

Benefits available in the case of human organ and tissue transplant are also subject to the following conditions:

a.

Benefits will be provided only when the Hospital and Physician customarily bill for the medical care and services involved in the human organ or tissue transplant;

b.

Under no circumstances will benefits be available for any "personal service" fee, organ or tissue fee or any other similar charge or fee;

c.

Only those necessary Hospital and Physician's medical care and service expenses, with respect to the donation, will be considered for benefits; and

d.

Benefits will be provided for the appropriate Hospital standard organ acquisition costs (live donor or cadaver), storage and transportation of human organ tissue donation.

See Organ Transplant Program section for information on additional benefits and participation requirements for Organ Transplant Program.

49.

The charges for treatment of Mental and Nervous Disorders will be payable as specified in the Schedule of Benefits. Benefits for Mental and Nervous Disorders are subject to the provisions of the Mental Health Parity Act of 1996 and any related amendments.

54.

The charges for treatment of Chemical Dependency, Drug and Substance Abuse. Inpatient/Outpatient Chemical Dependency Treatment Facility expenses shall also be payable as shown in the Schedule of Benefits. The Lifetime and/or Calendar Year Maximums for Inpatient/Outpatient Treatment and Office Visits are shown as separate items in the Schedule of Benefits.

58.

The charges for Family counseling.

59.

The charges for treatment of Temporomandibular Joint Syndrome (TMJ) and related care to include the initial diagnostic visit, x-rays of the joint, injections into the joint and surgical repair of the temporomandibular joint, to exclude dental and orthodontic services.

60.

The charge for hyperalimentation or Total Parenteral Nutrition (TPN) for persons recovering from or preparing for surgery.

61.

The charges for Covered Wellness Procedures listed as Preventive and Wellness Care Benefits subject to the Calendar Year Maximum Wellness Benefit payable as specified in the Schedule of Benefits.

62.

The charges for Hospital "admit kits."

63.

The applicable sales tax for covered services and supplies.

64.

The charges for the diagnosis and treatment of Attention Deficit Disorder (ADD) with the exclusion of charges for education and training.

65.

The charges for the treatment of Sleep Disorders to include sleep studies/diagnostic testing, devices, equipment and surgery.

66.

The charges for Allergy testing and treatment as specified in the Schedule of Benefits.

67.

The charges for diabetic self-management medical and nutritional training for diagnosed cases of diabetes rendered by a licensed Practitioner when recommended as a course of treatment by a Physician.

MAJOR MEDICAL PLAN EXCLUSIONS AND LIMITATIONS

GENERAL EXCLUSIONS AND LIMITATIONS

The following exclusions and limitations apply to expenses incurred by all Covered Persons:

1.

Charges incurred prior to the effective date of coverage under the Plan, or after coverage is terminated.

2.

Charges incurred as a result of war or any act of war, whether declared or undeclared, or caused during service in the armed forces of any country.

3.

Charges resulting from or sustained as a result of participation in a riot or civil insurrection.

4.

Charges arising out of or in the course of any occupation for wage or profit, or for which the Covered Person is entitled to benefits under any Workers' Compensation or Occupational Disease Law, or any such similar law.

5.

Hospital confinement, medical or surgical services or other treatment furnished or paid for by or on behalf of the United States, or any state, province or other political subdivision unless there is an unconditional requirement to pay such charges whether or not there is insurance.

6.

Charges incurred for which the Covered Person, in the absence of this coverage, is not legally obligated to pay, or for which a charge would not ordinarily be made in the absence of this coverage.

7.

Charges for Injury resulting from or sustained while engaged in an illegal occupation, unless such Injury is a result of a medical condition (either physical or mental) or an act of domestic violence.

8.

Charges for Injury resulting from or sustained during the commission of an assault or a crime punishable as a felony, unless such Injury is a result of a medical condition (either physical or mental) or an act of domestic violence.

9.

Charges incurred in connection with any self-inflicted Injury or Illness unless the Injury or Illness is a result of a medical condition (either physical or mental) or an act of domestic violence.

10.

Charges for research studies and Experimental medical procedures, treatment, drugs, devices and related services considered to be Experimental/Investigational in nature as defined in the Plan Definitions. The Claims Administrator retains the right to have such medical expenses reviewed by an independent panel of peer reviewers to determine whether such expenses are considered accepted, standard medical treatment or are Experimental/Investigational.

11.

Charges for any services or supplies not considered legal in the United States.

12.

Charges incurred as the result of travel outside the United States or its territories specifically to receive medical treatment.

13.

Charges incurred for services or supplies which constitute personal comfort or beautification items, television or telephone use, or charges in connection with custodial care or expenses actually incurred by other persons.

14.

Charges incurred in connection with the care or treatment of, or operations which are performed for Cosmetic purposes of any kind including treatment or surgery for complications or correction of cosmetic surgery or treatment, except:

a.

Reconstructive surgery as a result of an accidental bodily Injury;

b.

The surgical correction required as a result of a congenital disease or anomaly;

c.

Reconstructive surgery following neoplastic (cancer) surgery;

d.

Reconstruction of the breast following mastectomy;

e.

Surgery and reconstruction of the other breast to produce symmetrical appearance;

f.

Coverage for prostheses and physical complications related to all stages of covered mastectomy including lymphedemas, in a manner determined in consultation with the attending Physician and patient; and

g.

Removal of breast implants if deemed to be Medically Necessary and reconstructive breast surgery after implant removal. Breast reconstruction is not covered if the original implants were for cosmetic reasons. However, the removal of the implants is covered, if Medically Necessary, even if the original implant was for cosmetic reasons.

NOTE:

The Plan's breast reconstruction surgery benefits are subject to the requirements of the Mastectomy Provision of the Women's Health and Cancer Rights Act of 1998.

15.

Charges for wigs and hairpieces.

16.

Charges in excess of Usual and Customary charges or charges not recommended and approved by a Physician.

17.

Charges incurred in connection with services and supplies which are not Medically Necessary for treatment of an active Illness or Injury unless listed as Covered Wellness Procedures in the Preventive and Wellness section of the Schedule of Benefits.

18.

Charges incurred for routine Physical Examinations, routine pap smear/gynecological exams, routine mammograms, PSA tests, Well-Baby/Well-Child check-ups and routine immunizations in excess of the Calendar Year Maximum Wellness Benefit as specified in the Schedule of Benefits.

19.

Charges for Custodial and maintenance care. Unless specifically mentioned otherwise, the Plan does not provide benefits for services and supplies intended primarily to maintain a level of physical or mental function.

20.

Charges for services rendered by a Physician, nurse or licensed therapist who is a close relative of the Covered Person, or resides in the same household as the Covered Person.

21.

Charges for Hospitalization primarily for x-rays, laboratory, diagnostic study, physiotherapy, hydrotherapy, medical observation, convalescent or rest care, or any medical examination or test not connected with an active Illness or Injury.

22.

Charges for Physician's fees for any treatment which is not rendered by or provided under the supervision of a Physician.

23.

Charges incurred in connection with routine vision exams or eye refractions in excess of the Calendar Year Maximum Wellness Benefit, and the purchase or fitting of eyeglasses and contact lenses. This exclusion/limitation shall not apply to the initial purchase of eyeglasses or contact lenses following cataract surgery.

24.

Charges for any surgical procedure for the correction of a visual refractive problem including radial keratotomy, lasik or similar surgical procedures.

25.

Charges incurred in connection with routine hearing exams and charges for the purchase or fitting of hearing aids or such similar aid devices. This exclusion does not apply to Routine Newborn hearing exams and the initial purchase of a hearing aid if the loss of hearing is a result of an Illness, Accidental Injury or surgical procedure.

26.

Charges incurred for treatment on or to the teeth, the nerves or roots of the teeth, gingival tissue or alveolar processes; however, benefits will be payable for covered Oral Surgical procedures and treatment required because of Accidental Injury to sound natural teeth. All treatment must be rendered within twelve (12) months from the date of the accident unless Medically Necessary to delay treatment. This exception shall not in any event be deemed to include charges for treatment for the repair or replacement of a denture or bridgework. Injury to teeth from chewing or biting is not considered an Accidental Injury.

27.

Charges for callus or corn paring or excision; toenail trimming; any manipulative procedure for weak or fallen arches, flat or pronated foot, or foot strain, orthopedic shoes (unless attached to a brace), except for:

a.

An open cutting operation for the treatment of weak, strained, flat, unstable or unbalanced feet, metatarsalgia or bunions;

b.

Removal of nail roots;

c.

Foot treatment required because of a metabolic or peripheral vascular disease; and

d.

Orthotics/Orthosis when Medically Necessary (after or in lieu of surgery) when prescribed by a Physician, medically designed for a given patient and used to support, align, prevent or correct deformities or to improve the function of movable parts of the body.

28.

Charges for the treatment of obesity or charges related to weight control even for Morbid Obesity.

29.

Charges for weight loss programs and nutritional supplements even when recommended by a Physician.

30.

Charges for the treatment of smoking/tobacco addiction even when overall health of patient would be improved.

31.

Charges for Botox injections unless Medically Necessary for the following diagnoses: Achalasia, Hemifacial spasm (once brain tumor is ruled out), Neurogenic incontinence secondary to spinal cord injury when other treatments have failed, Blepharospasm, Spasmadic Torticollis or Cervical Dystonia, Strabismus (patient specific).

32.

Charges for education or training of any type including those for learning disabilities except diabetic self-management medical training for diagnosed cases of diabetes.

33.

Charges for acupuncture, hypnotherapy, behavior training, biofeedback and similar programs.

34.

Charges for the treatment of Mental and Nervous Disorders in excess of the Calendar Year Maximum Benefits as specified in the Schedule of Benefits.

35.

Charges for the treatment of Chemical Dependency, Drug and Substance Abuse in excess of the Lifetime and/or Calendar Year Maximum Benefits as specified in the Schedule of Benefits.

36.

Charges for services rendered by or in connection with a Residential Treatment Center.

37.

Charges for marriage counseling and Outpatient group therapy.

38.

Charges for Psychological Testing and I.Q. testing.

39.

Charges for Chiropractic Care in excess of the Calendar Year Maximum Benefit as specified in the Schedule of Benefits and maintenance therapy in accordance with the Utilization Review Company's criteria for maintenance care.

40.

Charges for massage therapy unless services are provided under a Physical Therapy Treatment Plan.

41.

Charges for services or supplies rendered to any Covered Employee or Dependent in connection with the voluntary interruption of a Pregnancy, unless the voluntary interruption of Pregnancy is Medically Necessary and the life of the Covered Person would be endangered if the fetus were carried to term, or if Pregnancy is the result of a criminal act such as rape or incest, or if a fetal or chromosomal abnormality exists which was diagnosed prior to the abortion. Benefits for treatment of complications arising from, or as the result of, any voluntary interruption of Pregnancy will be payable on the same basis as an Illness.

42.

Pregnancy and maternity charges incurred by Dependents other than Covered Dependent Spouses.

43.

Charges related to or in connection with newborns of Dependent children, unless newborn child meets the definition of an eligible Dependent.

44.

Charges for portable uterine monitors unless approved by the Utilization Review Company and/or Large Case Management.

45.

Charges related to or in connection with the treatment of infertility to include fertility studies, sterility studies, procedures to restore or enhance fertility, artificial insemination or in-vitro fertilization or other similar procedures.

46.

Charges resulting from or in connection with the reversal of a sterilization procedure.

47.

Charges for any form of contraception, except oral contraceptives, prescribed by a Physician specified as covered by the Prescription Drug Expense Benefit or the Mail Order Prescription Drug Plan, contraceptive injections administered in a Physician's office, and insertion and removal of contraceptive implants to a maximum of $1,200 per five (5) year period.

48.

Charges related to or in connection with sex change procedures and charges for sexual dysfunctions or inadequacies that do not have a physiological or organic basis.

49.

Charges related to or in connection with Experimental Organ and Tissue Transplants including any animal organ transplants.

50.

Charges related to or in connection with Organ and Tissue Transplants in excess of the Maximums specified in the Organ Transplant Program Schedule of Benefits.

51.

Charges for dental and orthodontic care related to Temporomandibular Joint Syndrome (TMJ).

52.

Charges for Private Duty Nursing in excess of the Lifetime Maximum Benefit as specified in the Schedule of Benefits.

53.

Charges for Speech Therapy to correct pre-speech deficiencies or therapy to improve speech skills not fully developed unless related to an Illness or Injury.

54.

Charges subject to the Pre-existing Condition Exclusion Limitation of the Plan except charges for Prescription Drugs covered under the Mail Order Prescription Drug Plan are not subject to the Pre-existing Condition Exclusion Limitation. For complete list of Pre-existing exceptions, refer to Pre-existing Condition Exclusion Limitation section.

55.

Any portion of the billed charges for services or supplies which the provider offers to waive, such as the portion which would not be paid by the Plan due to Deductible or Coinsurance provisions.

56.

Charges for purchase or rental of Continuous Passive Motion (CPM) equipment, unless used for post surgical rehabilitation.

57.

Charges for nerve stimulators and TENS units.

58.

Charges incurred for procurement and storage of one's own blood except for procurement and storage of one's own blood if obtained within three (3) months prior to a scheduled surgery.

59.

Claims received after twelve (12) months from the date the service was rendered.

ORGAN TRANSPLANT PROGRAM

NOTIFICATION TO UTILIZATION REVIEW COMPANY REQUIRED FOR COORDINATION OF CARE*

Expenses incurred in connection with any Organ or Tissue Transplant listed in this provision will be covered subject to notification and referral to the Plan Administrator's authorized review specialist. (Cornea transplants are not subject to the notification provision, but will be considered on the same basis as any other medical expense coverage under this Plan.) Transplant coverage is offered under this Plan through a Preferred Provider Network of specialized professionals and facilities. Coverage is also provided for Transplant services obtained outside of the Preferred Provider Network, at a reduced benefit level.

As soon as reasonably possible, but in no event more than ten (10) days* after a Covered Person's attending Physician has indicated that the Covered Person is a potential candidate for a transplant, the Covered Person or his Physician should notify the Plan Administrator's Utilization Review Company for referral to the Network's Medical Review Specialist, for evaluation and coordination of care. A comprehensive treatment plan must be developed for this Plan's medical review, and must include such information as diagnosis, the nature of the transplant, the setting of the procedure (i.e., name and address of the Hospital), any secondary medical complications, a five (5) year prognosis, two (2) qualified opinions confirming the need for the procedure, as well as a description and the estimated cost of the proposed treatment (one or both confirming second opinions may be waived by the Plan's Medical Review Specialist). Additional attending Physician's statements may also be required. The Covered Person may provide a comprehensive treatment plan independent of the Preferred Provider Network, but this will be subject to medical appropriateness review and may result in non-network benefit coverage.

All potential transplant cases will be assessed for their appropriateness for Large Case Management.

*Failure to notify the Utilization Review Company of a transplant procedure will result in the application of a $5,000 Deductible to all Covered Expenses incurred as a result of the transplant. This Deductible is in addition to any other Plan Deductible and Copayment requirements that would normally be applicable to the transplant procedure.

ORGAN TRANSPLANT NETWORK

As a result of the medical review, the Covered Person will be asked to consider obtaining transplant services from a participating Center of Excellence facility arranged by the Plan Administrator's authorized review specialist. The purpose of designating Centers of Excellence networks is to perform necessary transplants in the most appropriate setting for the procedure, to improve the quality and probability of a successful outcome and reduce the average cost of the procedures.

There is no obligation for the patient to use a Participating Transplant Network Facility. However, benefits for the transplant and its related expenses may vary depending on whether services are provided in or out of the Transplant Network. If a transplant is performed Out-of-Network, but the Covered Person has received approval from the Plan's Medical Review Specialist for Out-of-Network services, then Network Benefits will apply to the transplant and its related expenses. If services are provided Out-of-Network without approval from the Medical Review Specialist, then Out-of-Network Benefits will apply.

TRANSPLANT BENEFIT PERIOD

Covered Transplant Expenses will accumulate during a Transplant Benefit Period and will be charged toward the Transplant Benefit Period Maximums, if any, shown in the Transplant Schedule of Benefits. The term "Transplant Benefit Period" means the period beginning on the date of the initial evaluation and ending on the date twelve (12) consecutive months following the date of the transplant. (If the transplant is a bone marrow transplant, the date the marrow is re-infused is considered the date of the transplant.)

COVERED TRANSPLANT EXPENSES

The term "Covered Expenses" with respect to transplants includes the reasonable and customary expenses for services and supplies which are covered under this Plan (or which are specifically identified as covered only under this provision) and which are Medically Necessary and appropriate to the transplant, including:

1.

Charges incurred in the evaluation, screening and candidacy determination process.

2.

Charges incurred for organ transplantation.

3.

Charges for organ procurement, including donor expenses not covered under the donor's plan of benefits.

Coverage for organ procurement from a non-living donor will be provided for costs involved in removing, preserving and transporting the organ.

Coverage for organ procurement from living donor will be provided for the costs involved in screening the potential donor, transporting the donor to and from the site of the transplant, as well as for medical expenses associated with removal of the donated organ and the medical services provided to the donor in the interim and for follow up care.

If the transplant procedure is a bone marrow transplant, coverage will be provided for the cost involved in the removal of the patient's bone marrow (autologous) or the donor's marrow (allogenic). Coverage will also be provided for search charges to identify an unrelated match and treatment and storage cost of the marrow, up to the time of re-infusion. (The harvesting of the marrow need not be performed within the Transplant Benefit Period.)

4.

Charges incurred for follow up care, including immuno-suppressant therapy.

5.

Charges for transportation to and from the site of the covered organ transplant procedure for the recipient and one (1) other individual, or in the event that the recipient or the donor is a minor, two (2) other individuals. In addition, all reasonable and necessary lodging and meal expenses incurred during the Transplant Benefit Period will be covered up to a Maximum of $10,000 per transplant period.

RE-TRANSPLANTATION

Re-transplantation will be covered up to two (2) re-transplants, for a total of three (3) transplants per person, per lifetime. Each transplant will be subject to the Notification and review requirement for organ transplant. Each transplant and re-transplant will have a new Benefit Period and a new Maximum Benefit, subject to the Plan's overall per person Maximum Lifetime Benefit.

ACCUMULATION OF EXPENSES

Expenses incurred during any transplant period for the recipient and for the donor will accumulate towards the recipient's benefit and will be included in the Plan's overall per person Maximum Lifetime Benefit.

DONOR EXPENSES

Medical expenses of the donor will be covered under this provision to the extent that they are not covered elsewhere under this Plan or any other benefit plan covering the donor. In addition, medical expense benefits for a donor who is not a Plan Participant under this Plan are limited to a Maximum of $10,000 per transplant benefit period when the transplant services are provided Out-of-Network. This limit does not apply to the donor's transportation and lodging expenses described above under Covered Transplant Expenses.

PRE-EXISTING CONDITIONS LIMITATION

Transplant charges will be subject to the Plan's Pre-existing Condition Exclusion Limitation.

EXTENDED BENEFITS IN THE EVENT OF TERMINATION

In the event of termination of the Plan, or of the recipient's termination of membership in an eligible class, if a transplant treatment program had commenced while coverage was in force and benefits had not been exhausted, then benefits will be paid for expenses related to the same organ transplant which are incurred during the lesser of: a. the remainder of that transplant benefit period; or b. one (1) month after termination of the Plan or membership, as though coverage had not ended.

ORGAN TRANSPLANT SCHEDULE OF BENEFITS

Transplant Procedure

Network Benefits

Non-Network Benefits

Heart

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $110,000 including a Physician's Maximum of $20,000

Lung

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $155,000 including a Physician's Maximum of $20,000

Bone Marrow

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $130,000 including a Physician's Maximum of $20,000

Liver

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $130,000 including a Physician's Maximum of $20,000

Heart/Lung

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $150,000 including a Physician's Maximum of $20,000

Pancreas

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $70,000 including a Physician's Maximum of $20,000

Kidney

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $55,000 including a Physician's Maximum of $20,000

Kidney/Pancreas

100% of eligible charges

100% of eligible charges, up to an overall Maximum of $95,000 including a Physician's Maximum of $20,000

COORDINATION OF BENEFITS

The Coordination of Benefits provision is intended to prevent the payment of benefits which exceed Covered Expenses. It applies when the Plan Participant is also covered by another plan or plans. When more than one coverage exists, one plan (primary plan) normally pays its benefits in full and the other plans (secondary plans) pay a reduced benefit. This Plan may pay either its benefits in full or a reduced amount which, when added to the benefits payable by the other plan or plans, will not exceed 100% of Allowable Expenses. Only the amount paid by this Plan will be charged against the Plan Maximums.

The Coordination of Benefits provision applies whether or not a claim is filed under the other plan or plans. If needed, authorization must be given to this Plan to obtain information as to benefits or services available from the other plan or plans, or to recover overpayments.

All benefits contained in the Plan Document are subject to this provision.

For purposes of this Coordination of Benefits provision the term "plan" as used herein will mean any plan providing benefits or services for medical or dental treatment, and such benefits or services are provided by:

1.

Group insurance or any other arrangement for coverage for Covered Persons in a group whether on an insured or uninsured basis, including but not limited to:

a.

Hospital indemnity benefits; and

b.

Hospital reimbursement-type plans which permit the Covered Person to elect indemnity at the time of claims;

2.

Hospital or medical service organizations on a group basis, group practice and other group pre-payment plans;

3.

Hospital or medical service organizations on an individual basis having a provision similar in effect to this provision;

4.

A Licensed Health Maintenance Organization (HMO);

5.

Any coverage for students which is sponsored by, or provided through, a school or other educational institution;

6.

Any coverage under a governmental program, and any coverage required or provided by any statute;

7

Group automobile insurance;

8.

Individual automobile insurance coverage on an automobile leased or owned by the Employer; or

9.

Any individual automobile insurance, including no fault automobile insurance on an individual basis.

The term "plan" will be construed separately with respect to each policy, contract, or other arrangement for benefits or services, and separately with respect to that portion of any such policy, contract, or other arrangement which reserves the right to take the benefits or services of other plans into consideration in determining its benefits and that portion which does not.

The term "Allowable Expense" means any necessary item of expense, for which the charge is Usual and Customary, or is based on the contracted fee schedule of an alternate care delivery system, a portion of which is covered under at least one of the plans covering the person for whom the claim is made. When a plan provides benefits in the form of services rather than cash payments, then the reasonable cash value of each service rendered will be deemed to be both an Allowable Expense and a benefit paid.

The term "Claim Determination Period" means a Calendar Year, a Plan Year or that portion of a Calendar or Plan Year during which the Covered Person, for whom claim is made, has been covered under this Plan.

COORDINATION PROCEDURES

Notwithstanding the other provisions of this Plan, benefits that would be payable under this Plan will be reduced so that the sum of benefits and all benefits payable under all other plans will not exceed the total of Allowable Expenses incurred during any Claim Determination Period with respect to Covered Persons eligible for:

1.

Benefits, either as an insured person or employee or as a Dependent, under any other plan which has no provision similar in effect to this provision.

2.

Dependents' benefits under this Plan who are also eligible for benefits:

a.

As an insured person or employee under any other plan; or

b.

As a Dependent child of an insured person or employee covered under any other plan.

3.

A Covered Person under this Plan who is also eligible for benefits as an insured person or employee under any other plan and has been covered continuously for a longer period of time under such other plan.

For the purpose of determining the applicability of and for implementing this provision, or any provision of similar purpose in any other plan, the Plan Administrator may, without the consent of or notice to any person, release to or obtain from any other insurance company or other organization or person any information with respect to any person, which the Plan Administrator deems to be necessary for such purposes. Any Covered Person claiming benefits under this Plan will furnish to the Plan Administrator such information as may be necessary to implement this provision or to determine its applicability.

ORDER OF BENEFIT DETERMINATION

Each plan makes its claim payment according to where it falls in this order, if Medicare is not involved:

1.

If a plan contains no provision for Coordination of Benefits, then it pays primary before all other plans.

2.

The plan which covers the Covered Person as an employee (or named insured) pays primary as though no other plan existed; remaining recognized charges are paid under a secondary plan which covers the claimant as a Dependent.

3.

If the Covered Person is a Dependent child:

a.

Whichever parent has a birthday anniversary which occurs earlier in the Calendar Year shall be considered to have the primary plan;

b.

If birthday anniversaries are the same, then the plan of the parent who has been covered under his/her plan for the longer period of time will be primary; and

c.

If the plan with which this Plan is to be coordinated does not include the requirements shown above, then the plan without such requirements will be primary.

4.

If the Covered Person is a Dependent child and the parents are divorced, then:

a.

The plan of the parent with custody pays first, unless a court order or decree specifies the other parent to have financial responsibility, in which case that parent's plan would pay first; or

b.

The plan of a step-parent with whom the child lives pays second (if applicable).

5.

If the order set out in 1, 2, 3 or 4 above does not apply in a particular case, then the plan which has covered the Covered Person for the longest period of time will pay first.

FACILITY OF PAYMENT

Whenever payments which should have been made under this Plan in accordance with this provision have been made under any other plan or plans, the Plan Administrator will have the right, exercisable alone and in its sole discretion, to pay to any insurance company or other organization or person making such other payments any amounts it will determine in order to satisfy the intent of this provision, and amounts so paid will be deemed paid under this Plan and to the extent of such payments, the Plan Administrator will be fully discharged from liability under this Plan.

The benefits that are payable will be charged against any applicable Maximum payment or benefit of this Plan rather than the amount payable in the absence of this provision.

COORDINATION WITH MEDICARE

Notwithstanding all other provisions of this Plan, Covered Persons who are eligible for Medicare benefits, will be entitled to benefits under this Plan which will be coordinated with Medicare in accordance with the coordination of benefits provision of this Plan and subject to the rules and regulations as specified by the Tax Equity and Fiscal Responsibility Act of 1982 as they may be amended from time to time.

COORDINATION WITH AUTOMOBILE INSURANCE COVERAGE

The Plan's liability for expenses arising out of an automobile accident is based on the type of automobile insurance law enacted by the Covered Person's state. Nationally, there are three types of state automobile insurance laws:

1.   No-fault automobile insurance laws;

2.   Financial responsibility laws; or

3.   Other automobile liability insurance laws.

COORDINATION WITH AUTO NO-FAULT COVERAGE

Except as required by law, the Plan is secondary to any no-fault automobile coverage. It is not intended to reduce the level of coverage that would otherwise be available through a no-fault automobile insurance policy nor does it intend to be primary in order to reduce the premiums or cost of no-fault automobile coverage.

If the Covered Person or their Covered Dependent incur Covered Charges as a result of an automobile accident (either as driver, passenger or pedestrian), the amount of Covered Charges that the Plan will pay is limited to:

1.   Any Deductible under the automobile coverage;

2.   Any Copayment under the automobile coverage;

3.   Any expense properly excluded by the automobile coverage that is a Covered Charge; and

4.   Any expense that the Plan is required to pay by law.

Any Individual is considered to be covered under an automobile insurance policy if he/she is either:

1.   An owner or principal named insured of the policy;

2.   A Family member of a person insured under the policy; or

3.   A person who would be eligible for medical expense benefits under an automobile insurance policy if this Plan did not exist.

COORDINATION WITH FINANCIAL RESPONSIBILITY LAW

The Plan is secondary to automobile coverage or to any other party who may be liable for the Covered Person's medical expenses resulting from the automobile accident.

If Covered Person's state has a "financial responsibility" law which does not allow the Plan to pay benefits as secondary or which does not allow the Plan to advance payments with the intent of subrogating or recovering the payment, the Plan will not pay any benefits related to an automobile accident for the Covered Person or their Dependents.

COORDINATION WITH OTHER AUTOMOBILE LIABILITY INSURANCE

If the Covered Person's state does not have a no-fault automobile insurance law or a "financial responsibility" law, this Plan is secondary to their automobile insurance coverage or to any other party who may be liable for the Covered Person's medical expenses resulting from the automobile accident.

COORDINATION WITH UNDERINSURED/UNINSURED MOTORIST COVERAGE

If the Covered Person is involved in an automobile accident and as a result of the accident, the Plan pays benefits and if the Covered Person receives a settlement from their uninsured or underinsured motorist policy, the Plan is entitled to receive from the proceeds of the settlement with the uninsured or underinsured motorist coverage, the expenses of the Plan. The Plan is not entitled to receive any recovery that is in excess of its expenses. The Plan agrees to payment of benefits prior to the receipt by the Covered Person of any recovery from their underinsured or uninsured motorist policy. The Covered Person agrees to notify the Plan of the existence of a recovery from an underinsured or uninsured motorist policy and further agrees to remit to the Plan the proceeds of any recovery received from an underinsured or uninsured motorist policy up to the expenditures made by the Plan. Any expenses by the Plan which are in excess of the proceeds received by the underinsured/uninsured motorist policy will be the responsibility of the Plan pursuant to the terms and conditions of the Plan.

SUBROGATION

PLAN'S RIGHT TO SUBROGATION AND REIMBURSEMENT

In the event of any benefit payments made under the Plan to or on behalf of a Covered Person an automatic equitable subrogation lien, to the extent of such payments, attaches in favor of the Plan to all the rights of recovery and other rights of the Covered Person arising out of any claim or cause of action that may accrue because of the alleged malpractice, accidental, negligent, intentional, or tortious conduct, act or omission, of another person or entity (hereinafter all such persons or entities will be individually and collectively referred to as a "third party"). The Covered Person, by participation in this Plan, agrees that he/she and his/her estate, and the legal representatives of his/her estate, will be obligated and that the Plan will be fully subrogated under this automatic equitable subrogation lien to any recovery or right of recovery that he/she or the estate may have against any third party, including without limitation, any wrongful death claim. State law doctrines and rules, such as the "make whole" doctrine, the "anti-assignment" rule, or any other state law or rule, will not prevent the Plan from recovering 100% of its payments from the proceeds of the recovery.

The Covered Person, or the legal representative of beneficiaries of the Covered Person or his/her estate, must notify the Plan Administrator of any claim or lawsuit against a third party or insurance carrier within thirty (30) days of the date that the claim is made or the lawsuit is filed. The Plan Administrator, on behalf of the Plan, also has the right to pursue any action to enforce its automatic equitable subrogation lien against a third party or insurance carrier.

THE COVERED PERSON'S AGREEMENT TO SUBROGATION AND REIMBURSEMENT

The Covered Person, on behalf of himself/herself and each beneficiary of a payment made on the Covered Person's behalf, by accepting any Benefits under the Plan, consents and agrees:

1.

That the Plan will be promptly reimbursed for 100% of the payments made to or on the Covered Person's behalf under the Plan out of the first monies recovered as a result of any lawsuit, judgment, order, award, settlement, compromise, arbitration or other arrangement (regardless of whether there has been a full recovery or such sums are allocated to any particular type of loss, damage or expense and regardless of whether the Covered Person has been fully compensated for his losses or "made whole"); and

2.

To include all benefits paid or payable under the Plan in any liability or other claim against a third party or its insurance carrier. Furthermore, the Covered Person and said beneficiaries promise and agree to take such action, to furnish such information and assistance, to execute and deliver any assignments, subrogation and reimbursement agreements, and other instruments as the Plan Administrator or its agent may require to facilitate enforcement of the Plan's equitable subrogation lien and reimbursement rights, and not to prejudice, or in any way detrimentally affect, such rights. The Plan's rights will not be affected by any release, including a partial release, that is entered into without the consent of the Plan Administrator.

The Plan's automatic equitable subrogation lien and reimbursement rights will extend to:

1.

All conceivable sources of recovery, other than the Plan itself, including, by way of example and not limitation, any and all automobile insurance coverage (including uninsured/underinsured motorist coverage), no-fault coverage, medical insurance coverage, school insurance coverage, disability coverage, personal injury awards or settlements, and medical malpractice awards or settlements; and

2.

All types of payments made by or on behalf of a third party, regardless of how designated, including without limitation, payments for medical expenses, disability, accidental death or dismemberment, past or future wages or loss of earnings capacity, pain and suffering, mental anguish, loss of consortium or companionship, and exemplary damages of any kind. For purposes of clarity and not limitation, to the extent that a recovery from a third party is obtained by an attorney for the Covered Person, the full amount that the Plan is entitled to recover hereunder will not be offset or otherwise reduced by any attorney's fees or other costs of recovery that were not specifically approved in advance in writing by the Plan Administrator or its designated agent.

LIMITATION TO THE PLAN'S SUBROGATION AND REIMBURSEMENT RIGHTS

The Plan's automatic equitable subrogation lien and reimbursement rights:

1.

Will extend only to the recovery by the Plan of the benefits that it has paid or will pay to or on behalf of the Covered Person and the cost of prosecuting the claim for recovery, including reasonable attorney's fees and court and collection costs; and

2.

Will fully apply and control even if the Covered Person or beneficiary thereof has only received a partial recovery from a third party.

SUBROGATION AND REIMBURSEMENT RIGHTS NOT AFFECTED BY PAYMENT

The Plan's automatic equitable subrogation lien and reimbursement rights will not be affected if benefits are paid under the Plan before the Plan Administrator or its agent obtains any additional agreements from the Covered Person (or from any other Payee) or if the Plan Administrator does not request any such agreement. In addition, the failure or refusal of a Covered Person (or other payee, if applicable) to sign an agreement at the request of the Plan Administrator or its agent recognizing the Plan's automatic equitable subrogation lien and reimbursement rights may result in a forfeiture of all benefits payable to that Covered Person (or other payee), as determined by the Plan Administrator, even if such benefits have already been paid. The Plan Administrator will retain a right to recover paid benefits which are forfeited in such a manner; moreover, any such failure or refusal will not affect the Plan's rights which will remain in full force and effect.

LIEN ON PROCEEDS

The Plan Administrator, on behalf of the Plan, will have a first and primary equitable lien against the proceeds of any settlement, award or judgment that result from a claim, lawsuit or other action by or on behalf of a Covered Person who received benefits under the Plan. Notice of the lien is sufficient to establish the Plan's lien against the third party or insurance carrier. The Plan Administrator will be entitled to:

1.

Deduct the amount of the lien from any future claims payable to or on behalf of the Covered Person if:

a.

The lien is not repaid or otherwise recovered by the Plan Administrator; or

b.

The Covered Person or other claimant fails to promptly notify the Plan Administrator of such a payment received from a third party or insurance carrier that is subject to the Plan's equitable subrogation lien and reimbursement rights.

2.

To otherwise take any action that the Plan Administrator deems necessary or appropriate, in its discretion, to enforce the Plan's rights to automatic equitable subrogation lien and reimbursement rights to the full extent permitted by law.

RIGHT TO RECEIVE AND RELEASE NECESSARY INFORMATION

For the purposes of determining the applicability of and implementing the terms of this Plan or any other Plan, the Plan Administrator or Claims Administrator may, without the consent of or notice to any person, release to or obtain from any insurance company or other organization or person any information which the Plan Administrator or Claims Administrator deems to be necessary for such purposes, with respect to any person claiming benefits under this Plan. Any person claiming benefits under this Plan shall furnish to the Plan Administrator or Claims Administrator such information as may be necessary to implement this provision. This paragraph does not apply to obtaining and releasing Protected Health Information (PHI), which is addressed in a separate section of this Plan.

CLAIM FILING procedures

NOTICE AND PROOF OF CLAIM FOR BENEFITS

Written notice and proof of an incurred claim should always be filed with the Claims Administrator as soon as possible. Claims must be filed within twelve (12) months from the date of service in order for such claim to be considered for coverage by the Plan. If an individual's coverage under the Plan ceases, all claims incurred prior to termination of coverage must be filed within twelve (12) months from the date of service or the claims will not be covered by the Plan. Claims must be filed sooner in certain circumstances. If the Plan is terminated, all claims incurred prior to the Plan termination must be received within ninety (90) days after the termination or the claims will not be covered. Any claims incurred after termination of Plan coverage for any reason are not covered under the Plan.

CLAIMS DETERMINATION

The Plan Administrator maintains procedures to evaluate health care claims, to determine benefits and to review claim appeals for disputed determinations. Time periods are established for responding to and reviewing all claims made under the Plan. These time periods specify the maximum time allowed for each phase of the claims process. All time is measured in calendar days beginning from the date the claim is received, even if the claim is incomplete when received. When additional information is requested by the Claims Administrator (other than as part of an Adverse Benefit Determination), the time period for making a benefit determination is tolled until the additional information is received by the Claims Administrator or until the claimant's allotted time for responding to the request for additional information expires, whichever happens first.

The Plan Participant will be notified of the Plan's benefit determination as follows:

Time Periods for Initial Benefit Determinations:

1.

Initial Determination - After receiving the claim, the Plan has thirty (30) days in which to make a benefit determination.

2.

Extension of Initial Determination Period - One (1) extension of fifteen (15) days is permitted if the Claims Administrator determines that the extension is necessary due to matters beyond the control of the Plan and notifies the Claimant of the extension before the expiration of the initial thirty (30) day period of the circumstances requiring the extension of time and the date by which the Claims Administrator expects to render a decision.

Notice of Insufficient Information and Time Allowed Claimant to Provide Additional Information - If an extension, as described in (2), is necessary because additional information is needed from the Claimant in order for the Claims Administrator to process the claim, the notice of the extension must specifically describe the required information, and the Claimant must be afforded forty-five (45) days from the receipt of the notice to provide the specified information.

Time Periods for Appeal of Adverse Benefit Determinations:

1.

Time to Seek Appeal of Adverse Benefit Determination - A Claimant has one hundred eighty (180) days following receipt of a notification of an Adverse Benefit Determination within which to appeal the determination.

2.

Time for Decision on Appeal - There are two (2) levels of appeal, each of which requires a determination to be made within thirty (30) days of the receipt of the request, as explained further in the section entitled "Appeals Process."

NOTICE OF ADVERSE BENEFIT DETERMINATION

If the initial benefit determination is an Adverse Benefit Determination, notification will be sent to the Claimant and will include the following information:

1.

The reason or reasons for the Adverse Benefit Determination;

2.

References to the Plan provisions on which the Adverse Benefit Determination is based;

3.

A description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary;

4.

A description of the Plan's review procedures and the time limits applicable to such procedures, including a statement of the Claimant's right to bring a civil action following an Adverse Benefit Determination;

5.

If an internal rule, guideline, protocol, or other similar criterion was relied on in making the Adverse Benefit Determination, either the specific rule, guideline, protocol or other similar criterion or a statement that such was relied on in making the Adverse Benefit Determination and that a copy of the rule, guideline, protocol or other criterion will be provided free of charge on request; and

6.

If the Adverse Benefit Determination is based on a Medical Necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the Claimant's medical circumstances, or a statement that such explanation will be provided free of charge on request.

APPEAL PROCESS

The Plan provides for two (2) levels of appeal following an Adverse Benefit Determination. The Claimant has one hundred eighty (180) days following an Adverse Benefit Determination to file an appeal of that determination. The appeal process will include the following:

1.

Receipt of written request by the Claims Administrator from the Claimant or an authorized representative of the Claimant with the proper form for review of Adverse Benefit Determination initiates the appeal process.

2.

The Claimant will have the opportunity to submit written comments, documents, records and other information relating to the claim.

3.

The Claimant will be provided, on request and free of charge, reasonable access to and copies of, all documents, records, and other information relevant to the Claimant's claim for benefits.

4.

The review of the Adverse Benefit Determination will take into account all comments, documents, records and other information submitted by the Claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

5.

No deference will be afforded to the initial benefit determination.

6.

The party reviewing the appeal may be neither the party who made the initial Adverse Benefit Determination nor a subordinate of the party who made the initial Adverse Benefit Determination.

7.

In deciding an appeal on which the Adverse Benefit Determination was based in whole or in part on a medical judgment, including whether a particular treatment, drug, or other item is experimental, investigational, or not Medically Necessary or appropriate, the Claims Administrator or the Plan Administrator, as appropriate depending on the level of appeal, will consult with a health care professional who has appropriate training and experience in the field of medicine involving the medical judgment. The health care professional consulted for the appeal will not be the health care professional or a subordinate of the health care professional consulted in connection with the Adverse Benefit Determination that is the subject of the appeal.

8.

Medical or vocational experts whose advice was obtained on behalf of the Plan in connection with the Adverse Benefit Determination will be identified.

9.

The first level of appeal will be the responsibility of the Claims Administrator and will be decided within thirty (30) days of the Claims Administrator's receipt of the request. The second level of appeal will be the responsibility of the Plan Administrator and will be decided within thirty (30) days of the Plan Administrator's receipt of the request.

NOTICE OF BENEFIT DETERMINATION ON APPEAL

The Claimant will be notified of the Benefit Determination on Appeal. If there is an Adverse Benefit Determination on Appeal, the notification will include the following information:

1.

The reason or reasons for the Adverse Benefit Determination;

2.

References to the Plan provisions on which the Adverse Benefit Determination is based;

3.

A description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary;

4.

A description of the Plan's review procedures and the time limits applicable to such procedures, including a statement of the Claimant's right to bring a civil action following an Adverse Benefit Determination;

5.

If an internal rule, guideline, protocol, or other similar criterion was relied on in making the Adverse Benefit Determination, either the specific rule, guideline, protocol or other similar criterion or a statement that such was relied on in making the Adverse Benefit Determination and that a copy of the rule, guideline, protocol or other criterion will be provided free of charge on request;

6.

If the Adverse Benefit Determination is based on a Medical Necessity or experimental treatment or similar exclusion or limit, either an explanation of the scientific or clinical judgment for the determination, applying the terms of the Plan to the Claimant's medical circumstances, or a statement that such explanation will be provided free of charge on request;

7.

If the notification is a notification of an Adverse Benefit Determination on the final level of appeal, a statement of the Claimant's right to bring an action under section 502(a) of ERISA; and

8.

The following statement: "You and your Plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State Insurance Regulatory Agency."

Legal actions for benefits under the Plan may be brought by the Claimant following an Adverse Benefit Determination on appeal.

PHYSICAL EXAMINATION

The Plan Administrator or Claims Administrator has the right to have the Claimant examined as often as reasonably necessary while a claim is pending. Benefits are payable under this Plan only if they are Medically Necessary for the Illness or Accidental Injury of the Covered Person. This Plan reserves the right to make a utilization review to determine whether services are Medically Necessary for the proper treatment of the Covered Person. All such information will be confidential.

CLAIMS AUDIT

Once a written Claim for Benefits is received, the Claims Administrator, acting on the discretionary authority of the Plan Administrator, may elect to have such claim reviewed or audited for accuracy and reasonableness of charges as part of the adjudication process. This process may include, but may not be limited to, identifying charges for items/services that may not be covered or may not have been delivered, duplicate charges and charges beyond the reasonable, necessary and Usual and Customary guidelines as determined by the Plan.

PAYMENT OF CLAIMS

Plan benefits are payable to the Covered Employee unless the Claimant gives written direction, at the time of filing proof of such loss, to pay directly the health care provider rendering such services. Such payment to a health care provider is subject to the approval of the Plan Administrator. If any such benefit remains unpaid at the death of the Covered Employee, if the Claimant is a minor, or if the Claimant is, in the opinion of the Plan Administrator, legally incapable of giving a valid receipt and discharge for any payment, the Plan Administrator may, at its option, pay such benefits to any one or more of the following relatives of the Claimant: wife, husband, mother, father, child or children, brother or brothers, sister or sisters. Such payment will constitute a complete discharge of the Plan's obligation to the extent of such payment and the Plan Administrator will not be required to see the application of the money so paid.

GENERAL PROVISIONS

RIGHTS OF RECOVERY

Whenever payments have been made by the Plan with respect to allowable expenses in excess of the Maximum amount of payment necessary to satisfy the intent of this Plan, the Plan Administrator shall have the right, exercisable alone and in its sole discretion, to recover such excess payments.

MISSTATEMENT OF AGE

If the age of a Covered Person has been misstated and if the amount of contribution is based on age, an adjustment of contributions shall be made based on the Covered Person's true age. If age is a factor in determining eligibility or amount of coverage and there has been a misstatement of age, the coverages or amounts of benefits, or both, for which the person is covered shall be adjusted in accordance with the Covered Person's true age. Any such misstatement of age shall neither continue coverage otherwise validly terminated, nor terminate coverage otherwise validly in force. Contributions and benefits will be adjusted on the contribution due date next following the date of the discovery of such misstatement.

WAIVER OR ESTOPPEL

No term, condition or provision of the Plan shall be waived, and there shall be no estoppel against the enforcement of any provision of the Plan, except by written direction of the Plan Administrator. No such waiver shall be deemed a continuing waiver unless specifically stated. Each waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

WORKERS' COMPENSATION NOT AFFECTED

This Plan is not in lieu of, and does not affect any requirement for coverage by Workers' Compensation Insurance or where permitted and applicable any other alternative form of Workers' Compensation benefits.

CONFORMITY WITH LAW

If any provision of this Plan is contrary to any law to which it is subject, such provision is hereby amended to conform thereto.

CONFORMITY WITH STATUTE(S)

Any provision of the Plan, which is in conflict with statutes that are applicable to this Plan, is hereby amended to conform to the minimum requirements of said statute(s).

NOTICES

All payments or notices of any kind to Employees, Participants, beneficiaries, or Plan officials may be mailed to the address for that person last appearing on the records of the Plan Administrator. When such a notice is mailed by first class mail, it is deemed to have been: (a) duly delivered on the date post-marked; and (b) duly received three (3) calendar days after being deposited, postage prepaid, in the United States Mail. When such a notice is delivered in person, it is deemed to have been received the same day as delivery. Each person must keep the Plan Administrator notified of his current address. If there is doubt about the accuracy of an address, the Plan may give notice, by registered mail, to any such person's last address, that payments and other mail are being withheld pending receipt of a proper mailing address from that person.

STATEMENTS

In the absence of fraud, all statements made by a Covered Person will be deemed representations and not warranties. No such representations will void the Plan benefits or be used in defense to a claim hereunder unless a copy of the instrument containing such representation is or has been furnished to such Covered Person.

MISCELLANEOUS

Section titles are for conveniences of reference only, and are not to be considered in interpreting this Plan.

No failure to enforce any provision of this Plan shall affect the right thereafter to enforce such provision, nor shall such failure affect its right to enforce any other provision of this Plan.

ASSIGNMENT

The benefits provided under this Plan shall not be assignable without the consent of the Plan Administrator. The Employee may authorize the Plan Administrator to pay benefits directly to the Hospital, Physician or other party providing medical treatment. Any such payment will discharge the Plan to the extent of payment made. Unless permitted by law, payments may not be attached, nor be subject to the Employee's debts.

ALLOCATION AND APPORTIONMENT OF BENEFITS

The Plan reserves the right to allocate the Deductible amount to any Covered Charges and to apportion the benefits to the Covered Person and any assignees. Such allocation and apportionment shall be conclusive and shall be binding upon the Covered Person and all assignees.

FACILITY OF PAYMENT

If a Claimant is a minor or is physically or mentally incapable of giving a valid release for payment, the Claims Administrator at its option, may make payment to a party who has assumed responsibility for the care of such person. Such payments will be made until claim is made by a guardian. If a Claimant dies while benefits remain unpaid, benefits will be paid at the Claim Administrator's option to:

1.   The person or institution on whose charges claim is based; or

2.   A surviving relative (spouse, parent or child).

Such payment will release the Plan Administrator and Claims Administrator of all further liability to the extent of payment

PRIVACY OF PROTECTED HEALTH INFORMATION (PHI)

Effective April 14, 2004, the Plan will not use or disclose PHI except as permitted by this section or as otherwise permitted or required by law, including but not limited to the Privacy Standards of the Health Insurance and Portability Act of 1996 (the "HIPAA Privacy Standards"), as they may be amended from time to time. Nothing in this section shall be construed to prohibit the Plan Sponsor's receipt of "summary health information", as described in the HIPAA Privacy Standards, for certain Plan Sponsor-related purposes, including obtaining premium bids for health insurance, making Plan design and funding decisions, and modifying, amending or terminating the Plan.

PLAN SPONSOR'S OBLIGATIONS REGARDING PROTECTED HEALTH INFORMATION (PHI)

Effective April 14, 2004, the Plan will disclose PHI to the Plan Sponsor only upon receipt of a certification by the Plan Sponsor to the Plan that the Plan has been amended to provide for the Plan Sponsor's receipt of PHI and that the Plan Sponsor agrees to comply with the following provisions:

1.

The Plan Sponsor may use or disclose PHI for Plan enrollment purposes, including information as to whether an individual is enrolled in the Plan.

2.

The Plan Sponsor may use or disclose PHI for Plan administration functions, including for payment or health care operations purposes (as those terms are defined by the HIPAA Privacy Standards), and including quality assurance, claims processing, auditing and monitoring of the Plan.

3.

The Plan Sponsor may not use or further disclose PHI other than as permitted or required by the Plan documents or by law.

4.

The Plan Sponsor must ensure that any agents, including subcontractors, to whom the Plan Sponsor provides PHI received from the Plan agree to the same restrictions and conditions that apply to the Plan Sponsor with regard to the PHI.

5.

The Plan Sponsor may not use or disclose the PHI for employment-related actions and decisions or in connection with any other benefit or other Employee Benefit Plan of the Plan Sponsor.

6.

The Plan Sponsor must report to the Plan any use or disclosure of the PHI of which the Plan Sponsor becomes aware that is inconsistent with the uses or disclosures provided for under the terms of the Plan.

7.

The Plan Sponsor must make PHI available for access in accordance with the HIPAA Privacy Standards regarding an individual's right to access his/her PHI.

8.

The Plan Sponsor must make PHI available for amendment and, if required by the HIPAA Privacy Standards, incorporate any amendment made to PHI in accordance with the HIPAA Privacy Standards regarding an individual's right to have his PHI amended.

9.

The Plan Sponsor must make available information necessary to provide an accounting to an individual in accordance with the HIPAA Privacy Standards regarding an individual's right to receive an accounting of disclosures of his/her PHI.

10.

The Plan Sponsor must make internal practices, books, and records relating to the use and disclosure of PHI available to the Secretary of Health and Human Services for purposes of determining compliance by the Plan with the HIPAA Privacy Standards.

11.

The Plan Sponsor must, if feasible, return or destroy all PHI received from the Plan that the Plan Sponsor still maintains in any form and retain no copies of such information when no longer needed for the purpose for which disclosure was made, except that, if such return or destruction is not feasible, the Plan Sponsor must limit further uses and disclosures to those purposes that make the return or destruction not feasible.

12.

The Plan Sponsor must ensure adequate separation between the Plan and the Plan Sponsor by restricting access to and use of the PHI to only those Employees of the Plan Sponsor with responsibilities related to the administrative functions the Plan Sponsor performs for the Plan, as such Employees may be designated or identified, by name, job title, or classification, from time to time in various Business Associate Agreements between the Plan and the Plan's Business Associates or in other documents governing the administration of the Plan.

13.

The Plan Sponsor must ensure adequate separation between the Plan and the Plan Sponsor by maintaining a procedure for resolving any issues of noncompliance with provisions of the Plan document by persons described in paragraph 12 above through training, sanctions and other disciplinary action, as necessary.

ELIGIBILITY FOR COVERAGE

Coverage provided under this Plan for Employees and their Dependents shall be in accordance with the Eligibility, Effective Date, and Termination provisions as stated in this Plan Document as follows.

WAITING PERIOD

A Waiting Period is the period of time an Employee must satisfy while working for the Employer before becoming covered under the Plan.

The Plan's Waiting Period for all Employees is three (3) months.

EMPLOYEE ELIGIBILITY

An Employee eligible for coverage under the Plan shall be an Employee who meets the requirements in either number 1 and 2 of the following conditions or number 3, number 4, or number 5:

1.

Is regularly scheduled to work for the Employer on a Full-time Employment basis for at least thirty-five (35) hours per week; and

2.

Has satisfied a Waiting Period of three (3) months of continuous employment;

3.

Is a member of the Board of Directors, or is its General Counsel; (waiting period does not apply);

4.

Agents who meet the eligibility requirements under the plan (see "Agent Eligibility"); or

5.

Former Presidents and Chairmen of the Board who have served for a period of seven (7) or more years since 1980 for services which may be requested hereafter, their dependents, and, at the time of their deaths, their surviving dependents. Coverage is also available under this section for the surviving dependents of current Presidents and Chairmen of the Board (otherwise covered under #1 and #3) who have served for a period of seven (7) or more years since 1980 and who die while actively employed by the company. Dependents who are covered under this section will be eligible for benefits and covered to the same extent that they would be covered as a dependent of a living Employee. Spouses who are covered under this section will be covered for their lifetimes, regardless of remarriage.

AGENT ELIGIBILITY

Domestic Agents (no additional enrollments allowed)

To remain eligible for each calendar year, during each calendar year the agent must be less than 65 years of age and must earn at least $45,000 of first-year commissions. Coverage is contributory and terminates when the agent reaches age 65. (The current Domestic Agent in excess of 65 years of age is grand-fathered on the plan.)

International Agents

To become eligible to enroll, the agent must be contracted for at least one year, the agent must have earned at least $68,000 in first-year commissions during a calendar year, and the agent must have at least 85% premium persistency for business issued during the prior 13 months and at least 75% premium persistency for business issued during the prior 24 months. To remain eligible for each subsequent calendar year, the agent must earn at least $68,000 of first-year commissions each calendar year and maintain at least 85% premium persistency for business issued in the prior 13 months and at least 75% premium persistency for business issued during the prior 24 months. Coverage is contributory.

International Agents Older than age 65

If an agent is at least 65 years of age, has been contracted continuously for at least ten (10) years, and has been enrolled in this Plan for at least five (5) years, the agent must maintain total commission of at least $20,000 (both first-year and renewal commissions) during each calendar year in order for the agent to remain eligible for coverage. Coverage is contributory.

DATE OF ELIGIBILITY

Each person so employed will be eligible for coverage on the date he/she meets the Employee Eligibility requirements in 1 and 2, 3, 4, or 5 stated above.

DEPENDENT ELIGIBILITY

A Dependent, as defined in the Plan Definitions, will be considered eligible for coverage on the date the Employee becomes eligible for Dependent coverage, subject to all limitations and requirements of this Plan, and in accordance with the following:

1.

A newborn child of a Covered Employee will be considered eligible and will be covered from the moment of birth for thirty (30) days for Injury or Illness, including the necessary care or treatment of medically diagnosed congenital defects, birth abnormalities or prematurity, Routine Newborn Care and Well Baby Care. Written notification must be received by the Plan Administrator within thirty (30) after the child's date of birth for continued coverage. A newborn of a Dependent child is not eligible for this Plan unless the newborn child meets the definition of an eligible Dependent.

2.

A new spouse of a Covered Employee and any Dependent children of a new spouse who meet the Plan's definition of "Dependent" will be considered eligible and will be covered on the date of the Covered Employee's marriage, provided the spouse and/or his/her children are enrolled as Dependents of the Covered Employee within thirty (30) days after the date of marriage.

3.

A child under the age of eighteen (18) placed with the Covered Employee for adoption, whether or not the adoption has become final, will be considered eligible and will be covered from the date of such adoption or placement for adoption. "Placement" means the assumption and retention by the Covered Employee of a legal obligation for total or partial support of such child in anticipation of adoption of such child.

4.

A child of a non-custodial parent, who is a Covered Employee, will be considered eligible if the Covered Employee is required to provide benefit coverage for the child in accordance with applicable requirements of a Qualified Medical Child Support Order (QMCSO) as required by ERISA.

5.

A Dependent child will be considered eligible if child is unmarried, under nineteen (19) years of age or twenty-five (25) years of age if a Full-time Student and primarily dependent upon the Covered Employee for support. Proof of Full-time Student status is required. See definition of Full-time Student.

6.

If a Dependent of a Covered Employee is to be enrolled in the Plan, other than at the time of his/her eligibility or birth, adoption, court order or marriage to the Covered Employee, that Dependent would be considered a Late Enrollee unless he/she qualifies for a Special Enrollment.

7.

A spouse and/or child of a Covered Employee who previously was not eligible for the Plan will be considered eligible on the date he/she meets the Plan's definition of "Dependent."

The Eligibility provisions are subject to the requirements of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) effective August 10, 1993 as the same may be later amended.

If both the husband and wife are employed by the Company, and both have Dependent(s) eligible for coverage, either the husband or wife, but not both, may elect Dependent coverage for their eligible Dependents.

An Employee cannot be covered as a Dependent under this Plan.

NOTE:

A Dependent, who was enrolled on the most recent restated date of this Plan and who met the Plan's prior definition of Dependent, is also considered eligible for this Plan.

QUALIFIED MEDICAL CHILD SUPPORT ORDERS/PLACEMENT FOR ADOPTION

The Plan will comply with the rules relating to adopted children, children placed for adoption, Qualified Medical Child Support Orders ("QMCSO"), and National Medical Support Notices ("NMSN"). The Plan will use the following rules related to children placed for adoption, QMCSOs and NMSNs.

This Plan will provide benefits in accordance with the applicable requirements of any QMCSO or NMSN. A QMCSO is a medical child support order of a court or of certain administrative agencies that creates, recognizes or assigns to a child of a Covered Employee the right to receive health benefit coverage under the Plan. A NMSN is an order issued by a state agency requiring the Plan to cover a child. To be qualified, a medical child support order must comply with state and federal laws and contain the following:

1.

The name and last known mailing address (if any) of both the Covered Employee and the child covered under the order except that, to the extent provided in the order, the name and mailing address of an official of a state or a political subdivision thereof may be substituted for the mailing address of any such alternate recipient.

2.

A reasonable description of the type of coverage to be provided by the Plan for each child (or the manner in which the type of coverage will be determined).

3.

The period of coverage to which the order applies.

In addition, a QMCSO or NMSN will generally not be considered qualified if it requires the Plan to provide certain benefits or options which are not otherwise provided by the Plan. The Plan Administrator will notify the Covered Employee of the receipt of a medical child support order and the procedures for determining whether it is a Qualified Medical Child Support Order or a NMSN. The Plan Administrator will then determine within a reasonable period of time whether the medical child support is a QMSCO or NMSN.

Covered Employees may request and receive, free of charge, a copy of Plan procedures relating to QMCSOs and NMSNs.

This Plan will also provide benefits to Dependent children placed for adoption on the same basis as natural children even prior to the adoption becoming final. A child will be considered "placed for adoption" with a Covered Employee if the Covered Employee has assumed a legal obligation for total or partial support of the child in anticipation of adoption of the child. For this reason, if a child is placed with a Covered Employee for adoption by an adoption agency or other entity, the Covered Employee must provide to the Plan Administrator documentation (e.g., signed court order) that the adoption agency or other entity had legal custody of the child on the date that the child was placed with the Covered Employee for adoption. The Plan Administrator will determine within a reasonable period of time whether a child has been "placed for adoption."

The Plan Administrator has final, discretionary authority to determine: (1) whether a medical child support order qualifies as a QMCSO or NMSN; and (2) whether a child has been "placed for adoption."

EFFECTIVE DATE OF COVERAGE

EMPLOYEE EFFECTIVE DATE

An eligible Employee, properly enrolled in the Plan, will be referred to as a "Covered Employee."

Each Employee's coverage under the Plan shall become effective on his/her Date of Eligibility, which is the date the Employee completes the three (3) month Waiting Period provided written application for coverage is made on or before his/her Date of Eligibility or within thirty (30) days after the Date of his/her Eligibility.

DEPENDENT EFFECTIVE DATE

Dependent coverage under the Plan shall become effective on the date of Dependent Eligibility, provided the Employee makes written application for Dependent coverage on or within thirty (30) days after the date of Dependent Eligibility subject to the enrollment requirements as follows:

1.

In order to become covered under the Plan, eligible Dependents must be identified on an enrollment/change form.

2.

If the Employee makes written request for Dependent coverage on or before his/her own Date of Eligibility or within the thirty (30) days immediately following his/her own Date of Eligibility, then each eligible Dependent(s) coverages will become effective the same date the Employee's coverage is effective.

3.

If the Covered Employee makes written request to add a Dependent child to the Plan in accordance with a Qualified Medical Child Support Order (QMCSO), the effective date of coverage for the Dependent child will be the date specified in the QMCSO.

4.

If the Covered Employee makes written request to add a Dependent spouse and/or child who previously was not eligible for the Plan, the effective date of coverage is the date the individual meets the Plan's definition of Dependent.

LATE ENROLLEE

An Employee or Dependent who enrolls in the Plan more than thirty (30) days after the Date of his/her initial Eligibility is considered a Late Enrollee unless he/she qualifies for a Special Enrollment.

EMPLOYEE AND DEPENDENT SPECIAL ENROLLMENT PERIODS

The Plan provides Special Enrollment rights and Special Enrollment Periods for Employees and their Dependents who previously declined to enroll in the Plan and who remain eligible for the Plan.

SPECIAL ENROLLMENT PERIOD FOR LOSS OF OTHER COVERAGE

Eligible Employees and eligible Dependents who do not enroll in the Plan at their initial opportunity because of other health coverage and subsequently lose other sources of coverage (other than for cause or nonpayment of premium) have Special Enrollment rights. Special Enrollment in this Plan must be completed within thirty (30) days after the date other coverage ends. If an individual enrolls during a Special Enrollment Period, he/she is considered a Special Enrollee; he/she will not be considered a Late Enrollee.

Individuals, who previously declined coverage in the Plan because of other coverage, may be eligible to enroll in the Plan during the Special Enrollment Period if other coverage is lost due to one of the following:

1.

The other coverage terminated as a result of legal separation, divorce, death, termination of employment or reduction in the number of hours worked;

2.

COBRA continuation coverage was exhausted; or

3.

Coverage was lost because Employer contributions were terminated.

Loss of coverage due to an individual's failure to pay premiums or contributions does not qualify for a Special Enrollment Period.

Length of Special Enrollment Period for Loss of Other Coverage

A request for a Special Enrollment due to loss of other coverage must be made no later than thirty (30) days after the exhaustion of COBRA coverage or the termination of other non-COBRA coverage as a result of the loss of eligibility or termination of Employer contributions toward that coverage.

Effective Date Of Coverage Following Special Enrollment For Loss Of Other Coverage

The effective date of coverage for an eligible Employee and his/her eligible Dependents who make written application for coverage during a Special Enrollment Period will be the day following the date of loss of other coverage.

SPECIAL ENROLLMENT PERIOD FOR NEW DEPENDENT

1.

An Employee who previously declined enrollment and who remains eligible for coverage under the Plan has Special Enrollment rights when the eligible Employee acquires a new Dependent through marriage, birth, adoption or placement for adoption.

2.

A new spouse is entitled to Special Enrollment rights when he/she becomes the spouse of a Covered Employee or when a child becomes a Dependent of a Covered Employee through birth, adoption or placement for adoption.

3.

A person is entitled to Special Enrollment rights when the person becomes a Dependent of a Covered Employee through marriage, birth, adoption or placement for adoption.

4.

An Employee who previously declined enrollment and remains eligible for coverage under the Plan has Special Enrollment rights for himself/herself and the Employee's spouse if a child becomes a Dependent of the Employee through birth, adoption or placement for adoption.

Length of Special Enrollment Period for New Dependents

A request for a Special Enrollment due to acquiring New Dependents must be made no later than thirty (30) days after the date of marriage, birth, adoption or placement for adoption.

Effective Date of Coverage Following New Dependent Special Enrollment

The effective date of coverage for an eligible Employee and his/her eligible Dependents who make written application for coverage during a New Dependent Special Enrollment Period will be as follows:

1.

In the case of marriage:   the date of marriage;

2.

In the case of a Dependent's birth:   the date of birth; or

3.

In the case of a Dependent's adoption or placement for adoption:

the date of such adoption or placement for adoption

NOTE:

Proof of Qualifying Event for Special Enrollment will be required.

ANNUAL OPEN ENROLLMENT PERIOD FOR THE EMPLOYEE HEALTH PLAN

The Annual Open Enrollment Period for the Employee Health Plan is the month of November of each year for coverage to become effective January 1 provided written application for coverage is made on or before the end of the Open Enrollment Period or within thirty (30) days after the Annual Open Enrollment Period. All eligible Employees and Dependents not currently enrolled in the Plan may do so during the Annual Open Enrollment Period. Re-enrollment for Covered Employees is not required unless a Covered Employee requests a coverage change.

LATE ENROLLEE

A Late Enrollee is an Employee or Dependent who gave up his/her initial opportunity to enroll in the Plan. A Late Enrollee can only enroll once a year during the Annual Open Enrollment Period for the Plan unless the person qualifies for a Special Enrollment or if there is a Status Change.

EMPLOYEE LATE ENROLLEE

An Employee is considered a Late Enrollee if:

1.

He/she makes written application for coverage under the Plan more than thirty (30) days after the Date of his/her Eligibility;

2.

He/she was not eligible for a Special Enrollment; or

3.

He/she failed to enroll by the end of a Special Enrollment Period.

Effective Date Of Coverage For Employee Late Enrollees

The effective date of coverage for an Employee who is a Late Enrollee will be the effective date of the next Annual Open Enrollment for the Plan.

DEPENDENT LATE ENROLLEE

A Dependent is considered a Late Enrollee if:

1.

The Covered Employee makes written application for Dependent coverage after the thirty (30) day period immediately following his/her effective date of coverage and the Dependent was not enrolled by the end of a Special Enrollment Period;

2.

The Covered Employee makes written request to add a Dependent after the thirty (30) day period immediately following the date of birth, date of marriage, date of adoption or date of placement for adoption; or

3.

An eligible Employee (not currently enrolled in the Plan) makes written request to add a new Dependent more than thirty (30) days after the Dependent's date of birth, date of marriage, date of adoption or date of placement for adoption.

Effective Date of Coverage for Dependent Late Enrollees

The effective date of coverage for each Dependent who is a Late Enrollee will be the effective date of the next Annual Open Enrollment for the Plan.

The Eligibility and Effective Date provisions are subject to the requirements of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) and the Health Insurance Portability and Accountability Act of 1996 (HIPAA) as they may be amended.

COVERAGE CHANGES

FOR EMPLOYEES PARTICIPATING IN THE SECTION 125 PLAN

Contributions to the National Western Life Insurance Company Employee Health Plan can be made on a "Salary Reduction" basis under Section 125 of the Internal Revenue Code. This allows premium contributions to be withheld from Employee's paycheck on a "pre-tax" basis before any Federal Income Tax or Social Security Tax is calculated.

The Annual Election Period for the Section 125 Plan is the same as the Annual Open Enrollment Period for the Health Plan. This is the month of November of each year for an effective date of January 1. Once an election is made to participate, this election can only be changed during the next year's Annual Election Period for the Section 125 Plan.

An exception to this annual election only rule is allowed if there is a change in status due to certain events including any of the following:

Status Changes

-    Marriage - -    Divorce or legal separation (in those states recognizing legal separation) - -    Birth or adoption of a child - -    Death of spouse or child - -    Commencement of spouse's employment - -    Termination of spouse's employment - -    Significant cost or coverage changes for Employee or spouse - -    Change from part-time to full-time employment (or vice-versa)/reduction or increase in hours - -    Unpaid leave of absence - -    Change in the residence or worksite - -    Dependent satisfies or ceases to satisfy the eligibility requirements for coverage - -    Qualified Medical Child Support Order (QMCSO) - -    Entitlement to or loss of eligibility for Medicare or Medicaid

An election change may be made only if one of these recognized changes in status will result in the gain or loss of eligibility for coverage of the Employee, the Employee's spouse or Dependent.

A written request for addition or deletion of coverage due to a Status Change must be made within thirty (30) days of that change or the exception will not apply.

Effective Date of Coverage Following Status Change

Most Status Changes qualify for Special Enrollment, see Employee and Dependent Special Enrollment Periods section.

If there is a Status Change which does not qualify for a Special Enrollment Period as outlined in Employee and Dependent Special Enrollment Periods, the effective date of coverage will be the date of the Status Change.

FOR EMPLOYEES NOT PARTICIPATING IN THE SECTION 125 PLAN

A request for coverage change (addition or deletion of coverage) can also be made when premium contribution is withheld from Employee's paycheck on an after-tax basis. A written request for deletion of coverage can be made by signing and completing a Change Form. Deletion of coverage is subject to the Plan's Termination provisions. A written request for addition of coverage can be made subject to the Plan's Annual Open Enrollment, Eligibility, Effective Date, Special Enrollment Period and Late Enrollee provisions.

TERMINATION OF COVERAGE

EMPLOYEE TERMINATION

Employee's coverage shall automatically terminate immediately upon the earliest of the following dates:

1.

The date the Employee's employment terminates;

2.

The date the Employee ceases to be eligible or ceases to be in a class of Employees eligible for coverage;

3.

The date the Employee fails to make any required contribution for coverage;

4.

The date the Plan is terminated; or with respect to any Employee benefits of the Plan, the date of termination of such benefit;

5.

The date the Employee enters the Uniformed Services of the United States or armed forces of any country or international organization on a full-time active duty basis if active duty is to exceed thirty-one (31) days;

6.

The date the Employee requests termination of coverage;

7.

The date the Employee fails to return to Full-time Employment following an approved Leave of Absence. See Coverage During Leave of Absence section; or

8.

The date the Employee dies.

DEPENDENT TERMINATION

The Dependent coverage of an Employee shall automatically terminate immediately upon the earliest of the following dates:

1.

The date the Dependent ceases to be an eligible Dependent as defined in the Plan;

2.

The date of termination of the Employee's coverage under the Plan;

3.

The date the Employee ceases to be in a class of Plan Participants eligible for Dependent coverage;

4.

The date the Employee fails to make any required contribution for Dependent coverage;

5.

The date the Plan is terminated; or with respect to any Dependent's benefit of the Plan, the date of termination of such benefit;

6.

The date the Employee or Dependent enters the Uniformed Services of the United States or armed forces of any country or international organization on a full-time active duty basis if active duty is to exceed thirty-one (31) days;

7.

The date the Employee fails to return to Full-time Employment following an approved Leave of Absence. See Coverage During Leave of Absence section; or

8.

The date the Employee dies.

Coverage for the covered Dependent spouse of a Former President or Chairman of the Board will terminate the date the covered Dependent dies. Coverage for the covered Dependent child of a Former President or Chairman of the Board will terminate when the child ceases to be an eligible Dependent as defined in the Plan.

Coverage may be continued under COBRA, but continuation of coverage is not automatic upon the occurrence of a Qualifying Event. A covered Employee or a covered Dependent is responsible for notifying the Plan Administratorwithin sixty (60) days after the date of the Qualifying Event (loss of coverage due to divorce, legal separation, or a Dependent child ceasing to qualify as a Dependent). A change form may be obtained from the Employer. Failure to provide such notice will result in loss of eligibility to elect COBRA coverage.

NOTE:

The Termination provisions are subject to the requirements of the Consolidated Omnibus Budget Reconciliation Act (COBRA), Public Law 99-272 and Company'sSection 125 Plan.

COVERAGE DURING LEAVE OF ABSENCE

If, after depletion of sick leave and vacation time, active work ceases due to approved non-medical temporary Leave of Absence, lay-off, approved Medical and Disability Leave or approved Family and Medical Leave (FMLA), the Plan Administratormay, while Plan is in force, continue the Employee's coverage (Employee and Dependent) during the period after cessation of active work due to:

1.

Approved non-medical temporary Leave of Absence or lay-off, but not for more than three (3) months provided any required Employee contributions are made; or

2.

Approved Medical and Disability Leave but not for more than twelve (12) weeks provided any required Employee contributions are made; or

3.

Approved Family and Medical Leave (FMLA), but not to exceed a period of twelve (12) weeks provided any required Employee contributions are made.

The three (3) month approved Leave of Absence and twelve (12) week Medical and Disability Leave are concurrent with the twelve (12) week approved Family and Medical Leave (FMLA) and not in addition to FMLA.

If Employee has not returned to Full-time Employment after completion of an approved Leave of Absence, coverage terminates and COBRA continuation becomes available on the basis of reduction in hours. See COBRA section. Failure of Employee to make the required Employee contributions during an approved Leave of Absence will also result in termination of coverage.

Family and Medical Leave is subject to the requirements of the Family and Medical Leave Act (FMLA), Public Law 103-3.

ACTIVE DUTY IN THE ARMED FORCES

If a Covered Employee and/or his/her covered Dependent(s) would lose Plan coverage as a result of the Employee being called for active duty in the armed forces of the United States, such a reduction in hours (or termination of employment) would be a COBRA qualifying event. Any coverage mandated under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) will run concurrently with federally mandated COBRA coverage. See COBRA section.

REINSTATEMENT OF COVERAGE / REHIRES

An Employee, whose employment/coverage was terminated due to temporary leave of absence or layoff, and who resumes employment with the Companywithin a six (6) month period immediately following the date of such termination, shall become eligible for reinstatement of coverage on the date he/she resumes employment, and his/her covered Dependents shall also become eligible for reinstatement on that date. Other than waiving the Waiting Period, the reinstated Employee and his/her Dependents are treated as new Covered Persons and are subject to the Pre-existing Condition limitations of the Plan unless COBRA had been elected or the Pre-existing Condition Exclusion Period is reduced by periods of Creditable Coverage (Certificate of Coverage) provided by the reinstated person(s) without a significant break in coverage. See Portability and Creditable Coverage.

An Employee whose coverage would terminate due to active duty in the Uniformed Services of the United States, and qualifies for Military Leave under Uniformed Services Employment and Reemployment Rights Act (USERRA) will be reinstated on the date he/she resumes employment with the Company provided that such resumption of employment is within the time period specified in USERRA. The Pre-existing Condition Exclusion Limitation will not apply to an Employee who is entitled to and is reinstated immediately after military service under USERRA. (This waiver does not provide coverage for an Illness or Injury caused or aggravated by military service as determined by the Veterans Administration).

The Reinstatement provision is subject to the requirements of the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA).

FAMILY AND MEDICAL LEAVE (FMLA)

All Employers employing at least fifty (50) workers within a seventy-five (75) mile radius of the work place must provide eligible Employees with up to twelve (12) weeks of job-protected leave of absence during a twelve (12) month period, as determined by the Employer, for any of the following situations:

The birth or adoption of a child;

The serious Illness of the Employee's spouse, child, or parent; or

The Employee's own disabling serious Illness.

ELIGIBLE EMPLOYEES:  Employees who have been employed by the Employer for at least twelve (12) months and who have worked at least 1,250 hours for the Employer during the previous twelve (12) months are eligible.

BENEFIT REQUIREMENT:   The Employer must provide the same group health plan during the leave under the same level of contribution required during active employment.

RETURN TO EMPLOYMENT:  Although the leave is unpaid, the Employee must be guaranteed return to the same or equivalent position with equivalent Employee benefits, pay, and other terms of employment. (Note: an Employer may deny job restoration under the leave law to Employees who are in the highest paid 10% of Employees.)

Employee Benefits may include:

-  group life                      -  medical              -  dental

-  educational benefits      -  annual leave       -  pensions

-  sick leave                     -  disability

If an Employee chooses not to retain medical coverage during FMLA leave, these benefits must be restored upon return to service. Employees must be treated as though no service interruption had occurred. This means that new Waiting Periods and Pre-existing Condition Limitations cannot be applied. Any period of coverage provided for disability may run concurrently with FMLA leave.

The above listing of Employee Benefits may or may not be applicable to every Company's Plan of Benefits. This section is intended as a summary of the Family and Medical Leave Act of 1993 (FMLA) effective August 5, 1993, not as a complete interpretation of the law.

CONTINUATION OF GROUP HEALTH COVERAGE (COBRA)

NOTE: COBRA DOES NOT APPLY TO FOREIGN NATIONAL EMPLOYEES

CONTINUATION OF COVERAGE

(Applies to Medical Coverage and Prescription Drug)

When Plan coverage terminates due to a Qualifying Event, a covered Employee or covered Dependent is a Qualified Beneficiary and eligible to elect continued group health coverage ("COBRA coverage"). COBRA coverage is the same health coverage that applies to covered Employees and covered Dependents under the Plan. However, the individual electing COBRA coverage must pay the full cost of the coverage plus an administrative fee of 2 percent.

The length of time COBRA coverage can be continued is based upon the date of and the applicable Qualifying Event as described below:

Maximum

Qualified

Coverage

Beneficiary

Qualifying Event

Period

Covered Employee and/or

Loss of coverage due to

18 months

Covered Dependent

termination of employment

(other than for gross misconduct)

or reduction in hours

Disabled Covered Employee

Loss of coverage due to

29 months*

and/or Disabled Covered

termination of employment

Dependent and each Qualified

(other than for gross misconduct)

Beneficiary who is not disabled

or reduction of hours

Covered Dependent

Loss of coverage due to

36 months

divorce, legal separation, or

death of Employee

Covered Dependent

Loss of coverage due to ceasing

36 months

to qualify as a Dependent child

QUALIFIED BENEFICIARY

A Qualified Beneficiary also includes a child born to or placed for adoption with a former covered Employee/Qualified Beneficiary during the period of COBRA coverage. Newborns and adopted children of former covered Employees/Qualified Beneficiaries have independent COBRA rights and can remain on the Plan even if the former covered Employee/Qualified Beneficiary drops coverage.

*SOCIAL SECURITY DISABILITY

If a covered Employee or a covered Dependent is determined to be disabled, as defined in the Social Security Act, on the date of the termination of employment, reduction in hours or if a covered Employee or a covered Dependent becomes disabled at any time during the first sixty (60) days of COBRA continuation coverage, the disabled person may continue COBRA coverage for up to twenty-nine (29) months from the date of termination of employment or reduction in hours, provided the Social Security Administration determines, not later than eighteen (18) months after the date of loss of coverage due to termination of employment or reduction in hours, that the individual is disabled and the individual notifies the Plan Administrator of the determination within sixty (60) days after the determination is made.

The cost of COBRA coverage for an individual entitled to extended coverage due to Social Security disability for the period after the end of the eighteen (18) month COBRA coverage period may increase to 150 percent of the full cost for active participants.

SECONDARY QUALIFYING EVENTS

If COBRA coverage is elected by a covered Dependent based on loss of coverage due to termination of employment or reduction of hours and a second Qualifying Event (divorce, legal separation, death or a Dependent child ceasing to qualify as a Dependent) occurs during the eighteen (18) month COBRA coverage period, the covered Dependent's maximum COBRA coverage period will begin on the date of the first Qualifying Event and continue for a thirty-six (36) month period. For example: If a covered Employee terminates employment on December 31, 2002, the Employee's covered Dependent elects COBRA coverage, and the former Employee dies before July 1, 2004 (that is prior to the end of the original eighteen (18) month COBRA coverage period), the maximum COBRA coverage period for the Dependent who elected COBRA coverage is extended until December 31, 2005.

EMPLOYEE RESPONSIBILITIES

COBRA coverage is not automatic upon the occurrence of a Qualifying Event. A covered Employee or a covered Dependent is responsible for notifying the Plan Administratorwithin sixty (60) days after the date of the Qualifying Event (loss of coverage due to divorce, legal separation, or a Dependent child ceasing to qualify as a Dependent). A change form may be obtained from the Employer. Failure to provide such notice will result in loss of eligibility to elect COBRA coverage.

A Qualified Beneficiary must elect COBRA coverage no later than sixty (60) days after the date the eligible individual is sent an election form describing his/her right to elect continuation coverage (COBRA Election Period). If a Qualified Beneficiary elects coverage during the sixty (60) day COBRA Election Period, coverage is continuous from the time coverage would otherwise have been lost. A properly completed election form must be returned to the Plan Administrator, signed and dated, by the end of the COBRA Election Period.

If premium payment is not sent with the election form, initial premium payment for COBRA coverage must be received no later than forty-five (45) days after the date COBRA coverage is elected. Initial payment must cover the retroactive monthly coverage period beginning with the date of loss of coverage. Coverage will not become effective until initial premium payment is received.

Coverage will remain in effect if subsequent premiums are paid no later than thirty (30) days after the due dates of such payments. Failure to pay premiums within the time periods specified will result in termination of COBRA coverage. Once continuation is terminated, the coverage cannot be reinstated. If timely payments of the premium are made to the Plan in an amount that is not significantly less than the amount the Plan requires to be paid for a period of coverage, then the amount paid is deemed to satisfy the Plan's requirement for the amount that must be paid for continuation coverage, unless the Plan notifies the Qualified Beneficiary of the amount of the deficiency and grants a reasonable period of time (30 days) for payment of the deficiency to be made. For purposes of this section an amount not significantly less than the amount the Plan requires to be paid shall be defined as not more than the lesser of fifty dollars ($50) or ten percent (10%) of the required payment amount.

TERMINATION OF COBRA CONTINUATION COVERAGE

COBRA coverage, for a Qualified Beneficiary who elects such coverage, will terminate prior to the completion of the eighteen (18) month, twenty-nine (29) month, or thirty-six (36) month period previously discussed upon one of the following occurrences

1.

The Qualified Beneficiary becomes covered by another group health plan after the date of COBRA election, unless the other plan contains any exclusion or limitation with respect to a Pre-existing Condition of the individual;

2.

Required contributions are not paid by or on behalf of the Qualified Beneficiary in a timely manner;

3.

The Qualified Beneficiary becomes entitled to benefits under Medicare after the date of COBRA election;

4.

The Qualified Beneficiary makes a request, in writing, to terminate coverage; or

5.

The Plan Sponsor ceases to provide any group health plan to any similarly situated Employee.

NEW DEPENDENTS

If during the eighteen (18) months, twenty-nine (29) months or thirty-six (36) months, if applicable, of COBRA coverage, a Qualified Beneficiary acquires new Dependents (such as through marriage), the new Dependent(s) may be added to the coverage according to the provisions of the Plan. However, the new Dependents do not gain the status of a Qualified Beneficiary and will lose coverage if the Qualified Beneficiary who added them to the Plan loses coverage.

An exception to this is a child who is born to, or a child who is placed for adoption with the covered Employee Qualified Beneficiary. If the newborn or adopted child is added to the covered Employee's COBRA continuation coverage, then unlike a new spouse, the newborn or adopted child will gain the rights of all other Qualified Beneficiaries. The addition of a newborn or adopted child does not extend the eighteen (18) or twenty-nine (29) month coverage period. Plan procedures for adding new Dependents can be found in the Eligibility and Effective Date sections of this Plan. Premium rates will be adjusted at that time to the applicable rate.

OPEN ENROLLMENTS

Should an Open Enrollment Period occur during the COBRA continuation period, the Plan Administrator will notify the COBRA Participant of that right as well. If an Open Enrollment Period occurs, the Qualified Beneficiary will have the same rights to select the coverage and any of the options or plans that are available for similarly situated non-COBRA Participants.

TIMING OF THE ELECTION NOTICE

If a Qualifying Event is the Plan Participant's loss of coverage due to termination of employment, reduction of hours or death, the Plan Administrator has forty-four (44) days to notify the Qualified Beneficiary of the right to elect COBRA coverage or, when applicable, the Plan Administrator must notify the COBRA Administrator within thirty (30) days of the Qualifying Event, and the COBRA Administrator has fourteen (14) days to notify the Qualified Beneficiary of the right to elect COBRA coverage.

EXPANDED COBRA AND HIPAA BENEFIT PROTECTION TRADE BILL OF 2002

The Trade Bill of 2002 expanded COBRA and HIPAA benefit protections for certain COBRA Qualified Beneficiaries who lose jobs and health benefits as a result of American jobs lost to overseas business or those affected by increased foreign imports.

Eligible COBRA Qualified Beneficiaries: To be eligible for TAA (Trade Adjustment Assistance) Benefits, an Employee must have been laid off or put on a reduced work schedule (hours of work reduced to 80% or less of average weekly hours and wages reduced to 80% or less of average weekly wage) on or after the impact date and before the ending date of certification.

In order for the U.S. Department of Labor to issue a Certification Regarding Eligibility to apply for Worker Adjustment Assistance, the following requirements must be met:

1.  that workers have been totally or partially laid off; or

2.  that sales or productions have declined; or

3.  that increased imports have contributed importantly to worker layoffs.

Once the U.S. Department of Labor issues a Certification Regarding Eligibility, trade affected workers may apply for benefits under the TAA program.

If certification is received, then affected Qualified Beneficiaries are eligible for the expanded COBRA/HIPAA protections as follows:

65% COBRA Premium Tax Credit: While the tax credit is technically available back to January 1, 2002, a TAA Qualified Beneficiary can only claim the tax credit for months beginning 90 days after the enactment of the act on August 6, 2002 (November 6, 2002).

60-Day COBRA Election Period and New 18 Month Period: Since January 1, 2002, many TAA Qualified Beneficiaries have been offered the opportunity to elect continuation coverage, but did not do so because of the cost. In an effort to provide the tax credit to as many Qualified Beneficiaries as possible, Congress added a special 60-day COBRA election period to the Trade Bill.

HIPAA 63-Day Break in Coverage Rule Waived: When there is a break in coverage of more than 63 days between the time the original coverage ended and the time the COBRA continuation coverage would begin, current federal HIPAA rules would leave the Qualified Beneficiary subject to Pre-Existing Condition Exclusion provisions. Under the new Trade Bill provisions, under the above circumstances, the break in coverage would not be considered a break in coverage for purposes of portability.

USERRA CONTINUATION OF COVERAGE

These provisions summarize continuation of coverage under this Plan for employees absent from work due to military service. The Plan intends to provide benefits as mandated by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), and any amendments thereof.

As an Employee you have a right to choose this continuation of coverage if you are absent from work due to service in one of the uniformed services of the United States. "Service" means: active duty, active duty for training, initial active duty for training, inactive duty training, full-time National Guard duty and absence from work to determine the Employee's fitness for any of the designated types of duty.

Employees who are dishonorably discharged from the military are not eligible.

Under the law, the Employee must give the Employer written or verbal advance notice of the military leave, if it is practical to do so. A designated, authorized officer of the branch of the military in which the Employee will be serving may also provide such notice directly to the Employer.

If you choose Continuation of Coverage, the Employer is required to offer you coverage identical to that provided under the Plan prior to your military leave. Like COBRA coverage, such coverage may be continued for up to eighteen (18) months during a period of military service. The cumulative length of the Employee's absences cannot exceed five (5) years.

If you feel you might have continuation rights under USERRA, please contact Human Resources as soon as possible.

DEFINITIONS

Terminology listed below, along with the definition or explanation of the manner in which the term is used, will be recognized for the purpose of this Plan, only if used in this Plan. Terms defined, but not used in this Plan, are to be considered general in nature and are in no way to be used to define or limit benefits or provisions of the Plan. Words or phrases used in this Plan that are capitalized or set forth in bold type, but not defined in the Plan are contained in that form as section headings or for ease of review and are intended to have the general meanings associated with such words or phrases determined based on the content in which they are used.

Masculine pronouns used in this Plan Document shall include masculine or feminine gender unless the context indicates otherwise.

Wherever any words are used herein in the singular or plural, they shall be construed as though they were in the plural or singular, as the case may be, in all cases where they would so apply.

Accidental Injury: See definition of "Injury."

Actively at Work: As applied to an Employee: An Employee will be considered "Actively at Work" on any day the Employee performs in the customary manner all of the regular duties of employment; an Employee will be deemed "Actively at Work" on each day of a regular paid vacation or on a regular non-working day on which the covered Employee is not totally disabled, provided the covered Employee was "Actively at Work" on the last preceding regular work day. An Employee shall be deemed Actively at Work if the Employee is absent from work due to a health factor.

Adverse Benefit Determination: Any denial, reduction or termination of, or a failure to provide or make a payment (in whole or in part) for a benefit.

Allowable Expense: The term "Allowable Expense" means any necessary item of expense, for which the charge is Usual and Customary, or is based on the contracted fee schedule of an alternate care delivery system.

Ambulatory Surgical Center: The term "Ambulatory Surgical Center" means an institution or facility, either free-standing or as a part of a Hospital with permanent facilities, equipped and operated for the primary purpose of performing surgical procedures and to which a patient is admitted to and discharged from within a twenty-four (24) hour period. An office maintained by a Physician for the practice of medicine or dentistry, or for the primary purpose of performing terminations of Pregnancy, shall not be considered to be an Ambulatory Surgical Center.

Ancillary Services: Incidental services that assist a medical procedure, but are not essential to the accomplishment of the medical procedure (i.e., laboratory testing).

Annual Out-of-Pocket Maximum: The Maximum dollar amount a Covered Person will pay for Covered Medical Expenses, excluding the Calendar Year Deductible, other Deductibles, Copayments and any Covered Charges already paid at 100% in any one Calendar Year period, unless otherwise specified in the Schedule of Benefits.

Authorized Representative of Claimant: Person authorized to act on behalf of Claimant for a benefit claim or appeal of an Adverse Benefit Determination.

Benefit Percentage: The term "Benefit Percentage" means that portion of Covered Expenses to be paid by the Plan in accordance with the coverage provisions as shown on the Schedule of Benefits. It is the basis used to determine any out-of-pocket expenses in excess of the Calendar Year Deductible which are to be paid by the Employee.

Benefit Period: The term "Benefit Period" refers to the time period shown on the Schedule of Benefits. Such Benefit Period will terminate on the earliest of the following dates:

1.  The last day of the period so established; or

2.  The day the Maximum Lifetime Benefit applicable to the Covered Person becomes payable; or

3.  The day the Covered Person ceases to be covered for Major Medical Expense Benefits.

Birthing Center: A facility, staffed by Physicians, which is licensed as a Birthing Center in the jurisdiction where it is located.

Calendar Year: The term "Calendar Year" means a period of time commencing on January 1 and ending on December 31 of the same given year.

Chemical Dependency: The term "Chemical Dependency" means the abuse of or psychological or physical dependency on or addiction to alcohol or a controlled substance. A "controlled substance" means a toxic inhalant or a substance designated as a controlled substance in Chapter 481 of the Texas Health and Safety Code or equivalent state code where applicable.

Chemical Dependency Treatment Center: This term means a facility which provides a program for the treatment of Chemical Dependency pursuant to a written treatment plan approved and monitored by a Physician and which facility is also:

1.

Accredited as such a facility by the Joint Commission on Accreditation of Health Care Organizations sponsored by the A.M.A. and A.H.A.;

2.

Affiliated with a Hospital under contractual agreement with an established system for patient referral;

3.

Licensed as a Chemical Dependency treatment program by the applicable state Commission on Alcohol and Drug Abuse; and

4.

Licensed, certified or approved as a Chemical Dependency treatment program or center by any other state agency having legal authority to so license, certify or approve.

Chiropractic Services: The detection and correction, by manual or mechanical means, of the interference with nerve transmissions and expressions resulting from distortion, misalignment or dislocation of the spinal (vertebrae) column.

Claim Determination Period: The term "Claim Determination Period" means a Calendar Year, a Plan Year or that portion of a Calendar or Plan Year during which the Covered Person, for whom claim is made, has been covered under this Plan.

Claim for Benefits: A request for a Plan benefit or benefits made by a Claimant in accordance with the Plan's reasonable procedure for filing benefit claims.

Claimant: Individual for whom a claim is filed.

Claims Administrator: The third party or parties with whom the Plan Administratorhas contracted to process the claims for the benefits under this Plan.

Close Relative: The term "Close Relative" includes the spouse, mother, father, sister, brother, child, or in-laws of the Covered Person.

COBRA: The coverage available and provided, if elected, under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and its amendments.

COBRA Election Period: The sixty (60) day period during which a COBRA Qualified Beneficiary, who would lose coverage as a result of a Qualifying Event, may elect continuation coverage under COBRA. This sixty (60) day period begins no later than:

1.  The date of termination of coverage as a result of a Qualifying Event; or

2.  The date of the notice of the right to elect continuation coverage under this Plan.

COBRA Qualified Beneficiary: A COBRA Qualified Beneficiary means any former Employee or Dependent covered under this Plan on the day before the Qualifying Event, who is eligible for continuing coverage under the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and its amendments. A COBRA Qualified Beneficiary has independent election rights.

Coinsurance: The term "Coinsurance" means the portion of Covered Expenses that is shared by the Plan and the Covered Person in a specific ratio (i.e., 80%/20%) after the Calendar Year Deductible has been satisfied. The amount of Coinsurance paid by or on behalf of the Covered Person is applied toward the Covered Person's or Family's Annual Out-of-Pocket Maximum.

College: See definition of University.

Company: National Western Life Insurance Company (Plan Sponsor).

Complications of Pregnancy: This term means a disease, disorder or condition which is diagnosed as distinct from normal Pregnancy but adversely affected by or caused by Pregnancy. This includes, but not limited to:

1.

Inter-abdominal surgery, including cesarean section;

2.

Premicious vomiting (hyperemesis gravidarum);

3.

Toxemia with convulsions (eclampsia);

4.

Extra-uterine Pregnancy (ectopic);

5.

Postpartum hemorrhage;

6.

Rupture or prolapse of the uterus;

7.

Spontaneous termination of Pregnancy during a period of gestation in which a viable birth is not possible; or

8.

Similar medical and surgical conditions of comparable severity.

Complications of Pregnancy will not include:

1.

Elective abortion;

2.

False labor;

3.

Occasional spotting;

4.

Physician prescribed rest;

5.

Morning Illness; or

6.

Similar conditions associated with the management of a difficult Pregnancy.

Concurrent Review: Concurrent Review means the Utilization Review Company will monitor the Covered Person's Hospital stay and periodically evaluate the need for continued hospitalization.

Congenital Anomaly: Birth defect.

Convalescent Nursing Facility: The term "Convalescent Nursing Facility" means an institution or distinct part thereof, operated pursuant to law and one which meets all of the following conditions:

1.

It is licensed to provide, and is engaged in providing on an Inpatient basis, for persons convalescing from Injury or Illness, professional nursing services rendered by a Registered Nurse (R.N.) or by a Licensed Practical Nurse (L.P.N.) under the direction of a Registered Nurse and physical restoration services to assist patients to reach a degree of body functioning to permit self-care in essential daily living activities;

2.

Its services are provided for compensation from its patients and under the full-time supervision of a Physician or Registered Nurse;

3.

It provides twenty-four (24) hour-per-day nursing services by licensed nurses, under the direction of a full-time Registered Nurse;

4.

It maintains a complete medical record on each patient;

5.

It is not, other than incidentally, a place for rest, the aged, drug addicts, Chemical Dependency, mentally retarded individuals, custodial or educational care, or care of mental disorders; and

6.

It is approved and licensed by Medicare.

This term shall also apply to expenses incurred in an institution referring to itself as a Skilled Nursing Facility, Extended Care Facility, Convalescent Nursing Home, or any such other similar nomenclature.

Convalescent Period: The term "Convalescent Period" means a period of time commencing with the date of confinement by a Covered Person to a Convalescent Nursing Facility. Such confinement must meet all of the following conditions:

1.

Such confinement must commence within fourteen (14) days of being discharged from a Hospital;

2.

Said Hospital confinement must have been for a period of not less than three (3) consecutive days; and

3.

Both the Hospital and convalescent confinements must have been for the care and treatment of the same Illness or Injury.

A Convalescent Period will terminate when the Covered Person has been free of confinement in any and all institutions providing Hospital or nursing care for a period of one-hundred-twenty (120) consecutive days. A new Convalescent Period shall not commence until a previous Convalescent Period has terminated.

Copayment or Copay:  The portion of Covered Expenses which is payable by the Covered Person and which is not applicable to the Calendar Year Deductible or the Annual Out-of-Pocket Maximum.

Corrective Shoes:  Shoes with a prescription correction which is a permanent and integral part of the shoe.

Cosmetic Procedure:  The term "Cosmetic Procedure" means a procedure performed solely for the improvement of a Covered Person's appearance rather than for the improvement or restoration of bodily function.

Covered Employee:  An Employee meeting the eligibility requirements for coverage as specified in this Plan and who is properly enrolled in the Plan.

Covered Person:  An Employee, a Dependent, Board of Director, General Counsel, Agent, a COBRA Qualified Beneficiary or a COBRA Qualified Beneficiary's Dependent meeting the eligibility requirements for coverage as specified in this Plan, and who is properly enrolled in the Plan.

Creditable Coverage:  Includes most health coverage, such as coverage under a group health plan (including COBRA continuation coverage), HMO membership, an individual health insurance policy, Medicaid or Medicare. Creditable Coverage does not include coverage consisting solely of dental or vision benefits. A Certificate of Coverage (COC) is proof of Creditable Coverage.

Custodial Care:  The term "Custodial Care" means that type of care or service, wherever furnished and by whatever name called, which is designed primarily to assist a Covered Person, whether or not totally disabled, in the activities of daily living. Such activities include, but are not limited to: bathing, dressing, feeding, preparation of special diets, assistance in walking or in getting in and out of bed, and supervision over medication which can normally be self-administered.

Date of Hire:  The Employee's first day of full-time employment with the Employer.

Deductible:  The term "Deductible" means a specified dollar amount of Covered Expenses which must be incurred during a Calendar Year before any other Covered Expenses can be considered for payment according to the applicable Benefit Percentage. "Deductible" also means that dollar amount of the expense of a particular procedure or Covered Expense for which it is indicated in the Schedule of Benefits that a special Deductible will apply. The Plan Administratorreserves the right to allocate and apportion the Deductible and benefits to any Covered Persons and assignees.

Dependent:  The term "Dependent" means:

A.

The Covered Employee's legal spouse who is a resident of the same country in which the Covered Employee resides. Such spouse must have met all requirements of a valid marriage contract in accordance with the laws of the state of such parties. A Common law marriage recognized by the state in which the Covered Employee resides is considered a valid marriage for this Plan. NOTE: Proof of legal status may be required. A Common law marriage requires a notarized "Declaration and Registration of an Informal Marriage."

B.

The Covered Employee's child who meets all of the following conditions:

1.

Is a resident of the same country in which the Covered Employee resides;

2.

Is unmarried;

3.

Is either a

a.

natural child; or

b.

step-child; or

c

child who has been placed under the legal guardianship of the Covered

Employee; or

d.

child under the age of eighteen (18) who has been legally adopted or placed

for adoption with the Covered Employee.

4.

Is in the custody of, residing with and financially dependent upon the Covered Employee. This condition is waived if the child is a natural child or a legally adopted child or if the Covered Employeeis required to provide coverage due to a Qualified Medical Child Support Order (QMCSO) or divorce decree for a child not in his/her custody or not wholly dependent upon him;

5.

Is carried as an exemption on the Covered Employee's federal income tax return. This condition is waived if the child is a natural child or a legally adopted child or if the Covered Employeeis required to provide coverage due to a Qualified Medical Child Support Order (QMCSO) or divorce decree for a child not carried as an exemption on the Covered Employee's federal income tax return; and

6.

Is less than nineteen (19) years of age. This requirement is waived if the child is at least nineteen (19) years of age but less than twenty-five (25) years of age, unmarried and is dependent upon the Covered Employee for support, and is a regular Full-time Student at a qualified educational institution. See definition of Full-time Student.

NOTE:   Proof of Dependent Eligibility may be required

The Age requirement above is also waived for any unmarried mentally retarded or physically handicapped child, provided that the child is incapable of self-sustaining employment and is chiefly dependent upon the Participant for support and maintenance. Proof of incapacity must be furnished to the Claims Administrator at the time of enrollment or within thirty (30) days of the date such Dependent's coverage would have otherwise terminated due to the age requirement. In addition, the Claims Administrator reserves the right to request proof of continued incapacity at any time.

Donor:  One who furnishes blood, tissue, or an organ to be used in another person.

Durable Medical Equipment:  The term "Durable Medical Equipment" means equipment which is:

1.   Able to withstand repeated use;

2.   Primarily and customarily used to serve a medical purpose; and

3.   Not generally useful to a person in the absence of Illness or Injury.

Elective Surgical Procedure/Elective Surgery:  A non emergency surgical procedure which is scheduled at the Covered Person's convenience without endangering the Covered Person's life or without causing serious impairment to the Covered Person's bodily functions.

Employee:  Any person who is an active regular full-time Employee, regularly scheduled to work for the Employer in an employee-employer relationship. Directors, General Counsel, and agents who meet eligibility requirements under the plan shall be considered as "full-time" employees for the purpose of the Plan. Independent contractors and any other such person (s) not considered an employee by the Employer shall not be deemed an employee for the purpose of the Plan. Such a person must be scheduled to work at least thirty-five (35) hours per week for the Employer in order to be defined as "full-time". "Full-time" shall be, for the purposes of the Plan, the same definition that the Employer uses in its Company practice and procedures. Employee shall also include Presidents and Chairmen of the Board and former Presidents and Chairmen of the Board who have served for a period of seven (7) or more years since 1980 for services which may be requeste d hereafter, and, at the time of their deaths, their surviving dependents.

Employer:  The Company and any affiliates adopting the Plan with the consent of the Company by approval of the affiliate entity's governing body.

Enrollment Date:  The Enrollment Date in the Plan for an eligible Employee who enrolls in the Plan during his/her initial eligibility period is the Employee's Date of Hire. The Enrollment Date for a Special Enrollee or a Late Enrollee is the first day of coverage in the Plan. The term "Enrollment Date" is used to determine the Pre-existing Condition Exclusion and look-back periods and does not define Date of Eligibility for the Plan.

ERISA:  The term "ERISA" refers to the Employee Retirement Income Security Act of 1974 as amended from time to time. "ERISA" also refers to a provision or section thereof to which a specific reference is made herein.

Experimental/Investigational:  The term "Experimental/Investigational" means any treatments, procedures, drugs, medicines or related expenses for which one or more of the following is true:

1.

The device, drug, medicine or biological product cannot be lawfully marketed without approval of the U.S. Food and Drug Administration (FDA) and full approval has not been given at the time the device, drug, medicine or biological product is furnished;

2.

Reliable evidence shows that the treatment, procedure, device, drug or medicine is the subject of ongoing Phase I, II or III clinical trial or under scientific study to determine its maximum tolerated doses, toxicity, safety, efficacy or its efficacy as compared with the standard means of treatment or diagnosis;

3.

The Covered Person is required to sign a consent form which indicates the proposed treatment or procedure is part of a scientific study or medical research to determine its effectiveness or safety; or

4.

Reliable evidence shows that the opinion among experts regarding the treatment, procedure, device, drug or medicine is that further studies or clinical trials are necessary to determine its maximum tolerated dose, toxicity, safety, efficacy or its efficacy as compared with the standard means of treatment or diagnosis.

Reliable evidence means published reports and articles in authoritative and scientific literature; written protocol(s) used by treating facility or the protocol(s) of another facility studying substantially the same treatment, procedure, device, drug or medicine; or the written informed consent used by the treating facility or another facility studying substantially the same treatment, procedure, device, drug or medicine.

Medical treatment which is not considered standard treatment (i.e., not of proven benefit for a particular diagnosis) by the majority of the medical community or by Medicare/Medicaid or any other government financed programs or the National Cancer Institute regarding malignancies, will be considered Experimental/Investigational.

Family:  The term "Family" means a Covered Employee and his/her eligible Dependents.

Family and Medical Leave:  The term refers to a leave of absence pursuant to the provisions of the Family and Medical Leave Act (FMLA) of 1993.

Fiduciary:  The term "Fiduciary" means the Plan Administrator, but only with respect to the specific responsibilities relating to the administration of the Plan.

Free-standing Facility:  An independent facility which provides medical services on an Outpatient basis, usually not affiliated with a Hospital, i.e., Ambulatory Surgical Center, imaging center.

Full-Time Employment:  The term "Full-Time Employment" means a basis whereby an Employee is employed by the Employer for the minimum number of hours shown in the Employee Eligibility section of this Plan Document. Such work may occur either at the usual place of business of the Employer or at a location to which the business of the Employer requires the Employee to travel, and for which he/she receives regular earnings from the Employer.

Full-Time Student:  The term "Full-Time Student" means a Participant's Dependent child who is enrolled in and regularly attending an accredited college, or university for a minimum of twelve (12) semester hours. A person ceases to be a Full-time Student on the last day of the month in which the person graduates or otherwise ceases to be enrolled and in attendance at the institution on a full-time basis. However, a person continues to be a Full-time Student during periods of vacation established by the institution, but only if these vacation periods immediately follow periods of full-time enrollment at the institution. Full-time graduate school is determined by the institution attended by the student. Evidence of the child's status as a Full-time Student satisfactory to the Claims Administrator must be furnished by the Covered Person in the event of a claim. In no event will a person be a Full-time Student after the attainment of age twenty-fi ve (25).

Genetic Information:  Information about genes, gene products and inherited characteristics that may derive from an individual or a family member. This includes information derived from laboratory tests that identify mutations in specific genes or chromosomes, physical medical examinations, family histories and direct analyses of genes or chromosomes.

Health Insurance Portability and Accountability Act of 1996 (HIPAA):  With regard to health care plans, it should be noted that this Act implemented the portability of health insurance, amended ERISA disclosure requirements, set standards for Pre-existing Condition exclusion periods and changed health status eligibility provisions for employee health plans.

HIPAA Privacy Standards:  The Privacy Standards of the Health Insurance Portability and Accountability Act of 1996, as they may be amended from time to time.

Home Health Care Agency:  The term "Home Health Care Agency" means a public or private agency or organization that specializes in providing medical care and treatment in the patient's home. Such a provider must meet all of the following conditions:

1.

It is primarily engaged in and duly licensed, if such licensing is required, by the appropriate licensing authority to provide skilled nursing services and other therapeutic services;

2.

It has policies established by a professional group associated with the agency or organization. This professional group must include at least one Physician and at least one Registered Nurse (R.N.) to govern the services provided and it must provide for full-time supervision of such services by a Physician or Registered Nurse;

3.

It maintains a complete medical record on each individual; and

4.

It has a full-time administrator.

Home Health Care Plan:  The term "Home Health Care Plan" means a program for care and treatment of the Covered Person, established and approved by the Covered Person's attending Physician, which is in lieu of confinement as Inpatient in a Hospital or other Inpatient facility in the absence of the services and supplies provided for under the Home Health Care Plan.

Home Infusion Therapy:  This term means the administration of fluids, nutrition or medication (including all additives and chemotherapy) by intravenous or gastrointestinal (enteral) infusion or by intravenous injection in the home setting. Home Infusion Therapy shall include:

1.   Drugs and IV solutions; 2.   Pharmacy compounding and dispensing services; 3.   All equipment and ancillary supplies necessitated by the defined therapy; 4.   Delivery services; 5.   Patient and family education; and 6.   Nursing services.

Over-the-counter products which do not require a Physician's or Professional Other Provider's prescription, including but not limited to standard nutritional formulations used for enteral nutrition therapy, are not included within this definition.

Home Infusion Therapy Provider:  This term means an entity that is duly licensed by the appropriate state agency to provide Home Infusion Therapy.

Hospice:  The term "Hospice" means a health care program providing a coordinated set of services rendered at home, in Outpatient settings, or in institutional settings for Covered Persons suffering from a condition that has a terminal prognosis. A Hospice must have an interdisciplinary group of personnel which includes at least one Physician and one Registered Nurse, and it must maintain central clinical records on all patients. A Hospice must meet the standards of the National Hospice Organization (NHO) and applicable state licensing requirements.

Hospice Benefit Period:  The term "Hospice Benefit Period" means a specified amount of time during which the Covered Person undergoes Hospice care. Such time period begins on the date the attending Physician of a Covered Person certifies a diagnosis of terminally ill, and the Covered Person is accepted into a Hospice program. The period shall end the earlier of six (6) months from this date or at the death of the Covered Person. A new benefit period may begin if the attending Physician certifies that the Covered Person is still terminally ill; however, additional proof may be required by the Claim Administrator before such a new benefit period can begin.

Hospital:  The term "Hospital" means an accredited institution which is approved as a Hospital by the Joint Commission on the Accreditation of Health Care Organizations or the American Osteopathic Association, and which meets all of the following criteria:

1.

It is primarily engaged in providing, for compensation from its patients and on an Inpatient basis, diagnostic and therapeutic facilities for the surgical and medical diagnosis, treatment, and care of injured and sick persons by or under the supervision of a staff of Physicians. If primarily a facility for the treatment of Mental and/or Nervous Conditions, drug addiction and/or Chemical Dependency, such facility must have a bona fide arrangement by contract or otherwise with a Hospital to perform such surgical procedures as may be required;

2.

It continuously provides twenty-four (24) hours per day nursing service by registered professional nurses under the supervision of Physicians; and

3.

It is not, other than incidentally, a place for rest, the aged, or a nursing home, a hotel or the like.

Hospital Miscellaneous Expenses:  The term "Hospital Miscellaneous Expenses" means the actual charges made by a Hospital in its own behalf for services and supplies rendered to the Covered Person, which are Medically Necessary for the treatment of such Covered Person. Hospital Miscellaneous Expenses do not include charges for room and board or for professional services (including intensive nursing care by whatever name called), regardless of whether the services are rendered under the direction of the Hospital or otherwise.

Illness:  The term "Illness" means a bodily disorder, disease, physical sickness, mental infirmity, or functional nervous disorder of a Covered Person.

Immunization:  The protection of individuals or groups from specific diseases by vaccination or the injection of immune globulins.

Incurred Expenses:  The term "Incurred Expenses" means those services and supplies rendered to a Covered Person. Such expenses shall be considered to have been incurred at the time or date the service or supply is actually provided.

Injury:  The term "Injury" means a condition caused by accidental means which results in damage to the Covered Person's body from an external force.

Inpatient:  The term "Inpatient" refers to a patient admitted as a bed patient to a Hospital, Hospice or convalescent facility for treatment or observation; charges must be incurred for room and board or observation for a period of at least twenty-four (24) hours.

Late Enrollee:  An Employee or Dependent who gave up his/her initial opportunity to enroll in the Plan and who enrolls in the Plan more than thirty (30) days after the date of his/her eligibility and who was not eligible for a Special Enrollment Period or who failed to enroll by the end of a Special Enrollment Period.

Licensed Practical Nurse:  The term "Licensed Practical Nurse" means an individual who has received specialized nursing training and practical nursing experience, and is duly licensed to perform such nursing services by the state or regulatory agency responsible for such licensing in the state in which that individual performs such services.

Material Reduction:  Material Reduction in covered services or benefits is any modification to the Plan or change in the information required to be included in the Summary Plan Description (SPD) that, independently or in conjunction with other contemporaneous modification or changes, would be considered by the average Plan Participant to be an important reduction in covered services or benefits

Maximum Amounts:  Any Lifetime Maximum amounts or Calendar Year Maximum amounts or any Maximum amounts otherwise specified are applicable to the total expenses paid during all Plan Years whether or not the Covered Person has been continuously covered under this Plan.

Medical Care Benefits:  Amounts paid for the diagnosis, cure, mitigation, treatment or prevention of disease or amounts paid for the purpose of affecting any structure or function of the body.

Medical Emergency:  An Illness or Injury of such a nature that failure to get immediate medical care could put a person's life in danger or cause serious harm to bodily functions. Some examples of a Medical Emergency are: apparent heart attack, severe bleeding, sudden loss of consciousness, severe or multiple injuries, convulsions, apparent poisoning or severe pain from the sudden onset of an Illness. Some examples of conditions that are not generally considered a Medical Emergency are: colds, influenza, ear infections, nausea or headaches.

Medical Review Specialist:  The term "Medical Review Specialist" means an organization under contract to the Plan Administrator to provide the services required under the Cost Containment Features of Hospital Admission Notification/Continued Stay Review/Case Management. The Plan Administratorwill furnish the name, address, and phone number of the Medical Review Specialist.

Medically Necessary/Medical Necessity:  A "Medically Necessary" treatment, device, supply, medication or test is one which is generally accepted and used by the medical community and is appropriate for the condition being diagnosed or treated. Information which may be used to determine Medical Necessity may include independent Physician review, medical literature, results of clinical trials, nationally accepted Utilization Review criteria and conclusions reached by professional, medical or regulatory organizations. Not Medically Necessary is a treatment, device, supply, medication or test which does not contribute to the diagnosis of or therapeutic improvement for the condition in question, although well-being may be generally enhanced by it. The item can be outmoded or unproved as having diagnostic capability or effect on the condition in question. An independent Physician designated by the Utilization Review Company will review potential cas es deemed not Medically Necessary.

Medicare Benefits:  All benefits under Parts A and/or B of Title XVIII of the Social Security Act of 1965, as amended, from time to time.

Mental Health Parity Act of 1996:  Signed into law September 26, 1996 effective for plan years beginning on or after January 1, 1998.

Mental and Nervous Disorders:  "Mental or Nervous Disorder" shall mean any disease or condition, regardless of whether the cause is organic, that is classified as a Mental Disorder in the current edition of International Classification of Diseases, published by the U.S. Department of Health and Human Services; or is listed in the current edition of Diagnostic and Statistical Manual of Mental Disorders, published by the American Psychiatric Association.

Midwife:  The term "Midwife" means a licensed Registered Nurse (R.N.) who is certified as a Nurse Midwife (C.N.M.) by the American College of Nurse-Midwives and who is authorized to practice as a Nurse Midwife under state regulations.

Minor Emergency Medical Clinic:  The term "Minor Emergency Medical Clinic" means a Free-standing Facility which is engaged primarily in providing minor emergency and episodic medical care to a Covered Person. A board-certified Physician, a Registered Nurse, and a registered x-ray technician must be in attendance at all times that the clinic is open. The clinic's facilities must include x-ray and laboratory equipment and a life support system. For the purposes of this Plan, a clinic meeting these requirements will be considered to be a Minor Emergency Medical Clinic, by whatever actual name it may be called; however, a clinic located on the premises of or in conjunction with, or in any way made a part of a regular Hospital shall be excluded from the terms of this definition.

Morbid Obesity:  A diagnosed condition in which the body weight of an individual is the greater of 100 pounds or 100% over the medically recommended weight for a person of the same height, age and mobility and by a BMI (body mass index) greater than 40 (in accordance with the Utilization Review Company's criteria for morbid or severe obesity). The Plan does not cover treatment of Morbid Obesity.

Newborns' and Mothers' Health Protection Act of 1996 (NMHPA):  This amended ERISA by adding a new section restricting the extent to which group health plans may limit Hospital lengths of stays for mothers and newborn children following delivery. NMHPA regulations apply as of the first day of the first Plan Year beginning on or after January 1, 1998.

No-Fault Insurance:  Automobile insurance that pays for medical expenses for Injuries sustained during the operation of an automobile, regardless of who may have been responsible for causing the accident.

Nurse:  The term "Nurse" means an individual who has received specialized nursing training and is authorized to use the designation Registered Nurse (R.N.), Licensed Vocational Nurse (L.V.N.) or Licensed Practical Nurse (L.P.N.), and who is duly licensed by the state or regulatory agency responsible for such license in the state in which the individual performs the nursing services.

OBRA:  The coverage provided under the provisions of the Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) effective August 10, 1993.

Occupational Therapy:  Treatment which is rendered for reasons other than restoration of bodily functions and the prevention of disability. Such treatment is usually rendered by the use of work-related skills and leisure tasks for the evaluation of an individual's behavior and/or abilities of self-care, work or play.

Oral Surgery:  The term "Oral Surgery" means maxillofacial surgical procedures limited to:

1.

Excision of non-dental related neoplasms, including benign tumors and cysts and all malignant and pre-malignant lesions and growths;

2.

Incision and drainage of facial abscess;

3.

Surgical procedures involving salivary glands and ducts and non-dental related procedures of the accessory sinuses; and

4.

Surgical and diagnostic treatment of conditions affecting the temporomandibular joint (including the jaw and the craniomandibular joint) as a result of an accident, a trauma, a congenital defect, a developmental defect or a pathology.

Orthopedic Shoes:  Special shoes designed for support of the feet or the prevention or correction of deformities of the feet.

Orthotic:  The term "Orthotic" means an external device intended to correct a defect in form or function of the human body.

Out-of-Area Benefit:  "Out-of-Area Benefit" applies if a Covered Person receives services from a Non-PPO Provider because the Covered Person is living or traveling outside of the geographical zip code area serviced by the Preferred Provider Organization (PPO).

Outpatient:  The term "Outpatient" refers to a patient who receives medical services at a Hospital, but is not admitted as a registered overnight bed patient; this must be for a period of less than twenty-four (24) hours. This term can also be applicable to services rendered in a free-standing independent facility such as an Ambulatory Surgical Center.

Outpatient Chemical Dependency/Drug Treatment Facility:  The term "Outpatient Chemical Dependency/Drug Treatment Facility" means an institution which provides a program for a diagnosis, evaluation and effective treatment of Chemical Dependency, and/or drug use or abuse; provides detoxification services needed with its effective treatment program; provides infirmary level medical services or arranges at a Hospital in the area for any other medical services that may be required; is at all times supervised by a staff of Physicians; provides at all times skilled nursing care by licensed nurses who are directed by a full-time Registered Nurse (R.N.); prepares and maintains a written plan of treatment for each patient based on medical, psychological and social needs, which is supervised by a Physician, and meets applicable state and federal, if any, licensing standards.

Outpatient Psychiatric Facility:  The term "Outpatient Psychiatric Facility" means an administratively distinct governmental, public, private or independent unit or part of such unit that provides for a psychiatrist who has regularly scheduled hours in the facility, and who assumes the overall responsibility for coordinating the care of all patients.

Part-time Employee:  Any Employee who is not regularly scheduled to work for the Employer for at least the minimum number of hours shown in the Eligibility Section of this Plan Document.

Physician:  The term "Physician" means a person acting within the scope of his/her license and holding the degree of Doctor of Medicine (M.D.) or Doctor of Osteopathy (D.O.) and who is legally entitled to practice medicine in all its branches under the laws of the state or jurisdiction where the services are rendered.

Physically or Mentally Handicapped:  The inability of a person to be self-sufficient as the result of a condition such as mental retardation, cerebral palsy, epilepsy or another neurological disorder and diagnosed by a Physician as a permanent and continuing condition.

Placement for Adoption:  A child under the age of eighteen (18) placed with the Covered Employee for adoption, whether or not the adoption has become final, will be considered eligible and will be covered from the date of such adoption or Placement for Adoption. "Placement" means the assumption and retention by the Covered Employee of a legal obligation for total or partial support of such child in anticipation of adoption of such child.

Plan:  The term "Plan" means, without qualification, this Plan Document/Summary Plan Description, including any Amendments thereto.

Plan Administrator:  The term "Plan Administrator" means the Employer, who is responsible for the day-to-day functions and arrangements of the Plan. The Plan Administrator may employ persons or firms to process claims and perform other Plan connected services.

Plan Amendment:  The term "Plan Amendment" means a formal document that changes the provisions of the Plan Document, duly signed by the authorized person or persons as designated by the Plan Sponsor.

Plan Participant:  An eligible Employee, eligible Dependent, Board of Director, Agent, eligible COBRA Qualified Beneficiary or a COBRA Qualified Beneficiary's Dependent properly enrolled in the Plan.

Plan Sponsor:  The term "Plan Sponsor" means National Western Life Insurance Company.

Plan Year:  The Plan Year is January 1 through December 31 of the same Calendar Year. The Plan Year is the year on which Plan records are kept.

Post-Service Claim:  Any claim for which payment is requested for medical care already rendered to the Claimant.

Practitioner:  A Physician or person acting within the scope of applicable state licensure/certification requirements includes the following:

1.  Advance Practice Nurse (A.P.N.)

2.  Audiologist

3.  Certified Nurse Midwife (C.N.M.)

4.  Certified Operating Room Technician (C.O.R.T.)

5.  Certified Registered Nurse Anesthetist (C.R.N.A.)

6.  Certified Surgical Technician (C.S.T.)

7.  Doctor of Chiropractic (D.C.)

8.  Doctor of Dental Medicine (D.M.D.)

9.  Doctor of Dental Surgery (D.D.S.)

10. Doctor of Medicine (M.D.)

11. Doctor of Optometry (O.D.)

12. Doctor of Osteopathy (D.O.)

13. Doctor of Podiatry Medical (D.P.M.)

14. Licensed Clinical Social Worker (L.C.S.W.)

15. Licensed Occupational Therapist

16. Licensed or Registered Physical Therapist

17. Licensed Professional Counselor (L.P.C.)

18. Licensed Surgical Assistant (L.S.A.)

19. Master of Social Work (M.S.W.)

20. Physician Assistant (P.A.)

21. Psychologist (Ph.D., Ed.D., Psy.D.)

22. Registered Nurse First Assistant (R.N.F.A.)

23. Registered Nurse Practitioner (R.N.-FNP)

24. Speech Language Pathologist

Pre-existing Condition:  Any physical or mental Illness or Injury for which the Covered Person received medical care, advice, diagnosis or treatment, or for which a Physician was consulted or for which medical expenses were incurred or for which a Covered Person has taken prescribed drugs or medicines during the six (6) months immediately prior to the Covered Person's Enrollment Date in the Plan.

Preferred Provider Organization (PPO):  A Preferred Provider Organization (PPO) is an alternate health care delivery system with which Plan Administratorsmay contract to provide comprehensive medical care for Employees. A PPO is a network of individual Physicians, Hospitals and other providers who accept pre-negotiated, discounted fees for services rendered. Employee participation is encouraged by plan design for improved benefits when network providers are used. Employees have flexibility under PPO arrangements in which there is a choice of network or non-network providers.

Pregnancy:  The term "Pregnancy" means the physical state which results in childbirth, life-threatening abortion, or miscarriage, and any medical complications arising out of, or resulting from, such state.

Private Duty Nursing:  Continuous skilled care or intermittent care by a Registered Nurse or Licensed Practical Nurse while patient is not confined in a Hospital.

Protected Health Information (PHI):  "Protected Health Information (PHI)" is individually identifiable health information that is created or received by a Covered Entity and relates to: (a) a person's past, present or future physical or mental health; (b) provision of health care to that person; or (c) past, present or future payment for that person's health care.

Psychiatric Treatment Facility:  A mental health facility which:

1.

Provides treatment for individuals who suffer from acute Mental and Nervous Disorders;

2.

Uses a structured psychiatric program with individual treatment plans that have specified goals and appropriate objectives for the patient and treatment modality of the program; and

3.

Is clinically supervised by a Physician of medicine who is certified in psychiatry by the American Board of Psychiatry and Neurology.

Qualified Medical Child Support Order (QMCSO):  As originally enacted in OBRA 1993, as amended, a medical child support order must satisfy the following requirements to be a Qualified Medical Child Support Order under ERISA Section 609 (a)(2):

1.

The name and last known mailing address of the Covered Employee.

2.

The name and address of each alternate recipient. "Alternate recipient" means any child of a Covered Employee who is recognized under a medical child support order as having a right to enrollment under a group health plan with respect to such Covered Employee.

3.

A reasonable description of the type of coverage to be provided by the group health plan or the manner in which coverage will be determined.

4.

The period for which coverage must be provided.

5.

Each plan to which the order applies.

Qualified Medical Child Support Orders include not only court orders, but also administrative processes established under State law.

Reconstructive Surgery:  A procedure performed to restore the anatomy and/or functions of the body which are lost or impaired due to an Injury or Illness.

Registered Nurse:  The term "Registered Nurse" means an individual who has received specialized nursing training and is authorized to use the designation of "R.N.," and who is duly licensed by the state or regulatory agency responsible for such licensing in the state in which the individual performs such nursing services.

Rehabilitation Facility:  A legally operating institution or distinct part of an institution which has a transfer agreement with one or more Hospitals, and which is primarily engaged in providing comprehensive multi-disciplinary physical restorative services, post-acute Hospital and rehabilitative Inpatient care, and is duly licensed by the appropriate government agency to provide such services. It does not include institutions which provide only minimal care, custodial care, ambulatory, or part-time care services, or an institution which primarily provides treatment of Mental and Nervous Disorders, Chemical Dependency, or tuberculosis, except if such facility is licensed, certified or approved as a Rehabilitation Facility for the treatment of medical conditions or drug addiction or Chemical Dependency in the jurisdiction where it is located, or it is accredited as such a facility by the Joint Commission on the Accreditation of Health Care Organi zations, or the Commission on the Accreditation of Rehabilitation Facilities.

Retrospective Review:  This term means a determination by the Utilization Review Company that medical services performed either Inpatient or Outpatient met criteria for Medical Necessity.

Room and Board:  The term "Room and Board" refers to all charges, by whatever name called, which are made by a Hospital, Hospice, or Convalescent Nursing Facility, Rehabilitation Facility or other covered facilities as a condition of occupancy. Such charges do not include the professional services of Physicians nor intensive nursing care, by whatever name called.

Routine Newborn Care:  Inpatient charges for a well newborn child for nursery room and board, related expenses following birth, including newborn hearing tests and Physician's pediatric services including circumcision. This term does not apply to a newborn child's diagnosed Illness.

Semi-Private:  The term "Semi-Private" refers to a class of accommodations in a Hospital or Skilled Nursing Facility or other facility providing services on an Inpatient basis in which at least two patient beds are available per room.

Skilled Nursing Facility/ Extended Care Facility:  An institution that:

1.

Primarily provides skilled, as opposed to custodial, nursing service to patients; and

2.

Is approved by the Joint Commission on the Accreditation of Health Care Organizations and/or Medicare.

Sleep Disorder:  Medical/psychological condition that disrupts the patient's sleep on a chronic basis.

Special Enrollee:  An eligible Employee and his/her eligible Dependents who have Special Enrollment rights and who enroll in the Plan during a Special Enrollment Period.

Special Enrollment Period:  The Period of thirty (30) days in which an Employee or Dependent who previously declined enrollment in the Plan by signing a Waiver of Coverage, can enroll in the Plan. The Special Enrollment Period for both Employees and Dependents can be activated by:

1.

Loss of other coverage (other than for cause or non-payment of premium); or

2.

A new Dependent acquired by an Employee through marriage, birth, adoption or placement for adoption.

Speech Therapy:  A program which evaluates the patient's motor-speech skills, expressive and receptive language skills, writing and reading skills, and determines if the patient requires an extensive hearing evaluation by an audiologist. The therapist also evaluates the patient's cognitive functioning, as well as his/her social interaction skills such as the ability to maintain eye contact and initiate conversation. Therapy may also involve developing the patient's speech, listening and conversational skills and higher-level cognitive skills such as understanding abstract thought, making decisions, sequencing, etc. Therapy must be considered medically appropriate even for patients who do not have apparent speech problems, but who do have deficits in higher-level language functioning as a result of trauma or identifiable organic disease process.

Substance Abuse:  Use of or addiction to alcohol, drugs or controlled substances resulting in Chemical Dependency, which is psychological and/or physical dependence on same.

Surgery:  A branch of medicine concerned with the correction of physical defects, the repair of Injuries, and the treatment of disease. Surgical Procedures will include all CPT (Current Procedural Terminology) codes from 10000 to 69999.

Surgical Procedure:  The term "Surgical Procedure" means:

1.

Incision, excision, debridement or cauterization of any organ or part of the body, or the suturing of a wound;

2.

Manipulation reduction of a fracture or dislocation, or the manipulation of a joint, including application of a cast or traction;

3.

Removal by endoscopic means of a stone or other foreign object from any part of the body, or the diagnostic examination by endoscopic means of any part of the body;

4.

Induction of artificial pneumothorax and injection of sclerosing solutions;

5.

Arthrodesis, paracentesis, arthrocentesis and all injections into the joints or bursa;

6.

Obstetrical delivery and dilation and curettage; and

7.

Biopsy.

TEFRA:  The term "TEFRA" refers to the Tax Equity and Fiscal Responsibility Act of 1982, as amended from time to time.

Temporomandibular Joint Syndrome (TMJ):  Temporomandibular Joint Syndrome, also known as myofascial pain-dysfunction syndrome, is a disorder that affects the two joints at either side of the jaw (the temporomandibular joints).

Total Disability (Totally Disabled):  The term "Total Disability" means a physical state of a Covered Person resulting from an Illness or Injury which wholly prevents:

1.

In the case of an Employee, from engaging in any and every business or occupation and from performing any and all work for compensation or profit; or

2.

In the case of a Dependent or a COBRA Qualified Beneficiary, from performing the normal activities of a person of that age and sex in good health.

Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA):  Federal law which applies to persons who have been absent from work because of "service in the uniformed services." "Uniformed services" consists of the United States Army, Navy, Marine Corps, Air Force or Coast Guard; Army Reserve, Naval Reserve, Marine Corps Reserve, Air Force Reserve or Coast Guard Reserve; Army National Guard or Air National Guard; Commissioned Corps of the Public Health Service; any other category of persons designated by the President in time of war or emergency. "Service" in the uniformed services means: active duty, active duty for training, initial active duty for training, inactive duty training, full-time National Guard duty and absence from work for an examination to determine a person's fitness for any of the designated types of duty.

University:  The term "University" means an institution accredited in the current publication of Accredited Institutions of Higher Education.

Usual and Customary (U&C):

1.

The Usual fee - the fee most frequently charged or accepted for covered medical care or supplies by a Physician or Hospital; and

2.

The Customary fee - the fee charged or accepted for covered medical care or supplies by those of similar professional standing in the same geographical area; "area" means a region large enough to determine a cross section of providers of medical care or supplies.

Utilization Review Company:  A company with which the Plan Administrator may contract to provide consistent and measurable standards in which to evaluate and control health care utilization by determining appropriateness of care, setting and Medical Necessity. The Utilization Review Company's role is to ensure the best use of health care services, eliminating unnecessary costs while maintaining consideration for the patient's best interests.

Waiting Period:  The period of time an Employee must satisfy while working for the Employer before becoming eligible for this Plan. An Employee shall be deemed Actively at Work if the Employee is absent from work due to a health factor.

Well-Baby or Well-Child Care:  These terms mean medical treatment, services or supplies rendered to a child solely for the purpose of health maintenance and not for the treatment of an Illness or Injury.

EX-10

EXHIBIT 10(au)

TENTH AMENDMENT TO THE
NATIONAL WESTERN LIFE INSURANCE COMPANY
NON-QUALIFIED DEFINED BENEFIT PLAN

          This Tenth Amendment to the National Western Life Insurance Company Non-Qualified Defined Benefit Plan, as amended (the "Plan") is hereby adopted by National Western Life Insurance Company (the "Company").

WITNESSETH

          WHEREAS, the Plan was originally established effective January 1, 1991;

          WHEREAS, Section 6.2 of the Plan permits the Company to amend the Plan at any time; and

          WHEREAS, the Company desires to amend the Plan to freeze future benefit accruals under Section 4.9 of the Plan effective as of December 31, 2004 to comply with section 409A of the Internal Revenue Code of 1986, as amended by the American Jobs Creation Act of 2004.

          NOW, THEREFORE, the Plan is hereby amended as follows effective as of December 31, 2004:

1. Section 4.9 of the Plan is hereby amended by adding the following new paragraph at the end of such Section, such paragraph to read in its entirety as follows:

Notwithstanding anything herein to the contrary, the benefit payable to such Participant under this Section 4.9 shall be frozen effective as of December 31, 2004 and shall not increase on account of additional Service or Plan Compensation after such date. The provisions of this paragraph are intended to comply with the requirements of Code section 409A and shall be construed in accordance therewith. The provisions of this paragraph shall not be considered a "material modification" of the Plan, but shall instead be considered a cessation of future deferrals in accordance with Q&A-18(c) of Internal Revenue Service Notice 2005-1.

2. Except as hereinabove amended, the Plan, as previously amended, shall remain in full force and effect.

          IN WITNESS WHEREOF, the Company has adopted and executed this Tenth Amendment this 18th day of February, 2005.

National Western Life Insurance Company

/S/ James P. Payne

By: James P. Payne

Its: Sr. Vice President - Secretary

Approved by the Board of Directors February 18, 2005.

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

	State of		%
Name of Subsidiary	Incorporation	Owner	Ownership
The Westcap Corporation (of Delaware)	Delaware	National Western Life Insurance Company	100%
NWL Investments, Inc.	Texas	National Western Life Insurance Company	100%
NWL Financial, Inc.	Nevada	National Western Life Insurance Company	100%
NWL Services, Inc.	Nevada	National Western Life Insurance Company	100%

The subsidiaries conduct business under the same corporate names as detailed above.

EX-23

EXHIBIT 23(a) - INDEPENDENT AUDITORS' CONSENT


Consent of Independent Registered Public Accounting Firm

The Board of Directors
National Western Life Insurance Company

We consent to the incorporation by reference in the registration statement (No. 333-38549) on Form S-8 of National Western Life Insurance Company of our report dated March 15, 2005, with respect to the consolidated balance sheet of National Western Life Insurance Company as of December 31, 2004, and the related consolidated statements of earnings, comprehensive income, stockholders' equity, cash flows for the year then ended, and all related 2004 financial statement schedules, which report appears in the December 31, 2004, annual report on Form 10-K of National Western Life Insurance Company. Our report refers to a change in the method of accounting for two tiered annuities in 2004.



KPMG LLP
Austin, Texas
March 15, 2005

EX-23

EXHIBIT 23(b) - INDEPENDENT AUDITORS' CONSENT


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-38549 of National Western Life Insurance Company on Form S-8 of our report dated March 9, 2004, appearing in this Annual Report on Form 10-K of National Western Life Insurance Company for each of the two years in the period ended December 31, 2003.



DELOITTE & TOUCHE LLP
Dallas, Texas
March 15, 2005

EX-31

EXHIBIT 31(a)
CERTIFICATION
I, Robert L. Moody, certify that:
1.	I have reviewed this report on Form 10-K of National Western Life Insurance Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 10, 2005	/S/ Robert L. Moody
	Name:  Robert L. Moody
	Title:  Chairman of the Board and
	Chief Executive Officer

EX-31

EXHIBIT 31(b)
CERTIFICATION
I, Brian M. Pribyl, certify that:
1.	I have reviewed this report on Form 10-K of National Western Life Insurance Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)   Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)   Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
	a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
	b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 10, 2005	/S/ Brian M. Pribyl
	Name:  Brian M. Pribyl
	Title:  Senior Vice President,
	Chief Financial and
	Administrative Officer, and
	Treasurer

EX-32

EXHIBIT 32(a)

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of National Western Life Insurance Company ("Company") on Form 10-K for the period ended December 31, 2004 as filed with the Securities and Exchange Commission on or about the date hereof ("Report"), I, Robert L. Moody, Chairman of the Board and Chief Executive Officer of the Company and I, Brian M. Pribyl, Senior Vice President, Chief Financial and Administrative Officer, and Treasurer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)  to my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2)  the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:  March 10, 2005
	/S/Robert L. Moody
	Name:  Robert L. Moody
	Title:  Chairman of the Board and
	Chief Executive Officer
	/S/Brain M. Pribyl
	Name:  Brian M. Pribyl
	Title:  Senior Vice President,
	Chief Financial and
	Administrative Officer, and
	Treasurer