0000832480-21-000016.txt : 20210813 0000832480-21-000016.hdr.sgml : 20210813 20210813140111 ACCESSION NUMBER: 0000832480-21-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 59 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210813 DATE AS OF CHANGE: 20210813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UTG INC CENTRAL INDEX KEY: 0000832480 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 202907892 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16867 FILM NUMBER: 211171340 BUSINESS ADDRESS: STREET 1: 205 NORTH DEPOT STREET CITY: STANFORD STATE: KY ZIP: 40484 BUSINESS PHONE: 2173236300 MAIL ADDRESS: STREET 1: 205 NORTH DEPOT STREET CITY: STANFORD STATE: KY ZIP: 40484 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TRUST GROUP INC DATE OF NAME CHANGE: 20001206 FORMER COMPANY: FORMER CONFORMED NAME: UNITED TRUST INC /IL/ DATE OF NAME CHANGE: 19920703 10-Q 1 utg21q2.htm UTG21Q2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

OR

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

For the transition period from _____________ to ____________

Commission File No. 000-16867

 
UTG, INC.
 
 
(Exact name of registrant as specified in its charter)
 
     
Delaware
 
20-2907892
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
     
 
205 North Depot Street
 
 
Stanford, KY 40484
 
 
(Address of principal executive offices) (Zip Code)
 

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

Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
Name of each exchange on which registered
       None
                             None

Securities registered pursuant to Section 12(g) of the Act:

Title of class
Common Stock, stated value $.001 per share

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

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

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No
 
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

The number of shares outstanding of the registrant’s common stock as of July 31, 2021 was 3,170,293.



UTG, Inc.
(The “Company”)

TABLE OF CONTENTS

PART I.   Financial Information
4
Item 1.  Financial Statements
4
Condensed Consolidated Balance Sheets
4
Condensed Consolidated Statements of Operations
5
Condensed Consolidated Statements of Comprehensive Income (Loss)
6
Condensed Consolidated Statements of Shareholders’ Equity
7
Condensed Consolidated Statements of Cash Flows
9
Notes to Condensed Consolidated Financial Statements
10
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
23
Item 4.  Controls and Procedures
29
 
PART II.  Other Information
 
30
Item 1.  Legal Proceedings
30
Item 1A. Risk Factors
30
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds
30
Item 3.  Defaults Upon Senior Securities
30
Item 4.  Mine Safety Disclosures
30
Item 5.  Other Information
30
Item 6.  Exhibits
30
 
Signatures
 
31



Part 1.   Financial Information.
Item 1.  Financial Statements.

UTG, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

 
June 30, 2021
   
December 31, 2020*
 
ASSETS
 
Investments:
           
Investments available for sale:
           
Fixed maturities, at fair value (amortized cost $131,085,585 and $146,017,864)
 
$
146,250,065
   
$
165,779,997
 
    Equity securities, at fair value (cost $61,058,683 and $36,833,795)
   
121,154,900
     
78,075,187
 
Equity securities, at cost
   
14,543,343
     
14,389,189
 
Mortgage loans on real estate at amortized cost
   
13,985,960
     
20,802,365
 
Investment real estate
   
35,298,846
     
38,086,391
 
Notes receivable
   
23,100,967
     
17,682,296
 
Policy loans
   
8,483,130
     
8,590,524
 
Total investments
   
362,817,211
     
343,405,949
 
                 
Cash and cash equivalents
   
30,980,881
     
39,025,754
 
Accrued investment income
   
1,326,810
     
1,341,643
 
Reinsurance receivables:
               
Future policy benefits
   
25,043,878
     
25,267,920
 
Policy claims and other benefits
   
3,965,697
     
3,988,088
 
Cost of insurance acquired
   
3,743,626
     
4,101,471
 
Property and equipment, net of accumulated depreciation
   
310,322
     
348,170
 
Income tax receivable
   
803,265
     
0
 
Other assets
   
652,821
     
1,577,098
 
Total assets
 
$
429,644,511
   
$
419,056,093
 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
Liabilities:
               
Policy liabilities and accruals:
               
Future policyholder benefits
 
$
239,471,396
   
$
243,990,881
 
Policy claims and benefits payable
   
4,588,575
     
4,169,569
 
Other policyholder funds
   
353,451
     
365,761
 
Dividend and endowment accumulations
   
14,745,229
     
14,836,158
 
Income taxes payable
   
0
     
268,497
 
Deferred income taxes
   
15,960,900
     
12,995,714
 
Trading securities, at fair value (proceeds $652 and $11,246)
   
675
     
12,219
 
Other liabilities
   
5,059,652
     
5,275,803
 
Total liabilities
   
280,179,878
     
281,914,602
 
                 
Shareholders' equity:
               
Common stock - no par value, stated value $0.001 per share.  Authorized 7,000,000 shares - 3,173,009 and 3,175,564 shares outstanding
   
3,174
     
3,176
 
Additional paid-in capital
   
32,956,587
     
33,025,018
 
Retained earnings
   
104,035,750
     
88,068,284
 
Accumulated other comprehensive income
   
11,952,095
     
15,584,241
 
Total UTG shareholders' equity
   
148,947,606
     
136,680,719
 
Noncontrolling interests
   
517,027
     
460,772
 
Total shareholders' equity
   
149,464,633
     
137,141,491
 
Total liabilities and shareholders' equity
 
$
429,644,511
   
$
419,056,093
 

* Balance sheet audited at December 31, 2020.

See accompanying notes.



UTG, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

 
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
Revenue:
                       
Premiums and policy fees
 
$
2,296,481
   
$
2,379,976
   
$
4,595,544
   
$
4,735,731
 
Ceded reinsurance premiums and policy fees
   
(696,061
)
   
(690,036
)
   
(1,288,535
)
   
(1,370,476
)
Net investment income
   
2,082,359
     
3,021,654
     
4,042,026
     
5,851,840
 
Other income
   
94,470
     
93,772
     
189,205
     
152,814
 
      Revenue before net investment gains (losses)
   
3,777,249
     
4,805,366
     
7,538,240
     
9,369,909
 
Net investment gains (losses):
                               
Other-than-temporary impairments
   
(411,584
)
   
0
     
(411,584
)
   
0
 
Other realized investment gains, net
   
4,287,461
     
(1,978,846
)
   
4,432,507
     
(2,095,846
)
Change in fair value of equity securities
   
195,136
     
16,704,460
     
20,375,015
     
(688,477
)
      Total net investment gains (losses)
   
4,071,013
     
14,725,614
     
24,395,938
     
(2,784,323
)
Total revenue
   
7,848,262
     
19,530,980
     
31,934,178
     
6,585,586
 
                                 
Benefits and other expenses:
                               
Benefits, claims and settlement expenses:
                               
Life
   
4,025,758
     
3,422,177
     
8,020,609
     
6,962,538
 
Ceded reinsurance benefits and claims
   
(577,515
)
   
(353,168
)
   
(986,666
)
   
(988,111
)
Annuity
   
255,538
     
259,049
     
493,093
     
491,537
 
Dividends to policyholders
   
86,476
     
92,005
     
174,284
     
186,320
 
Commissions and amortization of deferred policy acquisition costs
   
(30,754
)
   
(28,559
)
   
(56,908
)
   
(63,676
)
Amortization of cost of insurance acquired
   
179,102
     
186,212
     
357,845
     
372,425
 
Operating expenses
   
1,734,156
     
1,703,606
     
3,837,533
     
3,690,298
 
Total benefits and other expenses
   
5,672,761
     
5,281,322
     
11,839,790
     
10,651,331
 
                                 
Income (loss) before income taxes
   
2,175,501
     
14,249,658
     
20,094,388
     
(4,065,745
)
Income tax (benefit) expense
   
350,499
     
2,504,024
     
4,070,667
     
(864,558
)
                                 
Net income (loss)
   
1,825,002
     
11,745,634
     
16,023,721
     
(3,201,187
)
                                 
Net income attributable to noncontrolling interests
   
(26,502
)
   
(33,514
)
   
(56,255
)
   
(65,754
)
                                 
Net income (loss) attributable to common shareholders
 
$
1,798,500
   
$
11,712,120
   
$
15,967,466
   
$
(3,266,941
)
                                 
Amounts attributable to common shareholders
                               
Basic income (loss) per share
 
$
0.57
   
$
3.58
   
$
5.03
   
$
(1.00
)
                                 
Diluted income (loss) per share
 
$
0.57
   
$
3.58
   
$
5.03
   
$
(1.00
)
                                 
Basic weighted average shares outstanding
   
3,175,027
     
3,272,715
     
3,176,012
     
3,273,395
 
                                 
Diluted weighted average shares outstanding
   
3,175,027
     
3,272,715
     
3,176,012
     
3,273,395
 


See accompanying notes.




UTG, Inc.

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

 
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
Net income (loss)
 
$
1,825,002
   
$
11,745,634
   
$
16,023,721
   
$
(3,201,187
)
                                 
Other comprehensive income (loss):
                               
                                 
Unrealized holding gains (losses) arising during period, pre-tax
   
2,505,067
     
6,595,986
     
(4,975,001
)
   
8,068,851
 
Tax (expense) benefit on unrealized holding gains (losses) arising during the period
   
(526,064
)
   
(1,385,157
)
   
1,044,750
     
(1,694,459
)
Unrealized holding gains (losses) arising during period, net of tax
   
1,979,003
     
5,210,829
     
(3,930,251
)
   
6,374,392
 
                                 
Less reclassification adjustment for (gains) losses included in net income
   
377,348
     
53,260
     
377,348
     
(338,223
)
Tax expense (benefit) for gains included in net income (loss)
   
(79,243
)
   
(11,185
)
   
(79,243
)
   
71,027
 
Reclassification adjustment for (gains) losses included in net income, net of tax
   
298,105
     
42,075
     
298,105
     
(267,196
)
Subtotal: Other comprehensive income (loss), net of tax
   
2,277,108
     
5,252,904
     
(3,632,146
)
   
6,107,196
 
                                 
Comprehensive income (loss)
   
4,102,110
     
16,998,538
     
12,391,575
     
2,906,009
 
                                 
Less comprehensive income attributable to noncontrolling interests
   
(26,502
)
   
(33,514
)
   
(56,255
)
   
(65,754
)
                                 
Comprehensive income (loss) attributable to UTG, Inc.
 
$
4,075,608
   
$
16,965,024
   
$
12,335,320
   
$
2,840,255
 


See accompanying notes.




UTG, Inc.
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended June 30, 2021
 
Common Stock
   
Additional Paid-In Capital
   
Retained Earnings
   
Accumulated Other
Comprehensive Income
   
Noncontrolling Interest
   
Total Shareholders’ Equity
 
                                     
Balance at March 31, 2021
 
$
3,178
   
$
33,065,925
   
$
102,237,250
   
$
9,674,987
   
$
490,525
   
$
145,471,865
 
Common stock issued during year
   
1
     
16,772
     
0
     
0
     
0
     
16,773
 
Treasury shares acquired
   
(5
)
   
(126,110
)
   
0
     
0
     
0
     
(126,115
)
Net income (loss) attributable to common shareholders
   
0
     
0
     
1,798,500
     
0
     
0
     
1,798,500
 
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes
   
0
     
0
     
0
     
2,277,108
     
0
     
2,277,108
 
Contributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Distributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Gain attributable to noncontrolling interest
   
0
     
0
     
0
     
0
     
26,502
     
26,502
 
Balance at June 30, 2021
 
$
3,174
   
$
32,956,587
   
$
104,035,750
   
$
11,952,095
   
$
517,027
   
$
149,464,633
 

Six Months Ended June 30, 2021
 
Common Stock
   
Additional Paid-In Capital
   
Retained Earnings
   
Accumulated Other
Comprehensive Income
   
Noncontrolling Interest
   
Total Shareholders’ Equity
 
                                     
Balance at December 31, 2020
 
$
3,176
   
$
33,025,018
   
$
88,068,284
   
$
15,584,241
   
$
460,772
   
$
137,141,491
 
Common stock issued during year
   
7
     
170,531
     
0
     
0
     
0
     
170,538
 
Treasury shares acquired
   
(9
)
   
(238,962
)
   
0
     
0
     
0
     
(238,971
)
Net income (loss) attributable to common shareholders
   
0
     
0
     
15,967,466
     
0
     
0
     
15,967,466
 
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes
   
0
     
0
     
0
     
(3,632,146
)
   
0
     
(3,632,146
)
Contributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Distributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Gain attributable to noncontrolling interest
   
0
     
0
     
0
     
0
     
56,255
     
56,255
 
Balance at June 30, 2021
 
$
3,174
   
$
32,956,587
   
$
104,035,750
   
$
11,952,095
   
$
517,027
   
$
149,464,633
 

See accompanying notes.




UTG, Inc.
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended June 30, 2020
 
Common Stock
   
Additional Paid-In Capital
   
Retained Earnings
   
Accumulated Other
Comprehensive Income
   
Noncontrolling Interest
   
Total Shareholders’ Equity
 
                                     
Balance at March 31, 2020
 
$
3,276
   
$
35,903,350
   
$
71,000,617
   
$
9,832,206
   
$
555,874
   
$
117,295,323
 
Common stock issued during year
   
1
     
16,739
     
0
     
0
     
0
     
16,740
 
Treasury shares acquired
   
(5
)
   
(139,449
)
   
0
     
0
     
0
     
(139,454
)
Net income attributable to common shareholders
   
0
     
0
     
11,712,120
     
0
     
0
     
11,712,120
 
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes
   
0
     
0
     
0
     
5,252,904
     
0
     
5,252,904
 
Contributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Distributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Gain attributable to noncontrolling interest
   
0
     
0
     
0
     
0
     
33,514
     
33,514
 
Balance at June 30, 2020
 
$
3,272
   
$
35,780,640
   
$
82,712,737
   
$
15,085,110
   
$
589,388
   
$
134,171,147
 

Six Months Ended June 30, 2020
 
Common Stock
   
Additional Paid-In Capital
   
Retained Earnings
   
Accumulated Other
Comprehensive Income
   
Noncontrolling Interest
   
Total Shareholders’ Equity
 
                                     
Balance at December 31, 2019
 
$
3,279
   
$
36,012,401
   
$
85,979,678
   
$
8,977,914
   
$
523,634
   
$
131,496,906
 
Common stock issued during year
   
7
     
218,282
     
0
     
0
     
0
     
218,289
 
Treasury shares acquired
   
(14
)
   
(450,043
)
   
0
     
0
     
0
     
(450,057
)
Net income attributable to common shareholders
   
0
     
0
     
(3,266,941
)
   
0
     
0
     
(3,266,941
)
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes
   
0
     
0
     
0
     
6,107,196
     
0
     
6,107,196
 
Contributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Distributions
   
0
     
0
     
0
     
0
     
0
     
0
 
Gain attributable to noncontrolling interest
   
0
     
0
     
0
     
0
     
65,754
     
65,754
 
Balance at June 30, 2020
 
$
3,272
   
$
35,780,640
   
$
82,712,737
   
$
15,085,110
   
$
589,388
   
$
134,171,147
 


See accompanying notes.





UTG, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

 
Six Months Ended
 
June 30,
 
June 30,
 
2021
 
2020
Cash flows from operating activities:
         
Net income (loss)
$
16,023,721
 
$
(3,201,187)
Adjustments to reconcile net income to net cash used in operating activities:
         
Amortization (accretion) of investments
 
27,843
   
(58,394)
Other-than-temporary impairments
 
411,584
   
0
Realized investment gains (losses), net
 
(4,432,507)
   
2,095,846
Change in fair value of equity securities
 
(20,375,015)
   
688,477
Unrealized trading (gains) losses included in income
 
(950)
   
0
Realized trading (gains) losses included in income
 
(18,304)
   
0
Amortization of cost of insurance acquired
 
357,845
   
372,425
Depreciation and depletion
 
1,260,915
   
239,510
Stock-based compensation
 
170,538
   
218,289
Charges for mortality and administration of universal life and annuity products
 
(3,216,269)
   
(3,164,512)
Interest credited to account balances
 
1,970,895
   
2,012,606
Change in accrued investment income
 
14,833
   
151,566
Change in reinsurance receivables
 
246,433
   
646,537
Change in policy liabilities and accruals
 
(2,293,954)
   
(2,219,077)
Change in income taxes receivable (payable)
 
(1,071,762)
   
472,319
Change in other assets and liabilities, net
 
4,632,604
   
(3,142,189)
Net cash used in operating activities
 
(6,291,550)
   
(4,887,784)
           
Cash flows from investing activities:
         
Proceeds from investments sold and matured:
         
Fixed maturities available for sale
 
14,542,087
   
12,253,350
Equity securities
 
5,161,155
   
16,186,805
Trading securities
 
241
   
0
Mortgage loans
 
7,569,346
   
230,116
Real estate
 
4,350,324
   
3,418,671
Notes receivable
 
581,329
   
3,333,296
Policy loans
 
559,398
   
713,241
Short-term investments
 
0
   
6,000,000
Total proceeds from investments sold and matured
 
32,763,880
   
42,135,479
Cost of investments acquired:
         
Fixed maturities available for sale
 
(20,000)
   
(9,038,928)
Equity securities
 
(24,990,946)
   
(10,286,666)
Trading securities
 
(358)
   
0
Mortgage loans
 
(747,941)
   
(5,098,138)
Real estate
 
(1,402,593)
   
0
Notes receivable
 
(6,000,000)
   
(3,500,000)
Policy loans
 
(452,004)
   
(618,465)
Short-term investments
 
0
   
(7,890,228)
Total cost of investments acquired
 
(33,613,842)
   
(36,432,425)
Net cash provided by (used in) investing activities
 
(849,962)
   
5,703,054
           
Cash flows from financing activities:
         
Policyholder contract deposits
 
2,343,191
   
2,283,017
Policyholder contract withdrawals
 
(3,007,581)
   
(2,118,404)
Purchase of treasury stock
 
(238,971)
   
(450,057)
Net cash used in financing activities
 
(903,361)
   
(285,444)
Net increase (decrease) in cash and cash equivalents
 
(8,044,873)
   
529,826
Cash and cash equivalents at beginning of period
 
39,025,754
   
28,787,629
Cash and cash equivalents at end of period
$
30,980,881
 
$
29,317,455

See accompanying notes.



UTG, Inc.

Notes to Condensed Consolidated Financial Statements
 (Unaudited)

Note 1 – Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet as of June 30, 2021, which has been derived from audited consolidated financial statements, and the unaudited interim Condensed Consolidated Financial Statements include the accounts of UTG, Inc. (the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”).  All significant intercompany accounts and transactions have been eliminated in consolidation.  The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of regulation S-X.  Accordingly, they do not include all of the information and notes required by GAAP for audited annual financial statements.  The information furnished includes all adjustments and accruals of a normal recurring nature, which in the opinion of Management, are necessary for a fair presentation of the results for the interim periods.  The unaudited Condensed Consolidated Financial Statements included herein and these related notes should be read in conjunction with the Company’s consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020The Company’s results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other future period.

During March 2020, a global pandemic was declared by the World Health Organization related to the rapidly growing outbreak of a novel strain of coronavirus (COVID-19). The pandemic has significantly impacted the economic conditions in the U.S. and globally, accelerating during the first half of March, as federal, state, and local governments reacted to the public health crisis, creating significant uncertainties in the U.S. economy. The Company has not experienced a slow-down in activities, however government restrictions and client-imposed delays are evaluated regularly and this could change. While the disruption is currently expected to be temporary, there is uncertainty around the duration. The Company cannot at this time predict the ultimate impact the pandemic will have on its results of operations, financial position, liquidity, or capital resources but such impact could be material.

This document at times will refer to the Registrant’s largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll.  Mr. Correll holds a majority ownership of First Southern Funding, LLC (“FSF”), a Kentucky corporation, and First Southern Bancorp, Inc. (“FSBI”), a financial services holding company.  FSBI operates through its 100% owned subsidiary bank, First Southern National Bank (“FSNB”).  Banking activities are conducted through multiple locations within south-central and western Kentucky.  Mr. Correll is Chief Executive Officer and Chairman of the Board of Directors of UTG and is currently UTG’s largest shareholder through his ownership control of FSF, FSBI and affiliates. At June 30, 2021, Mr. Correll owns or controls directly and indirectly approximately 65.02% of UTG’s outstanding stock.

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

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

Note 2 – Recently Issued Accounting Standards

During the six months ended June 30, 2021, there were no additions to or changes in the critical accounting policies disclosed in the 2020 Form 10-K.


Note 3 – Investments

Available for Sale Securities – Fixed Maturity Securities

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

Investments in available for sale securities are summarized as follows:


June 30, 2021
 
Original or Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Fair Value
 
Investments available for sale:
                       
Fixed maturities
                       
U.S. Government and govt. agencies and authorities
 
$
23,274,044
   
$
683,042
   
$
0
   
$
23,957,086
 
U.S. special revenue and assessments
   
11,546,895
     
1,013,220
     
0
     
12,560,115
 
All other corporate bonds
   
96,264,646
     
13,468,218
     
0
     
109,732,864
 
   
$
131,085,585
   
$
15,164,480
   
$
0
   
$
146,250,065
 

December 31, 2020
 
Original or Amortized Cost
   
Gross Unrealized Gains
   
Gross Unrealized Losses
   
Fair Value
 
Investments available for sale:
                       
Fixed maturities
                       
U.S. Government and govt. agencies and authorities
 
$
36,285,535
   
$
1,186,999
   
$
0
   
$
37,472,534
 
U.S. special revenue and assessments
   
11,556,980
     
1,382,164
     
0
     
12,939,144
 
All other corporate bonds
   
98,175,349
     
17,604,617
     
(411,647
)
   
115,368,319
 
   
$
146,017,864
   
$
20,173,780
   
$
(411,647
)
 
$
165,779,997
 

The amortized cost and estimated market value of debt securities at June 30, 2021, by contractual maturity, is shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fixed Maturities Available for Sale
June 30, 2021
 
Amortized Cost
   
Fair Value
 
Due in one year or less
 
$
13,537,448
   
$
13,702,990
 
Due after one year through five years
   
42,747,908
     
45,774,071
 
Due after five years through ten years
   
25,688,722
     
29,045,145
 
Due after ten years
   
22,246,160
     
25,789,400
 
Fixed maturities with no single maturity date
   
26,865,347
     
31,938,459
 
Total
 
$
131,085,585
   
$
146,250,065
 

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

June 30, 2021
Less than 12 months
 
12 months or longer
 
Total
 
 
Fair value
 
Unrealized losses
 
Fair value
 
Unrealized losses
 
Fair value
 
Unrealized losses
 
All other corporate bonds
 
$
0
     
0
     
0
     
0
     
0
   
$
0
 
Total fixed maturities
 
$
0
     
0
     
0
     
0
     
0
   
$
0
 
                                                 

December 31, 2020
Less than 12 months
 
12 months or longer
 
Total
 
 
Fair value
 
Unrealized losses
 
Fair value
 
Unrealized losses
 
Fair value
 
Unrealized losses
 
All other corporate bonds
 
$
4,937
     
(63
)
   
0
     
(411,584
)
   
4,937
   
$
(411,647
)
Total fixed maturities
 
$
4,937
     
(63
)
   
0
     
(411,584
)
   
4,937
   
$
(411,647
)
                                                 


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

 
Less than 12 months
   
12 months or longer
   
Total
 
As of June 30, 2021
                 
Fixed maturities
   
0
     
0
     
0
 
As of December 31, 2020
                       
Fixed maturities
   
1
     
1
     
2
 

Substantially all of the unrealized losses on fixed maturities at December 31, 2020 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, 2020.
Net Investment Gains (Losses)


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

 
Three Months Ended
   
Six Months Ended
 
   
June 30,
   
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
Realized gains:
                       
Sales of fixed maturities
 
$
34,236
   
$
11,732
   
$
34,236
   
$
403,215
 
Sales of equity securities
   
3,006,835
     
646,351
     
3,019,207
     
988,558
 
Sales of real estate
   
1,247,193
     
0
     
1,383,252
     
0
 
Other
   
0
     
0
     
0
     
0
 
Total realized gains
   
4,288,264
     
658,083
     
4,436,695
     
1,391,773
 
Realized losses:
                               
Sales of fixed maturities
   
0
     
(64,992
)
   
0
     
(64,992
)
Sales of equity securities
   
(803
)
   
(2,571,937
)
   
(4,188
)
   
(3,422,627
)
 Sales of real estate
   
0
     
0
     
0
     
0
 
 Other-than-temporary impairments
   
(411,584
)
   
0
     
(411,584
)
   
0
 
 Other
   
0
     
0
     
0
     
0
 
Total realized losses
   
(412,387
)
   
(2,636,929
)
   
(415,772
)
   
(3,487,619
)
Net realized investment gains (losses)
   
3,875,877
     
(1,978,846
)
   
4,020,923
     
(2,095,846
)
Change in fair value of equity securities:
                               
Change in fair value of equity securities held at the end of the period
   
195,136
     
16,704,460
     
20,375,015
     
(688,477
)
Change in fair value of equity securities
   
195,136
     
16,704,460
     
20,375,015
     
(688,477
)
Net investment gains (losses)
 
$
4,071,013
   
$
14,725,614
   
$
24,395,938
   
$
(2,784,323
)
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive income:
                               
Fixed maturities
 
$
2,505,067
   
$
6,595,986
   
$
(4,975,001
)
 
$
8,068,851
 
Net increase (decrease)
 
$
2,505,067
   
$
6,595,986
   
$
(4,975,001
)
 
$
8,068,851
 


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 Condensed Consolidated Statements of Operations.

The Company recognized an other-than-temporary impairment of $(411,584) on one fixed maturity security during the second quarter of 2021.  The other-than-temporary impairment was recognized due to the length of time the investment remained in an unrealized loss position. The Company did not recognize any other-than-temporary impairments during the six month period ended June 30, 2020.

Cost Method Investments

The Company held equity investments with an aggregate cost of $14,543,343 and $14,389,189 at June 30, 2021 and December 31, 2020, 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 June 30, 2021.

Trading Securities

Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Condensed Consolidated Statements of Operations.  Trading securities include exchange-traded equities and exchange-traded options.  Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale.  The fair value of derivatives included in trading security assets and trading security liabilities as of June 30, 2021 was $