UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004


o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number 033-43462

KEMPER INVESTORS LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)


ILLINOIS (State of Incorporation)		36-3050975 (IRS Employer Identification Number)

1400 AMERICAN LANE SCHAUMBURG, ILLINOIS (Address of Principal Executive Offices)		60196 (ZIP Code)

Registrant’s telephone number, including area code: (206) 232-8400

Securities registered pursuant to Section 12(b) of the Act: none

Securities registered pursuant to Section 12(g) of the Act: none

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). o Yes þ No

As of April 30, 2004, there were outstanding 250,000 shares of common stock, $10.00 par value per share, of the registrant.

Documents incorporated by reference: None.

KEMPER INVESTORS LIFE INSURANCE COMPANY

FORM 10-Q

PART I. FINANCIAL STATEMENTS

ITEM 1. Interim Financial Statements

Consolidated Balance Sheets -
March 31, 2004 and December 31, 2003				1

Consolidated Statements of Operations -
Three months ended March 31, 2004 and 2003				2

Consolidated Statements of Comprehensive Income (Loss) -
Three months ended March 31, 2004 and 2003				3

Consolidated Statements of Cash Flows -
Three months ended March 31, 2004 and 2003				4

Notes to Consolidated Financial Statements				5

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations				11

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk				20

ITEM 4. Controls and Procedures				21

PART II. OTHER INFORMATION

ITEM 6. Exhibits and Reports on Form 8-K				22

Signatures				23

PART 1. FINANCIAL STATEMENTS

ITEM 1. Interim Financial Statements

Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)

	March 31,
	2004			December 31,
	(unaudited)			2003

Assets
Fixed maturity securities, available for sale, at fair value (amortized cost:
March 31, 2004, $598,564; December 31, 2003, $627,793)	$	605,228		$	619,055
Equity securities, at fair value (cost: March 31, 2004 $4,111; December
31, 2003, $2,458)		4,458			2,774
Short-term investments		58,964			55,098
Joint venture mortgage loans		7,417			7,417
Third-party mortgage loans		52,955			52,955
Other real estate-related investments		5,284			5,495
Other invested assets		2,023			2,117

Total investments		736,329			744,911
Cash		6,267			7,414
Accrued investment income		12,517			10,475
Reinsurance recoverable		4,005,463			3,992,659
Deferred insurance acquisition costs		30,141			273,307
Deferred income taxes		176,685			203,383
Federal income tax receivable		44,047			33,067
Modified coinsurance receivable— related party		789,487			762,480
Other assets and receivables		68,913			71,131
Assets held in separate accounts		15,131,745			15,122,214

Total assets	$	21,001,594		$	21,221,041

Liabilities
Future policy benefits	$	4,394,343		$	4,319,667
Other policyholder benefits and funds payable		148,400			150,092
Payable to reinsurers		—			97,573
Modified coinsurance payable— related party		765,972			758,853
Deferred income tax liabilities		20,484			114,600
Other accounts payable and liabilities		35,551			19,748
Liabilities related to separate accounts		15,131,745			15,122,214

Total liabilities		20,496,495			20,582,747

Commitments and contingent liabilities
Stockholder’s equity
Capital stock-$10 par value, authorized 300,000 shares; issued and
outstanding 250,000 shares		2,500			2,500
Additional paid-in capital		841,633			841,633
Accumulated other comprehensive (loss) income		1,335			(12,283	)
Retained deficit		(340,369	)		(193,556	)

Total stockholder's equity		505,099			638,294

Total liabilities and stockholder's equity	$	21,001,594		$	21,221,041

See accompanying notes to consolidated financial statements.

Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Operations
(in thousands)
(unaudited)

	Three Months Ended
	March 31,

	2004			2003

Revenue

Net investment income	$	7,213		$	56,441
Net realized investment gains		4,243			3,160
Premium income		—			435
Separate account fees and charges		16,480			22,272
Broker-dealer commission revenue		—			7,101
Modified coinsurance income-- related party		18,463			—
Other income		(326	)		3,893

Total revenue		46,073			93,302
Benefits and Expenses
Interest credited to policyholders		2,867			39,053
Claims incurred and other policyholder benefits		10,875			12,905
Taxes, licenses and fees		1,836			(192	)
Commissions		5,185			19,243
Broker-dealer commission expense		—			6,918
Operating expenses		2,556			11,982
Deferral of insurance acquisition cost		—			(20,952	)
Amortization of deferred insurance acquisition costs		5,656			11,513
Amortization of value of business acquired		—			3,449
Amortization of other intangible assets		—			190

Total benefits and expenses		28,975			84,109
Income before income tax expense		17,098			9,193
Income tax expense (benefit)
Current		(10,978	)		(10,771	)
Deferred		16,966			14,190

Total income tax expense		5,988			3,419

Net income before cumulative effect of accounting change, net of tax		11,110			5,774

Cumulative effect of accounting change, net of tax		(157,923	)		—

Net income (loss)	$	(146,813	)	$	5,774

See accompanying notes to consolidated financial statements.

Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)

	Three Months Ended
	March 31,

	2004			2003

Net income (loss)	$	(146,813	)	$	5,774
Other comprehensive income (loss), before tax:
Unrealized holding gains (losses) on securities:
Unrealized losses on derivatives		(180	)		(547	)
Unrealized holding gains on investments		8,303			30,822
Unrealized holding gains on separate accounts investments, reclassified to
the general account assets per SOP 03-01		2,841			—
Reclassification adjustment for losses (gains) included in net income		4,288			(5,122	)

Net unrealized holding gains (losses) on securities		15,252			25,153
Reclassification adjustments for items included in net income (loss):
Adjustment to value of business acquired		—			(293	)
Adjustment for deferred insurance acquisition costs		(984	)		(6,032	)

Other comprehensive income, before related income tax expense		14,268			18,828
Related income tax expense		650			6,590

Other comprehensive income, net of tax		13,618			12,238

Comprehensive income (loss)	$	(133,195	)	$	18,012

See accompanying notes to consolidated financial statements.

Kemper Investors Life Insurance Company and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Three Months Ended
	March 31,

	2004			2003

Cash flows from operating activities
Net (loss) income	$	(146,813	)	$	5,774
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Cumulative effect accounting change		157,923			—
Net realized investment (gains)		(4,243	)		(3,160	)
Interest credited and other charges		3,292			44,924
Deferred insurance acquisition costs, net		5,656			(9,439	)
Amortization of value of business acquired		—			3,449
Amortization of net discount/premium on investments		6,462			5,228
Amortization of other intangible assets		—			190
Deferred income taxes		16,966			12,776
Net change in current federal income taxes		(10,980	)		(10,969	)
Benefits and premium taxes due related to separate account business
owned life insurance		(1,707	)		(12,103	)
Modified coinsurance—related party		(19,888	)		—
Other policyholder benefits and funds payable		1,603			—
Payable to reinsurers		(99,846	)		—
Other accounts and notes receivable		24,237			—
Other, net		—			(5,271	)

Net cash provided by (used in) operating activities		(67,338	)		31,399

Cash flows from investing activities
Cash from investments sold or matured:
Fixed maturity securities held to maturity		—			75,030
Fixed maturity securities sold prior to maturity		107,481			496,273
Mortgage loans, policy loans and other invested assets		211			23,397
Cost of investments purchased or loans originated:
Fixed maturity securities		(23,751	)		(667,561	)
Equity securities		(1,653	)		—
Mortgage loans, policy loans and other invested assets		—			(10,477	)
Short-term investments, net		(3,866	)		(33,799	)
Net change in receivable and payable for securities transactions		4,991			35,857
Net change in other assets		—			334

Net cash provided by (used in) investing activities		83,413			(80,946	)

Cash flows from financing activities
Policyholder account balances:
Deposits		12,716			145,255
Withdrawals		(3,510	)		(62,529	)
Capital contribution		—			1,415
Cash overdrafts		(26,428	)		1,764

Net cash provided by (used in) financing activities		(17,222	)		85,905

Net increase (decrease) in cash		(1,147	)		36,358
Cash, beginning of period		7,414			47,436

Cash, end of period	$	6,267		$	83,794

See accompanying notes to consolidated financial statements.

Kemper Investors Life Insurance Company and Subsidiaries
Notes to Consolidated Financial Statements (unaudited)

1. Basis of Presentation