RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2013

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

Note 11 – Related Party Transactions

On February 20, 2003, UG purchased $4,000,000 of a trust preferred security offering issued by First Southern Bancorp, Inc. ("FSBI").  The security has a mandatory redemption after 30 years with a call provision after 5 years.  The security pays a quarterly dividend at a fixed rate of 6.515%.  The Company received dividends of $264,219 and $264,943 during 2013 and 2012, respectively.  On March 30, 2009, UG purchased $1,000,000 of FSBI common stock.  The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement.

On November 14, 2011, UTG, Inc. merged with ACAP. Shareholders of ACAP received shares of UTG in exchange for their ACAP shares. ACAP was a 73.0% owned subsidiary of UG. The merger reduced the corporate structure and provided certain efficiencies and economies to the Companies.  All ACAP shareholders, other than UTG or UG, have the right to receive 233 shares of UTG common stock for each share of ACAP common stock they owned at closing.  Under the terms of the exchange ratio, UTG issued 50,328 shares to former ACAP shareholders.  An additional 129,548 UTG shares were not issued due to dissenting ACAP shareholders.  The shareholder dispute was settled during 2013.  See Note 8 - Commitments and Contingencies for additional information regarding the ACAP dissenting shareholders.

On September 28, 2011 UTG entered a joint ownership agreement with Bandyco, LLC and First Southern National Bank, for an 8.08% interest in an aircraft. Bandyco, LLC is affiliated with Ward F Correll, who is a director of the Company. The Company was responsible for an initial payment of $150,000 on September 30, 2011, along with a $125,000 payment on October 30, 2011. The Company pays a monthly operational fee of $25,000 starting in November 2011 and lasting through July 2016. The aircraft is issued for business related travel by various officers and employees of the Company. For years 2013 and 2012, UTG paid $427,776 and $573,393 for costs associated with the aircraft.

Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiary.  Under this arrangement, the subsidiary pays its proportionate share of expenses, based on an allocation formula.  During 2013 and 2012, UG paid $7,442,588 and $8,843,596, respectively, in expenses. The Ohio Department of Insurance has approved the cost sharing agreement and it is Management's opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.

The Company from time to time acquires mortgage loans through participation agreements with FSNB.  FSNB services the Company's mortgage loans including those covered by the participation agreements.  The Company pays a 0.25% servicing fee on these loans and a one-time fee at loan origination of 0.50% of the original loan amount to cover costs incurred by FSNB relating to the processing and establishment of the loan.  The Company paid $93,285 and $102,447 in servicing fees and $1,250 and $81,851 in origination fees to FSNB during 2013 and 2012, respectively.

The Company reimbursed expenses incurred by employees of FSNB relating to travel and other costs incurred on behalf of or relating to the Company.  The Company paid $45,669 and $90,939 in 2013 and 2012, respectively to FSNB in reimbursement of such costs.  In addition, the Company began reimbursing FSNB a portion of salaries and pension costs for Mr. Correll and Mr. Ditto.  The reimbursement was approved by the UTG Board of Directors and totaled $332,029 and $462,819 in 2013 and 2012, respectively, which included salaries and other benefits.