AMERICAN EQUITY LIFE ANNUITY ACCOUNT, N-4, 1998-02-19

AMERICAN EQUITY LIFE ANNUITY ACCOUNT
N-4, 1998-02-19

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 19, 1998

FILE NO. 33-
FILE NO. 811-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. _____ / /
POST-EFFECTIVE AMENDMENT NO. / /

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /

AMENDMENT NO. / /
---------------------

AMERICAN EQUITY LIFE ANNUITY ACCOUNT
(Exact Name of Registrant)

AMERICAN EQUITY INVESTMENT
LIFE INSURANCE COMPANY
(Name of Depositor)

5000 Westown Parkway, Suite 440
West Des Moines, Iowa 50266
(Address of Depositor's Principal Executive Offices)

------------------------

DEBRA J. RICHARDSON
5000 Westown Parkway, Suite 440
West Des Moines, Iowa 50266
(Name and Address of Agent for Service of Process)

------------------------

COPY TO:
STEPHEN E. ROTH, ESQUIRE
Sutherland, Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
------------------------

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER
THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

SECURITIES BEING OFFERED: FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
CONTRACTS.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO RULES 481(a) AND 495(a)

Showing location in Part A (prospectus) and Part B (statement of additional
information) of registration statement of information required by Form N-4

PART A

<TABLE>
<CAPTION>
ITEM OF FORM N-4 PROSPECTUS CAPTION
- ----------------------------------------- --------------------------------------------------------------------------------
<C> <S> <C>
1. Cover Page......................... Cover Page
2. Definitions........................ Definitions
3. Synopsis........................... Expense Tables; Summary
4. Condensed Financial Information.... Yields and Total Returns
5. General
(a) Depositor...................... American Equity Investment Life Insurance Company
(b) Registrant..................... American Equity Life Annuity Account
(c) Portfolio Company.............. Investment Options
(d) Fund Prospectus................ Investment Options
(e) Voting Rights.................. Voting Rights
(f) Administrators................. N/A
6. Deductions and Expenses
(a) General........................ Charges and Deductions; Summary
(b) Sales Load %................... Charges and Deductions; Summary
(c) Special Purchase Plan.......... N/A
(d) Commissions.................... Distribution of the Contracts
(e) Expenses -- Registrant......... Charges and Deductions; Summary
(f) Fund Expenses.................. Investment Options; Charges and Deductions
(g) Organizational Expenses........ N/A
7. Contracts
(a) Persons with Rights............ Summary; Addition, Deletion or Substitution of Investments; Description of
Annuity Contract; Payment Options; Voting Rights
(b) (i) Allocation of Purchase
Payments..................... Summary; Premiums; Free-Look Period; Allocation of Premiums
(ii) Transfers..................... Summary; Transfer Privilege
(iii) Exchanges.................... Transfers, Assignments or Exchanges of a Contract
(c) Changes........................ Additions, Deletions or Substitutions of Investments; Description of Annuity
Contract; Modification;
(d) Inquiries...................... Cover page; Inquiries
8. Annuity Period..................... Summary; Payment Options
9. Death Benefit...................... Death Benefit Before the Retirement Date; Death Benefit After the Retirement
Date
10. Purchases and Contract Value
(a) Purchases...................... Summary; Issuance of a Contract; Premiums; Free Look Period; Allocation of
Premiums; Variable Cash Value;
(b) Valuation...................... Definitions; Variable Cash Value;
(c) Daily Calculation.............. Definitions; Variable Cash Value;
(d) Underwriter.................... Issuance of a Contract; Distribution of the Contracts
11. Redemptions
(a) -- By Owners................... Summary; Transfer Privilege; Surrenders and Partial Surrenders; Proceeds on the
Retirement Date; Payments; Payment Options; Federal Tax Matters
-- By Annuitant.................... Summary; Transfer Privilege; Surrenders and Partial Surrenders; Proceeds on the
Retirement Date; Payments; Payment Options; Federal Tax Matters
(b) Taxes ORP...................... N/A
(c) Check Delay.................... Payments
(d) Lapse.......................... N/A
(e) Free Look...................... Summary; Free Look Period
</TABLE>
<PAGE>
<TABLE>
<C> <S> <C>
12. Taxes.............................. Summary; Federal Tax Matters
13. Legal Proceedings.................. Legal Proceedings
14. Table of Contents for the Statement Statement of Additional Information
of Additional Information......... Table of Contents
</TABLE>

PART B

<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART B CAPTION
- ----------------------------------------- --------------------------------------------------------------------------------
<C> <S> <C>
15. Cover Page......................... Cover Page
16. Table of Contents.................. Table of Contents
17. General Information and History.... General Information About the Company
18. Services
(a) Fees and Expenses of N/A
Registrant........................
(b) Management Contracts........... N/A
(c) Custodian...................... N/A
Independent Public Accountant...... Experts
(d) Assets of Registrant........... N/A
(e) Affiliated Persons............. N/A
(f) Principal Underwriter.......... Distribution of the Contracts (prospectus)
19. Purchase of Securities
Being Offered...................... Distribution of the Contracts (prospectus)
Offering Sales Load................ N/A
20. Underwriters....................... Distribution of the Contracts (prospectus)
21. Calculation of Performance Data.... Calculation of Yields and Total Returns; Yields and Total Returns (prospectus)
22. Annuity Payments................... Payment Options (prospectus)
23. Financial Statements............... Financial Statements
</TABLE>

PART C -- OTHER INFORMATION

<TABLE>
<CAPTION>
ITEM OF FORM N-4 PART C CAPTION
- ----------------------------------------- --------------------------------------------------------------------------------
<C> <S> <C>
24. Financial Statements and
Exhibits.......................... Financial Statements and Exhibits
(a) Financial Statements........... (a) Financial Statements
(b) Exhibits....................... (b) Exhibits
25. Directors and Officers of the
Depositor......................... Directors and Officers of American Equity Investment Life Insurance Company
26. Persons Controlled By or Under
Common Control with the Depositor
or Registrant..................... Persons Controlled By or In Common Control with the Depositor or Registrant
27. Number of Contractowners........... Number of owners
28. Indemnification.................... Indemnification
29. Principal Underwriters............. Principal Underwriter
30. Location of Accounts and Records... Location of Books and Records
31. Management Services................ Management Services
32. Undertakings....................... Undertakings and Representations
Signature Page..................... Signatures
</TABLE>
<PAGE>
VARIABLE ANNUITY
July , 1998

Prospectus for:

Flexible Premium Deferred Variable
Annuity Contracts

issued by
American Equity Investment Life
Insurance Company
- --------------------

Call Toll-Free
1-888-349-4650
- (Des Moines)
<PAGE>
PROSPECTUS
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American Equity Life Annuity Account
Individual Flexible Premium Deferred
Variable Annuity Contract

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This Prospectus describes the individual flexible
premium deferred variable annuity contract (the
"Contract") being offered by American Equity
Investment Life Insurance Company (the "Company").
The Contract may be sold to or in connection with
retirement plans, including those that qualify for
special federal tax treatment under the Internal
Revenue Code.

Premiums and accumulated values are allocated, as
designated by the owner, to one or more of the
subaccounts of the American Equity Life Annuity
Account (the "Account"), the Declared Interest
Option, or both. The assets of each Subaccount will
be invested solely in shares of the corresponding
Investment Options of EquiTrust Variable Insurance
Series Fund: ; :
or :
. [Information on additional
Investment Options to be provided by amendment.] The
accompanying prospectus for each Fund describes the
investment objectives and attendant risks of each
Investment Option. The accumulated value of the
Contracts prior to the retirement date, except for
amounts in the Declared Interest Option, will vary
according to the investment performance of each
Investment Option in which the selected Subaccounts
are invested. THE OWNER BEARS THE ENTIRE INVESTMENT
RISK ON AMOUNTS ALLOCATED TO THE ACCOUNT.

This Prospectus sets forth basic information about
the Contract and the Account that a prospective
investor should know before investing. Additional
information about the Contract and the Account is
contained in the Statement of Additional
Information, which has been filed with the
Securities and Exchange Commission. The Statement of
Additional Information is dated the same as this
Prospectus and is incorporated herein by reference.
The table of contents for the Statement of
Additional Information is on page of this
Prospectus. You may obtain a copy of the Statement
of Additional Information free of charge by writing
or calling the Company at the address or phone
number shown below.
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PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT
FOR FUTURE REFERENCE. THIS PROSPECTUS MUST BE
ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR
EACH FUND'S INVESTMENT OPTIONS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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Issued By

American Equity Investment Life Insurance Company
5000 Westown Parkway, Suite 440
<PAGE>
West Des Moines, Iowa 50266
1-888-349-4650
515- -

THE DATE OF THIS PROSPECTUS IS
JULY , 1998
<PAGE>
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TABLE OF CONTENTS
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PAGE

DEFINITIONS................................................................ 5

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EXPENSE TABLES............................................................. 3

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SUMMARY.................................................................... 6

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THE COMPANY, ACCOUNT AND INVESTMENT OPTIONS................................ 7

American Equity Investment Life Insurance Company............... 7

American Equity Life Annuity Account............................ 7

Investment Options.............................................. 8

Addition, Deletion or Substitution of Investments............... 10

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DESCRIPTION OF ANNUITY CONTRACT............................................ 10

Issuance of a Contract.......................................... 10

Premiums........................................................ 10

Free-Look Period................................................ 11

Allocation of Premiums.......................................... 11

Variable Accumulated Value...................................... 11

Transfer Privilege.............................................. 12

Partial Withdrawals and Surrenders.............................. 12

Death Benefit Before the Retirement Date........................ 13

Special Transfer and Withdrawal Options......................... 14

Death Benefit After the Retirement Date......................... 14

Proceeds on the Retirement Date................................. 14

Payments........................................................ 14

Modification.................................................... 15

Reports to Owners............................................... 15

Inquiries....................................................... 15

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THE DECLARED INTEREST OPTION............................................... 15

Minimum Guaranteed and Current Interest Rates................... 16

Transfers From Declared Interest Option......................... 16

Payment Deferral................................................ 16

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CHARGES AND DEDUCTIONS..................................................... 17

Surrender Charge (Contingent Deferred Sales Charge)............. 17

Annual Administrative Charge.................................... 18

Transfer Processing Fee......................................... 18

Mortality and Expense Risk Charge............................... 18

Investment Option Expenses...................................... 18

Premium Taxes................................................... 18

Other Taxes..................................................... 18

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PAYMENT OPTIONS............................................................ 19

Election of Options............................................. 19

Description of Options.......................................... 19

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YIELDS AND TOTAL RETURNS................................................... 20

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FEDERAL TAX MATTERS........................................................ 21

Introduction.................................................... 21

Tax Status of the Contract...................................... 22

Taxation of Annuities........................................... 23

Transfers, Assignments or Exchanges of a Contract............... 25

Withholding..................................................... 25

Multiple Contracts.............................................. 25

Taxation of Qualified Plans..................................... 25

Possible Charge for the Company's Taxes......................... 27

Other Tax Consequences.......................................... 27

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DISTRIBUTION OF THE CONTRACTS.............................................. 27

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LEGAL PROCEEDINGS.......................................................... 27

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VOTING RIGHTS.............................................................. 27

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FINANCIAL STATEMENTS....................................................... 28

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STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS...................... 29

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2
<PAGE>
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EXPENSE TABLES
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The following expense information assumes that the entire accumulated value is
variable accumulated value.

<TABLE>
<S> <C>
OWNER TRANSACTION EXPENSES
Sales Charge Imposed on Premiums................ None
Surrender Charge (contingent deferred sales
charge) as a percentage of the amount
surrendered....................................
</TABLE>

<TABLE>
<CAPTION>
CONTRACT YEAR* SURRENDER CHARGE
- -------------------- -----------------
<S> <C>
1.................. 8.5%
2.................. 8
3.................. 7.5
4.................. 7
5.................. 6.5
6.................. 6
7.................. 5
8.................. 3
9.................. 1
10 and after........ 0
</TABLE>

* After the first Contract Year, the owner may make
partial withdrawals of up to 10% of the
accumulated value on the most recent Contract
Anniversary without incurring a surrender charge.
If the Contract is subsequently surrendered during
the Contract Year, a surrender charge will be
applied to the partial withdrawals taken. The
amount that may be withdrawn without incurring a
surrender charge is NOT cumulative from Contract
Year to Contract Year.

<TABLE>
<S> <C>
Transfer Processing Fee......................... None*
</TABLE>

* The Company does not charge a fee for the first twelve transfers in a Contract
Year. The Company may charge $25 for each subsequent transfer in a Contract
Year.

<TABLE>
<S> <C>
ANNUAL ADMINISTRATIVE CHARGE...................... $ 45

ACCOUNT ANNUAL EXPENSES (as a percentage of
average net assets)
Mortality and Expense Risk Charge............... 1.40%
Other Account Expenses.......................... None
Total Account Expenses........................ 1.40%
</TABLE>

ANNUAL INVESTMENT OPTION EXPENSES (as a percentage of average net assets)

<TABLE>
<CAPTION>
ADVISORY OTHER TOTAL
INVESTMENT OPTION FEE EXPENSES EXPENSES
- -------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
EquiTrust Variable Insurance Series Fund
Value Growth....................................
High Grade Bond.................................
High Yield Bond.................................
Blue Chip.......................................
Money Market....................................

................................
................................
..........................................
........................................
...................................

...............................
...................................
............................
...................................
.................................
</TABLE>

The above tables are intended to assist the owner of
a Contract in understanding the costs and expenses
that he or she will bear directly or indirectly. The
tables reflect the

3
<PAGE>
expenses for the Account based on the actual
expenses for each Investment Option for the 1997
fiscal year. For a more complete description of the
various costs and expenses see "Charges and
Deductions" and the prospectus for each Investment
Option which accompany this Prospectus.

EXAMPLES: An owner would pay the following expenses on a $1,000 investment,
assuming a 5% annual return on assets:

1. If the Contract is surrendered or is annuitized at the end of the
applicable time period:

<TABLE>
<CAPTION>
3 5 10
SUBACCOUNT 1 YEAR YEARS YEARS YEARS
- -------------------------------------------------- ------ ------ ------ -------
<S> <C> <C> <C> <C>
Value Growth......................................
High Grade Bond...................................
High Yield Bond...................................
Money Market......................................
Blue Chip.........................................
..................................
..................................
............................................
..........................................
.....................................
.................................
.....................................
..............................
</TABLE>

2. If the Contract is not surrendered or annuitized at the end of the
applicable time period:

The examples provided above assume that no transfer
charges or premium taxes have been assessed. The
examples also assume that the annual administrative
charge is $45 and that the accumulated value per
contract is $10,000, which translates the
administrative charge into an assumed .45% charge
for the purposes of the examples based on a $1,000
investment.

THE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. THE
ASSUMED 5% ANNUAL RATE OF RETURN IS HYPOTHETICAL AND
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE ANNUAL RETURNS, WHICH MAY BE GREATER OR LESS
THAN THIS ASSUMED RATE.

[INFORMATION AND FOOTNOTES ON ADDITIONAL INVESTMENT
OPTIONS TO BE PROVIDED BY AMENDMENT.]

4
<PAGE>
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DEFINITIONS
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<TABLE>
<S> <C>
ACCOUNT.................. American Equity Life Annuity Account.
ACCUMULATED VALUE........ The total amount invested under the Contract. It
is the sum of the values of the Contract in each
Subaccount of the Account plus the value of the
Contract in the Declared Interest Option.
ADMINISTRATIVE OFFICE.... The administrative offices of the Company at 5400
University Avenue, West Des Moines, Iowa 50266.
ANNUITANT................ The person or persons whose life (or lives)
determines the annuity benefits payable under the
Contract and whose death determines the death
benefit.
BENEFICIARY.............. The person to whom the proceeds payable on the
death of the owner/annuitant will be paid.
BUSINESS DAY............. Each day that the New York Stock Exchange is open
for trading, except the day after Thanksgiving,
the Thursday before Christmas (in 1998) and any
day on which the Administrative Office is closed
because of a weather-related or comparable type of
emergency and is unable to segregate orders and
redemption requests received on that day.
THE CODE................. The Internal Revenue Code of 1986, as amended.
COMPANY.................. American Equity Investment Life Insurance Company
located at 5000 Westown Parkway, Suite 440, West
Des Moines, Iowa 50266
CONTRACT ANNIVERSARY..... Same date in each Contract Year as the Contract
Date.
CONTRACT DATE............ The date on which a properly completed application
is received by the Company at the Administrative
Office. It is the date set forth on the data page
of the Contract which is used to determine
Contract Years and Contract Anniversaries.
CONTRACT YEAR............ A twelve-month period beginning on the Contract
Date or on a Contract Anniversary.
DECLARED INTEREST An investment option under the Contract funded by
OPTION.................. the Company's General Account. It is not part of,
nor dependent upon, the investment performance of
the Account.
DUE PROOF OF DEATH....... Proof of death satisfactory to the Company. Such
proof may consist of the following if acceptable
to the Company:
(a) a certified copy of the death certificate;
(b) a certified copy of a court decree reciting a
finding of death; or
(c) any other proof satisfactory to the Company.
FUND..................... An open-end diversified management investment
company in which the Account invests.
GENERAL ACCOUNT.......... The assets of the Company other than those
allocated to the Account or any other separate
account of the Company.
INVESTMENT OPTION........ A separate investment portfolio of a Fund.
NET ACCUMULATED VALUE.... The accumulated value less any applicable
surrender charge.
NON-QUALIFIED CONTRACT... A Contract that is not a "Qualified Contract."
OWNER.................... The person who owns the Contract and who is
entitled to exercise all rights and privileges
provided in the Contract.
QUALIFIED CONTRACT....... A Contract that is issued in connection with plans
that qualify for special federal income tax
treatment under Sections 401, 403(b) or 408 of the
Code.
RETIREMENT DATE.......... The date when the accumulated value will be
applied under a payment option, if the annuitant
is still living.
SEC...................... U.S. Securities and Exchange Commission.
SUBACCOUNT............... A subdivision of the Account, the assets of which
are invested in a corresponding Investment Option.
VALUATION PERIOD......... The period that starts at the close of business
(3:00 p.m. central time) on one Business Day and
ends at the close of business on the next
succeeding Business Day.
WRITTEN NOTICE........... A written request or notice in a form satisfactory
to the Company which is signed by the owner and
received at the Home Office.
</TABLE>

5
<PAGE>
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SUMMARY
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THE CONTRACT ISSUANCE OF A CONTRACT. Contracts may be sold in
connection with retirement plans which may or may
not qualify for special federal tax treatment under
the Code. There is no maximum age for owners on the
Contract date. (See "Issuance of a Contract.")

FREE-LOOK PERIOD. The owner has the right to return
the Contract within 20 days after he or she receives
it. The returned Contract will become void. The
Company will return to the owner an amount equal to
the greater of the premiums paid or the accumulated
value on the date the returned Contract is received
at the Administrative Office plus administrative
charges and charges deducted from the Account. (See
"Free-Look Period.")

PREMIUMS. The minimum amount which the Company will
accept as an initial premium is $1,000 for Qualified
Contracts and $5,000 for non-Qualified Contracts.
Subsequent premiums of not less than $50 may be paid
under the Contract. (See "Premiums.")

ALLOCATION OF PREMIUMS. Premiums under a Contract
will be allocated, as designated by the owner, to
one or more Subaccounts, the Declared Interest
Option, or both. The initial premium will be
allocated to the Money Market Subaccount for a
10-day period following the Contract date. At the
end of that period, the amount in the Money Market
Subaccount will be allocated among the Subaccounts
and the Declared Interest Option in accordance with
the owner's percentage allocation in the
application. The assets of each Subaccount will be
invested solely in a corresponding Investment
Option. The accumulated value, except for amounts in
the Declared Interest Option, will vary according to
the investment performance of the Investment Option
in which the selected Subaccounts are invested.
Interest will be credited to amounts in the Declared
Interest Option at a guaranteed minimum rate of 3%
per year, or a higher current interest rate declared
by the Company. (See "Allocation of Premiums.")

TRANSFERS. On or before the retirement date, the
owner may transfer all or part of the amount in a
Subaccount or the Declared Interest Option to
another Subaccount or the Declared Interest Option
subject to certain restrictions.

The total amount transferred each time must be at
least $100 or the entire amount in the Subaccount,
if less. Transfers out of the Declared Interest
Option must be for no more than 25% of the
accumulated value in that option. No fee is
currently charged for the first twelve transfers
during a Contract year, but the Company may assess a
transfer processing fee of $25 for each subsequent
transfer during a Contract year. (See "Transfer
Privilege.")

PARTIAL WITHDRAWAL. Upon written notice at any time
before the retirement date, the owner may withdraw
part of the accumulated value subject to certain
limitations. (See "Partial Withdrawals.")

SURRENDER. Upon written notice received on or before
the retirement date, the owner may surrender the
Contract and receive its net accumulated value. (See
"Surrender.")
- --------------------------------------------------------------------------------
CHARGES AND DEDUCTIONS The following charges and deductions are assessed
under the Contract:

SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE).
No charge for sales expense is deducted from
premiums at the time premiums are paid. However, if
a Contract has not been in force for nine full
Contract years, upon surrender, partial withdrawal
or the application of the accumulated value to
certain payment options under certain circumstances,
a surrender charge is deducted from the amount
surrendered, withdrawn or from the remaining
accumulated value.

6
<PAGE>
For the first Contract year, the charge is 8.5% of
the amount surrendered. Thereafter, the surrender
charge decreases each subsequent Contract Year. In
no event will the total surrender charge on any
Contract exceed 8.5% of the total premiums paid
under the Contract. (See "Charge for Partial
Withdrawal or Surrender.")

Subject to certain restrictions, for partial
withdrawals in each Contract year after the first
Contract year, up to 10% of the accumulated value on
the most recent Contract Anniversary may be
withdrawn without a current surrender charge. If the
Contract is subsequently surrendered during the
Contract Year, a surrender charge will be applied to
partial withdrawals taken. (See "Amounts Not Subject
to Surrender Charge.") The surrender charge may be
waived as provided in the Contracts. (See "Waiver of
Surrender Charge.")

ANNUAL ADMINISTRATIVE CHARGE. On the Contract date
and on each Contract anniversary prior to the
retirement date, the Company deducts an annual
administrative charge of $45 from the accumulated
value. (See "Annual Administrative Charge.")

MORTALITY AND EXPENSE RISK CHARGE. The Company
deducts a daily mortality and expense risk charge to
compensate it for assuming certain mortality and
expense risks. The charge is deducted from the
assets of the Account at an annual rate of 1.40%
(approximately 1.01% for mortality risk and 0.39%
for expense risks). (See "Mortality and Expense Risk
Charge.")
- --------------------------------------------------------------------------------
ANNUITY PROVISIONS On the retirement date, the accumulated value (less
any applicable surrender charge) will be applied
under a payment option, unless the owner chooses to
receive the net accumulated value in a lump sum.
Payments under these options do not depend upon the
Account's performance. (See "Payment Options.")
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS Generally, a distribution (including a surrender,
partial withdrawal or death benefit payment) may
result in taxable income. In certain circumstances,
a 10% penalty tax may apply. For further discussion
of the federal income status of variable annuity
contracts, see "Federal Tax Matters."
- --------------------------------------------------------------------------------
THE COMPANY, ACCOUNT AND INVESTMENT OPTIONS
- --------------------------------------------------------------------------------
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
The Company is a full service underwriter of annuity
and insurance products which was incorporated in the
State of Iowa on December 19, 1980. The Company
markets its products through a network of over 4,500
independent agents in the states of Alabama,
Arizona, Arkansas, California, Colorado, Delaware,
Florida, Georgia, Idaho, Illinois, Indiana, Iowa,
Kentucky, Louisiana, Maryland, Michigan, Minnesota,
Missouri, Montana, Nebraska, Nevada, North Dakota,
Ohio, Oregon, Pennsylvania, South Carolina, South
Dakota, Texas, Utah, Washington, West Virginia,
Wisconsin and the District of Columbia.
- --------------------------------------------------------------------------------
AMERICAN EQUITY LIFE ANNUITY ACCOUNT
The Account was established by the Company as a
separate account on January 12, 1998. The Account
will receive and invest premiums paid under the
Contracts. In addition, the Account may receive and
invest premiums for any other variable annuity
contracts issued in the future by the Company.

Although the assets in the Account are the property
of the Company, the assets in the Account
attributable to the Contracts are not chargeable
with liabilities arising out of any other business
which the Company may conduct. The assets of the
Account are available to cover the general
liabilities of the Company only to the extent that
the Account's assets exceed its liabilities arising
under the Contracts and any other contracts
supported by the Account. The Company has the right
to transfer to the general account any assets of the
Account which are in excess of such reserves and
other contract liabilities. All obligations arising
under the Contracts are general corporate
obligations of the Company.

The Account currently is divided into fifteen
Subaccounts but may, in the future, include
additional subaccounts. Each Subaccount invests
exclusively in shares of a

7
<PAGE>
single corresponding Investment Option. Income and
realized and unrealized gains or losses from the
assets of each Subaccount are credited to or charged
against that Subaccount without regard to income,
gains or losses from any other Subaccount.

The Account has been registered as a unit investment
trust under the Investment Company Act of 1940 (the
"1940 Act") and meets the definition of a separate
account under the federal securities laws.
Registration with the Securities and Exchange
Commission does not involve supervision of the
management or investment practices or policies of
the Account or the Company by the SEC. The Account
is also subject to the laws of the State of Iowa
which regulate the operations of insurance companies
domiciled in Iowa.
- --------------------------------------------------------------------------------
INVESTMENT OPTIONS The Account invests in shares of the Investment
Options. The Investment Options currently include
the Value Growth Portfolio, High Grade Bond
Portfolio, High Yield Bond Portfolio, Money Market
Portfolio and Blue Chip Portfolio of EquiTrust
Variable Insurance Series Fund.
Portfolio,
Portfolio, Portfolio, Portfolio and
Portfolio of and
the Portfolio,
Portfolio, Portfolio,
Portfolio and Portfolio
of . The Account
may, in the future, provide for additional
investment options. Each Investment Option has its
own investment objectives and the income and losses
for each Investment Option will be determined
separately.

The investment objectives and policies of each
Investment Option are summarized below. There is no
assurance that any Investment Option will achieve
its stated objectives. More detailed information,
including a description of risks and expenses, may
be found in the prospectus for each Investment
Option, which must accompany or precede this
Prospectus and which should be read carefully and
retained for future reference.

EQUITRUST VARIABLE INSURANCE SERIES FUND

VALUE GROWTH PORTFOLIO. This Portfolio seeks long-term capital appreciation.
The Portfolio pursues this objective by investing primarily in equity
securities of companies that the investment adviser believes have a
potential to earn a high return on capital and/or in equity securities that
the investment adviser believes are undervalued by the market place. Such
equity securities may include common stock, preferred stock and securities
convertible or exchangeable into common stock.

HIGH GRADE BOND PORTFOLIO. This Portfolio seeks as high a level of current
income as is consistent with an investment in a high grade portfolio of debt
securities. The Portfolio will pursue this objective by investing primarily
in debt securities rated AAA, AA or A by Standard & Poor's or Aaa, Aa or A
by Moody's Investors Service, Inc. and in securities issued or guaranteed by
the United States government or its agencies or instrumentalities.

HIGH YIELD BOND PORTFOLIO. This Portfolio seeks as a primary objective, as
high a level of current income as is consistent with investment in a
portfolio of fixed-income securities rated in the lower categories of
established rating services. As a secondary objective, the Portfolio seeks
capital appreciation when consistent with its primary objective. The
Portfolio pursues these objectives by investing primarily in fixed-income
securities rated Baa or lower by Moody's Investors Service, Inc. and/or BBB
or lower by Standards & Poor's, or in unrated securities of comparable
quality. AN INVESTMENT IN THIS PORTFOLIO MAY ENTAIL GREATER THAN ORDINARY
FINANCIAL RISK. (See the Fund Prospectus "Principal Risk Factors--Special
Considerations--High Yield Bonds.")

MONEY MARKET PORTFOLIO. This Portfolio seeks maximum current income
consistent with liquidity and stability of principal. The Portfolio will
pursue this objective by investing in high quality short-term money market
instruments. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED
NOR GUARANTEED BY THE U .S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE
MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE.

8
<PAGE>

BLUE CHIP PORTFOLIO. This Portfolio seeks growth of capital and income. The
Portfolio pursues this objective by investing primarily in common stocks of
well-capitalized, established companies. Because this Portfolio may be
invested heavily in particular stocks or industries, an investment in this
Portfolio may entail relatively greater risk of loss.

EquiTrust Variable Insurance Series Fund currently
sells shares only to the Account and to separate
accounts of the Company supporting other variable
life insurance policies and variable annuity
contracts. EquiTrust Variable Insurance Series Fund
may in the future sell shares to other separate
accounts of the Company or its life insurance
company affiliates supporting other variable
products, or to variable life insurance and annuity
separate accounts of insurance companies not
affiliated with the Company. The other Funds
currently sell shares: (a) to the Account as well as
to separate accounts of insurance companies that may
or may not be affiliated with the Company or each
other; and (b) to separate accounts to serve as the
underlying investment for both variable insurance
policies and variable annuity contracts. The Company
currently does not foresee any disadvantages to
owners arising from the sale of shares to support
variable annuity contracts and variable life
insurance policies, or from shares being sold to
separate accounts of insurance companies that may or
may not be affiliated with the Company. However, the
Company will monitor events in order to identify any
material irreconcilable conflicts that might
possibly arise. In the event of such a conflict, it
would determine what action, if any, should be taken
in response to the conflict. In addition, if the
Company believes that a Fund's response to any such
conflicts insufficiently protects owners, it will
take appropriate action on its own, including
withdrawing the Account's investment in that Fund.
(See the Fund prospectuses for more detail.)

Each Fund is registered with the SEC as an open-end,
diversified management investment company. Such
registration does not involve supervision of the
management or investment practices or policies of
the Fund by the SEC.

[Additional information on Investment Options to be
provided by amendment.]

9
<PAGE>
- --------------------------------------------------------------------------------
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
The Company reserves the right, subject to
applicable law, to make additions to, deletions from
or substitutions for the shares that are held in the
Account or that the Account may purchase. If the
shares of an Investment Option are no longer
available for investment or if, in the Company's
judgment, further investment in any Investment
Option should become inappropriate in view of the
purposes of the Account, the Company may redeem the
shares, if any, of that Investment Option and
substitute shares of another Investment Option. The
Company will not substitute any shares attributable
to a Contract's interest in a Subaccount without
notice and prior approval of the SEC and state
insurance authorities, to the extent required by the
1940 Act or other applicable law.

The Company also reserves the right to establish
additional subaccounts of the Account, each of which
would invest in shares corresponding to an
Investment Option or in shares of another investment
company having a specified investment objective. The
Company may, in its sole discretion, establish new
subaccounts or eliminate or combine one or more
Subaccounts if marketing needs, tax considerations
or investment conditions warrant. Any new
subaccounts may be made available to existing
Contract owners on a basis to be determined by the
Company. Subject to obtaining any approvals or
consents required by applicable law, the assets of
one or more Subaccounts may be transferred to any
other Subaccount if, in the sole discretion of the
Company, marketing, tax or investment conditions
warrant.

In the event of any such substitution or change, the
Company may, by appropriate endorsement, change the
Contract to reflect the substitution or change. If
the Company deems it to be in the best interest of
Contract owners and annuitants, and subject to any
approvals that may be required under applicable law,
the Account may be operated as a management
investment company under the 1940 Act, it may be
deregistered under that Act if registration is no
longer required, it may be combined with other
Company separate accounts or its assets may be
transferred to another separate account of the
Company. In addition, the Company may, when
permitted by law, restrict or eliminate any voting
rights of owners or the persons who have such rights
under the Contracts.
- --------------------------------------------------------------------------------
DESCRIPTION OF ANNUITY CONTRACT
- --------------------------------------------------------------------------------
ISSUANCE OF A CONTRACT In order to purchase a Contract, application must be
made to the Company through a licensed
representative of the Company, who is also a
registered representative of a broker-dealer having
a selling agreement with EquiTrust Marketing
Services, Inc. (formerly FBL Marketing Services,
Inc.), the distributor and principal underwriter of
the Contracts, or a broker-dealer having a selling
agreement with such broker/dealer. The Contract Date
will be the date the properly completed application
is received by the Company at its Administrative
Office. If this date is the 29th, 30th or 31st of
any month, the Contract Date will be the 28th of
such month. Contracts may be sold to or in
connection with retirement plans that do not qualify
for special tax treatment as well as retirement
plans that qualify for special tax treatment under
the Code. There is no maximum age for owners on the
Contract date.
- --------------------------------------------------------------------------------
PREMIUMS The minimum initial premium which the Company will
accept is $1,000 for Qualified Contracts and $5,000
for non-Qualified Contracts. Subsequent premium
payments may be paid at any time during the
annuitant's lifetime and before the retirement date
and must be for at least $50.

At the time of application, a premium reminder
notice schedule may be selected based on an annual,
semi-annual, or quarterly payment. The owner will
receive a premium reminder notice at the specified
interval. The owner may change the amount and
schedule of the premium reminder notice. Also, under
the Automatic Payment Plan, the owner can select a
monthly payment schedule pursuant to which

10
<PAGE>
premium payments will be automatically deducted from
a bank account or other source rather than being
"billed." The Contract will not necessarily lapse
even if premiums are not paid.
- --------------------------------------------------------------------------------
FREE-LOOK PERIOD The Contract provides for an initial "free-look"
period. The owner has the right to return the
Contract within 20 days of receiving it. When the
Company receives the returned Contract at its
Administrative Office, it will cancel the Contract
and refund to the owner an amount equal to the
greater of the premiums paid under the Contract or
the sum of the accumulated value as of the date the
returned Contract is received by the Company at its
Administrative Office plus the amount of the annual
administration charge and any charges deducted from
the Account.
- --------------------------------------------------------------------------------
ALLOCATION OF PREMIUMS If the application for a Contract is properly
completed and is accompanied by all the information
necessary to process it, including payment of the
initial premium, the initial premium will be
allocated to the Money Market Subaccount within two
business days of receipt of such premium by the
Company at its Administrative Office. If the
application is not properly completed, the Company
reserves the right to retain the premium for up to
five business days while it attempts to complete the
application. If the application is not complete at
the end of the 5-day period, the Company will inform
the applicant of the reason for the delay and the
initial premium will be returned immediately, unless
the applicant specifically consents to the Company
retaining the premium until the application is
complete.

At the time of application, the owner selects how
the initial premium is to be allocated among the
Subaccounts and the Declared Interest Option. Any
allocation must be for at least 10% of a premium
payment and be in whole percentages.

The initial premium will be allocated to the Money
Market Subaccount for a 10-day period following the
Contract date. After the expiration of the 10-day
period, the amount in the Money Market Subaccount
will be allocated among the Subaccounts and the
Declared Interest Option in accordance with the
owner's percentage allocation in the application.
Any subsequent premiums will be allocated at the end
of the valuation period in which the subsequent
premium is received by the Company in the same
manner, unless the allocation percentages are
changed. Subsequent premiums will be allocated in
accordance with the allocation schedule in effect at
the time the premium payment is received. However,
owners may direct individual payments to a specific
Subaccount or the Declared Interest Option (or any
combination thereof) without changing the existing
allocation schedule.

The allocation schedule may be changed by the owner
at any time by written notice. Changing the
allocation schedule will not change the allocation
of existing accumulated values among the Subaccounts
or the Declared Interest Option.

The accumulated values allocated to a Subaccount
will vary with that Subaccount's investment
experience, and the owner bears the entire
investment risk. Owners should periodically review
their premium allocation schedule in light of market
conditions and their overall financial objectives.
- --------------------------------------------------------------------------------
VARIABLE ACCUMULATED VALUE The variable accumulated value will reflect the
investment experience of the selected Subaccounts,
any premiums paid, any surrenders or partial
withdrawals, any transfers and any charges assessed
in connection with the Contract. There is no
guaranteed minimum variable accumulated value, and,
because a Contract's variable accumulated value on
any future date depends upon a number of variables,
it cannot be predetermined.

CALCULATION OF VARIABLE ACCUMULATED VALUE. The variable accumulated value is
determined at the end of each valuation period. The value will be the aggregate
of the values attributable to the Contract in each of the Subaccounts,
determined for each Subaccount by multiplying that Subaccount's unit value for
the relevant valuation period by the number of Subaccount units allocated to the
Contract.

DETERMINATION OF NUMBER OF UNITS. Any amounts allocated to the Subaccounts will
be converted into Subaccount units. The number of units to be credited to a
Contract is determined by dividing the dollar amount being allocated to a

11
<PAGE>
Subaccount by the unit value for that Subaccount at the end of the valuation
period during which the amount was allocated. The number of units in any
Subaccount will be increased at the end of the valuation period by any premiums
allocated to the Subaccount during the current valuation period and by any
amounts transferred to the Subaccount from another Subaccount or the Declared
Interest Option during the current valuation period. The number of units in any
Subaccount will be decreased at the end of the valuation period by any amounts
transferred from that Subaccount to another Subaccount or the Declared Interest
Option, any amounts withdrawn during the current valuation period, any surrender
charge assessed upon a partial withdrawal or surrender and the annual
administrative charge, if assessed during the current valuation period.

DETERMINATION OF UNIT VALUE. The unit value for each Subaccount's first
valuation period is set at $10. The unit value for a Subaccount is calculated
for each subsequent valuation period by dividing (a) by (b) where:

(a) is the net result of:

1. the value of the net assets in the Subaccount at the end of the
preceding valuation period; plus

2. the investment income, dividends and capital gains, realized or
unrealized, credited to the Subaccount during the current valuation
period; minus

3. the capital losses, realized or unrealized, charged against the
Subaccount during the current valuation period; minus

4. any amount charged for taxes or any amount set aside during the
valuation period as a provision for taxes attributable to the Subaccount;
minus

5. the daily amount charged for mortality and expense risks for each
day of the current valuation period; and

(b) the number of units outstanding at the end of the preceding
valuation period.
- --------------------------------------------------------------------------------
TRANSFER PRIVILEGE Before the retirement date, an owner may transfer
all or part of an amount in a Subaccount to another
Subaccount or the Declared Interest Option at any
time, or transfer up to 25% of an amount in the
Declared Interest Option to one or more Subaccounts.
However, if a transfer request would reduce the
amount in the Declared Interest Option below $1,000,
the owner may transfer the entire amount from the
Declared Interest Option. The minimum transfer
amount must be the lesser of $100 or the entire
amount in that Subaccount or the Declared Interest
Option.

The transfer will be made as of the business day on
or next following the day written notice requesting
such transfer is received at the Administrative
Office. There is no limit on the number of transfers
that can be made among or between Subaccounts or the
Declared Interest Option. (See "Transfers from
Declared Interest Option.")

There is no charge for the first twelve transfers
during a Contract Year. The Company may charge $25
for each subsequent transfer during a Contract Year.
Unless paid in cash, the transfer processing fee
will be deducted on a pro-rata basis from the
Subaccounts or Declared Interest Option to which the
transfer is made.

Transfers may be made based upon instructions given
by telephone, provided the appropriate election has
been made at the time of application or proper
authorization is provided to the Company. The
Company reserves the right to suspend telephone
transfer privileges at any time, for any class of
Contracts, for any reason.
- --------------------------------------------------------------------------------
PARTIAL WITHDRAWALS AND SURRENDERS

PARTIAL WITHDRAWALS. At any time before the retirement date, an owner may make a
partial withdrawal of the accumulated value. The minimum amount which may be
withdrawn is $500; the maximum amount is that which would leave the remaining
accumulated value equal to or less than $2,000. A partial withdrawal request
that would reduce the accumulated value to $2,000 or less will be treated as a
full surrender of the Contract. The Company will withdraw the amount requested
from the accumulated value as of the Business Day on or next following the day
written notice requesting the partial withdrawal is received at the
Administrative Office. Any applicable surrender charge will, at the election of
the owner, be deducted from the remaining accumulated value or be deducted from
the amount withdrawn. (See "Surrender Charge.")

The owner may specify the amount of the partial
withdrawal to be made from certain Subaccounts or
the Declared Interest Option. If the owner does not
so specify, or if

12
<PAGE>
the amount in the designated Subaccount(s) or
Declared Interest Option is inadequate to comply
with the request, the partial withdrawal will be
made from each Subaccount and the Declared Interest
Option based on the proportion that the value in
such Subaccount bears to the total accumulated value
on the date the request is received at the
Administrative Office.

A partial withdrawal may have adverse federal income
tax consequences, including a penalty tax. (See
"Taxation of Annuities.")

SURRENDER. At any time before the retirement date, the owner may request a
surrender of the contract for its net accumulated value. The net accumulated
value will be determined as of the Business Day on or next following the date
written notice requesting surrender and the Contract are received at the
Administrative Office. The net accumulated value will be paid in a lump sum
unless the owner requests payment under a payment option. A surrender may have
adverse federal income tax consequences. (See "Taxation of Annuities.")

SURRENDER AND PARTIAL WITHDRAWAL RESTRICTIONS. The owner's right to make
surrenders and partial withdrawals is subject to any restrictions imposed by
applicable law or employee benefit plan.

RESTRICTIONS ON DISTRIBUTIONS FROM CERTAIN TYPES OF CONTRACTS. There are certain
restrictions on surrenders and partial withdrawals of Contracts used as funding
vehicles for Code Section 403(b) retirement plans. Section 403(b)(11) of the
Code restricts the distribution under Section 403(b) annuity contracts of: (i)
elective contributions made in years beginning after December 31, 1988; (ii)
earnings on those contributions; and (iii) earnings in such years on amounts
held as of the last year beginning before January 1, 1989. Distributions of
those amounts may only occur upon the death of the employee, attainment of age
59 1/2, separation from service, disability or financial hardship. In addition,
income attributable to elective contributions may not be distributed in the case
of hardship.
- --------------------------------------------------------------------------------
DEATH BENEFIT BEFORE THE RETIREMENT DATE
DEATH OF OWNER. If an owner dies prior to the
retirement date, any surviving owner becomes the
sole owner. If there is no surviving owner, the
annuitant becomes the new owner unless the deceased
owner was also the annuitant. If the sole deceased
owner was also the annuitant, then the provisions
relating to the death of an annuitant (described
below) will govern unless the deceased owner was one
of two joint annuitants. (In the latter event, the
surviving annuitant becomes the owner.)

The following options are available to the sole
surviving owners or new owners:

1. If the owner is the spouse of the deceased owner, he or she may
continue the Contract as the new owner.

2. If the owner is not the spouse of the deceased owner:

(a) he or she may elect to receive the net accumulated value in a
single sum within 5 years of the deceased owner's death; or

(b) he or she may elect to receive the net accumulated value paid out
under one of the annuity payment options.

Under either of these options, sole surviving owners
or new owners may exercise all ownership rights and
privileges from the date of the deceased owner's
death until the date that the net accumulated value
is paid.

DEATH OF AN ANNUITANT. If the annuitant dies before
the retirement date, the Company will pay the death
benefit under the Contract to the beneficiary. If
there is no surviving beneficiary, the Company will
pay the death benefit to the owner or the owner's
estate. The death benefit is equal to the greater of
the sum of the premiums paid less the sum of all
partial withdrawal reductions (including applicable
surrender charges), the accumulated value on the
date the Company receives due proof of the
annuitant's death, or the accumulated value on the
most recent Contract Anniversary (plus subsequent
premiums paid and less subsequent partial
withdrawals) if the annuitant's age on the Contract
Date was less than 76. If the annuitant's age on the
Contract Date was 76 or older, the death benefit is
equal to the greater of the sum of the premiums paid
less the sum of all partial withdrawal reductions
(including applicable surrender charges), as of the
date the Company receives due proof of death, or the
accumulated value as of the date the Company
receives due proof of death.

13
<PAGE>
A partial withdrawal reduction is defined as (a) the
death benefit times (b) the amount of the partial
withdrawal divided by (c) the accumulated value
immediately prior to withdrawal.

There is no death benefit payable if the annuitant
dies after the retirement date. The death benefit
will be paid to the beneficiary in a lump sum unless
the owner or beneficiary elects a payment option.

If the annuitant who is also the the owner dies, the
provisions described immediately above apply except
that the beneficiary may only apply the death
benefit payment to an annuity payment option if:

1. payments under the option begin within 1 year of the annuitant's
death; and

2. payments under the option are payable over the beneficiary's life or
over a period not greater than the beneficiary's life expectancy.

If the owner's spouse is the designated beneficiary,
the Contract may be continued with such surviving
spouse as the new owner.
- --------------------------------------------------------------------------------
SPECIAL TRANSFER AND WITHDRAWAL OPTIONS
DOLLAR COST AVERAGING. Dollar Cost Averaging is a
special type of automatic transfer. Under this
option, an owner may periodically transfer a
specified amount in a Subaccount or the Declared
Interest Option to another Subaccount or the
Declared Interest Option.

SYSTEMATIC WITHDRAWALS. The Systematic Withdrawal
option allows for automatic partial withdrawals.
Under this option, specified amounts may be
periodically withdrawn from the Contract's
accumulated value. The owner may specify the
allocation of the withdrawals among the Subaccounts
and Declared Interest Option.

The use of Dollar Cost Averaging and Systematic
Withdrawals are subject to all the same provisions
and limitations as regular transfers and regular
partial withdrawals described above. The Company
prohibits the use of these two options at the same
time.
- --------------------------------------------------------------------------------
DEATH BENEFIT AFTER THE RETIREMENT DATE
If an owner dies on or after the retirement date,
any surviving owner becomes the sole owner. If there
is no surviving owner, the payee receiving annuity
payments becomes the new owner. Such owners will
have the rights of owners during the annuity period,
including the right to name successor payees if the
deceased owner had not previously done so.

Other rules may apply to a Qualified Contract.
- --------------------------------------------------------------------------------
PROCEEDS ON THE RETIREMENT DATE
The retirement date is selected by the owner. For
Non-Qualified Contracts, the retirement date may not
be after the later of the annuitant's age 70 or 10
years after the Contract date. For Qualified
Contracts, the retirement date must be no later than
the annuitant's age 70 1/2 or such other date as
meets the requirements of the Code.

On the retirement date, the proceeds will be applied
under the life income annuity payment option with
ten years guaranteed, unless the owner chooses to
have the proceeds paid under another payment option
or in a lump sum. (See "Payment Options.") If a
payment option is elected, the amount that will be
applied is the accumulated value less any applicable
surrender charge. If a lump sum payment is chosen,
the amount paid will be the net accumulated value on
the retirement date.

The retirement date may be changed subject to these
limitations: the owner's written notice must be
received at the Administrative Office at least 30
days before the current retirement date; the
requested retirement date must be a date that is at
least 30 days after receipt of the written notice;
and the requested retirement date must be no later
than the annuitant's 70th birthday or any earlier
date required by law.
- --------------------------------------------------------------------------------
PAYMENTS

14
<PAGE>
Any surrender, partial withdrawal or death benefit
will usually be paid within seven days of receipt of
a written request, any information or documentation
reasonably necessary to process the request and, in
the case of a death benefit, receipt and filing of
due proof of death. However, payments may be
postponed if:

1. the New York Stock Exchange is closed, other than customary weekend
and holiday closings, or trading on the exchange is restricted as determined
by the SEC; or

2. the SEC permits by an order the postponement for the protection of
owners; or

3. the SEC determines that an emergency exists that would make the
disposal of securities held in the Account or the determination of the value
of the Account's net assets not reasonably practicable.

If a recent check or draft has been submitted, the
Company has the right to delay payment until it has
assured itself that the check or draft has been
honored.

The Company has the right to defer payment of any
surrender, partial withdrawal or transfer from the
Declared Interest Option for up to six months from
the date of receipt of written notice for such a
surrender, withdrawal or transfer. If payment is not
made within 30 days after receipt of documentation
necessary to complete the transaction, or such
shorter period as required by a particular
jurisdiction, interest will be added to the amount
paid from the date of receipt of documentation at 3%
or such higher rate required for a particular state.
- --------------------------------------------------------------------------------
MODIFICATION Upon notice to the owner, the Company may modify the
Contract if:

1. necessary to make the Contract or the Account comply with any law or
regulation issued by a governmental agency to which the Company is subject;
or

2. necessary to assure continued qualification of the Contract under
the Code or other federal or state laws relating to retirement annuities or
variable annuity contracts; or

3. necessary to reflect a change in the operation of the Account; or

4. the modification provides additional Account and/or fixed
accumulation options.

In the event of most such modifications, the Company
will make appropriate endorsement to the Contract.
- --------------------------------------------------------------------------------
REPORTS TO OWNERS At least annually, the Company will mail to each
owner, at such owner's last known address of record,
a report containing the accumulated value (including
the accumulated value in each Subaccount and the
Declared Interest Option) of the Contract, premiums
paid and charges deducted since the last report,
partial withdrawals made since the last report and
any further information required by any applicable
law or regulation.
- --------------------------------------------------------------------------------
INQUIRIES Inquiries regarding a Contract may be made by
writing to the Company at its Home Office.

15
<PAGE>
- --------------------------------------------------------------------------------
THE DECLARED INTEREST OPTION
- --------------------------------------------------------------------------------
An owner may allocate some or all of the premiums
and transfer some or all of the accumulated value to
the Declared Interest Option, which is part of the
General Account and pays interest at declared rates
guaranteed for each Contract year (subject to a
minimum guaranteed interest rate of 3%). The
principal, after deductions, is also guaranteed. The
Company's General Account supports its insurance and
annuity obligations.

The Declared Interest Option has not been, and is
not required to be, registered with the SEC under
the Securities Act of 1933 (the "1933 Act"), and
neither the Declared Interest Option nor the
Company's General Account has been registered as an
investment company under the 1940 Act. Therefore,
neither the Company's General Account, the Declared
Interest Option, nor any interests therein are
generally subject to regulation under the 1933 Act
or the 1940 Act. The disclosures relating to these
accounts which are included in this Prospectus are
for the owner's information and have not been
reviewed by the SEC. However, such disclosures may
be subject to certain generally applicable
provisions of Federal securities laws relating to
the accuracy and completeness of statements made in
prospectuses.

The portion of the accumulated value allocated to
the Declared Interest Option (the "Declared Interest
Option accumulated value") will be credited with
rates of interest, as described below. Since the
Declared Interest Option is part of the General
Account, the Company assumes the risk of investment
gain or loss on this amount. All assets in the
General Account are subject to the Company's general
liabilities from business operations.
- --------------------------------------------------------------------------------
MINIMUM GUARANTEED AND CURRENT INTEREST RATES
The Declared Interest Option cash value is
guaranteed to accumulate at a minimum effective
annual interest rate of 3%. The Company intends to
credit the Declared Interest Option accumulated
value with current rates in excess of the minimum
guarantee but is not obligated to do so. These
current interest rates are influenced by, but do not
necessarily correspond to, prevailing general market
interest rates. Any interest credited on the amounts
in the Declared Interest Option in excess of the
minimum guaranteed rate of 3% per year will be
determined in the sole discretion of the Company.
The owner, therefore, assumes the risk that interest
credited may not exceed the guaranteed rate.

From time to time, the Company establishes new
current interest rates for the Declared Interest
Option under the Contracts. The rate applicable for
a particular Contract is the rate in effect on the
most recent Contract anniversary. This rate remains
unchanged for that Contract until the next Contract
anniversary (i.e., for the entire Contract year).
During each Contract year, the entire Declared
Interest Option accumulated value (including amounts
allocated or transferred to the Declared Interest
Option during that year) is credited with the
interest rate in effect for that Contract year. Once
credited, interest becomes part of the Declared
Interest Option accumulated value.

The Company reserves the right to change the method
of crediting interest from time to time, provided
that such changes do not have the effect of reducing
the guaranteed rate of interest below 3% per annum
or shorten the period for which the current interest
rate applies to less than a Contract year (except
for the year in which such amount is received or
transferred).

CALCULATION OF DECLARED INTEREST OPTION ACCUMULATED VALUE. The Declared Interest
Option accumulated value at any time is equal to amounts allocated and
transferred to it, plus interest credited less amounts deducted, transferred or
withdrawn.
- --------------------------------------------------------------------------------
TRANSFERS FROM DECLARED INTEREST OPTION
An unlimited number of transfers are allowed from
the Declared Interest Option to any or all of the
Subaccounts in each Contract year. The amount
transferred from the Declared Interest Option may
not exceed 25% of the Declared Interest Option
accumulated value on the date of transfer, unless
the balance after the transfer would be less than
$1,000, in which case the entire amount may be
transferred.
- --------------------------------------------------------------------------------
PAYMENT DEFERRAL

16
<PAGE>
The Company has the right to defer payment of any
surrender, partial withdrawal or transfer from the
Declared Interest Option up to six months from the
date of receipt of the written notice for surrender
or transfer.

17
<PAGE>

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CHARGES AND DEDUCTIONS
- --------------------------------------------------------------------------------
SURRENDER CHARGE (CONTINGENT DEFERRED SALES CHARGE)
GENERAL. No charge for sales expenses is deducted
from premiums at the time premiums are paid.
However, within certain time limits described below,
a surrender charge (contingent deferred sales
charge) is deducted from the accumulated value if a
partial withdrawal or surrender is made before the
retirement date. Also, as described below, a
surrender charge may be deducted from amounts
applied to certain payment options.

In the event surrender charges are not sufficient to
cover sales expenses, the loss will be borne by the
Company; conversely, if the amount of such charges
proves more than enough, the excess will be retained
by the Company.

CHARGE FOR PARTIAL WITHDRAWAL OR SURRENDER. During the first nine Contract
years, if a partial withdrawal or surrender is made, the applicable surrender
charge will be as follows:

<TABLE>
<CAPTION>
CONTRACT YEAR IN CHARGE AS PERCENTAGE
WHICH SURRENDER OCCURS OF AMOUNT SURRENDERED
- -------------------------------------- ---------------------
<S> <C>
1..................................... 8.5%
2..................................... 8
3..................................... 7.5
4..................................... 7
5..................................... 6.5
6..................................... 6
7..................................... 5
8..................................... 3
9..................................... 1
10 and after.......................... 0
</TABLE>

No surrender charge is deducted if the partial
withdrawal or surrender occurs after nine full
Contract years.

In no event will the total surrender charges
assessed under a Contract exceed 8.5% of the total
premiums paid under that Contract.

If the Contract is being surrendered, the surrender
charge is deducted from the accumulated value in
determining the net accumulated value. For a partial
withdrawal, the surrender charge may, at the
election of the owner, be deducted from the
accumulated value remaining after the amount
requested is withdrawn or be deducted from the
amount of the withdrawal requested.

AMOUNTS NOT SUBJECT TO SURRENDER CHARGE. For partial withdrawals in each
Contract year after the first Contract year, up to 10% of the accumulated value
on the most recent Contract Anniversary may be withdrawn without a current
surrender charge. If the Contract is subsequently surrendered during the
Contract Year, a surrender charge will be applied to partial withdrawals taken
during that Contract Year, as well as to the amount surrendered.

Any amounts surrendered in excess of 10% of the
accumulated value will be assessed a surrender
charge. This right is not cumulative from Contract
year to Contract year.

SURRENDER CHARGE AT THE RETIREMENT DATE. If any payment option is selected at
the retirement date other than options 2-5 described below (see "Payment
Options"), the surrender charge is assessed against the accumulated value
applied to that option. If payment options 3 or 5 are selected, no surrender
charge is assessed and if payment options 2 or 4 are selected, the surrender
charge is applied by adding the fixed number of years for which payments will be
made under the option to the number of Contract years since the Contract date
and using this sum in the surrender charge table.

WAIVER OF SURRENDER CHARGE. Upon written notice from the owner before the
retirement date, the surrender charge may be waived on any partial withdrawal or
surrender if the annuitant is terminally ill, as defined in the Contract, stays
in a qualified nursing center for 90 days, or is required to satisfy Internal
Revenue Code minimum distribution requirements.
- --------------------------------------------------------------------------------
ANNUAL ADMINISTRATIVE CHARGEOn the Contract date and on each Contract
anniversary prior to the retirement date, the
Company deducts from the accumulated value an annual
administrative charge of $45 to

17
<PAGE>
reimburse it for administrative expenses relating to
the Contract. (If the Contract date falls on
Thanksgiving, the Friday following Thanksgiving or
the weekend following Thanksgiving, the annual
administrative charge will be deducted on the
preceding Business Day.) The charge will be deducted
from each Subaccount and the Declared Interest
Option based on the proportion that the value in
each such Subaccount bears to the total accumulated
value. No annual administrative charge is payable
during the annuity payment period.
- --------------------------------------------------------------------------------
TRANSFER PROCESSING FEE There is no charge for the first twelve transfers
during a Contract Year. The Company may charge $25
for each subsequent transfer during a Contract year.
Unless paid in cash, the transfer processing fee
will be deducted on a pro-rata basis from the
Subaccounts or Declared Interest Option to which the
transfer is made.
- --------------------------------------------------------------------------------
MORTALITY AND EXPENSE RISK CHARGE
To compensate the Company for assuming mortality and
expense risks, the Company deducts a daily mortality
and expense risk charge from the assets of the
Account. The charge is at an annual rate of 1.40%
(daily rate of 0.0038091%) (approximately 1.01% for
mortality risk and 0.39% for expense risk).

The mortality risk the Company assumes is that
annuitants may live for a longer period of time than
estimated when the guarantees in the Contract were
established. Because of these guarantees, each payee
is assured that longevity will not have an adverse
effect on the annuity payments received. The
mortality risk that the Company assumes also
includes a guarantee to pay a death benefit if the
owner/annuitant dies before the retirement date. The
expense risk that the Company assumes is the risk
that the administrative fees and transfer fees may
be insufficient to cover actual future expenses.
- --------------------------------------------------------------------------------
INVESTMENT OPTION EXPENSES Because the Account purchases shares of the
Investment Options, the net assets of the Account
will reflect the investment advisory fees and other
operating expenses incurred by each Investment
Option. (See the Expense Tables in this prospectus
and the accompanying Investment Option
prospectuses.)
- --------------------------------------------------------------------------------
PREMIUM TAXES Currently, no charge or deduction is made under the
Contracts for premium taxes. The Company reserves
the right, however, to deduct such taxes from
accumulated value. Various states and other
governmental entities levy a premium tax, currently
ranging up to 3.5%, on annuity contracts issued by
insurance companies. Premium tax rates are subject
to change, from time to time, by legislative and
other governmental action.
- --------------------------------------------------------------------------------
OTHER TAXES Currently, no charge is made against the Account for
any federal, state or local taxes that the Company
incurs or that may be attributable to the Account or
the Contracts. The Company may, however, make such a
charge in the future for any such tax or economic
burden on the Company resulting from the application
of the tax laws that it determines to be properly
attributable to the Account or Contracts.
- --------------------------------------------------------------------------------
PAYMENT OPTIONS
- --------------------------------------------------------------------------------
The Contract ends on the retirement date, at which
time the accumulated value (or, under certain
options, the net accumulated value) will be applied
under a payment option, unless the owner elects to
receive the net accumulated value in a single sum.
If an election of a payment option has not been
filed at the Administrative Office on the retirement
date, the proceeds will be paid as a life income
annuity with payments for ten years guaranteed.
Prior to the retirement date, the owner can have the
entire net accumulated value applied under a payment
option, or a beneficiary can have the death benefit
applied under a payment option. The Contract must be
surrendered so that the applicable amount can be
paid in a lump sum or a supplemental contract for
the applicable payment option can be issued.

The payment options available are described below.
The term "payee" means a person who is entitled to
receive payment under that option. The payment
options

18
<PAGE>
are fixed, which means that each option has a fixed
and guaranteed amount to be paid during the annuity
payment period that is not in any way dependent upon
the investment experience of the Account.
- --------------------------------------------------------------------------------
ELECTION OF OPTIONS An option may be elected, revoked or changed at any
time before the retirement date while the annuitant
is living. If an election is not in effect at the
annuitant's death or if payment is to be made in one
sum under an existing election, the beneficiary may
elect one of the options after the death of the
owner/annuitant.

An election of payment options and any revocation or
change must be made by written notice and signed by
the owner or beneficiary, as appropriate.

The Company reserves the right to refuse the
election of a payment option other than paying the
proceeds in a lump sum if: 1) the total payments
together would be less than $2,000; 2) each payment
would be less than $20; or 3) the payee is an
assignee, estate, trustee, partnership, corporation
or association.
- --------------------------------------------------------------------------------
DESCRIPTION OF OPTIONS

OPTION 1--INTEREST INCOME. To have the proceeds left
with the Company to earn interest at a rate to be
determined by the Company. Interest will be paid
every month or every 3, 6 or 12 months as the payee
selects. Under this option, the payee may withdraw
part or all of the proceeds at any time.

OPTION 2--INCOME FOR A FIXED TERM. To have the
proceeds paid out in equal installments for a fixed
number of years.

OPTION 3--LIFE INCOME OPTION WITH TERM CERTAIN. To
have the proceeds paid in equal amounts (at
intervals elected by the payee) during the payee's
lifetime with the guarantee that payments will be
made for a period of not less than the specified
number of years. Under this option, at the death of
a payee having no beneficiary (or where the
beneficiary died prior to the payee), the present
value of the current dollar amount on the date of
death of any remaining guaranteed payments will be
paid in one sum to the executors or administrators
of the payee's estate. Also under this option, if
any beneficiary dies while receiving payment, the
present value of the current dollar amount on the
date of death of any remaining guaranteed payments
will be paid in one sum to the executors or
administrators of the beneficiary's estate.
Calculation of such present value shall be no less
than 3%.

OPTION 4--INCOME FOR FIXED AMOUNT. To have the
proceeds paid out in equal installments (at
intervals elected by the payee) of a specific
amount. The payments will continue until all the
proceeds plus interest have been paid out.

OPTION 5--JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY
LIFE INCOME. To have proceeds paid out in equal
installments for as long as two joint payees live.
When one payee dies, installments of two-thirds of
the first installment will be paid to the surviving
payee until he or she dies.

The amount of each payment will be determined from
the tables in the Contract which apply to the
particular option using the payee's age and sex. Age
will be determined from the last birthday at the due
date of the first payment.

ALTERNATE PAYMENT OPTION. In lieu of one of the above options, the cash value,
cash surrender value or death benefit, as applicable, may be settled under any
other payment option made available by the Company or requested and agreed to by
the Company.
- --------------------------------------------------------------------------------
YIELDS AND TOTAL RETURNS
- --------------------------------------------------------------------------------
From time to time, the Company may advertise or
include in sales literature yields, effective yields
and total returns for the Subaccounts. THESE FIGURES
ARE BASED ON HISTORICAL EARNINGS AND DO NOT INDICATE
OR PROJECT FUTURE PERFORMANCE. Each Subaccount may,
from time to time, advertise or include in sales
literature performance relative to certain
performance rankings and indices compiled by
independent organizations.

19
<PAGE>
More detailed information as to the calculation of
performance, as well as comparisons with unmanaged
market indices, appears in the Statement of
Additional Information.

Effective yields and total returns for the
Subaccounts are based on the investment performance
of the corresponding Investment Option. Each
Investment Option's performance in part reflects the
Investment Option's expenses. (See the accompanying
Investment Option Prospectuses.)

The yield of the Money Market Subaccount refers to
the annualized income generated by an investment in
the Subaccount over a specified seven-day period.
The yield is calculated by assuming that the income
generated for that seven-day period is generated
each seven-day period over a 52-week period and is
shown as a percentage of the investment. The
effective yield is calculated similarly but, when
annualized, the income earned by an investment in
the Subaccount is assumed to be reinvested. The
effective yield will be slightly higher than the
yield because of the compounding effect of this
assumed reinvestment.

The yield of a Subaccount (except the Money Market
Subaccount) refers to the annualized income
generated by an investment in the Subaccount over a
specified 30-day or one-month period. The yield is
calculated by assuming that the income generated by
the investment during that 30-day or one-month
period is generated each period over a 12-month
period and is shown as a percentage of the
investment.

The total return of a Subaccount refers to return
quotations assuming an investment under a Contract
has been held in the Subaccount for various periods
of time. When a Subaccount has been in operation for
one, five and ten years, respectively, the total
return for these periods will be provided. For
periods prior to the date the Account commenced
operations, performance information will be
calculated based on the performance of the
Investment Options and the assumption that the
Subaccounts were in existence for the same periods
as those indicated for the Investment Options, with
the level of Contract charges that were in effect at
the inception of the Subaccounts for the Contracts.

The average annual total return quotations represent
the average annual compounded rates of return that
would equate an initial investment of $1,000 under a
Contract to the redemption value of that investment
as of the last day of each of the periods for which
total return quotations are provided. Average annual
total return information shows the average
percentage change in the value of an investment in
the Subaccount from the beginning date of the
measuring period to the end of that period. This
standardized version of average annual total return
reflects all historical investment results less all
charges and deductions applied against the
Subaccount (including any surrender charge that
would apply if an owner terminated the Contract at
the end of each period indicated, but excluding any
deductions for premium taxes).

In addition to the standard version described above,
total return performance information computed on two
different non-standard bases may be used in
advertisements or sales literature. Average annual
total return information may be presented, computed
on the same basis as described above, except
deductions will not include the surrender charge. In
addition, the Company may, from time to time,
disclose cumulative total return for Contracts
funded by Subaccounts.

From time to time, yields, standard average annual
total returns and non-standard total returns for the
Fund's Investment Options may be disclosed,
including such disclosures for periods prior to the
date the Account commenced operations.

Non-standard performance data will only be disclosed
if the standard performance data for the required
periods is also disclosed. For additional
information regarding the calculation of other
performance data, please refer to the Statement of
Additional Information.

20
<PAGE>
In advertising and sales literature, the performance
of each Subaccount may be compared to the
performance of other variable annuity issuers in
general, or to the performance of particular types
of variable annuities investing in mutual funds or
investment portfolios of mutual funds with
investment objectives similar to each of the
Subaccounts. Lipper Analytical Services, Inc.
("Lipper") and the Variable Annuity Research Data
Service ("VARDS") are independent services which
monitor and rank the performance of variable annuity
issuers in each of the major categories of
investment objectives on an industry-wide basis.

Lipper's rankings include variable life insurance
issuers as well as variable annuity issuers. VARDS
rankings compare only variable annuity issuers. The
performance analyses prepared by Lipper and VARDS
each rank such issuers on the basis of total return,
assuming reinvestment of distributions, but do not
take sales charges, redemption fees or certain
expense deductions at the separate account level
into consideration. In addition, VARDS prepares risk
rankings, which consider the effects of market risk
on total return performance. This type of ranking
provides data as to which funds provide the highest
total return within various categories of funds
defined by the degree of risk inherent in their
investment objectives.

Advertising and sales literature may also compare
the performance of each Subaccount to the Standard &
Poor's Index of 500 Common Stocks, a widely used
measure of stock performance. This unmanaged index
assumes the reinvestment of dividends but does not
reflect any "deduction" for the expense of operating
or managing an investment portfolio. Other
independent ranking services and indices may also be
used as a source of performance comparison.

The Company may also report other information
including the effect of tax-deferred compounding on
a Subaccount's investment returns, or returns in
general, which may be illustrated by tables, graphs
or charts. All income and capital gains derived from
Subaccount investments are reinvested and can lead
to substantial long-term accumulation of assets,
provided that the underlying Portfolio's investment
experience is positive.
- --------------------------------------------------------------------------------
FEDERAL TAX MATTERS
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE
- --------------------------------------------------------------------------------
INTRODUCTION This discussion is not intended to address the tax
consequences resulting from all of the situations in
which a person may be entitled to or may receive a
distribution under the annuity contract issued by
the Company. Any person concerned about these tax
implications should consult a competent tax adviser
before initiating any transaction. This discussion
is based upon the Company's understanding of the
present Federal income tax laws, as they are
currently interpreted by the Internal Revenue
Service. No representation is made as to the
likelihood of the continuation of the present
federal income tax laws or of the current
interpretation by the Internal Revenue Service.
Moreover, no attempt has been made to consider any
applicable state or other tax laws.

The Contract may be purchased on a non-qualified
basis ("Non-Qualified Contract") or purchased and
used in connection with plans qualifying for
favorable tax treatment ("Qualified Contract"). The
Qualified Contract is designed for use by
individuals whose premium payments are comprised
solely of proceeds from and/or contributions under
retirement plans which are intended to qualify as
plans entitled to special income tax treatment under
Sections 401(a), 403(b), or 408 of the Internal
Revenue Code of 1986, as amended (the "Code"). The
ultimate effect of federal income taxes on the
amounts held under a Contract, or annuity payments,
and on the economic benefit to the owner, the
annuitant or the beneficiary depends on the type of
retirement plan, on the tax and employment status of
the individual concerned, and on the Company's tax
status. In addition, certain requirements must be
satisfied in purchasing a Qualified Contract with
proceeds from a tax-qualified plan and receiving
distributions from a Qualified Contract in order to
continue receiving favorable tax treatment.
Therefore, purchasers of Qualified Contracts should
seek

21
<PAGE>
competent legal and tax advice regarding the
suitability of a Contract for their situation, the
applicable requirements and the tax treatment of the
rights and benefits of a Contract. The following
discussion assumes that Qualified Contracts are
purchased with proceeds from and/or contributions
under retirement plans that qualify for the intended
special federal income tax treatment.
- --------------------------------------------------------------------------------
TAX STATUS OF THE CONTRACT

DIVERSIFICATION REQUIREMENTS. Section 817(h) of the Code provides that separate
account investments underlying a contract must be "adequately diversified" in
accordance with Treasury regulations in order for the contract to qualify as an
annuity contract under Section 72 of the Code. The Account, through each
Portfolio of the Fund, intends to comply with the diversification requirements
prescribed in regulations under Section 817(h) of the Code, which affect how the
assets in the various Subaccounts may be invested. Although the Company does not
have control over the Fund in which the Account invests, we believe that each
Portfolio in which the Account owns shares will meet the diversification
requirements, and therefore, the Contract will be treated as an annuity contract
under the Code.

In certain circumstances, owners of variable annuity
contracts may be considered the owners, for federal
income tax purposes, of the assets of the separate
account used to support their contracts. In those
circumstances, income and gains from the separate
account assets would be includible in the variable
annuity contract owner's gross income. Several years
ago, the IRS stated in published rulings that a
variable contract owner will be considered the owner
of separate account assets if the contract owner
possesses incident of ownership in those assets,
such as the ability to exercise investment control
over the assets. More recently, the Treasury
Department announced, in connection with the
issuance of regulations concerning investment
diversification, that those regulations "do not
provide guidance concerning the circumstances in
which investor control of the investments of a
segregated asset account may cause the investor
(I.E., the contract owner), rather than the
insurance company, to be treated as the owner of the
assets in the account." This announcement also
states that guidance would be issued by way of
regulations or rulings on the "extent to which
policyholders may direct their investments to
particular subaccounts without being treated as
owners of the underlying assets."

The ownership rights under the Contracts are similar
to, but different in certain respects from, those
described by the Service in rulings in which it was
determined that contract owners were not owners of
separate account assets. For example, the owner of a
Contract has the choice of one or more Subaccounts
in which to allocate premiums and Contract values,
and may be able to transfer among Subaccounts more
frequently than in such rulings. These differences
could result in the contract owner being treated as
the owner of the assets of the Account. In addition,
the Company does not know what standards will be set
forth, if any, in the regulations or rulings which
the Treasury Department has stated it expects to
issue. The Company therefore reserves the right to
modify the Contract as necessary to attempt to
prevent the contract owner from being considered the
owner of the assets of the Account.

REQUIRED DISTRIBUTIONS. In order to be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires any
Non-Qualified Contract to provide that: (a) if any owner dies on or after the
retirement date but prior to the time the entire interest in the contract has
been distributed, the remaining portion of such interest will be distributed at
least as rapidly as under the method of distribution being used as of the date
of that owner's death; and (b) if any owner dies prior to the annuity
commencement date, the entire interest in the Contract will be distributed
within five years after the date of the owner's death. These requirements will
be considered satisfied as to any portion of the owner's interest which is
payable to or for the benefit of a "designated beneficiary" and which is
distributed over the life of such beneficiary or over a period not extending
beyond the life expectancy of that beneficiary, provided that such distributions
begin within one year of that owner's death. The owner's "designated
beneficiary" is the person designated by such owner as a beneficiary and to whom
ownership of the contract passes by reason of death and must be a natural
person. However, if the owner's "designated beneficiary" is the surviving spouse
of the owner, the Contract may be continued with the surviving spouse as the new
owner.

The Non-Qualified Contracts contain provisions which
are intended to comply with the requirements of
Section 72(s) of the Code, although no regulations
interpreting

22
<PAGE>
these requirements have yet been issued. The Company
intends to review such provisions and modify them if
necessary to assure that they comply with the
requirements of Code Section 72(s) when clarified by
regulation or otherwise.

Other rules may apply to Qualified Contracts.

The following discussion assumes that the Contracts
will qualify as annuity contracts for federal income
tax purposes.
- --------------------------------------------------------------------------------
TAXATION OF ANNUITIES

IN GENERAL. Section 72 of the Code governs taxation of annuities in general. The
Company believes that an owner who is a natural person is not taxed on increases
in the value of a Contract until distribution occurs by withdrawing all or part
of the cash value (e.g., partial surrenders and surrenders) or as annuity
payments under the payment option elected. For this purpose, the assignment,
pledge, or agreement to assign or pledge any portion of the cash value (and in
the case of a Qualified Contract, any portion of an interest in the qualified
plan) generally will be treated as a distribution. The taxable portion of a
distribution (in the form of a single sum payment or payment option) is taxable
as ordinary income.

The owner of any annuity contract who is not a
natural person generally must include in income any
increase in the excess of the cash value over the
"investment in the contract" during the taxable
year. There are some exceptions to this rule, and a
prospective owner that is not a natural person may
wish to discuss these with a competent tax adviser.

The following discussion generally applies to
Contracts owned by natural persons.

PARTIAL WITHDRAWALS. In the case of a partial withdrawal from a Qualified
Contract, under Section 72(e) of the Code, a ratable portion of the amount
received is taxable, generally based on the ratio of the "investment in the
contract" to the participant's total accrued benefit or balance under the
retirement plan. The "investment in the contract" generally equals the portion,
if any, of any premium payments paid by or on behalf of the individual under a
Contract which was not excluded from the individual's gross income. For
Contracts issued in connection with qualified plans, the "investment in the
contract" can be zero. Special tax rules may be available for certain
distributions from Qualified Contracts.

In the case of a partial withdrawal from a
Non-Qualified Contract, under Section 72(e) amounts
received are generally first treated as taxable
income to the extent that the cash value immediately
before the partial withdrawal exceeds the
"investment in the contract" at that time. Any
additional amount withdrawn is not taxable.

In the case of a surrender under a Qualified or
Non-Qualified Contract, the amount received
generally will be taxable only to the extent it
exceeds the "investment in the contract."

Section 1035 of the Code provides that no gain or
loss shall be recognized on the exchange of one
annuity contract for another. If the surrendered
contract was issued prior to August 14, 1982, the
tax rules formerly provided that the surrender was
taxable only to the extent the amount received
exceeds the owner's investment in the contract will
continue to apply to amounts allocable to
investments in that contract prior to August 14,
1982. In contrast, contracts issued after January
19, 1985 in a Code Section 1035 exchange are treated
as new contracts for purposes of the penalty and
distribution-at-death rules. Special rules and
procedures apply to Section 1035 transactions.
Prospective owners wishing to take advantage of
Section 1035 should consult their tax adviser.

ANNUITY PAYMENTS. Although tax consequences may vary depending on the payment
option elected under an annuity contract, under Code Section 72(b), generally
(prior to recovery of the investment in the contract) gross income does not
include that part of any amount received as an annuity under an annuity contract
that bears the same ratio to such amount as the investment in the contract bears
to the expected return at the annuity starting date. Stated differently, prior
to recovery of the investment in the contract, generally, there is no tax on the
amount of each payment which represents the same ratio that the "investment in
the contract" bears to the total expected value of the annuity payments for the
term of the payment; however, the remainder of each income payment is taxable.
After the "investment in the contract" is recovered, the full amount of any
additional annuity payments is taxable.

23
<PAGE>
TAXATION OF DEATH BENEFIT PROCEEDS. Amounts may be distributed from a Contract
because of the death of the owner. Generally, such amounts are includible in the
income of the recipient as follows: (i) if distributed in a lump sum, they are
taxed in the same manner as a surrender of the contract or (ii) if distributed
under a payment option, they are taxed in the same way as annuity payments. For
these purposes, the investment in the Contract is not affected by the owner's
death. That is, the investment in the Contract remains the amount of any
purchase payments which were not excluded from gross income.

PENALTY TAX ON CERTAIN WITHDRAWALS. In the case of a distribution pursuant to a
Non-Qualified Contract, there may be imposed a federal penalty tax equal to 10%
of the amount treated as taxable income. In general, however, there is no
penalty on distributions:

1. made on or after the taxpayer reaches age 59 1/2;

2. made on or after the death of the holder (or if the holder is not an
individual, the death of the primary annuitant);

3. attributable to the taxpayer becoming disabled;

4. as part of a series of substantially equal periodic payments (not
less frequently than annually) for the life (or life expectancy) of the
taxpayer or the joint lives (or joint life expectancies) of the taxpayer and
his or her designated beneficiary;

5. made under certain annuities issued in connection with structured
settlement agreements;

6. made under an annuity contract that is purchased with a single
premium when the retirement date is no later than a year from purchase of
the annuity and substantially equal periodic payments are made, not less
frequently than annually, during the annuity payment period; and

7. any payment allocable to an investment (including earnings thereon)
made before August 14, 1982 in a contract issued before that date.

Other tax penalties may apply to certain
distributions under a Qualified Contract.

POSSIBLE CHANGES IN TAXATION. In past years, legislation has been proposed that
would have adversely modified the federal taxation of certain annuities. For
example, one such proposal would have changed the tax treatment of non-qualified
annuities that did not have "substantial life contingencies" by taxing income as
it is credited to the annuity. Although as of the date of this prospectus
Congress is not considering any legislation regarding taxation of annuities,
there is always the possibility that the tax treatment of annuities could change
by legislation or other means (such as IRS regulations, revenue rulings,
judicial decisions, etc.). Moreover, it is also possible that any change could
be retroactive (that is, effective prior to the date of the change).
- --------------------------------------------------------------------------------
TRANSFERS, ASSIGNMENTS OR EXCHANGES OF A CONTRACT
A transfer of ownership of a Contract, the
designation of an annuitant, payee or other
beneficiary who is not also the owner, the selection
of certain retirement dates or the exchange of a
Contract may result in certain tax consequences to
the owner that are not discussed herein. An owner
contemplating any such transfer, assignment,
selection or exchange of a Contract should contact a
competent tax adviser with respect to the potential
tax effects of such a transaction.
- --------------------------------------------------------------------------------
WITHHOLDING Pension and annuity distributions generally are
subject to withholding for the recipient's federal
income tax liability at rates that vary according to
the type of distribution and the recipient's tax
status. Recipients, however, generally are provided
the opportunity to elect not to have tax withheld
from distributions. Effective January 1, 1993,
distributions from certain qualified plans are
generally subject to mandatory withholding. Certain
states also require withholding of state income tax
whenever federal income tax is withheld.
- --------------------------------------------------------------------------------
MULTIPLE CONTRACTS All non-qualified deferred annuity contracts entered
into after October 21, 1988 that are issued by the
Company (or its affiliates) to the same owner during
any calendar year are treated as one annuity
Contract for purposes of determining the amount
includible in gross income under Section 72(e). This
rule could affect the time when income is taxable
and the amount that might be subject to the 10%
penalty tax described above. In addition, the
Treasury Department has specific authority to issue
regulations that prevent the avoidance of Section
72(e) through the serial purchase of annuity
contracts or otherwise. There may also be other
situations in which the Treasury may conclude that
it would be

24
<PAGE>
appropriate to aggregate two or more annuity
contracts purchased by the same owner. Accordingly,
a Contract owner should consult a competent tax
adviser before purchasing more than one annuity
contract.
- --------------------------------------------------------------------------------
TAXATION OF QUALIFIED
PLANS

25
<PAGE>
The Contracts are designed for use with several
types of qualified plans. The tax rules applicable
to participants in these qualified plans vary
according to the type of plan and the terms and
conditions of the plan itself. Special favorable tax
treatment may be available for certain types of
contributions and distributions. Adverse tax
consequences may result from contributions in excess
of specified limits; distributions prior to age
59 1/2 (subject to certain exceptions);
distributions that do not conform to specified
commencement and minimum distribution rules;
aggregate distributions in excess of a specified
annual amount; and in other specified circumstances.
Therefore, no attempt is made to provide more than
general information about the use of the Contracts
with the various types of qualified retirement
plans. Contract owners, the annuitants, and
beneficiaries are cautioned that the rights of any
person to any benefits under these qualified
retirement plans may be subject to the terms and
conditions of the plans themselves, regardless of
the terms and conditions of the Contract, but the
Company shall not be bound by the terms and
conditions of such plans to the extent such terms
contradict the Contract, unless the Company
consents. Some retirement plans are subject to
distribution and other requirements that are not
incorporated into our Contract administration
procedures. Owners, participants and beneficiaries
are responsible for determining that contributions,
distributions and other transactions with respect to
the Contracts comply with applicable law. Brief
descriptions follow of the various types of
qualified retirement plans available in connection
with a Contract. The Company will amend the Contract
as necessary to conform it to the requirements of
the Code.

CORPORATE PENSION AND PROFIT SHARING PLANS AND H.R. 10 PLANS. Section 401(a) of
the Code permits corporate employers to establish various types of retirement
plans for employees, and permits self-employed individuals to establish these
plans for themselves and their employees. These retirement plans may permit the
purchase of the Contracts to accumulate retirement savings under the plans.
Adverse tax or other legal consequences to the plan, to the participant or both
may result if this Contract is assigned or transferred to any individual as a
means to provide benefit payments, unless the plan complies with all legal
requirements applicable to such benefits prior to transfer of the Contract.
Employers intending to use the Contract with such plans should seek competent
advice.

INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
"Individual Retirement Annuity" or "IRA". These IRAs are subject to limits on
the amount that may be contributed, the persons who may be eligible and on the
time when distributions may commence. Also, distributions from certain other
types of qualified retirement plans may be "rolled over" on a tax-deferred basis
into an IRA. Sales of the Contract for use with IRAs may be subject to special
requirements of the Internal Revenue Service. Employers may establish Simplified
Employee Pension (SEP) Plans to provide IRA contributions on behalf of their
employees.

SIMPLE RETIREMENT ACCOUNTS. Beginning January 1, 1997, certain small employers
may establish Simple Retirement Accounts as provided by Section 408(p) of the
Code, under which employees may elect to defer up to $6,000 (as increased for
cost of living adjustments) as a percentage of compensation. The sponsoring
employer is required to make a matching contribution on behalf of contributing
employees. Distributions from a Simple Retirement Account are subject to the
same restrictions that apply to IRA distributions and are taxed as ordinary
income. Subject to certain exceptions, premature distributions prior to age
59 1/2 are subject to a 10% penalty tax, which is increased to 25% if the
distribution occurs within the first two years after the commencement of the
employee's participation in the plan. The failure of the Simple Retirement
Account to meet Code requirements may result in adverse tax consequences.

TAX SHELTERED ANNUITIES. Section 403(b) of the Code allows employees of certain
Section 501(c)(3) organizations and public schools to exclude from their gross
income the premiums paid, within certain limits, on a Contract that will provide
an annuity for the employee's retirement. These premiums may be subject to FICA
(social security) tax. Code section 403(b)(11) restricts the distribution under
Code section 403(b) annuity contracts of: (1) elective contributions made in
years beginning after December 31, 1988; (2) earnings on those contributions;
and (3) earnings in such years on amounts held as of the last year beginning
before January 1, 1989. Distribution of those amounts may only occur upon death
of the employee, attainment of age 59 1/2, separation from service, disability,
or financial hardship. In addition, income attributable to elective
contributions may not be distributed in the case of hardship.

RESTRICTIONS UNDER QUALIFIED CONTRACTS. Other restrictions with respect to the
election, commencement or distribution of benefits may apply under Qualified
Contracts or under the terms of the plans in respect of which Qualified
Contracts are issued.

26
<PAGE>
- --------------------------------------------------------------------------------
POSSIBLE CHARGE FOR
THE COMPANY'S TAXES
At the present time, the Company makes no charge
to the Subaccounts for any Federal, state or
local taxes that the Company incurs which may be
attributable to such Subaccounts or the
Contracts. The Company, however, reserves the
right in the future to make a charge for any
such tax or other economic burden resulting from
the application of the tax laws that it
determines to be properly attributable to the
Subaccounts or to the Contracts.
- --------------------------------------------------------------------------------
OTHER TAX CONSEQUENCES As noted above, the foregoing comments about the
Federal tax consequences under these Contracts are
not exhaustive, and special rules are provided with
respect to other tax situations not discussed in the
Prospectus. Further, the Federal income tax
consequences discussed herein reflect the Company's
understanding of current law and the law may change.
Federal estate and state and local estate,
inheritance and other tax consequences of ownership
or receipt of distributions under a Contract depend
on the individual circumstances of each owner or
recipient of the distribution. A competent tax
adviser should be consulted for further information.
- --------------------------------------------------------------------------------
DISTRIBUTION OF THE CONTRACTS
- --------------------------------------------------------------------------------
The Contracts will be offered to the public on a
continuous basis. The Company does not anticipate
discontinuing the offering of the Contracts, but
reserves the right to discontinue the offering.
Applications for Contracts are solicited by agents
who are licensed by applicable state insurance
authorities to sell the Company's variable annuity
contracts and who are also registered
representatives of broker/dealers having selling
agreements with EquiTrust Marketing Services, Inc.
(formerly FBL Marketing Services, Inc.), distributor
and principal underwriter of the Contracts or
broker/dealers having selling agreements with such
broker/dealers. The broker/ dealers are registered
with the SEC under the Securities Exchange Act of
1934 as broker/dealers and are members of the
National Association of Securities Dealers, Inc.
The Company may pay broker/dealers with selling
agreements up to an amount equal to 8.5% of the
premiums paid under a Contract during the first
Contract year, 3% of the premiums paid in the second
through ninth Contract years and 1% of the premiums
paid in the tenth and subsequent Contract years. The
Company also may pay other distribution expenses
such as production incentive bonuses, agent's
insurance and pension benefits, and agency expense
allowances. These distribution expenses do not
result in any additional charges against the
Contracts that are not described under "Charges and
Deductions."
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- --------------------------------------------------------------------------------
There are no legal proceedings to which the Account
is a party or the assets of the Account are subject.
The Company is not involved in any litigation that
is of material importance in relation to its total
assets or that relates to the Account.
- --------------------------------------------------------------------------------
VOTING RIGHTS
- --------------------------------------------------------------------------------
In accordance with its view of current applicable
law, the Company will vote the Fund shares held in
the Account at regular and special shareholder
meetings of the Funds, in accordance with
instructions received from persons having voting
interests in the corresponding Subaccounts. If,
however, the 1940 Act or any regulation thereunder
should be amended, or if the present interpretation
thereof should change, or the Company otherwise
determines that it is allowed to vote the shares in
its own right, it may elect to do so.

The number of votes that an owner has the right to
instruct will be calculated separately for each
Subaccount, and may include fractional votes. An
owner holds a voting interest in each Subaccount to
which the accumulated value is allocated. The owner
only has voting interest prior to the retirement
date. For each owner, the

27
<PAGE>
number of votes attributable to a Subaccount will be
determined by dividing the accumulated value
attributable to that owner's Contract in that
Subaccount by the net asset value per share of the
Investment Option in which that Subaccount invests.

The number of votes of an Investment Option which
are available to the owner will be determined as of
the date coincident with the date established by
that Investment Option for determining shareholders
eligible to vote at the relevant meeting for that
Fund. Voting instructions will be solicited by
written communication prior to such meeting in
accordance with procedures established by each Fund.
Each owner having a voting interest in a Subaccount
will receive proxy materials and reports relating to
any meeting of shareholders of the Investment Option
in which that Subaccount invests.

Fund shares as to which no timely instructions are
received and shares held by the Company in a
Subaccount as to which no owner has a beneficial
interest will be voted in proportion to the voting
instructions which are received with respect to all
Contracts participating in that Subaccount. Voting
instructions to abstain on any item to be voted upon
will be applied to reduce the total number of votes
eligible to be cast on a matter.
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The consolidated balance sheets of the Company at
December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in
stockholders' equity and cash flows for the years
then ended, and for the period from December 28,
1995 (date operation commenced) through December 31,
1995, as well as the related Report of Independent
Auditors are contained in the Statement of
Additional Information.

It is anticipated that the Variable Account will
commence operations in 1998; accordingly, no
financial statements currently exist.

[Financial statements to be provided by amendment.]

28
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF
CONTENTS
- --------------------------------------------------------------------------------

PAGE

<TABLE>
<S> <C>
GENERAL INFORMATION ABOUT THE COMPANY............................................................. 1
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
ADDITIONAL CONTRACT PROVISIONS.................................................................... 1
</TABLE>

<TABLE>
<S> <C> <C>
The Contract......................................................... 1
</TABLE>

<TABLE>
<S> <C> <C>
Incontestability..................................................... 1
</TABLE>

<TABLE>
<S> <C> <C>
Misstatement of Age or Sex........................................... 1
</TABLE>

<TABLE>
<S> <C> <C>
Non-Participation.................................................... 1
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
CALCULATION OF YIELDS AND TOTAL RETURNS........................................................... 1
</TABLE>

<TABLE>
<S> <C> <C>
Money Market Subaccount Yields....................................... 1
</TABLE>

<TABLE>
<S> <C> <C>
Other Subaccount Yields.............................................. 3
</TABLE>

<TABLE>
<S> <C> <C>
Average Annual Total Returns......................................... 4
</TABLE>

<TABLE>
<S> <C> <C>
Other Total Returns.................................................. 6
</TABLE>

<TABLE>
<S> <C> <C>
Effect of the Administrative Charge on Performance Data.............. 6
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
LEGAL MATTERS..................................................................................... 6
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
EXPERTS........................................................................................... 7
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
OTHER INFORMATION................................................................................. 7
</TABLE>

- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
FINANCIAL STATEMENTS.............................................................................. 7
</TABLE>

- --------------------------------------------------------------------------------

29
<PAGE>
AMERICAN EQUITY INVESTMENT
LIFE INSURANCE COMPANY
5000 WESTOWN PARKWAY, SUITE 440
WEST DES MOINES, IOWA 50266
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
5000 Westown Parkway, Suite 440
West Des Moines, Iowa 50266
1-888-349-6502

AMERICAN EQUITY LIFE ANNUITY ACCOUNT
INDIVIDUAL FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT

This Statement of Additional Information contains
information in addition to the information described
in the Prospectus for the flexible premium deferred
variable annuity contract (the "Contract") offered
by American Equity Investment Life Insurance Company
(the "Company"). This Statement of Additional
Information is not a Prospectus, and it should be
read only in conjunction with the Prospectuses for
the Contract, EquiTrust Variable Insurance Series
Fund, and . The Prospectuses are dated
the same as this Statement of Additional
information. You may obtain a copy of the
Prospectuses by writing or calling us at our address
or phone number shown above.

July , 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS

<TABLE>
<S> <C>
GENERAL INFORMATION ABOUT THE COMPANY............................................................... 1
ADDITIONAL CONTRACT PROVISIONS...................................................................... 1
The Contract...................................................................................... 1
Incontestability.................................................................................. 1
Misstatement of Age or Sex........................................................................ 1
Non-Participation................................................................................. 1
CALCULATION OF YIELDS AND TOTAL RETURNS............................................................. 1
Money Market Subaccount Yields.................................................................... 1
Other Subaccount Yields........................................................................... 3
Average Annual Total Returns...................................................................... 4
Other Total Returns............................................................................... 6
Effect of the Administrative Fee On Performance Data.............................................. 6
LEGAL MATTERS....................................................................................... 6
EXPERTS............................................................................................. 7
OTHER INFORMATION................................................................................... 7
FINANCIAL STATEMENTS................................................................................ 7
</TABLE>
<PAGE>
GENERAL INFORMATION ABOUT THE COMPANY

One hundred percent of the outstanding Common Stock, par value $1 per share, of
the Company is owned by American Equity Investment Life Holding Company (the
"Holding Company"). As of January 15, 1998, no persons or entities beneficially
owned more than 25% of the Common Stock, par value $1 per share, of the Holding
Company. The Holding Company develops, markets, issues and administers annuity
contracts and life insurance policies through the Company. The principal offices
of the Company and American Equity Investment Life Holding Company are at 5000
Westown Parkway, Suite 440, West Des Moines, Iowa 50266.

ADDITIONAL CONTRACT PROVISIONS

THE CONTRACT

The application and all other attached papers are part of the Contract. The
statements made in the application are deemed representations and not
warranties. The Company will not use any statement in defense of a claim or to
void the Contract unless it is contained in the application.

INCONTESTABILITY

The Company will not contest the Contract from its Contract date.

MISSTATEMENT OF AGE OR SEX

If the age or sex of the annuitant has been misstated, the amount which will
be paid is that which the proceeds would have purchased at the correct age and
sex.

NON-PARTICIPATION

The Contracts are not eligible for dividends and will not participate in the
Company's divisible surplus.

CALCULATION OF YIELDS AND TOTAL RETURNS

From time to time, the Company may disclose yields, total returns and other
performance data pertaining to the contracts for a Subaccount. Such performance
data will be computed, or accompanied by performance data computed, in
accordance with the standards defined by the SEC.

MONEY MARKET SUBACCOUNT YIELDS

From time to time, advertisements and sales literature may quote the current
annualized yield of the Money Market Subaccount for a seven-day period in a
manner which does not take into consideration any realized or unrealized gains
or losses on shares of the Money Market Investment Option or on its portfolio
securities.

This current annualized yield is computed by
determining the net change (exclusive or realized
gains and losses on the sale of securities and
unrealized appreciation and depreciation) at the end
of the seven-day period in the value of a
hypothetical account under a Contract having a
balance of 1 unit of the Money Market Subaccount at
the beginning of the period, dividing such net
change in account value by the value of the
hypothetical account at the beginning of the period
to determine the base period return, and annualizing
this quotient on a 365-day basis.

1
<PAGE>
The net change in account value reflects: 1) net
income from the Investment Option attributable to
the hypothetical account; and 2) charges and
deductions imposed under the Contract which are
attributable to the hypothetical account. The
charges and deductions include the per unit charges
for the hypothetical account for: 1) the annual
administrative fee and 2) the mortality and expense
risk charge. For purposes of calculating current
yields for a Contract, an average per unit
administrative fee is used based on the $45
administrative fee deducted at the beginning of each
Contract Year. Current Yield will be calculated
according to the following formula:

<TABLE>
<S> <C> <C>
Current Yield = ((NCS - ES)/UV) X (365/7)
Where:
NCS = the net change in the value of the Investment Option (exclusive or realized gains
or losses on the sale of securities and unrealized appreciation and depreciation)
for the seven-day period attributable to a hypothetical account having a balance of
1 subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the seven-day
period.
UV = the unit value for the first day of the seven-day period.

Effective Yield = (1 + ((NCS-ES)/UV))365/7 - 1
Where:
NCS = the net change in the value of the Investment Option (exclusive of realized gains
or losses on the sale of securities and unrealized appreciation and depreciation)
for the seven-day period attributable to a hypothetical account having a balance of
1 subaccount unit.
ES = per unit expenses attributable to the hypothetical account for the seven-day
period.
UV = the unit value for the first day of the seven-day period.
</TABLE>

Because of the charges and deductions imposed under
the Contract, the yield for the Money Market
Subaccount will be lower than the yield for the
Money Market Investment Option.

2
<PAGE>
The current and effective yields on amounts held in
the Money Market Subaccount normally will fluctuate
on a daily basis. THEREFORE, THE DISCLOSED YIELD FOR
ANY GIVEN PAST PERIOD IS NOT AN INDICATION OR
REPRESENTATION OF FUTURE YIELDS OR RATES OF RETURN.
The Money Market Subaccount's actual yield is
affected by changes in interest rates on money
market securities, average portfolio maturity of the
Money Market Investment Option, the types of quality
of portfolio securities held by the Money Market
Investment Option and the Money Market Investment
Option operating expenses. Yields on amounts held in
the Money Market Subaccount may also be presented
for periods other than a seven-day period.

OTHER SUBACCOUNT YIELDS

From time to time, sales literature or advertisements may quote the current
annualized yield of one or more of the subaccounts (except the Money Market
Subaccount) for a Contract for 30-day or one month periods. The annualized yield
or a subaccount refers to income generated by the subaccount during a 30-day or
one-month period is assumed to be generated each period over a 12-month period.

The yield is computed by: 1) dividing net investment
income of the Investment Option attributable to the
subaccount units less subaccount expenses for the
period; by 2) the maximum offering price per unit on
the last day of the period times the daily average
number of units outstanding for the period; by 3)
compounding that yield for a six-month period; and
by 4) multiplying that result by 2. Expenses
attributable to the subaccount include the annual
administrative fee and the mortality and expense
risk charge. The yield calculation assumes an
administrative fee of $45 per year per Contract
deducted at the beginning of each Contract year. For
purposes of calculating the 30-day or one-month
yield, an average administrative fee per dollar of
Contract value in the Account issued to determine
the amount of the charge attributable to the
subaccount for the 30-day or one-month period. The
30-day or one-month yield is calculated according to
the following formula:

<TABLE>
<S> <C> <C>
Yield = 2 X ((NI - ES)/(U X UV)) + 1)6 - 1
Where:
NI = net income of the Investment Option for the 30-day or one-month period attributable
to the subaccount's units.
ES = expenses of the subaccount for the 30-day or one-month period.
U = the average number of units outstanding.
</TABLE>

3
<PAGE>
<TABLE>
<S> <C> <C>
UV = the unit value at the close of the last day in the 30-day one-month period.
</TABLE>

Because of the charges and deductions imposed under
the Contracts, the yield for the subaccount will be
lower that the yield for the corresponding
Investment Option.

The yield on the amounts held in the subaccounts
normally will fluctuate over time. THEREFORE, THE
DISCLOSED YIELD FOR ANY GIVEN PAST PERIOD IS NOT AN
INDICATION OR REPRESENTATION OF FUTURE YIELDS OR
RATES OF RETURN. A subaccount's actual yield is
affected by the types and quality of Investment
Option securities held by the corresponding
Investment Option and its operating expenses.

Yield calculations do not take into account the
Surrender Charge under the Contract equal to 1% to
8.5% of the amount withdrawn or surrendered during
the first nine Contract years. For partial
withdrawals in each Contract year after the first
Contract year, up to 10% of the accumulated value on
the most recent Contract Anniversary may be
withdrawn without a current surrender charge.

AVERAGE ANNUAL TOTAL RETURNS

From time to time, sales literature or advertisements may also quote average
annual total returns for one or more of the subaccounts for various periods of
time.

When a subaccount has been in operation for 1, 5 and
10 years, respectively, the average annual total
return for these periods will be provided. Average
annual total returns for other periods of time may,
from time to time, also be disclosed.

Standard average annual total returns represent the
average annual compounded rates of return that would
equate an initial investment of $1,000 under a
Contract to the redemption value of that investment
as of the last day of each of the periods. The
ending date for each period for which total return
quotations are provided will be for the most recent
month-end practicable, considering the type and
media of the communication that will be stated in
the communication.

Standard average annual total returns will be
calculated using subaccount unit values which the
Company calculates on each valuation day based on
the performance of the subaccount's underlying
portfolio, the deductions for the mortality and
expense risk charge, and the annual administrative
fee. The calculation assumes that the administrative
fee is $45 per year per Contract deducted at the
beginning of each Contract year. For purposes of
calculating average annual total return, an average
per dollar administrative fee attributable to the
hypothetical account for the period is used. The

4
<PAGE>
calculation also assumes surrender of the Contract
at the end of the period for the return quotation.
Total returns will therefore reflect a deduction of
the surrender charge for any period less than ten
years. The total return will then be calculated
according to the following formula:

<TABLE>
<S> <C> <C>
TR = ((ERV/P)/N)-1
Where:
TR = the average annual total return net of subaccount recurring charges.
EHV = the ending redeemable value (net of any applicable surrender charge) of the
hypothetical account at the end of the period.
P = a hypothetical initial payment of $1,000.
N = the number of years in the period.
</TABLE>

From time to time, sales literature or
advertisements may also quote average annual total
returns for periods prior to the date the Account
commenced operations. Such performance information
for the subaccounts will be calculated based on the
performance of the Investment Option and the
assumption that the subaccounts were in existence
for the same periods as those indicated for the
Investment Option, with the level of Contract
charges that were in effect at the inception of the
subaccounts.

Such average annual total return information for the
Subaccounts is as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DATE OF INCEPTION OF
FOR THE 1-YEAR PERIOD FOR THE 5-YEAR PERIOD INVESTMENT OPTION
SUBACCOUNT ENDED 12/31/97 ENDED 12/31/97 TO 12/31/97
- ----------------------------------- ----------------------- ----------------------- -------------------------
<S> <C> <C> <C>
Value Growth.......................
High Grade Bond....................
High Yield Bond....................
Money Market (1)...................

Blue Chip (2)......................
</TABLE>

- ------------------------
(1) The Money Market Portfolio commenced operations on February 20, 1990.

(2) The Blue Chip Portfolio commenced operations on October 15, 1990.

5
<PAGE>
OTHER TOTAL RETURNS

From time to time, sales literature or advertisements may also quote average
annual total returns that do not reflect the surrender charge. These are
calculated in exactly the same way as average annual total returns described
above, except that the ending redeemable value of the hypothetical account for
the period is replaced with an ending value for the period that does not take
into account any charges on amounts surrendered or withdrawn.

The Company may disclose cumulative total returns in
conjunction with the standard formats described
above. The cumulative total returns will be
calculated using the following formula:

<TABLE>
<S> <C> <C>
CTR = (ERV/P) - 1
Where:
CTR = The cumulative total return net of subaccount recurring charges for the period.
ERV = The ending redeemable value of the hypothetical investment at the end of the
period.
P = A hypothetical single payment of $1,000.
</TABLE>

EFFECT OF THE ADMINISTRATIVE FEE ON PERFORMANCE DATA

The Contract provides for a $45 annual administrative fee to be deducted
annually at the beginning of each Contract Year, from the subaccounts and the
Declared Interest Option based, on the proportion that the value of each such
account bears to the total cash value. For purposes of reflecting the
administrative fee in yield and total return quotations, the annual charge is
converted into a per-dollar per-day charge based on the average contract value
in the Account of all Contracts on the last day of the period for which
quotations are provided. The per-dollar per-day average charge will then be
adjusted to reflect the basis upon which the particular quotation is calculated.

LEGAL MATTERS

All matters relating to Iowa law pertaining to the Contracts, including the
validity of the Contracts and the Company's authority to issue the Contracts,
have been passed upon by Whitfield & Eddy, P.L.C., Legal Counsel of the Company.
Sutherland, Asbill & Brennan LLP, Washington D.C. has provided advice on certain
matters relating to the federal securities laws.

6
<PAGE>
EXPERTS

The consolidated financial statements of the Company at December 31, 1997 and
1996 and for the years then ended, and for the period from December 28, 1995
(date operations commenced) through December 31, 1995, appearing herein, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.

[Financial statements to be provided by amendment.]

OTHER INFORMATION

A registration statement has been filed with the SEC under the Securities Act of
1933 as amended, with respect to the Contracts discussed in this Statement of
Additional Information. Not all the information set forth in the registration
statement, amendments and exhibits thereto has been included in this Statement
of Additional Information. Statements contained in this Statement of Additional
Information concerning the content of the Contracts and other legal instruments
are intended to be summaries. For a complete statement of the terms of these
documents, reference should be made to the instruments filed with the SEC.

FINANCIAL STATEMENTS

The Company's financial statements included in this Statement of Additional
Information should be considered only as bearing on the Company's ability to
meet its obligations under the Contracts. They should not be considered as
bearing on the investment performance of the assets held in the Account.

[Financial statements to be provided by amendment.]

7
<PAGE>
PART C
OTHER INFORMATION
<PAGE>
PART C
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements

All required financial statements are included in
Part B.

(b) Exhibits

<TABLE>
<C> <C> <S>
(1) *Certified resolution of the board of directors of American Equity Investment Life Insurance
Company (the "Company") establishing American Equity Life Annuity Account (the "Account").
(2) Not Applicable.
(3) Underwriting agreement among the Company, the Account and EquiTrust Marketing Services, Inc.
("EquiTrust Marketing").
(4) *(a) Contract Form
(5) (a) Contract Application.
(6) *(a) Articles of Incorporation of the Company.
*(b) By-Laws of the Company.
(7) Not Applicable.
(8) Participation agreement between the registrant and the Company.
(9) *Opinion and Consent of Whitfield & Eddy, P.L.C.
(10) (a) Consent of Sutherland, Asbill & Brennan LLP
(b) Consent of Ernst & Young LLP.
*(c) Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Consulting Actuary.
(11) Not Applicable.
(12) Not Applicable.
(13) Not Applicable.
(14) *Powers of Attorney.
</TABLE>

- ------------------------
* Attached as an exhibit.

ITEM 25. DIRECTORS AND OFFICERS OF THE COMPANY

Incorporated herein by reference to the prospectus in the Form S-6
registration statement (File No. 33-45815) for certain variable life insurance
contracts issued by the Company filed with the Commission on February 6, 1998.

ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT

The registrant is a segregated asset account of the Company and is therefore
owned and controlled by the Company. All of the Company's outstanding voting
common stock is owned by American Equity Investment Life Holding Company. This
Company and its affiliates are described more fully in the prospectus included
in this registration statement. An organizational chart is set forth on the
following page.

SEE ORGANIZATIONAL CHART ON FOLLOWING PAGE

1
<PAGE>
ORGANIZATIONAL CHART

2
<PAGE>
ITEM 27. NUMBER OF CONTRACT OWNERS

As of the date of the prospectus included in this registration statement, no
contracts have been sold.

ITEM 28. INDEMNIFICATION

Article XII of the Company's By-Laws provides for the indemnification by the
Company of any person who is a party or who is threatened to be made a party to
any threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the Company) by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Article
XII also provides for the indemnification by the Company of any person who was
or is a party or is threatened to be made a party to any threatened, pending, or
completed action or suit by or in the right of the Company to procure a judgment
in its favor by reason of the fact that he is or was a director or officer of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or another enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, except that no indemnification will be made in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Company
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.

Insofar as indemnification for liability arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange
Commission such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person
of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such
director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling
precedent, submit to a court of appropriate
jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the
final adjudication of such issue.

ITEM 29. PRINCIPAL UNDERWRITER

(a) EquiTrust Marketing Services, Inc. is the registrant's principal
underwriter and also serves as the principal underwriter of certain variable
life insurance contracts issued by Farm Bureau Life Variable Account, Farm
Bureau Life Variable Account II and the Company.

(b) Officers and Directors of EquiTrust Marketing Services, Inc.

<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS* POSITIONS AND OFFICES WITH THE COMPANY
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
Stephen M. Morain General Counsel and Assistant Secretary, Iowa Farm Bureau Federation;
Senior Vice President, General Counsel and Director General Counsel, Secretary and Director, Farm Bureau Management
Corporation; Senior Vice President, General Counsel and Director, FBL
Financial Group, Inc.; Senior Vice President and General Counsel, Farm
Bureau Life Insurance Company and other affiliates of the foregoing.
Holds various positions with affiliates of the foregoing. Director,
Computer Aided Design Software, Inc., and Iowa Business Development
Finance Corporation Chairman, Edge Technologies, Inc.
</TABLE>

3
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS* POSITIONS AND OFFICES WITH THE COMPANY
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
William J. Oddy Chief Operating Officer, FBL Financial Group, Inc., Farm Bureau Life
Chief Operating Officer and Director Insurance Company, Western Farm Bureau Life Insurance Company and other
affiliates of the foregoing. Holds various positions with affiliates of
the foregoing.
Dennis M. Marker Investment Vice President, Administration, FBL Financial Group, Inc.
Investment Vice President, Administration, Secretary Holds various positions with affiliates of the foregoing.
and Director
Richard D. Warming Chief Investment Officer and Assistant Treasurer, Farm Bureau Life
Chief Investment Officer and Director Insurance Company, FBL Financial Group, Inc., Western Farm Bureau Life
Insurance Company and other affiliates of the foregoing. Holds various
positions with affiliates of the foregoing.
Thomas R. Gibson Chief Executive Officer and Director, FBL Financial Group, Inc.; Chief
Chief Executive Officer and Director Executive Officer, Farm Bureau Life Insurance Company, Western Farm
Bureau Life Insurance Company and other affiliates of the foregoing.
Holds various positions with affiliates of the foregoing.
Timothy J. Hoffman Chief Property/Casualty Officer, FBL Financial Group, Inc.; Vice
Vice President and Director President, Farm Bureau Life Insurance Company, Western Farm Bureau Life
Insurance Company and other affiliates of the foregoing. Holds various
positions with affiliates of the foregoing.
James W. Noyce Chief Financial Officer, Farm Bureau Life Insurance Company, FBL
Chief Financial Officer, Treasurer and Director Financial Group, Inc., Western Farm Bureau Life Insurance Company and
other affiliates of the foregoing. Holds various positions with
affiliates of the foregoing.
Thomas E. Burlingame Vice President - Associate General Counsel, FBL Financial Group, Inc.
Vice President - Associate General Counsel and and FBL Investment Advisory Services, Inc.
Director
F. Walter Tomenga Vice President - Corporate Affairs and Marketing Services, FBL Financial
Vice President and Director Group, Inc. Holds various positions with affiliates of the foregoing.
Lynn E. Wilson Vice President - Life Sales, FBL Financial Group, Inc. Holds various
President and Director positions with affiliates of the foregoing.
Sue A. Cornick Market Conduct and Mutual Funds Vice President and Assistant Secretary,
Market Conduct and Mutual Funds Vice President and FBL Investment Advisory Services, Inc., FBL Money Market Fund, Inc.,
Assistant Secretary FBL Series Fund, Inc. and FBL Variable Insurance Series Fund.
Kristi Rojohn Assistant Mutual Funds Manager and Assistant Secretary, FBL Investment
Assistant Mutual Funds Manager and Assistant Secretary Advisory Services, Inc.; Assistant Secretary, FBL Money Market Fund,
Inc., FBL Series Fund, Inc. and FBL Variable Insurance SeriesFund.
Elaine A. Followwill Compliance Assistant and Assistant Secretary, FBL Investment Advisory
Compliance Assistant and Assistant Secretary Services, Inc.; Assistant Secretary, FBL Money Market Fund, Inc., FBL
Series Fund, Inc. and FBL Variable Insurance Series Fund
Roger F. Grefe Investment Management Vice President, FBL Financial Group, Inc. and FBL
Investment Management Vice President Investment Advisory Services, Inc.
Lou Ann Sandburg Vice President, Investments, FBL Financial Group, Inc. and FBL
Vice President, Investments Investment Advisory Services, Inc.
Robert Rummelhart Fixed Income Vice President, FBL Financial Group, Inc. and FBL
Fixed Income Vice President Investment Advisory Services, Inc.
</TABLE>

4
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS ADDRESS* POSITIONS AND OFFICES WITH THE COMPANY
- ------------------------------------------------------ ------------------------------------------------------------------------
<S> <C>
Charles T. Happel Portfolio Manager, FBL Investment Advisory Services, Inc.
Portfolio Manager
Laura Kellen Beebe Portfolio Manager, FBL Investment Advisory Services, Inc.
Portfolio Manager
</TABLE>

- ------------------------
* The principal business address of all of the persons listed above is 5400
University Avenue, West Des Moines, Iowa 50266.

ITEM 30. LOCATION BOOKS AND RECORDS

All of the accounts, books, records or other documents required to be kept
by Section 31(a) of the Investment Company Act of 1940 and rules thereunder, are
maintained by the Company at 5000 Westown Parkway, Suite 440, West Des Moines,
Iowa 50266 or 5400 University Avenue, West Des Moines, Iowa 50266.

ITEM 31. MANAGEMENT SERVICES

All management contracts are discussed in Part A or Part B of this
registration statement.

ITEM 32. UNDERTAKINGS AND REPRESENTATIONS

(a) The registrant undertakes that it will file a post-effective amendment
to this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
16 months old for as long as purchase payments under the contracts offered
herein are being accepted.

(b) The registrant undertakes that it will include either (1) as part of any
application to purchase a contract offered by the prospectus, a space that an
applicant can check to request a statement of additional information, or (2) a
post card or similar written communication affixed to or included in the
prospectus that the applicant can remove and send to the Company for a statement
of additional information.

(c) The registrant undertakes to deliver any statement of additional
information and any financial statements required to be made available under
this Form N-4 promptly upon written or oral request to the Company at the
address or phone number listed in the prospectus.

(d) The Company represents that in connection with its offering of the
contracts as funding vehicles for retirement plans meeting the requirements of
Section 403(b) of the Internal Revenue Code of 1986, it is relying on a no-
action letter dated November 28, 1988, to the American Council of Life Insurance
(Ref. No. IP-6-88) regarding Sections 22(e), 27(c)(1), and 27(d) of the
Investment Company Act of 1940, and that paragraphs numbered (1) through (4) of
that letter will be complied with.

(e) The Company represents that the aggregate charges under the Contracts
are reasonable in relation to the services rendered, the expenses expected to be
incurred and the risks assumed by the Company.

5
<PAGE>
SIGNATURES

As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, American Equity Life Annuity Account has duly caused this
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of West Des Moines, State of Iowa, on the 12th day
of January, 1998.

American Equity Investment Life
Insurance Company
American Equity Life Annuity Account

By: /s/ D.J. NOBLE

-----------------------------------
D.J. Noble
CHAIRMAN
American Equity Investment Life
Insurance Company

Attest: /s/ TERRY REIMER

---------------------------------
Terry A. Reimer
CHIEF FIANNCIAL OFFICER
American Equity Investment Life
Insurance Company

As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities indicated on the dates
set forth below.

SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------

/s/ D.J. NOBLE Chairman and Director
- ----------------------------------- [Principal Executive January 12, 1998
D.J. Noble Officer]

Chief Financial Officer
/s/ TERRY A. REIMER and Director [Principal
- ----------------------------------- Financial Officer] January 12, 1998
Terry A. Reimer [Principal Accounting
Officer]

/s/ JAMES M. GERLACH
- ----------------------------------- Director January 12, 1998
James M. Gerlach

/s/ DAVID S. MULCAHY
- ----------------------------------- Director January 12, 1998
David S. Mulcahy

/s/ WILLIAM J. ODDY
- ----------------------------------- Director January 12, 1998
William J. Oddy

/s/ DEBRA J. RICHARDSON
- ----------------------------------- Director January 12, 1998
Debra J. Richardson

/s/ JACK W. SCHROEDER
- ----------------------------------- Director January 12, 1998
Jack W. Schroeder

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, American Equity
Life Annuity Account, has duly caused this Registration Statement to be signed
on its behalf by the undersigned thereunto duly authorized in the City of West
Des Moines, State of Iowa, on the 12th day of January, 1998.

American Equity Life Annuity Account
(Registrant)

American Equity Investment Life
Insurance Company
(Depositor)

By: /s/ D.J. NOBLE

-----------------------------------
D.J. Noble
CHAIRMAN
American Equity Investment Life
Insurance Company
<PAGE>
EXHIBIT INDEX

<TABLE>
<C> <S> <C>
1 Certified resolution of the board of directors of American Equity Investment Life
Insurance Company establishing American Equity Life Annuity Account.
4(a) Contract Form.
6(a) Articles of Incorporation of the Company.
6(b) By-Laws of the Company.
9 Opinion and Consent of Whitfield & Eddy, P.L.C.
10(c) Opinion and Consent of Christopher G. Daniels, FSA, MSAA, Consulting Actuary.
14 Powers of Attorney.
</TABLE>

<PAGE>

RESOLUTIONS ADOPTED BY
THE BOARD OF DIRECTORS OF
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
January 12, 1998

RESOLVED, that the Board of Directors of American Equity Investment Life
Insurance Company (the "Company"), hereby establishes a separate account,
pursuant to the provisions of Section 508A.1 of the Insurance Laws of the State
of Iowa, designated American Equity Life Annuity Account (hereinafter the
"Variable Account"), for the following use and purposes, and subject to such
conditions as hereinafter set forth; and

FURTHER RESOLVED, that the Variable Account is established for the purpose of
providing for the issuance by the Company of certain variable life insurance
policies (the "Policies"), and shall constitute a funding medium to support
reserves under such Policies issued by the Company; and

FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to the Variable Account shall be credited to or charged
against the Variable Account, without regard to other income, gains or losses of
the Company; and

FURTHER RESOLVED, that the assets of the Variable Account equal to the reserves
and other liabilities under the Policies and any other variable life insurance
policies issued through the Variable Account may not be charged with liabilities
arising out of any other business the Company may conduct; and

FURTHER RESOLVED, that the Variable Account shall be divided into investment
subaccounts (the "Subaccounts"), each of which shall invest in the shares of a
mutual fund portfolio, and net premiums under the Policies shall be allocated
among the Subaccounts in accordance with instructions received from owners of
the Policies; and

FURTHER RESOLVED, that Executive Committee of the Board of Directors be, and
hereby is, authorized to add or remove any Subaccount of the Variable Account or
add or remove any mutual fund portfolio as may hereafter be deemed necessary or
appropriate; and

FURTHER RESOLVED, that the income, gains and losses, realized or unrealized,
from assets allocated to each Subaccount of the Variable Account shall be
credited to or charged against such Subaccount of the Variable Account, without
regard to other income, gains or losses of any other Subaccount of the Variable
Account; and

FURTHER RESOLVED, that Executive Committee be, and it hereby is, authorized to
invest such amount or amounts of the Company's cash in the Variable Account or
in any Subaccount thereof or in any mutual fund portfolio as may be deemed
necessary or

1
<PAGE>

appropriate to facilitate the commencement of the Variable Account's and/ or the
mutual fund portfolio's operations and/ or to meet any minimum capital
requirements under the Investment Company Act of 1940, as amended (the "1940
Act"); and

FURTHER RESOLVED, that the Executive Committee (hereafter, the "empowered
officers") and each of them, with full power to act without the others, be, and
they hereby are, severally authorized to transfer cash from time to time from
the Company's general account to the Variable Account, or from the Variable
Account to the general account, as deemed necessary or appropriate and
consistent with the terms of the Policies; and

FURTHER RESOLVED, that the Board of Directors of the Company reserves the right
to change the designation of the Variable Account hereafter to such other
designation as it may deem necessary or appropriate; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, with such assistance from the Company's independent
certified public accountants, legal counsel and independent consultants or
others as they may require, be, and they hereby are, severally authorized and
directed to take all action necessary to: (a) register the Policies under the
Variable Account as a unit investment trust under the 1940 Act; (b) register the
Policies under the Securities Act of 1933 (the "1933 Act), and (c) take all
other actions that are necessary in connection with the offering of the Policies
for sale and the operation of the Variable Account in order to comply with the
1940 Act, the 1933 Act, the 1933 Securities Exchange Act of 1934 and other
applicable Federal laws, including the filing of any registration statements,
any undertakings, no-action requests, consents, applications for exemptions from
the 1940 Act or other applicable federal laws, and any amendments to the
foregoing as the empowered officers of the Company shall deem necessary and
appropriate; and

FURTHER RESOLVED, that the empowered officers, and each of them, with full
power to act without the others, are severally authorized to prepare, execute
and cause to be filed with the Securities and Exchange Commission on behalf
of the Variable Account, and by the Company as sponsor and depositor, a
Notification of Registration on Form N-8A, and a registration statement on
Form N-4 registering the Variable Account under the 1940 Act and registering
the Policies under the 1933 Act, and any and all amendments to the foregoing
on behalf of the Variable Account and the Company and on behalf of and as
attorneys-in-fact for the empowered officers and/ or any other officer of the
Company; and

FURTHER RESOLVED, that Debra J. Richardson, Vice President and Secretary (and
any successor to such position), is duly appointed as agent for service under
any such registration statement, duly authorized to receive communications and
notices from the Securities and Exchange Commission with respect thereto; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are severally authorized on behalf of the Variable
Account and on behalf of the Company to take any and all such action that each
of them may deem

2
<PAGE>

necessary or advisable in order to offer and sell the Policies, including any
registrations, filings and qualifications both of the Company, its officers,
agents and employees, and of the Policies, under the insurance and securities
laws of any of the states of the United States of America or other
jurisdictions, and in connection therewith to prepare, execute, deliver and file
all such applications, requests, undertakings, reports, covenants, resolutions,
applications for exemptions, consents to service of process and other papers and
instruments as may be required under such laws, and to take any and all further
action which such officers or legal counsel of the Company may deem necessary or
desirable (including entering into whatever agreements and contracts may be
necessary) in order to maintain such registrations or qualifications for as long
as the officers or legal counsel deem it to be in the best interests of the
Variable Account and the Company; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and they hereby are, severally authorized in the
names and on behalf of the Variable Account and the Company: (a) to execute and
file irrevocable written consents on the part of the Variable Account and of the
Company to be used in such states wherein such consents to service of process
may be required under the insurance or securities laws therein in connection
with the registration or qualification of the Policies; and (b) to appoint the
appropriate state official, or such other person as may be allowed by insurance
or securities laws, agent of the Variable Account and of the Company for the
purpose of receiving and accepting process; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, be, and hereby are, severally authorized to establish
procedures under which the Company will provide voting rights for owners of the
Policies with respect to securities owned by the Variable Account; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute such
agreement or agreements as deemed necessary and appropriate (a) with a qualified
entity under which such entity will be appointed principal underwriter and
distributor for the Policies, (b) with one or more qualified entities to provide
administrative services in connection with the establishment and maintenance of
the Variable Account and the administration of the Policies, and (c) with the
designated mutual fund portfolios and/ or the principal underwriter and
distributor of such mutual fund portfolios for the purchase and redemption of
portfolio shares; and

FURTHER RESOLVED, that the empowered officers and each of them, with full power
to act without the others, are hereby severally authorized to execute and
deliver such agreements and other documents and do such acts and things as each
of them may deem necessary or desirable to carry out the foregoing resolutions
and the intent and purposes thereof.

<PAGE>

- --------------------------------------------------------------------------------

NON-PARTICIPATING
FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY POLICY

RETIREMENT BENEFIT PAYABLE ON THE RETIREMENT DATE. DEATH BENEFIT PAYABLE AT
DEATH BEFORE THE RETIREMENT DATE. FLEXIBLE PREMIUMS PAYABLE FOR THE
ANNUITANT'S LIFE OR UNTIL THE RETIREMENT DATE. THE ACCUMULATED VALUE IN THE
VARIABLE ACCOUNT IS BASED ON THE INVESTMENT EXPERIENCE OF THAT ACCOUNT, AND
MAY INCREASE OR DECREASE DAILY. IT IS NOT GUARANTEED AS TO DOLLAR AMOUNT. THE
VARIABLE FEATURES OF THIS POLICY ARE DESCRIBED ON PAGES 9 AND 10.

American Equity Investment Life Insurance Company will pay the benefits of
this policy subject to all of its terms.

RIGHT TO EXAMINE POLICY

The owner may cancel this policy by delivering or mailing a written notice or
sending a telegram or fax to the agent through whom it was purchased or the Farm
Bureau Life Insurance Company, 5400 University Avenue, West Des Moines, Iowa
50266-5997 and by returning the policy or contract before midnight of the
twentieth day after the date you receive the policy. Notice given by mail and
return of the policy or contract by mail are effective on being postmarked,
properly addressed and postage prepaid. Farm Bureau Life will refund, within
seven days after it receives the returned policy, an amount equal to the greater
of the premiums paid or the sum of:

a) the accumulated value of the policy on the date the policy is received at
the home office;
b) any administrative charges which were deducted; and
c) amounts approximating daily charges against the variable account.

Signed for and on behalf of Farm Bureau Life Insurance Company at its home
office at 5400 University Avenue, West Des Moines, Iowa, 50266-5997, effective
as of the date of issue of this policy.

/s/ D. J. Noble /s/ Terry A. Reimer
President Secretary

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY [LOGO]
5000 WESTOWN PARKWAY, SUITE 440
WEST DES MOINES, IOWA 50266-5997

- --------------------------------------------------------------------------------

<PAGE>

This policy is a legal contract between the owner and American Equity
Investment Life Insurance Company.

READ YOUR POLICY CAREFULLY

INDEX OF MAJOR POLICY PROVISIONS

POLICY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3
Annuitant; Age; Sex; Policy Number; Policy Date; Owner(s);
Normal Retirement Date; Interest Rates; Schedule of Forms
and Premiums; Schedule of Charges; Schedule of Investment
Options.

SECTION 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . Page 5
1.1 You or Your; 1.2 Annual Administrative Charge; 1.3
Annuitant; 1.4 Age; 1.5 Beneficiary; 1.6 Business Day; 1.7
Declared Interest Option; 1.8 Due Proof of Death; 1.9
Eligibility for Waiver of Surrender Charge; 1.10 Fund;
1.11 General Account; 1.12 Home Office; 1.13 Owner;
1.14 Physician; 1.15 Policy Anniversary; 1.16 Policy
Date; 1.17 Policy Year; 1.18 Retirement Date; 1.19 SEC;
1.20 Surrender Charge; 1.21 Qualified Nursing Care Center;
1.22 Valuation Period; 1.23 Variable Account; 1.24 We, Our,
Us or the Company.

SECTION 2 - THE CONTRACT. . . . . . . . . . . . . . . . . . . . . . . Page 6
2.1 Retirement Date; 2.2 Contract; 2.3 Modification; 2.4
Incontestable Clause; 2.5 Misstatement of Age or Sex; 2.6
Return of Policy and Policy Settlement; 2.7 Termination;
2.8 Non-Participation.

SECTION 3 - OWNERSHIP AND BENEFICIARIES . . . . . . . . . . . . . . . Page 7
3.1 Ownership; 3.2 Beneficiary; 3.3 Change of Owner or
Beneficiary; 3.4 Assignment.

SECTION 4 - PREMIUMS. . . . . . . . . . . . . . . . . . . . . . . . . Page 7
4.1 Premium Payment; 4.2 Payment Frequency; 4.3 Unscheduled
Premiums; 4.4 Allocation of Premiums.

SECTION 5 - ANNUITY AND DEATH BENEFITS. . . . . . . . . . . . . . . . Page 8
5.1 Annuity Benefit; 5.2 Death Benefit; 5.3 Death of Owner;
5.4 Death Proceeds at Death of Annuity During Accumulation
Period.

SECTION 6 - VARIABLE ACCOUNT . . . . . . . . . . . . . . . . . . . . Page 9
6.1 Variable Account; 6.2 Subaccounts; 6.3 Fund Portfolios;
6.4 Transfers.

SECTION 7 - ACCUMULATED VALUE BENEFITS. . . . . . . . . . . . . . . . Page 10
7.1 Accumulated Value; 7.2 Net Accumulated Value; 7.3
Variable Accumulated Value; 7.4 Subaccount Units; 7.5 Unit
Value; 7.6 Declared Interest Option Accumulated Value;
7.7 Declared Interest Option Interest; 7.8 Surrender; 7.9
Surrender Charge; 7.10 Ten Percent Withdrawal Privilege;
7.11 Waiver of Surrender Charge; 7.12 Partial Withdrawal;
7.13 Delay of Payment; 7.14 Tax Charges; 7.15 Annual Report.

SECTION 8 - PAYMENT OF PROCEEDS . . . . . . . . . . . . . . . . . . . Page 14
8.1 Choice of Options; 8.2 Payment Options; 8.3 Interest
and Mortality; 8.4 Requirements; 8.5 Effective Date;
8.6 Death of Payee; 8.7 Withdrawal of Proceeds; 8.8 Claims
of Creditors.

PAYMENT OPTION TABLES . . . . . . . . . . . . . . . . . . . . . . . . Page 15

Any additional benefits and endorsements which apply to this policy are listed
on the policy data page and are described in the forms which follow page 15 of
this policy.

<PAGE>

POLICY DATA

Annuitant [JOHN DOE]

Age [35]

Sex [MALE]

Policy Number [12345]

Policy Date [03-01-1998]

Owner(s) [JOHN DOE]

Normal Retirement Date [11-01-2026]

On Declared Interest Option:
Guaranteed Interest Rate 3.00%
Current Interest Rate [5.50%]
Current Interest Rate guaranteed to: [03-01-1999]

*************************SCHEDULE OF FORMS AND PREMIUMS*************************

Form No. Description
- ------- -----------
434-062(06-98) NON-PARTICIPATING FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY

<PAGE>

SCHEDULE OF CHARGES

Annual Administrative Charge: [$45.00 per year]
Transfer Charge: [$25]
Mortality and Expense Risk Charge: [.0038091% of the variable
cash value per day (equivalent
to 1.40% per year).]

A surrender charge will apply during the first [9] policy years.
[The surrender charge will be as shown in the following table:

Surrender Charge
Policy Year (as a percent of Accumulated Value)
- ----------- -----------------------------------
1 8.5%
2 8.0%
3 7.5%
4 7.0%
5 6.5%
6 6.0%
7 5.0%
8 3.0%
9 1.0%
Thereafter 0%]

However, the total surrender charge assessed will never exceed 8.5% of the
premiums paid.

SCHEDULE OF INVESTMENT OPTIONS

General Account: The general assets of American Equity
Investment Life Insurance Company.

Separate Account: American Equity Investment Life Annuity Account

Subaccounts: Fund
[Subaccount A [Investment Option A
Subaccount B Investment Option B
Subaccount C Investment Option C
Subaccount D Investment Option D
Subaccount E Investment Option E
Subaccount F Investment Option F
Subaccount G Investment Option G
Subaccount H Investment Option H
Subaccount I Investment Option I
Subaccount J Investment Option J
Subaccount K Investment Option K
Subaccount L Investment Option L
Subaccount M Investment Option M
Subaccount N Investment Option N
Subaccount 0] Investment Option 0]

Form Number 434-062(06-98)
Policy Number 1234567

<PAGE>

- --------------------------------------------------------------------------------
SECTION 1 - DEFINITIONS
- --------------------------------------------------------------------------------

1.1 YOU OR YOUR
means the owner, or owners, of this policy.

1.2 ANNUAL ADMINISTRATIVE CHARGE
means a fee that is charged yearly. The annual administrative charge may go up
or down but is guaranteed not to exceed $45. The annual administrative charge as
of the policy date is shown on the policy data page.

1.3 ANNUITANT
The person (or persons) whose life (or lives) determine(s) the annuity and
death benefit. No more than two Annuitants may be named. Provisions referring to
the death of an Annuitant mean the last surviving Annuitant.

1.4 AGE
means age at the last birthday.

1.5 BENEFICIARY
The person (or persons) named by you to whom the proceeds payable on the
death of the Annuitant will be paid. Prior to the retirement date, if no
beneficiary survives the annuitant, you or your estate will be the
beneficiary.

1.6 BUSINESS DAY
means a day when the New York Stock Exchange is open for trading, except for the
day after Thanksgiving, any other designated Company holidays, and any day the
home office is closed because of a weather-related or comparable type of
emergency. Assets are valued at the close of the business day.

1.7 DECLARED INTEREST OPTION
means an option pursuant to which accumulated value accrues interest at a
guaranteed minimum rate. The declared interest option is supported by the
general account.

1.8 DUE PROOF OF DEATH
Proof of death satisfactory to us. Such proof may consist of a certified copy
of the death record, a certified copy of a court decree reciting a finding of
death, or any other proof satisfactory to us.

1.9 ELIGIBILITY FOR WAIVER OF SURRENDER CHARGE
means the annuitant:
a) is diagnosed by a Qualified Physician as having a terminal illness. A
terminal illness is any disease or medical condition which the
Qualified Physician expects will result in death within one year;
b) stays in a Qualified Nursing Care Center for 90 days; or
d) is required to satisfy the minimum distribution requirement of
Sec. 401(a) 9 of the Internal Revenue Code.

1.10 FUND
means the investment options shown on the policy data page. The corresponding
funds are registered with the SEC under the Investment Company Act of 1940 as
open-end diversified management investment companies or unit investment trusts.

1.11 GENERAL ACCOUNT
means all our assets other than those allocated to the variable account or any
other separate account. We have complete ownership and control of the assets of
the general account.

1.12 HOME OFFICE
means Farm Bureau Life Insurance Company at its home office, 5400 University
Avenue, West Des Moines, Iowa, 50266-5997.

1.13 OWNER
The person (or persons) who own(s) the policy and who is entitled to exercise
all rights and privileges provided in the policy. The original owner(s) is shown
on the policy data page.

1.14 QUALIFIED PHYSICIAN
means a licensed, medical practitioner performing within the scope of his/her
license. Such person must be someone other than you, the annuitant, or a member
of the immediate family of either you or the annuitant.

1.15 POLICY ANNIVERSARY
means the same date in each year as the policy date.

1.16 POLICY DATE
means the policy date shown on the policy data page. This date is used to
determine policy years and anniversaries. The date of issue is equal to the
policy date.

1.17 POLICY YEAR
means the 12-month period that begins on the policy date or on a policy
anniversary.

1.18 RETIREMENT DATE
means the policy anniversary nearest the

<PAGE>

retirement age chosen in the application. If no age is chosen, age 70 will be
used. Subject to the payment option provisions, the owner may change the
retirement date at any time. However, the retirement date may not be changed
after payments begin.

1.19 SEC
means the Securities and Exchange Commission, a U.S. government agency.

1.20 SURRENDER CHARGE
means a fee that is applied at the time of any partial or full surrender. The
surrender charges are shown on the policy data page.

1.21 QUALIFIED NURSING CARE CENTER
means a long term care center that is licensed to operate according to the laws
of their location. The following are qualified nursing care centers:
a) Skilled Nursing Center - means a center:
i) That provides skilled nursing care supervised by a licensed
physician;
ii) That provides 24-hour nursing care by, or supervised, an R.N.;
and
iii) That keeps daily medical record of each patient.

b) Intermediate Care Center - means a center:

i) That provides 24-hour nursing care by, or supervised by an R.N.
or an L.P.N.; and
ii) That keeps a daily medical record of each patient.

c) Hospital - means a center:

i) That operates for the care and treatment of sick or injured
persons as inpatients;
ii) That provides 24-hour nursing care by, or supervised by, an R.N.;
iii) That is supervised by a staff of licensed physicians; and
iv) That has medical, diagnostic, and major surgery capabilities or
access to such capabilities.

Qualified Nursing Care Center does not include:
a) Drug or alcohol treatment centers;
b) Home for the aged or mentally ill, community living centers, or places
that primarily provide domiciliary, residency or retirement care;
c) Places owned or operated by a member of the annuitant's immediate
family.

1.22 VALUATION PERIOD
means the period between the close of business on a business day and the close
of business on the next business day.

1.23 VARIABLE ACCOUNT
means the Separate Account shown on the policy data page. It is a unit
investment trust registered with the SEC under the Investment Company Act of
1940.

1.24 OUR, US OR THE COMPANY
means the American Equity Investment Life Insurance Company.

- --------------------------------------------------------------------------------
SECTION 2 - THE CONTRACT
- --------------------------------------------------------------------------------

2.1 RETIREMENT DATE
The owner may choose a retirement date on the application. However, such
retirement date may not be after the latest of the annuitant's 70th birthday or
the 10th policy anniversary. If no date is chosen on the application, age 70
will be used. The owner may change the retirement date at any time. However, the
retirement date may not be changed after payments begin. However, if the policy
is subject to Internal Revenue Service minimum distribution requirements, we
will begin distributions as required.

2.2 CONTRACT
This policy is a legal contract. We issue this policy in consideration of the
first premium and the statements in the application. The entire contract
consists of:
a) the basic policy;
b) any endorsements or additional benefit riders;
c) the attached copy of your application; and
d) any amendments, supplemental applications or other attached papers.

We rely on statements made in the application for the policy. These statements
in the absence of fraud are deemed representations and not warranties. No
statement will void this policy or be used in defense of a claim unless:
a) it is contained in the application; and
b) such application is attached to this policy.

2.3 MODIFICATION
No one can change any part of this policy except

6
<PAGE>

the owner and one of our officers. Both must agree to a change, and it must be
in writing. No agent may change this policy or waive any of its provisions.

2.4 INCONTESTABLE CLAUSE
We will not contest this policy from its policy date.

2.5 MISSTATEMENT OF AGE OR SEX
We have the right to correct benefits for misstated age or sex. In such an
event, benefits will be the amount the premium actually paid would have bought
at the correct age or sex.

2.6 RETURN OF POLICY AND POLICY SETTLEMENT
We reserve the right to have this policy sent to us for any:
a) modification; b) death settlement; c) surrender or partial surrender;
d) assignment; e) change of owner or beneficiary; f) election; or g) exercise
of any policy privilege.

We will send a payment contract to replace this policy if any payment option is
chosen. All sums to be paid by us under this policy are considered paid when
tendered by us at our home office.

2.7 TERMINATION
This policy ends when any one of the following events occurs:
a) the owner requests that the policy be canceled;
b) the annuitant dies; or
c) the policy is surrendered.

2.8 NON-PARTICIPATION
This policy does not share in the Company's surplus or profits.

- --------------------------------------------------------------------------------
SECTION 3 - OWNERSHIP AND BENEFICIARIES
- --------------------------------------------------------------------------------

3.1 OWNERSHIP
The owner has all rights, title and interest in the policy during the
accumulation period and while the annuitant is living. You may exercise all
rights and options stated in the policy, subject to the rights of any
irrevocable beneficiary.

3.2 BENEFICIARY
Beneficiaries are as named in the application, unless changed by the owner. The
interests of any beneficiary in a class who dies before the annuitant will pass
to any survivors of the class, unless the policy provides otherwise. Secondary
beneficiaries will have the right to receive the proceeds only if no primary
beneficiary survives. If no beneficiary survives the annuitant, we will pay the
proceeds to you or your estate.

In finding and identifying beneficiaries we may rely on sworn statements, other
facts, or evidence we deem satisfactory. Any benefits we pay based on such
information will be a valid discharge of our duty up to the amount paid.

3.3 CHANGE OF OWNER OR BENEFICIARY
While the annuitant lives, a change of owner or beneficiary can be made at any
time, subject to the following rules:
a) the change must be in writing on a form acceptable to us;
b) it must be signed by the owner;
c) if the owner is more than one person, the written notice for change must be
signed by all persons named as owner;
d) the form must be sent to and recorded by us;
e) a request for change of beneficiary must be signed by any irrevocable
beneficiary; and
f) the change will take effect on the date signed, but it will not apply to
any payment or action by us before we receive the form.

3.4 ASSIGNMENT
No assignment of this policy will bind us unless:
a) it is in writing on a form acceptable to us;
b) signed by the owner; and
c) received by us at our home office.

We will not be responsible for the validity of an assignment.

- --------------------------------------------------------------------------------
SECTION 4 - PREMIUMS
- --------------------------------------------------------------------------------

4.1 PREMIUM PAYMENT
Premium payments may be made at any time. However, we reserve the right to limit
or restrict the amount of a premium payment as we deem appropriate. Premiums are
to be paid at our home office. The first premium must be equal to or greater
than $1,000. Thereafter, premium payments are flexible as to both timing and
amount. Each premium is to be paid at our home office. No payment may be less
than $50 without our consent.

4.2 PAYMENT FREQUENCY
The first premium is due on or prior to the policy

7
<PAGE>

date. We will send periodic reminder notices to the owner. The minimum amount
for which such notice will be sent will be $50. A reminder notice may be sent
for different periods, which may be 12, 6, or 3 months. The reminder notice
period may be changed upon request.

4.3 UNSCHEDULED PREMIUMS
Unscheduled premium payments of at least $50 may be made at any time prior to
the maturity date. The Company may, in its discretion, waive the $50 minimum
requirements. The Company reserves the right to limit the number and amount
of unscheduled premium payments.

4.4 ALLOCATION OF PREMIUM
The owner will determine the percentage of premium that will be allocated to
each subaccount of the variable account and to the declared interest option. The
owner may choose to allocate all the premium, a percentage or nothing to a
particular subaccount or to the declared interest option. Any allocation must be
for at least 10% of the premium. A fractional percent may not be chosen.

On the policy date, premiums will be initially allocated to the money market
subaccount. On the eleventh day following the policy date, we will transfer part
or all of the accumulated value in the money market subaccount to the
subaccounts or the declared interest option in accordance with the premium
allocation percentages shown in the application. For any premium received after
we receive the signed form, the premium will be allocated in accordance with the
premium allocation percentages shown in the application or the most recent
written instructions of the owner.

The owner may change the allocation for future premiums at any time, subject to
the following rules:
a) the policy must be in force;
b) there must be an accumulated value;
c) the change must be in writing on a form acceptable to us;
d) the form must be signed by the owner;
e) the change will take effect on the business day on or next following the
date we receive the signed form at our home office.

A change of allocation of future premiums does not affect current accumulated
values.

- --------------------------------------------------------------------------------
SECTION 5 - ANNUITY AND DEATH BENEFITS
- --------------------------------------------------------------------------------

5.1 ANNUITY BENEFIT
If the annuitant lives to the retirement date, we will pay the annuitant a
monthly income for the rest of the annuitant's life beginning on the retirement
date if:
a) this policy is in force on the retirement date;
b) the owner has not elected to have the accumulated value paid in a single
sum; and
c) the owner has not elected a payment option.

The amount of payments will be obtained by applying the accumulated value under
payment option 3. We will make at least 120 payments. After 120 payments the
annuitant must be living to receive further payments. If the annuitant dies
before 120 payments have been received, any remaining payments will be paid to
the beneficiary. If no beneficiary survives, we will pay the commuted value, as
determined by us, of any remaining payments to the estate of the last
beneficiary to die.

5.2 DEATH OF ANNUITANT DURING ACCUMULATION PERIOD
If the sole annuitant dies during the accumulation period and the annuitant is
not an owner, we will pay the death benefit to the beneficiary. The beneficiary
may elect to apply this sum under one of the annuity payment options as payee.
See Section 5.3 if you are the annuitant.

5.3 DEATH OF OWNER
If any owner dies prior to the retirement date and the deceased owner is the
sole annuitant, we will pay the death benefit to the beneficiary in one sum
within five (5) years of the deceased owner's death. The beneficiary may elect
(within 60 days of the date we receive due proof of death) to apply this sum
under one of the annuity payment options as payee, provided:

a) payments under the annuity payment option begin not later than one (1)
year after the owner's death; and
b) payments will be payable for the life of the beneficiary, or over a
period not greater than the beneficiary's life expectancy.

If any owner dies and the deceased owner is not the annuitant (or a co-annuitant
survives the

8
<PAGE>

deceased owner/annuitant), the new owner will be the surviving owner if any. The
new owner will be the annuitant (unless otherwise provided) if there are no
surviving owners. If the sole new owner is the deceased owner's spouse, the
contract may be continued. If the new owner is someone other than the deceased
owner's spouse, the surrender value of the policy must be distributed within
five (5) years of the deceased owner's death.

If any owner dies on or after the retirement date, but before all proceeds
payable under this contract have been distributed, we will continue payments to
the annuitant (or, if the deceased owner was the annuitant, to the beneficiary)
under the payment method in effect at the time of the deceased owner's death.

For purposes of this section, if any owner of this contract is not an
individual, the death or change of any annuitant shall be treated as the death
of an owner.

5.4 DEATH PROCEEDS AT DEATH OF ANNUITANT DURING ACCUMULATION PERIOD
The death proceeds will be determined based on the annuitant's age on the policy
date. If there is more than one annuitant, we will use the age of the last
surviving annuitant.

If the annuitant's age on the policy date is:
a) less than 76, the death proceeds will be equal to the greater of:
1) the sum of all premium payments less any partial withdrawals, as of
the date due proof of death is received;
2) the accumulated value as of the date due proof of death is received;
3) the death benefit anniversary amount as of the date of death plus any
premium payment made and less any partial withdrawals since the most
recent death benefit anniversary prior to death;

The death benefit anniversary amount is equal to the accumulated value
on the most recent policy anniversary. The death benefit anniversary
amount is determined on the first policy anniversary and on each
subsequent policy anniversary thereafter.

b) 76 or greater, the death benefit is equal to the greater of:
1) the sum of all premium payments less any partial withdrawals, as of
the date due proof of death is received; or
2) the accumulated value as of the date due proof of death is received.

- --------------------------------------------------------------------------------
SECTION 6 - VARIABLE ACCOUNT
- --------------------------------------------------------------------------------

6.1 VARIABLE ACCOUNT
We own the assets of the variable account. We will value the assets of the
variable account each business day. The assets of such account will be kept
separate from the assets of our general account and any other separate accounts.
Income, and realized and unrealized gains or losses from assets in the variable
account will be credited to or charged against such account without regard to
our other income, gains or losses.

That portion of the assets of the variable account which equals the reserves and
other policy liabilities of the policies which are supported by the variable
account will not be charged with liabilities arising from any other business we
conduct. We have the right to transfer to our general account any assets of the
variable account which are in excess of such reserves and other policy
liabilities.

While the variable account is registered with the SEC and thereby subject to SEC
rules and regulations, it is also subject to the laws of the State of Iowa which
regulate the operations of insurance companies incorporated in Iowa. The
investment policy of the variable account will not be changed without the
approval of the Insurance Commissioner of the State of Iowa. The approval
process is on file with the insurance commissioner of the state in which this
policy was delivered.

We also reserve the right to transfer assets of the variable account, which we
determine to be associated with the class of policies to which this policy
belongs, to another separate account. If this type of transfer is made, the term
"variable account," as used in this policy, shall then mean the variable account
to which the assets were transferred.

When permitted by law, we also reserve the right to:
a) deregister the variable account under the Investment Company Act of 1940;
b) manage the variable account under the direction

<PAGE>

of a committee;
c) restrict or eliminate any voting rights of owners, or other persons who
have voting rights as to the variable account; and
d) combine the variable account with other separate accounts.

6.2 SUBACCOUNTS
The variable account is divided into subaccounts. The subaccounts are listed on
page 4. Subject to obtaining any approvals or consents required by applicable
law, we reserve the right to eliminate or combine any subaccounts and the right
to transfer the assets of one or more subaccounts to any other subaccount. We
also reserve the right to add new subaccounts and make such subaccounts
available to any class or series of policies as we deem appropriate. Each new
subaccount would invest in a new investment option of the fund, or in shares of
another investment company. The owner will determine the percentage of premium
that will be allocated to each subaccount in accordance with the allocation of
premium provision.

6.3 FUND INVESTMENT OPTIONS
The fund has several investment options each of which corresponds to one of the
subaccounts of the variable account. The investment options are listed on the
policy data page. Premiums allocated to a subaccount will automatically be
invested in the fund investment option associated with that subaccount. The
owner will share only in the income, gains or losses of the investment option(s)
where shares are held.

We have the right, subject to compliance with any applicable laws, to make:
a) additions to;
b) deletions from; or
c) substitutions for;
the shares of a fund investment option that are held by the variable account or
that the account may purchase.

We also reserve the right to dispose of the shares of an investment option of
the fund listed on page 4 and to substitute shares of another investment option
of such fund or another mutual fund investment option, if:

a) the shares of the investment option are no longer available for investment;
or
b) if in our judgment further investment in the investment option should
become inappropriate in view of the purposes of the variable account.

In the event of any substitution or change, we may, by appropriate endorsement,
make such changes in this and other policies as may be necessary or appropriate
to reflect the substitution or change.

6.4 TRANSFERS
The owner may transfer all or part of the accumulated value among the
subaccounts of the variable account and between the subaccounts and
the declared interest option, subject to the following rules:
a) The transfer request must be in writing on a form acceptable to us.
b) The form must be signed by the owner.
c) The transfer will take effect as of the end of the valuation period during
which we receive the signed form at our home office.
d) The owner may transfer amounts among the subaccounts of the variable
account an unlimited number of times in a policy year.
e) The owner may transfer amounts from the declared interest option to the
variable account an unlimited number of times. Amounts transferred from the
declared interest option are considered transferred on a last-in-first-out
basis.
f) The first twelve transfers in each policy year will be made without a
transfer charge. Thereafter, each time amounts are transferred a transfer
charge may be imposed. This transfer charge is shown on the policy data
page.
g) The accumulated value on the date of the transfer will not be affected by
the transfer except to the extent of the transfer charge. Unless paid in
cash, the transfer charge will be deducted on a pro rata basis from the
declared interest option and/or the subaccounts to which the transfer is
made.
h) The owner must transfer at least:
(1) a total of $100; or
(2) the total accumulated value in the subaccount or the total
accumulated value in the declared interest option, if the total
amount transferred is less than $100.
i) No more than 25% of the accumulated value in the declared interest option
may be transferred unless the balance in the declared interest option after
the transfer would be less than $1,000. If the balance in the declared
interest option would fail below $1,000, the accumulated value in the
declared interest option may be transferred.

<PAGE>

- --------------------------------------------------------------------------------
SECTION 7 - ACCUMULATED VALUE BENEFITS
- --------------------------------------------------------------------------------

7.1 ACCUMULATED VALUE
The accumulated value of this policy will be the sum of:
a) the accumulated value in the subaccounts of the variable account; plus
b) the accumulated value in the declared interest option.

All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered.

7.2 NET ACCUMULATED VALUE
The net accumulated value of this policy will be the accumulated value less a
surrender charge. All of the values are the same or more than the minimums set
by the laws of the state where the policy is delivered.

7.3 VARIABLE ACCUMULATED VALUE
On the business day on or next following the day we receive a completed
application and the minimum initial premium, the variable accumulated value is
the total amount of premium, if any, allocated to the subaccounts of the
variable account. After such date, the policy's variable accumulated value is
equal to the sum of the policy's accumulated value in each subaccount. The value
in a subaccount is equal to a) multiplied by b) where:
a) is the current number of subaccount units; and
b) is the current unit value.

The variable accumulated value will vary from business day to business day
reflecting changes in a) and b) above.

7.4 SUBACCOUNT UNITS
When transactions are made which affect the variable accumulated value, dollar
amounts are converted to subaccount units. The number of subaccount units for a
transaction is determined by dividing the dollar amount of the transaction by
the current unit value.

The number of units for a subaccount attributable to a policy increases when:
a) premiums are allocated under the policy to that subaccount; or
b) transfers from the declared interest option or other subaccounts are
credited under the policy to that subaccount.

The number of units for a subaccount attributable to a policy decreases when:
a) the owner makes a surrender or partial withdrawal from that subaccount;
b) transfers are made from that subaccount to the declared interest option
or other subaccounts; or
c) the annual administrative charge shown on the policy data page is deducted
(the annual administrative charge will be prorated among the subaccounts
and the declared interest option).

7.5 UNIT VALUE
The unit value for a subaccount on any business day is determined by dividing
each subaccount's net asset value by the number of units outstanding
at the time of calculation. The unit value for each subaccount was set initially
at $10.00 when the subaccounts first purchased fund shares. The
unit value for each subsequent valuation period is calculated by dividing a) by
b), where:
a) is:
(1) the value of the net assets of the subaccount at the end of the
preceding valuation period; plus
(2) the investment income and capital gains, realized or unrealized,
credited to the net assets of that subaccount during the valuation
period for which the unit value is being determined; minus
(3) the capital losses, realized or unrealized, charged against those net
assets during the valuation period; minus
(4) any amount charged against the subaccount for taxes, or any amount set
aside during the valuation period by the Company as a provision for
taxes attributable to the operation or maintenance of that subaccount;
minus
(5) the mortality and expense risk shown on the policy data page. This
charge may go up or down but will never exceed 0.0038091% of the net
daily assets in that subaccount for each day in the valuation period.
The maximum charge corresponds to a charge of 1.40% per year of the
average daily net assets of the subaccount for mortality and expense
risks.

b) is the number of units outstanding at the end of the preceding valuation
period.

<PAGE>

The unit value for a valuation period applies for each day in the period. We
will value the net assets in each subaccount at their fair market value in
accordance with accepted accounting practices and applicable laws and
regulations.

7.6 DECLARED INTEREST OPTION ACCUMULATED VALUE
The declared interest option accumulated value as of the eleventh day following
the policy date is the premium allocated to the declared interest option as of
that date. Thereafter, the declared interest option accumulated value changes
every valuation period.

The declared interest option accumulated value increases when:
a) premiums are allocated to the declared interest option; or
b) transfers from the other subaccounts are credited to the declared interest
option; or
c) any interest is credited to the declared interest option.

The declared interest option accumulated value decreases when:
a) the owner makes a surrender or partial withdrawal from the declared
interest option; or
b) transfers are made from the declared interest option to other subaccounts;
or
c) the annual administrative charge shown on the policy data page is deducted
(the annual administrative charge will be prorated among the subaccounts
and the declared interest option).

For the purposes of the above calculation, interest does not accrue on amounts
deducted for policy charges, amounts transferred from or on amounts surrendered
or withdrawn from the declared interest option. Interest is accrued on the
accumulated value of the declared interest option on a daily basis and is
credited no less frequently than once a policy year.

7.7 DECLARED INTEREST OPTION INTEREST
The guaranteed minimum interest rate applied to the declared interest option
accumulated value is an effective rate of 3.0% per year. Interest in excess of
the minimum rate may be applied. The amount of the excess interest credited for
any policy year will be set by us at the start of that policy year and will be
guaranteed for such year.

7.8 SURRENDER
Before the retirement date, the owner may surrender the policy, subject to the
following rules:
a) The owner must send a written request to us along with such information or
evidence as may be required by law or as may be needed to process the
request.
b) The amount of any such surrender may be paid in cash or we will apply part
or all of it under a payment option.
c) We have the right to defer payment of a surrender from the declared
interest option for up to 6 months.
d) The amount of accumulated value surrendered will be subject to a surrender
charge.
e) Upon surrender, the policy will terminate.

7.9 SURRENDER CHARGE
The surrender charge is shown on the policy data page. The total surrender
charges assessed will never exceed 8.5% of premiums paid.

If all of the accumulated value is applied under payment option 2, 3, 4 or 5,
the surrender charge will be reduced as follows:
a) if option 3 or 5 is used, the surrender charge will be zero; or
b) if option 2 or 4 is used, the surrender charge will be applied, however,
the fixed number of years for which payment will be made is added to the
number of years the contract has been in force to determine what the charge
will be.

All of the values are the same or more than the minimums set by the laws of the
state where the policy is delivered.

7.10 TEN PERCENT WITHDRAWAL PRIVILEGE
After the first policy year, amounts up to the "withdrawal privilege amount" may
be withdrawn from the policy during each policy year without being subject to
the surrender charge. The withdrawal privilege amount will be equal to 10% of
the accumulated value on the most recent policy anniversary. If the policy is
subsequently surrendered during the policy year, the surrender charge will be
applied to any partial withdrawals taken during that policy year, as well as the
amount surrendered.

7.11 WAIVER OF SURRENDER CHARGE
The owner may make a surrender of this policy without incurring a surrender
charge if the annuitant becomes eligible for waiver of the surrender charge.

<PAGE>

The waiver of the surrender charge is subject to the following rules:
a) We must receive a written request on our form signed by the owner.
b) The policy must be in force or not providing benefits under any payment
option.
c) Proof must be provided that the conditions of eligibility requirements for
waiver of the surrender charge have been met, including an attending
physician's statement and any other proof we may require. We reserve the
right to seek a second medical opinion or have an examination performed at
our expense by a physician we choose.
d) If there are joint annuitants, you may exercise this waiver privilege once,
for either the first or second annuitant, but not both.
e) The annuitant must become eligible for waiver of surrender charge after the
first contract year ends.

7.12 PARTIAL WITHDRAWAL
Before the retirement date, the owner may obtain a partial withdrawal of the
accumulated value, subject to the following rules:
a) The amount of any partial withdrawal must be at least $500;
b) If the accumulated value after a partial withdrawal is less than $2,000, we
have the right to pay the remaining accumulated value to the owner as a
full surrender;
c) The accumulated value will be reduced by the amount of any partial
withdrawal and any surrender charge applying to such withdrawal. The owner
may tell us how to allocate a partial withdrawal among the subaccounts and
the declared interest option. If the owner does not so instruct, we will
prorate the partial withdrawal among the subaccounts and the declared
interest option. The allocation will be in the same proportion that the
accumulated value in each of the subaccounts and the accumulated value in
the declared interest option bears to the total accumulated value on the
date we receive the request;
d) Amounts withdrawn from the declared interest option are considered
withdrawn on the last-in-first-out basis.

7.13 DELAY OF PAYMENT
Proceeds from full surrenders and partial surrenders will usually be mailed to
the owner within seven days after the owner's signed request is received in our
home office. We will usually mail any death claim proceeds within seven days
after we receive due proof of death. We have the right to delay such payment
whenever:
a) the New York Stock Exchange is closed other than on customary weekend and
any holiday closing;
b) trading on the New York Stock Exchange is restricted as determined by the
SEC;
c) the SEC, by order, permits postponement for the protection of policyowners;
d) as a result of an emergency, as determined by the SEC, it is not reasonably
possible to dispose of securities or to determine the value of the net
assets of the variable account.

We have the right to defer payment which is derived from any amount paid to us
by check or draft until we are satisfied the check or draft has been paid by the
bank on which it is drawn.

We also have the right to delay making a full surrender or partial surrender,
from the declared interest option for up to six months from the date we receive
the owner's request.

7.14 TAX CHARGES
The Company may deduct state and local government premium tax from the
accumulated value, if such taxes are applicable in your state. The Company may
also make a charge against the accumulated value of this policy for any tax or
economic burden on the Company resulting from the application of federal, state
or local tax laws that the Company determines to be properly attributable to the
separate account or the policies. The charge will be applied by:
a) redeeming the number of subaccount units from the separate account equal to
the pro rata share of the charge applicable to the subaccounts; or
b) deducting from the declared interest option accumulated value the pro rata
portion of the charge applicable to the declared interest option.

7.15 ANNUAL REPORT
At least once each year we will send a report, without charge, to the owner
which shows:
a) all premiums paid and charges made since the last report;
b) the current accumulated value including the value in each subaccount and
the declared interest option; and
c) any partial surrenders since the last report.

<PAGE>

An illustrative report will be sent to the owner upon request. A fee may be
charged for this report.

- --------------------------------------------------------------------------------
SECTION 8 - PAYMENT OF PROCEEDS
- --------------------------------------------------------------------------------

8.1 CHOICE OF OPTIONS
The owner may choose to have the proceeds of this policy paid under a payment
option. After the annuitant's death, the beneficiary may choose an option if the
owner had not done so before the annuitant's death. If no payment option is
chosen, we will pay the proceeds of this policy in one sum. We may also fulfill
our obligation under this policy by paying the proceeds in one sum if:

a) the proceeds are less than $2,000;
b) periodic payments become less than $20; or
c) the payee is an assignee, estate, trustee, partnership, corporation, or
association.

8.2 PAYMENT OPTIONS
The choice of payment options are:
1) INTEREST INCOME -- The proceeds will be left with us to earn interest. The
interest will be paid every 1, 3, 6 or 12 months as the payee chooses. The
rate of interest will be determined by us. The payee may withdraw all or
part of the proceeds at any time.

2) INCOME FOR FIXED TERM -- The proceeds will be paid out in equal
installments for a fixed term of years.

3) LIFE INCOME WITH TERM CERTAIN -- The proceeds will be paid out in equal
installments for as long as the payee lives, but for not less than a term
certain. The owner or payee may choose one of the terms certain shown in
the payment option tables.

4) INCOME FOR FIXED AMOUNT -- The proceeds will be paid out in equal
installments of a specified amount. The payments will continue until all
proceeds plus interest have been paid out.

5) JOINT AND TWO-THIRDS TO SURVIVOR MONTHLY LIFE INCOME -- The proceeds will
be paid out in equal monthly installments for as long as two joint payees
live. When one payee dies, installments of two-thirds of the first
installment will be paid to the surviving payee. Payments will stop when
the surviving payee dies.

The proceeds may be paid in any other manner requested and agreed to by us, or
under any other payment options made available by the Company.

8.3 INTEREST AND MORTALITY
The minimum interest rate used in computing any payment option is 3% per year.
Higher interest rates may be used on the effective date of the payment contract.
We may at any time declare additional interest on these funds. The amount of
additional interest and how it is determined will be set by us.

The mortality table which is used for options 3) and 5) is the "1983 Table a"
individual annuity mortality table.

8.4 WITHDRAWAL OF PROCEEDS
The payee may not withdraw the funds under a payment option unless agreed to in
the payment contract. We have the right to defer a withdrawal for up to 6
months. We may also refuse to allow partial withdrawals of less than $250.

8.5 CLAIMS OF CREDITORS
Payments under any payment option will be exempt from the claims of creditors to
the maximum extent allowed by law.

<PAGE>

PAYMENT OPTION TABLES
(PER $1,000 OF PROCEEDS)

- --------------------------------------------------------------------------------
Option 2 - Income for Fixed Term
Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
Number of
Years Annual Monthly
- --------------------------------------------------------------------------------
5 211.99 17.91
10 113.82 9.61
15 81.33 6.87
20 65.26 5.51
25 55.76 4.71
30 49.53 4.18
- --------------------------------------------------------------------------------

Guaranteed Settlement Option 5
Joint and Two-thirds to Survivor Monthly Life Income
Monthly Installments per $1,000 of Proceeds
- --------------------------------------------------------------------------------
Female Age
Male
Age 55 60 62 65 70
-----------------------------------------------------------------
60 4.44 4.71 4.82 5.01 5.34
62 4.53 4.81 4.93 5.13 5.50
65 4.65 4.97 5.11 5.33 5.75
70 4.88 5.24 5.41 5.68 6.20
75 5.11 5.52 5.71 6.04 6.68
- --------------------------------------------------------------------------------

- ---------------------------------------------------------------------------------------------------------
GUARANTEED SETTLEMENT OPTION 3
LIFE INCOME WITH TERM CERTAIN
MONTLY INSTALLMENTS PER $1,000 PROCEEDS
- ---------------------------------------------------------------------------------------------------------
MALE FEMALE
- ---------------------------------------------------------------------------------------------------------
YEARS CERTAIN YEARS CERTAIN

Age 0 5 10 15 20 0 5 10 15 20
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
55 $4.70 4.68 4.62 4.53 4.39 4.25 4.25 4.22 4.18 4.11
56 4.80 4.78 4.72 4.61 4.45 4.34 4.33 4.30 4.25 4.17
57 4.91 4.89 4.82 4.69 4.51 4.42 4.41 4.38 4.32 4.23
58 5.03 5.00 4.92 4.78 4.58 4.52 4.50 4.47 4.40 4.30
59 5.15 5.12 5.03 4.87 4.64 4.61 4.60 4.56 4.48 4.37
60 5.28 5.25 5.14 4.96 4.71 4.72 4.70 4.66 4.57 4.44

- ---------------------------------------------------------------------------------------------------------

61 5.42 5.39 5.26 5.06 4.78 4.83 4.81 4.76 4.66 4.51
62 5.57 5.53 5.39 5.16 4.84 4.95 4.93 4.86 4.75 4.58
63 5.74 5.69 5.52 5.26 4.90 5.07 5.05 4.98 4.85 4.65
64 5.91 5.85 5.66 5.36 4.96 5.21 5.18 5.10 4.95 4.72
65 6.10 6.03 5.81 5.46 5.02 5.35 5.32 5.22 5.05 4.79

- ---------------------------------------------------------------------------------------------------------

66 6.29 6.21 5.96 5.56 5.08 5.51 5.47 5.36 5.16 4.86
67 6.50 6.41 6.11 5.66 5.13 5.67 5.63 5.50 5.26 4.93
68 6.73 6.62 6.28 5.76 5.18 5.85 5.80 5.65 5.37 5.00
69 6.97 6.84 6.44 5.86 5.23 6.04 5.98 5.80 5.49 5.06
70 7.23 7.07 6.61 5.96 5.27 6.25 6.18 5.96 5.60 5.12

- ---------------------------------------------------------------------------------------------------------

71 7.51 7.32 6.78 6.05 5.31 6.47 6.39 6.14 5.71 5.18
72 7.80 7.58 6.96 6.14 5.34 6.71 6.62 6.31 5.83 5.23
73 8.12 7.85 7.14 6.23 5.37 6.97 6.86 6.50 5.94 5.28
74 8.45 8.14 7.32 6.31 5.40 7.26 7.12 6.69 6.04 5.32
75 8.82 8.44 7.49 6.38 5.42 7.56 7.39 6.89 6.14 5.35
- ---------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

NON-PARTICIPATING
FLEXIBLE PREMIUM
DEFERRED VARIABLE ANNUITY POLICY

If you have any questions concerning this policy or if anyone
suggests that you change or replace this policy, please contact
your American Equity Investment Life agent or our home office.
(515-225-5400)

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
5000 WESTOWN PARKWAY, SUITE 440
WEST DES MOINES, IOWA 50266-5997

- --------------------------------------------------------------------------------

<PAGE>

SEP 30 1996
SECRETARY OF STATE
ARTICLES OF MERGER
OF
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:

Pursuant to section 1105 of the Iowa Business Corporation Act, the
undersigned corporation, formerly known as Century Life Insurance Company,
adopts the following Articles of Merger:

1. That the Plan of Merger is as set forth in the Acquisition and Merger
Agreement attached hereto and made a part hereof.

2A. The designation, number of outstanding shares, and number of votes
entitled to be cast by each voting group entitled to vote separately on the Plan
as to each corporation is as follows:

AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY

Votes Entitled to be
Designation of Group Shares Outstanding Cast on Merger
-------------------- ------------------ --------------------

Common 2,500,000 2,500,000

2A.2 The total number of undisputed votes cast for the Plan by each voting
group was:

Voting Group Votes for
------------ ---------

Common 2,500,000

The number of votes cast for the Plan by each voting group was sufficient
for approval by that voting group.

CENTURY LIFE INSURANCE COMPANY

Votes Entitled to be
Designation of Group Shares Outstanding Cast on Merger
-------------------- ------------------ --------------------

Common 750,000 750,000

<PAGE>

2A.2 The total number of undisputed votes cast for the Plan by each
voting group was:

Voting Group Votes for
------------ ---------

Common 750,000

The number of votes cast for the Plan by each voting group was sufficient
for approval by that voting group.

The effective date and time of this document is September 30, 1996 at 1:00 p.m.,
Central Daylight Time.

AMERICAN EQUITY INVESTMENT
LIFE INSURANCE COMPANY

By: /s/ D. J. Noble
-----------------------
D. J. Noble, President

-2-
<PAGE>

CERTIFICATE OF ATTORNEY GENERAL

I hereby certify that on this date I examined the within Articles of Merger
of American Equity Investment Life Insurance Company, formerly known as Century
Life Insurance Company, and the same are found to be in conformity with the
Constitution and the laws of the United States and the State of Iowa.

Dated this 25th day of September, 1996.

/s/ Scott M. Galenbeck
---------------------------
Assistant Attorney General

CERTIFICATE OF COMMISSIONER OF INSURANCE

I hereby certify that the within Articles of Merger between American Equity
Investment Life Insurance Company, formerly known as Century Life Insurance
Company, and are hereby approved by me this 25th day of September, 1996.

/s/ Robert L. Howe
-------------------------------
Deputy Commissioner of Insurance
of the State of Iowa

<PAGE>

-------------------------------------------------------

ACQUISITION AND MERGER AGREEMENT

BETWEEN

CENTURY LIFE INSURANCE COMPANY

CENTURY LIFE OF AMERICA

AND

AMERICAN EQUITY INVESTMENT
LIFE INSURANCE COMPANY

AMERICAN EQUITY INVESTMENT
LIFE HOLDING COMPANY

-------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

SECTION PAGE
- ------- ----

ONE Identity of Merging Corporation and Surviving Corporation 1

1.1 Name of Each Corporation Planning to Merge 1
1.2 Surviving Corporation 2

TWO The Merger 2

2.1 Effective Time and Closing 2
2.2 Rights of Surviving Corporation 2
2.3 Claims Against Constituent Corporations 2
2.4 Tax Election 2

THREE Change of Name, Restated Articles of Incorporation and 3
Amended Bylaws, and Officers and Directors

3.1 Change of Name 3
3.2 Articles of Incorporation and Bylaws 3
3.3 Officers and Directors 3

FOUR Conversion and Payment of Shares 3

4.1 Liquidating Distribution by Century 3
4.2 American Equity Shares Owned by AEI Holding 3
4.3 Century Shares Owned by CLA 4
4.4 Shares of Surviving Corporation after Merger 4
4.5 Actions by Board of Directors of Surviving Corporation 4

FIVE Capital and Surplus and Existing Business of Century 4

5.1 Capital and Surplus 4
5.2 Existing Business 4

SIX Representations and Warranties of Century and CLA 5

6.1 Corporate Status 5
6.2 Capitalization 5
6.3 Financial Statements 5
6.4 Title to Property 6
6.5 Corporate Action 6
6.6 Litigation 6
6.7 Taxes 7
6.8 Employment and Other Contracts 7
6.9 Contracts and Other Commitments 7
6.10 Insurance Filings 8
6.11 Execution and Delivery 8

-i-

<PAGE>

Section Page
- ------- ----

SEVEN Representations and Warranties of American Equity 8

7.1 Corporate 8
7.2 Capitalization 8
7.3 Financial Statements 8
7.4 Title to Property 9
7.5 Corporation Action 9
7.6 Litigation 9
7.7 Taxes 10
7.8 Employment and Other Contracts 10
7.9 Contracts and Other Commitments 10
7.10 Insurance Filings 10
7.11 Execution and Delivery 11
7.12 Approvals 11
7.13 Capitalization 11

EIGHT Nature and Survival of Representations, Warranties, 11
Covenants, Agreements, Guarantees, Indemnifications and
Hold Harmless

8.1 American Equity and AEI Holding 11
8.2 Century and CLA 11

NINE Conditions Precedent to American Equity's and/or AEI 12
Holding's Obligations

9.1 Satisfaction by Century and CLA 12
(a) Representations and Warranties are True and 12
Correct
(b) Performance and Compliance 12
(c) Delivery of Certificate of Century 13
(d) Opinion of Century's and CLA's Counsel 13
(e) Certificate of CLA 13
9.2 Other Conditions 13

TEN Conditions Precedent to CLA's and Century's Obligations 14

10.1 Satisfaction by American Equity 14
(a) Representations and Warranties and True and
Correct 14
(b) Opinion of American Equity's and AEI Holding's 14
Counsel
(c) Delivery of Certificate of American Equity 14
(d) Certificate of AEI Holding 15
10.2 Other Conditions 15
(a) Tax Matters 15
(b) Approvals 15

-ii-

<PAGE>

Section Page
- ------- ----

ELEVEN Obligations and Restrictions Pending Merger 15

11.1 Conduct of Business 15
11.2 Absence of Change 15
11.3 Access to Records 15
11.4 Approvals 16
11.5 Dividends 16
11.6 Stock Options 16

TWELVE Statutory Representation 16

THIRTEEN Termination and Abandonment 16

13.1 Mutual Consent 16
13.2 By a Constituent Corporation 16
13.3 By a Party 17
13.4 Passage of Time 17

FOURTEEN Closing Procedures and Documents 17

14.1 Delivery by Century and CLA 17
A. Shares of Century 17
B. Resignation of Directors and Officers 17
C. Opinion of Counsel 17
D. Certificates 17
E. Corporate Documents 17
F. Financial Statements 17
G. Assumption Reinsurance Agreement 17
H. List of Business 18
I. Other 18
14.2 Delivery by American Equity and AEI Holding 18
A. Payment of Funds 18
B. Opinion of Counsel 18
C. Certificates 18
D. Approvals 18
E. Other 18

-iii-

<PAGE>

Section Page
- ------- ----

FIFTEEN Miscellaneous 18

15.1 Insurance Department Approval 18
15.2 Reserve Guaranty 18
15.3 Brokerage 18
15.4 Addition of Exhibits 19
15.5 Specific Performance 19
15.6 Press Releases 19
15.7 Confidentiality 19
15.8 Expenses 19
15.9 Notices 19
15.10 Waiver of Conditions 20
15.11 Registered Office of Surviving Corporation 20
15.12 Entire Agreement 21
15.13 Governing Law 21
15.14 Severability 21
15.15 Parties in Interest 21
15.16 Amendment 21
15.17 Counterparts 21
15.18 Dispute Resolution: Arbitration 21

EXHIBITS

Exhibit No. 1 Procedures and Fees for Administration of 23
and Valuation of Retained Business

Exhibit No. 2 Century Life Insurance Company Licenses 24

Exhibit No. 3 Century Life Insurance Company Litigation, 25
Taxes, and Contracts and Commitments

-iv-

<PAGE>

ACQUISITION AND MERGER AGREEMENT

THIS ACQUISITION AND MERGER AGREEMENT ("Agreement") is entered into this
18th day of April, 1996, between Century Life Insurance Company, an insurance
corporation organized and existing under the laws of the State of Iowa, which
has its principal place of business in Waverly, Bremer County, Iowa (hereinafter
called "Century"), Century Life of America, an insurance company organized and
existing under the laws of the State of Iowa, with its principal place of
business in Waverly, Bremer County, Iowa (hereinafter called "CLA"), American
Equity Investment Life Insurance Company, an insurance corporation organized and
existing under the laws of the State of Iowa, with its principal place of
business in Des Moines, Polk County, Iowa (hereinafter called "American Equity")
and American Equity Investment Life Holding Company, a corporation organized and
existing under the laws of the State of Delaware, with its principal place of
business in Des Moines, Polk County, Iowa (hereinafter called "AEI Holding").

WHEREAS, CLA desires to sell the stock of Century and AEI Holding desires
to purchase the stock of Century and simultaneously merge (the "Merger")
American Equity into Century (hereinafter sometimes referred to together as
"Constituent Corporations") pursuant to the applicable statutes of the State of
Iowa in accordance with the terms and conditions hereinafter set forth, wherein
Century will be the surviving corporation (hereinafter sometimes referred to as
"Surviving Corporation" when reference is made to it after the Effective Time);
and

WHEREAS, Century is duly organized and existing under the corporate
and insurance laws of the State of Iowa, having been incorporated on December
19, 1980, and having authorized capital stock consisting of Seven Hundred
Fifty Thousand (750,000) shares of common stock with a par value of $2.00 per
share, of which all Seven Hundred Fifty Thousand (750,000) shares are now
issued and outstanding; and

WHEREAS, American Equity is duly organized and existing under the
corporate and insurance laws of the State of Iowa, having been incorporated on
December 28, 1995, and having authorized capital stock consisting of Four
Million (4,000,000) shares of common stock with a par value of $1.00 per
share, of which Two Million Five Hundred Thousand (2,500,000) shares are
issued and outstanding, and 500,000 shares of Series Preferred Stock, of
which none are issued or outstanding.

NOW, THEREFORE, for good and valuable consideration, including the
mutual covenants contained herein, the parties intending to be legally bound
do hereby agree that AEI Holding shall purchase the stock of Century and
simultaneously American Equity shall be merged with and into Century pursuant
to the applicable statutes of the State of Iowa on the following terms and
conditions:

SECTION ONE

Identity of Merging Corporations and Surviving Corporation

1.1 NAME OF EACH CORPORATION PLANNING TO MERGE. The corporations
which are merging pursuant to this Agreement are American Equity Investment Life
Insurance Company and Century Life Insurance Company, both of which are
insurance corporations organized and

<PAGE>

existing under the laws of the State of Iowa, each with its principal place of
business in the State of Iowa.

1.2 SURVIVING CORPORATION. Century shall be the Surviving
Corporation: provided, however, that simultaneously with the Merger, the name of
the Surviving Corporation will be change to American Equity Investment Life
Insurance Company.

SECTION TWO

The Merger

2.1 EFFECTIVE TIME AND CLOSING. Subject to the terms and conditions
of this Agreement, the closing pursuant to this Agreement ("Closing") shall take
place on September 30,1996 at the offices of Whitfield & Eddy, P.L.C., Des
Moines, Iowa, or at such other place as the parties may agree. At the Closing,
the Articles of Merger shall be executed and AEI Holding shall immediately file
such Articles with the Iowa Secretary of State. The Articles of Merger shall
state that the Merger is to be effective on September 30, 1996 ("Effective
Date") at 1:00 p.m. ("Effective Time").

2.2 RIGHTS OF SURVIVING CORPORATION. The Surviving Corporation shall
succeed to and possess all of the rights, privileges, powers, immunities and
franchises, public or private, of each of the Constituent Corporations which,
together with all property (real, personal or mixed) of each of the Constituent
Corporations, shall be vested in the Surviving Corporation without further act
or deed and thereafter shall constitute the same rights, powers, immunities,
franchises and property of the Surviving Corporation as they were of the
respective Constituent Corporations, and the title of any real estate vested by
deed or otherwise in either of the Constituent Corporations is vested in the
Surviving Corporation without reversion or impairment.

2.3 CLAIMS AGAINST CONSTITUENT CORPORATIONS. Any claims existing
or action or proceeding pending by or against either of the Constituent
Corporations on the Effective Date may be prosecuted by or against it as if
the Merger had not taken place, subject, however, to any indemnifications
granted in this Agreement.

2.4 TAX ELECTION. AEI Holding agrees to make an election under
Section 338(g) of the Internal Revenue Code and the parties hereto shall make a
timely joint election under Section 338(h)(10) of the Internal Revenue Code on
Internal Revenue Service Form 8023-A. Comparable elections, if available, shall
be made under state law in order to have the acquisition of Century by AEI
Holding treated as an asset acquisition for state tax purposes in the same
manner as it will be treated under Section 338 of the Internal Revenue Code for
federal income tax purposes. American Equity and CLA shall agree upon the
allocation of the Purchase Price to the various assets of Century which it owns
immediately preceding the Effective Time.

-2-

<PAGE>

SECTION THREE

Change of Name,
Restated Articles of Incorporation and Amended Bylaws,
and Officers and Directors

3.1 CHANGE OF NAME. As part of this Agreement, Century, which is
the Surviving Corporation, shall change its name to American Equity
Investment Life Insurance Company to be effective at the Effective Time. AEI
Holding covenants and agrees that the name change will occur in all
jurisdictions listed in Exhibit No. 2 prior to January 1, 1997, and all
affected policyholders of Century will be provided with a name change
endorsement in accordance with applicable law. If for any reason the
Surviving Corporation cannot change its name to American Equity Investment
Life Insurance Company prior to January 1, 1997, AEI Holding covenants and
agrees that the Surviving Corporation shall, by January 1, 1997, nonetheless
effect a name change to a name that does not include any of the words
"Century," "CEN-TRAC," "CENTURION," or numeral "21."

3.2 ARTICLES OF INCORPORATION. The Articles of Incorporation and
Bylaws of American Equity shall be adopted by the Surviving Corporation and
shall be the Restated Articles of Incorporation and Amended Bylaws of the
Surviving Corporation upon consummation of the Merger, and AEI Holding shall
prepare and file such Restated Articles of Incorporation with the Iowa
Insurance Commissioner and the Iowa Secretary of State to be effective at the
Effective Time.

3.3 OFFICERS AND DIRECTORS. The officers and directors of American
Equity shall become all of the officers and directors of the Surviving
Corporation at the Effective Time.

SECTION FOUR

Conversion and Payment of Shares

4.1 LIQUIDATING DISTRIBUTION BY CENTURY. The parties acknowledge
that for federal income tax purposes, CLA and Century intend to enter into
transactions that will be treated as a tax-free liquidation of Century and to
liquidate Century in a tax-free manner that allows Century's corporate shell,
charter and licenses to be maintained for sale to AEI Holding, which sale
shall be accomplished through the Merger. As such, as of the Effective Date,
Century's assets will consist solely of assets on deposit with state
insurance departments and cash in the amount of Five Million Dollars
($5,000,000) (the "Retained Assets"), its licenses and charter and any
Retained Business as defined in SECTION 5.2 of this Agreement. At the
Closing, Century shall distribute its cash to CLA as a liquidating
distribution.

4.2 AMERICAN EQUITY SHARES OWNED BY AEI HOLDING. On the Effective
Date, American Equity shall merge with and into Century and the Two Million
Five Hundred Thousand (2,500,000) shares of common stock of American Equity
outstanding and owned of record by AEI Holding, shall be converted into Two
Million Five Hundred Thousand

-3-
<PAGE>

(2,500,000) shares, having a par value of $1.00 per share, of
newly-authorized common stock of the Surviving Corporation by exchanging each
share of common stock of American Equity for one share of common stock of the
Surviving Corporation.

4.3 CENTURY SHARES OWNED BY CLA. At the Closing, to be effective
at the Effective Time, the Seven Hundred Fifty Thousand (750,000) shares of
common stock of Century outstanding and owned by record by CLA shall be
transferred to AEI Holding in exchange for an amount equal to Seven Hundred
Thousand Dollars ($700,000), plus (i) the amount of any Retained Assets not
distributed to Century under SECTION 4.1 above and (ii) the value of the
Retained Business, determined in accordance with Exhibit No. 1, payable by
wire transfer to an account designated by CLA, and, simultaneously, Century
will redeem said stock from AEI Holding for the same amount.

4.4 SHARES OF SURVIVING CORPORATION AFTER MERGER. Upon
consummation of the Merger, Two Million Five Hundred Thousand (2,500,000)
fully paid shares of common stock of the Surviving Corporation (American
Equity Investment Life Insurance Company, formerly Century Life Insurance
Company), having par value of $1.00 per share, will be issued and outstanding
and all such common shares will be owned by AEI Holding, and One Million Five
Hundred Thousand (1,500,000) shares of common stock will be authorized, but
unissued. Additionally, Five Hundred Thousand (500,000) shares of Series
Preferred Stock will be authorized, none of which will be issued or
outstanding.

4.5 ACTIONS BY BOARD OF DIRECTORS OF SURVIVING CORPORATION. The
Board of Directors of the Surviving Corporation is empowered to adopt further
rules and regulations not inconsistent with the provisions of this Agreement.

SECTION FIVE

Capital and Surplus
and Existing Business of Century

5.1 CAPITAL AND SURPLUS. Prior to the Closing, Century shall
distribute to CLA all of its assets other than the Retained Assets, licenses
and charter, and Retained Business.

5.2 EXISTING BUSINESS. On or before September 13, 1996, Century
shall, to the extent permitted by applicable state laws, enter into an
assumption reinsurance or similar agreement with CLA with respect to some or
all of Century's insurance business which is on the books of Century as of
the date of this Agreement. Century may continue to be directly liable under
an assumption reinsurance or similar agreement with respect to such policies.
Century shall take all actions it deems necessary to complete and give effect
to said assumption reinsurance agreement. Any insurance business on the
books of Century which Century and CLA conclude cannot be assumed by CLA
under an assumption reinsurance agreement ("Retained Business") shall be
handled in accordance with the terms and conditions set forth in Exhibit
No. 1 attached hereto.

-4-
<PAGE>

SECTION SIX

Representations and Warranties of Century and CLA

Century and CLA represent and warrant to American Equity that:

6.1 CORPORATE STATUS. Century is an insurance company duly
organized and licensed, validly existing and in good standing under the laws
of the State of Iowa and has the corporate power and authority to own its
property and to carry on its business as presently conducted. Century is
duly qualified and licensed to transact business as a foreign insurance
company in good standing in each jurisdiction where the ownership of its
property or the conduct of its business makes such qualification and
licensing necessary. A list setting forth all of the states in which Century
is qualified and licensed to transact the business of insurance is attached
hereto as Exhibit No. 2. Additionally, Century is an accredited reinsurer
in the State of New York. Copies of the Articles of Incorporation and Bylaws
of Century, including all amendments thereto, to be delivered to American
Equity pursuant to SECTION 14.1.E will be complete and correct and, to the
best of its knowledge, the minute books of Century to be delivered to
American Equity pursuant to SECTION 14.1.E will be complete and will
correctly reflect, in all material respects, all corporate actions taken at
all meetings of Directors and Shareholders of Century and will correctly
record all resolutions with respect to which certified copies have been
delivered to other parties.

6.2 CAPITALIZATION. The authorized capital stock of Century
consists of Seven Hundred Fifty Thousand (750,000) shares of common stock,
having a par value of $2.00 per share, all of which shares are issued and
outstanding and owned by CLA. All of the issued and outstanding shares of
common stock of Century are free and clear of all security interests, liens,
hypothecations, pledges, charges and assessments, voting trusts, or other
encumbrances of any kind whatsoever; and have been validly issued and are
fully paid and nonassessable. There are no outstanding options, warrants,
subscriptions, calls, commitments or other claims of any sort whatsoever in
respect of, or securities convertible into, any shares of common stock of
Century. Prior to the Closing, Century and CLA will take such action as is
necessary to change the par value of Century's stock to $2.67 per share.

6.3 FINANCIAL STATEMENTS.

i. Century has furnished to American Equity the 1995 Annual
Statement of Century as filed with the Iowa Insurance Division and the
certified audit report of Century's December 31, 1995 financial statement.
Within thirty-five (35) days, respectively, after the end of the first and
second quarters of 1996, Century will provide American Equity with the
unaudited financial statements of Century for the year-to-date periods ended
March 31 and June 30, 1996. At least ten (10) days prior to the Closing,
Century will provide unaudited financial statements of Century for the
year-to-date period ended August 31, 1996. Within twenty (20) business days
following the Effective Date, Century will provide an unaudited financial
statement of Century for the year-to-date period ended September 30, 1996.
All said documents are sometimes hereinafter collectively called the
"Financial Statements." Century and CLA warrant that the existing Financial
Statements are, and the future Financial Statements will be, complete and
correct in all material respects, except as reflected in Exhibit No. 3; are
and will

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be in accordance with statutory accounting principles, and fairly present the
results of operations of Century for the period indicated. Immediately prior
to the Effective Time, Century's assets will consist solely of the Retained
Assets, its licenses and charter, and the Retained Business.

ii. Except as and to the extent reflected and reserved
against in the Financial Statements, Century has no liability, commitment or
obligation of any nature, whether absolute, accrued, contingent or otherwise,
and whether due or to become due including, without limitation, any liability
for taxes.

iii. Since the 1995 Annual Statement of Century, there have
been no material changes in the balance sheet of Century, except those which
are reflected on the Financial Statements or have occurred in the ordinary
transaction of business or are the result of permitted actions taken by
Century under SECTION FIVE hereof.

6.4 TITLE TO PROPERTY. Century owns and has good and marketable
title to all of its property and assets, free and clear of all mortgages,
security interests, pledges, liens, conditional sales agreements, options,
hypothecations, encumbrances or charges, except for pledges to state
insurance departments.

6.5 CORPORATE ACTION. Century has or by the Effective Date will
have taken, all corporate action required to authorize the execution and
delivery to American Equity and AEI Holding of this Agreement and the
consummation of the transactions contemplated hereby. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby and in accordance with this Agreement, will violate any
provisions of, or result in the breach of, or default under, or accelerate or
permit the acceleration of the performance required by the terms of (a) any
provision of any federal, state, local or foreign law, regulation, ordinance,
order, rule or administrative rule of any governmental authority or
instrumentality applicable to CLA or Century, including, without limitation,
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, or the "Blue Sky" laws of any state having jurisdiction; (b) the
Articles of Incorporation or Bylaws of Century or CLA; (c) any agreement to
which Century or CLA is a party or by which either of them may be bound, or
(d) any order, judgment, writ, injunction or decree of any court or other
governmental agency or instrumentality applicable to Century or CLA, or
result in the creation of any security interests, claims, liens, charges, or
encumbrances of any kind whatsoever, upon any of the outstanding shares of
Century or upon any of the property or assets of Century, or in any way
affect or violate the terms or conditions of, or result in the cancellation,
modification, revocation or suspension of, any of the licenses, approvals,
certificates, permits or authorities referred to in SECTION 6.1 hereof,
assuming all approvals are obtained for the transactions contemplated herein.

6.6 LITIGATION. Except as described on Exhibit No. 3 attached
hereto, there are no actions, suits, proceedings or investigations pending,
or to the knowledge of Century or CLA, threatened against Century; there are
no actions, suits, proceedings or investigations pending, or to the knowledge
of CLA, threatened against CLA which would prevent the consummation of this
Agreement or any of the transactions contemplated hereby or declare the same
unlawful or invalid or cause the rescission thereof. AEI Holding agrees that
CLA may, at its option, control the defense of any claim or proceeding
against Century or the Surviving Corporation

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which arises out of any occurrence or occurrences prior to the Effective
Date, including the claims described on Exhibit No. 3 hereto, and such claims
as may be asserted hereafter or any claim or proceeding for which CLA may be
liable under SECTION 8.2.B. In such situations, CLA shall pay the costs of
the defense of such claims directly to the appropriate third parties and any
judgments, awards or settlements to the parties entitled thereto, provided
suitable releases are provided to the Surviving Corporation. AEI Holding
further agrees that CLA may, at CLA's own expense, prosecute or continue the
prosecution of any claim or proceeding against third parties which arise out
of any occurrence or occurrences prior to the Effective Date, including
claims described on Exhibit No. 3 hereto or such claims as may be asserted
hereafter, and CLA shall be entitled to receive and retain all damages and
other sums payable to CLA or Century in connection with such claims. Century
or the Surviving Corporation shall take any and all action and execute such
documents as may be necessary to convey to CLA any of the rights described in
this paragraph.

6.7 TAXES. To the best of its knowledge, Century has filed all tax
returns and reports required by applicable foreign, federal, state and local
law to be filed by it and such returns and reports are true, complete and
correct. All taxes and other governmental charges with respect to Century
have been paid or accrued on its books, and the provision for taxes shown in
the Financial Statements is adequate to cover the liability of Century as of
the date of each such Financial Statement for all taxes based on income,
gross receipts, premiums, sales or purchases, capital stock or surplus, and
business or assets of Century. Except as described in Exhibit No. 3, neither
the Internal Revenue Service nor any other taxing authority has notified
Century of any proposed additional taxes, interest or penalties in respect to
Century. No extension of time for assessments of deficiences has been
granted by Century to any taxing authority. At the Effective Date, all tax
payment obligations of Century will have been paid or accrued.

To the best of Century's knowledge, proper accurate amounts
have been withheld from employees and agents of Century for all periods in
full and complete compliance with the tax withholding provisions of
applicable state and federal laws; proper and accurate federal and state tax
returns have been filed by Century for all periods for which returns were due
with respect to income tax withholding, social security and unemployment
taxes and the amounts shown thereon to be due and payable have been paid in
full or adequate provision therefor is shown on the Financial Statements; and
the hours worked by, and payments made to, employees of Century have not been
in violation of the Fair Labor Standards Act or any applicable state laws
dealing with similar matters. CLA has caused, or will cause Century to file,
prior to the Effective Date and on a timely basis, its income tax returns for
the year ended December 31, 1995.

6.8 EMPLOYMENT AND OTHER CONTRACTS. Century is not a party to or
bound by any written or oral employment, consulting or similar contract with
any person. Century is currently a party to a number of brokerage agreements
which will be terminated or assumed by CLA on or before the Effective Date.

6.9 CONTRACTS AND OTHER COMMITMENTS. Century is not a party to or
bound by any written or oral contract, agreement, commitment or understanding
not made in the ordinary course of its business, or similar businesses, or
which is materially adverse to it, except for the settlement agreement with
Century 21, described in Exhibit No. 3, nor does it have any present

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or future obligation to pay any commissions to agents, except under the
brokerage agreements referenced in SECTION 6.8. Century has materially complied
with all the provisions of all such instruments and of all other contracts,
agreements and commitments or understandings to which it is a party and it is
not in default under any provisions thereof. CLA has made no financial
guaranties on behalf of Century to any state or any regulatory body, except as
described in Exhibit No. 3.

6.10 INSURANCE FILINGS. Century has filed on a timely basis its 1995
Annual Statement with each state listed in Exhibit No. 2 attached hereto.

6.11 EXECUTION AND DELIVERY. When executed and delivered to American
Equity and AEI Holding by CLA and Century, this Agreement will constitute a
valid and legally binding obligation of CLA and Century, as applicable, in
accordance with the terms hereof.

SECTION SEVEN

Representation and Warranties of American Equity

American Equity and AEI Holding represent and warrant to Century that:

7.1 CORPORATE STATUS. American Equity is an insurance company duly
organized and licensed, validly existing and in good standing under the laws of
the State of Iowa and has the corporate power and authority to own its property
and to carry on its business as presently conducted. American Equity is duly
qualified and licensed to transact business in the State of Iowa. Copies of the
Articles of Incorporation and Bylaws of American Equity, as amended, to be
delivered to Century will be complete and correct and the minute books of
American Equity to be delivered to the Surviving Corporation will be complete
and will correctly reflect, in all material respects, all corporate actions
taken at all meetings of Directors and Shareholders of American Equity and will
correctly record all resolutions with respect to which certified copies have
been delivered to other parties.

7.2 CAPITALIZATION. The authorized capital stock of American Equity
consists of Four Million (4,000,000) shares of common stock, $1.00 par value per
share, of which Two Million Five Hundred Thousand (2,500,000) shares are issued
and outstanding and owned by AEI Holding, and Five Hundred Thousand (500,000)
shares of Series Preferred Stock, none of which are issued or outstanding. All
of the issued and outstanding shares of common stock of American Equity are free
and clear of all security interests, liens, hypothecations, pledges, charges and
assessments, voting trusts, or other encumbrances of any kind whatsoever, and
have been validly issued and are fully paid and nonassessable. There are no
outstanding options, warrants, subscriptions, calls, commitments or other claims
of any sort whatsoever in respect of, or securities convertible into, any shares
of common stock of American Equity.

7.3 FINANCIAL STATEMENTS.

i. American Equity has furnished to Century the 1995 Annual
Statement of American Equity as filed with the Iowa Insurance Division, and will
furnish to Century the

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<PAGE>

certified audit report of American Equity's December 31, 1995 financial
statement when completed, said documents sometimes hereinafter collectively
called the "Financial Statements." American Equity warrants that the existing
Financial Statements are, and the future Financial Statements will be, complete
and correct in all material respects; are and will be in accordance with
statutory accounting principles, and fairly present the results of operations of
American Equity for the period indicated.

ii. Except as and to the extent reflected and reserved against
in its Financial Statements, American Equity has no liability, commitment or
obligation of any nature, whether absolute, accrued, contingent or otherwise,
and whether due or to become due including, without limitation, any liability
for taxes in respect to or measured by the income of American Equity.

iii. Since the 1995 Annual Statement of American Equity, there
have been no material changes in the balance sheet of American Equity which
would adversely affect its ability to consummate the Merger.

7.4 TITLE TO PROPERTY. American Equity owns and has good and
marketable title to all of its property and assets, free and clear of all
mortgages, security interests, pledges, liens, conditional sales agreements,
options, hypothecations, encumbrances or charges.

7.5 CORPORATE ACTION. American Equity has or by the Effective Date
will have taken, all corporate action required to authorize the execution and
delivery to Century of this Agreement and the consummation of the transactions
contemplated hereby. Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby, including the Closing
hereunder, will violate any provisions of, or result in the breach of, or
default under, or accelerate or permit the acceleration of the performance
required by the terms of (a) any provision of any federal, state, local or
foreign law, regulation, ordinance, order, rule or administrative rule of any
governmental authority or instrumentality applicable to AEI Holding or American
Equity, including, without limitation, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, or the "Blue Sky" laws of any state having
jurisdiction; (b) the Articles of Incorporation or American Equity or AEI
Holding; (c) any agreement to which American Equity or AEI Holding is a party
or by which either of them may be bound, or (d) any order, judgment, writ,
injunction or decree of any court or other governmental agency or
instrumentality applicable to American Equity or AEI Holding, or result in the
creation of any security interests, AEI claims, liens, charges, or encumbrances
of any kind whatsoever, upon any of the outstanding shares of American Equity or
upon any of the property or assets of American Equity, or in any way affect or
violate the terms or conditions of, or result in the cancellation, modification,
revocation or suspension of, any of the licenses, approvals, certificates,
permits or authorities referred to in SECTION 7.1.

7.6 LITIGATION. Except for suits of a character incident to the
normal conduct of business of American Equity, there are no actions, suits,
proceedings or investigations pending, or to the knowledge of American Equity or
AEI Holding, threatened against American Equity; there are no actions, suits,
proceedings or investigations pending, or to the knowledge of AEI Holding,
threatened against AEI Holding which would prevent the consummation of this

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<PAGE>

Agreement or any of the transactions contemplated hereby or declare the same
unlawful or invalid or cause the rescission thereof.

7.7 TAXES. To the best of its knowledge, American Equity has filed
all tax returns and reports required by applicable foreign, federal, state and
local law to be filed by it and such returns and reports are true, complete and
correct. All taxes and other governmental charges with respect to American
Equity have been paid or accrued on its books through the Effective Date, and
the provision for taxes shown in the Financial Statements is adequate to cover
the liability of American Equity as of the date of such Financial Statement for
all taxes based on income, gross receipts, premiums, sales or purchases, capital
stock or surplus, and business or assets of American Equity. Neither the
Internal Revenue Service nor any other taxing authority has notified American
Equity of any proposed additional taxes, interest or penalties in respect to
American Equity. No extension of time for assessments of deficiencies has been
granted by American Equity to any taxing authority. At the Effective Date, all
tax payment obligations of American Equity will have been paid or accrued.

To the best of American Equity's knowledge, proper accurate
amounts have been withheld from employees of American Equity for all periods in
full and complete compliance with the tax withholding provisions of applicable
state and federal laws; proper and accurate federal and state tax returns have
been filed by American Equity for all periods for which returns were due with
respect to income tax withholding, social security and unemployment taxes and
the amounts shown thereon to be due and payable have been paid in full or
adequate provision therefor is shown on the Financial Statements; and the hours
worked by, and payments made to, employees of American Equity have not been in
violation of the Fair Labor Standards Act or any applicable state laws dealing
with similar matters. AEI Holding has caused, or will cause American Equity to
file, subsequent to the Effective Date and on a timely basis, its income tax
returns for the year ended December 31, 1995, and the income tax returns of the
Surviving Corporation.

7.8 EMPLOYMENT AND OTHER CONTRACTS. American Equity is not a party to
or bound by any written or oral employment, consulting or similar contract with
any person.

7.9 CONTRACTS AND OTHER COMMITMENTS. American Equity is not a party
to or bound by any written or oral contract, agreement, commitment or
understanding not made in the ordinary course of its business, or similar
businesses, or which is materially adverse to it. American Equity has complied
with all the provisions of all such instruments and of all other contracts,
agreements and commitments or understandings to which it is a party and it is
not in default under any provisions thereof.

7.10 INSURANCE FILINGS. American Equity has filed on a timely basis
its 1995 Annual Statement with the State of Iowa and such Statement is true,
correct and complete. In addition, American Equity will file on a timely basis
prior to the Effective Date, all other reports and documents required by
applicable state laws, including notification and/or requests for approval of
this Agreement. All such reports and documents are or will be true, correct and
complete.

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7.11 EXECUTION AND DELIVERY. When executed and delivered to Century by
American Equity and AEI Holding, this Agreement will constitute a valid and
legally binding obligation of American Equity and AEI Holding, as applicable, in
accordance with the terms hereof.

7.12 APPROVALS. American Equity and AEI Holding have obtained or will
obtain prior to Closing, any required approval from the appropriate regulatory
bodies for the transactions contemplated by this Agreement, including AEI
Holding's acquisition of control of Century and the Merger. AEI Holding agrees
to obtain approval or a waiver of the approvals requirements from California,
Iowa, Michigan, Colorado and Arizona related to AEI Holding's acquisition of
control of Century and the Merger and agrees to notify all other states listed
in Exhibit No. 2. If a state notified requires approval or any other compliance
activity, AEI Holding will obtain such approval and/or follow the required
compliance activity. CLA and Century agree to cooperate in seeking such
approvals and to supply such documents and information as is required in
connection therewith.

7.13 CAPITALIZATION. At the Effective Time, American Equity and AEI
Holding shall cause the Surviving Corporation to have sufficient capitalization
to satisfy the minimum capitalization requirements of and maintain the Surviving
Corporation's license in the State of Iowa.

SECTION EIGHT

Nature and Survival of Representations, Warranties,
Covenants, Agreements, Guarantees, Indemnifications
and Hold Harmless

8.1 AMERICAN EQUITY AND AEI HOLDING.

A. SURVIVAL OF REPRESENTATIONS, ETC. The representation,
warranties, covenants and agreements of American Equity and AEI Holding set
forth in this Agreement and in any documents delivered pursuant to the terms
hereof shall survive the Closing and any examination made by or on behalf of
Century and CLA.

B. INDEMNIFICATION AND HOLD HARMLESS. AEI Holding agrees
to indemnify CLA, and to hold it harmless from and against, and will pay to CLA
upon demand, the full amount of any loss, claim, damage, liability or expense
(including reasonable attorneys' fees resulting to CLA, directly or indirectly,
from any breach of the representations, warranties, covenants and agreements of
AEI Holding and American Equity contained in this Agreement if discovered by CLA
on or before August 1, 2001. AEI Holding shall indemnify and hold CLA harmless
from any loss or damage sustained by CLA arising out of any claim, action or
proceeding against American Equity or AEI Holding prior to the Effective Time.

8.2 CENTURY AND CLA

A. SURVIVAL OF REPRESENTATIONS, ETC. The representation,
warranties, covenants and agreements of Century and CLA set forth in this
Agreement and in any documents

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<PAGE>

delivered pursuant to the terms hereof shall survive the Closing and any
examination made by or on behalf of American Equity and AEI Holding.

B. INDEMNIFICATION AND HOLD HARMLESS. CLA agrees to
indemnify AEI Holding and/or the Surviving Corporation as applicable, and to
hold them harmless from and against, and will pay to AEI Holding and/or the
Surviving Corporation upon demand, the full amount of any loss, claim,
damage, liability or expense (including reasonable attorneys' fees) resulting
to AEI Holding and/or the Surviving Corporation, as applicable, directly or
indirectly, (i) from any activity of Century or CLA (including a claim in
excess of the corresponding reserve incurred by a Century policyholder
related to Retained Business if the event giving rise to the claim occurs
prior to the Effective Time) which takes place prior to the Effective Time,
(including matters referred to in Exhibit No. 3) and from any breach of the
representations, warranties, covenants and agreements of CLA and Century
contained in this Agreement if discovered by AEI Holding or the Surviving
Corporation on or before August 1, 2001; provided, however, that if the
breach results in the loss of a license of the Surviving Corporation, the
amount of the indemnification because of the loss of the license shall be
limited to $30,000 per license and CLA shall not be liable for lost profits,
the cost to replace the license or any other damages/amounts; (ii) from any
assessment made by any state guaranty fund against Century (or the Surviving
Corporation if such assessment is due to the Century being the Surviving
Corporation) which consists of a flat fee assessed prior to the Effective
Date or is based on premiums generated by Century prior to the Effective
Date; (iii) arising out of any insurance business of Century which has been
assumed and/or reinsured by CLA or any other company prior to the Effective
Date, and (iv) any claim asserted by any broker or agent for commissions or
other monies due in the past or in the future as a result of any business
conducted by Century prior to the Effective Date or contracts or agreements
entered into by Century prior to the Effective Date. Any taxes of any kind
(other than guaranty fund accounts, which shall be handled in the manner set
forth in (ii) above) assessed against Century or the Surviving Corporation as
a result of activity of Century prior to the Effective Date shall be paid by
CLA and any refunds or overpayments of taxes of any kind attributable to
activity of Century prior to the Effective Date shall be paid to CLA.

SECTION NINE

Conditions Precedent to American Equity's
and/or AEI Holding's Obligations

9.1 SATISFACTION BY CENTURY AND CLA. The obligations of American
Equity and/or AEI Holding under this Agreement shall be subject to the
satisfaction by Century and CLA of each of the following conditions precedent:

(a) REPRESENTATIONS AND WARRANTIES ARE TRUE AND CORRECT. The
representations and warranties of Century and CLA set forth in this Agreement
shall be true and correct in all material respects at the Effective Date.

(b) PERFORMANCE AND COMPLIANCE. Century and CLA shall have performed
and complied with all agreements and conditions required by this Agreement to be
performed or complied with by them prior to the Effective Date.

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(c) DELIVERY OF CERTIFICATE OF CENTURY. Century shall have delivered
to American Equity a certificate of the President or any Vice President and the
Secretary or any Assistant Secretary of Century, dated as of the Effective Date,
certifying that the conditions set forth in SECTIONS 11.1, 11.5 and 11.6 hereof
are true and correct as of the Effective Date.

(d) OPINION OF CENTURY'S AND CLA'S COUNSEL. Century and CLA shall
have delivered to American Equity and AEI Holding a favorable opinion of their
legal counsel, dated as of the Effective Date, to the effect that: (i) Century
is a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, has full power and authority to own its
property and to carry on its business as presently conducted, and is duly
licensed to transact the business of insurance in those states as set forth in
Exhibit No. 2 attached hereto, (ii) Century's entire authorized capital stock
consists of Seven Hundred Fifty Thousand (750,000) shares of common stock, $2.67
par value per share, all of which are outstanding. All of such issued and
outstanding shares of common stock of Century are validly issued, fully paid and
nonassessable, are owned by CLA, free and clear of any security interests,
liens, hypothecations, pledges, encumbrances, charges and assessments, voting
trusts, or other encumbrances of any kind whatsoever; (iii) the execution of
this Agreement and the consummation of the transactions contemplated hereby have
not, or will not at the time of Closing, result in a breach of or default under
the Articles of Incorporation or Bylaws of Century or the Bylaws and governing
instruments of CLA or of any agreement, instrument or understanding to which CLA
or Century is a party or by which any of them may be bound; (iv) Century and CLA
have obtained all necessary consents, approvals, authorizations or orders of any
court or governmental authority or instrumentality necessary for the assumption
reinsurance and the transfer of assets contemplated by SECTION 5; (v) this
Agreement has been duly and validly authorized, executed and delivered by CLA
and Century and is the valid and binding agreement of CLA and Century, as
applicable, and is enforceable in accordance with its terms; (vi) except as
described in Exhibit No. 3, such counsel has no knowledge of any actions, suits,
proceedings or investigations pending or threatened in any court or before any
governmental agency or instrumentality against, by or affecting Century or its
business (financial or otherwise).

(e) CERTIFICATE OF CLA. CLA shall have delivered to AEI Holding a
certificate of the President or any Vice President and of the Secretary or any
Assistant Secretary of CLA certifying that the representations and warranties of
CLA set forth in this Agreement and set forth in each Exhibit hereto are true
and complete in all material respects as of the Effective Date.

9.2 OTHER CONDITIONS. The obligations of AEI Holding and American
Equity under this Agreement shall also be subject to the receipt of all
regulatory approvals required for the transactions contemplated herein.

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SECTION TEN

Conditions Precedent to
CLA's and Century's Obligations

10.1 SATISFACTION BY AMERICAN EQUITY. The obligations of Century and
CLA under this Agreement shall be subject to the satisfaction by American Equity
and AEI Holding of each of the following conditions precedent:

(a) REPRESENTATIONS AND WARRANTIES ARE TRUE AND CORRECT. The
representations and warranties of American Equity and AEI Holding set forth in
this Agreement shall be true and correct in all material respects at the
Effective Date.

(b) OPINION OF AMERICAN EQUITY'S AND AEI HOLDING'S COUNSEL.
American Equity and AEI Holding shall have delivered to Century and CLA a
favorable opinion of their legal counsel, dated as of the Effective Date, to
the effect that: (i) American Equity is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation,
has full power and authority to own its property and to carry on its business
as presently conducted, and is duly licensed to transact the business of
insurance in the State of Iowa, (ii) American Equity's entire authorized
capital stock consists of Four Million (4,000,000) shares of common stock,
$1.00 par value per share, of which Two Million Five Hundred Thousand
(2,500,000) shares are outstanding. All of such issued and outstanding
shares of common stock of American Equity are validly issued, fully paid and
nonassessable, are owned by AEI Holding, free and clear of any security
interests, liens, hypothecations, pledges, encumbrances, charges and
assessments, voting trusts, or other encumbrances of any kind whatsoever;
(iii) the execution of this Agreement and the consummation of the
transactions contemplated hereby have not, or will not at the time of
closing, result in a breach of or default under the Articles of Incorporation
or Bylaws of American Equity or AEI Holding or of any agreement, instrument
or understanding to which AEI Holding or American Equity is a party or by
which any of them may be bound; (iv) American Equity has obtained all
required consents, approvals, authorizations or orders of any court or
governmental authority or instrumentality which are required for the
consummation by American Equity or AEI Holding of the transactions
contemplated by this Agreement; (v) this Agreement has been duly and validly
authorized, executed and delivered by AEI Holding and American Equity and is
the valid and binding agreement of AEI Holding and American Equity, as
applicable, and is enforceable in accordance with its terms; (vi) such
counsel have no knowledge of any actions, suits, proceedings or
investigations (other than those which would be of a character incident to
the normal conduct of the business of American Equity) pending or threatened
in any court or before any governmental agency or instrumentality against, by
or affecting American Equity or its business, prospects or condition
(financial or otherwise); and (vii) AEI Holding and American Equity are
legally authorized to execute this Agreement and be bound by all of its terms.

(c) DELIVERY OF CERTIFICATE OF AMERICAN EQUITY. American Equity shall
have delivered to Century a certificate of the President or any Vice President
and the Secretary of any Assistant Secretary of American Equity, dated as of the
Effective Date, certifying that the conditions set forth in SECTIONS 7.12 and
11.1 hereof are true and correct as of the Effective Date.

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(d) CERTIFICATE OF AEI HOLDING. AEI Holding shall have delivered to
Century a certificate of the President or any Vice President and of the
Secretary or any Assistant Secretary of Century certifying that the
representations and warranties of American Equity set forth in this Agreement
and set forth in each Exhibit hereto are true and complete in all material
respects as of the Effective Date.

10.2 OTHER CONDITIONS. The obligations of Century and CLA under this
Agreement shall also be subject to the satisfaction of each of the following
precedents:

(a) TAX MATTERS. Century determining that the "liquidation" of
Century can be accomplished in a tax-free manner if Century's existence, charter
and licenses are maintained. Century must notify American Equity on or before
May 15, 1996, if this condition cannot be met, otherwise this condition shall be
deemed waived.

(b) APPROVALS. All approvals required for the transactions
contemplated herein as described in SECTIONS 7.12 AND 9.1(d) shall have been
obtained.

SECTION ELEVEN

Obligations and Restrictions Pending Merger

Each of the Constituent Corporations (except as otherwise indicated
herein) respectively agrees with the other that, subject to the terms of this
Agreement and except as may be permitted elsewhere in the Agreement or
otherwise consented to by the other in writing, it will, from the date
hereof, to and including the Effective Date, take or refrain from taking, as
the case may be, the following actions with respect to its own organization,
business and affairs:

11.1 CONDUCT OF BUSINESS. It shall conduct its business only in the
usual and ordinary course, except for activities and transactions which in the
aggregate are not material or are contemplated or permitted by this Agreement.
In addition, CLA will cause Century to file on a timely basis prior to the
Closing, all reports and documents required by applicable state laws to be filed
on or before the Effective Date in order for Century to continue to be duly
qualified and licensed to transact the business of insurance in each state
listed in Exhibit No. 2 attached hereto. Century and/or CLA shall provide
policyholders of Century with any endorsements or certificates required in
connection with CLA's assumption of Century's policies.

11.2 ABSENCE OF CHANGE. It shall not cause any event, and shall use
its best efforts to prevent the occurrence of any event within its sole control,
which would cause its representations and warranties made herein to be untrue as
of the Effective Date.

11.3 ACCESS TO RECORDS. It shall permit authorized representatives
of the other Constituent Corporation to have access, during ordinary business
hours, to its offices, properties, books and records in order that the other
may make such investigation of its affairs as the other deems desirable, and
it shall furnish, and shall cause its certified public accountants to furnish
the other with such financial and other information concerning itself, its
businesses and properties as the other may from time to time request,
including (without limitation) information

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<PAGE>

required for inclusion, or the preparation of, any information required in
connection with the Merger.

11.4 APPROVALS. It shall cause this Agreement to be submitted to its
shareholders in a manner provided by applicable state law as promptly as is
practicable after the date of execution of this Agreement and shall use its best
efforts to obtain the necessary affirmative vote of its shareholders in favor of
this Agreement as may be required to authorize this Agreement and the Merger.

11.5 DIVIDENDS. Century will not declare or pay any dividend in
cash, stock or property, or make any distribution on, or directly or
indirectly redeem, purchase or otherwise acquire any shares of its
outstanding capital stock or make any other distribution of assets to its
shareholders, except for distributions or dividends reasonably necessary or
appropriate for Century to achieve the results contemplated by SECTIONS 4.1,
5.1 and 5.2 hereof.

11.6 STOCK OPTIONS. Century will not issue or sell, grant options or
issue warrants to purchase or the right to subscribe to any shares of its
capital stock or any of its other securities, or make any other changes in its
capital structure.

SECTION TWELVE

Statutory Representation

No officer, director or shareholder of either of the Constituent
Corporations shall receive any compensation, gratuity or otherwise, directly or
indirectly, for in any manner aiding, promoting or assisting in this Merger,
except for legal fees in the event such person, other than an employee of a
Constituent Corporation, performs legal services in connection with the Merger.

SECTION THIRTEEN

Termination and Abandonment

Anything in this Agreement to the contrary notwithstanding, this
Agreement may be terminated and the Merger abandoned (in which case the
Constituent Corporations shall notify their respective shareholders in
accordance with applicable law), at any time, whether before or after approval
by shareholders and notwithstanding favorable shareholder action, prior to the
Effective Date, under the following conditions:

13.1 MUTUAL CONSENT. By the mutual consent of the parties;

13.1 BY A CONSTITUENT CORPORATION. If any of the conditions to its
obligations under this Agreement specified in SECTIONS TEN and ELEVEN, as
applicable to said Constituent Corporation, have not been satisfied or waived at
or prior to the Closing;

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13.3 BY A PARTY. If any action, proceeding or governmental
investigation is instituted and pending, or threatened against any party, or any
of their respective directors or officers, seeking to restrain or prohibit the
consummation of the Merger, or to change the terms of this Agreement, or to
obtain damages or other relief in connection with the Merger, if such action,
proceeding or governmental investigation makes the consummation of the Merger,
in the reasonable judgment of the party, inadvisable;

13.4 PASSAGE OF TIME. Subject to SECTION 10.2(a), by any party, if the
Merger has not been consummated on or before September 30, 1996, or such later
date as may be agreed to in writing by the Constituent Corporations.

SECTION FOURTEEN

Closing Procedures and Documents

14.1 DELIVERY BY CENTURY AND CLA. The obligations of AEI Holding and
American Equity are subject to the delivery on or before the Effective Date by
Century and CLA of:

A. SHARES OF CENTURY. Certificates representing Seven Hundred
Fifty Thousand (750,000) shares of the common stock of Century.

B. RESIGNATIONS OF DIRECTORS AND OFFICERS. Resignations of
the Directors and all Officers of Century.

C. OPINION OF COUNSEL. Opinion of counsel as provided in
SECTION 9.1(d) hereof.

D. CERTIFICATES. Certificates by the respective officers of
Century and CLA as provided in SECTIONS 9.1(c) and 9.1(e) hereof.

E. CORPORATE DOCUMENTS. Copies of the Articles of
Incorporation of Century, as amended, certified by the Secretary of State of
Iowa or the Iowa Insurance Commissioner, and of its Bylaws, as amended,
certified by the Secretary or Assistant Secretary of Century, all as of a
date not more than fifteen (15) days prior to the Effective Date, together
with the minute books, stock transfer books, and all other books and records
of Century;

F. FINANCIAL STATEMENTS. The unaudited balance sheet of
Century as of August 31, 1996 as provided in SECTION 6.3(i) hereof;

G. ASSUMPTION REINSURANCE AGREEMENT. An executed original
Assumption Reinsurance Agreement for all insurance business of Century which has
been assumed and reinsured by CLA;

H. LIST OF BUSINESS. A list of all of Century's policies of
insurance and annuity contracts which are in effect on the Closing Date that
will constitute Retained Business; and

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I. OTHER. Such other instruments and documents required or
contemplated under this Agreement.

14.2 DELIVERY BY AMERICAN EQUITY AND AEI HOLDING. The obligations of
Century and CLA are subject to delivery on or before the Effective Date by
American Equity and AEI Holding of:

A. PAYMENT OF FUNDS. A wire transfer at Closing to an
account designated by CLA for the payment of funds owed to CLA as provided in
SECTIONS 4.1 and 4.3 hereof.

B. OPINION OF COUNSEL. Opinion of counsel as provided in
SECTION 10.1(b) hereof.

C. CERTIFICATES. Certificates by the respective officers of
American Equity and AEI Holding as provided in SECTIONS 10.1(c) and 10.1(d)
hereof.

D. APPROVALS. Evidence of compliance with SECTION 7.12 to
CLA's reasonable satisfaction.

E. OTHER. Such other instruments and documents required or
contemplated under this Agreement.

SECTION FIFTEEN

Miscellaneous

15.1 INSURANCE DEPARTMENT APPROVAL. The Merger is subject to approval
by the Iowa Insurance Division, and the approval, if required, of a Form A
filing with the Iowa Insurance Division. American Equity agrees forthwith to
use its best efforts to obtain such approval and the approval of any comparable
regulatory authority in any other state which requires such approval, including,
but not limited to, those states listed in SECTION 7.12 or which indicate that
approval is required. Century and CLA shall fully cooperate in this approval
process. The Merger contemplated by this Agreement is expressly subject to such
approval where required by law.

15.2 RESERVE GUARANTY. If the Retained Business consists of fewer than
200 policies and such Retained Business requires legal reserves, CLA hereby
warrants and guarantees that the reserves of Century, as of the Effective Date,
will meet or exceed all regulatory requirements, as of the Effective Date, for
the Retained Business on the books of Century.

15.3 BROKERAGE. CLA agrees to indemnify and hold AEI Holding harmless
from all liabilities arising from any claim for brokerage commission or finder's
fees in connection with the transactions contemplated by this Agreement arising
out of any action on the part of CLA or Century. AEI Holding agrees to
indemnify and hold CLA harmless from all liabilities arising out of any claim
for brokerage commission or finder's fees in connection with the transactions

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<PAGE>

contemplated by this Agreement arising out of any action of AEI Holding or
American Equity. Neither party hereto is aware of any brokerage fee liability
arising as a result of the transactions contemplated by this Agreement.

15.4 ADDITION OF EXHIBITS. If any Exhibit referred to herein, other
than Exhibit Nos. 1 and 2 attached hereto, shall not have been attached hereto
at the time of the execution of this Agreement, or if such Exhibit is incomplete
at such time, such Exhibit may be later attached and completed and initialed by
Century and American Equity, and such Exhibit shall, as later attached or
completed, for all purposes, be deemed part of this Agreement as if attached
hereto at the time of execution. Any such Exhibit will be made available for
attachment or completion no later than the Effective Date.

15.5 SPECIFIC PERFORMANCE. The parties acknowledge that the nature of
this transaction is unique and that the parties will be taking significant
actions or refraining from taking actions in reliance on this Agreement and, for
these reasons and others, the parties agree that each party shall be entitled as
a matter of right to specifically enforce this Agreement in any court of
competent jurisdiction. This right to specific performance shall be cumulative
and in addition to whatever remedies a party may have at law or in equity,
including, without limitation, recovery of damages.

15.6 PRESS RELEASES. All signing parties to this Agreement agree to
consult with each other in issuing any press release or otherwise making any
public statement with respect to this Agreement and all of the transactions
contemplated hereby and further agree not to issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law after consultation with counsel. More specifically, no
announcements or other releases shall be made and the fact that a sale or merger
is pending shall not be disclosed before May 15, 1996, except as required by law
or as is reasonably necessary to obtain approvals required herein.

15.7 CONFIDENTIALITY. All signing parties shall use their best efforts
to maintain the confidentiality of the negotiations of the matters set forth in
this Agreement, and in the case there is no closing under this Agreement, each
party agrees to return to and maintain as confidential all information obtained
from the other party.

15.8 EXPENSES. Each of the parties will bear its own expenses incurred
with this Agreement and a closing hereunder, including without limitation, all
legal, accounting, travel and other similar fees and expenses.

15.9 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed, first class, postage prepaid or sent via telefax:

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<PAGE>

If to AEI Holding or American Equity:

American Equity Investment Life Insurance Company
P.O. Box 71216
Des Moines, Iowa 50325
Attention: D. J. Noble, President
Telephone: 515-284-7510
Telefax: 515-242-0479

With copy to:

Harley A. Whitfield
and William L. Fairbank
Whitfield & Eddy, P.L.C.
317 Sixth Avenue, Suite 1200
Des Moines, Iowa 50309-4110
Telephone: 515-288-6041
Telefax: 515-246-1474

If to Century or CLA:

Century Life of America
2000 Heritage Way
Waverly, Iowa 50677
Attention: Kevin Lentz
Telephone: 319-352-1000
Telefax: 319-352-1272

With copy to:

John Waggoner
Century Life of America
5910 Mineral Point Road
Madison, Wisconsin 53705
Telephone: 608-231-7318
Telefax: 608-238-2472

15.10 WAIVER OF CONDITIONS. Any failure of either of the Constituent
Corporations and/or CLA and/or AEI Holding to comply with any obligation,
covenant, agreement or condition herein may be expressly waived in writing
signed by the other Constituent Corporation and its parent company (i.e., CLA or
AEI Holding), but such waiver or failure to insist upon strict compliance with
such obligations, a covenant, agreement or condition shall not operate as a
waiver of, or estoppel with respect to, any subsequent or other failure.

15.11 REGISTERED OFFICE OF SURVIVING CORPORATION. The registered
executive office of the Surviving Corporation shall be at P.O. Box 71216, Des
Moines, Iowa 50325.

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<PAGE>

15.12 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter of this Agreement,
and this Agreement (including each Exhibit hereto) supersedes all prior and
contemporaneous agreements between the parties hereto in connection with the
subject matter of this Agreement.

15.13 GOVERNING LAW. This Agreement and the provisions hereof shall be
governed by the laws of the State of Iowa.

15.14 SEVERABILITY. The provisions of this Agreement are severable. If
any provision, phrase, clause or word hereof be rendered or declared illegal, as
violative of public policy or otherwise, then any such provision, phrase, clause
or word hereof shall be deemed stricken and deleted from this Agreement, and it
shall not violate, invalidate, impair or otherwise affect any other provision,
phrase, clause or word hereof.

15.15 PARTIES IN INTEREST. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of each of the signing parties.

15.16 AMENDMENT. Subject to applicable law, this Agreement may be
amended, modified and supplemented by mutual consent of the respective Boards of
Directors of the Constituent Corporations or by the respective officers
authorized by such Boards of Directors at any time prior to the Effective Date
with respect to any of the terms contained herein, in such manner as may be
agreed upon in writing by such Boards of Directors or such officers.

15.17 COUNTERPARTS. For the convenience of the parties, and to
facilitate the filing hereof with appropriate governmental authorities, this
Agreement may be executed in one or more counterparts, each of which together
shall be deemed to be an original.

15.18 DISPUTE RESOLUTION; ARBITRATION. In the event of any controversy
or dispute relating to this Agreement, the parties shall refer the matter to
their respective senior management for resolution. If they are not able to
resolve the matter after a period of thirty days, any party may refer the matter
for settlement by arbitration in accordance with the rules of the American
Arbitration Association. The parties shall jointly agree upon an arbitrator.
If they are unable to agree, they shall each select one arbitrator and those two
arbitrators shall select a third arbitrator who will arbitrate the matter.
Notwithstanding anything to the contrary in the rules of the American
Arbitration Association, the arbitrator shall take evidence directly from
witnesses and documents presented by the parties and all witnesses shall be made
available for cross-examination. Each party shall bear its own expenses of any
arbitration and shall share equally the fees and expenses of the arbitrator
unless otherwise ordered by the arbitrator.

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<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

CENTURY LIFE INSURANCE COMPANY

By: /s/
------------------------------
Its: President and Chief Executive Officer
-------------------------------------

CENTURY LIFE OF AMERICA

By: /s/
------------------------------
Its: President and Chief Executive Officer
-------------------------------------

AMERICAN EQUITY INVESTMENT
LIFE INSURANCE COMPANY

By: /s/ D. J. Noble
------------------------------
Its: President
------------------------------

AMERICAN EQUITY INVESTMENT
LIFE HOLDING COMPANY

By: /s/ D. J. Noble
------------------------------
Its: President
------------------------------

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EXHIBIT NO. 1

Procedures and Fees for
Administration and Valuation of Retained Business

In accordance with SECTION 5.2 of the Agreement, any insurance business
remaining on the books of Century on the Effective Date is defined as
Retained Business. If the Retained Business consists of 200 or more policies
(including life insurance and annuities), CLA will, prior to the Effective
Date, one-hundred percent reinsure all of the Retained Business and the
parties shall mutually agree upon a reinsurance treaty to be executed, if
necessary. The reinsurance treaty shall provide that the Surviving
Corporation shall pay CLA all premiums received, that CLA shall assume all
risk for the Retained Business, and that CLA will determine all nonguaranteed
elements of the Retained Business (e.g., dividend liability, excess interest
liability, dividend rate assumption and excess credits). This Retained
Business shall be administered by the Surviving Corporation for a fee of
$3.00 per policy per month. This administration fee shall be increased
annually by three and one-half percent (3.5%) on September 30 of each year
beginning in 1997. For purposes of SECTION 4.3 of the Agreement, such
Retained Business which is reinsured shall have no "value" attributed to it.

If the Retained Business consists of fewer than 200 policies, it will not be
reinsured by CLA, and the value of the Retained Business shall be determined as
follows:

(a) Life Insurance Policies: The value of the life insurance policies
shall be an amount which is equal to (i) 50% of the annualized
premiums, plus (ii) 15% of the total reserves excluding deficiency
reserves, if any.

(b) Annuities: The value of annuities shall be an amount equal to 2% of
the total reserves attributable to said annuities.

The total value of the life insurance policies and annuities, as calculated
above, shall be the value of the Retained Business pursuant to SECTION 4.3 of
the Agreement.

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EXHIBIT NO. 2

CENTURY LIFE INSURANCE COMPANY

LICENSED STATES

Arizona
California
Colorado
Delaware
District of Columbia
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Michigan
Minnesota
Montana
Nebraska
North Dakota
Ohio
Oregon
Pennsylvania
South Dakota
Texas
Washington
Wisconsin

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<PAGE>

EXHIBIT NO. 3

Century Life Insurance Company Litigation,
Taxes and Contracts and Commitments

6.3 FINANCIAL STATEMENTS. The Articles of Incorporation for Century Life
Insurance Company are being amended to reflect the $2.67 par value for its
stock.

6.6 LITIGATION.

1. MAIER V. CENTURY LIFE OF AMERICA AND CENTURY LIFE INSURANCE COMPANY.
2. LEVENSON V. CENTURY LIFE INSURANCE COMPANY, ET. AL.
3. PROVIDIAN LIFE AND HEALTH INSURANCE COMPANY AND NATIONAL LIBERTY
CORPORATION V. CUNA MUTUAL INSURANCE SOCIETY, MEMBERS LIFE
INSURANCE COMPANY, CUNA MUTUAL INVESTMENT CORPORATION, CENTURY
LIFE OF AMERICA AND CENTURY LIFE INSURANCE COMPANY.
4. PFLUGER V. CENTURY COMPANIES OF AMERICA.*
5. SPITZER V. DLC FINANCIAL SERVICES, INC., ET. AL. V. CENTURY COMPANIES
OF AMERICA ET. AL.*
6. Century Life Insurance Company is currently under audit for tax years
1993-94. At this time there is no indication on the possible
outcome of the audit.

*Filed against Century Companies of America. It is unclear whether this
will include Century Life Insurance Company.

6.7 TAXES.

Century Life Insurance Company is currently under audit for tax years
1993-94. At this time there is no indication on the possible outcome of
the audit.

6.8 CONTRACTS AND COMMITMENTS.

CENTURY 21 SETTLEMENT AGREEMENT. This is a settlement agreement through
which Century Life of America agreed, on its own behalf and on behalf of
its subsidiaries (including Century Life Insurance Company) to discontinue
the use of all names and marks incorporating the words "Century,"
"CEN-TRAC" or "CENTURION" or the numeral "21" on or before
December 31, 1997.

GUARANTEES. The Board of Directors of Century Life of America adopted a
resolution which guarantees that it will make contributions to Century Life
Insurance Company as necessary to maintain Century Life Insurance Company's
capital and surplus at $2,500,000. Copies of the resolution were provided
to Iowa, Idaho Century Life of America has not executed any
guarantee agreements.

filed by FILED
Whitfield & Eddy IOWA
Bill Fairbank SECRETARY OF STATE
317 6th Ave Ste 1200 9-30-96
DSM, IA 50309 2:33 pm
W124122
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[STAMP]

<PAGE>

SEP 30 1996
SECRETARY OF STATE
RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
(formerly known as Century Life Insurance Company)

TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:

Pursuant to section 1007 of the Iowa Business Corporation Act, American
Equity Investment Life Insurance Company adopts the following Restated Articles
of Incorporation:

1. The name of the Corporation is American Equity Investment Life
Insurance Company. The original Articles of Incorporation were filed on December
16, 1980, effective December 19, 1980, under the name of Century Life Insurance
Company.

2. Restated Articles of Incorporation:

- --------------------------------------------------------------------------------

ARTICLE I
NAME

The name of this Corporation is American Equity Investment Life Insurance
Company.

ARTICLE II
PLACE OF BUSINESS AND REGISTERED OFFICE

The location of the Corporation's principal place of business and resident
office is 5000 Westown Parkway, West Des Moines, Polk County, Iowa 50266.

The street address of the registered office in Iowa and the name of its
initial registered agent at that office is:

Debra J. Richardson
5000 Westown Parkway
West Des Moines, Iowa 50266

ARTICLE III
PURPOSES

The purposes of this Corporation shall be:

(1) To insure the lives of persons on the stock legal reserve plan.

(3) To insure persons against physical disability or death caused
by accident or disease, and to issue such life contracts either independently
or in conjunction with life insurance policies as may be determined by the
Board of Directors.

(4) To reinsure any part of its risk on the types of insurance
policies it issues.

(5) To do and perform such other activities which are incidental to
the foregoing.

ARTICLE IV
CAPITAL STOCK

The total number of shares that may be issued by this Corporation is
4,500,000 shares of which 500,000 shares of the par value of $1 per share
shall be designated Series Preferred Stock and 4,000,000 shares of the par
value of $1 per share shall be designated common stock.

A. COMMON SHARES. Each holder of the common stock shall have one
vote for each share of common stock held by him. Subject to the rights of
the holders of any outstanding Series Preferred Stock, the holders of the
common shares shall be entitled to receive dividends from the remaining
surplus of the Corporation, when and as such dividends shall be declared by
the Board of Directors. Subject to the rights of the holders of any
outstanding Series Preferred Stock, upon the dissolution of the Corporation
or upon its liquidation otherwise, or upon any distribution of its assets by
way of return of capital, the holders of common shares shall be entitled to
receive and be paid all the remaining assets of the Corporation.

B. SERIES PREFERRED SHARES. The following is (i) a statement of
the designations, voting powers, preferences and rights and the
qualifications, limitations or restrictions of the Series Preferred Stock
except as the designations, voting powers, preferences and rights and
qualifications, limitations or restrictions thereof of any series of Series
Preferred Stock may be stated and expressed in a resolution or resolutions
providing for the issuance of such series pursuant to authority herein
expressly vested in the Board of Directors of the Corporation; and (ii) a
statement of the authority referred to above expressly vested in the Board of
Directors.

(1) The Series Preferred Stock may be issued from time to
time in one or more series of any number of shares; provided that the
aggregate number of shares outstanding of all such series shall not exceed
the total number of shares of Series Preferred Stock authorized by this
Article IV. Each series of Series Preferred Stock shall be distinctively
designated. Except as otherwise provided by the resolutions creating the
series of Series Preferred Stock, all series of Series Preferred Stock shall
rank equally and be identical in all respects.

(2) Except as otherwise provided by the resolutions creating
any series of Series Preferred Stock, holders of such Series Preferred Stock
shall not have any right to vote for election of directors or on any other
matter or any right to notice of any meeting of stockholders.

(3) In the event of any complete, or substantially complete,
voluntary or involuntary, liquidation, dissolution or winding up of the
Corporation, before any distribution or payment shall be made to the holders
of the Common Stock, if one or more series of Series

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<PAGE>

Preferred Stock has been created as authorized in this Article IV, all of the
assets of the Corporation shall be paid and distributed among the
shareholders of the Corporation as provided in the resolution or resolutions
creating such series.

Neither the merger nor consolidation of the Corporation
into or with any other corporation, nor the merger of any corporation into
the Corporation, nor the sale or transfer by the Corporation of all or any
part of its assets shall be deemed a liquidation, dissolution or winding up
of the Corporation for the purposes of this subsection (3).

(4) Authority is hereby vested in the Board of Directors
from time to time to authorize the issuance of Series Preferred Stock of any
series and to state and express, in the resolution or resolutions creating
and providing for the issue of shares of any series, the designations, voting
powers, if any, preferences and relative participating, optional or other
special rights and the qualifications, limitations and restrictions thereof
of such series to the full extent nor or hereafter permitted by the laws of
the State of Iowa in respect of the matters set forth in the following
clauses (a) through (h), inclusive.

(a) The designation of the series and the number of
shares which shall constitute such series, which number may be altered from
time to time by like action of the Board of Directors in respect of shares
then unissued.

(b) The annual dividend rate on the shares of that
series, the conditions upon which the time or times when such dividends are
payable, the preference to, or the relation to, the payment of the dividends
payable on shares of such series to the dividends payable on shares of any
other class or classes or any other series of stock, whether such dividends
shall be cumulative or noncumulative and, if cumulative, the dates from which
dividends on shares of such series shall be cumulative.

(c) The redemption price or prices, if any, and the
time or times at which the terms and conditions upon which shares of such
series shall be redeemable.

(d) The rights of shares of such series upon the
liquidation, dissolution or winding up of, or upon any distribution of the
assets of, the Corporation and the preference to, or the relation to, such
rights of shares of such series to the rights on any other class or classes
or any other series of stock of the Corporation.

(e) The voting rights, if any, of such series in
addition to the voting rights prescribed by law, and the terms of exercise of
such voting rights.

(f) The rights, if any, of the holders of such shares
of such series to convert such shares into, or to exchange such shares for,
shares of any other class or classes or of any other series of the same or
any other class or classes of stock of the Corporation and the price or
prices or the rates of exchange and the adjustments at which such shares
shall be convertible or exchangeable, and any other terms and conditions of
such conversion or exchange.

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<PAGE>

(g) The requirement of any sinking or purchase fund
or funds to be applied to the purchase or redemption of shares of such series
and, if so, the amount of such fund or funds and the manner of application.

(h) Any other preferences and relative participating,
optional or other special rights of shares of such series and qualifications,
limitations or restrictions thereof.

ARTICLE V
DIRECTORS AND OFFICERS

The affairs of this Corporation shall be managed by a Board of
Directors of not less than five (5) nor more than fifteen (15), the exact
number of Directors to be specified from time to time as set forth in the
Bylaws of the Corporation.

The Directors shall elect such officers as they see fit or as may be
provided for by the Bylaws of the Corporation.

As of the effective time of these Articles, the following persons will
serve as Directors until the next Annual Meeting of the Stockholders:

Carl M. Harris Des Moines, Iowa
Robert L. Hilton Destin, Florida
David S. Mulcahy Des Moines, Iowa
D.J. Noble Longboat Key, Florida
A.J. Strickland III Tuscaloosa, Alabama
Harley A. Whitfield Spirit Lake, Iowa

Directors and officers shall serve until their successors have been elected
and qualified. The Board of Directors shall have the authority to fill all
vacancies for the unexpired portion of a term.

ARTICLE VI
ANNUAL MEETINGS

The Annual Meeting of the Stockholders of the corporation, commencing
with the year 1997, may be held at the principal office of the Corporation in
the State of Iowa, and at such other place, within or without the State of
Iowa, and at such place therein, as may be designated from time to time by
the Board of Directors and stated in the notice of the meeting, on the third
Tuesday in May of each year (or if said day be a legal holiday, then on the
next succeeding day not a legal holiday), for the purpose of electing
directors and for the transaction of such other business as may properly be
brought before the meeting.

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<PAGE>

ARTICLE VII
PROXIES

No Proxy shall be valid for more than eleven (11) months unless a
longer period is expressly provided in the appointment form. A Proxy may be
revoked at any time by the stockholder who executed it.

Corporate shareholders may vote through a properly designated
representative or through a properly executed proxy. All proxies must be
filed with the Secretary at least one (1) day prior to an election or meeting
at which they are to be used or such additional time as may be provided by
the Bylaws.

ARTICLE VIII
CORPORATE INSTRUMENTS - SEAL

All instruments executed by the Corporation which are required to be
acknowledged and which affect an interest in real estate, shall be executed
by the Chairman of the Board or President or Executive Vice President or any
Vice President attested by the Secretary or Assistant Secretary, and all
other instruments executed by the Corporation, including any releases or
mortgages or liens, may be executed by the Chairman of the Board or President
or Executive Vice President or any Vice President, or the Secretary or the
Treasurer or any Assistant Secretary or Assistant Treasurer. Notwithstanding
any of the foregoing provisions, any written instrument may be executed by an
officer or officers, agent or agents or other person or persons specifically
designated by resolution of the Board of Directors of this Corporation. The
Corporation shall have a corporate seal which shall bear the words, "American
Equity Investment Life Insurance Company" around the edge, with the words,
"Corporate Seal" in the middle.

ARTICLE IX
STOCKHOLDERS' LIABILITY

The private property of the shareholders of this Corporation shall be
exempt from corporate liabilities, and this Article shall not be amended.

ARTICLE X
BYLAWS

The Board of Directors, at any regular or special meeting, is
authorized to adopt, alter, amend or repeal the Bylaws and to adopt new
bylaws not inconsistent with the law or these Articles of Incorporation, by
an affirmative vote of a majority of the membership of the Board as
distinguished from a majority of a quorum.

The stockholders of the Corporation may at any regular or special
meeting called for the purpose, repeal, alter, or amend any existing Bylaws
made by the Board of Directors, or adopt such bylaws as they deem appropriate
by the affirmative vote of a majority of votes entitled to be cast by the
holders of shares of each voting group represented at such meeting, in person
or by proxy, if a quorum shall be present.

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<PAGE>

ARTICLE XI
AMENDMENTS

Subject to the approval of the Insurance Commissioner of the State of
Iowa, these Articles, except this Article XI, may be amended at any Annual
Meeting of the Shareholders or at any special meeting thereof called for that
purpose, and such amendment shall be made by the affirmative vote of a
majority of votes entitled to be cast by the holders of shares of each voting
group represented at said meeting, in person or by proxy; provided, however,
that a quorum is present at said meeting. At any meeting of the stockholders
to consider and act upon any proposed amendment to the Articles of
Incorporation, the stockholders may adopt any modification or revision
thereof proposed at said meeting.

ARTICLE XII
LIABILITY OF OFFICERS AND DIRECTORS

The Corporation shall:

(a) Indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer, employee, or agent of the Corporation,
or is or was serving at the request of the Corporation as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust or enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit, or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.

(b) Indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending, or completed action or suit by or
in the right of the Corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee, or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership,
joint venture, trust, or another enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made
in respect of any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Corporation unless and only to the extent that the court in
which such action or suit was brought shall determine upon application that,
despite

-6-
<PAGE>

the adjudication of liability but in view of all circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such court shall deem proper.

(c) To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in paragraphs (a) and (b), or in
defense of any claim, issue, or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection therewith.

(d) Any indemnification under paragraphs (a) and (b) (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case upon a determination that the indemnification of the
director, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in paragraphs (a) and
(b). Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit, or proceeding, or (ii) if such a quorum is not obtainable,
or, even if obtainable, and a quorum of disinterested directors so directs,
by independent legal counsel in a written opinion, or (iii) by the
shareholders.

(e) Expenses, including attorneys' fees, incurred in defending a
civil or criminal action, suit, or proceeding may be paid by the Corporation
in advance of the final disposition of such action, suit, or proceeding as
authorized in the manners provided in paragraph (d) upon receipt of an
undertaking by or on behalf of the director, officer, employee, or agent to
repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation as authorized in this section.

(f) The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee, or agent and
shall inure to the benefit of the heirs, executors, and administrators of
such a person.

In the absence of fraud, or undisclosed conflict of interest
such as may be required to be reported by Insurance Department regulations or
action of the Board of Directors, no contract or transaction between this
Corporation and any other association or Corporation shall be affected by the
fact that any Director or Officer of this Corporation is interested in, or is
a Director or officer of such other association or Corporation, and any
Director or officer of this Corporation individually may be a party to, or
may be interested in any such contract or transaction of the Corporation, and
no such contract or transaction of the Corporation with any person, firm,
association or Corporation shall be affected by the fact that any Director or
officer of the Corporation is a party to or interested in any such contract
or transaction or in any way connected with any such person, firm,
association or Corporation, and each and every person who may become a
Director or officer of this Corporation is hereby relieved from all liability
which may otherwise exist by reason of contracting with the Corporation for
the benefit of himself or any other person, firm, association or corporation
in which he may be in any way interested, except as otherwise provided by
Section 508.8, Code of Iowa.

-7-
<PAGE>

A director of this Corporation shall not be personally liable
to the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, or (iii) for any transaction from which the
director derived an improper personal benefit.

ARTICLE XIII
PROPORTIONATE REPRESENTATION

Notwithstanding any other provision of these Articles, the
holder or holders, jointly or severally, of not less than one-fifth, but less
than a majority of the shares of the capital stock of the Corporation shall
be entitled to nominate, to be elected, or appointed, as the case may be,
Directors of the Corporation as set forth in this Article XIII. In the event
nomination of a Director or Directors shall be made as provided herein, there
shall be elected to the extent that the total number to be elected is
divisible, such proportionate number from the persons nominated as the shares
of stock held by persons making such nominations bear to the whole number of
shares issued; provided, however, the holder or holders of the minority shares
of stock shall only be entitled to one-fifth (disregarding fractions) of the
total number of Directors to be elected for each one-fifth of the entire
capital stock of such Corporation so held by them; and provided, further,
that this Article shall not be construed to prevent the holders of a majority
of the outstanding stock of the Corporation from electing the majority of its
Directors. Vacancies occurring from time to time on the Board of Directors
shall be filled so as to preserve and secure to such minority and majority
shareholders a proportionate representation as provided in this Article.

ARTICLE XIV
PERPETUAL EXISTENCE

The existence of the Corporation shall be perpetual.

- -------------------------------------------------------------------------------

Dated this 30th day of September, 1996.

3. The duly adopted Restated Articles of Incorporation supersede
the original Articles of Incorporation and all amendments to them.

4. The restated Articles of Incorporation amend the Articles of
Incorporation requiring shareholder approval. The Restated Articles of
Incorporation were approved by the shareholders. The designation, number of
outstanding shares, number of votes entitled to be cast by each voting group
entitled to vote separately on the Restated Articles of Incorporation, and
the number of votes of each voting group indisputably represented at the
meeting is as follows:

-8-
<PAGE>

VOTES ENTITLED VOTES
DESIGNATION SHARES TO BE CAST ON REPRESENTED
OF GROUP OUTSTANDING RESTATED ARTICLES AT MEETING
-------- ----------- ----------------- ----------

Common 2,500,000 2,500,000 2,500,000

4B. The total number of undisputed votes cast for the Restated
Articles of Incorporation by each voting group was:

VOTING GROUP VOTES FOR
------------ ---------
Common 2,500,000

The effective date and time of this document is September 30, 1996 at
1:00 p.m., Central Daylight Time.

/s/ D. J. Noble
-----------------------------
D. J. Noble
5000 Westown Parkway
West Des Moines, Iowa 50266

STATE OF IOWA )
)ss.
COUNTY OF POLK )

On this 30th day of September, 1996, before me, the undersigned, a
Notary Public in and for said County and said State, personally appeared
D. J. Noble, to me known to be the identical person named in and who executed
the foregoing instrument, and acknowledged that he executed the same as his
voluntary act and deed.

/s/ William L. Fairbank
-----------------------------
Notary Public in and for the
State of Iowa

[STAMP]

-9-

<PAGE>

CERTIFICATE OF ATTORNEY GENERAL

I hereby certify that on this date I examined the within Restated
Articles of Incorporation of American Equity Investment Life Insurance
Company (formerly known as Century Life Insurance Company) and the same are
found to be in conformity with the Constitution and the laws of the United
States and the State of Iowa.

Dated this 25th day of September, 1996.

/s/ Scott M. Galenbeck
--------------------------
Assistant Attorney General

CERTIFICATE OF COMMISSIONER OF INSURANCE

I hereby certify that the within Restated Articles of Incorporation of
American Equity Investment Life Insurance Company (formerly known as Century
Life Insurance Company) are hereby approved by me this 25th day of September,
1996.

/s/ Robert L. Howe
--------------------------------
Deputy Commissioner of Insurance
of the State of Iowa

Filed by FILED
Whitfield & Eddy IOWA
Bill Fairbank SECRETARY OF STATE
317 6th Ave Ste 1200 9-30-96
DSM, IA 50309 2:45 pm
W124123

-9-
<PAGE>

[STAMP]

<PAGE>

ARTICLES OF CORRECTION
OF
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
(FORMERLY KNOWN AS CENTURY LIFE INSURANCE COMPANY)

TO THE SECRETARY OF STATE
OF THE STATE OF IOWA:

Pursuant to Section 490.124 of the Iowa Business Corporation Act,
American Equity Investment Life Insurance Company hereby adopts the following
Articles of Correction:

1. On September 30, 1996, American Equity Investment Life Insurance
Company (formerly known as Century Life Insurance Company) filed Restated
Articles of Incorporation.

2. Article III of the Restated Articles of Incorporation contained
an incorrect statement of the purposes of the corporation in that certain
types of insurance which the company intends to offer were inadvertently
omitted.

3. To correct this omission, subclause (2) of Article III will state
as follows:

(2) To issue all forms of life insurance policies, including
without limitation, ordinary life, limited payment life,
variable life, endowment policies, fixed and variable
annuities, accident policies, accident and health policies,
hospital and medical expense policies, group accident and
health policies and noncancellable accident and health policies.

AMERICAN EQUITY INVESTMENT
LIFE INSURANCE COMPANY

By: /s/ D. J. Noble
-----------------------------------
D. J. Noble, President

<PAGE>

CERTIFICATE OF APPROVAL
ATTORNEY GENERAL

Pursuant to provisions of the Iowa Code, the undersigned approves the
Articles of Correction of American Equity Investment Life Insurance Company
and finds them in conformance with the laws of the United States and with the
laws and Constitution of the State of Iowa.

THOMAS J. MILLER
Attorney General of Iowa

10-23-96 By: /s/ Scott M. Galenbeck
- ---------- -----------------------------
Date SCOTT M. GALENBECK
Assistant Attorney General

CERTIFICATE OF APPROVAL
COMMISSIONER OF INSURANCE

Pursuant to provisions the of the Iowa Code, the undersigned approves the
Articles of Correction of American Equity Investment Life Insurance Company

THERESE M. VAUGHAN
Commissioner of Insurance

10-23-96 By: /s/ Robert L. Howe
- ---------- -----------------------------
Date ROBERT L. HOWE
Deputy Commissioner and
Chief Examiner

FILED
IOWA
SECRETARY OF STATE
10-25-1996
3:59 pm
W125877

<PAGE>

RESTATED BYLAWS
OF
AMERICAN EQUITY INVESTMENT LIFE INSURANCE COMPANY
(FORMERLY KNOWN AS CENTURY LIFE INSURANCE COMPANY)
EFFECTIVE: SEPTEMBER 30, 1996

ARTICLE I
PRINCIPAL OFFICES

In addition to its principal office in the State of Iowa, the Corporation
may also have offices at such other places within or without the State of Iowa
as the Board of Directors shall from time to time determine.

ARTICLE II
STOCKHOLDERS' MEETINGS

SECTION 1. ANNUAL MEETINGS. The Annual Meeting of the Stockholders of the
Corporation for the election of Directors and for the transaction of such other
business as may properly come before the meeting shall be held at the offices of
the Corporation in the State of Iowa on the third Tuesday in May of each year at
the time established by resolution of the Board of Directors.

SECTION 2. SPECIAL MEETINGS. Meetings of the stockholders shall be held at
the principal offices of the Corporation. Special meetings of the stockholders
of the Corporation may be held, upon call of the Chairman of the Board,
President, a majority of the stockholders or a majority of the Board of
Directors. Such call shall state the time, place and purposes of the meeting.

SECTION 3. PLACE OF MEETINGS. Notwithstanding the provisions of Sections 1
and 2 hereof, a meeting of shareholders may be held in some other place in the
county where the Corporation has its principal place of business if notice
thereof is mailed at least twenty (20) days prior to the meeting informing the
shareholders of the place, time and hour of the meeting.

SECTION 4. NOTICE OF MEETINGS. Except as may otherwise be required by the
Corporation's Articles of Incorporation, notice of the time and place of every
meeting of stockholders and of the business to be acted on at such meeting shall
be given personally or mailed by the Secretary or an Assistant Secretary, at
least twenty (20) days before the meeting, to each stockholder of record voting
power and entitled to such notice at his last known post office address;
provided, however, that if a stockholder be present at a meeting, or in writing
waives notice thereof before or after the meeting, notice of the meeting to such
stockholder shall be unnecessary.

SECTION 5. QUORUM. The holders of the stock of the Corporation having a
majority of the voting power present, in person or by proxy, shall constitute a
quorum, but less than a quorum shall have power to adjourn any meeting from time
to time without notice. Except as otherwise provided in the Corporation's
Articles of Incorporation, the holders of a majority of the stock present and
entitled to vote at a duly qualified meeting of stockholders shall have power to
act.

<PAGE>

SECTION 6. VOTING. At every meeting of stockholders each stockholder
entitled to vote thereat shall be entitled to one vote for each share of stock
held by him. A stockholder may vote and otherwise act in person or by proxy; but
no proxy shall be voted more than three (3) years after its date unless such
proxy provides for a longer period.

ARTICLE III
BOARD OF DIRECTORS

The affairs of the Corporation shall be managed by its Board of Directors.

SECTION 1. NUMBER OF DIRECTORS. The number of directors of the corporation
shall be not less than five (5) nor more than fifteen (15), the exact number to
be fixed from time to time by the Board pursuant to a resolution adopted by a
majority of the entire Board, except that the initial Board of Directors shall
consist of six (6) persons.

SECTION 2. VACANCIES. Any vacancies in the Board shall be filled by the
affirmative vote of a majority of the remaining directors even though less than
a quorum of the Board, or by a sole remaining director. The term of any director
chosen to fill a vacancy shall expire at the next annual meeting of shareholders
and until that director's successor shall be elected and qualified.

SECTION 3. DIRECTORS MEETINGS.

(a) Meetings of the Board of Directors may be held at any place or
places within or without the State of Iowa.

(b) Meetings of the Board of Directors shall be held at the times
fixed by resolutions of the Board or upon call of the Chairman of the Board, the
President or any two directors. The Secretary or officer performing his duties
shall give reasonable notice (which need not in any event exceed two (2) days)
of all meetings of directors, provided that a meeting may be held without notice
immediately after the annual election, and notice need not be given of regular
meetings held at times fixed by resolution of the Board. Meetings may be held at
any time without notice if a waiver of such notice is executed by all of the
Directors either before or after the meeting. Notice by mail or telegraph to the
usual business or residence address of the directors not less than the time
above specified before the meeting shall be sufficient. A majority of the
directors then in office shall constitute a quorum and the act of a majority of
the directors present at any meeting at which a quorum is present shall be the
act of the Board of Directors. Less than such a quorum shall have power to
adjourn any meeting from time to time without notice. The Board may take action
without a meeting and without notice if a consent to such action is executed by
all of the Directors. The Board of Directors or any committee designated by the
Board, may participate in a meeting of the Board or Committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation
therein shall constitute presence in person at such meeting.

-2-
<PAGE>

SECTION 4. DIRECTORS' FEES. The Board of Directors shall have power to
authorize the payment of compensation to the directors for services to the
Corporation, including fees for attendance at meetings of the Board of
Directors, of the Executive Committee and of other committees and to determine
the amount of such compensation and fees.

SECTION 5. COMMITTEES.

(a) The board of directors, by resolution adopted by the affirmative vote
of a majority of the number of directors then in office, may establish one or
more committees, including an executive committee, each committee to consist of
two (2) or more directors appointed by the board of directors. Any such
committee shall serve at the will of the board of directors. Each such committee
shall have the powers and duties delegated to it by the board of directors. The
board of directors may elect one or more of its members as alternate members of
any such committee who may take the place of any absent member or members at any
meeting of such committee upon request by the president or the chairperson of
such committee. Each such committee shall fix its own rules governing the
conduct of its activities as the board of directors may request.

(b) A committee of the board shall not: (i) authorize distributions by the
Corporation; (ii) approve or propose to shareholders of the Corporation action
that the law requires be approved by shareholders; (iii) fill vacancies on the
board of directors of the Corporation or on any of its committees; (iv) amend
the articles of incorporation of the Corporation; (v) adopt, amend or repeal
bylaws of the Corporation; (vi) approve a plan of merger not requiring
shareholder approval; (vii) authorize or approve reacquisition of shares by the
Corporation, except according to a formula or method prescribed by the board of
directors; or (viii) authorize or approve the issuance or sale or contract for
sale of shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except that the board of
directors may authorize a committee or a senior executive officer of the
Corporation to do so within limits specifically prescribed by the board of
directors.

ARTICLE IV
OFFICERS

SECTION 1. GENERALLY. The officers of the Corporation shall be a President,
one or more Vice Presidents (the number thereof to be determined by the board of
directors), a Secretary, a Treasurer and such other officers as may from time to
time be appointed by the board of directors. One person may hold the offices and
perform the duties of any two or more of said offices. In its discretion, the
board of directors may delegate the powers or duties of any officer to any other
officer or agents, notwithstanding any provision of these bylaws, and the board
of directors may leave unfilled for any such period as it may fix, any office
except those of President, Treasurer and Secretary. The officers of the
Corporation shall be appointed annually by the board of directors at the annual
meeting thereof. Each such officer shall hold office until the next succeeding
annual meeting of the board of directors and until his successor shall have been
duly chosen and shall qualify or until his death or until he shall resign or
shall have been removed.

-3-
<PAGE>

SECTION 2. REMOVAL. Any officer may be removed by the board of directors,
with or without cause, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed.

SECTION 3. POWERS AND DUTIES OF THE PRESIDENT. The President shall be the
chief executive officer of the Corporation. Subject to the provisions of these
bylaws and to the direction of the board of directors, he or she shall have the
responsibility for the general management and control of the business and
affairs of the Corporation and shall perform all duties and have all powers
which are commonly incident to the office of chief executive or which are
delegated to him or her by the board of directors. He or she shall have power to
sign all stock certificates, contracts and other instruments of the Corporation
which are authorized and shall have general supervision and direction of all of
the other officers, employees and agents of the Corporation.

SECTION 4. POWERS AND DUTIES OF THE VICE PRESIDENT(S). In the absence of
the President or in the event of the death, inability or refusal to act of
the President, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated at the time of
their election, or in the absence of any designation, the senior Vice
President in length of service) shall perform the duties of the President,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President. Any Vice President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the Corporation;
and shall perform such other duties and have such authority as from time to
time may be assigned to such Vice President by the President or by the board
of directors.

SECTION 5. POWERS AND DUTIES OF THE SECRETARY. The Secretary shall (a) keep
minutes of all meetings of the shareholders and of the board of directors; (b)
authenticate records of the Corporation and attend to giving and serving all
notices of the Corporation as provided by these bylaws or as required by law;
(c) be custodian of the corporate seal (if any), the stock certificate books and
such other books, records and papers as the board of directors may direct, and
see that the corporate seal (if any) is affixed to all stock certificates and to
all documents, the execution of which on behalf of the Corporation under its
seal (if any) is duly authorized; (d) keep a stock record showing the names of
all persons who are shareholders of the Corporation, their post office addresses
as furnished by each such shareholder, and the number of shares of each class of
stock held by them respectively, and at least ten (10) days before each
shareholders' meeting, prepare a complete list of shareholders entitled to vote
at such meeting arranged in alphabetical order; (e) sign with the President or a
Vice President certificates for shares of the Corporation, the issuance of which
shall have been duly authorized; and (f) in general, perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to the Secretary by the President or the board of directors.

SECTION 6. POWERS AND DUTIES OF THE TREASURER. The Treasurer shall (a) have
custody of and be responsible for all monies and securities of the Corporation,
shall keep full and accurate records and accounts in books belonging to the
Corporation, showing the transactions of the Corporation, its accounts,
liabilities and financial condition and shall see that all expenditures are duly
authorized and are evidenced by proper receipts and vouchers; (b) deposit in the
name of the Corporation in such depository or depositories as are approved by
the directors, all monies that may come into the Treasurer's hands for the
Corporation's account;

-4-
<PAGE>

(c) render an account of the financial condition of the Corporation at least
annually; and (d) in general, perform such duties as may from time to time be
assigned to the Treasurer by the President or by the board of directors.

SECTION 7. ASSISTANTS. There shall be such number of Assistant Secretaries
and Assistant Treasurers as the board of directors may from time to time
authorize and appoint. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties as shall be assigned to them by the
Secretary, or the Treasurer, respectively, or by the president or the board of
directors. The board of directors shall have the power to appoint any person to
act as assistant to any other officer, or to perform the duties of any other
officer whenever for any reason it is impracticable for such officer to act
personally, and such assistant or acting officer so appointed shall have the
power to perform all the duties of the office to which he or she is so appointed
to be assistant, or as to which he or she is so appointed to act, except as such
power may be otherwise defined or restricted by the board of directors.

ARTICLE V
TRANSFER OF CORPORATE STOCK

The stock of the Corporation shall be transferable or assignable only on
the books of the Corporation by the holders in person, or by attorney, on the
surrender of the certificates therefor, with an assignment and power of attorney
endorsed thereon or attached thereto, duly executed, with such proof or a
guarantee of the authenticity of the signature as the Corporation or its agents
may reasonably require. Lost or destroyed certificates may be replaced in
accordance with such regulations as the Board of Directors may prescribe. The
Board of Directors may appoint one or more transfer agents and registrars of the
stock.

ARTICLE VI
STOCK RIGHTS - EFFECTIVE DATE

The Board of Directors shall have the power to close the stock transfer
books of the Corporation for a period not exceeding fifty (50) days preceding
the date of any meeting of stockholders, or the date for payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or for a period
not exceeding fifty (50) days in connection with obtaining the consent of
stockholders for any purpose. In lieu of closing the stock transfer books as
aforesaid, the Board of Directors is hereby authorized to fix in advance a date,
not exceeding fifty (50) days preceding the date of any meeting of stockholders
or the date for the payment of any dividend or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, or a date in connection with obtaining such consent, as a
record date for the determination of the stockholders entitled to notice of and
to vote at, any such meeting, or entitled to receive payment of any such
dividends, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to give
such consent, and in such case such stockholders and only such stockholders as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote, at such meeting or to receive payment of such dividend,
or to receive such allotment of rights, or to exercise such rights, or to give
such consent, as the case may be, notwithstanding any transfer of any stock on
the books of the Corporation.

-5-
<PAGE>

ARTICLE VII
DEPOSITORIES

The Board of Directors is authorized to select such depositories as it
shall deem proper for the funds of the Corporation. All checks and drafts
against such deposited funds shall be signed and countersigned by persons to be
specified by the Board of Directors.

ARTICLE VIII
INSTRUMENTS AFFECTING REAL ESTATE

All instruments executed by the Corporation which are required to be
acknowledged and which affect an interest in real estate, shall be executed by
the Chairman of the Board or President or Executive Vice President or any Vice
President attested by the Secretary or Assistant Secretary, and all other
instruments executed by the Corporation, including any releases or mortgages or
liens, may be executed by the Chairman of the Board or President or Executive
Vice President or any Vice President, or the Secretary or the Treasurer or any
Assistant Secretary or Assistant Treasurer. Notwithstanding any of the foregoing
provisions, any written instrument may be executed by an officer or officers,
agent or agents or other person or persons specifically designated by resolution
of the Board of Directors of this Corporation. The Corporation shall have a
corporate seal which shall bear the words, "American Equity Investment Life
Insurance Company" around the edge, with the words, "Corporate Seal" in the
middle.

ARTICLE IX
AMENDMENTS

Either the Board of Directors or the stockholders may alter or amend these
Bylaws at any meeting duly held.

-6-

<PAGE>

[LETTERHEAD]

February 2, 1998

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Gentlemen:

With reference to the Registration Statement on Form N-4 filed by American
Equity Investment Life Insurance Company ("Company") and its American Equity
Life Annuity Account with the Securities and Exchange Commission covering
certain variable annuity contracts, I have examined such documents and such law
as I considered necessary and appropriate, and, on the basis of such
examinations, it is my opinion that:

1. Company is duly organized and validly existing under the laws of the State
of Iowa.

2. The variable annuity contracts, when issued as contemplated by the said
Form N-4 Registration Statement will constitute legal, validly issued and
binding obligations of American Equity Investment Life Insurance Company.

I hereby consent to the filing of this opinion as an exhibit to the said
Form N-4 Registration Statement and to the reference to my name under the
caption "Legal Matters" in the Prospectus contained in the said Registration
Statement. In giving this consent, I am not admitting that I am in the category
of persons whose consent is required under Section 7 of the Securities Act of
1933.

Very truly yours,

WHITFIELD & EDDY, P.L.C.

by: /s/ Wendy L. Carlson
-------------------------
Wendy L. Carlson

WLC/de

<PAGE>

[LOGO]

February 2, 1998

American Equity Investment
Life Insurance Company
5000 Westown Parkway, Suite 440
West Des Moines, IA 50266

Gentlemen:

This opinion is furnished in connection with the registration by American Equity
Investment Life Insurance Company of a flexible premium deferred variable
annuity contract ("Contract") under the Securities Act of 1933, as amended.
The prospectus included in this Initial Filing to the Registration Statement on
Form N-4 describes the Contract. I have provided actuarial advice concerning
the preparation of the policy form described in the Registration Statement, and
I am familiar with the Registration Statement and exhibits thereto.

It is my professional opinion that:

(1) The fees and charges deducted under the Contract, in the aggregate, are
reasonable in relation to the services rendered, the expenses expected to
be incurred and the risks assumed by the insurance company.

I hereby consent to the use of this opinion as an exhibit to the Initial Filing
to the Registration Statement and to the reference to my name under the heading
"Experts" in the Prospectus.

Sincerely,

/s/ Christopher G. Daniels
Christopher G. Daniels, FSA, MAAA
American Equity Investment Life Insurance Company

P.O. Box 71216-Des Moines, IA 50325-Phone (515) 221-0002-1 (888) 221-1234-
Fax (515) 221-8947

<PAGE>

POWER OF ATTORNEY

The undersigned directors of American Equity Investment Life Insurance Company,
an Iowa corporation (the "Company"), hereby constitute and appoint Debra J.
Richardson, and William J. Oddy, and each of them (with full power to each of
them to act alone), his true and lawful attorney-in-fact and agent, with full
power of substitution to each, for him and on his behalf and in his name, place
and stead, to execute and file any of the documents referred to below relating
to registrations under the Securities Act of 1933 and under the Investment
Company Act of 1940 with respect to any life insurance policies or annuity
contracts: registration statements on any form or forms under the Securities Act
of 1933 and under the Investment Company Act of 1940, and any and all amendments
and supplements thereto, with all exhibits and all instruments necessary or
appropriate in connection therewith, each of said attorneys-in-fact and agents
and him or their substitutes being empowered to act with or without the others
or other, and to have full power and authority to do or cause to be done in the
name and on behalf of the undersigned each and every act and thing requisite and
necessary or appropriate with respect thereto to be done in and about the
premises in order to effectuate the same, as fully to all intents and purposes
as the undersigned might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, or any of them, may do or cause to
be done by virtue thereof.

IN WITNESS WHEREOF, the undersigned has hereto set his or her hand on the date
set forth below.

NAME DATE
- ---- ----

/s/ D.J. Noble January 15, 1998
- ------------------------------ ----------------
D.J. Noble

/s/ James M. Gerlach January 15, 1998
- ------------------------------ ----------------
James M. Gerlach

/s/ David S. Mulcahy January 15, 1998
- ------------------------------ ----------------
David S. Mulcahy

/s/ William J. Oddy January 15, 1998
- ------------------------------ ----------------
William J. Oddy

/s/ Terry A. Reimer January 15, 1998
- ------------------------------ ----------------
Terry A. Reimer

/s/ Debra J. Richardson January 15, 1998
- ------------------------------ ----------------
Debra J. Richardson

/s/ Jack W. Schroeder January 15, 1998
- ------------------------------ ----------------
Jack W. Schroeder