UTG INC - Annual Report: 2011 (Form 10-K)

utg10k2011.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
	OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2011
	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 Number 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, Springfield, IL		62703
(Address of principal executive offices)		(Zip code)

Registrant's telephone number, including area code: (217) 241-6300

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of each exchange on which registered
None	None

Securities registered pursuant to Section 12(g) of the Act:

Title of class

Common Stock, stated value $.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]

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 [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K. [ ]

Indicate by check mark whether the registrant is large accelerated filer, an accelerator filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	[ ]	Accelerated Filer	[ ]
Non Accelerated Filer	[ ]	Smaller Reporting Company	[X]

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes [ ] No [X]

As of June 30, 2011, shares of the Registrant’s common stock held by non-affiliates (based upon the price of the last sale of $11.40 per share), had an aggregate market value of approximately $14,496,456.

At February 1, 2012 the Registrant had 3,879,333 outstanding shares of Common Stock, stated value $.001 per share.

Documents incorporated by reference: None

UTG, INC.

FORM 10-K

YEAR ENDED DECEMBER 31, 2011

TABLE OF CONTENTS

PART I……………………………………………………………………………………………………………………………………………………………………………………………	3
ITEM 1. BUSINESS…………………………………………………………………………………………………..………………………………………………………………………………………	3
ITEM 1A. RISK FACTORS……………………………………………………………………………….………………………………………………………………………………………….……….	13
ITEM 1B. UNRESOLVED STAFF COMMENTS…………………………………………………………………….…………………………………………………………………….……………….	15
ITEM 2. PROPERTIES……………………………………………………………………………………………….………………………………………….……………………………….…………...	15
ITEM 3. LEGAL PROCEEDINGS…………………………………………………………………………………...…………………………………………………………………………………...…..	15
ITEM 4. REMOVED AND RESERVED………………………………………….……………………………….………………………………………….……………………………….……………..
PART II…………………………………………………………………………………………………………………………………………………………………………………………...	16
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUTY SECURITIES………………………………….………………………………….………………………………….………………….	16
ITEM 6. SELECTED FINANCIAL DATA…………………………………………………………………………………………………………………………………………………………………	17
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS……………………………………………………………………………..……………………………………………………………………………..…………	17
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK…………………….……………………………………………………………………………..….	31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA………………………………………….………………………………………….………………………………………	33
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE………………………………………………………………………….………………………………………………………………………….…………..	64
ITEM 9A. CONTROLS AND PROCEDURES……………………………………………………………………….……………………………………………………………………….………………	65
ITEM 9B. OTHER INFORMATION…………………………………………………………………………………..…………………………………………………………………………………..….	65
PART III…………………………………………………………………………………………………………………..……………………………………………………………………….	66
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE…………………….…………………….…………………….…………………….…………………….…	66
ITEM 11. EXECUTIVE COMPENSATION…………………………………………………………………………………………………………………………………………………………………	70
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS………………………………………………………………………………………………………………………………………………….	75
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE………………………………………………………………………….………………………………………………………………………….………………	77
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES…………………………………………………………………………………………………………………………………………..	78
PART IV…………………………………………………………………………………………………………………………………………………………………………………………..	79
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.………………………………..………….………………………………..………….………………………………..………	79

PART I

ITEM 1. BUSINESS

FORWARD-LOOKING INFORMATION

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 those projected in forward-looking statements. Additional information concerning factors that could cause actual results to differ from those in the forward-looking statements is contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations".

OVERVIEW

UTG, Inc. (the "Registrant" or “UTG”) was originally incorporated in 1984, under the name United Trust, Inc. under the laws of the State of Illinois, to serve as an insurance holding company. The Registrant and its subsidiaries (the "Company") have only one significant industry segment - insurance. The current name, UTG, Inc., and state of incorporation, Delaware, were adopted during 2005 through a merger transaction. The Company's dominant business is individual life insurance, which includes the servicing of existing insurance business in force, the acquisition of other companies in the insurance business, and the administration processing of life insurance business for other entities.

At December 31, 2011, significant majority-owned subsidiaries of the Registrant were as depicted on the following organizational chart:

Entity	Parent	Percentage Owned
UTG, Inc. (UTG)
Universal Guaranty Life Insurance Company (UG)	UTG, Inc.	100%
American Capitol Insurance Company (AC)	Universal Guaranty Life Insurance Company	100%
Imperial Plan, Inc.(Imperial Plan)	American Capitol Insurance Company	100%
Collier Beach, LLC	Universal Guaranty Life Insurance Company	100%
Cumberland Woodlands, LLC (CW)	Universal Guaranty Life Insurance Company	100%
HPG Acquisitions, LLC (HPG)	Universal Guaranty Life Insurance Company	74%
Northwest Florida of Okaloosa Holding, LLC	Universal Guaranty Life Insurance Company	68%
Sand Lake, LLC (Sand Lake)	Universal Guaranty Life Insurance Company	100%
Stanford Wilderness Road, LLC (SWR)	Universal Guaranty Life Insurance Company	100%
Sun Valley Homes, LLC (Sun Valley)	Universal Guaranty Life Insurance Company	67%
UG Acquisitions, LLC	Universal Guaranty Life Insurance Company	100%
UTG Avalon, LLC	Universal Guaranty Life Insurance Company	100%
Wingate of St Johns Holding, LLC	Universal Guaranty Life Insurance Company	52%

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. FSBI operates through its 100% owned subsidiary bank, First Southern National Bank (FSNB). Banking activities are conducted through multiple locations within south-central and western 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 December 31, 2011, Mr. Correll owns or controls directly and indirectly approximately 57% of UTG’s outstanding stock.

UTG is a life insurance holding company. The focus of UTG is the acquisition of other companies in similar lines of business and management of the insurance subsidiaries. UTG has no activities outside the life insurance focus. UTG has a history of acquisitions and consolidation in which life insurance companies are involved.

UG is a wholly-owned life insurance subsidiary of UTG domiciled in the State of Ohio, which operates in the individual life insurance business. The primary focus of UG has been the servicing of existing insurance business in force. In addition, UG provides insurance administrative services for other non-related entities.

AC is a wholly-owned life insurance subsidiary of UG domiciled in the State of Texas, which operates in the individual life insurance business. The primary focus of AC has been the servicing of existing insurance business in force.

HPG is a 74% owned subsidiary of UG, which owns for investment purposes, commercial property located in downtown Midland, Texas. The property includes three commercial office buildings with a total of approximately 530,000 square feet and adjoining parking with 280 spaces.

SWR is a wholly-owned subsidiary of UG, which owns for investment purposes, commercial real estate located in downtown Stanford, Kentucky. Future plans for these properties include a rehabilitation of the buildings and will include commercial/retail space once completed.

CW is a wholly-owned subsidiary of UG, which owns for investment purposes, approximately 9,300 acres of land in Kentucky.

Sun Valley is a 67% owned subsidiary of UG, which owns for investment purposes, residential real estate in Phoenix, Arizona. Sun Valley has been acquiring foreclosed residential properties in the Phoenix area with the intent to rehab and sell over a short period of time. Sun Valley is currently in a wind down phase.

Sand Lake is a wholly-owned subsidiary of UG, which owns for investment purposes, approximately 98.85 acres of vacant land in Flagler County, Florida.

Collier Beach, LLC is a wholly-owned subsidiary of UG, which owns for investment purposes, property in Hilton Head, South Carolina.

Northwest Florida of Okaloosa Holding, LLC is a 68% owned subsidiary of UG, which owns for investment purposes, approximately 540 acres of land in Crestview, Florida.

UG Acquisitions, LLC is a wholly-owned subsidiary of UG, which owns for investment purposes, various multi-family properties through out the United States.

UTG Avalon, LLC is a wholly-owned subsidiary of UG, which owns for investment purposes, a beach estate development in Vero Beach, Florida.

Wingate of St Johns Holding, LLC is a 52% owned subsidiary of UG, which owns for investment purposes, approximately 1,496 acres of land in St. John’s County, Florida.

HISTORY

UTG was incorporated December 14, 1984, as an Illinois corporation through an intrastate public offering under the name United Trust, Inc. (UTI). Over the years, UTG acquired several additional holding and life insurance companies. UTG streamlined and simplified the corporate structure following the acquisitions through dissolution of intermediate holding companies and mergers of several life insurance companies.

In March 2005, UTG’s Board of Directors adopted a proposal to change the state of incorporation of UTG from Illinois to Delaware by merging UTG with and into a wholly-owned Delaware subsidiary (the “reincorporation merger”). The reincorporation merger effected only a change in UTG’s legal domicile and certain other changes of a legal nature. The Board of Directors submitted the reincorporation proposal to its shareholders for approval at the 2005 annual meeting of shareholders, which was approved subsequently and affected on July 1, 2005.

In December 2006, the Company completed an acquisition transaction whereby it acquired a controlling interest in ACAP Corporation, which owned two life insurance subsidiaries. The acquisition resulted in an increase of approximately $90,000,000 in invested assets, $160,000,000 in total assets and 200,000 additional policies to administer. The administration of the acquired entities was moved to Springfield, Illinois during December 2006. The Company believes this acquisition was a good fit with its existing administration and operations. Significant expense savings were realized as a result of the combining of operations compared to costs of the two entities operating separately.

On December 30, 2009 the Company completed the sale transaction of its previously 100% owned subsidiary, Texas Imperial Life Insurance Company. The subsidiary was sold to United Funeral Directors Benefit Life Insurance Company, an unaffiliated third party. The sale price was $6,415,169 which was paid in cash. The sale resulted in an increase in statutory capital of $3,800,000 before taxes in the Company. The transaction was entered into to further streamline operations of the affiliate group. Texas Imperial was a stipulated premium company, a unique status under Texas rules.

On November 14, 2011, ACAP was merged into UTG. Under the terms of the merger, ACAP shareholders received shares of UTG in exchange for their ACAP shares. ACAP was a 73% owned subsidiary of UG. The merger reduced the corporate structure and provided certain efficiencies and economies to the Companies. All ACAP shareholders, other than UTG or UG, have the right to receive 233 shares of UTG common stock for each share of ACAP common stock they owned at closing. Under the terms of the exchange ratio, UTG issued 50,328 shares to former ACAP shareholders.

PRODUCTS

UG’s current product portfolio consists of a limited number of life insurance product offerings. All of the products are individual life insurance products, with design variations from each other to provide choices to the customer. These variations generally center around the length of the premium paying period, length of the coverage period and whether the product accumulates cash value or not. The products are designed to be competitive in the marketplace.

Effective January 1, 2009, the Company began using as required the 2001 CSO reserve table for new issues on a Statutory basis.

UG currently offers a limited portfolio of traditional insurance products. UG’s “Ten Pay Whole Life” insurance product has a level face amount. The level premium is payable for the first ten policy years. This policy is available for issue ages 0-65, and has a minimum face amount of $10,000. This policy can be used in conversion situations, where it is available up to age 75 and at a minimum face amount of $5,000. There is no policy fee.

The “Tradition” is a fixed premium whole life insurance policy. Premiums are level and payable for life. Issue ages are 0-80. The minimum face amount is the greater of $10,000 or the amount of coverage provided by a $100 annual premium. There is a $30 annual policy fee. This product has the same optional riders as the Preferred Whole Life, listed above.

Kid Kare is a single premium level term policy to age 21. The product is sold in units, with one unit equal to a face amount of $5,000 for a single premium of $250. The policy is issued from ages 0-15 and has conversion privileges at age 21. There is no policy fee.

The “First Annuity” is the only active annuity product in UG’s portfolio. This product is issued for ages 0-80. The minimum annual premium in the first year is $5,000, with premiums being optional in all other years. This policy has a decreasing surrender charge during the first five years of the contract.

The “Full Circle” is a decreasing term product available in 10, 15, 20, 25 or 30 year terms. The product is generally issued to ages 20 to 65, with a minimum face amount of $10,000.

The “Sentinel” is a 10 year level term product. The product is generally issued to ages 18 to 65, with a minimum face amount of $25,000.

AC has no currently available product offerings.

The Company's actual experience for earned interest, persistency and mortality varies from the assumptions applied to pricing and for determining premiums. Accordingly, differences between the Company's actual experience and those assumptions applied may impact the profitability of the Company. The Company monitors investment yields, and when necessary adjusts credited interest rates on its insurance products to preserve targeted interest spreads. Credited rates are reviewed and established by the Board of Directors of UG. Currently, all crediting rates have been reduced to the respective product guaranteed interest rate.

The Company has a variety of policies in force different from those being marketed. Interest sensitive products, including universal life and excess interest whole life (“fixed premium UL”), account for 55% of the insurance in force. Approximately 10% of the insurance in force is participating business, which represents policies under which the policy owner shares in the insurance company’s statutory divisible surplus. The Company's average persistency rate for its policies in force for 2011 and 2010 has been 95.8% and 96.0%, respectively.

Interest sensitive life insurance products have characteristics similar to annuities with respect to the crediting of a current rate of interest at or above a guaranteed minimum rate and the use of surrender charges to discourage premature withdrawal of cash values. Universal life insurance policies also involve variable premium charges against the policyholder's account balance for the cost of insurance and administrative expenses. Interest sensitive whole life products generally have fixed premiums. Interest sensitive life insurance products are designed with a combination of front-end loads, periodic variable charges, and back-end loads or surrender charges.

Traditional life insurance products have premiums and benefits predetermined at issue; the premiums are set at levels that are designed to exceed expected policyholder benefits and insurance company expenses. Participating business is traditional life insurance with the added feature that the policyholder may share in the divisible surplus of the insurance company through policyholder dividend. This dividend is set annually by the Board of Directors of UG and is completely discretionary.

MARKETING

The Company has not actively marketed life products in the past several years. Management currently places little emphasis on new business production, believing resources could be better utilized in other ways. Current sales primarily represent sales to existing customers through additional insurance needs or conservation efforts. The Company currently encourages policy retention as opposed to new sales in an attempt to maintain or improve current persistency levels. In this regard, several of the home office staff have become licensed insurance agents enabling them broader abilities when dealing with the customer in regard to his/her existing policies and possible alternatives.

Excluding licensed home office personnel, UG has 15 general agents. These agents primarily service their existing clients. New sales for UG are primarily in the Midwest region with most sales in the states of Ohio and West Virginia. UG is licensed to sell life insurance in Alabama, Arizona, Arkansas, Colorado, Delaware, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin.

AC has no licensed agents. AC is licensed to sell life insurance in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Delaware, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Louisiana, Maine, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wyoming.

In 2011, approximately $10,223,000 of total direct premium was collected by UG. Ohio accounted for 30%, Illinois accounted for 17%, and West Virginia accounted for 9% of total direct premiums collected. No other state accounted for more than 5% of direct premiums collected.

In 2011, approximately $2,597,000 of total direct premium was collected by AC. Texas accounted for 33%, Louisiana accounted for 10%, Tennessee accounted for 9%, and Mississippi accounted for 7% of total direct premiums collected. No other state accounted for more than 5% of direct premiums collected.

UNDERWRITING

The underwriting procedures of the insurance subsidiaries are established by Management. Insurance policies are issued by the Company based upon underwriting practices established for each market in which the Company operates. Most policies are individually underwritten. Applications for insurance are reviewed to determine additional information required to make an underwriting decision, which depends on the amount of insurance applied for and the applicant's age and medical history. Additional information may include inspection reports, medical examinations, and statements from doctors who have treated the applicant in the past and, where indicated, special medical tests. After reviewing the information collected, the Company either issues the policy as applied for, issues with an extra premium charge because of unfavorable factors, or rejects the application. Substandard risks may be referred to reinsurers for full or partial reinsurance of the substandard risk.

RESERVES

The applicable insurance laws under which the insurance subsidiaries operate require that the insurance company report policy reserves as liabilities to meet future obligations on the policies in force. These reserves are the amounts which, with the additional premiums to be received and interest thereon compounded annually at certain assumed rates, are calculated in accordance with applicable law to be sufficient to meet the various policy and contract obligations as they mature. These laws specify that the reserves shall not be less than reserves calculated using certain mortality tables and interest rates.

The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiaries’ experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2% to 6% for life insurance and 2.5% to 9.25% for annuities. Benefit reserves for traditional life insurance policies include certain deferred profits on limited-payment policies that are being recognized in income over the policy term. Policy benefit claims are charged to expense in the period that the claims are incurred. Current mortality rate assumptions are based on 1975-80 select and ultimate tables. Withdrawal rate assumptions are based upon Linton B or Linton C, which are industry standard actuarial tables for forecasting assumed policy lapse rates.

Benefit reserves for universal life insurance and interest sensitive life insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims in excess of related policy account balances. Interest crediting rates for universal life and interest sensitive products range from 4.0% to 5.5%, for the years ended, December 31, 2011 and 2010.

REINSURANCE

As is customary in the insurance industry, the insurance subsidiaries cede insurance to, and assume insurance from, other insurance companies under reinsurance agreements. Reinsurance agreements are intended to limit a life insurer's maximum loss on a large or unusually hazardous risk or to obtain a greater diversification of risk. The ceding insurance company remains primarily liable with respect to ceded insurance should any reinsurer be unable to meet the obligations assumed by it. However, it is the practice of insurers to reduce their exposure to loss to the extent that they have been reinsured with other insurance companies. The Company sets a limit on the amount of insurance retained on the life of any one person. The Company will not retain more than $125,000, including accidental death benefits, on any one life. At December 31, 2011, the Company had gross insurance in force of $1.663 billion of which approximately $401 million was ceded to reinsurers.

The Company's reinsured business is ceded to numerous reinsurers. The Company monitors the solvency of its reinsurers in seeking to minimize the risk of loss in the event of a failure by one of the parties. The Company is primarily liable to the insureds even if the reinsurers are unable to meet their obligations. The primary reinsurers of the Company are large, well capitalized entities.

Currently, UG is utilizing reinsurance agreements with Optimum Re Insurance Company, (Optimum) and Swiss Re Life and Health America Incorporated (SWISS RE). Optimum and SWISS RE currently hold an “A-” (Excellent) and "A+" (Superior) rating, respectively, from A.M. Best, an industry rating company. The reinsurance agreements were effective December 1, 1993, and covered most new business of UG. Under the terms of the agreements, UG cedes risk amounts above its retention limit of $100,000 with a minimum cession of $25,000. Ceded amounts are shared equally between the two reinsurers on a yearly renewable term (YRT) basis, a common industry method. The treaty is self-administered; meaning the Company records the reinsurance results and reports them to the reinsurers.

Also, Optimum is the reinsurer of 100% of the accidental death benefits (ADB) in force of UG. This coverage is renewable annually at the Company’s option. Optimum specializes in reinsurance agreements with small to mid-size carriers such as UG.

UG entered into a coinsurance agreement with Park Avenue Life Insurance Company (PALIC) effective September 30, 1996. Under the terms of the agreement, UG ceded to PALIC substantially all of its then in-force paid-up life insurance policies. Paid-up life insurance generally refers to non-premium paying life insurance policies. Under the terms of the agreement, UG sold 100% of the future results of this block of business to PALIC through a coinsurance agreement. UG continues to administer the business for PALIC and receives a servicing fee through a commission allowance based on the remaining in-force policies each month. PALIC has the right to assumption reinsure the business, at its option, and transfer the administration. The Company is not aware of any such plans. PALIC and its ultimate parent, The Guardian Life Insurance Company of America (Guardian), currently hold an “A” (Excellent) and "A++" (Superior) rating, respectively, from A.M. Best. The PALIC agreement accounts for approximately 64% of UG’s reinsurance reserve credit, as of December 31, 2011.

On September 30, 1998, UG entered into a coinsurance agreement with The Independent Order of Vikings, (IOV) an Illinois fraternal benefit society. Under the terms of the agreement, UG agreed to assume, on a coinsurance basis, 25% of the reserves and liabilities arising from all in-force insurance contracts issued by the IOV to its members. At December 31, 2011, the IOV insurance in-force assumed by UG was approximately $1,582,000, with reserves being held on that amount of approximately $365,000.

On June 7, 2000, UG assumed an already existing coinsurance agreement, dated January 1, 1992, between Lancaster Life Reinsurance Company (LLRC), an Arizona corporation and Investors Heritage Life Insurance Company (IHL), a corporation organized under the laws of the Commonwealth of Kentucky. Under the terms of the agreement, LLRC agreed to assume from IHL a 90% quota share of new issues of credit life and accident and health policies that have been written on or after January 1, 1992 through various branches of the First Southern National Bank. The maximum amount of credit life insurance that can be assumed on any one individual’s life is $15,000. UG assumed all the rights and obligations formerly held by LLRC as the reinsurer in the agreement. LLRC liquidated its charter immediately following the transfer. At December 31, 2011, the IHL agreement has insurance in-force of approximately $711,000, with reserves being held on that amount of approximately $9,000.

At December 31, 1992, AC entered into a reinsurance agreement with Canada Life Assurance Company (“the Canada Life agreement”) that fully reinsured virtually all of its traditional life insurance policies. The reinsurer’s obligations under the Canada Life agreement were secured by assets withheld by AC representing policy loans and deferred and uncollected premiums related to the reinsured policies. AC continues to administer the reinsured policies, for which it receives an expense allowance from the reinsurer. At December 31, 2011, the Canada Life agreement has insurance in-force of approximately $52,560,000, with reserves being held on that amount of approximately $34,193,000. As of December 31, 2011, there remains $129,969 in profits to be generated under this treaty. Should future experience under the treaty match the experience of recent years, which cannot reliably be predicted to occur, it should take until mid-2012 to generate the remaining profits. However, regarding the uncertainty as to when the specified level may be reached, it should be noted that the experience has been erratic from year to year and the number of policies in force that are covered by the treaty diminishes each year.

During 1997, AC acquired 100% of the policies in force of World Service Life Insurance Company through a combination of assumption reinsurance and coinsurance. While 91.42% of the acquired policies are coinsured under the Canada Life agreement, AC did not coinsure the balance of the policies. AC retains the administration of the reinsured policies, for which it receives an expense allowance from the reinsurer. Canada Life currently holds an "A+" (Superior) rating from A.M. Best.

Reinsurance agreements such as the Canada Life treaty described above are often referred to as financial reinsurance arrangements and are utilized within the insurance industry as a method of borrowing funds or statutory capital for an acquisition of a block of business or company. The borrowed funds are generally in the form of an initial ceding commission received from the reinsurer. The original borrowed amount is then repaid in future periods from the profits generated by the acquired block or company. Values of the target are determined based upon an actuarial valuation and future projections. Actual results may vary from year to year based upon the performance of the business relative to the assumptions used in the projections. Under the terms of this agreement, all financial activity relating to the policies covered by the agreement are utilized to repay the remaining outstanding balance, which was $129,969 as of December 31, 2011. Results under this agreement are included in various line items of the income statement, with an overall impact to net income of approximately $11,200 and $20,700 in 2011 and 2010, respectively. The net result of the activity represents the fee paid to the reinsurer for the use of their funds or statutory capital during the duration of the agreement.

During 1998, AC closed a coinsurance transaction with Universal Life Insurance Company (“Universal”). Pursuant to the coinsurance agreement, AC coinsured 100% of the individual life insurance policies of Universal in force at January 1, 1998. During 2010, this block of business was assumption reinsured into AC and is now considered direct business of AC. AC is now directly liable for any and all claims against these policies.

The Company does not have any short-duration reinsurance contracts. The effect of the Company's long-duration reinsurance contracts on premiums earned in 2011 and 2010 were as follows:

		Shown in thousands

		2011 Premiums Earned		2010 Premiums Earned

Direct	$	14,049	$	16,463
Assumed		33		36
Ceded		(3,935)		(4,108)
Net Premiums	$	10,147	$	12,391

INVESTMENTS

Investment income represents a significant portion of the Company's total income. Investments are subject to applicable state insurance laws and regulations, which limit the concentration of investments in any one category or class and further limit the investment in any one issuer. Generally, these limitations are imposed as a percentage of statutory assets or percentage of statutory capital and surplus of each company.

The following table reflects net investment income by type of investment:

		December 31,

		2011		2010

Fixed Maturities Held for Sale	$	4,277,019	$	5,577,292
Equity Securities		971,008		891,777
Trading Securities		(2,342,085)		5,143,204
Mortgage Loans		645,838		1,176,747
Discounted Mortgage Loans		8,231,832		12,897,978
Real Estate		6,820,847		6,600,327
Policy Loans		807,389		864,416
Short-term Investments		156,527		57,339
Cash and Cash Equivalents		8,396		10,761
Total Consolidated Investment Income		19,576,771		33,219,841
Investment Expenses		(8,378,606)		(8,361,004)
Consolidated Net Investment Income	$	11,198,165	$	24,858,837

At December 31, 2011, the Company had a total of $25,192,025 in investment real estate, which did not produce income during 2011.

The following table summarizes the Company's fixed maturities distribution at December 31, 2011 and 2010 by ratings category as issued by Standard and Poor's, a leading ratings analyst.

Fixed	Maturities

	% of	Portfolio

Rating	2011	2010
Investment Grade
AAA	27%	74%
AA	57%	4%
A	3%	9%
BBB	11%	13%
Below Investment Grade	2%	0%
	100%	100%

The following table summarizes the Company's fixed maturities held for sale by major classification:

		Carrying Value

		2011		2010
U.S. Government and government agencies and authorities	$	70,599,928	$	79,023,933
States, municipalities and political subdivisions		241,317		335,198
Collateralized mortgage obligations		759,727		16,674,262
Public utilities		462,075		987,025
All other corporate bonds		52,520,130		50,885,530
	$	124,583,177	$	147,905,948

The following table shows the composition, average maturity and yield of the Company's investment portfolio at December 31, 2011.

		Average
		Carrying	Average	Average
Investments		Value	Maturity	Yield

Fixed maturities held for sale	$	136,245,000	12 years	3.14%
Equity securities		18,160,000	Not applicable	5.35%
Trading securities		22,774,000	Not applicable	(10.28%)
Mortgage loans		10,842,000	1 year	5.96%
Discounted mortgage loans		37,496,000	3 years	21.95%
Investment real estate		58,427,000	Not applicable	11.67%
Policy loans		13,644,000	Not applicable	5.92%
Short-term investments and Cash and cash equivalents		50,705,000	On demand	0.33%
Total Investments and Cash and cash equivalents	$	348,293,000		5.62%

Management monitors its investment maturities, which in their opinion is sufficient to meet the Company's cash requirements. Fixed maturities of $0 mature in one year and $17,463,652 mature in two to five years.

The Company, from time to time, acquires mortgage loans through participation agreements with FSNB. FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market. The Company is able to receive participations from FSNB for three primary reasons: 1) FSNB has already reached its maximum lending limit to a single borrower, but the borrower is still considered a suitable risk; 2) the interest rate on a particular loan may be fixed for a long period that is more suitable for UG given its asset-liability structure; and 3) FSNB’s loan growth might at times outpace its deposit growth, resulting in FSNB participating such excess loan growth rather than turning customers away. For originated loans, the Company’s management is responsible for the final approval of such loans after evaluation. Before a new loan is issued, the applicant is subject to certain criteria set forth by Company management to ensure quality control. These criteria include, but are not limited to, a credit report, personal financial information such as outstanding debt, sources of income, and personal equity. Once the loan is approved, the Company directly funds the loan to the borrower. The Company bears all risk of loss associated with the terms of the mortgage with the borrower.

During the fourth quarter of 2009, the Company began purchasing discounted commercial mortgage loans. Management has extensive background and experience in the analysis and valuation of commercial real estate and believes there are significant opportunities currently available in the discounted mortgage loan arena. Experienced personnel of FSNB have also been utilized in the analysis phase. This experience dates back to discounted loans during the Resolution Trust days where such loans were being sold from defunct savings and loans in the early 1990’s. The discounted loans are available through the FDIC sale of assets of closed banks and from banks wanting to reduce their loan portfolios. The loans are available on a loan by loan bid process. Prior to placing a bid, each loan is reviewed to determine interest level utilizing such information as type of collateral, location of collateral, interest rate, current loan status and available cashflows or other sources of repayment. Once it is determined interest in the loan remains, the collateral is physically inspected. Following physical inspection, if interest still remains, a bid price is determined and a bid is submitted. Once a loan has been acquired, contact is made with the appropriate individuals to begin a dialog with a goal of determining the borrower’s willingness to work together. There are generally three paths a discounted loan will take: the borrowers pay as required; a settlement is reached with the loan being paid off at a discounted value; or the loan is foreclosed.

During the fourth quarter of 2009, the Company had acquired $118,368,661 of discounted mortgage loans at a total cost of $35,224,022, representing an average purchase price to outstanding loan of 29.8%. During 2009, the Company recorded approximately $1,000,000 in income from this loan activity. During 2010, the Company acquired an additional $111,258,867 of discounted mortgage loans at a total cost of $36,283,278, representing an average purchase price to outstanding loan of 32.6%. Additionally, during 2010, the Company settled, sold or had paid off mortgage loans totaling $40,038,789. During 2010, the Company recorded approximately $12,898,000 in income from the discounted mortgage loan activity, including $7,645,258 in discount accruals. During 2011, the Company acquired an additional $17,930,217 of discounted mortgage loans at a total cost of $6,673,601, representing an average purchase price to outstanding loan of 37.2%. Additionally, during 2011, the Company settled, sold or had paid off mortgage loans totaling $29,916,298. During 2011, the Company recorded approximately $8,232,000 in income from the discounted mortgage loan activity, including $3,940,274 in discount accruals. While the Company reported income from the discounted loans, the majority of the income was the result of one-time events that occurred during the year. The Company does not anticipate the same return going forward from the discounted commercial mortgage loan portfolio.

During 2011 and 2010, the Company acquired approximately $17,930,217 and $37,080,000 in both regular participation mortgage loans as well as discounted mortgage loans, respectively. FSNB services the mortgage loan portfolio of the Company. The Company pays FSNB a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan amount to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $136,457 and $190,297 in servicing fees and $89,651 and $508,283 in origination fees to FSNB during 2011 and 2010, respectively.

At December 31, 2011, the Company holds $9,272,919 in mortgage loans, which represents approximately 2% of the total assets and $27,467,920 in discounted mortgage loans, which represents 6% of the total assets. Most mortgage loans are first position loans. Loans issued are generally limited to no more than 80% of the appraised value of the property. During 2011, the Company recognized an other-than-temporary impairment of $982,354 on these loans as a result of its appraisal valuation and management’s analysis and determination of value.

While management believes the discounted loans will continue to have favorable earnings and outcomes as they are worked through, there can be no assurance this will remain true in future periods. Changes in the current economy such as an even greater downturn than recently experienced could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers’ ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. As such, management has taken a conservative approach with these investments and has classified all discounted mortgage loans held as non-accrual. In such status, the Company is not recording any accrued interest income nor is it recording any accrual of discount on the loans held. Discount accruals reported during 2011 were the result of the loan basis already being fully paid.

As of December 31, 2011, the Company’s discounted mortgage loan portfolio contained 87 loans with a carrying value of $27,467,920. The loans’ payment performance during the past year is shown as follows:

Payment Frequency	Number of Loans		Carrying Value

No payments received	28	$	2,962,026
One-time payment received	5		622,142
Irregular payments received	23		9,832,242
Periodic payments received	31		14,051,510
Total	87	$	27,467,920

The following table shows a distribution of the Company’s mortgage loans and discounted mortgage loans by type:

Mortgage Loans		Amount	% of Total

Commercial – all other	$	36,359,693	99%
Residential – all other		381,146	1%
Total	$	36,740,839	100%

The following table shows a geographic distribution of the Company’s mortgage loan portfolio including discounted mortgage loans and investment real estate:

	Mortgage Loans	Real Estate

Alabama	2%	0%
Arizona	7%	8%
California	3%	1%
Colorado	0%	4%
Florida	28%	35%
Georgia	4%	3%
Illinois	0%	1%
Indiana	1%	0%
Kentucky	11%	15%
Maryland	2%	0%
Michigan	0%	1%
Minnesota	4%	0%
Nevada	5%	0%
North Carolina	3%	0%
Ohio	11%	2%
Pennsylvania	4%	0%
South Carolina	0%	2%
Texas	9%	24%
Utah	0%	1%
Virginia	1%	0%
West Virginia	5%	3%
Total	100%	100%

The following table summarizes discounted mortgage loan holdings of the Company:

Category		2011		2010

In good standing	$	6,657,971	$	9,665,059
Overdue interest over 90 days		5,907,192		16,192,815
Restructured		7,726,156		4,306,800
In process of foreclosure		7,176,601		17,359,186
Total discounted mortgage loans	$	27,467,920	$	47,523,860

Total foreclosed discounted mortgage loans during the year	$	21,059,386	$	8,939,548

At December 31, 2011, the Company has 21 discounted mortgage loans totaling $7,176,601 in the process of foreclosure and 15 discounted mortgage loans totaling $7,726,156 under a repayment plan or restructuring.

During 2011, the Company foreclosed on 14 discounted mortgage loans with a total carrying value of $21,059,386. Of these foreclosures, 4 loans totaling $3,677,922 were transferred to real estate, one loan is now UG’s wholly owned subsidiary, UTG Avalon, LLC, one loan is UG’s 67% owned subsidiary, Northwest Florida of Okaloose Holding, LLC, and one loan is UG’s 52% owned subsidiary, Wingate of St Johns Holding, LLC. Subsequent to the foreclosures, one foreclosed loan was sold with the Company realizing a gain of $496,908 upon the sale.

COMPETITION

The insurance business is a highly competitive industry and there are a number of other companies, both stock and mutual, doing business in areas where the Company operates. Many of these competing insurers are larger, have more diversified and established lines of insurance coverage, have substantially greater financial resources and brand recognition, as well as a greater number of agents. Other significant competitive factors in the insurance industry include policyholder benefits, service to policyholders, and premium rates.

In recent years, the Company has not placed an emphasis on new business production. Costs associated with supporting new business can be significant. The insurance industry as a whole has experienced a decline in the total number of agents who sell insurance products; therefore competition has intensified for top producing sales agents. The relatively small size of the Company, and the resulting limitations, has made it challenging to compete in this area. The number of agents marketing the Company’s products is a negligible number.

The Company performs administrative work as a third party administrator (TPA) for unaffiliated life insurance companies. These TPA revenue fees are included in the line item “other income” on the Company’s consolidated statements of operations. The Company intends to continue to pursue other TPA arrangements. The Company provides TPA services to insurance companies seeking business process outsourcing solutions. Management believes the Company is positioned to generate additional revenues by utilizing the Company’s current excess capacity and administrative services.

GOVERNMENT REGULATION

Insurance companies are subject to regulation and supervision in all the states where they do business. Generally the state supervisory agencies have broad administrative powers relating to granting and revoking licenses to transact business, license agents, approving forms of policies used, regulating trade practices and market conduct, the form and content of required financial statements, reserve requirements, permitted investments, approval of dividends and in general, the conduct of all insurance activities. Insurance regulation is concerned primarily with the protection of policyholders. The Company cannot predict the impact of any future proposals, regulations or market conduct investigations. UG is domiciled in the state of Ohio. AC is domiciled in the state of Texas.

Insurance companies must also file detailed annual reports on a statutory accounting basis with the state supervisory agencies where each does business; (see Note 6 to the consolidated financial statements) regarding statutory equity and income from operations. These agencies may examine the business and accounts at any time. Under the rules of the National Association of Insurance Commissioners (NAIC) and state laws, the supervisory agencies of one or more states examine a company periodically, usually at three to five year intervals.

Most states also have insurance holding company statutes, which require registration and periodic reporting by insurance companies controlled by other corporations licensed to transact business within their respective jurisdictions. The insurance subsidiaries are subject to such legislation and registered as a controlled insurer in those jurisdictions in which such registration is required. Statutes vary from state to state but typically require periodic disclosure, concerning the corporation that controls the registered insurers and all subsidiaries of such corporation. In addition, prior notice to, or approval by, the state insurance commission of material transactions with affiliates, including transfers of assets, reinsurance agreements, management agreements (see Note 9 to the consolidated financial statements), and payment of dividends (see Note 2 to the consolidated financial statements) in excess of specified amounts by the insurance subsidiary, within the holding company system, are required.

Risk-based capital requirements and state guaranty fund laws are discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Information regarding the Company including recent filings with the Securities and Exchange Commission is available on the Company’s web site at www.utgins.com.

EMPLOYEES

At December 31, 2011, UTG and its subsidiaries had 67 full-time employees. UTG’s operations are headquartered in Springfield, Illinois.

ITEM 1A. RISK FACTORS

The risks and uncertainties described below are not the only ones that UTG faces. Additional risks and uncertainties that the Company is unaware of, or currently deemed immaterial, also may become important factors that affect our business. If any of these risks were to occur, our business, financial condition or results of operations could be materially and adversely affected.

The Company faces significant competition for insurance and third party administration clients. Competition in the insurance industry may limit our ability to attract and retain customers. UTG may face competition now and in the future from the following: other insurance and third party administration (TPA) providers, including larger non-insurance related companies which provide TPA services.

In particular, our competitors include insurance companies whose greater resources may afford them a marketplace advantage by enabling them to provide insurance services with lower margins. Additionally, insurance companies and other institutions with larger capitalization and others not subject to insurance regulatory restrictions have the ability to serve the insurance needs of larger customers. If the Company is unable to attract and retain insurance clients, continued growth, results of operations and financial condition may otherwise be negatively affected.

The main sources of income from operations are premium and net investment income. Net investment income is equal to the difference between the investment income received from various types of investment securities and other income-producing assets and the related expenses incurred in connection with maintaining these investments. The primary sources of income can be affected by changes in market interest rates and various economic conditions. These conditions are highly sensitive to many factors beyond our control, including general economic conditions, both domestic and foreign, and the monetary and fiscal policies of various governmental and regulatory authorities. The Company has adopted asset and liability management policies to try to minimize the potential adverse effects of changes in interest rates on our net interest income, primarily by altering the mix and maturity of loans, investments and funding sources. However, even with these policies in place, the Company cannot provide assurance that changes in interest rates will not negatively impact our operating results.

An increase in interest rates also could have a negative impact on business by reducing the demand for insurance products. Fluctuations in interest rates may result in disintermediation, which is the flow of funds away from insurance companies into direct investments that pay higher rates of return, and may affect the value of investment securities and other interest-earning assets. Since 2008 disintermediation has not been much of an issue, however given the long term nature of UG’s investments, should the market suddenly turn the impact could be extreme and disproportionate.

Significant time has been spent internally researching the Company’s risk and communicating with outside investment advisors about the current investment environment and ways to ensure preservation of capital and mitigate any losses. Management has put extensive efforts into evaluating its investment holdings. Management intends to continue its close monitoring of its bond holdings and other investments for additional deterioration or market condition changes. Future events may result in Management’s determination certain current investment holdings may need to be sold which could result in gains or losses in future periods. Such future events could also result in other than temporary declines in value that could result in future period impairment losses.

Within the Company’s trading accounts, certain trading securities carried as liabilities represent securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale.

Because UTG serves primarily individuals located in four states, the ability of our customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of December 31, 2011, approximately 52% of our total direct premium was collected from Illinois, Louisiana, Ohio, and Texas. Thus, results of operations are heavily dependent upon the strength of these economies.

In addition, a substantial portion of our investment mortgage loans are secured by real estate located primarily in Arizona, Florida, Georgia, Kentucky, Ohio and Texas. Consequently, our ability to continue to originate real estate loans may be impaired by adverse changes in local and regional economic conditions in these real estate markets or by acts of nature. These events also could have an adverse effect on the value of our collateral and, due to the concentration of our collateral in real estate, on our financial condition.

The Company has traditionally obtained funds principally through premium deposits. If, as a result of competitive pressures, market interest rates, general economic conditions or other events, the balance of the premium deposits decrease relative to our overall operations, the Company may have to look for ways to further reduce operating costs which could have a negative impact on results of operations or financial condition.

The Company has significant business risks in the amount of policy benefit expenses incurred each year. The majority of these expenses are related to death claims paid on life insurance contracts. The Company has no control over these expenses, which have a significant impact on our financial results.

Insurance holding companies operate in a highly regulated environment and are subject to supervision and examination by various federal and state regulatory agencies. The cost of compliance with regulatory requirements may adversely affect our results of operations or financial condition. Federal and state laws and regulations govern numerous matters including: changes in the ownership or control, maintenance of adequate capital and the financial condition of an insurance company, permissible types, amounts and terms of investments, permissible non-insurance activities, the level of policyholder reserves, and restrictions on dividend payments.

The Company will continue to consider the acquisition of other businesses. However, the opportunities to make suitable acquisitions on favorable terms in the future may not be available, which could negatively impact the growth of business. UTG expects that other insurance and financial companies will compete to acquire compatible businesses. This competition could increase prices for acquisitions that we would likely pursue, and our competitors may have greater resources. Also, acquisitions of regulated businesses such as insurance companies are subject to various regulatory approvals. If appropriate regulatory approvals are not received, an acquisition would not be able to complete what we believe is in our best interest.

UTG has in the past acquired, and will in the future consider the acquisition of other businesses. If other companies are acquired in the future, our business may be negatively impacted by risks related to those acquisitions. These risks include the following: the risk that the acquired business will not perform in accordance with management’s expectations; the risk that difficulties will arise in connection with the integration of the operations of the acquired business with our operations; the risk that Management will divert its attention from other aspects of our business; the risk that key employees of the acquired business are lost; the risks associated with entering into geographic and product markets in which we have limited or no direct prior experience; and the risks of the acquired company assumed in connection with an acquisition.

As a result of these risks, any given acquisition, if and when consummated, may adversely affect our results of operations or financial condition. In addition, because the consideration for an acquisition may involve cash, debt or the issuance of shares of our common stock and may involve the payment of a premium over book and market values, existing holders of our common stock could experience dilution in connection with the acquisition.

UTG relies heavily on communications and information systems to conduct our business. Any failure or interruptions or breach in security of these systems could result in failures or disruptions in our customer relationship management, general ledger, or administrative servicing systems. The occurrence of any failures or interruptions could result in a loss of customer business and have a material adverse effect on our results of operations and financial condition.

Under regulatory capital adequacy guidelines and other regulatory requirements, we must meet guidelines that include quantitative measures of assets, liabilities, and certain off-balance sheet items, subject to qualitative judgments by regulators about components, risk weightings and other factors. If we fail to meet these minimum capital guidelines and other regulatory requirements, our financial condition would be materially and adversely affected.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The Company owns an office complex in Springfield, Illinois, which houses the primary insurance operations. The office buildings in this complex contain 57,000 square feet of office and warehouse space, and are carried at $1,525,958. The facilities occupied by the Company are adequate relative to the Company's present operations.

ITEM 3. LEGAL PROCEEDINGS

In the normal course of business the Company is involved from time to time in various legal actions and other state and federal proceedings. Management is of the opinion that the ultimate disposition of these matters will not have a material adverse effect on the Company’s results of operations or financial position.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Registrant is a public company whose common stock is traded in the over-the-counter market. Over-the-counter quotations can be obtained with the UTGN.OB stock symbol.

The following table shows the high and low closing prices for each quarterly period during the past two years, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The quotations below were acquired from the NASDAQ web site, which also provides quotes for over-the-counter traded securities such as UTG.

	2011		2010

PERIOD	High	Low	High	Low

First quarter	10.75	9.00	10.10	8.76
Second quarter	11.75	10.75	10.00	8.80
Third quarter	12.50	11.40	9.75	9.50
Fourth quarter	13.10	11.80	10.40	8.75

UTG has not declared or paid any dividends on its common stock in the past two fiscal years, and has no current plans to pay dividends on its common stock as it intends to retain all earnings for investment in and growth of the Company’s business. See Note 3 in the accompanying consolidated financial statements for information regarding dividend restrictions, including applicable restrictions on the ability of the Company’s life insurance subsidiaries to pay dividends.

As of February 1, 2012 there were 7,335 record holders of UTG common stock.

Purchases of Equity Securities

The following table provides information with respect to purchases we made of our common stock during the three months ended December 31, 2011 and total repurchases:

	Total Number of Shares Purchased		Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares That May Yet Be Purchased Under the Program		Approximate Dollar Value That May Yet Be Purchased Under the Program
Oct. 1 through Oct. 31, 2011	0	$	0	0	N/A	$	1,349,473
Nov. 1 through Nov. 30, 2011	0	$	0	0	N/A	$	1,349,473
Dec. 1 through Dec. 31, 2011	2,634	$	12.25	2,634	N/A	$	1,317,206
Total	2,634			2,634

The Board of Directors of UTG authorized the repurchase in the open market or in privately negotiated transactions of up to $5 million of UTG's common stock. This program can be terminated at any time. Open market purchases are generally limited to a maximum per share price of the most recent reported per share GAAP equity book value of the Company. Through December 31, 2011, UTG has spent $3,682,794 in the acquisition of 490,726 shares under this program.

ITEM 6. SELECTED FINANCIAL DATA

The following selected historical consolidated financial data should be read in conjunction with “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Item 8 – Financial Statements and Supplementary Data” and other financial information included elsewhere in this report.

FINANCIAL HIGHLIGHTS
(000’s omitted, except per share data)

		2011		2010		2009		2008		2007
Premium income net of reinsurance	$	10,147	$	12,391	$	13,502	$	13,309	$	14,413
Net investment income		11,198		24,859		14,241		17,516		16,880
Total revenues		34,964		38,443		28,759		35,239		38,873
Net income (loss)-common shareholders’		6,317		7,597		(4,290)		654		2,143
Basic income (loss) per share		1.65		1.97		(1.12)		0.17		0.56
Total assets		433,721		441,588		431,519		457,779		473,655
Total notes payable		9,532		10,372		14,403		15,617		19,914
Dividends paid per share		NONE		NONE		NONE		NONE		NONE

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this section is to discuss and analyze the Company's consolidated results of operations, financial condition and liquidity and capital resources for the two years ended December 31, 2011. This analysis should be read in conjunction with the consolidated financial statements and related notes, which 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 December 31, 2011.

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.

Critical Accounting Policies

General

We have identified the accounting policies below as critical to the understanding of our results of operations and our financial position. The application of these critical accounting policies in preparing our financial statements requires Management to use significant judgments and estimates concerning future results or other developments including the likelihood, timing or amount of one or more future transactions or amounts. Actual results may differ from these estimates under different assumptions or conditions. On an on-going basis, we evaluate our estimates, assumptions and judgments based upon historical experience and various other information that we believe to be reasonable under the circumstances. For a detailed discussion of other significant accounting policies, see Note 1 to the consolidated financial statements.

DAC and Cost of Insurance Acquired

Deferred acquisition costs (DAC) and cost of insurance acquired reflect our expectations about the future experience of the existing business in-force. The primary assumptions regarding future experience that can affect the carrying value of DAC and cost of insurance acquired balances include mortality, interest spreads and policy lapse rates. Significant changes in these assumptions can impact amortization of DAC and cost of insurance acquired in both the current and future periods, which is reflected in earnings.

Investments

The Company accounts for its investments in debt and equity securities pursuant to FASB Codification 320-10 section 5, 15, 25, 30, 35, 45, 50, and 55 and 942-10 section 50, Accounting for Certain Investments in Debt and Equity Securities. The Company has classified all of its investments as available-for-sale with the exception of certain securities classified as trading securities. Available-for-sale investments are carried at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets for available-for-sale securities. Trading securities are carried at fair value with unrealized gains and losses reported in income in the Consolidated Statements of Operations. Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. Net realized gains and losses on investments are computed using the specific identification method and are reported in the Consolidated Statements of Operations.

Declines in value of securities available-for-sale that are judged to be other-than-temporary are determined based on the specific identification method and are reported in the Consolidated Statements of Operations as realized losses. The factors considered by management in determining when a decline is other-than-temporary include but are not limited to: the length of time and extent to which the fair value has been less than cost; the financial condition and near-term prospects of the issuer; adverse changes in ratings announced by one or more rating agencies; subordinated credit support; whether the issuer of a debt security has remained current on principal and interest payments; current expected cash flows; whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions (including, in the case of fixed maturities, the effect of changes in market interest rates); and the Company's intent and ability to hold the security for a period of time sufficient to allow for a recovery in fair value. For structured securities, such as mortgage-backed securities, an impairment loss is recognized when there has been a decrease in expected cash flows and/or a decline in the security's fair value below cost.

Deferred Income Taxes

The provision for deferred income taxes is based on the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates to temporary differences between amounts reported in the Consolidated Financial Statements and the tax bases of existing assets and liabilities. A valuation allowance is recognized for the portion of deferred tax assets that, in Management's judgment, is not likely to be realized. The effect on deferred income taxes of a change in tax rates or laws is recognized in income tax expense in the period that includes the enactment date.

Future Policy Benefits and Expenses

Recognition of Revenues and Related Expenses

Premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits, consist principally of whole life insurance policies, and certain annuities with life contingencies are recognized as revenues when due. Limited payment life insurance policies defer gross premiums received in excess of net premiums, which is then recognized in income in a constant relationship with insurance in force. Accident and health insurance premiums are recognized as revenue pro rata over the terms of the policies. Benefits and related expenses associated with the premiums earned are charged to expense proportionately over the lives of the policies through a provision for future policy benefit liabilities and through deferral and amortization of deferred policy acquisition costs. For universal life and investment products, generally there is no requirement for payment of premium other than to maintain account values at a level sufficient to pay mortality and expense charges. Consequently, premiums for universal life policies and investment products are not reported as revenue, but as deposits. Policy fee revenue for universal life policies and investment products consists of charges for the cost of insurance and policy administration fees assessed during the period. Expenses include interest credited to policy account balances and benefit claims incurred in excess of policy account balances.

Results of Operations

(a)

Revenues

Premiums and policy fee revenues, net of reinsurance premiums and policy fees, decreased approximately 18% when comparing 2011 to 2010. The Company writes very little new business. Unless the Company acquires a block of in-force business, Management expects premium revenue to continue to decline on the existing block of business at a rate consistent with prior experience. The Company’s average persistency rate for all policies in force for 2011 and 2010 was approximately 95.8% and 96.0%, respectively. Persistency is a measure of insurance in force retained in relation to the previous year.

The Company’s primary source of new business production, which has been immaterial, comes from internal conservation efforts. 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, efforts continue to be 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.

Net investment income decreased approximately 55% when comparing 2011 to 2010. The overall gross investment yields for 2011 and 2010 are 5.66% and 9.82%, respectively. The majority of the decrease in investment income is from the Company’s trading securities and discount mortgage loan portfolio. Approximately $8,232,000, of gross investment income is attributable to the discount mortgage loan portfolio, including $3,940,000 in discount accruals which declined from $12,898,000 in 2010. The Company reported a loss of $2,342,000 from the shift in trading securities during the year compared to income of $5,131,000 from a year ago. Trading securities are discussed in more detail below.

During the fourth quarter of 2009, the Company had acquired $118,368,661 of discounted mortgage loans at a total cost of $35,224,022, representing an average purchase price to outstanding loan of 29.8%. During 2009, the Company recorded approximately $1,000,000 in income from this loan activity. During 2010, the Company acquired an additional $111,258,867 of discounted mortgage loans at a total cost of $36,283,278, representing an average purchase price to outstanding loan of 32.6%. Additionally, during 2010, the Company settled, sold or had paid off discounted mortgage loans totaling $23,607,100. During 2010, the Company recorded approximately $12,898,000 in income from the discounted mortgage loan activity, including $7,645,258 in discount accruals. During 2011, the Company acquired an additional $17,930,217 of discounted mortgage loans at a total cost of $6,673,601, representing an average purchase price to outstanding loan of 37.2%. During 2011, the Company settled, sold or had paid off discounted mortgage loans totaling $15,032,186. While the Company reported income from the discounted loans, the majority of the income was the result of one-time events that occurred during the year. The Company does not anticipate the same return going forward from the discounted commercial mortgage loan portfolio.

The discounted mortgage loans decreased approximately $20,000,000 when comparing December 31, 2011 to December 31, 2010. During 2011, discounted mortgage loans were harder to find and purchase in 2011 due to more competition in the market. As a result, the Company purchased less discounted mortgage loans in 2011 and as the mortgage loans pay off, the balance will continue to decrease.

While management believes the discounted loans will continue to have favorable earnings and outcomes as they are worked through, there can be no assurance this will remain true in future periods. Changes in the current economy such as an even greater downturn than recently experienced could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers’ ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. As such, management has taken a conservative approach with these investments and has classified all discounted mortgage loans held as non-accrual. In such status, the Company is recording interest income on a cash basis and is recording any accrual of discount on the loans held when realized. Discount accruals reported during 2011 were the result of the loan basis already being fully paid.

During 2009, the Company also contributed a portion of the investment portfolio to professionally managed trading accounts as another way to combat the current low rate environment. The accounts were established to generate a fair return while reducing risk. Securities designated as trading are reported at fair value with gains or losses resulting from changes in fair value recognized in net investment income. During 2010, approximately 21%, or $5,131,000, of investment income was due to this trading portfolio, yielding approximately 12.8% after fees. During 2011, the trading portfolio had negative earnings to investment income of approximately $2,300,000. Volatility should be expected, as well as possible losses. Management’s target return on these accounts is 6% to 8%.

In mid August 2011, the investment market took a sudden sharp decline. The U.S. debt ratings were lowered and concerns of European nations’ debt and potential defaults were in the forefront. During this time, certain of the Company’s trading securities were also negatively impacted resulting in losses of approximately $7.1 million during the second half of 2011. These losses primarily resulted from holdings relating to market volatility and options relating to U.S. Treasury securities. The Company had a positive earnings track record in its trading securities accounts up until this point.

With the sudden market shift, historic correlations between investments ceased to function pursuant to historical norms. For example, as U.S. Treasury yields shift, other debt securities such as corporate bonds typically follow. In this period, U.S. Treasury securities saw a dramatic and sudden shift in value, while corporate debt remained relatively unchanged. Indexes reflecting market volatility experienced historic increases over a three day period in August when U.S. Treasury debt was downgraded.

The Company has reduced its holdings in these investments with a corresponding reduction in market exposure. Management still believes its trading activities remain a viable and integral part of its overall investment strategy in the current economy. Management is currently reviewing alternatives on how to better manage its exposure to such radical market shifts.

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%. Interest crediting rates on adjustable rate policies have been reduced to their guaranteed minimum rates, and as such, cannot be lowered any further. Policy interest crediting rate changes and expense load changes become effective on an individual policy basis on the next policy anniversary. Therefore, it takes a full year from the time the change was determined for the full impact of such change to be realized. If interest rates decline in the future, the Company won’t be able to lower rates and both net investment income and net income will be impacted negatively.

Net realized investment gains (losses) were $11,562,629 and $(640,538) in 2011 and 2010, respectively. During 2011, other-than-temporary impairments of approximately $3,360,000 and $982,354 were taken as a result of appraisal valuations and management’s analysis and determination of value on investment real estate and discounted mortgage loans, respectively. These losses were offset by realized gains of approximately $8,914,000, and $7,321,000 from bond sales and real estate, respectively. During the fourth quarter of 2011, the Company took advantage of the unusually high price spreads on U.S. Government treasury securities by selling a portion of its U.S. Treasury holdings. The gain on real estate is mainly attributable to the sale of timber from Cumberland Woodlands, which is a one-time event. During 2010, other-than-temporary impairments of approximately $610,000 and $740,000 were taken on bonds backed by trust preferred securities and on common stock, respectively. The other-than-temporary impairments were due to changes in expected future cash flows. Additionally, an other-than-temporary impairment of approximately $129,000 was taken on a mortgage loan as a result of its appraisal valuation. These losses were partially offset by realized gains of approximately $811,000 on bond sales.

Management continues to view the Company’s investment portfolio with utmost priority. Significant time has been spent internally researching the Company’s risk and communicating with outside investment advisors about the current investment environment and ways to ensure preservation of capital and mitigate any losses. Management has put extensive efforts into evaluating the investment holdings. Additionally, members of the Company’s board of directors and investment committee have been solicited for advice and provided with information. Management has reviewed the Company’s entire portfolio on a security level basis to be sure all understand our holdings, potential risks and underlying credit supporting the investments. Management intends to continue its close monitoring of its bond holdings and other investments for additional deterioration or market condition changes. Future events may result in Management’s determination that certain current investment holdings may need to be sold which could result in gains or losses in future periods. Such future events could also result in other than temporary declines in value that could result in future period impairment losses.

There are a number of significant risks and uncertainties inherent in the process of monitoring impairments and determining if impairment is other-than-temporary. These risks and uncertainties related to Management’s assessment of other-than-temporary declines in value include but are not limited to: the risk that Company's assessment of an issuer's ability to meet all of its contractual obligations will change based on changes in the credit characteristics of that issuer; the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; the risk that fraudulent information could be provided to the Company's investment professionals who determine the fair value estimates.

In recent periods, Management’s focus has been placed on promoting and growing TPA services to unaffiliated life insurance companies. The Company receives monthly fees based on policy in force counts and certain other activity indicators, such as number of premium collections performed, or services performed. For the years ended 2011 and 2010, the Company received $2,021,348 and $1,724,880 for this work, respectively. These TPA revenue fees are included in the line item “other income” on the Company’s consolidated statements of operations. During 2010, the Company obtained an additional contract for these services, which provides approximately $300,000 additional revenues annually. Administration for this block of business began in the first quarter of 2011. The Company intends to continue to pursue other TPA arrangements as well. The Company provides TPA services to insurance companies seeking business process outsourcing solutions. Management believes the Company is positioned to generate additional revenues by utilizing the Company’s current excess capacity and administrative services.

In summary, the Company’s basis for future revenue growth is expected to come from the following primary sources: expansion of TPA revenues, conservation of business currently in force, the maximization of investment earnings and the acquisition of other companies or policy blocks in the life insurance business. Management has placed a significant emphasis on the development of these revenue sources and products offered to enhance these opportunities.

(b)

Expenses

Benefits, claims and settlement expenses net of reinsurance benefits and claims, decreased $692,178 from 2010 to 2011. The decrease relates primarily to changes in the Company’s death claim experience. Death claims were approximately $712,000 less in 2011 as compared to 2010. There is no single event that caused the mortality variances. Policy claims vary from year to year and therefore, fluctuations in mortality are to be expected and are not considered unusual by management.

Changes in policyholder reserves, or future policy benefits, also impact this line item. Reserves are calculated on an individual policy basis and generally increase over the life of the policy as a result of additional premium payments and acknowledgement of increased risk as the insured continues to age. The short-term impact of policy surrenders is negligible since a reserve for future policy benefits payable is held which is, at a minimum, equal to and generally greater than the cash surrender value of a policy. The benefit of fewer policy surrenders is primarily received over a longer time period through the retention of the Company’s asset base.

Commissions and amortization of deferred policy acquisition costs decreased $116,731 from 2010 to 2011. The Company’s financial reinsurance agreement along with lower commissions makes up the decrease. The earnings on the block of business covered by the financial reinsurance agreement are utilized to re-pay the original borrowed amount. The commission allowance reported each period from this agreement represents the net earnings on the identified policies covered by the agreement in each reporting period. Results from this agreement included in this line item were approximately $(804,133) and $(674,816) for the years 2011 and 2010, respectively. As financial reinsurance, all financial results relating to this block of business are utilized to repay the outstanding borrowed amount from the reinsurer. Securities are specifically identified and segregated in a trust account relative to this arrangement. Should a gain or loss occur on one of these identified securities in the trust account, the results are included in the calculation of the current period financial results of the treaty with the reinsurer. While the agreement may result in variances in this line item, this arrangement has no material impact on net income. The overall impact to net income was $11,000 and $21,000 for the years 2011 and 2010, respectively. A liability for the original ceding commission was established at the origination of the agreement and is amortized through this line item as earnings on the block of business are realized. Management anticipates this arrangement to fully pay out during 2012. At year end 2011, $129,969 was still needed in earnings. Most of the Company’s agent agreements contained vesting provisions, which provide for continued compensation payments to agents upon their termination subject to certain minimums and often limited to a specific period of time. Another factor affecting this line item is attributable to normal amortization of the deferred policy acquisition costs asset. The Company reviews the recoverability of the asset based on current trends and known events compared to the assumptions used in the establishment of the original asset. No impairments were recorded in the periods reported.

Net amortization of cost of insurance acquired decreased 7% in 2011 compared to 2010. Cost of insurance acquired is established when an insurance company is acquired. The Company assigns a portion of its cost to the right to receive future profits from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. Cost of insurance acquired is comprised of individual life insurance products including whole life, interest sensitive whole life and universal life insurance products. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The Company utilizes a 12% discount rate on the remaining unamortized business. The interest rates may vary due to risk analysis performed at the time of acquisition on the business acquired. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. Amortization of cost of insurance acquired is particularly sensitive to changes in interest rate spreads and persistency of certain blocks of insurance in-force. Persistency is a measure of insurance in force retained in relation to the previous year. The Company's average persistency rate for all policies in force for 2011 and 2010 has been approximately 95.8% and 96.0%, respectively. The Company monitors these projections to determine the adequacy of present values assigned to future profits. No impairments were recorded in the periods reported.

Operating expenses increased approximately 4% in 2011 compared to 2010. Management continues to place significant emphasis on expense monitoring and cost containment. Maintaining administrative efficiencies directly impacts net income.

Interest expense decreased approximately 14% during 2011 compared to 2010. This decrease is the result of a lower outstanding balance of debt as well as the general decline in interest rates. The Company made principal payments of $3,600,000 during 2011 on its long-term debt to FTN Financial. During 2010, the Company made principal payments of $3,600,351. The loan matures on December 7, 2012 with a final principal payment due of $3,291,411.

Deferred taxes are established to recognize future tax effects attributable to temporary differences between the financial statements and the tax return. As these differences are realized in the financial statement or tax return, the deferred income tax established on the difference is recognized in the financial statements as an income tax expense or credit.

(c)	Net income

The Company had a net income of $6,316,615 and $7,596,575 in 2011 and 2010, respectively. The decrease in net income in 2011 is primarily related to lower investment income offset by increased realized investment gains. One-time events, primarily reflected in realized gains, comprise a majority of net income of the Company during 2011. Future earnings will be significantly negatively impacted should earnings from these one-time items not be realizable in a future period. While Management believes there remain additional investments with such one-time earnings, when or if realized remains uncertain.

Financial Condition

(a)

Assets

Investments are the largest asset group of the Company. The Company's insurance subsidiaries are regulated by insurance statutes and regulations as to the type of investments they are permitted to make, and the amount of funds that may be used for any one type of investment. In light of these statutes and regulations, 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. Some insurance companies have suffered significant losses in their investment portfolios in the last few years; however, because of the Company’s conservative investment philosophy the Company has avoided such significant losses.

At December 31, 2011, the carrying value of fixed maturity securities in default as to principal or interest was immaterial in the context of consolidated assets, shareholders' equity or results from operations. 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 all fixed maturity investments as “investments held for sale”.

The following table summarizes the Company's fixed maturities distribution at December 31, 2011 and 2010 by ratings category as issued by Standard and Poor's, a leading ratings analyst.

Fixed	Maturities

	% of	Portfolio
Rating
	2011	2010
Investment Grade
AAA	27%	74%
AA	57%	4%
A	3%	9%
BBB	11%	13%
Below Investment Grade	2%	0%
	100%	100%

In recent periods there have been significant downgrades to many bond issues outstanding including a downgrade of U.S. issued debt during 2011. During the fourth quarter of 2011, the Company took advantage of the unusually high price spreads on U.S. government treasury securities relative to other types of bonds in the marketplace, by selling a portion of its U.S. treasury holdings realizing gains of approximately $6,412,000. The Company began re-deploying its excess cash balances into BBB and BB rated corporate debt issues. Interest spreads on these investments are higher than historic trends and Management believes this is an opportunity to enhance yield and provide more recurring investment income. Lower rated bonds are viewed by the marketplace to inherently hold more risk. The trade-off on this risk is a higher interest yield. Each investment is analyzed prior to acquisition to determine if Management is comfortable with the increased risk relative to the yield. Management believes there are opportunities currently available in this area where certain corporate bond issues have been more harshly impacted by the marketplace than may really be justified. It is this type of bond Management is primarily searching for to invest in.

Mortgage loan investments represent 8% and 14% of total assets of the Company at year-end 2011 and 2010, respectively. A significant portion of the Company’s mortgage loan investments result from opportunities available through FSNB, an affiliate of Mr. Jesse T. Correll. Mr. Correll is the CEO and Chairman of the Board of Directors of UTG, and directly and indirectly through affiliates, its largest shareholder. FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market. FSNB services all the mortgage loans of the Company. The majority of this amount was in the form of loans purchased at a discount from failed banks. The Company pays FSNB a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan amount to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $136,457 and $190,297 in servicing fees and $89,651 and $508,283 in origination fees to FSNB during 2011 and 2010, respectively.

During the fourth quarter of 2009, the Company had acquired $118,368,661 of discounted mortgage loans at a total cost of $35,224,022, representing an average purchase price to outstanding loan of 29.8%. During 2009, the Company recorded approximately $1,000,000 in income from this loan activity. During 2010, the Company acquired an additional $111,258,867 of discounted mortgage loans at a total cost of $36,283,278, representing an average purchase price to outstanding loan of 32.6%. Additionally, during 2010, the Company settled, sold or had paid off discounted mortgage loans totaling $23,607,100. During 2010, the Company recorded approximately $12,898,000 in income from the discounted mortgage loan activity, including $7,645,258 in discount accruals. During 2011, the Company acquired an additional $17,930,217 of discounted mortgage loans at a total cost of $6,673,601, representing an average purchase price to outstanding loan of 37.2%. During 2011, the Company settled, sold or had paid off discounted mortgage loans totaling $15,032,186. The Company recorded approximately $8,232,000 in income from the discounted mortgage loan activity, including $3,940,275 in discount accruals. While the Company reported income from the discounted loans, the majority of the income was the result of one-time events that occurred during the year. The Company does not anticipate the same return going forward from the discounted commercial mortgage loan portfolio.

Sub-prime mortgage lending has received significant attention. Default rates have risen sharply on these loans causing a negative impact in the economy in general. While the Company does not have a material direct exposure to sub-prime mortgage loans, the Company could still be negatively impacted indirectly primarily through fixed maturity holdings in financial institutions that do have sub-prime loan exposures. Declines in values relating to such entities will negatively impact the Company through unrealized investment losses. Should any of these entities declare bankruptcy, the Company would then report a realized loss on its investment. Management monitors events relating to this topic.

Total investment real estate holdings represent approximately 14% and 12% of the total assets of the Company, net of accumulated depreciation, at year-end 2011 and 2010, respectively. The Company has transferred several investments to real estate in the past year. The gain on real estate is mainly attributable to the sale of timber from Cumberland Woodlands of approximately $6,313,000, which is a one-time event. Expected returns on these investments exceed those available in fixed income securities. However, these returns may not always be as steady or predictable.

In mid August, the investment market took a sudden sharp decline. The U.S. debt ratings were lowered and concerns of European nations’ debt and potential defaults were in the forefront. During this time, certain of the Company’s trading securities were also negatively impacted resulting in losses of approximately $7.1 million as of year end 2011 when compared to second quarter 2011 earnings. These losses primarily resulted from holdings relating to market volatility and options relating to U.S. Treasury securities. The Company had a positive earnings track record in its trading securities accounts up until this point.

Policy loans remained consistent for the periods presented. Industry experience for policy loans indicates that few policy loans are ever repaid by the policyholder other than through termination of the policy. Policy loans are systematically reviewed to ensure that no individual policy loan exceeds the underlying cash value of the policy.

Cash and cash equivalents increased by approximately $64,000,000 comparing 2011 to 2010. This cash will be redeployed into additional investments in 2012. The Company has begun re-deploying its excess cash balances into BBB and BB rated corporate debt issues. Interest spreads on these investments are higher than historic trends and Management believes this is an opportunity to enhance yields and provide more recurring investment income.

Deferred policy acquisition costs decreased 12% in 2011 compared to 2010. Deferred policy acquisition costs, which vary with, and are primarily related to producing new business, are referred to as DAC. DAC consists primarily of commissions and certain costs of policy issuance and underwriting, net of fees charged to the policy in excess of ultimate fees charged. To the extent these costs are recoverable from future profits, the Company defers these costs and amortizes them with interest in relation to the present value of expected gross profits from the contracts, discounted using the interest rate credited by the policy. The Company had $0 in policy acquisition costs deferred, $6,000 in interest accretion and $74,345 in amortization in 2011, and had $0 in policy acquisition costs deferred, $6,000 in interest accretion and $97,029 in amortization in 2010.

Cost of insurance acquired decreased approximately 9% in 2011 compared to 2010. When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future cash flows from the acquired policies. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. In 2011 and 2010, amortization decreased the asset by $1,231,015 and $1,324,731, respectively. No impairments of this asset were recorded for the periods presented.

The Company is currently in the process of merging its two life companies, American Capitol Insurance Company and Universal Guaranty Life Insurance Company.

(b)	Liabilities

The largest liability, by far, is future policy benefits. The decrease from 2010 to 2011 in this line item was approximately 2%. This decrease is attributable primarily to a decrease in the total future policy benefits held. As policies in force terminate, the corresponding reserve liability held for those policies is released. Management expects this item to continue to decline at similar rates in future periods unless an acquisition of an existing block of business occurs.

At December 31, 2011, the Company has outstanding notes payable of $9,531,645 as compared to $10,372,239 a year ago. Approximately $3,290,000 of this debt is related to the acquisition of ACAP Corporation. The Company has four lines of credit available for operating liquidity or acquisitions of additional lines of business. The outstanding balances on these lines of credit were $6,000,000 and $2,290,000 as of December 31, 2011 and 2010, respectively. The Company's debt is discussed in more detail in Note 12 to the consolidated financial statements.

A portion of the Company’s funds has been dedicated to an experienced team of market professionals with the goal of grinding out a reasonable return with lower overall volatility and reduced risk. The portfolio contains exchange traded equities and options which have been classified as trading securities on the balance sheet.

(c)	Shareholders' Equity

Total shareholders' equity increased approximately 16% in 2011 compared to 2010. This increase is primarily due to the net income of $6,316,615 for the year as well as unrealized gains included in other comprehensive income.

Each year, the NAIC calculates financial ratio results (commonly referred to as IRIS ratios) for each insurance company. These ratios compare key financial data pertaining to the statutory balance sheet and income statement. The results are then compared to pre-established normal ranges determined by the NAIC. Results outside the range typically require explanation to the domiciliary insurance department. At year-end 2011, UG had one ratio while AC had four ratios outside the normal range. All variances reported were anticipated by Management. These ratios are discussed in more detail in the Regulatory Environment discussion included in this Item 7.

Liquidity and Capital Resources

The Company has three principal needs for cash - the insurance companies’ contractual obligations to policyholders, the payment of operating expenses and servicing its outstanding debt. Cash and cash equivalents as a percentage of total assets were 19% and 4% as of December 31, 2011 and 2010. Fixed maturities as a percentage of total invested assets were 47% and 45% as of December 31, 2011 and 2010, respectively.

The Company's investments are predominantly in fixed maturity investments such as bonds, which provide sufficient return to cover future obligations. The Company carries all of its fixed maturity holdings as held for sale which are reported in the consolidated financial statements at their market value.

Many of the Company's products contain surrender charges and other features which reward persistency and penalize the early withdrawal of funds. With respect to such products, surrender charges are generally sufficient to cover the Company's unamortized deferred policy acquisition costs with respect to the policy being surrendered.

Cash used in operating activities was $(10,487,204) and $(2,986,295) in 2011 and 2010, 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. The Company has not marketed any significant new products for several years. As such, premium revenues continue to decline. Management anticipates future cashflows from operations to remain similar to historic trends.

Cash provided by (used in) investing activities was $78,850,682 and $(11,480,532) for 2011 and 2010, respectively. During 2011, fixed maturities sold made up 67% of the investments sold and matured. The Company sold ETF’s and reinvested in low interest bonds. In the fourth quarter, the Company sold the low interest bonds and is currently re-deploying the cash into BBB and BB rated corporate debt issues. During 2010, more emphasis was placed on the trading securities and discounted mortgage loans. These two investment areas accounted for 86% of investments acquired during 2010 and 79% of investments sold during 2010.

Net cash used in financing activities was $(3,921,255) and $(4,542,564) for 2011 and 2010, respectively. Cash used in financing activities during both years was primarily the result of debt reduction.

Net policyholder contract deposits decreased approximately $419,000 in 2011 compared to 2010. Policyholder contract withdrawals decreased approximately $382,000 in 2011 compared to 2010. Management anticipates continued moderate declines in contract deposits and withdrawals as this block of business continues to decline. Contract withdrawals can vary from year to year based on outside influences such as changes in interest rates, competition and other economic factors.

On December 8, 2006, UTG borrowed funds from First Tennessee Bank National Association through execution of an $18,000,000 promissory note. The note is secured by the pledge of 100% of the common stock of UG. The promissory note carries a variable rate of interest based on the 3 month LIBOR rate plus 180 basis points. Interest is payable quarterly. Principal is payable annually beginning at the end of the second year in five installments of $3,600,000. The loan matures on December 7, 2012. The Company made principal payments of $3,600,000 during 2011. During 2010, the Company made principal payments of $3,600,351. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $3,291,411 and $6,891,411, respectively.

In addition to the above promissory note, First Tennessee Bank National Association also provided UTG with a revolving credit note. During 2011, at the renewal of the note, Management decided to increase the note amount from $2,750,000 to $5,000,000 to provide for additional operating liquidity and flexibility for current operations. This note is for a one-year term and may be renewed by consent of both parties. The credit note is to provide operating liquidity for UTG. The promissory note carries a variable rate of interest based on the 90-day LIBOR rate plus 2.75 percentage points, but at no time will the rate be less than 3.25%. The collateral held on the above note also secures this credit note. UTG had borrowings of $2,943,000 and $290,000 against this note during 2011 and 2010, respectively. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $1,000,000 and $290,000, respectively.

In November 2007, the Company became a member of the Federal Home Loan Bank (FHLB). This membership allows the Company access to additional credit up to a maximum of 50% of the total assets of UG. To be a member of the FHLB, UG was required to purchase shares of common stock of FHLB. Borrowing capacity is based on 50 times each dollar of stock acquired in FHLB above the "base membership" amount. UG's current line of credit with the FHLB is $15,000,000. During 2011, UG had borrowings of $0 against this line of credit and repayments of $2,000,000. During 2010, UG had borrowings of $2,000,000 and repayments of $0 at a rate of 0.25%. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $0 and $2,000,000, respectively.

In June 2006, the Company renewed a five-year contract for services related to its purchase of the “ID3” software system. This contract was replaced effective May 28, 2011. The new contract provides for a lifetime license for the ID3 system but obligates the Company, for a three year period, to pay $28,250 per month for hosting services; and to pay $8,666 per month for maintenance, for a five year period. While the contract allows the Company to exit either obligation early, substantial penalties would be incurred.

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, and the servicing of its debt are primarily provided by its subsidiaries. On a parent only basis, UTG's cash flow is dependent on management fees received from its insurance subsidiaries, stockholder dividends from its subsidiaries and earnings received on cash balances. On December 31, 2011, 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. The payment of cash dividends to shareholders by UTG is not legally restricted. However, the state insurance department regulates insurance company dividend payments where the company is domiciled.

UG is an Ohio domiciled insurance company, which requires notification within five business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend. Ordinary dividends are defined as the greater of: a) prior year statutory net income or b) 10% of statutory capital and surplus. For the year ended December 31, 2011, UG had statutory net income of $582,217. At December 31, 2011, UG's statutory capital and surplus amounted to $33,167,222. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. UG paid ordinary dividends of $2,930,000 and $2,725,000 to UTG in 2011 and 2010, respectively. No extraordinary dividends were paid during the two year period.

AC is a Texas domiciled insurance company, which requires notification within two business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend. Ordinary dividends are defined as the greater of: a) prior year statutory earnings from operations or b) 10% of statutory surplus. At December 31, 2011, AC statutory earnings from operations were $874,660. At December 31, 2011, AC statutory surplus was $6,625,808. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. AC paid ordinary dividends of $600,000 and $728,130 during 2011 and 2010, respectively. No extraordinary dividends were paid during the two year period.

Management believes the overall sources of liquidity available will be sufficient to satisfy its financial obligations.

Regulatory Environment

The Company's current and merged insurance subsidiaries are assessed contributions by life and health guaranty associations in almost all states to indemnify policyholders of failed companies. In several states the company may reduce premium taxes paid to recover a portion of assessments paid to the states' guaranty fund association. This right of "offset" may come under review by the various states, and the company cannot predict whether and to what extent legislative initiatives may affect this right to offset. In addition, some state guaranty associations have adjusted the basis by which they assess the cost of insolvencies to individual companies. The Company believes that its reserve for future guaranty fund assessments is sufficient to provide for assessments related to known insolvencies. This reserve is based upon management's current expectation of the availability of this right of offset, known insolvencies and state guaranty fund assessment bases. However, changes in the basis whereby assessments are charged to individual companies and changes in the availability of the right to offset assessments against premium tax payments could materially affect the company's results.

Currently, the insurance subsidiaries are subject to government regulation in each of the states in which they conduct business. Such regulation is vested in state agencies having broad administrative power dealing with all aspects of the insurance business, including the power to: (i) grant and revoke licenses to transact business; (ii) regulate and supervise trade practices and market conduct; (iii) establish guaranty associations; (iv) license agents; (v) approve policy forms; (vi) approve premium rates for some lines of business; (vii) establish reserve requirements; (viii) prescribe the form and content of required financial statements and reports; (ix) determine the reasonableness and adequacy of statutory capital and surplus; and (x) regulate the type and amount of permitted investments. Insurance regulation is concerned primarily with the protection of policyholders. The Company cannot predict the impact of any future proposals, regulations or market conduct investigations. UG is domiciled in the state of Ohio. AC is domiciled in the state of Texas.

The insurance regulatory framework continues to be scrutinized by various states, the federal government and the National Association of Insurance Commissioners (NAIC). The NAIC is an association whose membership consists of the insurance commissioners or their designees of the various states. The NAIC has no direct regulatory authority over insurance companies. However, its primary purpose is to provide a more consistent method of regulation and reporting from state to state. This is accomplished through the issuance of model regulations, which can be adopted by individual states unmodified, modified to meet the state's own needs or requirements, or dismissed entirely.

Most states also have insurance holding company statutes, which require registration and periodic reporting by insurance companies controlled by other corporations licensed to transact business within their respective jurisdictions. The insurance subsidiaries are subject to such legislation and registered as controlled insurers in those jurisdictions in which such registration is required. Statutes vary from state to state but typically require periodic disclosure, concerning the corporation that controls the registered insurers and all subsidiaries of such corporation. In addition, prior notice to, or approval by, the state insurance commission of material inter-corporate transfers of assets, reinsurance agreements, management agreements (see Note 9 to the consolidated financial statements), and payment of dividends (see Note 3 to the consolidated financial statements) in excess of specified amounts by the insurance subsidiaries, within the holding company system, are required.

Each year, the NAIC calculates financial ratio results (commonly referred to as IRIS ratios) for each company. These ratios measure various statutory balance sheet and income statement financial information. The results are then compared to pre-established normal ranges determined by the NAIC. Results outside the range typically require explanation to the domiciliary insurance department.

At year-end 2011, UG had one ratio outside the normal range. AC had four ratios outside the normal range. Each of the ratios outside the normal range was anticipated by Management. UG’s ratio relates to the Company’s affiliated investments. The Company has made investments in real estate projects, which have been consolidated into these financial statements through limited liability companies. The limited liability companies were created to provide additional risk protection to the Company. AC’s ratios outside the normal range relate to net change in capital and surplus, gross change in capital and surplus, net income to total income and change in asset mix. The Company’s unrealized gains shifted to unrealized losses during 2011 contributing to the drop in capital and surplus. The drop in the net income to total income ratio is the result of the net loss recognized and drop in total income compared to 2010. AC sold bonds and held a large cash balance at year end 2011 compared to a much lower cash balance at year end 2010.

The NAIC's risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. The risk-based capital (RBC) formula measures the adequacy of statutory capital and surplus in relation to investment and insurance risks such as asset quality, mortality and morbidity, asset and liability matching and other business factors. The RBC formula is used by state insurance regulators as an early warning tool to identify, for the purpose of initiating regulatory action, insurance companies that potentially are inadequately capitalized. In addition, the formula defines new minimum capital standards that supplement the current system of low fixed minimum capital and surplus requirements on a state-by-state basis. Regulatory compliance is determined by a ratio of the insurance company's regulatory total adjusted capital, as defined by the NAIC, to its authorized control level RBC, as defined by the NAIC. Insurance companies below specific trigger points or ratios are classified within certain levels, each of which requires specific corrective action. The levels and ratios are as follows:

		Ratio of Total Adjusted Capital to
		Authorized Control Level RBC
Regulatory Event		(Less Than or Equal to)

Company action level		2.0*
Regulatory action level		1.5
Authorized control level		1.0
Mandatory control level		0.7

		*Or, 2.5 with negative trend

At December 31, 2011, UG has a ratio of approximately 3.7, which is 370% of the authorized control level. AC’s ratio is approximately 7.0, which is 700% of the authorized control level. Accordingly, both companies meet the RBC requirements.

On July 30, 2002, President Bush signed into law the “SARBANES-OXLEY” Act of 2002 (“the Act”). This Law, enacted in response to several high-profile business failures, was developed to provide meaningful reforms that protect the public interest and restore confidence in the reporting practices of publicly traded companies. The implications of the Act to public companies, (which includes UTG) are vast, widespread, and evolving. The Company has implemented requirements affecting the current reporting period, and is continually monitoring, evaluating, and planning implementation of requirements that will need to be taken into account in future reporting periods. As part of the implementing these requirements, the Company has developed a compliance plan, which includes documentation, evaluation and testing of key financial reporting controls.

The “USA PATRIOT” Act of 2001 (“the Patriot Act”), enacted in response to the terrorist attacks of September 11, 2001, strengthens our Nation’s ability to combat terrorism and prevent and detect money-laundering activities. Under Section 352 of the Patriot Act, financial institutions (definition includes insurance companies) are required to develop an anti-money laundering program. The practices and procedures implemented under the program should reflect the risks of money laundering given the entity’s products, methods of distribution, contact with customers and forms of customer payment and deposits. In addition, Section 326 of the Patriot Act creates minimum standards for financial institutions regarding the identity of their customers in connection with the purchase of a policy or contract of insurance. The Company has instituted an anti-money laundering program to comply with Section 352, and has communicated this program throughout the organization. In addition, all new business applications are regularly screened through the Medical Information Bureau. The Company regularly updates the information provided by the Office of Foreign Asset Control, U.S. Treasury Department in order to remain in compliance with the Patriot Act and will continue to monitor this issue as changes and new proposals are made.

Accounting Developments

In December 2011, Accounting Standards Board (“FASB”) issued the Accounting Standards Update (“ASU”) No 2011-12 Comprehensive Income (Topic 220) Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. The amendments are being made to allow the Board time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-12 to have a material impact on its consolidated financial statements.

In December 2011, FASB issued the ASU No. 2011-11 Balance Sheet (Topic 210) Disclosure about Offsetting Assets and Liabilities. The amendments in this Update require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company does not expect the adoption of ASU 2011-11 to have a material impact on its consolidated financial statements.

In December 2011, FASB issued the ASU No. 2011-10 Property, Plant, and Equipment (Topic 360) Derecognition of in Substance Real Estate-a Scope Clarification. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should deregognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. The Company does not expect the adoption of ASU 2011-10 to have a material impact on its consolidated financial statements.

In September 2011, FASB issued the ASU No. 2011-08 Intangibles – Goodwill and Other (Topic 350) Testing Goodwill for Impairment. Under the amendments in this Update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in paragraph 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph 350-20-35-9. Under the amendments in this Update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-08 to have a material impact on its consolidated financial statements.

In June 2011, the FASB issued the ASU No. 2011-05 Comprehensive Income (Topic 220) Presentation of Comprehensive Income. Under the amendments to Topic 220, Comprehensive Income, in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the entity is required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The amendments in this Update should be applied retrospectively. The amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-05 to have a material impact on its consolidated financial statements.

In May 2011, the FASB issued the ASU No. 2011-04 Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For many of the requirements, the Board does not intend for the amendments in this Update to result in a change in the application of the requirements in Topic 820. Some of the amendments clarify the Board’s intent about the application of existing fair value measurement requirements. Other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. The amendments in this Update are effective prospectively during interim and annual periods beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-04 to have a material impact on its consolidated financial statements.

ITEM 7A. 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. The Company’s exposure to equity prices and foreign currency exchange rates is immaterial. The information is presented 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 63% of the investment portfolio as of December 31, 2011. 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 57% of the fixed maturities owned at December 31, 2011 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 December 31, 2011:

Decrease in Interest Rates		Increase in Interest Rates

200 Basis Points	100 Basis Points	100 Basis Points	200 Basis Points	300 Basis Points

$32,267,000	$15,324,000	$(12,832,000)	$(23,546,000)	$(32,516,000)

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. The Company attempts to mitigate its exposure to adverse interest rate movements through staggering the maturities of its fixed maturity investments and through maintaining cash and other short term investments to assure sufficient liquidity to meet its obligations and to address reinvestment risk considerations. 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.

At December 31, 2011, $8,519,064 of assets and $(5,471,475) of liabilities were classified as trading securities carried at fair value. Included in these amounts are derivative investments with a fair value of $3,217,420 and $(4,187,885) in trading securities assets and trading securities liabilities, respectively.

At December 31, 2010, $37,029,550 of assets and $(18,429,677) of liabilities were classified as trading securities carried at fair value. Included in these amounts are derivative investments with a fair value of $2,244,478 and $(17,246,957) in trading securities assets and trading securities liabilities, respectively.

The Company had no capital lease obligations, material operating lease obligations or purchase obligations outstanding as of December 31, 2011.

The Company has $9,531,645 in debt outstanding at December 31, 2011.

Future policy benefits reflected as liabilities of the Company on its balance sheet as of December 31, 2011, 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.

Tabular presentation

The following table provides information about the Company’s long term debt that is sensitive to changes in interest rates. The table presents principal cash flows and related weighted average interest rates by expected maturity dates. The Company has no interest rate derivative financial instruments or interest rate swap contracts.

December 31, 2011
Expected maturity date

Long term debt	2012	2013	2014	2015	Thereafter	Total	Fair value

Fixed rate	29,207	31,586	34,154	36,935	108,352	240,234	227,889
Average interest rate	5.0%	5.0%	5.0%	5.0%	5.0%	5.0%

Variable rate	3,291,411	5,000,000	0	0	0	8,291,411	8,291,411
Average interest rate	2.3%	2.3%	N/A	N/A	N/A	2.3%


Short term debt

Variable rate	1,000,000	0	0	0	0	1,000,000	1,000,000
Average interest rate	3.25%	N/A	N/A	N/A	N/A	3.25%

Equity risk

Equity risk is the risk that the Company will incur economic losses due to adverse fluctuations in a particular stock. As of December 31, 2011 and 2010, the fair value of our equity securities was $17,299,628 and $19,021,957, respectively. As of December 31, 2011 a 10% decline in the value of the equity securities would result in an unrealized loss of $1,729,963 as compared to an estimated unrealized loss of $1,902,196 as of December 31, 2010. The selection of a 10% unfavorable change in the equity markets should not be construed as a prediction by the Company of future market events, but rather as an illustration of the potential impact of such an event.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Listed below are the financial statements included in this Part of the Annual Report on SEC Form 10-K:

	Page No.
UTG, INC. AND CONSOLIDATED SUBSIDIARIES
Report of Management on Internal Controls Over Financial Reporting……..…..............................……..…..............................……..…..... Report of Independent Registered Public Accounting Firm for the years ended December 31, 2011 and 2010…………………………………………..…..…....…………………………………………	34 35
Consolidated Balance Sheets………………………………………………………………………....….……………………………………….	36
Consolidated Statements of Operations…………………………………………………..………...……………………………………………	37
Consolidated Statements of Shareholders’ Equity and Comprehensive Income………………………………………..…………………………………...…..………………………………………...	38
Consolidated Statements of Cash Flows……………………………………………………......…...….……………………………………….	39
Notes to Consolidated Financial Statements……………………………………………………......…..……………………………………....	40-64

Report of Management on Internal Controls Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and its Board of Directors regarding the preparation and fair presentation of published financial statements. However, internal control systems, no matter how well designed, cannot provide absolute assurance. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework contained in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Report”).

Based on our evaluation under the framework in the COSO Report our management concluded that our internal control over financial reporting was effective as of December 31, 2011.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

During the Company’s fourth fiscal quarter, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of UTG, Inc. and Subsidiaries

Springfield, Illinois

We have audited the accompanying consolidated balance sheets of UTG, Inc. (a Delaware corporation, the “Company”) and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended. Our audits also included the financial statement schedules I, II, IV and V. These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of UTG, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ Brown Smith Wallace, L.L.C.

St. Louis, Missouri

March 26, 2012

UTG, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2011 and 2010




ASSETS

				2011		2010
Investments:
	Investments available for sale:
	Fixed maturities, at fair value (amortized cost $107,514,400 and $142,948,693)		$	124,583,177	$	147,905,948
	Equity securities, at fair value (cost $16,200,043 and $18,940,811)			17,299,628		19,021,957
	Trading securities, at fair value (cost $9,147,237 and $34,183,252)			8,519,064		37,029,550
	Mortgage loans on real estate at amortized cost			9,272,919		12,411,587
	Discounted mortgage loans on real estate at amortized cost			27,467,920		47,523,860
	Investment real estate			62,701,375		53,148,755
	Policy loans			13,312,229		13,976,019
		Total Investments		263,156,312		331,017,676

Cash and cash equivalents				82,925,675		18,483,452
Accrued investment income				1,136,741		1,609,425
Reinsurance receivables:
	Future policy benefits			64,693,384		67,033,539
	Policy claims and other benefits			4,029,412		4,446,940
Cost of insurance acquired				12,846,266		14,077,281
Deferred policy acquisition costs				488,266		556,958
Property and equipment, net of accumulated depreciation				1,527,285		1,478,935
Income taxes receivable				281,636		0
Other assets				2,636,280		2,883,893
		Total assets	$	433,721,257	$	441,588,099


LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
	Future policy benefits		$	301,393,689	$	307,509,531
	Policy claims and benefits payable			3,016,866		3,588,914
	Other policyholder funds			636,319		810,062
	Dividend and endowment accumulations			14,176,151		14,190,946
Income taxes payable				0		209,888
Deferred income taxes				13,745,751		13,381,278
Notes payable				9,531,645		10,372,239
Trading securities, at fair value (proceeds $6,288,562 and $17,387,108)				5,471,475		18,429,677
Other liabilities				9,964,313		7,967,807
		Total liabilities		357,936,209		376,460,342


Shareholders' equity:
Common stock - no par value, stated value $.001 per share.
	Authorized 7,000,000 shares - 3,854,610 and 3,848,079 shares issued
	and outstanding			3,855		3,848
Additional paid-in capital				45,051,608		41,432,636
Retained earnings				12,651,687		6,335,072
Accumulated other comprehensive income				11,792,214		3,679,684
Total UTG shareholders' equity				69,499,364		51,451,240
Noncontrolling interest				6,285,684		13,676,517
		Total shareholders' equity		75,785,048		65,127,757
		Total liabilities and shareholders' equity	$	433,721,257	$	441,588,099

UTG, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2011 and 2010


				2011		2010

Revenues:

	Premiums and policy fees		$	14,082,400	$	16,498,551
	Reinsurance premiums and policy fees			(3,935,191)		(4,107,958)
	Net investment income			11,198,165		24,858,837
	Other income			2,055,502		1,834,465
		Revenues before realized gains (losses)		23,400,876		39,083,895
	Realized investment gains (losses), net:
		Other-than-temporary impairments		(4,342,784)		(1,478,970)
		Other realized investment gains, net		15,905,413		838,432
		Total realized investment gains (losses), net		11,562,629		(640,538)
		Total revenues		34,963,505		38,443,357


Benefits and other expenses:

	Benefits, claims and settlement expenses:
		Life		20,539,432		23,833,379
		Reinsurance benefits and claims		(3,843,351)		(6,424,865)
		Annuity		1,044,455		976,755
		Dividends to policyholders		514,268		561,713
	Commissions and amortization of deferred
		policy acquisition costs		(941,581)		(824,850)
	Amortization of cost of insurance acquired			1,231,015		1,324,731
	Operating expenses			8,389,781		8,030,984
	Interest expense			260,540		304,353
		Total benefits and other expenses		27,194,559		27,782,200

Income before income taxes				7,768,946		10,661,157
Income tax expense				(1,265,662)		(2,278,245)

Net income				6,503,284		8,382,912

Net income attributable to noncontrolling interest				(186,669)		(786,337)

Net income attributable to common shareholders			$	6,316,615	$	7,596,575

Amounts attributable to common shareholders:

	Basic income per share		$	1.65	$	1.96

	Diluted income per share		$	1.65	$	1.96

	Basic weighted average shares outstanding			3,824,444		3,874,012

	Diluted weighted average shares outstanding			3,824,444		3,874,012

UTG, Inc.
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity and Comprehensive Income


Period ended December 31, 2011		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interest		Total Shareholders' Equity		Comprehensive Income

Balance at January 1, 2011	$	3,848	$	41,432,636	$	6,335,072	$	3,679,684	$	13,676,517	$	65,127,757	$	0
Common stock issued during year		50		4,094,476		0		0		0		4,094,526		0
Treasury shares acquired and retired		(43)		(475,504)		0		0		0		(475,547)		0
Net income attributable to common shareholders		0		0		6,316,615		0		0		6,316,615		6,316,615
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0		0		0		8,112,530		0		8,112,530		8,112,530
Contributions		0		0		0		0		0		0		0
Distributions		0		0		0		0		(3,131,271)		(3,131,271)		0
Mergers		0		0		0		0		(6,895,546)		(6,895,546)		0
Acquisitions		0		0		0		0		1,777,900		1,777,900		0
Gain attributable to noncontrolling interest		0		0		0		0		858,084		858,084		0
Balance at December 31, 2011	$	3,855	$	45,051,608	$	12,651,687	$	11,792,214	$	6,285,684	$	75,785,048	$	14,429,145

UTG, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2011 and 2010


			2011		2010

Cash flows from operating activities:
Net income attributable to common shares		$	6,316,615	$	7,596,575
Adjustments to reconcile net income to net cash
used in operating activities net of changes in assets and liabilities
resulting from the sales and purchases of subsidiaries:
	Amortization (accretion) of investments		(3,964,398)		(7,530,201)
	Realized investment (gains) losses, net		(11,562,629)		640,538
	Unrealized trading (gains) losses included in income		1,604,757		(1,803,729)
	Amortization of deferred policy acquisition costs		68,692		90,568
	Amortization of cost of insurance acquired		1,231,015		1,324,731
	Depreciation		1,412,661		1,311,029
	Net income attributable to noncontrolling interest		186,669		786,337
	Charges for mortality and administration
	of universal life and annuity products		(7,353,389)		(7,709,727)
	Interest credited to account balances		5,152,218		5,247,365
	Change in accrued investment income		472,684		(32,226)
	Change in reinsurance receivables		2,757,683		2,265,937
	Change in policy liabilities and accruals		(5,037,087)		(4,007,032)
	Change in income taxes payable		(4,535,859)		277,669
	Change in other assets and liabilities, net		2,763,164		(1,444,129)
Net cash used in operating activities			(10,487,204)		(2,986,295)

Cash flows from investing activities:
Proceeds from investments sold and matured:
	Fixed maturities available for sale		173,221,329		24,718,790
	Equity securities available for sale		3,572,456		948,385
	Trading securities		29,733,306		163,891,508
	Mortgage loans		3,139,903		16,431,689
	Discounted mortgage loans		15,032,186		23,607,100
	Real estate		29,621,068		2,709,233
	Policy loans		4,299,197		3,468,202
	Short-term investments		0		700,000
Total proceeds from investments sold and matured			258,619,445		236,474,907
Cost of investments acquired:
	Fixed maturities available for sale		(128,598,767)		(28,947,923)
	Equity securities available for sale		(727,258)		(1,333,942)
	Trading securities		(19,626,789)		(171,842,107)
	Mortgage loans		(1,235)		(2,489,523)
	Discounted mortgage loans		(11,122,151)		(38,323,757)
	Real estate		(15,842,681)		(1,778,281)
	Policy loans		(3,635,407)		(3,100,615)
Total cost of investments acquired			(179,554,288)		(247,816,148)
Purchase of property and equipment			(214,475)		(139,291)
Net cash provided by (used in) investing activities			78,850,682		(11,480,532)

Cash flows from financing activities:
	Policyholder contract deposits		6,213,174		6,632,125
	Policyholder contract withdrawals		(5,851,344)		(6,232,871)
	Proceeds from notes payable/line of credit		7,943,000		7,290,000
	Payments of principal on notes payable/line of credit		(8,783,594)		(11,320,650)
	Purchase of treasury stock		(475,547)		(349,675)
	Proceeds from sale of subsidiary		164,327		0
	Non controlling distributions of consolidated subsidiary		(3,131,271)		(561,493)
Net cash used in financing activities			(3,921,255)		(4,542,564)

Net increase (decrease) in cash and cash equivalents			64,442,223		(19,009,391)
Cash and cash equivalents at beginning of year			18,483,452		37,492,843
Cash and cash equivalents at end of year		$	82,925,675	$	18,483,452

UTG, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.	ORGANIZATION - At December 31, 2011, the significant majority-owned subsidiaries of UTG were as depicted on the following organizational chart.

Entity	Parent	Percentage Owned
UTG, Inc. (UTG)
Universal Guaranty Life Insurance Company (UG)	UTG, Inc.	100%
American Capitol Insurance Company (AC)	Universal Guaranty Life Insurance Company	100%
Imperial Plan, Inc.(Imperial Plan)	American Capitol Insurance Company	100%
Collier Beach, LLC	Universal Guaranty Life Insurance Company	100%
Cumberland Woodlands, LLC (CW)	Universal Guaranty Life Insurance Company	100%
HPG Acquisitions, LLC (HPG)	Universal Guaranty Life Insurance Company	74%
Northwest Florida of Okaloosa Holding, LLC	Universal Guaranty Life Insurance Company	68%
Sand Lake, LLC (Sand Lake)	Universal Guaranty Life Insurance Company	100%
Stanford Wilderness Road, LLC (SWR)	Universal Guaranty Life Insurance Company	100%
Sun Valley Homes, LLC (Sun Valley)	Universal Guaranty Life Insurance Company	67%
UG Acquisitions, LLC	Universal Guaranty Life Insurance Company	100%
UTG Avalon, LLC	Universal Guaranty Life Insurance Company	100%
Wingate of St Johns Holding, LLC	Universal Guaranty Life Insurance Company	52%

UTG and its subsidiaries are collectively referred to as (“The Company”). The Company’s significant accounting policies are summarized as follows.

B.	NATURE OF OPERATIONS - UTG is an insurance holding company. The Company’s dominant business is individual life insurance which includes the servicing of existing insurance business in force and the acquisition of other companies in the insurance business.
C.	BUSINESS SEGMENTS - The Company has only one business segment – life insurance.
D.	BASIS OF PRESENTATION - The financial statements of UTG and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America.
E.	PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the Registrant and its wholly and majority-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated.
F.	INVESTMENTS - Investments are shown on the following bases:
	Investments available for sale - at fair value, unrealized gains and losses deemed temporary, net of deferred income taxes, are credited or charged, as appropriate, directly to accumulated other comprehensive income or loss (a component of shareholders’ equity). Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. Net realized gains and losses on sales of held for sale securities, and unrealized losses considered to be other-than-temporary, are recorded to net realized investment gains (losses) in the Consolidated Statements of Operations.
	Trading securities – at fair value, with gains or losses resulting from changes in fair value recognized in earnings. Trading securities include exchange traded equities, exchange traded equity options, and futures.
	Mortgage loans on real estate - at unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected.
	Discounted mortgage loans – during 2010 and 2011, the Company purchased non-performing loans at a deep discount through an auction process led by the federal government. In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company. Accordingly, the Company records its investment in the discounted loans at its original purchase price. Management works the loans with the borrower to reach a settlement on the loan or they foreclose on the underlying collateral which is primarily commercial real estate. For cash payments received during the work out process, the Company records these payments to interest income on a cash basis. For loan settlements reached, the Company records the amount in excess of the carrying amount of the loan as a discount accretion to investment income at the closing date. Management reviews the discount loan portfolio regularly for impairment. If an impairment is identified (after consideration of the underlying collateral), the Company records an impairment to earnings in the period the information becomes known.
	Real estate - investment real estate held for sale at lower of cost or fair value less cost to sell. Expenses to maintain the property are expensed as incurred.
	Policy loans - at unpaid balances including accumulated interest but not in excess of the cash surrender value of the related policy.
	Short-term investments - at amortized cost, which approximates fair value.
	Realized gains and losses include sales of investments, periodic changes in fair value on trading securities, and write downs in value. If any, other-than-temporary declines in fair value are recognized in net income on the specific identification basis.
	Unrealized gains and losses on investments available for sale are recognized in other comprehensive income on the specific identification basis. With each reporting period, management reviews its investment portfolio for securities whose value has declined below amortized cost to assess whether the decline is other than temporary. Included in the analysis are considerations of the severity and duration of the decline in fair value, the length of time expected to recover, the financial condition of the issuer, and whether the Company either plans to sell the security or it is more-likely-than-not that it will be required to sell the security before recovery of its amortized cost. If there is deemed to be an other than temporary decline in the value of any individual equity security, the Company reclassifies the associated net unrealized loss out of accumulated other comprehensive income with a corresponding charge to investment income. For debt securities available for sale that are determined to have an other than temporary impairment (“OTTI”), the credit component of the OTTI is recognized in earnings and the non-credit component is recognized in accumulated other comprehensive income (loss) in situations where the Company does not intend to sell the security and it is more-likely-than-not that the Company will not be required to sell the security.
G.	CASH EQUIVALENTS - The Company considers certificates of deposit and other short-term instruments with an original purchased maturity of three months or less to be cash equivalents.
H.	REINSURANCE - In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts. The Company retains a maximum of $125,000 of coverage per individual life.
	Reinsurance receivables are recognized in a manner consistent with the liabilities relating to the underlying reinsured contracts. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. For financial reinsurance arrangements, the Company reports the initial ceding commission received as an “other liability” on its financial statements. Financial results in subsequent periods are reported in the various line items of the income statement as with other reinsurance agreements, with the repayment amount reported in the line item “amortization of DAC”. The net impact to the statement of operations in any subsequent period represents the fees paid to the reinsurer on the current outstanding balance of the initial ceding commission.
I.	FUTURE POLICY BENEFITS AND EXPENSES - The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiaries’ experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2% to 6% for life insurance and 2.5% to 9.3% for annuities. Benefit reserves for traditional life insurance policies include certain deferred profits on limited-payment policies that are being recognized in income over the policy term. Policy benefit claims are charged to expense in the period that the claims are incurred. Current mortality rate assumptions are based on 1975-80 select and ultimate tables. Withdrawal rate assumptions are based upon Linton B or C, which are industry standard actuarial tables for forecasting assumed policy lapse rates.
	Benefit reserves for universal life insurance and interest sensitive life insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims in excess of related policy account balances. Interest crediting rates for universal life and interest sensitive products range from 4.0% to 5.5% as of December 31, 2011 and 2010.
J.	POLICY AND CONTRACT CLAIMS - Policy and contract claims include provisions for reported claims in process of settlement, valued in accordance with the terms of the policies and contracts, as well as provisions for claims incurred and unreported based on prior experience of the Company. Incurred but not reported claims were $1,309,068 and $1,315,533 as of December 31, 2011 and 2010 respectively.
K.	COST OF INSURANCE ACQUIRED - When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. The Company utilizes a 12% discount rate on the remaining unamortized business. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rate utilized in the amortization calculation is 12%. The interest rates vary due to differences in the blocks of business. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.

		2011		2010

Cost of insurance acquired, beginning of year	$	14,077,281	$	15,402,012

Interest accretion		1,711,885		1,870,852
Amortization		(2,942,900)		(3,195,583)
Net amortization
		(1,231,015)		(1,324,731)
Cost of insurance acquired, end of year	$	12,846,266	$	14,077,281

Estimated net amortization expense of cost of insurance acquired for the next five years is as follows:

	Interest Accretion	Amortization	Net Amortization
2012	1,564,000	2,710,000	1,146,000
2013	1,427,000	2,491,000	1,064,000
2014	1,299,000	2,285,000	986,000
2015	1,181,000	2,088,000	907,000
2016	1,072,000	1,945,000	873,000

L.	DEFERRED POLICY ACQUISITION COSTS - Commissions and other costs (salaries of certain employees involved in the underwriting and policy issue functions and medical and inspection fees) of acquiring life insurance products that vary with and are primarily related to the production of new business have been deferred. Traditional life insurance acquisition costs are being amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policy benefit reserves.
	For universal life insurance and interest sensitive life insurance products, acquisition costs are being amortized generally in proportion to the present value of expected gross profits from surrender charges and investment, mortality, and expense margins. Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 944, "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments," the Company makes certain assumptions regarding the mortality, persistency, expenses, and interest rates it expects to experience in future periods. These assumptions are to be best estimates and are to be periodically updated whenever actual experience and/or expectations for the future change from initial assumptions. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.
	The following table summarizes deferred policy acquisition costs and related data for the years shown:

		2011		2010

Deferred, beginning of year	$	556,958	$	647,526

Interest accretion		5,653		6,461
Amortization charged to income		(74,345)		(97,029)
Net amortization		(68,692)		(90,568)
Change for the year		(68,692)		(90,568)
Deferred, end of year	$	488,266	$	556,958

Estimated net amortization expense of deferred policy acquisition costs for the next five years is as follows:

		Interest Acceletion		Amortization		Net Amortization
2012	$	5,000	$	62,000	$	57,000
2013		4,000		56,000		52,000
2014		3,000		51,000		48,000
2015		3,000		78,000		75,000
2016		2,000		76,000		74,000

M.		PROPERTY AND EQUIPMENT - Company-occupied property, data processing equipment and furniture and office equipment are stated at cost less accumulated depreciation of $3,235,642 and $3,079,922 at December 31, 2011 and 2010, respectively. Depreciation is computed on a straight-line basis for financial reporting purposes using estimated useful lives of three to thirty years. Depreciation expense was $162,941 and $175,809 for the years ended December 31, 2011 and 2010, respectively.
N.		INCOME TAXES - Income taxes are reported Pursuant to FASB Codification 740-10. Deferred income taxes are recorded to reflect the tax consequences on future periods of differences between the tax bases of assets and liabilities and their financial reporting amounts at the end of each period. The principal assets and liabilities giving rise to such differences are deferred policy acquisition costs, differences in tax basis of invested assets, cost of insurance acquired, future policy benefits, and gains on the sale of subsidiaries.
O.		EARNINGS PER SHARE - Earnings per share (EPS) are reported pursuant to FASB Codification 260-10. The objective of both basic EPS and diluted EPS is to measure the performance of an entity over the reporting period. Basic EPS is computed by dividing net income/(loss) attributable to common shares (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. In addition, the numerator also is adjusted for any changes in income or loss that would result from the assumed conversion of those potential common shares.
P.		RECOGNITION OF REVENUES AND RELATED EXPENSES - Premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits, consist principally of whole life insurance policies, and certain annuities with life contingencies are recognized as revenues when due. Limited payment life insurance policies defer gross premiums received in excess of net premiums, which is then recognized in income in a constant relationship with insurance in force. Accident and health insurance premiums are recognized as revenue pro rata over the terms of the policies. Benefits and related expenses associated with the premiums earned are charged to expense proportionately over the lives of the policies through a provision for future policy benefit liabilities and through deferral and amortization of deferred policy acquisition costs. For universal life and investment products, generally there is no requirement for payment of premium other than to maintain account values at a level sufficient to pay mortality and expense charges. Consequently, premiums for universal life policies and investment products are not reported as revenue, but as deposits. Policy fee revenue for universal life policies and investment products consists of charges for the cost of insurance and policy administration fees assessed during the period. Expenses include interest credited to policy account balances and benefit claims incurred in excess of policy account balances.
Q.		PARTICIPATING INSURANCE - Participating business represents 10% of life insurance in force at December 31, 2011 and 2010. Premium income from participating business represents 18% and 16% of total premiums for the years ended December 31, 2011 and 2010, respectively. The amount of dividends to be paid is determined annually by the insurance subsidiary's Board of Directors. Earnings allocable to participating policyholders are based on legal requirements that vary by state.
R.		RECLASSIFICATIONS - Certain prior year amounts have been reclassified to conform to the 2011 presentation. Such reclassifications had no effect on previously reported net income or shareholders' equity.
S.		USE OF ESTIMATES - In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following estimates have been identified as critical in that they involve a high degree of judgment and are subject to a significant degree of variability: (i) deferred acquisition cost; (ii) policy liabilities and accruals; (iii) reinsurance recoverable; (iv) other-than-temporary impairment; (v) federal income taxes; (vi) cost of insurance acquired; (vii) discounted mortgage loans on real estate; (viii) foreclosed loans held for resale; and (vix) deferred tax assets and liabilities.
T.		IMPAIRMENT OF LONG LIVED ASSETS - The Company evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long lived assets may warrant revision or that the remaining balance of an asset may not be recoverable. The measurement of possible impairment is based on the ability to recover the balance of assets from expected future operating cash flows on an undiscounted basis. During 2011, other-than-temporary impairments of $3,360,430 were taken on real estate as a result of appraisal valuations and management’s analysis and determination of value. During 2011, other-than-temporary impairments of $982,354 were taken on mortgage loans as a result of appraisal valuations and management’s analysis and determination of value.
2.	RECENT ACCOUNTING PRONOUNCEMENTS

In December 2011, Accounting Standards Board (“FASB”) issued the Accounting Standards Update (“ASU”) No 2011-12 Comprehensive Income (Topic 220) Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. The amendments are being made to allow the Board time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-12 to have a material impact on its consolidated financial statements.

In December 2011, FASB issued the ASU No. 2011-10 Property, Plant, and Equipment (Topic 360) Derecognition of in Substance Real Estate-a Scope Clarification. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. The Company does not expect the adoption of ASU 2011-10 to have a material impact on its consolidated financial statements.

In September 2011, FASB issued the ASU No. 2011-08 Intangibles – Goodwill and Other (Topic 350) Testing Goodwill for Impairment. Under the amendments in this Update, an entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in paragraph ASC 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph ASC 350-20-35-9. Under the amendments in this Update, an entity has the option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the first step of the two-step goodwill impairment test. An entity may resume performing the qualitative assessment in any subsequent period. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect the adoption of ASU 2011-08 to have a material impact on its consolidated financial statements.

3.	SHAREHOLDER DIVIDEND RESTRICTION AND MINIMUM STATUTORY CAPITAL

At December 31, 2011, substantially all of consolidated shareholders' equity represents net assets of UTG’s subsidiaries. The payment of cash dividends to shareholders by UTG is not legally restricted. However, the state insurance department regulates insurance company dividend payments where the company is domiciled. UG and AC’s dividend limitations are described below.

AC is a Texas domiciled insurance company, which requires notification within two business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend. Ordinary dividends are defined as the greater of: a) prior year statutory earnings from operations or b) 10% of statutory surplus. At December 31, 2011, AC statutory earnings from operations were $874,660. At December 31, 2011 AC, statutory surplus was $6,625,808. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. AC paid ordinary dividends of $600,000 and $728,130 during 2011 and 2010, respectively. No extraordinary dividends were paid during the two year period.

UG is required to maintain minimum statutory surplus of $2,500,000. AC is required to maintain minimum statutory surplus of $1,400,000.

4.	INCOME TAXES

The valuation allowance against deferred taxes is a sensitive accounting estimate. The Company follows the guidance of ASC 740, “Income Taxes,” which prescribes the liability method of accounting for deferred income taxes. Under the liability method, companies establish a deferred tax liability or asset for the future tax effects of temporary differences between book and tax basis of assets and liabilities.

FASB ASC Topic 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The recognition threshold is based on a determination of whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized. Management believes the Company has no material uncertain income tax provisions at December 31, 2011 or 2010.

The Company’s Federal income tax returns are periodically audited by the Internal Revenue Service (“IRS”). In February 2011, the federal income tax return for 2009 of UTG underwent an IRS examination. The examination was closed with no adjustments to the return. There is no examination ongoing currently, nor is management aware of any pending examination by the IRS. The statutes of limitation for the assessments of additional tax are closed for all tax years prior to 2008. Management believes that adequate provision has been made in the consolidated financial statements for any potential assessments that may result from future tax examinations and other tax-related matters for all open tax years.

At December 31, 2011 and 2010, respectively, the Company had gross deferred tax assets of $2,879,079 and $3,243,631, and gross deferred tax liabilities of $16,624,830 and $16,624,909, resulting from temporary differences primarily related to the life insurance subsidiaries. Allowances are established as a result of uncertainty in the Company’s ability to utilize the loss carryforwards which is dependent on generating sufficient taxable income prior to expiration of the loss carryforward. The Company has not experienced any reductions of deferred tax assets due to the lapse of applicable statute of limitations.

The Company classifies interest and penalties on underpayment of income taxes as income tax expense. No interest or penalties were included in the reported income taxes for the years presented. Tax years 2008 to current remain subject to examination. The Company has no agreements of extension of the review period currently in effect. The Company is not aware of any potential or proposed changes to any of its tax filings.

The companies of the group file separate federal income tax returns except for ACAP, AC, and Imperial Plan, which file a consolidated life/non-life federal income tax return. Beginning in 2012, AC and Imperial Plan will also file separate federal income tax returns as a result of the merger of ACAP during 2011.

Life insurance company taxation is based primarily upon statutory results with certain special deductions and other items available only to life insurance companies. Income tax expense (benefits) consists of the following components:

		2011		2010

Current tax	$	5,296,407	$	2,710,769
Deferred tax		(4,030,745)		(432,524)
	$	1,265,662	$	2,278,245

The expense for income differed from the amounts computed by applying the applicable United States statutory rate of 35% before income taxes as a result of the following differences:

		2011		2010

Tax computed at statutory rate	$	2,719,131	$	3,731,405
Changes in taxes due to:
Valuation allowance		0		(147,521)
Non-controlling interest		(65,334)		(276,185)
Small company deduction		(623,767)		(986,502)
Other		(764,368)		(42,952)
Income tax expense (benefit)	$	1,265,662	$	2,278,245

The following table summarizes the major components that comprise the deferred tax liability as reflected in the balance sheets:

		2011		2010

Investments	$	5,519,570	$	4,751,156
Cost of insurance acquired		4,496,193		4,927,048
Deferred policy acquisition costs		170,893		194,935
Management/consulting fees		(70,554)		(80,381)
Future policy benefits		2,447,327		2,671,913
Deferred gain on sale of subsidiary		2,312,483		2,312,483
Other liabilities		(120,039)		(304,229)
Federal tax DAC		(1,010,122)		(1,091,647)
Deferred tax liability	$	13,745,751	$	13,381,278

5.	ANALYSIS OF INVESTMENTS, INVESTMENT INCOME AND INVESTMENT GAIN
A.	NET INVESTMENT INCOME - The following table reflects net investment income by type of investment:

		2011		2010

Fixed Maturities Available for Sale	$	4,277,019	$	5,577,292
Equity Securities		971,008		891,777
Trading Securities		(2,342,085)		5,143,204
Mortgage Loans		645,838		1,176,747
Discounted Mortgage Loans		8,231,832		12,897,978
Real Estate		6,820,847		6,600,327
Policy Loans		807,389		864,416
Short-term Investments		156,527		57,339
Cash and Cash Equivalents		8,396		10,761
Total Consolidated Investment Income		19,576,771		33,219,841
Investment Expenses		(8,378,606)		(8,361,004)
Consolidated Net Investment Income	$	11,198,165	$	24,858,837

The following table reflects net realized investment gains (losses) by type of investment:

2011		Gross Realized Gains		Gross Realized (Losses)		Net Realized Gains (Losses)

Fixed Maturities Available for Sale	$	9,290,554	$	(376,567)	$	8,913,987
Equity Securities		0		(126,193)		(126,193)
Real Estate		7,371,693		(50,634)		7,321,059
Real Estate – OTTI		0		(3,360,430)		(3,360,430)
Mortgage Loans – OTTI		0		(982,354)		(982,354)
Consolidated Net Realized Losses	$	16,662,247	$	(4,896,178)	$	11,766,069

2010		Gross Realized Gains		Gross Realized (Losses)		Net Realized Gains (Losses)

Fixed Maturities Available for Sale	$	811,175	$	(3,334)	$	807,841
Fixed Maturities Available for Sale - OTTI		0		(610,254)		(610,254)
Equity Securities		0		(21,360)		(21,360)
Equity Securities – OTTI		0		(726,828)		(726,828)
Real Estate		51,949		0		51,949
Mortgage Loans – OTTI		0		(128,867)		(128,867)
Other		0		(13,019)		(13,019)
Consolidated Net Realized Losses	$	863,124	$	(1,503,662)	$	(640,538)

B.	INVESTMENT SECURITIES

The amortized cost and estimated market values of investments in securities including investments available for sale are as follows:

2011		Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	56,794,363	$	13,805,565	$	0	$	70,599,928
States, municipalities and political subdivisions		235,000		6,317		0		241,317
Collateralized mortgage obligations		750,944		11,756		(2,973)		759,727
Public utilities		399,887		62,188		0		462,075
All other corporate bonds		49,334,206		4,901,684		(1,715,760)		52,520,130
		107,514,400		18,787,510		(1,718,733)		124,583,177
Equity securities		16,200,043		1,216,286		(116,701)		17,299,628
Total	$	123,714,443	$	20,003,796	$	(1,835,434)	$	141,882,805

2010		Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	74,596,648	$	4,427,285	$	0	$	79,023,933
States, municipalities and political subdivisions		330,000		5,198		0		335,198
Collateralized mortgage obligations		16,170,099		510,840		(6,677)		16,674,262
Public utilities		904,139		82,886		0		987,025
All other corporate bonds		50,947,807		2,320,965		(2,383,242)		50,885,530
		142,948,693		7,347,174		(2,389,919)		147,905,948
Equity securities		18,940,811		177,400		(96,254)		19,021,957
Total	$	161,889,504	$	7,524,574	$	(2,486,173)	$	166,927,905

The Company held two fixed maturity investments totaling $17,258,542 and three fixed maturity investments of $75,329,675 that exceeded 10% of shareholder’s equity at December 31, 2011 and 2010, respectively. The Company held no equity investments that exceeded 10% of shareholders’ equity at December 31, 2011 and December 31, 2010.

By insurance statute, the majority of the Company's investment portfolio is invested in investment grade securities to provide ample protection for policyholders.

Below investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. Debt securities classified as below-investment grade are those that receive a Standard & Poor's rating of BB or below.

The Company held, below investment grade investments with an amortized cost of $1,843,314 and $138,840 as of December 31, 2011 and 2010, respectively. The investments are all classified as All Other Corporate bonds.

The fair value of investments with sustained gross unrealized losses at December 31, 2011 and 2010 are as follows:

2011		Less than 12 months			12 months or longer			Total

		Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value	Unrealized losses
Collateralized mortgage obligations	$	7,008	(36)	$	97,868	(2,937)	$	104,876	(2,973)
All other corporate bonds		3,915,393	(17,574)		1,268,583	(1,698,186)		5,183,976	(1,715,760)
Total fixed maturity	$	3,922,401	(17,610)	$	1,366,451	(1,701,123)	$	5,288,852	(1,718,733)

Equity securities	$	848,032	(55,141)	$	292,441	(61,560)	$	1,140,473	(116,701)

2010		Less than 12 months			12 months or longer			Total

		Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value	Unrealized losses
Collateralized mortgage obligations	$	0	0	$	104,033	(6,677)	$	104,033	(6,677)
All other corporate bonds		13,959,305	(413,862)		2,620,277	(1,969,380)		16,579,582	(2,383,242)
Total fixed maturity	$	13,959,305	(413,862)	$	2,724,310	(1,976,057)	$	16,683,615	(2,389,919)

Equity securities	$	1,082,748	(96,254)	$	0	0	$	1,082,748	(96,254)

As of December 31, 2011, the Company had five fixed maturity investments and two equity investment with unrealized losses less than 12 months, and six fixed maturity investments and one equity investments with unrealized losses greater than 12 months. As of December 31, 2010, the Company had three fixed maturity investments and two equity investments with unrealized losses less than 12 months, and five fixed maturity investments and no equity investments with unrealized losses greater than 12 months.

The unrealized losses of fixed maturity investments were primarily due to financial market participants’ perception of increased risks associated with the current market environment. The unrealized losses of equity investments were primarily caused by normal market fluctuations in publicly traded securities.

The Company regularly reviews its investment portfolio for factors that may indicate that a decline in fair value of an investment is other than temporary. Based on an evaluation of the issues, including, but not limited to, intentions to sell or ability to hold the fixed maturity and equity securities with unrealized losses for a period of time sufficient for them to recover; the length of time and amount of the unrealized loss; and the credit ratings of the issuers of the investments, the Company held nineteen investments and six investments as other-than-temporarily impaired at December 31, 2011 and 2010, respectively. The other-than-temporary impairments during 2011 were due to appraisal valuations and Management’s analysis of discounted mortgage loans and real estate. The other-than-temporary impairments during 2010 were due to changes in expected future cash flows of investments in stocks as well as in bonds backed by trust preferred securities of banks. In addition, the Company recognized an other-than-temporary impairment in a mortgage loan as a result of its appraisal valuation. The other-than-temporary impairments are detailed below:

2011		Beginning Amortized Cost		OTTI Credit Loss		Ending Amortized Cost		Unrealized Loss		Carrying Value
Discounted Mortgage Loans
Cogley	$	72,494	$	(72,494)	$	0	$	0	$	0

Housezing	$	14,002	$	(14,002)	$	0	$	0	$	0

DC Byers	$	165,495	$	(165,495)	$	0	$	0	$	0

Sahlani	$	9,575	$	(9,575)	$	0	$	0	$	0

2011		Beginning Amortized Cost		OTTI Credit Loss		Ending Amortized Cost		Unrealized Loss		Carrying Value
Continued
HJ Management Corp	$	12,704	$	(12,704)	$	0	$	0	$	0

Jarvis Development	$	769,120	$	(39,120)	$	730,000	$	0	$	730,000

Greenway Developers	$	1,268,039	$	(668,039)	$	600,000	$	0	$	600,000

First Pyramid	$	925	$	(925)	$	0	$	0	$	0

Real Estate
Green Top	$	597,537	$	(97,537)	$	500,000	$	0	$	500,000

First Pyramid	$	123,277	$	(23,277)	$	100,000	$	0	$	100,000

Athens Trust	$	2,262,352	$	(1,762,352)	$	500,000	$	0	$	500,000

Ebert & Wolf	$	441,425	$	(191,425)	$	250,000	$	0	$	250,000

Platinum Auto Wash	$	690,620	$	(315,620)	$	375,000	$	0	$	375,000

Pulaski County	$	225,000	$	(75,000)	$	150,000	$	0	$	150,000

RLF Lexington	$	102,004	$	(102,004)	$	0	$	0	$	0

Wingate of St Johns	$	1,596,122	$	(666,122)	$	930,000	$	0	$	930,000

Northwest Florida	$	692,374	$	(62,374)	$	630,000	$	0	$	630,000

Sand Lake	$	564,719	$	(64,719)	$	500,000	$	0	$	500,000

2010		Beginning Amortized Cost		OTTI Credit Loss		Ending Amortized Cost		Unrealized Loss		Carrying Value

Bonds
Preferred Term Securities I	$	416,157	$	(136,935)	$	279,222	$	(206,924)	$	72,298

Preferred Term Securities II	$	2,161,808	$	(473,319)	$	1,688,489	$	(1,621,946)	$	66,543

Common Stock
Investors Heritage Capital Corp	$	618,348	$	(215,174)	$	403,174	$	0	$	403,174

Amen Properties, Inc.	$	1,628,432	$	(456,032)	$	1,172,400	$	0	$	1,172,400

SFF Royalty	$	1,934,336	$	(68,643)	$	1,865,693	$	0	$	1,865,693

Discounted Mortgage Loans
Jarvis Development	$	858,867	$	(128,867)	$	730,000	$	0	$	730,000

The amortized cost and estimated market value of debt securities at December 31, 2011, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fixed Maturities Available for Sale December 31, 2011		Amortized Cost		Estimated Market Value

Due after one year through five years	$	17,463,652	$	18,910,614
Due after five years through ten years		26,784,234		30,492,848
Due after ten years		62,515,570		74,419,988
Collateralized mortgage obligations		750,944		759,727
Total	$	107,514,400	$	124,583,177

Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the consolidated statements of operations. Trading securities include exchange traded equities, exchange traded equity options, and futures. The fair value of trading securities included in assets was $8,519,064 and $37,029,550 as of December 31, 2011 and 2010, respectively. The fair value of trading securities included in liabilities was $(5,471,475) and $(18,429,677) as of December 31, 2011 and 2010, respectively. Trading securities’ unrealized gains were $4,319,155 and $5,574,151 as of December 31, 2011 and 2010, respectively. Unrealized losses due to trading securities were $(4,130,240) and $(3,770,422) as of December 31, 2011 and 2010, respectively. Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale. Realized gains and (losses) from trading securities were $(3,464,352) and $184,546 for the year ended December 31, 2011 and 2010, respectively. Trading securities are classified in cash flows from operating activities. Trading revenue charged to net income from trading securities was:

	December 31, 2011		December 31, 2010

	Net Realized and Unrealized Gains (Losses)		Net Realized and Unrealized Gains (Losses)

$	(3,275,437)	$	1,988,275

As of December 31, 2011, the Company held derivative instruments in the form of exchange-traded equity options and futures. The Company currently does not designate derivatives as hedging instruments. Exchange traded equity options and futures are matched with exchange traded equity securities in the Company’s trading portfolio, with the primary objective of generating a fair return while reducing risk. These derivatives are carried at fair value, with unrealized gains and losses recognized in investment income. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2011 was $3,217,420 and $(4,187,885), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2010 was $2,244,478 and $(17,246,957), respectively. Realized losses due to derivatives were $(1,343,588) and $(305,247) during 2011 and 2010, respectively. Unrealized gains included in trading security assets due to derivatives were $536,761 and $1,579,071 as of December 31, 2011 and December 31, 2010, respectively. Unrealized losses included in trading security liabilities due to derivatives were $(2,476,008) and $(3,392,010) as of December 31, 2011 and December 31, 2010, respectively.

C.	INVESTMENTS ON DEPOSIT – At December 31, 2011, investments carried at approximately $9,231,000 were on deposit with various state insurance departments.

MORTGAGE LOANS - The Company has in place a monitoring system to provide management with information regarding potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent. Management is provided with a monthly listing of loans that are 60 days or more past due along with a brief description of what steps are being taken to resolve the delinquency. All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans. Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified. Interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact. There are no mortgage loans past due as of December 31, 2011 or 2010.

A mortgage loan reserve is established and adjusted based on management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value. The Company had no mortgage loan allowance during 2011 and 2010.

DISCOUNT MORTGAGE LOANS - During the fourth quarter of 2009, the Company began purchasing discounted commercial mortgage loans. Management has extensive background and experience in the analysis and valuation of commercial real estate and believes there are significant opportunities currently available in the discounted mortgage loan arena. Experienced personnel of FSNB have also been utilized in the analysis phase. This experience dates back to discounted loans during the Resolution Trust days where such loans were being sold from defunct savings and loans in the early 1990’s. The discounted loans are available through the FDIC sale of assets of closed banks and from banks wanting to reduce their loan portfolios. The loans are available on a loan by loan bid process. Prior to placing a bid, each loan is reviewed to determine interest level utilizing such information as type of collateral, location of collateral, interest rate, current loan status and available cashflows or other sources of repayment. Once it is determined interest in the loan remains, the collateral is physically inspected. Following physical inspection, if interest still remains, a bid price is determined and a bid is submitted. Once a loan has been acquired, contact is made with the appropriate individuals to begin a dialog with a goal of determining the borrower’s willingness to work together. There are generally three paths a discounted loan will take: the borrowers pay as required; a settlement is reached with the loan being paid off at a discounted value; or the loan is foreclosed.

During the fourth quarter of 2009, the Company had acquired $118,368,661 of discounted mortgage loans at a total cost of $35,224,022, representing an average purchase price to outstanding loan of 29.8%. During 2009, the Company recorded approximately $1,000,000 in income from this loan activity. During 2010, the Company acquired an additional $111,258,867 of discounted mortgage loans at a total cost of $36,283,278, representing an average purchase price to outstanding loan of 32.6%. Additionally, during 2010, the Company settled, sold or had paid off discounted mortgage loans totaling $23,607,100. During 2010, the Company recorded approximately $12,898,000 in income from the discounted mortgage loan activity, including $7,645,258 in discount accruals. During 2011, the Company acquired an additional $17,930,217 of discounted mortgage loans at a total cost of $6,673,601, representing an average purchase price to outstanding loan of 10.7%. Additionally, during 2011, the Company settled, sold or had paid off mortgage loans totaling $29,916,298. During 2011, the Company recorded approximately $8,232,000 in income from the discounted mortgage loan activity, including $3,940,274 in discount accruals. While the Company reported income from the discounted loans, the majority of the income was the result of one-time events that occurred during the year. The Company does not anticipate the same return going forward from the discounted commercial mortgage loan portfolio.

At December 31, 2011, the Company holds $9,272,919 in mortgage loans, which represents approximately 2% of total assets and $27,467,920 in discounted mortgage loans, which represents 6% of total assets. Most mortgage loans are first position loans. Loans issued are generally limited to no more than 80% of the appraised value of the property. During 2011, the Company recognized an other-than-temporary impairment of $982,354 on these loans as a result of its appraisal valuation and management’s analysis and determination of value.

Payment Frequency	Number of Loans		Carrying Value

No payments received	28	$	2,962,026
One-time payment received	5		622,142
Irregular payments received	23		9,832,242
Periodic payments received	31		14,051,510
Total	87	$	27,467,920

The following table summarizes discounted mortgage loan holdings of the Company:

Category		2011		2010

In good standing	$	6,657,971	$	9,665,059
Overdue interest over 90 days		5,907,192		16,192,815
Restructured		7,726,156		4,306,800
In process of foreclosure		7,176,601		17,359,186
Total discounted mortgage loans	$	27,467,920	$	47,523,860

Total foreclosed discounted mortgage loans during the year	$	21,059,386	$	8,939,548

REAL ESTATE – Real estate acquired through foreclosure, consisting of properties obtained through foreclosure proceedings or acceptance of a deed in lieu of foreclosure, is reported on an individual asset basis at the lower of cost or fair value, less disposal costs. Fair value is determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources. When properties are acquired through foreclosure, any excess of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is recognized and charged to the income statement. Based upon management’s evaluation of the real estate acquired through foreclosure, additional expense is recorded when necessary in an amount sufficient to reflect any declines in estimated fair value. Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the consolidated statements of income.

6.	DISCLOSURES ABOUT FAIR VALUES

ASC 820, “Fair Value Measurements and Disclosures” established a hierarchical disclosure framework based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). An asset or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its valuation. ASC 820 defines the input levels as follows:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. U.S. treasuries are in Level 1 and valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access. Equity securities that are actively traded on an exchange listed in the U.S. are also included in Level 1. Equity security valuation is based on unadjusted quoted prices for identical assets in active markets that the Company can access.

Level 2 - Quoted prices in markets that are not active or inputs that are observable either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets consist of fixed income investments valued based on quoted prices for identical or similar assets in markets that are not active.

Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. The Company does not have any Level 3 financial assets or liabilities.

The following table presents the level within the hierarchy at which the Company’s financial assets and financial liabilities that are measured and recorded on a recurring basis at fair value as of December 31, 2011 and 2010:

2011		Level 1		Level 2		Level 3		Total

Assets
Fixed Maturities, available for sale	$	59,735,100	$	64,632,760	$	215,317	$	124,583,177
Equity Securities, available for sale		0		7,344,260		9,955,368		17,299,628
Trading Securities		8,519,064		0		0		8,519,064
Total	$	68,254,164	$	71,977,020	$	10,170,685	$	150,401,869

Liabilities
Trading Securities	$	5,471,475	$	0	$	0	$	5,471,475

2010		Level 1		Level 2		Level 3		Total

Assets
Fixed Maturities, available for sale	$	6,881,434	$	141,024,514	$	0	$	147,905,948
Equity Securities, available for sale		0		19,021,957		0		19,021,957
Trading Securities		37,029,550		0		0		37,029,550
Total	$	43,910,984	$	160,046,471	$	0	$	203,957,455

Liabilities
Trading Securities	$	18,429,677	$	0	$	0	$	18,429,677

The following table represents changes in assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

		Fixed Maturities, Available for Sale		Equity Securities, Available for Sale		Total
Balance at December 31, 2010	$	0	$	0	$	0
Transfers in to Level 3		215,317		9,955,368		10,170,685
Transfers out of Level 3		0		0		0
Balance at December 31, 2011	$	215,317	$	9,955,368	$	10,170,685

The Level 3 securities include collateralized debt obligations of trust preferred securities issued by banks and insurance companies and certain equity securities with unobservable inputs. None of the collateral is subprime or Alt-A mortgages (loans for which the typical documentation was not provided by the borrower).

The following table presents transfers in and out of each of the valuation levels of fair value.

		2011
		In		Out		Net
Level 1	$	0	$	0	$	0
Level 2		0		(10,170,685)		(10,170,685)
Level 3		10,170,685		0		10,170,685

Transfers into Level 3 occur when there is a lack of observable market information. The transfers occurred at December 31, 2011.

Assets and liabilities measured at fair value on a nonrecurring basis are summarized below.


				Fair value measurements using:
December 31, 2011		Balance 12/31/2011		Level 1		Level 2		Level 3
Discounted mortgage loans on real estate	$	1,330,000	$	0	$	0	$	1,330,000
Investment real estate		3,935,000		0		0		3,935,000

Certain assets are not carried at fair value on a recurring basis, including investments such as mortgage loans and policy loans. Accordingly such investments are only included in the fair value hierarchy disclosure when the investment is subject to re-measurement at fair value after initial recognition and the resulting re-measurement is reflected in the consolidated financial statements.

As of December 31, 2011 and 2010, the Company held $63 million and $53 million of investment real estate, respectively. The real estate is recorded at the lower of the net investment in the loan or the fair value of the real estate less costs to sell. The determination of fair value assessments are performed on a periodic, non-recurring basis by external appraisal and assessment of property values by management. Management believes these fair value assessments are classified as a Level 3 valuation technique under ASC 820, Fair Value Measurements and Disclosures as of December 31, 2011 and 2010.

The financial statements include various estimated fair value information at December 31, 2011 and 2010, as required by ASC 820. Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in that guidance and does not purport to represent the aggregate net fair value of the Company.

The following methods and assumptions were used to estimate the fair value of each class of financial instrument required to be valued by ASC 820 for which it is practicable to estimate that value:

(a) Cash and cash equivalents

The carrying amount in the financial statements approximates fair value because of the relatively short period of time between the origination of the instruments and their expected realization.

(b) Fixed maturities and investments available for sale

The Company utilized a pricing service to estimate fair value measurements for its fixed maturities and public common and preferred stocks. The pricing service utilizes market quotations for securities that have quoted market prices in active markets. Since fixed maturities other than U.S. Treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing. As the fair value estimates of most fixed maturity investments are based on observable market information rather than market quotes, the estimates of fair value other than U.S. Treasury securities are included in Level 2 of the hierarchy. U.S. Treasury securities are included in the amount disclosed in Level 1 as the estimates are based on unadjusted prices. The Company’s Level 2 investments include obligations of U.S. government agencies, municipal bonds, corporate debt securities and other mortgage backed securities.

Securities designated as trading securities are reported at fair value using market quotes, with gains or losses resulting from changes in fair value recognized in earnings. Trading securities include exchange traded equities and exchange traded equity long and short options.

(d) Mortgage loans on real estate

The fair values of mortgage loans are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings.

(e) Discounted mortgage loans

The Company has been purchasing non-performing loans at a deep discount through an auction process led by the federal government. In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company. Accordingly, the Company records its investment in the discounted loans at its original purchase price. Management has determined the fair value to be too difficult to calculate but believes it approximates the carrying value of these investments. Management works the loans with the borrower to reach a settlement on the loan or they foreclose on the underlying collateral which is primarily commercial real estate. For cash payments received during the work out process, the Company records these payments to interest income on a cash basis. For loan settlements reached, the Company records the amount in excess of the carrying amount of the loan as a discount accretion to investment income at the closing date. Management reviews the discount loan portfolio regularly for impairment. If an impairment is identified (after consideration of the underlying collateral), the Company records an impairment to earnings in the period the information becomes known.

(f) Policy loans

Policy loans are carried at the aggregate unpaid principal balances in the consolidated balance sheets which approximates fair value, and earn interest at rates ranging from 4% to 8%. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances.

(g) Short-term investments

Quoted market prices, if available, are used to determine the fair value. If quoted market prices are not available, management estimates the fair value based on the quoted market price of a financial instrument with similar characteristics.

(h) Notes payable

For borrowings subject to floating rates of interest, carrying value is a reasonable estimate of fair value. For fixed rate borrowings fair value is determined based on the borrowing rates currently available to the Company for loans with similar terms and average maturities.

The estimated fair values of the Company's financial instruments required to be valued by ASC 820 are as follows as of December 31:

		2011				2010
Assets		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Fixed maturities available for sale	$	124,583,177	$	124,583,177	$	147,905,948	$	147,905,948
Equity securities		17,299,628		17,299,628		19,021,957		19,021,957
Trading securities		8,519,064		8,519,064		37,029,550		37,029,550
Mortgage loans on real estate		9,272,919		9,116,148		12,411,587		12,524,140
Discounted mortgage loans		27,467,920		27,467,920		47,523,860		47,523,860
Policy loans		13,312,229		13,312,229		13,976,019		13,976,019
Liabilities
Notes payable		9,531,645		9,519,300		10,372,239		10,136,433
Trading securities		5,471,475		5,471,475		18,429,677		18,429,677

7.	STATUTORY EQUITY AND INCOME FROM OPERATIONS

The Company's insurance subsidiaries are domiciled in Ohio and Texas. The insurance subsidiaries prepare their statutory-based financial statements in accordance with accounting practices prescribed or permitted by the respective insurance department. These principles differ significantly from accounting principles generally accepted in the United States of America. "Prescribed" statutory accounting practices include state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (NAIC). "Permitted" statutory accounting practices encompass all accounting practices that are not prescribed; such practices may differ from state to state, from company to company within a state, and may change in the future. UG's total statutory shareholders' equity was approximately $33,167,000 and $30,443,000 at December 31, 2011 and 2010, respectively. UG reported a statutory net income (exclusive of inter-company dividends) of approximately $582,000 and $4,796,000 for 2011 and 2010, respectively. AC's total statutory shareholders' equity was approximately $9,126,000 and $10,934,000 at December 31, 2011 and 2010, respectively. AC reported a statutory net income/(loss) (exclusive of inter-company dividends) of approximately ($766,000) and $964,000 for 2011 and 2010, respectively.

8.	REINSURANCE

At December 31, 1992, AC entered into a reinsurance agreement with Canada Life Assurance Company (“the Canada Life agreement”) that fully reinsured virtually all of its traditional life insurance policies. The reinsurer’s obligations under the Canada Life agreement were secured by assets withheld by AC representing policy loans and deferred and uncollected premiums related to the reinsured policies. AC continues to administer the reinsured policies, for which it receives an expense allowance from the reinsurer. At December 31, 2011, the Canada Life agreement has insurance in-force of approximately $52,560,000, with reserves being held on that amount of approximately $34,193,000. As of December 31, 2011, there remains $129,969 in profits to be generated under this treaty. Should future experience under the treaty match the experience of recent years, which cannot reliably be predicted to occur, it should take until mid 2012 to generate the remaining profits. However, regarding the uncertainty as to when the specified level may be reached, it should be noted that the experience has been erratic from year to year and the number of policies in force that are covered by the treaty diminishes each year.

The Company does not have any short-duration reinsurance contracts. The effect of the Company's long-duration reinsurance contracts on premiums earned in 2011 and 2010 were as follows:

		Shown in thousands

		2011 Premiums Earned		2010 Premiums Earned

Direct	$	14,049	$	16,463
Assumed		33		36
Ceded		(3,935)		(4,108)
Net Premiums	$	10,147	$	12,391

9.	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. In the normal course of business the Company is involved from time to time in various legal actions and other state and federal proceedings. Management is of the opinion that the ultimate disposition of the matters will not have a material adverse effect on the Company’s results of operations or financial position.

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.

During 2009 Texas Imperial Life Insurance Company was sold. As part of this sale, the Company remains contingently liable for certain costs pending the outcome of an ongoing race-based audit on Texas Imperial Life Insurance Company by the Texas Department of Insurance. Under the agreement, the Company is responsible for 100% of the first $50,000 of costs, $90% of the next $50,000, 75% of the third $50,000 and 50% of costs above $150,000. Management had conservatively estimated the Company’s exposure and other costs at $50,000 based on information provided to date from the examination team. After paying costs of $2,273 during 2011, a contingent liability of $47,727 is reflected in its financial statements as of December 31, 2011. This contingency expires December 30, 2013.

During 2010, the Company committed to invest up to $2,000,000 in Llano Music, LLC, which invests in music royalties. Llano does capital calls as funds are needed to acquire the royalty rights. At December 31, 2011, the Company has $1,646,000 committed that has not been requested by Llano.

On November 9, 2011, ACAP shareholders approved a proposed merger with UTG whereby ACAP shareholders received 233 shares of UTG for each share previously held of ACAP. On November 14, 2011, the merger was completed. Certain of the ACAP shareholders dissented to the merger requesting the courts determine the value of the ACAP shares. The legal case is currently in the discovery phase. The Company has established a contingent liability in its year end financial statements of $2,550,822 to conservatively cover the anticipated proceeds due to the dissenting shareholders and associated legal and other costs.

10.	RELATED PARTY TRANSACTIONS

On February 20, 2003, UG purchased $4,000,000 of a trust preferred security offering issued by FSBI. The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515%. The Company received $264,219 of dividends in 2011 and 2010. On March 30, 2009, UG purchased $1,000,000 of FSBI common stock. The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement.

On November 14, 2011, the merger of UTG, Inc and ACAP took place. Shareholders of ACAP received shares of UTG in exchange for their ACAP shares. ACAP was a 73% owned subsidiary of UG. The merger reduced the corporate structure and provided certain efficiencies and economies to the Companies. All ACAP shareholders, other than UTG or UG, have the right to receive 233 shares of UTG common stock for each share of ACAP common stock they owned at closing. Under the terms of the exchange ratio, UTG issued 50,328 shares to former ACAP shareholders. An additional 129,548 UTG shares were not issued due to dissenting ACAP shareholders. See discussion in note 9 relating to the ACAP dissenting shareholders.

On September 28, 2011 UTG entered a joint ownership agreement with Bandyco, LLC and First Southern National Bank, for an 8.08% interest in an aircraft. Bandyco, LLC is affiliated with Ward, F Correll, who is a director of the Company. The Company was responsible for an initial payment of $150,000 on September 30, 2011, along with a $125,000 payment on October 30, 2011. The Company will pay a monthly operational fee of $25,000 starting in November 2011 and lasting through July 2013. The aircraft is issued for business related travel by various officers and employees of the Company. For years 2011 and 2010 UTG paid $392,227 and $308,362 for costs associated with the aircraft.

Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiaries, UG and AC. Under these arrangements, each company pays its proportionate share of expenses of the entire group, based on an allocation formula. During 2011, UG and AC paid $3,858,507 and $3,326,530, respectively. During 2010, UG and AC paid $3,692,434 and $3,174,724, respectively. Respective domiciliary insurance departments have approved the agreements of the insurance companies and it is Management's opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.

The Company from time to time acquires mortgage loans through participation agreements with FSNB. FSNB services the Company's mortgage loans including those covered by the participation agreements. The Company pays a .25% servicing fee on these loans and a onetime fee at loan origination of .50% of the original loan amount to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $136,457 and $190,297 in servicing fees and $89,651 and $508,283 in origination fees to FSNB during 2011 and 2010, respectively.

The Company reimbursed expenses incurred by employees of FSNB relating to travel and other costs incurred on behalf of or relating to the Company. The Company paid $15,392 and $23,763 in 2011 and 2010, respectively to FSNB in reimbursement of such costs. In addition, the Company began reimbursing FSNB a portion of salaries and pension costs for Mr. Correll, Mr. Ditto and a third employee. The reimbursement was approved by the UTG Board of Directors and totaled $348,610 and $433,340 in 2011 and 2010, respectively, which included salaries and other benefits.

11.	CAPITAL STOCK TRANSACTIONS

A.	STOCK REPURCHASE PROGRAM

B.	ACAP MERGER

On November 14, 2011, ACAP was merged into UTG. The merger was a share exchange with ACAP shareholders receiving 233 UTG shares for each ACAP share held. UTG issued 50,328 shares of common stock under this transaction.

C.	EARNINGS PER SHARE CALCULATIONS

The following is a reconciliation of the numerators and denominators of the basic and diluted EPS computations as presented on the income statement.

		For the Year Ended December 31, 2011

		(Numerator)	Shares (Denominator)		Per-Share Amount
Basic EPS
Income (Loss) attributable to Common Shareholders	$	6,316,615	3,824,444	$	1.65

Effect of Dilutive Securities
None		0	0

Diluted EPS
Income (Loss) attributable to Common Shareholders and Assumed Conversions	$	6,316,615	3,824,444	$	1.65

		For the Year Ended December 31, 2010

		(Numerator)	Shares (Denominator)		Per-Share Amount
Basic EPS
Income (Loss) attributable to Common Shareholders	$	7,596,575	3,874,012	$	1.96

Effect of Dilutive Securities
None		0	0

Diluted EPS
Income (Loss) attributable to Common Shareholders and Assumed Conversions	$	7,596,575	3,874,012	$	1.96

In accordance with FASB ASC Topic 260 “Earnings per share,” the computation of diluted earnings per share is the same as basic earnings per share for the years ending December 31, 2011 and 2010, as there were no outstanding securities, options or other offers that give the right to receive or acquire common shares of UTG.

12.	NOTES PAYABLE AND LINES OF CREDIT

At December 31, 2011 and 2010, the Company had $9,531,645 and $10,372,239, respectively, of debt outstanding.

On December 8, 2006, UTG borrowed funds from First Tennessee Bank National Association through execution of an $18,000,000 promissory note. The note is secured by the pledge of 100% of the common stock of UG. The promissory note carries a variable rate of interest based on the 3 month LIBOR rate plus 180 basis points. Interest is payable quarterly. Principal is payable annually beginning at the end of the second year in five installments of $3,600,000. The loan matures on December 7, 2012. The Company made principal payments of $3,600,000 and $3,600,351 during 2011 and 2010, respectively. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $3,291,411 and $6,891,411, respectively.

In addition to the above promissory note, First Tennessee Bank National Association also provided UTG with a $5,000,000 maximum revolving credit note. During 2010, Management decided that a reduction to a maximum $2,750,000 in this line of credit was more reasonable for current operations. On July 14, 2011, the Company signed a Change in Terms Agreement increasing the line of credit back to 5,000,000. This note is for a one-year term and may be renewed by consent of both parties. The credit note is to provide operating liquidity for UTG. The promissory note carries a variable rate of interest based on the 90-day LIBOR rate plus 2.75 percentage points, but at no time will the rate be less than 3.25%. The collateral held on the above promissory note also secures this credit note. During 2011 UTG had borrowings of $2,943,000 and $2,233,000 in principal payments. During 2010, UTG had borrowings of $290,000 and made no payments. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $1,000,000 and $290,000, respectively.

On April 6, 2011, UTG Avalon was extended a promissory note from First National Bank of Tennessee in the amount of $5,000,000. This note matures on January 3, 2013 and may be renewed by consent of both parties. The promissory note carries interest at a rate of 4.0%. During 2011, the Company had borrowings of $5,000,000 against this note. The funds were used to purchase a real estate investment, which serves as the collateral for the loan. At December 31, 2011 the outstanding principal balance on this debt was $5,000,000.

In November 2007, the Company became a member of the Federal Home Loan Bank (FHLB). This membership allows the Company access to additional credit up to a maximum of 50% of the total assets of UG. To be a member of the FHLB, UG was required to purchase shares of common stock of FHLB. Borrowing capacity is based on 50 times each dollar of stock acquired in FHLB above the "base membership" amount. UG's current line of credit with the FHLB is $15,000,000. During 2011, UG made payments of $2,000,000. During 2010, UG had borrowings of $2,000,000 against this line of credit. At December 31, 2011 and 2010, the outstanding principal balance on this debt was $0 and $2,000,000, respectively.

On February 7, 2007, HPG Acquisitions ("HPG"), a 74% owned affiliate of the Company, borrowed funds from First National Bank of Midland, through execution of a $373,862 promissory note. The note is secured by real estate owned by the HPG. The note bears interest at a fixed rate of 5%. The first payment was due January 15, 2008. There will be 119 regular payments of $3,965 followed by one irregular last payment estimated at $44,125. HPG made repayments of $36,089 during 2011 and $34,804 during 2010. At December 31, 2011 and 2010, the outstanding principal balance was $240,234 and $276,323, respectively.

The consolidated scheduled principal reductions on the long-term notes payable for the next five years are as follows:

Year		Amount

2012	$	4,320,618
2013		5,031,586
2014		34,154
2015		36,935
2016		39,941

13.	OTHER CASH FLOW DISCLOSURES

On a cash basis, the Company paid $251,791 and $295,223 in interest expense for the years 2011 and 2010, respectively. The Company paid $5,801,521 and $1,888,000 in federal income tax for 2011 and 2010, respectively. During 2011, the Company closed on an ACAP share for UTG share transaction. All ACAP shareholders, other than UTG or UG, have the right to receive 233 shares of UTG common stock for each share of ACAP common stock they owned at closing. Accordingly, the Company no longer reports a non-controlling interest component of equity for the minority ownership in ACAP. The difference between the carrying value of the non-controlling interest and the consideration received was recorded as a non-cash flow increase to additional paid-in capital of $4,100,000.

14.	CONCENTRATIONS

The Company maintains cash balances in financial institutions that at times may exceed federally insured limits. The Company maintains its primary operating cash accounts with First Southern National Bank, an affiliate of the largest shareholder of UTG, Mr. Jesse T. Correll, the Company’s CEO and Chairman. 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.

Because UTG serves primarily individuals located in four states, the ability of our customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of December 31, 2011, approximately 52% of the Company’s total direct premium was collected from Illinois, Louisiana, Ohio, and Texas. Thus, results of operations are heavily dependent upon the strength of these economies.

The Company reinsures that portion of insurance risk which is in excess of its retention limits. Retention limits range up to $125,000 per life. Life insurance ceded represented 24.1% of total life insurance in force at December 31, 2011. Insurance ceded represented 27.9% of premium income for 2011. The Company would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations.

15.	COMPREHENSIVE INCOME

2011		Before Tax Amount		Tax (Expense) or Benefit		Net of Tax Amount

Unrealized holding gains at begging of the year	$	21,268,608	$	(7,444,013)	$	13,824,595
Less: reclassification adjustment for gains realized in net income		8,787,793		(3,075,728)		5,712,065
Other comprehensive income	$	12,480,815	$	(4,368,285)	$	8,112,530

2010		Before Tax Amount		Tax (Expense) or Benefit		Net of Tax Amount

Unrealized holding gains during period	$	6,003,860	$	(2,101,351)	$	3,902,509
Less: reclassification adjustment for gains realized in net income		838,432		(293,451)		544,981
Other comprehensive income	$	5,165,428	$	(1,807,900)	$	3,357,528

16.	SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

		2011

		1st		2nd			3rd		4th

Premiums & Policy Fees, Net	$	2,951,292	$		2,619,749	$	2,217,318	$	2,358,850
Net Investment Income		6,291,517			5,575,059		(4,055,513)		3,387,102
Total Revenues		11,278,431			8,717,288		(756,558)		15,724,344
Policy Benefits, Including Dividends		4,810,956			4,269,485		5,084,665		4,089,698
Commissions & Amortization of DAC & COI		95,064			88,615		61,190		44,565
Operating Expenses		2,066,337			2,064,465		1,635,300		2,623,679
Operating Income (loss)		4,248,112			2,315,765		(7,637,013)		8,842,082
Net Income (loss) Attributable to Common Shareholders		3,359,965			1,255,936		(4,687,160)		6,387,874
Basic Earnings Per Share Attributable to Common Shareholders		0.88			0.33		(1.23)		1.67
Diluted Earnings Per Share Attributable to Common Shareholders		0.88			0.33		(1.23)		1.67

		2010

		1st		2nd			3rd		4th

Premiums & Policy Fees, Net	$	3,156,767	$		2,429,045	$	2,649,473	$	4,155,308
Net Investment Income		4,322,949			4,875,160		9,659,148		5,989,431
Total Revenues		7,683,648			7,777,912		13,019,273		9,962,524
Policy Benefits, Including Dividends		4,589,416			4,233,116		4,246,015		5,878,435
Commissions & Amortization of DAC & COI		213,809			104,372		2,800		178,900
Operating Expenses		1,971,570			1,848,216		1,927,023		2,284,175
Operating Income (Loss)		812,169			1,507,615		6,766,146		1,575,227
Net Income (Loss) Attributable to Common Shareholders		335,191			1,185,300		4,659,519		1,416,565
Basic Earnings (Loss) Per Share Attributable to Common Shareholders		0.09			0.31		1.20		0.36
Diluted Earnings (Loss) Per Share Attributable to Common Shareholders		0.09			0.31		1.20		0.36

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the principal executive officer and principal financial officer, allowing timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Board of Directors

In accordance with the laws of Delaware and the Certificate of Incorporation and Bylaws of UTG, as amended, UTG is managed by its executive officers under the direction of the Board of Directors. The Board elects executive officers, evaluates their performance, works with management in establishing business objectives and considers other fundamental corporate matters, such as the issuance of stock or other securities, the purchase or sale of a business and other significant corporate business transactions. In the fiscal year ended December 31, 2011, the Board met four times. All directors attended at least 75% of all meetings of the board.

The Board of Directors has an Audit Committee consisting of Messrs. Perry, Albin, and Brinck. The Audit Committee performs such duties as outlined in the Company’s Audit Committee Charter. The Audit Committee reviews and acts or reports to the Board with respect to various auditing and accounting matters, the scope of the audit procedures and the results thereof, internal accounting and control systems of UTG, the nature of services performed for UTG and the fees to be paid to the independent auditors, the performance of UTG's independent and internal auditors and the accounting practices of UTG. The Audit Committee also recommends to the full Board of Directors the auditors to be appointed by the Board. The Audit Committee met four times in 2011.

The Board has reviewed the qualifications of each member of the audit committee and determined no member of the committee meets the definition of a “financial expert”. The Board concluded however, that each member of the committee has a proven track record as a successful businessman, each operating their own company and their experience as businessmen provide a knowledge base and experience adequate for participation as a member of the committee.

The Board of Directors has a Compensation Committee consisting of Messrs. Dayton and Brinck. The Compensation Committee performs such duties as outlined in the Company’s Compensation Committee Charter. The Compensation Committee reviews and acts or reports to the Board with respect to various compensation matters relative to the Company’s executive officers.

Under UTG’s By-Laws, the Board of Directors should be comprised of at least six and no more than eleven directors. At December 31, 2011, the Board consisted of eleven directors. Shareholders elect Directors to serve for a period of one year at UTG’s Annual Shareholders’ meeting.

Section 16(a) Beneficial Ownership Reporting Compliance

Directors and officers of UTG file periodic reports regarding ownership of Company securities with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934 as amended, and the rules promulgated there under. UTG is not aware of any individuals who filed late with the Securities and Exchange Commission during 2011. SEC filings may be viewed from the Company’s Web site www.utgins.com.

The Board of Directors has provided a process for shareholders to send communications directly to the Board. These communications can be sent to James Rousey, President and Director of UTG at the corporate headquarters at 5250 South Sixth Street, Springfield, IL 62703.

Audit Committee Report to Shareholders

In connection with the December 31, 2011 financial statements, the audit committee: (1) reviewed and discussed the audited financial statements with management; (2) discussed with the auditors the matters required by Statement on Auditing Standards No. 114; and (3) received and discussed with the auditors the matters required by Independence Standards Board Statement No.1. Based upon these reviews and discussions, the audit committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K filed with the SEC.

William W. Perry -	Committee Chairman
John S. Albin
Joseph A. Brinck, II

The following information with respect to business experience of the Board of Directors has been furnished by the respective directors or obtained from the records of UTG.

Directors

Name, Age	Position with the Company, Business Experience and Other Directorships
John S. Albin, 83	Director of UTG since 1984; farmer in Douglas and Edgar counties, Illinois, since 1951; Chairman of the Board of Longview State Bank from 1978 to 2005; President of the Longview Capitol Corporation, a bank holding company, since 1978; Chairman of First National Bank of Ogden, Illinois, from 1987 to 2005; Chairman of the State Bank of Chrisman from 1988 to 2005; Chairman of First National Bank in Georgetown from 1994 to 2005; Director of Illini Community Development Corporation since 1990; Commissioner of Illinois Student Assistance Commission from 1996 to 2002.
Randall L. Attkisson, 66	Director of UTG since 1999; Director of ACAP Corporation and American Capitol Insurance Company since 2006; Director of Texas Imperial Life Insurance Company from 2006 to 2009; Director of First Southern Bancorp, Inc., a bank holding company, since 1986; Board Chairman of Young Life Raceway Region (Kentucky/Indiana) from 2008 to 2011; Partner of Bluegrass Financial Holdings Subs/Affiliates since 2008; Advisory Director of Kentucky Christian Foundation since 2002; Director of The River Foundation, Inc. since 1990; President of Randall L. Attkisson & Associates from 1982 to 1986; Commissioner of Kentucky Department of Banking & Securities from 1980 to 1982; Self-employed Banking Consultant in Miami, FL from 1978 to 1980.
Joseph A. Brinck, II, 56	Director of UTG since 2003; CEO of Stelter & Brinck, LTD, a full service combustion engineering and manufacturing company from 1979 to present; President of Superior Thermal, LTD from 1990 to present; President of Sanctity of Life Foundation since 2001 and Vice President of Ruah Woods Ministry since 2011. Currently holds Professional Engineering Licenses in Kentucky, Indiana and Illinois.
Jesse T. Correll, 55	Chairman and CEO of UTG and Universal Guaranty Life Insurance Company since 2000; Director of UTG since 1999; Chairman and CEO of ACAP Corporation and American Capitol Insurance Company since 2006; Chairman and CEO of Texas Imperial Life Insurance Company from 2006 to 2009; Chairman, President, Director of First Southern Bancorp, Inc. since 1983; Manager of First Southern Funding, LLC since 1992; President, Director of The River Foundation since 1990; Board member of Crown Financial Ministries from 2004 to 2009; Friends of the Good Samaritans since 2005; Generous Giving from 2006 to 2009 and the National Christian Foundation since 2006. Mr. Correll and his wife Angela have 3 children and 4 grandchildren. Jesse Correll is the son of Ward and Regina Correll.
Ward F. Correll, 83	Director of UTG since 2000; Director of ACAP Corporation and American Capitol Insurance Company since 2006; Director of Texas Imperial Life Insurance Company from 2006 to 2009; President, Director of Tradeway, Inc. of Somerset, KY since 1973; President, Director of Cumberland Lake Shell, Inc. of Somerset, KY since 1971; President, Director of Tradewind Shopping Center, Inc. of Somerset, KY since 1966; Director of First Southern Bancorp since 1987; Director of First Southern Funding, LLC since 1991; Director of The River Foundation since 1990; and Director First Southern Insurance Agency since 1987. Ward Correll is the father of Jesse Correll.
Thomas F. Darden, 57	Mr. Darden is the Chief Executive Officer of Cherokee Investment Partners, a private equity fund that invests in brownfields. Cherokee made its first brownfield investment in 1990 and has since raised five funds: $50 million in 1996, $250 million in 1999, $620 million in 2003 and $1.4 billion in 2006. Beginning in 1984, Mr. Darden served for 16 years as the Chairman of Cherokee Sanford Group, a brick manufacturing and soil remediation company. From 1981 to 1983, he was a consultant with Bain & Company in Boston. From 1977 to 1978, he worked as an environmental planner for the Korea Institute of Science and Technology in Seoul, where he was a Henry Luce Foundation Scholar. Mr. Darden is on the Boards of Shaw University and the Institute for The Environment at the University of North Carolina. He was Chairman of the Research Triangle Transit Authority and served two terms on the N.C. Board of Transportation. Mr. Darden serves on the Board of Governors of the Research Triangle Institute. Mr. Darden earned a Masters in Regional Planning from the University of North Carolina, a Juris Doctor from Yale Law School and a Bachelor of Arts from the University of North Carolina, where he was a Morehead Scholar. He and his wife, Jody, have three children.
Howard L. Dayton, Jr., 68	In 1985, Mr. Dayton founded Crown Ministries in Longwood, Florida. Crown Ministries merged with Christian Financial Concepts in September 2000 to form Crown Financial Ministries, the world’s largest financial ministry. He served as Chief Executive Officer from 1985 to 2007. He recently founded Compass - Finances God’s Way. Mr. Dayton is a graduate of Cornell University. He developed The Caboose, a successful railroad-themed restaurant in Orlando, FL in 1969. In 1972 he began his commercial real estate development career, specializing in office development in the Central Florida area. He also is the author of five books, Your Money: Frustration or Freedom, Your Money Counts, Free and Clear, Your Money Map, Money and Marriage God’s Way. He also has authored five popular small group studies including Crown’s Small Group Studies and produced several video series. Mr. Dayton became a director of UTG, Inc. in December 2005.
Daryl J. Heald, 47	Mr. Heald started in commercial real estate with the Allen Morris Company and then spent four years at Triaxia Partners Consulting Firm, both in Atlanta, Georgia. He later began serving as an associate trustee and executive committee member of the Maclellan Foundation and Senior Vice President from 2008 to 2010. In 2000, Daryl helped launch Generous Giving, Inc. and served as its President until January 2008. Mr. Heald founded Giving Wisely in 2008. Giving Wisely seeks to serve families on their journey of generosity by helping to connect their needs and passions with knowledge, experiences, opportunities, and relationships. Daryl also serves on the boards of Crown Financial Ministries, ProVision Foundation, the Haggai Institute, Chattanooga Football Club and is an elder at Lookout Mountain Presbyterian Church. Mr. Heald became a director of UTG, Inc. in September 2008. He holds a B.S. degree in economics from Westmont College. Daryl and his wife, Cathy, live in Lookout Mountain, Georgia with their six children.
Peter L. Ochs, 60	Mr. Ochs is founder of Capital III, a private equity investment firm located in Wichita, Kansas. Capital III specialized in impact investing with a focus on the US and Latin America. Prior to founding Capital III, Mr. Ochs spent 8 years in the commercial banking industry. Mr. Ochs graduated from the University of Kansas with a degree in business and finance. Mr. Ochs serves on the boards of UTG, Inc., the American Independence Funds and Trinity Academy. Mr. Ochs is married to Deborah and they have 2 children and 3 grandchildren.
William W. Perry, 55	Director of UTG since 2001; Director of American Capitol Insurance Company since 2006, Director of Texas Imperial Life Insurance Company from 2006 to 2009; Owner of SES Investments, Ltd., an oil and gas investments company since 1991; CEO of EGL Resources, Inc., an oil and gas operations company based in Texas and New Mexico since 1992; Trustee of Abel-Hangar Foundation, Director of River Foundation; President of Milagros Foundation; Director of University of Oklahoma Associates; Mayor of Midland, Texas since January 2008; Midland, Texas City Council member from 2002-2008; Board Member of IDT Corporation since 2010; and Chairman of Genie Energy since 2010.
James P. Rousey, 53	President since September 2006, Director of UTG and Universal Guaranty Life Insurance Company since September 2001; President and Director of ACAP Corporation and American Capitol Insurance Company since 2006; President and Director of Texas Imperial Life Insurance Company from 2006 to 2009; Regional CEO and Director of First Southern National Bank from 1988 to 2001. Board Member with the Illinois Fellowship of Christian Athletes from 2001-2005; Board Member with Contact Ministries from 2007-2011; Board Member with Amigos En Cristo, Inc from 2007-2009.

Executive Officers of UTG

More detailed information on the following executive officers of UTG appears under "Directors":

Jesse T. Correll	Chairman of the Board and Chief Executive Officer
James P. Rousey	President

Other executive officers of UTG are set forth below:

Name, Age	Position with UTG and Business Experience
Theodore C. Miller, 49	Corporate Secretary since December 2000, Senior Vice President and Chief Financial Officer since July 1997; Vice President since October 1992 and Treasurer from October 1992 to December 2003; Vice President and Controller of certain affiliated companies from 1984 to 1992. Vice President and Treasurer of certain affiliated companies from 1992 to 1997; Senior Vice President and Chief Financial Officer of subsidiary companies since 1997; Corporate Secretary of subsidiary companies since 2000.
Douglas P. Ditto, 56	Chief Investment Officer and Vice President since June 2009; Assistant Vice President from June 2003 to June 2009; Chief Executive Officer, and Executive Vice President of First Southern Bancorp since March 1985.

Code of Ethics

The Company has adopted a Code of Business Conduct and Ethics for our directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions) and employees. The Code of Business Conduct and Ethics is available to our stockholders by requesting a free copy of the Code of Business Conduct and Ethics by writing to us at UTG, Inc, 5250 South Sixth Street, Springfield, Illinois 62703.

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation Table

The following table sets forth certain information regarding compensation paid to or earned by UTG's Chief Executive Officer and President, and each of the executive officers of UTG whose salary plus bonus exceeded $100,000 during UTG's last fiscal year:

Summary Compensation Table
Name and Principal position	Year	Salary	Bonus	Stock Awards	Option Awards	Non-Equity Incentive Plan Comp	Nonqualified Deferred Comp Earnings	All Other Comp (1)		Total
Jesse T. Correll Chief Executive Officer	2011	150,000	50,000	0	0	0	0	6,000	(1)	206,000
	2010	145,415	50,000	0	0	0	0	4,662	(1)	200,077
	2009	140,550	0	0	0	0	0	4,323	(1)	144,873
James P. Rousey President	2011	145,000	35,000	0	0	0	0	7,615	(2)	187,615
	2010	142,708	25,000	0	0	0	0	5,975	(2)	173,683
	2009	140,000	0	0	0	0	0	983	(2)	140,983
Theodore C. Miller Secretary/Senior Vice President	2011	110,000	25,000	0	0	0	0	720	(3)	135,720
	2010	110,000	20,000	0	0	0	0	1,249	(3)	131,249
	2009	110,000	0	0	0	0	0	1,490	(3)	111,490
Douglas P. Ditto Chief Investment Officer appointed 7/17/2009	2011	100,050	50,000	0	0	0	0	3,951	(1)	154,001
	2010	100,045	25,000	0	0	0	0	3,001	(1)	128,046
	2009	100,000	0	0	0	0	0	3,077	(1)	103,077
Douglas A. Dockter (5) Vice President	2011	100,000	6,500	0	0	0	0	2,820	(4)	109,320
	2010	100,000	5,500	0	0	0	0	2,295	(4)	107,795
	2009	100,000	0	0	0	0	0	1,420	(4)	101,420

(1)	All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan.
(2)	All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan of $1,269, $575 and $263, group life insurance premiums of $720, $720 and $720, and country club membership fees of $5,626, $4,680 and $0 during 2011, 2010 and 2009 respectively.
(3)	All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan of $0, $529 and $770 and group life insurance premiums of $720, $720 and $720 during 2011, 2010 and 2009 respectively.
(4)	All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan of $2,100, $2,084 and $700 and group life insurance premiums of $720, $720 and $720 during 2011, 2010, and 2009 respectively.
(5)	Mr. Douglas A. Dockter is not considered an executive officer of UTG, but is included in this table pursuant to compensation disclosure requirements.

Option/SAR Grants/Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR Values

At December 31, 2011 there were no shares of the common stock of UTG subject to unexercised options held by the named executive officers. There were no options or stock appreciation rights granted to the named executive officers for the past three fiscal years.

Compensation of Directors

UTG's standard arrangement for the compensation of directors provides that each director shall receive an annual retainer of $2,400, plus $300 for each meeting attended and reimbursement for reasonable travel expenses. UTG's director compensation policy also provides that directors who are employees of UTG or its affiliates do not receive any compensation for their services as directors except for reimbursement for reasonable travel expenses for attending each meeting.

Director Compensation
Name	Fees Earned or Paid in Cash	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All Other Compensation	Total
Jesse Thomas Correll Chief Executive Officer	0	0	0	0	0	0	0
Randall Lanier Attkisson Director	3,300	0	0	0	0	0	3,300
James Patrick Rousey President	0	0	0	0	0	0	0
John Sanford Albin Director	3,300	0	0	0	0	0	3,300
Joseph Anthony Brinck, II Director	3,600	0	0	0	0	0	3,600
Ward Forrest Correll Director	3,300	0	0	0	0	0	3,300
William Wesley Perry Director (1)	3,300	0	0	0	0	0	3,300
Thomas Francis Darden, II Director (1)	3,600	0	0	0	0	0	3,600
Peter Loyd Ochs Director	3,600	0	0	0	0	0	3,600
Howard Lape Dayton Director	3,300	0	0	0	0	0	3,300
Daryl Jack Heald Director	3,300	0	0	0	0	0	3,300

(1) Messrs. Darden and Perry have their fees donated to various charitable organizations.

Report on Executive Compensation

Introduction

The Compensation Committee of the Board of Directors is responsible for determining and recommending to the full Board of Directors the compensation of the Company’s executive officers. The Compensation Committee strongly believes that UTG's executive officers directly impact the short-term and long-term performance of UTG. With this belief and the corresponding objective of making decisions that are in the best interest of UTG's shareholders, the Compensation Committee places significant emphasis on the design and administration of UTG's executive compensation plans.

Company management may be requested by the Compensation Committee to provide support such as to attend portions of meetings, make recommendations to the Compensation Committee and perform various day-to-day administrative functions on behalf of the committee. The Committee further has the authority to engage outside advisors, experts and other professionals to assist it. No such outside persons were engaged during 2011 or 2010.

The Company’s philosophy regarding compensation of executive officers is generally one of executive officers qualify for the same benefits and opportunities as provided to all of the employees of the Company. Special or unique perquisites to executive officers not provided to all employees amount to less than $10,000 to any one individual. The Company maintains a membership to a local country club that can only be utilized by the President. During 2009, this membership was suspended for a period of one year at the President’s request in an effort to further reduce expenses during the economic turmoil. During 2011 and 2010, the Company paid $5,626 and $4,680, respectively, to maintain this membership.

The Compensation Committee periodically reviews the Company’s compensation philosophy. From time to time, as necessary, the committee may modify the compensation philosophy, principles or goals. The compensation program is applied to our named executive officers in a fashion similar to its application to the Chief Executive Officer. Any differences are due to difference in job scope and market compensation for various positions.

The Company maintains employee benefits such as paid time off, health insurance, dental insurance, group life insurance and long term disability insurance. These benefits are generally competitive to other entities located in the Midwest where the Company must compete for employees. Executive officers are entitled to these benefits on the same basis and terms as other employees of the Company.

Executive Compensation Elements

The total compensation package for the executive officers of UTG consists of multiple elements. The Compensation Committee considers market compensation comparisons as it determines the elements, appropriate levels and mix of compensation to be paid to the executive officers in order to retain the executives necessary to the successful operation of the Company. The committee does not operate with rigid standards, rather, it works using a competitive market range. Many factors are considered in determining compensation, including the responsibilities assumed by the executive, the scope of the executive's position, experience, length of service, individual performance and internal equity considerations. In addition to a base salary, increased compensation of current and future executive officers of the Company will be determined using a “performance based” philosophy. UTG’s financial results are analyzed and future increases to compensation will be proportionately based on the profitability of the Company.

Base Salary. The Board of Directors through recommendations from the Compensation Committee, establishes base salaries at a level intended to be within the competitive market range of comparable companies.

Messrs. Jesse Correll and James Rousey, the Company’s CEO and President, voluntarily reduced their annual base salaries by $10,000 and $5,000, respectively, effective January 1, 2009, to further reduce and control expenses. In June 2010, the Board of Directors reinstated the voluntary reductions, reinstating their base salaries back to $150,000 and $145,000 respectively.

Incentive Awards. The Board of Directors from time to time may approve incentive awards for the executive officers. These incentive awards are generally in the form of a onetime cash bonus payment. Incentive awards are determined based on the overall operations of the Company as well as individual performance considerations. The Company does not utilize a specific set formula in the determination of incentive awards.

Stock Options. Stock options are granted at the discretion of the Board of Directors. There were no options granted to the named executive officers during the last three fiscal years.

Employment Contracts. There are no employment agreements or understandings in effect with any executive officers of the Company.

Deferred Compensation. The Company has no deferred compensation arrangements with any of its executive officers.

Tax and Accounting Implications of Compensation. As one of the factors considered in performing its duties, the Board of Directors evaluates the anticipated tax treatment to the Company and its subsidiaries, as well as to the executives, of various payments and benefits. The deductibility of some types of compensation depends upon the timing of an executive’s vesting or exercise of previously-granted rights. Deductibility may also be affected by interpretations of and changes in tax laws.

Chief Executive Officer

On March 27, 2000, Jesse T. Correll assumed the position of Chairman of the Board and Chief Executive Officer of UTG and each of its affiliates. Under Mr. Correll’s leadership, he declined to receive a salary, bonus or other forms of compensation for his duties with UTG and its affiliates in the year 2000. In March 2001, the Board of Directors approved an annual salary for Mr. Correll of $75,000, payment of which began on April 1, 2001. As a reflection of Mr. Correll’s leadership, the compensation of current and future executive officers of the Company will be determined by the Board of Directors using a “performance based” philosophy. The Board of Directors will consider UTG’s financial results and future compensation decisions will be proportionately based on the profitability of the Company. At the June 2007 meeting, members of the Board approved a salary increase for Mr. Correll to $150,000 annually. The increase became effective July 1, 2007. Additionally a $25,000 bonus was approved based on 2006 results. No bonus was paid during 2007, 2008 or 2009 based on results of the previous years. Effective January 1, 2009, Mr. Correll voluntarily reduced his annual salary by $10,000. In June 2010, the Board of Directors reinstated Mr. Correll’s base salary back to $150,000 In December 2010, the Board of Directors approved a bonus of $50,000 for Mr. Correll based on 2010 financial results of the Company. In December 2011, the Executive Compensation Committee approved a bonus of $50,000 based on the Company’s 2011 financial results.

Conclusion

The Compensation Committee believes this executive compensation plan provides a competitive and motivational compensation package to the executive officer team necessary to produce the results UTG strives to achieve. The committee also believes the executive compensation plan addresses both the interests of the shareholders and the executive team.

Compensation Committee Report

The Compensation Committee of the Board of Directors of UTG has reviewed and discussed the Compensation Disclosure and Analysis required by Item 402(b) of SEC Regulation S-K with Company management. Based on these reviews and discussions, the Compensation Committee recommended to the Board of Directors that this report on executive compensation be included with this filing.

Executive Compensation Committee

Howard L. Dayton

Joseph A. Brinck, II

Compensation Committee Interlocks and Insider Participation

The UTG Compensation Committee makes recommendations to the full Board of Directors on decisions regarding executive officer compensation who make the final determination. The following persons served as directors of UTG during 2011 and were officers or employees of UTG or its affiliates during 2011: Jesse T. Correll and James P. Rousey. Accordingly, these individuals have participated in decisions related to compensation of executive officers of UTG and its subsidiaries.

During 2011, Jesse T. Correll and James P. Rousey, executive officers of UTG, UG, ACAP and AC, were also members of the Board of Directors of UG, ACAP and AC.

Jesse T. Correll is a director and executive officer of FSBI and participates in compensation decisions of FSBI. FSBI owns or controls directly and indirectly approximately 38.8% of the outstanding common stock of UTG.

Performance Graph

The following graph compares the cumulative total shareholder return on UTG’s Common Stock during the five fiscal years ended December 31, 2011 with the cumulative total return on the NASDAQ Composite Index Performance and the NASDAQ Insurance Index (1). The graph assumes that $100 was invested on December 31, 2006 in each of the Company’s common stock, the NASDAQ Composite Index, and the NASDAQ Insurance Stock Index, and that any dividends were reinvested.

(1)

The Company selected the NASDAQ Composite Index Performance as an appropriate comparison. UTG was listed on the NASDAQ Small Cap exchange until December 31, 2001. Furthermore, the Company selected the NASDAQ Insurance Stock Index as the second comparison because there is no similar single “peer Company” in the NASDAQ system with which to compare stock performance and the closest additional line-of-business index which could be found was the NASDAQ Insurance Stock Index. Trading activity in the Company’s common stock is limited, which may be due in part as a result of the Company’s low profile. The Return Chart is not intended to forecast or be indicative of possible future performance of the Company’s common stock.

The foregoing graph shall not be deemed to be incorporated by reference into any filing of UTG under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that UTG specifically incorporates such information by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Principal Holders of Securities

The following tabulation sets forth the name and address of the entity known to be the beneficial owners of more than 5% of UTG’s common stock and shows: (i) the total number of shares of common stock beneficially owned by such person as of February 1, 2012 and the nature of such ownership; and (ii) the percent of the issued and outstanding shares of common stock so owned as of the same date.

Title		Amount	Percent
of	Name and Address	and Nature of	Of
Class	of Beneficial Owner (2)	Beneficial Ownership	Class (1)

Common	Jesse T. Correll	91,058	(3)	2.3%
Stock, no	First Southern Bancorp, Inc.	1,506,785	(3)(4)	38.8%
par value	First Southern Funding, LLC	341,997	(3)(4)	8.8%
	First Southern Holdings, LLC	1,277,716	(3)(4)	32.9%
	Ward F. Correll	268,906	(5)	6.9%
	WCorrell, Limited Partnership	72,750	(3)	1.9%
	Cumberland Lake Shell, Inc.	257,501	(5)	6.6%
	Total (6)	2,208,746		56.9%

(1)	The percentage of outstanding shares is based on 3,879,333 shares of common stock outstanding as of February 1, 2012.
(2)	The address for each of Jesse Correll, First Southern Bancorp, Inc. (“FSBI”), First Southern Funding, LLC (“FSF”), First Southern Holdings, LLC (“FSH”), and WCorrell, Limited Partnership (“WCorrell LP”), is P.O. Box 328, 99 Lancaster Street, Stanford, Kentucky 40484. The address for each of Ward Correll and Cumberland Lake Shell, Inc. (“CLS”) is P.O. Box 430, 150 Railroad Drive, Somerset, Kentucky 42502.
(3)	The share ownership of Jesse Correll listed includes 18,308 shares of common stock owned by him individually. The share ownership of Mr. Correll also includes 72,750 shares of Common Stock held by WCorrell, Limited Partnership, a limited partnership in which Jesse Correll serves as managing general partner and, as such, has sole voting and dispositive power over the shares held by it.
	In addition, by virtue of his ownership of voting securities of FSF and FSBI, and in turn, their ownership of 100% of the outstanding membership interests of FSH, Jesse Correll may be deemed to beneficially own the total number of shares of common stock owned by FSH (as well as the shares owned by FSBI directly), and may be deemed to share with FSH (as well as FSBI) the right to vote and to dispose of such shares. Mr. Correll owns approximately 76.52% of the outstanding membership interests of FSF; he owns directly approximately 48.17%, companies he controls own approximately 12.74%, and he has the power to vote but does not own an additional 3% of the outstanding voting stock of FSBI. FSBI and FSF in turn own 99% and 1%, respectively, of the outstanding membership interests of FSH.
(4)	The share ownership of FSBI consists of 229,069 shares of common stock held by FSBI directly (which FSBI acquired by virtue of its merger with Dyscim, LLC) and 1,277,716 shares of common stock held by FSH of which FSBI is a 99% member and FSF is a 1% member, as further described below. As a result, FSBI may be deemed to share the voting and dispositive power over the shares held by FSH.
(5)	Includes 257,501 shares of common stock held by CLS, all of the outstanding voting shares of which are owned by Ward F. Correll.
(6)	According to the most recent Schedule 13D, as amended, filed jointly by each of the entities and persons listed above, Jesse Correll, FSBI, FSF and FSH, have agreed in principle to act together for the purpose of acquiring or holding equity securities of UTG. In addition, the Schedule 13D indicates that because of their relationships with Jesse Correll and these other entities, Ward Correll, CLS, and WCorrell, Limited Partnership may also be deemed to be members of this group. Because the Schedule 13D indicates that for its purposes, each of these entities and persons may be deemed to have acquired beneficial ownership of the equity securities of UTG beneficially owned by the other entities and persons, each has been identified and listed in the above tabulation.

Security Ownership of Management of UTG

The following tabulation shows with respect to each of the directors of UTG, with respect to UTG’s chief executive officer and President, and each of UTG’s executive officers whose salary plus bonus exceeded $100,000 for fiscal 2011, and with respect to all executive officers and directors of UTG as a group: (i) the total number of shares of all classes of stock of UTG or any of its parents or subsidiaries, beneficially owned as of February 1, 2012 and the nature of such ownership; and (ii) the percent of the issued and outstanding shares of stock so owned, and granted stock options available as of the same date.

Title	Directors, Named Executive	Amount	Percent
of	Officers, & All Directors &	and Nature of	Of
Class	Executive Officers as a Group	Ownership	Class (1)

UTG’s	John S. Albin	10,503	(4)	*
Common	Randall L. Attkisson	5,615	(2)	*
Stock, no	Joseph A. Brinck, II	12,225		*
par value	Jesse T. Correll	1,939,840	(3)	50.0%
	Ward F. Correll	268,906	(5)	6.9%
	Thomas F. Darden	60,465		1.6%
	Howard L. Dayton, Jr.	4,548		*
	Douglas P. Ditto	0		*
	Daryl J. Heald	21,739	(6)
	Theodore C. Miller	8,557		*
	Peter L. Ochs	2,000	(6)	*
	William W. Perry	120,000		3.1%
	James P. Rousey	0		*
	All directors and executive officers as a group (thirteen in number)	2,454,398		63.3%

* Less than 1%

(1)	The percentage of outstanding shares for UTG is based on 3,879,333 shares of common stock outstanding as of February 1, 2012.
(2)	Randall L. Attkisson holds minority ownership positions in certain of the companies listed as owning UTG common stock including First Southern Bancorp, Inc. Ownership of these shares is reflected in the ownership of Jesse T. Correll.
(3)	The share ownership of Mr. Jesse Correll includes 18,308 shares of UTG, Inc common stock owned by him individually, 229,069 shares of UTG, Inc common stock held by First Southern Bancorp, Inc. and 341,997 shares of UTG, Inc common stock owned by First Southern Funding, LLC. The share ownership of Mr. Correll also includes 72,750 shares of UTG, Inc common stock held by WCorrell, Limited Partnership, a limited partnership in which Mr. Correll serves as managing general partner and, as such, has sole voting and dispositive power over the shares held by it. In addition, by virtue of his ownership of voting securities of First Southern Funding, LLC and First Southern Bancorp, Inc., and in turn, their ownership of 100% of the outstanding membership interests of First Southern Holdings, LLC (the holder of 1,277,716 shares of UTG, Inc common stock), Mr. Correll may be deemed to beneficially own the total number of shares of UTG, Inc common stock owned by First Southern Holdings, and may be deemed to share with First Southern Holdings the right to vote and to dispose of such shares. Mr. Correll owns approximately 76.52% of the outstanding membership interests of First Southern Funding; he owns directly approximately 48.17%, companies he controls own approximately 12.74%, and he has the power to vote but does not own an additional 3% of the outstanding voting stock of First Southern Bancorp. First Southern Bancorp and First Southern Funding in turn own 99% and 1%, respectively, of the outstanding membership interests of First Southern Holdings.
(4)	Includes 392 shares owned directly by Mr. Albin’s spouse.
(5)	The share ownership of Mr. Ward Correll includes 11,405 shares of UTG, Inc. common stock owned by him individually. Cumberland Lake Shell, Inc. owns 257,501 shares of UTG Common Stock, all of the outstanding voting shares of which are owned by Ward F. Correll. Ward F. Correll is the father of Jesse T. Correll. There are 72,750 shares of UTG Common Stock owned by WCorrell Limited Partnership in which Jesse T. Correll serves as managing general partner and, as such, has sole voting and dispositive power over the shares of Common Stock held by it. The aforementioned 72,750 shares are deemed to be beneficially owned by and listed under Jesse T. Correll in this section.
(6)	Shares held in a trust for benefit of named individual

Except as indicated above, the foregoing persons hold sole voting and investment power.

ITEM 13. CERTAIN RELATIONSHIPS AND REALTED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The Board of Directors determined that eight of the eleven current directors are “independent” as defined by Rule 5605 of the NASDAQ listing standards. The non-independent directors are Jesse T. Correll, Ward F. Correll and James P. Rousey.

On February 20, 2003, UG purchased $4,000,000 of a trust preferred security offering issued by FSBI. The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515%. The Company received $264,219 of dividends in 2011 and 2010. On March 30, 2009, UG purchased $1,000,000 of FSBI common stock. The sale and transfer of this security are restricted by the provisions of a stock restriction and buy-sell agreement.

On November 14, 2011, the merger of UTG, Inc and ACAP took place. Shareholders of ACAP received shares of UTG in exchange for their ACAP shares. ACAP was a 73% owned subsidiary of UG. The merger reduced the corporate structure and provided certain efficiencies and economies to the Company. All ACAP shareholders, other than UTG or UG, have the right to receive 233 shares of UTG common stock for each share of ACAP common stock they owned at closing. Under the terms of the exchange ratio, UTG issued 50,328 shares to former ACAP shareholders. An additional 129,548 UTG shares were not issued due to dissenting ACAP shareholders.

On September 28, 2011 UTG entered a joint ownership agreement with Bandyco, LLC and First Southern National Bank, for an 8.08% interest in an aircraft. Bandyco, LLC is affiliated with Ward, F Correll, who is a director of the Company. The Company is responsible for an initial payment of $150,000 on September 30, 2011, along with a $125,000 payment on October 30, 2011. The Company will pay a monthly operational fee of $25,000 starting in November 2011 and lasting through July 2013. The aircraft is issued for business related travel by various officers and employees of the Company. For years 2011 and 2010 UTG paid $397,227 and $308,362 for costs associated with the aircraft.

Respective domiciliary insurance departments have approved the agreements of the insurance companies and it is Management's opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.

On July 5, 2011 UG paid a cash dividend of $1,600,000 to UTG. On December 23, 2011 UG paid an additional cash dividend of $1,330,000 to UTG. On July 2, 2010, UG paid a cash dividend of $1,100,000 to UTG. On December 6, 2010, UG paid an additional dividend of $1,625,000 to UTG. On March 29, 2011 AC paid a cash dividend of $600,000 to ACAP. On May 10, 2010, AC paid a cash dividend of $728,130 to ACAP. These dividends were comprised entirely of ordinary dividends. No regulatory approvals were required prior to the payment of these dividends.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Brown Smith Wallace LLC (“BSW”) served as UTG’s independent certified public accounting firm for the fiscal years ended December 31, 2011 and 2010. In serving their primary function as outside auditor for UTG, BSW performed the following audit services: examination of annual consolidated financial statements; assistance and consultation on reports filed with the Securities and Exchange Commission; and assistance and consultation on separate financial reports filed with the State insurance regulatory authorities pursuant to certain statutory requirements.

Audit Fees. Audit fees paid for these audit services in the fiscal year ended December 31, 2011 and 2010 totaled $178,250 and $95,150, respectively and audit fees billed for quarterly reviews of the Company’s financial statements totaled $19,500 and $19,500 for the year 2011 and 2010, respectively.

Audit Related Fees. No audit related fees were incurred by the Company from BSW for the fiscal years ended December 31, 2011 and 2010.

Tax Fees. The Company paid $15,183 and $13,500 to BSW relating to certain tax advice and electronic filing of certain federal income tax returns of the Company for the years ended December 31, 2011 and 2010.

All Other Fees. The Company paid $17,345 to BSW for services relating to state insurance exams and SEC filings for the year ended December 31, 2011. The Company paid $20,000 to BSW for services relating to a SAS 70 audit of the Company for the year ended December 31, 2010. The audit committee approved the above work and fees of BSW.

The audit committee of the Company appoints the independent certified public accounting firm, with the appointment approved by the entire Board of Directors. Non-audit related services to be performed by the firm are to be approved by the audit committee prior to engagement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	The following documents are filed as a part of the report:

(1)	Financial Statements:
	See Item 8, Index to Financial Statements
(2)	Financial Statement Schedules
	Schedule I – Summary of Investments – other than invested in related parties.
	Schedule II – Condensed financial information of registrant
	Schedule IV – Reinsurance
	Schedule V – Valuation and qualifying accounts
	NOTE: Schedules other than those listed above are omitted because they are not required or the information is disclosed in the financial statements or footnotes.

(b)

Exhibits:

Index to Exhibits incorporated herein by this reference (See pages 80-81).

INDEX TO EXHIBITS

Exhibit

Number

2.1	(1)	Agreement and Plan of Merger of United Trust Group, Inc., An Illinois Corporation with and into UTG, Inc., A Delaware Corporation dated as of July 1, 2005, including exhibits thereto.
2.2	(2)	Stock Purchase Agreement, dated August 7, 2006, between UTG, Inc. and William F. Guest and John D. Cornett
2.3	(2)	Amendment No. 1, dated September 6, 2006, to the Stock Purchase Agreement, dated August 7, 2007, between UTG, Inc. and William F. Guest and John D. Cornett
2.4	(2)	Amendment No. 2, dated November 22, 2006, to the Stock Purchase Agreement, dated August 7, 2006, as amended, between UTG, Inc. and William F. Guest and John D. Cornett.
3.1	(1)	Certificate of Incorporation of the Registrant and all amendments thereto.
3.2	(1)	By-Laws for the Registrant and all amendments thereto.
4.1	(4)	UTG’s Agreement pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K with respect to long-term debt instruments.
10.1	(2)	Promissory note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
10.2	(2)	Revolving credit note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
10.3	(4)	Change in Terms Agreement dated May 11, 2010 to the revolving credit note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
10.4		Change in Terms Agreement dated July 14, 2011 to the revolving credit note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
10.5	(2)	Loan Agreement dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
10.6	(2)	Commercial pledge agreement dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
10.7	(2)	Negative pledge agreement dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
10.8		Line of Credit dated December 28, 2011, between UTG Avalon, LLC and First National Bank of Tennessee.
10.9	(2)	Administrative Services and Cost Sharing Agreement dated as of January 1, 2007 between UTG, Inc. and American Capitol Insurance Company
10.10	(3)	Administrative Services and Cost Sharing Agreement dated as of January 1, 2007 between UTG, Inc. and Universal Guaranty Life Insurance Company
10.11	(4)	Amendment to Reinsurance Agreement between Universal Guaranty Life Insurance Company and Optimum Re Insurance Company originally with Business Men’s Assurance Company of America
10.12	(4)	Reinsurance Agreement between Universal Guaranty Life Insurance Company and Swiss RE originally with Life Reassurance Corporation of America
10.13	(4)	Assumption Reinsurance Agreement between Universal Guaranty Life Insurance Company and Park Avenue Life Insurance Company formerly known as First International Life Insurance Company
10.14	(4)	Aircraft Lease Agreement
10.15		Aircraft Joint Ownership Agreement
10.16	(4)	General Agreement regarding Mortgage Loans by and between First Southern National Bank and Universal Guaranty Life Insurance Company
10.17	(4)	Loan Participation Agreement
10.18		StoneRiver Master Agreement
14.1	(1)	Code of Ethics and Business Conduct
14.2	(1)	Code of Ethical Conduct for Senior Financial Officers
21.1		List of Subsidiaries of the Registrant.
31.1		Certificate of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2		Certificate of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
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.
99.1	(1)	Audit Committee Charter.
99.2	(1)	Whistleblower Policy
99.3		Compensation Committee Charter
99.4		Investment Committee Charter
101		XBRL Interactive Data File

Footnote:

(1)	Incorporated by reference from the Company’s Annual Report on Form 10-K, File No. 0-16867, as of December 31, 2005.
(2)	Incorporated by reference from the Company’s Annual Report on Form 10-K, File No. 0-16867, as of December 31, 2006
(3)	Incorporated by reference from the Company’s Annual Report on Form 10-K, File No. 0-16867, as of December 31, 2007
(4)	Incorporated by reference from the Company’s Annual Report on Form 10-K, File No. 0-16867, as of December 31, 2010

UTG, INC.
SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
As of December 31, 2011

								Schedule I

Column A				Column B		Column C		Column D

								Amount at
								Which Shown
								in Balance
				Cost		Value		Sheet
Fixed maturities:
	Bonds:
		United States Government and
		government agencies and authorities	$	0	$	0	$	0
		State, municipalities, and political
		subdivisions		0		0		0
		Collateralized mortgage obligations		0		0		0
		Public utilities		0		0		0
		All other corporate bonds		0		0		0
	Total fixed maturities			0	$	0		0

Investments held for sale:
	Fixed maturities:
		United States Government and
		government agencies and authorities		56,794,363	$	70,599,928		70,599,928
		State, municipalities, and political
		subdivisions		235,000		241,317		241,317
		Collateralized mortgage obligations		750,944		759,727		759,727
		Public utilities		399,887		462,075		462,075
		All other corporate bonds		49,334,206		52,520,130		52,520,130
				107,514,400	$	124,583,177		124,583,177

	Equity securities:
		Banks, trusts and insurance companies		10,206,500	$	10,482,368		10,482,368
		All other corporate securities		5,993,543		6,817,260		6,817,260
				16,200,043	$	17,299,628		17,299,628

	Trading securities:			9,147,237		8,519,064		8,519,064


Mortgage loans on real estate				36,740,839				36,740,839
Investment real estate				62,701,375				62,701,375
Real estate acquired in satisfaction of debt				0				0
Policy loans				13,312,229				13,312,229
Other long-term investments				0				0
Short-term investments				0				0
	Total investments		$	245,616,123			$	263,156,312

UTG, Inc.

Schedule II

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

NOTES TO CONDENSED FINANCIAL INFORMATION

(a)	The condensed financial information should be read in conjunction with the consolidated financial statements and notes of UTG, Inc. and Consolidated Subsidiaries.

UTG, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT ONLY BALANCE SHEETS
As of December 31, 2011 and 2010

						Schedule II


				2011		2010

ASSETS

	Investment in affiliates		$	78,514,156	$	58,421,342
	Cash and cash equivalents			133,460		(44,270)
	F.I.T. Recoverable			0		3,851
	Accrued interest income			0		34,601
	Note receivable from affiliate			0		2,682,849
	Receivable from affiliate			149,371		0
	Other assets			23,988		24,864
		Total assets	$	78,820,975	$	61,123,237




LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
	Notes payable		$	4,291,411	$	7,181,411
	Payable to affiliate (net)			0		13,946
	F.I.T. Payable			9,311		0
	Deferred income taxes			2,241,930		2,232,102
	Other liabilities			2,778,959		244,538
		Total liabilities		9,321,611		9,671,997




Shareholders' equity:
	Common stock, net of treasury shares			3,855		3,848
	Additional paid-in capital, net of treasury			45,051,608		41,432,636
	Retained earnings (accumulated deficit)			12,651,687		6,335,072
	Accumulated other comprehensive
	income of affiliates			11,792,214		3,679,684
		Total shareholders' equity		69,499,364		51,451,240
		Total liabilities and shareholders' equity	$	78,820,975	$	61,123,237

UTG, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT ONLY STATEMENTS OF OPERATIONS
Two Years Ended December 31, 2011

						Schedule II



				2011		2010

Revenues:

	Management fees from affiliates		$	7,183,535	$	6,927,158
	Interest income			36,964		66,721
	Other income			100,507		99,708
				7,321,006		7,093,587


Expenses:

	Interest expense			248,863		202,477
	Operating expenses			6,932,528		6,475,837
				7,181,391		6,678,314

	Operating income			139,615		415,273

	Income tax expense			(37,990)		(131,921)
	Equity in income of subsidiaries			6,214,990		7,313,223
		Net income	$	6,316,615	$	7,596,575


Basic income per share			$	1.65	$	1.96

Diluted income per share			$	1.65	$	1.96

Basic weighted average shares outstanding				3,824,444		3,874,012

Diluted weighted average shares outstanding				3,824,444		3,874,012

UTG, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT ONLY STATEMENTS OF CASH FLOWS
Two Years Ended December 31, 2011

					Schedule II



			2011		2010

Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income		$	6,316,615	$	7,596,575
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
	Equity in income of subsidiaries		(6,214,990)		(7,313,223)
	Change in FIT recoverable		13,162		(3,718)
	Change in accrued interest income		34,601		55,028
	Change in indebtedness to affiliates, net		(163,317)		(84,557)
	Change in deferred income taxes		9,828		97,772
	Change in other assets and liabilities		(99,265)		(326,177)
Net cash provided by (used in) operating activities			(103,366)		21,700

Cash flows from financing activities:
	Purchase of treasury stock		(475,547)		(349,675)
	Proceeds from repayment of note receivable		506,483		576,235
	Cash of subsidiary at date of merger		45,833		0
	Proceeds from sale of subsidiary		164,327		0
	Proceeds from notes payable		2,943,000		290,000
	Payments on notes payable		(5,833,000)		(3,600,351)
	Dividend received from subsidiary		2,930,000		2,725,000
Net cash provided by (used in) financing activities			281,096		(358,791)

Net increase (decrease) in cash and cash equivalents			177,730		(337,091)
Cash and cash equivalents at beginning of year			(44,270)		292,821
Cash and cash equivalents at end of year		$	133,460	$	(44,270)

UTG, INC.
REINSURANCE
As of December 31, 2011 and the year ended December 31, 2011

									Schedule IV





Column A		Column B		Column C		Column D		Column E	Column F

									Percentage
				Ceded to		Assumed			of amount
				other		from other			assumed to
		Gross amount		companies		companies		Net amount	net







Life insurance
in force	$	1,660,331,833	$	401,350,867	$	2,293,615	$	1,261,274,581	0.2%



Premiums and policy fees:

Life insurance	$	14,018,831	$	3,921,723	$	32,428	$	10,129,536	0.3%

Accident and health
insurance		30,919		13,468		222		17,673	1.3%

	$	14,049,750	$	3,935,191	$	32,650	$	10,147,209	0.3%

UTG, INC.
REINSURANCE
As of December 31, 2010 and the year ended December 31, 2010

									Schedule IV





Column A		Column B		Column C		Column D		Column E	Column F

									Percentage
				Ceded to		Assumed			of amount
				other		from other			assumed to
		Gross amount		companies		companies		Net amount	net







Life insurance
in force	$	1,764,813,341	$	433,379,000	$	2,447,659	$	1,333,882,000	0.2%



Premiums and policy fees:

Life insurance	$	16,429,755	$	4,094,341	$	34,687	$	12,370,101	0.3%

Accident and health
insurance		32,835		13,617		1,274		20,492	6.2%

	$	16,462,590	$	4,107,958	$	35,961	$	12,390,593	0.3%

UTG, INC.
VALUATION AND QUALIFYING ACCOUNTS
As of and for the years ended December 31, 2011 and 2010


								Schedule V




		Balance at		Additions,
		Beginning		Charges				Balance at
Description		Of Period		and Expenses		Deductions		End of Period


December 31, 2011
.
Allowance for doubtful accounts -
mortgage loans	$	0	$	0	$	0	$	0




December 31, 2010
.
Allowance for doubtful accounts -
mortgage loans	$	12,730	$	0	$	12,730	$	0

SIGNATURES

Pursuant to the requirements of Section 13 or 15(D) of the Securities Exchange Act of 1934, UTG, Inc. has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

				UTG, Inc.


By:				/s/ Jesse T. Correll
				Jesse T. Correll
		Chairman and Chief Executive Officer and Director


By:				/s/ Theodore C. Miller
				Theodore C. Miller
	Senior Vice President, Chief Financial Officer and Secretary
			(principal financial and accounting officer)

Date: March 26, 2012

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:		By: /s/ Daryl J. Heald
John S. Albin Director		Daryl J. Heald Director

By:		By: /s/ Howard L. Dayton
Randall L. Attkisson Director		Howard L. Dayton Director

By: /s/ Joseph A. Brinck		By: /s/ Peter L. Ochs
Joseph A. Brinck Director		Peter L. Ochs Director

By: /s/ Jesse T. Correll		By: /s/ William W. Perry
Jesse T. Correll Chairman of the Board, Chief Executive Officer and Director		William W. Perry Director

By: /s/ /Ward F. Correll		By: /s/ James P. Rousey
Ward F. Correll Director		James P. Rousey President and Director

By: /s/ Thomas F. Darden		By: /s/ Theodore C. Miller
Thomas F. Darden Director		Theodore C. Miller Corporate Secretary and Chief Financial Officer