Company Update

Date: November 13, 2008

This past Friday, we released our quarterly financial results to the public which showed a net loss for the three months ended September 30, 2008. By historical standards, the financial results for the Company were challenging and reflective of the financial environment that we live in today. At the same time, the amount of the financial damage inflicted upon National Western was minimal compared to the level of losses being reported by other financial service companies during the same period.

As managers of sizable investment portfolios with exposure to a variety of industries and credit risk, life insurance companies have been hit particularly hard by the liquidity and credit crunch crisis. The values of investment holdings have been, in some cases, severely impacted. Consequently, life insurance companies have been reporting sizable losses in their third quarter earnings releases primarily driven by theses investment losses, some of which have been in excess of $1 billion.

Accounting rules require companies, along with their auditors, to conduct a thorough review of their investment portfolios to assess the soundness and ultimate realizability of their holdings. These rules require a company to write down any investment holdings which are considered to be “impaired” beyond just a temporary basis. These investment writedowns are the losses you are reading about in the earnings announcements of other companies. In doing this analysis with our auditors during the third quarter, we identified a handful of such investments that were considered to be other than temporarily impaired which we recorded investment losses in our third quarter results. The amount of these writedowns were approximately $14 million, after taxes. To put this in context, these investment losses were approximately 0.3% of our total assets.

One additional area of concern with respect to the financial losses currently being reported has been the mention of derivative investments, often speculative in nature such as credit default swaps, that have been identified as additional drivers of the financial duress in certain companies. National Western does not have any exposure to credit default swaps. In our financial information, you may periodically see the term “derivatives” used. This terminology in financial statements is standard protocol and encompasses a wide range of financial instruments. Our derivatives are not speculative. They are strictly index options we purchase to hedge the equity return feature of our fixed indexed life insurance and annuity products. We purchase these options using the premium allocation imbedded in our product pricing such that the options serve as a hedge rather than a speculative investment. Accordingly, losses we may report from time to time associated with these options are market value changes in the worth of the options and are limited to the cost of the options.

Although we were disappointed to report the investment losses we sustained during the financial crisis of the third quarter, the financial soundness and stability of the Company’s management approach was again revealed by the low level of losses incurred relative to our asset base. Combined with our superior capital and surplus position, National Western remains a safe and solid financial institution. We continue to believe that our financial infrastructure puts us in a position of financial strength sufficient to endure the current economic climate.

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