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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.

org 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