0000832480-15-000010.txt : 20150512 0000832480-15-000010.hdr.sgml : 20150512 20150512151945 ACCESSION NUMBER: 0000832480-15-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20150331 FILED AS OF DATE: 20150512 DATE AS OF CHANGE: 20150512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UTG INC CENTRAL INDEX KEY: 0000832480 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 202907892 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16867 FILM NUMBER: 15854177 BUSINESS ADDRESS: STREET 1: PO BOX 5147 STREET 2: 5250 SOUTH SIXTH STREET ROAD CITY: SPRINGFIELD STATE: IL ZIP: 62703 BUSINESS PHONE: 2173236300 MAIL ADDRESS: STREET 1: PO BOX 5147 STREET 2: 5250 SOUTH SIXTH STREET CITY: SPINGFIELD STATE: IL ZIP: 62705 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TRUST GROUP INC DATE OF NAME CHANGE: 20001206 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TRUST INC /IL/ DATE OF NAME CHANGE: 19920703 10-Q 1 utg15q1.htm UTG15Q1(MARKED)  
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


(Mark One)

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

For the quarterly period ended March 31, 2015

OR

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

For the transition period from _____________ to ____________

Commission File No. 0-16867

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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

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

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company

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

The number of shares outstanding of the registrant's common stock as of April 30, 2015, was 3,716,047.
UTG, Inc.
(The "Company")

TABLE OF CONTENTS

PART I.   Financial Information
3
 
Item 1.  Financial Statements
3
 
Condensed Consolidated Balance Sheets
3
 
Condensed Consolidated Statements of Operations
4
 
Condensed Consolidated Statements of Comprehensive Income (Loss)
5
 
Condensed Consolidated Statements of Cash Flows
6
 
Notes to Condensed Consolidated Financial Statements
7
 
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
17
 
Item 4.  Controls and Procedures
21
     
 
PART II.  Other Information
21
 
Item 1.  Legal Proceedings
21
 
Item 1A. Risk Factors
21
 
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
21
 
Item 3.  Defaults Upon Senior Securities
21
 
Item 4.  Mine Safety Disclosures
21
 
Item 5.  Other Information
21
 
Item 6.  Exhibits
22
 
 
Signatures
 
23
 
 
Exhibit Index
 
24

 

Part 1.   Financial Information.
Item 1.  Financial Statements
 
UTG, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

                                 
  ASSETS                  
   
March 31,
 
December 31,
         
   
2015
 
2014*
         
Investments:
                 
Investments available for sale:
                 
Fixed maturities, at fair value (amortized cost $189,187,290 and $188,634,364)
$
200,563,990
$
197,481,456
         
Equity securities, at fair value (cost $40,567,620 and $39,275,638)
 
43,351,685
 
40,996,002
         
Trading securities, at fair value (cost $5,162,637 and $5,179,850)
 
3,236,000
 
3,826,250
         
Mortgage loans on real estate at amortized cost
 
12,426,552
 
14,060,930
         
Discounted mortgage loans on real estate at cost
 
7,882,374
 
9,101,052
         
Investment real estate
 
51,306,778
 
51,007,101
         
Policy loans
 
10,905,412
 
11,104,485
         
Short-term investments
 
4,170,257
 
4,382,181
         
Total investments
 
333,843,048
 
331,959,457
         
                   
Cash and cash equivalents
 
14,158,897
 
13,977,443
         
Accrued investment income
 
2,590,338
 
2,662,865
         
Reinsurance receivables:
                 
Future policy benefits
 
27,925,083
 
27,906,905
         
Policy claims and other benefits
 
3,865,776
 
3,788,294
         
Cost of insurance acquired
 
8,821,083
 
9,047,984
         
Deferred policy acquisition costs
 
0
 
0
         
Property and equipment, net of accumulated depreciation
 
2,360,455
 
2,475,829
         
Income tax receivable
 
79,973
 
0
         
Other assets
 
9,565,673
 
8,081,461
         
Total assets
$
403,210,326
$
399,900,238
         
                   
  LIABILITIES AND SHAREHOLDER'S EQUITY                
                                 
Liabilities:
                 
Policy liabilities and accruals:
                 
Future policyholder benefits
$
273,940,829
$
275,044,909
         
Policy claims and benefits payable
 
3,409,527
 
3,208,324
         
Other policyholder funds
 
435,671
 
341,248
         
Dividend and endowment accumulations
 
14,247,763
 
14,239,054
         
Deferred income taxes
 
11,145,917
 
9,413,794
         
Notes payable
 
4,400,000
 
4,400,000
         
Trading securities, at fair value (proceeds $76,145 and $464,215)
 
10,375
 
23,853
         
Other liabilities
 
7,320,777
 
7,723,213
         
Total liabilities
 
314,910,859
 
316,327,638
         
                   
Shareholders' equity:
                 
Common stock - no par value, stated value $.001 per share.  Authorized 7,000,000 shares - 3,717,965 and 3,706,780 shares outstanding
 
3,718
 
3,706
         
Additional paid-in capital
 
43,273,445
 
43,122,944
         
Retained earnings
 
34,649,417
 
32,145,662
         
Accumulated other comprehensive income
 
9,189,624
 
6,853,974
       
Total UTG shareholders' equity
 
87,116,204
 
82,126,286
     
Noncontrolling interests
 
1,183,263
 
1,446,314
   
Total shareholders' equity
 
88,299,467
 
83,572,600
 
Total liabilities and shareholders' equity
$
403,210,326
$
399,900,238

* Balance sheet audited at December 31, 2014.
See accompanying notes.
 
UTG, Inc.
 
  
Condensed Consolidated Statements of Operations (Unaudited)
 
   
Three Months Ended
   
March 31,
   
March 31,
   
2015
   
2014
Revenue:
         
Premiums and policy fees
$
2,937,514
 
$
2,733,687
Ceded reinsurance premiums and policy fees
 
(779,326)
   
(780,983)
Net investment income
 
5,954,502
   
4,533,119
Other income
 
167,393
   
520,431
Revenues before realized gains (losses)
 
8,280,083
   
7,006,254
Realized investment gains (losses), net:
         
Other-than-temporary impairments
 
0
   
0
Other realized investment gains, net
 
2,903,906
   
277,424
Total realized investment gains (losses), net
 
2,903,906
   
277,424
Total revenue
 
11,183,989
   
7,283,678
           
Benefits and other expenses:
         
Benefits, claims and settlement expenses:
         
Life
 
4,676,213
   
6,686,047
Ceded reinsurance benefits and claims
 
(494,696)
   
(1,202,470)
Annuity
 
249,250
   
278,577
Dividends to policyholders
 
130,636
   
136,172
Commissions and amortization of deferred policy acquisition costs
 
(42,225)
   
(101,137)
Amortization of cost of insurance acquired
 
226,901
   
246,412
Operating expenses
 
2,199,095
   
2,656,118
Interest expense
 
37,973
   
181,832
Total benefits and other expenses
 
6,983,147
   
8,881,551
           
           
Income (loss) before income taxes
 
4,200,842
   
(1,597,873)
Income tax benefit (expense)
 
(1,461,249)
   
192,511
           
Net income (loss)
 
2,739,593
   
(1,405,362)
           
Net income attributable to noncontrolling interests
 
(235,838)
   
(122,954)
           
Net income (loss) attributable to common shareholders'
$
2,503,755
 
$
(1,528,316)
           
Amounts attributable to common shareholders'
         
Basic income (loss) per share
$
0.68
 
$
(0.41)
           
Diluted income (loss) per share
$
0.68
 
$
(0.41)
           
Basic weighted average shares outstanding
 
3,707,755
   
3,771,867
           
Diluted weighted average shares outstanding
 
3,707,755
   
3,771,867

See accompanying notes.
 
UTG, Inc.

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

   
Three Month Ended
   
March 31,
   
March 31,
   
2015
   
2014
           
           
           
Net income (loss)
$
2,739,593
 
$
(1,405,362)
           
Other comprehensive income (loss):
         
           
Unrealized holding gains (losses) arising during period, pre-tax
 
3,709,599
   
5,316,805
Tax (expense) benefit on unrealized holding gains (losses) arising during the period
 
(1,298,360)
   
(1,860,882)
Unrealized holding gains (losses) arising during period, net of tax
 
2,411,239
   
3,455,923
           
Less reclassification adjustment for gains included in net income
 
(116,291)
   
(252,008)
Tax expense for gains included in net income
 
40,702
   
88,203
Reclassification adjustment for gains included in net income, net of tax
 
(75,589)
   
(163,805)
  Subtotal:  Other comprehensive income (loss), net of tax
 
2,335,650
   
3,292,118
           
Comprehensive income (loss)
 
5,075,243
   
1,886,756
           
Less comprehensive income attributable to noncontrolling interests
$
(235,838)
 
$
(122,954)
           
Comprehensive income (loss) attributable to UTG, Inc.
 
4,839,405
   
1,763,802

See accompanying notes.

UTG, INC.

 
Condensed Consolidated Statements of Cash Flows (Unaudited)
         
   
Three Months Ended
 
   
March 31,
   
March 31,
 
   
2015
   
2014
 
         
Cash flows from operating activities:
       
Net income (loss) attributable to common shareholders
 
$
2,503,755
   
$
(1,528,316
)
Adjustments to reconcile net income to net cash used in operating activities:
               
Amortization (accretion) of investments
   
(3,119,078
)
   
(536,311
)
Realized investment gains, net
   
(2,903,906
)
   
(277,424
)
Unrealized trading (gains) losses included in income
   
947,630
     
(260,651
)
Realized trading gains included in income
   
(387,750
)
   
0
 
Amortization of deferred policy acquisition costs
   
0
     
12,914
 
Amortization of cost of insurance acquired
   
226,901
     
246,412
 
Depreciation
   
200,450
     
318,708
 
Net income attributable to noncontrolling interest
   
235,838
     
122,954
 
Charges for mortality and administration of universal life and annuity products
   
(1,665,654
)
   
(1,689,689
)
Interest credited to account balances
   
1,385,988
     
1,419,880
 
Change in accrued investment income
   
72,527
     
217,824
 
Change in reinsurance receivables
   
(95,660
)
   
468,671
 
Change in policy liabilities and accruals
   
(589,949
)
   
(1,207,644
)
Change in income taxes receivable (payable)
   
(2,013,216
)
   
2,406
 
Change in other assets and liabilities, net
   
(1,412,184
)
   
566,693
 
Net cash used in operating activities
   
(6,614,308
)
   
(2,123,573
)
                 
Cash flows from investing activities:
               
Proceeds from investments sold and matured:
               
Fixed maturities available for sale
   
3,009,394
     
10,868,969
 
Equity securities available for sale
   
1,141,660
     
167,504
 
Trading securities
   
16,893
     
75,134
 
Mortgage loans
   
1,634,379
     
75,134
 
Discounted mortgage loans
   
4,459,218
     
2,087,795
 
Real estate
   
9,230,904
     
521,361
 
Policy loans
   
686,113
     
886,346
 
Short-term investments
   
228,503
     
0
 
Total proceeds from investments sold and matured
   
20,407,064
     
15,233,637
 
Cost of investments acquired:
               
Fixed maturities available for sale
   
(3,557,854
)
   
(8,813,706
)
Equity securities available for sale
   
(2,432,839
)
   
0
 
Trading securities
   
0
     
(257,730
)
Mortgage loans
   
0
     
(107,681
)
Discounted mortgage loans
   
(9,638
)
   
(5,638
)
Real estate
   
(6,828,846
)
   
(5,638
)
Policy loans
   
(487,040
)
   
(663,488
)
Short-term investments
   
(16,579
)
   
(184,800
)
Total cost of investments acquired
   
(13,332,796
)
   
(11,183,725
)
Net cash provided by investing activities
   
7,074,268
     
4,049,912
 
                 
Cash flows from financing activities:
               
Policyholder contract deposits
   
1,459,335
     
1,489,219
 
Policyholder contract withdrawals
   
(1,389,465
)
   
(1,615,210
)
Purchase of treasury stock
   
150,513
     
(78,003
)
Non controlling contributions (distributions) of consolidated subsidiary
   
(498,889
)
   
0
 
Sale of block of businees
   
0
     
(3,045,574
)
Net cash used in financing activities
   
(278,506
)
   
(3,249,568
)
                 
Net increase (decrease) in cash and cash equivalents
   
181,454
     
(1,323,229
)
Cash and cash equivalents at beginning of period
   
13,977,443
     
19,838,618
 
Cash and cash equivalents at end of period
 
$
14,158,897
     
18,515,389
 

See accompanying notes.

 
UTG, Inc.
Notes to Condensed Consolidated Financial Statements

  Note 1 – Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet as of December 31, 2014, which has been derived from audited consolidated financial statements, and the unaudited interim Condensed Consolidated Financial Statements include the accounts of UTG, Inc. (the "Parent" or "UTG") and its subsidiaries (collectively with the Parent, the "Company").  All significant intercompany accounts and transactions have been eliminated in consolidation.  The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8 of regulation S-X.  Accordingly, they do not include all of the information and notes required by GAAP for audited annual financial statements.  The information furnished includes all adjustments and accruals of a normal recurring nature, which in the opinion of Management, are necessary for a fair presentation of the results for the interim periods.  The unaudited Condensed Consolidated Financial Statements included herein and these related notes should be read in conjunction with the Company's consolidated financial statements, and the notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.  The Company's results of operations for the three month period ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 or for any other future period.

This document at times will refer to UTG's largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll.  Mr. Correll holds a majority ownership of First Southern Funding, LLC ("FSF"), a Kentucky corporation, and First Southern Bancorp, Inc. ("FSBI"), a financial services holding company.  FSBI operates through its   100 %owned subsidiary bank, First Southern National Bank ("FSNB").  Banking activities are conducted through multiple locations within south-central and western Kentucky.  Mr. Correll is Chief Executive Officer and Chairman of the Board of Directors of UTG and is currently UTG's largest shareholder through his ownership control of FSF, FSBI and affiliates.  At March 31, 2015, Mr. Correll owns or controls directly and indirectly approximately  57.32% of UTG's outstanding stock.

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


Note 2 – Recently Issued Accounting Standards

In January 2015, the FASB issued ASU 2015-01, Income Statement – Extraordinary and Unusual Items, ("ASU 2015-01"), which removes the concept of extraordinary items from U.S. GAAP.  Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual and occurs infrequently.  This separate, net-of-tax presentation will no longer be allowed.  The existing requirement to separately disclose events or transactions that are unusual or occur infrequently on a pre-tax basis within continuing operations in the income statement has been retained.  The new guidance requires similar separate presentation of items that are both unusual and infrequent.  The new standard is effective for periods beginning after December 15, 2015.  Early adoption is permitted, but only as of the beginning of the fiscal year of adoption.  Upon adoption, the Company will present transactions that are both unusual and infrequent, if any, on a pre-tax basis within continuing operations in the income statement.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement No. 167, included in ASU 2010-10, for certain investment funds. All reporting entities that hold a variable interest in other legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements. This ASU is effective for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period. This is not expected to have a material impact on the financial statements of the Company.


Note 3 – Investments

Available for Sale Securities – Fixed Maturity and Equity Securities

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

Investments in available for sale securities are summarized as follows:

March 31, 2015
 
Original or Amortized
Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Estimated
Fair
Value
Investments available for sale:
                     
Fixed maturities
                     
U.S. Government and govt. agencies and authorities
 
$
22,417,779
 
 
$
2,018,645
 
 
$
(7,032)
 
 
$
24,429,392
U.S. special revenue and assessments
 
1,137,664
   
26,396
   
0
   
1,164,060
Collateralized mortgage obligations
 
916,506
   
80,657
   
(10)
   
997,153
Public utilities
 
399,931
   
57,704
   
0
   
457,635
All other corporate bonds
 
164,315,410
   
10,736,662
   
(1,536,322)
   
173,515,750
   
189,187,290
   
12,920,064
   
(1,543,364)
   
200,563,990
Equity securities
 
40,567,620
   
3,366,554
   
(582,489)
   
43,351,685
Total
$
229,754,910
 
$
16,286,618
 
$
(2,125,853)
 
$
243,915,675


December 31, 2014
 
Original or Amortized
Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Estimated
Fair
Value
Investments available for sale:
                     
Fixed maturities
                     
U.S. Government and govt. agencies and authorities
 
$
23,036,161
 
 
$
1,970,791
 
 
$
(50,184)
 
 
$
24,956,768
States, municipalities and political subdivisions
 
95,000
   
2,385
   
0
   
97,385
U.S. special revenue and assessments
 
1,137,702
   
13,739
   
(202,930)
   
948,511
Collateralized mortgage obligations
 
1,005,081
   
92,091
   
(6)
   
1,097,166
Public utilities
 
399,927
   
55,913
   
0
   
455,840
All other corporate bonds
 
162,960,493
   
8,624,486
   
(1,659,193)
   
169,925,786
   
188,634,364
   
10,759,405
   
(1,912,313)
   
197,481,456
Equity securities
 
39,275,638
   
2,260,855
   
(540,491)
   
40,996,002
Total
$
227,910,002
 
$
13,020,260
 
$
(2,452,804)
 
$
238,477,458

The amortized cost and estimated market value of debt securities at March 31, 2015, by contractual maturity, is shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fixed Maturities Available for Sale
March 31, 2015
 
Amortized
Cost
   
Estimated
Fair Value
           
Due in one year or less
$
3,359,020
 
$
3,450,132
Due after one year through five years
 
22,740,022
   
24,083,177
Due after five years through ten years
 
81,389,426
   
86,783,934
Due after ten years
 
80,782,316
   
85,249,594
Collateralized mortgage obligations
 
916,506
   
997,153
Total
$
189,187,290
 
$
200,563,990

The fair value of investments with sustained gross unrealized losses at March 31, 2015 and December 31, 2014 are as follows:

March 31, 2015
 
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
$
0
0
 
$
4,990,625
(7,032)
 
$
4,990,625
(7,032)
Collateralized mortgage obligations
 
0
0
   
986
(10)
   
986
(10)
All other corporate bonds
 
19,437,851
(351,722)
   
3,576,334
(1,184,600)
   
23,014,185
(1,536,322)
Total fixed maturities
$
19,437,851
(351,722)
 
$
8,567,945
(1,191,642)
 
$
28,005,796
(1,543,364)
                       
Equity securities
$
2,579,789
(582,489)
 
$
0
0
 
$
2,579,789
(582,489)

December 31, 2014
 
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
$
0
0
 
$
4,947,265
(50,184)
 
$
4,947,265
(50,184)
U.S. special revenue and assessments
 
0
0
   
784,390
(202,930)
   
784,390
(202,930)
Collateralized mortgage obligations
 
0
0
   
1,012
(6)
   
1,012
(6)
All other corporate bonds
 
28,954,477
(416,560)
   
3,535,206
(1,242,633)
   
32,489,683
(1,659,193)
Total fixed maturities
$
28,954,477
(416,560)
 
$
9,267,873
(1,495,753)
 
$
38,222,350
(1,912,313)
                       
Equity securities
$
6,067,132
(540,491)
 
$
0
0
 
$
6,067,132
(540,491)

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

 
Less than 12 months
 
12 months or longer
 
Total
As of March 31, 2015
         
Fixed maturities
12
 
6
 
18
Equity securities
25
 
0
 
25
As of December 31, 2014
         
Fixed maturities
18
 
7
 
25
Equity securities
25
 
0
 
25

Substantially all of the unrealized losses on fixed maturities available for sale and equity securities at March 31, 2015 and December 31, 2014 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase.  The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position.  Based upon the Company's expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company's evaluation of other relevant factors, the Company deems these securities to be temporarily impaired as of March 31, 2015 and December 31, 2014.

The Company regularly reviews its investment securities for factors that may indicate that a decline in fair value of an investment is other than temporary.  The factors considered by Management in its regular review to identify and recognize other-than-temporary impairment losses on fixed maturities include, but are not limited to: the length of time and extent to which the fair value has been less than cost; the Company's intent to sell, or be required to sell, the debt security before the anticipated recovery of its remaining amortized cost basis; the financial condition and near-term prospects of the issuer; adverse changes in ratings announced by one or more rating agencies; subordinated credit support; whether the issuer of a debt security has remained current on principal and interest payments; current expected cash flows; whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions, including the effect of changes in market interest rates.  If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date would be recognized by a charge to other-than-temporary losses in the Condensed Consolidated Statements of Operations.

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

Based on Management's review of the investment portfolio, the Company did not record any losses for other-than-temporary impairments in the Condensed Consolidated Statements of Operations for the three month period ended March 31, 2015 and 2014.


Trading Securities

Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Condensed Consolidated Statements of Operations.  Trading securities include exchange-traded equities and exchange-traded options.  Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale.  The fair value of derivatives included in trading security assets and trading security liabilities as of March 31, 2015 was $0 and $(10,375), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2014 was $6,250 and $(23,853), respectively.  Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only.
Trading revenue charged to net investment income from trading securities was:

   
Three Months Ended
   
March 31,
   
2015
   
2014
           
Net unrealized gains (losses)
$
947,630
 
$
260,651
Net realized gains (losses)
 
(423,657)
   
21,173
Net unrealized and realized gains (losses)
$
523,973
 
$
281,824



Mortgage Loans

As of March 31, 2015 and December 31, 2014, the Company's mortgage loan portfolio contained 30 and 33 mortgage loans, including discounted mortgage loans, with a carrying value of $20,308,926 and $23,161,982, respectively.

Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers' ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices.  Given the uncertainty of the current market, Management has taken a conservative approach with the discounted mortgage loans and has classified all discounted mortgage loans held as non-accrual.  In such status, the Company is not recording any accrued interest income nor is it recording any accrual of discount on the loans held.  Discount accruals reported during 2015 and 2014 were the result of the loan basis already being fully paid.

On the remainder of the mortgage loan portfolio, interest accruals are analyzed based on the likelihood of repayment.  In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property.  The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

A mortgage loan reserve is established and adjusted based on Management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value.  The Company acquires the discounted mortgage loans at below contract value, and believes that it will fully recover its carrying value upon disposal, therefore no reserve for delinquent loans is deemed necessary.  Those loans not currently paying any interest or principal are being vigorously worked by Management.  The current discounted commercial mortgage loan portfolio has an average price of  27.84 % of face value and Management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased.

Note 4 – Fair Value Measurements

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

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

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

Level 3 – Valuation is based upon unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability.

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

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

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

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

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

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

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

Equity securities available for sale consist of common and preferred stocks mainly in private equity investments, financial institutions and insurance companies. Equity securities for which there is sufficient market data are categorized as Level 1 or 2 in the fair value hierarchy.  For the equity securities in which quoted market prices are not available, the transaction price is used as the best estimate of fair value at inception.  When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected exit values. The Company performs ongoing reviews of the underlying investments. The reviews consist of the evaluations of expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy.

Securities designated as trading securities consist of exchange traded equities and exchange traded options.  These securities are primarily valued at quoted active market prices, and are therefore categorized as Level 1 in the fair value hierarchy.

The following table presents the Company's assets and liabilities measured at fair value in the Condensed Consolidated Balance Sheet on a recurring basis as of March 31, 2015.


   
Level 1
   
Level 2
   
Level 3
   
Total
                       
Assets
                     
Fixed Maturities, available for sale
$
12,761,197
 
$
186,869,986
 
$
932,807
 
$
200,563,990
Equity Securities, available for sale
 
6,619,542
   
6,810,303
   
29,921,840
   
43,351,685
Trading Securities
 
3,236,000
   
0
   
0
   
3,236,000
Total
$
22,616,739
 
$
193,680,289
 
$
30,854,647
 
$
247,151,675
                       
Liabilities
                     
Trading Securities
$
10,375
 
$
0
 
$
0
 
$
10,375

The following table presents the Company's assets and liabilities measured at fair value in the Condensed Consolidated Balance Sheet on a recurring basis as of December 31, 2014.

   
Level 1
   
Level 2
   
Level 3
   
Total
                       
Assets
                     
Fixed Maturities, available for sale
$
13,374,878
 
$
183,236,853
 
$
869,725
 
$
197,481,456
Equity Securities, available for sale
 
4,756,292
   
7,361,076
   
28,878,634
   
40,996,002
Trading Securities
 
3,826,250
   
0
   
0
   
3,826,250
Total
$
21,957,420
 
$
190,597,929
 
$
29,748,359
 
$
242,303,708
                       
Liabilities
                     
Trading Securities
$
23,853
 
$
0
 
$
0
 
$
23,853

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

   
Fixed Maturities,
Available for Sale
   
Equity Securities,
Available for Sale
   
 
Total
Balance at December 31, 2014
$
869,725
 
$
28,878,634
 
$
29,748,359
Total unrealized gains (losses):
               
Included in realized gains(losses)
 
0
   
0
   
0
Included in other comprehensive income
 
63,082
   
97,581
   
160,663
    Purchases
 
0
   
945,625
   
945,625
Sales
$
0
 
$
0
 
$
0
Balance at March 31, 2015
 
932,807
   
29,921,840
   
30,854,647

The Level 3 securities include collateralized debt obligations of trust preferred securities issued by banks and insurance companies and certain equity securities with unobservable inputs.  The Company computed fair value of Level 3 investments based on a review of current financial information, earnings trends and similar companies in the same industries.

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


The carrying values and estimated fair values of certain of the Company's financial instruments not recorded at fair value in the Condensed Consolidated Balance Sheets are shown below. Because the fair value for all Condensed Consolidated Balance Sheet items are not required to be disclosed, the aggregate fair value amounts presented below are not reflective of the underlying value of the Company.


   
March 31, 2015
   
December 31, 2014
 
 
Assets
 
 
Carrying
Amount
   
Estimated
Fair
Value
   
 
Carrying
Amount
   
Estimated
Fair
Value
Mortgage loans on real estate
$
12,426,552
 
$
12,582,915
 
$
14,060,930
 
$
14,236,676
Discounted mortgage loans
 
7,882,374
   
7,882,374
   
9,101,052
   
9,101,052
Investment real estate
 
51,306,778
   
51,306,778
   
51,007,101
   
51,007,101
Policy loans
 
10,905,412
   
10,905,412
   
11,104,485
   
11,104,485
Cash and cash equivalents
 
14,158,897
   
14,158,897
   
13,977,443
   
13,977,443
Short term investments
 
4,170,257
   
4,170,257
   
4,382,181
   
4,382,181
Collateral and non-collateral loans
 
9,565,673
   
9,565,673
   
5,612,560
   
5,612,560
                       
Liabilities
                     
Notes payable
 
4,400,000
   
4,400,000
   
4,400,000
   
4,400,000

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

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

The Company has purchased non-performing discounted mortgage loans at a deep discount through an auction process led by the federal government.  In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company.  Accordingly, the Company records its investment in the discounted loans at its original purchase price, which Management believes approximates fair value.  The inputs used to measure the fair value of our discounted mortgage loans are classified as Level 3 within the fair value hierarchy.

Investment real estate is recorded at the lower of the net investment in the real estate or the fair value of the real estate less costs to sell.  The determination of fair value assessments are performed on a periodic, non-recurring basis by external appraisal and assessment of property values by Management.  The inputs used to measure the fair value of our investment real estate are classified as Level 3 within the fair value hierarchy.

Policy loans are carried at the aggregate unpaid principal balances in the consolidated balance sheets which approximate fair value, and earn interest at rates ranging from 4 % to 8 %. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances.  The inputs used to measure the fair value of our policy loans are classified as Level 3 within the fair value hierarchy.

The carrying amount of cash and cash equivalents in the condensed consolidated financial statements approximates fair value given the highly liquid nature of the instruments.  The inputs used to measure the fair value of our cash and cash equivalents are classified as Level 1 within the fair value hierarchy.

The carrying amount of short term investments in the condensed consolidated financial statements approximates fair value.  The inputs used to measure the fair value of our short term investments are classified as Level 3 within the fair value hierarchy.

The Company invests in collateral and non-collateral loans that are reported in the other assets balance on the Company's Consolidated Balance Sheets.  The loans are carried at their unpaid principal balances, which approximates fair value. The inputs used to measure the fair value of the loans are classified as Level 3 within the fair value hierarchy.

The carrying value is a reasonable estimate of fair value for notes payable subject to floating rates of interest.  The fair value of notes payable with fixed rate borrowings is determined based on the borrowing rates currently available to the Company for loans with similar terms and average maturities.  The inputs used to measure the fair value of our notes payable are classified as Level 2 within the fair value hierarchy.


Note 5 – Credit Arrangements

At March 31, 2015 and December 31, 2014, the Company had the following outstanding debt:

     
Outstanding Principal Balance
Instrument
 
Issue Date
 
Maturity Date
   
March 31, 2015
   
December 31, 2014
Promissory Note:
                   
UTG Avalon
 
12/29/2014
 
4/1/2018
   
4,400,000
   
4,400,000

Instrument
 
Issue Date
 
Maturity Date
   
Revolving Credit Limit
   
December 31, 2014
 
Borrowings
 
Repayments
   
March 31, 2015
Lines of Credit:
                                 
UTG
 
2013-11-20
 
2015-11-20
 
$
8,000,000
 
$
0
 
0
 
0
 
$
0


The UTG Avalon promissory note issued on December 29, 2014 carries interest at a rate of 3.5 % with interest payable quarterly beginning in July of 2015.  The interest is a variable rate that is equal to the lowest of the U.S. Prime Rates as published in the money section of the Wall Street Journal.  The interest rate is subject to change monthly and any change in interest rate is effective the first day of the month following the rate change. Principal is due upon maturity of the note.  During the second quarter of 2015, UTG Avalon repaid $2,000,000 of the outstanding principal balance on the promissory note.  The principal payment was paid by UTG and as a result of the payment, an intercompany promissory note receivable/payable was established.

The UTG line of credit carries interest at a fixed rate of  3.75% and is payable monthly. As collateral, UTG has pledged  100% of the common voting stock of its wholly owned subsidiary, Universal Guaranty Life Insurance Company ("UG"). .

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

Year
 
Amount
     
2015
$
0
2016
 
0
2017
 
0
2018
 
4,400,000
2019
 
0

Note 6 – Shareholders' Equity

Stock Repurchase Programs

The Board of Directors of UTG authorized the repurchase in the open market or in privately negotiated transactions of up to $7,000,000 of UTG's common stock. Repurchased shares are available for future issuance for general corporate purposes.  This program can be terminated at any time.  Open market purchases are made based on the last available market price and are generally limited to a maximum per share price of the most recent reported per share GAAP equity book value of the Company.  During the three month period ended  March 31, 2015, the Company repurchased 3,156 shares through the stock repurchase program for $43,456.  Through March 31, 2015, UTG has spent $6,166,581 in the acquisition of 665,854 shares under this program.

Earnings Per Share Calculations

Earnings per share are based on the weighted average number of common shares outstanding during each period.  At March 31, 2015 and 2014, diluted earnings per share were the same as basic earnings per share since the Company had no dilutive instruments outstanding.

Note 7 – Commitments and Contingencies
The insurance industry has experienced a number of civil jury verdicts which have been returned against life and health insurers in the jurisdictions in which the Company does business involving the insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters.  Some of the lawsuits have resulted in the award of substantial judgments against the insurer, including material amounts of punitive damages.  In some states, juries have substantial discretion in awarding punitive damages in these circumstances.  In the normal course of business, the Company is involved from time to time in various legal actions and other state and federal proceedings.  Management is of the opinion that the ultimate disposition of the matters will not have a materially adverse effect on the Company's results of operations or financial position.

Under the insurance guaranty fund laws in most states, insurance companies doing business in a participating state can be assessed up to prescribed limits for policyholder losses incurred by insolvent or failed insurance companies.  Although the Company cannot predict the amount of any future assessments, most insurance guaranty fund laws currently provide that an assessment may be excused or deferred if it would threaten an insurer's financial strength.  Mandatory assessments may be partially recovered through a reduction in future premium tax in some states. The Company does not believe such assessments will be materially different from amounts already provided for in the condensed consolidated financial statements, though the Company has no control over such assessments.

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

The following table represents the total funding commitments and the unfunded commitment as of March 31, 2015 related to certain investments:


   
Total Funding
   
Unfunded
   
Commitment
   
Commitment
RLF III, LLC
$
4,000,000
 
$
398,120
Llano Music, LLC
 
4,000,000
   
1,904,000
Marcellus HBPI, LLP
 
1,800,000
   
141,300
Sovereign's Capital, LP Fund I
 
500,000
   
185,000
MM-Appalachia IV, LP
 
2,475,000
   
825,000
UGLIC, LLC
 
1,600,000
   
800,000
Sovereign's Capital, LP Fund II
 
1,000,000
   
1,000,000

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

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

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

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

During 2013, the Company committed to invest in MM-Appalachia IV, LP, which purchases land for leasing opportunities to those looking to harvest natural resources. MM-Appalachia IV, LP makes capital calls to investors as funds are needed for continued land purchases. During January of 2015, MM-Appalachia IV, LP called $371,250 of the unfunded commitment. Also, in January of 2015, the Company committed to invest an additional $825,000 in MM-Appalachia IV, LP.

During 2014, the Company committed to invest in UGLIC, LLC, which purchases real estate tax receivables.  UGLIC, LLC makes capital calls as funds are needed for additional purchases.

During 2015, the Company committed to invest in Sovereign's Capital, LP Fund II ("Sovereign's"), which invests in companies in emerging markets. Sovereign's makes capital calls to investors as funds are needed
Note 8 – Other Cash Flow Disclosures


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

   
Three Months Ended
   
March 31,
   
2015
   
2014
           
Interest
$
0
 
$
19,672
Federal income tax
 
3,000,000
   
0


Note 9 – Concentrations of Credit Risk

The Company maintains cash balances in financial institutions that at times may exceed federally insured limits.  The Company maintains its primary operating cash accounts with First Southern National Bank, an affiliate of the largest shareholder of UTG, Mr. Jesse Correll, the Company's CEO and Chairman.  The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

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

The following is Management's discussion and analysis of the financial condition and results of operations of UTG, Inc. and its subsidiaries (collectively with the Parent, the "Company").  The following discussion of the financial condition and results of operations of the Company should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company and the related Notes thereto appearing in the Company's annual report on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

Cautionary Statement Regarding Forward-Looking Statements

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

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

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

Overview

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

Critical Accounting Policies

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires Management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ significantly from those estimates.  The Company has identified certain estimates that involve a higher degree of judgment and are subject to a significant degree of variability.  The Company's critical accounting policies and the related estimates considered most significant by Management are disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.  Management has identified the accounting policies related to cost of insurance acquired, assumptions and judgments utilized in determining if declines in fair values of investments are other-than-temporary, and valuation methods for investments that are not actively traded as those, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's Condensed Consolidated Financial Statements and this Management's Discussion and Analysis.

During the three months ended March 31, 2015, there were no additions to or changes in the critical accounting policies disclosed in the 2014 Form 10-K, except for recently adopted accounting standards discussed in Note 2 of the Notes to the Condensed Consolidated Financial Statements.

Results of Operations

On a consolidated basis, the Company reported net income attributable to common shareholders' of $2,504,000 for the three month period ended March 31, 2015 and a net loss attributable to common shareholders' of $(1,528,000) for the three month period ended March 31, 2014.

Revenues

The Company's total revenues increased by $3,900,000 when comparing the three month period ended March 31, 2015 to the same period in 2014.  The increase was mainly attributable to an increase in net investment income and realized investment gains recognized by the company during the first quarter of 2015.

Premium and policy fee revenues, net of reinsurance, were comparable for the first quarter of 2015 and 2014.  The Company writes minimal new business.  Unless the Company acquires a new insurance company or a block of in-force business, Management expects premium revenue to continue to decline on the existing blocks of business at a rate consistent with prior experience.

Net investment income represented 53% and 62% of the Company's total revenues for the three month period ended March 31, 2015 and 2014, respectively.  The Company reported net investment income of $5,955,000 for the three month period ended March 31, 2015, an increase of 31% compared to the same period in 2014.  Investment income from the fixed maturities investment portfolio and the discounted mortgage loan investment portfolio represented approximately 83%, of the gross investment income for the three month period ended March 31, 2015.

For the three month period ended March 31, 2015, income from the discounted mortgage loan portfolio increased by $3,145,000, compared to the same period in 2014.  During the first quarter of 2015, the Company had two discounted mortgage loans that were repaid.  The discounted mortgage loan investment balance decreased 13% from December 31, 2014 to March 31, 2015 and is expected to continue trending downward as the Company does not anticipate acquiring any additional discounted loan portfolios in the near term.

In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company.  Accordingly, the Company records its investment in the discounted loans at its original purchase price adjusted for any principal receipts received.  Management works with the borrower to reach a settlement on the loan or they foreclose on the underlying collateral which is primarily commercial real estate.  For loan settlements reached, the Company records the amount in excess of the carrying amount of the loan as a discount accretion to investment income at the closing date. 

The Company reported net realized investment gains of $2,904,000 and $277,000 for the three month periods ended March 31, 2015 and 2014, respectively.  The 2015 gain is the result of the Company selling a parcel of investment real estate during January of 2015.  Realized investment gains and losses are expected to vary depending on the investing activities of the Company.

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

Expenses

The Company reported total benefits and other expenses of $4,560,000 for the three month period ended March 31, 2015, a decrease of 23% from the same period in 2014.  Benefits, claims and settlement expenses represented 66% of the Company's total expenses for the three month periods ended March 31, 2015 and 2014.  The other major expense category of the Company is operating expenses, which represented 31% and 30% of the Company's total expenses for the three month periods ended March 31, 2015 and 2014, respectively.

In early 2013, the Company began a proactive analysis of its in-force business to try to reconnect with lost customers and verify its customers were not deceased.  In some instances, the Company found that the customer was indeed deceased, but no notification or claim was presented to the Company.  During 2014, the Company paid approximately $1,200,000 in death claim benefits as a result of this action. This project was completed during the second quarter of 2014. When comparing first quarter 2015 and 2014 benefit expenses, 2014 expenses were higher as a result of this project.
Net amortization of cost of insurance acquired decreased 8% during the three month period ended March 31, 2015 compared to the same period in 2014.  Cost of insurance acquired is established when an insurance company is acquired or when the Company acquires a block of in-force business.  The Company assigns a portion of its cost to the right to receive future profits from insurance contracts existing at the date of the acquisition.  Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates may vary due to risk analysis performed at the time of acquisition on the business acquired. The Company utilizes a 12% discount rate on the remaining unamortized business.  The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.  Amortization of cost of insurance acquired is particularly sensitive to changes in interest rate spreads and persistency of certain blocks of insurance in-force.  This expense is expected to decrease, unless the Company acquires a new block of business.

Operating expenses decreased 17% or $457,000 in the three month period ended March 31, 2015 in comparison to the same period in 2014.  When comparing first quarter 2015 and 2014 operating expense activities, the Company's information technology expenses were down $710,000 during 2015 and the Company's charitable contributions were up $418,000 in 2015.

Information technology expenses were higher in 2014 as the result of the implementation of a new administrative system.  Following an extensive analysis of current administrative systems available in the market place, early in 2014 the Company determined it would change its administrative system.  Management anticipates it will be year-end 2015 before fully converted to the new system.  Management believes this system change will position the Company for the future by providing a more modern and flexible operating system while reducing ongoing operating costs.

UTG has a strong philanthropic program. The Company generally allocates a portion of its GAAP net income to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. Charitable contributions made by the Company are expected to vary from year to year depending on the earnings of the Company.

Financial Condition

Investment Information

Investments represent approximately 83% of total assets at March 31, 2015 and December 31, 2014.  Accordingly, investments are the largest asset group of the Company.  The Company's insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments that it is permitted to make and the amount of funds that may be used for any one type of investment.  In light of these statutes and regulations, the majority of the Company's investment portfolio is invested in a diverse set of securities.

As of March 31, 2015, the carrying value of fixed maturity securities in default as to principal or interest was immaterial in the context of consolidated assets, shareholders' equity or results from operations.  To provide additional flexibility and liquidity, the Company has identified all fixed maturity securities as "investments available for sale".  Investments available for sale are carried at market, with changes in market value charged directly to shareholders' equity.  Changes in the market value of available for sale securities resulted in a net unrealized gain of $2,411,000 and $3,456,000 for the three month periods ended March 31, 2015 and 2014, respectively.

The Company's March 31, 2015 discounted mortgage loan asset balance decreased by 13% in comparison to the December 31, 2014 balance.  The decrease in the discounted mortgage loan balance is mainly attributable to two mortgage loans being fully repaid during the first quarter of 2015. The Company expects this investment balance to continue trending downward as the Company does not anticipate acquiring any additional discounted loan portfolios in the near term.

Capital Resources

Total shareholders' equity increased 6% as of March 31, 2015 when compared to December 31, 2014. The increase in shareholders' equity is mainly attributable to the change in accumulated other comprehensive income.  The balance in accumulated other comprehensive income has increased $2,336,000 from December 31, 2014 to March 31, 2015.  The increase in other comprehensive income is related to the unrealized gains on the company's available for sale securities.


At March 31, 2015 and December 31, 2014, the Company had $4,400,000 of debt outstanding.  The outstanding debt belongs to UTG Avalon, LLC, a wholly owned subsidiary of UG.  During the second quarter of 2015, UTG Avalon repaid $2,000,000 of the outstanding principal balance on the promissory note.  The principal payment was paid by UTG and as a result of the payment, an intercompany promissory note receivable/payable was established.

The Company's investments are predominately in fixed maturity investments such as bonds, which provide sufficient return to cover future obligations.  The Company carries all of its fixed maturity holdings as available for sale, which are reported in the Condensed Consolidated Financial Statements at their market value.

Liquidity

The Company has three principal needs for cash - the insurance company's contractual obligations to policyholders, the payment of operating expenses and debt service.  Cash and cash equivalents represented 4% and 3% of total assets as of March 31, 2015 and December 31, 2014, respectively.  Fixed maturities as a percentage of total assets were approximately 50% and 49% as of March 31, 2015 and December 31, 2014, respectively.

The Company currently has access to funds for operating liquidity.  UTG has an $8,000,000 revolving credit note with Illinois National Bank.  At March 31, 2015, the Company had no outstanding borrowings against the UTG line of credit.

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

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

Net cash used in operating activities was $6,614,000 and $2,124,000 for the three month periods ended March 31, 2015 and 2014, respectively.  During the fourth quarter of 2014, the Company recognized a significant profit and established an income tax liablility related to this profit.  The income taxes were paid during the first quarter of 2015.  Also, there was an increase in other assets during the first quarter of 2015.

Net cash provided by investing activities was $7,074,000 and $4,050,000 for the three month period ended March 31, 2015 and 2014, respectively. First quarter 2015 results were more favorable as a result of the settlement of the two discounted mortgage loans and the gain on the sale of the real estate parcel. The cash provided by investing activities is expected to vary from quarter to quarter depending on market conditions and Management's ability to find and negotiate favorable investment contracts.

Net cash used in financing activities was $279,000 and $3,250,000 for the three month period ended March 31, 2015 and 2014, respectively.  During the first quarter of 2014, the Company used cash of approximately $3,000,000 in the settlement of the sale of a small block of life insurance business.  The sale of this block of business was approved by the Ohio Department of Insurance during the first quarter of 2014.

UTG is a holding Company that has no day-to-day operations of its own.  Funds required to meet its expenses, generally costs associated with maintaining the Company in good standing with states in which it does business and the servicing of its debt, are primarily provided by its subsidiaries.  On a parent only basis, UTG's cash flow is dependent on Management fees received from its insurance subsidiary, stockholder dividends from its subsidiary and earnings received on cash balances.  At March 31, 2015, substantially all of the consolidated shareholders' equity represented net assets of its subsidiary.  The Company's insurance subsidiary has maintained adequate statutory capital and surplus.  The payment of cash dividends to shareholders by UTG is not legally restricted.  However, the state insurance department regulates insurance Company dividend payments where the Company is domiciled.  No dividends were paid to shareholders in 2014 or the three month period ended March 31, 2015.

UG is an Ohio domiciled insurance company, which requires notification within five business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend.  Ordinary dividends are defined as the greater of:  a) prior year statutory net income or b) 10% of statutory capital and surplus.  For the year ended December 31, 2014, UG had statutory net income of $12,200,000.  At December 31, 2014 UG's statutory capital and surplus amounted to $41,147,000.  Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation.  During 2014, UG paid UTG ordinary dividends of $4,800,000.  During the second quarter of 2015, UG paid UTG a dividend of $2,000,000. UTG used the dividends received during 2014 and 2015 to pay on its outstanding line of credit balance and purchase outstanding shares of UTG stock.

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

ITEM 4.  CONTROLS AND PROCEDURES

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

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

NONE


ITEM 1A.  RISK FACTORS

NONE

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

NONE


ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

NONE

ITEM 4.  MINE SAFETY DISCLOSURES

NONE

ITEM 5.  OTHER INFORMATION

NONE






ITEM 6.  EXHIBITS

*31.1
Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as
required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2
Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1
Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2
Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101
Interactive Data File

*Filed herewith

SIGNATURES


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


UTG, INC.
(Registrant)


Date:
May 12, 2015
 
By
/s/ James P. Rousey
       
James P. Rousey
       
President and Director








Date:
May 12, 2015
 
By
/s/ Theodore C. Miller
       
Theodore C. Miller
       
Senior Vice President
       
   and Chief Financial Officer


EXHIBIT INDEX



Exhibit Number
Description


*31.1
Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as
required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2
Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1
Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2
Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101
Interactive Data File

* Filed herewith

EX-31.1 2 q1exhibit311.htm CERTIFICATION
Exhibit 31.1
CERTIFICATIONS
 
 
I, Jesse T. Correll, Chairman of the Board and Chief Executive Officer of UTG, Inc., certify that:
 
1.
 
I have reviewed this quarterly report on Form 10-Q of the registrant, UTG, Inc.;
             
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
             
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
4.
 
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
     
   
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
       
   
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
       
   
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
       
   
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
       
5.
 
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
     
   
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
       
   
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
       

Date:
May 12, 2015
By
/s/ Jesse T. Correll
   
Chairman of the Board and
   
Chief Executive Officer
EX-31.2 3 q1exhibit312.htm CERTIFICATION
Exhibit 31.2
CERTIFICATIONS
 
 
I, Theodore C. Miller,  Senior Vice President, Corporate Secretary and Chief Financial Officer of UTG, Inc., certify that:
     
1.
 
I have reviewed this quarterly report on Form 10-Q of the registrant, UTG, Inc.;
             
2.
 
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
             
3.
 
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
4.
 
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
     
   
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
       
   
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
       
   
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
       
   
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
       
5.
 
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
     
   
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
       
   
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
       

Date:
May 12, 2015
By
/s/ Theodore C. Miller
   
Senior Vice President, Corporate Secretary and
   
Chief Financial Officer
EX-32.1 4 q1exhibit321.htm CERTIFICATION
Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of UTG, Inc. (the "Company") for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Jesse T. Correll, Chairman of the Board and Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company


Date:
May 12, 2015
By:
/s/ Jesse T. Correll
     
Jesse T. Correll
     
Chairman of the Board and
     
Chief Executive Officer
EX-32.2 5 q1exhibit322.htm CERTIFICATION
Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of UTG, Inc. (the "Company") for the period ended March 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report") I, Theodore C. Miller, Senior Vice President, Corporate Secretary and Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1)
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
   
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company


Date:
May 12, 2015
By:
/s/ Theodore C. Miller
     
Theodore C. Miller
     
Senior Vice President, Corporate
     
Secretary and Chief Financial Officer
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color: #000000; text-align: center;">Amortized</div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Cost</div></td><td style="width: 4.72%; vertical-align: top;">&#160;</td><td style="width: 4.71%; vertical-align: bottom;">&#160;</td><td style="width: 19.82%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Estimated</div><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Fair Value</div></td></tr><tr><td style="width: 46.36%; vertical-align: top;">&#160;</td><td style="width: 5.07%; vertical-align: top;">&#160;</td><td style="width: 19.33%; vertical-align: top;">&#160;</td><td style="width: 4.72%; vertical-align: top;">&#160;</td><td style="width: 4.71%; vertical-align: top;">&#160;</td><td style="width: 19.82%; vertical-align: top;">&#160;</td></tr><tr><td style="width: 46.36%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Due in one year or less</div></td><td style="width: 5.07%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 19.33%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">3,359,020</div></td><td style="width: 4.72%; vertical-align: top;">&#160;</td><td style="width: 4.71%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 19.82%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">3,450,132</div></td></tr><tr><td style="width: 46.36%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Due after one year through five years</div></td><td style="width: 5.07%; vertical-align: top;">&#160;</td><td style="width: 19.33%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">22,740,022</div></td><td style="width: 4.72%; vertical-align: top;">&#160;</td><td style="width: 4.71%; vertical-align: top;">&#160;</td><td style="width: 19.82%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">24,083,177</div></td></tr><tr><td style="width: 46.36%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Due after five years through ten years</div></td><td style="width: 5.07%; vertical-align: top;">&#160;</td><td style="width: 19.33%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">81,389,426</div></td><td style="width: 4.72%; vertical-align: top;">&#160;</td><td style="width: 4.71%; vertical-align: top;">&#160;</td><td style="width: 19.82%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">86,783,934</div></td></tr><tr><td style="width: 46.36%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Due after ten years</div></td><td style="width: 5.07%; vertical-align: top;">&#160;</td><td style="width: 19.33%; vertical-align: top;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">80,782,316</div></td><td style="width: 4.72%; vertical-align: top;">&#160;</td><td style="width: 4.71%; 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vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;">&#160;</td><td style="width: 10.47%; vertical-align: bottom;">&#160;</td><td style="width: 10.64%; vertical-align: bottom;">&#160;</td><td style="width: 2.58%; vertical-align: top;">&#160;</td><td style="width: 2.58%; vertical-align: bottom;">&#160;</td><td style="width: 10.46%; vertical-align: bottom;">&#160;</td><td style="width: 11.46%; vertical-align: bottom;">&#160;</td></tr><tr><td style="width: 23.05%; vertical-align: bottom;">&#160;</td><td style="width: 2.44%; vertical-align: bottom;">&#160;</td><td style="width: 10.42%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Fair value</div></td><td style="width: 10.65%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Unrealized losses</div></td><td style="width: 2.62%; 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font-family: 'Times New Roman', Times, serif; width: 90%;"><tr><td style="width: 23.05%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">December 31, 2014</div></td><td style="width: 2.44%; vertical-align: bottom;">&#160;</td><td colspan="2" style="width: 21.07%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Less than 12 months</div></td><td style="width: 2.62%; vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;">&#160;</td><td colspan="2" style="width: 21.12%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">12 months or longer</div></td><td style="width: 2.58%; 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vertical-align: bottom;">&#160;</td></tr><tr><td style="width: 23.05%; vertical-align: bottom;">&#160;</td><td style="width: 2.44%; vertical-align: bottom;">&#160;</td><td style="width: 10.42%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Fair value</div></td><td style="width: 10.65%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Unrealized losses</div></td><td style="width: 2.62%; vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;">&#160;</td><td style="width: 10.47%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Fair value</div></td><td style="width: 10.64%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Unrealized losses</div></td><td style="width: 2.58%; vertical-align: top;">&#160;</td><td style="width: 2.58%; vertical-align: bottom;">&#160;</td><td style="width: 10.46%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Fair value</div></td><td style="width: 11.46%; vertical-align: bottom; border-bottom: #000000 2px solid;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: center;">Unrealized losses</div></td></tr><tr><td style="width: 23.05%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">U.S. Government and govt. agencies and authorities</div></td><td style="width: 2.44%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 10.42%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">0</div></td><td style="width: 10.65%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">0</div></td><td style="width: 2.62%; vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 10.47%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">4,947,265</div></td><td style="width: 10.64%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-right: 4.5pt;">(50,184)</div></td><td style="width: 2.58%; vertical-align: top;">&#160;</td><td style="width: 2.58%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 10.46%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">4,947,265</div></td><td style="width: 11.46%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">(50,184)</div></td></tr><tr><td style="width: 23.05%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">U.S. special revenue and assessments</div></td><td style="width: 2.44%; vertical-align: bottom;">&#160;</td><td style="width: 10.42%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">0</div></td><td style="width: 10.65%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">0</div></td><td style="width: 2.62%; vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;">&#160;</td><td style="width: 10.47%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">784,390</div></td><td style="width: 10.64%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-right: 4.5pt;">(202,930)</div></td><td style="width: 2.58%; vertical-align: top;">&#160;</td><td style="width: 2.58%; vertical-align: bottom;">&#160;</td><td style="width: 10.46%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">784,390</div></td><td style="width: 11.46%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">(202,930)</div></td></tr><tr><td style="width: 23.05%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Collateralized mortgage obligations</div></td><td style="width: 2.44%; vertical-align: bottom;">&#160;</td><td style="width: 10.42%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">0</div></td><td style="width: 10.65%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; 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vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Total fixed maturities</div></td><td style="width: 2.44%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 10.42%; vertical-align: bottom; border-bottom: #000000 4px double;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">28,954,477</div></td><td style="width: 10.65%; vertical-align: bottom; border-bottom: #000000 4px double;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">(416,560)</div></td><td style="width: 2.62%; vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; 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vertical-align: bottom; border-bottom: #000000 4px double;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">(1,912,313)</div></td></tr><tr><td style="width: 23.05%; vertical-align: bottom;">&#160;</td><td style="width: 2.44%; vertical-align: bottom;">&#160;</td><td style="width: 10.42%; vertical-align: bottom;">&#160;</td><td style="width: 10.65%; vertical-align: bottom;">&#160;</td><td style="width: 2.62%; vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;">&#160;</td><td style="width: 10.47%; vertical-align: bottom;">&#160;</td><td style="width: 10.64%; vertical-align: bottom;">&#160;</td><td style="width: 2.58%; vertical-align: top;">&#160;</td><td style="width: 2.58%; vertical-align: bottom;">&#160;</td><td style="width: 10.46%; vertical-align: bottom;">&#160;</td><td style="width: 11.46%; vertical-align: bottom;">&#160;</td></tr><tr><td style="width: 23.05%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: left; margin-left: 7.2pt; text-indent: -7.2pt;">Equity securities</div></td><td style="width: 2.44%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 10.42%; vertical-align: bottom; border-bottom: #000000 4px double;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">6,067,132</div></td><td style="width: 10.65%; vertical-align: bottom; border-bottom: #000000 4px double;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right; margin-right: 4.5pt;">(540,491)</div></td><td style="width: 2.62%; vertical-align: top;">&#160;</td><td style="width: 2.61%; vertical-align: bottom;"><div style="font-size: 10pt; font-family: 'Times New Roman', Times, serif; color: #000000; text-align: right;">$</div></td><td style="width: 10.47%; 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