UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 AND 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 April
30, 2003, was 4,005,085.
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 March 31, 2003 and December 31, 2002....3
Consolidated Statements of Operations for the three months
ended March 31, 2003 and 2002...........................................4
Consolidated Statement of Changes in Shareholders' Equity for the
period ended March 31, 2003..............................................5
Consolidated Statements of Cash Flows for the three months ended
March 31, 2003 and 2002..................................................6
Notes to Consolidated Financial Statements................................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........17
ITEM 4. CONTROLS AND PROCEDURES ..........................................17
PART II. OTHER INFORMATION..................................................18
ITEM 1. LEGAL PROCEEDINGS.................................................18
ITEM 2. CHANGE IN SECURITIES..............................................18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............18
ITEM 5. OTHER INFORMATION.................................................18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................18
SIGNATURES....................................................................19
CERTIFICATIONS................................................................20
EXHIBIT INDEX.................................................................22
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
---------------------------------------------------------------------------------------------------------------
March 31, December 31,
ASSETS 2003 2002*
------------------ ------------------
Investments:
Fixed maturities at amortized cost
(market $56,033,123 and $60,517,065) $ 53,939,130 $ 58,327,663
Investments held for sale:
Fixed maturities, at market
(cost $115,207,807 and $105,244,887) 118,319,987 108,704,518
Equity securities, at market
(cost $8,142,662 and $4,122,887) 8,445,630 4,883,870
Mortgage loans on real estate at amortized cost 22,925,327 23,804,827
Investment real estate, at cost,
net of accumulated depreciation 16,909,345 17,503,812
Policy loans 13,260,642 13,346,504
Short-term investments 326,562 377,676
------------------ ------------------
234,126,623 226,948,870
Cash and cash equivalents 16,629,741 24,050,485
Accrued investment income 2,379,932 2,452,840
Reinsurance receivables:
Future policy benefits 32,940,377 33,039,036
Policy claims and other benefits 3,722,366 3,770,285
Cost of insurance acquired 22,785,678 23,156,164
Deferred policy acquisition costs 2,294,026 2,462,487
Property and equipment,
net of accumulated depreciation 2,142,297 2,203,408
Income taxes receivable, current 203,323 245,132
Other assets 307,022 574,263
------------------ ------------------
Total assets $ 317,531,385 $ 318,902,970
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits $ 235,166,458 $ 234,762,656
Policy claims and benefits payable 2,640,605 1,834,952
Other policyholder funds 1,248,240 1,176,359
Dividend and endowment accumulations 12,638,105 12,628,294
Deferred income taxes 12,044,704 12,239,060
Notes payable 2,289,776 2,995,275
Other liabilities 4,361,330 4,943,507
------------------ ------------------
Total liabilities 270,389,218 270,580,103
------------------ ------------------
Shareholders' equity:
Common stock - no par value, stated value $.02 per share
Authorized 7,000,000 shares - 3,507,845 and 3,536,311 shares
issued after deducting treasury shares of 156,073 and 147,607 70,156 70,726
Additional paid-in capital 42,679,379 42,976,344
Retained earnings 2,009,732 2,503,856
Accumulated other comprehensive income 2,382,900 2,771,941
------------------ ------------------
Total shareholders' equity 47,142,167 48,322,867
------------------ ------------------
Total liabilities and shareholders' equity $ 317,531,385 $ 318,902,970
================== ==================
*Balance sheet audited at December 31, 2002
See accompanying notes.
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
--------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, March 31,
2003 2002
----------------- -----------------
Revenues:
Premiums and policy fees $ 4,567,277 $ 4,994,227
Reinsurance premiums and policy fees (684,274) (717,366)
Net investment income 2,750,690 3,307,478
Realized investment gains, net 242,281 4,696
Other income 171,781 204,006
----------------- -----------------
7,047,755 7,793,041
Benefits and other expenses:
Benefits, claims and settlement expenses:
Life 5,451,065 5,328,814
Reinsurance benefits and claims (477,644) (1,026,833)
Annuity 277,191 268,675
Dividends to policyholders 270,308 264,450
Commissions and amortization of deferred
policy acquisition costs 173,653 302,521
Amortization of cost of insurance acquired 370,486 386,097
Operating expenses 1,169,440 1,530,433
Interest expense 41,416 72,210
----------------- -----------------
7,275,915 7,126,367
Income (loss) before income taxes, minority interest
and equity in earnings of investees (228,160) 666,674
Income tax expense (265,964) (83,880)
Minority interest in income of
consolidated subsidiaries 0 (105,760)
----------------- -----------------
Net income (loss) $ (494,124) $ 477,034
================= =================
Basic income (loss) per share from continuing
operations and net income (loss) $ (0.14) $ 0.14
================= =================
Diluted income (loss) per share from continuing
operations and net income (loss) $ (0.12) $ 0.14
================= =================
Basic weighted average shares outstanding 3,519,191 3,528,436
================= =================
Diluted weighted average shares outstanding 4,019,191 3,528,436
================= =================
See accompanying notes.
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
For the Period ended March 31, 2003 (Unaudited)
-------------------------------------------------------------------------------------------------------
Common stock
Balance, beginning of year $ 70,726
Issued during year 0
Retired common shares (400)
Purchase treasury shares (170)
------------------
Balance, end of period 70,156
------------------
Additional paid-in capital
Balance, beginning of year 42,976,344
Issued during year 0
Retired common shares (238,400)
Purchase treasury shares (58,565)
------------------
Balance, end of period 42,679,379
------------------
Retained earnings
Balance, beginning of year 2,503,856
Net loss (494,124) $ (494,124)
------------------ ------------------
Balance, end of period 2,009,732
------------------
Accumulated other comprehensive income
Balance, beginning of year 2,771,941
Other comprehensive income
Unrealized holding loss on securities
and reclassification adjustment (389,041) (389,041)
------------------ ------------------
Comprehensive income $ (883,165)
==================
Balance, end of period 2,382,900
------------------
Total shareholders' equity, end of period $ 47,142,167
==================
See accompanying notes.
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
------------------------------------------------------------------------------------------------------------
Three Months Ended
March 31, March 31,
2003 2002
--------------- --------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income (loss) $ (494,124)$ 477,034
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Amortization/accretion of fixed maturities 168,017 97,202
Realized investment gains, net (242,281) (4,696)
Policy acquisition costs deferred (8,000) (17,000)
Amortization of deferred policy acquisition costs 176,461 272,108
Amortization of cost of insurance acquired 370,486 386,097
Depreciation 121,233 151,597
Minority interest 0 105,760
Change in accrued investment income 72,908 376,308
Change in reinsurance receivables 146,578 395,590
Change in policy liabilities and accruals 1,075,409 (859,384)
Charges for mortality and administration of
universal life and annuity products (2,116,380) (2,234,743)
Interest credited to account balances 1,381,828 1,475,314
Change in income taxes 198,753 55,161
Change in other assets and liabilities, net (1,199) (813,541)
--------------- --------------
Net cash provided by (used in) operating activities 849,689 (137,193)
Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities held for sale 12,329,492 8,420,000
Fixed maturities matured 12,136,686 6,885,707
Mortgage loans 3,643,730 2,483,750
Real estate 766,905 486,592
Policy loans 656,512 757,831
Short-term 51,114 50,000
--------------- --------------
Total proceeds from investments sold and matured 29,584,439 19,083,880
Cost of investments acquired:
Fixed maturities held for sale (26,771,651) (14,970,384)
Fixed maturities (3,436,538) 0
Equity securities (4,000,000) (185,075)
Mortgage loans (2,764,230) (3,654,685)
Real estate (259,059) (63,981)
Policy loans (570,650) (623,959)
Short-term 0 (1,450)
--------------- --------------
Total cost of investments acquired (37,802,128) (19,499,534)
Purchase of property and equipment 0 (8,051)
--------------- --------------
Net cash used in investing activities (8,217,689) (423,705)
Cash flows from financing activities:
Policyholder contract deposits 2,658,689 2,746,397
Policyholder contract withdrawals (1,708,399) (2,267,119)
Payments of principal on notes payable (705,499) (777,199)
Proceeds from line of credit 0 600,000
Retirement of common stock (238,800) 0
Purchase of treasury stock (58,735) (298,665)
--------------- --------------
Net cash provided by (used in) financing activities (52,744) 3,414
--------------- --------------
Net decrease in cash and cash equivalents (7,420,744) (557,484)
Cash and cash equivalents at beginning of period 24,050,485 15,477,348
--------------- --------------
Cash and cash equivalents at end of period $ 16,629,741 $ 14,919,864
=============== ==============
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 March 31, 2003 Mr. Correll owns or controls directly and
indirectly approximately 60% of UTG's outstanding stock.
At March 31, 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 March 31, 2003 and December 31, 2002, fixed maturities and fixed
maturities held for sale represented 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 March 31, 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 March 31, 2003 and 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 the 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 March 31, 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 from the date of issue. 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 March 31, 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 will be available for
future issuance for general corporate purposes. From inception of the plan
through April 30, 2003, UTG has spent $716,422 in the acquisition of 102,004
shares 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 March 31, 2003, UTG had an obligation to issue to FSF or its assigns
500,000 shares of UTG common stock, as a result of a failed earnings covenant
(See note 4C to the consolidated financial statements below). As such, the
computation of diluted earnings per share differs from basic earnings per share
at March 31, 2003. At March 31, 2002, diluted earnings per share is the same as
basic earnings per share since the Company 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, are to be issued by the Department of the Treasury sometime this
spring. In anticipation of the final regulations, the Company has instituted an
anti-money laundering program to comply with Section 352, and has communicated
this program throughout the organization. The Company is currently working on a
database program to facilitate compliance with Section 326. The Company will
monitor the release of the final regulations and make any adjustments needed for
continued compliance at that time.
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 2002 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
will begin in May 2003 and is expected to be completed by February 2004. The
conversion will be 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.
David A. Morlan, individually and on behalf of all others similarly situated v.
Universal Guaranty Life Ins., United Trust Assurance Co., United Security
Assurance Co., United Trust Group, Inc. and First Commonwealth Corporation,
(U.S. District Court for the Southern District of Illinois)
On April 26, 1999, the above lawsuit was filed by David Morlan and Louis Black
in the Southern District of Illinois against Universal Guaranty Life Insurance
Company ("UG") and United Trust Assurance Company ("UTAC") (merged into UG in
1992). After the lawsuit was filed, the plaintiffs, who were former insurance
salesmen, amended their complaint, dropped Louis Black as a plaintiff, and added
United Security Assurance Company ("USAC") (merged into UG in 1999) and UTG as
defendants. The plaintiffs are alleging that they were employees of UG, UTAC or
USAC rather than independent contractors. The plaintiffs have asked to recover
various employee benefits, costs and attorneys' fees, as well as monetary
damages based on the defendants' alleged failure to withhold certain taxes. A
trial date has been currently set for August 26, 2003.
The Company continues to believe that it has meritorious grounds to defend this
lawsuit, and it intends to defend the case vigorously. The Company believes that
the defense and ultimate resolution of the lawsuit should not have a material
adverse effect upon the business, results of operations or financial condition
of the Company. Nevertheless, if the lawsuit were to be successful, it is likely
that such resolution would have a material adverse effect on the Company's
business, results of operations and financial condition. At March 31, 2003, the
Company maintains a liability of $225,000 to cover estimated legal costs
associated with the defense of this matter.
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 $41,416 and $71,898 in interest expense during
the first quarter of 2003 and 2002, respectively. The Company paid $0 and $290
in federal income tax during the first quarter of 2003 and 2002, respectively.
At March 31, 2003, the Company had acquired $19,775 in equity securities for
which the cash had not yet been paid. The payable for these securities is
included in the line item other liabilities on the balance sheet.
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 the largest
shareholder of UTG, Jesse T. Correll, the Company's CEO and Chairman. In
aggregate at March 31, 2003 these accounts hold approximately $5,000,000 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
March 31, 2003 Amount or Benefit Amount
---------------------------------------------- ---------------- ----------------- ---------------
Unrealized holding losses during
Period $ (597,903) $ 209,266 $ (388,637)
Less: reclassification adjustment
for gains realized in net income (621) 217 (404)
---------------- ----------------- ---------------
Net unrealized losses (598,524) 209,483 (389,041)
---------------- ----------------- ---------------
Other comprehensive income $ (598,524) $ 209,483 $ (389,041)
================ ================= ===============
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 caried at cost, pending valuation by the National
Association of Insurance Commissioners' Securities Valuation Office.
10. MERGER OF LIFE INSURANCE SUBSIDIARIES
The ABE, APPL, and UG Boards approved merger transactions at the March 2003
meeting whereby ABE and APPL would each be merged with and into UG. The mergers
will require the approval of the insurance departments of the States of Ohio and
Illinois prior to completion. The Company does not anticipate any delays with
the approval process and expects the mergers to be completed by July 2003.
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 March 31, 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 9% when comparing the first quarter of 2003 to the same period in
2002. 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 17% when comparing the first quarter of 2003 to
the same period in 2002. The national prime rate has continued its decline going
from 4.75% at March 31, 2002 to 4.25% at March 31, 2003. The declining interest
rates over the last couple of years 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. This
approach hurts investment earnings in the short run, but 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 net realized investment gains of $242,281 in the first quarter
of 2003 compared to net realized investment gains of $4,696 for the same period
in 2002. Approximately $240,000 of the net realized gains in the first quarter
of 2003 were attributable to the sale of two separate parcels of land held for
investment purposes in Springfield, Illinois.
Other income decreased 16% when comparing the first quarter of 2003 to the same
period in 2002. 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 quarter of 2003 and
2002, the Company received $117,260 and $124,635 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 and administrative 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 16% in the first quarter of 2003 compared to the same period
in 2002. This increase is due to a reduction in reinsurance benefits and claims
incurred in the current quarter. 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, direct death benefits and policy surrenders remained at
comparable levels when comparing the first quarter of 2003 to the same period in
2002.
Commissions and amortization of deferred policy acquisition costs decreased 43%
in the first quarter of 2003 compared to the same period in 2002. 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 the two
periods reported.
Operating expenses decreased 24% in the first quarter of 2003 compared to the
same period in 2002. Expense reductions have been made in the normal course of
business, as the Company simplifies its organizational structure and continually
monitors expenditures looking for savings opportunities. Subsequent to the
reporting period, 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 will begin in May 2003 and is expected to be completed by
February 2004. The conversion will be performed utilizing Company personnel with
onsite training and guidance provided by Fiserv. The conversion is expected to
cost approximately $600,000.
Interest expense decreased 43% in the first quarter of 2003 compared to the same
period in 2002. The Company has used dividend payments from its life insurance
subsidiary UG to reduce long term debt outstanding from $4,223,471 at March 31,
2002 to $2,289,776 at March 31, 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 are include current cash balances of UTG, and expected future
dividends from its life insurance subsidiary UG.
(c) Net income
The Company had a net loss of $(494,124) in the first quarter of 2003 compared
to net income of $477,034 for the same period in 2002. Total revenues decreased
approximately $745,000, which was primarily attributable to a 17% decrease in
investment income and a 9% decrease in premium revenues. Income tax expense
increased approximately $180,000, which was primarily attributable to a shift in
the Company's deferred tax liability. Partially offsetting the above decreases
to net income, the minority interest liability of approximately $106,000 held at
March 31, 2002, was 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 retreated slightly since December 31,
2002. Total shareholders' equity decreased approximately $1,181,000 as of March
31, 2003 compared to December 31, 2002. The decrease was mainly attributable to
a net loss of $494,124, the purchase of treasury shares and retirement of common
stock in the amount $297,535, and unrealized losses of $389,041 on investments
held for sale.
Investments represent approximately 74% and 71% of total assets at March 31,
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 March 31, 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 5% and 8% as of March 31, 2003, and December
31, 2002, respectively. Fixed maturities as a percentage of total invested
assets were approximately 74% as of March 31, 2003 and December 31, 2002.
Future policy benefits are primarily long-term in nature and therefore, the
Company's investments are predominantly in 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.
Cash provided by (used in) operating activities was $849,689 and $(137,193) for
the periods ending March 31, 2003 and March 31, 2002, respectively. The net cash
provided by operating activities plus net policyholder contract deposits after
the payment of policyholder withdrawals equaled $1,799,979 for the first quarter
of 2003 and $342,085 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.
Cash used in investing activities was $8,217,689 and $423,705, for the periods
ending March 31, 2003 and March 31, 2002, respectively. The most significant
aspect of cash used in investing activities are the fixed maturity transactions.
Fixed maturities account for 80% and 77% of the total cost of investments
acquired in the first quarter of 2003 and for the same period in 2002,
respectively.
Net cash provided by (used in) financing activities was $(52,744) and $3,414 for
the periods ending March 31, 2003 and March 31, 2002, respectively. Policyholder
contract deposits decreased 3% for the first quarter of 2003 compared to the
same period in 2002. Policyholder contract withdrawals decreased 25% for the
first quarter of 2003 compared to the same period in 2002. In addition, as of
March 31, 2002, the Company had purchased $58,735 in treasury stock under the
stock repurchase program and retired $238,800 in common stock from a former
employee of the Company, originally issued under the employee and director stock
purchase program.
At March 31, 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 March 31, 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.
--------------------------------------------------------------------------------------------------
March 31, 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 2,406,156
------------------ -------- -------- -------- -------- -------- ----------- ---------- -----------
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.
NONE
ITEM 5. OTHER INFORMATION.
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
99.1 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
99.2 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
99.3 United Trust Group Whistle Blower Policy
(b) Reports on Form 8-K
No reports on Form 8-K were filed by UTG during the quarterly period ended March
31, 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: May 13, 2003 By /s/ Randall L. Attkisson
Randall L. Attkisson
President, Chief Operating Officer
and Director
Date: May 13, 2003 By /s/ Theodore C. Miller
Theodore C. Miller
Senior Vice President
and Chief Financial Officer
CERTIFICATIONS
I, Jesse T. Correll, Chairman of the Board and Chief Executive Officer of United
Trust Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant,
United Trust Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 13, 2003 By /s/ Jesse T. Correll
Chairman of the Board and
Chief Executive Officer
CERTIFICATIONS
I, Theodore C. Miller, Senior Vice President, Corporate Secretary and Chief
Financial Officer of United Trust Group, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant,
United Trust Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 13, 2003 By /s/ Theodore C. Miller
Senior Vice President, Corporate Secretary and
Chief Financial Officer
EXHIBIT INDEX
Exhibit Number Description
99.1 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
99.2 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
99.3 United Trust Group Whistle Blower Policy
