UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 AND 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to ___________________
Commission File No. 0-16867
UNITED TRUST GROUP, INC.
(Exact name of registrant as specified in its charter)
ILLINOIS 37-1172848
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5250 SOUTH SIXTH STREET
P.O. BOX 5147
SPRINGFIELD, IL 62705
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (217) 241-6300
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 [ ]
The number of shares outstanding of the registrant's common stock as of July 31,
2003, was 3,998,633.
UNITED TRUST GROUP, INC. AND SUBSIDIARIES
(The “Company”)
TABLE OF CONTENTS
Part 1. Financial Information 3
Item 1. Financial Statements 3
Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002
Consolidated Statements of Operations for the three and six months
ended June 30, 2003 and 2002 4
Consolidated Statement of Changes in Shareholders' Equity for
the six months ended June 30, 2003 5
Consolidated Statements of Cash Flows for the six months ended
June 30, 2003 and 2002 6
Notes to Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 18
ITEM 4. CONTROLS AND PROCEDURES 18
PART II. OTHER INFORMATION 19
ITEM 1. LEGAL PROCEEDINGS 19
ITEM 2. CHANGE IN SECURITIES 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19
ITEM 5. OTHER INFORMATION 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
SIGNATURES 21
EXHIBIT INDEX 22
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
June 30, December 31,
ASSETS 2003 2002*
------------------ ------------------
Investments:
Fixed maturities at amortized cost
(market $39,408,839 and $60,517,065) $ 37,925,136 $ 58,327,663
Investments held for sale:
Fixed maturities, at market
(cost $129,612,824 and $105,244,887) 133,046,748 108,704,518
Equity securities, at market
(cost $10,514,357 and $4,122,887) 11,784,143 4,883,870
Mortgage loans on real estate at amortized cost 23,780,623 23,804,827
Investment real estate, at cost,
net of accumulated depreciation 17,767,600 17,503,812
Policy loans 13,246,825 13,346,504
Short-term investments 230,109 377,676
------------------ ------------------
237,781,184 226,948,870
Cash and cash equivalents 14,128,969 24,050,485
Accrued investment income 2,175,221 2,452,840
Reinsurance receivables:
Future policy benefits 32,863,910 33,039,036
Policy claims and other benefits 3,895,677 3,770,285
Cost of insurance acquired 22,416,343 23,156,164
Deferred policy acquisition costs 2,227,565 2,462,487
Property and equipment,
net of accumulated depreciation 2,638,644 2,203,408
Income taxes receivable, current 86,464 245,132
Other assets 244,442 574,263
------------------ ------------------
Total assets $ 318,458,419 $ 318,902,970
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits $ 235,844,154 $ 234,762,656
Policy claims and benefits payable 1,678,239 1,834,952
Other policyholder funds 1,167,178 1,176,359
Dividend and endowment accumulations 12,621,895 12,628,294
Deferred income taxes 11,619,092 12,239,060
Notes payable 2,289,776 2,995,275
Other liabilities 5,991,454 4,943,507
------------------ ------------------
Total liabilities 271,211,788 270,580,103
------------------ ------------------
Shareholders' equity:
Common stock - no par value, stated value $.02 per share
Authorized 7,000,000 shares - 4,001,019 and 3,536,311 shares issued
after deducting treasury shares of 161,237 and 147,607 80,020 70,726
Additional paid-in capital 42,612,809 42,976,344
Retained earnings 1,340,240 2,503,856
Accumulated other comprehensive income 3,213,562 2,771,941
------------------ ------------------
Total shareholders' equity 47,246,631 48,322,867
------------------ ------------------
Total liabilities and shareholders' equity $ 318,458,419 $ 318,902,970
================== ==================
* Balance sheet audited at December 31, 2002.
See accopanying notes
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
--------------- --------------- ---------------- ---------------
Revenues:
Premiums and policy fees $ 4,802,915 $ 4,955,669 $ 9,370,192 $ 9,949,896
Reinsurance premiums and policy fees (709,676) (567,385) (1,393,950) (1,284,751)
Net investment income 2,898,159 3,287,608 5,648,849 6,595,086
Realized investment gains, net 317,877 6,731 560,158 11,427
Other income 169,035 216,352 340,816 420,358
--------------- --------------- ---------------- ---------------
7,478,310 7,898,975 14,526,065 15,692,016
Benefits and other expenses:
Benefits, claims and settlement expenses:
Life 5,076,050 5,082,676 10,527,115 10,411,490
Reinsurance benefits and claims (679,579) (1,033,159) (1,157,223) (2,059,992)
Annuity 289,162 305,121 566,353 573,796
Dividends to policyholders 245,810 255,361 516,118 519,811
Commissions and amortization of deferred
policy acquisition costs 72,579 193,590 246,232 496,111
Amortization of cost of insurance acquired 369,335 385,098 739,821 771,195
Operating expenses 3,500,807 1,649,134 4,670,247 3,179,567
Interest expense 39,962 61,394 81,378 133,604
--------------- --------------- ---------------- ---------------
8,914,126 6,899,215 16,190,041 14,025,582
Income (loss) before income taxes, minority interest
and equity in earnings of investees (1,435,816) 999,760 (1,663,976) 1,666,434
Income tax (expense) credit 766,324 (119,226) 500,360 (203,106)
Minority interest in income of
consolidated subsidiaries 0 (157,855) 0 (263,615)
--------------- --------------- ---------------- ---------------
Net income (loss) $ (669,492)$ 722,679 $ (1,163,616)$ 1,199,713
=============== =============== ================ ===============
Basic income (loss) per share from continuing
operations and net income (loss) $ (0.17)$ 0.21 $ (0.32)$ 0.34
=============== =============== ================ ===============
Diluted income (loss) per share from continuing
operations and net income (loss) $ (0.17)$ 0.21 $ (0.32)$ 0.34
=============== =============== ================ ===============
Basic weighted average shares outstanding 3,845,046 3,500,212 3,683,019 3,514,246
=============== =============== ================ ===============
Diluted weighted average shares outstanding 3,845,046 3,500,212 3,683,019 3,514,246
=============== =============== ================ ===============
See accompanying notes
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
For the six months ended June 30, 2003 (Unaudited)
Common stock
Balance, beginning of year $ 70,726
Issued during year 10,000
Retired common shares (433)
Purchase treasury shares (273)
------------------
Balance, end of period 80,020
------------------
Additional paid-in capital
Balance, beginning of year 42,976,344
Issued during year (10,000)
Retired common shares (258,361)
Purchase treasury shares (95,174)
------------------
Balance, end of period 42,612,809
------------------
Retained earnings
Balance, beginning of year 2,503,856
Net loss (1,163,616) $ (1,163,616)
------------------ ------------------
Balance, end of period 1,340,240
------------------
Accumulated other comprehensive income
Balance, beginning of year 2,771,941
Other comprehensive income
Unrealized holding gain on securities
net of minority interest and
reclassification adjustment 441,621 441,621
------------------ ------------------
Comprehensive income $ (721,995)
==================
Balance, end of period 3,213,562
------------------
Total shareholders' equity, end of period $ 47,246,631
See accompanying notes
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended
June 30, June 30,
2003 2002
--------------- --------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income (loss) $ (1,163,616)$ 1,199,713
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Amortization/accretion of fixed maturities 514,127 192,955
Realized investment gains, net of losses (560,158) (11,427)
Policy acquisition costs deferred (40,000) (43,000)
Amortization of deferred policy acquisition costs 274,922 417,216
Amortization of cost of insurance acquired 739,821 771,195
Depreciation 305,554 293,227
Minority interest 0 263,615
Change in accrued investment income 277,619 165,887
Change in reinsurance receivables 49,734 624,066
Change in policy liabilities and accruals 1,172,031 (1,280,403)
Charges for mortality and administration of
universal life and annuity products (4,376,292) (4,412,958)
Interest credited to account balances 2,761,079 2,803,906
Change in income taxes payable (567,571) 178,053
Change in other assets and liabilities, net 1,547,729 (1,189,807)
--------------- --------------
Net cash provided by (used in) operating activities 934,979 (27,762)
Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities held for sale 36,346,064 8,770,000
Fixed maturities matured 24,922,488 13,248,311
Mortgage loans 5,021,255 3,390,918
Real estate 872,903 613,473
Policy loans 1,257,763 1,365,716
Short-term 150,000 100,869
--------------- --------------
Total proceeds from investments sold and matured 68,570,473 27,489,287
Cost of investments acquired:
Fixed maturities held for sale (61,147,319) (21,753,580)
Fixed maturities (4,283,412) (3,053,805)
Equity securities (6,391,470) (185,075)
Mortgage loans (4,997,051) (4,351,770)
Real estate (1,184,103) (127,386)
Policy loans (1,158,084) (1,395,977)
Short-term (2,433) 0
--------------- --------------
Total cost of investments acquired (79,163,872) (30,867,593)
Purchase of property and equipment (555,743) (14,965)
--------------- --------------
Net cash used in investing activities (11,149,142) (3,393,271)
Cash flows from financing activities:
Policyholder contract deposits 4,939,629 5,286,775
Policyholder contract withdrawals (3,587,242) (3,864,468)
Proceeds from line of credit 0 1,350,000
Retirement of common stock (258,794) 0
Purchase of treasury stock (95,447) (413,018)
Payments from FCC merger 0 (1,137,250)
Payments of principal on notes payable (705,499) (1,490,311)
--------------- --------------
Net cash provided by (used in) financing activities 292,647 (268,272)
--------------- --------------
Net decrease in cash and cash equivalents (9,921,516) (3,689,305)
Cash and cash equivalents at beginning of period 24,050,485 15,477,348
--------------- --------------
Cash and cash equivalents at end of period $ 14,128,969 $ 11,788,043
=============== ==============
See accompanying notes
UNITED TRUST GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by United
Trust Group, Inc. (“UTG”) and its consolidated subsidiaries (“Company”) pursuant
to the rules and regulations of the Securities and Exchange Commission. Although
the Company believes the disclosures are adequate to make the information
presented not be misleading, it is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements and
the notes thereto presented in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended December 31,
2002.
The information furnished reflects, in the opinion of the Company, all
adjustments (which include only normal and recurring accruals) necessary for a
fair presentation of the results of operations for the periods presented.
Operating results for interim periods are not necessarily indicative of
operating results to be expected for the year or of the Company's future
financial condition.
This document at times will refer to the Registrant's largest shareholder, Mr.
Jesse T. Correll and certain companies controlled by Mr. Correll. Mr. Correll
holds a majority ownership of First Southern Funding LLC, a Kentucky
corporation, (“FSF”) and First Southern Bancorp, Inc. (“FSBI”), a financial
services holding company that owns 100% of First Southern National Bank
(“FSNB”), which operates out of 14 locations in central Kentucky. Mr. Correll is
Chief Executive Officer and Chairman of the Board of Directors of UTG and is
currently UTG's largest shareholder through his ownership control of FSF, FSBI
and affiliates. At June 30, 2003 Mr. Correll owns or controls directly and
indirectly approximately 65% of UTG's outstanding stock.
At June 30, 2003, consolidated subsidiaries of United Trust Group, Inc. were as
depicted on the following organizational chart. For an explanation of
contemplated future changes to the organizational structure, please refer to
note 10 to the consolidated financial statements.
2. INVESTMENTS
As of June 30, 2003 and December 31, 2002, fixed maturities and fixed maturities
held for sale represented 72% and 74% of total invested assets. As prescribed by
the various state insurance department statutes and regulations, the insurance
companies' investment portfolio is required to be invested in investment grade
securities to provide ample protection for policyholders. In light of these
statutes and regulations, and the Company's business and investment strategy,
the Company generally seeks to invest in United States government and government
agency securities and other high quality low risk investments. As of June 30,
2003, the carrying value of fixed maturity securities in default as to principal
or interest was immaterial in the context of consolidated assets or
shareholders' equity. The investments held for sale are carried at market, with
changes in market value directly charged to shareholders' equity. To provide
additional flexibility and liquidity, the Company has categorized almost all
fixed maturity investments acquired since 2000 as available for sale.
3. NOTES PAYABLE
At June 30, 2003 an December 31, 2002, the Company had $2,289,776 and $2,995,275
in long-term debt outstanding, respectively. The notes payable were incurred in
April 2001 to facilitate the repurchase of common stock owned primarily by James
E. Melville and Larry E. Ryherd, two former officers and directors of UTG, and
members of their respective families. These notes bear interest at the fixed
rate of 7% per annum (paid quarterly) with payments of principal to be made in
five equal annual installments. In January 2003, the balance of an advance
principal payment in the amount of $705,499 was made on these notes.
The collective scheduled principal reductions on these notes for the next five
years is as follows:
Year Amount
2003 $ 0
2004 763,259
2005 763,259
2006 763,258
2007 0
A. Lines of Credit
On November 15, 2001, UTG was extended a $3,300,000 line of credit (“LOC”) from
the First National Bank of the Cumberlands (“FNBC”) located in Livingston,
Tennessee. The FNBC is owned by, Millard V. Oakley, who is a former Director of
UTG. The line of credit was for a one-year term from the date of issue. Upon
maturity the Company renewed the LOC for an additional one-year term. The
interest rate on the LOC is variable and indexed to be the lowest of the U.S.
prime rates as published in the Wall Street Journal, with any interest rate
adjustments to be made monthly. At June 30, 2003, the Company had no outstanding
borrowings attributable to this LOC.
On April 1, 2002, UTG was extended a $5,000,000 line of credit (“LOC”) from an
unaffiliated third party, Southwest Bank of St. Louis. The LOC was for a
one-year term from the date of issue. Upon maturity the Company renewed the LOC
for an additional one-year term, with a maturity date of April 30, 2004. As
collateral for any draws under the line of credit, the former FCC, which has now
merged into UTG, pledged 100% of the common stock of its insurance subsidiary
UG. Borrowings under the LOC will bear interest at the rate of .25% in excess of
Southwest Bank of St. Louis' prime rate. At June 30, 2003, the Company had no
outstanding borrowings attributable to this LOC.
4. CAPITAL STOCK TRANSACTIONS
A. Stock Repurchase Program
On June 5, 2001, the board of directors of UTG authorized the repurchase from
time to time in the open market or in privately negotiated transactions of up to
$1 million of UTG's common stock. Repurchased shares under the program will be
available for future issuance for general corporate purposes. Through July 31,
2003, UTG has spent $762,541 in the acquisition of 108,456 shares of its common
stock under this program.
B. Earnings Per Share Calculations
Earnings per share are based on the weighted average number of common shares
outstanding during each period, retroactively adjusted to give effect to all
stock splits, in accordance with Statement of Financial Accounting Standards No.
128. At June 30, 2003 and June 30, 2002 diluted earnings per share were the same
as basic earnings per share since the UTG had no dilutive instruments
outstanding.
C. Shares Acquired by FSF and Affiliates with Options Granted
On November 20, 1998, FSF and affiliates acquired 929,904 shares of common stock
of UTG from UTG and certain UTG shareholders. As consideration for the shares,
FSF paid UTG $10,999,995 and certain shareholders of UTG $999,990 in cash.
Included in the stock acquisition agreement is an earnings covenant whereby UTG
warrants UTG and its subsidiaries and affiliates will have future earnings of at
least $30,000,000 for a five-year period beginning January 1, 1998. Such
earnings are computed based on statutory results excluding inter-company
activities such as inter-company dividends plus realized and unrealized gains
and losses on real estate, mortgage loans and unaffiliated common stocks. At the
end of the covenant period, an adjustment is to be made equal to the difference
between the then market value and statutory carrying value of real estate still
owned that existed at the beginning of the covenant period. Should UTG not meet
the covenant requirements, any shortfall will first be reduced by the actual
average tax rate for UTG for the period, then will be further reduced by
one-half of the percentage, if any, representing UTG's ownership percentage of
the insurance company subsidiaries. This result will then be reduced by
$250,000. The remaining amount will be paid by UTG in the form of UTG common
stock valued at $15.00 per share with a maximum number of shares to be issued of
500,000. However, there shall be no limit to the number of shares transferred to
the extent that there are legal fees, settlements, damage payments or other
losses as a result of certain legal action taken. The price and number of shares
shall be adjusted for any applicable stock splits, stock dividends or other
recapitalizations. For the five-year period starting January 1, 1998 and ending
December 31, 2002, the Company had total earnings of $16,970,883 applicable to
this covenant. Therefore, UTG did not meet the earnings requirements stipulated,
and pursuant to the covenant based on a final accounting, the Company issued
500,000 previously unissued shares of UTG common stock to FSF on April 30, 2003.
5. COMMITMENTS AND CONTINGENCIES
The insurance industry has experienced a number of civil jury verdicts which
have been returned against life and health insurers in the jurisdictions in
which the Company does business involving the insurers' sales practices, alleged
agent misconduct, failure to properly supervise agents, and other matters. Some
of the lawsuits have resulted in the award of substantial judgments against the
insurer, including material amounts of punitive damages. In some states, juries
have substantial discretion in awarding punitive damages in these circumstances.
The Company cannot predict the effect that these lawsuits may have on the
Company in the future.
Under the insurance guaranty fund laws in most states, insurance companies doing
business in a participating state can be assessed up to prescribed limits for
policyholder losses incurred by insolvent or failed insurance companies.
Although the Company cannot predict the amount of any future assessments, most
insurance guaranty fund laws currently provide that an assessment may be excused
or deferred if it would threaten an insurer's financial strength. Mandatory
assessments may be partially recovered through a reduction in future premium tax
in some states. The Company does not believe such assessments will be materially
different from amounts already provided for in the financial statements, though
the Company has no control over such assessments.
The State of Florida began an investigation of industrial life insurance
policies in the fall of 1999 regarding policies with race-based premiums. This
investigation has quickly spread to other states and to other types of small
face amount policies and was expanded to consider the fairness of premiums for
all small policies including policies which did not have race-based premiums.
The NAIC historically has defined a "small face amount policy" as one with a
face amount of $15,000 or less. Under current reviews, some states have
increased this amount to policies of $25,000 or less. These states are
attempting to force insurers to refund "excess premiums" to insureds or
beneficiaries of insureds. The Company's insurance subsidiaries have no
race-based premium products, but do have policies with face amounts under the
above-scrutinized limitations. The outcome of this issue could be dramatic on
the insurance industry as a whole as well as the Company itself. The Company
will continue to monitor developments regarding this matter to determine to what
extent, if any, the Company may be exposed.
On October 26, 2001, President Bush signed into law the “USA PATRIOT” Act of
2001 (“the Patriot Act”). This Law, enacted in response to the terrorist attacks
of September 11, 2001, strengthens our Nation's ability to combat terrorism and
prevent and detect money-laundering activities. Under Section 352 of the Patriot
Act, financial institutions (definition includes insurance companies) are
required to develop an anti-money laundering program. The practices and
procedures implemented under the program should reflect the risks of money
laundering given the entity's products, methods of distribution, contact with
customers and forms of customer payment and deposits. In addition, Section 326
of the Patriot Act creates minimum standards for financial institutions
regarding the identity of their customers in connection with the purchase of a
policy or contract of insurance. Final regulations regarding the aforementioned
Patriot Act, were issued by the Department of the Treasury in April 2003. As
such, the Company has instituted an anti-money laundering program to comply with
Section 352, and has communicated this program throughout the organization. The
Company currently has in place a database program to facilitate compliance with
Section 326. The Company will continue to monitor developments regarding the Act
to determine if any adjustments are needed for continued compliance.
On July 30, 2002, President Bush signed into law the “SARBANES-OXLEY” Act of
2002 (“the Act”). This Law, enacted in response to several high-profile business
failures, was developed to provide meaningful reforms that protect the public
interest and restore confidence in the reporting practices of publicly traded
companies. The implications of the Act to public companies, (which includes UTG)
are vast, widespread, and evolving. Many of the new requirements will not take
effect or full effect until after calendar-year-end companies have completed
their 2003 annual reports. The Company has implemented requirements affecting
the current reporting period, and is continually monitoring, evaluating, and
planning implementation of requirements that will need to be taken into account
in future reporting periods.
On April 25, 2003 the Company entered into an agreement with Fiserv for the
conversion of the two TPA client companies to the “ID3” system. The conversion
began in May 2003 and is expected to be completed by December 2003. The
conversion is being performed utilizing Company personnel with onsite training
and guidance provided by Fiserv. The conversion is expected to cost
approximately $600,000. Following the conversion of these blocks of business the
Company anticipates immediately starting the conversion of the remaining
insurance business to the “ID3” software system. Fiserv LIS is a unit of Fiserv,
Inc. (Nasdaq: FISV) which is an independent, full-service provider of integrated
data processing and information management systems to the financial industry,
headquartered in Brookfield, Wisconsin.
As previously disclosed in the Company's filings, litigation styled David Morlan
et al. v. Universal Guaranty Life Insurance Company, United Trust Assurance
Company, United Security Assurance Company, United Trust Group, Inc. and First
Commonwealth Corporation, is currently pending in the United States District
Court for the Southern District of Illinois.
In late June 2003, a mediation was held in an attempt to bring resolution to
this lawsuit. The negotiations continued in July and August, and a proposed
settlement was ultimately reached. Although the Company continues to believe
that it has meritorious grounds to defend this lawsuit, the legal process can be
lengthy and costly, with no guarantee of success in the final resolution. Under
these circumstances, management believes a settlement of the matter may be in
the best interests of the Company. Under the terms of the proposed settlement,
the Company will pay approximately $1,950,000 in attorneys' fees, costs and
expenses, and the Company, through its insurance subsidiaries, will provide
certain life insurance benefits at a discount to members of the class (or their
transferees) choosing to purchase life insurance benefits.
The proposed settlement has received preliminary approval from the Court;
however, the proposed settlement will not become final until certain procedural
matters are completed such as notice of the proposed settlement being given to
the class members and until after the proposed settlement is approved at a
fairness hearing, which is expected to occur later in 2003. Given the status of
the proposed settlement, the Company has established a contingent liability in
its June 30, 2003 financial statements of $1,950,000. This figure represents
management's best estimation of the initial out-of-pocket costs associated with
the proposed settlement should it ultimately receive final approval. The
ultimate impact, if any, on the Company's financial condition from providing
discounted life insurance benefits to class members who elect to purchase such
benefits cannot be determined at this time as the Company does not yet know who
among the class members, if any, will elect to purchase such benefits.
UTG and its subsidiaries are named as defendants in a number of legal actions
arising as a part of the ordinary course of business relating primarily to
claims made under insurance policies. Those actions have been considered in
establishing the Company's liabilities. Management is of the opinion that the
settlement of those actions will not have a material adverse effect on the
Company's financial position or results of operations.
6. OTHER CASH FLOW DISCLOSURE
On a cash basis, the Company paid $81,378 and $132,318 in interest expense
during the first six months of 2003 and 2002, respectively. The Company paid $0
and $15,290 in federal income tax during the first six months of 2003 and 2002,
respectively. In April 2003, the Company issued 500,000 previously unissued
shares of UTG common stock to FSF (please refer to note 4C to the consolidated
financial statements for further discussion).
7. CONCENTRATION OF CREDIT RISK
The Company maintains cash balances in financial institutions that at times may
exceed federally insured limits. The Company maintains its primary operating
cash accounts with First Southern National Bank, an affiliate of UTG, and its
largest shareholder, Chairman and CEO, Jesse Correll. The Company holds
approximately $400,000 for which there are no pledges or guarantees outside FDIC
insurance limits. The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant credit risk on cash and cash
equivalents.
8. COMPREHENSIVE INCOME
Tax
Before-Tax (Expense) Net of Tax
June 30, 2003 Amount or Benefit Amount
---------------------------------------------- ---------------- ----------------- ---------------
Unrealized holding gains during
Period $ 680,038 $ (238,013) $ 442,025
Less: reclassification adjustment
for gains realized in net income (621) 217 (404)
---------------- ----------------- ---------------
Net unrealized gains 679,417 (237,796) 441,621
---------------- ----------------- ---------------
Other comprehensive income $ 679,417 $ (237,796) $ 441,621
================ ================= ===============
9. RELATED PARTY TRANSACTIONS
On February 20, 2003, UG purchased $4,000,000 of a trust preferred security
offering issued by an upstream affiliate, First Southern Bancorp, Inc. The
security has a mandatory redemption after 30 years with a call provision after 5
years. The security pays a quarterly dividend at a fixed rate of 6.515%. This
security is currently carried at cost, pending valuation by the National
Association of Insurance Commissioners Securities Valuation Office.
10. MERGER OF LIFE INSURANCE SUBSIDIARIES
At the March 2003 Board of Directors meeting, the ABE, APPL, and UG Boards
reaffirmed the merger of ABE and APPL with and into UG and approved the final
merger documents. Upon receiving the necessary regulatory approvals, the mergers
were consummated effective July 1, 2003. ABE and APPL were each 100% owned
subsidiaries of UG prior to the merger. The mergers result in a more simplified
holding company structure.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this section is to discuss and analyze the Company's consolidated
results of operations, financial condition and liquidity and capital resources.
This analysis should be read in conjunction with the consolidated financial
statements and related notes that appear elsewhere in this report. The Company
reports financial results on a consolidated basis. The consolidated financial
statements include the accounts of UTG and its subsidiaries at June 30, 2003.
Cautionary Statement Regarding Forward-Looking Statements
Any forward-looking statement contained herein or in any other oral or written
statement by the Company or any of its officers, directors or employees is
qualified by the fact that actual results of the Company may differ materially
from any such statement due to the following important factors, among other
risks and uncertainties inherent in the Company's business:
1. Prevailing interest rate levels, which may affect the ability of the
Company to sell its products, the market value of the Company's investments
and the lapse ratio of the Company's policies, notwithstanding product
design features intended to enhance persistency of the Company's products.
2. Changes in the federal income tax laws and regulations which may affect the
relative tax advantages of the Company's products.
3. Changes in the regulation of financial services, including bank sales and
underwriting of insurance products, which may affect the competitive
environment for the Company's products.
4. Other factors affecting the performance of the Company, including, but not
limited to, market conduct claims, insurance industry insolvencies,
insurance regulatory initiatives and developments, stock market
performance, an unfavorable outcome in pending litigation, and investment
performance.
Results of Operations
(a) Revenues
Premiums and policy fee revenues, net of reinsurance premiums and policy fees,
decreased 8% when comparing the first six months of 2003 to the same period in
2002, and decreased 7% for the second quarter comparison. The Company currently
writes little new business. Unless the Company acquires a block of in-force
business or significantly increases its marketing, management expects premium
revenue to continue to decline at a similar rate, which is consistent with prior
experience.
Several of the customer service representatives of the Company have become
licensed insurance agents, allowing them to offer products within the Company's
portfolio to existing customers. The Company is currently implementing a new
product referred to as “the Legacy” to be used by the licensed customer service
representatives when selling insurance on new lives, or attempting to conserve
insurance on existing business. Since the implementation of the new product is
just starting, results of this effort are yet to be seen.
The Company is in the early stages of moving forward with a marketing
opportunity with First Southern National Bank ("FSNB") an affiliate of UTG's
largest shareholder, Chairman and CEO, Jesse T. Correll. Management has
considered various products including annuity type products, mortgage protection
products and existing insurance products, as potential products that could be
marketed to banking customers. This marketing opportunity has potential and is
believed to be a viable niche. The Company has recently designed the "Horizon"
annuity product as well as the aforementioned "Legacy" life product, which are
both to be used in marketing efforts through FSNB.
Although premium writings through FSNB and by the customer service
representatives of the Company are not expected to be significant to Company
revenue in the near future, management believes it is a start in their attempt
to slow down the yearly decline in premium revenue.
Net investment income decreased 14% when comparing the first six months of 2003
to the same period in 2002, and decreased 12% for the second quarter comparison.
The national prime rate was 4.75% during the first six months of 2002 and ranged
from a high of 4.25% to a low of 4.00% during the first six months of 2003. This
declining interest rate environment has resulted in lower earnings on short-term
funds as well as on longer-term investments acquired. Should this economic
climate continue, net investment income should continue to decline as the
Company, along with others in the insurance industry, seeks adequate returns on
investments, while staying within the conservative investment guidelines set
forth by insurance regulations. Management has shortened the length of the
Company's portfolio and maintained a conservative investment philosophy. As
such, following an analysis of current holdings during the second quarter of
2003, the Company liquidated approximately $4,084,000 of its corporate bonds. In
addition, as investments have matured or been called, the Company has reinvested
at current lower yields. Although this hurts investment earnings in the short
run, the Company has not had to write off any investment losses due to excessive
risk, and management feels we are in a better position for an economic up-turn.
The Company's investments are generally managed to match related insurance and
policyholder liabilities. The comparison of investment return with insurance or
investment product crediting rates establishes an interest spread. The Company
monitors investment yields, and when necessary adjusts credited interest rates
on its insurance products to preserve targeted interest spreads, ranging from 1%
to 2%. At the March 2002 Board of Directors meeting, the Boards of the insurance
subsidiaries lowered all remaining rate-adjustable products to their guaranteed
minimum rates. The guaranteed minimum crediting rates on these products range
from 3% to 5.5%. These adjustments were in response to the continued declines in
interest rates in the marketplace. Policy interest crediting rate changes become
effective on an individual policy basis on the next policy anniversary. If
interest rates continue to decline, the Company won't be able to lower rates,
and both net investment income and net income will be impacted negatively.
The Company had realized investment gains of $560,158 in the first six months of
2003 compared to net realized investment gains of $11,427 for the same period in
2002. The net realized gains in 2003 consist of a $317,360 gain on bonds of
which $316,966 was attributable to the Company's liquidation of its corporate
bonds discussed above. In 2003, there was also $242,798 in net realized gains on
real estate that was primarily from the sale two separate parcels of land held
for investment purposes in Springfield, Illinois. In 2002, net realized gains
consisted of a $6,078 gain on bonds and a $5,349 gain on common stocks. A
quarterly comparison shows realized investment gains of $317,877 for the
quarterly period ended June 30, 2003, and $6,731 for the same period in 2002.
The large net realized gain during the second quarter of 2003 is attributable to
the Company's liquidation of its corporate bonds discussed above.
Other income decreased 19% when comparing the first six months of 2003 to the
same period in 2002, and decreased 22% for the second quarter comparison. The
majority of the revenue in this line item comes from the Company performing
administrative work as a third party administrator (“TPA”) for an unaffiliated
life insurance company, and as such, receives monthly fees based on policy in
force counts and certain other activity indicators such as number of premium
collections performed. During the first six months of 2003 and 2002, the Company
received $233,274 and $271,622 respectively, for this work. During the second
quarter of 2003 and 2002, the Company received $116,014 and $146,987
respectively, for this work. These TPA revenue fees are included in the line
item "other income" on the Company's consolidated statements of operations. The
Company intends to pursue other TPA arrangements, and in 2002 entered into an
alliance with Fiserv Life Insurance Solutions (Fiserv LIS), to provide TPA
services to insurance companies seeking business process outsourcing solutions.
Fiserv LIS will be responsible for the marketing and sales function for the
alliance, as well as providing the datacenter operations. UTG will staff the
administration effort. Although still in its early stages, management believes
this alliance with Fiserv LIS positions the Company to generate additional
revenues by utilizing the Company's current excess capacity, administrative
services, and implementation of the new Fiserve LIS “ID3” software system.
Currently, the Company operates on the “Life 70” software system, which is
obsolete and is no longer being supported. In addition, due to ongoing
regulatory changes and the fact the Company is repositioning itself for future
growth, the Company believes implementation of the “ID3” software system is
critical in order to proceed in the Company's new direction of TPA services.
Fiserv LIS is a unit of Fiserv, Inc. (Nasdaq: FISV) which is an independent,
full-service provider of integrated data processing and information management
systems to the financial industry, headquartered in Brookfield, Wisconsin.
(b) Expenses
Life benefits, claims and settlement expenses net of reinsurance benefits and
claims, increased 12% in the first six months of 2003 compared to the same
period in 2002, and increased 9% for the second quarter comparison. This
increase for the first six months is due to a reduction in reinsurance benefits
incurred year to date. In the first six months of 2003, the Company had no high
face death claims that were reinsured. In the first six months of 2002 the
Company had a few high face death claims that were reinsured. The Company
reinsures its risks as to not retain more than $125,000, including accidental
death benefits, on any one life. Therefore, the amount of reinsurance benefit
incurred is determined by the size of an insured's policy when a claim for
benefit is made. Aside from the effect of reinsurance, policy surrenders
remained at comparable levels when comparing the first six months of 2003 to the
same period in 2002. A second quarter comparison revealed the Company had
approximately $1,200,000 less in direct death benefits and no high face death
claims in 2003 as compared to 2002. Consequently, the reinsurance benefits and
claims received, decreased accordingly. Policy claims vary from year to year and
therefore, fluctuations in mortality are to be expected and are not considered
unusual by management. Overall, reserves continue to increase on in-force
policies as the age of the insureds increases.
Commissions and amortization of deferred policy acquisition costs decreased 50%
for the first sixth months of 2003 compared to the same period in 2002, and
decreased 63% for the second quarter comparison. The most significant factor in
the decrease is attributable to the Company paying fewer commissions, since the
company writes very little new business and renewal premiums on existing
business continue to decline. Another factor of the decrease is attributable to
normal amortization of the deferred policy acquisition costs asset. The Company
reviews the recoverability of the asset based on current trends and known events
compared to the assumptions used in the establishment of the original asset. No
impairments were recorded in either of the periods reported.
Operating expenses increased 47% in the first six months of 2003 compared to the
same period in 2002, and increased 112% for the second quarter comparison. This
increase is attributable to the establishment of a contingent liability of
$1,950,000 relating to a lawsuit (see note 5 to the consolidated financial
statements for further discussion). Excluding the contingency established,
expenses declined due to expense reductions made in the normal course of
business, as the Company simplifies its organizational structure and continually
monitors expenditures looking for savings opportunities. In April 2003, the
Company entered into an agreement with Fiserv for the conversion of two TPA
client companies to the “ID3” system. The conversion began in May 2003
and is expected to be completed by December 2003. The conversion is being
performed utilizing Company personnel with onsite training and guidance provided
by Fiserv. The conversion is expected to cost approximately $600,000.
Interest expense decreased 39% in the first six months of 2003 compared to the
same period in 2002, and decreased 35% for the second quarter comparison. The
Company has used dividend payments from its life insurance subsidiary UG to
reduce long term debt outstanding from $4,260,359 at June 30, 2002 to $2,289,776
at June 30, 2003. All remaining debt was incurred in April 2001 to facilitate
the repurchase of common stock owned primarily by James E. Melville and Larry E.
Ryherd, two former officers and directors of UTG, and members of their
respective families. The notes bear interest at the fixed rate of 7% per annum
(paid quarterly) with payments of principal to be made in five equal annual
installments. In January 2003 the balance of an advance principal payment in the
amount of $705,499 was made on these notes. The future collective scheduled
principal reductions on these notes are due as follows: $763,259 on April 1,
2004, $763,259 on April 1, 2005 and $763,258 due on April 1, 2006. Management
believes overall sources available are adequate to service this debt. These
sources include current cash balances of UTG, existing lines of credit and
expected future dividends from its life insurance subsidiary UG.
(c) Net income
The Company had a net loss of $1,163,616 in the first six months of 2003
compared to net income of $1,199,713 for the same period in 2002 and a net loss
of $669,492 in the second quarter of 2003 as compared to net income of $722,679
for the second quarter of 2002. The net loss in 2003 was mainly attributable to
the establishment of a contingent liability relating to a lawsuit (see note 5 to
the consolidated financial statements for further discussion). The contingent
liability resulted in a decline in net income of $1,267,500, net of tax effects.
In addition, total revenues decreased approximately $1,166,000, which was
primarily attributable to a 14% decrease in investment income and a 6% decrease
in premium revenues. Partially offsetting the above mentioned decreases to net
income, was the minority interest in earnings of approximately $264,000 at June
30, 2002. All minority interests were retired with the merger of First
Commonwealth Corporation (a then 82% owned subsidiary of UTG) with and into UTG
on June 12, 2002.
Financial Condition
The financial condition of the Company has declined since December 31, 2002.
Total shareholders' equity decreased approximately $1,076,000 as of June 30,
2003 compared to December 31, 2002. The decrease is mainly attributable to the
accrual of a contingent liability of $1,267,500, net of taxes, relating to a
lawsuit (see note 5 to the consolidated financial statements for further
discussion) that was included in the net loss of $1,163,616. In addition, the
Company purchased treasury shares and retired common stock in the amount of
$354,241, which also decreased shareholders' equity. These negatives were
partially offset by unrealized gains of $441,621 on investments held for sale.
Investments represent approximately 75% and 71% of total assets at June 30, 2003
and December 31, 2002, respectively. Accordingly, investments are the largest
asset group of the Company. The Company's insurance subsidiaries are regulated
by insurance statutes and regulations as to the type of investments that they
are permitted to make and the amount of funds that may be used for any one type
of investment. In light of these statutes and regulations, the majority of the
Company's investment portfolio is invested in high quality, low risk
investments.
As of June 30, 2003, the carrying value of fixed maturity securities in default
as to principal or interest was immaterial in the context of consolidated assets
or shareholders' equity. The Company has identified securities it may sell and
classified them as “investments held for sale”. Investments held for sale are
carried at market, with changes in market value charged directly to
shareholders' equity. To provide additional flexibility and liquidity, the
Company has categorized almost all fixed maturity investments acquired since
2000 as available for sale.
Liquidity and Capital Resources
The Company has three principal needs for cash - the insurance companies'
contractual obligations to policyholders, the payment of operating expenses and
the servicing of its long-term debt. Cash and cash equivalents as a percentage
of total assets were approximately 4% and 8% as of June 30, 2003, and December
31, 2002, respectively. Fixed maturities as a percentage of total invested
assets were approximately 72% and 74% as of June 30, 2003 and December 31, 2002.
Future policy benefits are primarily long-term in nature and therefore, the
Company's investments are predominantly in long-term fixed maturity investments
such as bonds and mortgage loans which provide sufficient return to cover these
obligations. The Company has the ability and intent to hold these investments to
maturity; consequently, the Company's investment in fixed maturities held to
maturity is reported in the financial statements at their amortized cost.
Many of the Company's products contain surrender charges and other features
which reward persistency and penalize the early withdrawal of funds. With
respect to such products, surrender charges are generally sufficient to cover
the Company's unamortized deferred policy acquisition costs with respect to the
policy being surrendered.
Net cash provided by (used in) operating activities was $934,979 and $(27,762)
for the six month periods ending June 30, 2003 and June 30, 2002, respectively.
The net cash provided by operating activities plus net policyholder contract
deposits after the payment of policyholder withdrawals equaled $2,287,366 for
the first six months of 2003 and $1,394,545 for the same period in 2002.
Management utilizes this measurement of cash flows as an indicator of the
performance of the Company's insurance operations, since reporting regulations
require cash inflows and outflows from universal life insurance products to be
shown as financing activities when reporting on cash flows.
Net cash used in investing activities was $11,149,142 and $3,393,271, for the
six month periods ending June 30, 2003 and June 30, 2002, respectively. The most
significant aspect of cash used in investing activities are the fixed maturity
transactions. Fixed maturities account for 83% and 80% of the total cost of
investments acquired in the first six months of 2003 and for the same period in
2002, respectively.
Net cash provided by (used in) financing activities was $292,647 and $(268,272)
for the six month periods ending June 30, 2003 and June 30, 2002, respectively.
Policyholder contract deposits decreased 7% in the first six months of 2003
compared to the same period in 2002. Policyholder contract withdrawals decreased
7% in the first six months of 2003 compared to the same period in 2002. In
addition, as of June 30, 2003, the Company had purchased $95,447 in treasury
stock under its stock repurchase program and retired $258,794 in common stock
that was originally issued under the employee and director stock purchase
program.
At June 30, 2003, the Company had a total of $2,289,776 in long-term debt
outstanding. All remaining debt is owed to two former officers and directors of
the Company and their respective families as a result of an April 2001 stock
purchase transaction. These notes bear interest at the fixed rate of 7% per
annum (paid quarterly), with remaining principal payments of $763,259 due
annually in 2004 and 2005 and $763,258 due in 2006. Management believes overall
sources available are more than adequate to service this debt. These sources
include current cash balances of UTG, expected future operating cashflows and
payment of dividends from the Company's life subsidiary, UG. In January 2003,
UTG paid the balance of an advance principal payment in the amount of $705,499
completing the remaining 2003 principal payment.
UTG is a holding company that has no day-to-day operations of its own. Funds
required to meet its expenses, generally costs associated with maintaining the
company in good standing with states in which it does business, are primarily
provided by its subsidiaries. On a parent only basis, UTG's cash flow is
dependent on management fees received from its subsidiaries and earnings
received on cash balances. At June 30, 2003, substantially all of the
consolidated shareholders equity represents net assets of its subsidiaries. The
Company's insurance subsidiaries have maintained adequate statutory capital and
surplus and have not used surplus relief or financial reinsurance, which have
come under scrutiny by many state insurance departments. The payment of cash
dividends to shareholders is not legally restricted. However, the state
insurance department regulates insurance company dividend payments where the
company is domiciled.
UG is an Ohio domiciled insurance company, which requires five days prior
notification to the insurance commissioner for the payment of an ordinary
dividend. Ordinary dividends are defined as the greater of: a) prior year
statutory earnings or b) 10% of statutory capital and surplus. At December 31,
2002 UG's total statutory capital and surplus amounted to $16,030,200. At
December 31, 2002, UG had a statutory gain from operations of $2,062,744.
Extraordinary dividends (amounts in excess of ordinary dividend limitations)
require prior approval of the insurance commissioner and are not restricted to a
specific calculation. UG paid an ordinary dividend of $600,000 to UTG in April
2003.
Management believes the overall sources of liquidity available will be
sufficient to satisfy the Company's financial obligations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk relates, broadly, to changes in the value of financial instruments
that arise from adverse movements in interest rates, equity prices and foreign
exchange rates. The Company is exposed principally to changes in interest rates,
which affect the market prices of its fixed maturities available for sale and
its variable rate debt outstanding. The Company's exposure to equity prices and
foreign currency exchange rates is immaterial. The information presented below
is in U.S. dollars, the Company's reporting currency.
Interest rate risk
The Company could experience economic losses if it were required to liquidate
fixed income securities available for sale during periods of rising and/or
volatile interest rates. The Company attempts to mitigate its exposure to
adverse interest rate movements through a staggering of the maturities of its
fixed maturity investments and through maintaining cash and other short term
investments to assure sufficient liquidity to meet its obligations and to
address reinvestment risk considerations.
Tabular presentation
The following table provides information about the Company's long term debt that
is sensitive to changes in interest rates. The table presents principal cash
flows and related weighted average interest rates by expected maturity dates.
The Company has no derivative financial instruments or interest rate swap
contracts. In January 2003, the balance of an advance principal payment in the
amount of $705,499 was made on these notes.
June 30, 2003
Expected maturity date
2003 2004 2005 2006 2007 Thereafter Total Fair value
Long term debt
Fixed rate 0 763,259 763,259 763,258 0 0 2,289,776 2,411,707
Avg. int. rate 0 7.0% 7.0% 7.0% 0 0 7.0% 0
Variable rate 0 0 0 0 0 0 0 0
Avg. int. rate 0 0 0 0 0 0 0 0
ITEM 4. CONTROLS AND PROCEDURES
Within the 90 days prior to the filing date of this quarterly report, an
evaluation was performed under the supervision and with the participation of the
Company's management, including the President and Chief Executive Officer (the
“CEO”) and the Chief Financial Officer (the “CFO”), of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on that evaluation, the Company's management, including the CEO and CFO,
concluded that the Company's disclosure controls and procedures were effective
in alerting them on a timely basis to material information relating to the
Company required to be included in the Company's periodic reports filed or
submitted under the Securities Exchange Act of 1934, as amended. There have been
no significant changes in the Company's internal controls or in other factors
that could significantly affect internal controls subsequent to the date of the
evaluation.
PART II. OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
NONE
ITEM 2. CHANGE IN SECURITIES.
NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Shareholders held on June 11, 2003, the following
matters were submitted to the shareholders of UTG and voted on as indicated:
1. To elect eight directors to serve for a term of one year and until their
successors are elected and qualified:
DIRECTOR FOR WITHHELD AGAINST
John S. Albin 2,567,518 10,879 1,032
Randall L. Attkisson 2,567,788 10,879 762
Jesse T. Correll 2,567,293 10,879 1,257
Ward F. Correll 2,567,833 10,879 717
Thomas F. Darden 2,567,610 10,879 940
William W. Perry 2,567,560 10,879 990
James P. Rousey 2,567,440 10,879 1,110
Robert W. Teater 2,567,518 10,879 1,032
ITEM 5. OTHER INFORMATION.
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
31.1 Certification of Jesse T. Correll, Chief Executive Officer and Chairman of
the Board of UTG, as required pursuant to Section 302
31.2 Certification of Theordore C. Miller, Chief Financial Officer, Senior Vice
President and Corporate Secretary of UTG as required pursuant to Section
302
32.1 Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of
the Board of UTG, as required pursuant to 18 U.S.C. Section 1350
32.2 Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice
President and Corporate Secretary of UTG, as required pursuant to 18 U.S.C.
Section 1350
99.P Code of Ethical Conduct for Senior Financial Officers
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by UTG during the quarterly period ended June
30, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED TRUST GROUP, INC.
(Registrant)
Date: August 11, 2003 By /s/ Randall L. Attkisson
Randall L. Attkisson
President, Chief Operating Officer
and Director
Date: August 11, 2003 By /s/ Theodore C. Miller
Theodore C. Miller
Senior Vice President
and Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
31.1 Certification of Jesse T. Correll, Chief Executive Officer and Chairman of
the Board of UTG, as required pursuant to Section 302
31.2 Certification of Theordore C. Miller, Chief Financial Officer, Senior Vice
President and Corporate Secretary of UTG as required pursuant to Section
302
32.1 Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of
the Board of UTG, as required pursuant to 18 U.S.C. Section 1350
32.2 Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice
President and Corporate Secretary of UTG, as required pursuant to 18 U.S.C.
Section 1350
99.P Code of Ethical Conduct for Senior Financial Officers
