[x]
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2019
|
|
or
|
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from _____________ to ______________
|
UTG, INC.
|
||
(Exact name of registrant as specified in its charter)
|
||
Delaware
|
20-2907892
|
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
205 North Depot Street, Stanford, KY
|
40484
|
|
(Address of principal executive offices)
|
(Zip code)
|
|
Securities registered pursuant to Section 12(b) of the Act:
|
|
Title of each class
|
Name of each exchange on which registered
|
None
|
None
|
PART I
|
3
|
Item 1. Business
|
3
|
Item 1A. Risk Factors
|
7
|
Item 1B. Unresolved Staff Comments
|
7
|
Item 2. Properties
|
7
|
Item 3. Legal Proceedings
|
8
|
Item 4. Mine Safety Disclosures
|
8
|
PART II
|
8
|
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
8
|
Item 6. Selected Financial Data
|
9
|
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
9
|
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
|
18
|
Item 8. Financial Statements and Supplementary Data
|
18
|
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
|
44
|
Item 9A. Controls and Procedures
|
44
|
Item 9B. Other Information
|
45
|
PART III
|
45
|
Item 10. Directors, Executive Officers and Corporate Governance
|
45
|
Item 11. Executive Compensation
|
49
|
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
50
|
Item 13. Certain Relationships and Related Transactions, and Director Independence
|
51
|
Item 14. Principal Accounting Fees and Services
|
53
|
PART IV
|
53
|
Item 15. Exhibits and Financial Statement Schedules
|
53
|
Rating
|
2019
|
|
Investment Grade
|
||
AAA
|
6%
|
|
AA+
|
30%
|
|
AA
|
3%
|
|
AA-
|
10%
|
|
A+
|
12%
|
|
A
|
12%
|
|
A-
|
13%
|
|
BBB+
|
4%
|
|
BBB
|
8%
|
|
BBB-
|
1%
|
|
Below Investment Grade
|
1%
|
|
100%
|
Average
|
||||||
Carrying
|
Average
|
Average
|
||||
Investments
|
Value
|
Maturity
|
Yield
|
|||
Fixed maturities held for sale
|
$
|
166,295,079
|
9.46 years
|
3.52%
|
||
Equity securities
|
84,682,070
|
Not applicable
|
1.82%
|
|||
Mortgage loans
|
8,646,199
|
8.76 years
|
5.55%
|
|||
Investment real estate
|
48,431,407
|
Not applicable
|
6.06%
|
|||
Notes receivable
|
21,602,385
|
4.39 years
|
8.55%
|
|||
Policy loans
|
9,004,049
|
Not applicable
|
6.75%
|
|||
Cash, cash equivalents and short term
|
29,689,982
|
On demand
|
0.59%
|
|||
Total investments
|
$
|
368,351,171
|
3.65%
|
Mortgage Loans
|
Amount
|
% of Total
|
||
Farm – all other
|
$
|
108,986
|
1%
|
|
Commercial – all other
|
7,963,879
|
97%
|
||
Residential – all other
|
150,421
|
2%
|
||
Total
|
$
|
8,223,286
|
100%
|
Mortgage Loans
|
Real Estate
|
||
Arizona
|
22%
|
0%
|
|
Florida
|
0%
|
8%
|
|
Georgia
|
0%
|
16%
|
|
Kentucky
|
60%
|
24%
|
|
New Jersey
|
7%
|
0%
|
|
South Carolina
|
0%
|
5%
|
|
Texas
|
0%
|
24%
|
|
West Virginia
|
11%
|
23%
|
|
Total
|
100%
|
100%
|
2019
|
2018
|
|||||||
Period
|
High
|
Low
|
High
|
Low
|
||||
First quarter
|
30.50
|
30.10
|
25.20
|
22.95
|
||||
Second quarter
|
34.00
|
29.36
|
28.25
|
24.00
|
||||
Third quarter
|
33.01
|
30.01
|
34.00
|
26.00
|
||||
Fourth quarter
|
39.80
|
33.25
|
33.00
|
31.00
|
Total Number of Shares Purchased
|
Average Price Paid Per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Program
|
Maximum Number of Shares That May Yet Be Purchased Under the Program
|
Approximate Dollar Value That May Yet Be Purchased Under the Program
|
|||||
Oct. 1 through Oct. 31, 2019
|
980
|
$
|
33.73
|
980
|
N/A
|
$
|
3,739,548
|
||
Nov. 1 through Nov. 30, 2019
|
480
|
$
|
34.60
|
480
|
N/A
|
$
|
3,722,940
|
||
Dec. 1 through Dec. 31, 2019
|
294
|
$
|
35.50
|
294
|
N/A
|
$
|
3,712,503
|
||
Total
|
1,754
|
1,754
|
2019
|
2018
|
|||
Net investment income
|
$
|
11,315,646
|
$
|
11,202,668
|
Net investment gains (losses)
|
25,425,822
|
22,456,835
|
||
Change in net unrealized investment gains (losses) on available-for-sale securities
|
10,822,757
|
(7,744,899)
|
2019
|
2018
|
|||
Fixed maturities
|
$
|
5,854,031
|
$
|
7,273,157
|
Equity securities
|
1,543,904
|
1,628,649
|
||
Mortgage loans
|
479,841
|
1,234,115
|
||
Real estate
|
2,934,666
|
2,771,348
|
||
Notes receivable
|
1,848,314
|
979,742
|
||
Policy loans
|
607,537
|
646,993
|
||
Cash and cash equivalents
|
175,917
|
355,276
|
||
Short-term
|
-
|
18,159
|
||
Total consolidated investment income
|
13,444,210
|
14,907,439
|
||
Investment expenses
|
(2,128,564)
|
(3,704,771)
|
||
Consolidated net investment income
|
$
|
11,315,646
|
$
|
11,202,668
|
2019
|
2018
|
|||
Fixed maturities available for sale
|
$
|
189,070
|
$
|
10,751,955
|
Equity securities
|
9,560,716
|
-
|
||
Real estate
|
3,929,195
|
1,588,122
|
||
Trading securities
|
(132,518)
|
-
|
||
Fixed maturities available for sale – OTTI
|
(650,956)
|
-
|
||
Real estate – OTTI
|
-
|
(300,000)
|
||
Consolidated net realized investment gains
|
12,895,507
|
12,040,077
|
||
Change in fair value of equity securities
|
12,530,315
|
10,416,758
|
||
Net investment gains
|
$
|
25,425,822
|
$
|
22,456,835
|
2019
|
As a % of Total Investments
|
As a % of Total Assets
|
|||||
Fixed maturities
|
$
|
171,629,373
|
49%
|
41%
|
|||
Equity securities
|
89,581,040
|
25%
|
21%
|
||||
Mortgage loans
|
8,223,286
|
2%
|
2%
|
||||
Real estate
|
44,344,236
|
13%
|
11%
|
||||
Notes receivable
|
19,487,458
|
6%
|
5%
|
||||
Policy loans
|
8,803,876
|
2%
|
2%
|
||||
Short-term investments
|
10,442,173
|
3%
|
2%
|
||||
Total investments
|
$
|
352,511,442
|
100%
|
84%
|
2018
|
As a % of Total Investments
|
As a % of Total Assets
|
|||||
Fixed maturities
|
$
|
160,960,784
|
48%
|
41%
|
|||
Equity securities
|
79,783,099
|
24%
|
20%
|
||||
Mortgage loans
|
9,069,111
|
3%
|
2%
|
||||
Real estate
|
52,518,577
|
16%
|
13%
|
||||
Notes receivable
|
23,717,312
|
7%
|
6%
|
||||
Policy loans
|
9,204,222
|
2%
|
3%
|
||||
Total investments
|
$
|
335,253,105
|
100%
|
85%
|
Page No.
|
|
UTG, Inc. and Consolidated Subsidiaries
|
|
Report of Independent Registered Public Accounting Firm
|
19
|
Consolidated Balance Sheets
|
20
|
Consolidated Statements of Operations
|
21
|
Consolidated Statements of Comprehensive Income
|
22
|
Consolidated Statements of Shareholders’ Equity
|
23
|
Consolidated Statements of Cash Flows
|
24
|
Notes to Consolidated Financial Statements
|
25
|
ASSETS
|
|||||
2019
|
2018
|
||||
Investments:
|
|||||
Investments available for sale:
|
|||||
Fixed maturities, at fair value (amortized cost $159,959,855 and $160,895,869)
|
$
|
171,629,373
|
$
|
160,960,784
|
|
Equity securities, at fair value (cost $32,578,862 and $34,885,107)
|
78,661,793
|
67,664,482
|
|||
Equity securities, at cost
|
10,919,247
|
12,118,617
|
|||
Mortgage loans on real estate at amortized cost
|
8,223,286
|
9,069,111
|
|||
Investment real estate, net
|
44,344,236
|
52,518,577
|
|||
Notes receivable
|
19,487,458
|
23,717,312
|
|||
Policy loans
|
8,803,876
|
9,204,222
|
|||
Short-term investments
|
10,442,173
|
–
|
|||
Total
investments
|
352,511,442
|
335,253,105
|
|||
Cash and cash equivalents
|
28,787,629
|
20,150,162
|
|||
Accrued investment income
|
1,679,783
|
2,119,882
|
|||
Reinsurance receivables:
|
|||||
Future policy benefits
|
25,655,161
|
26,117,936
|
|||
Policy claims and other benefits
|
4,142,142
|
4,053,882
|
|||
Cost of insurance acquired
|
4,846,321
|
5,622,227
|
|||
Property and equipment, net of accumulated depreciation
|
427,736
|
688,567
|
|||
Income taxes receivable
|
–
|
279,333
|
|||
Other assets
|
695,517
|
1,263,242
|
|||
Total
assets
|
$
|
418,745,731
|
$
|
395,548,336
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|||||
Policy liabilities and accruals:
|
|||||
Future policy benefits
|
$
|
249,264,308
|
$
|
253,852,368
|
|
Policy claims and benefits payable
|
3,631,666
|
4,267,481
|
|||
Other policyholder funds
|
404,177
|
372,072
|
|||
Dividend and endowment accumulations
|
14,626,475
|
14,608,838
|
|||
Income taxes payable
|
313,662
|
–
|
|||
Deferred income taxes
|
13,222,604
|
9,113,480
|
|||
Other liabilities
|
5,785,933
|
6,257,387
|
|||
Total
liabilities
|
287,248,825
|
288,471,626
|
|||
Shareholders' equity:
|
|||||
Common stock - no par value, stated value $0.001 per share. Authorized 7,000,000 shares - 3,277,830 and
3,295,870 shares issued and outstanding
|
3,279
|
3,296
|
|||
Additional paid-in capital
|
36,012,401
|
36,567,865
|
|||
Retained earnings
|
85,979,678
|
69,708,901
|
|||
Accumulated other comprehensive income
|
8,977,914
|
62,495
|
|||
Total UTG shareholders' equity
|
130,973,272
|
106,342,557
|
|||
Noncontrolling interest
|
523,634
|
734,153
|
|||
Total shareholders' equity
|
131,496,906
|
107,076,710
|
|||
Total liabilities and shareholders' equity
|
$
|
418,745,731
|
$
|
395,548,336
|
|
2019
|
2018
|
||||
Revenue:
|
|||||
Premiums and policy fees
|
$
|
9,601,612
|
$
|
10,076,351
|
|
Ceded reinsurance premiums and policy fees
|
(2,535,980)
|
(2,862,701)
|
|||
Net investment income
|
11,315,646
|
11,202,668
|
|||
Other income
|
388,340
|
400,034
|
|||
Revenues before net investment gains (losses)
|
18,769,618
|
18,816,352
|
|||
Net investment gains (losses):
|
|||||
Other-than-temporary impairments
|
(650,956)
|
(300,000)
|
|||
Other realized investment gains, net
|
13,546,463
|
12,340,077
|
|||
Change in fair value of equity securities
|
12,530,315
|
10,416,758
|
|||
Total net investment gains
|
25,425,822
|
22,456,835
|
|||
Total revenues
|
44,195,440
|
41,273,187
|
|||
Benefits and other expenses:
|
|||||
Benefits, claims and settlement expenses:
|
|||||
Life
|
16,191,227
|
16,751,922
|
|||
Ceded reinsurance benefits and claims
|
(2,233,585)
|
(2,610,586)
|
|||
Annuity
|
1,039,604
|
1,044,397
|
|||
Dividends to policyholders
|
359,147
|
390,368
|
|||
Commissions
|
(130,828)
|
(147,922)
|
|||
Amortization of cost of insurance acquired
|
775,906
|
806,065
|
|||
Operating expenses
|
8,006,748
|
8,531,113
|
|||
Total benefits and other expenses
|
24,008,219
|
24,765,357
|
|||
Income before income taxes
|
20,187,221
|
16,507,830
|
|||
Income tax expense (benefit)
|
3,591,301
|
3,907,536
|
|||
Net income
|
16,595,920
|
12,600,294
|
|||
Net income attributable to noncontrolling interest
|
(325,143)
|
(209,177)
|
|||
Net income attributable to common shareholders
|
$
|
16,270,777
|
$
|
12,391,117
|
|
Amounts attributable to common shareholders:
|
|||||
Basic income per share
|
$
|
4.95
|
$
|
3.75
|
|
Diluted income per share
|
$
|
4.95
|
$
|
3.75
|
|
Basic weighted average shares outstanding
|
3,285,813
|
3,307,448
|
|||
Diluted weighted average shares outstanding
|
3,285,813
|
3,307,448
|
2019
|
2018
|
||||
Net income
|
$
|
16,595,920
|
$
|
12,600,294
|
|
Other comprehensive income (loss):
|
|||||
Unrealized holding gains (losses) arising during period, pre-tax
|
10,822,757
|
(7,744,899)
|
|||
Tax (expense) benefit on unrealized holding gains (losses) arising during the period
|
(2,272,779)
|
1,626,429
|
|||
Unrealized holding gains (losses) arising during period, net of tax
|
8,549,978
|
(6,118,470)
|
|||
Less reclassification adjustment for (gains) losses included in net income
|
462,584
|
(10,751,955)
|
|||
Tax expense (benefit) for gains included in net income
|
(97,143)
|
2,257,911
|
|||
Reclassification adjustment for gains included in net income, net of tax
|
365,441
|
(8,494,044)
|
|||
Subtotal: Other comprehensive income (loss), net of tax
|
8,915,419
|
(14,612,514)
|
|||
Comprehensive income (loss)
|
25,511,339
|
(2,012,220)
|
|||
Less comprehensive income attributable to noncontrolling interests
|
(325,143)
|
(209,177)
|
|||
Comprehensive income (loss) attributable to UTG, Inc.
|
$
|
25,186,196
|
$
|
(2,221,397)
|
Year ended December 31, 2019
|
Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Income (Loss)
|
Noncontrolling Interest
|
Total Shareholders' Equity
|
|
Balance at January 1, 2019
|
$
|
3,296
|
36,567,865
|
69,708,901
|
62,495
|
734,153
|
107,076,710
|
Common stock issued during year
|
11
|
353,876
|
-
|
-
|
-
|
353,887
|
|
Treasury shares acquired and retired
|
(28)
|
(909,340)
|
-
|
-
|
-
|
(909,368)
|
|
Net income attributable to common shareholders
|
-
|
-
|
16,270,777
|
-
|
-
|
16,270,777
|
|
Unrealized holding loss on securities net of noncontrolling interest and reclassification adjustment and
taxes
|
-
|
-
|
-
|
8,915,419
|
-
|
8,915,419
|
|
Contributions
|
-
|
-
|
-
|
-
|
-
|
0
|
|
Distributions
|
-
|
-
|
-
|
-
|
(535,662)
|
(535,662)
|
|
Gain attributable to noncontrolling interest
|
-
|
-
|
-
|
-
|
325,143
|
325,143
|
|
Balance at December 31, 2019
|
$
|
3,279
|
36,012,401
|
85,979,678
|
8,977,914
|
523,634
|
131,496,906
|
Year ended December 31, 2018
|
Common Stock
|
Additional Paid-In Capital
|
Retained Earnings
|
Accumulated Other Comprehensive Income (Loss)
|
Noncontrolling Interest
|
Total Shareholders' Equity
|
|
Balance at December 31, 2017
|
$
|
3,333
|
37,536,164
|
39,040,456
|
32,952,338
|
899,227
|
110,431,518
|
Adoption of Accounting Standards Update No 2016-01 (Note 1)
|
-
|
-
|
18,277,328
|
(18,277,328)
|
-
|
-
|
|
3,333
|
37,536,164
|
57,317,784
|
14,675,010
|
899,227
|
110,431,518
|
||
Common stock issued during year
|
13
|
360,799
|
-
|
-
|
-
|
360,812
|
|
Treasury shares acquired and retired
|
(50)
|
(1,329,098)
|
-
|
-
|
-
|
(1,329,148)
|
|
Net income attributable to common shareholders
|
-
|
-
|
12,391,117
|
-
|
-
|
12,391,117
|
|
Unrealized holding loss on securities net of noncontrolling interest and reclassification adjustment and
taxes
|
-
|
-
|
-
|
(14,612,515)
|
-
|
(14,612,515)
|
|
Contributions
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Distributions
|
-
|
-
|
-
|
-
|
(374,252)
|
(374,252)
|
|
Gain attributable to noncontrolling interest
|
-
|
-
|
-
|
-
|
209,178
|
209,178
|
|
Balance at December 31, 2018
|
$
|
3,296
|
36,567,865
|
69,708,901
|
62,495
|
734,153
|
107,076,710
|
2019
|
2018
|
||||
Cash flows from operating activities:
|
|||||
Net income
|
$
|
16,595,920
|
$
|
12,600,294
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|||||
Amortization (accretion) of investments
|
136,991
|
(142,519)
|
|||
Other-than-temporary impairments
|
650,956
|
300,000
|
|||
Realized investment gains, net
|
(13,678,981)
|
(12,340,077)
|
|||
Change in fair value of equity securities
|
(12,530,315)
|
(10,416,758)
|
|||
Realized trading (gains) losses included in income
|
132,518
|
-
|
|||
Amortization of cost of insurance acquired
|
775,906
|
806,065
|
|||
Depreciation
|
1,039,453
|
1,067,297
|
|||
Stock-based compensation
|
353,887
|
360,812
|
|||
Charges for mortality and administration of universal life and annuity products
|
(5,211,485)
|
(6,602,846)
|
|||
Interest credited to account balances
|
4,088,309
|
4,221,969
|
|||
Change in accrued investment income
|
440,099
|
870,839
|
|||
Change in reinsurance receivables
|
374,515
|
198,575
|
|||
Change in policy liabilities and accruals
|
(4,331,160)
|
(2,237,947)
|
|||
Change in income taxes receivable (payable)
|
592,995
|
270,518
|
|||
Change in other assets and liabilities, net
|
1,988,577
|
5,985,699
|
|||
Net cash used in operating activities
|
(8,581,815)
|
(5,058,079)
|
|||
Cash flows from investing activities:
|
|||||
Proceeds from investments sold and matured:
|
|||||
Fixed maturities available for sale
|
14,390,181
|
66,408,611
|
|||
Equity securities
|
14,385,393
|
2,169,989
|
|||
Mortgage loans
|
5,283,749
|
8,878,073
|
|||
Real estate
|
13,283,895
|
14,341,204
|
|||
Notes receivable
|
20,261,459
|
6,783,702
|
|||
Policy loans
|
1,635,686
|
1,599,896
|
|||
Short-term investments
|
-
|
7,549,076
|
|||
Total proceeds from investments sold and matured
|
69,240,363
|
107,730,551
|
|||
Cost of investments acquired:
|
|||||
Fixed maturities available for sale
|
(14,634,233)
|
(56,940,883)
|
|||
Equity securities
|
(2,092,304)
|
(12,687,839)
|
|||
Trading securities
|
(132,518)
|
-
|
|||
Mortgage loans
|
(4,367,644)
|
(91,954)
|
|||
Real estate
|
(1,958,982)
|
(15,704,151)
|
|||
Notes receivable
|
(16,031,605)
|
(11,496,998)
|
|||
Policy loans
|
(1,235,340)
|
(1,244,976)
|
|||
Short-term investments
|
(10,403,628)
|
(7,549,076)
|
|||
Total cost of investments acquired
|
(50,856,254)
|
(105,715,877)
|
|||
Net cash provided by investing activities
|
18,384,109
|
2,014,674
|
|||
Cash flows from financing activities:
|
|||||
Policyholder contract deposits
|
4,669,825
|
4,696,980
|
|||
Policyholder contract withdrawals
|
(4,389,622)
|
(5,234,212)
|
|||
Purchase of treasury stock
|
(909,368)
|
(1,329,148)
|
|||
Noncontrolling contributions/(distributions) of consolidated subsidiary
|
(535,662)
|
(374,252)
|
|||
Net cash used in financing activities
|
(1,164,827)
|
(2,240,632)
|
|||
Net increase (decrease) in cash and cash equivalents
|
8,637,467
|
(5,284,037)
|
|||
Cash and cash equivalents at beginning of year
|
20,150,162
|
25,434,199
|
|||
Cash and cash equivalents at end of year
|
$
|
28,787,629
|
$
|
20,150,162
|
December 31, 2019
|
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
|
$
|
35,761,440
|
$
|
402,832
|
$
|
(35,529)
|
$
|
36,128,743
|
||||
U.S. special revenue and assessments
|
14,371,263
|
832,100
|
-
|
15,203,363
|
||||||||
All other corporate bonds
|
109,827,152
|
10,470,115
|
-
|
120,297,267
|
||||||||
Total
|
$
|
159,959,855
|
$
|
11,705,047
|
$
|
(35,529)
|
$
|
171,629,373
|
December 31, 2018
|
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
|
$
|
25,649,410
|
$
|
149,006
|
$
|
(138,222)
|
$
|
25,660,194
|
||||
U.S. special revenue and assessments
|
16,350,486
|
334,300
|
(4,406)
|
16,680,380
|
||||||||
All other corporate bonds
|
118,895,973
|
2,569,287
|
(2,845,050)
|
118,620,210
|
||||||||
Total
|
$ |
160,895,869
|
$ |
3,052,593
|
$ |
(2,987,678)
|
$ |
160,960,784
|
Fixed Maturities Available for Sale
December 31, 2019
|
Amortized
Cost
|
Estimated
Fair Value
|
||||
Due in one year or less
|
$
|
11,286,769
|
$
|
11,461,374
|
||
Due after one year through five years
|
50,028,712
|
51,609,109
|
||||
Due after five years through ten years
|
50,866,597
|
56,224,286
|
||||
Due after ten years
|
47,777,777
|
52,334,604
|
||||
Total
|
$
|
159,959,855
|
$
|
171,629,373
|
December 31, 2019
|
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
|
$
|
6,059,380
|
(35,529)
|
$
|
-
|
-
|
$
|
6,059,380
|
(35,529)
|
||||||
Total fixed maturities
|
$
|
6,059,380
|
(35,529)
|
$
|
-
|
-
|
$
|
6,059,380
|
(35,529)
|
December 31, 2018
|
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
|
$
|
6,429,700
|
(49,904)
|
$
|
1,592,679
|
(88,318)
|
$
|
8,022,379
|
(138,222)
|
||||||
U.S. special revenue and assessments
|
4,023,920
|
(4,406)
|
-
|
-
|
4,023,920
|
(4,406)
|
|||||||||
All other corporate bonds
|
49,270,729
|
(2,033,507)
|
15,337,739
|
(811,543)
|
64,608,468
|
(2,845,050)
|
|||||||||
Total fixed maturities
|
$
|
59,724,349
|
(2,087,817)
|
$
|
16,930,418
|
(899,861)
|
$
|
76,654,767
|
(2,987,678)
|
Less than 12 months
|
12 months or longer
|
Total
|
|||
As of December 31, 2019
|
|||||
Fixed maturities
|
3
|
-
|
3
|
||
As of December 31, 2018
|
|||||
Fixed maturities
|
30
|
10
|
40
|
2019
|
2018
|
||||
Net unrealized gains (losses)
|
$
|
-
|
$
|
-
|
|
Net realized gains (losses)
|
(132,518)
|
-
|
|||
Net unrealized and realized gains (losses)
|
$
|
(132,518)
|
$
|
-
|
2019
|
2018
|
||||||
Maximum
rate
|
Minimum
rate
|
Maximum
rate
|
Minimum
rate
|
||||
Farm loans
|
5.00 %
|
5.00 %
|
5.00 %
|
5.00 %
|
|||
Commercial loans
|
7.50 %
|
4.82 %
|
7.50 %
|
4.00 %
|
|||
Residential loans
|
5.50 %
|
5.50 %
|
8.00 %
|
8.00 %
|
2019
|
2018
|
||||
In good standing
|
$
|
8,223,286
|
$
|
7,169,272
|
|
Overdue interest over 90 days
|
-
|
1,899,839
|
|||
Total mortgage loans
|
$
|
8,223,286
|
$
|
9,069,111
|
|
Total foreclosed loans during the year
|
$
|
234,044
|
$
|
-
|
2019
|
2018
|
||||
Fixed maturities
|
$
|
5,854,031
|
$
|
7,273,157
|
|
Equity securities
|
1,543,904
|
1,628,649
|
|||
Mortgage loans
|
479,841
|
1,234,115
|
|||
Real estate
|
2,934,666
|
2,771,348
|
|||
Notes receivable
|
1,848,314
|
979,742
|
|||
Policy loans
|
607,537
|
646,993
|
|||
Cash and cash equivalents
|
175,917
|
355,276
|
|||
Short-term
|
-
|
18,159
|
|||
Total consolidated investment income
|
13,444,210
|
14,907,439
|
|||
Investment expenses
|
(2,128,564)
|
(3,704,771)
|
|||
Consolidated net investment income
|
$
|
11,315,646
|
$
|
11,202,668
|
2019
|
2018
|
|||||
Realized gains on available-for-sale investments:
|
||||||
Sales of fixed maturities
|
$
|
331,322
|
$
|
11,708,320
|
||
Sales of equity securities
|
9,560,716
|
-
|
||||
Sales of real estate
|
3,929,195
|
1,588,122
|
||||
Other
|
-
|
-
|
||||
Total realized gains
|
13,821,233
|
13,296,442
|
||||
Realized losses on available-for-sale investments:
|
||||||
Sales of fixed maturities
|
(142,252)
|
(956,365)
|
||||
Sales of equity securities
|
-
|
-
|
||||
Sales of real estate
|
-
|
-
|
||||
Other-than-temporary impairments
|
(650,956)
|
(300,000)
|
||||
Other
|
(132,518)
|
-
|
||||
Total realized losses
|
(925,726)
|
(1,256,365)
|
||||
Net realized investment gains (losses)
|
12,895,507
|
12,040,077
|
||||
Change in fair value of equity securities:
|
||||||
Change in fair value of equity securities held at the end of the period
|
12,530,315
|
10,416,758
|
||||
Change in fair value of equity securities
|
12,530,315
|
10,416,758
|
||||
Net investment gains (losses)
|
$
|
25,425,822
|
$
|
22,456,835
|
||
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive
income:
|
||||||
Fixed maturities
|
$
|
10,822,757
|
$
|
(7,744,899)
|
||
Net increase (decrease)
|
$
|
10,822,757
|
$
|
(7,744,899)
|
2019
|
2018
|
||||
Other than temporary impairments:
|
|||||
Fixed maturities
|
$
|
650,956
|
$
|
-
|
|
Real estate
|
-
|
300,000
|
|||
Total other than temporary impairments
|
$
|
650,956
|
$
|
300,000
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Assets
|
|||||||||||
Fixed Maturities, available for sale
|
$
|
36,128,743
|
$
|
135,500,630
|
$
|
-
|
$
|
171,629,373
|
|||
Equity Securities
|
29,888,281
|
14,258,750
|
34,514,762
|
78,661,793
|
|||||||
Total
|
$
|
66,017,024
|
$
|
149,759,380
|
$
|
34,514,762
|
$
|
250,291,166
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||
Assets
|
|||||||||||
Fixed Maturities, available for sale
|
$
|
25,660,194
|
$
|
134,865,746
|
$
|
434,844
|
$
|
160,960,784
|
|||
Equity Securities
|
27,634,283
|
10,557,031
|
29,473,168
|
67,664,482
|
|||||||
Total
|
$
|
53,294,477
|
$
|
145,422,777
|
$
|
29,908,012
|
$
|
228,625,266
|
Fixed Maturities,
Available for Sale
|
Equity Securities
|
Total
|
||||||
Balance at December 31, 2018
|
$
|
434,844
|
$
|
29,473,168
|
$
|
29,908,012
|
||
Transfers in to Level 3
|
-
|
-
|
-
|
|||||
Transfer out of Level 3
|
-
|
-
|
-
|
|||||
Total unrealized gain (losses):
|
||||||||
Included in net income (loss)
|
-
|
6,461,670
|
6,461,670
|
|||||
Included in other comprehensive income
|
(422,927)
|
-
|
(422,927)
|
|||||
Purchases
|
-
|
1,038,220
|
1,038,220
|
|||||
Sales
|
(11,917)
|
(2,458,296)
|
(2,470,213)
|
|||||
Balance at December 31, 2019
|
$
|
-
|
$
|
34,514,762
|
$
|
34,514,762
|
December 31, 2019
|
December 31, 2018
|
|||
Change in fair value of equity securities included in net income (loss) relating to assets held
|
$
|
6,461,670
|
$
|
4,633,751
|
December 31, 2019
|
December 31, 2018
|
||||||||||
Assets
|
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
|||||||
Equity securities
|
$
|
10,919,247
|
$
|
10,919,247
|
$
|
12,118,617
|
$
|
12,118,617
|
|||
Mortgage loans on real estate
|
8,223,286
|
8,223,286
|
9,069,111
|
9,069,111
|
|||||||
Investment real estate
|
44,344,236
|
44,344,236
|
52,518,577
|
52,518,577
|
|||||||
Notes receivable
|
19,487,458
|
19,487,458
|
23,717,312
|
23,717,312
|
|||||||
Policy loans
|
8,803,876
|
8,803,876
|
9,204,222
|
9,204,222
|
|||||||
Short-term investments
|
10,442,173
|
10,442,173
|
-
|
-
|
|||||||
Cash and cash equivalents
|
28,787,629
|
28,787,629
|
20,150,162
|
20,150,162
|
2019
|
2018
|
||||
Premiums Earned
|
Premiums Earned
|
||||
Direct
|
$
|
9,601,259
|
$
|
10,074,892
|
|
Assumed
|
353
|
1,459
|
|||
Ceded
|
(2,535,980)
|
(2,862,701)
|
|||
Net Premiums
|
$
|
7,065,632
|
$
|
7,213,650
|
2019
|
2018
|
||||
Cost of insurance acquired, beginning of year
|
$
|
5,622,227
|
$
|
6,428,292
|
|
Interest accretion
|
769,612
|
866,339
|
|||
Amortization
|
(1,545,518)
|
(1,672,404)
|
|||
Net amortization
|
(775,906)
|
(806,065)
|
|||
Cost of insurance acquired, end of year
|
$
|
4,846,321
|
$
|
5,622,227
|
Interest
Accretion
|
Amortization
|
Net
Amortization
|
|||
2020
|
676,503
|
1,421,353
|
744,850
|
||
2021
|
587,120
|
1,302,090
|
714,970
|
||
2022
|
501,324
|
1,189,672
|
688,348
|
||
2023
|
418,722
|
1,079,979
|
661,257
|
||
2024
|
339,372
|
975,187
|
635,815
|
2019
|
2018
|
||||
Current tax
|
$
|
1,698,995
|
$
|
1,922,542
|
|
Deferred tax
|
1,892,306
|
1,984,994
|
|||
Income tax expense
|
$
|
3,591,301
|
$
|
3,907,536
|
2019
|
2018
|
||||
Tax computed at statutory rate
|
$
|
4,239,316
|
$
|
3,466,644
|
|
Changes in taxes due to:
|
|||||
Non-controlling interest
|
(68,280)
|
(43,927)
|
|||
Dividend received deduction
|
(175,866)
|
(170,690)
|
|||
Other
|
(403,869)
|
655,509
|
|||
Income tax expense
|
$
|
3,591,301
|
$
|
3,907,536
|
2019
|
2018
|
||||
Investments
|
$
|
10,983,955
|
$
|
6,939,758
|
|
Cost of insurance acquired
|
1,017,727
|
1,180,668
|
|||
Management/consulting fees
|
(9,147)
|
(15,724)
|
|||
Future policy benefits
|
(460,923)
|
(1,670,814)
|
|||
Deferred gain on sale of subsidiary
|
1,387,490
|
1,387,490
|
|||
Other assets (liabilities)
|
197,876
|
65,573
|
|||
Reserves adjustment
|
288,320
|
1,426,205
|
|||
Federal tax DAC
|
(182,694)
|
(199,676)
|
|||
Deferred tax liability
|
$
|
13,222,604
|
$
|
9,113,480
|
Instrument
|
Issue Date
|
Maturity Date
|
Revolving Credit Limit
|
December 31, 2018
|
Borrowings
|
Repayments
|
December 31, 2019
|
||||||||||
Lines of Credit:
|
|||||||||||||||||
UTG
|
11/20/2013
|
11/20/2020
|
$
|
8,000,000
|
$
|
-
|
-
|
-
|
$
|
-
|
|||||||
UG
|
6/2/2015
|
5/8/2020
|
10,000,000
|
-
|
-
|
-
|
-
|
Total Funding
Commitment
|
Unfunded
Commitment
|
||||
RLF III, LLC
|
$
|
4,000,000
|
$
|
398,120
|
|
Sovereign’s Capital, LP Fund I
|
500,000
|
20,000
|
|||
Sovereign's Capital, LP Fund II
|
1,000,000
|
158,596
|
|||
Sovereign's Capital, LP Fund III
|
1,000,000
|
800,000
|
|||
Barton Springs Music, LLC
|
1,750,000
|
302,250
|
2019
|
2018
|
|||||||
Basic weighted average shares outstanding
|
3,285,813
|
3,307,448
|
||||||
Weighted average dilutive options outstanding
|
0
|
0
|
||||||
Diluted weighted average shares outstanding
|
3,285,813
|
3,307,448
|
2019
|
2018
|
||||
Net income (loss)
|
$
|
8,268,187
|
$
|
6,166,411
|
|
Capital and surplus
|
65,951,037
|
60,024,931
|
2019
|
2018
|
||||
Interest
|
$
|
-
|
$
|
-
|
|
Federal income tax
|
1,106,000
|
1,652,000
|
Gabriel J. Molnar
|
Committee Chairman
|
Thomas E. Harmon
|
|
John M. Cortines
|
Name, Age
|
Position with the Company, Business Experience and Other Directorships
|
Jesse T. Correll, 63
|
Chairman of UTG and Universal Guaranty Life Insurance Company since 2000; Director of UTG since 1999; Chairman of First Southern Bancorp, Inc.
since 1988; CEO of First Southern Bancorp, Inc. from 1988-2015; Manager and President of First Southern Funding, LLC since 1992; President, Director of The River Foundation since 1990; Board member of Crown Financial Ministries from 2004 to
2009; Friends of the Good Samaritans since 2005; Generous Giving from 2006 to 2009; the National Christian Foundation since 2006; Centre Board of Trustees since 2015; and Cumberland Lake Shell, Inc. since 2017.
|
Preston H. Correll, 39
|
Founder of Marksbury Farm Market based in Bryantsville, Kentucky. He also owns and operates St. Asaph Farm in Stanford, Kentucky and focuses on
sustainable farming and raising natural meat. He spent a year and a half in India working with the Good Samaritans ministry and now serves on the board of the Friends of the Good Samaritans. Director of UTG, Inc. since December 2018.
|
John M. Cortines, 31
|
Mr. Cortines serves as the Chief Operating Officer of Generous Giving, a non-profit organization. He is the co-author of two books on money, faith,
and generosity. Prior to entering the nonprofit sector, he worked in the oil and gas industry as an engineer for Chevron Corporation. Mr. Cortines is a graduate of Harvard Business School (MBA), King Abdullah University of Science and
Technology (MS), and Texas A&M University (BS). Director of UTG, Inc. since December 2018.
|
Thomas F Darden, II, 65
|
Mr. Darden is the Founder and Chief Executive Officer of Cherokee, an investment company that invests in both private equity and venture capital.
Beginning in 1984, Mr. Darden served for 16 years as the Chairman of Cherokee Sanford Group, a brick manufacturing and soil remediation company. From 1981 to 1983, he was a consultant with Bain & Company in Boston. From 1977 to 1978, he
worked as an environmental planner for the Korea Institute of Science and Technology in Seoul, where he was a Henry Luce Foundation Scholar. Mr. Darden is on the Boards of Shaw University, the Institute for The Environment at the University
of North Carolina and the Board of Governors of the Research Triangle Institute. Mr. Darden earned a Masters in Regional Planning from the University of North Carolina, a Juris Doctor from Yale Law School and a Bachelor of Arts from the
University of North Carolina, where he was a Morehead Scholar.
|
Howard L. Dayton, Jr., 76
|
In 1985, Mr. Dayton founded Crown Ministries in Longwood, Florida. Crown Ministries merged with Christian Financial Concepts in September 2000 to
form Crown Financial Ministries, the world’s largest financial ministry. He served as Chief Executive Officer from 1985 to 2007 and in 2009 founded Compass - Finances God’s Way. Mr. Dayton is a graduate of Cornell University. He developed
The Caboose, a successful railroad-themed restaurant in Orlando, FL in 1969. In 1972 he began his commercial real estate development career, specializing in office development in the Central Florida area. He has authored five popular small
group studies, produced several video series, and was the host for the nationally syndicated radio programs MoneyWise and HeyHoward. Asbury University named their business school the Howard Dayton School of Business. Mr. Dayton became a Director of UTG, Inc. in
December 2005.
|
Thomas E. Harmon, 65
|
Director of UTG and Universal Guaranty Life Insurance Company since March 2016. Mr Harmon is the owner and President of Harmon Foods, Inc., a
chain of retail supermarkets, for the past 40 years. Mr. Harmon has been active in many charitable organizations over the years, most recently serving as a Board Member with Amigos En Cristo Ministries, an organization serving one of the
most disadvantaged parts of the world – Juarez, Mexico.
|
Gabriel J. Molnar, 33
|
Mr. Molnar is the Chief Financial Officer at Capstone Realty Inc., a commercial real estate development company in Louisville, Kentucky. Mr.
Molnar is a licensed CPA and real estate salesman in Kentucky. Prior to Capstone, Mr. Molnar worked as a Financial Analyst with Procter & Gamble and as a public company auditor and healthcare consultant with PricewaterhouseCoopers. Mr.
Molnar received a MBA from the Owen Graduate School of Management at Vanderbilt University and is also a graduate of Asbury University in Wilmore, Kentucky.
|
Peter L. Ochs, 68
|
Mr. Ochs is founder of Capital III, a private equity investment firm located in Wichita, Kansas. Capital III provides impact investment capital
and management with investments in manufacturing, real estate, energy, and education with a geographical focus on the US and Latin America. Prior to founding Capital III, Mr. Ochs spent 8 years in the commercial banking industry. Mr. Ochs
graduated from the University of Kansas with a degree in business and finance. He currently serves on the boards of UTG, Inc., the American Independence Funds, and Trinity Academy.
|
James P. Rousey, 61
|
President of UTG and Universal Guaranty Life Insurance Company since September 2006; Director of UTG and Universal Guaranty Life Insurance Company
since September 2001; Chief Executive Officer of First Southern Bancorp, Inc. since 2016; Chair of ACLI Forum 500 from 2015-2016; Member of Board of Governors of ACLI from 2014 to 2017; Regional CEO and Director of First Southern National
Bank from 1988 to 2001. Board Member with the Illinois Fellowship of Christian Athletes from 2001-2005; Board Member with Contact Ministries from 2007-2011; Board Member with Amigos En Cristo, Inc. from 2007-2009; Advisory Board Member with
Natalie’s Sister since 2018; Board Member with Hustonville Cemetery since 2019; Serge Board Member since 2019.
|
Jesse T. Correll
|
Chairman of the Board and Chief Executive Officer
|
James P. Rousey
|
President
|
Name, Age
|
Position with UTG and Business Experience
|
Theodore C. Miller, 57
|
Corporate Secretary of UTG, Inc. and Universal Guaranty Life Insurance Company since December 2000; Senior Vice President and Chief Financial
Officer since July 1997; Vice President since October 1992 and Treasurer from October 1992 to December 2003; Vice President and Controller of certain affiliated companies from 1984 to 1992; Vice President and Treasurer of certain affiliated
companies from 1992 to 1997; Senior Vice President and Chief Financial Officer of subsidiary companies since 1997; Corporate Secretary of subsidiary companies since 2000; and Chief Financial Officer and Corporate Secretary of First Southern
Bancorp, Inc. and First Southern National Bank since 2016.
|
Douglas P. Ditto, 64
|
Vice President of UTG, Inc. and Universal Guaranty Life Insurance Company since June 2009; Chief Investment Officer from 2009 to 2012; Assistant
Vice President from June 2003 to June 2009; Executive Vice President of First Southern Bancorp, Inc. since March 1985.
|
Name and Principal position
|
Year
|
Salary
|
Bonus
|
Stock Awards
(1)
|
All Other Compensation
(2)
|
Total
|
Jesse T. Correll
Chief Executive Officer
|
2019
|
$180,000
|
$ 90,000
|
$ -
|
$7,194
|
$277,194
|
2018
|
$176,250
|
-
|
$140,000
|
$6,386
|
$322,636
|
|
James P. Rousey
President
|
2019
|
$100,000
|
90,000
|
35,000
|
$3,666
|
$228,666
|
2018
|
$95,000
|
115,000
|
-
|
$1,912
|
$211,912
|
|
Douglas P. Ditto
Vice President
|
2019
|
$142,500
|
-
|
$125,000
|
$5,694
|
$273,194
|
2018
|
$138,750
|
-
|
$90,000
|
$5,420
|
$234,170
|
(1)
|
Stock awards in the form of an annual bonus of 5,313 and 9,200 shares were issued in 2019 and 2018, respectively.
|
(2)
|
All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan
|
Name
|
Fees Earned or Paid in Cash
|
Stock Awards
(1)
|
All Other Compensation
(2)
|
Total
|
Jesse T. Correll, Chief Executive Officer
|
$ -
|
$ -
|
$ -
|
$ -
|
James P. Rousey, President
|
-
|
-
|
-
|
-
|
Randall L. Attkisson, Director (3)
|
-
|
5,000
|
-
|
5,000
|
Joseph A. Brinck, II, Director (4)
|
-
|
-
|
-
|
-
|
Preston H. Correll, Director
|
-
|
15,000
|
2,500
|
17,500
|
John M. Cortines, Director
|
-
|
15,000
|
-
|
15,000
|
Thomas F. Darden, II, Director
|
-
|
15,000
|
-
|
15,000
|
Howard L. Dayton, Director
|
-
|
15,000
|
5,000
|
20,000
|
Thomas E. Harmon, Director
|
-
|
15,000
|
-
|
15,000
|
Gabriel J. Molnar, Director
|
-
|
15,000
|
-
|
15,000
|
Peter L. Ochs, Director
|
-
|
12,500
|
-
|
12,500
|
Title
|
Amount
|
Percent
|
|
of
|
Name and Address
|
and Nature of
|
Of
|
Class
|
of Beneficial Owner (2)
|
Beneficial Ownership
|
Class (1)
|
Common
|
Jesse T. Correll
|
127,577
|
(3)(5)
|
3.9%
|
Stock, no
|
First Southern Bancorp, Inc.
|
1,406,785
|
(3)(4)(5)
|
43.0%
|
par value
|
First Southern Funding, LLC
|
359,590
|
(3)(4)(5)(6)
|
10.9%
|
First Southern Holdings, LLC
|
1,201,876
|
(3)(4)(5)
|
36.7%
|
|
WCorrell, Limited Partnership
|
72,750
|
(3)(5)
|
2.2%
|
|
Cumberland Lake Shell, Inc.
|
257,501
|
(5)
|
7.8%
|
(1) The percentage of shares owned is based on 3,271,006 shares of Common Stock outstanding as of February 18, 2020.
|
(2) The address for each of Jesse Correll, First Southern Bancorp, Inc. (“FSBI”), First Southern Funding, LLC (“FSF”), First Southern Holdings, LLC
(“FSH”), and WCorrell, Limited Partnership (“WCorrell LP”), is 205 North Depot Street, Stanford, Kentucky 40484. The address for Cumberland Lake Shell, Inc. (“CLS”) is P.O. Box 430, 150 Railroad Drive, Somerset, Kentucky 42502.
|
(3) The share ownership of Jesse Correll listed includes 54,827 shares of Common Stock owned by him individually. The share ownership of Mr.
Correll also includes 72,750 shares of Common Stock held by WCorrell, Limited Partnership, a limited partnership in which Jesse Correll serves as managing general partner and as such, has sole voting and dispositive power over the shares held
by the entity. In addition, by virtue of his ownership of voting securities of FSF and FSBI, and in turn, their ownership of 100% of the outstanding membership interests of FSH (the holder of 1,201,876 shares of Common Stock), Mr. Correll may
be deemed to beneficially own the total number of shares of Common Stock owned by FSH, and may be deemed to share with FSH the right to vote and to dispose of such shares. Mr. Correll owns approximately 76% of the outstanding membership
interests of FSF. Additionally, Mr. Correll owns directly approximately 45%, companies he controls own approximately 15%, and he has the power to vote but does not own an additional 2% of the outstanding voting stock of FSBI. FSBI and FSF in
turn own 99% and 1%, respectively, of the outstanding membership interests of FSH.
|
(4) The share ownership of FSBI consists of 204,909 shares of Common Stock held by FSBI directly and 1,201,876 shares of Common Stock held by FSH
of which FSBI is a 99% member and FSF is a 1% member. As a result, FSBI may be deemed to share the voting and dispositive power over the shares held by FSH.
|
(5) According to the Schedule 13D, as amended, filed April 8, 2019, Jesse Correll, FSBI, FSF and FSH, have agreed in principle to act together for
the purpose of acquiring or holding equity securities of UTG. In addition, because of their relationship with these Reporting Persons, Cumberland Lake Shell, Inc. and WCorrell Limited Partnership may also be deemed to be members of this
group. Therefore, each may be deemed to have acquired beneficial ownership of the equity securities of UTG beneficially owned by each of the Reporting Persons.
|
(6) Includes 4,035 shares in street name.
|
Title of
|
Name and Address of
|
Amount and Nature of
|
Percent of
|
Class
|
Beneficial Owner
|
Beneficial Ownership
|
Class (1)
|
UTG’s
|
Jesse T. Correll
|
Stanford, KY
|
2,151,453
|
(2)
|
65.7%
|
Common
|
Preston H. Correll
|
Stanford, KY
|
575
|
*
|
|
Stock, no
|
John M. Cortines
|
Oviedo, FL
|
2,713
|
(3)
|
*
|
Par value
|
Thomas F. Darden, II
|
Raleigh, NC
|
61,194
|
1.8%
|
|
Howard L. Dayton, Jr.
|
Sanford, FL
|
8,893
|
(4)
|
*
|
|
Douglas P. Ditto
|
Danville, KY
|
27,885
|
(5)
|
*
|
|
Thomas E. Harmon
|
Springfield, IL
|
1,832
|
*
|
||
Theodore C. Miller
|
Stanford, KY
|
12,292
|
*
|
||
Gabriel J. Molnar
|
Louisville, KY
|
1,163
|
*
|
||
Peter L. Ochs
|
Valley Center, KS
|
5,897
|
(6)
|
*
|
|
James P. Rousey
|
Hustonville, KY
|
10,515
|
(7)
|
*
|
|
All Directors and executive officers as a group (eleven in number)
|
2,284,412
|
69.8%
|
(a)
|
The following documents are filed as a part of the report:
|
(1)
|
Financial Statements:
|
Included in Part II, Item 8 of this Report.
|
|
(2)
|
Financial Statement Schedules
|
The financial statement schedules have been omitted as they are deemed inapplicable or not required by Regulation S-X.
|
(a)(3) & (b)
|
Exhibits
The following are exhibits to this report, and if incorporated by reference, we have indicated the document previously filed with the SEC in which
the exhibit was included:
|
Exhibit
Number
|
Description
|
3.1
|
Certificate of Incorporation of the Registrant and all amendments
thereto [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 3.1].
|
3.2
|
By-Laws for the Registrant and all amendments thereto [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 3.2].
|
4.1
|
UTG’s Agreement pursuant to Item 601(b) (4) (iii) (A) of Regulation
S-K with respect to long-term debt instruments [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally
filed as Exhibit 4.1].
|
10.1
|
Amendment to Reinsurance Agreement between Universal Guaranty Life
Insurance Company and Optimum Re Insurance Company originally with Business Men’s Assurance Company of America. [Incorporated by reference to the
Registrant’s form 10-K, for the year ended December 31, 2015 originally filed as Exhibit 10.2].
|
10.2
|
Reinsurance Agreement between Universal Guaranty Life Insurance
Company and Swiss RE originally with Life Reassurance Corporation of America. [Incorporated by reference to the Registrant’s form 10-K, for the year ended
December 31, 2015 originally filed as Exhibit 10.3].
|
10.3
|
Assumption Reinsurance Agreement between Universal Guaranty Life
Insurance Company and Park Avenue Life Insurance Company formerly known as First International Life Insurance Company. [Incorporated by reference to the
Registrant’s form 10-K, for the year ended December 31, 2015 originally filed as Exhibit 10.4].
|
10.5
|
Commercial pledge agreement dated November 20, 2012, between UTG, Inc.
and Illinois National Bank. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2012 originally filed as Exhibit
10.20].
|
10.6
|
Administrative Services and Cost Sharing Agreement dated as of January
1, 2007 between UTG, Inc. and Universal Guaranty Life Insurance Company [Incorporated by reference to the Registrant’s form 10-K, for the year ended
December 31, 2013 originally filed as Exhibit 10.11].
|
10.7
|
Agreement regarding Mortgage Loans by and between First Southern
National Bank and Universal Guaranty Life Insurance Company [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013
originally filed as Exhibit 10.12].
|
10.8
|
Universal Guaranty Participation Agreement-Purchased Loan [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.13].
|
10.9
|
Universal Guaranty Participation Agreement-Originated Loan [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.14].
|
10.10
|
Management Data, Inc. Software License Agreement [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2014 originally filed as Exhibit 10.16].
|
10.12
|
Aircraft Joint Ownership Agreement by and among Bandyco, LLC, First
Southern National Bank and UTG, Inc. dated August 11, 2014 [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2014 originally filed as Exhibit 10.18].
|
|
Promissory Note dated November 20, 2019, between UTG, Inc. and Illinois National Bank.
|
10.14
|
Shared Services Agreement between UTG, Inc. and FSNB effective January 1, 2017.
[Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2018 originally filed as Exhibit 10.14].
|
10.15
|
Amendment #1 to the Shared Services Agreement between UTG, Inc. and FSNB effective January 1, 2018
[Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2018 originally filed as Exhibit 10.15].
|
10.16
|
Amendment #2 to the Shared Services Agreement between UTG, Inc. and FSNB effective September 1, 2018.
[Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2018 originally filed as Exhibit 10.16].
|
10.17
|
Amendment #3 to the Shared Services Agreement between UTG, Inc. and FSNB effective January 1, 2019.
[Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2018 originally filed as Exhibit 10.17].
|
14.1
|
Code of Ethics and Business Conduct [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 14.1].
|
14.2
|
Code of Ethical Conduct for Senior Financial Officers [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 14.2].
|
*21.1
|
List of Subsidiaries of the Registrant.
|
*31.1
|
Certificate 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
|
Certificate 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.
|
99.1
|
Audit Committee Charter.
[Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2018 originally filed as Exhibit 99.1].
|
99.2
|
Whistleblower Policy [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 99.2].
|
99.3
|
Compensation Committee Charter. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2015 originally filed as Exhibit 99.3].
|
99.4
|
Investment Committee Charter. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2015 originally filed as Exhibit 99.4].
|
*101
|
Interactive Data File
|
UTG, Inc.
|
||||||||
By:
|
/s/ Jesse T. Correll
|
|||||||
Jesse T. Correll
|
||||||||
Chairman and Chief Executive Officer and Director
|
||||||||
By:
|
/s/ Theodore C. Miller
|
|||||||
Theodore C. Miller
|
||||||||
Senior Vice President, Chief Financial Officer and Secretary
|
||||||||
(principal financial and accounting officer)
|
By: /s/ Jesse T. Correll
|
By: /s/ Thomas E. Harmon
|
|
Jesse T. Correll
Chairman of the Board, Chief Executive Officer and Director
|
Thomas E. Harmon
Director
|
|
By: /s/ Preston H. Correll
|
By: /s/ Gabriel J. Molnar
|
|
Preston H. Correll
Director
|
Gabriel J. Molnar
Director
|
|
By: /s/ John M. Cortines
|
By: /s/ Peter L. Ochs
|
|
John M. Cortines
Director
|
Peter L. Ochs
Director
|
|
By: /s/ Thomas F. Darden II
|
By: /s/ James P. Rousey
|
|
Thomas F. Darden II
Director
|
James P. Rousey
Director
|
|
By: /s/ Howard L. Dayton
|
By: /s/ Theodore C. Miller
|
|
Howard L. Dayton
Director
|
Theodore C. Miller
Corporate Secretary and Chief Financial Officer
|
|
Principal
$8,000,000.00
|
Loan Date
11-20-2019
|
Maturity
11-20-2020
|
Loan No.
72957158-40000
|
Call / Coll
C / 3
|
Account
72957158
|
Officer
TWG
|
Initials
|
||
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
|
Borrower:
|
UTG, INC.
|
Lender:
|
INB NATIONAL ASSOCIATION
|
||
5250 SOUTH SIXTH STREET
|
MAIN BRANCH
|
||||
SPRINGFIELD, IL 62703
|
322 E. CAPITOL
|
||||
SPRINGFIELD, IL 62701
|
|||||
Principal Amount: $8,000,000.00
|
Interest Rate: 4.040%
|
Date of Note: November 20, 2019
|
BORROWER:
UTG, INC.
|
|||||||
By:
|
/s/ James P. Rousey
|
By:
|
/s/ Theodore C. Miller
|
||||
JAMES P. ROUSEY, President of UTG, INC.
|
THEODORE C. MILLER, CFO/Secretary of UTG, INC.
|
||||||
LIST OF SUBSIDIARIES
|
|||
Subsidiary Name
|
State of Incorporation
|
||
BCG Land, LLC
|
Kentucky
|
||
Bluegrass Land & Minerals, LLC
|
Kentucky
|
||
Collier Beach, LLC
|
South Carolina
|
||
Consolidated Timberland, LLC
|
Georgia
|
||
Cumberland Woodlands, LLC
|
Kentucky
|
||
Imperial Plan, Inc.
|
Texas
|
||
Midland Superblock Partners, LLC
|
Texas
|
||
Red River Gorge Properties, LLC
|
Kentucky
|
||
Stanford Wilderness Road, LLC
|
Kentucky
|
||
UG Acquisitions, LLC
|
Delaware
|
||
UTG Avalon, LLC
|
Florida
|
||
Universal Guaranty Life Insurance Company
|
Ohio
|
CERTIFICATIONS
|
|||||||||||
I, Jesse T. Correll, Chairman of the Board and Chief Executive Officer of UTG, Inc., certify that:
|
|||||||||||
1.
|
I have reviewed this annual report on Form 10-K of the registrant, UTG, Inc.;
|
||||||||||
2.
|
Based on my knowledge, this annual 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 changes 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: March 20, 2020
|
By
|
/s/ Jesse T. Correll
|
|||||||||
Chairman of the Board and
|
|||||||||||
Chief Executive Officer
|
CERTIFICATIONS
|
|||||||
I, Theodore C. Miller, Senior Vice President, Corporate Secretary and Chief Financial Officer of UTG, Inc., certify that:
|
|||||||
1.
|
I have reviewed this annual report on Form 10-K of the registrant, UTG, Inc.;
|
||||||
2.
|
Based on my knowledge, this annual 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 changes 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: March 20, 2020
|
By
|
/s/ Theodore C. Miller
|
Senior Vice President, Corporate Secretary and
|
||
Chief Financial Officer
|
(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:
|
March 20, 2020
|
By:
|
/s/ Jesse T. Correll
|
Jesse T. Correll
|
|||
Chairman of the Board and
|
|||
Chief Executive Officer
|
(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:
|
March 20, 2020
|
By:
|
/s/ Theodore C. Miller
|
Theodore C. Miller
|
|||
Senior Vice President, Corporate
|
|||
Secretary and Chief Financial Officer
|
Consolidated Statements of Shareholders' Equity - USD ($) |
Common Stock [Member] |
Additional Paid-In Capital [Member] |
Retained Earnings [Member] |
Accumulated Other Comprehensive Income [Member] |
Noncontrolling Interest [Member] |
Total |
---|---|---|---|---|---|---|
Adoption of Accounting Standards Update No 2016-01 | ASU 2016-01 [Member] | $ 0 | $ 0 | $ 18,277,328 | $ (18,277,328) | $ 0 | $ 0 |
Balance at Dec. 31, 2017 | 3,333 | 37,536,164 | 39,040,456 | 32,952,338 | 899,227 | 110,431,518 |
Balance at Dec. 31, 2017 | 3,333 | 37,536,164 | 57,317,784 | 14,675,010 | 899,227 | 110,431,518 |
Common stock issued during year | 13 | 360,799 | 0 | 0 | 0 | 360,812 |
Treasury shares acquired and retired | (50) | (1,329,098) | 0 | 0 | 0 | (1,329,148) |
Net income attributable to common shareholders | 0 | 0 | 12,391,117 | 0 | 0 | 12,391,117 |
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes | 0 | 0 | 0 | (14,612,515) | 0 | (14,612,515) |
Contributions | 0 | 0 | 0 | 0 | 0 | 0 |
Distributions | 0 | 0 | 0 | 0 | (374,252) | (374,252) |
Gain attributable to noncontrolling interest | 0 | 0 | 0 | 0 | 209,178 | 209,178 |
Balance at Dec. 31, 2018 | 3,296 | 36,567,865 | 69,708,901 | 62,495 | 734,153 | 107,076,710 |
Common stock issued during year | 11 | 353,876 | 0 | 0 | 0 | 353,887 |
Treasury shares acquired and retired | (28) | (909,340) | 0 | 0 | 0 | (909,368) |
Net income attributable to common shareholders | 0 | 0 | 16,270,777 | 0 | 0 | 16,270,777 |
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes | 0 | 0 | 0 | 8,915,419 | 0 | 8,915,419 |
Contributions | 0 | 0 | 0 | 0 | 0 | 0 |
Distributions | 0 | 0 | 0 | 0 | (535,662) | (535,662) |
Gain attributable to noncontrolling interest | 0 | 0 | 0 | 0 | 325,143 | 325,143 |
Balance at Dec. 31, 2019 | $ 3,279 | $ 36,012,401 | $ 85,979,678 | $ 8,977,914 | $ 523,634 | $ 131,496,906 |
Commitments and Contingencies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Note 8 – 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 December 31, 2019 related to certain investments:
During 2006, the Company committed to invest in RLF III, LLC (“RLF”), which makes land-based investments in undervalued assets. RLF makes capital calls as funds are needed for continued land purchases. During 2012, the Company committed to invest in Sovereign’s Capital, LP Fund I (“Sovereign’s”), which invests in companies in emerging markets. Sovereign’s makes capital calls to investors as funds are needed. During 2015, the Company committed to invest in Sovereign’s Capital, LP Fund II (“Sovereign’s II”), which invests in companies in emerging markets. Sovereign’s II makes capital calls to investors as funds are needed. During 2018, the Company committed to invest in Sovereign’s Capital, LP Fund III (“Sovereign’s III”), which invests in companies in emerging markets. Sovereign’s III makes capital calls to investors as funds are needed. During 2018, the Company committed to invest in Barton Springs Music, LLC (“Barton”), which invests in music royalties. Barton makes capital calls to its investors as funds are needed to acquire the royalty rights. |
Reinsurance |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||
Reinsurance [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Reinsurance | Note 4 - Reinsurance As is customary in the insurance industry, the insurance subsidiary cedes insurance to, and assumes insurance from, other insurance companies under reinsurance agreements. Reinsurance agreements are intended to limit a life insurer's maximum loss on a large or unusually hazardous risk or to obtain a greater diversification of risk. The ceding insurance company remains primarily liable with respect to ceded insurance should any reinsurer be unable to meet the obligations assumed by it. However, it is the practice of insurers to reduce their exposure to loss to the extent that they have been reinsured with other insurance companies. The Company sets a limit on the amount of insurance retained on the life of any one person. The Company will not retain more than $125,000, including accidental death benefits, on any one life. At December 31, 2019, the Company had gross insurance in-force of $1.1 billion of which approximately $214 million was ceded to reinsurers. At December 31, 2018, the Company had gross insurance in-force of $1.1 billion of which approximately $228 million was ceded to reinsurers. The Company's reinsured business is ceded to numerous reinsurers. The Company monitors the solvency of its reinsurers in seeking to minimize the risk of loss in the event of a failure by one of the parties. The Company is primarily liable to the insureds even if the reinsurers are unable to meet their obligations. The primary reinsurers of the Company are large, well-capitalized entities. Most recently, UG utilized reinsurance agreements with Optimum Re Insurance Company (“Optimum”), and Swiss Re Life and Health America Incorporated (“SWISS RE”). Optimum and SWISS RE currently hold an “A” (Excellent) and "A+" (Superior) rating, respectively, from A.M. Best, an industry rating company. The reinsurance agreements were effective December 1, 1993, and covered most new business of UG. Under the terms of the agreements, UG cedes risk amounts above its retention limit of $100,000 with a minimum cession of $25,000. Ceded amounts are shared equally between the two reinsurers on a yearly renewable term (“YRT”) basis, a common industry method. The treaty is self-administered; meaning the Company records the reinsurance results and reports them to the reinsurers. Also, Optimum is the reinsurer of 100% of the accidental death benefits (“ADB”) in force of UG. This coverage is renewable annually at the Company’s option. Optimum specializes in reinsurance agreements with small to mid-size carriers such as UG. UG entered into a coinsurance agreement with Park Avenue Life Insurance Company (“PALIC”) effective September 30, 1996. Under the terms of the agreement, UG ceded to PALIC substantially all of its then in-force paid-up life insurance policies. Paid-up life insurance generally refers to non-premium paying life insurance policies. Under the terms of the agreement, UG sold 100% of the future results of this block of business to PALIC through a coinsurance agreement. UG continues to administer the business for PALIC and receives a servicing fee through a commission allowance based on the remaining in-force policies each month. PALIC has the right to assumption reinsure the business, at its option, and transfer the administration. The Company is not aware of any such plans. PALIC’s ultimate parent, The Guardian Life Insurance Company of America (“Guardian”), currently holds an "A++" (Superior) rating from A.M. Best. The PALIC agreement accounts for approximately 64% and 63% of UG’s reinsurance reserve credit, as of December 31, 2019 and 2018, respectively. The Company does not have any short-duration reinsurance contracts. The effect of the Company's long-duration reinsurance contracts on premiums earned in 2019 and 2018 were as follows:
|
Other Cash Flow Disclosures |
12 Months Ended | ||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||
Other Cash Flow Disclosures [Abstract] | |||||||||||||||||||||||||
Other Cash Flow Disclosures | Note 12 – Other Cash Flow Disclosures On a cash basis, the Company paid the following expenses for the periods ended December 31:
|
Other Cash Flow Disclosures (Tables) |
12 Months Ended | ||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | |||||||||||||||||||||||||
Other Cash Flow Disclosures [Abstract] | |||||||||||||||||||||||||
Expenses Paid on a Cash Basis | On a cash basis, the Company paid the following expenses for the periods ended December 31:
|
Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income tax expense (benefits) | Income tax expense (benefit) consists of the following components:
|
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Income tax expense (benefit) reconciliation | The expense for income taxes differed from the amounts computed by applying the applicable United States statutory rate of 21% and 21% as of December 31, 2019 and 2018, respectively, before income taxes as a result of the following differences:
|
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Major components that comprise the deferred tax liability | The following table summarizes the major components that comprise the net deferred tax liability as reflected in the balance sheets:
|
Investments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available for Sale Securities | The following tables provide a summary of fixed maturities available for sale by original or amortized cost and estimated fair value:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Securities by Contractual Maturity | The following table provides a summary of fixed maturities by contractual maturity as of December 31, 2019. Actual maturities could differ from contractual maturities due to call or prepayment provisions:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Investments with Sustained Gross Unrealized Losses | The fair value of investments with sustained gross unrealized losses at December 31, 2019 and 2018 are as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities in Continuous Unrealized Loss Position | The following table provides additional information regarding the number of securities that were in an unrealized loss position for greater than or less than twelve months:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading Revenue Charged to Investment Income from Trading Securities | Trading Securities Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Consolidated Statements of Operations. Trading Securities included exchange-traded equities and exchange-traded options. Trading securities carried as liabilities were securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, was recognized upon the termination of the short sale. Earnings from trading securities were classified in cash flows from operating activities. The Company did not hold any trading securities at December 31, 2019 or 2018. The following table reflects trading securities revenue charged to net investment income for the periods ended December 31:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Maximum and Minimum Lending Rates for Mortgage Loan | During 2019 and 2018, the maximum and minimum lending rates for mortgage loans were:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discounted Mortgage Holdings | The following table summarizes the mortgage loan holdings of the Company for the periods ended December 31:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Investment Income | Analysis of Investment Operations The following table reflects the Company’s net investment income for the periods ended December 31:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Realized Investment Gains and Losses | The following table presents the Company’s net realized investments gains (losses) and the change in net unrealized gains on available-for-sale investments for the periods ended December 31:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other than Temporary Impairment | Based on Management’s review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Consolidated Statements of Operations for the periods ended December 31:
|
Cost of Insurance Acquired (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Insurance Acquired [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Cost of Insurance Acquired |
|
||||||||||||||||||||||||||||||||||||||||||||||||
Estimated Net Amortization Expense of Cost of Insurance Acquired for Next Five Years | Estimated net amortization expense of cost of insurance acquired for the next five years is as follows:
|
Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
---|---|
Dec. 31, 2019 | |
Summary of Significant Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation – The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), under guidance issued by the Financial Accounting Standards Board (“FASB”). The preparation of financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Principles of Consolidation | Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the Registrant and its wholly and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated during consolidation. |
Business Segments | Business Segments – The Company has only one business segment – life insurance. |
Investments | Investments – The Company reports its investments as follows: Fixed Maturity Investments – The Company classifies its fixed maturity investments, which include bonds, as available for sale. Investments classified as available for sale are carried at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. Net realized gains and losses on sales of available for sale securities, and unrealized losses considered to be other-than-temporary, are recorded to net realized investment gains (losses) in the Consolidated Statements of Operations. Equity Securities at Fair Value – Investments in equity securities, which include common and preferred stocks, are reported at fair value with unrealized gains and losses reported as a component of net income (loss). Equity Securities at Cost – These investments are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company adopted ASU 2016-01 during 2018 and transferred equity securities of $12,118,617, that do not have a readily determinable fair value, from equity securities at fair value to equity securities at cost on the financial statements. There was no impact to the Consolidated Statements of Operations or net Shareholders' Equity as a result of the change. Mortgage Loans on Real Estate – Mortgage loans on real estate are reported at their unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Included in the mortgage loans balance is discounted mortgage loans on real estate. Discounted mortgage loans on real estate are loans that the Company purchased at a deep discount through an auction process led by the Federal Government or other intermediary. 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. 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 cash payments received during the work out process, the Company records these payments to interest income on a cash basis. 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. Management reviews the discount loan portfolio regularly for impairment. If an impairment is identified (after consideration of the underlying collateral), the Company records an impairment to earnings in the period the information becomes known. Investment Real Estate – Investment real estate held for sale is reported at the lower of cost or fair value less cost to sell. Expenses to maintain the property are expensed as incurred. Notes Receivable – Notes receivable are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. Policy Loans – Policy loans are reported at their unpaid balances, including accumulated interest, but not in excess of the cash surrender value of the related policy. Short-Term Investments – Short-term investments have remaining maturities exceeding three months and under 12 months at the time of purchase and are stated at amortized cost, which approximates fair value. Gains and Losses – Realized gains and losses include sales of investments and investment impairments. If any, other-than-temporary impairments in fair value are recognized in net income on the specific identification basis. |
Fair Value | Fair Value – Fair values for cash, short-term investments, short-term debt, receivables and payables approximate carrying value. Fair values for fixed maturities, equity securities and certain other assets are determined in accordance with specific accounting guidance. Fair values are based on quoted market prices, where available. Otherwise, fair values are based on quoted market prices of comparable instruments in active markets, quotes in inactive markets, or other observable criteria. Mortgage loans on real estate are estimated using discounted cash flow analyses. Discounted mortgage loans on real estate are reported at original purchase price, which Management believes approximates fair value. For more specific information regarding the Company’s measurements and procedures in valuing financial instruments, see Note 3 – Fair Value Measurements. |
Impairment of Investments | Impairment of Investments – The Company evaluates its investment portfolio for other-than-temporary impairments as described in Note 2 – Investments. If a security is deemed to be other-than-temporarily impaired, the cost basis of the security is written down to fair value and is treated as a realized loss. Current accounting guidance states that if an entity intends to sell or if it is more likely than not that it will be required to sell an impaired security prior to recovery of its cost basis, the security is to be considered other-than-temporarily impaired and the full amount of impairment must be charged to earnings. Otherwise, losses on fixed maturities which are other-than-temporarily impaired are separated into two categories, the portion of the loss which is considered credit loss and the portion of the loss which is due to other factors. The credit loss portion is charged to earnings while the loss due to other factors is charged to other comprehensive income. |
Cash Equivalents and Cash | Cash Equivalents – Cash equivalents consist of money market accounts and investments with maturities of three months or less when purchased. Cash – Cash consists of balances on hand and on deposit in banks and financial institutions. |
Reinsurance | Reinsurance - In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts. The Company retains a maximum of $125,000 of coverage per individual life. Reinsurance receivables are recognized in a manner consistent with the liabilities relating to the underlying reinsured contracts. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. |
Cost of Insurance Acquired | Cost of Insurance Acquired - When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. 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 amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. |
Property and Equipment | Property and Equipment - Company-occupied property, data processing equipment and furniture and office equipment are stated at cost less accumulated depreciation of $5,916,424 and $5,655,593 at December 31, 2019 and 2018, respectively. Depreciation is computed on a straight-line basis for financial reporting purposes using estimated useful lives of 3 to 30 years. Depreciation expense was $260,831 and $430,260 for the years ended December 31, 2019 and 2018, respectively. |
Future Policy Benefits and Expenses | Future Policy Benefits and Expenses - The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiary’s experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2.0% to 6.0% for life insurance and 2.5% to 7.5% for annuities. Benefit reserves for traditional life insurance policies include certain deferred profits on limited-payment policies that are being recognized in income over the policy term. Policy benefit claims are charged to expense in the period that the claims are incurred. The mortality rate assumptions for policies currently issued by the Company are based on 2001 select and ultimate tables. Withdrawal rate assumptions are based upon Linton B or C, which are industry standard actuarial tables for forecasting assumed policy lapse rates. Benefit reserves for universal life insurance and interest sensitive life insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims in excess of related policy account balances. Interest crediting rates for universal life and interest sensitive products range from 3.0% to 6.0% as of December 31, 2019 and 2018. |
Policy Claims and Benefits Payable | Policy Claims and Benefits Payable - Policy and contract claims include provisions for reported claims in process of settlement, valued in accordance with the terms of the policies and contracts, as well as provisions for claims incurred and unreported. The estimate of incurred and unreported claims is based on prior experience. The Company makes an estimate after careful evaluation of all information available to the Company. There is no certainty the stated liability for policy claims and benefits payable, including the estimate for incurred but unreported claims, will be the Company’s ultimate obligation. |
Income Taxes | Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax impact attributable to differences between the financial statement book values and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. More information concerning income taxes is provided in Note 6 – Income Taxes. |
Earnings Per Share | Earnings Per Share – The objective of both basic earnings per share (“EPS”) and diluted EPS is to measure the performance of an entity over the reporting period. The Company presents basic and diluted EPS on the face of the Consolidated Statements of Operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is calculated by adding to shares outstanding the additional net effect of potentially dilutive securities or contracts, such as stock options, which could be exercised or converted into common shares. |
Recognition of Revenues and Related Expenses | Recognition of Revenues and Related Expenses - Premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits, consist principally of whole life insurance policies, and certain annuities with life contingencies are recognized as revenues when due. Limited payment life insurance policies defer gross premiums received in excess of net premiums, which is then recognized in income in a constant relationship with insurance in-force. Accident and health insurance premiums are recognized as revenue pro rata over the terms of the policies. Benefits and related expenses associated with the premiums earned are charged to expense proportionately over the lives of the policies through a provision for future policy benefit liabilities and through deferral and amortization of deferred policy acquisition costs. For universal life and investment products, generally there is no requirement for payment of premium other than to maintain account values at a level sufficient to pay mortality and expense charges. Consequently, premiums for universal life policies and investment products are not reported as revenue, but as deposits. Policy fee revenue for universal life policies and investment products consists of charges for the cost of insurance and policy administration fees assessed during the period. Expenses include interest credited to policy account balances and benefit claims incurred in excess of policy account balances. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In January of 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 or ASU 2020-01. ASU 2020-01 clarifies the interaction between accounting standards related to equity securities, equity method investments, and certain derivatives. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. In December of 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes or ASU 2019-12. ASU 2019-12 is expected to reduce the cost and complexity related to the accounting for income taxes. The ASU removes specific exceptions to the general principles in Topic 740 and improves the financial statement preparer's application of income tax related guidance. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. In August 2018, the FASB issued Accounting Standards Update No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement or ASU 2018-13. ASU 2018-13 modifies certain disclosure requirements related to fair value measurements including requiring disclosures on changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements and a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. In August 2018, the FASB issued Accounting Standards Update No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts or ASU 2018-12. ASU 2018-12 significantly changes how insurers account for long-duration insurance contracts. The new guidance will require insurers to review and update, if necessary, the assumptions used to measure insurance liabilities periodically, rather than retain assumptions used at contract inception. The updated guidance also changes the recognition and measurement of deferred acquisition costs (DAC) and created a new category of benefit features called market risk benefits (MRB) that will be measured at fair value. The guidance also significantly expands the disclosure requirements for long-duration contracts. The ASU was originally effective for fiscal years, and interim periods within those years, for years beginning after December 15, 2020 and early adoption is permitted. The guidance on measuring the liabilities for future policy benefits and DAC will be adopted on a modified retrospective basis as of the earliest period presented in the year of adoption. The guidance on MRB will be adopted on a retrospective basis as of the earliest period presented in the year of adoption. In November of 2019, the FASB issued ASU 2019-09, which delayed the effective date of ASU 2018-12 to fiscal years beginning after December 15, 2023 for smaller reporting companies. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. Accounting Standards Update (ASU 2016-13), Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments – The amendments included in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better evaluate their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 was originally effective for public companies for fiscal years beginning after December 15, 2019. In November of 2019, the FASB issued Accounting Standards Update No. 2019-10, which delayed the implementation of ASU 2016-13 to fiscal years beginning after December 15, 2022 for smaller reporting companies. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements. |
Investments, Other-Than-Temporary Impairments (Details) - USD ($) |
12 Months Ended | |
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Dec. 31, 2019 |
Dec. 31, 2018 |
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Other than Temporary Impairment Losses [Abstract] | ||
Other-than-temporary impairments | $ 650,956 | $ 300,000 |
Fixed Maturities [Member] | ||
Other than Temporary Impairment Losses [Abstract] | ||
Other-than-temporary impairments | 650,956 | 0 |
Real Estate [Member] | ||
Other than Temporary Impairment Losses [Abstract] | ||
Other-than-temporary impairments | $ 0 | $ 300,000 |
Other Cash Flow Disclosures (Details) - USD ($) |
12 Months Ended | |
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Dec. 31, 2019 |
Dec. 31, 2018 |
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Other Cash Flow Disclosures [Abstract] | ||
Interest | $ 0 | $ 0 |
Federal income tax | $ 1,106,000 | $ 1,652,000 |
Commitments and Contingencies (Details) |
Dec. 31, 2019
USD ($)
|
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RLF III, LLC [Member] | |
Total Funding Commitments and Unfunded Commitment [Abstract] | |
Total Funding Commitment | $ 4,000,000 |
Unfunded Commitment | 398,120 |
Sovereign's Capital, LP Fund I [Member] | |
Total Funding Commitments and Unfunded Commitment [Abstract] | |
Total Funding Commitment | 500,000 |
Unfunded Commitment | 20,000 |
Sovereigns Capital LP Fund II [Member] | |
Total Funding Commitments and Unfunded Commitment [Abstract] | |
Total Funding Commitment | 1,000,000 |
Unfunded Commitment | 158,596 |
Sovereigns Capital LP Fund III [Member] | |
Total Funding Commitments and Unfunded Commitment [Abstract] | |
Total Funding Commitment | 1,000,000 |
Unfunded Commitment | 800,000 |
Barton Springs Music, LLC [Member] | |
Total Funding Commitments and Unfunded Commitment [Abstract] | |
Total Funding Commitment | 1,750,000 |
Unfunded Commitment | $ 302,250 |
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Investments available for sale: | ||
Fixed maturities, amortized cost | $ 159,959,855 | $ 160,895,869 |
Equity securities, cost | $ 32,578,862 | $ 34,885,107 |
Shareholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, stated value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 7,000,000 | 7,000,000 |
Common stock, issued (in shares) | 3,277,830 | 3,295,870 |
Common stock, outstanding (in shares) | 3,277,830 | 3,295,870 |
Related Party Transactions |
12 Months Ended |
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Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 11 – Related Party Transactions The articles of incorporation of UG contain the following language under item 12 relative to related party transactions: A director shall not be disqualified from-dealing with or contracting with the corporation as vendor, purchaser; employee, agent or otherwise; nor, in the absence of fraud, shall any transaction or contract or act of this corporation be void or in any way affected or invalidated by the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder, director or officer is in any way interested in such transaction or contract or act, provided the fact that such director or such firm or such corporation so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction or act shall be taken: nor shall any such director be accountable .or responsible to the company for or in respect to such transaction or contract or act of. this corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such action or contract; and any such director may be counted in determining the existence of a quorum of any meeting of the Board of Directors of the company which shall authorize or take action in respect to any such contract or transaction or act and may vote thereat to authorize, ratify, or approve any such contract or transaction or act, with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer were not interested in such transaction or contract or act. On February 20, 2003, UG purchased $4 million of a trust preferred security offering issued by First Southern Bancorp, Inc. (“FSBI”). The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515%. The Company received dividends of $198,297 and $283,151 during 2019 and 2018, respectively. On March 30, 2009, UG purchased $1 million of FSBI common stock. The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement. During 2019, the Company received a preferred pay down of $558,000 leaving a cost basis of $3,002,000. UTG has a 30.10% ownership interest in an aircraft that is jointly owned with First Southern National Bank and Bandyco, LLC. Bandyco, LLC is affiliated with the Estate of Ward F. Correll. Mr. Correll is the father of Jesse Correll and a former director of the Company. The aircraft is used for business related travel by various officers and employees of the Company. For years 2019 and 2018, UTG paid $354,404 and $391,851 for costs associated with the aircraft, respectively. Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiary. Under this arrangement, the subsidiary pays its proportionate share of expenses, based on an allocation formula. During 2019 and 2018, UG paid $7,397,953 and $7,093,227, respectively, in expenses. The Ohio Department of Insurance has approved the cost sharing agreement and it is Management’s opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America. The Company from time to time acquires mortgage loans through participation agreements with FSNB. FSNB services the Company's mortgage loans including those covered by the participation agreements. The Company pays a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $15,138 and $8,393 in servicing fees and $0 and $0 in origination fees to FSNB during 2019 and 2018, respectively. Effective January 1, 2017, UTG entered into a shared services contract with FSNB. Pursuant to the terms of the agreement, UTG and FSNB will utilize the services of the other’s staff in certain instances for the betterment of both entities. Personnel within departments, such as accounting, human resources, and information technology, are shared between the entities. Costs of these resources are then reimbursed between the companies. The shared services arrangement provides benefits to both parties such as access to a greater pool of knowledgeable staff, efficiencies from elimination of redundancies and more streamlined operations. The Company reimbursed expenses incurred by employees of FSNB relating to salaries, travel and other costs incurred on behalf of or relating to the Company and received reimbursements from FSNB. The Company paid $519,857 and $571,648 in 2019 and 2018, respectively to FSNB in net reimbursement of such costs. In addition, the Company reimburses FSNB a portion of salaries and pension costs for Mr. Correll and Mr. Ditto. The reimbursement was approved by the UTG Board of Directors and totaled $322,188 and $307,645 in 2019 and 2018, respectively, which included salaries and other benefits. Effective July 1, 2018, the Company assumed the employees of several smaller entities associated with UTG. The purpose of this was to support the continued efforts to further streamline operations amongst associated entities. The salaries, benefits, and payroll related processing fees are 100% reimbursed by the associated entities on a monthly basis. During 2019 and 2018, the Company received reimbursements of $922,357 and $372,849, respectively. The Company rents approximately 8,000 square feet of office space, located in Stanford, Kentucky, from FSNB and pays $2,000 per month in rent. The Company paid rent of $24,000 to FSNB during 2019 and 2018. As previously disclosed in the Notes Receivable section of Note 2 - Investments, several of the Company’s notes have participation agreements in place with third parties. Certain participation agreements are with FSF, a related party. The participation agreements are sold without recourse and assigned to the participant based on their pro-rata share of the principal, interest and collateral as specified in the participation agreements. The undivided participations in the notes receivable range from 20% - 50%. The total amount of loans participated to FSF was $250,000 as of December 31, 2019 and 2018. During 2016, UG and FSF established a partnership agreement and formed a limited liability company to purchase real estate. FSF contributed $140,000 to the partnership, which gave them a 10% ownership in the LLC. The property held by this LLC was sold in January of 2019 and the funds from the sale were subsequently distributed to the members. |
Credit Arrangements |
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Credit Arrangements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Arrangements | Note 7 – Credit Arrangements At December 31, 2019 and 2018, the Company had the following lines of credit available:
The UTG line of credit carries interest at a fixed rate of 4.040% 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"). During May of 2019, the Federal Home Loan Bank approved UG’s Cash Management Advance Application (“CMA”). The CMA gives the Company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity. |
Fair Value Measurements |
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Note 3 – Fair Value Measurements The Company measures its assets and liabilities recorded at fair value in the 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 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 consist of common and preferred stocks mainly in private equity investments, financial institutions and publicly traded corporations. Equity securities for which there is sufficient market data are categorized as Level 1 or 2 in the fair value hierarchy. For the equity securities in which quoted market prices are not available, the Company uses industry standard pricing methodologies, including discounted cash flow models that may incorporate various inputs such as payment expectations, risk of the investment, market data, and health of the underlying company. The inputs are based upon Management's assumptions and available market information. When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy. During 2019, the Company received an offer to purchase its investments in certain music royalties held in the form of Level 3 equity investments. As a result of this event, the Company elected to change its valuation methodology from using discounted cash flow models to estimate fair value to marking the investment do the offer price to estimate the fair value. The change in methodology resulted in recording an unrealized gain on investment of approximately $2.1 million during the year ended December 31, 2019. The investments were sold during the first quarter of 2020. The Company recognized a gain of approximately $4.2 million on the sale. The 2020 net income is unaffected by the sale as the realized gain is offset by the unrealized gain reversal at the time of sale. The following table presents the Company’s assets and liabilities measured at fair value in the consolidated balance sheet on a recurring basis as of December 31, 2019.
The following table presents the Company’s assets and liabilities measured at fair value in the consolidated balance sheet on a recurring basis as of December 31, 2018.
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.
The Level 3 securities include one fixed maturity and certain equity securities with unobservable inputs. The Company computed fair value of Level 3 equity investments based on a review of current financial information, earnings trends and similar companies in the same industries. The Company did not transfer any assets in or out of Level 3 during 2019. The Company transferred certain cost method investments out of Level 3 during 2018. Transfers occur when there is a lack of observable market information. 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 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 Consolidated Balance Sheets are shown below. Because the fair value for all 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.
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. A portion of the mortgage loans balance consists of discounted mortgage loans. The Company has historically 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, including the Company's investment in oil and gas royalties, 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. Notes receivable 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. 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. Short-term investments are stated at amortized costs, which approximates fair value. The carrying amount of cash and cash equivalents in the Consolidated Balance Sheets 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. |
Investments, Number of Securities in Unrealized Loss Position (Details) - Security |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Fixed Maturities [Abstract] | ||
Less than 12 months, number of securities | 3 | 30 |
12 months or longer, number of securities | 0 | 10 |
Total number of securities | 3 | 40 |
Fair Value Measurements (Tables) |
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Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table presents the Company’s assets and liabilities measured at fair value in the consolidated balance sheet on a recurring basis as of December 31, 2019.
The following table presents the Company’s assets and liabilities measured at fair value in the consolidated balance sheet on a recurring basis as of December 31, 2018.
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Reconciliation for Level 3 Assets Measured at Fair Value on a Recurring Basis | 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.
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Carrying Values and Estimated Fair Values of Financial Instruments not Recorded at Fair Value | The carrying values and estimated fair values of certain of the Company’s financial instruments not recorded at fair value in the Consolidated Balance Sheets are shown below. Because the fair value for all 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.
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Concentrations |
12 Months Ended |
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Dec. 31, 2019 | |
Concentrations [Abstract] | |
Concentrations | Note 13 - Concentrations 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 T. Correll, the Company’s CEO and Chairman. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Because UTG serves primarily individuals located in four states, the ability of our customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of December 31, 2019 and 2018, approximately 56% of the Company’s total direct premium was collected from Illinois, Ohio, Texas and West Virginia. Thus, results of operations are heavily dependent upon the strength of these economies. The Company reinsures that portion of insurance risk which is in excess of its retention limits. Retention limits range up to $125,000 per life. Life insurance ceded represented 20% of total life insurance in force at December 31, 2019 and 2018, respectively. Insurance ceded represented 33% and 35% of premium income for 2019 and 2018, respectively. The Company would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations. The Company owns a variety of investments associated with the oil and gas industry. These investments represented approximately 25% of the Company’s total invested assets at December 31, 2019 and 2018. |
Credit Arrangements (Tables) |
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Credit Arrangements | At December 31, 2019 and 2018, the Company had the following lines of credit available:
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Cost of Insurance Acquired (Details) - USD ($) |
12 Months Ended | |
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Dec. 31, 2019 |
Dec. 31, 2018 |
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Cost of insurance acquired [Roll Forward] | ||
Interest rate used in amortization calculation | 12.00% | |
Cost of insurance acquired, beginning of year | $ 5,622,227 | $ 6,428,292 |
Interest accretion | 769,612 | 866,339 |
Amortization | (1,545,518) | (1,672,404) |
Net amortization | (775,906) | (806,065) |
Cost of insurance acquired, end of year | 4,846,321 | $ 5,622,227 |
Interest Accretion [Abstract] | ||
2020 | 676,503 | |
2021 | 587,120 | |
2022 | 501,324 | |
2023 | 418,722 | |
2024 | 339,372 | |
Amortization [Abstract] | ||
2020 | 1,421,353 | |
2021 | 1,302,090 | |
2022 | 1,189,672 | |
2023 | 1,079,979 | |
2024 | 975,187 | |
Net Amortization [Abstract] | ||
2020 | 744,850 | |
2021 | 714,970 | |
2022 | 688,348 | |
2023 | 661,257 | |
2024 | $ 635,815 |
Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Note 2 – Investments Available for Sale Securities – Fixed Maturity and Equity Securities The following tables provide a summary of fixed maturities available for sale by original or amortized cost and estimated fair value:
The following table provides a summary of fixed maturities by contractual maturity as of December 31, 2019. Actual maturities could differ from contractual maturities due to call or prepayment provisions:
By insurance statute, the majority of the Company's investment portfolio is invested in investment grade securities to provide ample protection for policyholders. Below investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. Debt securities classified as below-investment grade are those that receive a Standard & Poor's rating of BB+ or below. The Company held below investment grade investments with an estimated market value of $1,031,570 and $2,618,594 as of December 31, 2019 and December 31, 2018, respectively. The investments are all classified as “All other corporate bonds”. The fair value of investments with sustained gross unrealized losses at December 31, 2019 and 2018 are as follows:
The following table provides additional information regarding the number of securities that were in an unrealized loss position for greater than or less than twelve months:
Substantially all of the unrealized losses on fixed maturities available for sale at December 31, 2019 and 2018 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 December 31, 2019 and 2018. Cost Method Investments The Company held equity investments with an aggregate cost of $10,919,247 and $12,118,617 at December 31, 2019 and 2018, respectively. These equity investments were not reported at fair value because it is not practicable to estimate their fair values due to insufficient information being available. Management did not identify any events or changes in circumstances that might have a significant adverse effect on the reported value of those investments. Based on Management's evaluation of the expected cash flow of the investments, and the Company's ability and intent to hold the investments for a reasonable period of time, the Company does not deem an other-than-temporary impairment necessary at December 31, 2019. Trading Securities Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Consolidated Statements of Operations. Trading Securities included exchange-traded equities and exchange-traded options. Trading securities carried as liabilities were securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, was recognized upon the termination of the short sale. Earnings from trading securities were classified in cash flows from operating activities. The Company did not hold any trading securities at December 31, 2019 or 2018. The following table reflects trading securities revenue charged to net investment income for the periods ended December 31:
Mortgage Loans on Real Estate The Company, from time to time, acquires mortgage loans through participation agreements with FSNB. FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market. The Company is able to receive participations from FSNB for three primary reasons: 1) FSNB has already reached its maximum lending limit to a single borrower, but the borrower is still considered a suitable risk; 2) the interest rate on a particular loan may be fixed for a long period that is more suitable for UG given its asset-liability structure; and 3) FSNB’s loan growth might at times outpace its deposit growth, resulting in FSNB participating such excess loan growth rather than turning customers away. For originated loans, the Company’s Management is responsible for the final approval of such loans after evaluation. Before a new loan is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. These criteria include, but are not limited to, a credit report, personal financial information such as outstanding debt, sources of income, and personal equity. Once the loan is approved, the Company directly funds the loan to the borrower. The Company bears all risk of loss associated with the terms of the mortgage with the borrower. During 2019 and 2018, the Company acquired $4,367,644 and $91,954 in mortgage loans, respectively. FSNB services the majority of the Company’s mortgage loan portfolio. The Company pays FSNB a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan. During 2019 and 2018, the maximum and minimum lending rates for mortgage loans were:
Most mortgage loans are first position loans. Loans issued are generally limited to no more than 80% of the appraised value of the property. The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent. Management is provided with a monthly listing of loans that are 60 days or more past due. All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans. Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified. Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact. Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers’ ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. Interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. 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 mortgage loan reserve was $0 at December 31, 2019 and December 31, 2018. The following table summarizes the mortgage loan holdings of the Company for the periods ended December 31:
Investment Real Estate Investment real estate held for sale is reported at the lower of cost or fair value less cost to sell. Investment Real estate acquired through foreclosure, consisting of properties obtained through foreclosure proceedings or acceptance of a deed in lieu of foreclosure, is reported on an individual asset basis at the lower of cost or fair value, less disposal costs. Fair value is determined on the basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources. When properties are acquired through foreclosure, any excess of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is recognized and charged to the Consolidated Statements of Operations. Based upon Management’s evaluation of the real estate acquired through foreclosure, additional expense is recorded when necessary in an amount sufficient to reflect any declines in estimated fair value. The Company's investment real estate portfolio includes ownerships in oil and gas royalties. As of December 31, 2019 and 2018, investments in oil and gas royalties represented 44% and 43%, respectively, of the total investment real estate portfolio. Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Consolidated Statements of Operations. During 2019 and 2018, the Company acquired $1,958,982 and $15,704,151 of investment real estate, respectively. Notes Receivable Notes receivable represent collateral loans and promissory notes issued by the Company and are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The valuation allowance as of December 31, 2019 and 2018 was $0. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. During 2019 and 2018, the Company acquired $16,031,605 and $11,496,998 of notes receivable, respectively. Before a new note is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. Once the note is approved, the Company directly funds the note to the borrower. Several of the notes have participation agreements in place, whereas the Company has reduced its investment in the note receivable by participating a portion of the note to a third party. Similar to the mortgage loans, FSNB services several of the notes receivable. The Company, and the participants in the notes, share in the risk of loss associated with the terms of the note with the borrower, based upon their ownership percentage in the note. The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. Analysis of Investment Operations The following table reflects the Company’s net investment income for the periods ended December 31:
The following table presents the Company’s net realized investments gains (losses) and the change in net unrealized gains on available-for-sale investments for the periods ended December 31:
Other-Than-Temporary Impairments 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. Management regularly reviews its real estate portfolio in comparison to appraisal valuations and current market conditions for indications of other-than-temporary impairments. If a decline in value is judged by Management to be other-than-temporary, a loss is recognized by a charge to other-than-temporary impairment losses in the Consolidated Statements of Operations. The other-than-temporary impairments recognized during 2018 and 2019 were taken as a result of Management's assessment and determination of value of the investments. The investments were written down to better reflect their current expected value. Based on Management’s review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Consolidated Statements of Operations for the periods ended December 31:
Investments on Deposit The Company had investments with a fair value of $8,371,827 and $8,317,514 on deposit with various state insurance departments as of December 31, 2019 and 2018, respectively. |
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