Kansas City Life Insurance has returned to profit in 2026 after last year’s $45 million class action settlement over cost-of-insurance charges on universal life policies, though third-quarter earnings slipped 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% reduction in operating expenses.
For the first nine months of 2026, 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 company also raised its quarterly dividend to $0.18 per share from $0.14 a year earlier.
The swing in earnings reflects a $35.5 million after-tax legal settlement accrual booked in the second quarter of 2025. The underlying $45 million nationwide settlement resolved class action claims over cost-of-insurance rates charged on certain universal life and variable universal life policies, covering around 88,000 policyholders whose policies were in force on or after January 1, 2002. Kansas City Life did not admit liability or wrongdoing. At the time, chief executive Walter Bixby said the deal would remove future uncertainty and ongoing legal expense.
Excluding the settlement charge, nine-month net income in 2025 would have been $13.8 million. On that basis, this year’s result is $5.3 million, or 38%, higher, driven mainly by a 4% rise in investment revenues.
Kansas City Life’s case is one of a series of COI disputes that have run through the US life insurance industry over the past decade. Policyholders have challenged increases in charges deducted from the cash value of universal life policies, arguing insurers applied factors not permitted under the policy terms. Several carriers have paid large settlements or faced adverse jury verdicts. A $45 million settlement is a substantially heavier burden for a company of Kansas City Life’s size than it would be for one of the largest life carriers.
For advisors, the settlement draws a line under the uncertainty for Kansas City Life’s universal life policyholders, and the return to profitability is a reassuring signal on the company’s financial position.
More broadly, COI litigation is a reminder of why regular in-force reviews matter. Rising cost-of-insurance charges can erode cash values and cause policies to lapse earlier than originally illustrated. Running updated in-force illustrations with clients, and confirming that current premiums are still sufficient to keep a policy in force, protects clients and reduces the risk of disputes down the line.
