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UTG INC - Quarter Report: 2012 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
 
OF 1934

For the quarterly period ended September 30, 2012

OR

[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
 
OF 1934

For the transition period from _____________ to ____________


Commission File No. 0-16867

 
UTG, INC.
 
 
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
Delaware
 
20-2907892
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
 
 
 
 
5250 SOUTH SIXTH STREET
 
 
P.O. BOX 5147
 
 
SPRINGFIELD, IL  62705
 
 
(Address of principal executive offices) (Zip Code)
 
 
 
 

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a small reporting company.  See definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]
Accelerated filer [  ]
Non-accelerated filer [  ]
Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company.
Yes [  ]
No [X]

The number of shares outstanding of the registrant's common stock as of October 24, 2012, was 3,792,974.

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

TABLE OF CONTENTS

PART 1.   FINANCIAL INFORMATION
3
   ITEM 1.  FINANCIAL STATEMENTS
3
      Condensed Consolidated Balance Sheets
3
      Condensed Consolidated Statements of Operations
4
      Condensed Consolidated Statements of Comprehensive Income
5
      Condensed Consolidated Statements of Cash Flows
6
      Notes to Condensed Consolidated Financial Statements
7
   ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 
                 RESULTS OF OPERATIONS
18
   ITEM 4.  CONTROLS AND PROCEDURES
23
 
PART II.  OTHER INFORMATION
 
24
   ITEM 1.  LEGAL PROCEEDINGS
24
   ITEM 1A. RISK FACTORS
24
   ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
24
   ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
24
   ITEM 4.  MINE SAFETY DISCLOSURES
24
   ITEM 5.  OTHER INFORMATION
24
   ITEM 6.  EXHIBITS
24
 
SIGNATURES
 
25
 
EXHIBIT INDEX
 
26





PART 1.  FINANCIAL INFORMATION
Item 1.  Financial Statements
 
 
 
 
 
 
UTG, Inc.
AND SUBSIDIARIES
 
 
 
 
 
 
Condensed Consolidated Balance Sheets (Unaudited)
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
September 30,
 
December 31,
 
 
 
2012
 
2011*
Investments:
 
 
 
 
 
Investments available for sale:
 
 
 
 
 
Fixed maturities, at fair value (amortized cost $181,670,688 and $107,514,400)
 
$
195,972,913
$
124,583,177
Equity securities, at fair value (cost $28,191,223 and $16,200,043)
 
 
29,015,941
 
17,299,628
Trading securities, at fair value (cost $10,243,381 and $9,147,237)
 
 
13,914,699
 
8,519,064
Mortgage loans on real estate at amortized cost
 
 
22,652,297
 
9,272,919
Discounted mortgage loans on real estate at cost
 
 
26,672,841
 
27,467,920
Investment real estate
 
 
63,485,418
 
62,701,375
Policy loans
 
 
12,737,798
 
13,312,229
Total investments
 
 
364,451,907
 
263,156,312
 
 
 
 
 
 
Cash and cash equivalents
 
 
21,195,290
 
82,925,675
Accrued investment income
 
 
2,111,548
 
1,136,741
Reinsurance receivables:
 
 
 
 
 
Future policy benefits
 
 
29,340,375
 
64,693,384
Policy claims and other benefits
 
 
4,630,042
 
4,029,412
Cost of insurance acquired
 
 
11,987,140
 
12,846,266
Deferred policy acquisition costs
 
 
441,730
 
488,266
Property and equipment, net of accumulated depreciation
 
 
1,386,754
 
1,527,285
Income tax receivable
 
 
0
 
281,636
Other assets
 
 
2,149,259
 
2,636,280
Total assets
 
$
437,694,045
$
433,721,257
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
 
 
 
 
 
Policy liabilities and accruals:
 
 
 
 
 
Future policyholder benefits
 
$
295,350,496
$
301,393,689
Policy claims and benefits payable
 
 
5,029,634
 
3,016,866
Other policyholder funds
 
 
521,979
 
636,319
Dividend and endowment accumulations
 
 
14,059,729
 
14,176,151
Income tax payable
 
 
2,259,832
 
0
Deferred income taxes
 
 
13,248,816
 
13,745,751
Notes payable
 
 
8,115,439
 
9,531,645
Trading securities, at fair value (proceeds $7,108,044 and $6,288,562)
 
 
10,223,976
 
5,471,475
Other liabilities
 
 
8,456,827
 
9,964,313
Total liabilities
 
 
357,266,728
 
357,936,209
 
 
 
 
 
 
Shareholders' equity:
 
 
 
 
 
Common stock - no par value, stated value $.001 per share.  Authorized 7,000,000 shares - 3,793,762 and 3,854,610 shares outstanding
 
 
3,793
 
3,855
Additional paid-in capital
 
 
44,270,546
 
45,051,608
Retained earnings
 
 
19,448,382
 
12,651,687
Accumulated other comprehensive income
 
 
9,952,322
 
11,792,214
Total UTG shareholders' equity
 
 
73,675,043
 
69,499,364
Noncontrolling interests
 
 
6,752,274
 
6,285,684
Total shareholders' equity
 
 
80,427,317
 
75,785,048
Total liabilities and shareholders' equity
 
$
437,694,045
$
433,721,257
 
 
 
 
 
 
* Balance sheet audited at December 31, 2011.
 
 
 
 
 
See accompanying notes.


UTG, Inc.
AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
Condensed Consolidated Statements of Operations (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2012
 
2011
 
2012
 
2011
Revenue:
 
 
 
 
 
 
 
 
Premiums and policy fees
$
3,158,614
$
3,367,828
$
10,155,175
$
10,769,842
Ceded reinsurance premiums and policy fees
 
(830,087)
 
(1,150,510)
 
(2,602,152)
 
(2,981,483)
Net investment income (loss)
 
4,611,440
 
(4,055,513)
 
13,990,695
 
7,811,063
Other income
 
514,850
 
519,190
 
1,594,029
 
1,520,894
Revenues before realized gains
 
7,454,817
 
(1,319,005)
 
23,137,747
 
17,120,316
Realized investment gains, net:
 
 
 
 
 
 
 
 
Other-than-temporary impairments
 
0
 
0
 
0
 
(262,067)
Other realized investment gains, net
 
255,555
 
562,447
 
11,238,250
 
2,483,955
Total realized investment gains, net
 
255,555
 
562,447
 
11,238,250
 
2,221,888
Total revenue (loss)
 
7,710,372
 
(756,558)
 
34,375,997
 
19,342,204
 
 
 
 
 
 
 
 
 
Benefits and other expenses:
 
 
 
 
 
 
 
 
Benefits, claims and settlement expenses:
 
 
 
 
 
 
 
 
Life
 
6,570,185
 
6,090,616
 
17,967,145
 
15,866,565
Ceded Reinsurance benefits and claims
 
(1,864,743)
 
(1,398,015)
 
(3,893,151)
 
(2,908,849)
Annuity
 
298,940
 
282,967
 
777,859
 
806,508
Dividends to policyholders
 
107,293
 
109,097
 
373,563
 
400,882
Commissions and amortization of deferred policy acquisition costs
 
(140,218)
 
(246,563)
 
(424,702)
 
(678,392)
Amortization of cost of insurance acquired
 
286,376
 
307,753
 
859,126
 
923,261
Operating expenses
 
1,767,229
 
1,635,300
 
7,053,358
 
5,766,102
Interest expense
 
67,568
 
99,300
 
222,266
 
239,263
Total benefits and other expenses
 
7,092,630
 
6,880,455
 
22,935,464
 
20,415,340
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
 
617,742
 
(7,637,013)
 
11,440,533
 
(1,073,136)
Income tax (expense) benefit
 
(288,007)
 
2,345,119
 
(4,017,248)
 
961,408
 
 
 
 
 
 
 
 
 
Net income (loss)
 
329,735
 
(5,291,894)
 
7,423,285
 
(111,728)
 
 
 
 
 
 
 
 
 
Net (income) loss attributable to noncontrolling interests
 
(200,212)
 
604,734
 
(626,590)
 
40,469
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to common shareholders'
$
129,523
$
(4,687,160)
$
6,796,695
$
(71,259)
 
 
 
 
 
 
 
 
 
Amounts attributable to common shareholders'
 
 
 
 
 
 
 
 
Basic income per share
$
0.03
$
(1.23)
$
1.78
$
(0.02)
 
 
 
 
 
 
 
 
 
Diluted income per share
$
0.03
$
(1.23)
$
1.78
$
(0.02)
 
 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
 
3,797,779
 
3,807,430
 
3,816,354
 
3,815,602
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
3,797,779
 
3,807,430
 
3,816,354
 
3,815,602
See accompanying notes.


UTG, Inc.
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
September 30,
 
September 30,
 
 
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Income (loss)
$
         329,735
$
     (5,291,894)
$
      7,423,285
$
        (111,728)
 
 
 
 
 
 
 
 
 
 
Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrealized holding gains arising during period
 
      4,740,177
 
     12,773,424
 
      4,091,719
 
     14,359,172
 
Less reclassification adjustment for gains included in net income
 
        (121,191)
 
          (47,624)
 
     (5,931,611)
 
     (1,406,955)
 
    Subtotal:  Other comprehensive income (loss), net of tax
 
      4,618,986
 
     12,725,800
 
     (1,839,892)
 
     12,952,217
 
 
 
 
 
 
 
 
 
 
Comprehensive income
 
      4,948,721
 
      7,433,906
 
      5,583,393
 
     12,840,489
 
 
 
 
 
 
 
 
 
 
Less comprehensive (income) loss attributable to noncontrolling interests
 
        (200,212)
 
         604,734
 
        (626,590)
 
           40,469
 
 
 
 
 
 
 
 
 
 
Comprehensive income attributable to UTG, Inc.
$
      4,748,509
$
      8,038,640
$
      4,956,803
$
     12,880,958
See accompanying notes.

 


UTG, Inc.
AND SUBSIDIARIES
 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
 
 
September 30,
 
September 30,
 
 
 
2012
 
2011
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
Net income (loss) attributable to common shareholders
 
$
      6,796,695
 $
          (71,259)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
 
 
Amortization (accretion) of investments
 
 
2,218,898
 
(3,195,015)
Realized investment gains, net
 
 
(11,238,250)
 
(2,221,888)
Unrealized trading gains included in income
 
 
281,685
 
1,412,630
Amortization of deferred policy acquisition costs
 
 
46,536
 
51,519
Amortization of cost of insurance acquired
 
 
859,126
 
923,261
Depreciation
 
 
959,836
 
1,048,126
Net income (loss) attributable to noncontrolling interest
 
 
626,590
 
(40,469)
Charges for mortality and administration of universal life and annuity products
 
 
(5,281,297)
 
(5,547,734)
Interest credited to account balances
 
 
3,725,149
 
3,915,979
Change in accrued investment income (loss)
 
 
(974,807)
 
371,310
Change in reinsurance receivables
 
 
1,507,932
 
1,748,548
Change in policy liabilities and accruals
 
 
(2,422,859)
 
(3,856,527)
Change in income taxes receivable (payable)
 
 
2,259,832
 
(3,260,867)
Change in other assets and liabilities, net
 
 
(935,954)
 
2,358,592
Net cash used in operating activities
 
 
     (1,570,888)
 
     (6,363,794)
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
Proceeds from investments sold and matured:
 
 
 
 
 
Fixed maturities available for sale
 
 
84,519,249
 
130,999,311
Equity securities available for sale
 
 
1,287,475
 
3,231,410
Trading securities
 
 
15,344,038
 
14,209,807
Mortgage loans
 
 
4,134,379
 
2,984,255
Discounted mortgage loans
 
 
7,195,550
 
10,288,755
Real estate
 
 
9,499,500
 
9,921,610
Policy loans
 
 
2,782,021
 
3,478,803
Total proceeds from investments sold and matured
 
 
   124,762,212
 
   175,113,951
Cost of investments acquired:
 
 
 
 
 
Fixed maturities available for sale
 
 
(122,811,049)
 
(125,182,803)
Equity securities available for sale
 
 
(11,938,273)
 
(781,307)
Trading securities
 
 
(12,876,567)
 
(4,641,579)
Mortgage loans
 
 
(17,513,757)
 
(846)
Discounted mortgage loans
 
 
(6,146,295)
 
(10,378,446)
Real estate
 
 
(9,299,718)
 
(12,431,325)
Policy loans
 
 
(4,194,686)
 
(2,862,585)
Total cost of investments acquired
 
 
(184,780,345)
 
(156,278,891)
Sale/Purchase of property and equipment
 
 
17,440
 
(204,475)
Net cash provided by (used in) investing activities
 
 
    (60,000,693)
 
     18,630,585
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
Policyholder contract deposits
 
 
4,382,637
 
4,743,069
Policyholder contract withdrawals
 
 
(4,664,817)
 
(4,690,873)
Proceeds from notes payable/line of credit
 
 
1,411,000
 
5,613,000
Payments of principal on notes payable/line of credit
 
 
(2,827,206)
 
(3,958,284)
Purchase of treasury stock
 
 
(781,124)
 
(443,282)
Distributions to minority interests of consolidated subsidiaries
 
 
(160,000)
 
(388,275)
Cash received in reinsurance recapture
 
 
2,480,706
 
0
Net cash provided by (used in) financing activities
 
 
        (158,804)
 
         875,355
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
 
 
(61,730,385)
 
13,142,146
Cash and cash equivalents at beginning of period
 
 
82,925,675
 
18,483,452
Cash and cash equivalents at end of period
 
$
     21,195,290
 $
     31,625,598
See accompanying notes.

 

UTG, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements

1.
BASIS OF PRESENTATION

The accompanying condensed consolidated balance sheet as of December 31, 2011, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements include the accounts of UTG, Inc. (the "Parent") and its subsidiaries (collectively with the Parent, the "Company").  All significant intercompany accounts and transactions have been eliminated in consolidation.  The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8 of regulation S-X.  Accordingly, they do not include all of the information and notes required by GAAP for audited annual financial statements.  The information furnished includes all adjustments and accruals of a normal recurring nature, which in the opinion of management, are necessary for a fair presentation of the results for the interim periods.  The unaudited condensed consolidated financial statements included herein and these related notes should be read in conjunction with the Company's consolidated financial statements, and the notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, as amended by Amendment No. 1 on Form 10-K/A.  The Company's results of operations for the nine month period ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012 or for any other future period.

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 ("FSF"), a Kentucky corporation, 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 September 30, 2012, Mr. Correll owns or controls directly and indirectly approximately 58% of UTG's outstanding stock.

2.
NEW ACCOUNTING STANDARDS

Intangibles-Goodwill and Other – In July 2012, the Financial Accounting Standards Board ("FASB") issued guidance on the testing of indefinite-lived intangible assets for impairment, which is intended to reduce the cost and complexity of the impairment test for indefinite-lived intangible assets by providing an entity with the option to first assess qualitatively whether it is necessary to perform the impairment test that is currently in place. An entity would not be required to quantitatively calculate the fair value of an indefinite-lived intangible asset unless the entity determines that it is more likely than not that its fair value is less than its carrying value. This guidance is effective for interim and annual impairment tests beginning after September 15, 2012, with early adoption permitted. The adoption of this guidance will not have a material effect on the Company's consolidated financial statements.

Comprehensive Income - In June and December 2011, the FASB issued guidance that requires all non-owner changes in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. For public entities, the amendments were effective for fiscal years and interim periods within those years, beginning after December 15, 2011 and should be applied retrospectively. This standard only affected the Company's presentation of comprehensive income.

Fair Value Measurement - In May 2011, the FASB issued guidance to achieve common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. Some of the amendments in this update clarify the FASB's intent about the application of certain existing fair value measurement requirements and other amendments change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. None of the amendments in this update require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. For public entities, this guidance was effective during interim and annual periods beginning after December 15, 2011. The adoption of this guidance, effective January 1, 2012, did not have a material effect on the Company's consolidated financial statements.

3.
INVESTMENTS

A.
Available for Sale Securities – Fixed Maturity and Equity Securities

The Company's insurance subsidiary is 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.

Investments in available for sale securities are summarized as follows:

September 30, 2012
 
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
 
$
38,900,060
 
$
5,637,145
 
$
0
 
$
44,537,205
States, municipalities and political subdivisions
 
185,000
 
8,181
 
0
 
193,181
U.S. special revenue and assessments
 
2,162,068
 
177,494
 
(13,420)
 
2,326,142
Collateralized mortgage obligations
 
2,596,651
 
203,792
 
0
 
2,800,443
Public utilities
 
399,896
 
68,686
 
0
 
468,582
All other corporate bonds
 
137,427,013
 
10,111,709
 
(1,891,362)
 
145,647,360
 
 
181,670,688
 
16,207,007
 
(1,904,782)
 
195,972,913
Equity securities
 
28,191,223
 
1,144,323
 
(319,605)
 
29,015,941
Total
$
209,861,911
$
17,351,330
$
(2,224,387)
$
224,988,854


December 31, 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

 
The amortized cost and estimated market value of debt securities at September 30, 2012, 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
September 30, 2012
 
Amortized
Cost
 
Estimated
Market Value
 
 
 
 
 
Due in one year or less
$
4,526,032
$
4,791,764
Due after one year through five years
 
26,233,409
 
28,447,947
Due after five years through ten years
 
118,010,160
 
128,112,307
Due after ten years
 
30,304,436
 
31,820,452
Collateralized mortgage obligations
 
2,596,651
 
2,800,443
Total
$
181,670,688
$
195,972,913

The fair value of investments with sustained gross unrealized losses at September 30, 2012 and December 31, 2011 are as follows:

September 30, 2012
 
Less than 12 months
 
12 months or longer
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
Fair value
Unrealized losses
 
Fair value
Unrealized losses
 
Fair value
Unrealized losses
U.S. special revenue and assessments
$
0
0
$
986,580
(13,420)
$
986,580
(13,420)
All other corporate bonds
 
8,501,862
(285,215)
 
345,082
(1,606,147)
 
8,846,944
(1,891,362)
Total fixed maturities
$
8,501,862
(285,215)
$
1,331,662
(1,619,567)
$
9,833,524
(1,904,782)
 
 
 
 
 
 
 
 
 
 
Equity securities
$
9,536,942
(208,209)
$
952,604
(111,396)
$
10,489,546
(319,605)

December 31, 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)

Additional information regarding investments in an unrealized loss position is as follows:

 
Less than 12 months
 
12 months or longer
 
Total
As of September 30, 2012
 
 
 
 
 
   Fixed maturities
3
 
4
 
7
   Equity securities
10
 
1
 
11
As of December 31, 2011
 
 
 
 
 
   Fixed maturities
5
 
6
 
11
   Equity securities
2
 
1
 
3

Substantially all of the unrealized losses on fixed maturities available for sale at September 30, 2012 and December 31, 2011 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase.  The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position.  Based upon the Company's expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company's evaluation of other relevant factors, the Company deems these securities to be temporarily impaired as of September 30, 2012.
 
The Company regularly reviews its investment securities for factors that may indicate that a decline in fair value of an investment is other than temporary.  The factors considered by management in its regular review to identify and recognize other-than-temporary impairment losses on fixed maturities include, but are not limited to: the length of time and extent to which the fair value has been less than cost; the Company's intent to sell, or be required to sell, the debt security before the anticipated recovery of its remaining amortized cost basis; 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 the effect of changes in market interest rates.  If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date would be recognized by a charge to other-than-temporary losses in the Condensed Consolidated Statements of Operations.

Equity securities may experience other-than-temporary impairments in the future based on the prospects for full recovery in value in a reasonable period of time and the Company's ability and intent to hold the security to recovery.  If a decline in fair value is judged by management to be other-than-temporary or management does not have the intent or ability to hold a security, a loss is recognized by a charge to other-than-temporary impairment losses in the Condensed Consolidated Statements of Operations.

Based on management's review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Condensed Consolidated Statements of Operations:

 
 
Three Months Ended
 
 
September 30,
 
 
2012
 
2011
 
 
 
 
 
Other than temporary impairments:
 
 
 
 
    Mortgage loans
$
0
$
0
 
 
 
 
 

 
 
Nine Months Ended
 
 
September 30,
 
 
2012
 
2011
 
 
 
 
 
Other than temporary impairments:
 
 
 
 
    Mortgage loans
$
0
$
262,067
 
 
 
 
 

The other-than-temporary impairments recognized during 2011 were due to appraisal valuations and Management's analysis of discounted mortgage loans. The mortgage loans were written down to better reflect current expected market values.

B.
Trading Securities

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 Condensed Consolidated Statements of Operations.  Trading securities include exchange-traded equities and exchange-traded options and futures.  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.  The fair value of derivatives included in trading security assets and trading security liabilities as of September 30, 2012 was $10,293,812 and $(8,714,017), respectively. 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.  Earnings from trading securities are classified in cash flows from operating activities.

Trading revenue charged to net investment income from trading securities was:

 
 
Three Months Ended
 
 
September 30,
 
 
2012
 
2011
 
 
 
 
 
Net unrealized losses
$
(448,936)
$
(2,769,974)
Net realized gains (losses)
 
1,110,965
 
(4,350,117)
Net unrealized and realized gains (losses)
$
662,029
$
(7,120,091)
 
 
 
 
 

 
 
Nine Months Ended
 
 
September 30,
 
 
2012
 
2011
 
 
 
 
 
Net unrealized gains (losses)
$
(281,685)
$
(1,412,630)
Net realized gains (losses)
 
3,004,278
 
(993,168)
Net unrealized and realized gains (losses)
$
2,722,593
$
(2,405,798)
 
 
 
 
 

C.
Mortgage Loans

As of September 30, 2012 and December 31, 2011, the Company's mortgage loan portfolio contained 75 and 101 mortgage loans, including discounted mortgage loans, with a carrying value of $49,325,138 and $36,740,839, respectively.

Changes in the current economy 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.  Given the uncertainty of the current market, management has taken a conservative approach with the discounted mortgage loans 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 and 2012 were the result of the loan basis already being fully paid.

On the remainder of the mortgage loan portfolio, 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.

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 acquires the discounted mortgage loans at below fair value, therefore no reserve for delinquent loans is deemed necessary.  Those loans not currently paying are being vigorously worked by management.  The current discounted commercial mortgage loan portfolio has an average price of 36.2% of face value and management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased.

4.
FAIR VALUE MEASUREMENTS

The Company measures its assets and liabilities recorded at fair value in the condensed consolidated balance sheets based on the framework set forth in the GAAP fair value accounting guidance.  The framework establishes a fair value hierarchy of three levels based upon the transparency of information used in measuring the fair value of assets or liabilities as of the measurement date.  The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three categories.

Level 1 – Valuation is based upon quoted prices for identical assets or liabilities in active markets that the Company is able to access.  Level 1 fair value is not subject to valuation adjustments.

Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar instruments in markets that are not active. In addition, the Company may use various valuation techniques or pricing models that use observable inputs to measure fair value.

Level 3 – Valuation is based upon 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 Company's own assumptions about the inputs that market participants would use in pricing the asset or liability.

The Company determines the existence of an active market for an asset or liability based on its judgment as to whether transactions for the asset or liability occur in such market with sufficient frequency and volume to provide reliable pricing information.  If the Company concludes that there has been a significant decrease in the volume and level of activity for an investment in relation to normal market activity for such investment, adjustments to transactions and quoted prices are made to estimate fair value.

The inputs used in the valuation techniques employed by the Company are provided by nationally recognized pricing services, external investment managers and internal resources.  To assess these inputs, the Company's review process includes, but is not limited to, quantitative analysis including benchmarking, initial and ongoing evaluations of methodologies used by external parties to calculate fair value, and ongoing evaluations of fair value estimates based on the Company's knowledge and monitoring of market conditions.

The Company periodically reviews the pricing service provider's policies and procedures for valuing securities.  The assumptions underlying the valuations from external service providers, including unobservable inputs, are generally not readily available as this information is often deemed proprietary.  Accordingly, the Company is unable to obtain comprehensive information regarding these assumptions and methodologies.

The Company's investments in fixed maturity securities available for sale, equity securities available for sale and trading securities assets and liabilities are carried at fair value.  The following are the Company's methodologies and valuation techniques for assets and liabilities measured at fair value.

Fixed maturities available for sale mainly consist of U.S. treasury securities and corporate debt securities. The Company employs a market approach to the valuation of securities where there are sufficient market transactions involving identical or comparable assets. If sufficient market data is not available for identical or comparable assets, the Company uses an income approach to valuation. The majority of the financial instruments included in fixed maturity securities available for sale are evaluated utilizing observable inputs; accordingly, they are categorized in either Level 1 or Level 2 of the fair value hierarchy. However, in instances where significant inputs utilized in valuation of the securities are unobservable, the securities are categorized in Level 3 of the fair value hierarchy.

Corporate securities primarily include fixed rate corporate bonds. Inputs utilized in connection with the Company's valuation techniques relating to this class of securities include recently executed transactions, market price quotations, benchmark yields and issuer spreads. Corporate securities are categorized in Level 2 of the fair value hierarchy.

U.S. treasury securities are based on quoted prices in active markets and are generally categorized in Level 1 of the fair value hierarchy.

Equity securities available for sale consist of common and preferred stocks mainly in private equity investments, financial institutions and insurance companies. Equity securities for which there is sufficient market data are categorized as Level 2 in the fair value hierarchy. For the equity securities in which quoted market prices are not available, the transaction price is used as the best estimate of fair value at inception.  When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected exit values. The Company performs ongoing reviews of the underlying investments. The reviews consist of the evaluations of expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy.

Securities designated as trading securities consist of exchange-traded equities, options and futures.  These securities are primarily valued at quoted active market prices, and are therefore categorized as Level 1 in the fair value hierarchy.
 
The following table presents the Company's assets and liabilities measured at fair value in the condensed consolidated balance sheet on a recurring basis as of September 30, 2012.

 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
Fixed Maturities, available for sale
$
26,577,895
$
169,128,926
$
266,092
$
195,972,913
Equity Securities, available for sale
 
0
 
8,859,293
 
20,156,648
 
29,015,941
Trading Securities
 
13,914,699
 
0
 
0
 
13,914,699
Total
$
40,492,594
$
177,988,219
$
20,422,740
$
238,903,553
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
Trading Securities
$
10,223,976
$
0
$
0
$
10,223,976

The following table presents the Company's assets and liabilities measured at fair value in the condensed consolidated balance sheet on a recurring basis as of December 31, 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

The following table provides reconciliations for Level 3 assets measured at fair value on a recurring basis. Transfers into and out of Level 3 are recognized as of the end of the quarter in which they occur.

 
 
Fixed Maturities,
Available for Sale
 
Equity Securities,
Available for Sale
 
 
Total
Balance at December 31, 2011
$
215,317
$
9,955,368
$
10,170,685
      Total unrealized gain or losses:
 
 
 
 
 
 
           Included in other comprehensive income
 
50,775
 
78,995
 
129,770
       Purchases
 
0
 
10,122,285
 
10,122,285
Balance at September 30, 2012
$
266,092
$
20,156,648
$
20,422,740

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 condensed consolidated financial statements.
 
The carrying values and estimated fair values of certain of the Company's financial instruments not recorded at fair value in the condensed consolidated balance sheets are shown below. Because the fair value for all condensed consolidated balance sheet items are not required to be disclosed, the aggregate fair value amounts presented below are not reflective of the underlying value of the Company.

 
 
September 30, 2012
 
December 31, 2011
 
 
Assets
 
 
Carrying
Amount
 
Estimated
Fair
Value
 
 
Carrying
Amount
 
Estimated
Fair
Value
Mortgage loans on real estate
$
22,652,297
$
26,660,697
$
9,272,919
$
9,116,148
Discounted mortgage loans
 
26,672,841
 
26,672,841
 
27,467,920
 
27,467,920
Investment real estate
 
63,485,418
 
63,485,418
 
62,701,375
 
62,701,375
Policy loans
 
12,737,798
 
12,737,798
 
13,312,229
 
13,312,229
Cash and cash equivalents
 
21,195,290
 
21,195,290
 
82,925,675
 
82,925,675
Liabilities
 
 
 
 
 
 
 
 
Notes payable
 
8,115,439
 
8,106,760
 
9,531,645
 
9,519,300

The above estimated fair value amounts have been determined based upon the following valuation methodologies. Considerable judgment was required to interpret market data in order to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange.  The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts.

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

The Company has been purchasing non-performing discounted mortgage 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, which management believes approximates fair value.

Investment 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.

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.

The carrying amount of cash and cash equivalents in the financial statements approximates fair value given the highly liquid nature of the instruments.

The carrying value is a reasonable estimate of fair value for notes payable subject to floating rates of interest.  The fair value of notes payable with fixed rate borrowings is determined based on the borrowing rates currently available to the Company for loans with similar terms and average maturities.
 
5.
NOTES PAYABLE

At September 30, 2012 and December 31, 2011, the Company had the following outstanding debt:

 
 
 
 
Outstanding Principal Balance
Instrument
Issue
Date
Maturity Date
 
September 30, 2012
 
December 31, 2011
Promissory Note:
 
 
 
 
 
 
   UTG
12/8/2006
12/7/2012
$
2,766,971
$
3,291,411
   HPG Acquisitions
2/7/2007
11/7/2017
 
218,468
 
240,234

Instrument
Issue Date
Maturity Date
 
Revolving Credit Limit
 
December 31, 2011
Borrowings
Repayments
 
September 30, 2012
Lines of Credit:
 
 
 
 
 
 
 
 
 
 
   UTG
7/14/2011
12/7/2012
$
5,000,000
$
1,000,000
1,411,000
2,281,000
$
130,000
   UTG Avalon
12/28/2011
1/3/2013
 
5,000,000
 
5,000,000
0
0
 
5,000,000
   UG
12/28/2010
12/7/2012
 
15,000,000
 
0
0
0
 
0

The UTG promissory 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 and principal is payable annually beginning at the end of the second year.

The HPG Acquisitions promissory note is secured by real estate owned by HPG. The promissory note bears interest at a fixed rate of 5%.

The UTG line of credit 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 line of credit.

The UTG Avalon line of credit carries interest at a rate of 4.0% and is payable in two semi-annual payments.

UG is 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, the Company 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.

During the third quarter of 2012, the Company signed a letter of intent to enter into a new line of credit agreement. Final acceptance of the credit facility is expected to occur during the fourth quarter 2012. The new line of credit is expected to replace the existing UTG line of credit.

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

 
Year
 
Amount
 
 
 
 
 
 
 
2012
$
2,919,837
 
 
2013
 
5,031,586
 
 
2014
 
34,154
 
 
2015
 
36,935
 
 
2016
 
39,941
 
 
6.      SHAREHOLDERS' EQUITY
 
A.
Stock Repurchase Program

The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of up to $5 million of UTG's common stock. During September 2012, the Board of Directors approved a resolution to increase the repurchase amount by $1 million, for a total repurchase of $6 million.  Repurchased shares are available for future issuance for general corporate purposes.  This program can be terminated at any time.  Open market purchases are made based on the last available market price and are generally limited to a maximum per share price of the most recent reported per share GAAP equity book value of the Company.  Through October 2012, UTG has spent $4,474,463 in the acquisition of 552,362 shares under this program.

B.
Earnings Per Share Calculations

Earnings per share are based on the weighted average number of common shares outstanding during each period.  At September 30, 2012 and September 30, 2011, diluted earnings per share were the same as basic earnings per share since the Company had no dilutive instruments outstanding.

7.
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 materially 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.

As part of the Texas Imperial Life Insurance Company 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 the 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 and has established a contingent liability of $47,727 in its financial statements.  This contingency expires December 30, 2013.

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.

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 of $2,550,822 to cover the anticipated proceeds due to the dissenting shareholders and associated legal and other costs.

The following table represents the total funding commitments and the unfunded commitment as of September 30, 2012 related to certain investments:

 
 
Total Funding
 
Unfunded
 
 
Commitment
 
Commitment
RLF III, LLC
$
4,000,000
$
398,120
Llano Music, LLC
 
2,000,000
 
936,000
Marcellus III, LLP
 
1,250,000
 
529,375
Dew Learning, LLC
 
1,000,000
 
857,000
Marcellus HBPI, LLP
 
1,800,000
 
1,485,000
PBEX, LLC
 
5,625,000
 
4,218,750
Sovereign's Capital, LP
 
500,000
 
250,000
 
During 2006, the Company committed to invest in RLF III, LLC ("RLF"), which makes land-based investment in undervalued assets. RLF does capital calls as funds are needed for continued land purchases.

During 2010, the Company made a commitment to invest in Llano Music, LLC ("Llano), which invests in music royalties. Llano does capital calls to its investors as funds are needed to acquire the royalty rights.

During 2011, the Company committed to invest in Marcellus III, LLP, which purchases land for leasing opportunities to those looking to harvest natural resources. Marcellus III, LLC does capital calls to its investors as funds are needed for continued land purchases.

During 2012, the Company made a commitment to investment in Dew Learning, LLC ("Dew"), which is involved in the marketing and distribution of an electronic education based classroom model. Dew does capital calls to investors as funds are needed for continued development of the program.

During 2012, the Company committed to invest in Marcellus HBPI, LLP, which purchases land for leasing opportunities to those looking to harvest natural resources. Marcellus HPBI, LLC does capital calls to investors as funds are needed for continued land purchases.

During 2012, the Company committed to invest in PBEX, LLC, which purchases land for leasing opportunities to those looking to harvest natural resources. PBEX, LLC does capital calls to investors as funds are needed for continued land purchases.

During 2012, the Company committed to invest in Sovereign's Capital, LP ("Sovereign's"), which invests in companies in emerging markets. Sovereign's is expected to call the remaining unfunded commitment during 2013.

8.
OTHER CASH FLOW DISCLOSURES

On a cash basis, the Company paid the following expenses:

 
 
Three Months Ended
 
 
September 30,
 
 
2012
 
2011
 
 
 
 
 
Interest expense
$
19,896
$
146,437
Federal income tax
 
65,689
 
394,459

 
 
Nine Months Ended
 
 
September 30,
 
 
2012
 
2011
 
 
 
 
 
Interest expense
$
169,509
$
230,840
Federal income tax
 
1,408,770
 
2,299,459

At the end of August, the financial reinsurance agreement with Canada Life Assurance Company was fully repaid.  At that time, the reserves were recaptured through elimination of reinsurance recoverable in exchange for assets received equal to the recaptured reserves.  The following table reflects the breakdown of the assets received.

 
 
Assets Received
 
 
 
Bonds
$
27,651,746
Common Stock
 
1,023,394
Cash
 
2,480,706
Total
$
31,155,846

The non-cash acquisitions of bonds and common stock resulting from recapture of reinsurance have been excluded from the accompanying statements of cash flows.
 
9.
CONCENTRATION OF CREDIT RISK

The Company maintains cash balances in financial institutions that at times may exceed federally insured limits.  The Company maintains its primary operating cash accounts with First Southern National Bank, an affiliate of the largest shareholder of UTG, Mr. Jesse 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.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of UTG, Inc. and its subsidiaries (collectively, the "Company") should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company and the related Notes thereto appearing in the Company's annual report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

Cautionary Statement Regarding Forward-Looking Statements

Any forward-looking statement contained herein or in any other oral or written statement by the Company or any of its officers, directors or employees is qualified by the fact that actual results of the Company may differ materially from any such statement due to the following important factors, among other risks and uncertainties inherent in the Company's business:

 
1.
Prevailing interest rate levels, which may affect the ability of the Company to sell its products, the market value of the Company's investments and the lapse ratio of the Company's policies, notwithstanding product design features intended to enhance persistency of the Company's products.
 
 
2.
 
Changes in the federal income tax laws and regulations which may affect the relative tax advantages of the Company's products.
 
 
3.
 
Changes in the regulation of financial services, including bank sales and underwriting of insurance products, which may affect the competitive environment for the Company's products.
 
 
4.
 
Other factors affecting the performance of the Company, including, but not limited to, market conduct claims, insurance industry insolvencies, insurance regulatory initiatives and developments, stock market performance, an unfavorable outcome in pending litigation, and investment performance.

Overview

UTG, Inc., a Delaware corporation, is a life insurance holding company.  The Company's dominant business is individual life insurance, which includes the servicing of existing insurance policies in force, the acquisition of other companies in the life insurance business and the administration and processing of life insurance business for other entities.  The Company's focus for the future includes growing the administrative portion of the business.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ significantly from those estimates.  The Company has identified certain estimates that involve a higher degree of judgment and are subject to a significant degree of variability.  The Company's critical accounting policies and the related estimates considered most significant by management are disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.  Management has identified the accounting policies related to cost of insurance acquired, assumptions and judgments utilized in determining if declines in fair values of investments are other-than-temporary, and valuation methods for investments that are not actively traded as those, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's Condensed Consolidated Financial Statements and this Management's Discussion and Analysis.

During the nine months ended September 30, 2012, there were no additions to or changes in the critical accounting policies disclosed in the 2011 Form 10-K, except for recently adopted accounting standards discussed in Note 2 of the Notes to the Condensed Consolidated Financial Statements.

Results of Operations

(a)
Revenues

The Company's premium and policy fee revenues, net of reinsurance, were approximately $2.3 million for the third quarter of 2012, an increase of approximately 5% compared to the same quarter in 2011 and approximately $7.6 million for the nine months ended September 30, 2012, a decrease of approximately 3% compared to the corresponding period ended in 2011. Unless the Company acquires a block of in-force business management expects premium revenue to continue to decline on the existing blocks of business at a rate consistent with prior experience. However, premium revenue increased during the third quarter 2012 as a result of the Company recapturing the financial reinsurance.

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.

The Company reported net investment income of approximately $4.6 million during the third quarter 2012 and approximately $14 million for the nine months ended September 30, 2012. The company reported a net investment loss of approximately $4.1 million during the third quarter 2011 and net investment income of approximately $7.8 million for the nine months ended September 30, 2011.  The variance in 2012 and 2011 investment income results are mainly attributable to activity in the trading portfolio, the fixed maturity portfolio and the mortgage loan portfolio.

During the third quarter of 2012, the Company reported income of approximately $662,000 in the trading securities portfolio while during the third quarter 2011, the Company recorded approximately $7 million of losses in the trading securities investment portfolio.  For the nine months ended September 30, 2012 and 2011, the Company recognized investment income of approximately $2.7 million and a loss of approximately $2.4 million, respectively, from the trading securities portfolio.  During 2012, the Company has seen a positive turn in earnings from the trading securities. Volatility as well as possible losses should be expected in the trading securities portfolio. Management's target return on the trading securities portfolio is 6% to 8%.

Income from fixed maturities increased approximately 59% or $672,000 when comparing the third quarter 2012 to the third quarter 2011 and by approximately 48% or $1.6 million when comparing the nine months ended September 30, 2012 to the nine months ended September 30, 2011. The increase in income is attributable to the higher yield earned on the BBB and BB bonds the Company began investing in during 2012. In early 2012, the Company invested a significant portion of its excess cash balances in fixed maturity investments.

The Company received less income from mortgage loans, including discounted mortgage loans, during the third quarter of 2012 and the first nine months of 2012 compared to the same periods in 2011. During the third quarter of 2012 and 2011, the Company received mortgage loan interest of approximately $1.4 million and $1.8 million, respectively.  During the nine months ended September 30, 2012 and 2011, the Company recorded mortgage loan interest of $4.3 million and $6.9 million, respectively, which is mainly attributable to discounted mortgage loan activity. This decrease is due to fewer discounted mortgage loan settlements during the current year.

Should any of the factors change, such as the ability to acquire additional loans at such a large discount due to increased competition or insufficient supply, the ability of borrowers to settle loans mainly through refinancing, another decline in the overall economy, and other such factors, the performance of this type of investment could abruptly end, directly affecting future net income.  While management believes the current portfolio would remain profitable in another downturn, with no source of new acquisitions of discounted loans, the future profit stream from this activity would be limited.  Alternatively, should the Company need to look at fixed maturities for additional investment if discounted loans were no longer a viable option, the rate of return would be significantly lower given the low interest rate environment also resulting in substantially lower income.

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 lower them 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.

The Company had net realized investment gains of approximately $256,000 and $562,000 for the third quarter of 2012 and 2011, respectively and approximately $11.2 million and $2.2 million for the nine months ended September 30, 2012 and 2011, respectively.  The increase in net realized gains in 2012, in comparison to 2011, is mainly attributable to the sale of fixed maturities and certain real estate investments.

During 2012, the Company reported realized gains of approximately $9.1 million from the sale of fixed maturities, primarily U.S. Treasury holdings.  Additionally, realized gains of approximately $1.7 million were recognized from the sale of real estate.

During the fourth quarter of 2011 and first quarter months of 2012, 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 majority of its U.S. treasury holdings.  The Company has redeployed a majority of its excess cash balances into BBB and BB rated corporate debt issues.  Included in fixed maturity purchases, the Company purchased approximately $66,509,000 and $22,325,000 of BBB and BB rated corporate debt issues, respectively.  These corporate debt issues have an average interest yield of 5.03%.  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 default 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.

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 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.

Other income primarily represented revenues received relating to the performance of administrative work as a TPA for unaffiliated life insurance companies, which has remained consistent over the periods presented.  The Company receives monthly fees based on policy in force counts and certain other activity indicators such as number of policies issued.  Management remains committed to the pursuit of additional TPA clients and believes this area continues to show potential for growth.

(b)
Expenses

Life benefits, claims and settlement expenses, net of reinsurance benefits and claims, increased approximately 9% in the nine month period ended September, 30 2012 compared to the same period in 2011 and by less than 1% for the third quarter 2012, compared to the same quarter in 2011. Policy claims vary from period to period and therefore, fluctuations in mortality are to be expected and are not considered unusual by management.

Commissions and amortization of deferred policy acquisition costs decreased approximately 37% in the nine month period ended September 30, 2012 compared to the same period in 2011 and by approximately 43% for the third quarter 2012, compared to the same quarter in 2011.  The majority of this number is driven by a financial reinsurance agreement.  The earnings on the block of business covered by this 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.  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.  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.  This arrangement was fully repaid in August 2012. With the reinsurance recaptured by the Company, a 15% profit share will continue to be paid to the reinsurer going forward relative to the block of business.

The financial reinsurance was repaid during the third quarter 2012. As a result of the financial reinsurance being repaid, the Company recognizes assets in exchange for reducing its reinsurance recoverable.

Another significant factor is attributable to the Company paying fewer commissions since the Company writes very little new business and renewal premiums on existing business continue to decline.  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 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 any of the periods presented.

Net amortization of cost of insurance acquired decreased approximately 7% in the nine month period ended September 30, 2012 compared to the same period in 2011 and by approximately 7% for the third quarter 2012 compared to the same quarter in 2011. 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. This expense is expected to decrease, unless the Company acquires a new block of business.

Operating expenses increased approximately 22% in the nine month period ended September 30, 2012 in comparison to the same period in 2011 and by approximately 8% for the third quarter 2012 in comparison to the same quarter in 2011.  The increase in 2012 expenses, in comparison to 2011, is primarily attributable to an increase in legal expenses, charitable contributions and a new aircraft use agreement.

The Company's legal expenses increased by approximately $197,000 when comparing the nine month period ended September 30, 2012 to the same period in 2011 and decreased by approximately $51,000 when comparing the third quarter of 2012 to the third quarter of 2011.  The overall increase in legal expenses is primarily attributable to the merger of American Capitol and the ACAP dissenters' lawsuit.

The Company's charitable contributions for the nine months ended September 30, 2012 and 2011 were approximately $691,000 and $137,000, respectively. The Company's charitable contributions for the three months ended September 30, 2012 and 2011 were approximately $66,000 and $115,000, respectively.  Charitable contributions are expected to vary from quarter to quarter and year to year depending on the earnings of the Company.

Additionally, in August 2011, the Company entered into a new agreement relating to the use of an aircraft. This agreement resulted in increased expenses of approximately $25,000 per month, beginning in January 2012.

Management continues to place significant emphasis on expense monitoring and cost containment.  Maintaining administrative efficiencies directly impacts net income.

Interest expense decreased by approximately 7% during the first nine months of 2012 compared to the same period in 2011. Interest expense decreased by approximately 32% during the three month period ended September 30, 2012 compared to the same period in 2011. The decrease in interest expense is a result of the Company's outstanding debt balance decreasing during 2012.

(c)
Net Income/Loss

The Company reported net income attributable to common shareholders' of approximately $6.8 million during the nine month period ended September 30, 2012, compared to a loss of approximately $71,000 for the same period in 2011. Third quarter 2012 net income was approximately $130,000, compared to a net loss of approximately $4.7 million in the third quarter 2011. The 2011 losses were mainly attributable to the losses reported in the trading securities portfolio. The 2012 earnings are mainly attributable to favorable yields on bonds and certain real estate investments. The Company's 2012 earnings were further influenced by realized gains on fixed maturities and the sale of a parcel of real estate.

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

Total shareholders' equity increased by approximately 6% as of September 30, 2012 compared to December 31, 2011. Retained earnings increased by approximately 54% as of September 30, 2012. The increase in retained earnings is attributable to the current year earnings of the Company.  The increase in retained earnings was offset by a decrease of approximately 16% in accumulated other comprehensive income. The decrease in accumulated other comprehensive income is due to the change in the unrealized values on investments.

Investments represent approximately 83% and 61% of total assets at September 30, 2012 and December 31, 2011, respectively.  Accordingly, investments are the largest asset group of the Company.  The Company's insurance subsidiaries are regulated by insurance statutes and regulations as to the type of investments that they are permitted to make and the amount of funds that may be used for any one type of investment.  In light of these statutes and regulations, the majority of the Company's investment portfolio is invested in a diverse set of securities.

As of September 30, 2012, 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.  To provide additional flexibility and liquidity, the Company has identified all fixed maturity securities as "investments held for sale".  Investments held for sale are carried at market, with changes in market value charged directly to shareholders' equity.

In April 2012, the Company received the necessary approvals and completed the merger of its two 100% owned insurance subsidiaries, with American Capitol Insurance Company being merged into Universal Guaranty Life Insurance Company.  This transaction was done to provide the Company with additional administrative efficiencies and cost savings related to maintaining separate legal entities.

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 debt service.  Cash and cash equivalents as a percentage of total assets were approximately 5% and 19% as of September 30, 2012, and December 31, 2011, respectively.  Fixed maturities as a percentage of total assets were approximately 45% and 29% as of September 30, 2012 and December 31, 2011, respectively.

The Company currently has access to funds for operating liquidity.  UTG has a $5,000,000 revolving credit note with First Tennessee Bank National Association.  The revolving credit note was increased at renewal, during 2011, to provide for additional operating liquidity and flexibility for current operations.  On April 6, 2011, UTG Avalon was extended a credit note from First National Bank of Tennessee for $5,000,000.  UG is a member of the FHLB which allows UG access to credit.  UG's current line of credit with the FHLB is $15,000,000.  At September 30, 2012, the Company had $5,130,000 of outstanding borrowings attributable to the lines of credit.

Future policy benefits are primarily long-term in nature and therefore, the Company's investments are predominantly in long-term fixed maturity investments such as bonds and mortgage loans which provide sufficient return to cover these obligations.

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

Net cash used in operating activities was $1,570,888 and $6,363,794 for the nine months ending September 30, 2012 and 2011, respectively.

Net cash provided by (used in) investing activities was $(60,000,693) and $18,630585 for the nine month period ending September 30, 2012 and 2011, respectively.  During the first nine months of 2012, more emphasis was placed on the sale of U.S. treasury holdings and re-deploying the cash through the purchase of BBB and BB rated corporate bonds.

Net cash provided by (used in) financing activities was $(158,804) and $875,355 for the nine month period ending September 30, 2012 and 2011, respectively.

At September 30, 2012, the Company had $8,115,439 of debt outstanding.  At December 31, 2011, the Company had $9,531,645 of debt outstanding.  The debt is primarily attributable to the acquisition of ACAP at the end of 2006 and the borrowings on the line of credit to purchase investments.

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.  At September 30, 2012, substantially all of the consolidated shareholders equity represents net assets of its subsidiaries.  The Company's insurance subsidiary has maintained adequate statutory capital and surplus.  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.  No dividends were paid to shareholders in 2011 or the first nine months of 2012.

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.  During the first nine months of 2012, UG paid UTG ordinary dividends of $1,988,722. UTG used the dividends to pay off a portion of its long-term debt and line of credit.

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


ITEM 4.  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.
 

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

NONE

ITEM 1A.  RISK FACTORS

NONE

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

NONE

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

NONE

ITEM 4.  MINE SAFETY DISCLOSURES

NONE

ITEM 5.  OTHER INFORMATION

NONE

ITEM 6.  EXHIBITS

*31.1
Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
*31.2
Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
*32.1
Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
*32.2
Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
**101.INS
XBRL Instance Document
 
**101.SCH
XBRL Taxonomy Extension Scheme Document
 
**101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
**101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
**101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
**101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document


 

SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


UTG, INC.
(Registrant)


Date:
November 9, 2012
 
By
/s/ James P. Rousey
 
 
 
 
James P. Rousey
 
 
 
 
President and Director








Date:
November 9, 2012
 
By
/s/ Theodore C. Miller
 
 
 
 
Theodore C. Miller
 
 
 
 
Senior Vice President
 
 
 
 
   and Chief Financial Officer


 
EXHIBIT INDEX



Exhibit Number
Description


*31.1
Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
*31.2
Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
*32.1
Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
*32.2
Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
**101.INS
XBRL Instance Document
 
**101.SCH
XBRL Taxonomy Extension Scheme Document
 
**101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
 
**101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
 
**101.LAB
XBRL Taxonomy Extension Label Linkbase Document
 
**101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.