What does PAC stand for?

Common types of CMO tranches include: * Planned Amortization Class tranches establish a fixed principal payment schedule by using a PAC tranche and a companion tranche to smooth out the effects of prepayments, whether they are slower than expected or faster than expected.

Planned Amortization Class (PAC) Tranches PAC tranches use a mechanism similar to a "sinking fund" to establish a fixed principal payment schedule that directs cash-flow irregularities caused by faster- or slower-than-expected prepayments away from the PAC tranche and toward another "companion" or "support" tranche (see below).

0% ========== ======= ========== ====== (1) Includes government, asset-backed securities and mortgage-backed securities June 30, 2000 June 30, 1999 Mortgage Backed Securities: Amortized Market Amortized Market Cost Value Cost Value ---------------------------- -------- -------- --------- --------- Planned Amortization Class (PACs) $257,335 $251,646 $327,615 $328,862 Targeted Amortization Class (TACs) 5,794 5,640 14,817 15,532 Sequential Pay 222,209 209,281 275,151 268,531 Subordinated 105,474 103,294 77,752 78,018 Adjustable Rate Mortgages (ARMs) 831 814 13,614 13,598 Pass-thru 1,046,393 1,006,447 1,463,235 1,437,888 ---------- ---------- ---------- ---------- Total $1,638,036 $1,577,122 $2,172,184 $2,142,429 ========== ========== ========== ========== AmerUs Life Holdings, Inc.

Based on an analysis of yield and average-life uncertainty, we believe balloon MBSs are attractive versus 15-year pass-throughs and planned amortization class (PAC) bonds.

Lower levels of prepayment volatility in 1989, and the on-going development of relatively stable multiclass derivatives--notably CMO planned amortization class (PAC) bonds--further nudged corporate investors to allocate more assets to the mortgage securities market.