UTG INC - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

☐	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. 000-16867

	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.)

	205 North Depot Street
	Stanford, KY 40484
	(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 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 ⌧ No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ⌧ No □

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

Large accelerated filer □	Accelerated filer □

Non-accelerated filer □	Smaller reporting company ☒

	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

The number of shares outstanding of the registrant’s common stock as of October 31, 2023 was 3,163,446.

UTG, Inc.

(The “Company”)

TABLE OF CONTENTS

Part I. Financial Information	4
Item 1. Financial Statements	4
Condensed Consolidated Balance Sheets	4
Condensed Consolidated Statements of Operations	5
Condensed Consolidated Statements of Comprehensive Income (Loss)	6
Condensed Consolidated Statements of Shareholders’ Equity	7
Condensed Consolidated Statements of Cash Flows	9
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 4. Controls and Procedures	33
Part II. Other Information	33
Item 1. Legal Proceedings	33
Item 1A. Risk Factors	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	33
Item 4. Mine Safety Disclosures	33
Item 5. Other Information	33
Item 6. Exhibits	33
Signatures	34

Part 1. Financial Information.

Item 1. Financial Statements.

UTG, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

	September 30, 2023			December 31, 2022*
ASSETS
Investments:
Investments, available for sale:
Fixed maturities, at fair value (amortized cost $113,208,324 and $117,279,820)	$	101,674,112		$	108,313,059
Equity securities, at fair value (cost $80,536,585 and $77,015,688)		144,207,758			150,053,686
Equity securities, at cost		15,683,343			15,683,343
Mortgage loans on real estate at amortized cost		14,785,687			30,698,694
Investment real estate		31,609,218			34,934,352
Notes receivable		13,182,860			14,424,127
Policy loans		6,160,290			6,567,434
Short-term investments		23,393,115			3,596,941
Total investments		350,696,383			364,271,636

Cash and cash equivalents		27,565,435			45,290,385
Accrued investment income		1,238,050			1,371,677
Reinsurance receivables:
Future policy benefits		24,006,478			24,318,030
Policy claims and other benefits		4,084,730			4,638,857
Cost of insurance acquired		2,202,210			2,698,153
Income tax receivable		2,422,190			0
Other assets		2,894,400			4,945,627
Total assets	$	415,109,876		$	447,534,365

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Future policyholder benefits	$	225,228,358		$	229,582,664
Policy claims and benefits payable		3,343,051			4,072,879
Other policyholder funds		297,328			318,096
Dividend and endowment accumulations		14,726,171			14,802,746
Income taxes payable		0			4,189,081
Deferred income taxes		10,476,186			11,582,138
Notes payable		0			19,000,000
Other liabilities		7,152,998			5,958,385
Total liabilities		261,224,092			289,505,989

Shareholders' equity:
Common stock - no par value, stated value $0.001 per share. Authorized 7,000,000 shares - 3,164,857 and 3,164,809 shares outstanding		3,167			3,166
Additional paid-in capital		32,603,313			32,693,972
Retained earnings		129,877,197			131,989,352
Accumulated other comprehensive income (loss)		(9,139,871	)		(7,111,586	)
Total UTG shareholders' equity		153,343,806			157,574,904
Noncontrolling interests		541,978			453,472
Total shareholders' equity		153,885,784			158,028,376
Total liabilities and shareholders' equity	$	415,109,876		$	447,534,365

* Balance sheet audited at December 31, 2022.

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2023			2022			2023			2022
Revenue:
Premiums and policy fees	$	1,855,251		$	2,025,092		$	5,999,868		$	6,333,796
Ceded reinsurance premiums and policy fees		(601,994	)		(676,460	)		(1,926,975	)		(2,044,259	)
Net investment income		3,432,684			6,266,722			9,994,645			15,166,276
Other income		69,901			88,035			176,719			243,071
Revenue before net investment gains (losses)		4,755,842			7,703,389			14,244,257			19,698,884
Net investment gains (losses):
Other realized investment gains, net		7,938,232			1,900,458			8,973,842			6,759,716
Change in fair value of equity securities		(23,403	)		7,097,738			(7,209,399	)		14,462,029
Total net investment gains (losses)		7,914,829			8,998,196			1,764,443			21,221,745
Total revenue		12,670,671			16,701,585			16,008,700			40,920,629

Benefits and other expenses:
Benefits, claims and settlement expenses:
Life		3,773,579			3,343,438			11,922,019			11,613,356
Ceded reinsurance benefits and claims		(461,207	)		(486,899	)		(1,958,223	)		(1,228,489	)
Annuity		259,299			252,079			768,742			771,309
Dividends to policyholders		61,770			63,632			230,472			236,724
Commissions and amortization of deferred policy acquisition costs		(30,318	)		(34,352	)		(84,472	)		(86,311	)
Amortization of cost of insurance acquired		165,304			172,087			495,943			516,261
Operating expenses		3,136,691			2,733,470			7,444,106			7,551,131
Interest expense		0			36,748			16,820			72,028
Total benefits and other expenses		6,905,118			6,080,203			18,835,407			19,446,009

Income (loss) before income taxes		5,765,553			10,621,382			(2,826,707	)		21,474,620
Income tax expense (benefit)		531,882			2,542,701			(1,257,308	)		4,915,001

Net income (loss)		5,233,671			8,078,681			(1,569,399	)		16,559,619

Net income attributable to noncontrolling interests		(28,994	)		(26,825	)		(88,506	)		(80,646	)

Net income (loss) attributable to common shareholders	$	5,204,677		$	8,051,856		$	(1,657,905	)	$	16,478,973

Amounts attributable to common shareholders
Basic income (loss) per share	$	1.64		$	2.54		$	(0.52	)	$	5.20

Diluted income (loss) per share	$	1.64		$	2.54		$	(0.52	)	$	5.20

Basic weighted average shares outstanding		3,169,466			3,165,842			3,181,306			3,169,704

Diluted weighted average shares outstanding		3,169,466			3,165,842			3,181,306			3,169,704

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2023			2022			2023			2022
Net income (loss)	$	5,233,671		$	8,078,681		$	(1,569,399	)	$	16,559,619

Other comprehensive income (loss):

Unrealized holding gains (losses) arising during period, pre-tax		(3,606,251	)		(7,122,856	)		(2,521,367	)		(23,436,431	)
Tax (expense) benefit on unrealized holding gains (losses) arising during the period		759,387			1,495,712			539,165			4,921,563
Unrealized holding gains (losses) arising during period, net of tax		(2,846,864	)		(5,627,144	)		(1,982,202	)		(18,514,868	)

Less reclassification adjustment for (gains) losses included in net income		(12,500	)		0			(58,333	)		527
Tax expense (benefit) for gains included in net income (loss)		2,625			0			12,250			(111	)
Reclassification adjustment for (gains) losses included in net income, net of tax		(9,875	)		0			(46,083	)		416

Subtotal: Other comprehensive income (loss), net of tax		(2,856,739	)		(5,627,144	)		(2,028,285	)		(18,514,452	)

Comprehensive income (loss)		2,376,932			2,451,537			(3,597,684	)		(1,954,833	)

Less comprehensive income attributable to noncontrolling interests		(28,994	)		(26,825	)		(88,506	)		(80,646	)

Comprehensive income (loss) attributable to UTG, Inc.	$	2,347,938		$	2,424,712		$	(3,686,190	)	$	(2,035,479	)

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended September 30, 2023	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total Shareholders’ Equity

Balance at June 30, 2023	$	3,184		$	33,136,764		$	124,672,520	$	(6,283,132	)	$	512,984	$	152,042,320
Common stock issued during year		0			0			0		0			0		0
Treasury shares acquired		(17	)		(533,451	)		0		0			0		(533,468	)
Net income (loss) attributable to common shareholders		0			0			5,204,677		0			0		5,204,677
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		(2,856,739	)		0		(2,856,739	)
Contributions		0			0			0		0			0		0
Distributions		0			0			0		0			0		0
Gain attributable to noncontrolling interest		0			0			0		0			28,994		28,994
Balance at September 30, 2023	$	3,167		$	32,603,313		$	129,877,197	$	(9,139,871	)	$	541,978	$	153,885,784

Nine Months Ended September 30, 2023	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total Shareholders’ Equity

Balance at December 31, 2022	$	3,166		$	32,693,972		$	131,989,352		$	(7,111,586	)	$	453,472	$	158,028,376
Adoption of new accounting standard		0			0			(454,250	)		0			0		(454,250	)
		3,166			32,693,972			131,535,102			(7,111,586	)		453,472		157,574,126
Common stock issued during year		27			674,363			0			0			0		674,390
Treasury shares acquired		(26	)		(765,022	)		0			0			0		(765,048	)
Net income (loss) attributable to common shareholders		0			0			(1,657,905	)		0			0		(1,657,905	)
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0			(2,028,285	)		0		(2,028,285	)
Contributions		0			0			0			0			0		0
Distributions		0			0			0			0			0		0
Gain attributable to noncontrolling interest		0			0			0			0			88,506		88,506
Balance at September 30, 2023	$	3,167		$	32,603,313		$	129,877,197		$	(9,139,871	)	$	541,978	$	153,885,784

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended September 30, 2022	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total Shareholders’ Equity

Balance at June 30, 2022	$	3,170		$	32,854,050		$	106,158,464	$	(2,634,157	)	$	530,976		$	136,912,503
Common stock issued during year		0			0			0		0			0			0
Treasury shares acquired		(6	)		(191,893	)		0		0			0			(191,899	)
Net income attributable to common shareholders		0			0			8,051,856		0			0			8,051,856
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		(5,627,144	)		0			(5,627,144	)
Contributions		0			0			0		0			0			0
Distributions		0			0			0		0			(600	)		(600	)
Gain attributable to noncontrolling interest		0			0			0		0			26,825			26,825
Balance at September 30, 2022	$	3,164		$	32,662,157		$	114,210,320	$	(8,261,301	)	$	557,201		$	139,171,541

Nine Months Ended September 30, 2022	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest		Total Shareholders’ Equity

Balance at December 31, 2021	$	3,167		$	32,780,587		$	97,731,347	$	10,253,151		$	476,555	$	141,244,807
Common stock issued during year		18			486,779			0		0			0		486,797
Treasury shares acquired		(21	)		(605,209	)		0		0			0		(605,230	)
Net income attributable to common shareholders		0			0			16,478,973		0			0		16,478,973
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		(18,514,452	)		0		(18,514,452	)
Contributions		0			0			0		0			0		0
Distributions		0			0			0		0			0		0
Gain attributable to noncontrolling interest		0			0			0		0			80,646		80,646
Balance at September 30, 2022	$	3,164		$	32,662,157		$	114,210,320	$	(8,261,301	)	$	557,201	$	139,171,541

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	September 30,			September 30,
	2023			2022
Cash flows from operating activities:
Net income (loss)	$	(1,569,399	)	$	16,559,619
Adjustments to reconcile net income to net cash used in operating activities:
Amortization (accretion) of investments		(149,951	)		24,741
Realized investment gains, net		(8,973,842	)		(6,759,716	)
Change in fair value of equity securities		7,209,399			(14,462,029	)
Realized trading losses included in income		0			13,283
Amortization of cost of insurance acquired		495,943			516,261
Depreciation and depletion		447,698			1,635,706
Stock-based compensation		674,390			486,797
Charges for mortality and administration of universal life and annuity products		(4,288,294	)		(4,480,817	)
Interest credited to account balances		2,741,851			2,831,885
Change in accrued investment income		133,627			31,527
Change in reinsurance receivables		865,679			827,435
Change in policy liabilities and accruals		(3,464,745	)		(3,074,992	)
Change in income taxes receivable (payable)		(6,611,271	)		1,378,658
Change in other assets and liabilities, net		2,764,428			4,194,376
Net cash used in operating activities		(9,724,487	)		(277,266	)

Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities available for sale		4,058,333			8,628,136
Equity securities		6,861,942			10,735,510
Trading securities		0			17,983
Mortgage loans		17,601,131			1,443,119
Real estate		15,533,712			11,387,025
Notes receivable		4,650,509			3,984,614
Policy loans		1,106,310			903,696
Short-term investments		9,740,815			0
Total proceeds from investments sold and matured		59,552,752			37,100,083
Cost of investments acquired:
Fixed maturities available for sale		0			(1,112,505	)
Equity securities		(7,874,161	)		(12,540,638	)
Trading securities		0			(32,382	)
Mortgage loans		(2,050,124	)		(1,755,496	)
Real estate		(4,115,151	)		(4,236,603	)
Notes receivable		(3,579,241	)		(5,870,657	)
Policy loans		(699,167	)		(728,348	)
Short-term investments		(29,300,034	)		0
Total cost of investments acquired		(47,617,878	)		(26,276,629	)
Net cash provided by investing activities		11,934,874			10,823,454

Cash flows from financing activities:
Policyholder contract deposits		3,144,884			3,455,489
Policyholder contract withdrawals		(3,315,173	)		(3,400,630	)
Proceeds from notes payable/line of credit		2,500,000			19,500,000
Payments of principal on notes payable/line of credit		(21,500,000	)		(35,500,000	)
Purchase of treasury stock		(765,048	)		(605,230	)
Non controlling contributions (distributions) of consolidated subsidiary		0			0
Net cash used in financing activities		(19,935,337	)		(16,550,371	)
Net decrease in cash and cash equivalents		(17,724,950	)		(6,004,183	)
Cash and cash equivalents at beginning of period		45,290,385			30,787,278
Cash and cash equivalents at end of period	$	27,565,435		$	24,783,095

See accompanying notes.

UTG, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet as of September 30, 2023, which has been derived from audited consolidated 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, 2022. The Company’s results of operations for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 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 Chairman of the Board of Directors, Chief Executive Officer, President, and a Director of UTG and is currently UTG’s largest shareholder through his ownership control of FSF, FSBI and affiliates. At September 30, 2023, Mr. Correll owns or controls directly and indirectly approximately 65.79% of UTG’s outstanding stock.

UTG’s life insurance subsidiary, Universal Guaranty Life Insurance Company (“UG”), has several wholly-owned and majority-owned subsidiaries. The subsidiaries were formed to hold certain real estate investments. The real estate investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG.

Certain amounts in prior periods have been reclassified to conform with the current period presentation.

Note 2 – Recently Issued Accounting Standards

In the first quarter of 2023, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposure such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

The Company adopted ASC 326 and all related subsequent amendments thereto using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposure. The transition adjustment of the adoption of CECL included an increase in the allowance for credit losses on loans of $540,000, which is presented as a reduction to net loans outstanding, and an increase in the allowance for credit losses on unfunded commitments of $35,000, which is recorded within other liabilities. The Company recorded a net decrease to retained earnings of $454,250 as of January 1, 2023 for the cumulative effect of adopting CECL, which reflects the transition adjustments noted above, net of the applicable deferred tax assets recorded. Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards ("Incurred Loss").

The updated guidance also amended the current other-than-temporary model for available-for-sale securities and requires the recognition of impairments relating to credit losses through an allowance account and limits the amount of credit loss to the difference between a security’s amortized costs basis and its fair value. In addition, the length of time a security has been in an unrealized loss position will no longer impact the determination of whether a credit loss exists.

The following are changes to the Company’s Significant Accounting Policies as result of the adoption of ASU No. 2016-13:

Fixed maturity securities comprised of bonds are classified as available-for-sale and are carried at fair value with unrealized gains and losses, net of applicable income taxes, reported in accumulated other comprehensive income. The amortized cost of fixed maturity securities available-for-sale is adjusted for amortization of premium and accretion of discount to maturity. The amortized cost of fixed maturity securities available-for-sale are written down to fair value when a decline is considered to be other-than-temporary.

The Company evaluates the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline in value is the result of a credit loss or other factors. An allowance for credit losses is recorded against available-for-sale securities to reflect the amount of an unrealized loss attributed to credit. This impairment is limited by the amount the fair value is less than the amortized cost basis. Any remaining unrealized loss is recognized in other comprehensive income (loss) with no change to the cost basis of the security. This determination involves a degree of uncertainty. Changes in the allowance for credit losses are recognized in earnings.

The assessment and determination of whether or not a credit loss exists is based on consideration of the cash flows expected to be collected from the fixed maturity security. The Company develops those expectations after considering various factors such as agency ratings, the financial condition of the issuer or underlying obligors, payment history, payment structure of the security, industry and market conditions, underlying collateral, and other factors that may be relevant based on the facts and circumstances pertaining to individual securities.

If the Company intends to sell the fixed maturity or will be more likely than not required to sell the fixed maturity security before recovery of the amortized cost basis, then any allowance for credit losses, if previously recorded, is written off and the fixed maturity security’s amortized cost is written down to the security’s fair value as of the reporting dates with any incremental impairment recorded as a charge to noninterest income.

Prior to 2023, the Company evaluated the difference between the cost or amortized cost and estimated fair value of its fixed maturity securities to determine whether any decline is value was other-than-temporary in nature. That determination involved a degree of uncertainty. If a decline in the fair value of a security was determined to be temporary, the decline was recorded as an unrealized loss in shareholders’ equity. If a decline in a security’s fair value is considered to be other-than-temporary, the Company then determined the proper treatment for the other-than-temporary impairment. The amount of any other-than-temporary impairment related to a credit loss was recognized in earnings and reflected as a reduction in the cost basis of the security; and the amount of any other-than-temporary impairment related to other factors is recognized in other comprehensive income (loss) with no change to the cost basis of the security. If an other-than-temporary impairment related to a credit loss occurs with respect to a bond, the Company amortized the reduced book value back to the security’s expected recovery value over the remaining term of the bond. The Company continued to review the security for further impairment that would prompt another write-down in the value.

Mortgage loans are carried at unpaid balances, net of unamortized premium or discount. This measurement of mortgage loans on an amortized cost basis reduced by an allowance for credit losses representing a valuation allowance that is deducted from the amortized cost basis of mortgage loans to present the net carrying value at the amount expected to be collected on the mortgage loans.

Notes receivable are carried at unpaid balances, net of unamortized premium or discount. This measurement of notes receivable on an amortized cost basis reduced by an allowance for credit losses representing a valuation allowance that is deducted from the amortized cost basis of notes receivable to present the net carrying value at the amount expected to be collected on the notes receivable.

The Statement of Operations reflects the measurement of credit losses for newly recognized mortgage loans and notes receivable as well as the expected increases or decreases of expected credit losses that have taken place during the period. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the collectability of the reported mortgage loan balances. The Company uses judgment in determining the relevant information and estimation methods that are appropriate in establishing the valuation allowance for credit losses.The allowance for credit losses for mortgage loans and notes receivable with a more-than-insignificant amount of credit determination since origination is determined and the initial allowance for credit losses should be added to the purchase price of the mortgage loans rather than being reported as a credit loss expense.

While the Company utilizes its best judgment and information available, the ultimate adequacy of this allowance is dependent upon a variety of factors beyond our control, including the performance of the mortgage loan and notes receivable portfolios, the economy, and interest rates. The allowance for possible loan losses consists of specific valuation allowances established for probable losses on specific loans and a portfolio reserve for probably incurred but not specifically identified loans.

Note 3 – Investments

Available for Sale Securities – Fixed Maturity 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, 2023	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	16,317,458	$	0	$	(1,044,198	)	$	15,273,260
U.S. special revenue and assessments		7,530,519		0		(487,454	)		7,043,065
All other corporate bonds		89,360,347		37,216		(10,039,776	)		79,357,787
	$	113,208,324	$	37,216	$	(11,571,428	)	$	101,674,112

December 31, 2022	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	18,315,321	$	0	$	(1,104,146	)	$	17,211,175
U.S. special revenue and assessments		7,535,018		0		(335,918	)		7,199,100
All other corporate bonds		91,429,481		65,529		(7,592,226	)		83,902,784
	$	117,279,820	$	65,529	$	(9,032,290	)	$	108,313,059

The amortized cost and estimated market value of debt securities at September 30, 2023, 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, 2023	Amortized Cost		Fair Value
Due in one year or less	$	8,499,821	$	8,429,455
Due after one year through five years		51,497,869		48,657,990
Due after five years through ten years		4,182,082		3,988,524
Due after ten years		21,892,608		18,524,135
Fixed maturities with no single maturity date		27,135,944		22,074,008
Total	$	113,208,324	$	101,674,112

The fair value of investments with sustained gross unrealized losses are as follows:

September 30, 2023	Less than 12 months					12 months or longer					Total
	Fair value		Unrealized losses			Fair value		Unrealized losses			Fair value		Unrealized losses
U.S. Government and govt. agencies and authorities	$	1,476,590		(24,645	)		13,796,670	$	(1,019,553	)		15,273,260	$	(1,044,198	)
U.S. Special Revenue and Assessments		0		0			7,043,065		(487,454	)		7,043,065		(487,454	)
All other corporate bonds		7,585,524		(210,980	)		70,741,578		(9,828,796	)		78,327,102		(10,039,776	)
Total fixed maturities	$	9,062,114		(235,625	)		91,581,313		(11,335,803	)		100,643,427	$	(11,571,428	)

December 31, 2022	Less than 12 months					12 months or longer				Total
	Fair value		Unrealized losses			Fair value		Unrealized losses		Fair value		Unrealized losses
U.S. Government and govt. agencies and authorities	$	17,211,175		(1,104,146	)		0	$	0		17,211,175	$	(1,104,146	)
U.S. special revenue and assessments		7,199,100		(335,918	)		0		0		7,199,100		(335,918	)
All other corporate bonds		80,144,564		(7,592,226	)		0		0		80,144,564		(7,592,226	)
Total fixed maturities	$	104,554,839		(9,032,290	)		0	$	0		104,554,839	$	(9,032,290	)

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, 2023
Fixed maturities		7		47		54
As of December 31, 2022
Fixed maturities		57		0		57

Substantially all of the unrealized losses on fixed maturities at September 30, 2023 and December 31, 2022 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. Based upon Management’s review of the fixed maturity available-for-sale portfolio, an allowance for credit losses is not deemed necessary as of September 30, 2023.

There were no impairment losses recognized by the Company during the nine moths ended September 30, 2023. Management believes that the Company will fully recover its cost basis in the securities held as of September 30, 2023, and Management does not have the intent to sell nor is it more likely than not the Company will be required to sell such securities until they recover or mature.

Net unrealized losses included in other comprehensive income (loss) for investments classifies as available-for-sale, net of the effect of deferred income taxes, assuming that the depreciation had been realized as of September 30, 2023 and December 31, 2022:

	September 30, 2023			December 31, 2022
Unrealized appreciation (depreciation) on available-for-sale securities	$	(11,534,212	)	$	(8,996,761	)
Deferred income taxes		2,422,185			1,889,320
Net unrealized appreciation (depreciation) on available-for-sale securities	$	(9,112,027	)	$	(7,107,441	)

Net Investment Gains (Losses)

The following table presents net investment gains (losses) and the change in net unrealized gains (losses) on investments.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Realized gains:
Sales of fixed maturities	$	12,500		$	0		$	58,333		$	4,683
Sales of equity securities		110,742			1,485,872			359,216			1,883,453
Sales of real estate		7,815,364			449,133			8,541,124			5,020,973
Sales of short-term investments		0			0			23,509			0
Total realized gains		7,938,606			1,935,005			8,982,182			6,909,109
Realized losses:
Sales of fixed maturities		0			0			0			(5,210	)
Sales of equity securities		0			0			(7,966	)		(109,636	)
Sales of real estate		0			(34,547	)		0			(34,547	)
Sales of short-term investments		(374	)		0			(374	)		0
Total realized losses		(374	)		(34,547	)		(8,340	)		(149,393	)
Net realized investment gains (losses)		7,938,232			1,900,458			8,973,842			6,759,716
Change in fair value of equity securities:
Change in fair value of equity securities held at the end of the period		(23,403	)		7,097,738			(7,209,399	)		14,462,029
Change in fair value of equity securities		(23,403	)		7,097,738			(7,209,399	)		14,462,029
Net investment gains (losses)	$	7,914,829		$	8,998,196		$	1,764,443		$	21,221,745
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive income:
Fixed maturities	$	(3,606,251	)	$	(7,122,856	)	$	(2,521,367	)	$	(23,436,431	)
Net increase (decrease)	$	(3,606,251	)	$	(7,122,856	)	$	(2,521,367	)	$	(23,436,431	)

Cost Method Investments

The Company held equity investments with an aggregate cost of $15,683,343 at September 30, 2023 and December 31, 2022. These equity investments were not reported at fair value because it is not practicable to estimate their fair values due to insufficient information being available. Management did not identify any events or changes in circumstances that might have a significant adverse effect on the reported value of those investments. Based on Management’s evaluation of the expected cash flow of the investments, and the Company’s ability and intent to hold the investments for a reasonable period of time, the Company does not deem an other-than-temporary impairment necessary at September 30, 2023.

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 Consolidated Statements of Operations. Trading Securities included exchange-traded equities and exchange-traded options. Trading securities carried as liabilities were 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, 2023 was $0. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2022 was $0. Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only.

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

	Three Months Ended
	September 30,
	2023		2022
Net unrealized gains (losses)	$	0	$	0
Net realized gains (losses)		0		0
Net unrealized and realized gains (losses)	$	0	$	0

	Nine Months Ended
	September 30,
	2023		2022
Net unrealized gains (losses)	$	0	$	0
Net realized gains (losses)		0		(13,283	)
Net unrealized and realized gains (losses)	$	0	$	(13,283	)

Mortgage Loans

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 nine months ended September 30, 2023 and 2022, the Company acquired $2,050,124 and $1,755,496 in mortgage loans, respectively. FSNB services the majority of the Company’s mortgage loan portfolio. The Company pays FSNB a 0.25% servicing fee on these loans and a one-time fee at loan origination of 0.50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan.

During 2023 and 2022, the maximum and minimum lending rates for the mortgage loan portfolio were:

	2023						2022
	Maximum rate			Minimum rate			Maximum rate			Minimum rate
Farm Loans		5.00	%		5.00	%		5.00	%		4.50	%
Commercial Loans		8.75	%		4.00	%		7.00	%		4.00	%
Residential Loans		5.00	%		4.15	%		5.00	%		4.15	%

Most mortgage loans are first position loans. Loans issued are generally limited to no more than 80% of the appraised value of the property.

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. 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.

The following is a summary of the mortgage loans outstanding and the related allowance for credit losses:

	September 30, 2023			December 31, 2022
Farm	$	338,207		$	383,278
Commercial		14,610,583			30,102,775
Residential		206,897			212,641
Total mortgage loans		15,155,687			30,698,694
Less allowance for credit losses		(370,000	)		0
Total mortgage loans, net	$	14,785,687		$	30,698,694

There were no past due loans as of September 30, 2023 and December 31, 2022.

Notes Receivable

Notes receivable represent collateral loans and promissory notes issued by the Company and are reported at their unpaid principal balances, adjusted for valuation allowances. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. During the nine months ended September 30, 2023 and 2022 the Company acquired $3,579,241 and $5,870,657 of notes receivable, respectively.

Before a new note is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. Once the note is approved, the Company directly funds the note to the borrower. Several of the notes have participation agreements in place, whereas the Company has reduced its investment in the note receivable by participating a portion of the note to a third party.

Similar to the mortgage loans, FSNB services the notes receivable. The Company, and the participants in the notes, share in the risk of loss associated with the terms of the note with the borrower, based upon their ownership percentage in the note. The Company has in place a monitoring system to provide Management with information regarding potential troubled loans.

The following is a summary of the notes receivable outstanding and the related allowance for credit losses:

	September 30, 2023			December 31, 2022
Notes receivable	$	13,352,860		$	14,424,127
Less allowance for credit losses		(170,000	)		0
Total notes receivable, net	$	13,182,860		$	14,424,127

Allowance for Credit Losses - Loans

The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when Management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The allowance for credit losses represents Management's estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by Management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.

The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments - mortgage loans on real estate and notes receivable.

The allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for risk tolerance, loan review and audit results, asset quality and portfolio trends, industry concentrations, external factors and economic conditions.

Loans that do not share risk characteristics are evaluated on an individual bases, When Management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate.

Allowance for Credit Losses - Unfunded Commitments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.

The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company's income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well a any third-party guarantees. The allowance for unfunded commitments is included in other liabilities on the Company's consolidated balance sheets.

Investment Real Estate

Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis for financial reporting purposes using estimated useful lives of 3 to 30 years. The Company periodically reviews its real estate held-for-investment for impairment and tests for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. During the nine months ended September 30, 2023, no impairments were recognized on the investment real estate.

Note 4 - Fair Value Measurements of the Condensed Consolidated Financial Statements provides further information regarding the fair value of financial instruments that are not measured at fair value. The investment real estate owned by the Company is included in this portion of the Note 4 - Fair Value Measurements disclosure.

The following table provides an allocation of the Company’s investment real estate by type:

	September 30, 2023		December 31, 2022
Raw land	$	7,471,926	$	11,634,472
Commercial		5,847,661		5,124,847
Residential		4,738,882		3,402,502
Land, minerals and royalty interests		13,550,749		14,772,531
Total investment real estate	$	31,609,218	$	34,934,352

The Company’s investment real estate portfolio includes ownership in oil and gas royalties. As of September 30, 2023 and December 31, 2022, investments in oil and gas royalties represented 43% and 42%, respectively, of the total investment real estate portfolio. See Note 9 – Concentrations of Credit Risk of the Condensed Consolidated Financial Statements for additional information regarding the allocation of the oil and gas investment real estate holdings by industry type.

Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2023 and 2022, the Company acquired $4,115,151 and $4,236,603 of investment real estate, respectively.

Short-Term Investments

Short-term investments have remaining maturities exceeding three months and under 12 months at the time of purchase and are stated at amortized cost, which approximates fair value. The short-term investments consist of United States Treasury securities.

During 2023 and 2022, the Company acquired $29,300,034 and $0, respectively, in short-term investments.

Note 4 – Fair Value Measurements

Fair Value Measurements on a Recurring Basis

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three levels based on the observability of valuation inputs:

Level 1 – Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Valuation methodologies include quoted prices for similar assets and liabilities in active markets or quoted prices for identical, quoted prices for identical or similar assets or liabilities in markets that are not active, or 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.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

September 30, 2023	Level 1		Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	15,273,260	$	0	$	0	$	0	$	15,273,260
U.S. special revenue and assessments		0		7,043,065		0		0		7,043,065
Corporate securities		0		79,357,787		0		0		79,357,787
Total fixed maturities		15,273,260		86,400,852		0		0		101,674,112
Equity securities:
Common stocks		38,069,750		5,435,800		6,840,062		92,615,146		142,960,758
Preferred stocks		0		0		1,247,000		0		1,247,000
Total equity securities		38,069,750		5,435,800		8,087,062		92,615,146		144,207,758
Total financial assets	$	53,343,010	$	91,836,652	$	8,087,062	$	92,615,146	$	245,881,870

December 31, 2022	Level 1		Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	17,211,175	$	0	$	0	$	0	$	17,211,175
U.S. special revenue and assessments		0		7,199,100		0		0		7,199,100
Corporate securities		0		83,902,784		0		0		83,902,784
Total fixed maturities		17,211,175		91,101,884		0		0		108,313,059
Equity securities:
Common stocks		45,999,477		6,651,800		6,720,643		89,434,766		148,806,686
Preferred stocks		0		0		1,247,000		0		1,247,000
Total equity securities		45,999,477		6,651,800		7,967,643		89,434,766		150,053,686
Total financial assets	$	63,210,652	$	97,753,684	$	7,967,643	$	89,434,766	$	258,366,745

The following is a description of the valuation techniques used the by Company to measure assets reported at fair value on a recurring basis. There have been no significant changes in the valuation techniques utilized by the Company for the nine months ended September 30, 2023.

Available for Sale Securities

Securities classified as available for sale are recorded at fair value on a recurring basis. Securities classified as Level 1 utilized fair value measurements based upon quoted market prices, when available. If quoted market prices are not available, the Company obtains fair value measurements from recently executed transactions, market price quotations, benchmark yields and issuer spreads to value Level 2 securities. In certain instances where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements are estimated on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standard generally accepted in the United States.

Equity Securities at Fair Value

Equity securities consist of common stocks mainly in private equity investments, financial institutions and publicly traded corporations. Equity securities for which there is sufficient market data are categorized as Level 1 or 2 in the fair value hierarchy. For the equity securities in which quoted market prices are not available, the Company uses industry standard pricing methodologies, including discounted cash flow models that may incorporate various inputs such as payment expectations, risk of the investment, market data, and health of the underlying company. The inputs are based upon Management’s assumptions and available market information. When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy.

Equity Securities at Net Asset Value

Certain equity securities carried at fair value, which do not have readily determinable fair values, use net asset value (“NAV”) and are excluded from the fair value hierarchy. These investments are generally not readily redeemable by the investee. See Note 7 – Commitments and Contingencies for additional information regarding unfunded commitments.

Trading Securities

Trading securities are recorded at fair value. They are classified as Level 1 and utilize fair value measurements based upon quoted market prices.

Change in Recurring Fair Value Measurements

The following table presents the changes in Level 3 equity securities measured at fair value on a recurring basis and equity securities measured at net asset value, and the realized and unrealized gains (losses) related to the equity securities.

	Equity Securities at Fair Value			Equity Securities at Net Asset Value			Total
Balance at December 31, 2022	$	7,967,643		$	89,434,766		$	97,402,409
Realized gains (losses)		0			95,606			95,606
Unrealized gains (losses)		(68,706	)		(1,485,604	)		(1,554,310	)
Purchases		354,375			5,173,181			5,527,556
Sales		(166,250	)		(602,803	)		(769,053	)
Balance at September 30, 2023	$	8,087,062		$	92,615,146		$	100,702,208

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at September 30, 2023 and December 31, 2022 may include changes in fair value that were attributable to both observable and unobservable inputs.

Quantitative Information About Level 3 Fair Value Measurements

The following table presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and include only those instruments for which information about the inputs is reasonably available to the Company, such as data from independent third-party valuation service providers and from internal valuation models.

Financial Assets	Fair Value at September 30, 2023		Fair Value at December 31, 2022		Valuation Technique
Equities	$	92,615,146	$	89,434,766	Net Asset Value
Equities		8,087,062		7,967,643	Pricing Model
Total	$	100,702,208	$	97,402,409

Uncertainty of Fair Value Measurements

The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements of these assets as of the reporting date.

Equity Securities at Fair Value

Fair market value for equity securities is derived based on unobservable inputs, such as projected normalized revenues and industry standard multiples of revenue for the equity securities valued using pricing model. Significant increases (decreases) in either of those inputs in isolation would result in a significantly higher (lower) fair value measurement.

Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share

Investment Company	Fair Value at September 30, 2023		Unfunded Commitments		Redemption Frequency		Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	38,234,062	$	0	Quarterly		45 days
Non-Redeemable		54,381,084		6,298,697		n/a		n/a
Total	$	92,615,146	$	6,298,697

Investment Company	Fair Value at December 31, 2022		Unfunded Commitments		Redemption Frequency		Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	43,724,562	$	0	Quarterly		45 days
Non-Redeemable		45,710,204		7,779,867		n/a		n/a
Total	$	89,434,766	$	7,779,867

Fair Value Measurements on a Nonrecurring Basis

Certain assets are not carried at fair value on a recurring basis. 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 Company did not recognize any re-measurements or impairments of financial instruments at September 30, 2023 or December 31, 2022.

Fair Value Information About Financial Instruments Not Measured at Fair Value

The following table presents the carrying amount and estimated fair values of the Company’s financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

	Carrying		Estimated
September 30, 2023	Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Preferred stock, at cost	$	15,683,343		15,683,343		0		0		15,683,343
Mortgage loans on real estate		14,785,687		14,007,952		0		0		14,007,952
Investment real estate		31,609,218		78,305,554		0		0		78,305,554
Notes receivable		13,182,860		13,320,399		0		0		13,320,399
Policy loans		6,160,290		6,160,290		0		0		6,160,290

	Carrying		Estimated
December 31, 2022	Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Preferred stock, at cost	$	15,683,343		15,683,343		0		0		15,683,343
Mortgage loans on real estate		30,698,694		29,735,873		0		0		46,906,538
Investment real estate		34,934,352		92,425,241		0		0		92,425,241
Notes receivable		14,424,127		14,812,523		0		0		14,812,523
Policy loans		6,567,434		6,567,434		0		0		6,567,434
Liabilities
Notes payable		19,000,000		19,000,000		0		19,000,000		0

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 inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 3 within the fair value hierarchy.

Investment real estate is recorded at the lower of the net investment in the real estate 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. The inputs used to measure the fair value of our investment real estate are classified as Level 3 within the fair value hierarchy.

The fair values of notes receivable are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings. The inputs used to measure the fair value of the notes receivable are classified as Level 3 within the fair value hierarchy.

Policy loans are carried at the aggregate unpaid principal balances in the Condensed Consolidated Balance Sheets which approximate 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 inputs used to measure the fair value of our policy loans are classified as Level 3 within the fair value hierarchy.

The carrying value for notes payable is a reasonable estimate of fair value 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. The inputs used to measure the fair value of our notes payable are classified as Level 2 within the fair value hierarchy.

Note 5 – Credit Arrangements

Instrument	Issue Date	Maturity Date	Revolving Credit Limit		December 31, 2022		Borrowings	Repayments	September 30, 2023
Lines of Credit:
UTG	11/20/2013	11/20/2023	$	8,000,000		0	0	0	$	0
UG - CMA	10/21/2021	10/6/2023		25,000,000		19,000,000	2,500,000	21,500,000		0

The UTG line of credit carries interest at a fixed rate of 6.500% and is payable monthly. As collateral, UTG has pledged 100% of the common voting stock of its wholly owned subsidiary, Universal Guaranty Life Insurance Company. UTG is in the process of renewing this line of credit.

During October of 2023, the Federal Home Loan Bank approved UG’s Cash Management Advance Application (“CMA”). The CMA gives the Company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity. The Company has pledged bonds with a collateral lendable value of $18,946,634.

Note 6 – Shareholders’ Equity

Stock Repurchase Program – The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG’s common stock. At a meeting of the Board of Directors in March of 2022, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million of UTG’s common stock, for a total repurchase of up to $22 million of UTG’s common stock in the open market or in privately negotiated transactions. Company Management has broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. Open market purchases are made based on the last available market price but may be limited. During the nine months ended September 30, 2023, the Company repurchased 26,863 shares through the stock repurchase program for $765,048. Through September 30, 2023, UTG has spent $20,074,486 in the acquisition of 1,353,076 shares under this program.

During 2023, the Company issued 26,911 shares of stock to management and employees as compensation at a cost of $674,390. These awards are determined at the discretion of the Board of Directors.

Earnings Per Share Calculations

Earnings per share are based on the weighted average number of common shares outstanding during each period. For the nine months ended September 30, 2023 and 2022, diluted earnings per share were the same as basic earnings per share since the Company had no dilutive instruments outstanding.

Note 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 condensed consolidated financial statements, though the Company has no control over such assessments.

The following table represents the total funding commitments and the unfunded commitment as of September 30, 2023 related to certain investments:

	Total Funding Commitment		Unfunded Commitment
RLF III, LLC	$	4,000,000	$	398,120
Sovereign’s Capital, LP Fund I		500,000		13,000
Sovereign's Capital, LP Fund II		1,000,000		76,732
Sovereign's Capital, LP Fund III		3,000,000		505,453
Garden City Companies, LLC		2,000,000		510,546
Carrizo Springs Music, LLC		5,000,000		189,711
Legacy Venture X, LLC		3,000,000		1,350,000
QCC Investment Co., LLC		1,500,000		150,000
Sovereign's Capital Evergreen Fund I, LLC		3,000,000		4,062
Sovereign's Capital Lower Middle Market Fund II, LP		3,000,000		1,768,904
Elisha's Properties, LLC		1,096,750		491,823
Granite Shoals Music, LLC		6,500,000		5,633,332
Legacy Venture XI, LLC		2,000,000		1,920,000
Great American Media Group, LLC		4,000,000		4,000,000

During 2006, the Company committed to invest in RLF III, LLC (“RLF”), which makes land-based investments in undervalued assets. RLF makes capital calls as funds are needed for continued land purchases.

During 2012, the Company committed to invest in Sovereign’s Capital, LP Fund I (“Sovereign’s”), which invests in companies in emerging markets. Sovereign’s makes capital calls to investors as funds are needed.

During 2015, the Company committed to invest in Sovereign’s Capital, LP Fund II (“Sovereign’s II”), which invests in companies in emerging markets. Sovereign’s II makes capital calls to investors as funds are needed.

During 2018, the Company committed to invest in Sovereign’s Capital, LP Fund III (“Sovereign’s III”), which invests in companies in emerging markets. Sovereign’s III makes capital calls to investors as funds are needed.

During 2020, the Company committed to invest in Garden City Companies, LLC (“Garden City”), which invests primarily in companies in the health care, inspection/testing services and maintenance service arena. Garden City makes capital calls to investors as funds are needed.

During 2020, the Company committed to invest in Carrizo Springs Music, LLC (“Carrizo”), which invests in music royalties. Carrizo makes capital calls to its investors as funds are needed to acquire the royalty rights.

During 2020, the Company committed to invest in Legacy Venture X, LLC (“Legacy Venture X”), which is a fund of funds. Legacy Venture X makes capital calls to its investors as funds are needed.

During 2021, the Company committed to invest in QCC Investment Co., LLC (“QCC”). The funds are being utilized to purchase a manufacturing entity. QCC makes capital calls to its investors as funds are needed.

During 2021, the Company committed to invest in Sovereign's Capital Evergreen Fund I, LLC ("Evergreen"), which invests in companies in emerging markets. Evergreen makes capital calls to investors as funds are needed.

During 2022, the Company committed to invest in Sovereign's Capital Lower Middle Market Fund II, LP ("Sovereign's LMM"), which invests in companies in emerging markets. Sovereign's LMM makes capital calls to investors as funds are needed.

During 2022, the Company committed to invest in Elisha's Properties, LLC ("Elisha's"), which investment in real estate properties. Elisha's makes capital calls as funds are needed.

During 2022, the Company committed to invest in Granite Shoals Music, LLC (“Granite”), which invests in music royalties. Granite makes capital calls to its investors as funds are needed to acquire the royalty rights.

During 2022, the Company committed to invest in Legacy Venture XI, LLC (“Legacy Venture XI”), which is a fund of funds. Legacy Venture XI makes capital calls to its investors as funds are needed.

During 2023, the Company committed to fund a collateral loan for Great American Media Group, LLC ("GAMG"). GAMG makes draw requests on the loan as funds are needed to fund the operating needs of the Company.

Note 8 – Other Cash Flow Disclosures

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

	Three Months Ended
	September 30,
	2023			2022
Interest		$	0		$	31,244
Federal income tax			740,000			0

	Nine Months Ended
	September 30,
	2023			2022
Interest		$	44,814		$	61,440
Federal income tax			5,800,000			1,000,000

Note 9 – Concentrations 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.

Because UTG serves primarily individuals located in three states, the ability of the Company's customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of September 30, 2023 and 2022, approximately 51% and 49%, respectively, of the Company’s total direct premium was collected from Illinois, 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 22% and 20% of total life insurance in force at September 30, 2023 and December 31, 2022, respectively. Insurance ceded represented 39% of premium income for the nine months ended September 30, 2023 and 2022. 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.

The Company owns a variety of investments associated with the oil and gas industry. These investments represent approximately 28% and 31% of the Company’s total invested assets as of September 30, 2023 and December 31, 2022, respectively. The following table provides an allocation of the oil and gas investments by type.

September 30, 2023	Land, Minerals & Royalty Interests		Exploration		Total
Fixed maturities, at fair value	$	0	$	1,034,870	$	1,034,870
Equity securities, at fair value		81,985,219		0		81,985,219
Investment real estate		13,550,754		0		13,550,754
Notes receivable		2,000,000		0		2,000,000
Total	$	97,535,973	$	1,034,870	$	98,570,843

December 31, 2022	Land, Minerals & Royalty Interests		Exploration		Total
Fixed maturities, at fair value	$	0	$	1,060,710	$	1,060,710
Equity securities, at fair value		93,811,806		0		93,811,806
Investment real estate		14,772,536		0		14,772,536
Notes receivable		1,950,657		0		1,950,657
Total	$	110,534,999	$	1,060,710	$	111,595,709

At September 30, 2023 and December 31, 2022, the Company owned two equity securities that represented approximately 48% and 50%, respectively, of the total investments associated with the oil and gas industry.

The Company’s results of operations and financial condition have in the past been, and may in the future be, adversely affected by the degree of certain industry specific concentrations in the Company’s investment portfolio. The Company has significant exposure to investments associated with the oil and gas industry. Events or developments that have a negative effect on the oil and gas industry may adversely affect the valuation of our investments in this specific industry. The Company’s ability to sell its investments associated with the oil and gas industry may be limited.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is Management's discussion and analysis of the financial condition and results of operations of UTG, Inc. and its subsidiaries (collectively with the Parent, the "Company"). The following discussion of the financial condition and results of operations of 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, 2022, 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

This report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. We have based our forward-looking statements on our current expectations and projections about future events. Our forward-looking statements include information about possible or assumed future results of operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as the growth of our business and operations, our business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “probably,” or similar expressions, we are making forward-looking statements.

Numerous risks and uncertainties may impact the matters addressed by our forward-looking statements, any of which could negatively and materially affect our future financial results and performance.

Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this report, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved. In light of these risks, uncertainties and assumptions, any forward-looking event discussed in this report may not occur. Our forward-looking statements speak only as of the date made, and we undertake no obligation to update or review any forward-looking statement, whether as a result of new information, future events or other developments, unless the securities laws require us to do so.

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, the acquisition of blocks of business and the administration and processing of life insurance business for other entities.

UTG has a strong philanthropic program. The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. The Company also encourages its staff to be involved on a personal level through monetary giving, volunteerism and use of their talents to assist those less fortunate than themselves. Through these efforts, the Company hopes to make a positive difference in the local community, state, nation and world.

On February 21, 2023 Mr. James Rousey submitted a letter of resignation stating his desire to retire. In this regard, he retired as President of UTG, Inc. and its subsidiary, Universal Guaranty Life Insurance Company as well as his position as a Director of both entities. This was effective as of the date of the letter. The Board of Directors of UTG, Inc. and Universal Guaranty Life Insurance Company formally accepted the resignation letter on February 22, 2023. Mr. Jesse Correll, CEO and Chairman of the Board of the companies, assumed the title of President initially. At the June 2023 Board of Directors meeting, the Board appointed Mr. Daniel Roberts as President of Universal Guaranty Life Insurance Company. Mr. Correll continues to hold the President title for UTG, Inc. Mr. Roberts was previously a Vice President with both companies.

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, 2022. Management has identified the accounting policies related to cost of insurance acquired, assumptions and judgments utilized in determining whether any decline in value is the result of a credit loss or other factors, 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, 2023, there were no additions to or changes in the critical accounting policies disclosed in the 2022 Form 10-K, except for the January 1, 2023 adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). See Note 2 – Recently Adopted Accounting Principles for further information regarding the adoption of ASU No. 2016-13.

Results of Operations

On a consolidated basis, the Company reported a net loss attributable to common shareholders of approximately $(1.7) million for the nine-month period ended September 30, 2023, and net income attributable to common shareholders of approximately $5.2 million for the three-month period ended September 30, 2023.

For the nine-month period ended September 30, 2022, the Company reported net income attributable to common shareholders of approximately $16.5 million and a net income attributable to common shareholders of approximately $8.1 million for the three-month period ended September 30, 2022.

Revenues

For the nine-month period ended September 30, 2023, the Company reported total revenues of approximately $16.0 million and for the same period in 2022 total revenues of approximately $40.9 million. The Company reported total revenues of approximately $12.7 million and $16.7 million for the three-month period ended September 30, 2023, and 2022, respectively.

The variance in total revenue between third quarter 2022 and 2023 results, and the year-to-date results, is primarily the result of the change in the fair value of equity securities. The Company reported a year-to-date 2023 loss in the change in the fair value of equity securities of approximately $(7.2) million and a third quarter 2023 loss of approximately $(23,000). Most of the unrealized stock losses in 2023 occurred during the first quarter. It appears the markets have somewhat stabilized since then although continued volatility should always be expected.

This line item is material to the results reported in the Condensed Consolidated Statements of Operations, and this line item can also be extremely volatile, as it reflects changes in the stock market. While these results can be material and volatile, most of the equity holdings of the Company were acquired with a long-term view, thus making these intermediate changes in value of less concern to Management. Management monitors its equity holdings looking more at the specific entity and market it is in relative to performance and less to changes due to general market swings that occur over the holding period of the investment.

The Company reported revenue before net investment gains (losses) of approximately $14.2 million and $19.7 million for the nine-month-period ended September 30, 2023 and 2022, respectively. The Company reported $4.8 million and $7.7 million, respectively, of revenue before net investment gains (losses) for the third quarter of 2023 and 2022, respectively. The decline in the 2023 results, when compared to 2022, are the result of a decline in net investment income in the third quarter and year-to-date.

The following table summarizes our investment performance.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net investment income	$	3,432,684	$	6,266,722	$	9,994,645	$	15,166,276
Net investment gains (losses)	$	7,938,232	$	1,900,458	$	8,973,842	$	6,759,716
Change in net unrealized investment gains (losses) on equity securities, pre-tax	$	(23,403)	$	7,097,738	$	(7,209,399)	$	14,462,029

The following table reflects net investment income of the Company:

		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

Fixed maturities available for sale	$	1,012,577	$	1,025,578	$	3,032,835	$	3,125,400
Equity securities		250,435		719,953		949,096		2,057,986
Trading securities		0		0		0		(13,283)
Mortgage loans		242,073		307,492		916,524		907,284
Real estate		2,926,082		4,924,772		7,021,560		11,103,517
Notes receivable		354,125		273,376		1,087,103		659,024
Policy loans		103,137		121,097		327,353		369,297
Short-term investments		114,244		0		213,447		0
Cash and cash equivalents		333,643		43,812		700,182		53,746
Total consolidated investment income		5,336,316		7,416,080		14,248,100		18,262,971
Investment expenses		(1,903,632)		(1,149,358)		(4,253,455)		(3,096,695)
Consolidated net investment income	$	3,432,684	$	6,266,722	$	9,994,645	$	15,166,276

Net investment income represented 70% and 77% of the Company's revenue before net investment gains (losses) as of September 30, 2023 and 2022, respectively. For the third quarter ended September 30, net investment income represented 72% and 81% of revenue before net investment gains (losses) for 2023 and 2022, respectively. When comparing current and prior year results, net investment income was comparable in a majority of the investment categories outside of the equity securities, real estate and cash and cash equivalents investment portfolios.

Since the start of 2022, we have seen more volatility in the U.S. markets in general and have seen an increase in bonds yields. This is due to the Federal Open Market Committee (“FOMC”) aggressively raising interest rates to fight the inflation that is currently being experienced. As of September 30, 2023, the interest rate environment experienced eleven rate increases totaling 5.25% over the last 1.5 years. While these actions had a negative impact on some of our investments that we currently own, this will also allow for better yields on future investments acquired as current investments mature.

Earnings from the equity securities investment portfolio represented approximately 7% and 11% of the total consolidated investment income reported by the Company during the nine months ended September 30, 2023 and 2022, respectively. Income from the equity securities portfolio was down approximately 54% or $1,109,000 when comparing year to date 2023 and 2022 results. Third quarter 2023 and 2022 earnings from equity securities represented approximately 5% and 10%, respectively, of the total investment income reported by the Company. Income from the equity securities portfolio was down approximately 65% when comparing third quarter 2023 and 2022 results.

The 2022 investment income from equity securities was exceptionally high, and the result of dividends from oil and gas equity securities. When comparing historical earnings, the 2023 earnings from the equity securities portfolio are more comparable to the third quarter and year to date results for 2021.

The earnings reported by the real estate investment portfolio represented 49% and 61% of the total consolidated investment income reported by the Company during the nine months ended September 30, 2023 and 2022, respectively. Earnings from the real estate investment portfolio were down approximately $4.1 million when comparing year to date 2023 and 2022 results. Earnings reported by the real estate investment portfolio represented 55% and 66% of the total consolidated investment income for the third quarter 2023 and 2022, respectively, and is down approximately $2.0 million in the current year.

Earnings from the real estate investment portfolio are primarily related to the oil and gas and timber industries. In 2022, we experienced the reopening of the world economies post-COVID, and the demand for oil and gas and other commodities substantially increased, which resulted in increases in prices in the marketplace. Add to this the Russian invasion of Ukraine, and more upward pricing pressure was felt. In 2022, oil averaged $105 per barrel compared to an average price of $78 in 2023. Earnings from the real estate investment portfolio are expected to vary depending on the real estate activities and the potential distributions that may occur.

The following table reflects net investment gains (losses):

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2023		2022		2023		2022
Fixed maturities available for sale		12,500		0		58,333		(527)
Equity securities		110,742		1,485,872		351,250		1,773,817
Real estate		7,815,364		414,586		8,541,124		4,986,426
Short-term investments		(374)		0		23,135		0
Consolidated net realized investment gains		7,938,232		1,900,458		8,973,842		6,759,716
Change in fair value of equity securities		(23,403)		7,097,738		(7,209,399)		14,462,029
	$	7,914,829	$	8,998,196	$	1,764,443	$	21,221,745

Realized investment gains are the result of one-time events and are expected to vary from year to year.

The sale of four small equity security holdings represents the realized investment gains from equity securities during 2023. In 2022, the Company sold two securities that represented a majority of the gain reported.

During 2023, the Company sold several smaller real estate land parcels located in Kentucky producing realized gains of approximately $760,000. Additionally, during third quarter 2023, the Company sold a large land parcel in West Virginia realizing a gain of approximately $7.6 million. During 2022, the Company sold a real estate parcel in Kentucky that produced a gain of $3.5 million and a parcel in Georgia that produced a gain of $812,000.

The Company reported a year-to-date 2023 loss in the change in the fair value of equity securities of approximately $(7.2) million and a third quarter 2023 loss of approximately $(23,000). For the nine month period ended September 30, 2022, the Company reported a gain of approximately $14.5 million and a third quarter gain of approximately $7.1 million.

Year to date, the Company has seen negative results in its equity investments. However, most all the negative results occurred in the first quarter of 2023. Since that time, we reported a slight rebound, and it appears to be the result of market stabilization. Equity investments primarily in the oil and gas area represent almost all of the unrealized losses reported in 2023. The Company experienced significant unrealized gains on these same investments in 2022. Oil prices declined in early 2023 as concerns of recession intensified leading to a reduction in world demand for oil temporarily causing the price to decline. Periodic pull backs and downward market adjustments are expected by management. Management believes its current equity investments continue to be solid investments for the Company and have further growth potential; however, changes in market conditions could cause volatility in market prices.

In summary, the Company’s basis for future revenue is expected to come from the following primary sources: 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 to enhance these opportunities.

Expenses

The Company reported total benefits and other expenses of approximately $11.0 million for the nine month period ended September 30, 2023, a decrease of approximately 4% from the same period in 2022. Benefits, claims and settlement expenses represented approximately 58% and 59% of the Company's total expenses for the nine month periods ended September 30, 2023 and 2022, respectively. The other major expense category of the Company is operating expenses, which represented approximately 40% and 39% of the Company's total expenses for the nine month periods ended September 30, 2023 and 2022, respectively.

When comparing third quarter 2023 and 2022 results, total benefits and other expenses were up approximately 15%. Benefits, claims and settlement expenses represented 53% and 52% of the Company’s total expenses for the third quarter of 2023 and 2022, respectively.

Life benefits, claims and settlement expenses, net of reinsurance benefits and claims were down approximately 4% when comparing the nine months ended September 30, 2023, and 2022. When comparing third quarter 2023 and 2022 results, life benefits, claims and settlement expenses were up approximately 16%. Policy claims vary from period to period and therefore, fluctuations in mortality are to be expected and are not considered unusual by Management.

Early in the COVID-19 pandemic, the Company implemented a process to monitor death claims resulting from COVID-19. Prior to the pandemic, death benefits were $12.6 million, $12.8 million and $12.4 million in 2017, 2018 and 2019, respectively. During the three plus years of the pandemic, total death benefits were $14.3 million, $16.0 million, and $13.3 million in 2020, 2021, and 2022, respectively. When comparing the nine-month periods ended 2023 and 2022, there was a decline of approximately $420,000 in death benefits, net of reinsurance. Death benefits of the Company have been higher than recent past experience, even when adjusting for the identified COVID-19 claims. This anomaly showed throughout the entire U.S. insurance industry. Industry experts believe this increase in death benefits while not always directly related to COVID-19, were caused indirectly by the pandemic due to delays in medical care as a result of the lockdown in 2020 and then later, people’s fears of seeking out treatment and trouble making up appointments. This is further compounded by depression from isolation. In the latter half of 2022, claims appeared to be moving back to pre-pandemic levels. This has continued throughout 2023. While we believe our mortality experience has returned to pre-pandemic norms, we cannot be absolutely certain at this time. For the nine months of 2023, the Company has had $63,000 of claims associated with COVID.

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 acknowledgment 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.

Operating expenses decreased approximately 1% in the nine month period ended September 30, 2023 as compared to the same period in 2022. For third quarter operating expenses increased approximately 15% comparing 2023 to 2022.

While comparable year to date, there are three expense items that are different from the prior year, salary, charitable contributions and aircraft maintenance. The third quarter increase in expenses were from a bonus accrual related to the sale of the West Virginia real estate during the quarter and an increase in charitable contributions as the realized gain significantly increased our current year taxable income. Charitable expense fluctuates based on reported taxable income of the Company. Additionally, in 2022 the Company incurred maintenance expenses relating to the Company’s partially owned aircraft. The year to date 2023 aircraft maintenance expense is $316,000 less than year to date 2022. Expenses in the remaining categories are comparable between years.

As mentioned above in the Overview section of the Management Discussion and Analysis, UTG has a strong philanthropic program. The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. Charitable contributions made by the Company are expected to vary from year to year depending on the earnings of the Company.

Net amortization of cost of insurance acquired decreased approximately 4% when comparing current and prior year activity. Cost of insurance acquired is established when an insurance company is acquired or when the Company acquires a block of in-force business. 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. 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 rates may vary due to risk analysis performed at the time of acquisition on the business acquired. The Company utilizes a 12% discount rate on the remaining unamortized business. 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.

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

Financial Condition

Investment Information

Investments are the largest asset group of the Company. The Company's insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments they are permitted to make, and the amount of funds that may be used for any one type of investment.

The following table reflects, by investment category, the investments held by the Company as of September 30, 2023, and December 31, 2022:

		September 30, 2023	As a % of Total Investments	As a % of Total Assets
Fixed maturities	$	101,674,112	29%	24%
Equity securities, at fair value		144,207,758	41%	35%
Equity securities, at cost		15,683,343	4%	4%
Mortgage loans		14,785,687	4%	4%
Real Estate		31,609,218	9%	8%
Notes receivable		13,182,860	4%	3%
Policy loans		6,160,290	2%	1%
Short-term		23,393,115	7%	6%
Total investments	$	350,696,383	100%	85%

		December 31, 2022	As a % of Total Investments	As a % of Total Assets
Fixed maturities	$	108,313,059	30%	24%
Equity securities, at fair value		150,053,686	41%	33%
Equity securities, at cost		15,683,343	4%	4%
Mortgage loans		30,698,694	8%	7%
Real Estate		34,934,352	10%	8%
Notes receivable		14,424,127	4%	3%
Policy loans		6,567,434	2%	1%
Short-term		3,596,941	1%	1%
Total investments	$	364,271,636	100%	81%

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. 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 will not be able to lower rates and both net investment income and net income will be impacted negatively.

The Company’s total investments represented 85% and 81% of the Company’s total assets as of September 30, 2023, and December 31, 2022, respectively. Fixed maturities and equity securities consistently represented a substantial portion, 70% and 71%, of the total investments during 2023 and 2022, respectively. The overall investment mix, as a percentage of total investments, remained fairly consistent when comparing the respective investments held as of September 30, 2023 and December 31, 2022.

As of September 30, 2023, 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 available for sale". Investments available for sale are carried at market value, with changes in market value charged directly to the other comprehensive component of shareholders' equity. Changes in the market value of available for sale securities resulted in net unrealized gains (losses) of approximately $(2.0) million and $(18.5) million as of September 30, 2023 and 2022, respectively. The variance in the net unrealized gains and losses is the result of normal market fluctuations mainly related to changes in interest rates in the marketplace.

In the first quarter of 2023, the Company adopted ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASCD 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposure such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

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 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 reviews 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 possible 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.

Capital Resources

Total shareholders' equity decreased by approximately 3% as of September 30, 2023, compared to December 31, 2022. The decrease is mainly attributable to a decrease in retained earnings, which is the result of the current year net loss reported by the Company and the decline in market value of the available for sale fixed maturities portfolio.

Liquidity

Liquidity provides the Company with the ability to meet on demand the cash commitments required by its business operations and financial obligations. The Company’s liquidity is primarily derived from cash balances, a portfolio of marketable securities and line of credit facilities. The Company has two principal needs for cash – the insurance company’s contractual obligations to policyholders and the payment of operating expenses.

Parent Company Liquidity

UTG is a holding company that has no day-to-day operations of its own. Cash flows from UTG’s insurance subsidiary, UG, are used to pay costs associated with maintaining the Company in good standing with states in which it does business and purchasing outstanding shares of UTG stock. UTG's cash flow is dependent on management fees received from its insurance subsidiary, stockholder dividends from its subsidiary and earnings received on cash balances. As of September 30, 2023, and December 31, 2022, substantially all of the consolidated shareholders’ equity represents net assets of its subsidiaries. As of September 30, 2023, the Parent company has received $2 million in dividends from its insurance subsidiary. Certain restrictions exist on the payment of dividends from the insurance subsidiary to the Parent company. For further information regarding the restrictions on the payment of dividends by the insurance subsidiary, see Note 9 – Shareholders’ Equity in the Notes to the Consolidated Financial Statements. Although these restrictions exist, dividend availability from the insurance subsidiary has historically been sufficient to meet the cash flow needs of the Parent company.

Insurance Subsidiary Liquidity

Sources of cash flows for the insurance subsidiary primarily consist of premium and investment income. Cash outflows from operations include policy benefit payments, administrative expenses, taxes and dividends to the Parent company.

Short-Term Borrowings

During October of 2022, the Federal Home Loan Bank approved UG’s Cash Management Advance Application (“CMA”). The CMA is a source of overnight liquidity utilized to address the day-to-day cash needs of a Company. The CMA gives the company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity. The Company has pledged bonds with a collateral lendable value of $18.9 million as of September 30, 2023. During the fourth quarter of 2022, the Company borrowed $19 million and planned to utilize the funds for investing activities. During the first quarter of 2023, the Company repaid the entire outstanding principal balance. The CMA agreement was renewed for another year in October 2023.

Consolidated Liquidity

Cash used in operating activities was approximately $9.7 million in 2023 and cash used in operating activities was approximately $0.3 million in 2022, 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 cash flows from operations to remain similar to historic trends.

During 2023, the Company’s investing activities provided net cash of approximately $11.9 million and $10.8 million in 2022, respectively. The Company recognized proceeds of approximately $59.6 million and $37.1 million from investments sold and matured in 2023 and 2022, respectively. The Company used approximately $47.6 million and $26.3 million to acquire investments during 2023 and 2022, respectively. The net cash provided by investing activities is expected to vary from year to year depending on market conditions and management’s ability to find and negotiate favorable investment contracts.

Net cash used in financing activities was approximately $20.0 million and $16.6 million during 2023 and 2022, respectively. As of September 30, 2023 and December 31, 2022, the Company had $0 and $19 million, respectively, in debt outstanding with third parties.

The Company had cash and cash equivalents of approximately $27.6 million as of September 30, 2023. Additionally, the Company had short term investments of $23.4 million and a portfolio of marketable fixed maturity securities that could be sold, if an unexpected event were to occur. These securities had a fair value of approximately $101.7 million however, the strong cash flows from investing activities, investment maturities and the availability of the line of credit facilities make it unlikely that the Company would need to sell securities for liquidity purposes.

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

Item 4. Controls and Procedure

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 quarterly 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

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 and Senior Vice President 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 and Senior Vice President of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101	The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to the Condensed Consolidated Financial Statements (detail tagged).
**104	Cover Page Interactive Data File (formatted in iXBRL and included in exhibit 101).

* Filed herewith

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 13, 2023	By	/s/ Jesse T. Correll
			Jesse T. Correll
			Chairman of the Board, Chief Executive Officer, President and Director (Principal Executive Officer)

Date:	November 13, 2023	By	/s/ Theodore C. Miller
			Theodore C. Miller
			Chief Financial Officer and Senior Vice President (Principal Financial and Accounting Officer)