UTG INC - Quarter Report: 2006 June (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 June 30, 2006
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 July 31,
2006, was 3,873,647.
UTG, 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, 2006 and December 31, 2005.....3
Consolidated Statements of Operations for the three and six months
ended June 30, 2006 and 2005............................................4
Consolidated Statement of Changes in Shareholders' Equity and
Comprehensive income for the six months ended June 30, 2006.............5
Consolidated Statements of Cash Flows for the six months ended
June 30, 2006 and 2005..................................................6
Notes to Consolidated Financial Statements................................7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...................................................13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........18
ITEM 4. CONTROLS AND PROCEDURES..............................................19
PART II. OTHER INFORMATION....................................................20
ITEM 1. LEGAL PROCEEDINGS....................................................20
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS.............................20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES......................................20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................20
ITEM 5. OTHER INFORMATION....................................................20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................20
SIGNATURES....................................................................21
EXHIBIT INDEX, FOLLOWED BY EXHIBITS...........................................23
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
UTG, Inc.
and Subsidiaries
Consolidated Balance Sheets (Unaudited)
-----------------------------------------------------------------------------------------------------------------------
June 30, December 31,
ASSETS 2006 2005*
------------------ ------------------
Investments:
Fixed maturities at amortized cost
(market $7,024,829 and $7,500,291) $ 7,200,030 $ 7,513,064
Investments held for sale:
Fixed maturities, at market (cost $131,336,244 and $127,000,657) 126,825,378 125,075,626
Equity securities, at market (cost $15,220,777 and $15,098,815) 22,166,617 24,574,259
Mortgage loans on real estate at amortized cost 34,975,770 36,781,293
Investment real estate, at cost, net of accumulated depreciation 44,167,323 42,587,982
Policy loans 12,279,944 12,644,838
Short-term investments 43,438 42,116
------------------ ------------------
247,658,500 249,219,178
Cash and cash equivalents 9,870,973 12,204,087
Securities of affiliate 4,000,000 4,000,000
Accrued investment income 1,574,534 1,538,972
Reinsurance receivables:
Future policy benefits 31,717,627 31,908,738
Policy claims and other benefits 4,120,896 4,017,833
Cost of insurance acquired 9,296,963 10,554,447
Deferred policy acquisition costs 1,309,126 1,414,364
Property and equipment, net of accumulated depreciation 2,068,738 1,921,841
Income taxes receivable, current 365,515 150,447
Other assets 1,832,901 1,901,594
------------------ ------------------
Total assets $313,815,773 $ 318,831,501
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits $ 235,680,514 $ 234,959,085
Policy claims and benefits payable 1,872,212 1,950,037
Other policyholder funds 998,639 1,217,857
Dividend and endowment accumulations 12,624,982 12,638,713
Deferred income taxes 6,074,887 8,100,615
Other liabilities 4,039,185 4,738,809
------------------ ------------------
Total liabilities 261,290,419 263,605,116
------------------ ------------------
Minority interests in consolidated subsidiaries 11,553,267 11,908,933
------------------ ------------------
Shareholders' equity:
Common stock - no par value, stated value $.001 per share
Authorized 7,000,000 shares - 3,874,181 and 3,901,800 shares issued
after deducting treasury shares of 331,061 and 303,442 3,874 3,902
Additional paid-in capital 42,066,712 42,295,661
Accumulated deficit (2,756,153) (3,637,349)
Accumulated other comprehensive income 1,657,654 4,655,238
------------------ ------------------
Total shareholders' equity 40,972,087 43,317,452
------------------ ------------------
Total liabilities and shareholders' equity $ 313,815,773 $ 318,831,501
================== ==================
* Balance sheet audited at December 31, 2005.
See accompanying notes.
UTG, Inc.
and Subsidiaries
Consolidated Statements of Operations (Unaudited)
--------------------------------------------------------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
------------ ------------- ------------ -------------
Revenues:
Premiums and policy fees $ 4,150,834 $ 4,316,761 $ 8,316,600 $ 8,521,721
Reinsurance premiums and policy fees (589,106) (795,524) (1,327,100) (1,487,789)
Net investment income 2,803,703 2,356,705 5,342,877 4,789,964
Realized investment gains (losses), net (121,135) 1,260,339 3,042,558 1,242,281
Other income 506,807 280,753 1,205,457 549,590
------------ ------------- ------------- -------------
6,751,103 7,419,034 16,580,392 13,615,767
Benefits and other expenses:
Benefits, claims and settlement expenses:
Life 6,108,086 3,634,033 11,501,330 8,504,080
Reinsurance benefits and claims (431,460) (365,406) (1,122,685) (669,702)
Annuity 298,631 268,183 504,162 518,251
Dividends to policyholders 286,137 240,920 475,689 516,927
Commissions and amortization of deferred
policy acquisition costs (10,018) (75,815) (23,492) (58,444)
Amortization of cost of insurance acquired 627,493 463,293 1,257,484 928,856
Operating expenses 1,385,837 1,622,680 3,110,034 2,879,564
Interest expense 0 0 0 13
------------ ------------- ------------- -------------
8,264,706 5,787,888 15,702,522 12,619,545
Gain (loss) before income taxes, minority interest
and equity in earnings of investees (1,513,603) 1,631,146 877,870 996,222
Income tax credit (expense) 671,459 (212,657) (52,368) (118,754)
Minority interest in (income) loss of
consolidated subsidiaries 44,018 (23,456) 55,694 (29,003)
------------ ------------- ------------- -------------
Net income (loss) $ (798,126)$ 1,395,033 $ 881,196 $ 848,465
============ ============= ============= =============
Basic income (loss) per share from continuing
operations and net income (loss) $ (0.21)$ 0.35 $ 0.23 $ 0.21
============ ============= ============= =============
Diluted income (loss) per share from continuing
operations and net income (loss) $ (0.21)$ 0.35 $ 0.23 $ 0.21
============ ============= ============= =============
Basic weighted average shares outstanding 3,879,960 3,952,164 3,888,920 3,956,368
============ ============= ============= =============
Diluted weighted average shares outstanding 3,879,960 3,952,164 3,888,920 3,956,368
============ ============= ============= =============
See accompanying notes.
UTG, Inc.
and Subsidiaries
Consolidated Statement of Changes in
Shareholders' Equity and Comprehensive Income
For the six months ended June 30, 2006 (Unaudited)
-----------------------------------------------------------------------------------------------------------------
Common stock
Balance, beginning of year $ 3,902
Issued during year 0
Retired common shares 0
Purchase treasury shares (28)
---------------
Balance, end of period 3,874
---------------
Additional paid-in capital
Balance, beginning of year 42,295,661
Issued during year 0
Retired common shares 0
Purchase treasury shares (228,949)
---------------
Balance, end of period 42,066,712
---------------
Accumulated deficit
Balance, beginning of year (3,637,349)
Net income 881,196
---------------
Balance, end of period (2,756,153)
---------------
Accumulated other comprehensive income
Balance, beginning of year 4,655,238
Other comprehensive income
Unrealized holding loss on securities net of
minority interest and reclassification adjustment (2,997,584)
---------------
Comprehensive income
Balance, end of period 1,657,654
---------------
Total shareholders' equity, end of period $ 40,311,954
===============
Comprehensive income
Net gain $ 881,196
Unrealized holding losses on securities
net of reclassification adjustment (2,997,584)
---------------
Total comprehensive income $ (2,116,388)
===============
See accompanying notes.
UTG, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
----------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30, June 30,
2006 2005
--------------- ---------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income $ 881,196 $ 848,465
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Amortization/accretion of fixed maturities 225,750 355,026
Realized investment gains, net (3,203,637) (1,242,281)
Policy acquisition costs deferred 0 (14,000)
Amortization of deferred policy acquisition costs 105,238 146,949
Amortization of cost of insurance acquired 1,257,484 928,856
Depreciation 1,226,779 1,039,090
Minority interest (55,694) 29,016
Change in accrued investment income (35,562) 54,545
Change in reinsurance receivables 88,048 472,013
Change in policy liabilities and accruals 1,475,798 345,217
Charges for mortality and administration of
universal life and annuity products (4,667,987) (4,577,979)
Interest credited to account balances 2,617,606 2,673,277
Change in income taxes payable (122,940) 1,088,737
Change in other assets and liabilities, net (630,931) (1,470,358)
--------------- ---------------
Net cash provided by (used in) operating activities (838,852) 676,573
Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities held for sale 5,673,288 17,699,090
Fixed maturities matured 2,802,824 2,800,406
Equity securities 8,107,724 2,300,000
Mortgage loans 5,423,561 2,459,517
Real estate 101,055 0
Policy loans 1,784,083 1,811,434
Short-term 219 0
--------------- ---------------
Total proceeds from investments sold and matured 23,892,754 27,070,447
Cost of investments acquired:
Fixed maturities held for sale (10,216,824) (5,268,921)
Fixed maturities (2,506,647) (493,359)
Equity securities (5,188,061) 0
Mortgage loans (3,618,038) (13,892,440)
Real estate (2,918,098) (2,276,634)
Policy loans (1,419,161) (1,735,982)
Short-term 0 (234)
--------------- ---------------
Total cost of investments acquired (25,866,829) (23,667,570)
Purchase of property and equipment (276,448) (18,974)
--------------- ---------------
Net cash provided by (used in) investing activities (2,250,523) 3,383,903
Cash flows from financing activities:
Policyholder contract deposits 4,160,860 4,431,978
Policyholder contract withdrawals (3,175,622) (3,103,773)
Purchase of treasury stock (228,977) (112,429)
--------------- ---------------
Net cash provided by financing activities 756,261 1,215,776
--------------- ---------------
Net increase in cash and cash equivalents (2,333,114) 5,276,252
Cash and cash equivalents at beginning of period 12,204,087 11,859,472
--------------- ---------------
Cash and cash equivalents at end of period $ 9,870,973 $ 17,135,724
=============== ===============
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, 2005.
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, 2006, Mr. Correll owns or controls directly and
indirectly approximately 66% of UTG's outstanding stock.
At June 30, 2006, consolidated subsidiaries of UTG, Inc. were as depicted on the
following organizational chart.
UTG, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
2. INVESTMENTS
As of June 30, 2006 and December 31, 2005, fixed maturities and fixed maturities
held for sale represented 54% and 53%, 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, 2006, 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, 2006 and December 31, 2005, the Company had no long-term debt
outstanding.
On June 1, 2005, UG was extended a $ 3,300,000 line of credit from the FNBT. The
LOC is for a one-year term and is renewed annually. 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, 2006, 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 is for a one-year term and is renewed annually. 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, 2006, 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 2005 and 2004, the Board of Directors of UTG approved offerings under the
plan to qualified individuals. For the years ended December 31, 2005 and 2004,
two individuals purchased 12,000 shares and four individuals purchased 14,440
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,
2006, UTG had 101,877 shares outstanding that were issued under this program
with a value of $ 13.79 per share pursuant to the above formula.
B. Stock Repurchase Program
In 2001 and 2004, the Board of Directors of UTG authorized the repurchase in the
open market or in privately negotiated transactions of up to a total of $ 2
million of UTG's common stock. On April 18, 2006, an additional $ 1 million, for
a total of $ 3 million, was authorized for repurchasing shares at the Company's
option. Repurchased shares are available for future issuance for general
corporate purposes. Through July 31, 2006, UTG has spent $ 2,236,631 in the
acquisition of 304,428 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, 2006, 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.
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 staffs the
administration effort. To facilitate the alliance, the Company has converted 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. 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 June 30, 2006.
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 was 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. The contract was amended in
May 2006 for an additional five year period beginning on the amendment date.
Under the amended contract, the Company is required to pay $ 8,333 per month in
software maintenance costs and a minimum of $ 14,058 for production processing
fees. The production processing fees are adjusted for the number of policies
administered on the ID3 software system.
As of June 30, 2006, the Company had several loans outstanding with committed
balances available to the borrower. These funds have not been advanced to the
borrower. These commitments are available to the borrower until the maturity of
the loan or exhausted. The total amount committed to these borrowers was
$ 7,142,000.
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 June 30, 2006.
6. OTHER CASH FLOW DISCLOSURE
On a cash basis, the Company paid $ 0 and $ 13 in interest expense during the
first six months of 2006 and 2005, respectively. The Company paid $ 305,250 and
$ 0 of federal income tax during the first six months of 2006 and 2005,
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 $ 553,513 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, 2006 Amount or Benefit Amount
---------------------------------------------- ---------------- ----------------- ---------------
Unrealized holding gain during
Period $ (9,292,526) $ 3,252,384 $ (6,040,142)
Less: reclassification adjustment
for gains realized in net income 4,680,858 (1,638,300) 3,042,558
---------------- ----------------- ---------------
Net unrealized gain (4,611,668) 1,614,084 (2,997,584)
---------------- ----------------- ---------------
Other comprehensive income $ (4,611,668) $ 1,614,084 $ (2,997,584)
================ ================= ===============
9. NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued Statement No. 155,
Accounting for Certain Hybrid Financial Instruments - An amendment of FASB
Statements No. 133 and 140. The statement improves the financial reporting by
eliminating the exemption from applying Statement 133 to interest in securitized
financial assets so that similar instruments are accounted for similarly
regardless of the form of the instrument. The statement is effective for all
financial instruments acquired or issued after the beginning of an entity's
first fiscal year that begins after September 15, 2006. The Company will account
for all qualifying financial instruments in accordance with the requirements of
Statement No. 155, should this apply.
The FASB also issued Statement No. 156, Accounting for Servicing of Financial
Assets - an amendment of FASB Statement No. 140. The statement requires that all
separately recognized servicing assets and servicing liabilities be initially
measured at fair value, if possible. The statement permits, but does not
require, the subsequent measurement of servicing assets and liabilities at fair
value. The statement is effective for fiscal years beginning after September 15,
2006. The Company will account for all separately recognized servicing assets
and servicing liabilities in accordance with the requirements of Statement No.
156, should this apply.
10. SUBSEQUENT EVENT
On August 7, 2006, the Company entered into a definitive Stock Purchase
Agreement (the "Agreement") with William F. Guest and John D. Cornett pursuant
to which the Company has agreed to purchase a majority of the issued and
outstanding common stock of Acap Corporation ("Acap"). Acap is a privately owned
Delaware corporation which owns 100% of the issued and outstanding stock of
American Capitol Insurance Company, a Texas life insurance company, which in
turn owns 100% of the issued and outstanding stock of Texas Imperial Life
Insurance Company and Imperial Plan, Inc.
At the closing of the Agreement, the Company will purchase from Messrs. Guest
and Cornett a total of 1,492 shares of common stock of Acap for an aggregate
purchase price of $14,535,064, and may purchase as many as an additional 352
shares from certain other shareholders, on the same terms (including price).
In addition, at the closing, the Company will enter into stock put option
agreements under which certain individuals, who currently hold options to
purchase Acap shares, will have the opportunity to sell to UTG up to 266 shares
of common stock of Acap during the period ending December 16, 2007. The purchase
price for shares under the stock put option agreements will be the same as under
the Agreement, except that it will be increased up to the time such shares are
purchased upon exercise of the options at the rate of 5% per annum, compounded
daily.
The Company has also agreed to loan Acap the funds, approximately $ 3,300,000,
required to retire certain indebtedness of Acap and to redeem all of Acap's
outstanding preferred stock at the closing of the Agreement.
Assuming the Company purchases all of the shares of Acap common stock that may
be purchased under the Agreement and the stock put option agreements, the
Company will acquire up to 72.8% of the outstanding shares of common stock of
Acap, and the total cost of the transaction to the Company (including the loan
to Acap for the payment of Acap indebtedness and redemption of Acap preferred
stock) will be approximately $24 million, to be paid in cash.
The transaction will require regulatory approval under the Texas insurance code.
The Company has made a $200,000 earnest money payment to Mr. Guest, which the
sellers may retain if they terminate the Agreement because the closing of the
Agreement does not occur on December 8, 2006 as a result of the Company's
breach.
In addition, on August 11, 2006, two subsidiaries of UTG, Inc. (the "Company"),
Hampshire Plaza, LLC and Hampshire Plaza Garage, LLC completed an agreement for
the sale of real estate owned by the subsidiaries. The real estate was sold for
the agreed upon total sales price of $ 25,500,000.
Hampshire Plaza, LLC is a 67% owned subsidiary, which owned for investment
purposes, a property consisting of a 254,228 square foot office tower, and
72,382 square foot attached retail plaza totaling 326,610 square feet along with
an attached 349 space parking garage, in Manchester, New Hampshire. Hampshire
Plaza Garage, LLC is a 67% owned subsidiary, which owned for investment
purposes, a property consisting of a 578 space parking garage, in New Hampshire.
The Company will recognize a realized gain, net of taxes, of approximately $
3,398,000, or $ 0.88 per common share outstanding.
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 six months ended June 30, 2006, as compared to the same
period of 2005, 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, 2005, 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 June 30, 2006.
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, 2005, 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 2006.
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 2006 to the same period in 2005. The Company currently writes a nominal
amount of 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 revenue associated with premiums and policy fees increased
approximately $ 40,000, or 1%, for the three month period ended June 30, 2006,
compared to the same period of 2005. This increase is based mainly on the timing
of premium receipts and reinsurance premiums paid.
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 in the foreseeable future.
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. This potential is in the very early states of consideration.
Management will proceed cautiously and may even determine not to proceed. The
introduction of new products is 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 increased 12% when comparing the first six months of 2006
to the same period in 2005. While there has been a significant increase in the
national prime rate during the last several months, from 4.00% to 8.25%, this
has not been the only factor in the stability of the Company's overall net
investment income. Interest rates on long-term bonds available in the
marketplace have not increased as significantly as prevailing bank prime rates.
During 2004, management began to lengthen the Company's portfolio while
maintaining a conservative investment philosophy. During 2005, management
continued to lengthen the life of the bond portfolio and monitor interest and
extension risk. Although this temporarily impacted investment earnings in the
short run, the Company has not had to write off any investment losses due to
excessive risk. Net investment income for the second quarter of 2006 reflected
an increase of 19% over the same period of 2005. The impact of the Company's
stable mortgage loan portfolio and rising interest rates are the primary causes
of the increase.
Also in response to the interest rate environment in the bond market, the
Company has increased its investment in mortgage loans. The balance of mortgage
loan investments increased from approximately $ 20,722,000 at December 31, 2004
to $ 36,781,000 at December 31, 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. The
mortgage loan inventory has remained level during the first six months of 2006.
These loans have an average loan to value rate of 50% and an average yield of
7.05%.
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 gains of $ 3,042,558 in the first six months of
2006 compared to net realized investment gains of $ 1,242,281 for the same
period in 2005. The net realized gains in 2006 are primarily comprised of net
realized gains from the disposal of certain equity securities. 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. This transaction occurred
during the second quarter of 2005, which accounts for the $ 1,380,000 difference
in realized investment gains between 2005 and 2006.
Other income increased when comparing the first six months of 2006 to the same
period in 2005. 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 2006 and
2005, the Company received $ 886,076 and $ 452,844 respectively, for this work.
These TPA revenue fees are included in the line item "other income" on the
Company's consolidated statements of operations. The Company began providing
additional administrative services for this insurance provider during the fourth
quarter of 2005 that increased the annual revenue for TPA services. These
revenues are reflected in the second quarter of 2006.
The Company intends 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, increased 28% in the first six months of 2006 compared to the same
period in 2005. Policy claims vary from year to year and therefore, fluctuations
in mortality are to be expected and are not considered unusual by management.
Overall, reserves continue to increase on in-force policies as the age of the
insured increases. The life benefits, claims and settlement expenses, net of
reinsurance benefits and claims, increased $ 2,483,664 or 66% when comparing the
second quarter of 2006 to the same period of 2005.
Commissions and amortization of deferred policy acquisition costs remained
consistent for the first six months of 2006 compared to the same period in 2005.
The most significant factor to consider is the Company pays 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 increased 8% the first six months of 2006 compared to the
same period in 2005. The increase in expenses is due primarily to an increase in
information technology costs, depreciation and equipment maintenance costs. The
Company continues to monitor expenditures looking for savings opportunities.
Operating expenses actually decreased 15% when comparing the second quarter of
2006 to the same period of 2005. The primary reason for this fluctuation is
consistent with the year to date results; however, the timing of expense is a
contributing factor to this variation.
(c) Net income
The Company had a net gain of $ 881,196 in the first six months of 2006 compared
to a net gain of $ 848,465 for the same period in 2005. The net gain in 2006 was
mainly attributable to the sale of certain equity securities and increased TPA
revenues while the net gain in 2005 was mainly attributable to the gain from the
sale of certain common stock during the second quarter of 2005. The Company had
a net loss of $ (798,126) in the second quarter of 2006, compared to a gain of $
1,395,033 in the same period of 2005. As previously discussed, the sale of
common stock in 2005, and related gain, occurred during the second quarter,
which accounts for the difference between the periods.
Financial Condition
Total shareholders' equity decreased approximately $ 2,345,000 as of June 30,
2006 compared to December 31, 2005. In addition to the current quarter loss, the
decrease is attributable to a decline in market value of the debt and equity
investments of $ 2,998,000, net of deferred taxes, that was included in the
accumulated other comprehensive income. In addition, the Company purchased
treasury shares in the amount of $ 228,977, which decreased shareholders'
equity.
Investments represent approximately 79% and 78% of total assets at June 30, 2006
and December 31, 2005, 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.
On June 20, 2006, two subsidiaries of the Company, Hampshire Plaza, LLC and
Hampshire Plaza Garage, LLC, completed an agreement for the sale of real estate
owned by the subsidiaries. The real estate is being sold for an agreed upon
total sales price of $ 25,500,000.
In addition, the Company has agreed to provide short-term financing in the
acquisition of this property. Should the buyer elect to finance the acquisition
of the property with the Company, the promissory note will be in the amount of
up to $ 25,500,000 bearing interest at an annual rate of six percent and having
a term of five months. If financing is provided, the properties being sold will
be held as collateral along with an additional property currently owned by the
buyer.
As of June 30, 2006, 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 3%
and 4% as of June 30, 2006, and December 31, 2005, respectively. Fixed
maturities as a percentage of total assets were approximately 43% and 42% as of
June 30, 2006 and December 31, 2005, respectively.
Net cash provided by (used in) operating activities was $ (838,852) and
$ 676,573 for the six months ending June 30, 2006 and 2005, 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
revenues increased approximately $ 3,000,000 in 2006 compared to 2005, 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 increased approximately
$ 3,100,000 in 2006 compared to 2005. This increase is the result of 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 provided by (used in) investing activities was $ (2,250,523) and
$ 3,383,903 for the six-month periods ending June 30, 2006 and 2005,
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 $ 5,673,288 and $ 17,699,090 that sold and matured
in the first six months of 2006 and 2005, respectively. This is in addition to
the $ 2,802,824 and $ 2,800,406 of the held to maturity securities that matured
in the first six months of 2006 and 2005, respectively. In addition, the Company
purchased $ 12,723,471 and $ 5,762,280 of fixed maturities in 2006 and 2005,
respectively. Also, the investment in mortgage loans decreased from $ 13,892,440
in the first six months of 2005 to $ 3,618,038 in the same period of 2006.
Net cash provided by financing activities was $ 756,261 and $ 1,215,776 for the
six month periods ending June 30, 2006 and 2005, respectively. Policyholder
contract deposits decreased 6% in the first six months of 2006 compared to the
same period in 2005. Policyholder contract withdrawals increased 2% in the first
six months of 2006 compared to the same period in 2005.
At June 30, 2006 and 2005, 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 June 30, 2006, 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. No dividends were paid to shareholders in 2005 or the
first six months of 2006.
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,
2005, UG's total statutory capital and surplus amounted to $ 25,645,716. At
December 31, 2005, UG had a statutory gain from operations of $ 5,113,557.
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") issued Statement No. 155,
Accounting for Certain Hybrid Financial Instruments - An amendment of FASB
Statements No. 133 and 140. The statement improves the financial reporting by
eliminating the exemption from applying Statement 133 to interest in securitized
financial assets so that similar instruments are accounted for similarly
regardless of the form of the instrument. The statement is effective for all
financial instruments acquired or issued after the beginning of an entity's
first fiscal year that begins after September 15, 2006. The Company will account
for all qualifying financial instruments in accordance with the requirements of
Statement No. 155, should this apply.
The FASB also issued Statement No. 156, Accounting for Servicing of Financial
Assets - an amendment of FASB Statement No. 140. The statement requires that all
separately recognized servicing assets and servicing liabilities be initially
measured at fair value, if possible. The statement permits, but does not
require, the subsequent measurement of servicing assets and liabilities at fair
value. The statement is effective for fiscal years beginning after September 15,
2006. The Company will account for all separately recognized servicing assets
and servicing liabilities in accordance with the requirements of Statement No.
156, should this apply.
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 68% of the investment portfolio as of June 30,
2006. 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
78% of the fixed maturities owned at June 30, 2006 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 June 30, 2006:
Decreases in Interest Rates Increases in Interest Rates
200 Basis 100 Basis 100 Basis 200 Basis 300 Basis
Points Points Points Points Points
----------------------- ------------------ ----------------- ---------------------- -----------------------
$ 4,986,000 $ 946,000 $ (9,710,000) $ (14,810,000) $ (19,757,000)
----------------------- ------------------ ----------------- ---------------------- -----------------------
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 to 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 June 30, 2006 and December 31, 2005, 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 June 30, 2006.
Future policy benefits reflected as liabilities of the Company on its balance
sheet as of June 30, 2006, 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. Due to the nature of these
liabilities, maturity is event dependent and therefore, these liabilities have
been classified as having an indeterminate maturity.
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 21, 2006, the following
matters were submitted to the shareholders of UTG and voted on as indicated:
1. To elect ten directors to serve for a term of one year and until their
successors are elected and qualified:
DIRECTOR FOR WITHHELD AGAINST
--------------------------- --------------- ---------------- ---------------
John S. Albin 2,928,196 8,787 222
--------------------------- --------------- ---------------- ---------------
Randall L. Attkisson 2,914,118 8,787 14,300
--------------------------- --------------- ---------------- ---------------
Joseph A. Brinck II 2,928,418 8,787 0
--------------------------- --------------- ---------------- ---------------
Jesse T. Correll 2,913,264 8,787 15,154
--------------------------- --------------- ---------------- ---------------
Ward F. Correll 2,914,052 8,787 14,366
--------------------------- --------------- ---------------- ---------------
Thomas F. Darden II 2,928,298 8,787 120
--------------------------- --------------- ---------------- ---------------
Howard L. Dayton Jr 2,927,962 8,787 456
--------------------------- --------------- ---------------- ---------------
Peter L Ochs 2,928,046 8,787 372
--------------------------- --------------- ---------------- ---------------
William W. Perry 2,927,798 8,787 620
--------------------------- --------------- ---------------- ---------------
James P. Rousey 2,914,418 8,787 14,000
--------------------------- --------------- ---------------- ---------------
ITEM 5. OTHER INFORMATION.
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
11. 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
12. REPORTS ON FORM 8-K
On June 21, 2006, UTG filed a report on Form 8-K regarding Item 1.01 Entry into
a Material Definitive Agreement. The information reported in the 8-K discussed
an agreement entered into by two subsidiaries of UTG, Inc. (the "Company"),
Hampshire Plaza, LLC and Hampshire Plaza Garage, LLC for the sale of real estate
owned by the subsidiaries. The real estate is being sold for an agreed upon
total sales price of $ 25,500,000.
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: August 8, 2006 By /s/ Randall L. Attkisson
Randall L. Attkisson
President, Chief Operating Officer
and Director
Date: August 8, 2006 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
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