Kansas City Life Insurance Company's underlying second-quarter profit increased 14% as higher investment revenue offset an increase in policyholder benefits, while the absence of a major legal charge recorded a year earlier produced a much larger reported swing from loss to profit. For brokers evaluating whether to place or retain business with the carrier, the more consequential story sits underneath that improvement, not in the improvement itself.
The life and annuity insurer reported net income of $7.8 million, or $0.80 per share, for the three months ended June 30, 2026. That compared with a net loss of $28.7 million, or $2.96 per share, in the same period last year.
The comparison was heavily affected by a $45 million legal settlement accrual included in the company's 2025 results. Excluding that charge, Kansas City Life would have earned $6.8 million in the second quarter of 2025. On that basis, quarterly net income increased by $1 million, or 14%, in 2026.
The underlying improvement was mainly driven by a $3.5 million increase in investment revenue. This was partly offset by a $2.6 million, or 4%, rise in policyholder benefits. Total quarterly revenue increased to $125.9 million from $122.4 million a year earlier.
The legal charge related to a nationwide settlement involving the cost-of-insurance rates applied to certain universal life and variable universal life policies. The agreement covered claims involving about 88,000 policies and several class-action cases. Plaintiffs alleged that Kansas City Life used factors not allowed under the policy language when calculating cost-of-insurance deductions. The insurer denied the allegations and did not admit wrongdoing under the settlement.
That accrual is why the reported reversal from a $28.7 million loss to a $7.8 million profit looks more dramatic than the change in the company's recurring performance actually is. But it cuts the other way too: an accrual is an estimate of what a settlement will ultimately cost, not a confirmed final number. Brokers should treat this quarter's "clean" comparison with some caution rather than assuming the litigation is now fully priced and behind the company. If the actual cash cost of resolving claims across 88,000 policies comes in above what was accrued, some or all of this quarter's improvement could reverse in a future period. Nothing in the earnings release indicates that has happened, but nothing rules it out either, and that uncertainty is precisely what AM Best flagged when it revised the company's outlook.
For the first six months of 2026, Kansas City Life reported net income of $17.3 million, or $1.79 per share, compared with a net loss of $24.6 million, or $2.53 per share, in the same period last year. Excluding the legal accrual, first-half 2025 net income would have been $11 million. On a comparable basis, earnings increased by $6.4 million, or 58%, in the first half of 2026, reflecting a $5.3 million, or 6%, rise in investment revenue and a $2.3 million, or 4%, decline in operating expenses, partly offset by a $2.1 million, or 1%, decrease in insurance revenue.
The decline in insurance revenue came as the wider US individual life market continued to grow. LIMRA reported that new annualized individual life premium rose 7% in the first quarter of 2026, while the number of policies sold increased 5%. The US annuity market also remained active: preliminary LIMRA figures showed second-quarter annuity sales reached a record $123.9 billion, up 4% from a year earlier, with first-half sales totaling $231.3 billion, up 2%.
Kansas City Life's insurance revenue is not directly comparable with LIMRA's new-sales figures, and the company did not disclose product-level premiums, new policy sales or changes in market share. That gap matters more than it might in an ordinary quarter: without knowing whether the revenue decline reflects weaker new business, a shrinking existing policy base, or a shift in product mix, a broker can't tell whether Kansas City Life is losing ground in a growing market or simply managing its book differently. Given that the company is simultaneously operating under a negative capital outlook, that distinction, rather than being a minor disclosure gap, is one worth asking the company or its wholesalers about directly before recommending new business.
The company's investment income growth also reflects an important source of earnings for life insurers, which invest premiums in bonds and other assets to support long-term policy obligations. Kansas City Life did not disclose enough detail in its earnings announcement to determine how much of the increase came from higher portfolio yields, changes in its asset mix or other investment activity.
Kansas City Life's capital position is the piece of this story most directly relevant to a broker's decision to place or retain business here. In December 2025, AM Best affirmed the insurer's A- financial strength rating but revised its outlook to negative, citing its cost-of-insurance litigation exposure and uncertainty over its effect on capital growth. The rating agency assessed the company's balance-sheet strength as very strong but described its operating performance as marginal.
The latest earnings announcement did not provide updated statutory surplus, risk-based capital or product-level sales figures. Those measures would give brokers a clearer view of the insurer's financial position, sales performance and ability to compete in the life and annuity market, and their absence means this quarter's improved profit shouldn't be read as evidence the negative outlook has been resolved. A negative outlook signals AM Best sees a reasonable chance of a downgrade within the next 12 to 24 months if conditions don't improve; a single strong quarter, especially one shaped by the absence of a prior-year charge rather than new business growth, doesn't by itself change that assessment. Brokers with clients holding Kansas City Life universal life or variable universal life policies, particularly any of the roughly 88,000 policies covered by the settlement, have a reasonable basis to ask for an update on where the litigation and capital position actually stand before the next rating action, rather than waiting for AM Best's next scheduled review.
Kansas City Life is based in Kansas City, Missouri, and sells life insurance and annuity products in 49 states and the District of Columbia. Its shares trade on the OTCQX market under the ticker KCLI.
