COINSURANCE AGREEMENT

THIS COINSURANCE AGREEMENT (the “Agreement”) is made and entered into by and between INVESTORS LIFE INSURANCE COMPANY OF NORTH AMERICA (“Company”), a Texas stock life insurance company, and FAMILY LIFE INSURANCE COMPANY (“Reinsurer”), a Texas stock life insurance company.

WHEREAS, Financial Industries Corporation, the parent of both Company and Reinsurer, has agreed to sell Reinsurer to The Manhattan Life Insurance Company pursuant to a Stock Purchase Agreement that includes among its terms the reinsurance of the Policies;

WHEREAS, Company is the issuer of insurance Policies (as defined herein) consisting of mortgage protection life insurance policies;

WHEREAS, Company desires to cede a portion of its risks under the Policies to Reinsurer subject to this Agreement;

WHEREAS, effective as of the Effective Date, Company will cede or retrocede its risks under the Policies to Reinsurer, and Reinsurer will provide indemnity reinsurance of such risks, in each case on the terms and subject to the conditions set forth below; and

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, and in reliance upon the representations, warranties, conditions, and covenants contained herein, and intending to be legally bound hereby, Company and Reinsurer hereby agree as follows:

Capitalized terms used shall have the meaning given below.

1.1.   Closing Date. The date of closing of the sale of Reinsurer to The Manhattan Life Insurance Company.

1.2.   Effective Date. The date upon which the coinsurance of the Policies by Reinsurer under the terms of this Agreement shall be effective, which shall be 12:01 a.m. Central time, on the day following the effective date of termination of the Optimum Re Agreement.

1.3.   Expense Allowance Percentage. The percentage of net written premium (written premium less cancellations and refunds) specified in Schedule 1.3.

1.4.   Extracontractual Liabilities. Any claim or liability under, in connection with or with respect to the Policies for “bad faith”, punitive, exemplary or other extra-contractual damages that are based upon, relate to or arise out of any act, error or omission of Company, or any of its officers, directors, agents or employees, whether intentional or otherwise.

1.5.   Optimum Re Agreement. The Automatic Reinsurance Agreement between Company and Optimum Re Insurance Company dated January 19, 2005.

1.6.   Policies. All of those mortgage protection life insurance policy contracts and riders (but not universal life plans) issued or to be issued by the Family Sales Division of Company including those either identified by policy form number or Plan Code on Schedule 1.3.

1.7.   Policy. Each Policy reinsured by Reinsurer under this Agreement.

1.8.   Policyholder. Any individual or entity which is the owner of a Policy or which has the right to terminate or lapse the Policy, effect changes of beneficiary, coverage limits, add or terminate persons covered under such Policy or direct any other policy changes in such Policy.

1.9.   Reinsurance Percentage. The percentage of contractual liability of Company reinsured by Reinsurer as specified in Schedule 1.9.

2.1.   Reinsurance. Subject to the terms and conditions of this Agreement, effective as of the Effective Date, Company hereby cedes to Reinsurer, and Reinsurer hereby accepts and reinsures from Company the Reinsurance Percentage of the Policies that are issued by the Company on and after the Effective Date.

2.2.   Liability of Reinsurer. The liability of Reinsurer shall begin and terminate simultaneously with that of Company, and the extent of Reinsurer’s liability shall be governed by the general and special policy conditions of the Policies.

2.3.   Underwriting. All Policies shall be underwritten in accordance with current underwriting guidelines in use as of the Effective Date unless modified in accordance with Section 2.4.

2.4.   Modification. Any modifications or changes to the Policies must be mutually agreed upon by Company and Reinsurer.

2.5.   Premium Required. The receipt by Reinsurer of reinsurance premiums when and as required by this Agreement shall be a condition precedent to Reinsurer’s liability for each policy to be reinsured.

2.6.   Reinstatements. If a Policy that was reduced, terminated, or lapsed is reinstated, the reinsurance for such Policy under this Agreement will be reinstated automatically to the amount that would have been in force if the Policy had not been reduced, terminated, or lapsed.

2.7.   Authority and Territory. In no event shall the reinsurance be in force and binding unless the Policy issued directly by Company is in force and unless the issuance and delivery of the Policy constitutes the doing of business in a state of the United States of America or a country in which Company is properly licensed.

2.8.   Non-Forfeiture Benefits. The liability of Reinsurer shall include a pro rata share of any non-forfeiture benefits under the Policies in accordance with the Reinsurance Percentage.

2.9.   Recapture. The business reinsured is not subject to recapture except by agreement of the parties.

3.1.   Term. This Agreement shall commence on the Effective Date and continue in effect according to its terms, unless terminated pursuant to Section 3.2, until 12:01 a.m. CST on the fifth anniversary of the Effective Date. This Agreement cannot be terminated with respect to the Policies except by mutual agreement of Company and Reinsurer.

3.2.   Termination of New Sales. Reinsurer may terminate this Agreement with respect to new sales by Company of Policies as of the end of any calendar year or any renewal term by giving at least one hundred eighty (180) days notice in writing to Company prior to the end of such calendar year.

4.1.   Reinsurance Premium. Company agrees to pay Reinsurer reinsurance premiums equal to the Reinsurance Percentage multiplied by the collected premiums less the returns and cancellations.

4.2.   Expense Allowance. Reinsurer will pay Company an Expense Allowance equal to the Expense Allowance Percentage, multiplied by the reinsurance premiums, as calculated in Section 4.1 above, and the applicable fee, as specified in Schedule 1.3.

4.3.   Reinsurer Liability. Reinsurer shall not be directly liable for any commissions, taxes, or expenses incurred by Company except as specifically set forth in this Agreement.

5.1.   Quarterly Report. Company shall submit to Reinsurer a statement listing reinsurance premiums, new policies issued, paid claims and non-forfeiture benefits, expense allowances, premium taxes, assessments, reserves, and other pertinent data mutually agreed upon by both parties relating to the Policies by the fifteenth (15th) of the month following the end of each calendar quarter that this Agreement is in effect. Any balance due Reinsurer by Company shall be paid with the report. Any balance due Company from Reinsurer shall be paid within fifteen (15) days of receipt of such report.

5.2.   Access to Books and Records. Company and Reinsurer shall, have at all times, full and free access during regular business hours, at the home office of the other party, to inspect all books, record and files relating to the Policies in accordance with the terms of this Agreement.

5.3.   Error or Omission. It is expressly understood and agreed that if non-payment of reinsurance premium within the time specified or failure to comply with other terms of this Agreement is shown to be the result of a misunderstanding, oversight or clerical error, both Company and Reinsurer shall be restored to the positions they would have occupied had no such misunderstanding, oversight or clerical error occurred. Upon discovery of the oversight, clerical error or misunderstanding, the party that committed the oversight or clerical error or acted incorrectly as a result of a misunderstanding shall promptly notify the other party in writing.

5.4.   Lapses. If a Policy lapses for nonpayment of premium and is subsequently reinstated in accordance with the terms of the Policy and rules of Company, the reinsurance hereunder with respect to such Policy shall be reinstated automatically. Reinsurance premiums shall be payable hereunder with respect to any such Policy in full, as if such Policy had continued uninterrupted in force.

5.5.   Cooperation. Each party hereto shall cooperate fully with the other in all reasonable respects in order to accomplish the objectives of this Agreement.

5.6.   Premium Taxes. Company shall be liable for the payment of all Premium Taxes on premiums received under the Policies. Reinsurer shall allow Company a provision for Premium Taxes incurred in connection with premiums received under the Policies in proportion to the percentage under Schedule 1.3. The provision for Premium Taxes shall be two percent (2%) of premiums collected, as calculated on a calendar quarter basis, minus: (a) the sum of any Premium Taxes withheld by Company from amounts transferred to Reinsurer during such calendar quarter; and (b) the amount of any Premium Tax offset directly or indirectly available for use by Company during such calendar quarter as a consequence of any assessment or payment for which Company has been reimbursed by Reinsurer pursuant to Section 5.7 hereof, and shall be paid by Reinsurer to Company within thirty (30) days of the end of each calendar quarter.

5.7.   Guaranty Fund Assessments. In the event that Company is required to pay to any guaranty fund, insolvency fund, or similar plan, pool, association or organization maintained by any jurisdiction an assessment in respect of the Policies, the portion of such payment that relates to the Policies for such period shall be reimbursed to Company by Reinsurer in proportion to the Reinsurance Percentage. Company shall credit Reinsurer with any Premium Tax offset for such assessments relating to Policies in the proportion of the Reinsurance Percentage.

5.8.   Reserves. Reinsurer shall establish and maintain reserves in proportion to the Reinsurance Percentage in accordance with applicable statutory accounting standards.

5.9.   Other Reinsurance. The Company shall provide notice of termination with respect to the Optimum Re Agreement prior to the Closing and shall retain its pro rata share of liability without other reinsurance of any type.

6.1.   Notice and Settlement. Company shall give Reinsurer prompt notice of any and all claims. The settlement of any claim paid by Company shall be binding on Reinsurer. Reinsurer shall pay its Reinsurance Percentage to Company pursuant to Section 5.1

6.2.   Reduced Settlement and Expense. Should any claim be settled for a reduced sum, Company and Reinsurer shall participate in such reduction in proportion to their respective liabilities. Likewise, Reinsurer and Company shall share, in the same proportion as the Reinsurance Percentage, any special expenses for investigative or legal fees (excluding salaries, retainers, or ordinary administrative and overhead expenses). Claim expenses in connection with settlements such as external legal counsel fees, costs of investigative agency reports and case management fees from outside agencies shall be considered special expenses.

6.3.   Extracontractual Liabilities. Reinsurer shall not be liable for any extracontractual liabilities or any expense relating thereto.

7.1.   Indemnification. From and after the Effective Date, (a) Company shall indemnify, defend and hold harmless Reinsurer and its officers, directors, employees, agents and affiliates (collectively, the “Reinsurer Indemnified Parties”) from and against any costs and expenses (including interest, fines, penalties, statutory, punitive or extracontractual damages, refunds, reasonable attorneys’, accountants’, and actuaries fees and disbursements, and any other costs and expenses incident to any suit, action, investigation, or proceeding), damages, losses, charges, deficiencies, liabilities, obligations, claims, settlements, judgments, or diminution in value (“Loss” or “Losses”) sustained or incurred by, or asserted against Reinsurer which arises out of: (i) any breach or non-fulfillment by Company of, or any failure by Company to perform, any of the covenants, terms or conditions of or any of its duties or obligations under this Agreement, and (ii) any enforcement of this indemnity, and (b) Reinsurer shall indemnify, defend and hold harmless Company, and its officers, directors, employees, agents and affiliates (collectively, the “Company Indemnified Parties”) from and against any Loss sustained or incurred by, or asserted against, Company Indemnified Parties which arises out of (i) any breach or non-fulfillment by Reinsurer of, or any failure by Reinsurer to perform, any of the covenants, terms or conditions of or any of its duties or obligations under this Agreement, and (ii) any enforcement of this indemnity.

8.1.   Payment of Benefits under Insolvency. The obligations of Reinsurer under this Agreement shall be payable by Reinsurer while in force on the basis of the contractual liability of Company under the Policies without diminution or in any way affected or diminished because of the insolvency of Company. In the event of the insolvency of Company and the appointment of a conservator, liquidator, receiver, or statutory successor of Company while coinsurance under this Agreement is in effect as to any Policy, all coinsurance made, ceded, renewed or otherwise becoming effective shall be payable directly to such conservator, liquidator, receiver, or statutory successor immediately upon demand, with reasonable provision for verification, on the basis of claims allowed against Company by any court of competent jurisdiction or by any conservator, liquidator, receiver, or statutory successor of Company having authority to allow such claims, without diminution because of such insolvency or because such conservator, liquidator, receiver, or statutory successor has failed to pay all or a portion of any claims.

8.2.   Required Notice of and Defense against Claims. In the event of the insolvency of Company while reinsurance as to any Policy is in effect under this Agreement, the conservator, liquidator, receiver, or statutory successor of Company shall give Reinsurer written notice of the pendency of a claim against Company on a Policy within a reasonable time after such claim is filed in the insolvency proceeding. Such notice shall indicate the Policy reinsured and whether the claim could involve a possible liability on the part of Reinsurer. During the pendency of any such claim, Reinsurer may, at its own expense, investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses that Reinsurer may deem available to Company or its conservator, liquidator, receiver, or statutory successor. The expense thus incurred by Reinsurer shall be payable, subject to court approval, out of the estate of Company as a part of the expense of conservation or liquidation to the extent of a proportionate share of the benefit which may accrue to Company in conservation or liquidation solely as a result of the defense undertaken by Reinsurer, all in accordance with Sections 10-3-118(3)(b) and (8), Texas Revised Statutes.