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, 2008








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 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 13(g) of the Act:



Common Capital Stock par value $1.00 per share

(Title of Class)



Number of outstanding shares as of April 29, 2008 -- 1,114,433.160



---



CONTENTSPART I -- FINANCIAL INFORMATIONPageITEM 1
			Condensed Consolidated
			Financial Statements
			3ITEM 2
			Management's Discussion and
			Analysis of Financial Condition and Results of Operations
			12ITEM 4T
			Controls and Procedures
			19PART II -- OTHER INFORMATIONITEM 1
			Legal Proceedings
			20ITEM 2
			Unregistered Sales of Equity Securities and Use of
			Proceeds
			20ITEM 3
			Defaults Upon Senior Securities
			20ITEM 4.
			Submission of Matters to a Vote of Security Holders
			20ITEM 5.
			Other Information
			20ITEM 6.
			Exhibits
			20SIGNATURES
			
			21EXHIBIT 31.1
			
			22EXHIBIT 31.2
			
			23EXHIBIT 32
			
			24




---



PART I -- FINANCIAL INFORMATION




ITEM 1.  Condensed Consolidated Financial Statements



KENTUCKY INVESTORS, INC.Condensed Consolidated Balance
			Sheets (Unaudited)March 31,
			
			December 31,ASSETS
			
			2008
			
			2007Investments:Securities
			available-for-sale, at fair value:Fixed maturities
			(amortized cost: $280,561,406 and $283,670,281)
			$
			290,100,763
			$
			289,516,851Equity securities (cost:
			$4,849,471 and $3,850,263)
			
			5,097,114
			
			4,335,063Mortgage loans on real
			estate
			
			24,397,951
			
			24,812,445Policy loans
			
			6,943,801
			
			6,968,157Other long-term investments
			
			1,213,050
			
			878,036Short-term investments
			
			340,000
			
			365,000Total investments
			$
			328,092,679
			$
			326,875,552Cash and cash equivalents
			
			3,981,167
			
			1,238,194Accrued investment income
			
			3,512,145
			
			4,668,922Due premiums
			
			3,718,992
			
			3,726,202Deferred acquisition costs
			
			19,942,425
			
			20,379,631Present value of future
			profits
			
			93,489
			
			116,385Leased property under capital
			leases
			
			376,817
			
			372,928Property and equipment
			
			1,697,521
			
			1,678,094Collateral on securities
			loaned
			
			8,886,629
			
			2,186,372Cash value of company-owned
			life insurance
			
			6,910,665
			
			6,845,039Other assets
			
			270,623
			
			285,532Amounts recoverable from
			reinsurers
			
			50,979,718
			
			51,375,027$
			428,462,870
			$
			419,747,878LIABILITIES AND STOCKHOLDERS'
			EQUITYLIABILITIESPolicy liabilities:Benefit reserves
			$
			340,206,018
			
			341,268,264Unearned premium
			reserves
			
			12,504,487
			
			12,990,293Policy claims
			
			1,502,432
			
			1,476,669Liability for
			deposit-type contracts
			
			2,664,098
			
			2,663,641Reserves for dividends
			and endowments and other
			
			575,051
			
			547,262Total policy liabilities
			$
			357,452,086
			$
			358,946,129Deferred federal income tax
			liability
			
			6,256,318
			
			5,211,301Obligations under capital
			leases
			
			368,264
			
			371,736Notes payable
			
			4,583,024
			
			4,261,948Obligations to return
			collateral under securities loan agreement
			
			8,886,629
			
			2,186,372Accrued pension liability
			
			2,005,297
			
			2,159,914Other liabilities
			
			2,770,004
			
			2,053,378Total liabilities
			$
			382,321,622
			$
			375,190,778STOCKHOLDERS' EQUITYCommon stock (shares
			issued:  1,113,051 and 1,117,851)
			$
			1,113,051
			$
			1,117,851Paid-in surplus
			
			8,650,907
			
			8,650,907Accumulated other
			comprehensive income
			
			4,024,751
			
			1,902,238Retained earnings
			
			32,352,539
			
			32,886,104Total stockholders' equity
			$
			46,141,248
			$
			44,557,100$
			428,462,870
			$
			419,747,878See notes to consolidated financial
			statements.




---



KENTUCKY INVESTORS, INC.Condensed Consolidated Income
			Statements (Unaudited)Three Months Ended March 31,2008
			
			
			2007REVENUEPremiums and other
			considerations
			
			$
			10,775,890
			
			$
			10,992,072Premiums ceded
			
			
			(2,737,533)
			
			
			(2,750,109)Net premiums earned
			
			
			8,038,357
			
			
			8,241,963Investment income, net of
			expenses
			
			
			4,440,439
			
			
			4,527,399Realized losses on
			investments, net
			
			
			(1,471)
			
			
			(541)Other income
			
			
			272,778
			
			
			288,077Total revenue
			
			$
			12,750,103
			
			$
			13,056,898BENEFITS AND EXPENSESDeath and other benefits
			
			$
			8,756,468
			
			$
			8,878,261Guaranteed annual endowments
			
			
			139,676
			
			
			146,606Dividends to policyholders
			
			
			130,002
			
			
			133,359Increase in benefit reserves
			and unearned premiums
			
			
			433,560
			
			
			306,931Acquisition costs deferred
			
			
			(1,149,876)
			
			
			(1,251,924)Amortization of deferred
			acquisition costs
			
			
			1,308,471
			
			
			1,421,663Commissions
			
			
			525,582
			
			
			525,788Other insurance expenses
			
			
			2,579,742
			
			
			2,478,295Total benefits and expenses
			
			$
			12,723,625
			
			$
			12,638,979INCOME BEFORE FEDERAL INCOME
			TAXES
			
			$
			26,478
			
			$
			417,919PROVISION (BENEFIT) FOR
			FEDERAL INCOME TAXESCurrent
			
			$
			46,835
			
			$
			6,906Deferred
			
			
			(40,551)
			
			
			67,1156,284
			
			$
			74,021NET INCOME
			
			$
			20,194
			
			$
			343,898BASIC AND DILUTED NET
			EARNINGS PER SHARE
			
			$
			0.02
			
			$
			0.31DIVIDENDS PER SHARE
			
			$
			0.38
			
			$
			0.38See notes to consolidated financial statements.




---



KENTUCKY INVESTORS, INC.Condensed Consolidated Statements of Stockholders'
			Equity (Unaudited)AccumulatedOther
			
			
			
			TotalCommon
			
			Paid-in
			
			Comprehensive
			
			Retained
			
			Stockholders'Stock
			
			Surplus
			
			Income (Loss)
			
			Earnings
			
			EquityBALANCE, JANUARY 1, 2007
			$
			1,113,104
			$
			8,603,902
			$
			(114,520)
			$
			31,567,907
			$
			41,170,393Comprehensive income:Net income
			
			-
			
			-
			
			-
			
			343,898
			
			343,898Change in net unrealized
			appreciationon available-for-sale
			securities
			
			-
			
			-
			
			435,509
			
			-
			
			435,509Change in unrealized pension
			benefits
			
			-
			
			-
			
			29,536
			
			-
			
			29,536Change in fair value of
			hedging instrument
			
			-
			
			-
			
			(1,987)
			
			-
			
			(1,987)Total comprehensive income
			
			
			
			
			
			
			
			
			
			806,956Cash dividends
			
			-
			
			-
			
			-
			
			(458,852)
			
			(458,852)Issuances of common stock, net
			
			216
			
			1,750
			
			-
			
			3,975
			
			5,941BALANCE, MARCH 31, 2007
			$
			1,113,320
			$
			8,605,652
			$
			348,538
			$
			31,456,928
			$
			41,524,438BALANCE, 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)Repurchases 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
			$
			46,141,248See notes to consolidated financial statements.




---



KENTUCKY INVESTORS, INC.Condensed Consolidated Statements of Cash Flows (Unaudited)Three Months Ended March 31,2008
			
			
			2007NET CASH PROVIDED BY
			OPERATING ACTIVITIES
			
			$
			1,326,580
			
			$
			1,769,597INVESTING ACTIVITIESSecurities available-for-sale:Purchases
			
			$
			(6,021,224)
			
			$
			(4,510,514)Sales and maturities
			
			
			8,030,055
			
			
			3,926,150Other investments:Cost of acquisitions
			
			
			(332,543)
			
			
			(1,662,861)Sales and maturities
			
			
			461,379
			
			
			496,729Net additions to property and
			equipment
			
			
			(113,866)
			
			
			(77,648)NET CASH PROVIDED BY (USED
			IN) INVESTING ACTIVITIES
			
			$
			2,023,801
			
			$
			(1,828,144)FINANCING ACTIVITIESReceipts from universal life
			policies credited topolicyholder account
			balances
			
			$
			1,647,128
			
			$
			2,467,482Return of policyholder account
			balances on universal life policies
			
			
			(2,440,012)
			
			
			(2,733,180)Payments on notes payable
			
			
			(688,784)
			
			
			(1,196,709)Proceeds from notes payable
			
			
			1,009,860
			
			
			1,188,939Issuances (repurchases) of
			common stock
			
			
			(135,600)
			
			
			5,941NET CASH USED IN FINANCING
			ACTIVITIES
			
			$
			(607,408)
			
			$
			(267,527)INCREASE (DECREASE) IN CASH
			AND CASH EQUIVALENTS
			
			$
			2,742,973
			
			$
			(326,074)Cash and cash equivalents at
			beginning of period
			
			
			1,238,194
			
			
			1,776,491CASH AND CASH EQUIVALENTS AT
			END OF PERIOD
			
			$
			3,981,167
			
			$
			1,450,417See notes to consolidated financial statements.




---



KENTUCKY
INVESTORS, INC.



NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2008

(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, 2008 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2008. For
further information, refer to the consolidated financial statements and
footnotes thereto for the year ended December 31, 2007, 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.



Certain reclassifications have been made to the amounts
previously reported for the prior periods shown herein to conform to the current
period presentation.



NOTE C - 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, 2008 and 2007 were 1,115,108 and 1,113,257, respectively.



We account for our stock-based incentive program under
Statement of Financial Accounting Standard ("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 compensation, and compensation expense is measured as the change in
intrinsic value.



The Company's only outstanding stock options and stock
appreciation rights were issued in 1999. 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, 2008 and 2007. We recognized
an increase in compensation expense relative to the outstanding options of
$45,844 for the three month period ended March 31, 2008 compared to a decrease
in compensation expense of $88,631 associated with such options for the three
month period ended March 31, 2007. 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 D - 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. Results for the parent company, Investors Heritage Printing, At
Need Funding, Heritage Funding, and a portion of Investors Heritage Financial,
after elimination of intercompany amounts, are allocated to the Corporate and
Other segment.



During the third quarter 2007, we determined that certain
service fee income of Investors Heritage Financial that is derived from external
parties relative to credit administrative services being provided should be
included within the Credit Insurance Products and Administrative Services
segment.  Historically, all Investors Heritage Financial revenue and income had
been included in the Corporate and Other segment.  Accordingly, the prior period
segment data has been reclassified for comparative purposes with the current
period segment presentation.



Three Months Ended March 31,2008
			
			
			2007Revenue:Preneed and
			burial products
			$
			9,574,459
			
			$
			9,762,061Traditional and
			universal life products
			
			2,744,423
			
			
			2,857,413Credit insurance
			products and administrative services
			
			92,808
			
			
			125,437Corporate and
			other
			
			338,413
			
			
			311,987$
			12,750,103
			
			$
			13,056,898Pre-tax income
			(loss) from operations:Preneed and
			burial products
			$
			(327,282)
			
			$
			(140,677)Traditional and
			universal life products
			
			63,084
			
			
			241,051Credit insurance
			products and administrative services
			
			70,675
			
			
			98,682Corporate and
			other
			
			220,001
			
			
			218,863$
			26,478
			
			$
			417,919




NOTE E - Federal Income Taxes

The provision (benefit) 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 2004, 2005 and 2006 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, it is our policy to classify any interest and penalties (if
applicable) as income tax expense in the financial statements.



NOTE F - Comprehensive Income

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



Three Months Ended March 31,2008
			
			2007Net income
			$
			20,194
			$
			343,898Change in net unrealized appreciation on
			available-for-sale securities
			
			2,101,869
			
			435,509Change in unrealized pension benefits
			
			20,227
			
			29,536Change in fair value of hedging instrument
			
			417
			
			(1,987)Total comprehensive income
			$
			2,142,707
			$
			806,956




NOTE G -
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 31,2008
			
			2007Service cost
			$
			89,030
			$
			86,075Interest cost
			
			200,831
			
			183,238Expected return on
			plan assets
			
			(231,254)
			
			(212,874)Recognized net
			loss
			
			30,649
			
			44,752Net periodic
			benefit cost
			$
			89,256
			$
			101,191




We previously disclosed in our financial statements for
the year ended December 31, 2007 that we expected to contribute $852,920 to our
pension plan in 2008. As of March 31, 2008, $213,225 had been contributed. We
presently anticipate contributing an additional $639,695 to fund our pension
plan in 2008.



NOTE H - Investments

We participate in a securities lending program, primarily
for investment yield enhancement purposes, with third parties, mostly large
brokerage firms. Securities loaned are treated as financing arrangements and the
unrestricted collateral received is recorded as an asset, with an offsetting
liability recorded for our obligation to return the collateral, both reported at
fair value. We obtain collateral in an amount equal to 102% of the fair value of
domestic securities loaned, monitor the market value of securities loaned on a
daily basis and obtain additional collateral as necessary. At March 31, 2008,
there were securities on loan under this agreement with a market value of
$8,648,880, with associated collateral held of $8,886,629.  At December 31,
2007, there were securities on loan under this agreement with a market value of
$2,124,160, with associated collateral held of $2,186,372.  Income earned
relative to this program was $8,416 and $2,505, respectively, for the three
month periods ended March 31, 2008 and 2007.



NOTE I - Fair Values of Financial Instruments

Effective
January 1, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS
No. 157").  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.  The Company experienced no
material financial impact as a result of the adoption of SFAS No. 157.



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.
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. 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. 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 quarter 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, 2008.



Level 1
			
			Level 2
			
			Level 3
			
			TotalAssets:Fixed maturities
			$
			-
			$
			283,277,891
			$
			6,822,872
			$
			290,100,763Equity
			securities
			
			4,777,114
			
			-
			
			320,000
			
			5,097,114




Level 3 financial instruments consist of six corporate
asset-backed securities as well as one 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 quarter ended March 31, 2008.





Beginning 
			Balance
			
			Realized
			Gains
			(Losses)
			
			Unrealized
			Gains
			(Losses)
			
			Purchases
			(Sales)
			
			Transfers
			In (Out)
			
			Ending
			BalanceAssets:Fixed maturities
			$
			6,940,640
			$
			-
			$
			(117,768)
			$
			-
			$
			-
			$
			6,822,872Equity securities
			
			320,000
			
			-
			
			-
			
			-
			
			-
			
			320,000




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



---



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 will fully replace the previous
Legacy Protector and Legacy Preferred life insurance and annuity products during
2008.



The Heritage Final Expense product is sold in the final
expense markets. It is reinsured on an 80% quota share basis. 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.



Investors Heritage Life also provides term insurance
products, both on a decreasing and a level basis. The Term to 95 product
provides level coverage. Our decreasing term policy is primarily sold through
financial institutions.



Investors Heritage Life continues to market its
third-party administrative ("TPA") services as an additional revenue source.  We
currently have four 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, and 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, the security is written down to the estimated fair value
with a corresponding realized loss recognized in the consolidated statement of
income.



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, a change in our ability
or intent to hold temporarily impaired securities until maturity or recovery in
value could result in a future impairment charge.



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.



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; however, the application of
the new formula to our plan remains in process.  Accordingly, the effect of this
new law on the funding of our pension plan has not yet been determined, but is
expected to be material.  In anticipation of an increase in required funding, we
have voluntarily increased the projected contribution to our pension plan for
2008 by approximately $200,000 above our prior year contribution.



New Accounting Pronouncements

Effective
January 1, 2008, the Company adopted SFAS No. 157, "Fair Value Measurements" ("SFAS
No. 157").  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.  The Company experienced no
material financial impact as a result of the adoption of SFAS No. 157.



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 which 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 based on the nature of the information used to obtain
the fair value.  SFAS No. 157 requires certain disclosures about the level used
to measure assets and liabilities reported at fair value as well as disclosures
regarding changes in the values of those items reported using level 3 inputs,
which involve a great deal of estimation and judgment by management.



Refer to Note I of the condensed consolidated financial
statements for more explanation of SFAS No. 157 as well as for the required
disclosures.



INVESTMENTS, LIQUIDITY AND CAPITAL RESOURCES



Investments

Investors Heritage Life has maintained a sound,
conservative investment strategy. At March 31, 2008, 88.4% of invested assets
consisted of fixed income securities compared to 88.6% at December 31, 2007. At
March 31, 2008 and December 31, 2007, Investors Heritage Life's fixed income
investments were 100% investment grade, respectively, as rated by Standard &
Poor's. 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 recognized no other-than-temporary impairment losses
during the three months ended March 31, 2008 or the corresponding period in
2007. We believe that we will recover the cost basis in the securities held with
unrealized losses as we have both the intent and ability to hold the securities
until they mature or recover in value.



We continuously monitor the
investment risk within our portfolio, including the risk associated with
subprime lending with our CMO investments.  As of March 31, 2008, we have only
one CMO, with a fair value of approximately $67,000, 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.



We participate in a securities lending program, primarily
for investment yield enhancement purposes, with third parties, mostly large
brokerage firms. Securities loaned are treated as financing arrangements and the
unrestricted collateral received is recorded as an asset, with an offsetting
liability recorded for our obligation to return the collateral.



Additionally, Investors Heritage Life engages in
commercial and residential mortgage lending, with approximately 99.8% of these
investments being in commercial properties. All mortgage loans are originated
in-house 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, 2008, 7.4% of invested assets
consisted of mortgage loans compared to 7.6% at December 31, 2007. We anticipate
funding several new mortgage loan investments during the remainder of 2008 to
maintain a similar to slightly higher percentage of mortgage loans to total
invested assets. As of March 31, 2008, 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, 2008, 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 $8,038,357 for
the first quarter of 2008 (a decrease of 2.5% compared to the first quarter of
2007). The decrease was primarily due to lower sales in the preneed and burial
segment given the current economic environment. Net investment income was
$4,440,439 for the first quarter of 2008 (a decrease of 1.9% compared to the
first quarter of 2007). This decrease resulted from the current depressed
interest rate environment, which affects new investments in bonds as well as
interest earned on loans from At-Need Funding.  Additionally, mortgage loans
with higher yielding interest rates have paid down without being replaced, which
has further lowered investment income.  Total revenue was $12,750,103 for the
first quarter of 2008 (a decrease of 2.3% compared to the first quarter of
2007).



Total benefits and expenses were $12,723,625 in the first
quarter of 2008 (an increase of 0.7% compared to the first quarter of 2007). The
increase in benefits and expenses is primarily due to rising costs associated
with employee salaries and benefits.  After providing for federal income taxes,
our net income was $20,194 with earnings per share of $0.02 for the first
quarter of 2008 as compared to $343,898 and earnings per share of $0.31 for the
first quarter of 2007.



A dividend of $0.38 per share was paid on April 7, 2008,
to shareholders of record on March 21, 2008.



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 $9,574,459 for the first quarter of
2008 (a decrease of 1.9% compared to the first quarter of 2007).  This decrease
is due primarily to lower premium production in a competitive marketplace and
the Company's focus on maintaining profitable premium production.  Pre-tax loss
from operations was ($327,282) for the first quarter of 2008 compared to
($140,677) for the same period for 2007.  The increase in the pre-tax loss for
the current quarter is due to the decrease in premium production coupled with
the increase in general expenses as discussed above.



Traditional and Universal Life Products include
traditional life and group life insurance products, certain annuities and
universal life products. Revenues for this segment were $2,744,423 for the first
quarter of 2008 (a decrease of 4.0% compared to the first quarter of 2007).
Revenues on this segment are primarily derived from the sale of term insurance
products through banks, for which demand fluctuates along with economic
conditions. Pre-tax income from operations was $63,084 for the first quarter of
2008 compared to $241,051 for the same period for 2007. The decrease in pre-tax
income is caused by the decrease in premium and increase in general expenses
previously discussed.



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 $92,808 for the first quarter of 2008 (a decrease of 26.0%
compared to the first quarter of 2007). Pre-tax income from operations was
$70,675 for the first quarter of 2008 compared to $98,682 for the same period
for 2007.  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 $338,413 for the first quarter of 2008 (an increase of 8.5%
compared to the first quarter of 2007).  Pre-tax income from operations was
$220,001 for the first quarter of 2008 compared to $218,863 for the same period
of 2007. The increase in revenues and pre-tax income for the first quarter of
2008 in comparison to the same period in 2007 is primarily due to increases in
third-party administration fees, as certain clients were obtained late in the
first quarter of 2007.  This increase is partially offset by the increased
general expenses referred to above to arrive at pre-tax income.



While we continue to expand the operations of Investors
Heritage Financial, Investors Heritage Printing, At Need Funding and Heritage
Funding, approximately 1% of our consolidated revenues were generated by those
subsidiaries. Approximately 17% of Investors Heritage Financial's revenue for
the three month period ended March 31, 2008 was derived from the sale of
Investors Heritage Life's credit insurance products. During the first three
months of 2008, Kentucky Investors received dividends from Investors Heritage
Financial totaling $72,000 and received distributions from At Need Funding of
$26,000. We anticipate further dividend payments from Investors Heritage
Financial and distributions from At Need Funding during the remainder of 2008.



Federal Income Taxes

The provision (benefit) 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 months ended March 31, 2008 compared to 17.7% for
the three months ended March 31, 2007.



OFF-BALANCE SHEET ARRANGEMENTS



We have no off-balance sheet arrangements as of March 31,
2008.



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 8, 2008, 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
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-31.2 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 and
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 8, 2008
			
			PresidentBY:
			/s/Raymond L. CarrRaymond L. CarrDATE: May 8, 2008
			
			Vice President - Chief
			Financial Officer