SECURITIESAND EXCHANGE COMMISSION

 

Washington,D. C. 20549

FORM10-K

 

ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIESEXCHANGE ACT OF 1934

 

FOR THEFISCAL YEAR ENDED DECEMBER 31, 2002

 

COMMISSIONFILE NUMBER 0-1999

 

**KENTUCKYINVESTORS, INC.**

 

(Exact nameof registrant as specified in Charter)

 

| KENTUCKY                                                                                                                                                                                                                                                                                                                                                                                                                      | 61-6030333             |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|
| (State orOther Jurisdiction of                                                                                                                                                                                                                                                                                                                                                                                                | (IRSEmployer           |
| Incorporation or Organization)                                                                                                                                                                                                                                                                                                                                                                                                | Identification Number) |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 200 CapitalAvenue, Frankfort, Kentucky 40601                                                                                                                                                                                                                                                                                                                                                                                  |
| (Address ofPrincipal Executive Offices)                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Registrant's telephone number, including areacode 502-223-2361                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Securitiesregistered pursuant to Section 12(b) of the Act:                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Title ofEach Class                                                                                                                                                                                                                                                                                                                                                                                                            |
| Common $1Par Value                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Name ofEach Exchange on Which Registered                                                                                                                                                                                                                                                                                                                                                                                      |
| OTCBULLETIN BOARD                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Securitiesregistered pursuant to Section 12(g) of the Act:                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| CommonCapital Stock Par Value $1.00 Per Share                                                                                                                                                                                                                                                                                                                                                                                 |
| (Title ofClass)                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Indicate by check markwhether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.YES  (X)         NO |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of RegulationS-K (229.405 of this chapter) is not contained herein, and will notbe contained, to the best of registrant's knowledge, in definitiveproxy or information statements incorporated by reference in PartIII of this form 10-K or any amendments to this Form 10-K.(X)                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule12b-2 of the Securities Exchange Act of 1934)YES  (  )        NO  (X)                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| State the aggregate marketvalue of the voting stock held by nonaffiliates of the registrant$15,901,555.25 as of December 31, 2002                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Indicate the number ofshares outstanding of each of the registrant's classes of commonstock, as of the latest practicable date.                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Class                                                                                                                                                                                                                                                                                                                                                                                                                         |
| CommonCapital Stock                                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Outstandingat December 31, 2002                                                                                                                                                                                                                                                                                                                                                                                               |
| 1,143,389.72                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Documents Incorporated byReference:                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (1) Portions of the AnnualReport to the Stockholders for the year ended December 31, 2002(Form 10-K, Items 1, 5a, 6, 7, 7a and 8)                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (2) Portions of the ProxyStatement dated April 11, 2003, for the Annual Meeting ofStockholders to be held May 8, 2003 Fform 10-K, items 10, 11, 12and 13.)                                                                                                                                                                                                                                                                    |

CONTENTS

PARTI

|         |                                                     | Page |
|---------|-----------------------------------------------------|------|
| ITEM 1. | BUSINESS                                            | 5    |
| ITEM 2. | PROPERTIES                                          | 15   |
| ITEM 3. | LEGALPROCEEDINGS                                    | 15   |
| ITEM 4. | SUBMISSION OF MATTERS TO AVOTE OF SECURITY

HOLDERS | 15   |

PARTII

| ITEM 5.  | MARKET FOR THEREGISTRANT'S COMMON EQUITY AND

RELATED STOCKHOLDERMATTERS             | 15 |
|----------|--------------------------------------------------------------------------------------|----|
| ITEM 6.  | SELECTED FINANCIALDATA                                                               | 16 |
| ITEM 7.  | MANAGEMENT'S DISCUSSIONAND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OFOPERATIONS | 16 |
| ITEM 7a. | QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT

MARKET RISK                           | 16 |
| ITEM 8.  | FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA                                           | 16 |
| ITEM 9.  | CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING ANDFINANCIAL DISCLOSURE  | 16 |

PARTIII

| ITEM 10. | DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT                                              | 17 |
|----------|------------------------------------------------------------------------------------------------|----|
| ITEM 11. | EXECUTIVECOMPENSATION                                                                          | 18 |
| ITEM 12. | SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATEDSTOCKHOLDER

MATTERS | 18 |
| ITEM 13. | CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS                                                  | 18 |
| ITEM 14. | CONTROLS ANDPROCEDURES                                                                         | 18 |

PARTIV

| ITEM 15.         | EXHIBITS, FINANCIALSTATEMENT SCHEDULES AND

REPORTS ON FORM8-K | 19 |
|------------------|----------------------------------------------------------------|----|
| INDEX TOEXHIBITS |                                                                | 20 |
| SIGNATURES       |                                                                | 22 |

PARTI

Item 1.Business

(a) BusinessOverview

 

The business of KentuckyInvestors, Inc. is the holder of 100% of the outstanding commonstock of a life insurance company, a printing company and aninsurance marketing company and the sole member of a Kentuckylimited liability company.

Kentucky Investors owns100% of Investors Heritage Life Insurance Company, InvestorsHeritage Printing, Inc. and Investors Heritage Financial ServicesGroup, Inc. Kentucky Investors is the sole member of FamilyAssignment Services, LLC, a Kentucky limited liability corporation.We will be referring to Investors Heritage Printing, InvestorsHeritage Financial and Family Assignment as the "Non-insurancesubsidiaries". We will be referring to Investors Heritage Life,Investors Heritage Printing, Investors Heritage Financial andFamily Assignment as the "Subsidiaries". We will also be referringto Kentucky Investors and its subsidiaries as the"Company".

Investors Heritage Lifeowns 96% of Investors Underwriters, Inc., an investment holdingcompany. While the Non-insurance Subsidiaries continue to expand,less than 1% of Kentucky Investors' total operations were generatedby the Non-insurance Subsidiaries for the year ended December 31,2002. The Non-insurance Subsidiaries' total assets and stockholderequity comprised less than 1% in the aggregate of the KentuckyInvestors' reported total assets and stockholder equity as ofDecember 31, 2002.

Effective September 30,2002, Investors Heritage Life acquired all of the issued andoutstanding stock of Regal Life Insurance Company, a Maryland lifeinsurance company, from its parent, Bankers Independent InsuranceCompany.  On December 31, 2002, Regal was merged intoInvestors Heritage Life.  The acquisition and merger wereapproved by both the Maryland and Kentucky Departments ofInsurance.  The acquisition was accounted for under thepurchase accounting method as prescribed by SFAS 141“Business Combinations”.  The gross acquisitionprice was approximately $560,000, subject to adjustments to bedetermined within 180 days from the effective date of thetransaction.  The difference between the fair values of assetsreceived and liabilities assumed was recorded as the present valueof future profits (“PVFP”), representing theactuarially determined present value of anticipated profits to berealized from the business, using a risk-adjusted discountrate.

Investors HeritageFinancial, a wholly-owned insurance and financial service marketingcompany, markets Investors Heritage Life's credit insurance andmortgage redemption products and also markets a variety of productsto financial institutions for a number of other unaffiliatedcompanies.

(b) FinancialInformation About Business Segments

Investors HeritageLife

The business segments ofInvestors Heritage Life are identified and discussed on ScheduleIII, Supplementary Insurance Information and on pages 46-48 of theAnnual Report to Stockholders for the year ended December 31, 2002and are incorporated herein by reference. Investors Heritage Lifeoffers a portfolio of the standard forms of participating,non-participating, whole life, limited pay, endowments,split-funding, interest-sensitive whole life, guaranteed issuewhole life, universal life, term and group life. In addition,Investors Heritage Life writes credit life and credit accident andhealth insurance (collectively "Credit Insurance”) on a groupbasis.

OrdinaryProduction. The businesssegments for ordinary production are Preneed and burial productsand Traditional and universal life products. Investors HeritageLife is working diligently to increase ordinary product sales. Thelargest increase in this area has been the Preneed and burialproducts sales in the final expense and preneed funeral markets.Final expense sales include the sale of small face amount ordinarylife insurance products, the purpose of which is to pay theinsured's final expenses. Preneed funeral sales include the sale ofmodal premium and single premium ordinary life policies which aresold to fund a specific prearranged funeral contract.

Investors Heritage Lifehas continued to improve its marketing capability in this area. Asa result, Investors Heritage Life has steadily increased sales ofPreneed products and expanded into new states, including but notlimited to, Tennessee, Indiana, Illinois, Kansas, South Carolinaand Georgia and continues to experience growth in premiumproduction from these states.

Preneed sales were up 10%for the year 2002. Our efforts and strategy to continue asuccessful operation will hinge on continuing to provide solidproducts and outstanding administrative service and on the personalrelationships developed and fostered each year. The Legacy 2000product series is being replaced with the new Legacy Protector andLegacy Preferred products for both the single premium as well asthe modal premium policies.

Our Preneed and burialproduct sales are generated primarily through independent funeralhomes in fifteen states. In 2002, we experienced record sales inour core products and at the same time consolidated to a degree ourfield management staff, therefore reducing sales expenses. Ourproduction goal was $37,711,992 in new premium and we actuallyproduced $38,207,398. This is a 1% increase over our goal and a 10%increase over sales in 2001.

Credit InsuranceProducts and Administrative Services. Investors Heritage Life has marketed CreditInsurance since 1966. Since 1996 Investors Heritage Financial hasmarketed Investors Heritage Life’s Credit Insurance productsand will continue to do so in 2003. All of the risk on all CreditInsurance policies sold by Investors Heritage Life has been andwill continue to be reinsured with larger, highly rated companies.Currently Investors Heritage Life has reinsurance agreements withMunich American Reassurance Company ("Munich") and The Canada LifeAssurance Company ("Canada Life"). For the last several yearsInvestors Heritage Financial has been marketing products forseveral unaffiliated companies to financial institutions. During2002 Investors Heritage Financial continued to explore marketingopportunities for products and secured appointments with severalunaffiliated companies in order to market larger face amount termproducts, cancer, accident and second-to-die products. Theserelationships will allow Investors Heritage Financial to providemore products and better serve our existing accounts therebyallowing us to further strengthen these agencyrelationships.

During 2001, InvestorsHeritage Financial entered into a strategic marketing partnershipwith Cherokee National Life Insurance Company, a subsidiary ofAmerican United Life Insurance Company, to distribute InvestorsHeritage Life products. This relationship has brought new financialinstitution accounts in Tennessee, Georgia, South Carolina andLouisiana and further solidified this relationship. See“Other Subsidiaries” for furtherinformation. 

Management anticipatessteady growth in this segment during 2003 due to Investors HeritageFinancial's efforts.

Premium productiondecreased by $288,009 to $2,640,641 in 2002 for the credit ordinarysegment. This was a 9% decrease over 2001, primarily due thesluggish economy which caused decreased activity in the financialinstitution market.

(c) NarrativeDescription of Business

Preneed and BurialProducts. Sales for thissegment are under the direct supervision of the home office using aregionally supervised agency system. The method of field operationinvolves independent contractual agents working with district andregional managers. These managers contract with and train agentswho work under them. The regional managers may have severaldistrict managers under their supervision. As a result of InvestorsHeritage Life's growth in the Preneed area, agency relationshipshave also been entered into directly with numerous funeral homeowners. Management anticipates this trend to continue and,depending on the size of the funeral home and state law, Preneedcounselors will also become part of the agency force.

Investors Heritage Lifealso issues two non-participating interest-sensitive single premiumwhole life policies based on simplified underwriting. Thesepolicies provide for payment of the full face amount at the deathof the insured and for increasing death benefits on anon-guaranteed basis.

Investors Heritage Lifealso provides other products designed for the preneed funeralmarket. These products are single premium and modal premiumnon-participating whole life policies. Single premium policies aresold on a guaranteed issue basis and modal premium policies arefully underwritten. Both single and modal premium policies providefor non-guaranteed increasing death benefits and have a maximumface amount of $25,000.

The fourth generation ofproducts, for the preneed funeral market, called the “Legacy2000 Series”, differ from prior products by offeringsimplified underwriting for the multi-pay policies and shorterreduced benefit policies. Some of these products provide for thepayment of the full face amount at the death of the insured andsome provide graded death benefits during the first year. All ofthe products provide for increasing death benefits on anon-guaranteed basis.

During the first quarter2003, Investors Heritage Life will introduce its fifth generationof life products designed for the preneed funeral market. These newproducts provide an underwritten and a guaranteed issue singlepremium policy as well as underwritten and guaranteed issuemulti-pay policies. All of the products provide for increasingdeath benefits on a non-guaranteed basis with a guaranteed minimumincrease and the reduced benefit period has been lengthened for theguaranteed issue multi-pay product. These new products, called the“Legacy Protector and Legacy Preferred Series”, weredeveloped to combat the challenging economic environment andincreased mortality anti selection and will replace the Legacy 2000Series.

Investors Heritage Lifeintroduced a new series of final expense whole life insurancepolicies during 2001. These new products are non-participatingwhole life insurance issued with simplified underwriting. Theseproducts are offered outside of the preneed market and replace thelevel benefit policies that were included in the Legacy 2000series. The Heritage Final Expense product has been well receivedin our markets.

Since 1997 the majority ofbusiness written by Investors Heritage Life has been groupinsurance products sold in the preneed market. The Legacy 2000Series introduced during 1998 is also a group product in manystates as is the new Heritage Final Expense product that replacedthe Legacy 2000 Series in the second and third quarter of 2001.Therefore, group life premiums and in-force business remain athigher levels than individual premiums and in-force business. Grouplife premiums during 2002 were $22,357,847 as compared to$19,571,638 in 2001 representing an increase of 14%. The new LegacyProtector and Legacy Preferred Series will initially be sold asindividual products; however, management anticipates filing theseproducts on a group basis in many states during the second andthird quarter 2003.

Traditional andUniversal Life Products.Sales for this segment are under the direct supervision of the homeoffice using a regionally supervised agency system. The method offield operation involves independent contractual agents workingwith district and regional managers. These managers contract withand train agents who work under them. The regional managers mayhave several district managers under their supervision. InvestorsHeritage Life also sells business through general agents or brokerswho may represent one or more companies.

Approximately 36% of totalinsurance in force is Ordinary Life. The Ordinary Life sales arebuilt around a standard portfolio of life insurance policies withsome of the contributions to in-force business being aparticipating ordinary life insurance policy, a guaranteed issuewhole life policy and non-participating life policies. In addition,Investors Heritage Life offers term insurance products.

Some of the participatingpolicies provide for payment of guaranteed annual endowments offixed amounts beginning at the end of the second policy year andcontinuing through the premium-paying period. These policies alsohave an annual guaranteed benefit. As of December 31, 2002, 7% ofthe total ordinary insurance in force was comprised ofparticipating policies and approximately 4% of those policiesprovide some guaranteed benefit.

Another block ofparticipating policies provides for the payment of a dividend whichwill purchase additional insurance equal to 5% of the previousyear's total death benefit, including any additional insurancepurchased in prior years. The dividend is not guaranteed. As ofDecember 31, 2002, 3% of the total ordinary insurance in force wascomprised of participating policies with non-guaranteedbenefits.

Non-participating lifeinsurance policies sold in both the Preneed and burial productsegment and the Traditional and universal life segment represented93% of the total ordinary insurance in force.

Investors Heritage Lifealso provides term insurance products, both on a decreasing and alevel basis. During 2001, we introduced a new Term to 95 productthat replaced our Level Term product. We will continue to provideour decreasing term policy that is primarily sold through financialinstitutions.

Group life accounts forthe remaining 47% of total in-force business.  In addition tothe group business discussed above, Investors Heritage Lifeparticipates in the Federal Employee Group Life Insurance ("FEGLI")Program, which is administered by Metropolitan Life InsuranceCompany and in the Servicemen's Group Life Insurance ("SEGLI")Program which is administered by Prudential Insurance Company ofAmerica. As of year-end 2002 the total amount of insurance in forcefrom the FEGLI and SEGLI programs were $495,154,000 and$946,392,000, respectively.

CreditInsurance. Credit Insuranceis generally sold through banks, finance companies and automobiledealerships and is offered in connection with the extension ofcredit by financial institutions. The amount of the insurance isdesigned to cover the amount of the loan with the financialinstitution being the beneficiary of the insurance policy to theextent of the unpaid balance of the loan. Credit Insuranceproduction is dependent on consumer debt. In times of lowunemployment, reasonable interest rates and a steadily improvingeconomy, consumer debt increases; therefore, Credit Insurance salesincrease. When the economy slows, consumer debt slows and thereforeCredit Insurance sales decrease.

Investors HeritageFinancial initiated discussions with unaffiliated companiesregarding a transaction where the Credit Insurance business wouldbe written by Investors Heritage Life and all of the risk insuredwould be immediately reinsured to the unaffiliated company. Inaddition to receiving a retention fee, Investors Heritage Life alsoreceives a fee for administration and claims processing services.Investors Heritage Financial is able to generate revenues in theform of commissions from the sale of Investors HeritageLife’s Credit Insurance products.

Management believes therewill continue to be opportunities to administer Credit Insurancebusiness in Kentucky for non-domestic insurers. Investors HeritageLife has entered into reinsurance agreements with four unaffiliatedcompanies, Life Investors Insurance Company of America, BankersLife Insurance Company, Universal Guaranty Life Insurance Companyand American United Life Insurance Company. Pursuant to thoseagreements, our Credit Insurance products sold by Life Investors',Bankers Life's, Universal Guaranty’s and American UnitedLife's agents are reinsured to Life Investors, Bankers Life,Universal Guaranty’s and American United Life, respectively.Investors Heritage Life and Investors Heritage Financial are paid aretention fee and a marketing fee for services provided. Theagreement with Bankers Life was canceled effective January 31, 2001with respect to new business. Investors Heritage Financial willcontinue to seek contracts to operate as an administrator for othercompanies that sell Credit Insurance.

Investors HeritageFinancial will continue to call on banks, finance companies andselected automobile dealerships to market the Credit Insuranceproducts for Investors Heritage Life. As anticipated, more than 12%of Investors Heritage Financial's revenues for 2002 were derivedfrom the sale of Investors Heritage Life's Credit Insuranceproducts. Credit Insurance gross written premiums were lower thananticipated in 2002 due to the sluggish economy which causeddecreased loan demand. Investors Heritage Life anticipates 2003Credit Insurance gross written premiums to exceed$14,000,000.

In addition to sellingCredit Insurance, Investors Heritage Life bank agents may obtain anordinary life license enabling them to sell mortgage life insurancethat might be required in excess of the statutory credit lifelimitation enacted by each state where our Credit Insuranceproducts are sold. The mortgage life insurance sales operationswill continue to be conducted through Investors Heritage Financial.Further, Investors Heritage Financial is licensed with otherunaffiliated insurance companies to provide products that InvestorsHeritage Life does not offer to the financial institutions andother agents. These products include cancer, accident,second-to-die, large face amount term insurance, short term andlong term disability and annuities. These relationships generatedadditional fee income in the amount of $573,553 during 2002 andmanagement anticipates fee income from this area to continue togrow.

Risk. In many cases Investors Heritage Liferequires evidence of insurability before issuing individual lifepolicies including, in some cases, a medical examination or astatement by an attending physician. Home office underwritersreview the evidence of insurability required and approve theissuance of the policy in accordance with the application if therisk is acceptable. Some applicants who are substandard risks arerejected, but many are offered policies with higher premiums,restricted coverages or reduced benefits during the first or secondpolicy years. The majority of the single premium business iswritten through the preneed funeral market without evidence ofinsurability, relying on safeguards such as product design, limitson the amount of coverage, and premiums which recognize theresultant higher level of claims. To further reduce the risk, oneof our new single premium products requires evidence ofinsurability utilizing simplified underwriting.

Investors Heritage Lifeobtains reinsurance with respect to amounts in excess of itsretention limits. Currently the maximum limit of retention byInvestors Heritage Life on its standard contract for any one lifeis $100,000 plus the amount of the return of premium benefits, ifany. The maximum is reduced for substandard classes of risk. Themaximum retention on Credit Life is also $100,000 per life. Excesscoverages are reinsured externally to unaffiliatedreinsurers.

Management is continuallyreviewing its reinsurance programs and considering reducingretention amounts to provide more level profit streams and provideadditional protection against unusual claims. During 2001,Investors Heritage Life entered into two reinsurance agreements infurtherance of these goals. The first is with Munich whichreinsures the Heritage Final Expense products on an 80/20 quotashare basis with Investors Heritage Life retaining 20% of the riskon each life. The second is with Lincoln National ReinsuranceCompany (now Swiss Re) which reinsures the new Term to 95 producton an 80/20 quota share basis with Investors Heritage Liferetaining 20% of the risk on each life.

As of December 31, 2002,approximately $736,567,000, or 22% of total life insurance in forcewas reinsured with non-affiliated well-established insurancecompanies. Investors Heritage Life would become liable for thereinsured risks if the reinsurers could not meet their obligations.Investors Heritage Life has not experienced a reinsurer defaultunder any of the reinsurance agreements to which Investors HeritageLife is a party. Further, Investors Heritage Life has no knowledgeof and does not anticipate any material default in any existingreinsurance obligation.

Investors Heritage Life isparty to reinsurance and coinsurance agreements with twentynon-affiliated companies. The reinsurers for Investors HeritageLife and amounts of insurance in force that are reinsured are asfollows:

| Company                                     | Reinsurance                                             | Percent                       |
|---------------------------------------------|---------------------------------------------------------|-------------------------------|
|                                             | Amount                                                  | OfTotal                       |
| American United LifeInsurance Company       | $  38,409,000                                 | 5.22%                         |
| Bankers Life InsuranceCompany               | 42,373,000                                              | 5.75%                         |
| Business Men's AssuranceCompany             | 4,375,000                                               | 0.59%                         |
| Canada Life AssuranceCompany                | 166,494,000                                             | 22.61%                        |
| Connecticut General LifeInsurance Company   | 15,834,000                                              | 2.15%                         |
| Key Life InsuranceCompany                   | 1,210,000                                               | 0.16%                         |
| Life Investors InsuranceCompany of America  | 9,234,000                                               | 1.25%                         |
| Lincoln NationalReinsurance Company         | 85,873,000                                              | 11.66%                        |
| Munich AmericanReassurance Company          | 225,395,000                                             | 30.60%                        |
| Optimum Re InsuranceCompany                 | 4,940,000                                               | 0.67%                         |
| ReliaStar Life InsuranceCompany             | 87,400,000                                              | 11.87%                        |
| Scottish Annuity and LifeInsurance Company  | 49,891,000                                              | 6.77%                         |
| Swiss Re Life & HealthAmerica Insurance | 700,000                                                 | 0.10%                         |
| Universal Guaranty LifeInsurance Company    | 3,698,000                                               | 0.50%                         |
| Other Companies(6)                          |         741,000 |     0.10% |
|                                             | $736,567,000                                            | 100.00%                       |

From 1999 to July 2001,Investors Heritage Life reinsured all of the risk on the CreditInsurance products sold by its agents to Munich and ReliaStar.Effective July 1, 2001 ReliaStar terminated the reinsuranceagreement with respect to new issues. Therefore, Investors HeritageLife entered into a reinsurance agreement with Canada Life toreplace ReliaStar. Effective July 2003, Canada Life will exit theCredit Insurance market and Investors Heritage Life and InvestorsHeritage Financial will negotiate new reinsurance agreements toreplace Canada Life. As explained above, some of these creditinsurance risks have been and will be reinsured to Life Investors,Bankers Life, Universal Guaranty and American UnitedLife.

Regulation ofInsurance. InvestorsHeritage Life's business is subject to regulation and supervisionby the insurance regulatory authority of each state in whichInvestors Heritage Life is licensed to do business. Such regulatorsgrant licenses to transact business; regulate trade practices;approve policy forms; license agents; approve certain premiumrates; establish minimum reserve and loss ratio requirements;review form and content of required financial statements; prescribetypes and amounts of investments permitted; and assure thatcapital, surplus and solvency requirements are met. Insurancecompanies can also be required under the solvency or guaranty lawsof most states in which they do business to pay assessments up toprescribed limits to fund policyholder losses or liabilities ofinsolvent insurance companies. They are also required to filedetailed annual reports with supervisory agencies, and records oftheir business are subject to examination at any time. Under therules of the National Association of Insurance Commissioners("NAIC"), a self-regulatory organization of state insurancecommissioners, insurance companies are examined periodically by oneor more of the regulatory authorities.

Domiciled in theCommonwealth of Kentucky, Investors Heritage Life is licensed bythe Kentucky Department of Insurance and is subject to itsexamination and regulations. The triennial audit was completedduring 2002 for the three years ending December 31, 2000. TheExamination Report contains no specific recommendations and nomaterial adjustments were made to the statutory financialstatements of Investors Heritage Life.

In December of 1992, theNAIC adopted a "Risk Based Capital for Life and/or Health InsurersModel Act" (the "Model Act") which was designed to identifyinadequately capitalized life and health insurers. The Model Actdefines two key measures: (i) adjusted capital, which equals aninsurer's statutory capital and surplus plus its asset valuationreserve, plus one-half its liability for policyholder dividends("Adjusted Capital") and (ii) authorized control level risk basedcapital ("RBC"). RBC is determined by a complex formula which isintended to take into account the various risks assumed by aninsurer. Should an insurer's Adjusted Capital fall below certainprescribed levels (defined in terms of its RBC), the Model Actprovides for various levels of regulatory attention.

Since the Adjusted Capitallevels of Investors Heritage Life currently exceed all of theregulatory action levels as defined by the NAIC's Model Act, theModel Act currently has no negative impact on the Company'soperations or financial condition.

Statutory restrictionsalso limit the amount of dividends that may be paid by InvestorsHeritage Life. Generally, dividends during any year may not bepaid, without prior regulatory approval, in excess of the lesser of(a) 10 percent of statutory stockholders' equity as of thepreceding December 31, or (b) statutory net income for thepreceding year. In addition, dividends are limited to the amount ofunassigned surplus reported for statutory purposes, which was$9,554,673 at December 31, 2002. Dividend income from InvestorsHeritage Life for 2002 amounted to $566,819.

Competition. The life insurance business is highlycompetitive. With the introduction of universal life and otherinterest sensitive products in recent years, competition with otherfinancial institutions has increased. The industry includes bothstock and mutual companies, including some of the largest financialinstitutions in the United States. While Investors Heritage Life isresponsive to the current economic environment, the life insurancemarket is relatively volatile, and Investors Heritage Life'soperating results may vary as a result of thoseconditions.

Investors Heritage Lifedifferentiates itself through its marketing techniques, productfeatures, customer service and reputation. Investors Heritage Lifemaintains its competitive position by its focus on areas which havehistorically proven profitable. Those areas include single premiumpreneed products, modal premium final expense products, traditionalwhole life products, mortgage protection products and level termproducts. Investors Heritage Life's competitive position ismaintained by its ability to provide quality customer servicethroughout the distribution system. Other competitive strengthsinclude Investors Heritage Life's asset/liability managementsystem, a quality investment portfolio which provides liquidity andInvestors Heritage Life's non-leveraged financialposition.

The business of InvestorsHeritage Life is not seasonal.

OtherSubsidiaries. InvestorsHeritage Printing does job printing for Investors Heritage Life aswell as numerous unaffiliated sources. This includes the printingof the application forms and other office forms required byInvestors Heritage Life. While the income from Investors HeritagePrinting is not a significant factor in our overall business,Investors Heritage Printing will continue to work to improveprofitability during 2002. Revenues from Investors HeritagePrinting continued to be less than one percent of our total revenuefor 2002.

The formation andoperation of Investors Heritage Financial generates additionalrevenue to Kentucky Investors. Although this additional revenue isnot a significant factor in our overall business, InvestorsHeritage Financial remains steady in its operations with revenuesof $473,913 in 2002 compared to $526,525 in 2001. Revenues fromInvestors Heritage Financial continue to account for less than onepercent of our total revenue for 2001. See Schedule II.

During June 2002, theCompany acquired 400,000 shares of Cherokee National Life InsuranceCompany, a subsidiary of American United Life Insurance Company, inexchange for the Company’s non-recourse promissory note inthe amount of $4,000,000. The note is due June 28, 2007 andinterest will be paid quarterly at a rate equal to the prime rate.Cherokee National stock dividends will be paid quarterly and thedividend rate will be equal to the prime rate. No interest is dueon the note unless dividends have been paid. During December 2002,the 400,000 shares of Cherokee National common stock were exchangedfor 400,000 shares of Series A preferred stock of CherokeeNational.

During September 2002, theCompany authorized the formation of Family Assignment Services, LLCto provide funding for at-need funerals.  Family Assignment isa single member, limited liability corporation organized under thelaws of the Commonwealth of Kentucky. Kentucky Investors is thesole member of the LLC. Funding provided by Family Assignment issecured by assignments of verified incontestable life insurancepolicies issued by unaffiliated companies. The funds are advancedto funeral homes for services provided for the insured. Uponreceipt of death benefits from the insurance company, the principalbalance of the debt is reduced and interest and fees are recorded.This service is provided to funeral homes that do not have themanpower to complete necessary paperwork to process the insuranceclaim.

Dividend income from theNon-insurance Subsidiaries for 2002 amounted to approximately$446,000.

Additionally, KentuckyInvestors earns fees for other services performed for itssubsidiaries. The fees pay for the necessary supervision andcoordination required to provide a common policy for all thecompanies. The supervision results in a coordination of contractswith the various independent agents, common sales brochures, and asavings to each company in the area of printing and purchasing.Kentucky Investors purchases director and officer liabilitycoverage to include the directors and officers of each subsidiaryand also purchases blanket fidelity bonds to include employees ofeach subsidiary at a savings when compared to purchases made byindividual companies. The group life, hospitalization, and theretirement programs for the various companies are also administeredby Kentucky Investors. These fees are not significant to KentuckyInvestors’ total revenue. Kentucky Investors also has revenuefrom other investments, but it is not a significant factor in ourbusiness.

Employees. Kentucky Investors does not have any employees.Kentucky Investors’ officers perform various functionsdescribed in item 10; however, they are not paid a salary byKentucky Investors for performing such functions. The number ofpersons employed by Investors Heritage Life is 101. The number ofactive independent contractual agents of Investors Heritage Life is2,090. There are no unions organized nor are there any collectivebargaining agreements with the employees or agents. Management of Investors Heritage Life considers its relationshipwith the employees and agents to be satisfactory.

(d) FinancialInformation About Geographic Areas

The principal markets forInvestors Heritage Life's products are in the Commonwealths ofKentucky and Virginia, and the States of North Carolina, SouthCarolina, Georgia, Ohio, Indiana, Florida, Tennessee, Illinois,West Virginia, Arizona, Michigan, Mississippi and Texas. InvestorsHeritage Life has licensed ordinary agents and regional managersthroughout these states and credit life agents in over 327 banksand automobile dealerships.

Investors Heritage Life isalso licensed in fifteen other states: Alabama, Arkansas andLouisiana in the South and Southeast; Colorado, Missouri, NewMexico, North Dakota, South Dakota, Oklahoma, Montana, Nebraska,Kansas and Utah in the West; and Maryland and Pennsylvania in theNorth. The business in these states is written mostly throughgeneral agents. During 2001 Investors Heritage Life expanded itspreneed operation into several of these states, specifically,Mississippi, Michigan, Louisiana and Alabama. Managementanticipates continued growth in those states during2002.

Forward LookingInformation. The Companycautions readers regarding certain forward-looking statementscontained in this report and in any other statements made by, or anbehalf of, the Company, whether or not in future filings with theSecurities and Exchange Commission (the "SEC"). Forward-lookingstatements are statements not based on historical information andwhich relate to future operations, strategies, financial results,or other developments. Statements using verbs such as "expect,""anticipate," "believe" or words of similar import generallyinvolve forward-looking statements. Without limiting the foregoing,forward-looking statements include statements which represent theCompany's beliefs concerning future levels of sales and redemptionsof the Company's products, investment spreads and yields, or theearnings and profitability of the Company's activities.

Forward looking statementsare necessarily based on estimates and assumptions that areinherently subject to significant business, economic andcompetitive uncertainties and contingencies, many of which arebeyond the Company's control and many of which are subject tochange. These uncertainties and contingencies could cause actualresults to differ materially from those expressed in anyforward-looking statements made by, or on behalf of, the Company.Whether or not actual results differ materially fromforward-looking statements may depend on numerous foreseeable andunforeseeable factors and developments. Some of these may benational in scope, such as general economic conditions, changes intax law and changes in interest rates. Some may be related to theinsurance industry generally, such as pricing competition,regulatory developments, industry consolidation and the effects ofcompetition in the insurance business from other insurancecompanies and other financial institutions operating in theCompany's market area and elsewhere. Others may relate to theCompany specifically, such as credit, volatility and other risksassociated with the Company's investment portfolio. The Companycautions that such factors are not exclusive. The Company disclaimsany obligation to update forward-looking information.

Item 2.Properties

The physical property ofthe Company consists of the home office building and grounds, ownedin fee, at 200 Capital Avenue, Frankfort, Kentucky. Adjacent to thehome office, the Company owns additional property on Second Streetand on Shelby Street in Frankfort, Kentucky. One building is usedfor agency and company meetings; one building is a print shop usedby Investors Heritage Printing, one building is used for suppliesand additional storage; and one building is leased to a commercialtenant.

Item 3. LegalProceedings

There are no legalproceedings to which Kentucky Investors is a party. There are nolegal proceedings to which Investors Heritage Life is a party thatare material to the overall financial condition or results ofoperations of Kentucky Investors.

Item 4. Submission ofMatters to a Vote of Security Holders

None.

PARTII

Item 5. Market for theRegistrant's Common Equity and Related StockholderMatters

The information relative to themarket value of the Company's stock appears on page 50 of theAnnual Report to the Stockholders for the year ended December 31,2002, and is incorporated herein by reference.

Approximate Number of EquitySecurity Holders

(A)

Title ofClass

CommonStock

(B)

Number ofHolders of Record 12-31-2002

4,881

     (c)Dividends

Kentucky Investors, Inc.,paid dividends totaling $538,160 to stockholders in 2002representing $.38 per share. The 2003 cash dividend to be paidApril 7, 2003, to stockholders of record March 21, 2003 is $.38 pershare.

Item 6. Selected FinancialData

Selected financial datafor the past five years appears on page 27 in the Annual Report tothe Stockholders for the year ended December 31, 2002, and isincorporated herein by reference.

Item 7. Management'sDiscussion and Analysis of Financial Condition and Results ofOperations

Management's Discussionand Analysis of financial condition and results of operationsappears on pages 13-26 in the Annual Report to the Stockholders forthe year ended December 31, 2002, and is incorporated herein byreference.

Item 7a. Quantitative andQualitative Disclosures About Market Risk

Information appearingunder the caption "Market Risk Exposures" appears on page 25 in theAnnual Report to the Stockholders for the year ended December 31,2002, and is incorporated herein by reference.

Item 8. FinancialStatements and Supplementary Data

The financial statementsand notes appear on pages 28-49 in the Annual Report to theStockholders for the year ended December 31, 2002 and areincorporated herein by reference. See Part IV, Item 14.

Item 9. Changes in andDisagreements with Accountants on Accounting and FinancialDisclosure

None.

PARTIII

Item 10. Directors andExecutive Officers of the Registrant

The Executive officers anddirectors of the Company are:

                                              
| Name, Position & YearBecame                                                                                                                                                                     | Age |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----|
| Officer/Director                                                                                                                                                                                    |     |
| FamilyRelationship                                                                                                                                                                                  |     |
|                                                                                                                                                                                                     |     |
| Harry Lee WaterfieldII                                                                                                                                                                              | 59  |
| Chairman of the Board,President/1963                                                                                                                                                                |     |
|                                                                                                                                                                                                     |     |
| Jimmy R. McIver,Treasurer/2000                                                                       | 51  |
|                                                                                                                                                                                                     |     |
| Nancy WaterfieldWalton                                                                                                                                                                              | 63  |
| First VicePresident/1988                                                                                                                                                                            |     |
| Sister of Harry LeeWaterfieldII                                                       |     |
|                                                                                                                                                                                                     |     |
| Robert M. Hardy,Jr.                                                                                                                                                                                 | 45  |
| Director, Vice Presidentand General                                                                                                                                                                 |     |
| Counsel/1988                                                                                                                                                                                        |     |
| Nephew of Harry LeeWaterfieldII                                                                                |     |
|                                                                                                                                                                                                     |     |
| Raymond L. Carr, ChiefFinancial                                                                                                                                                                     | 54  |
| Officer, VicePresident/2002                             |     |
|                                                                                                                                                                                                     |     |
| Wilma Yeary,Secretary/1989                                        | 71  |
|                                                                                                                                                                                                     |     |
| Jane S. Jackson, AssistantSecretary/1989                                                                                                                         | 48  |
|                                                                                                                                                                                                     |     |
| Helen S. Wagner,Director/1986                                                         | 66  |
|                                                                                                                                                                                                     |     |
| Gordon Duke,Director/1991                                    | 57  |
|                                                                                                                                                                                                     |     |
| Harold G. Doran,Director/2001                                                         | 50  |
|                                                                                                                                                                                                     |     |
| Howard L. Graham,Director/2002                                                                            | 68  |
|                                                                                                                                                                                                     |     |
| Jerry F. Howell, Jr.,Director/1983                                                                        | 61  |
|                                                                                                                                                                                                     |     |
| David W. Reed,Director/1982                                                                                                             | 49  |

(b) Each of the Directorshas occupied the position indicated for a period of more than fiveyears unless otherwise stated in the information regarding thebusiness experience of the Directors who are not officers of theCompany which is shown on pages 2-3 of the Proxy Statement of theAnnual Meeting of Shareholders to be held on May 8, 2003, and isincorporated herein by reference.

There have been no eventsunder any bankruptcy act, no criminal proceedings and no judgmentsor injunctions material to the evaluation of the ability andintegrity of any Director or Executive Officer during the past fiveyears.

Officers are appointedannually by the Board of Directors at the Board meeting immediatelyfollowing the Annual Meeting of Shareholders. There are noarrangements or any understandings between any officer and anyother person pursuant to which the office was selected.

Item 11. ExecutiveCompensation

Information regardingcompensation of executive officers and transactions with executiveofficers and directors is shown on page 5 of the Proxy Statementfor the Annual Meeting of Shareholders to be held May 8, 2003, andis incorporated herein by reference.

Item 12. SecurityOwnership of Certain Beneficial Owners and Management and RelatedStockholder Matters

Security ownership byOfficers, Directors, and management is shown on pages 3 and 4 ofthe Proxy Statement for the Annual Meeting of Stockholders to beheld May 8, 2003, and is incorporated herein byreference.

Item 13. CertainRelationships and Related Transactions

Certain relationships andrelated transactions are shown on page 8 of the Proxy Statement forthe Annual Meeting of Stockholders to be held May 8, 2003, and areincorporated herein by reference.

Item 14. Controls andProcedures

Within the 90 days priorto the filing date of this Form 10-K, the Company carried out anevaluation, under the supervision and with the participation of theCompany's management, including the Company's Chief ExecutiveOfficer and Chief Financial Officer, of the effectiveness of thedesign and operation of the Company's disclosure controls andprocedures as defined in Rule 13a-14 of the Securities Exchange Actof 1934.  Based upon that evaluation, the Chief ExecutiveOfficer and Chief Financial Officer concluded that the Company'sdisclosure controls and procedures are effective in timely alertingthem to material information relating to the Company (including itsconsolidated subsidiaries) required to be included in this AnnualReport on Form 10-K. There have been no significant changes in theCompany's internal controls or in other factors which couldsignificantly affect internal controls subsequent to the date theCompany carried out its evaluation.

PARTIV

Item 15. Exhibits,Financial Statement Schedules And Reports On Form 8-K

(a)1. The followingfinancial Statements incorporated herein by reference in Item 8 tothe Company's Annual Report to Stockholders for the year endedDecember 31, 2002 (pages 28-31) filed as Exhibit 1thereto:

   Reportof Independent Auditors

   Consolidated Balance Sheets asof December 31, 2002 and 2001

   For eachof the three years in the period ended December 31,2002:

      ConsolidatedStatements of Income

      ConsolidatedStatements of Stockholders' Equity

      ConsolidatedStatements of Cash Flows

      Notes toConsolidated Financial Statements

(a)2. ConsolidatedFinancial Statement Schedules

   ScheduleI -- Summary of Investments -- Other Than Investments in RelatedParties

   ScheduleII -- Condensed Financial Information of Registrant

   ScheduleIII -- Supplementary Insurance Information

   ScheduleIV – Reinsurance

All other schedules havebeen omitted as not applicable, not required, or the requiredinformation has been included in the financial statements or notesthereto.

| **INDEX TOEXHIBITS**     |
|--------------------------|
|                     |
| (a)3. Listing ofExhibits |
|                     |  |
| Exhibit                  |  |
| Number                   | Description of Exhibits |
|                     |  |
| 3.1                      | Articles of Incorporationof the Company, as amended, is incorporated by reference as Exhibit3.1 to the Company's registration statement on Form S-4 filed on10-7-1999 (File No. 333-87947). |
|                     |  |
| 3.2                      | By-Laws of the Company, asamended, is incorporated by reference as Exhibit 3.2 to theCompany's registration statement on Form S-4 filed on 10-7-1999(File No. 333-87947). |
|                     |  |
| 11                       | Statements re: computationof Per Share Earnings is contained in Note A to the ConsolidatedFinancial Statements, "Common Stock and Earnings per Share", onpage 32 of the Annual Report to the Stockholders for the year endedDecember 31, 2002, and is incorporated herein byreference. |
|                     |  |
| 13                       | Annual Report to theStockholders for the year ended December 31, 2002 is attachedhereto as Exhibit 1 and is incorporated hereby byreference. |
|                          |  |
| 23                       | Consent of IndependentAuditors. |
|                          |  |
| 99.1 & 99.2          | Certification Pursuant to18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002. |

*The material included inthis Report shall not be deemed to be "filed" with the Commissionor otherwise subject to the liabilities of Section 18 of the Act,except to the extent that this registrant specifically incorporatesit in its Annual Report on this Form 10-K by reference.

|                                                                                                                              |
|------------------------------------------------------------------------------------------------------------------------------|
| (b) Reports on Form8-K.                                                                                                      |
|                                                                                                                              |
| None.                                                                                                                        |
|                                                                                                                              |
| (c) See Item 15(a)3above.                                                                                                    |
|                                                                                                                              |
| (d) Financial StatementSchedules - The response to this portion of Item 15 is submitted asa separate section of this report. |

SIGNATURES

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Actof 1934, the Registrant has duly caused this Form 10-K to be signedon its behalf by the undersigned, thereunto dulyauthorized.

KENTUCKY INVESTORS,INC.

March 13, 2003

DATE                                                                      /s/Harry Lee Waterfield II

BY: Harry Lee WaterfieldII

ITS: Chairman of the Boardand President

|      Harry LeeWaterfield IIand Raymond L.Carr, being the President and Chief Financial Officer and VicePresident, respectively, of Kentucky Investors, Inc., herebycertify as of this 24th day of March, 2003, that the Form 10-K forthe Year ended December 31, 2003 fully complies with therequirements of Section 13(a) or 15(d) of the Securities ExchangeAct of 1934 and that the information contained in the Form 10-Kfairly presents, in all material respects, the financial conditionand results of operations of Kentucky Investors, Inc. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | **KENTUCKY INVESTORS,INC.** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | /s/ Harry Lee WaterfieldII |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | BY: Harry Lee WaterfieldII |
| DATE: March 24,2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       President |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | /s/ Raymond L.Carr |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | BY: Raymond L.Carr |
| DATE: March 24,2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |       ChiefFinancial Officer – Vice President |

Pursuant to therequirements of the Securities Exchange Act of 1934, this report issigned below by the following persons on behalf of the Registrantand in the capacities and on the dates indicated.

/s/Harry Lee WaterfieldII

Harry Lee WaterfieldII

Chairman of the Board andPresident

Principal ExecutiveOfficer

March 13, 2003

/s/Robert M. Hardy,Jr.

Robert M. Hardy,Jr.

Vice President, GeneralCounsel and Director

March 13, 2003

/s/Jimmy McIver

Jimmy McIver

Treasurer

March 13, 2003

/s/Raymond L.Carr

Raymond L. Carr

Chief FinancialOfficer

Vice President

March 13, 2003

/s/Gordon Duke

Gordon Duke

Director

March 13, 2003

/s/Helen S.Wagner

Helen S. Wagner

Director

March 13, 2003

/s/Harold G.Doran

Harold G. Doran

Director

March 13, 2003

/s/David W.Reed

David W. Reed

Director

March 13, 2003

/s/Jerry F. Howell,Jr.

Jerry F. Howell,Jr.

Director

March 13, 2003

/s/ Howard L.Graham

Howard L.Graham

Director

March 13, 2003

**CERTIFICATIONS**

|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        | I, Harry Lee WaterfieldII, certify that:                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.     | I have reviewed thisannual report on Form 10-K of Kentucky Investors, Inc.;                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.     | Based on my knowledge,this annual report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the periodcovered by this annual report;                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.     | Based on my knowledge, thefinancial statements, and other financial information included inthis annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this annualreport;                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.     | The registrant's othercertifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant, and wehave:                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (a) Designed suchdisclosure controls and procedures to ensure that materialinformation relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is beingprepared,                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (b) Evaluated theeffectiveness of the registrant's disclosure controls andprocedures as of a date within 90 days prior to the filing date ofthis annual report (the "Evaluation Date"), and                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (c) Presented in thisannual report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as ofthe Evaluation Date;                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 5.     | The registrant's othercertifying officers and I have disclosed, based on our most recentevaluation, to the registrant's auditors and the audit committee ofthe registrant's board of directors:                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (a) All significantdeficiencies in the design or operation of internal controls whichcould adversely affect the registrant's ability to record, process,summarize, and report financial data and have identified for theregistrant's auditors any material weaknesses in internal controls;and,                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (b) Any fraud, whether ornot material, that involves management or other employees who havea significant role in the registrant's internal controls;and,                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 6.     | The registrant's othercertifying officers and I have indicated in this annual reportwhether or not there were significant changes in internal controlsor in other factors that could significantly affect internalcontrols subsequent to the date of our most recent evaluation,including any corrective actions with regard to significantdeficiencies and material weaknesses. |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |

| Date: March 24,2003 | By: /s/ Harry LeeWaterfield II |
|---------------------|--------------------------------|
|                     | Harry Lee WaterfieldII         |
|                     | President                      |

|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | I, Raymond L. Carr,certify that:                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 1.     | I have reviewed thisannual report on Form 10-K of Kentucky Investors, Inc.;                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 2.     | Based on my knowledge,this annual report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which suchstatements were made, not misleading with respect to the periodcovered by this annual report;                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.     | Based on my knowledge, thefinancial statements, and other financial information included inthis annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of theregistrant as of, and for, the periods presented in this quarterlyreport;                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.     | The registrant's othercertifying officers and I are responsible for establishing andmaintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-14 and 15d-14) for the registrant, and wehave:                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (a) Designed suchdisclosure controls and procedures to ensure that materialinformation relating to the registrant, including its consolidatedsubsidiaries, is made known to us by others within those entities,particularly during the period in which this annual report is beingprepared,                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (b) Evaluated theeffectiveness of the registrant's disclosure controls andprocedures as of a date within 90 days prior to the filing date ofthis annual report (the "Evaluation Date"), and                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (c) Presented in thisannual report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as ofthe Evaluation Date;                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 5.     | The registrant's othercertifying officers and I have disclosed, based on our most recentevaluation, to the registrant's auditors and the audit committee ofthe registrant's board of directors:                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (a) All significantdeficiencies in the design or operation of internal controls whichcould adversely affect the registrant's ability to record, process,summarize, and report financial data and have identified for theregistrant's auditors any material weaknesses in internal controls;and,                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
|        | (b) Any fraud, whether ornot material, that involves management or other employees who havea significant role in the registrant's internal controls;and,                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |
| 6.     | The registrant's othercertifying officers and I have indicated in this annual reportwhether or not there were significant changes in internal controlsor in other factors that could significantly affect internalcontrols subsequent to the date of our most recent evaluation,including any corrective actions with regard to significantdeficiencies and material weaknesses. |
|   |                                                                                                                                                                                                                                                                                                                                                                                  |

| Date: March 24,2003 | By: /s/ Raymond L.Carr                        |
|---------------------|-----------------------------------------------|
|                     | Raymond L. Carr                               |
|                     | Chief Financial Officer– Vice President |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| REPORT OF INDEPENDENTAUDITORS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| The Board of Directors andStockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| Kentucky Investors,Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| We have audited theaccompanying consolidated balance sheets of Kentucky Investors,Inc. as of December 31, 2002 and 2001, and the related consolidatedstatements of income, shareholders' equity, and cash flows for eachof the three years in the period ended December 31, 2002. Ouraudits also included the financial statement schedules listed inthe Index at Item 15(a). These financial statements and schedulesare the responsibility of the Company's management. Ourresponsibility is to express an opinion on these financialstatements and schedules based on our audits.                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| We conducted our audits inaccordance with auditing standards generally accepted in the UnitedStates. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide areasonable basis for our opinion. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| In our opinion, thefinancial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of KentuckyInvestors, Inc. at December 31, 2002 and 2001, and the consolidatedresults of their operations and their cash flows for each of thethree years in the period ended December 31, 2002, in conformitywith accounting principles generally accepted in the United States.Also, in our opinion, the related financial statement schedules,when considered in relation to the basic financial statements takenas a whole, present fairly in all material respects the informationset forth therein.     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| As discussed in Note A tothe consolidated financial statements, in 2002 the Company changedits method of accounting for goodwill.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | /s/ Ernst &Young |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |
| Cincinnati,Ohio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |
| March 7, 2003                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| EXHIBIT 23                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| CONSENT OF INDEPENDENTAUDITORS                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| We consent to theincorporation by reference in the Registration Statement (Form S-8NO. 33-46722-01) pertaining to the Kentucky Investors, Inc. andAffiliated Companies 401(k) Savings Plan of our report dated March7, 2003, with respect to the consolidated financial statements ofKentucky Investors, Inc. incorporated by reference in its AnnualReport (Form 10-K) for the year ended December 31, 2002, and therelated financial statement schedules included therein. |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | /s/Ernst & YoungLLP |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |
| Cincinnati,Ohio                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |
| March 24, 2003

                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|                                                            |
|-----------------------------------------------------------------|
| KENTUCKYINVESTORS, INC.                                         |
| SCHEDULE I-- SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENT IN |
| RELATEDPARTIES                                                  |
| DECEMBER31, 2002                                                |
|                                                            |
|                                                                 |  |  |  |
|                                                                 |  |  | AMOUNT |
|                                                                 |  |  | SHOWNIN |
|                                                                 |  |  | BALANCE |
| TYPE OFINVESTMENT                                               | COST | VALUE | SHEET |
|                                                            |  |  |  |
|  Fixedmaturities:                                          |  |  |  |
|                                                            |  |  |  |
|  Bonds:                                                    |  |  |  |
|   United Statesand                                    |  |  |  |
|   governmentagencies and                              |  |  |  |
|   authorities                                         | $  47,498,780  | $  52,174,915  | $  52,174,915  |
|                                                            |  |  |  |
|   States andpolitical                                 |  |  |  |
|   subdivisions                                        | 12,102,887  | 13,040,130  | 13,040,130  |
|                                                            |  |  |  |
|   Foreign                                             | 17,408,784  | 19,901,323  | 19,901,323  |
|                                                            |  |  |  |
|   Mortgage-backed securities                          | 43,954,332  | 46,725,833  | 46,725,833  |
|                                                            |  |  |  |
|   Corporate                                           | 133,068,087  | 146,740,422  | 146,740,422  |
|                                                            |  |  |  |
|   Redeemablepreferred stock                           |          357,094  |          362,020  |          362,020  |
|                                                            |  |  |  |
| Total fixedmaturities                                           | $254,389,964  | $278,944,643  | $278,944,643  |
|                                                            |  |  |  |
| Equitysecurities:                                               |  |  |  |
|                                                            |  |  |  |
|  CommonStocks:                                             |  |  |  |
|   Banks, trust& insurance                         |  |  |  |
|   companies                                           | $       490,761  | $    1,137,213  | $    1,137,213  |
|                                                            |  |  |  |
|   Industrial,miscellaneous and                        |  |  |  |
|   allother                                            | 1,041,156  | 1,048,019  | 1,048,019  |
|                                                            |  |  |  |
|   Nonredeemablepreferred                              |  |  |  |
|   stocks                                              |       4,036,690  |        4,033,010  |       4,033,010  |
|                                                            |  |  |  |
| Total equitysecurities                                          | $    5,568,607  | $    6,218,242  | $   6,218,242  |
|                                                            |  |  |  |
| Mortgage loans on realestate                                    | 24,020,718  | XXXXXXXXXX | 24,020,718  |
|                                                            |  |  |  |
| Policy loans                                                    | 8,128,488  | XXXXXXXXXX | 8,128,488  |
|                                                            |  |  |  |
| Other long terminvestments                                      | 769,847  | XXXXXXXXXX | 769,847  |
|                                                            |  |  |  |
| Short-terminvestments                                           |          920,000  | XXXXXXXXXX |          920,000  |
|                                                            |  |  |  |
| Totalinvestments                                                | $293,797,624  | XXXXXXXXXX | $319,001,938  |
|                                                            |  |  |  |
|                                                            |

|                                                        |
|-------------------------------------------------------------|
| SCHEDULE II- CONDENSED FINANCIAL INFORMATION OF REGISTRANT  |
| KENTUCKYINVESTORS, INC.                                     |
| CONDENSEDBALANCE SHEET                                      |
| FOR THEYEARS ENDED DECEMBER 31, 2002 and 2001               |
|                                                        |
|                                                        |
|                                                             | 2002 | 2001 |  |
|                                                        |  |  |  |
| Assets:                                                     |  |  |  |
|  Cash and CashEquivalents                              | $       62,820  | $     192,603  |  |
|  Investment inSubsidiary                               | 57,527,599  | 43,129,135  |  |
|  OtherAssets                                           | 555,590  | 472,528  |  |
|  Other Long TermInvestments                            |     2,194,233  |     1,811,619  |  |
|                                                             |  |  |  |
|   TotalAssets                                     | $60,340,242  | $45,605,885  |  |
|                                                        |  |  |  |
|                                                        |  |  |  |
| Liabilities:                                                |  |  |  |
|  NotesPayable                                          | $  2,386,638  | $  2,244,074  |  |
|  Notes Payable toAffiliate                             | 4,000,000  | -0-  |  |
|  OtherLiabilities                                      | 334,216  | 420,304  |  |
|  TaxesPayable                                          | (8,362) | 13,854  |  |
|                                                        |  |  |  |
| Stockholders'Equity:                                        |  |  |  |
|  CommonStock                                           | 1,143,390  | 1,132,960  |  |
|  Paid inSurplus                                        | 8,495,833  | 8,413,332  |  |
|  UnrealizedAppreciation (depreciation)                 |  |  |  |
|  ofavailable-for-sale securities of                    |  |  |  |
|  subsidiary                                            | 15,432,098  | 5,737,351  |  |
|  RetainedEarnings                                      |   28,556,429  |   27,644,010  |  |
|                                                        |  |  |  |
|                                                        |  |  |  |
| Total Stockholders'Equity                                   | $53,627,750  | $42,927,653  |  |
|                                                        |  |  |  |
|                                                        |  |  |  |
|   TotalLiabilities and Stockholders’ Equity | $60,340,242  | $ 45,605,885 |  |

|                                                          |
|---------------------------------------------------------------|
| SCHEDULE II- CONDENSED FINANCIAL INFORMATION OF REGISTRANT    |
| (CONTINUED)                                                   |
| KENTUCKYINVESTORS, INC.                                       |
| CONDENSEDSTATEMENTS OF INCOME                                 |
| FOR THEYEARS ENDED DECEMBER 31, 2002, 2001 and 2000           |
|                                                          |  |  |  |
|                                                               | 2002 | 2001 | 2000 |
| Income                                                        |  |  |  |
|  From printingservices to:                               |  |  |  |
|   Affiliatedcompanies                          | $   299,180  | $   302,612  | $  347,919  |
|   Others                                            | 194,437  | 207,152  | 171,874  |
|                                                          |  |  |  |
|   Realized Gain(Loss) on                            |  |  |  |
|     Investments                           | -0-  | 927  | (3,800) |
|   Other servicesto subsidiaries                     | 228,525  | 276,143  | 266,489  |
|   Dividends fromsubsidiaries                        | 659,930  | 566,819  | 566,819  |
|   Interest andother income                          |     341,050  |     284,618  |     349,391  |
|                                                          |  |  |  |
|                                                               | $1,723,122  | $1,638,271  | $1,698,692  |
|                                                          |  |  |  |
| OperatingExpenses                                             | $   780,584  | $   698,892  | $   759,318  |
|                                                          |  |  |  |
|   Operatingincome before                            |  |  |  |
|     equity inundistributed                |  |  |  |
|     earnings ofsubsidiary                 | $   942,538  | $   939,379  | $   939,374  |
|                                                          |  |  |  |
|   Equity inundistributed                            |  |  |  |
|       earnings ofsubsidiary for |  |  |  |
|       theyear                   | $   413,255  | $2,963,046  | $   687,130  |
|                                                          |  |  |  |
|   Income beforeprovision for                        |  |  |  |
|     income taxes                          | $1,355,793  | $3,902,425  | $1,626,504  |
|                                                          |  |  |  |
|   Provision forIncome Taxes                         |  |  |  |
|     Current                               | $   107,984  | $   118,084  | $   120,137  |
|     Deferred                              |        (9,000) |              -0-  |               -0-  |
|                                                          |  |  |  |
|                                                               | $     98,984  | $   118,084  | $   120,137  |
|                                                          |  |  |  |
| Net Income                                                    | $1,256,809  | $3,784,341  | $1,506,367  |
|                                                          |  |  |  |
| Earnings Per Share,Basic                                      | $         1.11  | $         3.33  | $         1.31  |
| Earnings Per Share,Diluted                                    | $         1.10  | $         3.33  | $         1.31  |
|                                                          |
|                                                          |
| SCHEDULE II- CONDENSED FINANCIAL INFORMATION OF REGISTRANT    |
| (CONTINUED)                                                   |
| KENTUCKYINVESTORS, INC.                                       |
| CONDENSEDSTATEMENTS OF CASH FLOWS                             |
| FOR THEYEARS ENDED DECEMBER 31, 2002, 2001 and 2000           |
|                                                          |
|                                                               | 2002 | 2001 | 2000 |
|                                                          |  |  |  |
| NET CASH PROVIDEDBY                                           |  |  |  |
|   ACTIVITIES                                        | $     652,184  | $     842,947  | $     763,553  |
|                                                          |  |  |  |
| FINANCINGACTIVITIES                                           |  |  |  |
|   Decrease inNotes Payable                          | $             -0-  | $               -0- | $   (293,277) |
|   Dividends                                         | (538,160) | (544,023) | (547,081) |
|   Acquisition ofTreasury Stock                      | (3,757) | (426,209) | (58,518) |
|   Acquisition ofAffiliated Stock                    | (4,000,000) | -0- | -0- |
|   Proceeds fromNotes Payable                        | 4,142,564  | 244,074  | 2,000,000  |
|   Notesreceivable                                   |     (382,614) |             (954) |   (1,810,665) |
|                                                          |  |  |  |
| CASH USED INFINANCING                                         |  |  |  |
| ACTIVITIES                                                    | $   (781,967) | $   (727,112) | $   (709,541) |
| INCREASE (DECREASE)IN                                         |  |  |  |
| CASH                                                          | $   (129,783) | $     115,835  | $       54,012  |
|                                                          |  |  |  |
| Cash and Cash Equivalentsat                                   |  |  |  |
|  beginning ofyear                                        | $    192,603  | $       76,768  | $       22,756  |
|                                                          |  |  |  |
| CASH AND CASH                                                 |  |  |  |
| EQUIVALENTS AT ENDOF                                          |  |  |  |
| YEAR                                                          | $      62,820  | $     192,603  | $       76,768  |
|                                                          |

|                                |
|-------------------------------------|
| KENTUCKYINVESTORS, INC.             |
| SCHEDULEIII                         |
| SUPPLEMENTARY INSURANCE INFORMATION |
| FOR THEYEAR ENDED DECEMBER 31, 2002 |
|                                |
| SEGMENT                             |
|                                |  |  |  |  |  |
|                                     |  |  | Credit |  |  |
|                                     |  |  | Insurance |  |  |
|                                     |  | Traditional | Productsand |  |  |
|                                     | PreneedBurial | Universal | Admn. | Corporate |  |
|                                     | Products | LifeProducts | Services | andOther | Total |
|                                |  |  |  |  |  |
| Deferred                            |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| acquisi-                            |  |  |  |  |  |
| tion                                |  |  |  |  |  |
| costs                               | $ 18,620,006  | $  5,641,939  | $       3,796  | $      6,201  | $ 24,271,942  |
|                                |  |  |  |  |  |
| Future                              |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| benefits,                           |  |  |  |  |  |
| losses,                             |  |  |  |  |  |
| claims &                        |  |  |  |  |  |
| loss                                |  |  |  |  |  |
| expenses                            | 246,389,692  | 68,815,243  | 2,719,260  | 7,412,103  | 325,336,298  |
|                                |  |  |  |  |  |
| Un-                                 |  |  |  |  |  |
| earned                              |  |  |  |  |  |
| premium                             | -0-  | 2,591  | 18,948,820  | 17,525  | 18,968,936  |
|                                |  |  |  |  |  |
| Other                               |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| claims &                        |  |  |  |  |  |
| benefits                            |  |  |  |  |  |
| payable                             | 1,242,937  | 2,094,065  | 451,493  | 219,245  | 4,007,740  |
|                                |  |  |  |  |  |
| Premium                             |  |  |  |  |  |
| revenue                             | 43,651,615  | 8,874,011  | (68,921) | 607,473  | 53,064,178  |
|                                |  |  |  |  |  |
| Net                                 |  |  |  |  |  |
| invest-                             |  |  |  |  |  |
| ment                                |  |  |  |  |  |
| income                              |  |  |  |  |  |
| (1) and                             |  |  |  |  |  |
| (3)                                 | 12,755,458  | 4,581,957  | 484  | 2,011,601  | 19,349,500  |
|                                |  |  |  |  |  |
| Benefit                             |  |  |  |  |  |
| claims                              |  |  |  |  |  |
| losses &                        |  |  |  |  |  |
| settle-                             |  |  |  |  |  |
| ment                                |  |  |  |  |  |
| expenses                            | 26,094,505  | 7,794,479  | (2,890) | 175,522  | 34,061,616  |
|                                |  |  |  |  |  |
| Amorti-                             |  |  |  |  |  |
| zation of                           |  |  |  |  |  |
| deferred                            |  |  |  |  |  |
| acquisi-                            |  |  |  |  |  |
| tion                                |  |  |  |  |  |
| costs                               | 6,579,050  | 1,474,666  | 2,493  | (3,278) | 8,052,931  |
|                                |  |  |  |  |  |
| Other                               |  |  |  |  |  |
| operat-                             |  |  |  |  |  |
| ing                                 |  |  |  |  |  |
| expenses                            |  |  |  |  |  |
| (2)                                 | 5,050,900  | 1,704,651  | 225,743  | 540,969  | 7,522,263  |

(1) Net investment incomeis allocated in proportion to policy liabilities and stockholders'equity for the subsidiary and to the corporate segment for theparent.

(2) Other operatingexpenses are assigned directly to the applicable segment for thesubsidiary and to the corporate segment for the parent.

(3) Includes realizedinvestment gains or losses.

|                                |
|-------------------------------------|
| KENTUCKYINVESTORS, INC.             |
| SCHEDULEIII                         |
| SUPPLEMENTARY INSURANCE INFORMATION |
| FOR THEYEAR ENDED DECEMBER 31, 2001 |
|                                |
| SEGMENT                             |
|                                |   |   |   |   |   |
|                                |   |   | Credit |   |   |
|                                |   | Traditional | Insurance |   |   |
|                                |   | and | Productsand |   |   |
|                                | PreneedBurial | Universal | Admn. | Corporate |   |
|                                | Products | LifeProducts | Services | andOther | Total |
|                                |  |  |  |  |  |
| Deferred                            |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| acquisi-                            |  |  |  |  |  |
| tion                                |  |  |  |  |  |
| costs                               | $ 18,592,147  | $  6,328,722  | $       6,289  | $      2,923  | $ 24,930,081  |
|                                |  |  |  |  |  |
| Future                              |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| benefits,                           |  |  |  |  |  |
| losses,                             |  |  |  |  |  |
| claims &                        |  |  |  |  |  |
| loss                                |  |  |  |  |  |
| expenses                            | 229,951,650  | 67,225,464  | 2,792,320  | 6,449,868  | 306,419,302  |
|                                |  |  |  |  |  |
| Un-                                 |  |  |  |  |  |
| earned                              |  |  |  |  |  |
| premium                             | -0-  | 2,866  | 21,532,831  | 15,106  | 21,550,803  |
|                                |  |  |  |  |  |
| Other                               |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| claims &                        |  |  |  |  |  |
| benefits                            |  |  |  |  |  |
| payable                             | 1,311,256  | 2,088,313  | 1,033,038  | 216,200  | 4,648,807  |
|                                |  |  |  |  |  |
| Premium                             |  |  |  |  |  |
| revenue                             | 40,661,736  | 8,763,502  | 9,102  | 396,209  | 49,830,549  |
|                                |  |  |  |  |  |
| Net                                 |  |  |  |  |  |
| invest-                             |  |  |  |  |  |
| ment                                |  |  |  |  |  |
| income                              |  |  |  |  |  |
| (1) and                             |  |  |  |  |  |
| (3)                                 | 12,681,222  | 4,617,497  | 1,116  | 2,126,589  | 19,426,424  |
|                                |  |  |  |  |  |
| Benefit                             |  |  |  |  |  |
| claims                              |  |  |  |  |  |
| losses &                        |  |  |  |  |  |
| settle-                             |  |  |  |  |  |
| ment                                |  |  |  |  |  |
| expenses                            | 23,702,419  | 7,166,291  | 22,205  | 778,184  | 31,669,099  |
|                                |  |  |  |  |  |
| Amorti-                             |  |  |  |  |  |
| zation of                           |  |  |  |  |  |
| deferred                            |  |  |  |  |  |
| acquisi-                            |  |  |  |  |  |
| tion                                |  |  |  |  |  |
| costs                               | 5,600,439  | 1,785,819  | 3,663  | 1,774  | 7,391,695  |
|                                |  |  |  |  |  |
| Other                               |  |  |  |  |  |
| operat-                             |  |  |  |  |  |
| ing                                 |  |  |  |  |  |
| expenses                            |  |  |  |  |  |
| (2)                                 | 4,833,931  | 1,658,434  | 307,534  | 555,295  | 7,355,194  |

(1) Net investment incomeis allocated in proportion to policy liabilities and stockholders'equity for the subsidiary and to the corporate segment for theparent.

(2) Other operatingexpenses are assigned directly to the applicable segment for thesubsidiary and to the corporate segment for the parent.

(3) Includes realizedinvestment gains or losses.

|                                     |
|-------------------------------------|
| KENTUCKYINVESTORS, INC.             |
| SCHEDULEIII                         |
| SUPPLEMENTARY INSURANCE INFORMATION |
| (CONTINUED)                         |
| FOR THEYEAR ENDED DECEMBER 31, 2000 |
|                                |
| SEGMENT                             |
|                                |
|                                     |  |  | Credit |  |  |
|                                     |  | Traditional | Insurance |  |  |
|                                     |  | and | Productsand |  |  |
|                                     | PreneedBurial | Universal | Admn. | Corporate |  |
|                                     | Products | LifeProducts | Services | andOther | Total |
|                                |  |  |  |  |  |
| Deferred                            |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| acquisi-                            |  |  |  |  |  |
| tion                                |  |  |  |  |  |
| costs                               | $ 17,140,527  | $  6,807,465  | $       9,952  | $      4,697  | $23,962,641  |
|                                |  |  |  |  |  |
| Future                              |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| benefits,                           |  |  |  |  |  |
| losses,                             |  |  |  |  |  |
| claims &                        |  |  |  |  |  |
| loss                                |  |  |  |  |  |
| expenses                            | 214,848,917  | 66,266,553  | 2,614,249  | 6,366,566  | 290,096,285  |
|                                |  |  |  |  |  |
| Un-                                 |  |  |  |  |  |
| earned                              |  |  |  |  |  |
| premium                             | -0-  | 3,732  | 23,782,200  | 30,239  | 23,816,171  |
|                                |  |  |  |  |  |
| Other                               |  |  |  |  |  |
| policy                              |  |  |  |  |  |
| claims &                        |  |  |  |  |  |
| benefits                            |  |  |  |  |  |
| payable                             | 1,300,485  | 1,948,740  | 1,016,614  | 190,447  | 4,456,286  |
|                                |  |  |  |  |  |
| Premium                             |  |  |  |  |  |
| revenue                             | 39,116,730  | 8,476,674  | 31,251 | 314,744  | 47,939,399  |
|                                |  |  |  |  |  |
| Net                                 |  |  |  |  |  |
| inves-                              |  |  |  |  |  |
| tment                               |  |  |  |  |  |
| income                              |  |  |  |  |  |
| (1) and                             |  |  |  |  |  |
| (3)                                 | 11,319,414  | 4,538,707  | 2,788  | 557,576  | 16,418,485  |
|                                |  |  |  |  |  |
| Benefit                             |  |  |  |  |  |
| claims,                             |  |  |  |  |  |
| losses &                        |  |  |  |  |  |
| settle-                             |  |  |  |  |  |
| ment                                |  |  |  |  |  |
| expenses                            | 20,573,913  | 7,109,896  | 15,732  | 392,723  | 28,092,264  |
|                                |  |  |  |  |  |
| Amorti-                             |  |  |  |  |  |
| zation of                           |  |  |  |  |  |
| deferred                            |  |  |  |  |  |
| acquisi-                            |  |  |  |  |  |
| tion costs                          | 5,444,515  | 1,754,820  | 11,111  | 2,612  | 7,213,058  |
|                                |  |  |  |  |  |
| Other                               |  |  |  |  |  |
| operat-                             |  |  |  |  |  |
| ing                                 |  |  |  |  |  |
| expenses                            |  |  |  |  |  |
| (2)                                 | 4,871,900  | 1,781,325  | 316,093  | 508,294  | 7,477,612  |

(1) Net investment incomeis allocated in proportion to policy liabilities and stockholders'equity for the subsidiary and to the corporate segment for theparent.

(2) Other operatingexpenses are assigned directly to the applicable segment for thesubsidiary and to the corporate segment for the parent.

(3) Includes realizedinvestment gains or losses.

| KENTUCKYINVESTORS, INC.             |
|-------------------------------------|
| SCHEDULE IV- REINSURANCE            |
| FOR THEYEAR ENDED DECEMBER 31, 2002 |

|                |                      |                   | Premium,         |                   |
|----------------|----------------------|-------------------|------------------|-------------------|
|                |                      | Premium, Life     | Accidentand      |                   |
|                | LifeInsurance        | Insuranceand      | Health           | TOTAL             |
|                | inForce              | Annuities         | Insurance        | PREMIUMS          |
|           |                      |                   |                  |                   |
| Gross Amount   | $1,860,666,000  | $61,422,612  | $4,275,455  | $65,698,067  |
|           |                      |                   |                  |                   |
| Ceded to other |                      |                   |                  |                   |
| Companies      | 736,567,000     | 11,363,521   | 4,275,558   | 15,639,079   |
|           |                      |                   |                  |                   |
| Assumed from   |                      |                   |                  |                   |
| other          |                      |                   |                  |                   |
| Companies      | 1,441,546,000   | 2,995,267    | 9,923       | 3,005,190    |
|           |                      |                   |                  |                   |
| Net Amount     | 2,565,645,000   | 53,054,358   | 9,820       | 53,064,178   |
|           |                      |                   |                  |                   |
| Percentage of  |                      |                   |                  |                   |
| Amount         |                      |                   |                  |                   |
| Assumed to Net | 56%             | 6%           | 101%        | 6%           |

| KENTUCKYINVESTORS, INC.             |
|-------------------------------------|
| SCHEDULE IV- REINSURANCE            |
| FOR THEYEAR ENDED DECEMBER 31, 2001 |

|                |                      |                   | Premium,         |                   |
|----------------|----------------------|-------------------|------------------|-------------------|
|                |                      | Premium, Life     | Accidentand      |                   |
|                | LifeInsurance        | Insuranceand      | Health           | TOTAL             |
|                | inForce              | Annuities         | Insurance        | PREMIUMS          |
|           |                      |                   |                  |                   |
| Gross Amount   | $1,898,615,000  | $59,817,687  | $4,889,191  | $64,706,878  |
|           |                      |                   |                  |                   |
| Ceded to other |                      |                   |                  |                   |
| Companies      | 783,567,000     | 12,512,940   | 4,889,658   | 17,402,598   |
|           |                      |                   |                  |                   |
| Assumed from   |                      |                   |                  |                   |
| other          |                      |                   |                  |                   |
| Companies      | 1,389,141,000   | 2,516,561    | 9,708       | 2,526,269    |
|           |                      |                   |                  |                   |
| Net Amount     | 2,504,189,000   | 49,821,308   | 9,241       | 49,830,549   |
|           |                      |                   |                  |                   |
| Percentage of  |                      |                   |                  |                   |
| Amount         |                      |                   |                  |                   |
| Assumed to Net | 55%             | 5%           | 105%        | 5%           |

| KENTUCKYINVESTORS, INC.             |
|-------------------------------------|
| SCHEDULE IV- REINSURANCE            |
| (CONTINUED)                         |
| FOR THEYEAR ENDED DECEMBER 31, 2000 |

|                |                      |                   | Premium          |                   |
|----------------|----------------------|-------------------|------------------|-------------------|
|                |                      | Premium,Life      | Accidentand      |                   |
|                | LifeInsurance        | Insuranceand      | Health           | TOTAL             |
|                | inForce              | Annuities         | Insurance        | PREMIUMS          |
|           |                      |                   |                  |                   |
| Gross Amount   | $1,913,771,000  | $59,299,373  | $5,637,282  | $64,936,655  |
|           |                      |                   |                  |                   |
| Ceded to other |                      |                   |                  |                   |
| Companies      | 834,725,000     | 13,729,123   | 5,642,818   | 19,371,941   |
|           |                      |                   |                  |                   |
| Assumed from   |                      |                   |                  |                   |
| other          |                      |                   |                  |                   |
| Companies      | 1,003,059,000   | 2,368,686    | 5,999       | 2,374,685    |
|           |                      |                   |                  |                   |
| Net Amount     | 2,082,105,000   | 47,938,936   | 463         | 47,939,399   |
|           |                      |                   |                  |                   |
| Percentage of  |                      |                   |                  |                   |
| Amount         |                      |                   |                  |                   |
| Assumed to Net | 48%             | 5%           | 1296%       | 5%           |