Item 1. Business
(a) Business Overview
Investors Heritage Capital Corporation is the holder of 100% of the outstanding common stock of a life insurance company, a printing company and an insurance marketing company and is the sole member of two Kentucky limited liability companies.
Investors Heritage Capital owns 100% of Investors Heritage Life Insurance Company, Investors Heritage Printing, Inc. and Investors Heritage Financial Services Group, Inc. Investors Heritage Capital is the sole member of At Need Funding, LLC, and Heritage Funding, LLC, both Kentucky limited liability corporations. We will be referring to Investors Heritage Printing, Investors Heritage Financial, At Need Funding and Heritage Funding as the "Non-insurance Subsidiaries". We will be referring to Investors Heritage Life, Investors Heritage Printing, Investors Heritage Financial and At Need Funding as the "Subsidiaries". We will also be referring to Investors Heritage Capital and its subsidiaries as "we", "us", "our" and as the "Company".
Investors Heritage Life owns 96% of Investors Underwriters, Inc., an investment holding company. Less than 1% of Investors Heritage Capital's total consolidated revenues were generated by the Non-insurance Subsidiaries for the year ended December 31, 2009. The Non-insurance Subsidiaries' total assets and stockholders' equity comprised less than 1% in the aggregate of Investors Heritage Capital's reported total assets and stockholders' equity as of December 31, 2009.
(b) Financial Information About Business Segments
Investors Heritage Life
The business segments of Investors Heritage Life are identified and discussed on page 8 of the Annual Report to Stockholders for the year ended December 31, 2009 and are incorporated herein by reference. We offer a portfolio of the standard forms of participating and non-participating whole life, limited pay, endowments, split-funding, interest-sensitive whole life, guaranteed issue whole life, universal life, term and group life. In addition, we write credit life and credit accident and health insurance (collectively "Credit Insurance") on a group basis. The business of Investors Heritage Life is not seasonal.
Ordinary Production. The business segments for ordinary production are Preneed and Burial products ("Preneed") and Traditional and Universal Life products ("Traditional"). Ordinary in force accounts for 31% of total in force business. We continue to work diligently to increase ordinary product sales. Our primary focus over the last several years has been the Preneed sales in the final expense and preneed funeral markets. Final expense sales include the sale of small face amount ordinary life insurance products, the purpose of which is to pay the insured's final
expenses. Preneed funeral sales include the sale of multiple premium and single premium ordinary life policies which are sold to fund a specific prearranged funeral contract.
Credit Insurance Products and Administrative Services ("Credit Insurance"). Investors Heritage Life has sold Credit Insurance since 1966. Since 1996, Investors Heritage Financial has marketed Investors Heritage Life's Credit Insurance products. All of the risk on Credit Insurance policies sold by Investors Heritage Life has been and will continue to be reinsured with larger, highly rated companies. Currently, Investors Heritage Life has reinsurance agreements with ACE Life Insurance Company and Swiss Life Insurance and Pension Company, which replaced Scottish Re (U.S.), Inc. as one of our reinsurers on new business effective June 1, 2008. During 2005, Investors Heritage Life, with the assistance of Investors Heritage Financial, entered into a joint venture partnership with the Kentucky Bankers Association ("KBA") to market various products to all of the KBA members throughout the Commonwealth of Kentucky. Investors Heritage Life reinsures credit business sold through KBA members to, and serves in an administrative capacity for, KenBanc Reinsurance Company, Ltd., the KBA's reinsurance company. Investors Heritage Financial markets Investors Heritage Life Credit Insurance products and mortgage redemption products through this partnership as well as products for several unaffiliated companies. These relationships allow Investors Heritage Financial to provide more products and better serve our existing accounts thereby allowing us to further strengthen these agency relationships.
During 2009, our market share through the Kentucky financial institutions remained steady although sales lagged due to economic conditions. We anticipate sales of our Credit Insurance and mortgage redemption products to rebound as the economic conditions strengthen.
We have executed a letter of intent with the KBA and its insurance agency subsidiary, KenBanc Insurance Services, Inc., whereby they would assume all marketing responsibilities for the credit insurance products to financial institutions in the Commonwealth of Kentucky. Investors Heritage Life will continue to provide insurance products to be marketed as well as all back office administrative services related to the credit insurance operations. We anticipate definitive agreements to be executed on or before the end of the second quarter 2010.
(c) Narrative Description of Business
Preneed and Burial Products ("Preneed"). Approximately 56% of total ordinary insurance in force is Preneed. Sales for this segment 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. As a result of our growth in the Preneed area, agency relationships have also been entered into directly with numerous funeral home owners. Management anticipates this trend to continue and, depending on the size of the funeral home and state law, preneed counselors may also become part of the agency force.
Preneed sales increased 4.4% during 2009 primarily due to increased marketing activity from our agency division in the preneed markets. Investors Heritage Life strives to continue to improve its marketing capability in this area. Our efforts and strategy to continue a successful ordinary
insurance operation hinge on continuing to provide solid products and outstanding administrative service and on the personal relationships developed and fostered each year. In the fourth quarter of 2007, we introduced a new preneed product replacing the Legacy Protector and Legacy Preferred product series. The Legacy Gold series includes both single premium as well as multi-pay policies. Reaction to this product in our markets continues to be favorable. The performance of this product series has been in line with expectations and has improved product profitability in this segment. Our Preneed sales are generated primarily through independent funeral homes in fourteen states.
We also market a series of final expense whole life insurance policies known as the "Heritage Final Expense Products". During the fourth quarter 2008, we introduced a new Final Expense product, Heritage Final Expense II, which replaced our old final expense product series and was designed to provide more flexibility to our customers. These products are non-participating whole life insurance issued with simplified underwriting. These products are offered outside of the preneed market and are performing in line with expectations.
Traditional and Universal Life Products ("Traditional"). Sales for this segment 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. We also sell business through general agents or brokers who may represent one or more companies.
Approximately 44% of total ordinary insurance in force is Traditional. These sales are built around a standard portfolio of life insurance policies with some of the contributions to in-force business being a participating ordinary life insurance policy, a guaranteed issue whole life policy and non-participating life policies. In addition, we offer term insurance products.
During the fourth quarter 2008, we also introduced a new Whole Life Policy, HLW Choice Whole Life, which replaced our Life Paid Up at 95 product. This Whole Life Policy is designed with numerous options and with flexibility to achieve our customer's goals.
As anticipated, ordinary premium production from financial institutions decreased by $338,772 to $586,431 in 2009. This 36.6% decrease over 2008 was primarily due to the tightening of consumer credit markets in light of the current economic situation.
Group life accounts for 60% of total in-force business. In addition to the group business discussed above, Investors Heritage Life participates in the Federal Employee Group Life Insurance ("FEGLI") Program, which is administered by Metropolitan Life Insurance Company, and in the Servicemen's Group Life Insurance ("SEGLI") Program, which is administered by Prudential Insurance Company of America. As of year-end 2009, the total amount of insurance in force from the FEGLI and SEGLI programs was approximately $583,857,000 and $1,357,321,000, respectively.
Credit Insurance. Credit Insurance, which accounts for 9% of total in-force business, is generally sold through banks, finance companies and automobile dealerships and is offered in connection
with the extension of credit. The amount of the insurance is designed to cover the amount of the loan with the financial institution being the beneficiary of the insurance policy to the extent of the unpaid balance of the loan. Credit Insurance production is 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.
Investors Heritage Life has reinsurance agreements with eight unaffiliated companies, Transamerica Life Insurance Company, Universal Guaranty Life Insurance Company, Madison National Life Insurance Company, Minnesota Life Insurance Company, KenBanc Reinsurance Company, Ltd., Plateau Insurance Company, Central States Health and Life Company of Omaha and Aspi Re Limited. Pursuant to those agreements, our Credit Insurance products sold by each company's agents are then reinsured to each company, respectively. Investors Heritage Life and Investors Heritage Financial are paid an initiation fee and an administration fee for services provided. Investors Heritage Financial will continue to seek contracts to operate as an administrator for other companies that sell Credit Insurance.
Investors Heritage Financial continued to call on banks, finance companies and selected automobile dealerships to market Credit Insurance products for Investors Heritage Life during 2009. As anticipated, 8.6% of Investors Heritage Financial revenues for 2009 were derived from the sale of Investors Heritage Life's Credit Insurance products. Credit Insurance gross written premiums were lower than in the prior year due primarily to lower loan demand related to the sluggish economy. As noted above, Investors Heritage Life has executed a letter of intent with the KBA and its affiliated insurance agency, KenBanc Insurance Services, Inc., whereby KenBanc will provide all marketing responsibilities for the sale of our credit insurance products through financial institutions in the Commonwealth of Kentucky.
In addition to selling Credit Insurance, Investors Heritage Life provides ongoing servicing of written credit business, generating fee income. Additionally, Investors Heritage Life bank agents may obtain an ordinary life license enabling them to sell mortgage life 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 mortgage life insurance sales operations will continue to be conducted through Investors Heritage Financial. During the fourth quarter of 2008, we introduced a new product for our credit ordinary sales through financial institutions, Heritage Protector IV. This product replaces the Heritage Protector III series. Further, Investors Heritage Financial is licensed with other unaffiliated insurance companies to provide products that Investors Heritage Life does not offer to the financial institutions and other agents. These products include cancer, accident, second-to-die, large face amount term insurance, short term and long term disability and annuities. These relationships generated additional fee income in the amount of $216,244 during 2009 and management anticipates continued fee income from this area.
Reinsurance. Investors Heritage Life utilizes a combination of yearly renewable term reinsurance and coinsurance to cede life insurance coverage in excess of its retention limit, which is $25,000 per life. This retention level was achieved by keeping current reinsurance treaties in place and adding additional yearly renewable term treaties for the difference. As
anticipated, this retention level has stabilized earnings fluctuations in the Traditional segment. Excess coverages are reinsured externally to unaffiliated reinsurers.
Investors Heritage Life has a reinsurance agreement with Munich American Reassurance Company, which reinsures the Heritage Final Expense products on an 80/20 quota share basis with Investors Heritage Life retaining 20% of the risk on each life. We also have a reinsurance agreement with Lincoln National Life Insurance Company, which reinsures the Term to 95 product on an 80/20 quota share basis with Investors Heritage Life retaining 20% of the risk on each life.
As of December 31, 2009, approximately $47,168,000 or 14% of total benefit and unearned premium reserves was reinsured with non-affiliated, well-established insurance companies. Investors Heritage Life is party to reinsurance and coinsurance agreements with twenty-seven non-affiliated companies. The reinsurers for Investors Heritage Life and amounts of insurance in force that are reinsured are as follows:
			Company
			Reinsurance
			Percent
			Reserves
Of 			Total
ACE Life Insurance 			Company
			$ 1,491,000
3.16%
Aspi Re Limited
247,000
0.52%
Canada Life 			Assurance Company
147,000
0.31%
Central States 			Health & Life Co. of Omaha
64,000
0.14%
KenBanc Reinsurance 			Company LTD
238,000
0.50%
Lincoln National 			Life Insurance Company
			1,101,000
2.33%
Madison National 			Life Insurance Company
155,000
0.33%
Minnesota Life 			Insurance Company
			3,050,000
6.47%
Munich American 			Reassurance Company
			5,339,000
11.32%
Optimum Re 			Insurance Company
33,000
0.07%
Plateau Insurance 			Company
19,000
0.04%
RBC Reinsurance 			(Ireland) Ltd.
893,000
1.89%
ReliaStar Life 			Insurance Company
29,000
0.06%
Scottish Annuity 			and Life Insurance Company
			27,890,000
59.13%
Scottish RE (US)
			1,595,000
3.38%
Settlers Life 			Insurance Company
			1,285,000
2.72%
Swiss Life 			Insurance and Pension Company
			2,665,000
5.65%
Swiss Re Life & 			Health America Inc.
447,000
0.95%
Transamerica Life 			Insurance Company
455,000
0.97%
Universal Guaranty 			Life Insurance Company
15,000
0.03%
Vernon General 			Insurance Company
3,000
0.01%
Other Companies (6)
			 7,000
			 0.02%
			$47,168,000
			100.00%
Investors Heritage Life reinsures all of the risk on the Credit Insurance products sold by its agents. Currently, this business is being reinsured with ACE Life Insurance Company and Swiss Life Insurance and Pension Company, which replaced Scottish Re (U.S.), Inc. effective June 1,
2008 on new sales of our credit products. As explained above, some of these credit insurance risks are also reinsured to Transamerica, Universal Guaranty, Madison National, Minnesota Life, KenBanc, Plateau, Central States and Aspi Re.
Administrative Services. During 2009, we continued to market our third party administrative services to non-affiliated companies. We have an employee whose primary responsibility is to promote this aspect of our organization. This additional marketing focus has and is expected to generate increased fee income associated with providing these services. Our overall revenue is further enhanced by the fact that we generally incur minimal expense increases associated with the third party administrative services, which decreases our overall unit costs.
We have the capacity within our organization to handle the additional load and we have been successful in providing services without the need to add new employees. During 2009, we added two new companies and now provide administrative services for eight companies. These agreements are with a variety of companies that encompass different levels of services, including in some cases, full life insurance back office administration and accounting.
Other Subsidiaries. Investors Heritage Printing does job printing for Investors Heritage Life as well as numerous unaffiliated sources. This includes the printing of the application forms and other office forms required by Investors Heritage Life. While the income from Investors Heritage Printing is not a significant factor in our overall business, Investors Heritage Printing continues to work to improve profitability. Revenues from Investors Heritage Printing were approximately $363,000 in 2009, down $3,000 compared to 2008.
The formation and operation of Investors Heritage Financial generates additional revenue to Investors Heritage Capital Corporation. Although this additional revenue is not a significant factor in our overall business, Investors Heritage Financial generated revenue from its operations of approximately $237,000 in 2009 compared to $329,000 in 2008. The decrease is directly related to the decrease in production of credit insurance and credit ordinary insurance due to the tightening of credit that resulted from the current economic conditions.
At Need Funding is a single member, limited liability company organized under the laws of the Commonwealth of Kentucky. Investors Heritage Capital Corporation is the sole member of the LLC. Funding provided by At Need Funding is secured by assignments of verified incontestable life insurance policies issued by unaffiliated companies. The funds are advanced to funeral homes for services provided for the insured. Upon receipt of death benefits from the unaffiliated insurance company, the principal balance of the debt is reduced and interest and fees are recorded. This service is marketed primarily to funeral homes that do not have the manpower to timely complete necessary paperwork to process the insurance claim. Revenues from At Need Funding were approximately $91,000 in 2009, down $15,000 compared to 2008, primarily due to the current economic conditions.
Dividends and distributions from the Non-insurance Subsidiaries for 2009 and 2008 amounted to $186,000 and $234,500, respectively.
Additionally, we earn fees for other services performed for our subsidiaries. The fees pay for the necessary supervision and coordination required to provide a common policy for all the companies. The supervision results in a coordination of contracts with the various independent agents, common sales brochures, and a savings to each company in the area of printing and purchasing. We purchase director and officer liability coverage, employment practices liability insurance coverage, and blanket fidelity bonds. All policies provide coverage for each of the subsidiaries and provide a cost savings when compared to purchases made by individual companies. We also administer the group life and the retirement programs for the various companies. These fees are not significant to our total revenue. Investors Heritage Capital Corporation also has revenue from other investments, but it is not a significant factor in our business.
Employees. Investors Heritage Capital Corporation does not have any employees. While Investors Heritage Capital Corporation's officers perform various functions, they are not paid a salary by Investors Heritage Capital Corporation for performing such functions. There are 86 people employed by Investors Heritage Life and three people employed by Investors Heritage Printing. The number of active independent contractual agents of Investors Heritage Life is 2,368. There are no unions organized nor are there any collective bargaining agreements with the employees or agents. Management of Investors Heritage Life considers its relationship with the employees and agents to be satisfactory.
(d) Financial Information about Geographic Areas
The principal markets for Investors Heritage Life's products are in the Commonwealths of Kentucky and Virginia, and the States of North Carolina, South Carolina, Georgia, Ohio, Indiana, Florida, Tennessee and Michigan. Investors Heritage Life has licensed ordinary agents and regional managers throughout these states and credit life agents in 257 banks and automobile dealerships.
Investors Heritage Life is also licensed in twenty other states: Alabama, Arizona, Arkansas, Illinois, Louisiana, Mississippi and West Virginia in the South and Southeast; Colorado, Missouri, New Mexico, North Dakota, South Dakota, Oklahoma, Montana, Nebraska, Kansas, Texas and Utah in the West; and Maryland and Pennsylvania in the North. The business in these states is written mostly through general agents.
Forward Looking Information. We caution readers regarding certain forward-looking statements contained in this report and in any other statements made by, or on behalf of, the Company, whether or not in future filings with the Securities and Exchange Commission (the "SEC"). Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results, or other developments. Statements using verbs such as "expect," "anticipate," "believe" or words of similar import generally involve forward-looking statements. Without limiting the foregoing, forward-looking statements include statements which represent our beliefs concerning future levels of sales and redemptions of our products, investment spreads and yields, or the earnings and profitability of our activities.
Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which are subject to change. These uncertainties and contingencies could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable factors and developments. Some of these may be national in scope, such as general economic conditions, changes in tax law and changes in interest rates. Some may be related to the insurance industry generally, such as pricing competition, regulatory developments, industry consolidation and the effects of competition in the insurance business from other insurance companies and other financial institutions operating in our market area and elsewhere. Others may relate to the Company specifically, such as credit, volatility and other risks associated with our investment portfolio. We caution that such factors are not exclusive. We disclaim any obligation to update forward-looking information.
Item 2.
Item 2. Properties
The physical property of the Company 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 Investors Heritage Printing, one building is used for supplies and additional storage; one building is leased to a commercial tenant and one building is a residential apartment building. All of the properties are in good condition.
Item 3.
Item 3. Legal Proceedings
There are no legal proceedings to which Investors Heritage Capital Corporation is a party. There are no legal proceedings to which Investors Heritage Life is a party that are material to the overall financial condition or results of operations of Investors Heritage Capital Corporation.
Item 4.
Item 4. Reserved
PART II
Item 5.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
(a)
(i) The stock of Investors Heritage Capital Corporation, Inc. is quoted on the OTC Bulletin Board. 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 Capital Corporation is IHRC. The following table shows the range of high and low closing sales prices of our shares on the OTC Bulletin Board market quotations.
HIGH
LOW
YEAR ENDED DECEMBER 31, 2009:
First Quarter
$24.00
$13.50
Second Quarter
			 19.00
			 14.65
Third Quarter
			 21.00
			 17.10
Fourth Quarter
			 19.00
			 17.15
HIGH
LOW
YEAR ENDED DECEMBER 31, 2008:
First Quarter
$29.50
$26.50
Second Quarter
			 31.00
			 26.75
Third Quarter
			 27.20
			 23.75
Fourth Quarter
			 29.75
			 19.85
(ii) Approximate Number of Equity Security Holders
(A)
Title of Class
Common Stock
(B)
Number of Holders of Record 12-31-2009
2,885
(iii) Dividends
Investors Heritage Capital Corporation did not pay a dividend in 2009.
(iv) Equity Compensation Plan Information
On September 24, 1999, Investors Heritage Capital's Board granted to certain directors and executive officers options to purchase 75,000 shares of Investors Heritage Capital common stock pursuant to the 1999 Stock Option and Stock Appreciation Rights Plan (the "Plan"). All of the options vested on September 24, 2001 and all outstanding awards expired on September 24, 2009. Investors Heritage Capital did not grant any options in 2009, and no option holders exercised any options during 2009. The Plan terminated on September 24, 2009.
(b) None.
(c) No share repurchases were made pursuant to a publicly announced plan or program. All share repurchases were shares tendered by original stockholders under our right of first refusal or by employees as part of our 401(k) plan.
Item 7.
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 5-14 in the Annual Report to the Stockholders for the year ended December 31, 2009, and is incorporated herein by reference.
Item 8.
Item 8. Financial Statements
The financial statements and notes appear on pages 16-39 in the Annual Report to the Stockholders for the year ended December 31, 2009 and are incorporated herein by reference. See Part IV, Item 15.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A(T).
Item 9A(T). Controls and Procedures (This report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section).
(a) Management is responsible for establishing and maintaining adequate internal control over the Company's financial reporting. As of the end of the period covered by this annual report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's internal controls over financial reporting as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon this evaluation, management concluded that, as of the end of the period covered by this annual report, the Company's internal controls over financial reporting are effective. The standard measures adopted by management in making its evaluation are the measures in the Internal-Control Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission. This annual report does not include an attestation report of the Company's
independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to the attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the Company's disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in this Annual Report on Form 10-K.
(b) Changes to Internal Control Over Financial Reporting
There was a change in the Company's internal control over financial reporting during the three months ended December 31, 2009 that may have materially affected, or was reasonably likely to materially affect, the Company's internal control over financial reporting. During December, 2009 we concluded that we did not maintain effective internal control over financial reporting in determining our insurance reserves for a limited block of our life policies and, as a result, a material weakness existed in our internal control over financial reporting relative to this portion of insurance reserves. On December 18, 2009, we implemented a new procedure to improve the control. Specifically, we instituted a control whereby key personnel involved in our financial reporting process review system reserve runs by plan code to confirm that our life insurance plans contain an appropriate insurance reserving code.
Item 9B.
Item 9B. Other Information
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
(a) The Executive officers and directors of the Company are:
Name, Position & Year Became
Age
Officer/Director
Family Relationship
Harry Lee Waterfield II
Chairman of the Board, President/1963
Jimmy R. McIver, Treasurer/2000
Robert M. Hardy, Jr.
Director, Vice President and General
Counsel/1988
Nephew of Harry Lee Waterfield II
Raymond L. Carr, Chief Financial
Officer, Vice President/2002
Jane S. Jackson, Secretary/2003
Helen S. Wagner, Director/1986
Gordon C. Duke, Director/1991
Harold G. Doran, Jr. Director/2001
Howard L. Graham, Director/2002
David W. Reed, Director/1982
Michael F. Dudgeon, Jr., Director/2004
Nephew of Harry Lee Waterfield II
(b) Each of the Directors has occupied the position indicated for a period of more than five years with the exception of Gordon C. Duke. Since 2003, Mr. Duke has been an independent businessman, and since November 1, 2008, he has also served as a consultant and as a Vice President for Nucleus: Kentucky's Life Science and Innovation Center, LLC. Board member and Audit Committee member, Jerry F. Howell, Jr. died in 2009 and his vacancy has not been filled by the Board.
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 ten years.
Additional information regarding the Directors and leadership structure of the Board are shown on page 4 and page 7, respectively, of the Proxy Statement for the Annual Meeting of Shareholders to be held May 13, 2010 and is incorporated herein by reference.
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.
The Board of Directors has determined that Audit Committee members Harold G. Doran, Jr. and Gordon C. Duke are audit committee financial experts as defined by Item 407(d)(5) of Regulation S-K of the Exchange Act and are independent as that term is used in Item 7(d) of Schedule 14A under the Exchange Act. The Company has a designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the Audit Committee are Harold G. Doran, Jr., Gordon C. Duke, and David W. Reed. All members of the Audit Committee are independent.
The Company has adopted a written code of ethics that applies to the Company's President and Chief Executive Officer, the Chief Financial Officer and all other corporate officers designated by the Chief Executive Officer. The Company has posted a copy of the code on the Company's internet website at the internet address: http://www.InvestorsHeritage.com. Copies of the code may be obtained free of charge from the Company's website at the above internet address.
Item 11.
Item 11. Executive Compensation
Information regarding compensation of executive officers and transactions with executive officers and directors is shown on pages 7-10 of the Proxy Statement for the Annual Meeting of Shareholders to be held May 13, 2010, and is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security ownership by Officers, Directors, and management is shown on pages 5-6 of the Proxy Statement for the Annual Meeting of Shareholders to be held May 13, 2010, and is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain relationships and related transactions are shown on page 11 of the Proxy Statement for the Annual Meeting of Shareholders to be held May 13, 2010, and are incorporated herein by reference.
Item 14.
Item 14. Principal Accountant Fees and Services
Information regarding accounting fees and services is shown on page 11 of the Proxy Statement for the Annual Meeting of Shareholders to be held May 13, 2010, and is incorporated herein by reference.
PART IV
Item 15.
Item 15. Exhibits
(a)1. The following financial statements incorporated herein by reference in Item 8 to the Company's Annual Report to Stockholders for the year ended December 31, 2009 (pages 16-39) are filed as Exhibit 1 thereto:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2009 and
For each of the two years in the period ended December 31, 2009:
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
INDEX TO EXHIBITS
(a)3. Listing of Exhibits
Exhibit
Number
			Description of Exhibits
3.1
Articles of 			Incorporation of the Company, as amended, is incorporated by 			reference as Exhibit 3.1 to the Company's registration statement on 			Form S-4 filed on 10-7-1999 (File No. 333-87947).
3.2
By-Laws of the 			Company, as amended, are incorporated by reference as Exhibit 3.2 to 			the Company's registration statement on Form S-4 filed on 10-7-1999 			(File No. 333-87947).
Statements re: 			computation of Per Share Earnings is contained in Note A to the 			Consolidated Financial Statements, "Common Stock and Earnings per 			Share", on page 22 of the Annual Report to the Stockholders for the 			year ended December 31, 2009, and is incorporated herein by 			reference.
Annual Report to the 			Stockholders for the year ended December 31, 2009 is attached hereto 			as Exhibit 13 and is incorporated herein by reference.
Consent of 			Independent Registered Public Accounting Firm.
31.1 &
31.2
Certifications 			pursuant to Securities and Exchange Act Rule 13a-14(a)/15d-14(a), as 			adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certifications 			pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 			906 of the Sarbanes-Oxley Act of 2002.
*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.
(b) See Item 15(a)3 above.
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 CAPITAL CORPORATION
March 			19, 2010
DATE
/s/Harry Lee Waterfield II
BY:
Harry Lee Waterfield II
ITS:
Chairman of the Board and President
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.
/s/Harry Lee Waterfield II
Harry Lee Waterfield II
Chairman of the Board and President
Principal Executive Officer
March 19, 2010
/s/Robert M. Hardy, Jr.
Robert M. Hardy, Jr.
Vice President, General Counsel and Director
March 19, 2010
/s/Jimmy R. McIver
Jimmy R. McIver
Treasurer
March 19, 2010
/s/Raymond L. Carr
Raymond L. Carr
Chief Financial Officer
Vice President
March 19, 2010
/s/Gordon C. Duke
Gordon C. Duke
Director
March 19, 2010
/s/Helen S. Wagner
Helen S. Wagner
Director
March 19, 2010
/s/Harold G. Doran
Harold G. Doran
Director
March 19, 2010
/s/David W. Reed
David W. Reed
Director
March 19, 2010
/s/ Howard L. Graham
Howard L. Graham
Director
March 19, 2010
/s/Michael F. Dudgeon, Jr.
Michael F. Dudgeon, Jr.
Director
March 19, 2010