UTG, INC.
|
||
Exact
name of registrant as specified in its charter)
|
||
Delaware
|
20-2907892
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
5250 South Sixth Street, Springfield,
IL
|
62703
|
|
(Address
of principal executive offices)
|
(Zip
code)
|
|
Registrant's
telephone number, including area code: (217) 241-6300
|
||
Securities
registered pursuant to Section 12(b) of the Act:
|
||
Title of each class
|
Name of exchange on which
registered
|
|
None
|
None
|
|
Large
Accelerated Filer
|
[ ]
|
Accelerated
Filer
|
[ ]
|
||||
Non
Accelerated Filer
|
[ ]
|
Smaller
Reporting Company
|
[X]
|
|
FORM
10-K
|
|
YEAR
ENDED DECEMBER 31, 2007
|
|
TABLE
OF CONTENTS
|
PART
I
|
|
|||
ITEM
1
|
BUSINESS
|
3
|
||
ITEM
1A
|
BUSINESS
RISKS
|
16
|
||
ITEM
1B
|
UNRESOLVED
STAFF COMMENTS
|
17
|
||
ITEM
2
|
PROPERTIES
|
18
|
||
ITEM
3
|
LEGAL
PROCEEDINGS
|
18
|
||
ITEM
4
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
|||
PART
II
|
19
|
|||
ITEM
5
|
MARKET
FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SHARES
|
19
|
||
ITEM
6
|
SELECTED
FINANCIAL DATA
|
21
|
||
ITEM
7
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
21
|
||
ITEM
7A
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
34
|
||
ITEM
8
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
36
|
||
ITEM
9
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
69
|
||
ITEM
9A
|
CONTROLS
AND PROCEDURES
|
69
|
||
ITEM
9B
|
OTHER
INFORMATION
|
69
|
||
PART
III
|
70
|
|||
ITEM
10
|
DIRECTORS
AND EXECUTIVE OFFICERS OF UTG
|
70
|
||
ITEM
11
|
EXECUTIVE
COMPENSATION
|
74
|
||
ITEM
12
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
79
|
||
ITEM
13
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
83
|
||
ITEM
14
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
84
|
||
PART
IV
|
85
|
|||
ITEM
15
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
|
85
|
|
PART
I
|
Shown
in thousands
|
||||||||||||||
2007
Premiums
Earned
|
2006
Premiums
Earned
|
2005
Premiums
Earned
|
||||||||||||
Direct
|
$
|
19,945
|
$
|
15,450
|
$
|
16,357
|
||||||||
Assumed
|
223
|
65
|
42
|
|||||||||||
Ceded
|
(5,755)
|
(2,655)
|
(2,672)
|
|||||||||||
Net
premiums
|
$
|
14,413
|
$
|
12,860
|
$
|
13,727
|
December 31,
|
||||||||||||||
2007
|
2006
|
2005
|
||||||||||||
Fixed
maturities and fixed maturities
held
for sale
|
$
|
11,790,380
|
$
|
6,838,277
|
$
|
6,661,648
|
||||||||
Equity
securities
|
1,077,749
|
915,864
|
771,379
|
|||||||||||
Mortgage
loans
|
2,689,956
|
2,739,350
|
2,033,007
|
|||||||||||
Real
estate
|
4,599,005
|
5,500,005
|
7,473,698
|
|||||||||||
Policy
loans
|
951,394
|
580,961
|
860,240
|
|||||||||||
Short-term
investments
|
21,929
|
27,620
|
3,699
|
|||||||||||
Cash
|
316,891
|
454,580
|
171,926
|
|||||||||||
Total
consolidated investment income
|
21,447,304
|
17,056,657
|
17,975,597
|
|||||||||||
Investment
expenses
|
(4,566,942)
|
(6,055,492)
|
(6,924,371)
|
|||||||||||
Consolidated
net investment income
|
$
|
16,880,362
|
$
|
11,001,165
|
$
|
11,051,226
|
Fixed
Maturities
|
|||
Rating
|
%
of Portfolio
|
||
2007
|
2006
|
||
Investment
Grade
|
|||
AAA
|
72%
|
70%
|
|
AA
|
8%
|
4%
|
|
A
|
13%
|
18%
|
|
BBB
|
7%
|
6%
|
|
Below
investment grade
|
0%
|
2%
|
|
100%
|
100%
|
Carrying
Value
|
||||
2007
|
2006
|
|||
U.S.
government and government agencies
|
$
|
36,011,577
|
$
|
44,940,220
|
States,
municipalities and political subdivisions
|
4,044,798
|
4,169,438
|
||
Collateralized
mortgage obligations
|
89,832,147
|
118,743,522
|
||
Public
utilities
|
4,594,501
|
6,097,151
|
||
Corporate
|
69,498,029
|
65,553,711
|
||
$
|
203,981,052
|
$
|
239,504,042
|
Average
|
||||||
Carrying
|
Average
|
Average
|
||||
Investments
|
Value
|
Maturity
|
Yield
|
|||
Fixed
maturities and fixed
maturities
held for sale
|
$
|
221,743,000
|
7
years
|
5.32%
|
||
Equity
securities
|
24,492,000
|
Not
applicable
|
4.40%
|
|||
Mortgage
Loans
|
38,809,000
|
7
years
|
6.93%
|
|||
Investment
real estate
|
41,565,000
|
Not
applicable
|
11.06%
|
|||
Policy
loans
|
15,787,000
|
Not
applicable
|
6.03%
|
|||
Short-term
investments
|
491,000
|
6
months
|
4.47%
|
|||
Cash
and cash equivalents
|
13,110,000
|
On
demand
|
3.99%
|
|||
Total
Investments and Cash
and
cash equivalents
|
$
|
355,997,000
|
6.02%
|
Mortgage
Loans
|
Amount
|
%
of Total
|
||
Commercial
– insured or guaranteed
|
$
|
1,080,433
|
2%
|
|
Commercial
– all other
|
34,355,861
|
75%
|
||
Farm
|
745,859
|
2%
|
||
Residential
– insured or guaranteed
|
826
|
0%
|
||
Residential
– all other
|
9,419,168
|
21%
|
Mortgage
Loans
|
Real
Estate
|
||
California
|
4%
|
0%
|
|
Florida
|
7%
|
0%
|
|
Georgia
|
17%
|
0%
|
|
Illinois
|
0%
|
2%
|
|
Kansas
|
5%
|
0%
|
|
Kentucky
|
62%
|
60%
|
|
Montana
|
1%
|
0%
|
|
Texas
|
4%
|
38%
|
|
Total
|
100%
|
100%
|
Delinquent
90
days or more
|
2007
|
2006
|
2005
|
|||
Non-accrual
status
|
$
|
50,690
|
$
|
64,136
|
$
|
42,400
|
Other
|
0
|
0
|
0
|
|||
Reserve
on delinquent
Loans
|
(19,730)
|
(33,500)
|
(36,000)
|
|||
Total
delinquent
|
$
|
30,960
|
$
|
30,636
|
$
|
6,400
|
Interest
income past due
(delinquent
loans)
|
$
|
0
|
$
|
0
|
$
|
0
|
In
process of restructuring
|
$
|
0
|
$
|
0
|
$
|
0
|
Restructuring
on other
than
market terms
|
0
|
0
|
0
|
|||
Other
potential problem
Loans
|
0
|
0
|
0
|
|||
Total
problem loans
|
$
|
0
|
$
|
0
|
$
|
0
|
Interest
income foregone
(restructured
loans)
|
$
|
0
|
$
|
0
|
$
|
0
|
In
process of foreclosure
|
$
|
0
|
$
|
0
|
$
|
0
|
Total
foreclosed loans
|
$
|
0
|
$
|
0
|
$
|
0
|
Interest
income foregone
(restructured
loans)
|
$
|
0
|
$
|
0
|
$
|
0
|
Property occupied
|
Amount
|
% of Total
|
|||
Home
Office
|
$
|
1,598,403
|
4%
|
||
Investment real estate
|
|||||
Commercial
|
39,154,175
|
96%
|
|||
Grand
total
|
$
|
40,752,578
|
100%
|
||
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under employee and
director stock purchase plans (excluding securities reflected in column
(a))
(c)
|
Employee
and Director Stock Purchase plans approved by security
holders
|
0
|
0
|
290,681
|
Employee
and Director Stock Purchase plans not approved by security
holders
|
0
|
0
|
0
|
Total
|
0
|
0
|
290,681
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Program
|
Maximum
Number of Shares That May Yet Be Purchased Under the
Program
|
Approximate
Dollar Value That May Yet Be Purchased Under the Program
|
||||||||
Oct
1 through Oct 31, 2007
|
1,516
|
$
|
8.00
|
1,516
|
N/A
|
$
356,048
|
||||||
Nov
1 through Nov 30, 2007
|
561
|
8.00
|
561
|
N/A
|
351,560
|
|||||||
Dec
1 through Dec 31, 2007
|
559
|
8.00
|
559
|
N/A
|
347,088
|
|||||||
Total
|
2,636
|
$
|
8.00
|
2,636
|
FINANCIAL
HIGHLIGHTS
(000's
omitted, except per share data)
|
||||||||||
2007
|
2006
|
2005
|
2004
|
2003
|
||||||
Premium
income
net
of reinsurance
|
$
|
14,413
|
$
|
12,860
|
$
|
13,727
|
$
|
14,140
|
$
|
15,023
|
Total
revenues
|
$
|
38,873
|
$
|
37,585
|
$
|
27,471
|
$
|
25,467
|
$
|
26,488
|
Net
income (loss)*
|
$
|
2,143
|
$
|
3,870
|
$
|
1,260
|
$
|
(276)
|
$
|
(6,396)
|
Basic
income (loss) per share
|
$
|
0.56
|
$
|
1.00
|
$
|
0.32
|
$
|
(0.07)
|
$
|
(1.67)
|
Total
assets
|
$
|
473,655
|
$
|
482,732
|
$
|
318,832
|
$
|
317,868
|
$
|
311,557
|
Total
long-term debt
|
$
|
19,914
|
$
|
22,990
|
$
|
0
|
$
|
0
|
$
|
2,290
|
Dividends
paid per share
|
NONE
|
NONE
|
NONE
|
NONE
|
NONE
|
·
|
Includes
equity earnings of investees.
|
1.
|
Prevailing
interest rate levels, which may affect the ability of the Company to sell
its products, the market value of the Company's investments and the lapse
ratio of the Company's policies, notwithstanding product design features
intended to enhance persistency of the Company's
products.
|
2.
|
Changes
in the federal income tax laws and regulations which may affect the
relative tax advantages of the Company's
products.
|
3.
|
Changes
in the regulation of financial services, including bank sales and
underwriting of insurance products, which may affect the competitive
environment for the Company's
products.
|
4.
|
Other
factors affecting the performance of the Company, including, but not
limited to, market conduct claims, insurance industry insolvencies,
insurance regulatory initiatives and developments, stock market
performance, an unfavorable outcome in pending litigation, and investment
performance.
|
Fixed
Maturities
|
|||
Rating
|
%
of Portfolio
|
||
2007
|
2006
|
||
Investment
Grade
|
|||
AAA
|
72%
|
70%
|
|
AA
|
8%
|
4%
|
|
A
|
13%
|
18%
|
|
BBB
|
7%
|
6%
|
|
Below
investment grade
|
0%
|
2%
|
|
100%
|
100%
|
Ratio of Total Adjusted
Capital to
|
Authorized Control Level
RBC
|
Regulatory
Event (Less Than or Equal to)
|
Company action
level 2*
|
Regulatory action
level 1.5
|
Authorized control
level 1
|
Mandatory control
level 0.7
|
Decreases in Interest Rates
|
Increases in Interest
Rates
|
|||
200
Basis
Points
|
100
Basis
Points
|
100
Basis
Points
|
200
Basis
Points
|
300
Basis
Points
|
$17,926,000
|
$10,038,000
|
$(7,803,000)
|
$(17,376,000)
|
$(26,205,000)
|
December 31,
2007
|
|||||||
Expected
maturity date
|
|||||||
2008
|
2009
|
2010
|
2011
|
Thereafter
|
Total
|
Fair
value
|
|
Long
term debt
|
|||||||
Fixed
rate
|
1,243,615
|
1,247,580
|
1,247,580
|
1,247,580
|
1,383,542
|
6,369,897
|
5,645,612
|
Avg.
int. rate
|
5.0%
|
5.0%
|
5.0%
|
5.0%
|
5.0%
|
5.0%
|
|
Variable
rate
|
0
|
3,049,995
|
3,600,000
|
3,600,000
|
3,294,454
|
13,544,449
|
13,544,449
|
Avg.
int. rate
|
6.9%
|
6.9%
|
6.9%
|
6.9%
|
6.9%
|
6.9%
|
Page No.
|
||
UTG,
INC. AND CONSOLIDATED SUBSIDIARIES
|
||
Report
of Brown Smith Wallace LLC, Independent
|
||
Registered
Public Accounting Firm for the years ended December 31,
2007 and 2006
|
37
|
|
Consolidated
Balance Sheets
|
38
|
|
Consolidated
Statements of Operations
|
39
|
|
Consolidated
Statements of Shareholders’ Equity
|
40
|
|
Consolidated
Statements of Cash Flows
|
41
|
|
Notes
to Consolidated Financial Statements
|
42-68
|
UTG,
INC.
|
||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||
As
of December 31, 2007 and 2006
|
||||||
ASSETS
|
||||||
2007
|
2006
|
|||||
Investments:
|
||||||
Fixed
maturities held to maturity, at amortized cost
|
||||||
(market
$6,330,036 and $6,244,373)
|
$
|
6,006,846
|
$
|
6,274,913
|
||
Investments
held for sale:
|
||||||
Fixed
maturities, at market (cost $196,079,174 and $235,054,655)
|
197,974,206
|
233,229,129
|
||||
Equity
securities, at market (cost $26,882,317 and $10,031,148)
|
32,678,592
|
16,305,591
|
||||
Mortgage
loans on real estate at amortized cost
|
45,602,147
|
32,015,446
|
||||
Investment
real estate, at cost, net of accumulated depreciation
|
39,154,175
|
43,975,642
|
||||
Policy
loans
|
15,643,238
|
15,931,525
|
||||
Short-term
investments
|
933,967
|
47,879
|
||||
337,993,171
|
347,780,125
|
|||||
Cash
and cash equivalents
|
17,746,468
|
8,472,553
|
||||
Securities
of affiliate
|
4,000,000
|
4,000,000
|
||||
Accrued
investment income
|
2,485,594
|
2,824,975
|
||||
Reinsurance
receivables:
|
||||||
Future
policy benefits
|
73,450,212
|
73,770,732
|
||||
Policy
claims and other benefits
|
4,657,663
|
5,040,219
|
||||
Cost
of insurance acquired
|
28,337,021
|
32,808,159
|
||||
Deferred
policy acquisition costs
|
1,009,528
|
1,188,888
|
||||
Property
and equipment, net of accumulated depreciation
|
1,752,199
|
3,129,331
|
||||
Income
taxes receivable, current
|
0
|
219,956
|
||||
Other
assets
|
2,222,898
|
3,496,856
|
||||
Total
assets
|
$
|
473,654,754
|
$
|
482,731,794
|
||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||
Policy
liabilities and accruals:
|
||||||
Future
policy benefits
|
$
|
346,076,921
|
$
|
351,587,689
|
||
Policy
claims and benefits payable
|
3,198,166
|
3,330,945
|
||||
Other
policyholder funds
|
1,000,216
|
1,124,045
|
||||
Dividend
and endowment accumulations
|
14,039,241
|
14,091,257
|
||||
Income
taxes payable, current
|
450,626
|
0
|
||||
Deferred
income taxes
|
16,502,035
|
16,480,068
|
||||
Notes
payable
|
19,914,346
|
22,990,081
|
||||
Other
liabilities
|
9,486,971
|
8,587,166
|
||||
Total
liabilities
|
410,668,522
|
418,191,251
|
||||
Minority
interests in consolidated subsidiaries
|
14,231,707
|
19,514,151
|
||||
Shareholders'
equity:
|
||||||
Common
stock - no par value, stated value $.001 per share.
|
||||||
Authorized
7,000,000 shares - 3,849,533 and 3,842,687 shares issued
|
||||||
and
outstanding after deducting treasury shares of 384,813 and
360,888
|
3,849
|
3,843
|
||||
Additional
paid-in capital
|
42,067,229
|
41,813,690
|
||||
Retained
earnings
|
2,374,990
|
232,371
|
||||
Accumulated
other comprehensive income
|
4,308,457
|
2,976,488
|
||||
Total
shareholders' equity
|
48,754,525
|
45,026,392
|
||||
Total
liabilities and shareholders' equity
|
$
|
473,654,754
|
$
|
482,731,794
|
||
UTG,
INC.
|
||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||
Three
Years Ended December 31, 2007
|
||||||||
2007
|
2006
|
2005
|
||||||
Revenues:
|
||||||||
Premiums
and policy fees
|
$
|
19,104,158
|
$
|
15,515,567
|
$
|
16,399,080
|
||
Reinsurance
premiums and policy fees
|
(4,690,792)
|
(2,655,142)
|
(2,672,397)
|
|||||
Net
investment income
|
16,880,362
|
11,001,165
|
11,051,226
|
|||||
Realized
investment gains, net
|
5,467,207
|
11,446,279
|
1,431,936
|
|||||
Other
income
|
2,111,637
|
2,277,350
|
1,261,495
|
|||||
38,872,572
|
37,585,219
|
27,471,340
|
||||||
Benefits
and other expenses:
|
||||||||
Benefits,
claims and settlement expenses:
|
||||||||
Life
|
25,567,473
|
20,108,067
|
17,589,143
|
|||||
Reinsurance
benefits and claims
|
(3,145,550)
|
(2,073,179)
|
(1,716,499)
|
|||||
Annuity
|
(471,222)
|
1,117,766
|
1,064,808
|
|||||
Dividends
to policyholders
|
1,170,631
|
932,723
|
938,891
|
|||||
Commissions
and amortization of deferred
|
||||||||
policy
acquisition costs
|
(2,016,521)
|
(65,908)
|
(14,267)
|
|||||
Amortization
of cost of insurance acquired
|
4,282,715
|
2,850,725
|
2,193,085
|
|||||
Operating
expenses
|
8,019,556
|
6,453,648
|
5,516,566
|
|||||
Interest
expense
|
1,391,427
|
234,125
|
0
|
|||||
34,798,509
|
29,557,967
|
25,571,727
|
||||||
Income
before income taxes and minority
|
||||||||
interest
|
4,074,063
|
8,027,252
|
1,899,613
|
|||||
Income
tax expense
|
(383,197)
|
(1,949,607)
|
(158,408)
|
|||||
Minority
interest in income of consolidated
|
||||||||
subsidiaries
|
(1,548,247)
|
(2,207,925)
|
(480,982)
|
|||||
Net
income
|
$
|
2,142,619
|
$
|
3,869,720
|
$
|
1,260,223
|
||
Basic
income per share from continuing
|
||||||||
operations
and net income
|
$
|
0.56
|
$
|
1.00
|
$
|
0.32
|
||
Diluted
income per share from continuing
|
||||||||
operations
and net income
|
$
|
0.56
|
$
|
1.00
|
$
|
0.32
|
||
Basic
weighted average shares outstanding
|
3,851,596
|
3,872,425
|
3,938,781
|
|||||
Diluted
weighted average shares outstanding
|
3,851,596
|
3,872,425
|
3,938,781
|
|||||
UTG,
INC.
|
||||||||||||||||
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS' EQUITY
|
||||||||||||||||
Three
Years Ended December 31, 2007
|
||||||||||||||||
2007
|
2006
|
2005
|
||||||||||||||
Common
stock
|
||||||||||||||||
Balance,
beginning of year
|
$
|
3,843
|
$
|
3,902
|
$
|
79,315
|
||||||||||
Issued
during year
|
30
|
0
|
120
|
|||||||||||||
Treasury
shares acquired
|
(24)
|
(59)
|
(75)
|
|||||||||||||
Change
in stated value
|
0
|
0
|
(75,458)
|
|||||||||||||
Balance,
end of year
|
$
|
3,849
|
$
|
3,843
|
$
|
3,902
|
||||||||||
Additional
paid-in capital
|
||||||||||||||||
Balance,
beginning of year
|
$
|
41,813,690
|
$
|
42,295,661
|
$
|
42,590,820
|
||||||||||
Issued
during year
|
446,668
|
0
|
151,200
|
|||||||||||||
Treasury
shares acquired
|
(190,530)
|
(481,971)
|
(521,817)
|
|||||||||||||
Retired
During Year
|
(2,599)
|
0
|
0
|
|||||||||||||
Change
in stated value
|
0
|
0
|
75,458
|
|||||||||||||
Balance,
end of year
|
$
|
42,067,229
|
$
|
41,813,690
|
$
|
42,295,661
|
||||||||||
Retained
earnings (accumulated deficit)
|
||||||||||||||||
Balance,
beginning of year
|
$
|
232,371
|
$
|
(3,637,349)
|
$
|
(4,897,572)
|
||||||||||
Net
income
|
2,142,619
|
$
|
2,142,619
|
3,869,720
|
$
|
3,869,720
|
1,260,223
|
$
|
1,260,223
|
|||||||
Balance,
end of year
|
$
|
2,374,990
|
$
|
232,371
|
$
|
(3,637,349)
|
||||||||||
Accumulated
other comprehensive income
|
||||||||||||||||
Balance,
beginning of year
|
$
|
2,976,488
|
$
|
4,655,238
|
$
|
6,678,542
|
||||||||||
Other
comprehensive income (loss)
|
||||||||||||||||
Unrealized
holding gain (loss) on securities
|
||||||||||||||||
net
of minority interest and
|
||||||||||||||||
reclassification
adjustment and taxes
|
1,331,969
|
1,331,969
|
(1,678,750)
|
(1,678,750)
|
(2,023,304)
|
(2,023,304)
|
||||||||||
Comprehensive
income (loss)
|
$
|
3,474,588
|
$
|
2,190,970
|
$
|
(763,081)
|
||||||||||
Balance,
end of year
|
$
|
4,308,457
|
$
|
2,976,488
|
$
|
4,655,238
|
||||||||||
Total
shareholders' equity, end of year
|
$
|
48,754,525
|
$
|
45,026,392
|
$
|
43,317,452
|
||||||||||
UTG,
INC.
|
||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
Three
Years Ended December 31, 2007
|
||||||||
2007
|
2006
|
2005
|
||||||
Increase
(decrease) in cash and cash equivalents
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$
|
2,142,619
|
$
|
3,869,720
|
$
|
1,260,223
|
||
Adjustments
to reconcile net income to net cash
|
||||||||
used
in operating activities net of changes in assets and
liabilities
|
||||||||
resulting
from the sales and purchases of subsidiaries:
|
||||||||
Amortization/accretion
of fixed maturities
|
93,211
|
391,013
|
606,914
|
|||||
Realized
investment (gains) losses, net
|
(5,467,208)
|
(11,446,279)
|
(1,459,959)
|
|||||
Amortization
of deferred policy acquisition costs
|
179,360
|
225,476
|
278,899
|
|||||
Amortization
of cost of insurance acquired
|
4,282,715
|
2,850,725
|
2,193,085
|
|||||
Depreciation
|
1,015,083
|
1,801,507
|
2,206,023
|
|||||
Minority
interest
|
1,548,247
|
2,207,925
|
480,982
|
|||||
Charges
for mortality and administration
|
||||||||
of
universal life and annuity products
|
(8,607,194)
|
(9,197,484)
|
(9,097,858)
|
|||||
Interest
credited to account balances
|
5,286,528
|
5,146,917
|
5,251,303
|
|||||
Policy
acquisition costs deferred
|
0
|
0
|
(8,000)
|
|||||
Change
in accrued investment income
|
339,381
|
(160,506)
|
139,421
|
|||||
Change
in reinsurance receivables
|
703,076
|
291,582
|
455,527
|
|||||
Change
in policy liabilities and accruals
|
(2,911,180)
|
1,976,884
|
1,017,812
|
|||||
Change
in income taxes payable
|
(157,125)
|
1,599,104
|
157,111
|
|||||
Change
in other assets and liabilities, net
|
2,362,186
|
(1,432,078)
|
(3,772,419)
|
|||||
Net
cash provided by (used in) operating activities
|
809,699
|
(1,875,494)
|
(290,936)
|
|||||
Cash
flows from investing activities:
|
||||||||
Proceeds
from investments sold and matured:
|
||||||||
Fixed
maturities held for sale
|
67,386,270
|
16,577,724
|
26,182,897
|
|||||
Fixed
maturities matured
|
1,596,785
|
3,729,019
|
5,816,061
|
|||||
Equity
securities
|
140,390
|
16,242,400
|
3,182,055
|
|||||
Mortgage
loans
|
9,230,011
|
12,152,376
|
10,050,792
|
|||||
Real
estate
|
36,366,487
|
20,984,831
|
876,594
|
|||||
Policy
loans
|
4,685,078
|
3,698,261
|
3,803,491
|
|||||
Short-term
|
1,312,195
|
1,546,907
|
425,000
|
|||||
Other
invested assets
|
793,749
|
0
|
0
|
|||||
Total
proceeds from investments sold and matured
|
121,510,965
|
74,931,518
|
50,336,890
|
|||||
Cost
of investments acquired:
|
||||||||
Fixed
maturities held for sale
|
(29,730,542)
|
(39,037,210)
|
(6,496,673)
|
|||||
Fixed
maturities
|
(1,319,428)
|
(2,506,647)
|
(1,474,140)
|
|||||
Equity
securities
|
(16,991,419)
|
(7,355,487)
|
(1,606,543)
|
|||||
Mortgage
loans
|
(22,816,712)
|
(7,306,094)
|
(26,109,670)
|
|||||
Real
estate
|
(33,506,988)
|
(20,883,148)
|
(11,883,777)
|
|||||
Policy
loans
|
(4,396,791)
|
(2,878,487)
|
(3,603,581)
|
|||||
Short-term
|
(2,193,967)
|
(1,557,655)
|
(428,221)
|
|||||
Other
invested assets
|
(800,000)
|
0
|
0
|
|||||
Total
cost of investments acquired
|
(111,755,847)
|
(81,524,728)
|
(51,602,605)
|
|||||
Purchase
of property and equipment
|
(72,674)
|
(1,468,660)
|
0
|
|||||
Sale
of property and equipment
|
1,191,508
|
0
|
0
|
|||||
Net
cash provided by (used in) investing activities
|
10,873,952
|
(8,061,870)
|
(1,265,715)
|
|||||
Cash
flows from financing activities:
|
||||||||
Policyholder
contract deposits
|
7,331,444
|
7,940,954
|
8,481,796
|
|||||
Policyholder
contract withdrawals
|
(6,918,990)
|
(6,401,947)
|
(6,209,958)
|
|||||
Proceeds
from notes payable
|
21,607,423
|
24,190,081
|
1,500,000
|
|||||
Payments
of principal on line of credit
|
(24,683,158)
|
(1,200,000)
|
(1,500,000)
|
|||||
Issuance
of common stock
|
444,099
|
0
|
151,320
|
|||||
Purchase
of treasury stock
|
(190,554)
|
(482,030)
|
(521,892)
|
|||||
Purchase
of subsidiary
|
0
|
(21,079,555)
|
0
|
|||||
Cash
of subsidiary at date of acquisition
|
0
|
3,238,327
|
0
|
|||||
Net
cash provided by (used in) financing activities
|
(2,409,736)
|
6,205,830
|
1,901,266
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
9,273,915
|
(3,731,534)
|
344,615
|
|||||
Cash
and cash equivalents at beginning of year
|
8,472,553
|
12,204,087
|
11,859,472
|
|||||
Cash
and cash equivalents at end of year
|
$
|
17,746,468
|
$
|
8,472,553
|
$
|
12,204,087
|
||
A.
|
ORGANIZATION
- At December 31, 2007, the significant majority-owned subsidiaries
of UTG, Inc were as depicted on the following organizational
chart.
|
|
B.
|
NATURE
OF OPERATIONS - UTG, Inc., is an insurance holding company, which sells
individual life insurance products through its insurance
subsidiaries. The Company's principal market is the mid-western
United States and Texas. The Company’s dominant business is
individual life insurance which includes the servicing of existing
insurance business in force, the solicitation of new individual life
insurance and the acquisition of other companies in the insurance
business.
|
|
C.
|
BUSINESS
SEGMENTS - The Company has only one significant business segment –
insurance.
|
|
D.
|
BASIS
OF PRESENTATION - The financial statements of UTG, Inc., and its
subsidiaries have been prepared in accordance with accounting principles
generally accepted in the United States of America which differ from
statutory accounting practices permitted by insurance regulatory
authorities.
|
|
E.
|
PRINCIPLES
OF CONSOLIDATION - The consolidated financial statements include the
accounts of the Registrant and its majority-owned subsidiaries. All
significant inter-company accounts and transactions have been
eliminated.
|
|
F.
|
INVESTMENTS
- Investments are shown on the following
bases:
|
|
Fixed
maturities held to maturity - at cost, adjusted for amortization of
premium or discount and other-than-temporary market value
declines. The amortized cost of such investments differs from
their market values; however, the Company has the ability and intent to
hold these investments to maturity, at which time the full face value is
expected to be realized.
|
|
Investments
held for sale - at current market value, unrealized appreciation or
depreciation is charged directly to shareholders'
equity.
|
|
Mortgage
loans on real estate - at unpaid balances, adjusted for amortization of
premium or discount, less allowance for possible
losses.
|
|
Real
estate - investment real estate at cost less allowance for depreciation
and, as appropriate, provisions for possible
losses. Accumulated depreciation on investment real estate was
$594,043 and $593,877 as of December 31, 2007 and 2006,
respectively.
|
|
Policy
loans - at unpaid balances including accumulated interest but not in
excess of the cash surrender value of the related
policy.
|
|
Short-term
investments - at cost, which approximates current market
value.
|
|
Realized
gains and losses on sales of investments are recognized in net income on
the specific identification basis.
|
|
Unrealized
gains and losses on investments carried at market value are recognized in
other comprehensive income on the specific identification
basis.
|
G.
|
CASH
EQUIVALENTS - The Company considers certificates of deposit and other
short-term instruments with an original purchased maturity of three months
or less cash equivalents.
|
H.
|
REINSURANCE
- In the normal course of business, the Company seeks to limit its
exposure to loss on any single insured and to recover a portion of
benefits paid by ceding reinsurance to other insurance enterprises or
reinsurers under excess coverage and coinsurance contracts. The
Company retains a maximum of $125,000 of coverage per individual
life.
|
|
Amounts
paid, or deemed to have been paid, for reinsurance contracts are recorded
as reinsurance receivables. Reinsurance receivables are
recognized in a manner consistent with the liabilities relating to the
underlying reinsured contracts. The cost of reinsurance related
to long-duration contracts is accounted for over the life of the
underlying reinsured policies using assumptions consistent with those used
to account for the underlying
policies.
|
|
I.
|
FUTURE
POLICY BENEFITS AND EXPENSES - The liabilities for traditional life
insurance and accident and health insurance policy benefits are computed
using a net level method. These liabilities include assumptions
as to investment yields, mortality, withdrawals, and other assumptions
based on the life insurance subsidiary’s experience adjusted to reflect
anticipated trends and to include provisions for possible unfavorable
deviations. The Company makes these assumptions at the time the
contract is issued or, in the case of contracts acquired by purchase, at
the purchase date. Future policy benefits for individual life
insurance and annuity policies are computed using interest rates ranging
from 2% to 6% for life insurance and 2.5% to 9.25% for
annuities. Benefit reserves for traditional life insurance
policies include certain deferred profits on limited-payment policies that
are being recognized in income over the policy term. Policy
benefit claims are charged to expense in the period that the claims are
incurred. Current mortality rate assumptions are based on
1975-80 select and ultimate tables. Withdrawal rate assumptions
are based upon Linton B or Linton C, which are industry standard actuarial
tables for forecasting assumed policy lapse
rates.
|
|
Benefit
reserves for universal life insurance and interest sensitive life
insurance products are computed under a retrospective deposit method and
represent policy account balances before applicable surrender
charges. Policy benefits and claims that are charged to expense
include benefit claims in excess of related policy account
balances. Interest crediting rates for universal life and
interest sensitive products range from 4.0% to 5.5% as of
December 31, 2007 and 2006.
|
|
J.
|
POLICY
AND CONTRACT CLAIMS - Policy and contract claims include provisions for
reported claims in process of settlement, valued in accordance with the
terms of the policies and contracts, as well as provisions for claims
incurred and unreported based on prior experience of the
Company. Incurred but not reported claims were $1,232,848
and $1,242,950 as of December 31, 2007 and 2006,
respectively.
|
K.
|
COST
OF INSURANCE ACQUIRED - When an insurance company is acquired, the Company
assigns a portion of its cost to the right to receive future cash flows
from insurance contracts existing at the date of the
acquisition. The cost of policies purchased represents the
actuarially determined present value of the projected future cash flows
from the acquired policies. The Company utilized 9% discount
rate on approximately 14% of the business, 12% discount rate on
approximately 83% of the business and 15% discount rate on approximately
3% of the business. Cost of insurance acquired is amortized
with interest in relation to expected future profits, including direct
charge-offs for any excess of the unamortized asset over the projected
future profits. The interest rates utilized in the amortization
calculation are 9% on approximately 7% of the balance, 12% on
approximately 50% of the balance and 15% on 43% of the
balance. The interest rates vary due to differences in the
blocks of business. The amortization is adjusted
retrospectively when estimates of current or future gross profits to be
realized from a group of products are
revised.
|
2007
|
2006
|
2005
|
||||
Cost
of insurance acquired,
beginning
of year
|
$
|
32,808,159
|
$
|
10,554,447
|
$
|
12,747,532
|
Acquired
with acquisition of
subsidiary
|
(188,423)
|
25,104,437
|
0
|
|||
Interest
accretion
|
6,024,911
|
3,426,178
|
3,739,918
|
|||
Amortization
|
(10,307,626)
|
(6,276,903)
|
(5,933,003)
|
|||
Net
amortization
|
(4,282,715)
|
(2,850,725)
|
(2,193,085)
|
|||
Cost
of insurance acquired,
end
of year
|
$
|
28,337,021
|
$
|
32,808,159
|
$
|
10,554,447
|
|
Cost
of insurance acquired was tested for impairment as part of the regular
reporting process. The fair value of the cost of insurance
acquired was estimated using the expected present value of future cash
flows. No impairment loss was realized during any of the three
years presented.
|
Interest Accretion
|
Amortization
|
Net Amortization
|
||
2008
|
5,437,000
|
9,480,000
|
4,043,000
|
|
2009
|
4,885,000
|
8,879,000
|
3,994,000
|
|
2010
|
2,437,000
|
4,345,000
|
1,908,000
|
|
2011
|
2,230,000
|
3,833,000
|
1,603,000
|
|
2012
|
2,037,000
|
3,529,000
|
1,492,000
|
|
L.
|
DEFERRED
POLICY ACQUISITION COSTS - Commissions and other costs (salaries of
certain employees involved in the underwriting and policy issue functions
and medical and inspection fees) of acquiring life insurance products that
vary with and are primarily related to the production of new business have
been deferred. Traditional life insurance acquisition costs are
being amortized over the premium-paying period of the related policies
using assumptions consistent with those used in computing policy benefit
reserves.
|
|
For
universal life insurance and interest sensitive life insurance products,
acquisition costs are being amortized generally in proportion to the
present value of expected gross profits from surrender charges and
investment, mortality, and expense margins. Under SFAS No. 97,
"Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of
Investments," the Company makes certain assumptions regarding the
mortality, persistency, expenses, and interest rates it expects to
experience in future periods. These assumptions are to be best
estimates and are to be periodically updated whenever actual experience
and/or expectations for the future change from initial
assumptions. The amortization is adjusted retrospectively when
estimates of current or future gross profits to be realized from a group
of products are revised.
|
2007
|
2006
|
2005
|
||||
Deferred,
beginning of year
|
$
|
1,188,888
|
$
|
1,414,364
|
$
|
1,685,263
|
Acquisition
costs deferred:
|
||||||
Commissions
|
0
|
0
|
0
|
|||
Other
expenses
|
0
|
0
|
5,000
|
|||
Total
|
0
|
0
|
5,000
|
|||
Interest
accretion
|
9,000
|
7,000
|
8,000
|
|||
Amortization
charged to income
|
(188,360)
|
(232,476)
|
(283,899)
|
|||
Net
amortization
|
(179,360)
|
(225,476)
|
(275,899)
|
|||
Change
for the year
|
(179,360)
|
(225,476)
|
(270,899)
|
|||
Deferred,
end of year
|
$
|
1,009,528
|
$
|
1,188,888
|
$
|
1,414,364
|
Interest
|
Net
|
|||||
Accretion
|
Amortization
|
Amortization
|
||||
2008
|
9,000
|
206,000
|
197,000
|
|||
2009
|
8,000
|
186,000
|
178,000
|
|||
2010
|
6,000
|
104,000
|
98,000
|
|||
2011
|
5,000
|
77,000
|
72,000
|
|||
2012
|
4,000
|
66,000
|
62,000
|
|
M.PROPERTY
AND EQUIPMENT - Company-occupied property, data processing equipment and
furniture and office equipment are stated at cost less accumulated
depreciation of $2,681,009 and $2,542,750 at December 31, 2007 and
2006, respectively. Depreciation is computed on a straight-line
basis for financial reporting purposes using estimated useful lives of
three to thirty years. Depreciation expense was $258,298,
$261,148, and $250,795 for the years ended December 31, 2007, 2006,
and 2005, respectively.
|
N.
|
INCOME
TAXES - Income taxes are reported under Statement of Financial Accounting
Standards Number 109. Deferred income taxes are recorded to
reflect the tax consequences on future periods of differences between the
tax bases of assets and liabilities and their financial reporting amounts
at the end of each such period.
|
O.
|
EARNINGS
PER SHARE - Earnings per share (EPS) are reported under Statement of
Financial Accounting Standards Number 128. The objective of
both basic EPS and diluted EPS is to measure the performance of an entity
over the reporting period. Basic EPS is computed by dividing
income available to common stockholders (the numerator) by the
weighted-average number of common shares outstanding (the denominator)
during the period. Diluted EPS is similar to the
computation of basic EPS except that the denominator is increased to
include the number of additional common shares that would have been
outstanding if the dilutive potential common shares had been
issued. In addition, the numerator also is adjusted for any
changes in income or loss that would result from the assumed conversion of
those potential common shares.
|
P.
|
TREASURY
SHARES - The Company holds 384,813 and 360,888 shares of common stock as
treasury shares with a cost basis of $2,846,517 and $2,632,910 at
December 31, 2007 and 2006,
respectively.
|
Q.
|
RECOGNITION
OF REVENUES AND RELATED EXPENSES - Premiums for traditional life insurance
products, which include those products with fixed and guaranteed premiums
and benefits, consist principally of whole life insurance policies, and
certain annuities with life contingencies are recognized as revenues when
due. Limited payment life insurance policies defer gross
premiums received in excess of net premiums, which is then recognized in
income in a constant relationship with insurance in force. Accident and
health insurance premiums are recognized as revenue pro rata over the
terms of the policies. Benefits and related expenses associated
with the premiums earned are charged to expense proportionately over the
lives of the policies through a provision for future policy benefit
liabilities and through deferral and amortization of deferred policy
acquisition costs. For universal life and investment products,
generally there is no requirement for payment of premium other than to
maintain account values at a level sufficient to pay mortality and expense
charges. Consequently, premiums for universal life policies and investment
products are not reported as revenue, but as deposits. Policy
fee revenue for universal life policies and investment products consists
of charges for the cost of insurance and policy administration fees
assessed during the period. Expenses include interest credited
to policy account balances and benefit claims incurred in excess of policy
account balances.
|
|
R.
|
PARTICIPATING
INSURANCE - Participating business represents 9% and 8% of life
insurance in force at December 31, 2007 and 2006,
respectively. Premium income from participating business
represents 42%, 33%, and 21% of total premiums for the years ended
December 31, 2007, 2006 and 2005, respectively. The amount
of dividends to be paid is determined annually by the insurance
subsidiary's Board of Directors. Earnings allocable to
participating policyholders are based on legal requirements that vary by
state.
|
|
S.
|
RECLASSIFICATIONS
- Certain prior year amounts have been reclassified to conform to the 2007
presentation. Such reclassifications had no effect on
previously reported net income or shareholders'
equity.
|
|
T.
|
USE
OF ESTIMATES - In preparing financial statements in conformity with
accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
|
|
U.
|
IMPAIRMENT
OF LONG LIVED ASSETS - The Company evaluates whether events and
circumstances have occurred that indicate the remaining estimated useful
life of long lived assets may warrant revision or that the remaining
balance of an asset may not be recoverable. The measurement of
possible impairment is based on the ability to recover the balance of
assets from expected future operating cash flows on an undiscounted
basis. In the opinion of management, no such impairment existed
at December 31, 2007.
|
2007
|
2006
|
2005
|
||||
Current
tax expense
|
$
|
1,076,824
|
$
|
398,268
|
$
|
21,368
|
Deferred
tax expense
|
(693,627)
|
1,551,339
|
137,040
|
|||
$
|
383,197
|
$
|
1,949,607
|
$
|
158,408
|
2007
|
2006
|
2005
|
||||
Net
income
|
$
|
2,142,619
|
$
|
3,869,720
|
$
|
1,260,223
|
Depreciation
|
54,564
|
0
|
0
|
|||
Management/consulting
fees
|
(99,486)
|
0
|
0
|
|||
Federal
income tax provision
|
221,820
|
181,070
|
(24,254)
|
|||
Gain
of subsidiaries
|
(1,870,426)
|
(3,616,283)
|
(1,155,680)
|
|||
Taxable
income
|
$
|
449,091
|
$
|
434,507
|
$
|
80,289
|
2007
|
2006
|
2005
|
||||||
Tax
computed at statutory rate
|
$
|
1,425,922
|
$
|
2,809,538
|
$
|
664,865
|
||
Changes
in taxes due to:
|
||||||||
Utilization
of AMT credit carryforward
|
0
|
(163,039)
|
0
|
|||||
Utilization
of capital loss carryforward
|
0
|
0
|
(327,467)
|
|||||
Dividend
received deduction
|
(246,255)
|
(224,386)
|
(188,988)
|
|||||
Depreciation
|
0
|
163,130
|
0
|
|||||
Current
year losses with no tax benefit
|
404,872
|
0
|
0
|
|||||
Minority
interest
|
(541,886)
|
(772,774)
|
(168,344)
|
|||||
Utilization
of net operating loss carryforward
|
0
|
396,899
|
0
|
|||||
Small
company deduction
|
(604,105)
|
(293,804)
|
211,474
|
|||||
Other
|
(55,351)
|
34,043
|
(33,132)
|
|||||
Income
tax expense
|
$
|
383,197
|
$
|
1,949,607
|
$
|
158,408
|
2007
|
2006
|
|||
Investments
|
$
|
5,638,562
|
$
|
4,988,293
|
Cost
of insurance acquired
|
9,917,957
|
11,482,856
|
||
Deferred
policy acquisition costs
|
353,335
|
416,111
|
||
Management/consulting
fees
|
(225,895)
|
(260,715)
|
||
Future
policy benefits
|
1,098,084
|
984,029
|
||
Gain
on sale of subsidiary
|
2,312,483
|
2,312,483
|
||
Allowance
for uncollectibles
|
(61,711)
|
(80,500)
|
||
Other
liabilities
|
(637,692)
|
(934,503)
|
||
Federal
tax DAC
|
(1,893,088)
|
(2,427,986)
|
||
Deferred
tax liability
|
$
|
16,502,035
|
$
|
16,480,068
|
A.
|
NET
INVESTMENT INCOME - The following table reflects net investment income by
type of investment:
|
December 31,
|
|||||||||||||||||
2007
|
2006
|
2005
|
|||||||||||||||
Fixed
maturities and fixed maturities
held
for sale
|
$
|
11,790,380
|
$
|
6,838,277
|
$
|
6,661,648
|
|||||||||||
Equity
securities
|
1,077,749
|
915,864
|
771,379
|
||||||||||||||
Mortgage
loans
|
2,689,956
|
2,739,350
|
2,033,007
|
||||||||||||||
Real
estate
|
4,599,005
|
5,500,005
|
7,473,698
|
||||||||||||||
Policy
loans
|
951,394
|
580,961
|
860,240
|
||||||||||||||
Short-term
investments
|
21,929
|
27,620
|
3,699
|
||||||||||||||
Cash
|
316,891
|
454,580
|
171,926
|
||||||||||||||
Total
consolidated investment income
|
21,447,304
|
17,056,657
|
17,975,597
|
||||||||||||||
Investment expenses |
(4,566,942)
(6,055,492) (6,924,371)
|
|
|
|
|||||||||||||
Consolidated
net investment income
|
$
|
16,880,362
|
$
|
11,001,165
|
$
|
11,051,226
|
Carrying
Value
|
|||||||||
2007
|
2006
|
||||||||
Investments
held for sale:
|
|||||||||
Fixed
maturities
|
|||||||||
U.S.
Government, government agencies and authorities
|
$
|
30,536,628
|
$
|
39,455,915
|
|||||
State,
municipalities and political subdivisions
|
3,540,633
|
3,480,759
|
|||||||
Collateralized
mortgage obligations
|
89,804,412
|
118,641,593
|
|||||||
Public
utilities
|
4,594,514
|
6,097,151
|
|||||||
All
other corporate bonds
|
69,498,019
|
65,553,711
|
|||||||
$
|
197,974,206
|
$
|
233,229,129
|
||||||
Equity
securities
|
|||||||||
Banks,
trusts and insurance companies
|
$
|
10,577,587
|
$
|
3,606,421
|
|||||
Industrial
and miscellaneous
|
22,101,005
|
12,699,170
|
|||||||
$
|
32,678,592
|
$
|
16,305,591
|
Carrying
Value
|
|||||||||
2007
|
2006
|
||||||||
Fixed
maturities held to maturity:
|
|||||||||
U.S.
Government, government agencies and authorities
|
$
|
5,474,946
|
$
|
5,484,304
|
|||||
State,
municipalities and political subdivisions
|
504,165
|
688,679
|
|||||||
Collateralized
mortgage obligations
|
27,735
|
101,930
|
|||||||
$
|
6,006,846
|
$
|
6,274,913
|
||||||
Securities
of affiliate
|
$
|
4,000,000
|
$
|
4,000,000
|
Below
Investment
Grade
Investments
|
2007
|
2006
|
|||
CMO
|
$
|
0
|
$
|
1,678,714
|
|
Corporate
|
489,673
|
2,396,868
|
|||
Total
|
$
|
489,673
|
$
|
4,075,582
|
|
The
amortized cost and estimated market values of investments in securities
including investments held for sale are as
follows:
|
2007
|
Cost
or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Market
Value
|
||||
Investments
held for sale:
|
||||||||
Fixed
maturities
|
||||||||
U.S.
Government and govt.
agencies
and authorities
|
$
|
29,054,693
|
$
|
1,482,348
|
$
|
(413)
|
$
|
30,536,628
|
States,
municipalities and
political
subdivisions
|
3,457,961
|
82,672
|
0
|
3,540,633
|
||||
Collateralized
mortgage
obligations
|
89,906,087
|
541,182
|
(642,857)
|
89,804,412
|
||||
Public
utilities
|
4,425,263
|
178,004
|
(8,753)
|
4,594,514
|
||||
All
other corporate bonds
|
69,235,170
|
1,381,579
|
(1,118,730)
|
69,498,019
|
||||
196,079,174
|
3,665,785
|
(1,770,753)
|
197,974,206
|
|||||
Equity
securities
|
26,882,317
|
7,377,656
|
(1,581,381)
|
32,678,592
|
||||
Total
|
$
|
222,961,491
|
$
|
11,043,441
|
$
|
(3,352,134)
|
$
|
230,652,798
|
Fixed
maturities held to maturity:
|
||||||||
U.S.
Government and govt.
agencies
and authorities
|
$
|
5,474,946
|
$
|
316,293
|
$
|
0
|
$
|
5,791,239
|
States,
municipalities and
political
subdivisions
|
504,165
|
7,016
|
0
|
511,181
|
||||
Collateralized
mortgage
obligations
|
27,735
|
117
|
(236)
|
27,616
|
||||
Total
|
$
|
6,006,846
|
$
|
323,426
|
$
|
(236)
|
$
|
6,330,036
|
Securities
of affiliate
|
$
|
4,000,000
|
$
|
0
|
$
|
0
|
$
|
4,000,000
|
2006
|
Cost
or
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Market
Value
|
||||
Investments
held for sale:
|
||||||||
Fixed
maturities
|
||||||||
U.S.
Government and govt.
agencies
and authorities
|
$
|
39,551,437
|
$
|
277,642
|
$
|
(373,164)
|
$
|
39,455,915
|
States,
municipalities and
political
subdivisions
|
3,460,863
|
25,213
|
(5,317)
|
3,480,759
|
||||
Collateralized
mortgage
obligations
|
120,390,106
|
90,803
|
(1,839,315)
|
118,641,594
|
||||
Public
utilities
|
6,097,151
|
0
|
0
|
6,097,151
|
||||
All
other corporate bonds
|
65,555,098
|
294,100
|
(295,488)
|
65,553,710
|
||||
235,054,655
|
687,758
|
(2,513,284)
|
233,229,129
|
|||||
Equity
securities
|
10,031,148
|
6,274,443
|
0
|
16,305,591
|
||||
Total
|
$
|
245,085,803
|
$
|
6,962,201
|
$
|
(2,513,284)
|
$
|
249,534,720
|
Fixed
maturities held to maturity:
|
||||||||
U.S.
Government and govt.
agencies
and authorities
|
$
|
5,484,304
|
$
|
0
|
$
|
(72,899)
|
$
|
5,411,405
|
States,
municipalities and
political
subdivisions
|
688,679
|
39,339
|
0
|
728,018
|
||||
Collateralized
mortgage
obligations
|
101,930
|
3,300
|
(280)
|
104,950
|
||||
Total
|
$
|
6,274,913
|
$
|
42,639
|
$
|
(73,179)
|
$
|
6,244,373
|
Securities
of affiliate
|
$
|
4,000,000
|
$
|
0
|
$
|
0
|
$
|
4,000,000
|
|
At
December 31, 2007 and 2006, the Company did not hold any fixed maturity
investments that exceeded 10% of shareholder’s equity. The
Company held two equity investments totaling $18,611,018 and one equity
investment of $11,677,170 that exceeded 10% of shareholder’s equity at
December 31, 2007 and 2006,
respectively.
|
|
The
fair value of investments with sustained gross unrealized losses at
December 31, 2007 and 2006 are as
follows:
|
2007
|
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
|
$ 338,769
|
$ (413)
|
$ 0
|
$ 0
|
$ 338,769
|
$ (413)
|
Collateralized mortgage
obligations
|
7,861,524
|
(114,149)
|
34,701,460
|
(528,944)
|
42,562,984
|
(643,093)
|
Public
utilities
|
501,007
|
(8,753)
|
0
|
0
|
501,007
|
(8,753)
|
All
other corporate bonds
|
30,121,438
|
(594,641)
|
7,410,565
|
(524,089)
|
37,532,003
|
(1,118,730)
|
Total
fixed maturity
|
$38,822,738
|
$ (717,956)
|
$42,112,025
|
$ (1,053,033)
|
$80,934,763
|
$(1,770,989)
|
Equity
securities
|
$ 8,624,374
|
$(1,581,381)
|
$ 0
|
$ 0
|
$ 8,624,374
|
$(1,581,381)
|
2006
|
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
|
$ 1,279,993
|
$ (17,565)
|
$20,929,637
|
$ (428,499)
|
$ 22,209,630
|
$ (446,064)
|
States,
municipalities and political subdivisions
|
1,024,683
|
(5,317)
|
0
|
0
|
1,024,683
|
(5,317)
|
Collateralized
mortgage obligations
|
8,186,571
|
(51,339)
|
65,484,517
|
(1,788,255)
|
73,671,088
|
(1,839,594)
|
All
other corporate bonds
|
0
|
0
|
8,154,382
|
(295,488)
|
8,154,382
|
(295,488)
|
Total
fixed maturity
|
$10,491,247
|
$ (74,221)
|
$94,568,536
|
$ (2,512,242)
|
$105,059,783
|
$(2,586,463)
|
|
The
unrealized losses of fixed maturity investments were primarily caused by
interest rate increases. The contractual terms of those
investments do not permit the issuer to settle the securities at a price
less than the amortized cost of the investment. The Company
regularly reviews its investment portfolio for factors that may indicate
that a decline in fair value of an investment is other than
temporary. Based on an evaluation of the issues, including, but
not limited to, intentions to sell or ability to hold the fixed maturity
and equity securities with unrealized losses for a period of time
sufficient for them to recover; the length of time and amount of the
unrealized loss; and the credit ratings of the issuers of the investments,
the Company does not consider these investments to be
other-than-temporarily impaired at December 31, 2007 and
2006.
|
|
The
amortized cost and estimated market value of debt securities at
December 31, 2007, 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 Held for Sale
December 31,
2007
|
Amortized
Cost
|
Estimated
Market
Value
|
||
Due
in one year or less
|
$
|
11,283,624
|
$
|
11,331,103
|
Due
after one year through five years
|
28,992,450
|
29,386,439
|
||
Due
after five years through ten years
|
38,550,306
|
39,135,107
|
||
Due
after ten years
|
41,498,729
|
42,544,947
|
||
Collateralized
mortgage obligations
|
75,754,065
|
75,576,610
|
||
Total
|
$
|
196,079,174
|
$
|
197,974,206
|
Fixed
Maturities Held to Maturity
December 31,
2007
|
Amortized
Cost
|
Estimated
Market
Value
|
||
Due
in one year or less
|
$
|
484,224
|
$
|
489,559
|
Due
after one year through five years
|
29,058
|
31,025
|
||
Due
after five years through ten years
|
5,467,420
|
5,783,545
|
||
Collateralized
mortgage obligations
|
26,144
|
25,907
|
||
Total
|
$
|
6,006,846
|
$
|
6,330,036
|
|
An
analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio for the years ended December 31, 2007,
2006 and 2005 is as follows:
|
Year
ended December 31, 2007
|
Cost
or
Amortized
Cost
|
Gross
Realized
Gains
|
Gross
Realized
Losses
|
Proceeds
From
Sale
|
||||
Scheduled
principal repayments,
Calls
and tenders:
|
||||||||
Held
for sale
|
$
|
22,937,961
|
$
|
34,076
|
$
|
0
|
$
|
22,972,037
|
Held
to maturity
|
1,596,785
|
0
|
0
|
1,596,785
|
||||
Sales:
|
||||||||
Held
for sale
|
44,801,958
|
183,513
|
(733,841)
|
44,251,630
|
||||
Held
to maturity
|
0
|
0
|
0
|
0
|
||||
Total
|
$
|
69,336,704
|
$
|
217,589
|
$
|
(733,841)
|
$
|
68,820,452
|
Year
ended December 31, 2006
|
Cost
or
Amortized
Cost
|
Gross
Realized
Gains
|
Gross
Realized
Losses
|
Proceeds
From
Sale
|
||||
Scheduled
principal repayments,
Calls
and tenders:
|
||||||||
Held
for sale
|
$
|
14,214,020
|
$
|
0
|
$
|
0
|
$
|
14,214,020
|
Held
to maturity
|
3,715,892
|
0
|
0
|
3,715,892
|
||||
Sales:
|
||||||||
Held
for sale
|
2,363,638
|
11,229
|
(11,163)
|
2,363,704
|
||||
Held
to maturity
|
13,314
|
0
|
(187)
|
13,127
|
||||
Total
|
$
|
20,306,864
|
$
|
11,229
|
$
|
(11,350)
|
$
|
20,306,743
|
Year
ended December 31, 2005
|
Cost
or
Amortized
Cost
|
Gross
Realized
Gains
|
Gross
Realized
Losses
|
Proceeds
From
Sale
|
||||
Scheduled
principal repayments,
Calls
and tenders:
|
||||||||
Held
for sale
|
$
|
15,114,740
|
$
|
9,682
|
$
|
0
|
$
|
15,124,422
|
Held
to maturity
|
5,801,888
|
2,300
|
(9,125)
|
5,795,063
|
||||
Sales:
|
||||||||
Held
for sale
|
11,124,418
|
15,077
|
(60,022)
|
11,079,473
|
||||
Held
to maturity
|
0
|
0
|
(0)
|
0
|
||||
Total
|
$
|
32,041,046
|
$
|
27,059
|
$
|
(69,147)
|
$
|
31,998,958
|
|
Annually,
the Company completes an analysis of sales of securities held to maturity
to further assess the issuer’s creditworthiness of fixed maturity
holdings.
|
C.
|
INVESTMENTS
ON DEPOSIT - At December 31, 2007, investments carried at
approximately $9,217,000 were on deposit with various state insurance
departments.
|
2007
|
2006
|
|||||||||||
Assets
|
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
||||||||
Fixed
maturities
|
$
|
6,006,846
|
$
|
6,330,036
|
$
|
6,274,913
|
$
|
6,244,373
|
||||
Fixed
maturities held for sale
|
197,974,206
|
197,974,206
|
233,229,129
|
233,229,129
|
||||||||
Equity
securities
|
28,678,592
|
28,678,592
|
16,305,591
|
16,305,591
|
||||||||
Securities
of affiliate
|
4,000,000
|
4,000,000
|
4,000,000
|
4,000,000
|
||||||||
Mortgage
loans on real estate
|
45,602,147
|
46,026,195
|
32,015,446
|
32,015,446
|
||||||||
Policy
loans
|
15,643,238
|
15,643,238
|
15,931,525
|
15,931,525
|
||||||||
Short-term
investments
|
933,967
|
933,967
|
47,879
|
47,879
|
||||||||
Liabilities
|
||||||||||||
Notes
payable
|
19,914,346
|
19,190,061
|
22,990,081
|
22,990,081
|
7.
|
REINSURANCE
|
Shown
in thousands
|
||||||||||||||
2007
Premiums
Earned
|
2006
Premiums
Earned
|
2005
Premiums
Earned
|
||||||||||||
Direct
|
$
|
19,945
|
$
|
15,450
|
$
|
16,357
|
||||||||
Assumed
|
223
|
65
|
42
|
|||||||||||
Ceded
|
(5,755)
|
(2,655)
|
(2,672)
|
|||||||||||
Net
premiums
|
$
|
14,413
|
$
|
12,860
|
$
|
13,727
|
9.
|
RELATED
PARTY TRANSACTIONS
|
For
the year ended December 31, 2007
|
||||||
Income(Loss)
|
Shares
|
Per-Share
|
||||
(Numerator)
|
(Denominator)
|
Amount
|
||||
Basic
EPS
|
||||||
Income
available to common shareholders
|
$
|
2,142,619
|
3,851,596
|
$
|
0.56
|
|
Effect
of Dilutive Securities
|
||||||
Options
|
0
|
0
|
||||
Diluted
EPS
|
||||||
Income
available to common shareholders and assumed conversions
|
$
|
2,142,619
|
3,851,596
|
$
|
0.56
|
|
For
the year ended December 31, 2006
|
||||||
Income
(Loss)
|
Shares
|
Per-Share
|
||||
(Numerator)
|
(Denominator)
|
Amount
|
||||
Basic
EPS
|
||||||
Income
available to common shareholders
|
$
|
3,869,720
|
3,872,425
|
$
|
1.00
|
|
Effect
of Dilutive Securities
|
||||||
Options
|
0
|
0
|
||||
Diluted
EPS
|
||||||
Income
available to common shareholders and assumed conversions
|
$
|
3,869,720
|
3,872,425
|
$
|
1.00
|
|
For
the year ended December 31, 2005
|
||||||
Income
|
Shares
|
Per-Share
|
||||
(Numerator)
|
(Denominator)
|
Amount
|
||||
Basic
EPS
|
||||||
Income
available to common shareholders
|
$
|
1,260,223
|
3,938,781
|
$
|
0.32
|
|
Effect
of Dilutive Securities
|
||||||
Options
|
0
|
0
|
||||
Diluted
EPS
|
||||||
Income
available to common shareholders and assumed conversions
|
$
|
1,260,223
|
3,938,781
|
$
|
0.32
|
|
Year
|
Amount
|
||
2008
|
$
|
1,243,615
|
|
2009
|
4,297,575
|
||
2010
|
4,847,580
|
||
2011
|
4,847,580
|
||
2012
|
4,542,034
|
Assets
acquired:
|
||||
Investments
|
$
|
85,970,516
|
||
Policy
loans
|
4,106,461
|
|||
Cash
and cash equivalents
|
3,238,327
|
|||
Reinsurance
on future policy benefits
|
42,250,714
|
|||
Cost
of insurance acquired
|
25,104,437
|
|||
All
other
|
2,306,434
|
|||
162,976,889
|
||||
Future
policy benefits
|
116,991,161
|
|||
Notes
payable
|
3,357,000
|
|||
Deferred
taxes
|
8,160,832
|
|||
All
other
|
6,803,588
|
|||
Minority
interest
|
9,994,661
|
|||
145,307,242
|
||||
$
|
17,669,647
|
2006
|
2005
|
|||
Total
revenues
|
$
|
44,115,000
|
$
|
43,255,000
|
Operating
income
|
4,607,000
|
2,897,000
|
||
Net
income
|
4,607,000
|
2,897,000
|
||
Net
income per common share
|
1.17
|
.73
|
Tax
|
|||||||
Before-Tax
|
(Expense)
|
Net
of Tax
|
|||||
2007
|
Amount
|
or
Benefit
|
Amount
|
||||
Unrealized
holding gains during
|
|||||||
period
|
$
|
10,460,271
|
$
|
(3,661,095)
|
$
|
6,799,176
|
|
Less:
reclassification adjustment
|
|||||||
for
gains realized in net income
|
8,411,088
|
(2,943,881)
|
5,467,207
|
||||
Net
unrealized gains
|
2,049,183
|
(717,214)
|
1,331,969
|
||||
Other
comprehensive income
|
$
|
2,049,183
|
$
|
(717,214)
|
$
|
1,331,969
|
|
Tax
|
|||||||
Before-Tax
|
(Expense)
|
Net
of Tax
|
|||||
2006
|
Amount
|
or
Benefit
|
Amount
|
||||
Unrealized
holding losses during
|
|||||||
period
|
$
|
(20,192,352)
|
$
|
7,067,323
|
$
|
(13,125,029)
|
|
Less:
reclassification adjustment
|
|||||||
for
losses realized in net income
|
17,609,660
|
6,163,381
|
11,446,279
|
||||
Net
unrealized losses
|
(2,582,692)
|
903,942
|
(1,678,750)
|
||||
Other
comprehensive deficit
|
$
|
(2,582,692)
|
$
|
903,942
|
$
|
(1,678,750)
|
|
Tax
|
|||||||
Before-Tax
|
(Expense)
|
Net
of Tax
|
|||||
2005
|
Amount
|
or
Benefit
|
Amount
|
||||
Unrealized
holding losses during
|
|||||||
period
|
$
|
(5,315,754)
|
$
|
1,860,514
|
$
|
(3,455,240)
|
|
Less:
reclassification adjustment
|
|||||||
for
losses realized in net income
|
2,202,978
|
(771,042)
|
1,431,936
|
||||
Net
unrealized losses
|
(3,112,775)
|
1,089,471
|
(2,023,304)
|
||||
Other
comprehensive deficit
|
$
|
(3,112,775)
|
$
|
1,089,471
|
$
|
(2,023,304)
|
|
17.
|
SELECTED
QUARTERLY FINANCIAL DATA
(UNAUDITED)
|
2007
|
||||||||
1st
|
2nd
|
3rd
|
4th
|
|||||
Premiums
and policy fees, net
|
$
|
4,976,503
|
$
|
4,513,283
|
$
|
2,478,016
|
$
|
2,445,564
|
Net
investment income
|
4,286,925
|
4,471,452
|
4,394,621
|
3,727,364
|
||||
Total
revenues
|
9,474,343
|
11,467,081
|
7,412,135
|
10,519,013
|
||||
Policy
benefits including
dividends
|
7,332,162
|
6,554,409
|
5,397,281
|
3,837,480
|
||||
Commissions
and
amortization
of DAC and COI
|
942,694
|
550,838
|
507,102
|
265,560
|
||||
Operating
expenses
|
2,116,006
|
2,052,800
|
1,750,562
|
2,100,188
|
||||
Operating
income (loss)
|
(1,195,669)
|
1,856,533
|
(553,541)
|
3,966,740
|
||||
Net
income (loss)
|
(832,465)
|
1,670,686
|
(514,705)
|
1,819,103
|
||||
Basic
earnings (loss) per share
|
(0.22)
|
0.43
|
(0.13)
|
0.48
|
||||
Diluted
earnings (loss) per
share
|
(0.22)
|
0.43
|
(0.13)
|
0.48
|
||||
2006
|
||||||||
1st
|
2nd
|
3rd
|
4th
|
|||||
Premiums
and policy fees, net
|
$
|
3,427,772
|
$
|
3,561,728
|
$
|
3,170,033
|
$
|
2,700,892
|
Net
investment income
|
2,539,174
|
2,803,703
|
2,434,510
|
3,223,778
|
||||
Total
revenues
|
9,829,289
|
6,751,103
|
13,843,092
|
7,161,735
|
||||
Policy
benefits including
dividends
|
5,097,102
|
6,261,394
|
4,280,808
|
4,446,083
|
||||
Commissions
and
amortization
of DAC and COI
|
616,517
|
617,475
|
829,880
|
720,945
|
||||
Operating
expenses
|
1,724,197
|
1,385,837
|
1,848,120
|
1,495,494
|
||||
Operating
income (loss)
|
2,391,473
|
(1,513,603)
|
6,884,284
|
265,098
|
||||
Net
income (loss)
|
1,679,322
|
(798,126)
|
2,033,778
|
954,746
|
||||
Basic
earnings (loss) per share
|
0.43
|
(0.21)
|
0.53
|
0.25
|
||||
Diluted
earnings (loss) per
share
|
0.43
|
(0.21)
|
0.53
|
0.25
|
||||
2005
|
||||||||
1st
|
2nd
|
3rd
|
4th
|
|||||
Premiums
and policy fees, net
|
$
|
3,512,695
|
$
|
3,521,237
|
$
|
3,389,342
|
$
|
3,303,409
|
Net
investment income
|
2,433,259
|
2,356,705
|
2,587,341
|
3,673,921
|
||||
Total
revenues
|
6,196,733
|
7,419,034
|
5,354,586
|
8,500,987
|
||||
Policy
benefits including
dividends
|
5,091,826
|
3,777,730
|
4,769,952
|
4,236,835
|
||||
Commissions
and
amortization
of DAC and COI
|
482,934
|
387,478
|
574,929
|
733,477
|
||||
Operating
expenses
|
1,256,884
|
1,622,680
|
1,309,983
|
1,325,404
|
||||
Operating
income (loss)
|
(634,924)
|
1,631,146
|
(1,301,880)
|
2,205,271
|
||||
Net
income (loss)
|
(546,568)
|
1,395,033
|
(1,248,416)
|
1,660,174
|
||||
Basic
earnings (loss) per share
|
(0.14)
|
0.35
|
(0.32)
|
0.43
|
||||
Diluted
earnings (loss) per
share
|
(0.14)
|
0.35
|
(0.32)
|
0.43
|
|
Name,
Age
|
Position
with the Company, Business Experience and Other
Directorships
|
John
S. Albin, 79
|
Director
of UTG since 1984; farmer in Douglas and Edgar counties, Illinois, since
1951; Chairman of the Board of Longview State Bank from 1978 to 2005;
President of the Longview Capitol Corporation, a bank holding company,
since 1978; Chairman of First National Bank of Ogden, Illinois, from 1987
to 2005; Chairman of the State Bank of Chrisman from 1988 to 2005;
Chairman of First National Bank in Georgetown from 1994 to 2005; Director
of Illini Community Development Corporation since 1990; Commissioner of
Illinois Student Assistance Commission from 1996 to
2002.
|
Randall
L. Attkisson, 62
|
Director
of UTG since 1999; Chief Operating Officer of UTG and Universal Guaranty
Life Insurance Company since 2001; Chief Operating Officer of Acap
Corporation, American Capitol Insurance Company, and Texas Imperial Life
Insurance Company since 2006; President of UTG and Universal Guaranty Life
Insurance company 2001-2006; President, Secretary and Treasurer of First
Southern Holdings, LLC since 2002; Chief Financial Officer, Treasurer,
Director of First Southern Bancorp, Inc, a bank holding company, since
1986; Treasurer and Manager of First Southern Funding, LLC since 1992;
Advisory Director of Kentucky Christian Foundation since 2002; Director of
The River Foundation, Inc. since 1990; President of Randall L. Attkisson
& Associates from 1982 to 1986; Commissioner of Kentucky Department of
Banking & Securities from 1980 to 1982; Self-employed Banking
Consultant in Miami, FL from 1978 to
1980.
|
Joseph
A. Brinck, II, 52
|
Director
of UTG since 2003; CEO of Stelter & Brinck, LTD, a full service
combustion engineering and manufacturing company from 1979 to present;
President of Superior Thermal, LTD from 1990 to
present. Currently holds Professional Engineering Licenses in
Ohio, Kentucky, Indiana and
Illinois.
|
Jesse
T. Correll, 51
|
Chairman
and CEO of UTG and Universal Guaranty Life Insurance Company since 2000;
Director of UTG since 1999; Chairman and CEO of Acap Corporation, American
Capitol Insurance Company, and Texas Imperial Life Insurance Company since
2006; Chairman, President, Director of First Southern Bancorp, Inc. since
1983; President, Director of First Southern Funding, LLC since 1992;
President, Director of The River Foundation since 1990; Board member of
Crown Financial Ministries since 2004; Friends of the Good Samaritans
since 2005; Generous Giving since 2006 and the National Christian
Foundation since 2006. Mr. Correll and his wife Angela have 3
children and 2 grandchildren. Jesse Correll is the son of Ward
and Regina Correll.
|
Ward
F. Correll, 79
|
Director
of UTG since 2000; Director of Acap Corporation, American Capitol
Insurance Company, and Texas Imperial Life Insurance Company since 2006;
President, Director of Tradeway, Inc. of Somerset, KY since 1973;
President, Director of Cumberland Lake Shell, Inc. of Somerset, KY since
1971; President, Director of Tradewind Shopping Center, Inc. of Somerset,
KY since 1966; Director of First Southern Bancorp since 1987; Director of
First Southern Funding, LLC since 1991; Director of The River Foundation
since 1990; and Director First Southern Insurance Agency since
1987. Ward Correll is the father of Jesse
Correll.
|
Thomas
F. Darden, 53
|
Mr.
Darden is the Chief Executive Officer of Cherokee Investment Partners, a
private equity fund with over $1 billion of capital for investing in
brownfields. Cherokee has offices in North Carolina, Colorado, New Jersey,
London, Toronto and Montreal. Beginning in 1984, he served for 16 years as
the Chairman of Cherokee Sanford Group, a privately-held brick
manufacturing company in the United States and previously the Southeast's
largest soil remediation company. From 1981 to 1983, Mr. Darden was a
consultant with Bain & Company in Boston. From 1977 to 1978, he worked
as an environmental planner for the Korea Institute of Science and
Technology in Seoul, where he was a Henry Luce Foundation Scholar. Mr.
Darden is on the Boards of Shaw University and the University of North
Carolina's Environmental Department and Duke University’s Nicholas School
of the Environment. He is on the Board of Directors of the
National Brownfield Association and on the Board of Trustees of North
Carolina Environmental Defense. Mr. Darden is a director of Winston
Hotels, Inc. (NYSE) and serves on the board of governors of Research
Triangle Institute in Research Triangle Park, N.C. He was
Chairman of the Research Triangle Transit Authority and served two terms
on the N.C. Board of Transportation through appointments by the Governor
and the Speaker of the House. Mr. Darden earned a Masters in
Regional Planning from the University of North Carolina at Chapel Hill, a
Doctor of Jurisprudence from Yale Law School and a Bachelor of Arts from
the University of North Carolina at Chapel Hill, where he was a Morehead
Scholar. His 1976 undergraduate thesis analyzed the environmental impact
of third world development, and his 1981 Yale thesis addressed interstate
acid rain air pollution. Mr. Darden and his wife Jody have three children,
ages 20 to 29.
|
Howard
L. Dayton, Jr., 64
|
In
1985, Mr. Dayton founded Crown Ministries in Longwood,
Florida. Crown Ministries merged with Christian Financial
Concepts in September 2000 to form Crown Financial Ministries, the world’s
largest financial ministry. He served as Chief Executive
Officer from 1985 to 2007. In 1972 he began his commercial real
estate development career, specializing in office development in the
Central Florida area. Mr. Dayton developed The Caboose, a
successful railroad-themed restaurant in Orlando, FL in
1969. He also is the author of Your Money Counts, Free and
Clear, Your Money Map and Crown’s Small Group
Studies.
|
Peter
L. Ochs, 56
|
Mr.
Ochs is founder of Capital III, a private investment banking firm located
in Wichita, Kansas. The firm has acted as an intermediary in
over 120 transactions since its founding in 1982. In addition
the firm provides valuation services to private companies for such
purposes as ESOP’s, estate planning, M & A, buy/sells, and internal
planning strategies. The firm also provides both tactical and
strategic planning for privately held companies. In recent
years the firm has focused primarily on providing services to companies in
which Mr. Ochs holds an equity interest. Since 1987, Mr. Ochs
has been an active investor and officer of several privately held
companies. In most cases his ownership position has represented
a controlling interest in the enterprise. Companies in which he
has held or still holds an investment include a community bank, a medical
equipment company, a manufacturer of electrical assemblies, a sports
training equipment company, a manufacturer of corporate identification
products, a cable TV programming company, and a retail lifestyle clothing
store. Mr. Ochs is also one of the founding members of Trinity
Academy; a Christ centered college preparatory high school in
Wichita. Prior to founding Capital III, Mr. Ochs spent 8 years
in the commercial banking business. He graduated from the
University of Kansas in 1974 with a degree in business &
finance.
|
William
W. Perry, 51
|
Director
of UTG since 2001; Director of American Capitol Insurance Company, and
Texas Imperial Life Insurance Company since 2006; Owner of SES
Investments, Ltd., an oil and gas investments company since 1991;
President of EGL Resources, Inc., an oil and gas operations company based
in Texas and New Mexico since 1992; Vice Chairman of American Shale Oil
Company (AMSO); President of a real estate investment company; Director of
Young Life Foundation and involved with Young Life in various capacities;
Director of Abel-Hangar Foundation, Director of River Foundation; Director
of Millagros Foundation; Director of University of Oklahoma Associates;
Mayor of Midland, Texas since January 2008; Midland, Texas City Council
member from 2002-2008.
|
James
P. Rousey, 49
|
President
since September 2006, Director of UTG and Universal Guaranty Life
Insurance Company since September 2001; President and Director of Acap
Corporation, American Capitol Insurance Company, and Texas Imperial Life
Insurance Company since 2006; Regional CEO and Director of First Southern
National Bank from 1988 to 2001. Board Member with the Illinois Fellowship
of Christian Athletes from 2001-2005; Board Member with Contact Ministries
since 2007; Board Member with Amigos En Cristo, Inc since
2007.
|
|
Theodore
C. Miller, 45 Corporate Secretary since December 2000, Senior
Vice President and Chief Financial Officer since July 1997; Vice President
since October 1992 and Treasurer from October 1992 to December 2003; Vice
President and Controller of certain affiliated companies from 1984 to
1992. Vice President and Treasurer of certain affiliated
companies from 1992 to 1997; Senior Vice President and Chief Financial
Officer of subsidiary companies since 1997; Corporate Secretary of
subsidiary companies since 2000.
|
Summary
Compensation Table
|
|||||||||
Name
and Principal position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Comp
|
Nonqualified
Deferred Comp Earnings
|
All
Other Comp
(1)
|
Total
|
Jesse
T. Correll
Chief
Executive Officer
|
2007
|
111,057
|
25,000
|
0
|
0
|
0
|
0
|
4,398
(1)
|
140,455
|
2006
|
75,000
|
0
|
0
|
0
|
0
|
0
|
4,743
(1)
|
79,743
|
|
Randall
L. Attkisson
Chief
Operating Officer
|
2007
|
110,481
|
25,000
|
0
|
0
|
0
|
0
|
6,491
(2)
|
141,972
|
2006
|
75,000
|
0
|
0
|
0
|
0
|
0
|
4,743
(2)
|
79,743
|
|
James
P. Rousey
President
|
2007
|
145,000
|
25,000
|
0
|
0
|
0
|
0
|
6,922
(3)
|
176,922
|
2006
|
137,917
|
0
|
0
|
0
|
0
|
0
|
6,989
(3)
|
144,906
|
|
Theodore
C. Miller
Secretary/Senior
Vice President
|
2007
|
110,000
|
20,050
|
0
|
0
|
0
|
0
|
3,071
(4)
|
133,121
|
2006
|
102,917
|
15,000
|
0
|
0
|
0
|
0
|
3,808
(4)
|
121,725
|
|
Douglas
A. Dockter (6)
Vice
President
|
2007
|
100,000
|
4,000
|
0
|
0
|
0
|
0
|
2,820
(5)
|
106,820
|
2006
|
100,000
|
5,500
|
0
|
0
|
0
|
0
|
3,345
(5)
|
108,845
|
|
(1)
|
All
Other Compensation consists of matching contributions to an Employee
Savings Trust 401(k) Plan.
|
(2)
|
All
Other Compensation consists of matching contributions to an Employee
Savings Trust 401(k) Plan.
|
(3)
|
All
Other Compensation consists of matching contributions to an Employee
Savings Trust 401(k) Plan of $2,302 and $2,069, group life insurance
premiums of $720 and $720, and country club membership fees of $3,900 and
$4,200 during 2007 and 2006,
respectively.
|
(4)
|
All
Other Compensation consists of matching contributions to an Employee
Savings Trust 401(k) Plan of $2,351 and $3,088 and group life insurance
premiums of $720 and $720 during 2007 and 2006,
respectively.
|
(5)
|
All
Other Compensation consists of matching contributions to an Employee
Savings Trust 401(k) Plan of $2,100 and $2,625 and group life insurance
premiums of $720 and $720 during 2007 and 2006
respectively.
|
(6)
|
Mr. Douglas A. Dockter is not
considered an executive officer of UTG, but is included in this table
pursuant to compensation disclosure
requirements.
|
Director
Compensation
|
|||||||
Name
|
Fees
Earned or Paid in Cash
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive Plan Compensation
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
|
All
Other Compensation
|
Total
|
Jesse
Thomas Correll
Chief
Executive Officer
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Randall
Lanier Attkisson
Chief
Operating Officer
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
James
Patrick Rousey
President
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
John
Sanford Albin
Director
|
3,000
|
0
|
0
|
0
|
0
|
0
|
3,000
|
Joseph
Anthony Brinck, II
Director
|
2,700
|
0
|
0
|
0
|
0
|
0
|
2,700
|
Ward
Forrest Correll
Director
|
2,700
|
0
|
0
|
0
|
0
|
0
|
2,700
|
William
Wesley Perry
Director
(1)
|
3,300
|
0
|
0
|
0
|
0
|
0
|
3,300
|
Thomas
Francis Darden, II
Director
(1)
|
3,000
|
0
|
0
|
0
|
0
|
0
|
3,000
|
Peter
Loyd Ochs
Director
|
3,000
|
0
|
0
|
0
|
0
|
0
|
3,000
|
Howard
Lape Dayton
Director
|
3,300
|
0
|
0
|
0
|
0
|
0
|
3,300
|
|
Performance
Graph
|
(1)
|
The
Company selected the NASDAQ Composite Index Performance as an appropriate
comparison. UTG was listed on the NASDAQ Small Cap exchange
until December 31, 2001. Furthermore, the Company selected the
NASDAQ Insurance Stock Index as the second comparison because there is no
similar single “peer company” in the NASDAQ system with which to compare
stock performance and the closest additional line-of-business index which
could be found was the NASDAQ Insurance Stock Index. Trading
activity in the Company’s common stock is limited, which may be due in
part as a result of the Company’s low profile. The Return Chart
is not intended to forecast or be indicative of possible future
performance of the Company’s common
stock.
|
|
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
|
|
Principal
Holders of Securities
|
Title of Class
|
Name
and Address of Beneficial Owner
(2)
|
Amount
and Nature of Beneficial Ownership
|
Percent
of Class (1)
|
||||
Common
Stock, no par value
|
Jesse
T. Correll
|
185,454
|
(3)
|
4.8%
|
|||
First
Southern Bancorp, Inc.
|
1,739,072
|
(3)(4)
|
45.1%
|
||||
First
Southern Funding, LLC
|
335,453
|
(3)(4)
|
8.7%
|
||||
First
Southern Holdings, LLC
|
1,483,791
|
(3)(4)
|
38.5%
|
||||
First
Southern Capital Corp, LLC
|
237,333
|
(3)(4)
|
6.1%
|
||||
First
Southern Investments, LLC
|
24,086
|
0.6%
|
|||||
Ward
F. Correll
|
105,520
|
(5)
|
2.7%
|
||||
WCorrell,
Limited Partnership
|
72,750
|
(3)
|
1.8%
|
||||
Cumberland
Lake Shell, Inc.
|
98,523
|
(5)
|
2.5%
|
||||
Total
(6)
|
2,626,918
|
68.0%
|
|||||
(1)
|
The
percentage of outstanding shares is based on 3,847,550 shares of common
stock outstanding as of March 1,
2008.
|
(2)
|
The
address for each of Jesse Correll, First Southern Bancorp, Inc. (“FSBI”),
First Southern Funding, LLC (“FSF”), First Southern Holdings, LLC (“FSH”),
First Southern Capital Corp., LLC (“FSC”), First Southern Investments, LLC
(“FSI”), and WCorrell, Limited Partnership (“WCorrell LP”), is P.O. Box
328, 99 Lancaster Street, Stanford, Kentucky 40484. The address
for each of Ward Correll and Cumberland Lake Shell, Inc. (“CLS”) is P.O.
Box 430, 150 Railroad Drive, Somerset, Kentucky
42502.
|
(3)
|
The
share ownership of Jesse Correll listed includes 112,704 shares of common
stock owned by him individually. The share ownership of Mr.
Correll also includes 72,750 shares of Common Stock held by WCorrell,
Limited Partnership, a limited partnership in which Jesse Correll serves
as managing general partner and, as such, has sole voting and dispositive
power over the shares held by it.
|
(4)
|
The
share ownership of FSBI consists of 255,281 shares of common stock held by
FSBI directly (which FSBI acquired by virtue of its merger with Dyscim,
LLC) and 1,483,791 shares of common stock held by FSH of which FSBI is a
99% member and FSF is a 1% member, as further described
below. As a result, FSBI may be deemed to share the voting and
dispositive power over the shares held by
FSH.
|
(5)
|
Includes
98,523 shares of common stock held by CLS, all of the outstanding voting
shares of which are owned by Ward F. Correll and his wife. As a result,
Ward F. Correll may be deemed to share the voting and dispositive power
over these shares.
|
(6)
|
According
to the most recent Schedule 13D, as amended, filed jointly by each of the
entities and persons listed above, Jesse Correll, FSBI, FSF, FSH, FSC, and
FSI, have agreed in principle to act together for the purpose of acquiring
or holding equity securities of UTG. In addition, the Schedule
13D indicates that because of their relationships with Jesse Correll and
these other entities, Ward Correll, CLS, and WCorrell, Limited Partnership
may also be deemed to be members of this group. Because the
Schedule 13D indicates that for its purposes, each of these entities and
persons may be deemed to have acquired beneficial ownership of the equity
securities of UTG beneficially owned by the other entities and persons,
each has been identified and listed in the above
tabulation.
|
Title of Class
|
Directors,
Named Executive Officers, & All Directors & Executive Officers as a
Group
|
Amount
and Nature of Ownership
|
Percent
of Class (1)
|
||||
UTG’s
Common Stock, no par value
|
John
S. Albin
|
10,503
|
(4)
|
*
|
|||
Randall
L. Attkisson
|
0
|
(2)
|
*
|
||||
Joseph
A. Brinck, II
|
7,500
|
(6)
|
*
|
||||
Jesse
T. Correll
|
2,497,312
|
(3)
|
64.9%
|
||||
Ward
F. Correll
|
105,520
|
(5)(6)
|
2.7%
|
||||
Thomas
F. Darden
|
37,095
|
(6)
|
*
|
||||
Howard
L. Dayton, Jr.
|
2,973
|
(6)
|
*
|
||||
Theodore
C. Miller
|
10,500
|
(6)
|
*
|
||||
Peter
L. Ochs
|
0
|
*
|
|||||
William
W. Perry
|
38,000
|
(6)
|
*
|
||||
James
P. Rousey
|
0
|
*
|
|||||
All
directors and executive officers as a group (eleven in
number)
|
2,709,403
|
70.4%
|
(1)
|
The
percentage of outstanding shares for UTG is based on 3,847,550 shares of
common stock outstanding as of March 1,
2008.
|
(2)
|
Randall
L. Attkisson is an associate and business partner of Mr. Jesse T. Correll
and holds minority ownership positions in certain of the companies listed
as owning UTG common stock including First Southern Bancorp,
Inc. Ownership of these shares is reflected in the ownership of
Jesse T. Correll.
|
(3)
|
The
share ownership of Mr. Correll includes 112,704 shares of UTG, Inc common
stock owned by him individually, 255,281 shares of UTG, Inc common stock
held by First Southern Bancorp, Inc. and 335,453 shares of UTG, Inc common
stock owned by First Southern Funding, LLC. The share ownership
of Mr. Correll also includes 72,750 shares of UTG, Inc common stock held
by WCorrell, Limited Partnership, a limited partnership in which Mr.
Correll serves as managing general partner and, as such, has sole voting
and dispositive power over the shares held by it. In
addition, by virtue of his ownership of voting securities of First
Southern Funding, LLC and First Southern Bancorp, Inc., and in turn, their
ownership of 100% of the outstanding membership interests of First
Southern Holdings, LLC (the holder of 1,483,791 shares of UTG, Inc common
stock), Mr. Correll may be deemed to beneficially own the total number of
shares of UTG, Inc common stock owned by First Southern Holdings, and may
be deemed to share with First Southern Holdings the right to vote and to
dispose of such shares. Mr. Correll owns approximately 82% of the
outstanding membership interests of First Southern Funding; he owns
directly approximately 50%, companies he controls own approximately 12%,
and he has the power to vote but does not own an additional 3% of the
outstanding voting stock of First Southern Bancorp. First
Southern Bancorp and First Southern Funding in turn own 99% and 1%,
respectively, of the outstanding membership interests of First Southern
Holdings. Mr. Correll is also a manager of First Southern
Capital Corp., LLC, and thereby may also be deemed to beneficially own the
237,333 shares of UTG, Inc common stock held by First Southern Capital,
and may be deemed to share with it the right to vote and to dispose of
such shares. Share ownership of Mr. Correll in UTG, Inc common
stock does not include 24,086 shares of UTG, Inc common stock held by
First Southern Investments, LLC.
|
(5)
|
Mr.
Correll directly owns 6,997 through the UTG Employee and Director Stock
Purchase Plan. Cumberland Lake Shell, Inc. owns 98,523 shares
of UTG Common Stock, all of the outstanding voting shares of which are
owned by Ward F. Correll and his wife. As a result Ward F.
Correll may be deemed to share the voting and dispositive power over these
shares. Ward F. Correll is the father of Jesse T.
Correll. There are 72,750 shares of UTG Common Stock owned by
WCorrell Limited Partnership in which Jesse T. Correll serves as managing
general partner and, as such, has sole voting and dispositive power over
the shares of Common Stock held by it. The aforementioned 72,750 shares
are deemed to be beneficially owned by and listed under Jesse T. Correll
in this section.
|
(6)
|
Shares
subject to UTG Employee and Director Stock Purchase
Plan.
|
Joseph
A. Brinck, II
|
7,500
|
|
Ward
F. Correll
|
6,997
|
|
Thomas
F. Darden
|
37,095
|
|
Howard
L. Dayton, Jr.
|
2,500
|
|
Theodore
C. Miller
|
10,500
|
|
William
W. Perry
|
38,000
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
(a)
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
Number
of securities remaining available for future issuance under employee and
director stock purchase plans (excluding securities reflected in column
(a))
(c)
|
Employee
and director stock purchase plans approved by security
holders
|
0
|
0
|
290,681
|
Employee
and director stock purchase plans not approved by security
holders
|
0
|
0
|
0
|
Total
|
0
|
0
|
290,681
|
|
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
|
|
NOTE: Schedules
other than those listed above are omitted because they are not required or
the information is disclosed in the financial statements or
footnotes.
|
|
2.1
|
(3)
|
Agreement
and Plan of Merger of United Trust Group, Inc., An Illinois Corporation
with and into UTG, Inc., A Delaware Corporation dated as of July 1, 2005,
including exhibits thereto.
|
|
2.2
|
(4)
|
Stock
Purchase Agreement, dated August 7, 2006, between UTG, Inc. and William F.
Guest and John D. Cornett
|
|
2.3
|
(4)
|
Amendment
No. 1, dated September 6, 2006, to the Stock Purchase Agreement, dated
August 7, 2007, between UTG, Inc. and William F. Guest and John D.
Cornett
|
|
2.4
|
(4)
|
Amendment
No. 2, dated November 22, 2006, to the Stock Purchase Agreement, dated
August 7, 2006, as amended, between UTG, Inc. and William F. Guest and
John D. Cornett.
|
|
3.1
|
(3)
|
Certificate
of Incorporation of the Registrant and all amendments
thereto.
|
|
3.2
|
(3)
|
By-Laws
for the Registrant and all amendments
thereto.
|
|
4.1
|
(2)
|
UTG’s
Agreement pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K with
respect to long-term debt
instruments.
|
|
10.1
|
(1)
|
Management
and Consultant Agreement dated as of January 1, 1993 between First
Commonwealth Corporation and Universal Guaranty Life Insurance
Company.
|
|
10.2
|
(3)
|
Line
of credit agreement dated June 1, 2005, between Universal Guaranty Life
Insurance Company and First National Bank of
Tennessee.
|
|
10.3
|
(4)
|
Amended
and Restated UTG, Inc. Employee and Director Stock Purchase Plan and form
of related Stock Restriction and Buy-Sell
Agreement.
|
|
10.4
|
(4)
|
Promissory
note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank
National Association.
|
|
10.5
|
(4)
|
Revolving
credit note dated December 8, 2006, between UTG, Inc. and First Tennessee
Bank National Association.
|
|
10.6
|
(4)
|
Loan
Agreement dated December 8, 2006, between UTG, Inc. and First Tennessee
Bank National Association.
|
|
10.7
|
(4)
|
Commercial
pledge agreement dated December 8, 2006, between UTG, Inc. and First
Tennessee Bank National
Association.
|
|
10.8
|
(4)
|
Negative
pledge agreement dated December 8, 2006, between UTG, Inc. and First
Tennessee Bank National
Association.
|
|
10.9
|
(4)
|
Coinsurance
Agreement between American Capitol Insurance Company and Reserve National
Insurance Company.
|
10.10
|
(4)
|
Coinsurance
Agreement between Texas Imperial Life Insurance Company and Reserve
National Insurance Company.
|
10.11
|
(4)
|
Administrative
Services Agreement between American Capitol Insurance Company and Reserve
National Insurance Company.
|
10.12
|
(4)
|
Administrative
Services Agreement between Texas Imperial Life Insurance Company and
Reserve National Insurance Company.
|
10.13
|
(4)
|
Administrative
Services and Cost Sharing Agreement dated as of January 1, 2007 between
UTG, Inc and American Capitol Insurance
Company
|
10.14
|
(4)
|
Administrative
Services and Cost Sharing Agreement dated as of January 1, 2007 between
UTG, Inc and Texas Imperial Life Insurance
Company
|
10.15
|
Administrative
Services and Cost Sharing Agreement dated as of January 1, 2007 between
UTG, Inc and Universal Guaranty Life Insurance
Company
|
|
14.1
|
(3)
|
Code
of Ethics and Business Conduct
|
|
14.2
|
(3)
|
Code
of Ethical Conduct for Senior Financial
Officers
|
21.1
|
List
of Subsidiaries of the Registrant.
|
31.1
|
Certificate
of Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a).
|
31.2
|
Certificate
of Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a).
|
32.1
|
Certificate
of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of
UTG, as required pursuant to 18 U.S.C. Section
1350.
|
32.2
|
Certificate
of Theodore C. Miller, Chief Financial Officer, Senior Vice President and
Corporate Secretary of UTG, as required pursuant to 18 U.S.C. Section
1350.
|
|
99.1
|
(3)
|
Audit
Committee Charter.
|
|
99.2
|
(3)
|
Whistleblower
Policy
|
|
(1)
|
Incorporated
by reference from the Company's Annual Report on Form 10-K, File No.
0-5392, as of December 31,
1993.
|
|
(2)
|
Incorporated
by reference from the Company's Annual Report on Form 10-K, File No.
0-5392, as of December 31,
2002.
|
|
(3)
|
Incorporated
by reference from the Company’s Annual Report on Form 10-K, File No.
0-16867, as of December 31, 2005.
|
|
(4)
|
Incorporated
by reference from the Company’s Annual Report on Form 10-K, File No.
0-16867, as of December 31, 2006
|
UTG,
INC.
|
||||||||
SUMMARY
OF INVESTMENTS - OTHER THAN
|
||||||||
INVESTMENTS
IN RELATED PARTIES
|
||||||||
As
of December 31, 2007
|
||||||||
Schedule
I
|
||||||||
Column
A
|
Column
B
|
Column
C
|
Column
D
|
|||||
Amount
at
|
||||||||
Which
Shown
|
||||||||
in
Balance
|
||||||||
Cost
|
Value
|
Sheet
|
||||||
Fixed
maturities:
|
||||||||
Bonds:
|
||||||||
United
States Government and
|
||||||||
government
agencies and authorities
|
$
|
5,474,946
|
$
|
5,791,239
|
$
|
5,474,946
|
||
State,
municipalities, and political
|
||||||||
subdivisions
|
504,165
|
511,181
|
504,165
|
|||||
Collateralized
mortgage obligations
|
27,735
|
27,616
|
27,735
|
|||||
Public
utilities
|
0
|
0
|
0
|
|||||
All
other corporate bonds
|
0
|
0
|
0
|
|||||
Total
fixed maturities
|
6,006,846
|
$
|
6,330,036
|
6,006,846
|
||||
Investments
held for sale:
|
||||||||
Fixed
maturities:
|
||||||||
United
States Government and
|
||||||||
government
agencies and authorities
|
29,054,693
|
$
|
30,536,628
|
30,536,628
|
||||
State,
municipalities, and political
|
||||||||
subdivisions
|
3,457,961
|
3,540,633
|
3,540,633
|
|||||
Collateralized
mortgage obligations
|
89,906,087
|
89,804,412
|
89,804,412
|
|||||
Public
utilities
|
4,425,263
|
4,594,514
|
4,594,514
|
|||||
All
other corporate bonds
|
69,235,170
|
69,498,019
|
69,498,019
|
|||||
196,079,174
|
$
|
197,974,206
|
197,974,206
|
|||||
Equity
securities:
|
||||||||
Banks,
trusts and insurance companies
|
12,155,756
|
$
|
10,577,587
|
10,577,587
|
||||
All
other corporate securities
|
14,726,561
|
22,101,005
|
22,101,005
|
|||||
26,882,317
|
$
|
32,678,592
|
32,678,592
|
|||||
Mortgage
loans on real estate
|
45,602,147
|
45,602,147
|
||||||
Investment
real estate
|
39,154,175
|
39,154,175
|
||||||
Real
estate acquired in satisfaction of debt
|
0
|
0
|
||||||
Policy
loans
|
15,643,238
|
15,643,238
|
||||||
Other
long-term investments
|
0
|
0
|
||||||
Short-term
investments
|
933,967
|
933,967
|
||||||
Total
investments
|
$
|
330,301,864
|
$
|
337,993,171
|
||||
(a)
|
The
condensed financial information should be read in conjunction with the
consolidated financial statements and notes of UTG, Inc. and Consolidated
Subsidiaries.
|
UTG,
INC.
|
||||||
CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
|
||||||
PARENT
ONLY BALANCE SHEETS
|
||||||
As
of December 31, 2007 and 2006
|
||||||
Schedule
II
|
||||||
2007
|
2006
|
|||||
ASSETS
|
||||||
Investment
in affiliates
|
$
|
61,579,893
|
$
|
59,421,533
|
||
Cash
and cash equivalents
|
320,073
|
113,258
|
||||
Accrued
interest income
|
73,689
|
15,125
|
||||
Note
receivable from affiliate
|
3,035,000
|
3,357,000
|
||||
Receivable
from affiliates, net
|
90,376
|
149,395
|
||||
Other
assets
|
178,842
|
290,680
|
||||
Total
assets
|
$
|
65,277,873
|
$
|
63,346,991
|
||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||
Liabilities:
|
||||||
Notes
payable
|
$
|
13,544,449
|
$
|
15,000,278
|
||
Deferred
income taxes
|
2,086,588
|
2,051,768
|
||||
Other
liabilities
|
892,311
|
1,268,553
|
||||
Total
liabilities
|
16,523,348
|
18,320,599
|
||||
Shareholders'
equity:
|
||||||
Common
stock, net of treasury shares
|
3,849
|
3,843
|
||||
Additional
paid-in capital, net of treasury
|
42,067,229
|
41,813,690
|
||||
Retained
earnings (accumulated deficit)
|
2,374,990
|
232,371
|
||||
Accumulated
other comprehensive
|
||||||
income
of affiliates
|
4,308,457
|
2,976,488
|
||||
Total
shareholders' equity
|
48,754,525
|
45,026,392
|
||||
Total
liabilities and shareholders' equity
|
$
|
65,277,873
|
$
|
63,346,991
|
||
UTG,
INC.
|
||||||||
CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
|
||||||||
PARENT
ONLY STATEMENTS OF OPERATIONS
|
||||||||
Three
Years Ended December 31, 2007
|
||||||||
Schedule
II
|
||||||||
2007
|
2006
|
2005
|
||||||
Revenues:
|
||||||||
Management
fees from affiliates
|
$
|
8,153,783
|
$
|
5,935,133
|
$
|
5,115,533
|
||
Interest
income
|
258,503
|
34,927
|
15,978
|
|||||
Other
income
|
107,205
|
366,237
|
102,973
|
|||||
8,519,491
|
6,336,297
|
5,234,484
|
||||||
Expenses:
|
||||||||
Interest
expense
|
1,033,247
|
70,463
|
0
|
|||||
Operating
expenses
|
6,992,231
|
5,831,327
|
5,154,195
|
|||||
8,025,478
|
5,901,790
|
5,154,195
|
||||||
Operating
income
|
494,013
|
434,507
|
80,289
|
|||||
Income
tax benefit (expense)
|
(221,820)
|
(181,070)
|
24,254
|
|||||
Equity
in income of subsidiaries
|
1,870,426
|
3,616,283
|
1,155,680
|
|||||
Net
income
|
$
|
2,142,619
|
$
|
3,869,720
|
$
|
1,260,223
|
||
Basic
income per share from continuing
|
||||||||
operations
and net income
|
$
|
0.56
|
$
|
1.00
|
$
|
0.32
|
||
Diluted
income per share from continuing
|
||||||||
operations
and net income
|
$
|
0.56
|
$
|
1.00
|
$
|
0.32
|
||
Basic
weighted average shares outstanding
|
3,851,596
|
3,872,425
|
3,938,781
|
|||||
Diluted
weighted average shares outstanding
|
3,851,596
|
3,872,425
|
3,938,781
|
|||||
UTG,
INC.
|
||||||||
CONDENSED
FINANCIAL INFORMATION OF REGISTRANT
|
||||||||
PARENT
ONLY STATEMENTS OF CASH FLOWS
|
||||||||
Three
Years Ended December 31, 2007
|
||||||||
Schedule
II
|
||||||||
2007
|
2006
|
2005
|
||||||
Increase
(decrease) in cash and cash equivalents
|
||||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$
|
2,142,619
|
$
|
3,869,720
|
$
|
1,260,223
|
||
Adjustments
to reconcile net income to
|
||||||||
net
cash provided by operating activities:
|
||||||||
Equity
in income of subsidiaries
|
(1,870,426)
|
(3,616,283)
|
(1,155,680)
|
|||||
Depreciation
|
138,149
|
138,149
|
104,766
|
|||||
Change
in FIT recoverable
|
0
|
48,747
|
(38,696)
|
|||||
Change
in accrued interest income
|
(58,564)
|
10,661
|
965
|
|||||
Change
in indebtedness (to) from affiliates, net
|
59,019
|
(12,628)
|
254,927
|
|||||
Change
in deferred income taxes
|
34,820
|
14,720
|
14,442
|
|||||
Change
in other assets and liabilities
|
(402,553)
|
(389,421)
|
(91,127)
|
|||||
Net
cash provided by operating activities
|
43,064
|
63,665
|
349,820
|
|||||
Cash
flows from financing activities:
|
||||||||
Purchase
of treasury stock
|
(193,153)
|
(832,030)
|
(521,892)
|
|||||
Issuance
of common stock
|
446,698
|
0
|
151,320
|
|||||
Issuance
of note receivable
|
0
|
(3,357,000)
|
0
|
|||||
Proceeds
from repayment of note receivable
|
322,000
|
0
|
0
|
|||||
Proceeds
from subsidiary for acquisition
|
487,811
|
5,250,000
|
0
|
|||||
Purchase
of subsidiary
|
(2,443,776)
|
(17,593,278)
|
0
|
|||||
Proceeds
from notes payable
|
1,994,176
|
15,700,278
|
0
|
|||||
Payments
on notes payable
|
(3,450,005)
|
(700,000)
|
0
|
|||||
Capital
contribution to subsidiary
|
0
|
(4,000,000)
|
0
|
|||||
Dividend
received from subsidiary
|
3,000,000
|
5,100,000
|
0
|
|||||
Net
cash provided by (used in) financing activities
|
163,751
|
(432,030)
|
(370,572)
|
|||||
Net
increase (decrease) in cash and cash equivalents
|
206,815
|
(368,365)
|
(20,752)
|
|||||
Cash
and cash equivalents at beginning of year
|
113,258
|
481,623
|
502,375
|
|||||
Cash
and cash equivalents at end of year
|
$
|
320,073
|
$
|
113,258
|
$
|
481,623
|
||
UTG,
INC.
|
||||||||||
REINSURANCE
|
||||||||||
As
of December 31, 2007 and the year ended December 31, 2007
|
||||||||||
Schedule
IV
|
||||||||||
Column A
|
Column
B
|
Column
C
|
Column
D
|
Column
E
|
Column
F
|
|||||
Percentage
|
||||||||||
Ceded
to
|
Assumed
|
of
amount
|
||||||||
other
|
from
other
|
assumed
to
|
||||||||
Gross
amount
|
companies
|
companies
|
Net
amount
|
net
|
||||||
Life
insurance
|
||||||||||
in
force
|
$
|
2,138,577,674
|
$
|
560,946,000
|
$
|
16,693,326
|
$
|
1,594,325,000
|
1.0%
|
|
Premiums
and policy fees:
|
||||||||||
Life
insurance
|
$
|
18,785,742
|
$
|
4,619,360
|
$
|
220,581
|
$
|
14,386,963
|
1.5%
|
|
Accident
and health
|
||||||||||
insurance
|
95,364
|
71,432
|
2,471
|
26,403
|
9.4%
|
|||||
$
|
18,881,106
|
$
|
4,690,792
|
$
|
223,052
|
$
|
14,413,366
|
1.5%
|
||
UTG,
INC.
|
||||||||||
REINSURANCE
|
||||||||||
As
of December 31, 2006 and the year ended December 31, 2006
|
||||||||||
Schedule
IV
|
||||||||||
Column A
|
Column
B
|
Column
C
|
Column
D
|
Column
E
|
Column
F
|
|||||
Percentage
|
||||||||||
Ceded
to
|
Assumed
|
of
amount
|
||||||||
other
|
from
other
|
assumed
to
|
||||||||
Gross
amount
|
companies
|
companies
|
Net
amount
|
net
|
||||||
Life
insurance
|
||||||||||
in
force
|
$
|
2,250,370,760
|
$
|
591,348,000
|
$
|
19,746,240
|
$
|
1,678,769,000
|
1.2%
|
|
Premiums
and policy fees:
|
||||||||||
Life
insurance
|
$
|
15,394,809
|
$
|
2,635,050
|
$
|
63,818
|
$
|
12,823,577
|
0.5%
|
|
Accident
and health
|
||||||||||
insurance
|
55,339
|
20,092
|
1,601
|
36,848
|
4.3%
|
|||||
$
|
15,450,148
|
$
|
2,655,142
|
$
|
65,419
|
$
|
12,860,425
|
0.5%
|
||
UTG,
INC.
|
||||||||||
REINSURANCE
|
||||||||||
As
of December 31, 2005 and the year ended December 31, 2005
|
||||||||||
Schedule
IV
|
||||||||||
Column A
|
Column
B
|
Column
C
|
Column
D
|
Column
E
|
Column
F
|
|||||
Percentage
|
||||||||||
Ceded
to
|
Assumed
|
of
amount
|
||||||||
other
|
from
other
|
assumed
to
|
||||||||
Gross
amount
|
companies
|
companies
|
Net
amount
|
net
|
||||||
Life
insurance
|
||||||||||
in
force
|
$
|
2,468,639,000
|
$
|
483,884,000
|
$
|
952,218,000
|
$
|
2,936,973,000
|
32.4%
|
|
Premiums
and policy fees:
|
||||||||||
Life
insurance
|
$
|
16,286,921
|
$
|
2,651,657
|
$
|
26,360
|
$
|
13,661,624
|
0.2%
|
|
Accident
and health
|
||||||||||
insurance
|
70,167
|
20,740
|
15,632
|
65,059
|
24.0%
|
|||||
$
|
16,357,088
|
$
|
2,672,397
|
$
|
41,992
|
$
|
13,726,683
|
0.3%
|
||
UTG,
INC.
|
||||
VALUATION
AND QUALIFYING ACCOUNTS
|
||||
As
of and for the years ended December 31, 2007, 2006, and
2005
|
||||
Schedule
V
|
||||
Balance
at
|
Additions
|
|||
Beginning
|
Charges
|
Balances
at
|
||
Description
|
Of
Period
|
and
Expenses
|
Deductions
|
End
of Period
|
December
31, 2007
|
||||
.
|
||||
Allowance
for doubtful accounts -
|
||||
mortgage
loans
|
$ 33,500
|
$ 0
|
$ 13,770
|
$ 19,730
|
December
31, 2006
|
||||
Allowance
for doubtful accounts -
|
||||
mortgage
loans
|
$ 36,000
|
$ 0
|
$ 2,500
|
$ 33,500
|
December
31, 2005
|
||||
Allowance
for doubtful accounts -
|
||||
mortgage
loans
|
$ 120,000
|
$ 0
|
$ 84,000
|
$ 36,000
|
UTG, Inc.
|
||
(Registrant)
|
||
John
S. Albin, Director
|
March 19,
2008
|
|
/s/ Randall
L. Attkisson
|
||
Randall
L. Attkisson, Chief Operating
|
March 19,
2008
|
|
Officer
and Director
|
||
/s/ Joseph
A. Brinck
|
||
Joseph
A. Brinck, Director
|
March 19,
2008
|
|
/s/ Jesse
T. Correll
|
||
Jesse
T. Correll, Chairman of the Board,
|
March 19,
2008
|
|
Chief
Executive Officer and Director
|
||
Ward
F. Correll, Director
|
March 19,
2008
|
|
/s/ Thomas
F. Darden
|
||
Thomas
F. Darden, Director
|
March 19,
2008
|
|
Howard
L. Dayton Jr., Director
|
March 19,
2008
|
|
Peter
L. Ochs, Director
|
March 19,
2008
|
|
/s/ William
W. Perry
|
||
William
W. Perry, Director
|
March 19,
2008
|
|
/s/ James
P. Rousey
|
||
James
P. Rousey, President and Director
|
March 19,
2008
|
|
/s/ Theodore
C. Miller
|
||
Theodore
C. Miller, Corporate Secretary
|
March 19,
2008
|
|
and
Chief Financial Officer
|