UNITED STATES

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, 2014

 

COMMISSION FILE NUMBER 000-01999

 

INVESTORS HERITAGE CAPITAL CORPORATION

 

(Exact name of registrant as specified in its Charter)

 

KENTUCKY	61-6030333
(State or Other Jurisdiction of	(IRS Employer
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:
None
Title of Each Class
None
Name of Each Exchange on Which Registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Capital Stock Par Value $1.00 Per Share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES  (  )    NO  (X)

 

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES  (  )    NO  (X)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  (X)         NO  (  )

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES (X) NO (  )

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 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 amendments to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer  (  ) Accelerated filer  (  )  Non-accelerated filer  (  ) (Do not check if a smaller reporting company) Smaller Reporting Company (X)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES  (  )    NO  (X)

State the aggregate market value of the voting and non-voting common equity stock held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity as of June 30, 2014.    $23,431,108.05

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 March 12, 2015

1,123,980.033

 

 

Documents Incorporated by Reference:

(1) Portions of the Annual Report to the Stockholders for the year ended December 31, 2014 (Form 10-K, Items 1, 7, 8 and 15.)

(2) Portions of the Proxy Statement dated April 3, 2015, for the Annual Meeting of Stockholders to be held May 14, 2015 (Form 10-K, Items 10, 11, 12, 13 and 14.)

 

 

CONTENTS

 

Part I

 

		Page
Item 1.	Business	5
Item 2.	Properties	13
Item 3.	Legal Proceedings	13
Part II

Item 5.	Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 8.	Financial Statements and Supplementary Data	15
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	15
Item 9A	Controls and Procedures	15
Item 9B.	Other Information	16
Part III

  

Item 10.	Directors, Executive Officers and Corporate Governance	17
Item 11.	Executive Compensation	18
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	18
Item 13.	Certain Relationships and Related Transactions, and Director Independence	18
Item 14.	Principal Accounting Fees and Services	19
Part IV

 

Item 15.		Exhibits, Financial Statement Schedules	20
Index To Exhibits			21
Signatures			22

 

 

PART I

 

Item 1. Business

 

(a) Business Overview

 

Investors Heritage Capital Corporation was incorporated in 1963 and 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 companies. 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, 2014. 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, 2014.

 

(b) Financial Information About Business Segments

 

Investors Heritage Life

 

The business segments of Investors Heritage Life are identified and discussed on page 10 of the Annual Report to Stockholders for the year ended December 31, 2014 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, single premium whole life, universal life, term and group life, annuities and single premium immediate annuities. 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.

 

Prior to being sold, all insurance products must be approved by the Departments of Insurance in each state where Investors Heritage Life is authorized to do business. In addition, the financial condition and market conduct condition of Investors Heritage Life are monitored and examined by the state regulatory agencies on a regular basis.

 

 

Ordinary Production. The business segments for ordinary production are Preneed and Burial products (“Preneed”) and Traditional and Universal Life products (“Traditional”). Ordinary insurance in force accounts for 79% of total insurance in force.  One of our primary focuses 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. A new final expense product was introduced in 2011 to be marketed through a different distribution system than our other final expense products. Sales under this new distribution system progressed more rapidly than anticipated and in the second quarter of 2013, the decision was made to change the final expense product and utilize a different distribution system. 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.

 

Traditional products consist of senior wealth transfer products, traditional life, group life, certain annuities and universal life products.

 

Administrative and Financial Services. This segment includes the administration of credit life and credit accident and health insurance as well as fees generated from our third party administration arrangements. 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, all credit insurance business is being reinsured with Swiss Life Ltd. and KenBanc Reinsurance Company, Ltd. Investors Heritage Life, in conjunction with the Kentucky Bankers Association (“KBA”) markets 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 Life has an exclusive marketing agreement with the KBA and its insurance agency subsidiary, KenBanc Insurance Services, Inc., whereby they handle all marketing and sales management responsibilities for the credit insurance products to financial institutions in the Commonwealth of Kentucky. Investors Heritage Life provides insurance products to be marketed as well as all back office administrative services related to the credit insurance operations.

 

In addition to credit administration, this segment includes fees generated relative to our third party administrative relationships. We provide tailored administrative services for six unaffiliated companies, comprised of four life insurance companies and two holding companies. Services provided to each company vary based on their needs and can include some or all aspects of back-office accounting, actuarial services and policy administration. We are continuing to market our third party administrative services to prospective clients.

 

 

(c) Narrative Description of Business

 

Preneed and Burial Products (“Preneed”).   Approximately 76% 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 district managers under their supervision. 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.

 

Investors Heritage Life strives to continue to improve its marketing capability in this area. Two new regional managers were hired in 2014. Our efforts and strategy to continue a successful preneed insurance operation hinge on continuing to provide solid products and outstanding administrative service and on the personal relationships developed and fostered each year. Our preneed product, the Legacy Gold series, includes both single premium as well as multi-pay policies. Our Preneed sales are generated primarily through independent funeral homes in fourteen states.

 

The preneed market is very competitive despite the recent conditions in the financial markets. There are more than twenty companies active in our preneed market. The principal methods of competition are product pricing including growth on preneed insurance products, commissions, and the quality and efficiency of service provided. Our competitive pricing and ourquality and efficient service as well as long term sustainability are positive factors in our competitive position. However, competitors introduce new products frequently and we strive to maintain and improve our offerings constantly as we ensure sales of sustainable and profitable business.

 

We also market a series of final expense whole life insurance policies known as the “Heritage FX Final Expense Products”. 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. We also sold the Heritage Advantage final expense product through a national general agent. In late 2013, we suspended marketing this product in order to limit the production volume to effectively manage the initial surplus strain associated with the product.

 

The final expense market is very competitive. The principal methods of competition are product pricing and commissions; however the quality and efficiency of service are also important factors.

 

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 24% 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 and in the fourth quarter of 2013, we introduced a new Express Term product for the middle income market.

We continue to sell products through our agreement with Puritan Financial Group. The products being sold include a single premium whole life policy and a single premium immediate annuity sold in conjunction with a ten-pay whole life policy. The program has been very successful producing over $10 million in premiums for 2013 and approximately $11 million in 2014. Under our agreement, the business will be produced by Investors Heritage Life for a period of no less than five years and is partially reinsured with Puritan Life Insurance Company of America on a coinsurance basis.

 

In addition, during 2013, Investors Heritage Life began accepting 75% of the risks on a coinsurance basis on similar products sold by Puritan Life Insurance Company of America and Sterling Investors Life Insurance Company. This reinsured business includes single premium life insurance policies and a single premium immediate annuity sold in combination with a ten-pay whole life insurance policy. These reinsurance agreements allow us to participate in certain states where we are not currently marketing. We assumed premiums in excess of $10 million under these coinsurance agreements in 2013 and in excess of $3 million in 2014.

 

The single premium and 10-pay whole life/single premium immediate annuity markets are also very competitive but in conjunction with our marketing partner, Investors Heritage has established a middle income market niche for the sale of lower volume products. Most of the major competitors are focused on much higher volume production. The principal methods of competition are product design, pricing and quality and efficiency of service.

 

Our ordinary products also include the HLW Choice Whole Life, Heritage Youth Protector and Heritage Protector IV.

 

Group life accounts for 6% of total insurance in force. During the third quarter of 2013, we entered into several marketing agreements with various association groups to provide a group term life insurance policy to members of the groups. Although this is not currently a large volume of business, we anticipate expanding the association group business and anticipate cross-selling other life insurance products to members of the groups.

 

Administrative and Financial Services. Credit insurance, which accounts for 15% of total insurance in force, 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 for credit insurance with eight unaffiliated companies. 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 continues to sell Investors Heritage Life’s credit insurance products through banks, finance companies and selected automobile dealerships. Only 7.7% of Investors Heritage Financial revenues for 2014 were derived from the sale of Investors Heritage Life's credit insurance products. The remaining revenues were primarily derived from service fees. Credit insurance gross written premiums were lower than in the prior year due primarily to lower loan demand related to the sluggish economy and regulatory conditions. As noted above, Investors Heritage Life has an exclusive marketing agreement with the KBA and its affiliated insurance agency, KenBanc Insurance Services, Inc., whereby KenBanc provides all marketing and sales management 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 are also conducted through KenBanc. 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 $139,892 during 2014 and management anticipates continued fee income from this area.

 

During 2014, 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 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 a significant number of new employees. We currently provide administrative services for six non-affiliated 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.

 

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 in most cases 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.

 

 

As of December 31, 2014, approximately $56,332,000 or 11% 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-three non-affiliated companies. The reinsurers for Investors Heritage Life and amount of reinsurance reserves are as follows:

 

		Reinsurance				Percent
NAME OF COMPANY		Reserves				of Total
Scottish Re (US)		$	21,386,000				37.96	%
Puritan Life Insurance Company of America			16,410,000				29.13	%
Munich American Reassurance Company			7,794,000				13.84	%
Minnesota Life Insurance Company			3,963,000				7.03	%
Swiss Life Ltd.			3,594,000				6.38	%
Settlers Life Insurance Company			937,000				1.66	%
Lincoln National Life Insurance Co.			856,000				1.52	%
Swiss Re Life & Health America Inc.			533,000				0.95	%
Transamerica Life Insurance Company			306,000				0.54	%
KenBanc Reinsurance Company LTD			129,000				0.23	%
Royal Bank of Canada Insurance Company LTD			128,000				0.23	%
Central States Health & Life Co of Omaha			83,000				0.15	%
ACE Life Insurance Company			74,000				0.13	%
Canada Life Assurance Company			46,000				0.08	%
Optimum Re Insurance Company			37,000				0.07	%
Wilton Re Life Insurance Company			29,000				0.05	%
Reliastar Life Insurance Company			11,000				0.02	%
Universal Guaranty Life Insurance Co.			7,000				0.01	%
Plateau Life Insurance Company			4,000				0.01	%
St James Reinsurance Corporation			3,000				0.01	%
Other Companies (3)			2,000				0.00	%
		$	56,332,000				100.00	%

  

Investors Heritage Life reinsures all of the risk on the credit insurance products sold by its agents with Swiss Life Ltd. and KenBanc Reinsurance Company, Ltd. As explained above, some of these credit insurance risks are also reinsured to Transamerica, Universal Guaranty, Madison National, Minnesota Life, Plateau, Central States and St James.

 

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. The income from Investors Heritage Printing is not a significant factor in our overall business. Revenues from Investors Heritage Printing were approximately $154,000 in 2014, down $21,000 compared to 2013.

 

 

The 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 $152,000 in 2014 compared to $166,000 in 2013. The decrease is primarily due to lower service fee income on credit insurance business.

 

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 $100,000 in 2014, up $4,000 compared to 2013.

 

Dividends and distributions from the Non-insurance Subsidiaries for 2014 and 2013 amounted to $95,000 and $625,000, respectively.

 

Additionally, we earn fees for other services performed for our subsidiaries. The fees pay for the necessary supervision and coordination required to provide common policies and procedures for all the subsidiaries. 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, professional liability 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. These fees are not significant to our total revenue and are eliminated in consolidation. 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 94 people employed by Investors Heritage Life and 87 of these individuals are full-time employees. The number of active independent contractual agents of Investors Heritage Life is 1,842. 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 Kentucky, North Carolina, Georgia, Indiana, Michigan, Ohio, Pennsylvania, South Carolina, Tennessee, Texas and Virginia. Investors Heritage Life has approximately 1,774 licensed ordinary agents and regional managers throughout these states and credit life agents in 285 banks and automobile dealerships.

 

 

Investors Heritage Life is also licensed in nineteen other states: Alabama, Arizona, Arkansas, Florida, Illinois, Louisiana, Mississippi and West Virginia in the South and Southeast; Colorado, Missouri, New Mexico, North Dakota, South Dakota, Oklahoma, Montana, Nebraska, Kansas and Utah in the West; and Maryland in the North. The business in these states is written mostly through general agents.

 

(e) Available Information

 

We file reports with the Securities and Exchange Commission, including, but not limited to, our annual report on form 10-K, quarterly reports on form 10-Q, current reports on form 8-K and amendments to those reports, as well as proxy and information statements and other filings pursuant to Section 13(a) or 15(d) of the Exchange Act. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer with the SEC and the SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov. We also make available, free of charge, on or through our internet website all reports filed with the SEC as soon as reasonably practicable after we have electronically filed such material with, or furnished it to, the SEC. Our website is www.investorsheritage.com.

 

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. Properties

 

Our physical property consists of the home office building and grounds, owned in fee, at 200 Capital Avenue, Frankfort, Kentucky. Adjacent to the home office, we own 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 currently available for lease to a commercial tenant and one building is a residential apartment building. All of the properties are in good condition.

 

 

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.

 

 

PART II

 

 

 

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

(a)

Market Information

 

The stock of Investors Heritage Capital Corporation is quoted on the OTCQB market. 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 prices of our shares on the OTCQB market quotations.

 

 

		HIGH				LOW
YEAR ENDED DECEMBER 31, 2014:
First Quarter		$	21.25			$	19.75
Second Quarter			21.25				19.60
Third Quarter			21.65				20.82
Fourth Quarter			21.75				21.12

 

 

 

		HIGH				LOW
YEAR ENDED DECEMBER 31, 2013:
First Quarter		$	22.75			$	17.50
Second Quarter			23.25				19.60
Third Quarter			23.10				21.30
Fourth Quarter			21.75				20.00

 

 

 

(b)

Holders

 

Approximate Number of Equity Security Holders

 

(A)

Title of Class

Common Stock

 

(B)

Number of Holders of Record as of 3-9-2015

2,468

 

  

(c)   Dividends

 

The 2015 cash dividend to be paid April 7, 2015, to stockholders of record March 20, 2015, is $.21 per share. Investors Heritage Capital Corporation paid an annual dividend totaling $225,717 to stockholders in 2014 representing $.20 per share and paid an annual dividend totaling $285,471 to stockholders in 2013 representing $.25 per share.

 

(d)   Securities Authorized for Issuance Under Equity Compensation Plan Information

 

None.

 

 

(f)	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. 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 5-20 in the Annual Report to the Stockholders for the year ended December 31, 2014, and is incorporated herein by reference.

 

Item 8. Financial Statements and Supplementary Data

 

The consolidated financial statements and notes appear on pages 22-55 in the Annual Report to the Stockholders for the year ended December 31, 2014, and are incorporated herein by reference. See Part IV, Item 15.

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

 

Item 9A. 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 our financial reporting. In addition, management is responsible for evaluating the effectiveness of our disclosure controls and procedures. As of the end of the period covered by this annual report, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 and of the effectiveness of the design and operation of our internal controls over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934.

 

 

Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including our consolidated subsidiaries) required to be included in this Annual Report on Form 10-K.

 

In addition, based upon this evaluation, management concluded that, as of the end of the period covered by this annual report, our 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 (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

(b)

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

(c)	Changes to Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting during the three months ended December 31, 2014 that may have materially affected, or was reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

Item 9B.  Other Information

 

None.

 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance

 

(a)	The executive officers and directors of the Company are:

 

Name, Position & Year Became
Officer/Director
Family Relationship	Age
Harry Lee Waterfield II	71
Chairman of the Board, President/1963
Shane S. Mitchell, Treasurer/2014	29
Robert M. Hardy, Jr.	57
Director, Executive Vice President and General
Counsel/1988
Nephew of Harry Lee Waterfield II
Raymond L. Carr, Executive Vice President,	66
Chief Operating Officer/2002
Larry J. Johnson II, Vice President, Chief	42
Financial Officer/2013
Jane S. Jackson, Secretary/2003	60
Helen S. Wagner, Director/1986	78
Gordon C. Duke, Director/1991	69
Harold G. Doran, Jr., Director/2001	61
David W. Reed, Director/1982	60
Michael F. Dudgeon, Jr., Director/2004	53
Nephew of Harry Lee Waterfield II
George R. Burgess, Jr., Director/2013	62

(b)

 

 

Information regarding the Directors, including their occupations and experience, and leadership structure of the Board are shown on pages 3-7, respectively, of the Proxy Statement for the Annual Meeting of Shareholders to be held May 14, 2015 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 ten 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 officer 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. Executive Compensation

 

Information regarding compensation of executive officers and transactions with executive officers and directors is shown on pages 7-11 of the Proxy Statement for the Annual Meeting of Shareholders to be held May 14, 2015, and is incorporated herein by reference.

 

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 14, 2015, and is incorporated herein by reference.

 

 

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

Certain relationships and related transactions are shown on page 12 of the Proxy Statement for the Annual Meeting of Shareholders to be held May 14, 2015, and are incorporated herein by reference.

 

 

Item 14. Principal Accounting 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 14, 2015, and is incorporated herein by reference.

 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules

 

(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, 2014 (pages 22-55) are filed as Exhibit 1 thereto:

 

   Report of Independent Registered Public Accounting Firm

 

   Consolidated Balance Sheets as of December 31, 2014 and 2013

 

   For each of the years ended December 31, 2014 and 2013:

 

      Consolidated Statements of Income

 

      Consolidated Statements of Comprehensive Income (Loss)

 

      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).
11		Statements re: computation of Per Share Earnings is contained in Note 1 to the Consolidated Financial Statements, "Common Stock and Earnings per Share", on page 31 of the Annual Report to the Stockholders for the year ended December 31, 2014, and is incorporated herein by reference.
13		Annual Report to the Stockholders for the year ended December 31, 2014 is attached hereto as Exhibit 1 and is incorporated herein by reference.
23		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.

101.INS** XBRL Instance

101.SCH**XBRL Taxonomy Extension Schema

101.CAL**XBRL Taxonomy Extension Calculation

101.DEF**XBRL Taxonomy Extension Definition

101.LAB**XBRL Taxonomy Extension Labels

101.PRE**XBRL Taxonomy Extension Presentation

 

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

*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 20, 2015
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 20, 2015

 

/s/Robert M. Hardy, Jr.

Robert M. Hardy, Jr.

Executive Vice President, General Counsel and Director

March 20, 2015

 

/s/Raymond L. Carr

Raymond L. Carr

Executive Vice President, Chief Operating Officer

March 20, 2015

 

/s/Larry J. Johnson II

Larry J. Johnson II

Vice President, Chief Financial Officer

March 20, 2015

 

/s/Gordon C. Duke

Gordon C. Duke

Director

March 20, 2015

 

 

/s/Helen S. Wagner

Helen S. Wagner

Director

March 20, 2015

 

/s/Harold G. Doran, Jr.

Harold G. Doran

Director

March 20, 2015

 

/s/David W. Reed

David W. Reed

Director

March 20, 2015

 

/s/Michael F. Dudgeon, Jr.

Michael F. Dudgeon, Jr.

Director

March 20, 2015

 

/s/George R. Burgess, Jr.

George R. Burgess

Director

March 20, 2015

 

 

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