INVESTORS HERITAGE LIFE INSURANCE CO /KY/, 10-K405, 1996-03-26

INVESTORS HERITAGE LIFE INSURANCE CO /KY/
10-K405, 1996-03-26
LIFE INSURANCE

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal year ended December 31, 1995
Commission File Number 0-3216

INVESTORS HERITAGE LIFE INSURANCE COMPANY, INC.
(Exact name of registrant as specified in Charter)

KENTUCKY 61-0574893
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification Number)

200 Capital Avenue, Frankfort, Kentucky 40601
(Address of Principal Executive Offices)

Registrant's telephone number, including area code 502 223-2361

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

Title of Each Class
Common $1 Par Value

Name of Each Exchange on Which Registered
NASDAQ

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

Common Capital Stock Par Value $1.00 Per Share
(Title of Class)

Indicate by check mark whether the registrant (l) 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this form 10-K
or any amendment to this Form 10-K. (X)

State the aggregate market value of the voting stock held by nonaffiliates of
the registrant $4,854,627 as of December 31, 1995.

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.

Class
Common Capital Stock

Outstanding at December 31, 1995
898,389

Documents Incorporated by Reference:

(1) Portions of the Annual Report to the Stockholders for the year ended
December 31, 1995 (Form 10-K, Items 1, 5a, 6, 7 and 8)
(2) Portions of the Proxy Statement dated April 19, 1996, for the Annual
Meeting of Stockholders to be held May 9, 1996 (Form 10-K, Items 10, 11, 12 and
13.) PART I

Item 1. Business

(a) General

(a) The business of the Company is life insurance. The Company was
incorporated under the laws of Kentucky on August 31, 1960, and commenced
business in April, 1961. Its principal office is located at 200 Capital
Avenue, Frankfort, Kentucky 40601, telephone number (502) 223-2361. The Company
also owns 96% of Investors Underwriters, Inc., an investment holding company.
Kentucky Investors, Inc., a Kentucky Corporation ("KII"), owns 73% of the
Company's stock. In addition, KII wholly owns Investors Heritage Printing, Inc.
("IHP") and Investors Heritage Financial Services Group, Inc. ("FSG"). The
business segments of the Company are identified and discussed on page 45-46
of the
Annual Report to Stockholders for the year ended December 31, 1995 and are
incorporated herein by reference.
A portfolio of the standard forms of participating, non-participating,
whole life, limited pay, endowment, split-funding, interest-sensitive whole
life, guaranteed issue whole life, universal life, term and group life is
offered by the Company. In addition, the Company has historically written
credit life and credit accident and health insurance (respectively, "Credit
Life" and "Credit A&H", and collectively "Credit Insurance") on a group basis;
and during 1995, the Company exited the credit insurance market as a direct
writer and experienced insignificant production (less than $500,000) from the
Credit Insurance product lines in 1995.
During 1995 sales operations were conducted through the Ordinary Life
sales division. Due to the fact that the Company was not a direct writer of
Credit Insurance products during 1995, FSG was formed as a wholly-owned
marketing company of KII to market a variety of products for a number of other
unaffiliated companies as well as the Company's mortgage protection products to
financial institutions. As anticipated, more than 10% of FSG's revenues during
1995 were derived from Franklin Life Insurance Company, Springfield, Illinois,
("Franklin") from the sale of Franklin's Credit Insurance products.
During 1996 sales operations will continue to be conducted through the
ordinary life division of the Company and through FSG which will market the
Company's Ordinary and Credit Insurance products and other products for
unaffiliated companies identified below. See "Material Changes and
Developments-Credit Insurance". It is anticipated that more than 10% of FSG's
revenues for 1996 will be derived from the sale of the Company's Credit
Insurance products.
Ordinary Life. Ordinary Life sales are under the direct supervision of
the home office using a regionally supervised agency system. The method of
field operation involves independent contractual agents working with district
and regional managers. These managers contract with and train agents who work
under them. The regional managers may have several district managers under
their supervision. The Company also sells business through general agents or
brokers who may represent one or more companies.
Approximately 37% of total insurance in force is Ordinary Life.
The Ordinary Life sales are built around a standard portfolio of life
insurance products with some of the major contributions to in-force business
being a participating ordinary life insurance policy, a guaranteed issue whole
life policy and non-participating life policies.
Some of the participating policies provide for payment of guaranteed
annual endowments of fixed amounts beginning at the end of the second policy
year and continuing through the premium paying period. These policies also have
an annual guaranteed benefit. As of December 31, 1995, 12% of the total
ordinary insurance in force was comprised of participating policies and of the
12%, approximately 7% was comprised of participating policies with some
guaranteed benefit.
Another block of participating policies provides for payment of a
dividend which will purchase additional insurance equal to 5% of the previous
year's total death benefit, including any additional insurance purchased in
prior years. The dividend is not guaranteed. As of December 31, 1995, 5% of
the total ordinary insurance in force was comprised of participating policies
with non-guaranteed benefits.
Non-participating life insurance policies represented 88% of the total
ordinary insurance in force.
Four different guaranteed issue whole life policies were sold through
1993. Each has a policy limit of $10,000 face amount, with graded death
benefits during the first two policy years. Two of the policies are non-
participating with non-guaranteed increases in the death benefit and two of the
policies are participating.
The Company also issues two non-participating interest-sensitive single
premium whole life policies based on simplified underwriting. These policies
provide for payment of the full face amount at the death of the insured and for
increasing death benefits on a non-guaranteed basis.
During 1994, the Company introduced new products designed for the pre-
arranged funeral market. These products are single premium and modal premium
non-participating whole life policies. Single premium policies are sold on a
guaranteed issue basis and modal premium policies are fully underwritten. Both
single and modal premium policies provide for non-guaranteed increasing death
benefits and have a maximum face amount of $25,000. The Company also sells a
mortgage protection product which is being marketed by FSG.
Although it was anticipated that during 1995 the Company would
introduce group products designed for the prearranged funeral market, those
products are still in the design phase and have not been introduced yet.
Credit Insurance. Credit Insurance is generally sold through banks,
finance companies and automobile dealerships and is offered in connection with
the extension of credit by these institutions. The amount of the insurance is
designed to cover the amount of the loan, with the financial institutions being
the beneficiary of the insurance policy to the extent of the unpaid balance of
the loan. Credit Insurance production is generally dependent on consumer debt.
In times of low unemployment, reasonable interest rates and a steadily
improving economy, consumer debt increases; therefore, Credit Insurance sales
increase. When the economy slows, consumer debt slows and therefore Credit
Insurance sales decrease.
During the fourth quarter of 1994, the Company began phasing out of the
Credit Insurance market as a direct writer and premium production from Credit
Insurance during 1995 was less than $500,000, as anticipated. The Company
continued to provide the administration and claims processing services for the
Credit Insurance operations. FSG entered into a marketing agreement with
Franklin to market Franklin's Credit Insurance products during 1995.
During the fourth quarter of 1995, the Company and FSG were advised that
Franklin was exiting the Commonwealth of Kentucky as a direct writer of Credit
Insurance products. FSG immediately began negotiations with several
unaffiliated insurance companies to market Credit Insurance for them.
Simultaneously, FSG initiated discussions with unaffiliated insurance companies
regarding a transaction where the Credit Insurance business would be written by
the Company and all of the risk would be immediately reinsured to the
unaffiliated insurance company. A reinsurance transaction was viewed favorably
because the Company would be able to generate an alternate source of income
through fees from administration and claim processing services provided. In
addition, FSG would be able to maintain its revenues in the form of commissions
from the sale of the Company's Credit Insurance products.
In December, 1995, the Company entered into a reinsurance agreement with
The Connecticut General Life Insurance Company, Bloomfield, Connecticut
("Connecticut General") under the terms of which the Company will cede to
Connecticut General all of the risk on all Credit Insurance policies sold by
the
Company. In addition to receiving a retention fee the Company will also receive
a fee for administration and claims processing services. Other than adding one
to three employees, no additional amounts are anticipated to be required to be
expended in order to further utilize the Company's administrative and claims
processing capabilities. Employees will be added only when warranted.
It was and continues to be management's belief that the number of
Credit Insurance providers in the Commonwealth of Kentucky is contracting as a
result of two Kentucky domestic insurers exiting the Credit Insurance market.
Management believed there would be opportunities to administer Credit Insurance
business in Kentucky for non-domestic insurers that are expected to replace
exiting insurers. This belief has come to fruition in an alternate way through
the reinsurance agreement with Connecticut General. The Company will continue
to seek contracts to operate as an administrator for other companies which sell
Credit Insurance.
FSG will call on banks, finance companies and selected automobile
dealerships to market the Credit Insurance products. The Company anticipates
Credit Insurance gross written premiums to exceed $10 million in 1996; however,
as described above, that business will be ceded to Connecticut General.
Approximately 9% of the total life insurance in force is Credit Insurance, all
of which was written directly by the Company.
In addition to selling Credit Insurance, some of the Company's bank
agents obtain an ordinary life license enabling them to sell mortgage insurance
that might be required in excess of the statutory Credit Life limitation
enacted
by each state where our Credit Insurance products are sold. The Company's
mortgage insurance products will continue to be marketed through FSG.
Group Life. Group life accounts for the remaining 54% of in-force
business. Since 1990, the Company has participated in the Federal Employee
Group Life Insurance (FEGLI) Program, which is administered by Metropolitan
Life
Insurance Company. As a result of the termination of the Commonwealth of
Kentucky group life contract, on November 30, 1992, the Company's participation
in the FEGLI Program was substantially decreased during 1993 and 1994. The
reduction from 1992 to 1993 was $195,690,000 to $721,775,000 and from 1993 to
1994 the reduction was $53,011,000 to $668,764,000. From 1994 to 1995 the
reduction was $34,106,000 to $634,658,000.
Principal Markets. 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, Illinois, Kansas, West
Virginia and Texas. The Company has licensed ordinary agents and regional
managers throughout these states. The Company also has licensed credit life
agents in over 75 banks and automobile dealerships throughout the Commonwealth
of Kentucky.
The Company is also licensed in sixteen other states: Georgia, Alabama,
Arkansas, Mississippi, and Louisiana in the South and Southeast; Colorado,
Missouri, New Mexico, North Dakota, South Dakota, Oklahoma, Montana, Nebraska,
Arizona and Utah in the West; and Michigan in the North. The business in these
states is written mostly through general agents.
Risk. The Company in many cases requires evidence of insurability before
issuing individual life policies including,in some cases, a medical examination
or a statement by an attending physician. Home office underwriters review the
evidence of insurability required and approve the issuance of the policy in
accordance with the application if the risk is acceptable. Some applicants who
are substandard risks are rejected, but many are offered policies with higher
premiums, restricted coverages or reduced benefits during the first two policy
years. The majority of the single premium business is written through the
prearranged funeral market without evidence of insurability, relying on
safeguards such as product design, limits on the amount of coverage, and
premiums which recognize the resultant higher level of claims.
Risk is integral to insurance but, as is customary in the insurance
business, the Company obtains reinsurance with respect to amounts in excess of
its retention limits. The maximum limit of retention by the Company on its
standard contract for any one life is $100,000 plus the amount of the return of
premium benefits, if any. The maximum is reduced for sub-standard classes of
risk. The maximum retention on Credit Life was $100,000 per life. Excess
coverages are reinsured externally. As of December 31, 1995; approximately
$180,265,000, or 8% of total life insurance in force was reinsured with non-
affiliated well established insurance companies. The Company would become
liable
for the reinsured risks if the reinsurers could not meet their obligations.
The Company is party to a number of reinsurance and coinsurance
agreements with non-affiliated companies. Approximately $180,265,000 of
insurance in force for the Company was reinsured with seventeen companies.
The reinsurers for the Company and amounts of insurance in force that are
reinsured are as follows:

COMPANY REINSURANCE AMOUNT PERCENT OF TOTAL
Crown Life Insurance Co. $53,359,000 29.6%
The Lincoln National Life Ins. Co.75,440,000 41.9%
J.M. Limited 17,703,000 9.8%
LNB Life Insurance Co. 4,984,000 2.8%
AEtna Life Insurance Co. 2,252,000 1.2%
Indiana-Kentucky Ins. Co. Ltd. 3,552,000 2.0%
Riverside Reinsurance Ltd. 4,807,000 2.7%
Pirtle Ltd. 2,860,000 1.6%
Lancaster Life Insurance Co. 4,012,000 2.2%
Business Men's Assurance Co. 4,139,000 2.3%
North American Reinsurance Co. 2,625,000 1.5%
Groves Reinsurance Ltd. 1,811,000 1.0%
Munich American Reinsurance Co. 1,865,000 1.0%
Other Companies (4) 856,000 .4%
TOTAL $180,265,000 100.0%

AEtna and Crown Life reinsured Credit Life and Credit A&H policies sold between
July 1, 1988 and June 30, 1992. These reinsurance agreements were terminated
with respect to new issues by the Company during 1991 and 1992, respectively.
Neither reinsurer accepted the risk on any new policies issued after the
termination date of each agreement; however, both AEtna and Crown Life continue
to provide reinsurance on all Credit Insurance policies sold prior to March 16,
1991 (AEtna) and June 30, 1992 (Crown Life). During 1996, the Company will
reinsure all of the risk on the Credit Insurance policies sold by its agents to
Connecticut General.
The Company has not experienced a reinsurer default under any of the
reinsurance agreements to which the Company is a party. Further, the Company
has no knowledge of and does not anticipate any material default in any
existing reinsurance obligations.
Regulation of Insurance. The business of the Company is subject to
regulation and supervision by the insurance regulatory authority of each state
in which the Company is licensed to do business. Such regulators grant licenses
to transact business; regulate trade practices; approve policy forms; license
agents; establish minimum reserve and loss ratio requirements; review form and
content of required financial statements; prescribe types and amounts of
investments permitted; and assure that capital, surplus and solvency
requirements are met. Insurance companies can also be required under the
solvency or guaranty laws of most states in which they do business to pay
assessments up to prescribed limits to fund policyholder losses or liabilities
of insolvent insurance companies. They are also required to file detailed
annual reports with supervisory agencies, and records of their business are
subject to examination at any time. Under the rules of the National Association
of Insurance Commissioners (the "NAIC"), a self-regulatory organization of
state insurance commissioners, insurance companies are examined periodically
by one or more of the regulatory authorities.
Domiciled in the Commonwealth of Kentucky, the Company is licensed by the
Kentucky Department of Insurance and is subject to its examination and
regulations. The quadrennial audit was completed during 1990 for the four years
ending December 31, 1989. The Company received an excellent report. The
Company received its most recent quadrennial examination during 1995. The
Company anticipates conclusion on or before the end of the second quarter of
1996. The examination will cover the five year period ending December 31, 1994.
Kentucky law now requires an examination every three years; therefore, it is
anticipated that the Company's next examination will commence during 1998 for
the three years ending December 31, 1997.
In December of 1992, the NAIC adopted a "Risk Based Capital for Life
and/or Health Insurers Model Act" (the "Model Act") which was designed to
identify inadequately capitalized life and health insurers. The Model Act
defines two key measures: (i) adjusted capital, which equals an insurer's
statutory capital and surplus plus its asset valuation reserve, plus one-half
its liability for policyholder dividends ("Adjusted Capital") and (ii)
authorized control level risk based capital ("RBC"). RBC is determined by a
complex formula which is intended to take into account the various risks
assumed
by an insurer. Should an insurer's Adjusted Capital fall below certain
prescribed levels (defined in terms of its RBC), the Model Act provides for the
following four different levels of regulatory attention:
"Company Action Level:" This level of review is triggered if an
insurer's Adjusted Capital is less than 200 percent of its RBC. The insurer is
required to submit a plan to the appropriate regulatory authority that
discusses
proposed corrective action. The Company's Adjusted Capital is more than 3.2
times the required amount.
"Regulatory Action Level": This level of review is triggered if an
insurer's Adjusted Capital is less than 150% of its RBC. The regulatory
authority formally requires the insurer to submit an RBC plan, and performs a
special examination of the insurer and issues an order specifying corrective
actions. The Company's Adjusted Capital is more than 4.2 times the required
amount.
"Authorized Control Level": This level of review is triggered if an
insurer's Adjusted Capital is less than 100% of its RBC. The regulatory
authority is authorized to take whatever action it deems necessary. The
Company's Adjusted Capital is more than 6.4 times the required amount.
"Mandatory Control Level": This level of review is triggered if an
insurer's Adjusted Capital falls below 70% of its RBC. The regulatory authority
is required to place the insurer under its control. The Company's Adjusted
Capital is more than 9.1 times the amount required.
Since the Adjusted Capital levels of the Company currently exceed all of
the regulatory action levels as defined by the NAIC's Model Act, the Model Act
currently has no impact on the Company's operations or financial condition.
Competition. The life insurance business is highly competitive. With
the introduction of universal life and other interest sensitive products in
recent years, competition with other financial institutions has increased. The
industry includes both stock and mutual companies, including some of the
largest
financial institutions in the United States. While the business is responsive
to the current economic environment, changes are not quite so volatile, and
there are indications that, except for Credit Life, the life insurance market
is stable, even in times of stress for other companies.
The Company differentiates itself through its marketing techniques,
product features, customer service and reputation. The Company maintains its
competitive position by its focus on areas which have historically proven
profitable. Those areas include single premium pre-need products, modal premium
final expense products, traditional whole life products, mortgage protection
products and level term products. The Company's competitive position is
maintained by its ability to provide quality customer service throughout the
distribution system. Other competitive strengths include the Company's
asset/liability management system, a quality investment portfolio which
provides liquidity and the Company's non-leveraged financial position.
The business of the Company is not seasonal.
(b) Material Changes and Developments
While changes in the life insurance business are not as dramatic as in
other forms of business, new product development and innovative sales methods
must be ongoing to meet the current economic times. The Company, however,
believes that growth from increased sales is directly related to the constant
attention paid to revising and selling the products developed by the Company.
rdinary Production. The Company is working diligently to increase
ordinary product sales. The largest increase in this area has been the final
expense and prearranged funeral sales. Final expense sales include the sale of
lower face amount ordinary life insurance products, the purpose of which is to
pay the insured's final expenses. Prearranged funeral sales include the sale of
modal premium and single premium ordinary life policies which are sold to fund
a specific prearranged funeral contract. The Company expanded its marketing
capability for this market through the 1993 acquisition of marketing assets and
agents from Legacy One, Inc., a former independent marketing agent for the
Company. As a result, the Company steadily increased sales during 1993 and
1994. The actual increase in 1994 over 1993 in overall ordinary premium
production was approximately 21%, significantly higher than the 10-12% increase
anticipated by management, and the increase in 1995 over 1994 was approximately
11%, as anticipated. The Company is continuing to increase its marketing
operations and to expand into new states, including but not limited to,
Tennessee, Indiana, Illinois, Kansas and South Carolina. The Company
anticipates continued growth in premium production of approximately 10-12
percent in the prearranged funeral market during 1996.
Credit Insurance. From 1988 to 1991, the Company substantially increased
sales of Credit Insurance to $37 million and reinsured substantial portions of
the Credit Life and Credit A&H business with AEtna and Crown Life. However,
during 1992 the Company decreased Credit Insurance production to the pre-1988
annual premium levels of $8-10 million. As a result of the anticipated
decreased in production, the reinsurance agreement with Crown Life was
terminated effective for policies written after June 30, 1992, as set forth
above. See "Business-Risk". Desired levels of Credit Insurance production were
reached in 1993 and 1994.
Throughout 1994 the Company continued to closely monitor Credit Life and
Credit A&H claims and make adjustments in the claims administration process.
Claim ratios on Credit A&H have stabilized. The Company continues to closely
monitor the claims paying process to make certain that proper payments are
being made in accordance with the policy.
The Company's Credit Insurance operation continued to be strong
throughout 1994 in financial institutions and with a selected number of
automobile dealers participating in either a reinsurance program or the
Company's commission structure. However, during 1994 the Company decided to
exit the Credit Insurance market as a direct writer. The driving factor behind
this decision was the desire of the Company's Board of Directors and management
to improve and strengthen the Company's surplus and profitability.
Historically, the Credit A&H line has not been a profitable segment of the
Company's business; however, when balanced with the Credit Life line,
acceptable
profit margins were achieved. Since 1991, the profitability of the lines
diminished due to increased losses on the Credit A&H line and shrinking profit
margins on the Credit Life line. Therefore, since other lines of business have
been and continue to show strong growth and profits, and the continued sale of
Credit A&H inhibited growth of the Company's surplus and the full realization
of
profits from other lines of business, management and the Board of Directors
determined that it was in the best interest of the Company and its stockholders
to discontinue as a direct writer of Credit Life and Credit A&H.
Realizing the significant contribution of our financial marketing group,
which was successful in increasing the Company's Credit Insurance production to
record levels during the late 1980's and early 1990's, and realizing the
significant relationship our employees have developed with the financial
institutions in the Commonwealth of Kentucky, KII formed FSG as a wholly-owned
subsidiary. During 1995, FSG was responsible for marketing a myriad of products
for unaffiliated companies to financial institutions including Credit Life and
Credit A&H (Franklin), Individual Disability (Illinois Mutual Life and Casualty
Company), Involuntary Unemployment Insurance (Vesta Fire Insurance Corp.), and
GAP, which covers the excess of the loan amount over the value of the
collateral
if the collateral is a total loss (General Electric Capital Assurance Company).
The Company was not a direct writer of any of these products during 1995. FSG
will continue to market the Company's mortgage protection products, and
management anticipates growth of approximately 3-5 percent in this segment of
the Company's business during 1996 due to the marketing efforts of FSG. In
addition, as explained in more detail below, FSG will be marketing the
Company's Credit Insurance products during 1996.
During the fourth quarter of 1995, FSG and the Company were advised that
Franklin was exiting the Commonwealth of Kentucky as a direct writer of Credit
Insurance products. FSG immediately began negotiating with a number of
unaffiliated insurance companies to market Credit insurance products for them.
In addition, FSG began negotiating a potential transaction with unaffiliated
companies where the Credit Insurance policies would be written by the Company
and all of the risk would be immediately reinsured to the unaffiliated company.
Under a reinsurance arrangement, the Company would generate alternative
revenues from retention fees and fees for administration and claims processing.
Additionally, FSG will continue to generate revenues in the form of
commissions.
Therefore, in December 1995 the Company entered into a reinsurance agreement
with Connecticut General under the terms of which all of the risk on all Credit
Insurance policies sold by the Company would be reinsured with Connecticut
General.
The decision to reenter the Credit Insurance market as a direct writer
required careful consideration of the decision to exit the market during 1995.
The driving factors behind the decision to reenter were the ability to
structure
the reinsurance transaction with a highly rated insurance company, the ability
to protect, improve and strengthen the Company's surplus and profitability, the
ability to utilize our Credit Insurance administration and claims processing
capabilities and the ability to generate alternative sources of revenue for the
Company. The structure of the reinsurance agreement with Connecticut General
accomplishes each of these goals. Further, FSG has been successful in retaining
the majority of the Credit Insurance agency accounts and has successfully
recruited another unaffiliated agency which is anticipated to more than double
overall gross written Credit Insurance premiums and will therefore further
enhance FSG's revenues.
Employees. The number of persons employed by the Company is 113. The
number of active independent contractual agents of the Company is 2,344.
Management of the Company considers its relationship with the employees and
agents to be satisfactory.tem 2. Properties
The physical property of the Registrant consists of the home office
building and grounds, owned in fee, at 200 Capital Avenue, Frankfort, Kentucky.
Adjacent to the home office, the Company owns additional property on Second
Street and on Shelby Street in Frankfort, Kentucky. One building is used for
Agency and Company meetings; one building is a print shop used by IHP, one
building is used for supplies and additional storage; and one building is
leased
to a commercial tenant. The Company also leases office space at One Harbison
Way, Suite 106, Columbia, South Carolina 29212.

Item 3. Legal Proceedings
There are no legal proceedings to which the Registrant is a party which
are material to the overall financial condition or the results of operations of
the Company.

Item 4. Submission of Matters to a Vote of Security Holders
None.

PART II
Item 5. Market for the Registrant's Common Stock and Related Security Matters
(a) The information relative to the market value of the Company's stock
appears on the inside back cover in the Annual Report to the Stockholders for
the year ended December 31, 1995, and is incorporated herein by reference.
(b) Approximate Number of Equity Security Holders
(A) (B)
Number of Holders
Title of Class of Record 12-31-95

Common Stock 2,941
(c) Dividends
Cash dividends paid in 1995 amounted to $685,219 or $.76 per share.
The 1995 cash dividend, to be paid April 12, 1996, is $.76 per share, payable
to stockholders of record March 29, 1996.

Item 6. Selected Financial Data
Selected financial data for the past five years appears on page 29 in
the Annual Report to the Stockholders for the year ended December 31, 1995, and
is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Management's Discussion and Analysis of financial condition and results
of operations appears on pages 9-21 in the Annual Report to the Stockholders
for the year ended December 31, 1995, and is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes appear on page 30
through 46 in the Annual Report to Stockholders for the year ended December 31,
1995, and are incorporated herein by reference. See Part IV, Item 14.

Item 9. Disagreements on Accounting and Financial Disclosure
None.
Part III
Item 10. Directors and Executive Officers of the Registrant
(a) The Executive officers and directors of the Company are:

Name, Position & Year Family
Became Officer/Director Age Relationship

Harry Lee Waterfield II 52
Chairman of the Board,
President/1963

Jimmy R. McIver 44
Treasurer/1988

Wilma Yeary 64
Secretary/1989

Jane S. Jackson 41
Assistant Secretary/1989

Howard L. Graham 61
Vice President, Corporate Services
1969

Loretta Jane Wise 49
Vice President, Policy Service/1988

Nancy W. Walton 56 Sister of
Vice President, Underwriting/1975 Harry Lee
Waterfield II

N. Douglas Hippe 57
Vice President, Acting/1974

Raymond L. Carr 47
Vice President, Admn. Operations
1977

John E. Simmons 43
Vice President, Credit Life/Office
Services

Donald R. Philpot 58
Vice President, Agency/1981

Margaret J. Kays 64
Vice President, Human Resources/
1993

Helen S. Wagner 59
Director/1986

Jerry F. Howell 82
Director/1964

Jerry F. Howell, Jr. 54 Son of Jerry
Director/1987 F. Howell

Robert M. Hardy, Jr. 38 Nephew of
General Counsel, Director/1986 Harry Lee
Waterfield II

Michael F. Dudgeon 34 Nephew of
Director/1988 Harry Lee
Waterfield II

Adron Doran 86
Director/1972

H. Glenn Doran 70
Director/1992

Clair S. Manson 68
Vice President, Chief Actuary/1987

Joe R. Johnson 78
Director/1972

(b) The principal occupation of each of the Officers listed above
for the past five years has been that as indicated, except for Margaret J.
Kays.
Ms. Kays was elected Vice President, Human Resources in 1993. Prior to that
time, Ms. Kays served as the Company's Assistant Vice President, Credit Life
Accounting. Each of the Directors has occupied the position indicated for a
period of more than five years with the exception of H. Glenn Doran. Mr. Doran
was elected to the Board in July of 1992. Information regarding the business
experience of the Directors who are not officers of the Company is shown on
pages 2, 3 and 4 of the Proxy Statement for the Annual Meeting of Shareholders
to be held on May 9, 1996, and is incorporated herein by reference.
There have been no events under any bankruptcy act, no criminal
proceedings and no judgments or injunctions material to the evaluation of the
ability and integrity of any Director or Executive Officer during the past five
years.
Officers are appointed annually by the Board of Directors at the Board
meeting immediately following the Annual Meeting of Shareholders. There are no
arrangements or any understandings between any officer and any other person
pursuant to which the office was selected.

Item 11. Executive Compensation and Transactions
Information regarding compensation of executive officers and
transactions with executive officers and directors is not restated in this
Annual Report because the response to this item is shown on page 5 & 6 of the
Proxy Statement for the Annual Meeting of Shareholders to be held May 9, 1996
and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management
Security ownership by Officers Directors, and management, is not
restated in this Annual Report because the response to this item is shown on
pages 2, 3 & 4 of the Proxy Statement for the Annual Meeting of
Stockholders to
be held May 9, 1996, and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions
Certain relationships and related transactions are shown on
the page 7 of
the Proxy Statement for the Annual Meeting of Stockholders to be held May 9,
1996, and are incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements incorporated herein by reference in Item 8
to the Company's Annual Report to Stockholders for the year ended December 31,
1995 (pages 30 to 46) filed as Exhibit 1:
Consolidated Balance Sheets -- December 31, 1995 and 1994
For the years ended December 31, 1995, 1994 and 1993:
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flow
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedule
Schedule I--Summary of Investments -- Other than Investments in Related
Parties
Schedule III -- Supplementary Insurance Information
Schedule IV -- Reinsurance
The financial statements and schedules of Investors Heritage Life
Insurance Company, as incorporated by reference in its Annual Report on Form
10-K filed with the Securities & Exchange Commission for the year ended
December 31, 1995, are incorporated herein by reference.
All other schedules have been omitted as not applicable, not required, or
the required information has been included in the financial statements, notes
thereto, or are incorporated herein by reference to the Annual Report on Form
10-K of Investors Heritage Life Insurance Company for the year ended December
31, 1995.

(a)3. Listing of Exhibits
Exhibit 1 - Annual Report to the Stockholders for the year ended December
31, 1995.*
Exhibit 3.1-- Articles of Incorporation of the Company, as amended.
Exhibit 3.2-- By-Laws of the Company, as amended.
Exhibit 11-- Statements re Computation of Per Share Earnings.**
Exhibit 23 - Consent of Independent Auditors.
*The material included in this Report shall not be deemed to be "filed"
with the Commission or otherwise subject to the liabilities of Section 18 of
the
Act, except to the extent that this registrant specifically incorporates it in
its Annual Report on this Form 10-K by reference.
**The information required is contained in Note A to the Consolidated
Financial Statements, "Common Stock and Earnings per Share", on page 37 of the
Annual Report to the Stockholders for the year ended December 31, 1995 and is
incorporated herein by reference.
(b) Reports on Form 8-K
No filing of Form 8-K was made in the fourth quarter, 1995.
(c) See Item 14(a)(3) above.
(d) Financial Statement Schedules - The response to this portion of
Item 14 is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

Investors Heritage Life Insurance Company

3-24-96 /s/
DATE BY: Harry Lee Waterfield II
ITS: Chairman of the Board, President and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

DATE

/s/
Chairman of the Board,
Harry Lee Waterfield II
President and Chief 3-14-96
Executive Officer

/s/
Treasurer 3-14-96
Jimmy R. McIver

/s/ 3-14-96
Howard L. Graham
Vice President
Corporate Services

/s/ 3-14-96
Jerry F. Howell
Director

/s/ 3-14-96
H. Glenn Doran
Director

/s/ 3-14-96
Helen S. Wagner
Director

/s/ 3-14-96
Adron Doran
Director

/s/ 3-14-96
Robert M. Hardy, Jr.
General Counsel
and Director

/s/ 3-14-96
Jerry F. Howell, Jr.
Director

/s/ 3-14-96
Michael F. Dudgeon, Jr.
Director

/s/ 3-14-96
Joe R. Johnson
Director

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Investors Heritage Life Insurance Company

We have audited the consolidated financial statements of Investors
Heritage Life Insurance Company and subsidiary listed in the accompanying Index
to financial statements (Item 14(a)). Our auditors also included the financial
statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.

We conducted our auditors in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of
Investors Heritage Life Insurance Company and subsidiary at December 31, 1995
and 1994, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995, in
conformity
with generally accepted accounting principles. Also, in our opinion, the
financial statement schedules, when considered in relation to the basis
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.

As discussed in Note A to the consolidated financial statements, the
Company changed its method of accounting for certain investments in debt
securities in 1994. Also, as discussed in Note A to the consolidated financial
statements, the Company changed its method of accounting for income taxes in
1993.

/s/
Ernst & Young LLP

Louisville, Kentucky
March 15, 1996

CONSENT OF INDEPENDENT AUDITORS

EXHIBIT 23

We consent to be incorporation by reference in the Registration Statement
(Form S-8 No. 33-46722-01) pertaining to the Kentucky Investors, Inc. and
Affiliated Companies 401(k) Savings Plan and Trust Agreement and in the related
prospectus of our report dated March 15, 1996 with respect to the consolidated
financial statements and schedules of Investors Heritage Life Insurance Company
included in the Annual Report (Form 10-K) for the year ended December 31, 1995.

/s/
Ernst & Young LLP

Louisville, Kentucky
March 25, 1996

INVESTORS HERITAGE LIFE INSURANCE COMPANY AND SUBSIDIARY
SCHEDULE I -- SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN
RELATED PARTIES
DECEMBER 31, 1995

AMOUNT AT
WHICH
MARKET SHOWN IN THE
TYPE OF INVESTMENT COST VALUE BALANCE
SHEET
Fixed maturity securities
available-for-sale:

Bonds:
United States and government
agencies and authorities $ 24,214,107 $25,563,404 $25,563,404

States and political 1,987,512 2,061,000 2,061,000
subdivisions

Foreign 5,015,069 5,275,140 5,275,140

Mortgage-backed
securities 31,685,496 32,506,539 32,506,539

Corporate 68,914,613 71,951,307 71,951,307

Redeemable preferred stock 21,000 44,326 44,326
------------ ----------- -----------
Total $131,837,797 $137,401,716 $137,401,716
============ ============ ============

Equity securities,
available for sale:

Common stocks:
Banks, trusts &
insurance companies $ 433,481 $ 1,761,658 $ 1,761,658

Industrial, misc.
and all other 331,005 305,388 305,388

Nonredeemable preferred
stocks 546,907 498,890 498,890
------------ ----------- -----------
Total $ 1,311,393 $ 2,565,936 $ 2,565,936
============ ============ ============

Total securities
available for sale: $133,149,190 $139,967,652 $139,967,652
============ ============ ============

Mortgage loans
on real
estate 13,058,464 XXXXXXXX 13,058,464

Policy loans 6,869,039 XXXXXXXX 6,869,039

Other long term
investments 301,733 XXXXXXXX 301,733

Short-term
investments 1,103,021 XXXXXXXX 1,103,021
------------ ------------

Total investments $154,481,447 XXXXXXXX $161,299,909
============ ============

INVESTORS HERITAGE LIFE INSURANCE COMPANY

SCHEDULE III

SUPPLEMENTARY INSURANCE INFORMATION

FOR THE YEAR ENDED DECEMBER 31, 1995

SEGMENT

Life Credit Accident Corporate Total
and (Life & Health
Annuities and
A&H)

$ $ $ $ $

Deferred
Policy
Acquisi-
tion
Costs 25,845,535 1,885,016 529,562 -0- 28,260,113

Future
Policy
Benefits,
Lossess,
Claims &
Loss
Expenses 154,363,644 608,600 209,901 -0- 155,182,145

Unearned
Premium 7,473 5,539,142 965,747 -0- 6,512,362

Other
Policy
Claims &
Benefits
Payable 3,415,505 262,739 88,068 -0- 3,766,312

Premiums
Revenue 33,185,006 (1,167,524) 1,043,894 -0- 33,061,376

Net
Invest-
ment
Income
(1) and
(3) 9,251,927 365,529 82,783 1,171,857 10,872,096

Benefits
claims,
Losses &
Settle-
ment
Expenses 33,529,515 (3,593,030) 187,439 -0- 30,123,924

Amorti-
zation
Deferred
Acquisi-
tion
Costs 2,809,459 2,673,578 602,920 -0- 6,085,957

Other
Operating
Expenses
(2) 5,147,730 992,599 234,049 607,562 6,981,940

(1) Net investment income is allocated in proportion to policy liabilities and
stockholders' equity.
(2) Other operating expenses are assigned directly to the applicable segment.
(3) Includes realized investment gains or losses.

FOR THE YEAR ENDED DECEMBER 31, 1994

SEGMENT

Life Credit Accident Corporate Total
and (Life & Health
Annuities and
A&H)

$ $ $ $ $

Deferred
Policy
Acquisi-
tion
Costs 25,124,359 4,747,594 627,482 -0- 30,499,435

Future
Policy
Benefits,
Lossess,
Claims &
Loss
Expenses 137,272,524 2,608,173 191,654 -0- 140,072,351

Unearned
Premium 10,717 13,917,874 1,178,085 -0- 15,106,676

Other
Policy
Claims &
Benefits
Payable 4,684,333 313,573 73,578 -0- 5,071,484

Premiums
Revenue 30,529,592 4,876,595 1,037,575 -0- 36,443,762

Net
Invest-
ment
Income
(1) and
(3) 7,940,980 520,975 83,895 1,811,501 10,357,351

Benefits
claims,
Losses &
Settle-
ment
Expenses 27,282,303 720,440 (379,281) -0- 27,623,462

Amorti-
zation
Deferred
Acquisi-
tion
Costs 4,226,129 4,961,903 904,838 -0- 10,092,870

Other
Operating
Expenses
(2) 4,208,623 874,651 180,311 768,624 6,032,209

FOR THE YEAR ENDED DECEMBER 31, 1993

SEGMENT

Life Credit Accident Corporate Total
and (Life & Health
Annuities and
A&H)

$ $ $ $ $

Deferred
Policy
Acquisi-
tion
Costs 24,191,714 6,034,497 1,049,320 -0- 31,275,531

Future
Policy
Benefits,
Lossess,
Claims &
Loss
Expenses 125,359,163 1,297,605 225,311 -0- 126,882,079

Unearned
Premium 571,151 24,952,574 1,980,751 -0- 27,504,476

Other
Policy
Claims &
Benefits
Payable 4,860,392 564,161 85,948 -0- 5,510,501

Premiums
Revenue 25,694,657 6,330,973 2,940,458 -0- 34,966,088

Net
Invest-
ment
Income
(1) and
(3) 7,544,523 666,029 120,530 2,059,392 10,390,474

Benefits
claims,
Losses &
Settle-
ment
Expenses 22,359,614 1,066,233 1,249,121 -0- 24,674,968

Amorti-
zation
Deferred
Acquisi-
tion
Costs 4,917,289 6,441,817 956,891 -0- 12,315,997

Other
Operating
Expenses
(2) 3,609,248 889,952 444,976 751,680 5,695,856

INVESTORS HERITAGE LIFE INSURANCE COMPANY AND SUBSIDIARY

SCHEDULE IV - REINSURANCE

FOR THE YEAR ENDED DECEMBER 31, 1995

Accident
Life Premium, and
Insurance Life Health TOTAL
In Force Insurance Insurance PREMIUMS

$ $ $ $

Gross Amount 1,301,580,403 30,088,838 (97,463) 29,991,375

Ceded to
other
Companies 180,264,855 807,810 327,654 1,135,464

Assumed
from other
Companies 1,235,769,597 3,477,443 870,956 4,348,399

Net Amount 2,357,085,145 32,758,471 445,839 33,204,310

Percentage
of Amount
Assumed to
Net 52% 11% 195% 13%

FOR THE YEAR ENDED DECEMBER 31, 1994

Accident
Life Premium, and
Insurance Life Health TOTAL
In Force Insurance Insurance PREMIUMS

$ $ $ $

Gross Amount 1,533,680,499 30,789,709 2,539,118 33,328,827

Ceded to
other
Companies 280,015,000 919,336 501,149 1,420,485

Assumed
from other
Companies 1,284,986,501 3,930,203 608,295 4,538,498

Net Amount 2,538,652,000 33,800,576 2,646,264 36,446,840

Percentage
of Amount
Assumed to
Net 51% 12% 23% 12%

FOR THE YEAR ENDED DECEMBER 31, 1993

Accident
Life Premium, and
Insurance Life Health TOTAL
In Force Insurance Insurance PREMIUMS

$ $ $ $

Gross Amount 1,708,906,548 25,678,356 3,008,938 28,687,294

Ceded to
other
Companies 449,844,000 164,700 319,785 484,485

Assumed
from other
Companies 1,416,024,452 4,096,564 2,666,715 6,763,279

Net Amount 2,675,087,000 29,610,220 5,355,868 34,966,088

Percentage
of Amount
Assumed to
Net 53% 14% 50% 19%

EXHIBIT 3.1

ARTICLES OF INCORPORATION

THE NATIONAL INVESTORS LIFE INSURANCE
COMPANY OF KENTUCKY

KNOW ALL MEN BY THESE PRESENTS:

That we, the undersigned, all being natural persons over twenty-one
years of age, and being citizens of the United States of America and residing
at
the addresses set opposite our respective names, do hereby associate ourselves
together for the purpose of forming a domestic stock insurance company under
the
provisions and terms of Chapter 304 of the Kentucky Revised Statutes, as
amended, and for that purpose do hereby certify;

ARTICLE I.
The name of the corporation is The National Investors Life Insurance
Company of Kentucky.
ARTICLE II.
The objects and purposes for which the corporation is formed and the
nature of the business to be transacted, promoted and carried on, are:
(a) To engage in the business of issuing policies of insurance on
human lives and insurance appertaining thereto or connected therewith,
including
the granting of annuities and endowment benefits, additional benefits in event
of death by accident or accidental means, additional benefits in event of the
total and permanent disability of the insured, optional modes of settlement or
proceeds and otherwise to do all things permitted to life insurance companies
under the laws of the Commonwealth of Kentucky s they presently exist or as
they hereafter may exist.
(2) To engage in the business of issuing policies of disability
insurance against bodily injury, disablement or death by accident or accidental
means, or the expense thereof, against disablement or expense resulting from
sickness, and every insurance appertaining thereto and otherwise to engage in
the business of disability insurance under the laws of the Commonwealth of
Kentucky as they presently exist or as they hereafter may exist.
(3) To do all things permitted by law to be done by corporations
engaged in the business of life insurance or disability insurance whether
specifically enumerated herein or not.

ARTICLE III.
The total authorized capital stock of the corporation shall be Six
Hundred and Forty Thousand shares (640,000) of the par value of One Dollar
($1.00) per share, each share having a voting right of one (1) vote per share.
The shares of capital stock shall be unassessable at all times and no
stockholder shall be liable thereon beyond the liability of his subscription
price.

ARTICLE IV.
The corporation shall commence business when One Hundred Twenty Five
Thousand Dollars ($125,000) of its capital stock has been fully subscribed,
paid
in and issued; and, in addition to said One Hundred Twenty Five Thousand
Dollars
($125,000), the corporation shall commence business with a paid in surplus of
Sixty Two Thousand Five Hundred Dollars ($62,500.00).

ARTICLE V.
The corporation is organized under the capital stock plan.

ARTICLE VI.
The principal office of the corporation shall be located in the city
of Frankfort, Commonwealth of Kentucky. The name of the resident agent upon
whom process can be served is Rudy Yessin, 6th Floor, McClure Building,
Frankfort, Kentucky.

ARTICLE VII.
The duration of the corporation shall be perpetual.

ARTICLE VIII.
The first board of directors of the corporation shall consist of the
incorporators named herein and they shall be empowered and authorized to manage
the stock, business and property of the corporation until a meeting of the
stockholders has been held and the stockholders, in accordance with the law of
the Commonwealth of Kentucky, have elected a board of directors.
The business and affairs of the corporation shall be transacted and
managed by a board of directors of not less than five (5) nor more than fifteen
(15) members, the size of the board to be determined from time to time by the
stockholders. directors shall continue in office for the term for which they
have been elected and until their successors have been duly elected and have
qualified.
The board of directors shall have power to make such by-laws and rules
to regulate the business of the corporation as are not inconsistent with the
provisions of these Articles of Incorporation or the laws of the Commonwealth
of Kentucky.
The board of directors may, by resolution, issue unissued stock
authorized by these Articles of Incorporation and such options or warrants to
purchase stock in this corporation in such amounts and on such terms as the
board may, in its discretion, deem desirable and necessary.

ARTICLE IX.
The corporation shall, at all times, maintain its principal office
within the Commonwealth of Kentucky and at said office shall maintain its
books,
records and files. Nothing contained herein, however, shall be construed to
apply to the books, records and files kept in any branch office relating solely
to the business transacted by said branch office.

ARTICLE X.
The names, places of residence and the number of shares of stock
subscribed by each incorporator, each of whom is a natural person over twenty-
one (21) years of age, are as follows:

NAME ADDRESS NO. OF SHARES
Michael J. Odom Southland Drive
Lexington, Kentucky 324,960

Rudy Yessin Frankfort, Kentucky 10

Jess P. Odom 124 Main Street
Little Rock, Arkansas 10

Earl B. North 124 Main Street
Little Rock, Arkansas 10

Gerland P. Patten Pyramid Life Building
Little Rock, Arkansas 10

IN WITNESS WHEREOF we have hereunto set our hands this the 17th day
of June, 1960.
Michael J. Odom
Rudy Yessin
Jess P. Odom
Earl B. North
Gerland P. Patten
APPROVED THIS 24th DAY OF AUGUST, 1960.
W. T. HOCKENSMITH
COMMISSIONER OF INSURANCE
COMMONWEALTH OF KENTUCKY

STATE OF KENTUCKY
COUNTY OF FRANKLIN
I, the undersigned, a Notary Public, in and for the County and State
aforesaid, do hereby certify that the foregoing Articles of Incorporation were
this day produced before me and were acknowledged by the persons whose names
appear hereunder to be their own free act and deed.
My commission expires September 24, 1960.
Witness my hand and seal this the 17th day of June, 1960.
/s/
Mildred Gardenhire, Notary Public

ORIGINAL COPY
FILED AND RECORDED
Henry H. Carter
August 31, 1960
Secretary of State of Kentucky
Frankfort, Kentucky
S. T. Lyon
Assistant Secretary of State

AMENDED ARTICLES OF INCORPORATION
NATIONAL INVESTORS LIFE INSURANCE
COMPANY OF KENTUCKY
(including change of name to)
INVESTORS HERITAGE LIFE INSURANCE COMPANY
* * * *

We, the undersigned, being the President and Secretary, respectively,
of The National Investors Life Insurance Company of Kentucky, a corporation
organized and existing under the laws of the Commonwealth of Kentucky,
do hereby
certify that at a meeting of the shareholders of the company, duly called and
held on April 30, 1964, at which a majority of the shareholders were present in
person or by proxy, adopted by a majority of those present in person or by
proxy
the following amendment of the Articles of Incorporation, amending Article One
of the original Articles of Incorporation so that the same shall hereinafter
read and be as follows:
I
The name of the Company shall be:
INVESTORS HERITAGE LIFE INSURANCE COMPANY
IN WITNESS WHEREOF, these Amended Articles of Incorporation have been
executed by Harry Lee Waterfield and Gene M. Brown as present President and
Secretary, respectively, of the company.
/s/
Harry Lee Waterfield, President
/s/
Gene M. Brown, Secretary
Secretary of State
Received
December 28, 1964
Commonwealth of Kentucky

State of Kentucky
County of Jefferson
On this 13th day of July, 1964, there personally appeared before me, a
Notary Public in and for the State and county aforesaid, harry Lee Waterfield,
president, and Gene M. Brown, secretary of the National Investors Life
Insurance
Company of Kentucky (now Investors Heritage Life Insurance Company), a Kentucky
corporation, each of whom acknowledged their signatures to the Amended Articles
of Incorporation to be his and her act and deed, and the act and deed of said
corporation, and certified the time and manner of adoption thereof.
/s/
Martha Hickman Notary Public,
Franklin County, Kentucky

My commission expires October 17, 1964.

This instrument prepared by:
/s/
Rudy Yessin
Attorney at Law
Frankfort, Kentucky

ORIGINAL COPY
FILED AND RECORDED
DECEMBER 20, 1964
THELMA L. STOVALL
SECRETARY OF STATE OF KENTUCKY
FRANKFORT, KENTUCKY
S. T. LYON
ASSISTANT SECRETARY OF STATE

Approved as filed
August 6, l964
Kentucky
Insurance Department

AMENDMENT TO THE ARTICLES OF
INCORPORATION OF INVESTMENT HERITAGE
LIFE INSURANCE COMPANY

Investors Heritage Life Insurance Company, a Kentucky corporation, by
its President, Harry Lee Waterfield, and its Secretary, Gene M. Brown, does
hereby certify that at a regular meeting of the stockholders duly called and
held at Frankfort, Kentucky, on the 25th day of March, 1965, at 10 A.M.(EST) at
which meeting a majority of said stockholders entitled to vote at said meeting
were present in person or by proxy by an affirmative vote of more than a
majority of the stockholders entitled to vote thereupon, Article III of the
articles of Incorporation was amended so that as amended, Article III provides
as follows:

"The total authorized capital stock of the corporation shall
be one million (1,000,000) shares of common stock of the par
value of One Dollar ($1.00), each share having one (1) vote.
All shares shall be equal in all respects. The shares of
capital stock shall be unassessable at all times and no
stockholder shall be liable thereon beyond the liability of
his subscription price.:

IN WITNESS WHEREOF, Investors Heritage Life Insurance Company
has caused its name and corporate seal to be affixed hereto by
Harry Lee Waterfield, its President, and Gene M. Brown, its Secretary.
This Thirty-First day of March, 1965.
INVESTORS HERITAGE LIFE INSURANCE COMPANY
/s/
BY: Harry Lee Waterfield, President
/s/
BY: Gene M. Brown, Secretary

Approved as filed April 12, 1965 Kentucky Department of Insurance
I hereby certify that this instrument has been drafted by Joseph J. Leary,
Attorney at Law, 200 St. Clair Street, Frankfort, Kentucky.
Secretary of State Received April 12, 1965, Commonwealth of Kentucky, 5-119240.

Commonwealth of Kentucky
County of Franklin
I, the undersigned Notary Public in and for the State and County
aforesaid, do hereby certify that on this day the foregoing Amendment to the
Articles of Incorporation of Investors Heritage Life Insurance Company was
produced before me in my county and was acknowledged by Harry Lee Waterfield
and
Gene M. Brown, by me personally known to be the President and Secretary,
respectively, of Investors Heritage Life Insurance Company, a Kentucky
corporation, to be their act and deed as such officers and the act and deed of
such corporation.
Witness my hand and seal of office this the thirty-first day of March,
1965.
My commission expires October 17, 1968.
/s/
Martha A. Hubbard, Notary Public
Original Copy filed and recorded April 12, 1965, Secretary of state of
Kentucky,
Frankfort, Kentucky, Thelma L. Stovall

AMENDMENT TO THE ARTICLES OF
INCORPORATION OF INVESTORS HERITAGE
LIFE INSURANCE COMPANY

Investors Heritage Life Insurance Company, a Kentucky corporation, by
its President, Harry Lee Waterfield, and its Secretary, Gene M. Brown, does
hereby certify that at a regular meeting of the stockholders duly called and
held at Frankfort, Kentucky, on the 8th day of May, 1969, at 10 A.M. (EST), at
which meeting a majority of said stockholders entitled to vote at said meeting
were present in person or by proxy by an affirmative vote of more than a
majority of the stockholders entitled to vote thereupon, Article III of the
Articles of Incorporation was amended so that as amended, Article III provides
as follows:

"The total authorized capital stock of the corporation shall
be one million (1,000,000) shares of common stock of the par
value of One Dollar and Twelve Cents ($1.12), each share
having one (1) vote. All shares shall be equal in all
respects. The shares of capital stock shall be unassessable
at all time and no stockholder shall be liable thereon
beyond the liability of his subscription price."

IN WITNESS WHEREOF, Investors Heritage Life Insurance Company has
caused its name and corporate seal to be affixed hereto by Harry Lee
Waterfield, its President, and Gene M. Brown, its Secretary.
This eighth day of May, 1969.
INVESTORS HERITAGE LIFE INSURANCE COMPANY
/s/
BY: Harry Lee Waterfield, President
/s/
BY: Gene M. Brown, Secretary
Received by Secretary of State May 9, 1969, Commonwealth of Kentucky

Commonwealth of Kentucky
County of Franklin
I, the undersigned Notary Public in and for the State and County
aforesaid, do hereby certify that on this day the foregoing Amendment to the
Articles of Incorporation of Investors Heritage Life Insurance Company was
produced before me in my county and was acknowledged by Harry Lee Waterfield
and
Gene M. Brown, by me personally known to be the President and Secretary,
respectively, of Investors Heritage Life Insurance Company, a Kentucky
corporation, to be their act and deed as such officers and the act and deed of
such corporation.
Witness my hand and seal of office this the eighth day of May, 1969.
My commission expires October 17, 1972.
/s/
Martha A. Hubbard, Notary Public
Approved as Filed, May 9, l969 Kentucky Insurance Department
Original Copy filed and recorded, Secretary of State May 9, l969
Approved as to form and legality: Assistant Attorney General, Joseph H. Eckert

AMENDMENT TO THE ARTICLES OF
INCORPORATION OF INVESTORS HERITAGE
LIFE INSURANCE COMPANY

Investors Heritage Life Insurance Company, a Kentucky corporation, by
its President, Harry Lee Waterfield, and its Secretary, Gene M. Brown, does
hereby certify that at a regular meeting of the stockholders duly called and
held at Frankfort, Kentucky, on the 9th day of May, 1974, at 10 A.M. (CDT), at
which meeting a majority of said stockholders entitled to vote at said meeting
were present in person or by proxy by an affirmative vote of more than a
majority of the stockholders entitled to vote thereupon, Article VIII of the
Articles of Incorporation was amended so that as amended, Article VIII provides
as follows:

"The business and affairs of the company shall be transacted
and managed by a Board of Directors of nine members. The
nine members shall be divided into three classes, each
consisting of three members, the office of the first class
to expire at the first annual meeting of stockholders after
their election, that of the second class to expire at the
second annual meeting after their election and that of the
third class to expire at the third annual meeting after
their election. At each annual meeting after such
classification, the number of Directors equal to the number
of the class whose term expires at the time of such meeting
shall be elected to hold office until the third succeeding
annual meeting. In the event of any vacancy occurring in
the Board of Directors, it shall be filled by the
affirmative vote of a majority of the remaining Directors
and shall be for the unexpired term of his predecessor in
office.

The Board of Directors shall have power to make such By-laws and
rules
to regulate the business of the corporation as are not inconsistent
with the provisions of these Articles of Incorporation or the laws of
the Commonwealth of Kentucky.

The Board of Directors may, by resolution, issue unissued stock
authorized by these Articles of Incorporation and such options or
warrants to purchase stock in this corporation in such amounts and on
such terms as the Board may, in its discretion, deem desirable and
necessary."

IT WITNESS WHEREOF, Investors Heritage Life Insurance Company has
caused its name and corporate seal to be affixed hereto by Harry Lee
Waterfield, its President, and Gene M. Brown, its Secretary.
This 16th day of May, 1974.
INVESTORS HERITAGE LIFE INSURANCE COMPANY

/s/
BY: Harry Lee Waterfield, President
/s/

BY: Gene M. Brown, Secretary

COMMONWEALTH OF KENTUCKY
COUNTY OF FRANKLIN

I, the undersigned Notary Public in and for the State and County
aforesaid, do hereby certify that on this day the foregoing Amendment to the
Articles of Incorporation of Investors Heritage Life Insurance Company was
produced before me in my County and was acknowledged by Harry Lee Waterfield
and
Gene M. Brown, by me personally known to be the President and Secretary,
respectively, of Investors Heritage Life Insurance Company, a Kentucky
corporation, to be their act and deed as such officers and the act and deed of
such corporation.
Witness my hand and seal of office this the 16th day of May, 1974.
My commission expires January 26, 1978.
/s/
Wilma Yeary, Notary Public

APPROVED AS FILED MAY 28, KENTUCKY INSURANCE DEPARTMENT
BY EDWARD L. FOSSETT
This document prepared by:
/s/
Joe R. Johnson
Attorney at Law
200 Capital Avenue
Frankfort, Kentucky 40601

VERIFICATION FORM

STATE OF KENTUCKY

COUNTY OF FRANKLIN

I, Wilma Yeary, a notary public, do hereby certify that on this 16th
day of May, 1974, personally appeared before me Harry Lee Waterfield, who,
being
by me first duly sworn, declared that he is the President of Investors Heritage
Life Insurance Company, that he signed the foregoing document as President of
the corporation, and that the statements therein contained are true.
/s/
Wilma Yeary, Notary Public

My commission expires 26th day of January, 1978.

Original Copy filed Secretary of State of Kentucky, Frankfort, Kentucky.
May 30, 1974, Thelma L. Stovall, Secretary of State.

CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION

I, DREXELL R. DAVIS, Secretary of State of the Commonwealth of Kentucky, do
hereby certify that Amended Articles of Incorporation of INVESTORS HERITAGE
LIFE
INSURANCE COMPANY amended pursuant to Kentucky Revised Statutes 271A, duly
signed and verified or acknowledged according to law, have been filed in my
office by said corporation, and that all taxes, fees and charges payable upon
the filing of said Articles of Amendment have been paid.

Given under my hand and seal of Office as Secretary of State, at Frankfort,
Kentucky, this 27th day of June, 1977.

/s/
Drexell R. Davis
Secretary of State

AMENDMENT TO THE ARTICLES OF
INCORPORATION OF INVESTORS HERITAGE
LIFE INSURANCE COMPANY

Investors Heritage Life Insurance Company, a Kentucky Corporation, by
its President, Harry Lee Waterfield, and its Secretary, Gene M. Brown, does
hereby certify that at a regular meeting of the stockholders duly called and
held at Frankfort, Kentucky, on the 12th day of May, 1977, at 10 A.M., at which
meeting a majority of said stockholders entitled to vote at said meeting were
present in person or by proxy by an affirmative vote of more than a majority of
the stockholders entitled to vote thereupon, Article III of the Articles of
Incorporation was amended so that as amended, Article III provides as follows:

"The total authorized capital stock of the corporation shall be one
million (1,000,000) shares of common stock of the par value of One
Dollar ($1.00) each share having one (1) vote. All shares shall be
equal in all respects. The shares of capital stock shall be
unassessable at all times and no stockholder shall be liable thereon
beyond the liability of his subscription price."

IN WITNESS WHEREOF, Investors Heritage Life Insurance Company has
caused its name and corporate seal to be affixed hereto by Harry Lee
Waterfield, its President, and Gene M. Brown, its Secretary.
This 12th day of June, 1977.
INVESTORS HERITAGE LIFE INSURANCE COMPANY
/s/
BY: Harry Lee Waterfield, President
/s/
BY: Gene M. Brown, Secretary

Approved for Form and Legality
Office of the Attorney General
Frankfort, Kentucky
BY: Victor Fox

Secretary of State of Kentucky,
Frankfort, Kentucky
June 27, 1977
Drexell R. Davis
Secretary of State

Kentucky Insurance Department
Approved June 15, 1977

Filed
June 28, 1977
9:39 A.M.
Lloyd T. Russell
Franklin County Court Clerk

CERTIFICATE OF MERGER OF DOMESTIC
AND FOREIGN CORPORATIONS

I, DREXELL R. DAVIS, Secretary of State of the Commonwealth of
Kentucky, do hereby certify that triplicate originals of Articles of the Merger
of INVESTORS HERITAGE LIFE INSURANCE COMPANY OF OHIO (OHIO NOT QUAL.)
corporation, into INVESTORS HERITAGE LIFE INSURANCE COMPANY,a KENTUCKY
corporation, duly signed and verified pursuant to the Provisions of Kentucky
Revised Statutes Chapter 271.l have been received in this office and comply
with
said statutes. Accordingly as Secretary of State and by virtue of the authority
rested in me by law, I do hereby issue this Certificate of Merger of INVESTORS
HERITAGE LIFE INSURANCE COMPANY OF OHIO (OHIO NOT QUAL.) into INVESTORS
HERITAGE LIFE INSURANCE COMPANY.

Witness my official signature and seal of office this 30th day of June, l977,
at Frankfort, Kentucky.

/s/
Drexell R. Davis
Secretary of State

VERIFICATION FORM

STATE OF KENTUCKY

COUNTY OF FRANKLIN

I, Wilma Yeary, a notary public, do hereby certify that on this 15th
day of June, l977, personally appeared before me, Harry Lee Waterfield, who,
being by me first duly sworn, declared that he is the President of Investors
Heritage Life Insurance Company that he signed the foregoing document as
President of the corporation, and that the statements therein contained are
true.

/s/
Wilma Yeary
Notary Public
My commission expires 26th day of January, 1978.

ARTICLES OF MERGER OF
INVESTORS HERITAGE LIFE INSURANCE COMPANY OF OHIO
INTO
INVESTORS HERITAGE LIFE INSURANCE COMPANY

Pursuant to the provisions of Section 271A.370 of the Kentucky
Revised Statutes, the undersigned hereby certify and verify:

1. CORPORATE PARTIES. The names of the constituent corporations are
Investors Heritage Life Insurance Company of Ohio ("Investors Heritage of
Ohio"), an Ohio Corporation, and Investors Heritage Life Insurance Company
("Investors Heritage"), a Kentucky Corporation, Investors Heritage is the
surviving corporation in the merger and its name as the surviving corporation
is Investors Heritage Life Insurance Company.

2. CAPITALIZATION. Investors Heritage of Ohio has issued and
outstanding 1,126,300 shares of Common Stock, par value $.50 per share.
Investors Heritage has issued and outstanding 687,335 shares of Common Stock
par value $1.00 per share.

3. PLAN OF MERGER. The attached Agreement and Plan of Merger (the
"Agreement and Plan of Merger"), signed and dated March 17, 1977, between
Investors Heritage and Investors Heritage of Ohio, is incorporated by reference
herein and made a part hereof.

4. MANNER OF ADOPTION BY INVESTORS HERITAGE. The Agreement and Plan
of Merger was approved by the Directors and shareholders of Investors Heritage
in the following manner:

(a) By resolution unanimously adopted by the Board of Directors of
Investors Heritage at meetings of the Board of Directors on January
26, 1977, and April 14, 1977;
(b) At a meeting of shareholders of Investors Heritage on the 12th
day of May, 1977, by affirmative vote of the holders of 540,566
shares
of Investors Heritage Common Stock, such affirmative vote
representing
the holders of more than a majority of the outstanding Common Stock
of Investors Heritage.

5. MANNER OF ADOPTION BY INVESTORS HERITAGE OF OHIO. The Agreement
and Plan of Merger was approved by the Directors and shareholders of Investors
Heritage of Ohio in the following manner:

(a) By resolutions unanimously adopted by the Board of Directors of
Investors Heritage of Ohio at meetings of the Board of Directors on
January 26, 1977, and April 15, 1977;

(b) At a meeting of the shareholders of Investors Heritage of Ohio on
the 13th day of May, 1977, by the affirmative vote of the holders of
812,225 shares of Common Stock of Investors Heritage of Ohio, such
affirmative votes representing the holders of more than two-thirds
(2/3) of the total number of shares of the outstanding capital stock
of Investors Heritage of Ohio.

6. APPROVAL BY THE KENTUCKY DEPARTMENT OF INSURANCE. The merger
provided for herein was approved by the Department of Insurance for the
Commonwealth of Kentucky on May 16, 1977.

7. APPROVAL BY THE OHIO MERGER COMMISSION. The merger provided for
herein was approved by the Ohio Merger Commission on June 24th, 1977.

8. EFFECTIVE DATE. The merger provided for herein shall become
effective at 12:00 Midnight, June 30, 1977.

9. NONABANDONMENT. The Agreement and Plan of Merger has not been
abandoned.

IN WITNESS WHEREOF, this Certificate has been signed this 28th day of
June, 1977.

INVESTORS HERITAGE LIFE INSURANCE COMPANY OF OHIO
/s/
JOHN W. BROWN, PRESIDENT
/s/
ROBERT M. HARDY, SECRETARY

INVESTORS HERITAGE LIFE INSURANCE COMPANY
/s/
HARRY LEE WATERFIELD, PRESIDENT
/s/
GENE M. BROWN, BY WILMA YEARY, ASSISTANT SECRETARY

COMMONWEALTH OF KENTUCKY

COUNTY OF FRANKLIN

I, the undersigned Notary Public in and for the State and County
aforesaid, do hereby certify that on this date the foregoing Articles of Merger
of Investors Heritage Life Insurance Company of Ohio with and into Investors
heritage Life Insurance Company was produced before me in my county and was
acknowledged by Harry Lee Waterfield and Gene M. Brown, by me personally known
to be the President and Secretary, respectively, of Investors Heritage Life
Insurance Company, to be their act and deed as such officers and the act and
deed of such corporation.

WITNESS my hand and seal of office this 27th day of June, 1977.

My commission expires: November, 11, 1980

/s/
JANE S. JACKSON
NOTARY PUBLIC

STATE OF OHIO

COUNTY OF FRANKLIN

I, the undersigned Notary Public, in and for the state and county
aforesaid, do hereby certify that on this day, the foregoing articles of merger
of Investors Heritage Life Insurance Company of Ohio with and into Investors
Heritage Life Insurance Company was produced before me in my county and was
acknowledged by John W. Brown and Robert Hardy, by me personally known to be
the President and Secretary, respectively, of Investors Heritage Life Insurance
Company of Ohio, to be their act and deed as such officers and the act and deed
of such corporation.

WITNESS my hand and seal of office this 28th day of June, 1977.

My Commission expires: Lifetime Commission
NOTARY PUBLIC
/s/
Austin P. Wildman
Attorney at Law
State of Ohio

AMENDMENT TO THE ARTICLES OF
INCORPORATION OF INVESTORS HERITAGE
LIFE INSURANCE COMPANY

Investors Heritage Life Insurance Company, a Kentucky corporation, by
its President, Harry Lee Waterfield II, and its Secretary, Gene M. Brown, does
hereby certify that at a regular meeting of the stockholders duly called and
held at Frankfort, Kentucky, on the 10th day of May, 1984, at 10:00 A.M., at
which meeting a majority of said stockholders entitled to vote at said meeting
were present in person or by proxy by an affirmative vote of more than a
majority of the stockholders entitled to vote thereupon, Article III of the
Articles of Incorporation was amended so that as amended, Article III provides
as follows:

"The total authorized capital stock of the corporation shall be two
million (2,000,000) shares of common stock of the par value of one
dollar ($1.00), each share having one (1) vote. All shares shall be
equal in all respects. The shares of capital stock shall be
unassessable at all times and no stockholder shall be liable thereon
beyond the liability of his subscription price."

IN WITNESS WHEREOF, Investors Heritage Life Insurance Company has
caused its name and corporate seal to be affixed hereto by Harry Lee Waterfield
II, its President, and Gene M. Brown, its Secretary.
This 17th day of May, 1984.

INVESTORS HERITAGE LIFE INSURANCE COMPANY
/s/
BY: Harry Lee Waterfield, II, President
/s/
BY: Gene M. Brown, Secretary
COMMONWEALTH OF KENTUCKY
COUNTY OF FRANKLIN
I, the undersigned Notary Public in and for the State and County
aforesaid, do hereby certify that on this day the foregoing Amendment to the
Articles of Incorporation of Investors Heritage Life Insurance Company was
produced before me in my County and was acknowledged by Harry lee Waterfield II
and Gene M. Brown, by me personally known to be the President and Secretary,
respectively, of Investors Heritage Life Insurance Company, a Kentucky
corporation, to be their act and deed as such officers and the act and deed of
such corporation.
Witness my hand and seal of office this the 17th day of May, 1984.
My Commission expires 7-1-86.
/s/
Wilma Yeary
Notary Public

This document prepared by:
/s/

Joe R. Johnson
Attorney at Law
200 Capital Avenue
Frankfort, Kentucky 40601

VERIFICATION FORM

STATE OF KENTUCKY

COUNTY OF FRANKLIN

I, Wilma Yeary, a Notary Public, do hereby certify that on this 17th
day of May, 1984, personally appeared before me Harry Lee Waterfield II, who,
being by me first duly sworn, declared that he is the President of Investors
Heritage Life Insurance Company, that he signed the foregoing document as
President of the corporation, and that the statements therein contained are
true.

/s/
Wilma Yeary
Notary Public

My Commission expires 2-1-86.

CERTIFICATE OF AMENDMENT
TO ARTICLES OF INCORPORATION

I, DREXELL R. DAVIS, Secretary of State of the Commonwealth of Kentucky, do
hereby certify that Amended Articles of Incorporation of Investors Heritage
Life
Insurance Company amended pursuant to Kentucky Revised Statutes, 271A, duly
signed and verified or acknowledged according to law, have been filed in my
office by said corporation, and that all taxes, fees and charges payable upon
the filing of said Articles of Amendment have been paid.

Given under my hand and seal of Office as Secretary of State, at Frankfort,
Kentucky, this 24th day of May, 1984.

/s/
Drexell R. Davis
Secretary of State

Original Copy Filed Approved for Form and Legality
Secretary of State of Kentucky Office of the Attorney General
Frankfort, Kentucky Frankfort, Kentucky 5-22-84
May 24, 1984 BY: Joseph R. Johnson

Approved
Kentucky Insurance Department
May 23, 1984

AMENDMENT TO THE ARTICLES OF
INCORPORATION OF INVESTORS HERITAGE
LIFE INSURANCE COMPANY

Investors Heritage Life Insurance Company, a Kentucky corporation, by
its President, Harry Lee Waterfield II, and its Secretary, Jane S. Jackson,
does
hereby certify that at a regular meeting of the stockholders duly called and
held at Frankfort, Kentucky, on the 12th day of May, 1988, at 10:00 A.M., at
which meeting a majority of said stockholders entitled to vote at said meeting
were present in person or by proxy by an affirmative vote of more than a
majority of the stockholders entitled to vote thereupon, Article III of the
Articles of Incorporation was amended so that as amended, Article III provides
an additional paragraph as follows:

"The shareholders of the corporation shall not have a preemptive
right to acquire the corporations's unissued shares."

IN WITNESS WHEREOF, Investors Heritage Life Insurance Company has
caused its name and corporate seal to be affixed hereto by Harry Lee Waterfield
II, its President, and Jane S. Jackson, its Secretary.

This 23rd day of February, 1989.
INVESTORS HERITAGE LIFE INSURANCE COMPANY
/s/
BY: Harry Lee Waterfield II, President
/s/
BY: Jane S. Jackson, Secretary

RECEIVED AND FILED
February 23, 1989
2:50 p.m.
$40.00
Bremer Ehrler
Secretary of State
Commonwealth of Kentucky

Filed February 23, 1989
3:01 p.m.
Donald C. Hulette
Franklin County Court Clerk

Approved for form and legality
Office of the Attorney General
Frankfort, Kentucky
BY: Joseph R. Johnson
2-23-89

Approved
Kentucky Department of Insurance
February 23, 1989

VERIFICATION FORM

STATE OF KENTUCKY

COUNTY OF FRANKLIN

I, Dianne Rogers, a Notary Public, do hereby certify that on this
23rd
day of February, 1989, personally appeared before me Harry Lee Waterfield II,
who, being by me first duly sworn, declared that he is the President of
Investors Heritage Life Insurance Company, that he signed the foregoing
document
as President of the corporation, and that the statements therein contained are
true.
/s/
Dianne A. Rogers
Notary Public My Commission Expires 1-23-90.

Commonwealth of Kentucky
County of Franklin

I, the undersigned Notary Public in and for the State and County
aforesaid, do hereby certify that on this day the foregoing Amendment to the
Articles of Incorporation of Investors Heritage Life Insurance Company was
produced before me in my county and was acknowledged by Harry Lee Waterfield II
and Jane S. Jackson, by me personally known to be the President and Secretary,
respectively, of Investors Heritage Life Insurance Company, a Kentucky
corporation, to be their act and deed as such officers and the act and deed of
such corporation.
Witness my hand and seal of office this the 23rd day of
February, 1989.
/s/
Dianne A. Rogers
Notary Public My Commission Expires 1-23-90.

This document prepared by
/s/
Robert M. Hardy, Jr.
Attorney at Law
200 Capital Avenue
Frankfort, Kentucky 40601

AMENDMENT TO THE ARTICLES OF
INCORPORATION OF INVESTORS HERITAGE
LIFE INSURANCE COMPANY

Investors Heritage Life Insurance Company, a Kentucky corporation, by
its President, Harry Lee Waterfield II, and its Secretary, Wilma Yeary, does
hereby certify that at a regular meeting of the stockholders duly called and
held at Frankfort, Kentucky, on the 11th day of May, 1989, at 10:00 A.M., at
which meeting a majority of said stockholders entitled to vote at said meeting
were present in person or by proxy, by an affirmative vote of more than a
majority of the stockholders entitled to vote thereupon, Article XI was added
to the Articles of Incorporation to read as follows:

"A director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of his
duties as a director, except for liability (i) for any transaction in
which the interest of the Company or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional
misconduct
or are known to the director to be in violation of law; (iii) for any
vote for or assent to an unlawful distribution to stockholders as
prohibited under KRS 271B.8-330; or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal
or modification of this Article by the stockholders of the Company
shall not adversely affect any limitation on the liability of a
director of the Company for matters arising prior to the time of such
repeal or modification."

In WITNESS WHEREOF, Investors Heritage Life Insurance Company has
caused its name and corporate seal to be affixed hereto by Harry Lee Waterfield
II, its President, and Wilma Yeary, its Secretary.
This 30th day of May, 1989.
INVESTORS HERITAGE LIFE INSURANCE COMPANY

/s/
BY: HARRY LEE WATERFIELD II, PRESIDENT
/s/
BY: WILMA YEARY, SECRETARY

Received and Filed June 14, 1989
11:12 a.m.
$40.00
Bremer Ehrler
Secretary of State
Commonwealth of Kentucky

Kentucky Insurance Department
Approved 6-14-89

Filed June 14, 1989
11:23 a.m.
Donald C. Hulette
Franklin County Court Clerk

Approved for Form and Legality
Office of the Attorney General
Frankfort, Kentucky
BY: Joseph R. Johnson
6-14-89

CERTIFICATION FORM

STATE OF KENTUCKY

COUNTY OF FRANKLIN

I, Jane S. Jackson, a Notary Public, do hereby certify that on the
30th day of May, 1989, personally appeared before me Harry Lee Waterfield II,
who, being by me first duly sworn, declared that he is the President of
Investors Heritage Life Insurance Company, that he signed the foregoing
document as President of the corporation, and that the statements therein
contained are true.
/s/
Jane S. Jackson
Notary Public
My Commission expires 11-11-92.

STATE OF KENTUCKY

COUNTY OF FRANKLIN

I, the undersigned Notary Public in and for the State and County
aforesaid, do hereby certify that on this day the foregoing Amendment to the
Articles of Incorporation of Investors Heritage Life Insurance Company was
produced before me in my county and was acknowledged by Harry Lee Waterfield II
and Wilma Yeary, by me personally known to be the President and Secretary,
respectively, of Investors Heritage Life Insurance Company, a Kentucky
corporation, to be their act and deed as such officers and act and deed of such
corporation.
Witness my hand and seal of office this the 30th day of May, 1989.
My Commission expires 11-11-92.
/s/
Jane S. Jackson
Notary Public

State of Kentucky

County of Franklin

I, Donald C. Hulette, Clerk of said county court, hereby certify that the
foregoing instrument has been duly recorded , Articles of Incorporation, Book
26, Page 397 in my said office.
6-14-89
Donald C. Hulette, Clerk

This document prepared by
/s/
Robert M. Hardy, Jr.
Attorney at Law
200 Capital Avenue
Frankfort, Kentucky 40601

EXHIBIT 3.2
BY-LAWS
OF
INVESTORS HERITAGE LIFE INSURANCE COMPANY

ARTICLE I.

Section 1. Time and Place of Meeting. The annual meeting of
stockholders for the election of directors shall be held at the principal
office
of the Company at 200 Capital Avenue, Frankfort, Kentucky 40601 or at such
other
place in Kentucky as the Board of Directors may, from time to time designate,
on
the second Thursday in May in each year at 10 A.M., or at such other hour as
the Board of Directors may fix prior to the notice of the meeting.

Special meetings of the stockholders shall be held in the same place
or places and shall be called by the President or Secretary upon direction of
the Board of Directors, or upon application of the owners of one-fourth of the
capital stock.

Section 2. Notice of Meetings. Unless otherwise required by statute,
notice of each meeting of stockholders shall be given to each stockholder of
record entitled to vote at such meeting not less than five nor more than sixty
days before the day on which the meeting is to be held, by mailing to such
stockholder, postage prepaid, a written or printed notice thereof addressed to
him at his last known post office address appearing on the books of the
company.
Such notice shall state the time and place of the meeting, and if a special
meeting, the purpose or purposes thereof.

Notice of any meeting need not be given to any stockholder who shall
attend such meeting in person or by proxy or to any stockholder who shall in
person or by attorney thereunto authorized in writing or by telegram waive
notice of such meeting. Unless otherwise required by statute, notice of any
adjourned meeting of stockholders need not be given.

Section 3. Quorum. At each meeting of stockholders a majority in
person or by proxy in interest of all the stockholders entitled to vote at such
meeting shall constitute a quorum for the transaction of business unless by
statutory requirement a greater majority is necessary. If the necessary
majority of stockholders be not present in person or by proxy at any meeting,
any stockholder or officer present may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present. At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally called.

Section 4. Voting. Except as may otherwise be required by law or by
the By-Laws, at each meeting of stockholders each stockholder shall be entitled
only to one vote for each share of Common Stock held by him and registered in
his name on the books of the company at the time of such meeting or at the date
fixed as a record date for the determination of the stockholders entitled to
vote pursuant to the provisions of Section 3 of Article VI of these By-Laws. In
case the transfer books of the company shall not have been closed and no date
shall have been fixed as a record date for the determination of the
stockholders
entitled to vote, as permitted by the provisions of said Section 3, no share of
stock shall be voted at any election of directors which has been transferred on
the books of the company within thirty days next preceding such election.

Any stockholder entitled to vote may vote in person or by proxy in
writing. the attendance at any meeting of a stockholder who may theretofore
have given a proxy shall not have the effect of revoking the same unless the
stockholder so attending shall, in writing, so notify the secretary of the
meeting at any time prior to the voting of the proxy.

Every person holding stock in any representative or fiduciary capacity
may represent the same at all meetings of stockholders and may vote thereon as
a stockholder; and every person who shall have pledged his stock as collateral
security may, nevertheless, represent the same at all such meetings and may
vote
thereon as a stockholder, unless in the transfer to the pledgee on the books of
the company he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee or his proxy may represent said stock and vote
thereon.

At each meeting of stockholders all matters other than those the
manner of deciding which is expressly regulated by statute or by the Articles
of
Incorporation or by these By-Laws, shall be decided by the vote of a majority
in interest of the stockholders present in person or by proxy and entitled to
vote.

ARTICLE II

Board of Directors

Section 1. General Powers. The business, affairs and property of
the company shall be managed by the Board of Directors.

Section 2. Number, Term of Office and Qualifications. The number of
directors shall be seven, elected at the annual meeting of stockholders. Each
of such directors shall serve until the next annual meeting of stockholders and
until his successor shall have been elected and qualified, or until his death,
or until he shall have resigned in the manner provided in Section 8 of this
Article II, or shall have been removed in the manner provided in Section 9 of
this Article II. Each director at the time of his election shall be a bona fide
holder of at least ten shares of stock of the company; any director ceasing to
be a bona fide stockholder shall cease to be a director.

Section 3. Election of Directors. At each meeting of the
stockholders for the election of directors, the directors shall be chosen by a
plurality of the votes given at such election. Every stockholder of record
entitled to vote shall be entitled to vote in person or by proxy the number of
shares owned by him for as many persons as there are directors to be elected or
to cumulate said shares so as to give one candidate as many votes as the number
of directors multiplied by the number of shares of stock shall equal, or to
distribute them on the same principle among as many candidates as he shall see
fit.

Section 4. Annual and Regular Meetings. The annual meetings of the
Board of Directors shall be held in each year immediately after the annual
meeting of the stockholders at the principal office of the company in
Frankfort,
Kentucky, or at such other place as the Board of Directors may fix from time to
time, and if so held, no notice of such meeting need be given. If the annual
meeting shall not be so held in any year, such meeting shall be held as soon
thereafter as practicable upon notice provided for in Section 6 of this Article
II. The Board of Directors shall meet on the Thursday following the second
Tuesday of each month.

Section 5. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by a majority of the directors then in
office, by the Executive Committee, the Chairman of the Board, or the
President,
at such time and place (which may be within or outside the State of Kentucky)
as may be specified in the respective notices or waivers of notice thereof.

Section 6. Notice of Meetings. No notice of regular meetings shall
be necessary. Notice of each special meeting of the Board of Directors shall be
mailed to each director at his residence or usual place of business at least
two
days before the day the meeting is to be held, or shall be sent to him at such
place by telegram, radio or cable, or telephone, or delivered to him
personally,
not later than the day before on which the meeting is to be held; provided,
however, that with respect to any meeting called to consider a proposed
amendment to the By-laws of the company, notice of the proposed change shall be
given to each director at least five days before the day on which such meeting
is to be held. Unless otherwise required by statute, notice of any special
meeting need not be given to any director who shall attend such meeting in
person or who shall waive notice thereof in writing or by telegram, radio or
cable. Any such meeting shall be a legal meeting without any notice thereof
having been given if all the directors shall be present thereat. Unless
otherwise required by statute, notice of any adjourned meeting need not be
given.

Section 7. Quorum and Manner of Acting. At each meeting of the Board
of Directors the presence of a majority of the directors in office shall be
necessary and sufficient to constitute a quorum for the transaction of
business.
Except as otherwise provided by statute or by these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum, a
majority of the directors present at the time and place of any meeting may
adjourn the meeting from time to time until a quorum shall be present. At any
such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally
called.

Section 8. Resignations. Any director may resign at any time by
giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the company. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or any such officer.

Section 9. Removal of Directors. Any director may be removed from
office for cause after due notice and hearing by the stockholders at a special
meeting called for that purpose, which may be held at the same time and place
as
the annual meeting if specified in the notice of the meeting. If such director
is a member of the Executive Committee, he shall cease to be a member of said
Committee when he ceases to be a director. Any vacancy in the Board of
Directors caused by any such removal may be filled at such meeting by the
stockholders entitled to vote; provided, however, that in case the stockholders
do not fill such vacancy at such meeting, such vacancy may be filled in the
manner provided in Section 10 of this Article II.

Section 10. Vacancies. If any vacancy shall occur in the Board of
Directors by reason of death, resignation, disqualification, removal or
otherwise, the remaining directors shall continue to act and such vacancy may
be
filled (subject to the provisions of Section 9 of this Article II) by the
affirmative votes of a majority of the remaining directors.

Section 11. Compensation. The directors shall receive such
compensation for their services as directors, and such allowance for traveling
expense for attendance at meetings of the Board, as may be determined by the
Board of Directors; the foregoing shall not be construed as prohibiting the
payment of any person who is a director of compensation for services rendered
to the company in any other capacity.

ARTICLE III

Executive Committee and Other Committees

Section 1. Designation of Members; Qualification; Term of Office.
The Board of Directors, by resolution or resolutions adopted from time to time,
may designate from among its members an Executive Committee consisting of the
President and such number of additional members as may be determined by the
Board.

Section 2. Powers. during the intervals between the meetings of the
Board of Directors (unless otherwise provided by statute, by these By-Laws, or
by resolution or resolutions adopted from time to time by the Board), the
Executive Committee shall have and may exercise all the powers of the Board of
Directors in the management of the business, affairs and property of the
company.

Section 3. Meetings; Notices; Records. The Executive committee, by
resolution, may provide for the holding of regular meetings, with or without
notice, and may fix the time and place at which such meetings shall be held.
Special meetings of the Executive Committee may be called from time to time by
any member of the Executive Committee. Meetings of the Executive Committee may
be held within or outside the State of Kentucky. Notice of each special meeting
shall be mailed to each member of the Executive Committee addressed to him at
his residence or usual place of business at least two days before the day on
which the meeting is to be held, or shall be sent to him at such place by
telegram, radio or cable, or telephoned or delivered to him personally, not
later than the day before the day on which the meeting is to be held. Notice of
any meeting need not be given to any member of the Executive committee who
shall
attend such meeting in person or who shall waive notice thereof in writing or
by
telegram, radio or cable. Any such meeting shall be a legal meeting without any
notice thereof having been given if all the members of the Executive Committee
shall be present thereat. Notice of any adjourned meeting need not be given.
The Executive Committee shall keep a record of its proceedings and shall report
such proceedings to the Board.

Section 4. Quorum and Manner of Acting. At each meeting of the
Executive Committee the presence of a majority of the members in office shall
be
necessary and sufficient to constitute a quorum for the transaction of
business,
and the act of a majority of the members present at any meeting at which a
quorum is present shall be the act of such Committee. In the absence of a
quorum, a majority of the members present at the time and place of any meeting
may adjourn the meeting from time to time until a quorum shall be present.

Section 5. Resignations. Any member of the Executive Committee may
resign at any time by giving written notice of such resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary of the
company. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or any such
officer.

Section 6. Removal. Any or all of the members of the Executive
Committee may be removed at any time, either for or without cause, by
resolution
or resolutions adopted at any meeting of the Board of Directors called for the
purpose.

Section 7. Vacancies. If any vacancy shall occur in the Executive
Committee by reason of death, resignation, disqualification, removal or
otherwise, the remaining members shall continue to act and such vacancy may be
filled by a resolution adopted at any meeting of the Board of Directors.

Section 8. Other Committees. The Board of Directors, by resolution
or resolutions adopted from time to time, may designate one or more other
committees of the Board, each such committee to consist of two or more of the
Directors, to have such name or names and to have such powers as may be
determined from time to time by resolution or resolutions adopted by the Board.

Section 9. Compensation. The members of any committee designated
pursuant to this Article III shall receive such compensation for their services
as such members, and such allowance for traveling expenses for attendance at
committee meetings, as may be determined by the Board of Directors; the
foregoing shall not be construed as prohibiting the payment to any person who
is
a member of any such committee of compensation for services rendered to the
company as a member of the Board or in any other capacity.

ARTICLE IV

Officers

Section 1. Number. The officers of the company shall be a Chairman of
the Board, a President, a First Vice President, one or more Vice Presidents, a
Comptroller, a General Counsel, a medical Director, a Secretary, a Treasurer,
and such other officers as may be appointed in accordance with the provisions
of
Section 3 of this Article IV. The same person may hold more than one office
except that the President may not also be the Secretary or as Assistant
Secretary.

Section 2. Election, Term of Office and Qualifications. Each officer
(except such officers as may be appointed in accordance with the provisions of
Section 3 of this Article IV) shall e chosen by the Board of Directors. Each
such officer (whether chosen at an annual meeting of the Board of Directors or
to fill a vacancy or otherwise) shall hold his office until the next annual
meeting of the Board of Directors and until his successor shall have been
chosen
and qualified, or until his death, or until he shall have resigned in the
manner
provided in Section 4 of this Article IV, or shall have been removed in the
manner provided in Section 5 of this Article IV. The Chairman of the Board,
the President and the First Vice President shall be and remain Directors of the
company during the terms of their respective offices. Any other officer may but
need not be a Director of the company.

Section 3. Subordinate Officers and Agents. The Board of Directors
from time to time may appoint other officers or agents (including one or more
Assistant Secretaries, one or more Assistant Medical Directors), to hold their
positions for such period, have such authority, and perform such duties as are
provided in these By-Laws or as may be provided in the resolutions appointing
them. The Board of Directors may delegate to any officer or agent the power to
appoint any such subordinate officers or agents and to prescribe their
respective terms of office, authorities and duties.

Section 4. Resignations. Any officer may resign at any time by
giving written notice of such resignation to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the company. Unless
otherwise specified in such written notice, such resignation shall take effect
upon receipt thereof by the Board of Directors or any such officer.

Section 5. Removal. Any officer specifically designated in Section 1
of this Article IV may be removed at any time, either for or without cause, by
resolution or resolutions adopted at any meeting of the Board of Directors
called for the purpose. Any officer or agent appointed in accordance with the
provisions of Section 3 of this Article IV may be removed, either for or
without
cause, by the Board of Directors, at any meeting, or by any superior officer or
agent upon whom such power of removal shall have been conferred by the Board of
Directors.

Section 6. Vacancies. Any vacancy in any office by reason of death,
resignation, removal, disqualification or any other cause shall be filled in
the
manner prescribed in these By-Laws for regular election or appointment to such
office.

Section 7. The Chairman of the Board. The Chairman of the Board
shall be the chief executive officer and shall preside at all meetings of the
Boar of Directors and shall have full executive authority and such other powers
and duties as from time to time may be assigned to him by the Board of
Directors.

Section 8. The President. The President shall be the chief operating
officer of the company. Subject to the direction of the Board of Directors, he
shall have general charge of the business, affairs and property of the company
and general supervision over its officers and agents. If present, he shall
preside at all meetings of stockholders and of the Executive Committee and, in
the absence or disability of the Chairman of the Board, at all meetings of the
Board of Directors, and he shall see that all orders and resolutions of the
Board of directors and of the Executive Committee are carried into effect. He
may sign, with any other officer thereunto duly authorized, certificates of
stock of the company, the issuance of which shall have been duly authorized,
and may sign and execute in the name of the company deeds, mortgages, bonds,
contracts, agreements or other instruments duly authorized by the Board of
Directors, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent.
From time to time he shall report to the Board of Directors and to the
Executive
Committee all matters within his knowledge which the interests of the company
may require to be brought to their attention. He shall also perform such other
duties as are given to him by these By-Laws or as from time to time may be
assigned to him by the Board of Directors.

Section 9. The First Vice President. The First Vice President shall
be vested with all the powers and shall perform all the duties of the President
in the absence or disability of the latter, unless or until the Directors shall
otherwise determine. He shall have such other powers and do and perform such
other and further acts as from time to time may be designated or required by
the Board of Directors.

Section 10. The Other Vice Presidents. The Vice Presidents, other
than the First Vice President, shall perform such duties as from time to time
may be assigned to them by the Board of Directors or the President.

Section 11. The General Counsel. The General Counsel shall be the
legal advisor to the company and to the several departments thereof and shall
be responsible for the conduct of all legal matters of the company.

Section 12. The Medical Director. It shall be the duty of the
Medical Director to set the standards of insurability necessary for insurance
in the company. He shall assist the underwriter in passing on insurance risks
for
the company's acceptance, and shall have such other duties as are attendant to
the proper medical handling of applications for insurance in the company.

Section 13. The Secretary. The Secretary shall:

(a) record all the proceedings of the meetings of the
stockholders, Board of Directors and Executive Committee in a book or books to
be kept for that purpose;

(b) cause all notices to be duly given in accordance with
the provisions of these By-Laws and as required by statute;

(c) whenever any committee shall be appointed in pursuance
of a resolution of the Board of Directors, furnish the Chairman of such
committee with a copy of such resolution;

(d) be custodian of the records and of the seal of the
company, and cause such seal to be affixed to all certificates representing
stock of the company prior to the issuance thereof, and to all instruments the
execution of which on behalf of the company under its seal shall have been duly
authorized;

(e) see that the lists, books, reports statements,
certificates, and other documents and records required by statute are properly
kept and filed;

(f) have charge of the stock books of the company and cause
the stock and transfer books to be kept in such manner as to show at any time
the amount of stock of the company issued and outstanding, the names
alphabetically arranged, and the addresses of the holders of record thereof;
the
number of shares held by each, and the date when each became such holder of
record; and exhibit at all reasonable times to any director, upon application,
the original or duplicate stock register; and

(g) in general, perform all duties incident to the office
of
Secretary and such other duties as are given to him by these By-Laws or as from
time to time may be assigned to him by the Board of Directors or the President.

Section 14. Assistant Secretaries. At the request of the Secretary
or in his absence or disability, the Assistant Secretary designated by him (or
in the absence of such designation, the Assistant Secretary designated by the
Board of Directors or the President) shall perform all the duties of the
Secretary, and, when so acting, shall have all the powers of and be subject to
all restrictions upon the Secretary. The Assistant Secretaries shall perform
such other duties as from time to time may be assigned to them respectively by
the Board of Directors, the President or the Secretary.

Section 15. The Treasurer. The Treasurer shall:

(a) have charge of and supervision over and be responsible
for the funds, securities, receipts and disbursements of the company;

(b) cause the moneys and other valuable effects of the
company to be deposited in the name and to the credit of the company in such
banks or trust companies or with such bankers or other depositaries as shall be
selected by the Board of Directors, or to be otherwise dealt with in such
manner as the Board of Directors may direct;

(c) cause the funds of the company to be discharged by
checks or drafts upon the authorized depositories of the company, and cause to
be taken and preserved proper vouchers for all moneys disbursed;

(d) render to the Board of Directors, the Executive
Committee, the Chairman of the Board, or the President, whenever requested, a
statement of the financial condition of the company and of all his transactions
as Treasurer;

(e) cause to be kept at the principal office of the company
correct books of account of all its business and transactions and exhibit such
books to any director upon application at such office during business hours;
and

(f) in general, perform all duties incident to the office of
Treasurer and such other duties as are given to him by these By-Laws or as from
time to time may be assigned to him by the Board of Directors or the President.

Section 16. Assistant Treasurers. At the request of the Treasurer or
in his absence or disability, the Assistant Treasurer designated by him (or in
the absence of such designation, the Assistant Treasurer designated by the
Board of Directors or the President) shall perform all the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all restrictions upon the Treasurer. The Assistant Treasurers shall perform
such other duties as from time to time may be assigned to them respectively by
the Board of Directors, the President or the Treasurer.

Section 17. The Comptroller. The Comptroller shall supervise the
keeping of the books and records of account and audits thereof, except as
otherwise provided by the Board of Directors, and shall perform such other
duties as from time to time may be assigned to him by the Board of Directors or
the President.

Section 18. Salaries. The salaries of the officers of the company
shall be fixed from time to time by the Board of Directors, except that the
Board of Directors may delegate to any person the power to fix the salaries or
other compensation of any officers or agents appointed in accordance with the
provisions of Section 3 of this Article IV. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
company.

Section 19. Surety Bonds. In case the Board of Directors shall so
require, any officer or agent of the company shall execute to the company a
bond
in such sum and with such surety or sureties as the Board of Directors may
direct, conditioned upon the faithful discharge of his duties.

ARTICLE V

Indemnification of Directors and Officers

Every person who now is or hereafter shall be a director or officer of
the company shall be indemnified by the company against all costs and expenses
(including counsel fees) actually and necessarily incurred by or imposed upon
him in connection with or resulting from any action, suit, or proceeding of
whatever nature to which he is or shall be made a party by reason of his being
or having been a director or officer of the company (whether or not he is a
director or officer of the company at the time he is made a party to such
action, suit or proceeding, or at the time such costs or expenses are incurred
by or imposed upon him), except in relation to matters as to which he shall be
adjudged in such action, suit, or proceeding to be liable for negligence or
misconduct in the performance of his duties as such director or officer;
provided, however, that in the case of an action, suit or proceeding which is
settled or compromised, such right of indemnification shall be applicable only
(a) if such settlement or compromise is approved by the Court having
jurisdiction of such action, suit or proceeding and (b) to the extent provided
in the terms of such compromise or settlement so approved. Every such person
shall be entitled, without demand by him upon the company or any action by the
company, to enforce his right to such indemnity in ac action at law against the
company.

The right of indemnification hereinabove provided shall not be deemed
exclusive of any other rights to which any such person may now or hereafter be
otherwise entitled and specifically, without limiting the generality of the
foregoing, shall not be deemed exclusive of any rights, pursuant to statute or
otherwise, of any such person in any such action, suit or proceeding to have
assessed or allowed in his favor, against the company or otherwise, his costs
and expenses incurred therein or in connection therewith or any part thereof.

ARTICLE VI

Shares and Their Transfer

Section 1. Stock Certificates. Except as provided by resolution of
the directors, every holder of stock in the company shall be entitled to have a
certificate, signed by the President or the First Vice President, and either
the
Treasurer or the Secretary and impressed with the corporate seal, certifying
the
number of shares owned by him in the company; provided, however, that where
such
certificate is signed by a transfer agent or a registrar, the signature of any
such President, First Vice President, Treasurer, or Secretary, and the
corporate
seal, may be facsimiles. In case any officer of the company who has signed, or
whose facsimile signature has been used on, any such certificate shall cease to
be such officer, for whatever cause, before the certificate shall have been
delivered by the company, the certificate shall be deemed to have been adopted
by the company unless the Board of Directors shall otherwise determine prior to
the issuance and delivery thereof, and may be issued and delivered as though
the
person who signed it or whose facsimile signature has been used thereon had not
ceased to be such officer of the company. Certificates representing shares of
stock of the company shall be in such form as shall be approved by the Board of
Directors. There shall be entered upon the stock books of the company at the
time of issuance of each share the number of the certificate issued, the name
and address of the person owning the shares represented thereby, the number of
such shares and the date of issuance thereof. Every certificate exchanged or
returned to the company shall be marked "cancelled", with the date of
cancellation.

Section 2. Transfer of Stock. Transfers of shares of stock of the
company shall be made on the books of the company by the holder of record
thereof or by his attorney thereunto duly authorized by a power of attorney
duly
executed in writing and filed with the Secretary of the company or any of its
transfer agents, and on surrender of the certificate or certificates
representing such shares. The company and its transfer agents and registrars,
if any, shall be entitled to treat the holder of record of any share or shares
of stock as the absolute owner thereof for all purposes, and accordingly shall
not be bound to recognize any legal, equitable or other claim to or interest in
such shares or shares on the part of any other person whether or not it or they
shall have express or other notice thereof, except as otherwise expressly
provided by the Statutes of the State of Kentucky; provided, however, that
whenever any transfer of shares shall be made for collateral security and not
absolutely, and written notice thereof shall be given to the Secretary of the
company or to any of its transfer agents, such fact shall be expressed in the
entry of the transfer.

Section 3. Closing of Transfer Books and Fixing of Record Dates. The
Board of Directors shall have the power to close the stock transfer books of
the
company for a period not exceeding forty days preceding the date of any meeting
of stockholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change or conversion, exchange, or
reclassification of capital stock shall go into effect; provided, however, that
the Board of Directors is authorized in lieu of closing the stock transfer
books
as aforesaid to fix in advance a date, not exceeding forty days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion, exchange or reclassification of capital stock shall go into
effect, as a record date for the determination of the stockholders entitled to
notice of and to vote at any such meeting, or entitled to receive payment of
any
such dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversation, exchange or reclassification of
capital stock, and in such cases only stockholders of record on the date so
fixed shall be entitled to such notice of and to vote at such meeting, or to
receive payment of such dividend, or to receive such allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
stock on the books of the company after any such record date fixed as
aforesaid.

Section 4. Regulations. Subject to the provisions of this Article
VI, the Board of Directors may make such rules and regulations as it may deem
expedient concerning the issuance, transfer and registration of certificates
for shares of the stock of the company.

Section 5. Transfer Agents and Registrars. The Board of Directors
may appoint one or more transfer agents and one or more registrars with respect
to the certificates representing shares of stock of the company and may require
all such certificates to bear the signature of either or both.

Section 6. Lost or Destroyed Certificates. The holder of any shares
of stock of the company shall immediately notify the company and its transfer
agents and registrars, if any, of any loss or destruction of the certificates
representing the same. Any person claiming a certificate of stock to be lost or
destroyed shall make an affidavit or affirmation of that fact and advertise the
same in such manner as the Board of Directors may require, and shall, if the
Directors so require, give the company a bond of indemnity, in form and with
one
or more sureties satisfactory to the Board, in at least double the value of the
stock represented by said certificate, whereupon a new certificate may be
issued of the same tenure and for the same number of shares as the one alleged
to be lost or destroyed.

ARTICLE VII

Corporate Seal

The corporate seal shall be circular in form and shall bear the name
of the company and the words and figures denoting its organization under the
Laws of the State of Kentucky, and otherwise shall be in such form as shall be
approved from time to time by the Board of Directors.

ARTICLE VIII

Fiscal Year

The fiscal year of the company shall begin on the first day of January
in each year and shall end on the thirty-first day of the following December.

ARTICLE IX

Amendments

Section 1. Amendment of By-Laws. The Board of Directors, by the
affirmative vote of a two-thirds majority thereof, may at any meeting, provided
the substance of the proposed amendment shall have been stated in the notice of
the meeting, amend or alter any of these By-Laws.

AMENDMENT TO BY-LAWS #1

Section 2 of Article II of the By-Laws was amended by the stockholders
in annual meeting on April 30, 1964, as follows:

"On motion of Mr. Leonard Preston, seconded by Mr. Robert Hudson, and
unanimously passed, the By-Laws of the company were amended to reflect that the
number of members on the Board of Directors shall now be seven instead of
five."

AMENDMENT TO BY-LAWS #2

Section 4 of Article II of the By-Laws was amended by the Board of
Directors in regular meeting held October 29, 1964, as follows:

"BE IT RESOLVED by the Board of Directors of National Investors Life
Insurance Company that the regular meeting of the Board of Directors be held
monthly on the Thursday following the second Tuesday of each month and that the
By-Laws, to that extent, be amended."

"On motion of Mr. Howell, seconded by Mr. Thurman, the resolution was
unanimously adopted."

AMENDMENT TO BY-LAWS #3

Section 5 of Article VI of the By-Laws was amended by the Board of
Directors in special meeting held December 29, 1964, as follows:

"The President announced that Citizens Fidelity Bank & Trust Company,
Louisville, had been engaged as the Transfer Agent for the company.
He expressed the view that the cost of the Transfer Agent would be no greater
than the cost to the company of acting as its own Transfer Agent; that in his
opinion the use of the Transfer Agent would be beneficial to the company; and
recommended that the bank be engaged for this purpose. On motion by Mr.
Thurman, seconded by Mr. Howell and duly carried, the recommendation of the
President was approved."

AMENDMENT TO BY-LAWS #4

Section 1 of Article 1 of the By-Laws was amended by the Board of
Directors in regular meeting held May 16, 1968, as follows:

"BE IT RESOLVED that Article 1, Section 1, of the By-Laws of
Investors Heritage Life Insurance Company be repealed and re-enacted to read
as follows:

Section 1. Time and Place of Meetings. The annual meeting of
stockholders for the election of Directors shall be held at the principal
office
of the company at 200 Capital Avenue, Frankfort, Kentucky, or at such other
place in Kentucky as the Board of Directors may, from time to time, designate,
on the second Thursday in May in each year at 10:00 A.M. or at such other hour
as the Board of Directors may fix prior to the notice of the meeting.

On motion of Mr. Thurman, seconded by Mr. Howell and carried
unanimously, the resolution was adopted."

AMENDMENT TO BY-LAWS #5

Section 2 of Article II of the By-Laws was amended by the
stockholders in annual meeting on May 11, 1972, as follows:

"Stockholder J.J. Leary made a motion that the By-Laws of the company
be amended to increase the number of members on the Board of Directors from
seven to nine, which motion was seconded by stockholder James W. Bean. Upon
vote, 545,686 or 79.83% of the shares voted yes, and 8,430 shares or 1.23%
voted no, and the motion carried."

AMENDMENT TO BY-LAWS #6

At a meeting of the Board of Directors on May 8, l974, at which
meeting a quorum of the Board was present and acting, the action of the
Executive Committee in recommending amendment of Section 1 of Article IV of the
By-Laws was unanimously approved, and provides as follows:

"Section 1. The officers of the Company shall be a Chairman of the
Board as the chief executive officer, a President, a First vice President, one
or more Vice President, a General Counsel, a medical Director, a Secretary and
a
Treasurer, and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article IV. The same person may hold more than
one office except that the President may not also be the Secretary or an
Assistant Secretary."

AMENDED MAY 9, 1979

AMENDMENT TO BY-LAWS #7

At a regular meeting of the stockholders, duly called and held at
Frankfort, Kentucky, on May 9, 1974, at which meeting a majority of the
stockholders entitled to vote were present in person or by proxy, Article VIII
of the Articles of Incorporation was amended so that, as amended, Article VIII
provides as follows, and has the effect of amending Article II, Section 2, of
the By-Laws:

"The business and affairs of the company shall be transacted and
managed by a Board of Directors of nine members. The nine members shall be
divided into three classes, each consisting of three members, the office of
the
first class to expire at the first annual meeting of stockholders after their
election, that of the second class to expire at the second annual meeting after
their election and that of the third class to expire at the third annual
meeting
after their election. At each annual meeting after such classification, the
number of Directors equal to the number of the class whose term expires at the
time of such meeting shall be elected to hold office until the third succeeding
annual meeting. In the event of any vacancy occurring in the Board of
Directors, it shall be filled by the affirmative vote of a majority of the
remaining Directors and shall be for the unexpired term of his predecessor in
office.

The Board of Directors shall have power to make such By-Laws and rules
to regulate the business of the corporation as are not inconsistent with the
provisions of these Articles of Incorporation or the laws of the Commonwealth
of Kentucky.

The Board of Directors may, by resolution, issue unissued stock
authorized by these Articles of Incorporation and such options or warrants to
purchase stock in this corporation in such amounts and on such terms as the
Board may, in its discretion, deem desirable and necessary."

AMENDMENT TO BY-LAWS #8

At a meeting of the Board of Directors on May 9, 1979, at which
meeting a quorum of the Board was present and acting, the action of the
Executive Committee in recommending amendment of Amendment #6 to Section 1 of
Article IV of the By-Laws was unanimously approved, and provides as follows:

"Section 1. The officers of the Company shall be a Chairman of the
Board as the Chief Executive Officer, a President as the Chief Operating
Officer, one or more Vice Presidents, a General Counsel, a Medical Director, a
Secretary and a Treasurer, and such other officers as may be appointed in
accordance with the provisions of Section 3 of this Article IV. The same person
may hold more than one office except that the President may not also be the
Secretary or an Assistant Secretary."

EXHIBIT 1

1995 ANNUAL REVIEW

KENTUCKY INVESTORS, INC.

INVESTORS HERITAGE
LIFE INSURANCE COMPANY

TABLE OF CONTENTS

Mission and Strategy Statement 2
Letter to Stockholders 3
Management's Discussion and Analysis 9
Corporate Officers 22

Kentucky Investors, Inc.

Consolidated Financial Statements 24
Selected Financial Data 28
Report of Independent Auditors 28

Investors Heritage Life Insurance Company

Selected Financial Data 29
Report of Independent Auditors 29
Consolidated Financial Statements 30

Notes to Consolidated Financial Statement 34
Board of Directors 47
Stock Prices and Annual Meeting 48

Photography by Lucy Johnson

Page 1

OUR MISSION

The mission of Investors Heritage Life Insurance Company is to provide quality
life insurance products and services, and maintain financial strength for the
benefit of our insureds, stockholders, agents and employees.

Investors Heritage Life Insurance Company is committed to achieving long term
financial objectives by implementing strategies to increase the volume and
quality of insurance in force. We will improve the quality of the delivery
system with programs to enhance the skills and timely response of marketing and
support service functions.

OUR STRATEGY

The strategic plan focuses on timely product development, technology,
education,
communication, human resources practices, and market concentration as key
elements to the attainment of financial objectives.

The overall strategy is to provide competitive products and superior quality
services while improving productivity and job enrichment.

Page 2

LETTER TO OUR SHAREHOLDERS

Kentucky Investors, Inc. ("Kentucky Investors") and Investors Heritage Life
Insurance Company ("Investors Heritage") (collectively the "Companies")
continued during 1995 to respond to market conditions and marketing
opportunities. Most of my comments to you relate to the sales and
administrative activities of the Companies that ultimately lead to the
financial results reported in the Management's Discussion & Analysis. First,
however, I would like to address two specific items which provide and improve
the financial strength of the Companies: the quality of our investments and
the asset/liability management process.

As in the past, the quality rating of our fixed income assets continues to
be
outstanding with an average rating of AA. Investors Heritage purchases only
investment grade bonds. At the end of 1995, 99.3% of our fixed income assets
(corporate bonds, US government agency paper and treasury bills) were rated
investment grade by Standard & Poor's. This compares to 99.2% in 1994 and 100%
in 1993. None of our fixed income assets are in default. At year end
Investors
Heritage had only one small mortgage loan ($46,526) more than sixty days
past due out of a mortgage loan portfolio of $13.1 Million. The pie chart on
Page 8 shows the Distribution of Invested Assets.

Additionally, we continue to perform an Asset Adequacy Analysis each
year, as we have done since 1991, even though we are required to do so every
three years. As in prior years, these tests demonstrated very favorable
results for the assets and liabilities of Investors Heritage held as of
December 31, 1995. Since 1991, Investors Heritage's model has become more
sophisticated and more useful. We are using the model for a variety of
applications beyond the required cash flow testing. For example, we can now
compare actual to expected results for specific product lines or explore the
outcomes of different marketing strategies. The model will be used
extensively this next year when working to comply with the new "Illustration
Actuary" requirements promulgated by the National Association of Insurance
Commissioners. The next logical step is financial projections and dynamic
solvency testing.

A very important result of the Asset Adequacy Analysis is illustrated by
the graph on Page 7. These curves show the option adjusted prices of assets,
liabilities and surplus at various shifts in the interest rate environment.
Note that surplus remains at relatively the same level regardless of the
magnitude of the interest rate shifts. The asset/liability management
process is outstanding, and in combination with the quality and
distribution
of assets clearly illustrates the strength of Investors Heritage's portfolio.
We believe this process is an integral part of proper management of the
Companies and we will continue to expand and refine it.

Page 3

A myriad of changes has occurred in our industry during the past several
years. Investors Heritage and Kentucky Investors have had the ability to adapt
to these changes due in large part to our investment in technology over the
years and our ability to create software geared to our products to take
advantage of the technology. Further, we have concentrated sales efforts in
specific markets and as a result, have seen the continued development
of a dynamic and successful sales organization.

Our investment in technology has enabled us to move forward in providing
administrative service as products become more complex and marketing and
financial reporting requirements rapidly expand. It has also enabled us to
cost effectively modernize sales practices using personal computers and
laptop computers throughout our distribution system, especially in funeral
homes and financial institutions as well as our base Ordinary Life
agents who choose to use them. Financial institutions selling Credit
related products can utilize software for personal computers that among
other things calculates rates and coverages and completes the application
process.

We are currently working on a plan to have software available for use in
our funeral home accounts that will enable Preneed and Final Expense
applications to be completed by a personal computer rather than requiring the
manual process of filling out the application. We anticipate
implementation of this new technology by the end of the second quarter.
This will be in addition to providing sales presentation information, up to
date death benefit information, and premium remittance through disks or
telecommunications.

You may have seen news reports of a major computer problem facing most users
of Information Services (computers). The problem is created with the
impending arrival of the year 2000 and a computer system's ability to correctly
process dates. Without going into the complicated details as to the
reason for the future service problems, I want to assure stockholders that
Investors Heritage and Kentucky Investors recognized this problem and acted a
number of years ago to solve it. As we implemented normal changes to
our Information Services, we took the necessary steps to handle the processing
of dates from the year 2000 and beyond. Therefore, we will not face the
herculean task and enormous cost of the changes facing many users of
Information Services in the next four years.

In the Preneed and Final Expense markets where products are sold by funeral
directors or affiliated agents to fund prearranged funerals, there are a
small number of companies competing. Investors Heritage is not the largest in
the field in terms of asset size or market share, but we are making progress
each year.

Page 4

For twenty years North Carolina has been our major state in the funeral home
market. In recent years, as Preneed sales started to come to the forefront
we have expanded to several other states, targeting eleven for special
attention. We have assembled a truly outstanding marketing team who have
done an outstanding job getting funeral homes to join Investors Heritage. In
1995, Preneed sales were up 11% over 1994. Seven of the eleven targeted
states had significantly increased sales and more importantly, the sales
organization in most of these states has begun to really take shape and develop
into the type of sales operation we want.

Last year we reported we were phasing out of the Credit Insurance market as a
direct writer but would continue marketing Credit Life and Credit Accident
& Health for Franklin Life Insurance Company ("Franklin") through Investors
Heritage Financial Services Group, Inc. (FSG), a wholly owned marketing
subsidiary of Kentucky Investors. We successfully did that during the
last quarter of 1994 and all of 1995. However, Franklin advised us in December
that they were getting out of the Credit Insurance business as result of a
change in ownership.

We re-examined our position in the Credit Insurance market and determined that
we could, and should, continue to generate alternative sources of revenue by
marketing and administering Credit insurance products. Investors Heritage
entered into a reinsurance agreement with Connecticut General Life Insurance
Company at the end of 1995 that enables us to take advantage of our
marketing through FSG and the administrative expertise of Investors Heritage
in the financial institutions market. All of the Credit insurance business
produced by FSG will be reinsured with Connecticut General.

We are pleased with FSG's first year of operation. FSG was able to retain the
vast majority of accounts during the transition at year end 1994. With the exit
of Franklin, FSG presented Investors Heritage with new opportunities and the
possibility to fully utilize our capabilities in administering the Credit
Insurance business. Additionally, FSG has improved its prospects by bringing in
another marketing group that has historically produced more than twice FSG's
production.

Our traditional Ordinary Life sales were slightly higher than last year and
we anticipate them to remain steady in 1996. It sometimes appears that
agents selling more traditional life insurance products receive little
attention due to the emphasis placed on the funeral home and Credit related
market. However, that is not our intent. We will continue to emphasize
traditional Ordinary Life insurance sales. Most of the technology utilized
for the special markets is also used for our traditional Ordinary products.
1995 was a very eventful year for Investors Heritage Printing, Inc., a
wholly owned subsidiary of Kentucky Investors. New marketing efforts
were successful and new equipment and internal technology mentioned last

Page 5

year improved our base of operation. In 1995, we purchased Community and
Suburban Press, one of the oldest printing operations in Frankfort, Kentucky.
For the past several years Community Press' primary work was syndicated
newspaper filler articles which we will continue to emphasize. This purchase
together with an increase from our own marketing efforts increased our job
printing and enabled us to more fully utilize our equipment and staff. For
the first time ever, Investors Heritage Printing paid a dividend to Kentucky
Investors.

For a number of years within the Life insurance industry, there have been
many consolidations, buyouts and mergers. State regulations, driven to a great
extent by the NAIC and many other requirements by other governing bodies
drive up administrative costs and make it common discussion and concern
within the industry that small companies will find it too costly and
complicated to compete in the future.

Management totally agrees that costs have gone up, sometimes unnecessarily from
so many new requirements, but we have over the years taken steps that help
us conform to the requirements as cost efficiently as possible. Groundwork
investment over time has spread out these costs for us to some extent. By
concentrating on specific markets and looking for, and finding, alternative
sources of income, thereby utilizing our marketing and administrative
capabilities, we are confident we will continue to be a solid small company
that will be able to compete and thrive in the future.

The investment and continued confidence of the stockholders of Investors
Heritage and Kentucky Investors have enabled both Companies to succeed and
are truly appreciated. We are also very proud of the hard work and dedication
for success by our sales and administrative staff. We are on the move with
great expectations for the future. On behalf of the Board of Directors, I
thank all associated with Investors Heritage and Kentucky Investors for your
interest and support throughout our first thirty-five years.

Respectfully submitted,
/s/
Harry Lee Waterfield II signature

Page 6

OPTION ADJUSTED VALUE VS TERM STRUCTURE SHIFT GRAPH

A graph appears on this page which shows the results of the Asset Adequacy
Analysis performed by Investors Heritage Life Insurance Company. The graph
demonstrates the option adjusted prices of assets, liabilities, and surplus at
various shifts in the interest rate environment.

Page 7

DISTRIBUTION OF INVESTED ASSETS GRAPH

A pie chart appears on this page showing the Distribution of Invested Assets
for
all of the assets of Investors Heritage Life Insurance Company. The chart shows
the following breakdown: Fixed Maturities:83.6%; Contractual in
Affiliates:0.4%;
Investments in Affiliates:1.4%; Equity Securities 1.6%; Short Term
Investments:0.7%; Policy Loans: 4.2%; Other Long Term Investments: 0.2%;
Mortgage Loans-R.E.: 7.9%.

Page 8

MANAGEMENT'S DISCUSSION AND ANALYSIS

EXPANSION IN OPERATIONS

During 1995, Kentucky Investors, Inc. ("KII") expanded its base of operations
and Investors Heritage Life Insurance Company ("IHL") continued to expand its
market share in the preneed funeral market. While IHL is focusing on the
preneed funeral market, other methods of utilizing all of our resources to the
fullest extent are continually explored. IHL's decision to exit the credit
insurance market as a direct writer initiated the formation of Investors
Heritage Financial Services Group, Inc. ("FSG"), a wholly owned subsidiary of
KII.

FSG entered into marketing agreements with a number of unaffiliated insurers
and
was and will continue to be responsible for marketing several products to
financial institutions including credit life, credit accident and health
(respectively "Credit Life" and "Credit A&H" and collectively "Credit
Insurance"), Individual Disability, Involuntary Unemployment Insurance and GAP
(which covers the excess of the loan value over the value of the collateral in
the event the collateral is a total loss). FSG also marketed and will continue
to market IHL's mortgage protection products and other ordinary life products
for IHL. Management anticipates steady growth in this area of IHL's business
due to the continued marketing efforts of FSG. In addition, as explained in
more detail below, during 1996 FSG will also market IHL's Credit Insurance
products.

FINANCIAL STRENGTH

The quality of our investment portfolio and the current level of shareholders'
equity of KII and IHL continues to provide a sound financial base as we
continue to expand our marketing system to offer competitive, quality products.
As of December 31, 1995, 99.3% of the fixed income portfolio of IHL was rated
investment grade by Standard and Poor's and none of our fixed income assets
were
in default. At December 31, 1995, IHL had only one small mortgage loan which
was more than 60 days past due. All other mortgage loans are performing.

REVENUES

Overall revenues were $44,076,000,$46,804,000 and $45,426,000 in 1995, 1994 and
1993, respectively for IHL. The changes were due primarily to the method of
presentation of a new ordinary life insurance product and marketing changes in
the Credit Insurance segment. A discussion of the changes follows. See "Life
and Annuity" and "Credit Insurance" below. Additionally, IHL has had steady
growth in Net Investment Income which increased $804,000 in 1995 from 1994. The
1994 increase over 1993 was $263,000.

Page 9

Life and Annuity

Revenues for the Life and Annuity business segment were $3,521,000 higher in
1995 than 1994. The 1994 increase over 1993 was $5,219,000. These increases
came primarily from a new ordinary life single premium product which was
introduced during the second quarter of 1994 and sold in the preneed funeral
market. This new single premium product resulted in a change in the
presentation of certain balance sheet and income items. The previous single
premium policy utilized in this market was interest sensitive in form and
therefore subject to Financial Accounting Standards Board Statement ("FAS") 97
which requires premiums to be considered deposits and not included in revenues.
The new product is not interest sensitive and is subject to the requirements of
FAS 60. Under FAS 60 revenues are considered to be premiums and not deposits,
thereby increasing premium income.

In addition, under FAS 97 deferred acquisition costs for interest sensitive
policies are capitalized and amortized over the life of the policy in
proportion
to expected gross profits. Under FAS 60 deferred acquisition costs for policies
that are not interest sensitive are capitalized and amortized in proportion to
premiums over the premium payment period. Therefore, since these FAS 60
products are single premium products, no acquisition costs are capitalized.
This results in a decrease to deferrals of acquisition-related costs. The
effect on the financial statements of this change is offset, however, by the
change in the reserve as the acquisition-related costs are utilized to reduce
the required benefit reserve under the FAS 60 reserving methodology.

Ordinary life sales were in line with production goals set for 1995. Ordinary
life production increased approximately 11% in 1995 over 1994, as anticipated,
due in large part to marketing advances in Kentucky. New life and annuity
premiums and deposits collected during 1995, 1994 and 1993 were $16,164,000,
$14,872,000 and $12,948,000, respectively. During 1995, IHL expanded its
preneed funeral and final expense marketing operation in several new states,
including but not limited to, Tennessee, Indiana, Illinois, Missouri, Georgia,
Virginia, Florida and South Carolina. Additionally, IHL improved its position
in the preneed funeral market in Kentucky where single premium production was
up
39%. IHL's marketing operation in North Carolina continues to be strong. North
Carolina accounts produced approximately 56% of IHL's single premium
production.
Management plans to continue to develop the preneed funeral market as well as
market other traditional life insurance products and anticipates increases in
single premium production for 1996 over 1995 in the range of 10-12%.

Page 10

Increase in Net investment income earned by ordinary life products also
contributed to the overall increase in Revenues. Net investment income
increased 10.2% in 1995 compared to 1994 and 4.8% in 1994 compared to 1993.

Revenues from annuity products decreased $294,101 from 1994 to 1995 and
increased $205,556 from 1993 to 1994. Annuity revenues were $1,791,445,
$2,085,546 and $1,879,990 for 1995, 1994 and 1993, respectively. The annuity
products are sold almost exclusively in conjunction with IHL's marketing
activities in the preneed funeral market.

Group Life revenues have decreased for the past three years for two primary
reasons. First, IHL withdrew participation in the Federal Employees Group Life
Program in late 1994 because the non-underwritten conversions that IHL was
required to accept exceeded its individual limits for life insurance. Second,
in 1993 IHL terminated two co-insurance agreements under which risks had been
assumed on group life policies. All of the reinsured group life policies were
recaptured by the respective reinsurer on a mutually acceptable basis.The one-
time pre-tax gain in 1993 on these recapture transactions was approximately
$637,000.

Credit Insurance

As reported last year, during the third quarter of 1994 IHL began the process
of
phasing out of the Credit Life and Credit A&H market as a direct writer. As a
result, 1995 revenues were down $6,233,000 from 1994, as anticipated. Revenues
from 1993 to 1994 were also down $1,625,000. Direct premiums from the Credit
Insurance segment, net of refunds of unearned premiums were ($544,000),
$5,757,000 and, $5,901,000 for 1995, 1994 and 1993, respectively.

During 1995,IHL continued to provide the administration of the Credit Insurance
operations and FSG entered into a marketing agreement with Franklin Life
Insurance Company ("Franklin") to market Franklin's Credit Insurance products.
In addition,IHL continued to look for relationships with unaffiliated companies
which would allow IHL to provide its administrative and claims processing
services for Credit Insurance products.

In the fourth quarter of 1995, FSG and IHL were advised that Franklin was
exiting the Credit Insurance market as a result of a change in ownership. FSG
immediately began negotiating with a number of unaffiliated insurance companies
to market Credit Insurance products for them. In addition, FSG initiated
discussions regarding a potential transaction with unaffiliated companies where
the Credit Insurance policies would be written by IHL and all of the risk would
be immediately reinsured to the unaffiliated company.

Page 11

Under a reinsurance arrangement,IHL would be able to utilize its administrative
capabilities and generate alternative revenues from retention fees and fees for
administration and claims processing while protecting its surplus and
profitability from other lines. Additionally, FSG will continue to generate
revenues in the form of commissions. In December 1995, IHL entered into a
reinsurance agreement with The Connecticut General Life Insurance Company
("Connecticut General") pursuant to which all of the risk on all Credit
Insurance policies sold by IHL would be reinsured with Connecticut General.

The decision to reenter the Credit Insurance market as a direct writer required
careful consideration. The driving factors behind the decision were the ability
to structure the reinsurance transaction with a highly rated insurance company,
the ability to protect,improve and strengthen IHL's surplus, and the ability to
utilize IHL's Credit Insurance administration and claims processing
capabilities
while generating alternative sources of revenue for IHL. The structure of the
reinsurance agreement with Connecticut General accomplishes each of these
goals.
In addition, FSG has been successful in retaining the majority of the Credit
Insurance agency accounts and has successfully recruited another unaffiliated
agency which is anticipated to more than double overall gross written Credit
Insurance premiums, and will therefore further enhance FSG's revenues.

Accident and Health

Revenues for this segment have experienced little change the last two years
after a significant decrease in 1994 compared to 1993 of $1,924,000. Revenues
for 1995 were $1,126,000 compared to $1,139,000 for 1994. Virtually all of this
segment has been from insurance assumed from other insurers. The individual
assumed reinsurance agreement was terminated as of December 31, 1993 due to the
insurer's decision to withdraw from the major medical insurance market.
Consequently the reinsured policies were recaptured from IHL which accounts for
almost all of the decrease in revenues from 1993 to 1994.

The remainder of the individual health insurance relates to a closed block of
business which was sold directly by IHL.

Corporate

The Corporate segment, measured primarily by stockholders' paid-in capital,
contributed surplus, earned surplus and property and equipment has had only a
slight change between 1995 and 1994. There was a decrease of $292,000 between
1994 and 1993. Lower investment yields in recent years are the primary reason
for the decrease.

Page 12

Reallocation of Segment Data

For 1995 the segment data shown in Note I to the Consolidated Financial
Statements was developed using a revised allocation methodology. Such change in
approach was applied and amounts have been restated for the 1994 and 1993
segment data. This change in approach was made to enhance the allocation of
costs and revenues to coincide with resources used by the segment and revenues
earned.

The primary changes occurred in Investment Income, net of expenses and Other
insurance expenses. Revenues for the Life and Annuities segment increased
$446,000 for 1994 and $458,000 for 1993. Revenues for the Corporate segment
decreased $497,000 for 1994 and $519,000 for 1993. Pre-Tax Income from
Operations for the Life and Annuities segment increased $115,000 for 1994 and
$513,000 for 1993. Pre-Tax Income from Operations for the Corporate segment
decreased $193,000 in 1994 and $379,000 in 1993. The effect on other segment
classifications was immaterial.

OPERATING RESULTS

IHL's Net Income for 1995 was down $1,484,000 or 61.8%,from 1994 and up $99,000
or 4.3% in 1994 compared to 1993. KII's Net Income for 1995 was down $968,000
or 63.6% from 1994 and up $330,000 or 27.7% in 1994 compared to 1993.

Earnings per share were $1.02, $2.66 and $2.54 for 1995, 1994 and 1993,
respectively for IHL. Earnings per share were $0.71, $1.97 and $1.55 during the
same periods for KII.

Life and Annuity

IHL's pre-tax income (Income from Operations Before Federal Income Tax) for the
Life and Annuity business segment was $1,143,000, $2,868,000 and $2,866,000 for
1995, 1994 and 1993, respectively. The decrease in Pre-Tax Income in 1995 when
compared to 1994 is primarily attributable to the following:

The issuance of legal reserve policies to members of dissolved mutual burial
associations in North Carolina. Management believed it was prudent to issue
these policies to open new marketing channels in the preneed insurance sector
and believes it has been successful in gaining market share as a result.
Management intends on limiting future issues of legal reserve policies to those
that are paid up.

A decrease in investment interest spread (i.e., interest earned over interest
credited) on IHL's annuity business. During the fourth quarter of 1995, IHL
realigned its interest crediting rates commensurate with its earned rates.

A higher volume of claims with lower face amounts which are within IHL's
retention were paid in 1995 compared to 1994.

Page 13

Credit Life and Credit Accident and Health

As noted above, during the third quarter of 1994 IHL began the process of
phasing out of the Credit Life and Credit A&H market as a direct writer. Since
that time this block of business has been decreasing at a significant rate due
to the short duration (approximately a two-year average term) of the policies.
Pre-Tax Losses were $826,000, $1,095,000 and $1,521,000 for 1995,1994 and 1993.
The improvement in this segment is due primarily to policy reserves being
released as the business matures which in turn is offset by claims and the
amortization of policy acquisition costs.

Policy reserve decreases in 1995, 1994 and 1993 were $5,521,000, $1,781,000 and
$3,343,000. Claim expenses were $1,928,000, $2,501,000 and $3,387,000.
Amortization of Deferred Acquisition Expense was $2,863,000, $1,287,000 and
$3,704,000. These three areas, in the aggregate, increased or (decreased) Pre-
Tax Income by $730,000, ($2,007,000) and ($3,748,000) for 1995, 1994 and 1993
respectively.

Accident and Health

Pre-Tax Income for the Group and Individual Accident and Health segment was
$108,000, $430,000 and $396,000 for 1995, 1994 and 1993, respectively. The
majority of this segment is from Involuntary Unemployment Insurance written
on a
group basis. Until 1995 it was about equally divided between direct writings
and assumed reinsurance. In 1994 the direct writings were discontinued which
accounts for the decrease in Pre-Tax Income in 1995. The remainder of this
segment is individual health insurance relating to a closed block of business
written directly by IHL.

Corporate

Pre-tax income for the Corporate segment was $460,000,$589,000 and $707,000 for
1995, 1994 and 1993, respectively. Primarily due to a decrease in investment
yield resulting from lower interest rates, and the increased use of surplus for
the sale of new Ordinary Life business, IHL experienced a reduction in the pre-
tax income for the last two years in this segment.

The statutory capital and surplus of IHL increased $1,194,000 in 1995,following
an increase of $1,706,000 in 1994 and $1,629,000 in 1993. During the year IHL
completed its negotiations with the Kentucky Department of Insurance (the
"Department") with regard to the valuation of certain assets held by IHL. Under
the agreement reached with the Department, IHL will write down the statutory
value of the home office real estate owned from market to depreciated cost over
a five-year period and will write down to zero its investment in the common
stock of its affiliates over a three-year period. For GAAP reporting purposes
the home office real estate is already carried at depreciated cost and the
common stock is carried at cost. While adjusting the statutory value of these
assets constitutes a change in IHL's long-standing method of valuation which
had
been approved by the Department, it is not anticipated that these adjustments
will affect IHL's financial position or net income based on generally accepted
accounting principles, or its statutory net income. For additional discussion
on this issue, refer to Note H to the Consolidated Financial Statements.

Page 14

INVESTMENTS, LIQUIDITY AND FUND RESTRICTIONS

IHL's investment portfolio continues to provide financial stability. It is
management's opinion that KII and IHL have adequate cash flows both on a long-
term and short-term basis as evidenced by the Consolidated Statements of Cash
Flows presented in this Annual Review. IHL's internal cash flows are derived
from insurance premiums and investments. The cash flows of KII are derived from
the dividends paid to it by IHL, FSG and Investors Heritage Printing, Inc.
("IHP"). Management anticipates these cash flows to experience steady growth
due to improved profitability of FSG and IHP. During 1995, FSG's first full
year of operation, revenues were $171,000 and FSG paid a dividend to KII in
December 1995 in the amount of $32,000. In addition, revenues from IHP were
$483,000 in 1995, up 6.2% compared to $451,000 in 1994, and IHP paid a dividend
to KII for the first time since its inception. Management of IHP will continue
to work to improve revenues from unaffiliated sources as well as providing
printing services for IHL. While revenues from these sources constitute less
than 1% of KII's overall revenues, management is working on the continued
growth and profitability of both FSG and IHP.

Management is not aware of any commitments or unusual events that could
materially affect KII's or IHL's capital resources. Further, there is no long-
term or short-term external debt. Other than the items disclosed in Note H to
the Consolidated Financial Statements and the increased regulatory reporting
requirements which generally increase administrative expenses, management is
not
aware of any current recommendations by any regulatory authority which if
implemented would have any material effect on IHL's liquidity, capital
resources
or operations. Management does not perceive a need for any external financing
and there are no plans to acquire same. However, KII and IHL will continue to
explore various opportunities including corporate 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 to IHL as to the payment of cash dividends to
shareholders which is discussed in more detail in Note G to the Consolidated
Financial Statements.

Page 15

Since inception, IHL has maintained a sound, conservative investment strategy.
IHL's fixed income portfolio of public bonds is managed by an independent
portfolio manager, Aeltus Investment Management, Inc. ("Aeltus"). As of
December 31, 1995, 83.6% of IHL's total invested assets are managed by Aeltus
pursuant to specific investment guidelines which have been approved by the
Board
of Directors. Since the inception of IHL's relationship with Aeltus, the
primary objectives have been to maintain the quality and integrity of the fixed
income portfolio while improving the total return on investments. These goals
have been accomplished by further diversifying the portfolio methodically over
the last 7 years.

The fixed income portfolio is diversified among sectors. The market value and
the Standard & Poor's average quality rating of this portfolio are $137.4
million and AA, respectively. The market value of this portfolio at year end
1994 was $114.9 million. At year end the fixed income portfolio was allocated
as follows: 50.1% - corporate; 18.6% - government; 23.6% - mortgage-backed
securities; 3.9% - foreigns; 2.3% - asset backed securities; and 1.5% - tax
exempt. Within the corporate bond sector, the portfolio is also diversified
with 32.1% of that sector invested in bank and finance, 44.3% in industrial and
miscellaneous, and 23.8% in utilities. Pie charts showing the Distribution of
Fixed Income Assets and Distribution of Corporate Bonds are located on page 17.

The fixed income portfolio also includes $32.5 million (at carrying value) of
mortgage-backed securities ("MBS") which represents 19.8% of total invested
assets and 23.7% of the fixed income portfolio. Mortgage-backed securities add
value to the portfolio and Aeltus has provided the expertise to purchase MBS
with the confidence that the credits have been properly analyzed and that the
investment properly suits the asset and liability needs of IHL.

There have been concerns expressed by rating agencies, various regulators and
other constituencies regarding investments in MBS by insurers and other
financial institutions. Although these highly rated securities provide
excellent credit quality, their liquidity and risk must be monitored. All of
the collateral of the MBS owned by IHL are guaranteed by the Government
National
Mortgage Association ("GNMA"), Federal National Mortgage Association("FNMA") or
Federal Home Loan Mortgage Corporation ("FHLMC").

The FNMA and FHLMC securities are structured either as publicly-traded
collateralized mortgage obligations ("CMO") or pass-throughs. Unlike most
corporate or real estate debt, the primary concern with a MBS is uncertainty of
timing of cash flows due to prepayment assumptions rather than the possibility
of loss of principal.

IHL's CMO holdings represent approximately 46.9% of the total MBS portfolio.
When these securities are purchased at a discount or premium, the income

Page 16

DISTRIBUTION OF FIXED INCOME ASSETS GRAPH
AND
DISTRIBUTION OF CORPORATE BONDS GRAPH

Two pie charts appears on this page showing the Distribution of Fixed Income
Assets and the Distribution of Corporate Bonds. The Fixed Income Chart shows
the following breakdown: corporate: 50.1%; government: 18.6%; mortgage-backed
securities: 23.6%; foreigns: 3.9%; asset-backed securities: 2.3%; tax exempt:
1.5%. The Corporate Bond Chart shows the following breakdown: bank and
finance: 32.1%; industrial and miscellaneous: 44.1%; utilities 23.8%.

Page 17

DISTRIBUTION OF MORTGAGE LOANS GRAPH

A pie chart appears on this page showing the Distribution of Mortgage Loans.
This chart shows the following breakdown: retail: 35.9%; apartments: 26.7%;
office properties: 16.8%; Residential (1 to 4 family): 3.8%;
industrial: 2.3%; hotels/motels: 0.8%; other 13.7%.

Page 18

yield will vary with changes in prepayment speeds due to the change in
accretion
of discount or amortization of premium, as well as the timing of the basic
principal and interest cash flows. The overall impact of the CMO's variability
in yields on the portfolio is not significant in relation to the yield and cash
flows of the total invested assets of IHL. More importantly, IHL has no
exposure to the more volatile, high-risk CMO's, such as those structured to
share in residual cash flows or which receive only interest payments. The CMO's
held by KII are primarily planned amortization class ("PAC") or support ("SUP")
class bonds (except for one sequential pay CMO of approximately $980,000) which
are structured to provide a more certain cash flow to the investor and
therefore have reduced prepayment risk.

Pass-throughs are the largest type of MBS owned by IHL, representing
approximately 53.1% of the total MBS portfolio. Pass-throughs are GNMA, FNMA or
FHLMC guaranteed MBS which, simply stated pass-through interest and principal
payments to the investors in accordance with their respective ownership
percentage.

Additionally, IHL also engages in commercial and residential mortgage lending
with more than 90% 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 120% are generally required. IHL
minimizes credit risk in its mortgage loan portfolio through various methods,
including stringently underwriting the loan request, maintaining small average
loan balances, reviewing its larger mortgage loans on an annual basis and
diversification by property type. The average loan balance is $246,386 and the
largest loan currently held by IHL is $685,469. IHL has $13.1 million invested
in mortgage loans which represents 7.9% of total invested assets. The portfolio
is diversified across various property types as follows: 16.8% - office;
35.9% - retail; 2.3% -industrial; - 3.8% 1 to 4 family; 26.7% -
apartments; 0.8% - hotels/motels; and 13.7% - other. A pie chart showing
the Distribution of Mortgage Loans is located on Page 18.

Although approximately 83% of IHL's mortgage loans are located in the various
geographic regions of Kentucky, IHL is familiar with its mortgage loan markets
and is not aware of any negative factors or trends which would have a material
impact on the local economies where IHL's mortgage loan properties are located.
IHL has been successful in adding value to the total investment portfolio
through its mortgage loan originations due to the fact that yields realized
from
the mortgage loan portfolio are from 2 to 4.5 percent higher than yields
realized from fixed income investments. Further, value has been added because
the mortgage loan portfolio has consistently performed well. As of December 31,
1995, IHL had only one non-performing mortgage loan, which would include loans
past due 60 days or more, loans in process of foreclosure, restructured loans
and real estate acquired through foreclosure The non-performing mortgage loan,
which is more

Page 19

than 60 days past due, is a residential mortgage with an outstanding balance of
$46,526 and the property securing the loan has a fair market value of $75,000.

The strength of our liquidity is found in our conservative approach in the
product development area and in the strength and stability of our fixed income
portfolio and our mortgage loans. For 1995, IHL's fixed income investments were
99.3% investment grade as rated by Standard & Poor's,an increase from 99.2% for
1994. None of KII's fixed income assets are in default. Liquidity is also
managed by laddering maturities of our fixed income portfolio. The average
duration of our fixed income investments is 4.4 years with approximately $3.7
million due within 12 months and approximately $43.3 million due within the
following four years. Historically management has anticipated that all such
investments will be held until maturity. However, one of the responsibilities
of our independent portfolio manager is to constantly monitor the credit rating
of our fixed income investments to determine if rating changes of any
investment requires action by management.

In accordance with FAS 115, which was implemented effective January 1, 1994,
debt securities that IHL did not have the positive intent and ability to hold-
to-maturity and all marketable equity securities were reclassified as
available-
for-sale and are carried at fair value. Unrealized gains and losses on
securities classified as available-for-sale are carried as a separate component
of Stockholders' Equity, net of taxes, and an adjustment
to deferred acquisition
costs. The Balance Sheets reflect this reclassification. Because management
believes it is prudent to have the ability to sell a fixed income investment if
market conditions warrant such action, approximately 94% of the fixed income
portfolio of IHL was classified as available-for-sale during 1994. The
remainder of the fixed income portfolio was classified as being
hold-to-maturity and those investments were carried at amortized cost.

However, as explained in detail in Note A to the Consolidated Financial
Statements, in 1995 IHL reclassified its hold-to-maturity securities so that
all
of IHL's fixed income securities are now classified as available-for-sale. The
decision to change the classification was based primarily on two factors.
First, during the Kentucky Department of Insurance examination, IHL was advised
that the Department was going to required IHL to write down four local
municipal
bonds because the Standard Valuation Office of the National Association of
Insurance Commissioners refused to value them. Rather than write the assets
down to zero, management and the Board of Directors determined that it was in
IHL's best interest to sell the securities. The second reason for the
reclassification was the pronouncement issued by the Financial Accounting
Standards Board allowing a window of opportunity to reclassify securities from
a
hold-to-maturity portfolio to available-for-sale without tainting IHL's FAS 115
classifications.

Page 20

As described in the President's Letter to Stockholders, a key element of
profitability and risk management is the asset/liability management process. To
test its financial strength and investment strategy, IHL has performed asset
adequacy analyses (cash flow testing) for the last several years. Although
regulatory requirements dictate this process be done every three years, IHL
performs these analyses every year. This asset/liability management process is
designed to monitor product and asset characteristics that affect future
profitability and risk management strategies. Dynamic models of both assets and
liabilities were created to project financial results under several different
interest rate scenarios. Items taken into account on the asset side include
maturity and liquidity risks, asset diversification and quality considerations.
On the liability side, interest crediting strategies and policyholder and agent
behavior (lapses, loans, withdrawals and premium flow) are directly related to
the interest rate environment being tested.

These tests demonstrate very favorable financial results for the assets and
liabilities of IHL held as of December 31, 1995. As indicated by the price
behavior curves shown in Page 7 of this Annual Review, there is always a
substantial positive difference between the present value of our assets as
compared to the present values of our liabilities. Our cash flow testing has
proven our investment strategy to be sound. Positive surplus is projected at
the end of ten years for each of the interest scenarios tested. Because it is a
vital tool in monitoring our financial stability, Management will continue to
refine the cash flow testing process.

CONSOLIDATION

The accompanying consolidated financial statements of Kentucky Investors, Inc.
and Investors Heritage Life Insurance Company include the accounts of their
respective majority-owned subsidiaries, after elimination of intercompany
transactions. This discussion and analysis is intended for both Investors
Heritage Life Insurance Company and Kentucky Investors, Inc. because their
respective financial statements are similar in presentation and identical in
most cases.

Page 21

CORPORATE OFFICERS

OFFICERS

Harry Lee Waterfield II Nancy W. Walton
Chairman of the Board, President, Vice President, UnderwritingI
Chief Executive Officer IKPF First Vice PresidentK

Jimmy R. McIver Clair S. Manson
TreasurerIKPF Vice President, Chief ActuaryI

Robert M. Hardy, Jr. John E. Simmons
General Counsel IK Vice President, Credit Life
Vice President, Legal F & Office ServicesI
Vice President, Marketing F

Wilma Yeary CPS Jane Wise
SecretaryIK Vice President, Policy ServicesI

Jane S. Jackson Margaret J. Kays
Assistant SecretaryIK Vice President, Human
SecretaryPF Resources I

Howard L. Graham Don R. Philpot
Vice President, Corporate Vice President, AgencyI
Services IK

Raymond L. Carr H. Douglas Hippe
Vice President, Vice President, AccountingI
Administrative Operations &
Computer ServicesI Rick Calvert
Vice PresidentP

William H. Keller, M.D. Ernst & Young
Medical DirectorI (not pictured) Independent AuditorIK

I Investors Heritage Life Insurance Company
K Kentucky Investors, Inc.
F Investors Heritage Financial Services Group, Inc.
P Investors Heritage Printing, Inc.

(Siloutte of picture on next page)

Page 22

PICTURE OF CORPORATE OFFICERS

Page 23

KENTUCKY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994
ASSETS 1995 1994

INVESTMENTS
Securities available-for-sale,
at fair value:
Fixed maturities $137,401,716 $108,804,461
Equity securities 2,566,023 2,002,745
Securities held-to-maturity,
at amortized cost -0- 6,580,321
Mortgage loans on real estate 13,058,464 11,844,582
Policy loans 6,869,039 6,842,862
Other long-term investments 301,733 301,401
Short-term investments 1,133,021 1,380,890
Total investments $161,329,996 $137,757,262

Cash and cash equivalents 2,417,375 2,336,712
Accrued investment income 2,139,836 2,133,761
Due and deferred premiums 4,714,057 4,365,644
Deferred acquisition costs 28,260,113 30,499,435
Property and equipment 1,881,038 1,955,204
Goodwill 2,149,735 2,254,067
Other assets 1,489,184 1,627,755
Amounts recoverable from reinsurers 3,663,782 8,437,140
$208,045,116 $191,366,980

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES
Policy liabilities:
Benefit reserves $155,182,145 $140,072,351
Unearned premium reserves 6,512,362 15,106,676
Policy claims 1,665,949 1,835,685
Other policyholders' funds:
Dividend & endowment accumulations 1,033,503 1,095,079
Reserves for dividends & endowments
& other 1,066,860 2,140,720
Total policy liabilities $165,460,819 $160,250,511
Federal income taxes 5,119,540 1,829,837
Other liabilities 2,707,832 2,822,040
Total liabilities $173,288,191 $164,902,388
MINORITY INTEREST IN SUBSIDIARY $ 10,115,385 $ 8,107,177

STOCKHOLDERS' EQUITY
Common stock $ 811,128 $ 779,895
Paid-in surplus 3,374,704 3,357,178
Unrealized appreciation (depreciation)
of available-for-sale securities 2,916,509 (2,756,991)
Retained earnings 17,539,199 16,977,333
Total stockholders' equity $ 24,641,540 $ 8,357,415

$208,045,116 $191,366,980

See notes to consolidated financial statements.

Page 24

KENTUCKY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

1995 1994 1993
REVENUES
Premiums and other
considerations $33,061,376 $36,443,762 $34,966,088
Investment income,
net of expenses 10,674,159 9,872,482 9,602,605
Realized gain on
investments, net 29,898 235,959 642,661
Other income 239,178 103,491 176,258
Total revenue $44,004,611 $46,655,694 $45,387,612

BENEFITS AND EXPENSES
Death and other benefits $17,291,402 $17,666,871 $19,182,945
Guaranteed annual endowments 890,056 921,148 951,286
Dividends to policyholders 784,506 852,398 954,400
Increase in benefit reserves
and unearned premiums 11,157,960 8,183,045 3,586,337
Acquisition costs deferred (4,981,000) (9,019,000) (9,754,000)
Amortization of deferred
acquisition costs 6,085,957 10,092,870 12,315,997
Commissions 4,177,725 8,007,178 8,779,813
Other insurance expenses 7,784,249 7,334,849 7,074,391
Total benefits and
expenses $43,190,855 $44,039,359 $43,091,169

Income from operations before
Federal Income Tax and minority
interest in net income of
subsidiary $ 813,756 $ 2,616,335 $ 2,296,443

Provision for income taxes
Current $ 687,000 $ 1,044,000 $ 2,699,000
Deferred (668,000) (583,000) (2,277,000)
$
19,000 $ 461,000 $ 422,000
INCOME FROM OPERATIONS BEFORE
MINORITY INTEREST IN NET INCOME
OF SUBSIDIARY AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE $794,756 $ 2,155,335 $ 1,874,443

MINORITY INTEREST IN NET INCOME
OF SUBSIDIARY 239,824 632,636 613,629

CUMULATIVE EFFECT OF ACCOUNTING
CHANGE -0- -0- (68,000)

NET INCOME $554,932 $ 1,522,699 $ 1,192,814

EARNINGS PER SHARE $.71 $1.97 $1.55

See notes to consolidated financial statements.

Page 25

<TABLE>
KENTUCKY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION
OF AVAILABLE-
COMMON PAID-IN FOR SALE RETAINED
STOCK SURPLUS SECURITIES EARNINGS

<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $774,660 $3,284,091
$ 461,601 $14,902,122

Net Income 1,192,814
Cash Dividend (309,257)
Cumulative effect of
accounting change (81,000)
Change in net unrealized
appreciation (depreciation) 114,332
Cost of common stock
purchased, net (2,874) (30,263)

BALANCE, DECEMBER 31, 1993 $771,786 $3,284,091 $ 494,933 $15,755,416
Adjustment to beginning balance
for change in accounting method 2,050,923
Net Income 1,522,699
Cash Dividend (318,462)
Change in net unrealized
appreciation (depreciation) (5,302,847)
Issuance of common
stock, net 8,109 73,087 17,680

BALANCE, DECEMBER 31, 1994 $779,895 $3,357,178 $(2,756,991) $16,977,333
Net Income 554,932
Cash Dividend (332,079)
Change in net unrealized
appreciation (depreciation) 5,673,500
Issuance of common
stock, net 31,233 17,526 339,013

BALANCE, DECEMBER 31, 1995 $811,128 $3,374,704 $ 2,916,509 $17,539,199

<F>

See notes to consolidated financial statements.

</TABLE>

Page 26

<TABLE>
KENTUCKY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

<CAPTION>
1995 1994 1993
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net Income $ 554,932 $ 1,522,699 $ 1,192,814
Adjustments to reconcile net income
to net cash provided by operating activities:
Increase (decrease) in Benefit Reserves 7,175,593 (216,474) 19,468,453
Change in Claims Liability (169,736) (513,266) (791,946)
Change in Other Policyholder Funds (1,135,436) 74,249 461,346
Amortization of Deferred Acquisition Costs 6,085,957 10,092,870 12,315,997
Policy Acquisition Costs Deferred (4,981,000) (9,019,000) (9,754,000)
Realized Gain on Investments (29,898) (235,959) (642,661)
Increase in Accrued Investment Income (6,075) (157,020) (148,471)
Change in Other Assets and
Other Liabilities 24,363 (947,234) 554,864
Provision for Deferred Federal Income Taxes (668,000) (583,000) (2,277,000)
Federal Income Tax (612) (949,646) 800,944
Change in Due and Deferred Premiums (348,413) (138,862) 63,731
Net Adjustment for Premium and
Discount on Investments 112,387 224,422 139,248
Depreciation and Other Amortization 358,920 354,724 359,445
Change in Minority Interest and Other (2,335) 340,751 409,404
Change in Amounts Recoverable from Reinsurers 4,773,358 10,103,840 (16,724,496)

NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 11,744,005 $ 9,953,094 $ 5,427,672

<CAPTION>
INVESTING ACTIVITIES
<S> <C> <C> <C>
Securities available-for-sale:
Purchases $(19,036,132) $(25,428,933) $ (41,313)
Sales and Maturities 8,946,675 8,103,582285,334
Securities held-to-maturity:
Purchases -0- (962,730) (43,673,683)
Sales and Maturities 204,084 6,127,887 33,391,890
Other Investments:
Cost of Acquisition (2,290,555) (1,489,150) (3,467,828)
Sales and Maturities 1,297,428 2,220,019 2,105,927
Net Additions to Property and Equipment (180,422) (44,160) (168,277)

NET CASH USED BY INVESTING
ACTIVITIES $(11,058,922) $(11,473,485) $(11,567,950)

<CAPTION>
FINANCING ACTIVITIES
<S> <C> <C> <C>
Receipts from universal life policies credited to
policyholder account balances $ 3,352,687 $ 5,096,198 $ 10,962,224
Return of policyholder account balances on
universal life policies (4,012,800) (4,087,252) (3,202,170)
Issuances (Purchases) of Common Stock 387,772 98,876 (33,137)
Dividends (332,079) (318,462) (309,257)

NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES $ (604,420) $ 789,360 $ 7,417,660

INCREASE (DECREASE) IN CASH $ 80,663 $ (731,031) $ 1,277,382

Cash and cash equivalents at beginning of year 2,336,712 3,067,743 1,790,361

CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 2,417,375 $ 2,336,712 $ 3,067,743

<FN>
See notes to consolidated financial statements.
</TABLE>

Page 27

<TABLE>
KENTUCKY INVESTORS, INC.

SELECTED FINANCIAL DATA
KENTUCKY INVESTORS, INC. AND SUBSIDIARIES
(000's omitted except for Earnings and Cash Dividends Per Share)
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Total Revenue $ 44,005 $ 46,656 $ 45,388 $ 45,567 $ 45,349
Total Benefits & Expenses 43,191 44,039 43,091 44,597 44,548
Net Income 555 1,523 1,193 516 418
Earnings Per Share .71 1.97 1.55 .65 .52
Total Assets 208,045 191,367 198,230 171,119 161,562
Total Liabilities 173,288 164,902 168,984 142,987 133,172
Long Term Debt -0- -0- -0- -0- -0-
Cash Dividends Per Share .38 .37 .36 .36 .36

</TABLE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Kentucky Investors, Inc.

We have audited the accompanying consolidated balance sheets of Kentucky
Investors, Inc. and subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Kentucky
Investors, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.

As discussed in Note A to the consolidated financial statements, the Company
changed its method of accounting for certain investments in debt securities
in
1994. Also, as discussed in Note A to the consolidated financial
statements, the Company changed its method of accounting for income taxes in
1993.

Louisville, Kentucky
March 15, 1996

Page 28

<TABLE>
INVESTORS HERITAGE LIFE INSURANCE COMPANY

SELECTED FINANCIAL DATA
INVESTORS HERITAGE LIFE INSURANCE COMPANY AND SUBSIDIARY
(000's omitted except for Earnings and Cash Dividends Per Share)
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Premiums $ 33,061 $ 36,444 $ 34,966 $ 34,671 $

34,857
Net Investment Income 10,815 10,011 9,748 10,021 9,711
Net Income 917 2,401 2,302 915 699
Earnings Per Share 1.02 2.66 2.54 1.00 .76
Total Assets 210,490 194,262 201,197 173,885 163,925
Policy Reserves 161,695 155,179 154,387 127,158 115,979
Long Term Debt -0- -0- -0- -0- -0-
Cash Dividends Per Share .76 .74 .72 .72 .72

</TABLE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Investors Heritage Life Insurance Company

We have audited the accompanying consolidated balance sheets of Investors
Heritage Life Insurance Company and subsidiary as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Investors Heritage
Life Insurance Company and subsidiary at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity
with generally accepted accounting principles.

As discussed in Note A to the consolidated financial statements, the Company
changed its method of accounting for certain investments in debt securities
in 1994. Also, as discussed in Note A to the consolidated financial
statements, the Company changed its method of accounting for income taxes in
1993.

Louisville, Kentucky
March 15, 1996

Page 29

INVESTORS HERITAGE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994

ASSETS 1995 1994
INVESTMENTS
Securities available-for-sale,
at fair value:
Fixed maturities $137,401,716 $108,804,461
Equity securities 2,565,936 2,002,678
Securities held-to-maturity,
at amortized cost -0- 6,580,321
Mortgage loans on real estate 13,058,464 11,844,582
Policy loans 6,869,039 6,842,862
Other long-term investments 301,733 301,401
Short-term investments 1,103,021 1,330,890

$161,299,909 $137,707,195
Investments in affiliates 2,309,438 2,679,684
Contractual obligations of
affiliate 747,753 835,666

Total investments $164,357,100 $141,222,545

Cash and cash equivalents 2,376,981 2,309,791
Accrued investment income 2,139,333 2,133,219
Due and deferred premiums 4,714,057 4,365,644
Deferred acquisition costs 28,260,113 30,499,435
Property and equipment 1,823,784 1,921,737
Goodwill 1,705,583 1,771,184
Other assets 1,449,163 1,601,275
Amounts recoverable from
reinsurers 3,663,782 8,437,140
$210,489,896 $194,261,970

LIABILITIES AND STOCKHOLDERS' EQUITY

Total policy liabilities $165,460,819 $160,250,511
Federal income taxes 3,705,719 427,794
Other liabilities 2,663,372 2,815,224

Total liabilities $171,829,910 $163,493,529

STOCKHOLDERS' EQUITY
Common stock $ 1,441,797 $ 1,443,259
Paid-in surplus 3,776,427 3,776,360
Unrealized appreciation
(depreciation)of
available-for-sale securities 3,948,035 (3,735,908)
Retained earnings 29,493,727 29,284,730

Total stockholders' equity $ 38,659,986 $ 30,768,441
$210,489,896 $194,261,970

See notes to consolidated financial statements.

Page 30

INVESTORS HERITAGE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

1995 1994 1993
REVENUES
Premiums
and other considerations $33,061,376 $36,443,762 $34,966,088
Investment income,
net of expenses 10,815,048 10,010,654 9,747,813
Realized gain
on investments, net 57,048 346,697 642,661
Other income 142,934 3,078 69,440
Total revenue $44,076,406 $46,804,191 $45,426,002

BENEFITS AND EXPENSES
Death and other benefits $17,291,402 $17,666,871 $19,182,945
Guaranteed annual
endowments 890,056 921,148 951,286
Dividends to
policyholders 784,506 852,398 954,400
Increase in benefit
reserves and
unearned premiums 11,157,960 8,183,045 3,586,337
Acquisition costs
deferred (4,981,000) (9,019,000) (9,754,000)
Amortization of deferred
acquisition costs 6,085,957 10,092,870 12,315,997
Commissions 4,177,725 8,007,178 8,779,813
Other insurance expenses 7,785,215 7,307,693 6,961,195
Total benefits and
expenses $43,191,821 $44,012,203 $42,977,973

INCOME FROM
OPERATIONS BEFORE
FEDERAL INCOME TAX $ 884,585 $ 2,791,988 $ 2,448,029

Provision for income taxes
Current $ 648,000 $ 1,061,000 $ 2,688,000
Deferred (680,000) (670,000) (2,360,000)

$ (32,000) $ 391,000 $ 328,000

INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 916,585 $ 2,400,988 $ 2,120,029

CUMULATIVE EFFECT OF
ACCOUNTING CHANGE -0- -0- 182,000

NET INCOME $ 916,585 $ 2,400,988 $ 2,302,029

EARNINGS PER SHARE $1.02 $2.66 $2.54

See notes to consolidated financial statements.

Page 31

<TABLE>
INVESTORS HERITAGE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

UNREALIZED
APPRECIATION
(DEPRECIATION)OF RETAINED
COMMON PAID-IN AVAILABLE-FOR-SALE
STOCK SURPLUS SECURITIES EARNINGS

<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $1,455,358 $3,774,115 $ 630,726 $26,025,963

Net Income 2,302,029
Cash Dividend (653,157)
Cumulative effect
of accounting change (110,000) 66,435
Change in net unrealized
appreciation (depreciation) 152,594
Cost of common stock
purchased (6,348) 1,268 (99,966)

BALANCE, DECEMBER 31, 1993 $1,449,010 $3,775,383 $ 673,320 $27,641,304

Adjustment to beginning balance
for change in accounting method 2,790,241
Net Income 2,400,988
Cash Dividend (666,892)
Change in net unrealized
appreciation (depreciation) (7,199,469)
Cost of common stock
purchased (5,751) 977 (90,670)

BALANCE, DECEMBER 31, 1994 $1,443,259 $3,776,360 $(3,735,908) $29,284,730

Net Income 916,585
Cash Dividend (685,219)
Change in net unrealized
appreciation (depreciation) 7,683,943
Cost of common stock
purchased (1,462) 67 (22,369)

BALANCE, DECEMBER 31, 1995 $1,441,797 $3,776,427 $ 3,948,035 $29,493,727

<FN>
See notes to consolidated financial statements.
</TABLE>
Page 32

INVESTORS HERITAGE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

1995 1994 1993
OPERATING ACTIVITIES
Net Income $ 916,585 $ 2,400,988 $ 2,302,029
Adjustments to reconcile net income
to net cash provided by operating activities:
Increase (decrease) in Benefit
Reserves 7,175,593 (216,474) 19,468,453
Change in Claims Liability (169,736) (513,266) (791,946)
Change in Other Policyholder
Funds (1,135,436) 74,249 461,346
Amortization of Deferred
Acquisition Costs 6,085,957 10,092,870 12,315,997
Policy Acquisition Costs
Deferred (4,981,000) (9,019,000) (9,754,000)
Realized Gain on Investments (57,048) (346,697) (642,661)
Increase in Accrued Investment
Income (6,114) (156,711) (148,537)
Change in Other Assets and
Other Liabilities 260 (921,683) 534,618
Provision for Deferred Federal
Income Taxes (680,000) (670,000) (2,360,000)
Federal Income Tax (411) (951,504) 552,874
Change in Due and Deferred
Premiums (348,413) (138,862) 63,731
Net Adjustment for Premium and
Discount on Investments 112,387 224,422 139,248
Depreciation and Other Amortization 313,464 350,838 355,936
Change in Amounts Recoverable
from Reinsurers 4,773,358 10,103,840 (16,724,496)

NET CASH PROVIDED BY OPERATING
ACTIVITIES $ 11,999,446 $10,313,010 $ 5,772,592

INVESTING ACTIVITIES
Securities available-for-sale:
Purchases $(19,036,132)
$25,428,933) $ (41,313)
Sales and Maturities 8,946,675 8,214,320 285,334
Securities held-to-maturity:
Purchases -0- (962,730) (43,673,683)
Sales and Maturities 204,084 6,127,887 33,391,890
Other Investments:
Cost of Acquisition (2,297,975) (1,511,189) (3,427,456)
Sales and Maturities 1,770,165 2,309,447 2,145,356
Net Additions to Property
and Equipment (149,910) (39,790) (168,277)

NET CASH USED BY INVESTING
ACTIVITIES
$(10,563,093) $(11,290,988) $(11,488,149)

FINANCING ACTIVITIES
Receipts from universal
life policies credited to
policyholder account balances $ 3,352,687 $ 5,096,198 $ 10,962,224
Return of policyholder account
balances on universal life policies (4,012,800) (4,087,252) (3,202,170)
Repurchase of Common Stock (23,831) (96,421) (106,314)
Dividends (685,219) (666,892) (653,157)

NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES $ (1,369,163) $ 245,633 $ 7,000,583

INCREASE (DECREASE) IN CASH $ 67,190 $ (732,345) $ 1,285,026

Cash and cash equivalents
at beginning of year $ 2,309,791 3,042,136 1,757,110

CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 2,376,981$ 2,309,791 $ 3,042,136

See notes to consolidated financial statements.

Page 33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

KENTUCKY INVESTORS, INC.

INVESTORS HERITAGE LIFE INSURANCE COMPANY

NOTE A - Nature of Operations and Accounting Policies

Kentucky Investors, Inc. (Kentucky Investors) is the holding company of
Investors Heritage Life Insurance Company (Investors Heritage), Investors
Heritage Printing, Inc., a printing company and Investors Heritage Financial
Services Group, Inc., an insurance marketing company formed in 1994. 99% of
Kentucky Investors operations are generated by Investors Heritage.

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

Basis of Presentation: The accompanying consolidated financial statements of
Kentucky Investors, Inc. and subsidiaries and Investors Heritage Life
Insurance
Company and subsidiary have been prepared in accordance with generally accepted
accounting principles (GAAP). Investors Heritage also submits financial
statements to insurance regulatory authorities based on statutory accounting
practices which differ from GAAP.

Principles of Consolidation: The consolidated financial statements include the
majority-owned subsidiaries of Kentucky Investors which are Investors Heritage
Printing, Inc., Investors Heritage and its subsidiary, Investors Underwriters,
Inc., and Investors Heritage Financial Services Group, Inc. Kentucky Investors
formed Investors Heritage Financial Services Group, a wholly-owned marketing
company which markets a variety of products for a number of companies as well
as
Investors Heritage's mortgage protection products to financial institutions in
1994. Intercompany transactions are eliminated in consolidation.

Investments: Effective January 1, 1994, Kentucky Investors and Investors
Heritage adopted Statement of Financial Accounting Standards (SFAS) No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". In
accordance with SFAS No. 115, Kentucky Investors and Investors Heritage
classified its fixed maturities and equity securities as available-for-sale or
held-to-maturity. Under SFAS No. 115, securities classified as held-to-maturity
are carried at amortized cost. Available-for-sale classified securities are
carried at fair value with appreciation (depreciation) relating to temporary
market value changes recorded as an adjustment to stockholders' equity. The
effect of SFAS No. 115 resulted in an increase to stockholders' equity (net of
adjustments to deferred policy acquisition costs and deferred federal income
taxes) of $2,050,923 and $2,790,241 for Kentucky Investors and Investors
Heritage, respectively, to reflect the January 1, 1994, net unrealized gains on
securities classified as available-for-sale previously carried at amortized
cost. The adoption of SFAS No. 115 had no effect on Kentucky Investors or
Investors Heritage net income. During 1995 the Financial Accounting Standards
Board declared a one time "holiday" from SFAS No. 115 restrictions relating to
the transfer of held-to-maturity classified securities to the
available-for-sale
classification. Specifically, FASB decided that companies would be allowed a
one time reassessment of their classification of securities. Pursuant to the
"holiday" Kentucky Investors and Investors Heritage reclassified its held-to-
maturity securities to

Page 34

NOTES

NOTE A - Continued

available-for-sale. This was completed effective November 30, 1995. On that
date the amortized cost, related gross unrealized gain and related gross
unrealized loss were $6,377,043, $251,188 and $46,733, respectively. Equity
securities are carried at fair value.

Premiums and discounts on fixed maturity investments are amortized into income
using the interest method. Anticipated prepayments on mortgage-backed
securities are considered in the determination of the effective yield on such
securities. If a difference arises between anticipated prepayments and actual
prepayments, the carrying value of the investment is adjusted with a
corresponding charge or credit to interest income.

Realized gains and losses on the sale of investments are determined based upon
the specific identification method and include provisions for other-than-
temporary impairments where appropriate.

Mortgage loans, policy loans and other long-term investments are carried at
unpaid balances. Short term investments represent securities with maturity
dates within one year but exceeding three months. These securities are carried
at amortized cost.

Cash equivalents include money market funds on deposit at various financial
institutions with contractual maturity dates within three months at the time of
purchase.

Deferred Acquisition Costs: Commissions and other acquisition costs which vary
with and are primarily related to the production of new business are deferred
and amortized over the life of the related policies. See Revenues and Expenses
regarding amortization methods. Recoverability of deferred acquisition costs is
evaluated annually by comparing the current estimate of the present value of
expected pretax future profits to the unamortized asset balance. If such
current estimate is less than the existing balance,the difference is charged to
expense.

Property and Equipment: Property and equipment is carried at cost less
accumulated depreciation, using principally the straight-line method.
Accumulated depreciation on property and equipment of Kentucky Investors was
$3,705,560 and $3,507,133 at December 31, 1995 and 1994, respectively.
Accumulated depreciation on property and equipment of Investors Heritage was
$3,632,463 and $3,440,760 at December 31, 1995 and 1994, respectively.

Goodwill: Goodwill for Investors Heritage is being amortized over forty years
using the straight-line method. Accumulated amortization was $918,414 and
$852,813 at December 31, 1995 and 1994, respectively.

Benefit Reserves and Policyholder Deposits: Reserves on traditional life and
accident and health insurance products are calculated using the net level
premium method based upon estimated future investment yields, mortality,
withdrawals and other assumptions, including dividends on participating
policies. The assumptions are locked in and based on projections of past
experience and include provisions for possible unfavorable deviation.

Benefit reserves and policyholder deposits on universal life and investment-
type products are determined by using the retrospective deposit method and
represent the policy account value before consideration of surrender charges.
In addition, unearned revenues are included as a part of the benefit reserve.

Page 35

NOTES

NOTE A - Continued

The mortality assumptions for regular ordinary business are based on the
1955-60
Basic Table, Select and Ultimate, for plans issued prior to 1982, the 1965-70
Basic Table, Select and Ultimate, for plans issued in 1982 through 1984, the
1975-80 Basic Table, Select and Ultimate, for plans issued after 1984 and on
the
Company's experience for final expense plans.

Reinsurance: Kentucky Investors and Investors Heritage assume and cede
reinsurance under various agreements providing greater diversification of
business, allowing management to control exposure to potential losses arising
from large risks, and providing additional capacity for growth. Amounts
recoverable from reinsurers are estimated in a manner consistent with the
related liabilities associated with the reinsured policies. During 1993,
Investors Heritage reached agreements with two insurers for the recapture of
certain assumed group life policies. This resulted in a $637,000 gain from
operations before tax in 1993. In accordance with SFAS No. 113 reserves ceded
to reinsurers of $3,361,687 are shown gross on the balance sheets of Kentucky
Investors and Investors Heritage.

Unearned Premium Reserves: Credit life unearned premium reserves are calculated
for level and reducing coverage using the monthly pro rata and Rule of 78's
methods, respectively. Credit accident and health unearned premium reserves are
determined based upon the Rule of 78's in 1995, 1994 and 1993. In 1992, credit
accident and health unearned premium reserves were determined as the mean of
the
pro rata and Rule of 78's reserves. The change increased Investors Heritage's
1993 income from operations before tax by $370,000.

Policy Claims: Policy claims are based on known liabilities plus estimated
future liabilities developed from trends of historical data applied to current
exposure.

Other Policyholders' Funds: Other policyholders' funds consist primarily of
dividends and endowments left on deposit at interest. Participating business
approximates 12% of ordinary life insurance in force. Participating dividends
are accrued as declared by the Board of Directors of Investors Heritage.

Federal Income Taxes: Effective January 1, 1993, Kentucky Investors and
Investors Heritage changed their method of accounting for income taxes in
accordance with FASB Statement 109, "Accounting for Income Taxes". Under
Statement 109, the liability method is required to be used in accounting for
income taxes. Under that method, deferred tax assets and liabilities are
determined based on differences between the financial reporting and the tax
bases of assets and liabilities and are measured using the enacted tax rates.
The cumulative effect of adopting Statement 109 as of January 1, 1993 was to
decrease net income by $68,000 ($ .09 per share) and increase net income by
$182,000 ($ .20 per share) for Kentucky Investors and Investors Heritage,
respectively.

Revenues and Expenses: Revenues on traditional life and accident and health
insurance products consist of direct and assumed premiums reported as earned
when due. Liabilities for future policy benefits, including unearned premium
reserves, are provided and acquisition costs are amortized by associating
benefits and expenses with earned premiums to recognize related profits over
the
life of the contracts. Acquisition costs are amortized over the premium paying
period using the net level premium method. Traditional life insurance products
are treated as long duration contracts based on the fact that they are ordinary
whole life insurance products which generally remain in force for the lifetime
of the insured. The accident and health insurance products are treated as long
duration contracts because they are non-cancelable.

Page 36

NOTES

NOTE A - Continued

Revenues for universal life and investment-type products consist of investment
income and policy charges for the cost of insurance and policy initiation and
administrative fees. Expenses include interest credited to policy account
balances, actual administrative expenses and benefit payments in excess of
policy account balances.

Deferred policy acquisition costs related to universal life and investment-type
products are amortized as a uniform percentage of each year's expected gross
profits, over the life of the policies. Amortization is unlocked for
significant changes in expected versus actual gross profits, including the
effects of realized gains or losses.

Common Stock and Earnings per Share: The par value per share for Kentucky
Investors is $1.00 with 1,225,000 shares authorized and 811,128, 779,895 and
771,786 shares issued at December 31, 1995, 1994 and 1993, respectively.
Earnings per share of common stock were computed based on the weighted average
number of common shares outstanding during each year. The number of common
shares used in this computation was 783,820 in 1995, 772,109 in 1994, and
769,570 in 1993. Cash dividends per share were $.38 in 1995, $.37 in 1994, and
$.36 in 1993.

The stated value of Investors Heritage common stock was $1,441,797, $1,443,259
and $1,449,010 at December 31, 1995, 1994 and 1993, respectively. 2,000,000
shares were authorized at December 31, 1995, 1994 and 1993 and 900,623,
901,537,
and 905,131 shares were issued at December 31, 1995, 1994 and 1993,
respectively. Earnings per share of common stock were computed based on the
weighted average number of common shares outstanding during each year: 901,151
in 1995, 902,115 in 1994, and 906,989 in 1993. Cash dividends per share were
$.76 in 1995, $.74 in 1994, and $.72 in 1993.

Reclassifications: Certain prior year amounts have been reclassified to conform
to the 1995 presentations.

Use of Estimates: The preparation of financial statements in conformity with
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.

New Accounting Pronouncements: Kentucky Investors and Investors Heritage have
elected to adopt SFAS No. 120, "Accounting and Reporting by Mutual Life
Insurance Enterprises and by Insurance Enterprises for Certain Long Duration
Participating Contracts", effective January 1, 1996 to account for their
participating life insurance policies. Management has evaluated the impact of
adoption to be immaterial to the financial statements of both Kentucky
Investors and Investors Heritage.

NOTE B - Investments

Investors Heritage limits credit risk by emphasizing investment grade
securities and by diversifying its investment portfolio among government and
corporate bonds and mortgage loans. Investors Heritage manages its fixed
income portfolio to diversify between and within industry sectors. Mortgage
loans are issued at loan to value ratios not exceeding 80 percent.
Approximately $10,815,000 of the loans outstanding at December 31, 1995 were to
borrowers located in Kentucky. All loans are secured by a first mortgage on the
property.

Page 37

NOTES
NOTE B - Continued

Investments in available-for-sale and held-to-maturity securities
are summarized as follows:

<TABLE>

1995 Gross Gross
<CAPTION> Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
Available-for-sale securities:
<S> <C> <C> <C> <C>
U.S. Government
Obligations
$ 24,214,107 $1,364,794 $ 15,497 $ 25,563,404
States and Political
Subdivisions 1,987,512 73,488 -0- 2,061,000
Corporate 68,935,613 3,138,499 78,479 71,995,633
Foreign 5,015,069 260,071 -0- 5,275,140
Mortgage-Backed Securities 31,685,496 921,819 100,776 32,506,539

Total Fixed Maturity
Securities $131,837,797 $5,758,671 $194,752 $137,401,716
Equity Securities 1,311,393 1,347,552 93,009 2,565,936

Total
$133,149,190 $7,106,223 $287,761 $139,967,652

1994 Gross Gross
<CAPTION> Amortized Unrealized Unrealized Fair
Cost Gains Losses Value

Available-for-sale securities:
<S> <C> <C> <C> <C>
U.S. Government Obligations
$ 29,489,371 $ 153,353 $1,331,031 $ 28,311,693
Corporate 63,925,650 174,999 4,263,242 59,837,407
Mortgage-Backed Securities 22,100,716 40,446 1,485,801 20,655,361

Total Fixed Maturity
Securities
$115,515,737 $ 368,798 $7,080,074 $108,804,461
Equity Securities 1,249,643 928,388 175,353 2,002,678

Total
$116,765,380 $ ,297,186 $ ,255,427 $110,807,139

Held-to-maturity securities:
States and Political
Subdivisions
$ 3,804,470 $ 31,498 $ 315,210 $ 3,520,758
Corporate 1,164,154 -0- 34,154 1,130,000
Mortgage-Backed Securities 1,611,697 -0- 148,638 1,463,059

Total
$ 6,580,321 $ 31,498 $ 498,002 $ 6,113,817

</TABLE>

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

December 31 December 31
1995 1994

Net unrealized appreciation
(depreciation) on available-
for-sale securities
$ 6,818,462 $ (5,958,241)
Adjustment to deferred
acquisition costs (836,591) 297,774
Deferred income taxes
(2,033,836) 1,924,559

Net unrealized appreciation
(depreciation) on
available-for-sale securities for
Investors Heritage
$ 3,948,035 $ (3,735,908)
Minority shareholders'
interest
(1,031,526) 978,917

Net unrealized appreciation
(depreciation) on
available-for-sale securities for
Kentucky Investors
$ 2,916,509 $ (2,756,991)

The amortized cost and fair value of debt securities at December 31, 1995, by
contractual maturity, are presented on the following page. Expected maturities
will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.

Page 38

NOTES

NOTE B - Continued

Available-for-Sale
Amortized Fair
Cost Value

Due in one year or less
$ 3,647,354 $ 3,708,957
Due after one year
through five years 41,873,594 43,283,787
Due after five years
through ten years 40,405,170 42,383,431
Due after ten years 12,266,568 13,482,102
Due at multiple maturity
dates 33,645,111 34,543,439

Total
$131,837,797 $137,401,716

Proceeds during 1995 and 1994 from sales and maturities of investments in
available-for-sale securities were $8,946,675 and $8,214,320, respectively.
Gross gains of $86,647 and $170,625 and gross losses of $50,315 and $35,599
were realized on those sales during 1995 and 1994, respectively. Proceeds
during 1995 and 1994 from sales and maturities of investments in held-to-
maturity securities were $204,084 and $6,127,887, respectively. Gross gains of
$2,135 and $116,525 and gross losses of $7,964 and $8,012, respectively, were
realized on those sales. Proceeds from sales and maturities of investments in
debt securities were $33,391,890 for 1993. Gross gains of $821,051 and gross
losses of $82,890 were realized on those sales in 1993.

Presented below is investment information for Investors Heritage, including the
accumulated and annual change in net unrealized investment gain or loss.
Additionally, the table below shows the annual change in net unrealized
investment gain (loss) and the amount of realized investment gain (loss) on
debt
and equity securities for the years ended December 31, 1995, 1994 and 1993:

1995 1994 1993
Change in unrealized
investment gain (loss):
Available-for-sale:
Debt securities $12,275,195 $(6,711,276) $ -0-
Equity securities 501,508 (267,147) 231,774

Held-to-maturity
(held for investment
prior to 1994):
Debt securities $ 466,504 $(5,663,480) $1,265,728

Realized investment
gain (loss):
Available-for-sale:
Debt securities $ 35,957 $ 134,213 $ -0-
Equity securities 375 813 1,605

Held-to-maturity
(held-for-investment
prior to 1994):
Debt securities $ (5,829) $ 108,513 $ 738,161

In 1995 there were sales of $146,914 of held-to-maturity securities with a
realized loss of $7,705. For statutory purposes the Company sold these
securities since they were not valued by the NAIC Securities Valuation Office.
Net realized gains of $1,876 result from prepayments and calls of held-to-
maturity securities in 1995. As previously mentioned in Note A, the balance of
held-to-maturity securities was transferred to available-for-sale on November
30, 1995. There were no sales of held-to-maturity securities in 1994. Realized
gains above in 1994 ($108,513) result from prepayments and calls of held-to-
maturity securities.

Page 39

NOTES

NOTE B - Continued

Major categories of investment income for Investors Heritage are summarized as
follows:

1995 1994 1993

Fixed maturities
$ 9,084,878 $ 8,210,890$ 7,934,808
Mortgage loans on
real estate 1,124,147 1,230,481 1,205,962
Other 961,604 908,508 951,670
___________ ___________ ___________
$11,170,629 $10,349,879 $10,092,440

Investment expenses 355,581 339,225 344,627

$10,815,048 $10,010,654$ 9,747,813

Investors Heritage and Kentucky Investors are required to hold assets on
deposit
for the benefit of policyholders in accordance with statutory rules and
regulations. At December 31, 1995 and 1994, these required deposits had book
values of $22,290,293 and $22,374,245, respectively, for Kentucky Investors and
Investors Heritage.

NOTE C - Fair Values of Financial Instruments

The following disclosure of the estimated fair values of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments". The estimated fair value amounts have
been determined using available market information and appropriate valuation
methodologies. However, considerable judgement was necessarily required to
interpret market data to develop these estimates. Accordingly, the estimates
are not necessarily indicative of the amounts which could be realized in a
current market exchange. The use of different market assumptions or estimation
methodologies may have a material effect on the fair value amounts. The
following table relates solely to Investors Heritage. Carrying values and fair
values for Kentucky Investors approximate those shown for Investors Heritage,
except for the investments in and obligations of affiliates recognized by
Investors Heritage which are eliminated for Kentucky Investors reporting.

December 31, 1995

Investors Heritage Carrying Fair
Value Value
Assets:
Fixed maturities $137,401,716 $137,401,716
Equity securities 2,565,936 2,565,936
Mortgages on real
estate - commercial 12,353,835 13,627,306
Mortgages on real
estate - residential 704,629 793,064
Policy loans 6,869,039 6,869,039
Other long-term
investments 301,733 301,733
Short-term investments 1,103,021 1,103,021
Investments in
affiliates 2,309,438 4,406,088
Contractual obligations
of affiliate 747,753 747,753
Cash and cash equivalents 2,376,981 2,376,981
Accrued investment income 2,139,333 2,139,333
Liabilities:
Policyholder deposits
(investment-type
contracts) $ 48,243,071 $ 43,049,666
Policy claims 1,665,949 1,665,949

Page 40

NOTES

NOTE C - Continued

The following methods and assumptions were used in estimating the "fair value"
disclosures for financial instruments in the accompanying financial statements
and notes thereto:

Cash, cash equivalents, short-term investments, policy loans, accrued
investment
income, other long term investments and contractual obligations of affiliates:
The carrying amounts reported for these financial instruments approximate their
fair values.

Fixed maturity, equity securities, and investments in affiliates: The fair
values for fixed maturity, equity securities (including redeemable preferred
stocks) and investments in affiliates are based on quoted market prices.

Mortgage loans: The fair values for mortgage loans are estimated using
discounted cash flow analyses, using the actual spot rate yield curve in effect
at December 31.

Investment-type contracts: The fair values for the liabilities under
investment-type insurance contracts are calculated as surrender values on these
contracts.

Policy claims: The carrying amounts reported for policy claims approximate
their fair value.

The fair values for insurance contracts other than investment contracts are not
required to be disclosed under SFAS No. 107.

NOTE D - Investment in Affiliates/Contractual Obligation of Affiliate

Investors Heritage's investment in the common stock of its parent, Kentucky
Investors, either directly or indirectly, was at December 31, 1995: Cost
$2,309,438, Market $4,406,088 and at December 31, 1994: Cost $2,679,684, Market
$4,710,107. Additionally, Investors Heritage owns several notes due from
Kentucky Investors, with variable interest rates and due dates from 1999 to
2004. Kentucky Investors owns approximately 74% of Investors Heritage. Sales
of common stock owned by Investors Heritage are reported by Kentucky Investors
as stock issuances. The consideration received from such sales is recorded by
Kentucky Investors as follows: an adjustment to common stock at par value of
securities sold, an adjustment to retained earnings for the cost of securities
sold in excess of par value, and an adjustment to paid in surplus for the
difference in consideration received and cost of the securities paid by
Investors Heritage.

NOTE E - Federal Income Tax

Deferred income 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. Significant components
of the Company's deferred tax liabilities and assets as of December 31 are as
follows:

Page 41

NOTES

NOTE E - Continued

Investors Heritage 1995 1994

Deferred tax liabilities:
Policy acquisition costs$ 7,972,000 $8,416,000
Net unrealized gain on
available-for-sale
securities 2,034,000 -0-
Other 235,000 176,000
Total deferred tax
liabilities $ 10,241,000 $8,592,000

Deferred tax assets:
Benefit reserves $ 6,286,000 $5,712,000
Other 501,000 527,000
Net unrealized losses on
available-for-sale securities -0- 1,925,000

Total deferred tax
assets $ 6,787,000 $8,164,000
Valuation allowance
for deferred tax assets (252,000) -0-
Net deferred tax assets $ 6,535,000 $8,164,000
Net deferred tax liabilities of
Investors Heritage $ 3,706,000 $ 428,000

Kentucky Investors
Deferred tax liability:
Undistributed earnings
in subsidiary 1,414,000 1,402,000

Net deferred tax liabilities of
Kentucky Investors $ 5,120,000 $1,830,000

A valuation allowance was recorded on net deferred tax assets exclusive of the
liability related to the net unrealized gain on available-for-sale securities.
The valuation allowance was established to record the net asset at its
estimated realizable value.

Federal income taxes in the consolidated balance sheets include deferred taxes
and in 1993, taxes currently payable. In 1995, taxes recoverable of $77,000 and
$-0- for Investors Heritage and Kentucky Investors, respectively, is included
in other assets in the consolidated balance sheets.

The reconciliation of income tax attributable to operations computed at the
federal statutory tax rate to income tax expense is:

1995 1994 1993

Statutory federal
income tax rate 35.0 % 35.0 % 35.0 %
Graduated tax rate (1.0)% (1.0)% (1.0)%
Small life insurance
company deduction (63.8)% (19.5)% (14.5)%
Dividend exclusion
and tax-exempt income(5.0)% (1.7)% (2.4)%
Increase in valuation 27.6 %
Alternative minimum taxes (2.5)%
Purchase accounting
differences 2.3 % .7 % .7 %
Other, net 1.3 % .5 % (1.9)%

Effective income tax rate-
Investors Heritage (3.6)% 14.0 % 13.4 %
Consolidating adjustments 5.9 % 3.6 % 5.0 %

Effective income tax rate-
Kentucky Investors 2.3 % 17.6 % 18.4 %

Page 42

NOTES

NOTE E - Continued

At December 31, 1995 approximately $4,000,000 of the retained earnings of
Investors Heritage represents earnings prior to 1984 which accumulated in an
account known as policyholders' surplus, which was not subject to income
taxation. In certain circumstances, including if distributions are made to
stockholders in excess of approximately $6,900,000, Investors Heritage could be
subject to additional federal income tax unrelated to its normal taxable
income.
No provision for such income tax has been provided for as management
foresees no events which would result in such tax being incurred.

Kentucky Investors made income tax payments of $34,750, $29,200 and $6,000 in
1995, 1994 and 1993, respectively. Investors Heritage made income tax payments
of $445,614, $2,450,000 and $2,005,000 in 1995, 1994, and 1993, respectively.

NOTE F - Employee Benefit Plans

Kentucky Investors and Investors Heritage participate in a noncontributory
retirement 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 tables provide additional details for Kentucky Investors on a
consolidated basis. Because the amounts for the parent company and Investors
Heritage Printing, Inc. are immaterial, they are not separately presented.

1995 1994 1993
Components of pension
expense:
Service cost $ (222,492) $ (212,612) $ (164,415)
Interest cost (289,538) (244,073) (212,520)
Actual return on
plan assets 296,918 269,622 252,606
Net amortization and
deferral (10,667) (71,269) (67,913)
Net periodic pension
expense $ (225,779) $ (258,332) $ 92,242)

Plan assets at
fair value $ 3,460,959 $ 3,050,765 $ 2,558,190

Actuarial present value
of projected benefit obligation:
Accumulated benefit obligations:
Vested $(3,356,652) $(2,537,144)$ (2,224,048)
Nonvested (45,880) (35,477) (26,889)

$(3,402,532) $ 2,572,621)$ (2,250,937)
Provision for future
salary increase (1,172,820) (833,712) (898,393)
Total projected benefit
obligation $(4,575,352) $(3,406,333)$ (3,149,330)
Projected benefit
obligation in excess
of fair value of plan
assets $(1,114,393) $ (355,568)$ (591,140)
Unrecognized net loss 1,255,751 506,848 800,896
Unrecognized transition
asset (204,861) (239,004) (273,148)

ACCRUED PENSION COST $ (63,503) $ (87,724)$ (63,392)
Excess of plan assets over
accumulated benefit
obligations $ 58,427 $ 478,144$ 307,253

Page 43

NOTES
NOTE F - Continued

The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% and 8.5% for 1995 and 1994, respectively.
The rate of increase in future compensation levels was 5% for 1995, 1994 and
1993. The expected long-term rate of return on plan assets was 9% in 1995, 1994
and 1993. Plan assets represent a deposit administration fund of Investors
Heritage.

Kentucky Investors and Investors Heritage also sponsor a 401(k) defined
contribution plan. Matching contributions to the plan expensed for 1995, 1994
and 1993 were $150,000, $131,000, and $138,000, respectively.

NOTE G - Stockholders' Equity and Dividend Restrictions

Statutory restrictions limit the amount of dividends which may be paid by
Investors Heritage. Generally, dividends during any year may not be paid,
without prior regulatory approval, in excess of the lessor of (a) 10 percent of
statutory stockholders' equity as of the preceding December 31, or (b)statutory
net income for the preceding year. In addition, dividends are limited to the
amount of unassigned surplus reported for statutory purposes, which was
$10,950,126 at December 31, 1995.

NOTE H - Statutory Accounting Practices

Stockholders' equity, as reported by Investors Heritage, was $15,061,860 and
$13,867,715 at December 31, 1995 and 1994, respectively. The statutory net
income was $2,063,471, $2,486,925, and $523,908 for the years ending December
31, 1995, 1994 and 1993, respectively.

Principle adjustments to statutory amounts to derive GAAP amounts include: a)
costs of acquiring new policies are deferred and amortized; b) benefit reserves
are calculated using more realistic investment, mortality and withdrawal
assumptions; c) deferred income taxes are provided; d) value of business
acquired and goodwill are established for acquired companies; and e) accounting
for certain investments in debt securities.

Investors Heritage is domiciled in the Commonwealth of Kentucky and prepares
its
statutory-basis financial statements in accordance with accounting practices
prescribed or permitted by the Kentucky Department of Insurance. "Prescribed"
statutory accounting practices include state laws, regulations, and general
administrative rules, as well as a variety of publications of the National
Association of Insurance Commissioners ("NAIC"). "Permitted" statutory
accounting practices encompass all accounting practices that are not
prescribed;
such practices may differ from state to state, may differ from company to
company within a state, and may change in the future. The NAIC currently is in
the process of recodifying statutory accounting practices, the result of which
is expected to constitute the only source of "prescribed" statutory accounting
practices. Accordingly, that project, which is expected to be completed in
1997, will likely change, to some extent, prescribed statutory accounting
practices, and may result in changes to the accounting practices that insurance
enterprises use to prepare their statutory financial statements. It is not
feasible to discuss the expected impact to the Company of the recodification of
statutory accounting practices since no changes have been determined with any
certainty.

During the year Investors Heritage completed its negotiations with the Kentucky
Department of Insurance (the "Department") with regard to the valuation of
certain assets held by Investors Heritage. Under the agreement reached with the
Department, Investors Heritage will write down the statutory value of the home
office real estate owned from market to depreciated cost over a five-year
period and will write down to zero its investment in the

Page 44

NOTES

NOTE H - continued

common stock of Investors Underwriters, Inc. (subsidiary) and its investment in
the common stock of Kentucky Investors over a three-year period. During 1995
the assets were written down by $1,527,826. After consideration of the Asset
Valuation Reserve (AVR) related to the write downs the net effect to statutory
surplus was a reduction of $395,071. The remaining write downs as of December
31, 1995 to be taken over the next four years against statutory surplus, before
consideration of AVR, will be approximately $5,178,000.

NOTE I - Segment and Reinsurance Data

Investors Heritage operates in four segments as shown in the following tables.
All segments except Corporate include both individual and group insurance.
Identifiable revenues, expenses and assets are assigned directly to the
applicable segment. Net investment income and invested assets are generally
allocated to the insurance and the corporate segments in proportion to policy
liabilities and stockholders' equity, respectively. Certain assets, such as
property and equipment, are assigned to the Corporate segment. Goodwill has
been allocated to the insurance lines based upon the mix of business of
companies acquired. Corporate segment results for the parent company, Investors
Heritage Printing, Inc., and Investors Heritage Financial Services Group are
immaterial, after elimination of intercompany amounts, and are not presented.

1995 1994 1993

(000's omitted)
Revenue:
Life & Annuities $ 42,437 $ 38,916 $ 33,697
Credit(Life & A&H) (802) 5,431 7,056
Accident & Health 1,126 1,139 3,063
Corporate 1,315 1,318 1,610

$ 44,076 $ 46,804 $ 45,426

Pre-Tax Income from Operations:
Life & Annuities $ 1,143 $ 2,868 $ 2,866
Credit(Life & A&H) (826) (1,095) (1,521)
Accident & Health 108 430 396
Corporate 460 589 707

$ 885 $ 2,792 $ 2,448

Assets:
Life & Annuities $ 163,834 $ 143,789 $ 133,911
Credit(Life & A&H) 8,186 20,107 33,556
Accident & Health 1,692 1,811 2,861
Corporate 36,778 28,555 30,869

$ 210,490 $ 194,262 $ 01,197

Amortization and Depreciation Expense:
Life & Annuities $ 2,874 $ 4,303 $ 3,968
Credit(Life & A&H) 2,672 4,971 7,451
Accident & Health 605 906 962
Corporate 248 264 291

$ 6,399 $ 10,444 $ 12,672

Page 45

NOTES

NOTE I - continued

For 1995, the development of segment data was derived using a revised
allocation
methodology. Such change in approach was applied and amounts have been restated
for the 1994 and 1993 segment data presented above. This change in approach was
made to enhance the allocation of costs and revenues to coincide with resources
used by the segment and revenues earned. As a result of this change, revenues
for the Life and Annuities segment increased $446,000 for 1994 and $458,000 for
1993. Revenues for the Corporate segment decreased $497,000 for 1994 and
$519,000 for 1993. Pre-Tax Income from Operations for the Life and Annuities
segment increased $115,000 for 1994 and $513,000 for 1993. Pre-Tax Income from
Operations for the Corporate segment decreased $193,000 in 1994 and $379,000 in
1993. The effect on other segment classifications presented above was
immaterial.

Investors Heritage cedes a portion of its credit life and accident insurance
through coinsurance agreements and utilizes yearly renewable term reinsurance
to
cede life insurance coverage in excess of its retention limit which has been set
at $100,000. Total premiums ceded amounted to $1,135,000 and $1,420,000 in 1995
and 1994, respectively, and commissions and expense allowances received were
$166,000 and $317,000 in 1995 and 1994, respectively. Unearned premium reserves
were reduced by $2,048,000 and $5,296,000 at December 31, 1995 and 1994,
respectively, for credit reinsurance transactions. Investors Heritage remains
contingently liable on all ceded insurance should any reinsurer be unable to
meet their obligations. Assumed reinsurance premiums were $4,348,000 and
$4,538,000 in 1995 and 1994, respectively.

NOTE J - Contingent Liabilities

Investors Heritage is named as a defendant in a number of legal actions arising
primarily from claims made under insurance policies. Management and its legal
counsel are of the opinion that the settlement of those actions will not have a
material adverse effect on Investors Heritage's financial position or results
of operations.

In most of the states in which Investors Heritage is licensed to do business,
guaranty fund assessments may be taken as a credit against premium taxes over a
five year period. These assessments, brought about by the insolvency of life
and health insurers, are levied at the discretion of the various state guaranty
fund associations to cover association obligations. There has been a
significant increase in recent years of guaranty fund assessments. There is no
reasonable way to determine if the assessments will increase or decrease in the
future, but management is of the opinion that the effect would not be material
on the financial position or results of operations of either Investors Heritage
or Kentucky Investors because of the use of premium tax off-sets.

On March 14, 1996, Investors Heritage received a letter from Crown Life
Insurance Company, a coinsurer of certain credit life and credit accident and
health policies sold by Investors Heritage, regarding certain disagreements in
the terms of their reinsurance agreement. Because of these disagreements, Crown
Life contends that Investors Heritage owes to them approximately $1,000,000.
Investors Heritage has not completed its investigation in order to respond to
Crown Life's assertions, but based on its preliminary assessment Investors
Heritage disagrees and intends to vigorously defend its position.

Page 46

BOARD OF DIRECTORS

Harry Lee Waterfield II
Chairman of the Board I K a b c d e f g h
Frankfort, Kentucky

Warner Hines K g
Frankfort, Kentucky

Dr. Adron Doran I a b e
Lexington, Kentucky

Jerry F. Howell I K a b c d e h
Leesburg, Florida

H. Glenn Doran I K c d f g
Murray, Kentucky

Dr. Jerry F. Howell, Jr. I K c f
Morehead, Kentucky

Michael F. Dudgeon, Jr. I c
Columbia, South Carolina

Joe R. Johnson I d
Frankfort, Kentucky

Gordon C. Duke K g
Frankfort, Kentucky

David W. Reed K h
Gilbertsville, Kentucky

Robert M. Hardy, Jr. I K a f g h
Frankfort, Kentucky

Helen Wagner K b f
Owensboro, Kentucky

I Investors Heritage Life Insurance Company
d Investors Heritage Life Finance Committee
K Kentucky Investors, Inc.
e Investors Heritage Life Compensation Committee
a Investors Heritage Life Executive Committee
f Kentucky Investors Executive Committee
b Investors Heritage Life Nominating Committee
g Kentucky Investors Finance Committee
c Investors Heritage Life Audit Committee
h Kentucky Investors Nominating Committee

STOCK INFORMATION

Stock Prices
NASDAQ OVER-THE-COUNTER MARKET QUOTATIONS
(Investors Heritage
Life Insurance Company and Kentucky Investors Inc. Logos)

Investors Heritage Life Insurance Company
1995 MARKET PRICE RANGE

26-28 March
26-28 June
26-28 Sept.
26-28 Dec.

1995 Annual Dividend Per Share - $.76

1994 MARKET PRICE RANGE

26-28 March
26-28 June
26-28 Sept.
26-28 Dec.

1994 Annual Dividend Per share - $.74

Kentucky Investors, Inc.
1995 MARKET PRICE RANGE

12 1/2 - 13 1/2 March
12 1/2 - 13 1/2 June
12 3/4 - 13 3/4 Sept.
12 3/4 - 13 3/4 Dec.

1995 Annual Dividend Per Share - $.38

1994 MARKET PRICE RANGE

12 1/2 - 13 1/2 March
12 1/2 - 13 1/2 June
12 1/2 - 13 1/2 Sept.
12 1/2 - 13 1/2 Dec.

1994 Annual Dividend Per Share - $.37

The stock of both companies is traded on over-the-counter market. Both stocks
are on the NASDAQ system. The quotations reflect inter-dealer prices, without
retail mark-up, mark-down, or commission, and may not represent actual
transactions. The symbol for Investors Heritage Life is INLF and the symbol for
Kentucky Investors is KINV.

The 1996 cash dividend to be paid to its stockholders by Investors Heritage
Life
on April 12, 1996 is $.76 per share, and the cash dividend to be paid on the
same date to its shareholders by Kentucky Investors is $.38 per share.

ANNUAL MEETING

The 1996 meeting of shareholders of Investors Heritage Life Insurance Company
is
scheduled for 10 a.m. on Thursday, May 9, 1996, at the company auditorium,
Second and Shelby Streets, Frankfort, Kentucky. The annual meeting of
shareholders of Kentucky Investors, Inc., is scheduled for the same date and
location at 11 a.m.

FORM 10-K

A copy of the Form 10-K Annual Report to the Securities and Exchange Commission
for either Company can be obtained upon request to the Secretary of that
company.

TRANSFER AGENT

Investors Heritage Life Insurance Company
Stock Transfer Department
P.O. Box 717
Frankfort, Kentucky 40602

(502) 223-2364 - EXT. 305

Page 48

<ARTICLE> 7

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<DEBT-HELD-FOR-SALE> 137,401,716
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 2,565,936
<MORTGAGE> 13,058,464
<REAL-ESTATE> 0
<TOTAL-INVEST> 164,357,100
<CASH> 2,376,981
<RECOVER-REINSURE> 79,430
<DEFERRED-ACQUISITION> 28,260,113
<TOTAL-ASSETS> 210,489,896
<POLICY-LOSSES> 155,182,145
<UNEARNED-PREMIUMS> 6,512,362
<POLICY-OTHER> 1,665,949
<POLICY-HOLDER-FUNDS> 2,100,363
<NOTES-PAYABLE> 0
0
0
<COMMON> 1,441,797
<OTHER-SE> 37,218,189
<TOTAL-LIABILITY-AND-EQUITY> 210,489,896
33,061,376
<INVESTMENT-INCOME> 10,815,048
<INVESTMENT-GAINS> 57,048
<OTHER-INCOME> 142,934
<BENEFITS> 17,291,402
<UNDERWRITING-AMORTIZATION> 1,104,957
<UNDERWRITING-OTHER> 24,797,462
<INCOME-PRETAX> 884,585
<INCOME-TAX> (32,000)
<INCOME-CONTINUING> 916,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 916,585
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0

</TABLE>