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 September 30, 2022

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 October 31, 2022 was 3,162,047.

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	8
Notes to Condensed Consolidated Financial Statements	9
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 4.  Controls and Procedures	29
Part II.  Other Information	29
Item 1.  Legal Proceedings	29
Item 1A. Risk Factors	29
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.  Defaults Upon Senior Securities	29
Item 4.  Mine Safety Disclosures	29
Item 5.  Other Information	29
Item 6.  Exhibits	29
Signatures	30

Part 1.   Financial Information.

Item 1.  Financial Statements.

UTG, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

	September 30, 2022			December 31, 2021*
ASSETS
Investments:
Investments available for sale:
Fixed maturities, at fair value (amortized cost $120,400,062 and $127,949,963)	$	109,977,965		$	140,963,881
Equity securities, at fair value (cost $76,424,988 and $68,403,168)		141,130,095			122,229,121
Equity securities, at cost		13,683,343			14,543,343
Mortgage loans on real estate at amortized cost		29,504,939			29,183,562
Investment real estate		35,948,558			39,748,261
Notes receivable		19,609,019			17,722,976
Policy loans		7,215,150			7,390,497
Total investments		357,069,069			371,781,641
Cash and cash equivalents		24,783,095			30,787,278
Accrued investment income		1,232,632			1,264,159
Reinsurance receivables:
Future policy benefits		24,385,124			24,740,562
Policy claims and other benefits		3,955,000			4,426,997
Cost of insurance acquired		2,870,240			3,386,501
Income tax receivable		0			975,373
Other assets		1,074,857			1,097,246
Total assets	$	415,370,017		$	438,459,757
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Future policyholder benefits	$	231,426,190		$	235,367,680
Policy claims and benefits payable		3,174,423			3,941,305
Other policyholder funds		325,249			345,248
Dividend and endowment accumulations		14,745,472			14,686,166
Income taxes payable		403,285			-
Deferred income taxes		11,295,176			13,680,396
Notes payable		8,000,000			24,000,000
Trading securities, at fair value (proceeds $0 and $2,202)		0			1,116
Other liabilities		6,828,681			5,193,039
Total liabilities		276,198,476			297,214,950
Shareholders' equity:
Common stock - no par value, stated value $0.001 per share.  Authorized 7,000,000 shares - 3,163,011 and 3,166,669 shares outstanding		3,164			3,167
Additional paid-in capital		32,662,157			32,780,587
Retained earnings		114,210,320			97,731,347
Accumulated other comprehensive income (loss)		(8,261,301	)		10,253,151
Total UTG shareholders' equity		138,614,340			140,768,252
Noncontrolling interests		557,201			476,555
Total shareholders' equity		139,171,541			141,244,807
Total liabilities and shareholders' equity	$	415,370,017		$	438,459,757

* Balance sheet audited at December 31, 2021.

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2022			2021			2022			2021
Revenue:
Premiums and policy fees	$	2,025,092		$	2,274,672		$	6,333,796		$	6,870,216
Ceded reinsurance premiums and policy fees		(676,460	)		(725,156	)		(2,044,259	)		(2,013,691	)
Net investment income		6,266,722			2,134,293			15,166,276			6,176,319
Other income		88,035			92,998			243,071			282,203
Revenue before net investment gains (losses)		7,703,389			3,776,807			19,698,884			11,315,047
Net investment gains (losses):
Other-than-temporary impairments		0			18,129			0			(393,455	)
Other realized investment gains, net		1,900,458			127,775			6,759,716			4,560,282
Change in fair value of equity securities		7,097,738			(9,380,710	)		14,462,029			10,994,305
Total net investment gains (losses)		8,998,196			(9,234,806	)		21,221,745			15,161,132
Total revenue		16,701,585			(5,457,999	)		40,920,629			26,476,179
Benefits and other expenses:
Benefits, claims and settlement expenses:
Life		3,343,438			4,974,295			11,613,356			12,994,904
Ceded reinsurance benefits and claims		(486,899	)		(904,913	)		(1,228,489	)		(1,891,579	)
Annuity		252,079			246,362			771,309			739,455
Dividends to policyholders		63,632			68,243			236,724			242,527
Commissions and amortization of deferred policy acquisition costs		(34,352	)		(37,464	)		(86,311	)		(94,372	)
Amortization of cost of insurance acquired		172,087			178,383			516,261			536,228
Operating expenses		2,733,470			1,777,102			7,551,131			5,614,635
Interest expense		36,748			0			72,028			0
Total benefits and other expenses		6,080,203			6,302,008			19,446,009			18,141,798
Income (loss) before income taxes		10,621,382			(11,760,007	)		21,474,620			8,334,381
Income tax expense (benefit)		2,542,701			(2,762,312	)		4,915,001			1,308,355
Net income (loss)		8,078,681			(8,997,695	)		16,559,619			7,026,026
Net income attributable to noncontrolling interests		(26,825	)		(14,577	)		(80,646	)		(70,832	)
Net income (loss) attributable to common shareholders	$	8,051,856		$	(9,012,272	)	$	16,478,973		$	6,955,194
Amounts attributable to common shareholders
Basic income (loss) per share	$	2.54		$	(2.84	)	$	5.20		$	2.19
Diluted income (loss) per share	$	2.54		$	(2.84	)	$	5.20		$	2.19
Basic weighted average shares outstanding		3,165,842			3,169,328			3,169,704			3,173,755
Diluted weighted average shares outstanding		3,165,842			3,169,328			3,169,704			3,173,755

See accompanying notes.

UTG, Inc.

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

	Three Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,			September 30,
	2022			2021			2022			2021
Net income (loss)	$	8,078,681		$	(8,997,695	)	$	16,559,619		$	7,026,026
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period, pre-tax		(7,122,856	)		(1,186,410	)		(23,436,431	)		(6,161,411	)
Tax (expense) benefit on unrealized holding gains (losses) arising during the period		1,495,712			249,146			4,921,563			1,293,896
Unrealized holding gains (losses) arising during period, net of tax		(5,627,144	)		(937,264	)		(18,514,868	)		(4,867,515	)
Less reclassification adjustment for (gains) losses included in net income		0			(39,762	)		527			337,586
Tax expense (benefit) for gains included in net income (loss)		0			8,350			(111	)		(70,893	)
Reclassification adjustment for (gains) losses included in net income, net of tax		0			(31,412	)		416			266,693
Subtotal: Other comprehensive income (loss), net of tax		(5,627,144	)		(968,676	)		(18,514,452	)		(4,600,822	)
Comprehensive income (loss)		2,451,537			(9,966,371	)		(1,954,833	)		2,425,204
Less comprehensive income attributable to noncontrolling interests		(26,825	)		(14,577	)		(80,646	)		(70,832	)
Comprehensive income (loss) attributable to UTG, Inc.	$	2,424,712		$	(9,980,948	)	$	(2,035,479	)	$	2,354,372

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended September 30, 2022	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income			Noncontrolling Interest			Total Shareholders’ Equity
Balance at June 30, 2022	$	3,170		$	32,854,050		$	106,158,464	$	(2,634,157	)	$	530,976		$	136,912,503
Common stock issued during year		0			0			0		0			0			0
Treasury shares acquired		(6	)		(191,893	)		0		0			0			(191,899	)
Net income (loss) attributable to common shareholders		0			0			8,051,856		0			0			8,051,856
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		(5,627,144	)		0			(5,627,144	)
Contributions		0			0			0		0			0			0
Distributions		0			0			0		0			(600	)		(600	)
Gain attributable to noncontrolling interest		0			0			0		0			26,825			26,825
Balance at September 30, 2022	$	3,164		$	32,662,157		$	114,210,320	$	(8,261,301	)	$	557,201		$	139,171,541

Nine Months Ended September 30, 2022	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income			Noncontrolling Interest		Total Shareholders’ Equity
Balance at December 31, 2021	$	3,167		$	32,780,587		$	97,731,347	$	10,253,151		$	476,555	$	141,244,807
Common stock issued during year		18			486,779			0		0			0		486,797
Treasury shares acquired		(21	)		(605,209	)		0		0			0		(605,230	)
Net income (loss) attributable to common shareholders		0			0			16,478,973		0			0		16,478,973
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		(18,514,452	)		0		(18,514,452	)
Contributions		0			0			0		0			0		0
Distributions		0			0			0		0			0		0
Gain attributable to noncontrolling interest		0			0			0		0			80,646		80,646
Balance at September 30, 2022	$	3,164		$	32,662,157		$	114,210,320	$	(8,261,301	)	$	557,201	$	139,171,541

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)

Three Months Ended September 30, 2021	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Noncontrolling Interest		Total Shareholders’ Equity
Balance at June 30, 2021	$	3,174		$	32,956,587		$	104,035,750		$	11,952,095		$	517,027	$	149,464,633
Common stock issued during year		0			0			0			0			0		0
Treasury shares acquired		(6	)		(155,735	)		0			0			0		(155,741	)
Net income attributable to common shareholders		0			0			(9,012,272	)		0			0		(9,012,272	)
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0			(968,676	)		0		(968,676	)
Contributions		0			0			0			0			0		0
Distributions		0			0			0			0			0		0
Gain attributable to noncontrolling interest		0			0			0			0			14,577		14,577
Balance at September 30, 2021	$	3,168		$	32,800,852		$	95,023,478		$	10,983,419		$	531,604	$	139,342,521

Nine Months Ended September 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		(15	)		(394,697	)		0		0			0		(394,712	)
Net income attributable to common shareholders		0			0			6,955,194		0			0		6,955,194
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		(4,600,822	)		0		(4,600,822	)
Contributions		0			0			0		0			0		0
Distributions		0			0			0		0			0		0
Gain attributable to noncontrolling interest		0			0			0		0			70,832		70,832
Balance at September 30, 2021	$	3,168		$	32,800,852		$	95,023,478	$	10,983,419		$	531,604	$	139,342,521

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended
	September 30,		September 30,
	2022		2021
Cash flows from operating activities:
Net income (loss)	$	16,559,619	$	7,026,026
Adjustments to reconcile net income to net cash used in operating activities:
Amortization (accretion) of investments		24,741		55,737
Other-than-temporary impairments		0		393,455
Realized investment gains (losses), net		(6,759,716)		(4,560,282)
Change in fair value of equity securities		(14,462,029)		(10,994,305)
Unrealized trading (gains) losses included in income		0		(1,329)
Realized trading (gains) losses included in income		13,283		(20,360)
Amortization of cost of insurance acquired		516,261		536,228
Depreciation and depletion		1,635,706		1,862,637
Stock-based compensation		486,797		170,538
Charges for mortality and administration of universal life and annuity products		(4,480,817)		(4,791,098)
Interest credited to account balances		2,831,885		2,940,521
Change in accrued investment income		31,527		299,159
Change in reinsurance receivables		827,435		(171,403)
Change in policy liabilities and accruals		(3,074,992)		(3,774,549)
Change in income taxes receivable (payable)		1,378,658		(1,433,348)
Change in other assets and liabilities, net		4,194,376		2,240,191
Net cash used in operating activities		(277,266)		(10,222,182)
Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities available for sale		8,628,136		18,581,107
Equity securities		10,735,510		5,306,206
Trading securities		17,983		29,283
Mortgage loans		1,443,119		7,758,199
Real estate		11,387,025		5,973,637
Notes receivable		3,984,614		1,372,154
Policy loans		903,696		1,588,854
Total proceeds from investments sold and matured		37,100,083		40,609,440
Cost of investments acquired:
Fixed maturities available for sale		(1,112,505)		(20,000)
Equity securities		(12,540,638)		(26,353,197)
Trading securities		(32,382)		(16,133)
Mortgage loans		(1,755,496)		(3,305,354)
Real estate		(4,236,603)		(5,507,777)
Notes receivable		(5,870,657)		(7,840,000)
Policy loans		(728,348)		(838,053)
Total cost of investments acquired		(26,276,629)		(43,880,514)
Net cash provided by (used in) investing activities		10,823,454		(3,271,074)
Cash flows from financing activities:
Policyholder contract deposits		3,455,489		3,303,536
Policyholder contract withdrawals		(3,400,630)		(4,327,607)
Proceeds from notes payable/line of credit		19,500,000		0
Payments of principal on notes payable/line of credit		(35,500,000)		0
Purchase of treasury stock		(605,230)		(394,712)
Non controlling contributions (distributions) of consolidated subsidiary		0		0
Net cash used in financing activities		(16,550,371)		(1,418,783)
Net increase (decrease) in cash and cash equivalents		(6,004,183)		(14,912,039)
Cash and cash equivalents at beginning of period		30,787,278		39,025,754
Cash and cash equivalents at end of period	$	24,783,095	$	24,113,715

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 September 30, 2022, 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, 2021.  The Company’s results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 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 2020, 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.  While the worst of the disruption appears to be behind us, there remains uncertainty should a new variant again appear. The Company cannot at this time predict the ultimate impact the pandemic or recurrence of such, may 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 September 30, 2022, Mr. Correll owns or controls directly and indirectly approximately 65.46% 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 nine months ended September 30, 2022, there were no additions to or changes in the critical accounting policies disclosed in the 2021 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:

September 30, 2022	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	$	21,313,155	$	0	$	(1,198,869	)	$	20,114,286
U.S. special revenue and assessments		7,536,507		0		(392,137	)		7,144,370
All other corporate bonds		91,550,400		90,639		(8,921,730	)		82,719,309
	$	120,400,062	$	90,639	$	(10,512,736	)	$	109,977,965

December 31, 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	$	25,312,358	$	355,623	$	(17,078	)	$	25,650,903
U.S. special revenue and assessments		7,540,867		982,668		0			8,523,535
All other corporate bonds		95,096,738		11,692,705		0			106,789,443
	$	127,949,963	$	13,030,996	$	(17,078	)	$	140,963,881

The amortized cost and estimated market value of debt securities at September 30, 2022, 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 September 30, 2022	Amortized Cost		Fair Value
Due in one year or less	$	8,496,905	$	8,416,295
Due after one year through five years		44,881,107		42,688,475
Due after five years through ten years		17,950,439		17,078,456
Due after ten years		22,053,354		18,865,205
Fixed maturities with no single maturity date		27,018,257		22,929,534
Total	$	120,400,062	$	109,977,965

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

September 30, 2022	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	$	20,114,286		(1,198,869	)		0		0		20,114,286	$	(1,198,869	)
U.S. Special Revenue and Assessments		7,144,370		(392,137	)		0		0		7,144,370		(392,137	)
All other corporate bonds		78,415,980		(8,921,730	)		0		0		78,415,980		(8,921,730	)
Total fixed maturities	$	105,674,636		(10,512,736	)		0		0		105,674,636	$	(10,512,736	)

December 31, 2021	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		$	4,042,825		(17,078	)		0		0		4,042,825		$	(17,078	)
Total fixed maturities		$	4,042,825		(17,078	)		0		0		4,042,825		$	(17,078	)

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

	Less than 12 months		12 months or longer		Total
As of September 30, 2022
Fixed maturities		58		0		58
As of December 31, 2021
Fixed maturities		3		0		3

Substantially all of the unrealized losses on fixed maturities at September 30, 2022 and December 31, 2021 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  September 30, 2022 and December 31, 2021.

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						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Realized gains:
Sales of fixed maturities	$	0		$	21,631		$	4,683		$	55,867
Sales of equity securities		1,485,872			19,344			1,883,453			3,038,551
Sales of real estate		449,133			104,204			5,020,973			1,487,456
Total realized gains		1,935,005			145,179			6,909,109			4,581,874
Realized losses:
Sales of fixed maturities		0			0			(5,210	)		0
Sales of equity securities		0			(17,404	)		(109,636	)		(21,592	)
Sales of real estate		(34,547	)		0			(34,547	)		0
Other-than-temporary impairments		0			18,129			0			(393,455	)
Total realized losses		(34,547	)		725			(149,393	)		(415,047	)
Net realized investment gains (losses)		1,900,458			145,904			6,759,716			4,166,827
Change in fair value of equity securities:
Change in fair value of equity securities held at the end of the period		7,097,738			(9,380,710	)		14,462,029			10,994,305
Change in fair value of equity securities		7,097,738			(9,380,710	)		14,462,029			10,994,305
Net investment gains (losses)	$	8,998,196		$	(9,234,806	)	$	21,221,745		$	15,161,132
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive income:
Fixed maturities	$	(7,122,856	)	$	(1,186,410	)	$	(23,436,431	)	$	(6,161,411	)
Net increase (decrease)	$	(7,122,856	)	$	(1,186,410	)	$	(23,436,431	)	$	(6,161,411	)

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 did not recognize any other-than-temporary impairments during the nine months ended September 30, 2022. The Company recognized an other-than-temporary impairment 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.

Cost Method Investments

The Company held equity investments with an aggregate cost of $13,683,343 and 14,543,343 at September 30, 2022 and December 31, 2021, 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 September 30, 2022.

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 September 30, 2022 was $0. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2021 was $0 and $1,116, respectively.  Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only.

Trading revenue charged to net investment income from trading securities was:

	Three Months Ended
	September 30,
	2022		2021
Net unrealized gains (losses)	$	0	$	379
Net realized gains (losses)		0		2,056
Net unrealized and realized gains (losses)	$	0	$	2,435

	Nine Months Ended
	September 30,
	2022			2021
Net unrealized gains (losses)	$	0		$	1,329
Net realized gains (losses)		(13,283	)		20,360
Net unrealized and realized gains (losses)	$	(13,283	)	$	21,689

Mortgage Loans

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 the nine months ended September 30, 2022 and 2021, the Company acquired $1,755,496 and $3,305,354 in mortgage loans, respectively.  FSNB services the majority of the Company’s mortgage loan portfolio.  The Company pays FSNB a 0.25% servicing fee on these loans and a one-time fee at loan origination of 0.50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan.

During 2022 and 2021, the maximum and minimum lending rates for mortgage loans were:

	2022						2021
	Maximum rate			Minimum rate			Maximum rate			Minimum rate
Farm Loans		6.00	%		4.50	%		6.00	%		4.50	%
Commercial Loans		6.00	%		4.10	%		5.50	%		4.10	%
Residential Loans		5.00	%		4.15	%		5.00	%		4.15	%

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 along with a brief description of what steps are being taken to resolve the delinquency.  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 September 30, 2022 and December 31, 2021.

The following table summarizes the mortgage loan holdings of the Company for the periods ended:

	September 30, 2022		December 31, 2021
In good standing	$	27,424,166	$	27,102,789
Overdue interest over 90 days		2,080,773		2,080,773
Total mortgage loans	$	29,504,939	$	29,183,562

Investment Real Estate

Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is computed on a straight-line basis for financial reporting purposes using estimated useful lives of 3 to 30 years. The Company periodically reviews its real estate held-for-investment for impairment and tests for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. During the nine months ended September 30, 2022, no impairments were recognized on the investment real estate.

Note 4 - Fair Value Measurements of the Condensed Consolidated Financial Statements provides further information regarding the fair value of financial instruments that are not measured at fair value. The investment real estate owned by the Company is included in this portion of the Note 4 - Fair Value Measurements disclosure.

The following table provides an allocation of the Company’s investment real estate by type:

	September 30, 2022		December 31, 2021
Raw land	$	12,365,607	$	14,538,507
Commercial		5,185,507		4,347,423
Residential		3,618,791		3,813,936
Land, minerals and royalty interests		14,778,653		17,048,395
Total investment real estate	$	35,948,558	$	39,748,261

The Company’s investment real estate portfolio includes ownership in oil and gas royalties. As of September 30, 2022 and December 31, 2021, investments in oil and gas royalties represented 41% and 43%, respectively, of the total investment real estate portfolio.  See Note 9 – Concentrations of Credit Risk of the Condensed Consolidated Financial Statements for additional information regarding the allocation of the oil and gas investment real estate holdings by industry type.

Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Condensed Consolidated Statements of Operations. During the nine months ended  September 30, 2022 and 2021, the Company acquired $4,236,603 and $5,507,777 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  September 30, 2022 and December 31, 2021 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 the nine months ended September 30, 2022 and 2021 the Company acquired  $5,870,657 and $7,840,000 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. 

Note 4 – Fair Value Measurements

Fair Value Measurements on a Recurring Basis

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three levels based on the observability of valuation inputs:

Level 1 – Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 – Valuation methodologies include quoted prices for similar assets and liabilities in active markets or quoted prices for identical, quoted prices for identical or similar assets or liabilities in markets that are not active, or 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.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

September 30, 2022	Level 1		Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	20,114,285	$	0	$	0	$	0	$	20,114,285
U.S. special revenue and assessments		0		7,144,370		0		0		7,144,370
Corporate securities		0		82,719,310		0		0		82,719,310
Total fixed maturities		20,114,285		89,863,680		0		0		109,977,965
Equity securities:
Common stocks		45,276,351		16,494,094		6,349,498		71,763,152		139,883,095
Preferred stocks		0		0		1,247,000		0		1,247,000
Total equity securities		45,276,351		16,494,094		7,596,498		71,763,152		141,130,095
Total financial assets	$	65,390,636	$	106,357,774	$	7,596,498	$	71,763,152	$	251,108,060
Liabilities
Trading securities	$	0	$	0	$	0	$	0	$	0

December 31, 2021	Level 1			Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	25,650,903		$	0	$	0	$	0	$	25,650,903
U.S. special revenue and assessments		0			8,523,535		0		0		8,523,535
Corporate securities		0			106,789,443		0		0		106,789,443
Total fixed maturities		25,650,903			115,312,978		0		0		140,963,881
Equity securities:
Common stocks		40,784,660			16,711,180		5,861,486		57,603,597		120,960,923
Preferred stocks		0			21,198		1,247,000		0		1,268,198
Total equity securities		40,784,660			16,732,378		7,108,486		57,603,597		122,229,121
Total financial assets	$	66,435,563		$	132,045,356	$	7,108,486	$	57,603,597	$	263,193,002
Liabilities
Trading securities	$	(1,116	)	$	0	$	0	$	0	$	(1,116	)

The following is a description of the valuation techniques used the by Company to measure assets reported at fair value on a recurring basis. There have been no significant changes in the valuation techniques utilized by the Company for the nine months ended September 30, 2022.

Available for Sale Securities

Securities classified as available for sale are recorded at fair value on a recurring basis. Securities classified as Level 1 utilized fair value measurements based upon quoted market prices, when available. If quoted market prices are not available, the Company obtains fair value measurements from recently executed transactions, market price quotations, benchmark yields and issuer spreads to value Level 2 securities. In certain instances where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Fair value determinations for Level 3 measurements are estimated on a quarterly basis where assumptions used are reviewed to ensure the estimated fair value complies with accounting standard generally accepted in the United States.

Equity Securities at Fair Value

Equity securities consist of common 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.

Equity Securities at Net Asset Value

Certain equity securities carried at fair value, which do not have readily determinable fair values, use net asset value (“NAV”) and are excluded from the fair value hierarchy. These investments are generally not readily redeemable by the investee. See Note 7 – Commitments and Contingencies for additional information regarding unfunded commitments.

Trading Securities

Trading securities are recorded at fair value. They are classified as Level 1 and utilize fair value measurements based upon quoted market prices.

Change in Recurring Fair Value Measurements

The following table presents the changes in Level 3 equity securities measured at fair value on a recurring basis and equity securities measured at net asset value, and the realized and unrealized gains (losses) related to the equity securities.

	Equity Securities at Fair Value			Equity Securities at Net Asset Value			Total
Balance at December 31, 2021	$	7,108,486		$	57,603,597		$	64,712,083
Realized gains (losses)		198,125			327,863			525,988
Unrealized gains (losses)		138,928			8,669,059			8,807,987
Purchases		352,084			7,682,338			8,034,422
Sales		(201,125	)		(2,519,705	)		(2,720,830	)
Balance at September 30, 2022	$	7,596,498		$	71,763,152		$	79,359,650

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at September 30, 2022 and December 31, 2021 may include changes in fair value that were attributable to both observable and unobservable inputs.

Quantitative Information About Level 3 Fair Value Measurements

The following table presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments, and include only those instruments for which information about the inputs is reasonably available to the Company, such as data from independent third-party valuation service providers and from internal valuation models.

Financial Assets	Fair Value at September 30, 2022		Fair Value at December 31, 2021		Valuation Technique
Equities	$	71,763,152	$	57,603,597	Net Asset Value
Equities		7,596,498		7,108,486	Pricing Model
Total	$	79,359,650	$	64,712,083

Uncertainty of Fair Value Measurements

The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements of these assets as of the reporting date.

Equity Securities at Fair Value

Fair market value for equity securities is derived based on unobservable inputs, such as projected normalized revenues and industry standard multiples of revenue for the equity securities valued using pricing model.  Significant increases (decreases) in either of those inputs in isolation would result in a significantly higher (lower) fair value measurement.

Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share

Investment Company	Fair Value at September 30, 2022		Unfunded Commitments		Redemption Frequency		Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	36,582,059	$	0	Quarterly		45 days
Non-Redeemable		35,181,093		9,335,341		n/a		n/a
Total	$	71,763,152	$	9,335,341

Investment Company	Fair Value at December 31, 2021		Unfunded Commitments		Redemption Frequency		Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	28,546,227	$	0	Quarterly		45 days
Non-Redeemable		29,057,370		5,288,967		n/a		n/a
Total	$	57,603,597	$	5,288,967

Fair Value Measurements on a Nonrecurring Basis

Certain assets are not carried at fair value on a recurring basis. Accordingly, such investments are only included in the fair value hierarchy disclosure when the investment is subject to re-measurement at fair value after initial recognition and the resulting re-measurement is reflected in the Condensed Consolidated Financial Statements. The Company did not recognize any re-measurements or impairments of financial instruments at September 30, 2022 or December 31, 2021.

Fair Value Information About Financial Instruments Not Measured at Fair Value

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

The following table presents the carrying amount and estimated fair values of the Company’s financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used:

	Carrying		Estimated
September 30, 2022	Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Common stock, at cost	$	5,168,198		5,168,198		0		0		5,168,198
Preferred stock, at cost		8,515,145		8,515,145		0		0		8,515,145
Mortgage loans on real estate and Notes receivable		49,113,958		48,164,823		0		0		48,164,823
Investment real estate		35,948,558		91,587,781		0		0		91,587,781
Policy loans		7,215,150		7,215,150		0		0		7,215,150
Liabilities
Notes payable		8,000,000		8,000,000		0		8,000,000		0

	Carrying		Estimated
December 31, 2021	Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Common stock, at cost	$	5,860,000		5,860,000		0		0		5,860,000
Preferred stock, at cost		8,683,343		8,683,343		0		0		8,683,343
Mortgage loans on real estate and Notes receivable		46,906,538		46,906,538		0		0		46,906,538
Investment real estate		39,748,261		96,463,112		0		0		96,463,112
Policy loans		7,390,497		7,390,497		0		0		7,390,497
Liabilities
Notes payable		24,000,000		24,000,000		0		24,000,000		0

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 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.

The fair values of notes receivable 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 the notes receivable are classified as Level 3 within the fair value hierarchy.

Policy loans are carried at the aggregate unpaid principal balances in the Condensed 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.

Note 5 – Credit Arrangements

Instrument	Issue Date	Maturity Date	Revolving Credit Limit		December 31, 2021		Borrowings	Repayments	September 30, 2022
Lines of Credit:
UTG	11/20/2013	11/20/2022	$	8,000,000		0	0	0	$	0
UG - CMA	10/21/2021	10/6/2023		25,000,000		24,000,000	19,500,000	35,500,000		8,000,000
UG - REPO	10/21/2021	10/7/2022		25,000,000		0	0	0		0

The UTG line of credit carries interest at a fixed rate of 3.750% 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.

During October of 2021, the Federal Home Loan Bank approved UG's Cash Management Advance ("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. The Company has pledged bonds with a collateral lendable value of $19,595,054.  During the fourth quarter of 2022, the Company repaid the outstanding balance of $8 million on the CMA. The interest rate on the borrowed funds is variable and was 3.13% at September 30, 2022.

The CMA is a source of overnight liquidity utilized to address the day-to-day cash needs of a Company. In order to provide the Company with multiple lending options, Management also applied for, and the FHLB approved, the Company's Repurchase ("REPO") Advance Application for $25 million. The REPO Advance requires a minimum borrowing of $15 million and provides financing for one day to one year at a fixed rate of interest. The Company has enough qualifying investments for collateral pledging of $25 million total against these two borrowing vehicles. The REPO expired on October 7, 2022 and Management did not renew this credit arrangement.

Note 6 – Shareholders’ Equity

Stock Repurchase Program – The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG’s common stock.  At a meeting of the Board of Directors in March of 2022, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million of UTG’s common stock, for a total  repurchase of up to $22 million of UTG’s common stock in the open market or in privately negotiated transactions. Company Management has broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. Open market purchases are made based on the last available market price but may be limited.  During the nine months ended September 30, 2022, the Company repurchased 21,621 shares through the stock repurchase program for $605,230. Through September 30, 2022, UTG has spent $19,228,860 in the acquisition of 1,338,915 shares under this program.

During 2022, the Company issued 17,963 shares of stock to management and employees as compensation at a cost of $486,797. These awards are determined at the discretion of the Board of Directors.

Earnings Per Share Calculations

Earnings per share are based on the weighted average number of common shares outstanding during each period.  For the nine months ended September 30, 2022 and 2021, diluted earnings per share were the same as basic earnings per share since the Company had no dilutive instruments outstanding.

Note 7 – Commitments and Contingencies

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

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

The following table represents the total funding commitments and the unfunded commitment as of September 30, 2022 related to certain investments:

	Total Funding Commitment		Unfunded Commitment
RLF III, LLC	$	4,000,000	$	398,120
Sovereign’s Capital, LP Fund I		500,000		13,000
Sovereign's Capital, LP Fund II		1,000,000		92,034
Sovereign's Capital, LP Fund III		3,000,000		641,440
Macritchie Storage II, LP		7,000,750		833,358
Garden City Companies, LLC		2,000,000		1,090,531
Carrizo Springs Music, LLC		5,000,000		189,711
Legacy Venture X, LLC		3,000,000		1,740,000
QCC Investment Co., LLC		1,500,000		150,000
Great American Media Group, LLC		4,000,000		1,240,000
Sovereign's Capital Evergreen Fund I, LLC		3,000,000		300,454
PBEX, LLC		2,000,000		1,199,343
Sovereign's Capital Lower Middle Market Fund II, LP		3,000,000		2,188,539
Elisha's Properties, LLC		1,096,750		491,823
Granite Shoals Music, LLC		6,500,000		6,147,916
Legacy Venture XI, LLC		2,000,000		1,920,000

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

During 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 fund a mortgage loan for Macritchie Storage II, LP ("Macritchie"). Macritchie makes draw requests as funds are needed to fund the construction project.

During 2020, the Company committed to invest in Garden City Companies, LLC (“Garden City”), which invests primarily in companies in the health care, inspection/testing services and maintenance service arena. Garden City makes capital calls to investors as funds are needed.

During 2020, the Company committed to invest in Carrizo Springs Music, LLC (“Carrizo”), which invests in music royalties.  Carrizo makes capital calls to its investors as funds are needed to acquire the royalty rights.

During 2020, the Company committed to invest in Legacy Venture X, LLC (“Legacy Venture X”), which is a fund of funds. Legacy Venture X makes capital calls to its investors as funds are needed.

During 2021, the Company committed to invest in QCC Investment Co., LLC (“QCC”). The funds are being utilized to purchase a manufacturing entity. QCC makes capital calls to its investors as funds are needed.

During 2021, the Company committed to fund a collateral loan for Great American Media Group, LLC (“GAM”). GAM makes draw requests on the loan as funds are needed to fund the operating needs of the Company.

During 2021, the Company committed to invest in Sovereign's Capital Evergreen Fund I, LLC ("Evergreen"), which invests in companies in emerging markets. Evergreen makes capital calls to investors as funds are needed.

During 2022, the Company committed to fund a collateral loan for PBEX, LLC (“PBEX"). PBEX makes draw requests on the loan as funds are needed to fund the operating needs of the Company.

During 2022, the Company committed to invest in Sovereign's Capital Lower Middle Market Fund II, LP ("Sovereign's LMM"), which invests in companies in emerging markets. Sovereign's LMM makes capital calls to investors as funds are needed.

During 2022, the Company committed to invest in Elisha's Properties, LLC ("Elisha's"), which investment in real estate properties. Elisha's makes capital calls as funds are needed.

During 2022, the Company committed to invest in Granite Shoals Music, LLC (“Granite”), which invests in music royalties.  Granite makes capital calls to its investors as funds are needed to acquire the royalty rights.

During 2022, the Company committed to invest in Legacy Venture XI, LLC (“Legacy Venture XI”), which is a fund of funds. Legacy Venture XI makes capital calls to its investors as funds are needed.

Note 8 – Other Cash Flow Disclosures

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

	Three Months Ended
	September 30,
	2022			2021
Interest		$	31,244		$	0
Federal income tax			0			0

	Nine Months Ended
	September 30,
	2022			2021
Interest		$	61,440		$	0
Federal income tax			1,000,000			1,202,000

Note 9 – Concentrations of Credit Risk

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

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 September 30, 2022 and 2021, approximately 53% 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 21% and 20% of total life insurance in force at September 30, 2022 and  December 31, 2021, respectively.  Insurance ceded represented 39% and 37% of premium income for the nine months ended September 30, 2022 and 2021, 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 represent approximately 28% and 22% of the Company’s total invested assets as of September 30, 2022 and December 31, 2021, respectively. The following table provides an allocation of the oil and gas investments by type.

September 30, 2022	Land, Minerals & Royalty Interests		Exploration		Total
Fixed maturities, at fair value	$	0	$	1,043,510	$	1,043,510
Equity securities, at fair value		79,988,199		0		79,988,199
Investment real estate		14,778,652		0		14,778,652
Notes receivable		5,800,657		0		5,800,657
Total	$	100,567,508	$	1,043,510	$	101,611,018

December 31, 2021	Land, Minerals & Royalty Interests		Exploration		Total
Fixed maturities, at fair value	$	0	$	1,249,040	$	1,249,040
Equity securities, at fair value		60,932,033		0		60,932,033
Investment real estate		16,351,500		0		16,351,500
Notes receivable		5,000,000		0		5,000,000
Total	$	82,283,533	$	1,249,040	$	83,532,573

At September 30, 2022 and December 31, 2021, the Company owned two equity securities that represented approximately 53% of the total investments associated with the oil and gas industry.

The Company’s results of operations and financial condition have in the past been, and may in the future be, adversely affected by the degree of certain industry specific concentrations in the Company’s investment portfolio. The Company has significant exposure to investments associated with the oil and gas industry. Events or developments that have a negative effect on the oil and gas industry may adversely affect the valuation of our investments in this specific industry. The Company’s ability to sell its investments associated with the oil and gas industry may be limited.

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

The following is Management’s discussion and analysis of the financial condition and results of operations of UTG, Inc. and its subsidiaries (collectively with the Parent, the “Company”).  The following discussion of the financial condition and results of operations of the Company should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company and the related Notes thereto appearing in the Company’s annual report on Form 10-K for the year ended  December 31, 2021, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

Cautionary Statement Regarding Forward-Looking Statements

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

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

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

Overview

UTG, Inc., a Delaware corporation, is a life insurance holding company.  The Company’s dominant business is individual life insurance, which includes the servicing of existing insurance policies in-force, the acquisition of other companies in the life insurance business, the acquisition of blocks of business and the administration and processing of life insurance business for other entities. 

UTG has a strong philanthropic program.  The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor.  The Company also encourages its staff to be involved on a personal level through monetary giving, volunteerism, and use of their talents to assist those less fortunate than themselves. Through these efforts, the Company hopes to make a positive difference in the local community, state, nation and world.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ significantly from those estimates.  The Company has identified certain estimates that involve a higher degree of judgment and are subject to a significant degree of variability.  The Company’s critical accounting policies and the related estimates considered most significant by Management are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.  Management has identified the accounting policies related to cost of insurance acquired, assumptions and judgments utilized in determining if declines in fair values of investments are other-than-temporary, and valuation methods for investments that are not actively traded as those, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company’s Condensed Consolidated Financial Statements and this Management’s Discussion and Analysis.

During the nine months ended September 30, 2022, there were no additions to or changes in the critical accounting policies disclosed in the 2021 Form 10-K.

Results of Operations

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 2020, 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.  While the worst of the disruption appears to be behind us, there remains uncertainty should a new variant again appear. The Company cannot at this time predict the ultimate impact the pandemic or recurrence of such, may have on its results of operations, financial position, liquidity, or capital resources but such impact could be material.  During the nine-month period ended September 30, 2022 the Company incurred 71 Covid claims totaling $1,104,522.  The Company incurred 166 claims totaling $1,293,625 during the year ended December 31, 2021.

On a consolidated basis, the Company reported net income attributable to common shareholders of approximately $16.5 million for the nine-month period ended September 30, 2022, and a net income attributable to common shareholders’ of approximately $8.1 million for the three-month period ended September 30, 2022.

For the nine-month period ended September 30, 2021, the Company reported net income attributable to common shareholders’ of approximately $7.0 million and net loss attributable to common shareholders’ of approximately $(9.0) million for the three-month period ended September 30, 2021.

Revenues

For the nine-month period ended September 30, 2022, the Company reported total revenues of approximately $40.9 million and for the same period in 2021 total revenues of approximately $26.5 million. The variance in total revenue between periods is primarily the result of the change in the fair value of equity securities and an increase in net investment income. The change in fair value of equity securities is material to the results reported in the consolidated statements of operations.  This line item can also be extremely volatile, reflecting changes in the stock market.  While both nine-month periods within 2022 and 2021 reflected positive results, 2021 results were 76% of that of 2022.  The Company reported total revenues of approximately $16.7 million for the three-month period ended September 30, 2022, and total revenues of $(5.5) million for the same period of 2021.  As stated in the nine-month periods, changes in the fair value of equity securities were the primary reason for the variance, with third quarter of 2022 showing a large gain in value on its equity securities, while the same period of 2021 reported a large loss in value on its equity securities.  While these results can be material and volatile, most of the equity holdings of the Company were acquired with a long-term view, thus making these intermediate changes in value of less concern to Management.  Management monitors its equity holdings looking more at the specific entity and market it is in relative to performance and less to changes due to general market swings that occur over the holding period of the investment.

The Company reported revenue before net investment gains (losses) of approximately $19.7 million and $11.3 million for the nine-month periods ended September 30, 2022 and 2021, respectively. Revenue before net investment gains (losses) increased primarily due to an increase in net investment income when comparing current year and prior year results.  For the three months ended September 30, 2022 and 2021 the Company reported approximately $7.7 million and $3.8 million, respectively.

Premium and policy fee revenues, net of reinsurance, declined 12% for the nine-months ended September 30, 2022 and 2021 and declined 13% for the third quarter ended September 30, 2022 and 2021.  The Company writes minimal new business.  Unless the Company acquires a new company or a block of in-force business, Management expects premium revenue to continue to decline on the existing block of business at a rate consistent with prior experience.  Premium and policy fee revenues, net of reinsurance, was reported at approximately $4.3 million and $4.9 million for the nine-months ended September 30, 2022, and 2021.  For the third quarter ended September 30, 2022 these amounts were $1.3 million and $1.5 million in 2022 and 2021, respectively.

The following table summarizes our investment performance.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Net investment income	$	6,266,722	$	2,134,293	$	15,166,276	$	6,176,319
Net investment gains (losses)	$	8,998,196	$	(9,234,806)	$	21,221,745	$	15,161,132
Change in net unrealized investment gains (losses) on equity securities, pre-tax	$	(7,122,856)	$	(1,226,171)	$	(23,436,015)	$	(5,823,825)

The following table reflects net investment income of the Company:

		Three Months Ended September 30,				Nine Months Ended September 30,
		2022		2021		2022		2021
Fixed maturities available for sale	$	1,025,578	$	1,107,003	$	3,125,400	$	3,486,817
Equity securities		719,953		349,007		2,057,986		919,959
Trading securities		0		2,435		(13,283)		21,689
Mortgage loans		307,492		142,195		907,284		523,816
Real estate		4,924,772		914,425		11,103,517		2,247,754
Notes receivable		273,376		244,679		659,024		738,549
Policy loans		121,097		130,394		369,297		426,893
Cash and cash equivalents		43,812		755		53,746		1,903
Total consolidated investment income		7,416,080		2,890,893		18,262,971		8,367,380
Investment expenses		(1,149,358)		(756,600)		(3,096,695)		(2,191,061)
Consolidated net investment income	$	6,266,722	$	2,134,293	$	15,166,276	$	6,176,319

Net investment income represented 77% and 55% of the Company's revenue before net investment gains (losses) for the nine-month period ended September 30, 2022 and 2021, respectively.    For the Third quarter only ended September 30, net investment income represented 81% and 57% of revenue before net investment gains (losses) for 2022 and 2021, respectively.  When comparing current and prior year results, net investment income was comparable in a majority of the investment categories outside of the equity securities and real estate investment portfolio.  Investment income earned by the real estate investment portfolio for both the nine months and the three months ended September 30, 2022, was materially larger than prior periods due to distributions from specific real estate investments, primarily related to the oil & gas & timber industries. Investment income earned by the fixed maturities, equity securities, and real estate investment portfolios represented approximately 89% and 80% of the total consolidated investment income for the nine months ended September 30, 2022 and 2021, respectively.

In March 2020, with the onset of the pandemic in America, financial markets became jittery experiencing a significant drop in the major market indices. In response, the Federal Reserve dropped interest rates to near zero. This action resulted in a drop in all other interest rates in the marketplace. While this increased the fair value of the Company’s current fixed income holdings, it made finding investments to acquire with any type of historic yield nearly impossible. In recent periods our economy has heated up with inflation running at higher than desired levels by Federal Reserve standards.  In this regard, the Federal Reserve has begun increasing interest rates in recent months with more increases currently being predicted.  This has resulted in an increase in the yields available in the bond market and drives the unrealized loss on the bond portfolio.

When comparing earnings from the fixed maturities portfolio for the six months ended June 30, 2022 and 2021 income was down approximately 10% or $361,000.  Income for the three-month period ended September 30 was down by 7% from the prior year.  This decrease can be primarily attributed to the maturity of several investments that were not replaced within the portfolio.  Rather the proceeds were used to pay down the Company’s outstanding debt or reinvested in a different asset class. Fixed maturities continue to represent one of the largest investment types and asset classes owned by the Company.  As of September 30, 2022, fixed maturities represented 31% of the total investments owned by the Company.

Earnings from the equity securities investment portfolio represented approximately 11% and 11% of the total consolidated investment income report by the Company during the nine months ended September 30, 2022 and 2021, respectively.  Income from the equity securities portfolio was up approximately 124% or $1,138,000 when comparing year to date 2022 and 2021 results.  Third quarter only results show an increase in the equity securities earnings of 106% or $371,000 when comparing 2022 to 2021.  This increase is primarily due to dividend increases seen in 2022 from equity positions held by the Company in oil and gas and from additional investments in dividend paying equities in the last year.

The earnings reported by the real estate investment portfolio represented 61% and 27% of the total consolidated investment income reported by the Company during the nine months ended September 30, 2022 and 2021, respectively. Earnings from the real estate investment portfolio were up approximately 394% or $8.8 million when comparing 2022 and 2021 results. Third quarter only results were up 439% when comparing 2022 and 2021.  The earnings from the real estate investment portfolio are expected to vary depending on the real estate activities and the potential distributions that may occur.  The earnings reported by the real estate investment portfolio are primarily related to the oil & gas and timber industries.  With the world economies beginning to reopen, demand for oil and gas and other commodities has substantially increased, which in turn has resulted in increases in prices in the marketplace.  Add to this the issues related to the Russian invasion of Ukraine; even more upward price pressure is being felt.  The Company holds several long-term investments within these industries that have benefitted in recent periods from a rise in prices seen both in real estate in general, but specifically within the Company’s concentrated industries.  Oil has increased in 2022 averaging $105 per barrel compared to an average price of $42 in 2020 and $70 in 2021.  This change has significantly increased the cashflow the Company is receiving from the royalty interests it holds.  While oil has recently dropped below $100 per barrel, it remains well above recent historic levels.

The earnings reported by the mortgage loan investment portfolio represented 5% and 6% of the total consolidated investment income reported by the Company during the nine months ended September 30, 2022 and 2021, respectively, and represented 4% and 5% for the three months ended September 30, 2022 and 2021, respectively.   The earnings from the mortgage loan portfolio have increased due to the increase in size of the portfolio. The mortgage loan investment portfolio increased by approximately 1% through the first nine months of 2022.  With the low investment rates available in the bond market in recent periods, the Company has placed more emphasis on loans to improve investment yields.

The following table reflects net investment gains (losses):

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		2022		2021		2022		2021
Other-than-temporary impairments	$	0	$	18,129	$	0	$	(393,455)
Fixed maturities available for sale		0		21,631		(527)		55,867
Equity securities		1,485,872		1,939		1,773,817		3,016,958
Real estate		414,586		104,205		4,986,426		1,487,457
Consolidated net realized investment gains		1,900,458		145,904		6,759,716		4,166,827
Change in fair value of equity securities		7,097,738		(9,380,710)		14,462,029		10,994,305
	$	8,998,196	$	(9,234,806)	$	21,221,745	$	15,161,132

Realized investment gains are the result of one-time events and are expected to vary from year to year.

The Company had one equity security sale in first quarter which represents approximately $370,000 of the realized investment gains from equity securities during 2022.  The Company sold a portion (approximately 20% of this holding) of an equity security in third quarter of 2022 realizing a gain of $1,135,000. The third quarter sale of a portion of an equity holding was a security in the oil and gas sector. The Company had several other small equity sales during 2022, which were not material to the operating results.  Over the entire holding period of the sold portion, the Company realized a gain of almost $4 million dollars on an original cost basis of $300,000.

The 2022 real estate gains are the result of the sales of real estate in Kentucky and Georgia, primarily occurring in the first quarter of 2022. The sale of a land parcel in Kentucky produced a gain of approximately $3.5 million, additionally, the Company sold a real estate parcel located in Georgia that produced gains of approximately $812,000.  The Company also sold a few additional smaller properties in Kentucky that produced the remaining gains in this category.

The Company reported a change in fair value of equity securities of approximately $14.5 million and $11.0 million for the nine months ended September 30, 2022, and 2021, respectively.  For the third quarter ended September 30, the Company reported a gain of $7.1 million and loss of $(9.4) million in 2022 and 2021, respectively.  This line item is material to the results reported in the consolidated statements of operations.  This line item can also be extremely volatile, reflecting changes in the stock market.  While both nine-month periods within 2022 and 2021 reflected positive results, 2021 third quarter results were a significant loss.  While these results can be material and volatile, most of the equity holdings of the Company were acquired with a long-term view, thus making these intermediate changes in value of less concern to Management.  Management monitors its equity holdings looking more at the specific entity and market it is in relative to performance and less to changes due to general market swings that occur over the holding period of the investment.

While the Company has seen significant positive results on its equity investments in the last two years, a pull back or downward market adjustment could slow these gains or even result in losses in future periods.  Management believes its current equity investments continue to be solid investments for the Company and have further growth potential; however, changes in market conditions could cause volatility in market prices.

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

Expenses

The Company reported total benefits and other expenses of approximately $19.4 million for the nine-month period ended September 30, 2022, an increase of approximately 7% from the same period in 2021.  Benefits, claims and settlement expenses represented approximately 59% and 67% of the Company's total expenses for the nine-month periods ended September 30, 2022, and 2021, respectively. The other major expense category of the Company is operating expenses, which represented approximately 39% and 31% of the Company's total expenses for the nine-month periods ended September 30, 2022, and 2021, respectively.

Life benefits, claims and settlement expenses, net of reinsurance benefits and claims were down approximately 6% or $(692,000) when comparing the nine months ended September 30, 2022, and 2021.  Policy claims vary from period to period and therefore, fluctuations in mortality are to be expected and are not considered unusual by Management.

Early in the COVID-19 pandemic, the Company implemented a process to monitor death claims resulting from COVID-19. Prior to the pandemic, death benefits were $12,624,000, $12,831,000 and $12,403,000 in 2017, 2018 and 2019, respectively. During the two plus years of the pandemic, total death benefits were $14,293,000 and $15,985,000 in 2020 and 2021, respectively.  First six-months of 2022 continued with higher than historic claims of $7,665,000 including total COVID related deaths of approximately $985,000. Third quarter 2022 had total death claims of $2,754,000 compared to $4,036,000 in third quarter 2021.  Death benefits of the Company have been higher than recent past experience, even when adjusting for the identified COVID-19 claims. This anomaly is showing throughout the entire U.S. insurance industry. Industry experts believe this increase in death benefits while not always directly related to COVID-19, are caused indirectly by the pandemic due to delays in medical care as a result of the lockdown in 2020 and then later, people’s fears of seeking out treatment and trouble making up appointments. This is further compounded by depression from isolation. Third quarter claims experience have declined from recent levels, returning closer to historic levels.  While we hope the worst of the pandemic is behind us, it is too early to determine with certainty.

Changes in policyholder reserves, or future policy benefits, also impact this line item.  Reserves are calculated on an individual policy basis and generally increase over the life of the policy as a result of additional premium payments and acknowledgment of increased risk as the insured continues to age.

The short-term impact of policy surrenders is negligible since a reserve for future policy benefits payable is held which is, at a minimum, equal to and generally greater than the cash surrender value of a policy.  The benefit of fewer policy surrenders is primarily received over a longer time period through the retention of the Company’s asset base. The surrender process has been impacted by temporary state rulings that were implemented as a result of COVID-19 and in some cases did not allow life insurance companies to lapse policies temporarily.  The rulings varied by state and had all expired by July 1, 2021.

Operating expenses increased approximately 34% in the nine-month period ended September 30, 2022 as compared to the same period in 2021 and increased approximately 54% for the third quarter period ended September 30, 2022 as compared to the same period in 2021.  This increase for both compared periods is primarily due to increased charitable contribution accruals based upon the Company’s taxable income which was significantly higher in 2022 compared to 2021. Additionally, the Company incurred a large maintenance expense relating to the Company’s partially owned aircraft. Expenses in the remaining categories are largely comparable between years.

Effective January 1, 2017, the Company and FSNB began sharing certain services. The shared services focuses on departments commonly utilized by both organizations such as financial accounting, human resources and information technology.  The shared services did not initially make a noticeable difference in operating expenses, but provides a larger team, which enhances capabilities and quality.

As mentioned above in the Overview section of the Management Discussion and Analysis, UTG has a strong philanthropic program.  The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor.  Charitable contributions made by the Company are expected to vary from year to year depending on the earnings of the Company.

Net amortization of cost of insurance acquired decreased approximately 4% when comparing current and prior year activity.  Cost of insurance acquired is established when an insurance company is acquired or when the Company acquires a block of in-force business.  The Company assigns a portion of its cost to the right to receive future profits from insurance contracts existing at the date of the acquisition.  Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates may vary due to risk analysis performed at the time of acquisition on the business acquired. The Company utilizes a 12% discount rate on the remaining unamortized business.  The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.  Amortization of cost of insurance acquired is particularly sensitive to changes in interest rate spreads and persistency of certain blocks of insurance in-force.  This expense is expected to decrease unless the Company acquires a new block of business.

Management continues to place significant emphasis on expense monitoring and cost containment. Maintaining administrative efficiencies directly impacts net income.

Financial Condition

Investment Information

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

The Company's investments are generally managed to match related insurance and policyholder liabilities.  The comparison of investment return with insurance or investment product crediting rates establishes an interest spread.  Interest crediting rates on adjustable-rate policies have been reduced to their guaranteed minimum rates, and as such, cannot be lowered any further.  Policy interest crediting rate changes and expense load changes become effective on an individual policy basis on the next policy anniversary.  Therefore, it takes a full year from the time the change was determined for the full impact of such change to be realized.  If interest rates decline in the future, the Company will not be able to lower rates and both net investment income and net income will be impacted negatively.

The Company’s total investments represented 86% and 85% of the Company’s total assets as of September 30, 2022, and December 31, 2021, respectively. Fixed maturities consistently represented a substantial portion, 31% and 38%, respectively, of the total investments during 2022 and 2021.  The overall investment mix, as a percentage of total investments, remained fairly consistent when comparing the respective investments held as of September 30, 2022 and December 31, 2021.

As of September 30, 2022, the carrying value of fixed maturity securities in default as to principal or interest was immaterial in the context of consolidated assets, shareholders’ equity or results from operations.  To provide additional flexibility and liquidity, the Company has identified all fixed maturity securities as "investments available for sale".  Investments available for sale are carried at market value, with changes in market value charged directly to the other comprehensive component of shareholders' equity.  Changes in the market value of available for sale securities resulted in net unrealized gains (losses) of approximately $(18.5) and $(4.6) million as of September 30, 2022 and 2021, respectively. The variance in the net unrealized gains and losses is the result of normal market fluctuations mainly related to changes in interest rates in the marketplace.

Management continues to view the Company’s investment portfolio with utmost priority. Significant time has been spent internally researching the Company’s risk and communicating with outside investment advisors about the current investment environment and ways to ensure preservation of capital and mitigate losses.  Management has put extensive efforts into evaluating the investment holdings.  Additionally, members of the Company’s Board of Directors and investment committee have been solicited for advice and provided with information.  Management reviews the Company’s entire portfolio on a security level basis to be sure all understand our holdings, potential risks and underlying credit supporting the investments.  Management intends to continue its close monitoring of its bond holdings and other investments for possible deterioration or market condition changes.  Future events may result in Management’s determination that certain current investment holdings may need to be sold which could result in gains or losses in future periods.  Such future events could also result in other than temporary declines in value that could result in future period impairment losses.

There are a number of significant risks and uncertainties inherent in the process of monitoring impairments and determining if impairment is other-than-temporary. These risks and uncertainties related to Management’s assessment of other-than-temporary declines in value include but are not limited to: the risk that Company's assessment of an issuer's ability to meet all of its contractual obligations will change based on changes in the credit characteristics of that issuer; the risk that the economic outlook will be worse than expected or have more of an impact on the issuer than anticipated; the risk that fraudulent information could be provided to the Company's investment professionals who determine the fair value estimates.

Capital Resources

Total shareholders' equity decreased by approximately 1% as of September 30, 2022, compared to December 31, 2021. The decrease is mainly attributable to the decline in market value of the Company’s fixed income portfolio due to current rate increases in the marketplace.  This was partially offset by an increase in retained earnings, which is the result of the current year net income reported by the Company.

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

The Company had $8 million and $24 million of debt outstanding as of September 30, 2022 and December 31, 2021, respectively.  During October, the Company repaid the total balance outstanding on its line of credit.

Liquidity

Liquidity provides the Company with the ability to meet on demand the cash commitments required by its business operations and financial obligations.  The Company’s liquidity is primarily derived from cash balances, a portfolio of marketable securities and line of credit facilities.  The Company has two principal needs for cash – the insurance company’s contractual obligations to policyholders and the payment of operating expenses.

Parent Company Liquidity - UTG is a holding company that has no day-to-day operations of its own.  Cash flows from UTG’s insurance subsidiary, UG, are used to pay costs associated with maintaining the Company in good standing with states in which it does business and purchasing outstanding shares of UTG stock.  UTG's cash flow is dependent on management fees received from its insurance subsidiary, stockholder dividends from its subsidiary and earnings received on cash balances.  As of September 30, 2022, and December 31, 2021, substantially all of the consolidated shareholders’ equity represents net assets of its subsidiaries.  Through the first nine months of 2022, UTG received dividends from its subsidiary, UG, totaling $3 million.  Certain restrictions exist on the payment of dividends from the insurance subsidiary to the Parent company.  For further information regarding the restrictions on the payment of dividends by the insurance subsidiary, see Note 9 – Shareholders’ Equity in the Notes to the Consolidated Financial Statements.  Although these restrictions exist, dividend availability from the insurance subsidiary has historically been sufficient to meet the cash flow needs of the Parent company.

Insurance Subsidiary Liquidity - Sources of cash flows for the insurance subsidiary primarily consist of premium and investment income.  Cash outflows from operations include policy benefit payments, administrative expenses, taxes and dividends to the Parent company.

UG is an Ohio domiciled insurance company, which requires notification within five business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend.  Ordinary dividends are defined as the greater of:  a) prior year statutory net income or b) 10% of statutory capital and surplus.  For the year ended December 31, 2021, UG had statutory net income of approximately $451,000.  At December 31, 2021 UG's statutory capital and surplus amounted to approximately $64.7 million.  Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. During 2021, UG paid UTG ordinary dividends of $5 million. During the third quarter of 2022, UG paid UTG total dividends of $3 million. UTG used the dividends received during 2021 and 2022 to purchase outstanding shares of UTG stock and for general operations of the Company.

Short-Term Borrowings - During the fourth quarter of 2021, Management made the business decision to pledge additional collateral to the Federal Home Loan Bank in order to increase the Company's borrowing capacity. The Company submitted, and the Federal Home Loan Bank approved, a new Cash Management Advance (CMA) with a collateral lendable value of $25 million This CMA replaces the CMA that was approved in May of 2021 for $10 million. During the fourth quarter 2021, the Company borrowed $24 million on the CMA and Management utilized the funds for investing activities. The interest rate on the borrowed funds is variable.  During the first nine months of 2022 the Company repaid $35.5 million and borrowed $19.5 million on the CMA leaving $8 million outstanding on September 30, 2022.  In October of 2022, the Company repaid $8.0 million on this line bringing the total outstanding borrowings to zero.

The CMA is a source of overnight liquidity utilized to address the day-to-day cash needs of a Company. In order to provide the Company with multiple lending options, Management also applied for, and the FHLB approved, the Company's Repurchase (REPO) Advance Application for $25 million. The REPO Advance requires a minimum borrowing of $15 million and provides financing for one day to one year at a fixed rate of interest.  The Company has enough qualifying investments for collateral pledging of $18.9 million total against these two borrowing vehicles.  In early fourth quarter, the Company chose to renew only the CMA and allowed the REPO to lapse given the lack of collateral to sustain both borrowing sources.  The Company believes the CMA provides it with the flexibility and liquidity it needs for its operations and investment activities.

Consolidated Liquidity

Cash used in operating activities was approximately $0.3 million and $10.2 million in 2022 and 2021, respectively.  Sources of operating cash flows of the Company, as with most insurance entities, is comprised primarily of premiums received on life insurance products and income earned on investments.  Uses of operating cash flows consist primarily of payments of benefits to policyholders and beneficiaries and operating expenses.  The Company has not marketed any significant new products for several years.  As such, premium revenues continue to decline.  Management anticipates future cash flows from operations to remain similar to historic trends.

During 2022 and 2021, the Company’s investing activities provided net cash of approximately $10.8 million and $(3.3) million, respectively. The Company recognized proceeds of approximately $37.1 million and $40.6 million from investments sold and matured in 2022 and 2021, respectively.  The Company used approximately $26.3 million and $43.9 million to acquire investments during 2022 and 2021, respectively.  The net cash provided by investing activities is expected to vary from year to year depending on market conditions and management’s ability to find and negotiate favorable investment contracts.

Net cash used in financing activities was approximately $16.6 million and $1.4 million during 2022 and 2021, respectively. As of September 30, 2022, the Company had $8 million in debt outstanding with third parties.  Subsequent to the end of the quarter, the Company repaid an additional $28 million on its borrowings leaving no outstanding balance.  The Company will continue to utilize this line of credit as needed for its operations and investing activities.

The Company had cash and cash equivalents of approximately $24.8 million as of September 30, 2022.  The Company has a portfolio of marketable fixed maturity securities that could be old, if an unexpected event were to occur.  These securities had a fair value of approximately $110 million at September 30, 2022. However, the strong cash flows from investing activities, investment maturities and the availability of the line of credit facilities make it unlikely that the Company would need to sell securities for liquidity purposes.  See Note 2 – Investments in the Notes to the Consolidated Financial Statements for detailed disclosures regarding the Company’s investment portfolio.

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

Item 4.  Controls and Procedure

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

Part II.  Other Information

Item 1.  Legal Proceedings

None

Item 1A.  Risk Factors

None

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.  Defaults Upon Senior SecuritiesI

None

Item 4.  Mine Safety Disclosures

None

Item 5.  Other Information

None

Item 6.  Exhibits

Exhibit Number	Description
*31.1	Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of Theodore C. Miller, Chief Financial Officer and Senior Vice President 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 and Senior Vice President of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101	The following financial statements from the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Shareholders' Equity, (v) Condensed Consolidated Statements of Cash Flows and (vi) Notes to the Condensed Consolidated Financial Statements (detail tagged).
**104	Cover Page Interactive Data File (formatted in iXBRL and included in exhibit 101).

* Filed herewith

SIGNATURES

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

UTG, INC.

(Registrant)

Date:	November 10, 2022	By	/s/ James P. Rousey
			James P. Rousey
			President and Director

Date:	November 10, 2022	By	/s/ Theodore C. Miller
			Theodore C. Miller
			Senior Vice President and Chief Financial Officer