UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington,
D.C. 20549



____________________



FORM 10-Q



____________________



QUARTERLY
REPORT

Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934



For the
quarterly period ended March 31, 2009



____________________



0-1999

(Commission file
number)



KENTUCKY INVESTORS, INC.

(Exact Name of
Registrant as Specified in its Charter)



KENTUCKY
			
			61-6030333(State
			or other jurisdiction of incorporation or organization)
			
			(I.R.S.
			Employer Identification Number)




200 Capital Avenue, P.O. Box 717

Frankfort, Kentucky 40602

(Address of principal executive offices)



(502) 223-2361

(Registrant's telephone number, including area
code)



____________________



Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.



Yes [X]   No [  ]





Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required
to submit and post such files).  Yes [   ]   No [   ]



Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
"large accelerated filer," "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act.



Large accelerated
filer    
[  ]                                                                                       
Accelerated filer   [  ]

Non-accelerated
filer      [  ] (Do not check if a smaller reporting company)   Smaller
reporting company  [X]



Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).



Yes [  ]   No [X]



Securities registered pursuant to Section 12(g)
of the Act:



Common Capital Stock par value $1.00 per share

(Title of Class)



Number of outstanding shares as of March 31,
2009 -- 1,120,686.256



---





CONTENTS





PART I -- FINANCIAL INFORMATIONPageITEM 1.
			Condensed Consolidated Financial Statements
			3ITEM 2.
			Management's Discussion and Analysis of
			Financial Condition and Results of Operations
			17ITEM 4T.
			Controls and Procedures
			24PART II -- OTHER INFORMATIONITEM 1.
			Legal
			Proceedings
			25ITEM 2.
			Unregistered Sales of Equity Securities and Use of Proceeds
			25ITEM 3.
			Defaults
			Upon Senior Securities
			25ITEM 4.
			Submission of Matters to a Vote of Security Holders
			25ITEM 5.
			Other
			Information
			25ITEM 6.
			Exhibits
			25




SIGNATURES
			
			26EXHIBIT 31.1
			
			27EXHIBIT 31.2
			
			29EXHIBIT 32
			
			31




---





PART I -- FINANCIAL INFORMATION




ITEM
1.  Condensed Consolidated Financial Statements



KENTUCKY INVESTORS, INC.

Condensed Consolidated Balance Sheets (Unaudited)



March 31,
			
			December 31,ASSETS
			
			2009
			
			2008Investments:Securities available-for-sale, at fair
			value:Fixed maturities (amortized cost:
			$283,911,073 and $282,335,626)
			$
			283,876,052
			$
			285,430,376Equity securities (cost: $4,047,728 and
			$4,040,062)
			
			3,600,565
			
			3,938,177Mortgage loans on real estate
			
			22,629,087
			
			22,512,438Policy loans
			
			6,909,770
			
			6,971,949Other long-term investments
			
			1,107,306
			
			1,021,741Short-term investments
			
			-
			
			25,000Total investments
			$
			318,122,780
			$
			319,899,681Cash and cash equivalents
			
			1,755,729
			
			2,819,257Accrued investment income
			
			3,563,620
			
			4,338,974Due premiums
			
			3,570,021
			
			3,618,390Deferred acquisition costs
			
			20,050,667
			
			19,882,671Present value of future profits
			
			25,937
			
			30,260Leased property under capital leases
			
			244,632
			
			283,695Property and equipment
			
			1,660,154
			
			1,702,331Cash value of company-owned life insurance
			
			7,833,289
			
			7,764,223Other assets
			
			290,560
			
			338,182Amounts recoverable from reinsurers
			
			48,468,002
			
			49,523,594$
			405,585,391
			$
			410,201,258LIABILITIES AND STOCKHOLDERS' EQUITYLIABILITIESPolicy liabilities:Benefit reserves
			$
			341,041,302
			$
			342,065,366Unearned premium reserves
			
			11,265,421
			
			12,154,938Policy claims
			
			1,499,042
			
			1,504,744Liability for deposit-type contracts
			
			2,761,779
			
			2,733,214Reserves for dividends and endowments and
			other
			
			543,613
			
			524,797Total policy liabilities
			$
			357,111,157
			$
			358,983,059Deferred federal income tax liability
			
			121,848
			
			1,292,352Obligations under capital leases
			
			245,689
			
			284,307Notes payable
			
			3,711,788
			
			3,701,506Accrued pension liability
			
			5,558,058
			
			5,641,941Other liabilities
			
			2,324,682
			
			1,990,538Total liabilities
			$
			369,073,222
			$
			371,893,703STOCKHOLDERS' EQUITYCommon stock (shares issued:  1,120,686 and
			1,120,686)
			$
			1,120,686
			$
			1,120,686Paid-in surplus
			
			8,705,492
			
			8,705,492Accumulated other comprehensive loss
			
			(4,583,387)
			
			(2,542,413)Retained earnings
			
			31,269,378
			
			31,023,790Total stockholders' equity
			$
			36,512,169
			$
			38,307,555$
			405,585,391
			$
			410,201,258




See
			notes to consolidated financial statements.



3



---



KENTUCKY INVESTORS, INC.

Condensed
Consolidated Income Statements (Unaudited)



Three Months Ended March 31,2009
			
			
			2008REVENUEPremiums and other considerations
			
			$
			9,913,269
			
			$
			10,775,890Premiums ceded
			
			
			(2,010,968)
			
			
			(2,737,533)Net premiums earned
			
			
			7,902,301
			
			
			8,038,357Investment income, net of expenses
			
			
			4,440,161
			
			
			4,440,439Realized gains (losses) on investments, net
			
			
			69,606
			
			
			(1,471)Other income
			
			
			216,765
			
			
			272,778Total revenue
			
			$
			12,628,833
			
			$
			12,750,103BENEFITS AND EXPENSESDeath and other benefits
			
			$
			8,723,019
			
			$
			8,756,468Guaranteed annual endowments
			
			
			132,423
			
			
			139,676Dividends to policyholders
			
			
			116,937
			
			
			130,002Increase in benefit reserves and unearned
			premiums
			
			
			394,569
			
			
			433,560Acquisition costs deferred
			
			
			(1,215,434)
			
			
			(1,149,876)Amortization of deferred acquisition costs
			
			
			1,225,311
			
			
			1,308,471Commissions
			
			
			515,139
			
			
			525,582Other insurance expenses
			
			
			2,771,707
			
			
			2,579,742Total benefits and expenses
			
			$
			12,663,671
			
			$
			12,723,625INCOME (LOSS) BEFORE FEDERAL INCOME TAXES
			
			$
			(34,838)
			
			$
			26,478PROVISION (BENEFIT) FOR FEDERAL INCOME TAXESCurrent
			
			$
			184,341
			
			$
			46,835Deferred
			
			
			(192,610)
			
			
			(40,551)$
			(8,269)
			
			$
			6,284NET INCOME (LOSS)
			
			$
			(26,569)
			
			$
			20,194BASIC AND DILUTED NET EARNINGS (LOSS) PER
			SHARE
			
			$
			(0.02)
			
			$
			0.02DIVIDENDS PER SHARE
			
			$
			-
			
			$
			0.38




See notes to consolidated financial statements.



4



---



KENTUCKY INVESTORS, INC.

Condensed
Consolidated Statements of Stockholders' Equity (Unaudited)



Common
			Stock
			
			Paid-in
			Surplus
			
			Accumulated
			Other
			Comprehensive
			Income (Loss)
			
			Retained
			Earnings
			
			Total
			Stockholders'
			EquityBALANCE, JANUARY 1, 2008
			$
			1,117,851
			$
			8,650,907
			$
			1,902,238
			$
			32,886,104
			$
			44,557,100Comprehensive income:Net
			income
			
			-
			
			-
			
			-
			
			20,194
			
			20,194Change in net unrealized appreciationon
			available-for-sale securities
			
			-
			
			-
			
			2,101,869
			
			-
			
			2,101,869Change in unrealized pension benefits
			
			-
			
			-
			
			20,227
			
			-
			
			20,227Change in fair value of hedging instrument
			
			-
			
			-
			
			417
			
			-
			
			417Total comprehensive income
			
			
			
			
			
			
			
			
			
			2,142,707Cash
			dividends
			
			-
			
			-
			
			-
			
			(422,959)
			
			(422,959)Issuances (redemptions) of common stock, net
			
			(4,800)
			
			-
			
			-
			
			(130,800)
			
			(135,600)BALANCE, MARCH 31, 2008
			$
			1,113,051
			$
			8,650,907
			$
			4,024,751
			$
			32,352,539
			$
			46,141,248BALANCE, JANUARY 1, 2009
			$
			1,120,686
			$
			8,705,492
			$
			(2,542,413)
			$
			31,023,790
			$
			38,307,555Cumulative effect of a change inaccounting principle
			
			-
			
			-
			
			(272,157)
			
			272,157
			
			-Comprehensive loss:Net
			loss
			
			-
			
			-
			
			-
			
			(26,569)
			
			(26,569)Change in net unrealized depreciationon
			available-for-sale securities
			
			-
			
			-
			
			(1,862,267)
			
			-
			
			(1,862,267)Change in unrealized pension benefits
			
			-
			
			-
			
			92,267
			
			-
			
			92,267Change in fair value of hedging instrument
			
			-
			
			-
			
			1,183
			
			-
			
			1,183Total comprehensive loss
			
			
			
			
			
			
			
			
			
			(1,795,386)BALANCE, MARCH 31, 2009
			$
			1,120,686
			$
			8,705,492
			$
			(4,583,387)
			$
			31,269,378
			$
			36,512,169




See notes to consolidated financial statements.



5



---





KENTUCKY INVESTORS, INC.

Condensed
Consolidated Statements of Cash Flows (Unaudited)



Three Months Ended March 31,2009
			
			
			2008NET CASH PROVIDED BY OPERATING ACTIVITIES
			
			$
			945,138
			
			$
			1,326,580INVESTING ACTIVITIESSecurities available-for-sale:Purchases
			
			$
			(16,207,686)
			
			$
			(6,021,224)Sales and maturities
			
			
			15,077,571
			
			
			8,030,055Other investments:Cost of acquisitions
			
			
			(574,516)
			
			
			(332,543)Sales and maturities
			
			
			459,481
			
			
			461,379Net additions to property and equipment
			
			
			(7,989)
			
			
			(113,866)NET CASH PROVIDED BY (USED IN) INVESTING
			ACTIVITIES
			
			$
			(1,253,139)
			
			$
			2,023,801FINANCING ACTIVITIESReceipts from universal life policies
			credited topolicyholder account balances
			
			$
			1,728,823
			
			$
			1,647,128Return of policyholder account balances on
			universal life policies
			
			
			(2,494,632)
			
			
			(2,440,012)Payments on notes payable
			
			
			(878,029)
			
			
			(688,784)Proceeds from notes payable
			
			
			888,311
			
			
			1,009,860Issuances (repurchases) of common stock
			
			
			-
			
			
			(135,600)NET CASH USED IN FINANCING ACTIVITIES
			
			$
			(755,527)
			
			$
			(607,408)INCREASE (DECREASE) IN CASH AND CASH
			EQUIVALENTS
			
			$
			(1,063,528)
			
			$
			2,742,973Cash and cash equivalents at beginning of
			period
			
			
			2,819,257
			
			
			1,238,194CASH AND CASH EQUIVALENTS AT END OF PERIOD
			
			$
			1,755,729
			
			$
			3,981,167




See notes to consolidated financial statements.



6



---



KENTUCKY INVESTORS, INC.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2009

(Unaudited)



NOTE A -
Nature of Operations

Kentucky Investors, Inc. is the holding company of Investors Heritage Life
Insurance Company; Investors Heritage Printing, Inc., a printing company;
Investors Heritage Financial Services Group, Inc., an insurance marketing
company; is the sole member of At Need Funding, LLC, a limited liability company
that provides advance funding of funerals in exchange for the irrevocable
assignment of life insurance policies from other nonaffiliated companies; and is
the sole member of Heritage Funding, LLC, a limited liability company that
invests in various business ventures. These entities are collectively
hereinafter referred to as the "Company". Approximately 99% of Kentucky
Investors' consolidated revenue is generated by Investors Heritage Life.



Our operations involve the sale and administration of various insurance and
annuity products, including, but not limited to, participating and
non-participating whole life, limited pay life, universal life, annuity
contracts, credit life, credit accident and health and group insurance policies.
The principal markets for the Company's products are in the Commonwealths of
Kentucky and Virginia, and the States of North Carolina, South Carolina, Ohio,
Indiana, Florida, Tennessee, Georgia, and Michigan.



NOTE B -
Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2009 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2009. For further information, refer to the consolidated
financial statements and footnotes thereto for the year ended December 31, 2008,
as included in our Annual Report on Form 10-K.



The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.



NOTE C --
New Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board ("FASB") issued FASB
Staff Position ("FSP") FAS 115-2 and FAS 124-2, "Recognition and Presentation of
Other-Than-Temporary Impairments" ("FSP FAS 115-2").  FSP FAS 115-2 requires
entities to separate an other-than-temporary impairment of a fixed maturity
security into two components when there are credit related losses associated
with the impaired fixed maturity security for which management asserts that it
does not have the intent to sell the security, and it is more likely than not
that it will not be required to sell the security before recovery of its cost
basis.  The amount of the other-than-temporary impairment related to a credit
loss is recognized in earnings, and the amount of the other-than-temporary
impairment related to other factors is recorded in other comprehensive loss. 
FSP FAS 115-2 is effective for periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009.  We elected to adopt
FSP FAS 115-2 effective January 1, 2009.  As a result of the adoption of this
standard, we recognized a cumulative effect adjustment of $409,483 (net of
deferred income tax of $137,326) to move non-credit related other-than-temporary
impairments previously recognized in earnings for the year ended December 31,
2008 from retained earnings to accumulated other comprehensive income (loss) for
fixed maturity securities held at the date of adoption.



In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions that are Not Orderly" ("FSP FAS 157-4").
  Under FSP FAS 157-4, if an entity determines that there has been a significant
decrease in the volume and level of activity for the asset or the liability in
relation to the normal market activity for the asset or liability (or similar
assets or liabilities), then transactions or quoted prices may not accurately
reflect fair value.   In addition, if there is evidence that the transaction for
the asset or liability is not orderly, the entity shall place little, if any
weight on that transaction price as an indicator of fair value.   FSP FAS 157-4
is effective for periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.   We elected to adopt FSP FAS
157-4 effective January 1, 2009, and its adoption did not have a material impact
on our consolidated financial condition or results of operations.



In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, "Interim Disclosures
about Fair Value of Financial Instruments" ("FSP FAS 107-1 and APB 28-1").   FSP
FAS 107-1 and APB 28-1 require disclosures about fair value of financial
instruments in interim and annual financial statements.   FSP FAS 107-1 and APB
28-1 is effective for periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.   We will adopt FSP FAS 107-1
and APB 28-1 effective for the second quarter of 2009 and will include the
required disclosures at that time.



NOTE D -- Investments

Investments in available-for-sale securities are
summarized as follows:



March 31, 2009
			
			Amortized
			Cost
			
			Gross
			Unrealized
			Gains
			
			Gross Unrealized Losses
			
			Fair
			ValueLess Than
			12 Months
			
			Greater Than
			12 MonthsFixed maturity securities:U.S.
			government obligations
			$
			32,027,275
			$
			2,712,348
			$
			-
			$
			-
			$
			34,739,623States
			and political subdivisions
			
			22,427,001
			
			769,865
			
			53,410
			
			129,000
			
			23,014,456Corporate
			
			147,123,470
			
			3,383,195
			
			1,968,438
			
			6,995,539
			
			141,542,688Foreign
			
			20,666,522
			
			2,015,500
			
			212,049
			
			826,881
			
			21,643,092Asset-backed securities
			
			7,280,270
			
			274,504
			
			64,379
			
			114,436
			
			7,375,959Mortgage-backed securities (MBS):Commercial MBS
			
			7,040,583
			
			-
			
			-
			
			1,110,759
			
			5,929,824Residential MBS
			
			47,345,952
			
			2,284,520
			
			-
			
			62
			
			49,630,410Total
			fixed maturity securities
			$
			283,911,073
			$
			11,439,932
			$
			2,298,276
			$
			9,176,677
			$
			283,876,052Equity securities:U.S.
			agencies
			
			552,800
			
			-
			
			-
			
			-
			
			552,800Mutual funds
			
			2,050,702
			
			-
			
			407,439
			
			-
			
			1,643,263Nonredeemable
			corporate preferred
			
			990,000
			
			-
			
			279,690
			
			-
			
			710,310Corporate common stock
			
			454,226
			
			239,966
			
			-
			
			-
			
			694,192Total
			equity securities
			
			4,047,728
			
			239,966
			
			687,129
			
			-
			
			3,600,565Total
			$
			287,958,801
			$
			11,679,898
			$
			2,985,405
			$
			9,176,677
			$
			287,476,617December 31, 2008
			
			Amortized
			Cost
			
			Gross
			Unrealized
			Gains
			
			Gross Unrealized Losses
			
			Fair
			ValueLess Than
			12 Months
			
			Greater Than
			12 MonthsFixed maturity securities:U.S.
			government obligations
			$
			22,387,095
			$
			2,763,378
			$
			-
			$
			-
			$
			25,150,473States
			and political subdivisions
			
			22,443,720
			
			521,626
			
			102,320
			
			109,990
			
			22,753,036Corporate
			
			140,156,197
			
			3,369,812
			
			1,821,035
			
			4,034,601
			
			137,670,373Foreign
			
			20,735,082
			
			2,403,250
			
			207,574
			
			319,957
			
			22,610,801Asset-backed securities
			
			11,892,227
			
			39,362
			
			148,789
			
			279,173
			
			11,503,627Mortgage-backed securities
			
			64,721,305
			
			2,028,284
			
			181,872
			
			825,651
			
			65,742,066Total
			fixed maturity securities
			$
			282,335,626
			$
			11,125,712
			$
			2,461,590
			$
			5,569,372
			$
			285,430,376Total
			equity securities
			
			4,040,062
			
			436,404
			
			538,289
			
			-
			
			3,938,177Total
			$
			286,375,688
			$
			11,562,116
			$
			2,999,879
			$
			5,569,372
			$
			289,368,553




The following table summarizes,
for all securities in an unrealized loss position as of the balance sheet dates,
the estimated fair value, pre-tax gross unrealized loss and number of securities
by length of time that those securities have been continuously in an unrealized
loss position.



March 31, 2009
			
			Estimated
			Fair Value
			
			Gross
			Unrealized
			Loss
			
			Number of
			SecuritiesFixed Maturities:Fewer than 6 months:States and political subdivisions
			$
			1,992,740
			$
			53,410
			
			1Corporate
			
			22,940,157
			
			1,213,818
			
			29Foreign
			
			3,773,443
			
			212,049
			
			4Asset-backed securities
			
			586,660
			
			64,379
			
			17-12 months:Corporate
			
			13,499,509
			
			754,620
			
			11Greater than 12 months:States and political subdivisions
			
			871,000
			
			129,000
			
			1Corporate
			
			27,784,246
			
			6,995,539
			
			35Foreign
			
			2,094,195
			
			826,881
			
			3Asset-backed securities
			
			948,441
			
			114,436
			
			2Commercial MBS
			
			5,929,824
			
			1,110,759
			
			7Residential MBS
			
			62,501
			
			62
			
			6Total fixed maturities
			$
			80,482,716
			$
			11,474,953
			
			100Equities:Fewer than 6 months:Mutual funds
			$
			1,412,524
			$
			319,894
			
			3Nonredeemable corporate preferred
			
			710,310
			
			279,690
			
			17-12 months:Mutual funds
			
			230,738
			
			87,545
			
			1Total equities
			
			2,353,572
			
			687,129
			
			5Total
			$
			82,836,288
			$
			12,162,082
			
			105December 31, 2008
			
			Estimated
			Fair Value
			
			Gross
			Unrealized
			Loss
			
			Number of
			SecuritiesFixed Maturities:Fewer than 6 months
			$
			29,639,437
			$
			1,137,770
			
			297-12 months
			
			23,011,682
			
			1,323,820
			
			22Greater than 12 months
			
			33,855,448
			
			5,569,372
			
			47Total fixed maturities
			
			86,506,567
			
			8,030,962
			
			98Equities:Fewer than 6 months
			
			1,520,803
			
			538,289
			
			3Total equities
			
			1,520,803
			
			538,289
			
			3Total
			$
			88,027,370
			$
			8,569,251
			
			101




As of March 31, 2009, all of the above
fixed maturity securities had a fair value to cost ratio equal to or greater
than 46% and the equity securities noted above had a fair value to cost ratio of
over 71%.   As of December 31, 2008, all of the above fixed maturity securities
had a fair value to cost ratio equal to or greater than 61% and the equity
securities noted above had a fair value to cost ratio of over 65%.  At March 31,
2009 and December 31, 2008, Investors Heritage Life's fixed maturity securities
were 99.4% and 99.9% investment grade, respectively, as rated by Standard &
Poor's.



The Company's decision to record
an impairment loss is primarily based on whether the security's fair value is
likely to remain significantly below its book value in light of all the factors
considered. Factors that are considered include the length of time the
security's fair value has been below its carrying amount, the credit worthiness
of the issuer, and the coupon and/or dividend payment history of the issuer. 
For any fixed maturity securities that are other-than-temporarily impaired, the
guidance in FSP FAS 115-2 is applied to determine whether the
other-than-temporary impairment is credit-related or related to other factors. 
Only in the case of a credit-related impairment where management cannot assert
that it does not have the intent to sell the security, or it is not more likely
than not that it will not be required to sell the security before recovery of
its cost basis, is a fixed maturity security adjusted to fair value and the
resulting losses recognized in realized gains/losses in the consolidated
statements of income.  Any other-than-temporary impairments on equity securities
are recorded in the consolidated statements of income in the periods incurred as
the difference between fair value and cost.  Based on our review, the Company
did not experience any other-than-temporary impairments during the first quarter
of 2009 or the first quarter of 2008.  The Company did experience certain
other-than-temporary impairments relative to Lehman Holdings bonds, Fifth Third
mutual funds, and Bank of America and JP Morgan bonds during the third and
fourth quarters of 2008.  Upon adoption of FSP FAS 115-2, a cumulative effect
adjustment (as discussed in Note C) was made to reflect the fact that the
other-than-temporary impairments on the Bank of America and JP Morgan bonds were
not credit-related but rather were related to other factors in the marketplace
as management asserts that it does not have the intent to sell, and it is more
likely than not that it will not be required to sell the securities before
recovery of their cost basis.



In accordance with SFAS No. 115,
net unrealized gains for investments classified as available-for-sale are
presented below, net of the effect on deferred income taxes and deferred
acquisition costs assuming that the appreciation (depreciation) had been
realized.



March 31,
			
			
			December 31,2009
			
			
			2008Net unrealized
			appreciation onavailable-for
			sale securities
			$
			(482,184)
			
			$
			2,992,865Adjustment to
			deferred acquisition costs
			
			22,892
			
			
			(154,982)Deferred income
			taxes
			
			(220,971)
			
			
			(1,383,722)Net unrealized
			appreciation onavailable-for
			sale securities
			$
			(680,263)
			
			$
			1,454,161




The amortized cost and fair
value of fixed maturity securities at March 31, 2009, by contractual maturity,
are presented below.  Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.



Available-for-SaleAmortized
			
			
			FairCost
			
			
			ValueDue in one year or
			less
			$
			9,555,794
			
			$
			9,784,762Due after one year
			through five years
			
			99,806,009
			
			
			101,442,207Due after five
			years through ten years
			
			85,549,193
			
			
			80,516,918Due after ten years
			
			34,613,542
			
			
			36,571,931Due at multiple
			maturity dates
			
			54,386,535
			
			
			55,560,234Total
			$
			283,911,073
			
			$
			283,876,052




Proceeds for the three months
ended March 31, 2009 and 2008 from sales and maturities of investments in
available-for-sale securities were $15,077,571 and $8,030,055, respectively. 
Gross gains of $71,535 and $368 and gross losses of $1,929 and $1,839 were
realized on those sales during the three month periods ended March 31, 2009 and
2008, respectively.



Presented below is investment
information, including the accumulated and annual change in net unrealized
investment gains or losses.  Additionally, the table shows the annual change in
net unrealized investment gains (losses) and the amount of realized investment
gains (losses) on debt and equity securities for the three months ended March
31, 2009 and 2008.



For
			the Period Ended March 31,2009
			
			
			2008Change in unrealized investment gains
			(losses):Available-for-sale:Fixed maturities
			$
			(3,129,771)
			
			$
			2,692,787Equity securities
			
			(345,278)
			
			
			(237,157)Realized investment gains (losses):Available-for-sale:Fixed maturities
			$
			69,606
			
			$
			(1,471)Equity securities
			
			-
			
			
			-




Major categories of net
investment income are summarized as follows:



For
			the Period Ended March 31,2009
			
			
			2008Fixed maturities
			$
			4,050,831
			
			$
			4,005,183Mortgage loans on
			real estate
			
			404,810
			
			
			441,488Other
			
			200,367
			
			
			203,479$
			4,656,008
			
			$
			4,650,150Investment expenses
			
			215,847
			
			
			209,711$
			4,440,161
			
			$
			4,440,439




NOTE E -- Fair Values of Financial Instruments

Statement of Financial
Accounting Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS No.
157") defines fair value, establishes a framework for measuring fair value and
enhances disclosures about fair value measurements.  Fair value is defined under
SFAS No. 157 as the price that would be received to sell an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date.  We also consider the impact of a
significant decrease in volume and level of activity for an asset or liability
when compared with normal activity in accordance with FSP FAS 157-4.



The
Company holds fixed maturities and equity securities that are measured and
reported at fair market value on the balance sheet.  The Company determines the
fair market values of its financial instruments based on the fair value
hierarchy established in SFAS No. 157 that requires an entity to maximize the
use of observable inputs and minimize the use of unobservable inputs when
measuring fair value.  The standard describes three levels of inputs that may be
used to measure fair value, as follows:



Level
1 - Quoted prices in active markets for identical assets or liabilities. The
Company's Level 1 assets and liabilities include debt and equity securities that
are traded in an active exchange market, as well as certain U.S. Treasury
securities that are highly liquid and are actively traded in over-the-counter
markets.



Level
2 - Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities. The Company's
Level 2 assets and liabilities include debt securities with quoted prices that
are traded less frequently than exchange-traded instruments or assets and
liabilities whose value is determined using a pricing model with inputs that are
observable in the market or can be derived principally from or corroborated by
observable market data. This category generally includes U.S. Government and
agency mortgage-backed debt securities and corporate debt securities.



Level
3 - Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities. The
Company's Level 3 assets and liabilities include financial instruments whose
value is determined using pricing models, discounted cash flow methodologies, or
similar techniques, as well as instruments for which the determination of fair
value requires significant management judgment or estimation. This category
generally includes certain private equity investments and asset-backed
securities where independent pricing information was not able to be obtained for
a significant portion of the underlying assets.



In accordance with SFAS No. 157, the Company has
categorized its financial instruments, based on the priority of the inputs to
the valuation technique, into the three-level fair value hierarchy.  If the
inputs used to measure the financial instruments fall within different levels of
the hierarchy, the categorization is based on the lowest level input that is
significant to the fair value measurement of the instrument.  A review of fair
value hierarchy classifications is conducted on a quarterly basis. Changes in
the valuation inputs, or their ability to be observed, may result in a
reclassification for certain financial assets or liabilities. Reclassifications
impacting Level 3 of the fair value hierarchy are reported as transfers in/out
of the Level 3 category as of the beginning of the period in which the
reclassifications occur.



The following table presents the Company's fair value
hierarchy for those financial instruments measured at fair value on a recurring
basis as of March 31, 2009 and December 31, 2008, respectively.



March 31, 2009Level 1
			
			Level 2
			
			Level 3
			
			TotalFixed maturities:U.S. government obligations
			$
			-
			$
			32,810,150
			$
			1,929,473
			$
			34,739,623States and political subdivisions
			
			-
			
			23,014,456
			
			-
			
			23,014,456Corporate
			
			-
			
			136,310,964
			
			5,231,724
			
			141,542,688Foreign
			
			-
			
			21,643,092
			
			-
			
			21,643,092Asset-backed securities
			
			-
			
			5,746,688
			
			1,629,271
			
			7,375,959Mortgage-backed securities:Commercial MBS
			
			-
			
			5,929,824
			
			-
			
			5,929,824Residential MBS
			
			-
			
			49,630,410
			
			-
			
			49,630,410Total fixed maturities
			$
			-
			$
			275,085,584
			$
			8,790,468
			$
			283,876,052Equity securities:U.S. agencies
			$
			552,800
			$
			-
			$
			-
			$
			552,800Mutual funds
			
			1,643,263
			
			-
			
			-
			
			1,643,263Nonredeemable corporate preferred
			
			710,310
			
			-
			
			-
			
			710,310Corporate common stock
			
			351,792
			
			-
			
			342,400
			
			694,192Total equity securities
			$
			3,258,165
			$
			-
			$
			342,400
			$
			3,600,565December 31, 2008Level 1
			
			Level 2
			
			Level 3
			
			TotalFixed maturities
			$
			-
			$
			277,204,295
			$
			8,226,081
			$
			285,430,376Equity securities
			
			3,595,777
			
			-
			
			342,400
			
			3,938,177




At March 31, 2009, Level 3 financial
instruments consisted of five corporate securities, one U.S. government
obligation, two asset-backed securities, one corporate redeemable preferred
stock and one common stock, where trading has been limited.  At December 31,
2008, Level 3 financial instruments consisted of four corporate securities, one
U.S. government obligation, two asset-backed securities, one corporate
redeemable preferred stock and one common stock, where trading has been limited.
 The fair values for these securities were primarily determined through the use
of non-binding broker quotes and internal models using unobservable assumptions
about market participants.  The following table provides a summary of changes in
fair value of our Level 3 financial instruments for the three month periods
ended March 31, 2009 and 2008, respectively.



Three Months Ended March 31, 2009January 1,
			
			Realized
			
			Unrealized2009
			
			Gains
			
			Gains
			
			Purchases
			
			Transfers
			
			EndingBalance
			
			(Losses)
			
			(Losses)
			
			(Sales)
			
			In
			(Out)
			
			BalanceFixed maturities:U.S. Government obligations
			$
			2,037,998
			$
			-
			$
			4,556
			$
			(113,081)
			$
			-
			$
			1,929,473Corporate
			
			4,588,512
			
			-
			
			(227,429)
			
			870,641
			
			-
			
			5,231,724Asset-backed securities
			
			1,599,571
			
			-
			
			64,362
			
			(34,662)
			
			-
			
			1,629,271Total fixed maturities
			$
			8,226,081
			$
			-
			$
			(158,511)
			$
			722,898
			$
			-
			$
			8,790,468Equity securities:Corporate common stock
			$
			
			$
			-
			$
			-
			$
			-
			$
			-
			$
			342,400Total equity securities
			$
			342,400
			$
			-
			$
			-
			$
			-
			$
			-
			$
			342,400Three Months Ended March 31, 2008January 1,
			
			Realized
			
			Unrealized2008
			
			Gains
			
			Gains
			
			Purchases
			
			Transfers
			
			EndingBalance
			
			(Losses)
			
			(Losses)
			
			(Sales)
			
			In
			(Out)
			
			BalanceFixed maturities
			$
			6,940,640
			$
			-
			$
			(117,768)
			$
			-
			$
			-
			$
			6,822,872Equity securities
			
			320,000
			
			-
			
			-
			
			-
			
			-
			
			320,000




The
unrealized gains (losses) on Level 3 investments are recorded as a component of
accumulated other comprehensive income (loss), net of tax, in accordance with
required accounting for our available-for-sale portfolio.



NOTE F - Earnings per Share and Stock-Based
Compensation

Earnings per share of common stock were
computed based on the weighted average number of common shares outstanding
during each period. The weighted average number of shares outstanding for the
three months ended March 31, 2009 and 2008 were 1,120,686 and 1,115,108,
respectively.



The Company's only outstanding stock
options and stock appreciation rights were issued in 1999. We account for our
stock-based incentive program under SFAS No. 123(R), "Share-Based Payment,"
which requires all share-based payments to employees to be recognized as
compensation expense in the consolidated income statement. We adopted the
provisions of SFAS No. 123(R) using the modified prospective method in which
compensation expense is recognized based on the requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," for all awards granted to employees
prior to January 1, 2006. Under this method, our stock-based compensation is
reported in the balance sheets as a liability based on the intrinsic value of
the award, and compensation expense is measured as the change in intrinsic
value.



Under our stock option and stock
appreciation rights plan, there were 61,125 outstanding options, having an
exercise price of $23.00 per share, as of March 31, 2009 and 2008. We recognized
a decrease in compensation expense relative to the outstanding options of
$213,938 for the three month period ended March 31, 2009 compared to an increase
in compensation expense of $45,844 associated with such options for the three
month period ended March 31, 2008. These changes in compensation expense were
based on changes in the market value of the Company's stock compared to the
exercise price of the options as of those dates.



NOTE G - Segment Data

We operate in four segments as shown in
the following table. All segments include both individual and group insurance.
Identifiable revenues and expenses are assigned directly to the applicable
segment. Net investment income is generally allocated to the insurance and the
corporate segments in proportion to policy liabilities and stockholders' equity,
respectively. Realized gains and losses, including realized losses as a result
of other-than-temporary impairments, are allocated to the Corporate and Other
segment.  Investors Heritage Financial revenue and income associated with credit
administrative services is assigned to that segment, with any remaining revenue
and income assigned to the Corporate and Other segment.  Results for the parent
company, Investors Heritage Printing, At Need Funding and Heritage Funding,
after elimination of intercompany amounts, are allocated to the Corporate and
Other segment.



Three Months Ended March 31,2009
			
			
			2008Revenue:Preneed and burial products
			$
			9,734,705
			
			$
			9,574,459Traditional and universal life products
			
			2,478,715
			
			
			2,744,423Credit insurance products and administrative
			services
			
			84,169
			
			
			92,808Corporate and other
			
			331,244
			
			
			338,413$
			12,628,833
			
			$
			12,750,103Pre-tax income (loss) from operations:Preneed and burial products
			$
			(276,186)
			
			$
			(327,282)Traditional and universal life products
			
			(104,890)
			
			
			63,084Credit insurance products and administrative
			services
			
			46,164
			
			
			70,675Corporate and other
			
			300,074
			
			
			220,001$
			(34,838)
			
			$
			26,478




NOTE H -- Federal Income Taxes

The provision for federal income taxes is
based on the estimated effective annual tax rate. Deferred taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. Income before federal income taxes differs from taxable income
principally due to the dividends-received deduction, the 404(k) dividend
deduction and the small life insurance company tax deduction.



We file U.S. federal income tax returns
and income tax returns in various state jurisdictions. Our 2005 through 2008
U.S. federal tax years remain subject to income tax examination by tax
authorities.  We have no known uncertain tax benefits within our provision for
income taxes. In addition, we do not believe the Company will be subject to any
penalties or interest relative to any open tax years and, therefore, have not
accrued any such amounts.  However, should such a circumstance arise, it is our
policy to classify any interest and penalties (if applicable) as income tax
expense in the financial statements.



NOTE I -- Comprehensive Income (Loss)

The components of comprehensive income (loss), net of
related federal income taxes, are as follows:



Three Months Ended March 31,2009
			
			2008Net income (loss)
			$
			(26,569)
			$
			20,194Change in net unrealized appreciation
			(depreciation) on securities
			
			(1,862,267)
			
			2,101,869Change in unrealized pension benefits
			
			92,267
			
			20,227Change in fair value of hedging instrument
			
			1,183
			
			417Total comprehensive income (loss)
			$
			(1,795,386)
			$
			2,142,707




NOTE J -- Employee Benefit Plans

We sponsor a noncontributory pension plan which covers
substantially all employees. Benefits are based on years of service and the
highest consecutive 60 months average earnings within the last 120 months of
credited service. Benefits are funded based on actuarially-determined amounts.



The following table provides the components of our net
periodic benefit cost:



Three Months Ended March 31,2009
			
			2008Service cost
			$
			94,516
			$
			89,030Interest cost
			
			235,174
			
			200,831Expected return on plan assets
			
			(170,572)
			
			(231,254)Recognized net loss
			
			139,798
			
			30,649Net periodic benefit cost
			$
			298,916
			$
			89,256




We previously disclosed in our financial statements for the year ended December
31, 2008 that we expected to contribute $972,000 to our pension plan in 2009. As
of March 31, 2009, $243,000 had been contributed. We presently anticipate
contributing an additional $729,000 to fund our pension plan in 2009.



---



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





GENERAL



Kentucky Investors is incorporated under the laws of the Commonwealth of
Kentucky and wholly owns Investors Heritage Life Insurance Company, a life
insurance company also incorporated under the laws of the Commonwealth of
Kentucky. Kentucky Investors also wholly owns Investors Heritage Financial
Services Group, Inc., a Kentucky insurance marketing company; Investors Heritage
Printing, Inc., a Kentucky printing company that provides printing to Investors
Heritage Life and other unaffiliated parties; is the sole member of At Need
Funding, LLC, a Kentucky limited liability company that provides advance funding
of funerals in exchange for the irrevocable assignment of life insurance
policies from other nonaffiliated companies; and is the sole member of Heritage
Funding, LLC, a limited liability company that invests in various business
ventures.



Investors Heritage Life offers a full line of life insurance products including,
but not limited to, whole life, term life, single premium life, multi-pay life
and annuities. Investors Heritage Life's primary lines of business are insurance
policies and annuities utilized to fund preneed funeral contracts, credit life
and credit disability insurance, and term life and reducing term life sold
through financial institutions.



In late 2007, we introduced the Legacy Gold product series, a new generation of
life insurance and annuity products marketed in conjunction with prearranged
funerals.  As a part of the process, we performed detailed analysis of the
preneed market and of the characteristics of our particular block of business. 
We believe that the result of these efforts is a very marketable product that
balances profitability with competitive commissions and death benefit growth to
provide adequate proceeds to cover funeral expenses and personal needs. 
Underwritten and guaranteed issue options are available.  This product series
replaced the Legacy Protector and Legacy Preferred series of life insurance and
annuity products during early 2008.



The Heritage Final Expense product is sold in the final expense markets. 
Introduced in 2002, it is reinsured on an 80% quota share basis exclusively with
Munich American Reassurance Company.  This reinsurance arrangement has helped to
reduce first year statutory surplus strain associated with new sales and should
provide a stable profit stream for the future.  During the fourth quarter of
2008, this product was replaced by the new Heritage Final Expense II product,
which incorporates the 2001 CSO table while also improving the marketability and
profitability of the product.



In late 2008 we updated two of our products within this line to incorporate the
2001 CSO table while enhancing the marketability and profitability of these
products.  The HLW Choice Whole Life replaced the Life Paid Up at 95 and the
Heritage Protector IV replaced the Heritage Protector III.



Investors Heritage Life continues to market its third-party administrative ("TPA")
services as an additional revenue source.  We currently have five TPA clients
for which we provide tailored services to meet each client's individual business
needs. We have been able to perform services for these clients using our
existing in-house resources.



Our primary uses of cash are ongoing operating expenses, debt service and
dividend payments. Our principal sources of cash are the dividends paid to us by
Investors Heritage Life and Investors Heritage Financial. Investors Heritage
Life's principal sources of cash are proceeds received from the sale of life
insurance policies, administrative service fees and investment income, including
realized gains (losses), less interest credited and benefits to policyholders
and expenses.





CRITICAL
ACCOUNTING POLICIES AND ESTIMATES



The discussion and analysis of our financial condition and results of operations
are based on our consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. Preparation of
these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses. We
evaluate our estimates continually, including those related to investments,
deferred acquisition costs, present value of future profits, policy liabilities,
income taxes, accrued pension expense, regulatory requirements, contingencies
and litigation. We base such estimates on historical experience and other
assumptions believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions. We
believe the following accounting policies, judgments and estimates are the most
critical to the preparation of our consolidated financial statements.



Investments
in Fixed Maturities, Equity Securities and Mortgage Loans

We hold fixed maturities and equity interests in a variety of companies. 
Additionally, we originate, underwrite and manage mortgage loans.  We
continuously evaluate all of our investments based on current economic
conditions, credit loss experience and other developments.  We evaluate the
difference between the cost/amortized cost and estimated fair value of our
investments to determine whether any decline in value is other-than-temporary in
nature.  This determination involves a degree of uncertainty.  If a decline in
the fair value of a security is determined to be temporary, the decline is
recorded as an unrealized loss in stockholders' equity. If a decline in a
security's fair value is considered to be other-than-temporary, we utilize the
provisions of SFAS 115 and FSP FAS 115-2 in determining the proper treatment for
the other-than-temporary impairment.  Our adoption of FSP FAS 115-2 during the
first quarter of 2009 amends the determination of other-than-temporary
impairments for debt securities (see Note C), but not for equity securities. 
For debt securities, the amount of any other-than-temporary impairment related
to a credit loss is recognized in earnings and reflected as a reduction in the
cost basis of the security; and the amount of any other-than-temporary
impairment related to other factors is recorded in other comprehensive loss with
no change to the cost basis of the security.  For equity securities, the amount
of any other-than-temporary impairment is recognized in earnings and reflected
as a reduction in the cost basis of the security.



The assessment of whether a decline in fair value is considered temporary or
other-than-temporary includes management's judgment as to the financial position
and future prospects of the entity issuing the security. It is not possible to
accurately predict when it may be determined that a specific security will
become impaired.  Future adverse changes in market conditions, poor operating
results of underlying investments and defaults on mortgage loan payments could
result in losses or an inability to recover the current carrying value of the
investments, thereby possibly requiring an impairment charge in the future. 
Likewise, if a change occurs in our intent to hold temporarily impaired
securities until maturity or recovery in value, or if it becomes more likely
than not that we will be required to sell such securities prior to recovery in
value or maturity, a future impairment charge could result.



If an
other-than-temporary impairment related to a credit loss occurs with respect to
a bond, we amortize the reduced book value back to the security's expected
recovery value over the remaining term of the bond.  We continue to review the
security for further impairment that would prompt another write-down in the
value.



Deferred
Acquisition Costs

The recovery of deferred acquisition costs is dependent on the future
profitability of the underlying business for which acquisition costs were
incurred.  Each reporting period, we evaluate the recoverability of the
unamortized balance of deferred acquisition costs.  We consider estimated future
gross profits or future premiums, expected mortality or morbidity, interest
earned and credited rates, persistency and expenses in determining whether the
balance is recoverable.  If we determine a portion of the unamortized balance is
not recoverable, it is immediately charged to amortization expense.  The
assumptions we use to amortize and evaluate the recoverability of the deferred
acquisition costs involve significant judgment.  A revision to these assumptions
may impact future financial results.



Deferred acquisition costs related
to annuities and universal life insurance products is deferred to the extent
deemed recoverable and amortized in relation to the present value of actual and
expected gross profits on the policies. To the extent that realized gains and
losses on securities result in adjustments to deferred acquisition costs related
to annuities, such adjustments are reflected as a component of the amortization
of deferred acquisition costs.



Deferred acquisition costs related
to annuities are also adjusted, net of tax, for the change in amortization that
would have been recorded if the unrealized gains (losses) from securities had
actually been realized. This adjustment is included in the change in net
unrealized appreciation (depreciation) on available-for-sale securities, a
component of "Accumulated Other Comprehensive Income (Loss)" in the
stockholders' equity section of the balance sheet.



Policy
Liabilities

Estimating liabilities for our long-duration insurance contracts requires
management to make various assumptions, including policyholder persistency,
mortality rates, investment yields, discretionary benefit increases, new
business pricing, and operating expense levels.  We evaluate historical
experience for these factors when assessing the need for changing current
assumptions.  However, since many of these factors are interdependent and
subject to short-term volatility during the long-duration contract period,
substantial judgment is required.  Actual experience may emerge differently from
that originally estimated.  Any such difference would be recognized in the
current year's consolidated statement of income.



Income
Taxes

We evaluate our deferred income tax assets, which partially offset our deferred
tax liabilities, for any necessary valuation allowances.  In doing so, we
consider our ability and potential for recovering income taxes associated with
such assets, which involve significant judgment.  Revisions to the assumptions
associated with any necessary valuation allowances would be recognized in the
financial statements in the period in which such revisions are made.



Accrued
Pension Expense

We maintain a defined benefit retirement plan on behalf of our employees. 
Measurement of the future benefit obligations associated with this plan involves
significant judgment, particularly in regard to the expected long-term rate of
return on plan assets, rate of compensation increases and the current discount
rate used to calculate the present value of future obligations.  Changes in
these assumptions can significantly impact the accrued pension liability and net
periodic benefit expense recorded in the financial statements.



The Pension Protection Act of 2006 was passed by legislators and signed by the
President on August 17, 2006 to address the funding mechanisms of pension plans.
The Act alters the traditional formula under which plan liabilities must be
funded, and it may result in significantly increased future funding costs
depending on investment returns.  Although increased contributions are not yet
required under the funding formula, we have voluntarily increased the projected
contribution to our pension plan for 2009 by approximately $100,000 above our
prior year contribution.



New
Accounting Pronouncements

In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, "Recognition and
Presentation of Other-Than-Temporary Impairments" ("FSP FAS 115-2").  FSP FAS
115-2 requires entities to separate an other-than-temporary impairment of a
fixed maturity security into two components when there are credit related losses
associated with the impaired fixed maturity security for which management
asserts that it does not have the intent to sell the security, and it is more
likely than not that it will not be required to sell the security before
recovery of its cost basis.  The amount of the other-than-temporary impairment
related to a credit loss is recognized in earnings, and the amount of the
other-than-temporary impairment related to other factors is recorded in other
comprehensive loss.  FSP FAS 115-2 is effective for periods ending after
June 15, 2009, with early adoption permitted for periods ending after March 15,
2009.  We elected to adopt FSP FAS 115-2 effective January 1, 2009.  As a result
of the adoption of this standard, we recognized a cumulative effect adjustment
of $409,483 (net of deferred income tax of $137,326) to move non-credit related
other-than-temporary impairments previously recognized in earnings for the year
ended December 31, 2008 from retained earnings to accumulated other
comprehensive income (loss) for fixed maturity securities held at the date of
adoption.



In
April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions that are Not Orderly" ("FSP FAS 157-4").   Under
FSP FAS 157-4, if an entity determines that there has been a significant
decrease in the volume and level of activity for the asset or the liability in
relation to the normal market activity for the asset or liability (or similar
assets or liabilities), then transactions or quoted prices may not accurately
reflect fair value.   In addition, if there is evidence that the transaction for
the asset or liability is not orderly, the entity shall place little, if any
weight on that transaction price as an indicator of fair value.   FSP FAS 157-4
is effective for periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.   We elected to adopt FSP FAS
157-4 effective January 1, 2009, and its adoption did not have a material impact
on our consolidated financial condition or results of operations.



In
April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, "Interim Disclosures
about Fair Value of Financial Instruments" ("FSP FAS 107-1 and APB 28-1").   FSP
FAS 107-1 and APB 28-1 require disclosures about fair value of financial
instruments in interim and annual financial statements.   FSP FAS 107-1 and APB
28-1 is effective for periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.   We will adopt FSP FAS 107-1
and APB 28-1 effective for the second quarter of 2009 and will include the
required disclosures at that time.



Refer to Notes D and E of the condensed consolidated financial statements for
more explanation of these new pronouncements as well as for the required
disclosures.



INVESTMENTS, LIQUIDITY AND CAPITAL RESOURCES



Investments

Investors Heritage Life maintains a sound, conservative investment strategy. At
March 31, 2009, 89.2% of invested assets consisted of fixed income securities
compared to 89.2% at December 31, 2008. At March 31, 2009 and December 31, 2008,
Investors Heritage Life's fixed income investments were 99.4% and 99.9%
investment grade, respectively, as rated by Standard & Poor's.



During 2008, we recognized an other-than-temporary impairment loss relative to
the two Lehman Brothers Holdings bonds in our portfolio that are in default,
each with a par value of $2,000,000.  While we have written down these
securities to fair value, we continue to work with our investment advisor to
estimate a recovery value on the bonds.  Our current estimates are that we will
ultimately recover anywhere from approximately 21%-60% of the par value on the
bonds.  We are amortizing the bond values up to the low end of this range and
plan to continue to hold these securities in expectation of future recoveries.



We have reviewed our investment portfolio and do not believe that there are
additional securities that are other-than-temporarily impaired at March 31, 2009
beyond those impairments taken previously.  Other than the Lehman Brothers
Holdings bonds, none of Investors Heritage Life's fixed income assets are in
default and there has been no material change in the distribution of its fixed
income portfolio.



We continuously monitor the investment risk within our portfolio, including the
risk associated with subprime lending with our CMO investments.  As of March 31,
2009, we have only one CMO, with a fair value of approximately $47,000, which
has any level of direct subprime exposure.  Based on our analysis, we believe
this investment is of high quality and expect no losses as a result of the
current subprime concerns.



Additionally, Investors Heritage Life engages in commercial and residential
mortgage lending, with approximately 99.9% of these investments being in
commercial properties. All mortgage loans are either originated in-house or
through two mortgage brokers, and all loans are secured by first mortgages on
the real estate.  Loan to value ratios of 80% or less and debt service coverage
from existing cash flows of 115% or higher are generally required.  We minimize
credit risk in our mortgage loan portfolio through various methods, including
stringently underwriting the loan request, maintaining small average loan
balances, reviewing larger mortgage loans on an annual basis and diversifying
the portfolio by property type.  At March 31, 2009, 7.1% of invested assets
consisted of mortgage loans compared to 7.0% at December 31, 2008. We anticipate
funding several new mortgage loan investments during the remainder of 2009 to
maintain a similar to slightly higher percentage of mortgage loans to total
invested assets. As of March 31, 2009, Investors Heritage Life had no
non-performing mortgage loans, which would include loans past due 90 days or
more, loans in process of foreclosure, restructured loans and real estate
acquired through foreclosure.



Liquidity and Capital Resources

Premiums, which include mortality and expense charges, investment income and
administrative service fees are Investors Heritage Life's primary sources of
cash flow used to meet short-term and long-term cash requirements.



Investors Heritage Life's short-term obligations consist primarily of
policyholder benefits and operating expenses. Investors Heritage Life has
historically been able to meet these obligations out of operating cash, premiums
and investment income.



Investors Heritage Life's principal long-term obligations are fixed contractual
obligations incurred in the sale of its life insurance products. The premiums
charged for these products are based on conservative and actuarially sound
assumptions as to mortality, persistency and interest. We believe these
assumptions will produce revenues sufficient to meet our future contractual
benefit obligations and operating expenses, and provide an adequate profit
margin.



Investors Heritage Life's conservative approach in the product development area
and the strength and stability of its fixed income and mortgage loan portfolios
provide adequate liquidity both in the short-term and the long-term.



Kentucky Investors principal sources of cash flow are rental income and
dividends from its subsidiaries. Kentucky Investors principal long-term
obligations are payments on long-term debt.



We assess our compliance with prescribed debt covenant requirements as outlined
in the terms of each debt agreement at least annually, if not otherwise required
in the debt agreement.  Management has assessed our position and as of March 31,
2009, we are in compliance with all debt covenant requirements.



We are not aware of any commitments or unusual events that could materially
affect capital resources. We have the option to prepay certain notes payable at
our discretion prior to their maturity dates.



We will continue to explore various opportunities including mergers and
acquisitions and purchasing blocks of business from other companies, which may
dictate a need for either long-term or short-term debt.  There are no
restrictions as to use of funds except the restriction on Investors Heritage
Life as to the payment of cash dividends to Kentucky Investors.



RESULTS OF
OPERATIONS



Overview

Premiums earned (net of reinsurance) were $7,902,301 for the first quarter of
2009 (a decrease of 1.7% compared to the first quarter of 2008). This decrease
was primarily due to the current poor economic conditions that have limited
disposable income typically used for new sales in many of our markets.  Total
revenue was $12,628,833 for the first quarter of 2009 (a decrease of 1.0%
compared to the first quarter of 2008).



Total benefits
and expenses were $12,663,671 in the first quarter of 2009 (a decrease of 0.5%
compared to the first quarter of 2008). This decrease correlates with the
decrease in new business generated.



Net investment
income was $4,440,161 for the first quarter of 2009 compared to $4,440,439 for
the first quarter of 2008. The fluctuating economic environment continues to put
pressure on new investment yields.



After providing
for federal income taxes, our net loss was $26,569 with a loss per share of
$0.02 for the first quarter of 2009 as compared to net income of $20,194 and
earnings per share of $0.02 for the first quarter of 2008.



In light of prior
year losses due to other-than-temporary impairments, we elected not to pay our
typical annual dividend during the first quarter of 2009.



Business
Segments

We internally
evaluate the performance of our operations by the following four business
segments:



Preneed and Burial Products include both life and annuity products sold by
funeral directors or affiliated agents to fund prearranged funerals. Revenues
for this segment were $9,734,705 for the first quarter of 2009 (an increase of
1.7% compared to the first quarter of 2008). This increase is due primarily to
increased preneed sales from the Legacy Gold preneed product series.  Pre-tax
loss from operations was $276,186 for the three month period ended March 31,
2009 compared to a pre-tax loss from operations of $327,282 for the three month
period ended March 31, 2008.  This improvement was also driven by the increase
in sales revenue.



Traditional and Universal Life Products include traditional life and group life
insurance products, certain annuities and universal life products. Revenues for
this segment were $2,478,715 for the first quarter of 2009 (a decrease of 9.7%
compared to the first quarter of 2008). Revenues on this segment are primarily
derived from the sale of term insurance products through banks, for which demand
fluctuates along with economic conditions. New sales have suffered due to the
tightening of consumer credit markets.  Pre-tax loss from operations was
$104,890 for the three month period ended March 31, 2009 compared to pre-tax
income of $63,084 for the three month period ended March 31, 2008. The decrease
in pre-tax income is primarily attributable to lower sales and higher than
anticipated death claims.



Credit Insurance Products and Administrative Services include the marketing and
administration of credit life and credit accident and health insurance products.
We reinsure 100% of the related underwriting risk currently produced within this
segment.  Accordingly, revenue is generated primarily from servicing and
administering the credit business for our reinsurers. Because the revenue is
fee-based, segment performance is in direct relation to new premium production
coupled with fees generated as premiums are earned. Premium production within
this segment is also significantly affected by economic conditions within our
credit markets, particularly Kentucky.  Revenues for this segment were $84,169
for the first quarter of 2009 (a decrease of 9.3% compared to the first quarter
of 2008). Pre-tax income from operations was $46,164 for the three month period
ended March 31, 2009 compared to $70,675 for the three month period ended March
31, 2008. These decreases in revenue and pre-tax income are directly related to
lower premium production within this segment of the business due to current
economic and lending conditions.



Corporate and Other consists of corporate accounts measured primarily by
stockholders' paid-in capital, contributed surplus, earned surplus, property and
equipment, and other minor business lines which include group annuities and
group and individual accident and health products. This segment also includes
fees generated from our TPA arrangements. Revenues for this segment were
$331,244 for the first quarter of 2009 (a decrease of 2.1% compared to the first
quarter of 2008).  Pre-tax income from operations was $300,074 for the three
month period ended March 31, 2009 compared to pre-tax income of $220,001 for the
three month period ended March 31, 2008. The increase in pre-tax income is
primarily driven by a reduction in the stock option compensation expense due to
changes in market values of the options between the two periods, which is
partially offset by higher general administrative expenses in the current year.



While we continue to expand the operations of Investors Heritage Financial,
Investors Heritage Printing, At Need Funding and Heritage Funding, less than 1%
of our consolidated revenues were generated by those subsidiaries. Approximately
7% of Investors Heritage Financial's revenue for the three month period ended
March 31, 2009 was derived from the sale of Investors Heritage Life's credit
insurance products. During the first three months of 2009, Kentucky Investors
received dividends from Investors Heritage Financial totaling $68,000 and
received distributions from At Need Funding of $33,000. We anticipate further
dividend payments from Investors Heritage Financial and distributions from At
Need Funding during the remainder of 2009.



Federal
Income Taxes

The provision for federal income taxes is based on the estimated effective
annual tax rate. Deferred taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Income before
federal income taxes differs from taxable income principally due to the
dividends-received deduction, the 404(k) dividend deduction and the small life
insurance company tax deduction. The effective tax rate was 23.7% for the three
month periods ended March 31, 2009 and 2008, respectively.



OFF-BALANCE
SHEET ARRANGEMENTS



We have no
off-balance sheet arrangements as of March 31, 2009.



FORWARD
LOOKING INFORMATION



We caution readers regarding certain forward-looking statements contained in
this report and in any other statements made by us or on our behalf, whether or
not in future filings with the Securities and Exchange Commission.
Forward-looking statements are statements not based on historical information
and which relate to future operations, strategies, financial results, or other
developments. Statements using verbs such as "expect", "anticipate", "believe"
or words of similar import generally involve forward-looking statements. Without
limiting the foregoing, forward-looking statements include statements which
represent our beliefs concerning future levels of sales and redemptions of
Investors Heritage Life's products, investment spreads and yields, or our
earnings and profitability.



Forward-looking statements are necessarily based on estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which are subject to change. These uncertainties and contingencies could
cause actual results to differ materially from those expressed in any
forward-looking statements made by us or on our behalf. Whether or not actual
results differ materially from forward-looking statements may depend on numerous
foreseeable and unforeseeable factors and developments. Some of these may be
national in scope, such as general economic conditions, changes in tax law and
changes in interest rates. Some may be related to the insurance industry
generally, such as pricing competition, regulatory developments, industry
consolidation and the effects of competition in the insurance business from
other insurance companies and other financial institutions operating in our
market area and elsewhere. Others may relate to us specifically, such as credit,
volatility and other risks associated with our investment portfolio. We caution
that such factors are not exclusive. We disclaim any obligation to update
forward-looking information.





ITEM 4T. Controls and Procedures



As of the end of the period covered by this Form 10-Q, we performed an
evaluation, under the supervision and with the participation of management,
including our Company's Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934. Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiaries) required to be
included in this Quarterly Report on Form 10-Q. There have been no significant
changes in our internal controls or in other factors which could significantly
affect internal controls over financial reporting during this most recent
quarter or subsequent to the date we carried out our evaluation.



---



PART II -- OTHER INFORMATION




ITEM 1. Legal Proceedings



Kentucky
Investors is not involved in any legal proceedings. From time to time Investors
Heritage Life is involved in litigation relating to claims arising out of its
operations in the normal course of business. As of May 14, 2009, Investors
Heritage Life is not a party to any legal proceedings, the adverse outcome of
which, in management's opinion, individually or in the aggregate, would have a
material adverse effect on our financial condition or results of operations.



ITEM 2. Unregistered Sales of Equity Securities and Use of
Proceeds



No share
repurchases were made pursuant to a publicly announced plan or program. All
share repurchases were shares tendered by original stockholders under our right
of first refusal or by employees as part of our 401(k) plan.



ITEM 3. Defaults Upon Senior Securities



None



ITEM 4. Submission of Matters to a Vote of Security Holders



None



ITEM 5. Other Information



None



ITEM 6. Exhibits



31.1 &
			31.2
			Certifications pursuant to Securities and Exchange
			Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of
			the Sarbanes-Oxley Act of  2002.32.1
			Certifications Pursuant to 18 U.S.C. Section 1350, as
			adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




---



SIGNATURES



Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.



KENTUCKY INVESTORS, INC.BY: /s/Harry Lee Waterfield IIHarry Lee Waterfield IIDATE: May 14, 2009
			PresidentBY: /s/Raymond L. CarrRaymond L. CarrDATE: May 14, 2009
			Vice President - Chief Financial Officer






---

---