Kansas City Life Insurance has returned to profit this year after last year’s class action settlement over cost-of-insurance charges, although its third-quarter earnings fell as revenue edged lower.
The Kansas City, Missouri-based life and annuity insurer reported third-quarter net income of $1.7 million, or $0.18 per share, down from $2.8 million, or $0.29 per share, a year earlier. Insurance revenues fell 1% to $1.1 million and investment revenues fell 1% to $600,000, partly offset by a 3% ($0.8 million) reduction in operating expenses.
For the first nine months, Kansas City Life reported net income of $19.1 million, or $1.97 per share, compared with a net loss of $21.7 million, or $2.24 per share, in the same period of 2025.
The swing reflects a $35.5 million after-tax legal settlement accrual that Kansas City Life booked in the second quarter of 2025 for class action lawsuits. Excluding that charge, nine-month net income would have been $13.8 million in 2025. On that basis, this year’s earnings are $5.3 million, or 38%, higher, mainly because investment revenues rose 4%.
The accrual related to a $45 million nationwide settlement the company agreed in June 2025 to resolve claims over the cost-of-insurance rates it charged on certain universal life and variable universal life policies. The settlement covered about 88,000 policyholders whose policies were in force on or after January 1, 2002. Kansas City Life didn’t admit liability or wrongdoing. At the time, chief executive Walter Bixby said the deal would remove future uncertainty and ongoing legal expense.
The company raised its quarterly dividend to $0.18 per share, from $0.14 a year earlier.
Kansas City Life’s case is one of a series of cost-of-insurance disputes affecting US life insurers over the past decade. Policyholders have challenged increases in the charges deducted from the cash value of universal life policies, arguing that insurers used factors not allowed under the policy terms. Several insurers have paid large settlements or faced jury verdicts.
The cases matter more for smaller insurers. A $45 million settlement is a much bigger burden for a company of Kansas City Life’s size than for one of the largest life carriers.
For life insurance agents and advisors, the settlement brings an end to the uncertainty for Kansas City Life’s universal life policyholders, and the company’s return to profitability is reassuring for its financial strength.
More broadly, cost-of-insurance litigation is a reminder of why advisors should carefully review in-force universal life policies with clients. Rising cost-of-insurance charges can erode cash values and cause policies to lapse sooner than illustrated. Regular in-force illustrations, and checking whether premiums are still sufficient to keep a policy in force, can help protect clients and reduce the risk of disputes.
