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, 2004
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 30,
2004, was 3,998,025.
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, 2004 and December 31, 2003.....3
Consolidated Statements of Operations for the three and six months
ended June 30, 2004 and 2003............................................4
Consolidated Statement of Changes in Shareholders' Equity for the
six months ended June 30, 2004..........................................5
Consolidated Statements of Cash Flows for the six months ended
June 30, 2004 and 2003..................................................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........16
ITEM 4. CONTROLS AND PROCEDURES...........................................17
PART II. OTHER INFORMATION..................................................18
ITEM 1. LEGAL PROCEEDINGS.................................................18
ITEM 2. CHANGE IN SECURITIES and Use of Proceeds..........................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
EXHIBIT INDEX, followed by exhibits...........................................21
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
-----------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
ASSETS 2004 2003*
------------------ -------------------
Investments:
Fixed maturities at amortized cost
(market $17,614,527 and $27,440,277) $ 17,371,671 $ 26,724,507
Investments held for sale:
Fixed maturities, at market (cost $139,847,687 and $139,248,547) 139,554,490 139,390,382
Equity securities, at market (cost $15,242,497 and $7,209,443) 19,196,711 9,362,165
Mortgage loans on real estate at amortized cost 21,179,783 26,715,968
Investment real estate, at cost, net of accumulated depreciation 28,011,398 24,725,824
Policy loans 13,002,731 13,226,399
Short-term investments 36,106 34,677
------------------ -------------------
238,352,890 240,179,922
Cash and cash equivalents 12,299,171 8,749,727
Securities of affiliate 4,000,000 4,000,000
Accrued investment income 1,703,744 1,961,552
Reinsurance receivables:
Future policy benefits 32,629,475 32,789,725
Policy claims and other benefits 4,049,134 4,120,299
Cost of insurance acquired 13,682,249 14,616,667
Deferred policy acquisition costs 1,981,953 2,122,643
Property and equipment, net of accumulated depreciation 2,304,664 2,450,109
Income taxes receivable, current 115,835 212,197
Other assets 287,766 354,292
------------------ -------------------
Total assets $ 311,406,881 $ 311,557,133
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits $ 236,363,466 $ 236,192,132
Policy claims and benefits payable 2,048,692 2,541,735
Other policyholder funds 1,356,181 1,038,063
Dividend and endowment accumulations 12,618,329 12,626,515
Deferred income taxes 6,533,619 6,763,648
Notes payable 2,275,000 2,289,776
Other liabilities 4,693,844 5,557,215
------------------ -------------------
Total liabilities 265,889,131 267,009,084
------------------ -------------------
Minority interests in consolidated subsidiaries 5,807,323 4,851,410
------------------ -------------------
Shareholders' equity:
Common stock - no par value, stated value $.02 per share
Authorized 7,000,000 shares - 3,993,131 and 4,004,666 shares issued
after deducting treasury shares of 185,671 and 174,136 79,783 80,008
Additional paid-in capital 42,605,356 42,672,189
Retained earnings (5,429,309) (4,621,955)
Accumulated other comprehensive income 2,454,597 1,566,397
------------------ -------------------
Total shareholders' equity 39,710,427 39,696,639
------------------ -------------------
Total liabilities and shareholders' equity $ 311,406,881 $ 311,557,133
================== ===================
* Balance sheet audited at December 31, 2003.
See accompanying 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,
2004 2003 2004 2003
-------------- --------------- -------------- ---------------
Revenues:
Premiums and policy fees $ 4,513,150 $ 4,802,915 $ 9,134,108 $ 9,370,192
Reinsurance premiums and policy fees (841,483) (709,676) (1,588,296) (1,393,950)
Net investment income 2,734,854 2,898,159 4,565,931 5,648,849
Realized investment gains (losses), net (619) 317,877 (92,754) 560,158
Other income 201,301 169,035 421,561 340,816
-------------- --------------- -------------- ---------------
6,607,203 7,478,310 12,440,550 14,526,065
Benefits and other expenses:
Benefits, claims and settlement expenses:
Life 5,474,567 5,076,050 10,347,645 10,527,115
Reinsurance benefits and claims (1,091,949) (679,579) (1,358,912) (1,157,223)
Annuity 288,938 289,162 569,633 566,353
Dividends to policyholders 251,736 245,810 536,968 516,118
Commissions and amortization of deferred
policy acquisition costs 39,322 72,579 64,738 246,232
Amortization of cost of insurance acquired 466,550 369,335 934,418 739,821
Operating expenses 1,432,013 3,500,807 2,829,461 4,670,247
Interest expense 24,709 39,962 50,343 81,378
-------------- --------------- -------------- ---------------
6,885,886 8,914,126 13,974,294 16,190,041
Loss before income taxes, minority interest
and equity in earnings of investees (278,683) (1,435,816) (1,533,744) (1,663,976)
Income tax credit 489,652 766,324 611,160 500,360
Minority interest in (income) loss of
consolidated subsidiaries (144,128) 0 115,230 0
-------------- --------------- -------------- ---------------
Net income (loss) $ 66,841 $ (669,492)$ (807,354)$ (1,163,616)
============== =============== ============== ===============
Basic income (loss) per share from continuing
operations and net income (loss) $ 0.02 $ (0.17)$ (0.20)$ (0.32)
============== =============== ============== ===============
Diluted income (loss) per share from continuing
operations and net income (loss) $ 0.02 $ (0.17)$ (0.20)$ (0.32)
============== =============== ============== ===============
Basic weighted average shares outstanding 3,980,811 3,845,046 3,983,358 3,683,019
============== =============== ============== ===============
Diluted weighted average shares outstanding 3,980,811 3,845,046 3,983,358 3,683,019
============== =============== ============== ===============
See accompanying notes
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity
For the six months ended June 30, 2004 (Unaudited)
------------------------------------------------------------------------------------------------------------------
Common stock
Balance, beginning of year $ 80,008
Issued during year 0
Retired common shares 0
Purchase treasury shares (225)
-----------------
Balance, end of period 79,783
-----------------
Additional paid-in capital
Balance, beginning of year 42,672,189
Issued during year 0
Retired common shares 0
Purchase treasury shares (66,833)
-----------------
Balance, end of period 42,605,356
-----------------
Retained earnings
Balance, beginning of year (4,621,955)
Net loss (807,354) $ (807,354)
----------------- -----------------
Balance, end of period (5,429,309)
-----------------
Accumulated other comprehensive income
Balance, beginning of year 1,566,397
Other comprehensive income
Unrealized holding gain on securities net of
minority interest and reclassification adjustment 888,200 888,200
----------------- -----------------
Comprehensive income $ 80,846
=================
Balance, end of period 2,454,597
-----------------
Total shareholders' equity, end of period $ 39,710,427
=================
See accompanying notes
UNITED TRUST GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
---------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30, June 30,
2004 2003
--------------- ---------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss $ (807,354) $ (1,163,616)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Amortization/accretion of fixed maturities 291,407 514,127
Realized investment gains (losses), net 92,754 (560,158)
Policy acquisition costs deferred (9,000) (40,000)
Amortization of deferred policy acquisition costs 149,690 274,922
Amortization of cost of insurance acquired 934,418 739,821
Depreciation 599,885 305,554
Minority interest 955,913 0
Change in accrued investment income 257,808 277,619
Change in reinsurance receivables 231,415 49,734
Change in policy liabilities and accruals 891,705 1,172,031
Charges for mortality and administration of
universal life and annuity products (4,703,525) (4,376,292)
Interest credited to account balances 2,710,746 2,761,079
Change in income taxes payable (611,928) (567,571)
Change in other assets and liabilities, net (796,845) 1,547,729
--------------- ---------------
Net cash provided by operating activities 187,089 934,979
Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities held for sale 47,830,852 36,346,064
Fixed maturities matured 10,627,244 24,922,488
Mortgage loans 6,712,921 5,021,255
Real estate 87,141 872,903
Policy loans 1,434,554 1,257,763
Short-term 0 150,000
--------------- ---------------
Total proceeds from investments sold and matured 66,692,712 68,570,473
Cost of investments acquired:
Fixed maturities held for sale (48,702,180) (61,147,319)
Fixed maturities (1,387,595) (4,283,412)
Equity securities (8,033,053) (6,391,470)
Mortgage loans (1,176,737) (4,997,051)
Real estate (3,817,178) (1,184,103)
Policy loans (1,210,886) (1,158,084)
Short-term (214) (2,433)
--------------- ---------------
Total cost of investments acquired (64,327,843) (79,163,872)
Purchase of property and equipment (9,977) (555,743)
--------------- ---------------
Net cash provided by (used in) investing activities 2,354,892 (11,149,142)
Cash flows from financing activities:
Policyholder contract deposits 4,735,116 4,939,629
Policyholder contract withdrawals (3,645,819) (3,587,242)
Proceeds from line of credit 2,275,000 0
Retirement of common stock 0 (258,794)
Purchase of treasury stock (67,058) (95,447)
Payments of principal on notes payable (2,289,776) (705,499)
--------------- ---------------
Net cash provided by financing activities 1,007,463 292,647
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 3,549,444 (9,921,516)
Cash and cash equivalents at beginning of period 8,749,727 24,050,485
--------------- ---------------
Cash and cash equivalents at end of period $ 12,299,171 $ 14,128,969
=============== ===============
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,
2003.
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 in the State of 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, 2004 Mr. Correll owns or controls directly and
indirectly approximately 66% of UTG's outstanding stock.
At June 30, 2004, consolidated subsidiaries of United Trust Group, Inc. were as
depicted on the following organizational chart.
2. INVESTMENTS
As of June 30, 2004 and December 31, 2003, fixed maturities and fixed maturities
held for sale represented 66% and 69%, respectively, 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, 2004, 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, 2004 and December 31, 2003, the Company had $ 2,275,000 and
$ 2,289,776 in notes payable 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 bore
interest at the fixed rate of 7% per annum (paid quarterly) with payments of
principal to be made in five equal annual installments. On January 7, 2004, the
Company paid the remaining principal balances on these notes with proceeds from
the Southwest Bank of St. Louis line of credit.
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 additional one-year or six-month terms, with a maturity date of October 30,
2004. As collateral for any draws under the line of credit, UTG pledged 100% of
the common stock of its insurance subsidiary UG. Borrowings under the LOC bear
interest at the rate of .25% in excess of Southwest Bank of St. Louis' prime
rate. At June 30, 2004, the Company had $ 2,275,000 outstanding borrowings
attributable to this LOC.
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 at the time was a
Director of UTG. The LOC was for a one-year term from the date of issue. Upon
maturity the Company renewed the LOC for additional one-year terms. 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, 2004, the Company had no outstanding borrowings
attributable to this LOC.
4. CAPITAL STOCK TRANSACTIONS
A. Employee and Director Stock Purchase Program
On March 26, 2002, the Board of Directors of UTG adopted, and on June 11, 2002,
the shareholders of UTG approved, the United Trust Group, Inc. Employee and
Director Stock Purchase Plan. The plan's purpose is to encourage ownership of
UTG stock by eligible directors and employees of UTG and its subsidiaries by
providing them with an opportunity to invest in shares of UTG common stock. The
plan is administered by the Board of Directors of UTG. A total of 400,000 shares
of common stock may be purchased under the plan, subject to appropriate
adjustment for stock dividends, stock splits or similar recapitalizations
resulting in a change in shares of UTG. The plan is not intended to qualify as
an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code.
During 2003 and 2002, the Board of Directors of UTG approved offerings under the
plan to qualified individuals. For the years ended December 31, 2003 and 2002,
eight individuals purchased 58,891 and three individuals purchased 16,546 shares
of UTG common stock, respectively. Each participant under the plan executed a
"stock restriction and buy-sell agreement", which among other things provides
UTG with a right of first refusal on any future sales of the shares acquired by
the participant under this plan.
The purchase price of shares repurchased under the stock restriction and
buy-sell agreement shall be computed, on a per share basis, equal to the sum of
(i) the original purchase price paid to acquire such shares from UTG and (ii)
the consolidated statutory net earnings (loss) per share of such shares during
the period from the end of the month next preceding the month in which such
shares were acquired pursuant to the plan, to the end of the month next
preceding the month in which the sale of such shares to UTG occurs. At June 30,
2004, UTG had 75,437 shares outstanding that were issued under this program with
a value of $ 11.57 per share pursuant to the above formula.
B. Stock Repurchase Program
On June 5, 2001, the Board of Directors of UTG authorized the repurchase in the
open market or in privately negotiated transactions of up to $ 1 million of
UTG's common stock. On June 16, 2004, an additional $ 1 million was authorized
for repurchased shares. Repurchased shares are available for future issuance for
general corporate purposes. Through July 30, 2004, UTG has spent $ 927,806 in
the acquisition of 135,610 shares under this program.
C. 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, 2004, diluted earnings per share were the same as basic
earnings per share since the UTG had no dilutive instruments outstanding.
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 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 2005 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 June 10, 2002 UTG and Fiserv LIS formed an alliance between their respective
organizations to provide third party administration (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 operations processing service for the Company. The Company will
staff the administration effort. To facilitate the alliance, the Company plans
to convert its existing business to "ID3", a software system owned by Fiserv LIS
to administer an array of life, health and annuity products in the insurance
industry. 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. The Company began the conversion of its existing insurance business
to the "ID3" software system in February 2004.
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 $ 50,343 and $ 81,378 in interest expense
during the first six months of 2004 and 2003, respectively. The Company paid no
federal income tax during the first six months of 2004 and 2003, respectively.
In April 2003, the Company issued 500,000 previously unissued shares of UTG
common stock to FSF.
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 $ 6,053,000 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, 2004 Amount or Benefit Amount
---------------------------------------------- ---------------- ----------------- ---------------
Unrealized holding gains during
period $ 1,509,160 $ 528,206 $ 980,954
Less: reclassification adjustment
for gains realized in net income (142,698) (49,944) (92,754)
---------------- ----------------- ---------------
Net unrealized gains 1,366,462 478,262 888,200
---------------- ----------------- ---------------
Other comprehensive income $ 1,366,462 $ 478,262 $ 888,200
================ ================= ===============
9. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") has issued Statement No. 132
(revised 2003), Employers' Disclosures about Pensions and Other Postretirement
Benefits (an amendment of FASB Statements 87, 88 and 106). Statement No. 132 was
developed to address concerns of users of financial statements regarding their
need for more information about pension plan assets, obligations, benefit
payment, contributions and net benefit costs.
This statement was effective at the beginning of the first interim period
beginning after December 15, 2003. The adoption of Statement 132 (revised 2003)
did not affect the Company's financial position or results of operations, since
the Company has no such plans that meet the provisions of this statement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion of Financial Condition and Results of Operations
analyzes the consolidated financial condition, changes in financial position and
results of operations for the three months and six months ended June 30, 2004,
as compared to the same period of 2003, of UTG and its subsidiaries. The
discussion supplements Management's Discussion and Analysis in Form 10-K for the
year ended December 31, 2003, and should be read in conjunction with the interim
financial statements and notes that appear elsewhere in this report.
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.
Update on Critical Accounting Policies
In our Form 10-K for the year ended December 31, 2003, we identified the
accounting policies that are critical to the understanding of our results of
operations and our financial position. They relate to deferred acquisition costs
(DAC), cost of insurance acquired, assumptions and judgments utilized in
determining if declines in fair values of investments are other-than-temporary,
and valuation methods for investments that are not actively traded.
We believe that these policies were applied in a consistent manner during the
first six months of 2004.
Results of Operations
(a) Revenues
The Company experienced a nominal decrease in premiums and policy fee revenues,
net of reinsurance premiums and policy fees, when comparing the first six months
of 2004 to the same period in 2003. 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.
Since early 2002, the Company has implemented a conservation effort, which is
still in place, in an attempt to improve the persistency rate of insurance
company's policies. Several of the customer service representatives of the
Company have become licensed insurance agents, allowing them to offer other
products within the Company's portfolio to existing customers. Additionally,
stronger efforts have been made in policy retention through more personal
contact with the customer including telephone calls to discuss alternatives and
reasons for a customer's request to surrender their policy. Previously, the
Company's agency force was primarily responsible for conservation efforts. With
the decline in the number of agents, their ability to reach these customers
diminished, making conservation efforts difficult. The conservation efforts
described above have been generally positive. Management will continue to
monitor these efforts and make adjustments as seen appropriate to enhance the
future success of the program. The Company has also implemented a new product
referred to as "the Legacy" to be specifically used by the licensed customer
service representatives as an alternative for the customer in the conservation
efforts. The Company is looking at additional products to offer to further
enhance conservation and home office sales.
The Company has considered the feasibility of a marketing opportunity with First
Southern National Bank (FSNB) an affiliate of UTG's largest shareholder,
Chairman and CEO, Mr. 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 designed an annuity product ("Horizon") as
well as two life products ("Legacy" and "Kid Kare") which are to be used in
marketing efforts by FSNB. The introduction of these new products is currently
not expected to produce significant premium writings. The Company is currently
looking at other types of products to compliment the existing offerings.
Net investment income decreased 19% when comparing the first six months of 2004
to the same period in 2003. Although there has been no significant change in the
national prime rate during the last year, the decline in the interest rate
environment has resulted in lower earnings on short-term funds as well as on
longer-term investments acquired. 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 first half of 2004,
the Company liquidated approximately $ 38,212,000 of its collateralized mortgage
obligation bond portfolio in order to limit its interest rate and extension
risk. In addition, there were $ 20,246,000 in bonds that matured or were called
during the first six months of 2004. The result of these transactions caused an
excess of cash invested in short-term money market funds during the first six
months of 2004. The Company reinvested this cash during the second quarter
primarily in governmental bonds 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.
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%. The Company has lowered all rate-adjustable products to their guaranteed
minimums. The guaranteed minimum crediting rates on these products range from 3%
to 5.5%. 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 realized investment losses of $ 92,754 in the first six months of
2004 compared to net realized investment gains of $ 560,158 for the same period
in 2003. The net realized loss in 2004 is primarily comprised of $ 93,969 in net
realized losses from the disposal of the collateralized mortgage obligations
previously discussed. 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. Also in 2003, there was $ 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.
Other income increased when comparing the first six months of 2004 to the same
period in 2003. The Company experienced a nominal increase in commission revenue
received in REC during the first six months of 2004. The majority of the revenue
in this line item comes from the Company performing administrative work as a
third party administrator ("TPA") for unaffiliated life insurance companies, 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 2004 and 2003, the Company received $ 274,760 and $ 281,306
respectively, for this work. These TPA revenue fees are included in the line
item "other income" on the Company's consolidated statements of operations.
During the second quarter of 2004, the Company reached an agreement with an
additional insurance provider that should provide approximately $ 300,000 in
gross annual revenue for these services. The agreement begins during the third
quarter of 2004. The Company intends to continue to pursue other TPA
arrangements through its alliance with Fiserv Life Insurance Solutions (Fiserv
LIS), to provide TPA services to insurance companies seeking business process
outsourcing solutions. Fiserv LIS is responsible for the marketing and sales
function for the alliance, as well as providing the data center operations. UTG
will staff the administration effort. 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 Fiserv LIS "ID3" software system. 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, decreased 2% in the first six months of 2004 compared to the same period
in 2003. Policy claims increased $ 1,058,000 for the first six months of 2004
compared to the same period in 2003. Policy claims vary from year to year and
therefore, fluctuations in mortality are to be expected and are not considered
unusual by management. Policy surrenders decreased when comparing the first six
months of 2004 to the same period in 2003. Consequently, the change in reserves
decreased due to level of surrenders, reduction in premiums and decreased
interest crediting rates. Overall, reserves continue to increase on in-force
policies as the age of the insured increases.
Commissions and amortization of deferred policy acquisition costs decreased 74%
for the first six months of 2004 compared to the same period in 2003. 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. Commissions paid will
continue to decline as terminated agents discontinue their association with the
Company. Depending upon the nature of the contract that the agent has with the
Company, the agent may become vested, a process which allows them to continue to
receive commissions for a certain period even after the agent has discontinued
his association with the Company. Over time, fewer and fewer agents have
remained vested, further reducing the commissions payable by the Company.
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 decreased 39% in the first six months of 2004 compared to the
same period in 2003. The decrease in expenses is due to the establishment of a
contingent liability of $ 1,950,000 relating to a lawsuit in 2003. Excluding the
contingency established, expenses declined due to reductions made in the normal
course of business, as the Company simplifies its organizational structure and
continually monitors expenditures looking for savings opportunities. The Company
continues to simplify its organizational structure and monitor expenditures
looking for savings opportunities.
Interest expense decreased 38% in the first six months of 2004 compared to the
same period in 2003. In January 2004, the Company utilized a line of credit to
repay the remaining debt 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 bore interest at the fixed rate of 7% per
annum. The line of credit bears interest at the rate of .25% in excess of
Southwest Bank of St. Louis' prime rate. Management believes overall sources
available are more than 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 $ (807,354) in the first six months of 2004
compared to a net loss of $ (1,163,616) for the same period in 2003. The net
loss in 2004 was mainly attributable to the decrease in investment income and
premium income. The net loss in 2003 was mainly attributable to the
establishment of a contingent liability relating to a lawsuit.
Financial Condition
The financial condition of the Company has improved since December 31, 2003.
Total shareholders' equity increased approximately $ 14,000 as of June 30, 2004
compared to December 31, 2003. The increase is attributable to the performance
of the equity investments of $ 888,000, net of deferred taxes, that was included
in the accumulated other comprehensive income. The Company purchased treasury
shares in the amount of $ 67,058, which decreased shareholders' equity. During
2003, the Company implemented FAS 150 regarding the accounting for certain
financial instruments with characteristics of both liabilities and equity. This
implementation resulted in reclassifying $ 49,635 from equity to other
liabilities on the financial statement.
Investments represent approximately 77% of total assets at June 30, 2004 and
December 31, 2003, 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, 2004, 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 3% as of June 30, 2004, and
December 31, 2003, respectively. Fixed maturities as a percentage of total
assets were approximately 50% and 53% as of June 30, 2004 and December 31, 2003,
respectively.
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 operating activities was $ 188,304 and $ 934,979 for the
six months ending June 30, 2004 and 2003, respectively. The net cash provided by
operating activities plus net policyholder contract deposits after the payment
of policyholder withdrawals equaled $ 1,277,601 for the first six months of 2004
and $ 2,287,366 the same period in 2003. 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 provided by (used in) investing activities was $ 2,353,677 and
$ (11,149,142) for the six-month periods ending June 30, 2004 and 2003,
respectively. The most significant aspect of cash provided by (used in)
investing activities is the fixed maturity transactions. The Company had fixed
maturities in the amount of $ 47,830,852 and $ 36,346,064 that sold and matured
in the first six months of 2004 and 2003, respectively. This is in addition to
the $ 10,627,244 and $ 24,922,488 of the held to maturity securities that
matured in the first six months of 2004 and 2003, respectively. In addition, the
Company purchased $ 50,089,775 and $ 65,430,731 of fixed maturities in 2004 and
2003, respectively.
Net cash provided by financing activities was $ 1,007,463 and $ 292,647 for the
six month periods ending June 30, 2004 and 2003, respectively. Policyholder
contract deposits decreased 4% in the first six months of 2004 compared to the
same period in 2003. Policyholder contract withdrawals increased 2% in the first
six months of 2004 compared to the same period in 2003. In addition, the Company
had retired $ 258,800 in common stock and reduced notes payable by $ 705,500 in
the first six months of 2003.
At June 30, 2004, the Company had a total of $ 2,275,000 in short-term debt
outstanding. Management believes overall sources available are more than
adequate to service this debt. These sources include current cash balances of
UTG, expected future operating cash flows and payment of dividends from the
Company's life subsidiary, UG.
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, 2004, 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,
2003 UG's total statutory capital and surplus amounted to $ 13,008,198. At
December 31, 2003, UG had a statutory loss from operations of $ (1,461,177).
Extraordinary dividends (amounts in excess of ordinary dividend limitations)
require prior approval of the insurance commissioner and are not restricted to a
specific calculation.
Management believes the overall sources of liquidity available will be
sufficient to satisfy the Company's financial obligations.
Accounting Developments
The Financial Accounting Standards Board ("FASB") has issued Statement No. 132
(revised 2003), Employers' Disclosures about Pensions and Other Postretirement
Benefits (an amendment of FASB Statements 87, 88 and 106). Statement No. 132 was
developed to address concerns of users of financial statements regarding their
need for more information about pension plan assets, obligations, benefit
payment, contributions and net benefit costs.
This statement was effective at the beginning of the first interim period
beginning after December 15, 2003. The adoption of Statement 132 (revised 2003)
did not affect the Company's financial position or results of operations, since
the Company has no such plans that meet the provisions of this statement.
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.
June 30, 2004
Expected maturity date
2004 2005 2006 2007 2008 Thereafter Total Fair value
Long term debt
Fixed rate 0 0 0 0 0 0 0 0
Avg. int. rate 0 0 0 0 0 0 0 0
Variable rate 2,275,000 0 0 0 0 0 2,275,000 2,275,000
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 AND USE OF PROCEEDS.
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 16, 2004, 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 2,719,580 0 11,946
Randall L. Attkisson 2,705,538 14,300 11,688
Joseph A. Brinck 2,719,898 0 11,628
Jesse T. Correll 2,705,370 14,300 11,856
Ward F. Correll 2,705,070 14,300 11,556
Thomas F. Darden 2,719,940 0 11,586
William W. Perry 2,719,940 0 11,586
James P. Rousey 2,705,556 14,300 11,670
ITEM 5. OTHER INFORMATION.
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
10. 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 Theodore 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
11. REPORTS ON FORM 8-K
NONE
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 9, 2004 By /s/ Randall L. Attkisson
Randall L. Attkisson
President, Chief Operating Officer
and Director
Date: August 9, 2004 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 Theodore 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
EXHIBIT 31.1
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-15(e) and 15d-15(e)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to 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 over financial reporting.
Date: August 9, 2004 By /s/ Jesse T. Correll
Chairman of the Board and
Chief Executive Officer
EXHIBIT 31.2
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-15(e) and 15d-15(e)) for the
registrant and have:
a. Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, 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 and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
c. Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to 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 over financial reporting.
Date: August 9, 2004 By /s/ Theodore C. Miller
Senior Vice President, Corporate Secretary and
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report on Form 10-Q of United Trust Group, Inc.
(the "Company") for the quarterly period ended June 30, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the "Report") I, Jesse T.
Correll, Chairman of the Board and Chief Executive Officer of the Company,
certify pursuant to 18 U.S.C.ss. 1350, as adopted pursuant toss.906 of the
Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company
By: /s/ Jesse T. Correll
Jesse T. Correll
Chairman of the Board and
Chief Executive Officer
Date: August 9, 2004
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Quarterly Report on Form 10-Q of United Trust Group, Inc.
(the "Company") for the quarterly period ended June 30, 2004, as filed with the
Securities and Exchange Commission on the date hereof (the "Report") I, Theodore
C. Miller, Senior Vice President, Corporate Secretary and Chief Financial
Officer of the Company, certify pursuant to 18 U.S.C.ss. 1350, as adopted
pursuant toss.906 of the Sarbanes-Oxley Act of 2002, that, to the best of my
knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company
By: /s/ Theodore C. Miller
Theodore C. Miller
Senior Vice President, Corporate Secretary and
Chief Financial Officer
Date: August 9, 2004
