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 September 30, 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)



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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 12(g) of the Act:



Common Capital
Stock par value $1.00 per share

(Title of Class)



Number of
outstanding shares as of November 13, 2008 -- 1,120,640.356



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CONTENTS





PART I -- FINANCIAL INFORMATIONPageITEM 1.
			Condensed Consolidated
			Financial Statements
			3ITEM 2.
			Management's Discussion and
			Analysis of Financial Condition and Results of Operations
			15ITEM 4T.
			Controls and Procedures
			22PART II -- OTHER INFORMATIONITEM 1.
			Legal Proceedings
			23ITEM 2.
			Unregistered Sales of Equity Securities and Use of
			Proceeds
			23ITEM 3.
			Defaults Upon Senior Securities
			23ITEM 4.
			Submission of Matters to a Vote of Security Holders
			23ITEM 5.
			Other Information
			23ITEM 6.
			Exhibits
			23SIGNATURES
			
			24EXHIBIT 31.1
			
			25EXHIBIT 31.2
			
			27EXHIBIT 32
			
			29




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PART I -- FINANCIAL INFORMATION




ITEM 1.  Condensed Consolidated Financial Statements



KENTUCKY INVESTORS, INC. Condensed Consolidated Balance Sheets (Unaudited)  September 30,
			
			December 31,ASSETS
			
			2008
			
			2007Investments:Securities
			available-for-sale, at fair value:Fixed maturities
			(amortized cost: $268,794,108 and $283,670,281)
			$
			264,414,827
			$
			289,516,851Equity securities (cost:
			$4,881,535 and $3,850,263)
			
			4,865,443
			
			4,335,063Mortgage loans on real
			estate
			
			22,671,616
			
			24,812,445Policy loans
			
			6,992,801
			
			6,968,157Other long-term investments
			
			1,010,156
			
			878,036Short-term investments
			
			340,000
			
			365,000Total investments
			$
			300,294,843
			$
			326,875,552Cash and cash equivalents
			
			17,946,634
			
			1,238,194Accrued investment income
			
			3,363,030
			
			4,668,922Due premiums
			
			3,666,792
			
			3,726,202Deferred acquisition costs
			
			20,587,597
			
			20,379,631Present value of future
			profits
			
			47,697
			
			116,385Leased property under capital
			leases
			
			291,252
			
			372,928Property and equipment
			
			1,740,886
			
			1,678,094Collateral on securities
			loaned
			
			14,883,529
			
			2,186,372Cash value of company-owned
			life insurance
			
			7,506,641
			
			6,845,039Other assets
			
			277,121
			
			285,532Amounts recoverable from
			reinsurers
			
			50,123,353
			
			51,375,027$
			420,729,375
			$
			419,747,878LIABILITIES AND STOCKHOLDERS'
			EQUITYLIABILITIESPolicy liabilities:Benefit reserves
			$
			342,140,453
			$
			341,268,264Unearned premium
			reserves
			
			12,499,824
			
			12,990,293Policy claims
			
			1,487,595
			
			1,476,669Liability for
			deposit-type contracts
			
			2,728,034
			
			2,663,641Reserves for dividends
			and endowments and other
			
			554,044
			
			547,262Total policy liabilities
			$
			359,409,950
			$
			358,946,129Deferred federal income tax
			liability
			
			37,996
			
			5,211,301Obligations under capital
			leases
			
			289,715
			
			371,736Notes payable
			
			3,870,476
			
			4,261,948Obligations to return
			collateral under securities loan agreement
			
			14,883,529
			
			2,186,372Accrued pension liability
			
			1,764,180
			
			2,159,914Other liabilities
			
			2,938,291
			
			2,053,378Total liabilities
			$
			383,194,137
			$
			375,190,778STOCKHOLDERS' EQUITYCommon stock (shares
			issued:  1,119,475 and 1,117,851)
			$
			1,119,475
			$
			1,117,851Paid-in surplus
			
			8,700,233
			
			8,650,907Accumulated other
			comprehensive income (loss)
			
			(3,415,349)
			
			1,902,238Retained earnings
			
			31,130,879
			
			32,886,104Total stockholders' equity
			$
			37,535,238
			$
			44,557,100$
			420,729,375
			$
			419,747,878






See notes to consolidated
financial statements.



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KENTUCKY INVESTORS, INC.

Condensed Consolidated Income Statements (Unaudited)



Three Months Ended September 30,2008
			
			
			2007REVENUEPremiums and other
			considerations
			
			$
			11,728,363
			
			$
			11,238,490Premiums ceded
			
			
			(3,297,029)
			
			
			(3,570,741)Net premiums earned
			
			
			8,431,334
			
			
			7,667,749Investment income, net of
			expenses
			
			
			4,401,634
			
			
			4,527,405Realized losses on
			investments, net
			
			
			(2,907,145)
			
			
			(1,683)Other income
			
			
			272,868
			
			
			115,311Total revenue
			
			$
			10,198,691
			
			$
			12,308,782BENEFITS AND EXPENSESDeath and other benefits
			
			$
			7,101,104
			
			$
			7,808,407Guaranteed annual endowments
			
			
			122,129
			
			
			128,048Dividends to policyholders
			
			
			114,309
			
			
			144,396Increase in benefit reserves
			and unearned premiums
			
			
			1,929,152
			
			
			749,205Acquisition costs deferred
			
			
			(1,184,285)
			
			
			(1,113,511)Amortization of deferred
			acquisition costs
			
			
			1,338,976
			
			
			1,310,886Commissions
			
			
			584,751
			
			
			499,735Other insurance expenses
			
			
			2,199,905
			
			
			2,242,005Total benefits and expenses
			
			
			12,206,041
			
			$
			11,769,171INCOME (LOSS) BEFORE FEDERAL
			INCOME TAXES
			
			$
			(2,007,350)
			
			$
			539,611PROVISION (BENEFIT) FOR
			FEDERAL INCOME TAXESCurrent
			
			$
			102,370
			
			$
			51,481Deferred
			
			
			(578,819)
			
			
			44,094$
			(476,449)
			
			$
			95,575NET INCOME (LOSS)
			
			$
			(1,530,901)
			
			$
			444,036BASIC AND DILUTED NET
			EARNINGS (LOSS) PER SHARE
			
			$
			(1.37)
			
			$
			0.40DIVIDENDS PER SHARE
			
			$
			-
			
			$
			-




See notes to consolidated
financial statements.



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KENTUCKY INVESTORS, INC.

Condensed Consolidated Income Statements (Unaudited)



Nine Months Ended September 30,2008
			
			
			2007REVENUEPremiums and other
			considerations
			
			$
			34,205,627
			
			$
			33,925,237Premiums ceded
			
			
			(9,523,970)
			
			
			(9,919,363)Net premiums earned
			
			
			24,681,657
			
			
			24,005,874Investment income, net of
			expenses
			
			
			13,354,889
			
			
			13,517,157Realized losses on
			investments, net
			
			
			(2,907,527)
			
			
			(1,082)Other income
			
			
			824,789
			
			
			754,973Total revenue
			
			$
			35,953,808
			
			$
			38,276,922BENEFITS AND EXPENSESDeath and other benefits
			
			$
			23,722,447
			
			$
			24,559,841Guaranteed annual endowments
			
			
			417,455
			
			
			438,348Dividends to policyholders
			
			
			416,602
			
			
			428,164Increase in benefit reserves
			and unearned premiums
			
			
			3,812,794
			
			
			2,121,568Acquisition costs deferred
			
			
			(3,540,392)
			
			
			(3,578,597)Amortization of deferred
			acquisition costs
			
			
			4,027,483
			
			
			4,154,096Commissions
			
			
			1,653,302
			
			
			1,535,635Other insurance expenses
			
			
			,174,503
			
			
			7,272,475Total benefits and expenses
			
			$
			37,684,194
			
			$
			36,931,530INCOME (LOSS) BEFORE FEDERAL
			INCOME TAXES
			
			$
			(1,730,386)
			
			$
			1,345,392PROVISION (BENEFIT) FOR
			FEDERAL INCOME TAXESCurrent
			
			$
			236,345
			
			$
			104,593Deferred
			
			
			(647,056)
			
			
			133,701$
			(410,711)
			
			$
			238,294NET INCOME (LOSS)
			
			$
			(1,319,675)
			
			$
			1,107,098BASIC AND DILUTED NET
			EARNINGS (LOSS) PER SHARE
			
			$
			(1.18)
			
			$
			0.99DIVIDENDS PER SHARE
			
			$
			0.38
			
			$
			0.38




See notes to consolidated financial
statements.



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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
			
			-
			
			-
			
			-
			
			1,107,098
			
			1,107,098Change in net unrealized
			appreciationon available-for-sale
			securities
			
			-
			
			-
			
			(1,024,442)
			
			-
			
			(1,024,442)Change in unrealized pension
			benefits
			
			-
			
			-
			
			88,609
			
			-
			
			88,609Change in fair value of
			hedging instrument
			
			-
			
			-
			
			(5,600)
			
			-
			
			(5,600)Total comprehensive income
			
			
			
			
			
			
			
			
			
			165,665Cash dividends
			
			-
			
			-
			
			-
			
			(423,062)
			
			(423,062)Issuances (redemptions) of
			common stock, net
			
			(86)
			
			7,616
			
			-
			
			(10,629)
			
			(3,099)BALANCE, SEPTEMBER 30, 2007
			$
			1,113,018
			$
			8,611,518
			$
			(1,055,953)
			$
			32,241,314
			$
			40,909,897BALANCE, JANUARY 1, 2008
			$
			1,117,851
			$
			8,650,907
			$
			1,902,238
			$
			32,886,104
			$
			44,557,100Comprehensive loss:Net loss
			
			-
			
			-
			
			-
			
			(1,319,675)
			
			(1,319,675)Change in net unrealized
			depreciationon available-for-sale
			securities
			
			-
			
			-
			
			(5,442,504)
			
			-
			
			(5,442,504)Change in unrealized pension
			benefits
			
			-
			
			-
			
			122,168
			
			-
			
			122,168Change in fair value of
			hedging instrument
			
			-
			
			-
			
			2,749
			
			-
			
			2,749Total comprehensive loss
			
			
			
			
			
			
			
			
			
			(6,637,262)Cash dividends
			
			-
			
			-
			
			-
			
			(422,959)
			
			(422,959)Issuances (redemptions) of
			common stock, net
			
			1,624
			
			49,326
			
			-
			
			(12,591)
			
			38,359BALANCE, SEPTEMBER 30, 2008
			$
			1,119,475
			$
			8,700,233
			$
			(3,415,349)
			$
			31,130,879
			$
			37,535,238




See notes to consolidated financial
statements.



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KENTUCKY INVESTORS, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)



Nine Months Ended September 30,2008
			
			
			2007NET CASH PROVIDED BY
			OPERATING ACTIVITIES
			
			$
			6,089,497
			
			$
			4,189,792INVESTING ACTIVITIESSecurities available-for-sale:Purchases
			
			$
			(17,276,585)
			
			$
			(13,554,554)Sales
			and maturities
			
			
			27,918,021
			
			
			11,086,819Other investments:Cost
			of acquisitions
			
			
			(909,350)
			
			
			(2,961,586)Sales
			and maturities
			
			
			2,918,415
			
			
			3,185,238Net
			additions to property and equipment
			
			
			(257,413)
			
			
			(406,714)NET CASH PROVIDED BY (USED
			IN) INVESTING ACTIVITIES
			
			$
			12,393,088
			
			$
			(2,650,797)FINANCING ACTIVITIESReceipts from universal life policies credited topolicyholder account balances
			
			$
			5,641,005
			
			$
			7,302,044Return of policyholder account balances on universal life policies
			
			
			(6,639,078)
			
			
			(7,696,529)Payments on notes payable
			
			
			(2,438,972)
			
			
			(3,987,981)Proceeds from notes payable
			
			
			2,047,500
			
			
			2,849,447Dividends paid
			
			
			(422,959)
			
			
			(423,062)Issuances (repurchases) of common stock
			
			
			38,359
			
			
			(3,099)NET CASH USED IN FINANCING
			ACTIVITIES
			
			$
			(1,774,145)
			
			$
			(1,959,180)INCREASE (DECREASE) IN CASH
			AND CASH EQUIVALENTS
			
			$
			16,708,440
			
			$
			(420,185)Cash
			and cash equivalents at beginning of period
			
			
			1,238,194
			
			
			1,776,491CASH AND CASH EQUIVALENTS AT
			END OF PERIOD
			
			$
			17,946,634
			
			$
			1,356,306




See notes to consolidated financial
statements.



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KENTUCKY INVESTORS, INC.



NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30,
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 nine months ended September 30, 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.



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 September 30, 2008 and 2007 were 1,117,670 and 1,113,066,
respectively. The weighted average number of shares outstanding for the nine
months ended September 30, 2008 and 2007 were 1,115,714 and 1,113,219,
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 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 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 September 30, 2008 and 2007. We
recognized a decrease in compensation expense relative to the outstanding
options of $33,619 for the three month period ended September 30, 2008 compared
to an increase in compensation expense of $143,644 associated with such options
for the three month period ended September 30, 2007. We recognized a decrease in
compensation expense relative to the outstanding options of $241,444 for the
nine month period ended September 30, 2008 compared to an increase in
compensation expense of $45,844 associated with such options for the nine month
period ended September 30, 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. 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 September 30,2008
			
			
			2007Revenue:Preneed and burial products
			$
			10,211,243
			
			$
			9,272,678Traditional and universal life
			products
			
			2,482,270
			
			
			2,746,644Credit insurance products and
			administrative services
			
			108,515
			
			
			117,634Corporate and other
			
			(2,603,337)
			
			
			171,826$
			10,198,691
			
			$
			12,308,782Pre-tax income (loss) from
			operations:Preneed and burial products
			$
			491,347
			
			$
			321,938Traditional and universal life
			products
			
			160,428
			
			
			224,720Credit insurance products and
			administrative services
			
			73,993
			
			
			95,684Corporate and other
			
			(2,733,118)
			
			
			(102,731)$
			(2,007,350)
			
			$
			539,611Nine Months Ended September 30,2008
			
			
			2007Revenue:Preneed and burial products
			$
			29,561,499
			
			$
			28,182,897Traditional and universal life
			products
			
			8,075,527
			
			
			8,920,560Credit insurance products and
			administrative services
			
			311,655
			
			
			306,134Corporate and other
			
			(1,994,873)
			
			
			867,331$
			35,953,808
			
			$
			38,276,922Pre-tax income (loss) from
			operations:Preneed and burial products
			$
			(47,332)
			
			$
			298,540Traditional and universal life
			products
			
			320,478
			
			
			512,271Credit insurance products and
			administrative services
			
			218,463
			
			
			201,380Corporate and other
			
			(2,221,995)
			
			
			333,201$
			(1,730,386)
			
			$
			1,345,392




NOTE E -- 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 2007
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 F -- Comprehensive Income (Loss)

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



Three Months Ended September 30,2008
			
			2007Net income (loss)
			$
			(1,530,901)
			$
			444,036Change in net unrealized
			appreciation (depreciation) on securities
			
			(2,708,789)
			
			2,209,767Change in unrealized pension
			benefits
			
			40,723
			
			29,537Change in fair value of
			hedging instrument
			
			(746)
			
			(10,921)Total comprehensive income
			(loss)
			$
			(4,199,713)
			$
			2,672,419Nine Months Ended September 30,2008
			
			2007Net income (loss)
			$
			(1,319,675)
			$
			1,107,098Change in net unrealized
			appreciation (depreciation) on securities
			
			(5,442,504)
			
			(1,024,442)Change in unrealized pension
			benefits
			
			122,168
			
			88,609Change in fair value of
			hedging instrument
			
			2,749
			
			(5,600)Total comprehensive income
			(loss)
			$
			(6,637,262)
			$
			165,665




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 September 30,2008
			
			2007Service cost
			$
			92,727
			$
			86,075Interest cost
			
			218,053
			
			183,238Expected return on plan assets
			
			(229,467)
			
			(212,874)Recognized net loss
			
			61,701
			
			44,752Net periodic benefit cost
			$
			143,014
			$
			101,191Nine Months Ended September 30,2008
			
			2007Service cost
			$
			278,183
			$
			258,225Interest cost
			
			654,161
			
			549,714Expected return on plan assets
			
			(688,403)
			
			(638,622)Recognized net loss
			
			185,103
			
			134,256Net periodic benefit cost
			$
			429,044
			$
			303,573




We previously disclosed in our financial
statements for the year ended December 31, 2007 that we expected to contribute
$852,900 to our pension plan in 2008. As of September 30, 2008, $639,675 had
been contributed. We presently anticipate contributing an additional $213,225 to
fund our pension plan in 2008.



At September 30, 2008, based on current
market conditions as well as current year contributions and benefits paid, the
fair value of our pension plan assets has decreased $912,992 since December 31,
2007.



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 cash equivalents as
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 September 30, 2008, there were
securities on loan under this agreement with a market value of $13,127,350, with
associated collateral held of $14,883,529.  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 $7,519 and $20,187, respectively, for the three and nine month
periods ended September 30, 2008. Income earned relative to this program was
$3,761 and $13,078, respectively, for the three and nine month periods ended
September 30, 2007.  We recalled all of these outstanding securities on loan
subsequent to September 30, 2008.



During the third quarter of 2008, we
determined that two Lehman Brothers Holdings bonds in our portfolio, each with a
par value of $2,000,000, were other-than-temporarily impaired.  At September 30,
2008, each bond was written down to its fair value at that date, which was
$250,000 per bond.  This determination resulted in a pre-tax realized loss of
$3,558,156, exclusive of adjustments to deferred acquisition costs as a result
of the loss.  We have reviewed the remainder of our investment portfolio and do
not believe that there are other securities that are other-than-temporarily
impaired at September 30, 2008.  There were no other-than-temporary impairments
recorded in the corresponding period in the prior year.



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. 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 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 September 30, 2008.



Level 1
			
			Level 2
			
			Level 3
			
			TotalAssets:Fixed maturities
			$
			-
			$
			254,074,637
			$
			10,340,190
			$
			264,414,827Equity securities
			
			4,545,443
			
			-
			
			320,000
			
			4,865,443




Level 3 financial instruments consist of
nine 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 three and nine month periods ended
September 30, 2008.



Three Months Ended September 30, 2008Realized
			
			UnrealizedJuly 1, 2008
			
			Gains
			
			Gains
			
			Purchases
			
			Transfers
			
			EndingBalance
			
			(Losses)
			
			(Losses)
			
			(Sales)
			
			In (Out)
			
			BalanceAssets:Fixed maturities
			$
			7,662,264
			$
			-
			$
			(43,378)
			$
			1,964,375
			$
			756,929
			$
			10,340,190Equity securities
			
			320,000
			
			-
			
			-
			
			-
			
			-
			
			320,000Nine Months Ended September 30, 2008Realized
			
			UnrealizedJanuary 1, 2008
			
			Gains
			
			Gains
			
			Purchases
			
			Transfers
			
			EndingBalance
			
			(Losses)
			
			(Losses)
			
			(Sales)
			
			In (Out)
			
			BalanceAssets:Fixed maturities
			$
			6,940,640
			$
			-
			$
			(316,924)
			$
			1,964,375
			$
			1,752,099
			$
			10,340,190Equity 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. 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.



If an other-than-temporary impairment
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
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 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 maintains a
sound, conservative investment strategy. At September 30, 2008, 88.1% of
invested assets consisted of fixed income securities compared to 88.6% at
December 31, 2007. At September 30, 2008 and December 31, 2007, Investors
Heritage Life's fixed income investments, with the exception of our two Lehman
Brothers Holdings bonds, were 100% investment grade as rated by Standard &
Poor's.



We recognized an other-than-temporary
impairment loss during the third quarter of 2008 relative to the two Lehman
Brothers Holdings bonds in our portfolio that are in default, each with a par
value of $2,000,000.  At September 30, 2008, each bond was written down to its
fair value at that date, which was $250,000 per bond.  This determination
resulted in a realized loss of $3,558,156.  While we have written down these
securities to fair value, we believe based on the evaluation of management and
our investment advisor that we will ultimately recover anywhere from 50%-80% of
the par value on the bonds.  Accordingly, we plan to hold the securities in
expectation of these future recoveries.



We have reviewed the remainder of our
investment portfolio and do not believe that there are additional securities
that are other-than-temporarily impaired at September 30, 2008.  There have been
no other-than-temporary impairments recorded in 2008, other than the Lehman
Brothers Holdings bonds, or in the corresponding period in the prior year. 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. 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 September 30, 2008, we have
only one CMO, with a fair value of approximately $54,000, 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.   Subsequent to the end of the current quarter, in response to
current market conditions, we successfully recalled all of our securities on
loan at September 30, 2008.



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
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 September 30, 2008, 7.5% 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 September 30, 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 September 30, 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
$8,431,334 for the third quarter of 2008 (an increase of 10.0% compared to the
third quarter of 2007) and $24,681,657 for the nine months ended September 30,
2008 (an increase of 2.8% compared to the corresponding period in 2007). This
increase was primarily due to increased new sales in the preneed and burial
segment due to the favorable market reception of our new Legacy Gold preneed
series.  Total revenue was $10,198,691 for the third quarter of 2008 (a decrease
of 17.1% compared to the third quarter of 2007) and $35,953,808 for the nine
months ended September 30, 2008 (a decrease of 6.1% compared to the
corresponding period in 2007).



Total benefits and expenses were
$12,206,041 in the third quarter of 2008 (an increase of 3.7% compared to the
third quarter of 2007) and $37,684,194 for the nine months ended September 30,
2008 (an increase of 2.0% compared to the corresponding period in 2007). The
increase in benefits and expenses is primarily due to increased reserves
relative to new business.



Net investment income was $4,401,634 for
the third quarter of 2008 (a decrease of 2.8% compared to the third quarter of
2007) and $13,354,889 for the nine months ended September 30, 2008 (a decrease
of 1.2% compared to the corresponding period in 2007). This decrease resulted
from changes in the interest rate environment over the last year, 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, which has further lowered investment income.  As previously
mentioned, the Company experienced a realized loss, totaling $3,558,156,
resulting from the other-than-temporary impairment of our Lehman Brothers
Holdings bonds.  This impairment loss is the primary driver of the current year
decrease in revenues and pre-tax income in comparison to the prior year.  This
realized loss was partially offset by realized gains on the sale of Fannie Mae
and Freddie Mac corporate bonds totaling $652,841 during the third quarter.



After providing for federal income taxes,
our net loss was $1,530,901 with a loss per share of $1.37 for the third quarter
of 2008 as compared to net income of $444,036 and earnings per share of $0.40
for the third quarter of 2007.  Our net loss for the nine months ended September
30, 2008 was $1,319,675 with a loss per share of $1.18 compared to net income of
$1,107,098 and earnings per share of $0.99 for the nine months ended September
30, 2007.



A dividend of $0.38 per share was paid on
April 7, 2008, to shareholders of record as of 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 $10,211,243 for the third
quarter of 2008 (an increase of 10.1% compared to the third quarter of 2007) and
$29,561,499 for the nine months ended September 30, 2008 (an increase of 4.9%
compared to the corresponding period in 2007). This increase is due primarily to
increased preneed sales from the Legacy Gold preneed product series.  Pre-tax
income from operations was $491,347 for the three month period ended September
30, 2008, and pre-tax loss from operations was $47,332 for the nine month period
ended September 30, 2008.  Pre-tax income was $321,938 and $298,540 for the
three and nine month periods ended September 30, 2007.  The increase in the
year-to-date pre-tax loss is due to continued spread compression and expense
pressure in the current economic environment, although the increase in sales is
helping to reduce the effect.



Traditional and Universal Life Products
include traditional life and group life insurance products, certain annuities
and universal life products. Revenues for this segment were $2,482,270 for the
third quarter of 2008 (a decrease of 9.6% compared to the third quarter of 2007)
and $8,075,527 for the nine months ended September 30, 2008 (a decrease of 9.5%
compared to the corresponding period in 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. New sales have suffered
due to the tightening of consumer credit markets.  Pre-tax income from
operations was $160,428 and $320,478 for the three and nine month periods ended
September 30, 2008, compared to pre-tax income of $224,720 and $512,271 for the
three and nine month periods ended September 30, 2007. The decrease in pre-tax
income is also primarily attributable to the lower sales.



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 $108,515 for the third
quarter of 2008 (a decrease of 7.8% compared to the third quarter of 2007) and
$311,655 for the nine months ended September 30, 2008 (an increase of 1.8%
compared to the corresponding period in 2007). Pre-tax income from operations
was $73,993 and $218,463 for the three and nine month periods ended September
30, 2008, compared to $95,684 and $201,380 for the three and nine month periods
ended September 30, 2007. These decreases in revenue and pre-tax income in the
current quarter are directly related to lower premium production within this
segment of the business due to current economic and lending conditions.  The
year-to-date increases are due primarily to a fee settlement on one of our
reinsurance contracts that occurred in the third quarter of 2007.



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 ($2,603,337) and ($1,994,873) for the three and
nine month periods ended September 30, 2008.  Revenues were $171,826 and
$867,331 for the three and nine month periods ended September 30, 2007.  Pre-tax
income (loss) from operations was ($2,733,118) and ($2,221,995) for the three
and nine month periods ended September 30, 2008, compared to ($102,731) and
$333,201 for the three and nine month periods ended September 30, 2007. The
current year losses are driven by the Lehman Brothers Holdings bond
other-than-temporary impairment, offset somewhat by the capital gains from the
sale of Fannie Mae and Freddie Mac corporate bonds as well as by a reduction in
compensation expense associated with our stock option plan.



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 14% of Investors Heritage
Financial's revenue for the nine month period ended September 30, 2008 was
derived from the sale of Investors Heritage Life's credit insurance products.
During the first nine months of 2008, Kentucky Investors received dividends from
Investors Heritage Financial totaling $135,000 and received distributions from
At Need Funding of $42,500. 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 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 and nine month periods ended September 30, 2008
compared to 17.7% for the three and nine month periods ended September 30, 2007.



OFF-BALANCE SHEET ARRANGEMENTS



We have no off-balance sheet arrangements as of September
30, 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.



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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 November 13, 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
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.




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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: November 13, 2008
			
			PresidentBY:
			/s/Raymond L. CarrRaymond L. CarrDATE: November 13, 2008
			
			Vice President - Chief Financial Officer








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