Annual Statements Open main menu

UTG INC - Quarter Report: 2005 September (Form 10-Q)

                                 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 September 30, 2005

                                       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

                                   UTG, INC.
             (Exact name of registrant as specified in its charter)

 DELAWARE                                                             20-2907892
(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
October 31, 2005, was 3,904,250.




                           UTG, INC. AND SUBSIDIARIES
                                (The "Company")



                               TABLE OF CONTENTS

PART 1.   FINANCIAL INFORMATION................................................3


   Item 1.  Financial Statements...............................................3

     Consolidated Balance Sheets as of September 30, 2005 and
         December 31, 2004.....................................................3
     Consolidated Statements of Operations for the three and nine months
         ended September 30, 2005 and 2004.....................................4
     Consolidated Statement of Changes in Shareholders' Equity for
         the nine months ended September 30, 2005..............................5
     Consolidated Statements of Cash Flows for the nine months ended
         September 30, 2005 and 2004...........................................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...........................................18

PART II.   OTHER INFORMATION..................................................19


   ITEM 1.  LEGAL PROCEEDINGS.................................................19

   ITEM 2.  CHANGE IN SECURITIES AND USE OF PROCEEDS..........................19

   ITEM 3.  DEFAULTS UPON SENIOR SECURITIES...................................19

   ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............19

   ITEM 5.  OTHER INFORMATION.................................................19

   ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K..................................19


SIGNATURES....................................................................20

EXHIBIT INDEX, FOLLOWED BY EXHIBITS...........................................22




                         Part 1. Financial Information.
                         Item 1. Financial Statements.

                                    UTG, INC.
                                AND SUBSIDIARIES

                     Consolidated Balance Sheets (Unaudited)
--------------------------------------------------------------------------------

                                                                                September 30,       December 31,
                  ASSETS                                                            2005                2004*
                                                                              ----------------    ----------------

Investments:
    Fixed maturities at amortized cost
      (market $9,415,946 and $12,097,708)                                  $        9,417,840  $       11,973,415
    Investments held for sale:
      Fixed maturities, at market (cost $129,966,717 and $147,217,453)            128,908,971         148,193,887
      Equity securities, at market (cost $14,184,971 and $15,216,214)              23,128,846          24,399,172
    Mortgage loans on real estate at amortized cost                                40,395,453          20,722,415
    Investment real estate, at cost, net of accumulated depreciation               42,420,321          28,192,081
    Policy loans                                                                   12,694,761          12,844,748
    Short-term investments                                                             41,246              39,489
                                                                              ----------------    ----------------
                                                                                  257,007,438         246,365,207

Cash and cash equivalents                                                           3,808,753          11,859,472
Securities of affiliate                                                             4,000,000           4,000,000
Accrued investment income                                                           1,725,470           1,678,393
Reinsurance receivables:
    Future policy benefits                                                         31,909,632          32,422,529
    Policy claims and other benefits                                                3,995,225           3,959,569
Cost of insurance acquired                                                         11,185,370          12,747,532
Deferred policy acquisition costs                                                   1,465,839           1,685,263
Property and equipment, net of accumulated depreciation                             2,001,404           2,172,636
Income taxes receivable, current                                                      113,001             181,683
Other assets                                                                          410,393             795,800
                                                                              ----------------    ----------------
     Total assets                                                          $      317,622,525  $      317,868,084
                                                                              ================    ================

          LIABILITIES AND SHAREHOLDERS' EQUITY

Policy liabilities and accruals:
Future policy benefits                                                     $      235,682,286  $      235,592,973
Policy claims and benefits payable                                                  1,572,250           1,879,566
Other policyholder funds                                                            1,267,730           1,323,668
Dividend and endowment accumulations                                               12,571,551          12,526,390
Deferred income taxes                                                               7,730,081           8,561,010
Other liabilities                                                                   4,311,991           7,405,434
                                                                              ----------------    ----------------
     Total liabilities                                                            263,135,889         267,289,041
                                                                              ----------------    ----------------
Minority interests in consolidated subsidiaries                                    11,497,390           6,127,938
                                                                              ----------------    ----------------
Shareholders' equity:
Common stock - no par value, stated value $.001 and $.02 per share
Authorized 7,000,000 shares - 3,909,444 and 3,965,533 shares issued
    after deducting treasury shares of 283,798 and 227,709                              3,909              79,315
Additional paid-in capital                                                         42,285,198          42,590,820
Accumulated deficit                                                                (4,361,904)         (4,897,572)
Accumulated other comprehensive income                                              5,062,043           6,678,542
                                                                              ----------------    ----------------
     Total shareholders' equity                                                    42,989,246          44,451,105
                                                                              ----------------    ----------------
     Total liabilities and shareholders' equity                            $      317,622,525  $      317,868,084
                                                                              ================    ================

* Balance sheet audited at December 31, 2004.

                            See accompanying notes.



                                    UTG, INC.
                                AND SUBSIDIARIES

                Consolidated Statements of Operations (Unaudited)
----------------------------------------------------------------------------------------------------------------------------------

                                                                  Three Months Ended                    Nine Months Ended
                                                             September 30,     September 30,      September 30,     September 30,
                                                                2005              2004               2005              2004
                                                           ---------------   ----------------   ---------------   ----------------
Revenues:

    Premiums and policy fees                            $       3,997,169 $        4,171,717 $      12,518,890 $       13,305,825
    Reinsurance premiums and policy fees                         (607,827)          (782,045)       (2,095,616)        (2,370,341)
    Net investment income                                       2,587,341          2,865,198         7,377,305          7,431,129
    Realized investment gains (losses), net                        32,223             24,000         1,274,504            (68,754)
    Other income                                                  281,299            150,432           830,889            571,993
                                                           ---------------   ----------------   ---------------   ----------------
                                                                6,290,205          6,429,302        19,905,972         18,869,852

Benefits and other expenses:

    Benefits, claims and settlement expenses:
      Life                                                      4,737,004          4,440,973        13,241,084         14,788,618
      Reinsurance benefits and claims                            (448,984)          (467,371)       (1,118,686)        (1,826,283)
      Annuity                                                     273,958            272,237           792,209            841,870
      Dividends to policyholders                                  207,974            221,174           724,901            758,142
    Commissions and amortization of deferred
      policy acquisition costs                                    (58,377)            76,234          (116,821)           140,972
    Amortization of cost of insurance acquired                    633,306            468,444         1,562,162          1,402,862
    Operating expenses                                          1,309,983          1,319,472         4,189,547          4,148,933
    Interest expense                                                1,602             27,110             1,615             77,453
                                                           ---------------   ----------------   ---------------   ----------------
                                                                6,656,466          6,358,273        19,276,011         20,332,567

Gain (loss) before income taxes, minority interest
    and equity in earnings of investees                          (366,261)            71,029           629,961         (1,462,715)

Income tax credit (expense)                                        93,900            168,114           (24,854)           779,274
Minority interest in (income) loss of
    consolidated subsidiaries                                     (40,436)           (97,879)          (69,439)            17,351
                                                           ---------------   ----------------   ---------------   ----------------

Net income (loss)                                       $        (312,797)$          141,264 $         535,668 $         (666,090)
                                                           ===============   ================   ===============   ================

Basic income (loss) per share from continuing
    operations and net income (loss)                    $           (0.08)$             0.04 $            0.14 $            (0.17)
                                                           ===============   ================   ===============   ================

Diluted income (loss) per share from continuing
    operations and net income (loss)                    $           (0.08)$             0.04 $            0.14 $            (0.17)
                                                           ===============   ================   ===============   ================

Basic weighted average shares outstanding                       3,931,388          3,978,944         3,947,950          3,992,858
                                                           ===============   ================   ===============   ================

Diluted weighted average shares outstanding                     3,931,388          3,978,944         3,947,950          3,992,858
                                                           ===============   ================   ===============   ================

                            See accompanying notes.

                                    UTG, INC.
                                AND SUBSIDIARIES
            Consolidated Statement of Changes in Shareholders' Equity
            For the nine months ended September 30, 2005 (Unaudited)
------------------------------------------------------------------------------------------


Common stock
    Balance, beginning of year                                      $          79,315
    Change in stated value                                                    (75,350)
    Issued during year                                                              0
    Retired common shares                                                           0
    Purchase treasury shares                                                      (56)
                                                                      ----------------
    Balance, end of period                                                      3,909
                                                                      ----------------

Additional paid-in capital
    Balance, beginning of year                                             42,590,820
    Change in stated value                                                     75,350
    Issued during year                                                              0
    Retired common shares                                                           0
    Purchase treasury shares                                                 (380,972)
                                                                      ----------------
    Balance, end of period                                                 42,285,198
                                                                      ----------------

Accumulated deficit
    Balance, beginning of year                                             (4,897,572)
    Net income                                                                535,668       $         535,668
                                                                      ----------------        ----------------
    Balance, end of period                                                 (4,361,904)
                                                                      ----------------

Accumulated other comprehensive income
    Balance, beginning of year                                              6,678,542
    Other comprehensive income
      Unrealized holding loss on securities net of
        minority interest and reclassification adjustment                  (1,616,499)             (1,616,499)
                                                                      ----------------        ----------------
    Comprehensive income                                                                    $      (1,080,831)
                                                                                              ================
    Balance, end of period                                                  5,062,043
                                                                      ----------------

Total shareholders' equity, end of period                           $      42,989,246
                                                                      ================

                            See accompanying notes.


                                    UTG, INC.
                                AND SUBSIDIARIES

                Consolidated Statements of Cash Flows (Unaudited)
----------------------------------------------------------------------------------------------------------------

                                                                                      Nine Months Ended
                                                                                 September 30,   September 30,
                                                                                    2005              2004
                                                                               ---------------   ---------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
  Net income (loss)                                                         $         535,668 $        (666,090)
  Adjustments to reconcile net income (loss) to net cash
    provided by operating activities:
      Amortization/accretion of fixed maturities                                      500,567           422,964
      Realized investment (gains) losses, net                                      (1,274,504)           68,754
      Policy acquisition costs deferred                                               (21,000)           (3,000)
      Amortization of deferred policy acquisition costs                               240,424           251,035
      Amortization of cost of insurance acquired                                    1,562,162         1,402,862
      Depreciation                                                                  1,564,800         1,148,302
      Minority interest                                                             5,369,452         1,053,783
      Change in accrued investment income                                             (47,077)          188,279
      Change in reinsurance receivables                                               477,241           489,352
      Change in policy liabilities and accruals                                       724,964         1,023,914
      Charges for mortality and administration of
        universal life and annuity products                                        (6,844,673)       (7,003,228)
      Interest credited to account balances                                         3,979,380         4,044,649
      Change in income taxes payable                                                1,563,107          (889,413)
      Change in other assets and liabilities, net                                  (2,706,626)          490,453
                                                                               ---------------   ---------------
Net cash provided by operating activities                                           5,623,885         2,022,616

Cash flows from investing activities:
  Proceeds from investments sold and matured:
    Fixed maturities held for sale                                                 23,120,537        64,444,104
    Fixed maturities matured                                                        2,932,302        13,322,714
    Equity securities                                                               2,300,000            25,570
    Mortgage loans                                                                  4,436,316         7,880,037
    Real estate                                                                       216,052           207,010
    Policy loans                                                                    2,531,059         2,047,253
                                                                               ---------------   ---------------
  Total proceeds from investments sold and matured                                 35,536,266        87,926,688
  Cost of investments acquired:
    Fixed maturities held for sale                                                 (6,260,171)      (64,159,619)
    Fixed maturities                                                                 (493,359)       (1,387,598)
    Equity securities                                                                       0        (8,033,053)
    Mortgage loans                                                                (25,406,670)       (2,626,540)
    Real estate                                                                   (16,175,252)       (4,784,262)
    Policy loans                                                                   (2,381,072)       (1,810,024)
    Short-term                                                                         (1,434)             (322)
                                                                               ---------------   ---------------
  Total cost of investments acquired                                              (50,717,958)      (82,801,418)
  Purchase of property and equipment                                                  (23,433)          (13,342)
                                                                               ---------------   ---------------
Net cash provided by (used in) investing activities                               (15,205,125)        5,111,928

Cash flows from financing activities:
  Policyholder contract deposits                                                    6,529,533         6,926,298
  Policyholder contract withdrawals                                                (4,617,984)       (5,325,686)
  Proceeds from line of credit                                                      1,500,000         2,275,000
  Purchase of treasury stock                                                         (381,028)         (240,319)
  Payments of principal on notes payable                                           (1,500,000)       (4,564,776)
                                                                               ---------------   ---------------
Net cash provided by (used in) financing activities                                 1,530,521          (929,483)
                                                                               ---------------   ---------------

Net increase (decrease) in cash and cash equivalents                               (8,050,719)        6,205,061
Cash and cash equivalents at beginning of period                                   11,859,472         8,749,727
                                                                               ---------------   ---------------
Cash and cash equivalents at end of period                                  $       3,808,753 $      14,954,788
                                                                               ===============   ===============
                            See accompanying notes.

                           UTG, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements


1. BASIS OF PRESENTATION

The accompanying  consolidated  financial  statements have been prepared by UTG,
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, 2004.

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  September 30,  2005, Mr. Correll owns or controls  directly and
indirectly approximately 66% of UTG's outstanding stock.

At September 30,  2005, consolidated  subsidiaries of UTG, Inc. were as depicted
on the following organizational chart.

org chart


On July 1, 2005, United Trust Group, Inc., an Illinois corporation,  merged with
and into its wholly-owned  subsidiary,  UTG, Inc. (UTG), a Delaware corporation,
for the purpose of effecting a change in the  Company's  state of  incorporation
from  Illinois to  Delaware.  The merger was  effected  pursuant to that certain
Agreement  and Plan of Merger  dated as of April 4, 2005,  which was approved by
the boards of directors of both UTG and United Trust Group,  Inc. The merger was
approved by the holders of two-thirds of the outstanding  shares of common stock
of United Trust Group,  Inc. at the 2005 annual meeting of  shareholders on June
15, 2005, and by the sole stockholder of UTG, Inc. on June 15, 2005.


2. INVESTMENTS

As of  September 30,  2005 and  December 31,  2004,  fixed  maturities and fixed
maturities  held  for  sale  represented  54% and  65%,  respectively,  of total
invested  assets.  As  prescribed  by the  various  state  insurance  department
statutes  and  regulations,  the  insurance  company's  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 September 30,  2005, 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 September 30,  2005 and December 31,  2004, the Company had no long-term debt
outstanding.

On November 15, 2001, UTG was extended a $ 3,300,000 line of credit ("LOC") from
the First National Bank of Tennessee ("FNBT") located in Livingston,  Tennessee.
The LOC was for a  one-year  term  from the date of  issue.  Upon  maturity  the
Company  had renewed  the LOC for  additional  terms  until  June 1,  2005.  The
interest  rate on the LOC was  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.  The Company had no borrowings  attributable  to
this LOC during 2005. In order to provide greater operational flexibility,  this
LOC was transferred to the Company's  wholly-owned insurance subsidiary upon the
June 1, 2005 maturity.

On June 1,  2005,  UG, a subsidiary  of the Company,  was extended a $ 3,300,000
line of credit from the FNBT.  The LOC was for a one-year  term from the date of
issue. The interest rate on the LOC was 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.  During the quarter  ended  September 30,
2005,  UG  had  borrowings  from  the  LOC  of  $ 1,500,000  and  repayments  of
$ 1,500,000.  At September 30,  2005, the Company had no outstanding  borrowings
attributable to this LOC.

On April 1,  2002, UTG was extended a $ 5,000,000  line of credit from Southwest
Bank of St. Louis.  The LOC expired one-year from the date of issue and has been
renewed for  additional  terms.  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 September 30,  2005, 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 2004 and 2003, the Board of Directors of UTG approved offerings under the
plan to qualified individuals.  For the years ended December 31,  2004 and 2003,
four individuals  purchased 14,440 and eight individuals purchased 58,891 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
September 30,  2005,  UTG had 89,877 shares  outstanding  that were issued under
this program with a value of $ 12.83 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 October 31,  2005, UTG has spent $ 1,542,482
in the acquisition of 233,825 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  September 30,  2005,  diluted earnings per share were the same as basic
earnings per share since 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.

On June 10,  2002 UTG and Fiserv  formed an alliance  between  their  respective
organizations to provide third party  administration (TPA) services to insurance
companies seeking business process outsourcing solutions.  Fiserv is 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  and TPA clients to "ID3",  a software  system  owned by
Fiserv to  administer  an array of life,  health  and  annuity  products  in the
insurance industry.  Fiserv 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. Also as part of this alliance,  a
liability   exists  which  is  contingent  on  the   completion  of  future  TPA
arrangements.  The balance remaining of this contingent  liability was $ 115,000
on September 30, 2005.

Also during June 2002, the Company entered into a five-year contract with Fiserv
for services  related to its purchase of the "ID3"  software  system.  Under the
contract,  the Company is  required  to pay a minimum of  $ 12,000  per month in
software  maintenance  costs and $ 5,000 per month in offsite  data center costs
for a five-year period from the date of the signing.

In the normal  course of business  the Company is involved  from time to time in
various  legal  actions and other state and federal  proceedings.  There were no
proceedings pending or threatened as of September 30, 2005.


6. OTHER CASH FLOW DISCLOSURE

On a cash basis,  the Company  paid  $ 1,615  and  $ 77,453 in interest  expense
during the first nine months of 2005 and 2004,  respectively.  The Company  paid
$ 1,755 and $ 100,000 in federal income tax during the first nine months of 2005
and 2004, respectively.


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  $ 6,900 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
              September 30, 2005                                Amount              or Benefit           Amount
              ----------------------------------------------    ----------------    -----------------    ---------------

              Unrealized holding loss during
                   period                                   $       (2,495,765) $           872,518  $       (1,622,247)
              Less: reclassification adjustment
                   for losses realized in net income                     8,843               (3,095)              5,748
                                                                ----------------    -----------------    ---------------
              Net unrealized loss                                   (2,486,922)             870,423          (1,616,499)
                                                                ----------------    -----------------    ---------------
              Other comprehensive income                    $       (2,486,922) $           870,423  $       (1,616,499)
                                                                ================    =================    ===============



9. NEW ACCOUNTING STANDARDS

The Financial  Accounting  Standards  Board ("FASB")  issued  Statement No. 154,
Accounting for Changes and Error  Corrections - a replacement of APB Opinion No.
20 and FASB  Statement No. 3. The  statement  changes the  requirements  for the
accounting  for and  reporting  of a change  in  accounting  principle.  It also
applies  to changes  required  by an  accounting  pronouncement  in the  unusual
instance that the pronouncement does not include specific transition provisions.
The statement is effective for accounting changes and corrections of errors made
in fiscal years  beginning after December 15, 2005. The Company will account for
all future changes and error  corrections in accordance with the requirements of
Statement No. 154.


10.RECLASSIFICATIONS

Certain  prior  year  amounts  have been  reclassified  to  conform  to the 2005
presentation.  Such  reclassifications  had no effect on previously reported net
income or shareholders' equity.


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
financial condition, changes in financial position and results of operations for
the three months and nine months ended  September 30,  2005,  as compared to the
same period of 2004, of UTG and its  subsidiaries.  This discussion and analysis
supplements Management's Discussion and Analysis in Form 10-K for the year ended
December 31,  2004, and should be read in conjunction with the interim financial
statements and 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 September 30, 2005.

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,  2004,  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 nine months of 2005.


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 nine
months of 2005 to the same period in 2004. 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.

The  Company's  primary  source  of  new  business  production  comes  from  the
conservation effort implemented several years ago. This effort was an attempt to
improve the persistency rate of the insurance company's policies. Several of the
customer  service  representatives  of the Company are also  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.  In 2003, the
Company  replaced its original  universal life product with a new universal life
contract  referred to as "the  Legacy".  This  product was designed for use with
several distribution  channels including the Company's own internal agents, bank
agent/employees  and through  personally  producing  general agents  "PPGA".  In
addition,  the Company has introduced  other new and updated  products in recent
periods including the Horizon Annuity and Kid Kare (a single premium, child term
policy).  The company is currently  working on  development  of a level term and
decreasing term product.  Management has no current plans to increase  marketing
efforts.  New product  development is anticipated to be utilized in conservation
efforts  and sales to  existing  customers.  Such sales are not  expected  to be
material.

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 products to compliment the existing offerings.

Net  investment  income  decreased  less than 1% when  comparing  the first nine
months of 2005 to the same period in 2004.  While  there has been a  significant
increase in the national prime rate during the last several  months,  from 4.00%
to 6.75%, this has not been the driving factor in the stability of the Company's
overall net investment  income.  Interest rates on long-term  bonds available in
the marketplace have not experienced a similar increase. During 2004, management
began to lengthen the  Company's  portfolio  while  maintaining  a  conservative
investment philosophy. As such, following an analysis of current holdings during
the first half of 2004, the Company liquidated approximately $ 64,444,000 of its
bond  portfolio  in order to limit its  interest  rate and  extension  risk.  In
addition,  there were  $ 13,322,000  in bonds that matured or were called during
the first nine months of 2004. The result of these transactions caused an excess
of cash invested in  short-term  money market funds during the first nine months
of 2004.  Although this hurt  investment  earnings in the short run, the Company
has not had to write off any investment losses due to excessive risk.

In response to the interest  rate  environment  in the bond market,  the Company
increased  its  investment  in mortgage  loans.  The  balance of  mortgage  loan
investments  increased from approximately  $ 20,722,000 at December 31,  2004 to
$ 40,395,000  at  September 30,  2005.  This has  allowed  the Company to obtain
higher yields than available in the bond market,  lengthen the overall portfolio
average life and still  maintain a  conservative  investment  portfolio.  During
2005, the Company issued $ 25,406,670 in new mortgage loans. These loans have an
average loan to value rate of 50% and an average yield of 6.26%.

More  significant  than the  change in bond  income was the  performance  of the
Company's real estate  investments during the first nine months of 2005 compared
to 2004. Net income from the Company's primary real estate holding improved more
than  $ 367,000  in  comparing  the  first  nine  months  of 2005 to  2004.  The
improvement  in real estate  investment  income is  principally  due to a higher
occupancy lease rate resulting in increased earnings in Hampshire Plaza.

Net investment  income  decreased 10% when  comparing the third quarter  results
from 2005 to the same  period in 2004.  The  decrease  in the third  quarter net
investment  income,  when  comparing  2005 with the same period in 2004,  is the
result of sales of timber in 2004 with  little  activity  in 2005.  Also,  while
significant  improvements  in the income from the Company's  primary real estate
holding have  occurred in 2005,  most of this  increase is  attributable  to the
first six months of the year.

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 were 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 gains of $ 1,274,504 in the first nine months of
2005 compared to net realized  investment losses of $ 68,754 for the same period
in 2004. The net realized gains in 2005 were primarily the result of the sale of
2,216,776  shares of common stock owned of BNL  Financial  Corporation  ("BNL").
These shares represented  approximately  10.57% of the then current  outstanding
shares of BNL and represent  all shares owned by UG. The shares were  reacquired
by the issuing  entity for an agreed upon sales  price of  $ 2,300,000.  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.  A quarterly  comparison shows realized  investment gains of $ 32,223
for the quarterly  period ended  September  30, 2005,  and $ 24,000 for the same
period in 2004.  The net  realized  gain  during  the third  quarter  of 2005 is
primarily attributable to the gain from the sale of one parcel real estate.

Other income  increased 45% when  comparing the first nine months of 2005 to the
same period in 2004. Other income increased 87% when comparing the third quarter
of 2005 to the same  period in 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 policy  applications  processed  and  agent  administration.
During the first nine months of 2005 and 2004,  the Company  received  $ 693,818
and $ 444,364  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 insurance provider that provides approximately $ 300,000 in gross annual
revenue for these  services.  The  agreement  began during the third  quarter of
2004.  In  addition,  Company  will begin  providing  additional  administrative
services for this insurance  provider on November 1, 2005 that will increase the
annual revenue by  approximately  $ 300,000.  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  6% in the first  nine  months of 2005  compared  to the same
period  in 2004.  These  expenses  increased  8% for the third  quarter  of 2005
compared to the same period in 2004. Policy claims decreased $ 1,838,000 for the
first nine months of 2005  compared to the same  period in 2004.  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 nine  months of 2005 to the same period in
2004.  Consequently,  the change in  reserves  decreased  due to a  leveling  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
$ 134,611  and  $ 257,793  for the three and nine months of 2005 compared to the
same period in 2004,  respectively.  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 the Company
discontinued its association  with most of its agency force.  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 increased slightly in the first nine months of 2005 compared
to the same period in 2004.  The  increase in  expenses is due  primarily  to an
increase  in  information   technology  costs  and  additional  personnel  costs
associated  with the increase in TPA revenues.  Excluding  these expense  items,
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.  Operating  expenses decreased
slightly in the third quarter of 2005 compared to the same period in 2004.

Interest expense  decreased 98% in the first nine months of 2005 compared to the
same  period in 2004.  The  Company  repaid all  outside  debt in 2004,  through
operating  cash  flows  and  dividends  received  from  its  subsidiary  UG.  At
September 30,  2005,  UTG had no debt  outstanding.  The Company paid $ 1,602 in
interest during the third quarter of 2005 due to utilization of its LOC.

(c)  Net income

The  Company  had net  income of $  535,668  in the  first  nine  months of 2005
compared to a net loss of $ 666,090 for the same period in 2004.  The net income
in 2005 was mainly attributable to the gain from the sale of the common stock of
BNL  during  the  second  quarter  of  2005.  The net  loss in 2004  was  mainly
attributable to the decrease in investment income and premium income.


Financial Condition

The financial  condition of the Company has declined  since  December 31,  2004.
Total   shareholders'   equity   decreased   approximately   $ 1,462,000  as  of
September 30,  2005 compared to December 31,  2004. The decrease is attributable
to the decline in market value of equity and bond  investments of  approximately
$ 1,616,000,  net of deferred taxes,  that was included in the accumulated other
comprehensive  income.  This  decline  was  partially  offset  by the gain  from
operations  described above. The Company purchased treasury shares in the amount
of $ 381,028, which decreased shareholders' equity.

Investments represent approximately 81% and 78% of total assets at September 30,
2005 and  December 31,  2004,  respectively.  Accordingly,  investments  are the
largest  asset group of the  Company.  The  Company's  insurance  subsidiary  is
regulated by insurance  statutes and  regulations  as to the type of investments
that it is  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  September 30,  2005, 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  two  principal  needs  for  cash  - the  insurance  company's
contractual  obligations to policyholders and the payment of operating expenses.
Cash and cash equivalents as a percentage of total assets were  approximately 1%
and 4% as of September 30,  2005, and  December 31,  2004,  respectively.  Fixed
maturities as a percentage of total assets were  approximately 44% and 50% as of
September 30, 2005 and December 31, 2004, respectively.

Net cash provided by operating  activities was  $ 5,623,885  and $ 2,022,616 for
the nine months ending September 30, 2005 and 2004, respectively.

Sources of operating cash flows of the Company, as with most insurance entities,
is  comprised  primarily  of premiums  received on life  insurance  products and
income earned on investments.  Uses of operating cash flows consist primarily of
payments of benefits to policyholders and beneficiaries and operating expenses.

Premiums received have shown a steady decline  historically,  as the Company has
not actively  marketed new products in several years.  Sources of operating cash
flows  increased  approximately  $ 1,970,000  in 2005  compared  to  2004,  with
investment gains representing  almost all of the increase.  See discussion under
results of operations - revenues for a more  detailed  discussion of the changes
in premiums and investment income.

The decline in operating cash sources has  historically  been offset by declines
in policy  benefits  payments.  Cash  payments  for death claims  represent  the
largest  component  of uses of cash  within  policy  benefits.  The  decline  in
operating  cash  sources  has  historically  been  offset by  declines in policy
benefits  payments.   Uses  of  operating  cash  flows  declined   approximately
$ 1,060,000  in 2005 compared to 2004.  This decline is the result of a decrease
in policy  benefit  payments.  See  discussion  under  results of  operations  -
expenses for a more  detailed  discussion  of changes in operating  expenses and
policy benefits.

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 used in investing  activities  was  $ (15,205,125)  for the  nine-month
period ending September 30, 2005. Net cash provided by investing  activities was
$ 5,111,928  for the  nine-month  period  ending  September  30, 2004.  The most
significant  aspect of cash  provided by or used in investing  activities is the
fixed maturity  transactions.  The Company had fixed maturities in the amount of
$ 23,120,537 and $ 64,444,104  that sold and matured in the first nine months of
2005  and  2004,  respectively.  This  is in  addition  to the  $ 2,932,302  and
$ 13,322,714  of the held to maturity  securities that matured in the first nine
months  of 2005 and 2004,  respectively.  In  addition,  the  Company  purchased
$ 6,753,530 and $ 65,547,217 of fixed maturities in 2005 and 2004, respectively.
Also, the investment in mortgage loans  increased from  $ 2,626,540 in the first
nine  months of 2004 to  $ 25,406,670  in the same  period of 2005.  The Company
invested  $ 16,175,252  in real  estate  during the first  nine  months of 2005,
compared to $ 2,626,540 for the same period of 2004.

Net cash provided by financing  activities  was  $ 1,530,521  for the nine month
period ending  September  30, 2005.  Net cash used in financing  activities  was
$ (929,483)  for the nine month period ending  September 30, 2004.  Policyholder
contract deposits  decreased 6% in the first nine months of 2005 compared to the
same period in 2004.  Policyholder  contract  withdrawals  decreased  13% in the
first nine months of 2005 compared to the same period in 2004.

At September 30, 2005 and 2004, the Company had no short-term debt outstanding.

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  September 30,  2005,  substantially  all of the
consolidated shareholders equity represents net assets of its subsidiaries.  The
Company's  insurance  subsidiary has maintained  adequate  statutory capital and
surplus and has 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,
2004 UG's total  statutory  capital and surplus  amounted  to  $ 21,860,401.  At
December 31,  2004,  UG had a  statutory  loss  from  operations  of  $ 762,152.
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.


Regulatory Environment

In March 2005,  UTG's Board of Directors  adopted a proposal to change the state
of incorporation of UTG from Illinois to Delaware by merging UTG with and into a
wholly-owned  Delaware subsidiary (the "reincorporation  merger").  The Board of
Directors and management of UTG believe that  reincorporation  to Delaware would
be  beneficial  to  the  Company   because   Delaware   corporate  law  is  more
comprehensive,   widely  used  and  extensively  interpreted  than  other  state
corporate laws,  including  Illinois corporate law. The  reincorporation  merger
will effect only a change in UTG's legal domicile and certain other changes of a
legal nature.  It will not result in any change in UTG's  business,  management,
fiscal year, assets or liabilities or location of its principal  facilities.  At
the  2005  annual  meeting  of  shareholders,   the  shareholders  approved  the
reincorporation merger to be effective July 1, 2005.


Accounting Developments

The Financial  Accounting  Standards  Board ("FASB")  issued  Statement No. 154,
Accounting for Changes and Error  Corrections - a replacement of APB Opinion No.
20 and FASB  Statement No. 3. The  statement  changes the  requirements  for the
accounting  for and  reporting  of a change  in  accounting  principle.  It also
applies  to changes  required  by an  accounting  pronouncement  in the  unusual
instance that the pronouncement does not include specific transition provisions.
The statement is effective for accounting changes and corrections of errors made
in fiscal years  beginning after December 15, 2005. The Company will account for
all future changes and error  corrections in accordance with the requirements of
Statement No. 154.


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's  exposure to interest  rate changes  results  from a  significant
holding of fixed maturity  investments and mortgage loans on real estate, all of
which   comprised   approximately   70%  of  the  investment   portfolio  as  of
September 30,  2005. These investments are mainly exposed to changes in treasury
rates.  The  fixed  maturities   investments   include  U.S.  government  bonds,
securities issued by government  agencies,  mortgage-backed  bonds and corporate
bonds. Approximately 79% of the fixed maturities owned at September 30, 2005 are
instruments  of the United States  government  or are backed by U.S.  government
agencies or private  corporations  carrying  the  implied  full faith and credit
backing of the U.S. government.

To manage interest rate risk, the Company performs periodic projections of asset
and  liability  cash  flows  to  evaluate  the  potential   sensitivity  of  the
investments and liabilities.  Management assesses interest rate sensitivity with
respect  to  the   available-for-sale   fixed   maturities   investments   using
hypothetical  test  scenarios  that assume either  upward or downward  100-basis
point shifts in the prevailing  interest rates.  The following  tables set forth
the  potential  amount of  unrealized  gains  (losses)  that  could be caused by
100-basis  point  upward and  downward  shifts on the  available-for-sale  fixed
maturities investments as of September 30, 2005:


        Decreases in Interest Rates                Increases in Interest Rates
        ----------------------- ------------------ ----------------- ---------------------- -----------------------
              200 Basis               100 Basis          100 Basis         200 Basis              300 Basis
                Points                  Points             Points            Points                 Points
        ----------------------- ------------------ ----------------- ---------------------- -----------------------
             $ 6,186,000             $ 3,793,000        $ (6,452,000)     $ (11,819,000)         $ (17,041,000)
        ----------------------- ------------------ ----------------- ---------------------- -----------------------

While the test scenario is for  illustrative  purposes only and does not reflect
our  expectations   regarding  future  interest  rates  or  the  performance  of
fixed-income  markets,  it is a near-term  change that illustrates the potential
impact of such events. Due to the composition of the Company's book of insurance
business,  management  believes it is unlikely that the Company would  encounter
large  surrender  activity due an interest  rate  increase  that would force the
disposal of fixed maturities at a loss.

There are no fixed maturities or other investment that management  classifies as
trading instruments. At September 30,  2005 and December 31, 2004, there were no
investments in derivative instruments.

The Company had no long-term debt, capital lease obligations, material operating
lease obligations or purchase obligations outstanding as of September 30, 2005.

Future policy  benefits  reflected as  liabilities of the Company on its balance
sheet as of September 30,  2005, represent actuarial estimates of liabilities of
future  policy  obligations  such as  expected  death  claims  on the  insurance
policies  in force as of the  financial  reporting  date.  The  following  table
provides information about the Company's estimated future policy obligations.

     ---------------------------- ----------------- ---------------- ----------------- ----------------- ----------------
                                       2006              2007             2008              2009              2010
     ---------------------------- ----------------- ---------------- ----------------- ----------------- ----------------

     ---------------------------- ----------------- ---------------- ----------------- ----------------- ----------------
       Future policy benefits           $17,200           $17,200          $17,200           $17,200           $17,200
     ---------------------------- ----------------- ---------------- ----------------- ----------------- ----------------

These are  estimates of future policy  benefits  presented are based on historic
trend analysis and actuarially  determined  estimates of future results.  Actual
results could vary  significantly  from these estimates  resulting in a material
impact on the Company's liquidity and financial condition.


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.

NONE

ITEM 5. OTHER INFORMATION.

NONE

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

   11. Exhibits

Exhibit Number             Description

     2.1  Articles  of  Merger  of  United  Trust  Group,   Inc.,   An  Illinois
          Corporation with and into UTG, Inc., A Delaware  Corporation  dated as
          of July 1, 2005, including exhibits thereto.

     3.1  Articles  of  Incorporation  of  the  Registrant  and  all  amendments
          thereto.

     3.2  By-Laws for the Registrant and all amendments thereto.

     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

   12. REPORTS ON FORM 8-K

On July 1,  2005,  UTG filed a report on Form 8-K  regarding  Item 3.03 Material
Modification to Rights of Security Holders.  The information reported in the 8-K
discussed  the  merger of the  United  Trust  Group,  Inc.  (UTG),  an  Illinois
corporation,  with and into its wholly-owned subsidiary, UTG, Inc. (UTG, Inc), a
Delaware  corporation,  for the purpose of  effecting a change in the  Company's
state of incorporation from Illinois to Delaware.

On  September 21,  2005,  UTG  filed a report  on Form 8-K  regarding  Item 4.01
Changes in Registrant's  Certifying Accountant.  The information reported in the
8-K discussed the dismissal of the Registrant's  independent  registered  public
account firm effective at the conclusion of its review of the Registrant's third
quarter financial statements.


                                   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.




                                   UTG, INC.
                                  (Registrant)










Date:   November 9, 2005                   By  /s/ Randall L. Attkisson

                                               Randall L. Attkisson
                                               President, Chief Operating Officer
                                                  and Director








Date:   November 9, 2005                   By  /s/ Theodore C. Miller

                                               Theodore C. Miller
                                               Senior Vice President
                                                  and Chief Financial Officer





                                 EXHIBIT INDEX



Exhibit Number             Description


     2.1  Articles  of  Merger  of  United  Trust  Group,   Inc.,   An  Illinois
          Corporation with and into UTG, Inc., A Delaware  Corporation  dated as
          of July 1, 2005, including exhibits thereto.

     3.1  Articles  of  Incorporation  of  the  Registrant  and  all  amendments
          thereto.

     3.2  By-Laws for the Registrant and all amendments thereto.

     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