Kansas City Life Insurance Company $1.25 par value common stock is being registered because the NASDAQ Capital Market, LLC has become a registered national securities exchange. The stock has not been previously registered because of our exemption for certain life insurance companies provided by 12(g)(2)(G) of the Securities Act of 1934. The stock has been listed on the NASDAQ Capital Market, LLC.

Item 1. Business......................................................................................................................	4
Item 1A. Risk Factors..................................................................................................................	7
Item 2. Financial Information........................................................................................................	11
Item 3. Properties......................................................................................................................	36
Item 4. Security Ownership of Certain Beneficial Owners and Management................................................	36
Item 5. Directors and Executive Officers...........................................................................................	39
Item 6. Executive Compensation.....................................................................................................	42
Item 7. Certain Relationships and Related Transactions, and Director Independence........................................	52
Item 8. Legal Proceedings............................................................................................................	53
Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters.........	54
Item 10. Recent Sales of Unregistered Securities.................................................................................	55
Item 11. Description of Registrant’s Securities to be Registered................................................................	55
Item 12. Indemnification of Directors and Officers...............................................................................	55
Item 13. Financial Statements and Supplementary Data..........................................................................	56
Consolidated Balance Sheets......................................................................................................	56
Consolidated Statements of Income..............................................................................................	57
Consolidated Statements of Stockholders’ Equity.............................................................................	58
Consolidated Statements of Cash Flows........................................................................................	59
Notes to Consolidated Financial Statements....................................................................................	60
Report of Independent Registered Public Accounting Firm..................................................................	91
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....................	93
Item 15. Financial Statements and Exhibits........................................................................................	93

Signatures................................................................................................................................	95
Supplemental Information............................................................................................................	96

Schedule I – Summary of Investments – Other Than Investments in Related Parties....................................	96
Schedule II – Condensed Financial Information of Registrant...............................................................	97
Schedule III – Supplementary Insurance Information........................................................................	100
Schedule IV – Reinsurance Information........................................................................................	101
Schedule V – Valuation and Qualifying Accounts............................................................................	102

Kansas City Life Insurance Company (the Company) was incorporated under the assessment laws of Missouri in 1895 as the Bankers Life Association. In 1900, its present corporate title was adopted and it was reorganized as a legal reserve company in 1903.

The Company has $31.3 billion of life insurance in force and approximately 620,000 policyowners as of December 31, 2006. Its assets were $4.5 billion and its stockholders’ equity was $684 million at year end. The Company’s net income for the year-ended December 31, 2006, was $36.9 million with total revenues of $448.4 million.

The Company primarily consists of three insurance companies: Kansas City Life Insurance Company (Kansas City Life) the parent company, and wholly owned subsidiaries Sunset Life Insurance Company of America (Sunset Life) and Old American Insurance Company (Old American). The Company also has several non-insurance subsidiaries that individually are not material.

The Company provides security assured to the people we serve; including our shareholders, policyowners, general agencies and sales representatives and our employees. The protection of funds entrusted to the Company by policyowners for their future security is a basic responsibility of each person who makes up the Company. Growth is essential for our long-term success and we are committed to achieving long-term growth in sales, revenues and profit.

Kansas City Life markets its individual insurance products, including traditional, interest sensitive and variable products through a nationwide sales force of independent general agents and third-party marketing arrangements. Kansas City Life also markets group insurance products, which include life, dental and disability products through a nationwide sales force of independent general agents, group brokers and third-party marketing arrangements. Kansas City Life operates in 48 states and the District of Columbia.

Sunset Life individual insurance products include traditional and interest sensitive products. To improve the efficiency of marketing efforts, the Sunset Life sales force has been integrated into the Kansas City Life sales force by appointing Sunset Life agents as agents of Kansas City Life effective January 1, 2006. Sunset Life continues as a life insurance company with its current block of business, but without new sales. Sunset Life operates in 43 states and the District of Columbia. Sunset Life’s administrative and accounting operations are part of the Company’s home office operations and administration.

Old American sells final expense insurance products nationwide through its general agency system, with exclusive territories, using direct response marketing to supply agents with leads. Old American operates in 46 states and the District of Columbia. Old American’s administrative and accounting operations are part of the Company’s home office but it operates and maintains a separate and independent field force.

The Company offers investment products and broker dealer services through its subsidiary Sunset Financial Services, Inc. (SFS) for both proprietary and non-proprietary variable insurance products and mutual funds.

The Company has three reportable business segments: Individual Insurance, Group Insurance and Old American. The Individual Insurance segment consists of individual insurance products for both Kansas City Life and Sunset Life. These products generate approximately 56% of consolidated revenues from customers. Group Insurance segment revenues account for 18% of consolidated revenues from customers and the Old American segment accounts for 26% of consolidated revenues from customers.

Kansas City Life and Sunset Life direct insurance revenues (total insurance revenues excluding reinsurance ceded) are primarily derived from premiums on traditional insurance products and contract charges. Traditional insurance products principally include term life and immediate annuities. Contract charges are collected from interest sensitive insurance products, including universal life, fixed deferred annuities and variable life and annuities. In 2006, they received 32% of its direct insurance revenues from premiums on traditional products, down from 34% in 2005 and 35% in 2004. The decline in premiums has primarily been the result of lower sales of immediate annuities. Over the past three years, the Company has focused its distribution efforts on life insurance sales, and a declining volume of annuity sales has resulted. These companies are central to the Company’s overall performance and generated 90% of consolidated net income in 2006.

The Company offers several insurance products in the Group Insurance segment: dental, group life, short and long-term disability, and vision. The Group Insurance segment markets its group products primarily to small and mid-size organizations. Products are sold through group representatives targeting a nationwide network of independent general agents and group brokers, along with the Company’s career general agents. This sales network is Group’s core distribution system. Additionally, the Company enters into selective third-party marketing arrangements to market group products. In 2006, this segment generated 18% of the Company’s customer revenues.

The group market is highly competitive and group policies are periodically reviewed to ensure they conform to target claims, expenses and profit objectives. Renewal terms that meet target pricing objectives are communicated to the group policyholder who may then decide to seek alternative bids from competing carriers.

The Group Insurance segment has experienced net losses in each of the last three years. Improvement efforts continue to be focused in three primary areas. First, emphasis is being placed on growing the in-force business to achieve better expense ratios from fixed costs and overhead. This will be achieved through increased individual productivity of the existing group representatives and through a continued expansion of the group distribution system. The second area of focus for improvement is to increase the use of technology to achieve improved administrative efficiency and reduce expenses. The third area of focus is to add new products to the portfolio, particularly voluntary products which tend to be more profitable and are increasingly becoming a larger share of the group marketplace.

The Company and its subsidiaries are subject to state regulations in their states of domicile and in the states in which they do business. Although the federal government generally does not regulate the business of insurance, federal initiatives often have an impact on the business in a variety of ways, including the taxation of insurance companies and the tax treatment of insurance products. In addition, the Company is a stock life insurance company and is subject to the rules and regulations of the Securities and Exchange Commission (SEC). Current legislative activities are not expected to have a significant impact on the ongoing operations of the Company.

The Company and its subsidiaries had 537 full-time employees as of December 31, 2006. The Company considers relations with its employees to be good.

The Company operates in the life insurance sector of the financial services industry in the United States. The industry is highly competitive with respect to pricing, selection of products and quality of service. No single competitor or any small group of competitors dominate any of the markets in which the Company operates.

Insurance revenues are affected by the level of new sales, the type of products sold, and the persistency of policies, all of which may be influenced by economic conditions, as well as competitive forces. Consumers continue to desire a broad portfolio of products with safety and competitive return objectives, which the Company strives to provide. The Company offers a broad range of products, including variable insurance products, which allow policyholders to participate in both the equity and fixed income markets. Interest sensitive and traditional insurance products combine safety of principal with competitive interest returns.

These documents may be accessed on the Company’s website at the following address: http://www.kclife.com and will be provided as soon as is practicable after filing with the SEC, although not always on the same day. As the Company is an electronic filer, the SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers. The address of that site is http://www.sec.gov.

On January 23, 2006, the Company entered into a definitive agreement to sell its bank subsidiary, Generations Bank, for $10.1 million in cash to Brooke Corporation. On January 8, 2007, the Company completed the sale of Generations Bank after receiving regulatory approval from the Office of Thrift Supervision. The gain on the sale was $1.9 million. The bank subsidiary and the results of operations were not material to the financial statements of the Company and are not disclosed separately.

In 2006, the Company entered into a Master General Agent and Marketing Agreement with American Republic Insurance Company (American Republic) under which American Republic agents market Kansas City Life’s insurance

products. For segment reporting purposes, sales under this agreement are reflected in the Individual Insurance segment.

As of year-end 2006, Group Insurance exited the stop loss market. The stop loss product line was being offered through an independent managing general underwriter, which also provided third-party administration. During the fourth quarter of 2006, the independent managing general underwriter was acquired by another organization, which then terminated the agreement. The Company will continue to focus on its core products and services, but may re-enter the stop loss market at a later date.

On January 1, 2005, the Company sold its administrative claims paying services, KCL Benefit Solutions, to The Epoch Group, L. C. for $0.2 million in order to concentrate more directly on its core products. As a result of this sale, other revenues and operating expenses declined in 2005 compared to the prior year. Other revenues for the Group Insurance segment declined $1.1 million or 62% in 2005 compared with 2004.

This report reviews the Company’s financial condition and results of operations, and historical information is presented and discussed. Where appropriate, factors that may affect future financial performance are also identified and discussed. Certain statements made in this report include “forward-looking statements” that fall within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate or imply future results, performance or achievements rather than historical facts and may contain words like “believe,” “expect,” “estimate,” “project,” “forecast,” “anticipate,” “plan,” “will,” “shall,” and other words, phrases or expressions with similar meaning.

Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those contemplated by the forward-looking statements. Factors that could cause the Company’s future results to differ materially from expected results include, but are not limited to:

The Company cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

The Company was incorporated as a life insurance company in 1895. The Company’s stock has traded on the NASDAQ Stock Market LLC since 1965. The stock has not been registered because of an exemption for certain life insurance companies provided by 12(g)(2)(G) of the Securities and Exchange Act of 1934. On July 31, 2006, the NASDAQ Stock Market LLC advised the Company that it had registered as a national securities exchange. The Company has been exempted from the registration requirement until August 1, 2009, but has elected to register its stock now.

Approximately 60 percent of the Company’s stock is held subject to a Voting Agreement dated October 31, 2004, as reported on a Schedule 13D filed by the Bixby Family Group with the Securities and Exchange Commission on November 2, 2004. In addition, approximately 5.7 percent of the stock is held by the Company’s Savings and Profit Sharing Plan, Employee Stock Plan and Agents Stock Bonus Plan. This leaves approximately 34.4 percent held by others thereby potentially reducing the size of the market for the companies stock. The Company has approximately 2,521 stockholders as of December 31, 2006.

Shareholders Group Signed Voting Agreement Making the Company a Controlled Company.

Because more than 50% of exemptions stockholder voting power is held pursuant to a Voting Agreement dated October 31, 2004, the Company has elected to be treated as a “controlled company” under the corporate governance listing standards of the NASDAQ Capital Market, LLC. Accordingly, the Company is exempt from the corporate governance listing standards requiring (i) a board consisting of a majority of directors who have been determined to be independent under the criteria set forth in the listing standards, (ii) a nominating committee composed entirely of independent directors (iii) a compensation committee composed entirely of independent directors. The voting group has sufficient voting power to control the board makeup.

Currently, seven of fourteen directors have been determined to be independent under the criteria set forth in the listing standards and the Compensation and Audit Committees are composed entirely of such independent directors. No independent directors sit on the nominating committee.

Classified Board May Restrict Replacement of Directors Resulting in Board Entrenchment.

The Board is classified into three classes of director positions each of which serves for a three year term. The classes are staggered over a three year period. The result is that only one third of the Board is subject to election each year. Cumulative voting is permitted which could further reduce the likelihood of replacing a director.

The Articles of Incorporation as restated and amended require an affirmative vote of at least 66 2/3% of the outstanding shares of each class of Voting Stock for a business combination with a Related Person, being any person that owns 5% or more of any outstanding shares of any class. The 66 2/3% vote requirement shall be calculated by excluding from the voted shares and number of shares of the class being considered those shares of which the Related Person is the Beneficial Owner all as provided for in Article 9 of said Articles.

The Company is a life insurance company whose admitted assets are allocated to lines of business and, therefore, represent future benefits to policyholders.

The Company categorizes its main risks into five major risk types. Asset/Liability and Market Risk, Credit Risk, Product Risk, Operational Risk and Strategic Risk.

Asset/Liability and Market Risk is the risk of loss resulting from market price volatility, interest rate changes, adverse movements in foreign currency rates, and from not having access to sufficient funds to meet both expected liabilities and unexpected cash demands.

The Company’s asset/liability management programs and procedures involve the monitoring of asset and liability durations for various product lines, cash flow testing under various interest rate scenarios to evaluate the potential

sensitivity of assets and liabilities to interest rate movements, and the continuous rebalancing of assets and liabilities with respect to yield, risk, and cash flow characteristics.

The Company believes its asset/liability management programs and procedures, along with certain product features, provide protection for the Company against the effects of changes in interest rates under various scenarios.

Cash flows and effective durations of the asset and liability portfolios are measured at points in time and are affected by changes in the level and term structure of interest rates, as well as changes in policyholder behavior. Further, durations are managed on an individual product level, as well as an aggregate portfolio basis. As a result, differences typically exist between the duration, cash flows and yields of assets versus liabilities on an individual portfolio and aggregate basis. The Company’s asset/liability management programs and procedures enable management to monitor the changes, which have both positive and negative correlations among certain portfolios, and to make adjustments to asset mix, liability crediting rates and product terms so as to manage risk and profitability over time.

The Company Has a Risk That the Asset or Liability Portfolio Performance May Differ From Forecasted Results.

The Company performs cash flow scenario testing through models of its in-force business. These models reflect specific product characteristics and include assumptions based on current and anticipated experience regarding the relationships between short-term and long-term interest rates (i.e., the slope of the yield curve), credit spreads, market liquidity and other factors, including policyholder behavior in certain market conditions. In addition, these models include asset cash flow projections, reflecting interest payments, sinking fund payments, principal payments, bond calls and mortgage prepayments.

The Company has a risk that the asset or liability portfolio performance may differ from forecasted results as a result of unforeseen economic circumstances, estimates or assumptions that prove incorrect, unanticipated policyholder behavior or other factors. The result of such deviation of actual versus expected performance could include excess or insufficient liquidity in future periods. Excess liquidity, in turn, could result in reduced profitability on one or more product lines. Insufficient liquidity could result in the need to generate liquidity through borrowing, asset sales or other means. The Company believes that adherence to its asset/liability management programs will provide sufficient liquidity to enable it to fulfill its obligation to pay benefits under its various insurance and deposit contracts. On a historical basis, the Company has not needed to liquidate assets to ensure sufficient cash flows. The Company maintains borrowing lines on a secured and unsecured basis to provide additional liquidity, if needed.

The Company markets certain variable products. The policyholder assumes essentially all the investment earnings risk for the portion of the account balance invested in the separate accounts. However, the Company assesses certain charges based on the policy account values and changes to the account values can affect the Company's earnings. The portion of the policyholder's account balance invested in the fixed general account, if any, is affected by many factors, including the absolute level of interest rates, relative performance of the fixed income and equity markets, spreads between interest yields on investments and rates credited to the policyholder's accounts, and changes in consumer preferences.

The Company holds a diversified portfolio of investments that includes cash, bonds, preferred stocks, mortgage-backed securities, commercial mortgages and real estate. Each of these investments is subject, in varying degree, to market risks that can affect their return and their fair value. A majority of these assets are debt instruments of corporations or U.S. Government Sponsored Enterprises (GSE) and are considered fixed income investments. Thus, the primary market risks affecting the Company’s portfolio are interest rate risk, credit risk and liquidity risk.

Interest rate risk arises from the price sensitivity of investments to changes in interest rates. Coupon and dividend income represent the greatest portion of an investment’s total return for most fixed income instruments in stable interest rate environments. The changes in the fair market price of such investments are inversely related to changes in market interest rates. As interest rates fall, the coupon and dividend streams of existing fixed rate investments become more valuable and market values rise. As interest rates rise, the opposite effect occurs.

The net unrealized gain on the Company’s investment portfolio decreased in 2006, primarily due to increasing interest rates. At year-end, the fair value of the securities exceeded its book value by $2.7 million.

Due to the complex nature of interest rate movements and their uneven effects on the value of fixed income investments, the Company uses sophisticated computer programs to help consider potential changes in the value of the portfolio. Assuming that changes occur equally over the entire term structure of interest rates or yield curve, it is estimated that a

100 basis point increase in rates would translate to a $131.6 million loss of fair value for the $2.8 billion securities portfolio. Conversely, a 100 basis point rate decrease would translate to a $128.6 million increase in fair value.

Market changes rarely follow a linear pattern in one direction for any length of time. Within any diversified portfolio, an investor will likely find embedded options, both puts and calls, that change the structure of the cash flow stream. Mortgage-backed securities are particularly sensitive to interest rate changes. As long-term interest rates fall, homeowners become more likely to refinance their mortgage or move up to a larger home, causing a prepayment of the outstanding mortgage principal, which must then be reinvested at a lower rate. Should interest rates rise suddenly, prepayments expected by investors may decrease, extending the duration of a mortgage pool. This represents a further interest rate risk to investors.

As interest rates rise, policyholders may become more likely to surrender policies or to borrow against cash values, often to meet sudden needs in an inflationary environment or to invest in higher yielding opportunities elsewhere. This risk of disintermediation may force the Company to liquidate parts of its portfolio at a time when the fair value of fixed income investments is falling. If interest rates fall, the Company may also be forced to invest new cash receipts at levels below the minimum guaranteed rates payable to policyholders, eroding profit margins. The Company can usually adapt to small sudden changes in interest rates or even large changes that occur over longer periods of time. However, cash flow may increase or decrease over the course of the business cycle. Therefore, the Company takes steps to ensure that adequate liquidity is available to meet obligations in a timely manner. To this end, the Company utilizes an asset/liability management program, and the Company maintains lines of credit with commercial banks and other short-term borrowing arrangements with financial institutions.

The majority of the Company’s investments are exposed to varying degrees of credit risk. Credit risk is the risk that the value of the investment may decline due to deterioration in the financial strength of the issuer and that the timely or ultimate payment of principal or interest might not occur. A default by an issuer usually involves some loss of principal to the investor. Losses can be mitigated by timely sales of affected securities or by active involvement in a restructuring process. However, there can be no assurance that the efforts of an investor will lead to favorable outcomes in a bankruptcy or restructuring.

The Company currently holds $154.6 million of foreign bonds. The foreign securities do not expose the Company directly to foreign currency risk, as the securities are denominated in U.S. dollars. As a result, the foreign currency risk lies with the issuer of the securities and may expose the issuer to fluctuations in the foreign currency market.

As market interest rates fluctuate, so will the value of the Company's investment portfolio and its stockholders' equity. At December 31, 2006, the Company had an unrealized investment gain of $1.2 million (net of related taxes, policyholder account balances and deferred acquisition costs), compared to $17.5 million at year-end 2005. This decrease was primarily the result of increases in interest rates.

Product Risk is the risk of significant loss due to actual experience emerging differently than assumed when the product was designed and priced, as a result of variations in experience such as investment returns, expenses, taxes, mortality and morbidity claims, sales mix and policyholder behavior.

Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events such as natural disasters or pandemic disease.

Strategic Risk is the risk of loss resulting from the inability to adequately plan or implement an appropriate business strategy, or to adapt to change in the external business, political or regulatory environment.

Ratings are important factors in establishing the competitive position of insurance companies. A downgrade, or the potential for such a downgrade, of any of our ratings could, among other things; materially increase the number of policy or contract surrenders for all or a portion of their net cash values and withdrawals by policyholders of cash values from their policies; result in the termination of relationships with independent general agents, and third party marketers of the Company’s products and services. Any of these consequences could adversely affect the Company’s profitability and financial condition.

The Company’s insurance business is subject to comprehensive state regulation and supervision throughout the United States. The primary purpose of state regulation of the insurance business is to protect policyholders, and not necessarily to protect other constituencies such as creditors or investors. State insurance regulators and the National Association of Insurance Commissioners continually reexamine existing laws and regulations and may impose changes in the future. Changes in federal legislation and administrative policies in areas such as employee benefit plan regulation, financial services regulation and federal taxation could result in increased exposure on outstanding products or reduced sales of new products and therefore, could reduce the Company’s profitability.

			2006		2005		2004		2003		2002
Revenues:
	Insurance revenues		$	235,154	$	238,495	$	250,101	$	272,644	$	248,581
	Net investment income			196,280		194,608		197,975		194,763		194,235
	Realized investment gains (losses)			5,621		6,113		45,929		(29,280)		(18,240)
	Other revenues			11,349		10,312		8,468		9,387		14,779
		Total revenues	$	448,404	$	449,528	$	502,473	$	447,514	$	439,355

Net income			$	36,918	$	36,184	$	57,687	$	14,793	$	31,549

Per common share:
	Net income, basic and diluted		$	3.11	$	3.03	$	4.83	$	1.24	$	2.63

	Cash dividends to stockholders		$	1.08	$	1.08	$	1.08	$	1.08	$	1.08