Utg Inc 10-K for FY2024
Utg Inc (UTGN)
10-K
2025-03-26
For: 2024-12-31
View Original
Added on
April 06, 2026
About this 10-K
Utg Inc filed this 10-K on March 26, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $84.91M
- up 222.8% from $26.31M a year earlier
- Net income
- $49.3M
- up 1755.8% from net income of $2.66M a year earlier
- Diluted EPS
- $15.57
- up 1753.6% from $0.84 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the fiscal year ended |
|
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 Number 000-16867
(Exact name of registrant as specified in its charter) |
||
(State or other jurisdiction of |
(I.R.S. Employer |
|
incorporation or organization) |
Identification No.) |
(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:
of class
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
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 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 ☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2024, shares of the Registrant’s common stock held by non-affiliates (based upon the price of the last sale of $29.00 per share), had an aggregate market value of approximately $26,130,885 .
At January 31, 2025 the Registrant had 3,157,376 outstanding shares of common stock, stated value $.001 per share.
Documents incorporated by reference: None
UTG, Inc.
Form 10-K
Year Ended December 31, 2024
TABLE OF CONTENTS
PART I |
4 |
Item 1. Business |
4 |
Item 1A. Risk Factors |
8 |
Item 1B. Unresolved Staff Comment |
8 |
Item 1C. Cybersecurity |
9 |
Item 2. Properties |
10 |
Item 3. Legal Proceedings |
10 |
Item 4. Mine Safety Disclosures |
10 |
PART II |
10 |
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
10 |
Item 6. Reserved |
11 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 |
Item 7A. Quantitative and Qualitative Disclosures About Market Risk |
21 |
Item 8. Financial Statements and Supplementary Data |
21 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures |
56 |
Item 9A. Controls and Procedures |
57 |
Item 9B. Other Information |
57 |
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
57 |
PART III |
58 |
Item 10. Directors, Executive Officers and Corporate Governance |
58 |
Item 11. Executive Compensation |
62 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
63 |
Item 13. Certain Relationships and Related Transactions, and Director Independence |
65 |
Item 14. Principal Accountant Fees and Services |
66 |
PART IV |
67 |
Item 15. Exhibits and Financial Statement Schedules |
67 |
Item 16. Form 10-K Summary |
69 |
Forward-Looking Statements
This report on Form 10-K 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.
General
The Holding Company - UTG, Inc. (the “Registrant”, “Company” or “UTG”) is an insurance holding company incorporated in the state of Delaware in 2005 and headquartered in Stanford, KY. The Company’s principal subsidiary is Universal Guaranty Life Insurance Company (“UG”). The Registrant and its primary subsidiary have only one significant segment, insurance.
The holding company has no significant business operations of its own and relies on fees, dividends and other distributions from its operating subsidiary as the principal source of cash flows to meet its obligations. The Company may explore supplemental sources of income in the future. The cash outlays of the Company mainly consist of operational costs and the costs of repurchasing Company common stock.
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.
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, a Kentucky corporation, (“FSF”) 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 December 31, 2024, Mr. Correll owns or controls directly and indirectly approximately 66% of UTG’s outstanding stock.
At December 31, 2024, the Company had consolidated assets of $477 million, consolidated liabilities of $266 million and total shareholders’ equity of $211 million. The Company’s consolidated liabilities include policyholder liabilities and accruals of $237 million.
The Company’s principal executive office is located at 205 North Depot Street, Stanford, Kentucky 40484. The Company’s telephone number is 217-241-6300.
The Insurance Company - Universal Guaranty Life Insurance Company is an Ohio domiciled life insurance company and is licensed in 37 states. The Company’s dominant business is individual life insurance, which includes the servicing of existing insurance business in-force, the acquisition of other companies in the insurance business, and the administration processing of life insurance business for other entities. The Insurance Company’s operations are conducted through its administrative office located in Stanford, Kentucky.
UG has several wholly-owned and majority-owned subsidiaries. The subsidiaries were formed to hold certain real estate and other investments. The investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG.
Reinsurance - As is customary in the insurance industry, the insurance subsidiary cedes insurance to, and assumes insurance from, other insurance companies under reinsurance agreements. Reinsurance agreements are intended to limit a life insurer’s maximum loss on a large or unusually hazardous risk or to obtain a greater diversification of risk. The ceding insurance company remains primarily liable with respect to ceded insurance should any reinsurer be unable to meet the obligations assumed by it. However, it is the practice of insurers to reduce their exposure to loss to the extent that they have been reinsured with other insurance companies. The Company sets a limit on the amount of insurance retained on the life of any one person. The Company will not retain more than $125,000, including accidental death benefits, on any one life.
The Company’s reinsured business is ceded to numerous reinsurers. The Company monitors the solvency of its reinsurers in seeking to minimize the risk of loss in the event of a failure by one of the parties. The Company is primarily liable to the insureds even if the reinsurers are unable to meet their obligations. The primary reinsurers of the Company are large, well-capitalized entities. See Note 4 - Reinsurance in the Notes to the Consolidated Financial Statements for additional information regarding the Company’s reinsurance activities.
Reserves - The applicable insurance laws under which the insurance subsidiary operates require that the insurance company report policy reserves as liabilities to meet future obligations on the policies in-force. These reserves are the amounts which, with the additional premiums to be received and interest thereon compounded annually at certain assumed rates, are calculated in accordance with applicable laws to be sufficient to meet the various policy and contract obligations as they mature. These laws specify that the reserves shall not be less than reserves calculated using certain mortality tables and interest rates.
The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiary’s experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2% to 6% for life insurance and 2.5% to 7.5% for annuities. Benefit reserves for traditional life insurance policies include certain deferred profits on limited-payment policies that are being recognized in income over the policy term. Policy benefit claims are charged to expense in the period that the claims are incurred. The mortality rate assumptions for policies currently issued by the Company are based on 2017 CSO Ultimate tables. Withdrawal rate assumptions are based upon Linton B or Linton C, which are industry standard actuarial tables for forecasting assumed policy lapse rates.
Benefit reserves for universal life insurance and interest sensitive life insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims in excess of related policy account balances.
Business Strategy
UG’s product portfolio consists of a limited number of life insurance product offerings. All of the products are individual life insurance products, with design variations from each other to provide choices to the customer. These variations generally center around the length of the premium paying period, length of the coverage period and whether the product accumulates cash value or not.
While the Company does not actively sell any new policies today, it has the following products available for issue:
Tradition – The Tradition policy is a fixed premium whole life insurance policy. Premiums are level and payable for life. Issue ages are 0-75. The minimum face amount is the greater of $10,000 or the amount of coverage provided by a $100 annual premium.
Annuity - The annuity product is a 5-year, single premium product. The product offers a guaranteed minimum rate of 1% and the rate can be adjusted at any time. The maximum surrender charge is 5% and subject to waiver for certain qualifying events. The annuity product offers a 10% free withdrawal each year beginning in year 2.
Business Concentrations
The Company maintains cash balances in financial institutions that at times may exceed federally insured limits. The Company maintains its primary operating cash accounts with First Southern National Bank, an affiliate of the largest shareholder of UTG, Mr. Jesse T. Correll, the Company’s CEO and Chairman. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Because UG serves primarily individuals located in three states, the ability of our customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of December 31, 2024 and 2023, respectively, approximately 52% and 51% of the Company’s total direct premium was collected from Illinois, Ohio, and Texas. Thus, results of operations are heavily dependent upon the strength of these economies.
The majority of the investments included in the Consolidated Balance Sheets are owned by UTG’s subsidiary, UG. As an insurance company, UG is subject to applicable state insurance laws and regulations, which limit the concentration of investments in any one category or class and further limit the investment in any one issuer. Generally, these limitations are imposed as a percentage of statutory assets or percentage of statutory capital and surplus of each company.
The Company owns a variety of investments associated with the oil and gas industry. These investments represented approximately 34% and 28% of the Company’s total invested assets at December 31, 2024 and 2023, respectively.
The Company’s investment real estate portfolio includes ownership in oil and gas royalties. As of December 31, 2024 and 2023, investments in oil and gas royalties represented 20% and 34%, respectively, of the total investment real estate portfolio.
See Note 13 - Concentrations of the Consolidated Financial Statements for additional disclosures regarding concentrations that have been identified by the Company.
Competition
The insurance business is a highly competitive industry and there are a number of other companies, both stock and mutual, doing business in areas where the Company operates. Many of these competing insurers are larger, have more diversified and established lines of insurance coverage, have substantially greater financial resources and brand recognition, as well as a greater number of agents. Other significant competitive factors in the insurance industry include policyholder benefits, service to policyholders, and premium rates.
In recent years, the Company has not placed an emphasis on new business production. Costs associated with supporting new business can be significant. Current sales primarily represent sales to existing customers through additional insurance needs or conservation efforts. The Company currently encourages policy retention as opposed to new sales in an attempt to maintain or improve current persistency levels.
The Company performs administrative work as a third-party administrator (“TPA”) for unaffiliated life insurance companies. The Company provides TPA services to insurance companies seeking business process outsourcing solutions. Revenue generated from TPA services is considered insignificant to the overall financial statements.
Human Capital
As of December 31, 2024, UTG and its subsidiaries had 40 full-time employees located in Kentucky and Illinois. These individuals are further supported by certain employees of First Southern National Bank (an affiliated entity) through a shared services arrangement. Under this arrangement, the two entities utilize the services of the other’s staff in certain instances for the betterment of both entities. Personnel within departments such as accounting, human resources and information technology are shared between the entities. UTG’s operations are headquartered in Stanford, Kentucky. The Company respects, values and invites diversity in our team members, customers, suppliers, and community. We seek to recognize the unique contribution each individual brings to our Company, and we are fully committed to supporting a rich culture of diversity as a cornerstone to our success. The Company strives to attract, develop, and retain talented individuals. To attract such individuals, we provide professional and personal development opportunities to team members. In addition, we seek to improve retention, development, and job satisfaction of team members from diverse groups by providing career skills training, peer mentoring and opportunities to interact with senior leaders. We encourage our team members to take initiative, accept challenges and achieve goals, all of which enables our team to work efficiently while providing excellent customer service which supports the Company’s strong performance.
UTG offers competitive compensation and benefits. Our pay for performance compensation philosophy is designed to reward employees for achievement and to align employee interests with the Company’s long-term growth. The Company’s benefits program includes health care, wellness initiatives, retirement offerings and paid time off.
Workplace health and safety is a vital aspect of running our business. We believe that safety must always be an integral part of any function or service performed, and the protection of our employees and visitors is our utmost priority. We have a business continuity plan in place that allows us to respond to threats to our health and safety, while ensuring that we can continue to provide quality service to our clients and shareholders at all times.
Code of Ethics
The Board of Directors has adopted a code of ethics for directors, officers, and financial personnel.
Regulation
Holding Company - States have enacted legislation requiring registration and periodic reporting by insurance companies domiciled within their respective jurisdictions that control or are controlled by other corporations so as to constitute a holding company system. Insurance holding company system statutes and regulations impose various limitations on investments in subsidiaries and may require prior regulatory approval for material transactions between insurers and affiliates and for the payment of certain dividends and other distributions.
Insurance - Insurance companies are subject to regulation and supervision in the states in which they do business. Generally the state supervisory agencies have broad administrative powers relating to granting and revoking licenses to transact business, licensing agents, approving policy forms, regulating trade practices, approving certain premium rates, setting minimum reserve and loss ratio requirements, determining the form and content of required financial statements, and prescribing the type and amount of investments permitted. Insurance companies are also required to file detailed annual reports with supervisory agencies, and records of their business are subject to examination at any time. Under the rules of the National Association of Insurance Commissioners (“NAIC”), insurance companies are examined periodically by one or more of the supervisory agencies.
Statutory Restrictions – Restrictions exist on the flow of funds to UTG from its insurance subsidiary. Statutory regulations require life insurance subsidiaries to maintain certain minimum amounts of capital and surplus. UG is required to maintain minimum statutory surplus of $2,500,000. At December 31, 2024, substantially all of the consolidated shareholders’ equity represents net assets of UTG’s subsidiaries.
Risk-Based Capital - The NAIC requires a risk-based capital formula be applied to all life and health insurers. The risk-based capital formula is a threshold formula rather than a target capital formula. It is designed only to identify companies that require regulatory attention and is not to be used to rate or rank companies that are adequately capitalized. UTG’s insurance subsidiary, UG, is more than adequately capitalized under the risk-based capital formula.
Guaranty Assessments – State guaranty laws provide for assessments from insurance companies to be placed into a fund which is used, in the event of failure or insolvency of an insurance company, to fulfill the obligations of that company to its policyholders. The amount which a company is assessed is determined according to the extent of these unsatisfied obligations in each state. Assessments are recoverable to a great extent as offsets against state premium taxes.
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 December of 2024, 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 $24 million of UTG’s common stock in the open market or in privately negotiated transactions since inception of the program. 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 2024, the Company repurchased 23,961 shares through the stock repurchase program for $648,152. Through December 31, 2024, UTG has spent $20,839,555 in the acquisition of 1,380,820 shares under this program.
Transactions with Affiliates
The articles of incorporation of UG contain the following language under item 12 relative to related party transactions:
A director shall not be disqualified from-dealing with or contracting with the corporation as vendor, purchaser; employee, agent or otherwise; nor, in the absence of fraud, shall any transaction or contract or act of this corporation be void or in any way affected or invalidated by the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder, director or officer is in any way interested in such transaction or contract or act, provided the fact that such director or such firm or such corporation so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction or act shall be taken: nor shall any such director be accountable or responsible to the company for or in respect to such transaction or contract or act of. this corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such action or contract; and any such director may be counted in determining the existence of a quorum of any meeting of the Board of Directors of the company which shall authorize or take action in respect to any such contract or transaction or act and may vote thereat to authorize, ratify, or approve any such contract or transaction or act, with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer were not interested in such transaction or contract or act.
Note 11 – Related Party Transactions of the Consolidated Financial Statements provides disclosures regarding transactions with related parties.
Anti-Money Laundering Laws
A series of laws and regulations beginning with the Bank Secrecy Act of 1970 require financial institutions to prevent, detect, and report illicit or illegal financial activities to the federal government to prevent money laundering, international drug trafficking, and terrorism. Under the US PATRIOT Act of 2001, financial institutions are subject to prohibitions against specified financial transactions and account relationships, requirements regarding the Customer Identification Program, as well as enhanced due diligence and “know your customer” standards in their dealings with high-risk customers, foreign financial institutions, and foreign individuals and entities. These rules also mandate a variety of record keeping, reporting and employee training requirements.
Data Security
Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of systems and networks and the confidentiality, availability and integrity of data. Although the Company makes efforts to maintain the security and integrity of the networks and systems, there can be no assurance that the security efforts will be effective or that attempted security breaches or disruptions would not be successful or damaging. In the event a security breach or failure results in the disclosure of sensitive third-party data or the transmission of harmful/malicious code to third parties, the Company could be subject to liability claims. Depending on their nature and scope, such threats also could potentially lead to improper use of our systems and networks, manipulation and destruction of data, loss of trade secrets, system downtimes and operational disruptions, which in turn, could adversely affect our reputation, competitiveness and results of operations.
Available Information
The Company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports with the Securities and Exchange Commission (“SEC”) pursuant to section 13(a) or 15(d) of the Securities and Exchange Act of 1934.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on its website at www.sec.gov. The Company’s website is www.utgins.com.
Item 1A. Risk Factors
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 1C. Cybersecurity
Overall Process
Cybersecurity risk management is an important and continuously evolving focus for the Company. The Company monitors its information systems to proactively assess, identify, and manage risks from vulnerabilities and assess cybersecurity threats. The Company’s process for identifying and assessing material risks from cybersecurity threats operates alongside the Company’s broader overall risk assessment process. The policies and procedures are managed by internal and external resources and are believed to be reasonably designed to prevent, detect, and respond to cybersecurity risks and incidents.
The Company’s processes and procedures include regular network, endpoint, and cloud monitoring, vulnerability assessments, and penetration testing. Periodically, the Company engages external partners to conduct periodic audits of our systems, test our systems infrastructure, and suggest improvements. Through these channels and others, we work to proactively identify potential vulnerabilities in our information security system. The assessments, external penetration testing and internal vulnerability analysis follow the standards of the National Institute of Standards and Technology (“NIST”) – Guidelines on Network Security Testing.
The Company provides mandatory initial and annual training thereafter for personnel regarding security awareness as a means to equip the Company’s personnel with the understanding of how to properly use and protect the computing resources entrusted to them, and to communicate the Company’s information security policies, standards, processes and practices. Training is supplemented by various testing initiatives, including social engineering testing.
Third-Party Access
The Company leverages the expertise of independent consultants and audit firms to evaluate the effectiveness of our risk management systems and address potential cybersecurity incidents efficiently.
The Company utilizes a combination of third-party information security assessments, key technologies, and ongoing internal and external evaluations to provide a level of protection of non-public personal information, to continually monitor and attempt to safeguard information on its operating systems, in cloud-based solutions, and those of third-party service providers, and to prevent, quickly detect and respond to attacks. The Company also utilizes firewall technology, multi-factor authentication, complex password construction, and a combination of software and third-party monitoring to detect and prevent intrusion, and cybersecurity threats, guard against unauthorized access, and continuously identify and prevent computer viruses on the Company’s information solutions.
Material Incidents
Cybersecurity Governance
Cybersecurity risk management processes are an integral part of the Company’s enterprise risk management. The Company’s management team, with assistance from a third-party advisor, is responsible for the day-to-day management of cybersecurity risks faced by the Company. The Board of Directors oversees the risk management policies of the Company and is responsible for the periodic review and approval of the risk management policies.
Item 2. Properties
The Company rents a portion of the first floor and second floor of an 8,000 square foot, two-story office building, located in Stanford, KY. The first floor of the building is occupied by UTG and FSNB employees that are included in the shared services agreement between the two entities. The second floor is occupied by the customer service call centers for both UTG and FSNB employees. The building is owned by FSNB and UTG pays $2,000 per month in rent to FSNB for the portion of the building occupied by UTG employees. The Company paid rent of $24,000 to FSNB in 2024 and 2023.
Item 3. Legal Proceedings
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 these matters will not have a material adverse effect on the Company’s results of operations or financial position.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Registrant is a public company whose common stock is traded in the over-the-counter market. Over-the-counter quotations can be obtained using the UTGN stock symbol.
The following table shows the high and low closing prices for each quarterly period during the past two years, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The quotations below were acquired from the Yahoo Finance web site, which also provides quotes for over-the-counter traded securities such as UTG.
2024 |
2023 |
|||||||
Period |
High |
Low |
High |
Low |
||||
First quarter |
32.00 |
30.01 |
26.75 |
24.18 |
||||
Second quarter |
30.54 |
29.00 |
38.63 |
26.00 |
||||
Third quarter |
29.08 |
25.75 |
38.63 |
29.60 |
||||
Fourth quarter |
29.50 |
24.81 |
34.00 |
30.01 |
||||
UTG has not declared or paid any dividends on its common stock in the past two fiscal years, and has no current plans to pay dividends on its common stock as it intends to retain all earnings for investment in and growth of the Company’s business. See Note 9 – Shareholders’ Equity in the Notes to the Consolidated Financial Statements for information regarding dividend restrictions, including applicable restrictions on the ability of the Company’s life insurance subsidiary to pay dividends.
As of January 31, 2025 there were 3,988 record holders of UTG common stock.
Purchases of Equity Securities
The following table provides information with respect to purchases we made of our common stock during the three months ended December 31, 2024 and total repurchases:
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Program |
Maximum Number of Shares That May Yet Be Purchased Under the Program |
Approximate Dollar Value That May Yet Be Purchased Under the Program |
||||||||||||||||
Oct. 1 through Oct. 31, 2024 |
12,786 |
$ |
25.09 |
12,786 |
N/A |
$ |
1,161,029 |
|||||||||||||
Nov. 1 through Nov. 30, 2024 |
0 |
$ |
0 |
0 |
N/A |
$ |
1,161,029 |
|||||||||||||
Dec. 1 through Dec. 31, 2024 |
21 |
$ |
27.82 |
21 |
N/A |
$ |
3,160,445 |
|||||||||||||
Total |
12,807 |
12,807 |
||||||||||||||||||
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 December of 2024, 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 $24 million of UTG’s common stock in the open market or in privately negotiated transactions since inception of the program. 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 2024, the Company repurchased 23,961 shares through the stock repurchase program for $648,152. Through December 31, 2024, UTG has spent $20,839,555 in the acquisition of 1,380,820 shares under this program.
Stock Performance Graph
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item.
Item 6. Reserved
Item 7. 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”) for the years ended December 31, 2024 and 2023. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report.
Cautionary Statement Regarding Forward-Looking Statements
This report on Form 10-K 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
We have identified the accounting policies below as critical to the understanding of our results of operations and our financial condition. The application of these critical accounting policies in preparing our consolidated financial statements requires Management to use significant judgments and estimates concerning future results or other developments including the likelihood, timing or amount of one or more future transactions or amounts. Actual results may differ from these estimates under different assumptions or conditions. On an on-going basis, we evaluate our estimates, assumptions and judgments based upon historical experience and various other information that we believe to be reasonable under the circumstances. For a detailed discussion of other significant accounting policies, see Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements.
Future Policy Benefits – Because of the long-term nature of insurance contracts, the insurance company is liable for policy benefit payments that will be made in the future. The liability for future policy benefits is determined by standard actuarial procedures common to the life insurance industry. The accounting policies for determining this liability are disclosed in Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements.
Valuation of Securities – The Company’s investment portfolio consists of fixed maturities, equity securities, mortgage loans, notes receivable and real estate to provide funding of future policy contractual obligations.
Fixed Maturity Investments – The Company classifies its fixed maturity investments, which include bonds, as available for sale. Investments classified as available for sale are carried at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. While the available-for-sale fixed maturity securities are generally expected to be held to maturity, they are classified as available-for-sale and are sold periodically to manage risk. Although all of the fixed maturity securities are classified as available-for-sale, the Company has the ability and intent to hold the securities until maturity. The Company has an evaluation process in place to monitor fixed maturity securities available for sale for credit loss. See Note 2 - Investments for further disclosure of the allowance for credit loss (“ACL”).
Equity Securities at Fair Value – Investments in equity securities, which include common and preferred stocks, are reported at fair value with unrealized gains and losses reported as a component of net income (loss).
Equity Securities at Cost – These investments are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Mortgage Loans on Real Estate – Mortgage loans on real estate are reported at their unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on mortgage loans carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL.
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. Real estate for which the Company commits to a plan to sell within one year and actively markets in its current condition, for a reasonable price, in comparison to its estimated fair value, is classified as held-for-sale. Real estate held-for-sale is stated at lower of depreciated cost or estimated fair value less expected disposition costs and is not depreciated.
Notes Receivable – Notes receivable are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on notes receivable carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in notes receivable being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL.
Deferred Income Taxes – The provision for deferred income taxes is based on the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates to temporary differences between amounts reported in the Consolidated Financial Statements and the tax basis of existing assets and liabilities. A valuation allowance is recognized for the portion of deferred tax assets that, in Management’s judgment, is not likely to be realized.
Results of Operations
On a consolidated basis, the Company had net income attributable to common shareholders of approximately $49.3 million and $2.7 million in 2024 and 2023, respectively. In 2024, income before income taxes was approximately $62.2 million compared to $2.8 million in 2023. Total revenues were approximately $84.9 million in 2024 and $26.3 million in 2023.
One-time events, primarily reflected in realized gains, comprise a substantial portion of the net income and revenue reported by the Company during 2024 and 2023. The magnitude of realized investment gains and losses in a given year is a function of the timing of trades of investments relative to the markets themselves as well as the recognition of any impairments on investments. Future earnings will be significantly negatively impacted should earnings from these one-time items not be realizable in a future period. While Management believes there remain additional investments with such one-time earnings, when or if realized remains uncertain.
The Company reported a change in fair value of equity securities of approximately $56.8 million and $(2.9) million for the years ended December 31, 2024 and 2023, 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. 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.
Total benefits and other expenses paid in 2024 were approximately $22.7 million compared to $23.5 million in 2023.
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.
Revenues
Premiums and policy fee revenues, net of reinsurance premiums and policy fees, declined approximately 1% when comparing 2024 to 2023. The Company writes very little 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. The Company’s average persistency rate for all policies in-force for 2024 and 2023 was approximately 96.6% and 96.7%, respectively. Persistency is a measure of insurance in-force retained in relation to the previous year. A positive impact on premium income is the consistency of the lapse percentage. Persistency of the business has been consistent over the last several years. The lapse percentages were 3.4% and 3.3% for 2024 and 2023, respectively.
The following table summarizes the Company’s investment performance for the years ended December 31:
2024 |
2023 |
|||||||
Net investment income |
$ |
16,093,592 |
$ |
14,053,528 |
||||
Net realized investment gains |
7,356,275 |
9,463,843 |
||||||
Change in fair value of equity securities |
56,839,751 |
(2,856,543 |
) |
|||||
The following table reflects net investment income of the Company for the years ended December 31:
2024 |
2023 |
|||||||
Fixed maturities, available for sale |
$ |
2,652,249 |
$ |
2,932,220 |
||||
Fixed maturities, held to maturity |
167,536 |
165,137 |
||||||
Equity securities |
4,233,674 |
3,708,633 |
||||||
Mortgage loans |
952,084 |
1,115,145 |
||||||
Real estate |
8,958,452 |
8,318,201 |
||||||
Notes receivable |
1,341,095 |
1,371,973 |
||||||
Policy loans |
412,701 |
433,556 |
||||||
Cash and cash equivalents |
1,668,712 |
1,007,840 |
||||||
Short-term investments |
661,962 |
529,125 |
||||||
Total consolidated investment income |
21,048,465 |
19,581,830 |
||||||
Investment expenses |
(4,954,873 |
) |
(5,528,302 |
) |
||||
Consolidated net investment income |
$ |
16,093,592 |
$ |
14,053,528 |
||||
Net investment income represented 74% and 71% of the Company’s revenue before net investment gains (losses) as of December 31, 2024 and 2023, respectively. Income from the fixed maturities, equity securities, and real estate portfolios represented 76% and 77%, respectively, of the gross investment income reported by the Company for 2024 and 2023.
Beginning in March 2022 and ending in July 2023, the Federal Open Market Committee (“FOMC”) aggressively raised interest rates to fight inflation. During this time period, the interest rate environment experienced eleven rate increases totaling 5.50%, including four increases during the first part of 2023. While these actions had a negative impact on some of our investments currently owned, this has also allowed for better yields on cash balances and recent investments acquired as investments mature. In the second half of 2024, the FOMC cut the interest rate 3 times for a total of 1% making the current rate 4.50%. The Company anticipates a similar decline in earnings on cash balances and any new investments that are acquired as investments mature.
Earnings from the fixed maturities investment portfolio represented 17% and 22% of the total consolidated net investment income for the years ended December 31, 2024 and 2023, respectively. When comparing earnings from the fixed maturities portfolio for the years ended December 31, 2024 and 2023 income was down approximately 9%. The decrease is due to the maturity of certain fixed maturity investments during 2024. The Company’s investment in fixed maturities continues to decline as we have, for the most part, chosen not to reinvest in fixed maturities. As of December 31, 2024 and 2023, fixed maturities represented 19% and 22%, respectively, of the total investments owned by the Company.
Earnings from the equity securities portfolio represented 26% of the total consolidated net investment income for the years ended December 31, 2024 and 2023, respectively. Earnings were up approximately $525,000 when comparing current year and prior year results. The 2024 increase in investment income from equity securities was mainly the result of increased dividends from oil and gas equity securities.
Earnings from the real estate portfolio represented 56% and 59% of the total consolidated net investment income for the years ended December 31, 2024 and 2023, respectively. Earnings were up about $640,000 when comparing current year and prior year results.
During 2024, the Company received $1.3 million of income from timber sales as compared to $550,000 in the prior year. Included in the 2024 and 2023 real estate income is approximately $3.6 million and $4.2 million of income from oil and gas royalty distributions, respectively. Income from oil and gas royalties represented approximately 41% and 50% of the real estate income for 2024 and 2023, respectively.
The earnings reported by the cash and short term investments represented 14% and 11% of the total consolidated net investment income reported by the Company during 2024 and 2023. The increase in earnings in this category is the result of a combination of higher cash and short term holdings in 2024 and from increased interest rates received from banks and other deposit institutions due to FOMC rate changes. With the three rate declines in 2024 moving it down 1.00%, the Company anticipates experiencing a similar decline in earnings on cash balances going forward.
The following table reflects net realized investment gains (losses) for the years ended December 31:
2024 |
2023 |
|||||||
Fixed maturities available for sale |
$ |
0 |
$ |
58,333 |
||||
Equity securities |
7,190,262 |
812,035 |
||||||
Real estate |
166,020 |
8,577,155 |
||||||
Short term investments |
(7 |
) |
16,320 |
|||||
Equity securities - OTTI |
(900,149 |
) |
0 |
|||||
Consolidated net realized investment gains |
6,456,126 |
9,463,843 |
||||||
Change in fair value of equity securities - held |
52,025,699 |
(4,900,829 |
) |
|||||
Change in fair value of equity securities - sold |
4,814,052 |
2,044,286 |
||||||
Total change in fair value of equity securities |
56,839,751 |
(2,856,543 |
) |
|||||
Net investment gains |
$ |
63,295,877 |
$ |
6,607,300 |
||||
Realized investment gains are the result of one-time events and are expected to vary from year to year.
Realized gains and losses from equity securities represent the difference between the fair value at the beginning of the reporting period and the fair value at the time of sale. The total gains from equity securities sold in 2024 were approximately $12.0 million, of which $7.2 million is being reported as gains from equity securities and $4.8 million is reported as a component of the change in the fair value of equity securities. The gains were the result of selling several equity securities holdings.
The total gains from equity securities sold in 2023 were approximately $2.9 million, of which $812,035 is being reported as gains from equity securities and $2.0 million is reported as a component of the change in the fair value of equity securities. The gains were the result of selling one large equity securities holding and several other small holdings.
The Company reported a change in fair value of equity securities of approximately $56.8 million and $(2.9) million for the years ended December 31, 2024 and 2023, respectively. This line item is material to the results reported in the Consolidated Statements of Operations, and this line item can also be extremely volatile. 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 less of a 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.
Equity investments, primarily in the oil and gas industry, represent almost all the unrealized gains reported in 2024 and unrealized losses reported in 2023. Periodic pull backs and rallies are expected by management. 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 2023, the Company saw negative results in its equity investments. However, most all the negative results occurred in the first quarter of 2023.
In 2024, the Company recognized an other-than-temporary impairment of $900,149 on an equity security. The other-than-temporary impairment recognized during 2024 was taken as a result of Management’s assessment and determination of value of the investment. The investment was written down to better reflect its current expected value.
During 2024, the Company sold several real estate land parcels in Kentucky and one small parcel in Illinois which makes up all of the realized gains in Real Estate. During 2023, the Company sold several smaller real estate land parcels located in Kentucky producing realized gains of approximately $940,000. Additionally, during third quarter 2023, the Company sold a large land parcel in West Virginia realizing a gain of approximately $7.6 million.
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 $22.7 million and $23.5 million for the years ended December 31, 2024 and 2023, respectively. Benefits, claims and settlement expenses represented approximately 56% and 62% of the Company’s total expenses for 2024 and 2023, respectively. The other major expense category of the Company is operating expenses, which represented 42% and 36% of the Company’s total expenses for 2024 and 2023, respectively.
Life benefits, claims and settlement expenses, net of reinsurance benefits, were down approximately 12% when comparing 2024 and 2023. Policy claims vary from year to year and therefore, fluctuations in mortality are to be expected and are not considered unusual by Management.
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.
Overall, the Company’s persistency for business in-force remained relatively steady at 96.6% in 2024 compared to 96.7% in 2023. The Company’s actual experience for earned interest, persistency, and mortality varies from the assumptions applied to pricing and for determining premiums. Accordingly, differences between the Company’s actual experience and those assumptions applied may affect the profitability of the Company. Interest crediting rates on adjustable rate policies have been reduced to their guaranteed minimum rates, and as such, cannot be lowered any further.
Operating expenses increased approximately 13% or $1.1 million in 2024 as compared to that of the same period in 2023. When comparing 2024 and 2023 expenses, there is one expense item that comprises the majority of the increase, charitable contributions. Charitable expense was approximately $690,000 more when comparing 2024 and 2023. Charitable expense fluctuates based on reported taxable income of the Company. Expenses in the remaining categories were comparable between years.
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. In 2024, the Company paid approximately $1.3 million in charitable donations as compared to $582,000 in 2023.
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 following table reflects, by investment category, the investments held by the Company as of December 31:
2024 |
As a % of Total Investments |
As a % of Total Assets |
||||||||||
Fixed maturities, available for sale |
$ |
76,480,086 |
19 |
% |
16 |
% |
||||||
Fixed maturities, held to maturity |
2,500,000 |
1 |
% |
1 |
% |
|||||||
Equity securities, at fair value |
234,506,227 |
59 |
% |
49 |
% |
|||||||
Equity securities, at cost |
21,203,393 |
5 |
% |
4 |
% |
|||||||
Mortgage loans |
16,277,981 |
4 |
% |
3 |
% |
|||||||
Real estate |
28,615,602 |
7 |
% |
6 |
% |
|||||||
Notes receivable |
12,672,175 |
3 |
% |
3 |
% |
|||||||
Policy loans |
5,692,565 |
1 |
% |
1 |
% |
|||||||
Short-term investments |
1,954,687 |
1 |
% |
1 |
% |
|||||||
Total investments |
$ |
399,902,716 |
100 |
% |
84 |
% |
||||||
2023 |
As a % of Total Investments |
As a % of Total Assets |
||||||||||
Fixed maturities, available for sale |
$ |
79,084,545 |
22 |
% |
18 |
% |
||||||
Fixed maturities, held to maturity |
2,500,000 |
1 |
% |
1 |
% |
|||||||
Equity securities, at fair value |
178,625,485 |
50 |
% |
41 |
% |
|||||||
Equity securities, at cost |
18,227,986 |
4 |
% |
4 |
% |
|||||||
Mortgage loans |
15,318,176 |
4 |
% |
3 |
% |
|||||||
Real estate |
21,975,120 |
6 |
% |
5 |
% |
|||||||
Notes receivable |
14,009,225 |
4 |
% |
3 |
% |
|||||||
Policy loans |
6,018,248 |
2 |
% |
1 |
% |
|||||||
Short-term investments |
29,132,236 |
7 |
% |
7 |
% |
|||||||
Total investments |
$ |
364,891,021 |
100 |
% |
83 |
% |
||||||
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 84% and 83% of the Company’s total assets as of December 31, 2024 and 2023, respectively. Fixed maturities and equity securities, at fair value, consistently represented a substantial portion, 79% and 73%, of the total investments during 2024 and 2023, respectively. The overall investment mix, as a percentage of total investments, remained fairly consistent when comparing the respective investments held as of December 31, 2024 and 2023.
As of December 31, 2024, 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 income component of shareholders' equity. Changes in the market value of available for sale securities resulted in net unrealized gains (losses) of approximately $(222,000) and $1.6 million as of December 31, 2024 and 2023, 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.
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 December 31, 2024 and 2023, substantially all of the consolidated shareholders’ equity represents net assets of its subsidiaries. In 2024, the Parent company received no dividends from its insurance subsidiary and received $2 million in 2023. 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.
Short-Term Borrowings
During October of 2024, the Federal Home Loan Bank approved the renewal of UG’s Cash Management Advance Application (“CMA”). The CMA is a source of overnight liquidity utilized to address the day-to-day cash needs of a Company. 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 $21.4 million as of December 31, 2024. During the fourth quarter of 2023, the Company borrowed $19 million and planned to utilize the funds for investing activities. During the first quarter of 2024, the Company repaid the entire outstanding principal balance.
Consolidated Liquidity
Cash used in operating activities was approximately $1.6 million and $9.8 million in 2024 and 2023, 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 with the exception of fluctuations in reinsurance premiums. Management anticipates future cash flows from operations to remain similar to historic trends.
During 2024 and 2023, the Company’s investing activities provided net cash of approximately $26.5 million and $6.9 million, respectively. The Company recognized proceeds of approximately $71.8 million and $79.6 million from investments sold and matured in 2024 and 2023, respectively. The Company used approximately $(45.3) million and $(72.7) million to acquire investments during 2024 and 2023, 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 $(20.9) million and $(1.2) million during 2024 and 2023, respectively. As of December 31, 2024 and 2023, the Company had $0 and $19 million, respectively, in debt outstanding with third parties.
The Company had cash and cash equivalents of approximately $45.3 million and $41.2 million as of December 31, 2024 and 2023, respectively. The Company has a portfolio of marketable fixed maturity securities that could be sold, if an unexpected event were to occur. These securities had a fair value of approximately $76.5 million and $79.1 million at December 31, 2024 and 2023, respectively. 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.
Capital Resources
The Company’s capital structure consists of available short-term debt, long-term debt and shareholders’ equity. A complete analysis and description of the short-term and long-term debt issues available as of December 31, 2024 and 2023 are presented in Note 7 – Credit Arrangements in the Notes to the Consolidated Financial Statements.
The Company had $0 and $19 million of debt outstanding as of December 31, 2024 and 2023, respectively.
The NAIC's risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. The risk-based capital (RBC) formula measures the adequacy of statutory capital and surplus in relation to investment and insurance risks such as asset quality, mortality and morbidity, asset and liability matching and other business factors. The RBC formula is used by state insurance regulators as an early warning tool to identify, for the purpose of initiating regulatory action, insurance companies that potentially are inadequately capitalized.
At December 31, 20244, UG has a ratio of approximately 4.90, which is 490% of the authorized control level. Accordingly, the Company meets the RBC requirements.
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 December of 2024, 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 $24 million of UTG’s common stock in the open market or in privately negotiated transactions since inception of the program. 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 20244, the Company repurchased 23,961 shares through the stock repurchase program for $648,152. Through December 31, 20244, UTG has spent $20,839,555 in the acquisition of 1,380,820 shares under this program.
Total shareholders’ equity was approximately $210.6 million and $161.7 million as of December 31, 2024 and 2023, respectively. Total shareholders' equity increased approximately 30% in 2024 as compared to 2023. The increase is primarily attributable to net income from operations. As of December 31, 2024 and 2023, the Company reported accumulated other comprehensive loss of approximately $(2.9) million and $(2.7) million, respectively.
New Accounting Pronouncements
See Note 1 – Summary of Significant Account Policies in the Notes to the Consolidated Financial Statements for information regarding new accounting pronouncements.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements, financing activities or other relationships with unconsolidated entities or other persons.
Contractual Obligations
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page No. |
|
UTG, Inc. and Consolidated Subsidiaries |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID #) |
23 |
Consolidated Balance Sheets |
27 |
Consolidated Statements of Operations |
28 |
Consolidated Statements of Comprehensive Income (Loss) |
29 |
Consolidated Statements of Shareholders’ Equity |
30 |
Consolidated Statements of Cash Flows |
31 |
Notes to Consolidated Financial Statements |
34 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of UTG, Inc. and Subsidiaries
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of UTG, Inc. and Subsidiaries (the Company) as of and 2023 , and the related consolidated statements of operations, comprehensive income (loss),, shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Classification, Valuation and Disclosure of Investments in Equity Securities – Refer to Notes 1 and 3
Critical Audit Matter Description
The Company invests in numerous equity securities including common stocks, limited partnerships and limited liability companies that are not publicly traded and may not have readily determinable fair values. These investments require a detailed analysis of the type of investment on an investment by investment basis to determine the appropriate classification of the investment as to whether the investment should be reported using the cost basis, the equity method or whether the investment should be reported at fair value based on the accounting literature. Since these investments are not publicly traded, the Company employs various methods in determining the appropriate valuation of the investments reported at fair value. These methods at times include utilizing industry specialists in assisting them in determining the fair value method and at other times, management is able to utilize the practical expedient of net asset value when the investment is an investment company. These methods at times depend on key inputs and assumptions crucial to determining fair value that may not be observable requiring managerial judgment and estimation. Last, the disclosure of this information in the Company’s financial statements can be challenging to management due to the volume of data and information needed to appropriately provide the necessary and generally accepted information for a reader to understand the classification and valuation decisions made by management.
The audit of these equity investments requires a substantial amount of time and effort in order to obtain the necessary audit evidence and opine on management’s classification, valuation and disclosure of the investments.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the equity investments that are not publicly traded included the following procedures, among others:
• |
We gained an understanding of the processes and procedures utilized by management to classify these investments and determine their values |
• |
We obtained documentation supporting the investments including purchase agreements, partnership agreements and limited liability company operating agreements as appropriate for each investment |
• |
We discussed and documented management’s determination of the classification of each investment as to cost method, equity method or fair value, including whether management asserted significant influence over operations of the investment |
• |
We obtained confirmation of the investment from investment entity personnel, and if appropriate, audited financial statements of the investment entity |
• |
We obtained and discussed valuation information from industry specialists when appropriate and when utilized by management in determining the fair value of an equity investment and considered and evaluated the valuation information provided by the specialist in concluding on the fair value estimated by management for financial reporting |
• |
For a selection of equity investments, we recalculated the Company’s valuation based on information obtained via confirmation, agreements and/or valuation specialists |
• |
We obtained and accumulated detailed information on the investments provided by management for disclosure of these investments in the financial statements and agreed this information to the documents obtained as a part of our audit procedures for purposes of classification and valuation |
Future Policy Benefits – Refer to Note 1
Critical Audit Matter Description
Liabilities for amounts payable under the Company’s life insurance products are recorded as future policy benefits liabilities. Such liabilities are established based on actuarial assumptions at the time policies are issued, or in the case of contracts acquired by purchase, at the purchase date. The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiary’s experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company’s future policy benefits liability was $ 218.3 million as of December 31, 2024.
The audit of future policy benefits requires the utilization of an actuarial specialist when considering the complex methods, assumptions and models management utilizes in determining the value of these liabilities.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to the liability for future policy benefits included the following procedures, among others:
• |
We gained an understanding of the processes utilized and controls implemented in determining the valuation of future policy benefits |
• |
We tested the underlying data used by management in developing the valuation and the completeness and accuracy of the data |
• |
We performed various analytical procedures |
• |
We obtained an opinion from management’s actuarial specialist confirming that the actuarial assumptions and methodologies used were reasonable and in accordance with presently accepted actuarial standards |
• |
We confirmed the independence of management’s consulting actuarial specialist and reviewed her qualifications as appointed consulting actuary |
We have served as the Company’s auditor since 2023.
/s/ Kerber, Eck & Braeckel LLP
March 25, 2025
UTG, Inc.
Consolidated Balance Sheets
As of December 31, 2024 and 2023
ASSETS |
||||||||
2024 |
2023 |
|||||||
(as restated) |
||||||||
Investments: |
||||||||
Investments available for sale: |
||||||||
Fixed maturities, at fair value (amortized cost $ |
$ |
$ |
||||||
Held to maturity redeemable preferred stock, at amortized cost |
||||||||
Equity securities, at fair value (cost $ |
||||||||
Equity securities, at cost |
||||||||
Mortgage loans on real estate at amortized cost (net of credit loss reserve of $ |
||||||||
Investment real estate, net |
||||||||
Notes receivable (net of credit loss reserve of $ |
||||||||
Policy loans |
||||||||
Short-term investments |
||||||||
Total investments |
||||||||
Cash and cash equivalents |
||||||||
Accrued investment income |
||||||||
Reinsurance receivables: |
||||||||
Future policy benefits |
||||||||
Policy claims and other benefits |
||||||||
Cost of insurance acquired |
||||||||
Income taxes receivable |
||||||||
Other assets |
||||||||
Total assets |
$ |
$ |
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||||
Policy liabilities and accruals: |
||||||||
Future policy benefits |
$ |
$ |
||||||
Policy claims and benefits payable |
||||||||
Other policyholder funds |
||||||||
Dividend and endowment accumulations |
||||||||
Deferred income taxes |
||||||||
Notes payable |
||||||||
Other liabilities |
||||||||
Total liabilities |
||||||||
Shareholders' equity: |
||||||||
Common stock - |
||||||||
Additional paid-in capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) |
( |
) |
||||
Total UTG shareholders' equity |
||||||||
Noncontrolling interest |
||||||||
Total shareholders' equity |
||||||||
Total liabilities and shareholders' equity |
$ |
$ |
||||||
See accompanying notes.
UTG, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2024 and 2023
2024 |
2023 |
|||||||
(as restated) |
||||||||
Revenue: |
||||||||
Premiums and policy fees |
$ |
$ |
||||||
Ceded reinsurance premiums and policy fees |
( |
) |
( |
) |
||||
Net investment income |
||||||||
Other income |
||||||||
Revenues before net investment gains (losses) |
||||||||
Net investment gains (losses): |
||||||||
Other-than-temporary impairments |
( |
) |
||||||
Other realized investment gains, net |
||||||||
Change in fair value of equity securities |
( |
) |
||||||
Total net investment gains |
||||||||
Total revenues |
||||||||
Benefits and other expenses: |
||||||||
Benefits, claims and settlement expenses: |
||||||||
Life |
||||||||
Ceded reinsurance benefits and claims |
( |
) |
( |
) |
||||
Annuity |
||||||||
Dividends to policyholders |
||||||||
Commissions |
( |
) |
( |
) |
||||
Amortization of cost of insurance acquired |
||||||||
Operating expenses |
||||||||
Interest expense |
||||||||
Total benefits and other expenses |
||||||||
Income before income taxes |
||||||||
Income tax expense |
||||||||
Net income |
||||||||
Net income attributable to noncontrolling interest |
( |
) |
( |
) |
||||
Net income attributable to common shareholders |
$ |
$ |
||||||
Amounts attributable to common shareholders: |
||||||||
Basic income per share |
$ |
$ |
||||||
Diluted income per share |
$ |
$ |
||||||
Basic weighted average shares outstanding |
||||||||
Diluted weighted average shares outstanding |
||||||||
See accompanying notes.
UTG, Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2024 and 2023
2024 |
2023 |
|||||||
(as restated) |
||||||||
Net income |
$ |
$ |
||||||
Other comprehensive income (loss): |
||||||||
Unrealized holding gains (losses) arising during period, pre-tax |
( |
) |
||||||
Tax (expense) benefit on unrealized holding gains (losses) arising during the period |
( |
) |
||||||
Unrealized holding gains (losses) arising during period, net of tax |
( |
) |
||||||
Less reclassification adjustment for gains included in net income |
( |
) |
||||||
Tax expense for gains included in net income |
||||||||
Reclassification adjustment for gains included in net income, net of tax |
( |
) |
||||||
Subtotal: Other comprehensive income (loss), net of tax |
( |
) |
||||||
Comprehensive income |
||||||||
Less comprehensive income attributable to noncontrolling interests |
( |
) |
( |
) |
||||
Comprehensive income attributable to UTG, Inc. |
$ |
$ |
||||||
See accompanying notes.
UTG, Inc.
Consolidated Statements of Shareholders’ Equity
Year ended December 31, 2024 |
Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Noncontrolling Interest |
Total Shareholders' Equity |
||||||||||||||||||
Balance at January 1, 2024 |
$ |
( |
) |
|||||||||||||||||||||
Common stock issued during year |
||||||||||||||||||||||||
Treasury shares acquired and retired |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Net income attributable to common shareholders |
||||||||||||||||||||||||
Unrealized holding loss on securities net of noncontrolling interest and reclassification adjustment and taxes |
( |
) |
( |
) |
||||||||||||||||||||
Distributions |
( |
) |
( |
) |
||||||||||||||||||||
Gain attributable to noncontrolling interest |
||||||||||||||||||||||||
Balance at December 31, 2024 |
$ |
( |
) |
|||||||||||||||||||||
Year ended December 31, 2023 (as restated) |
Common Stock |
Additional Paid-In Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Noncontrolling Interest |
Total Shareholders' Equity |
||||||||||||||||||
Balance at January 1, 2023 |
$ |
( |
) |
|||||||||||||||||||||
Prior period adjustment |
( |
) |
||||||||||||||||||||||
Adoption of new accounting standard |
( |
) |
( |
) |
||||||||||||||||||||
( |
) |
|||||||||||||||||||||||
Common stock issued during year |
||||||||||||||||||||||||
Treasury shares acquired and retired |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Net income attributable to common shareholders |
||||||||||||||||||||||||
Unrealized holding gain on securities net of noncontrolling interest and reclassification adjustment and taxes |
||||||||||||||||||||||||
Distributions |
( |
) |
( |
) |
||||||||||||||||||||
Gain attributable to noncontrolling interest |
||||||||||||||||||||||||
Balance at December 31, 2023 |
$ |
( |
) |
|||||||||||||||||||||
See accompanying notes.
UTG, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2024 and 2023
2024 |
2023 |
|||||||
(as restated) |
||||||||
Cash flows from operating activities: |
||||||||
Net income |
$ |
$ |
||||||
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
Accretion of investments |
( |
) |
( |
) |
||||
Other-than-temporary impairments |
||||||||
Realized investment gains, net |
( |
) |
( |
) |
||||
Change in fair value of equity securities |
( |
) |
||||||
Amortization of cost of insurance acquired |
||||||||
Provision for deferred income tax expense |
||||||||
Depreciation and depletion |
||||||||
Stock-based compensation |
||||||||
Charges for mortality and administration of universal life and annuity products |
( |
) |
( |
) |
||||
Interest credited to account balances |
||||||||
Change in accrued investment income |
( |
) |
||||||
Change in reinsurance receivables |
||||||||
Change in policy liabilities and accruals |
( |
) |
( |
) |
||||
Change in income taxes receivable (payable) |
( |
) |
||||||
Change in other assets and liabilities, net |
||||||||
Net cash used in operating activities |
( |
) |
( |
) |
||||
Cash flows from investing activities: |
||||||||
Proceeds from investments sold and matured: |
||||||||
Fixed maturities available for sale |
||||||||
Equity securities |
||||||||
Trading securities |
||||||||
Mortgage loans |
||||||||
Real estate |
||||||||
Notes receivable |
||||||||
Policy loans |
||||||||
Short-term investments |
||||||||
Total proceeds from investments sold and matured |
||||||||
Cost of investments acquired: |
||||||||
Fixed maturities available for sale |
( |
) |
||||||
Equity securities |
( |
) |
( |
) |
||||
Trading securities |
( |
) |
||||||
Mortgage loans |
( |
) |
( |
) |
||||
Real estate |
( |
) |
( |
) |
||||
Notes receivable |
( |
) |
( |
) |
||||
Policy loans |
( |
) |
( |
) |
||||
Short-term investments |
( |
) |
( |
) |
||||
Total cost of investments acquired |
( |
) |
( |
) |
||||
Net cash provided by investing activities |
||||||||
Cash flows from financing activities: |
||||||||
Policyholder contract deposits |
||||||||
Policyholder contract withdrawals |
( |
) |
( |
) |
||||
Proceeds from notes payable/line of credit |
||||||||
Payments of principal on notes payable/line of credit |
( |
) |
( |
) |
||||
Purchase of treasury stock |
( |
) |
( |
) |
||||
Noncontrolling contributions/(distributions) of consolidated subsidiary |
( |
) |
( |
) |
||||
Net cash used in financing activities |
( |
) |
( |
) |
||||
Net increase (decrease) in cash and cash equivalents |
( |
) |
||||||
Cash and cash equivalents at beginning of year |
||||||||
Cash and cash equivalents at end of year |
$ |
$ |
||||||
See accompanying notes.
UTG, Inc.
Notes to Consolidated Financial Statements
Note 1 – Summary of Significant Accounting Policies
Business – UTG, Inc. is an insurance holding company. The Company’s dominant business is individual life insurance, which includes the servicing of existing insurance in-force and the acquisition of other companies in the life insurance business. UTG and its subsidiaries are collectively referred to as the “Company”.
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, President, 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 December 31, 2024, Mr. Correll owns or controls directly and indirectly approximately 66 % of UTG’s outstanding stock.
UTG’s life insurance subsidiary has several wholly-owned and majority-owned subsidiaries. The subsidiaries were formed to hold certain real estate and other investments. The investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG.
Basis of Presentation – The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), under guidance issued by the Financial Accounting Standards Board (“FASB”). The preparation of financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the Registrant and its wholly and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated during consolidation.
Financial Information about Segments - The Financial Accounting Standards Board (“FASB”) guidance requires a “management approach” in the presentation of business segments based on how management internally evaluates the operating performance of business units. The Company has evaluated our operations and has determined there is not definitive segregation between corporate and insurance operations or between life and annuity operations. Therefore, the Company reports only consolidated operations.
Investments – The Company reports its investments as follows:
Investments in Fixed Maturity Securities – The Company classifies its investments in fixed maturity securities on the acquisition date and at each balance sheet date. Securities classified as held-to-maturity consist of redeemable preferred stock, and are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Securities classified as available-for-sale consist of bonds and are carried at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. The Company has an evaluation process in place to monitor fixed maturity securities available for sale for credit loss. See Note 2 - Investments for further disclosure of the allowance for credit loss (“ACL”).
Equity Securities at Fair Value – Investments in equity securities, which include common and perpetual preferred stocks, are reported at fair value with unrealized gains and losses reported as a component of net income (loss).
Equity Securities at Cost – These investments are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.
Mortgage Loans on Real Estate – Mortgage loans on real estate are reported at their unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on mortgage loans carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL.
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 . Real estate for which the Company commits to a plan to sell within one year and actively markets in its current condition, for a reasonable price, in comparison to its estimated fair value, is classified as held-for-sale. Real estate held-for-sale is stated at lower of depreciated cost or estimated fair value less expected disposition costs and is not depreciated. At December 31, 2024 and 2023, the Company did not hold any investment real estate held-for-sale.
Notes Receivable – Notes receivable are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on notes receivable carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in notes receivable being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL.
Policy Loans – Policy loans are reported at their unpaid balances, including accumulated interest, but not in excess of the cash surrender value of the related policy.
Short-Term Investments – Short-term investments have remaining maturities exceeding three months and under 12 months at the time of purchase and are stated at amortized cost, which approximates fair value.
Gains and Losses – Realized gains and losses include sales of investments and investment impairments. If any, other-than-temporary impairments in fair value are recognized in net income on the specific identification basis.
Fair Value – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent to initial recognition, fair values are based on unadjusted quoted prices for identical assets or liabilities in active markets that are readily and regularly obtainable. When such unadjusted quoted prices are not available, estimated fair values are based on quoted prices in markets that are not active, quoted prices for similar but not identical assets or liabilities, or other observable inputs. If these inputs are not available, or observable inputs are not determinable, unobservable inputs and/or adjustments to observable inputs requiring significant management judgment are used to determine the estimated fair value of assets and liabilities. These unobservable inputs can be based on Management’s judgment, assumptions or estimation and may not be observable in market activity. Unobservable inputs are based on Management’s assumptions about the inputs market participants would use in pricing the assets. For more specific information regarding the Company’s measurements and procedures in valuing financial instruments, see Note 3 – Fair Value Measurements.
Cash Equivalents – Cash equivalents consist of money market accounts and investments with maturities of three months or less when purchased.
Cash – Cash consists of balances on hand and on deposit in banks and financial institutions.
Reinsurance - In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts. The Company retains a maximum of $125,000 of coverage per individual life.
Reinsurance receivables are recognized in a manner consistent with the liabilities relating to the underlying reinsurance contracts. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. In the event that reinsurers do not meet their obligations to the Company under the terms of the reinsurance agreements, or when events or changes in circumstances indicate that its carrying amount may not be recoverable, reinsurance recoverable balances could become uncollectible. In such instances, reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance, consistent with the credit loss guidance which requires recording an allowance for credit loss (“ACL”). See Note 4 - Reinsurance for additional information.
Cost of Insurance Acquired - When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.
Future Policy Benefits and Expenses - The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiary’s experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2.0 % to 6.0 % for life insurance and 2.5 % to 7.5 % for annuities. Benefit reserves for traditional life insurance policies include certain deferred profits on limited-payment policies that are being recognized in income over the policy term. Policy benefit claims are charged to expense in the period that the claims are incurred. The mortality rate assumptions for policies currently issued by the Company are based on 2017 CSO Ultimate tables. Withdrawal rate assumptions are based upon Linton B or C, which are industry standard actuarial tables for forecasting assumed policy lapse rates.
Benefit reserves for universal life insurance and interest sensitive life insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims in excess of related policy account balances. Interest crediting rates for universal life and interest sensitive products range from 3.0 6.0
Policy Claims and Benefits Payable - Policy and contract claims include provisions for reported claims in process of settlement, valued in accordance with the terms of the policies and contracts, as well as provisions for claims incurred and unreported. The estimate of incurred and unreported claims is based on prior experience. The Company makes an estimate after careful evaluation of all information available to the Company. There is no certainty the stated liability for policy claims and benefits payable, including the estimate for incurred but unreported claims, will be the Company’s ultimate obligation.
Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax impact attributable to differences between the financial statement book values and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. More information concerning income taxes is provided in Note 6 – Income Taxes.
Earnings Per Share – The objective of both basic earnings per share (“EPS”) and diluted EPS is to measure the performance of an entity over the reporting period. The Company presents basic and diluted EPS on the face of the Consolidated Statements of Operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is calculated by adding to shares outstanding the additional net effect of potentially dilutive securities or contracts, such as stock options, which could be exercised or converted into common shares.
Recognition of Revenues and Related Expenses - Premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits, consist principally of whole life insurance policies, and certain annuities with life contingencies are recognized as revenues when due. Limited payment life insurance policies defer gross premiums received in excess of net premiums, which is then recognized in income in a constant relationship with insurance in-force. Accident and health insurance premiums are recognized as revenue pro rata over the terms of the policies. Benefits and related expenses associated with the premiums earned are charged to expense proportionately over the lives of the policies through a provision for future policy benefit liabilities and through deferral and amortization of deferred policy acquisition costs. For universal life and investment products, generally there is no requirement for payment of premium other than to maintain account values at a level sufficient to pay mortality and expense charges. Consequently, premiums for universal life policies and investment products are not reported as revenue, but as deposits. Policy fee revenue for universal life policies and investment products consists of charges for the cost of insurance and policy administration fees assessed during the period. Expenses include interest credited to policy account balances and benefit claims incurred in excess of policy account balances.
Recently Issued Accounting Standards
ASUs not listed below were assessed and either determined to be not applicable or are not expected to have a material impact on the Company’s consolidated financial statements or disclosures. ASUs issued but not yet adopted as of December 31, 2024 that are currently being assessed and may or may not have a material impact on the Company’s consolidated financial statements or disclosures are disclosed below:
The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. 'This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Specifically, they will be required to: Disclose the amounts of (a) purchases of inventory; (b) employee compensation; (c) depreciation; (d) intangible asset amortization; and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026. Accounting Standards Update No. 2025-01 amended the effective date of ASU No. 2024-03 to clarify that all public entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods after December 15, 2027. The Company is evaluating the impact of the guidance on its consolidated financial statements.
The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Amendments in this update require that public business entities, on an annual basis: (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments in this update require that all entities disclose on an annual basis the following information about income taxes: (1) the amounts of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received). ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024. The Company is evaluating the impact of the guidance on its consolidated financial statements.
The FASB issued Accounting Standards Update No. 2022-05, Financial Services-Insurance (Topic 944): Transition for Sold Contracts. ASU 2022-05 amends transition guidance in ASU No. 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (LDTI), for contracts that have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date. This ASU amends the LDTI transition guidance to allow an insurance entity to make an accounting policy election to exclude certain contracts or legal entities from applying the LDTI guidance when, as of the LDTI effective date, (a) the insurance contracts have been derecognized because of a sale or disposal and (b) the insurance entity has no significant continuing involvement with the derecognized contracts. See below for further analysis regarding ASU No. 2018-12.
The FASB issued Accounting Standards Update No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts or ASU 2018-12. ASU 2018-12 significantly changes how insurers account for long-duration insurance contracts. The new guidance will require insurers to review and update, if necessary, the assumptions used to measure insurance liabilities periodically, rather than retain assumptions used at contract inception. The updated guidance also changes the recognition and measurement of deferred acquisition costs (DAC) and created a new category of benefit features called market risk benefits (MRB) that will be measured at fair value. The guidance also significantly expands the disclosure requirements for long-duration contracts. The ASU was originally effective for fiscal years, and interim periods within those years, for years beginning after December 15, 2020, and early adoption is permitted. The guidance on measuring the liabilities for future policy benefits and DAC will be adopted on a modified retrospective basis as of the earliest period presented in the year of adoption. The guidance on MRB will be adopted on a retrospective basis as of the earliest period presented in the year of adoption. In November of 2019, the FASB issued ASU 2019-09, which delayed the effective date of ASU 2018-12 to fiscal years beginning after December 15, 2024, for smaller reporting companies. The Company is evaluating the impact on the consolidated financial statements.
Reclassifications - Certain reclassifications have been made to the 2023 Consolidated Financial Statements to make them comparable to the current year Consolidated Financial Statements. The Company has elected to reclassify certain investments on the Consolidated Balance Sheets and related footnotes for prior periods to conform with the presentation in the fiscal year ended December 31, 2024 Consolidated Financial Statements.
Revision of previously issued financial statements – The Company identified an error in its previously issued Consolidated Financial Statements related to the classification of certain investment types on the Consolidated Balance Sheets. The impact of the error to the prior period’s Consolidated Financial Statements was not considered to be material. See Note 16 - Revision of Previously Issued Consolidated Financial Statements for details of the revision.
Subsequent Events - Management has evaluated subsequent events for recognition and disclosure in the consolidated financial statements through the date the consolidated financial statements were available to be issued. The Company did not identify any subsequent events requiring recognition or disclosure.
Note 2 – Investments
Investment Risks and Uncertainties
Investments are exposed to the following primary sources of risk: credit, interest rate, liquidity, market valuation, currency and real estate risk. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of ACL and impairments, and the recognition of income on certain investments. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the Consolidated Financial Statements.
The determination of ACL and impairments is highly subjective and is based upon quarterly evaluations and assessments of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available.
Investment in 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 fixed maturity securities are summarized by type as follows for the years ended December 31:
2024 |
Original or Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
||||||||||||
Fixed maturities, at fair value |
||||||||||||||||
U.S. Government and govt. agencies and authorities |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
U.S. special revenue and assessments |
( |
) |
||||||||||||||
All other corporate bonds |
( |
) |
||||||||||||||
Total fixed maturities, at fair value |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
Held to maturity redeemable preferred stock, at amortized cost |
$ |
$ |
$ |
$ |
||||||||||||
2023 |
Original or Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Estimated Fair Value |
||||||||||||
Fixed maturities, at fair value |
||||||||||||||||
U.S. Government and govt. agencies and authorities |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
U.S. special revenue and assessments |
( |
) |
||||||||||||||
All other corporate bonds |
( |
) |
||||||||||||||
Total fixed maturities, at fair value |
$ |
$ |
$ |
( |
) |
$ |
||||||||||
Held to maturity redeemable preferred stock, at amortized cost |
$ |
$ |
$ |
$ |
||||||||||||
The amortized cost and estimated fair value of fixed maturity securities at December 31, 2024, by contractual maturity date, is shown below.
Fixed Maturity Securities December 31, 2024 |
Amortized Cost |
Estimated Fair Value |
||||||
Due in one year or less |
$ |
$ |
||||||
Due after one year through five years |
||||||||
Due after five years through ten years |
||||||||
Due after ten years |
||||||||
Total |
$ |
$ |
||||||
Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options.
By insurance statute, the majority of the Company’s investment portfolio is invested in investment grade securities to provide ample protection for policyholders.
Below investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. Debt securities classified as below-investment grade are those that receive a Standard & Poor’s rating of BB+ or below.
The Company held below investment grade investments with an estimated market value of $0
The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position as of December 31:
2024 |
Less than 12 months |
12 months or longer |
Total |
|||||||||||||||||||||
Estimated fair value |
Unrealized losses |
Estimated fair value |
Unrealized losses |
Estimated fair value |
Unrealized losses |
|||||||||||||||||||
U.S. Government and govt. agencies and authorities |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||||||||||||||
U.S. special revenue and assessments |
( |
) |
( |
) |
||||||||||||||||||||
All other corporate bonds |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Total fixed maturities |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||||||||||||||
2023 |
Less than 12 months |
12 months or longer |
Total |
|||||||||||||||||||||
Estimated fair value |
Unrealized losses |
Estimated fair value |
Unrealized losses |
Estimated fair value |
Unrealized losses |
|||||||||||||||||||
U.S. Government and govt. agencies and authorities |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||||||||||||||
U.S. special revenue and assessments |
( |
) |
( |
) |
||||||||||||||||||||
All other corporate bonds |
( |
) |
( |
) |
( |
) |
||||||||||||||||||
Total fixed maturities |
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||||||||||||||
The following table provides additional information regarding the number of securities that were in an unrealized loss position for greater than or less than twelve months:
Less than 12 months |
12 months or longer |
Total |
|||
As of December 31, 2024 |
|||||
Fixed maturities |
|||||
As of December 31, 2023 |
|||||
Fixed maturities |
Allowance for Credit Loss - Available for Sale Securities
Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the credit loss evaluation process include, but are not limited to: (1) the extent to which the estimated fair value has been below amortized cost, (2) adverse conditions specifically related to a security, an industry sector, adverse change in the financial condition of the issuer of the security, (3) payment structure of the security and likelihood of the issuer being able to make payments, (4) failure of the issuer to make scheduled interest and principal payments, (5) whether the issuer, or series of issuers or an industry has suffered a catastrophic loss or has exhausted natural resources, (6) whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers, (7) changes in the rating of the security by a rating agency, and (8) other subjective factors.
Substantially all of the unrealized losses on fixed maturity securities at December 31, 2024 and 2023 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. At December 31, 2024, the Company did not intend to sell its securities in an unrealized loss position, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost. Therefore, the Company concluded that these securities had not incurred a credit loss and should not have an allowance for credit loss at December 31, 2024.
Future provisions for credit loss will depend primarily on economic fundamentals, issuer performance, and changes in credit ratings.
Net unrealized losses included in other comprehensive income (loss) for investments classified as available-for-sale, net of the effect of deferred income taxes, assuming that the depreciation had been realized as of December 31, 2024 and December 31, 2023:
December 31, 2024 |
December 31, 2023 |
|||||||
Unrealized appreciation (depreciation) on available-for-sale securities |
$ |
( |
) |
$ |
( |
) |
||
Deferred income taxes |
||||||||
Net unrealized appreciation (depreciation) on available-for-sale securities |
$ |
( |
) |
$ |
( |
) |
||
Cost Method Investments
The Company held equity investments with an aggregate cost of $21,203,393 and $18,227,986 at December 31, 2024 and 2023, 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 reviews and considers 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 equity securities reported at cost, the Company reported an other-than-temporary impairment of $900,149 on one security during the fourth quarter of 2024. The other-than-temporary impairment was taken as a result of Management’s assessment and determination of value of the investment.
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 2024 and 2023, the Company acquired $5,421,945 and $2,654,293 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 2024 and 2023, the maximum and minimum lending rates for mortgage loans were:
2024 |
2023 |
||||||
Maximum rate |
Minimum rate |
Maximum rate |
Minimum rate |
||||
Farm loans |
|||||||
Commercial loans |
|||||||
Residential loans |
|||||||
Most mortgage loans are first position loans. Loans issued are generally limited to no more than 80 % of the appraised value of the property.
The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent. Management is provided with a monthly listing of loans that are 60 days or more past due. All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans. Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified. Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact.
Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers’ ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. Interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.
The following table summarizes the mortgage loan holdings of the Company for the periods ended December 31:
2024 |
2023 |
|||||||
In good standing |
$ |
$ |
||||||
Total mortgage loans |
$ |
$ |
||||||
Total foreclosed loans during the year |
$ |
$ |
||||||
The following is a summary of the mortgage loans outstanding and the related allowance for credit losses:
December 31, 2024 |
December 31, 2023 |
|||||||
Farm |
$ |
$ |
||||||
Commercial |
||||||||
Residential |
||||||||
Total mortgage loans |
||||||||
Less allowance for credit losses |
( |
) |
( |
) |
||||
Total mortgage loans, net |
$ |
$ |
||||||
There were no
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 2024 and 2023, no
Note 3 - Fair Value Measurements of the 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 3 - Fair Value Measurements disclosure.
The following table provides an allocation of the Company’s investment real estate by type for the periods ended December 31:
2024 |
2023 |
|||||||
Raw land |
$ |
$ |
||||||
Commercial |
||||||||
Residential |
||||||||
Land, minerals and royalty interests |
||||||||
Total investment real estate |
$ |
$ |
||||||
The Company’s investment real estate portfolio includes ownership in oil and gas royalties. As of December 31, 2024 and 2023, investments in oil and gas royalties represented 20 % and 34 %, respectively, of the total investment real estate portfolio. See Note 13 - Concentrations of the 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 Consolidated Statements of Operations. During 2024 and 2023, the Company acquired $11,603,519 and $3,417,744 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. 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 2024 and 2023, the Company acquired $805,000 and $4,779,241 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.
The following is a summary of the notes receivable outstanding and the related allowance for credit losses:
December 31, 2024 |
December 31, 2023 |
|||||||
Notes receivable |
$ |
$ |
||||||
Less allowance for credit losses |
( |
) |
( |
) |
||||
Total notes receivable, net |
$ |
$ |
||||||
Short-Term Investments
Short-term investments have remaining maturities exceeding three months and under 12 months at the time of purchase and are stated at amortized cost, which approximates fair value. The short-term investments consist of United States Treasury securities.
During 2024 and 2023, the Company acquired $1,910,488 and $48,473,476 , respectively, in short-term investments.
Allowance for Credit Loss - Loans
The allowance for credit loss (“ACL”) is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when Management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
The allowance for credit losses represents Management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by Management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments - mortgage loans on real estate and notes receivable.
The allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for risk tolerance, loan review and audit results, asset quality and portfolio trends, industry concentrations, external factors and economic conditions.
Loans that do not share risk characteristics are evaluated on an individual basis. When Management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate.
Allowance for Credit Loss - Unfunded Commitments
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.
The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Company’s income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments as of December 31, 2024 and 2023 is $50,000 and $51,000 , respectively, and is included in other liabilities on the Company’s Consolidated Balance Sheets.
Allowance for Credit Loss - Accrued Interest
Accrued interest is not included in the ACL and if deemed uncollectible, it is charged against interest income when determined to be uncollectible.
Allowance for Credit Loss - Summary of Activity
The following is a summary of activity related to the allowance for credits loss:
Allowance For Credit Losses |
||||||||||||||||
Mortgage |
Notes |
Unfunded |
||||||||||||||
Loans |
Receivable |
Commitments |
Total |
|||||||||||||
January 1, 2023 |
$ |
$ |
||||||||||||||
2023 Allowance |
||||||||||||||||
December 31, 2023 |
||||||||||||||||
2024 Change in Allowance |
( |
) |
( |
) |
( |
) |
( |
) |
||||||||
December 31, 2024 |
$ |
$ |
||||||||||||||
Analysis of Investment Operations
The following table reflects the Company’s net investment income for the periods ended December 31:
2024 |
2023 |
|||||||
Fixed maturities, available for sale |
$ |
$ |
||||||
Fixed maturities, held to maturity |
||||||||
Equity securities |
||||||||
Mortgage loans |
||||||||
Real estate |
||||||||
Notes receivable |
||||||||
Policy loans |
||||||||
Cash and cash equivalents |
||||||||
Short-term investments |
||||||||
Total consolidated investment income |
||||||||
Investment expenses |
( |
) |
( |
) |
||||
Consolidated net investment income |
$ |
$ |
||||||
The following table presents net investment gains (losses) and the change in net unrealized gains on investments for the periods ended December 31:
2024 |
2023 |
|||||||
Realized gains: |
||||||||
Sales of fixed maturities |
$ |
$ |
||||||
Sales of equity securities |
||||||||
Sales of real estate |
||||||||
Sales of short-term investments |
||||||||
Total realized gains |
||||||||
Realized losses: |
||||||||
Sales of equity securities |
( |
) |
||||||
Sales of short-term investments |
( |
) |
( |
) |
||||
Other-than-temporary impairments |
( |
) |
||||||
Total realized losses |
( |
) |
( |
) |
||||
Net realized investment gains |
||||||||
Change in fair value of equity securities: |
||||||||
Change in fair value of equity securities held at the end of the period |
( |
) |
||||||
Change in fair value of equity securities |
( |
) |
||||||
Net investment gains |
$ |
$ |
||||||
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive income: |
||||||||
Fixed maturities |
$ |
( |
) |
$ |
||||
Net increase (decrease) |
$ |
( |
) |
$ |
||||
Investments on Deposit
The Company had investments with a fair value of $8,400,396 and $7,959,076 on deposit with various state insurance departments as of December 31, 2024 and 2023, respectively.
Note 3 – Fair Value Measurements
Assets and liabilities recorded at fair value in the 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 as of December 31:
2024 |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Fixed maturity securities: |
||||||||||||||||
U.S. Government and government agencies and authorities |
$ |
$ |
$ |
$ |
||||||||||||
U.S. special revenue and assessments |
||||||||||||||||
Corporate securities |
||||||||||||||||
Total fixed maturities |
||||||||||||||||
Equity securities: |
||||||||||||||||
Common stocks |
||||||||||||||||
Limited liability companies |
||||||||||||||||
Total equity securities |
||||||||||||||||
Short-term investments |
||||||||||||||||
Total financial assets |
$ |
$ |
$ |
$ |
||||||||||||
2023 |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Fixed maturity securities: |
||||||||||||||||
U.S. Government and government agencies and authorities |
$ |
$ |
$ |
$ |
||||||||||||
U.S. special revenue and assessments |
||||||||||||||||
Corporate securities |
||||||||||||||||
Total fixed maturities |
||||||||||||||||
Equity securities: |
||||||||||||||||
Common stocks |
||||||||||||||||
Limited liability companies |
||||||||||||||||
Total equity securities |
||||||||||||||||
Short-term investments |
||||||||||||||||
Total financial assets |
$ |
$ |
$ |
$ |
||||||||||||
Total assets included in the fair value hierarchy exclude certain equity securities that were measured at estimated fair value using the net asset value (“NAV”) per share practical expedient. At December 31, 2024 and 2023, the estimated fair value of such investments was $84,141,189 and $52,738,701 , respectively. These investments are generally not readily redeemable by the investee.
The following is a description of the valuation techniques used by the Company to measure assets reported at fair value on a recurring basis.
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 standards generally accepted in the United States.
Equity Securities at Fair Value
Equity securities consist of common and preferred stocks and limited liability companies 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.
Change in Level 3 Recurring Fair Value Measurements
The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and related to the Level 3 assets and liabilities.
Investments in |
||||||||||||
Investments in Common Stocks |
Limited Liability Companies |
Total |
||||||||||
Balance at December 31, 2023 |
$ |
$ |
$ |
|||||||||
Unrealized gains |
||||||||||||
Purchases |
||||||||||||
Sales |
( |
) |
( |
) |
||||||||
Balance at December 31, 2024 |
$ |
$ |
$ |
|||||||||
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 on instruments held at December 31, 2024 and 2023 may include changes in fair value that were attributable to both observable and unobservable inputs.
Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable.
In 2024, there were no transfers in our out of Level 3.
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 includes 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 December 31, 2024 |
Fair Value at December 31, 2023 |
Valuation Technique |
||||||
Limited liability companies |
$ |
$ |
Pricing Model |
||||||
Common stocks |
Pricing Model |
||||||||
Total |
$ |
$ |
|||||||
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
The Company holds certain equity securities that are measured at estimated fair value using the NAV per share practical expedient. These investments are generally not readily redeemable by the investee. The following tables provide additional information regarding the assets carried at NAV.
Investment Category |
Fair Value at December 31, 2024 |
Unfunded Commitments |
Redemption Frequency |
Redemption Notice Period |
||||||||||||
Equity securities |
||||||||||||||||
Growth equity |
||||||||||||||||
Redeemable |
||||||||||||||||
Limited partnership |
$ |
$ |
||||||||||||||
Non-redeemable |
||||||||||||||||
Limited liability companies |
n/a |
n/a |
||||||||||||||
Limited partnerships |
n/a |
n/a |
||||||||||||||
Total |
$ |
$ |
||||||||||||||
Investment Category |
Fair Value at December 31, 2023 |
Unfunded Commitments |
Redemption Frequency |
Redemption Notice Period |
||||||||||||
Equity securities |
||||||||||||||||
Growth equity |
||||||||||||||||
Redeemable |
||||||||||||||||
Limited partnership |
$ |
$ |
||||||||||||||
Non-redeemable |
||||||||||||||||
Limited liability companies |
n/a |
n/a |
||||||||||||||
Limited partnerships |
n/a |
n/a |
||||||||||||||
Total |
$ |
$ |
||||||||||||||
The following are descriptions of the Company’s assets held at NAV.
The Company invested in a limited partnership that was formed under the laws of the State of Delaware in 1999, as a Delaware limited partnership (“LP”). The Limited Partnership Agreement provides for the Fund to continue until dissolved. There are significant restrictions to the dissolution process, which are outlined in the LP Agreement. The Fund invests in listed equity and fixed income securities as well as non-listed securities, including direct-owned minerals and other royalties. In 2013, UG entered into an irrevocable subscription agreement to invest in the LP.
The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware in 2020. The LLC agreement provides for the Company to continue until dissolved. There are significant restrictions to the dissolution process, which are outlined in the LLC Agreement. The LLC Company was formed for the purpose of acquiring, making investments in, and owning, holding, and growing operating businesses through the United States. In 2020, UG entered into a LLC Agreement to invest in this LLC.
The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware. The LLC was formed in 2020 to provide long-term investment returns. The Company will continue to operate until December 31, 2032, or until each of the investment funds in which the LLC invests terminates, unless terminated earlier or extended in accordance with the Operating Agreement. In 2020, UG completed the Subscription Agreement to become an investor in this LLC.
The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware. The LLC was formed in 2022 to amplify philanthropy by primarily investing in venture capital investment funds and in direct venture capital investments of operating companies. The Company will continue to operate until December 31, 2034, or until each of the investment funds in which the LLC invests terminates, unless terminated earlier or extended in accordance with the Operating Agreement. In 2022, the Company completed the Subscription Agreement to become an investor in this LLC.
The Company invested in the Limited Partnership ("LP"), a closed-end fund, formed pursuant to the laws of the state of Delaware under a limited partnership agreement in 2022, and shall dissolve upon the first to occur of either the end of the tenth anniversary of the final closing date or, if extended, upon the end of such extension(s), upon the dissolution or removal of the General Partner or upon other specific circumstances as defined in the LP Agreement.
The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2012 and is scheduled to terminate on the tenth anniversary of the final closing date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the LP is to make investments in and pursue targets that educate, train, and inspire men and women in the United States and around the world to value free enterprise, business, and economics to improve the quality of their lives and the lives and the lives of those in their communities. In 2012, the Company entered into a Limited Partnership Agreement to invest in this LP. The Company is currently in the process of winding down operations.
The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2015 and is scheduled to terminate on the tenth anniversary of the final closing date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the LP is to make investments in and pursue targets that educate, train, and inspire men and women in the United States and around the world to value free enterprise, business, and economics to improve the quality of their lives and the lives and the lives of those in their communities. In 2015, the Company entered into a Limited Partnership Agreement to invest in this LP.
The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2018 (the “Agreement”) and is scheduled to terminate on the twelfth anniversary of the Final Closing Date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the Partnership is to make investments in and pursue targets that educate, train, and inspire men and women in the United States and around the world to value free enterprise, business, and economics to improve the quality of their lives and the lives and the lives of those in their communities. In 2018, the Company entered into a Limited Partnership Agreement to invest in this LP.
The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware. The LLC was formed in 2021 for the purpose of investing in companies located in emerging markets. The Limited Liability Company Agreement provides for LLC to continue until dissolved, unless terminated earlier through terms specified in the Operating Agreement. In 2021, the Company entered into a Limited Liability Company Agreement to invest in the LLC.
The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2024 and is scheduled to terminate on the tenth anniversary of the final closing date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the LP is to invest in fire prevention related services. In 2024, the Company entered into a Limited Partnership Agreement to invest in this LP.
The Company invested in a LP that was formed pursuant to the laws of the state of Delaware under a limited partnership agreement in 2021 (the “Agreement”) and is scheduled to terminate on the tenth anniversary of the Final Closing Date, unless terminated sooner or extended in accordance with the Agreement. The Partnership is organized for the principal purposes of acquiring, holding, supervising, managing and disposing of investment in recapitalization, management buyouts, and corporate divestitures of Portfolio Companies operating in various segments of the U.S. lower middle markets. In 2022, the Company entered into a Limited Partnership Agreement to invest in this LP.
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 Consolidated Financial Statements. The Company did not recognize any re-measurements or impairments of financial instruments during the years ended December 31, 2024 and 2023.
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 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 as of December 31:
2024 |
Carrying Amount |
Estimated Fair Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||||
Assets |
||||||||||||||||||||
Held to maturity redeemable preferred stock |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Equity securities, at cost |
||||||||||||||||||||
Mortgage loans on real estate |
||||||||||||||||||||
Notes receivable |
||||||||||||||||||||
Policy loans |
||||||||||||||||||||
Accrued investment income |
||||||||||||||||||||
Liabilities |
||||||||||||||||||||
Policy claims and benefits payable |
||||||||||||||||||||
Dividend and endowment accumulations |
||||||||||||||||||||
2023 |
Carrying Amount |
Estimated Fair Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||||
Assets |
||||||||||||||||||||
Held to maturity redeemable preferred stock |
$ |
$ |
$ |
$ |
$ |
|||||||||||||||
Equity securities, at cost |
||||||||||||||||||||
Mortgage loans on real estate |
||||||||||||||||||||
Notes receivable |
||||||||||||||||||||
Policy loans |
||||||||||||||||||||
Accrued investment income |
||||||||||||||||||||
Liabilities |
||||||||||||||||||||
Policy claims and benefits payable |
||||||||||||||||||||
Dividend and endowment accumulations |
||||||||||||||||||||
Notes payable |
||||||||||||||||||||
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.
Held to maturity redeemable preferred stock is carried at cost, which approximates fair value.
Certain equity securities are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. It is not practicable to estimate their fair values due to insufficient information being available.
The fair values of mortgage loans on real estate are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings. The inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 3 within the fair value hierarchy.
The 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 Consolidated Balance Sheets which approximate fair value, and earn interest at rates ranging from 4 % to 8 %. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances. The inputs used to measure the fair value of our policy loans are classified as Level 3 within the fair value hierarchy.
The carrying value of accrued investment income approximates its fair value.
The carrying amounts reported for policy claims and benefits payable approximates fair value.
The carrying value for dividend and endowment accumulations approximates fair value.
The carrying value for notes payable is a reasonable estimate of fair value subject to floating rates of interest. The fair value of notes payable with fixed rate borrowings is determined based on the borrowing rates currently available to the Company for loans with similar terms and average maturities. The inputs used to measure the fair value of notes payable are classified as Level 2 within the fair value hierarchy.
Note 4 - Reinsurance
As is customary in the insurance industry, the insurance subsidiary cedes insurance to, and assumes insurance from, other insurance companies under reinsurance agreements. Reinsurance agreements are intended to limit a life insurer’s maximum loss on a large or unusually hazardous risk or to obtain a greater diversification of risk. The ceding insurance company remains primarily liable with respect to ceded insurance should any reinsurer be unable to meet the obligations assumed by it. However, it is the practice of insurers to reduce their exposure to loss to the extent that they have been reinsured with other insurance companies. The Company sets a limit on the amount of insurance retained on the life of any one person. The Company will not retain more than $125,000 , including accidental death benefits, on any one life. As of December 31, 2024, the Company had gross insurance in-force of approximately $801 million of which approximately $162 million was ceded to reinsurers. As December 31, 2023, the Company had gross insurance in-force of approximately $847 million of which approximately $172 million was ceded to reinsurers.
The Company’s reinsured business is ceded to numerous reinsurers. The Company monitors the solvency of its reinsurers in seeking to minimize the risk of loss in the event of a failure by one of the parties. The Company is primarily liable to the insureds even if the reinsurers are unable to meet their obligations. The primary reinsurers of the Company are large, well-capitalized entities.
Most recently, UG utilized reinsurance agreements with Optimum Re Insurance Company (“Optimum”), and Swiss Re Life and Health America Incorporated (“SWISS RE”). Optimum and SWISS RE currently hold an “A” (Excellent) and “A+” (Superior) rating, respectively, from A.M. Best, an industry rating company. The reinsurance agreements were effective December 1, 1993 and covered most new business of UG. Under the terms of the agreements, UG cedes risk amounts above its retention limit of $100,000 with a minimum cession of $25,000 . Ceded amounts are shared equally between the two reinsurers on a yearly renewable term (“YRT”) basis, a common industry method. The treaty is self-administered; meaning the Company records the reinsurance results and reports them to the reinsurers.
Also, Optimum is the reinsurer of 100 % of the accidental death benefits (“ADB”) in force of UG. This coverage is renewable annually at the Company’s option. Optimum specializes in reinsurance agreements with small to mid-size carriers such as UG.
UG entered into a coinsurance agreement with Park Avenue Life Insurance Company (“PALIC”) effective September 30, 1996. Under the terms of the agreement, UG ceded to PALIC substantially all of its then in-force paid-up life insurance policies. Paid-up life insurance generally refers to non-premium paying life insurance policies. Under the terms of the agreement, UG sold 100 % of the future results of this block of business to PALIC through a coinsurance agreement. UG continues to administer the business for PALIC and receives a servicing fee through a commission allowance based on the remaining in-force policies each month. PALIC has the right to assumption reinsure the business, at its option, and transfer the administration. The Company is not aware of any such plans. PALIC’s ultimate parent, The Guardian Life Insurance Company of America (“Guardian”), currently holds an “A++” (Superior) rating from A.M. Best. The PALIC agreement accounts for approximately 64
The Company does not have any short-duration reinsurance contracts. The effect of the Company’s long-duration reinsurance contracts on premiums earned in 2024 and 2023 were as follows:
2024 |
2023 |
|||||||
Premiums Earned |
Premiums Earned |
|||||||
Direct |
$ |
$ |
||||||
Assumed |
||||||||
Ceded |
( |
) |
( |
) |
||||
Net Premiums |
$ |
$ |
||||||
Note 5 – Cost of Insurance Acquired
When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates utilized may vary due to differences in the blocks of business. The interest rate utilized in the amortization calculation of the remaining cost of insurance acquired is 12 %. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.
2024 |
2023 |
|||||||
Cost of insurance acquired, beginning of year |
$ |
$ |
||||||
Interest accretion |
||||||||
Amortization |
( |
) |
( |
) |
||||
Net amortization |
( |
) |
( |
) |
||||
Cost of insurance acquired, end of year |
$ |
$ |
||||||
Estimated net amortization expense of cost of insurance acquired for the next three years is as follows:
Interest Accretion |
Amortization |
Net Amortization |
||||||||||
2025 |
||||||||||||
2026 |
||||||||||||
2027 |
||||||||||||
Note 6 – Income Taxes
UTG and UG file separate federal income tax returns.
Income tax expense (benefit) consists of the following components:
2024 |
2023 |
|||||||
Current tax expense (benefit) |
$ |
$ |
( |
) |
||||
Deferred tax |
||||||||
Income tax expense |
$ |
$ |
||||||
The expense for income taxes differed from the amounts computed by applying the applicable United States statutory rate of 21
2024 |
2023 |
|||||||
Tax computed at statutory rate |
$ |
$ |
||||||
Changes in taxes due to: |
||||||||
Non-controlling interest |
( |
) |
( |
) |
||||
Dividend received deduction |
( |
) |
( |
) |
||||
Oil and gas royalty's depletion |
( |
) |
( |
) |
||||
Other, including prior year true up |
( |
) |
||||||
Income tax expense |
$ |
$ |
||||||
The following table summarizes the major components that comprise the net deferred tax liability as reflected in the balance sheets:
2024 |
2023 |
|||||||
Investments |
$ |
$ |
||||||
Cost of insurance acquired |
||||||||
Management/consulting fees |
( |
) |
( |
) |
||||
Future policy benefits |
( |
) |
( |
) |
||||
Deferred gain on sale of subsidiary |
||||||||
Other liabilities |
( |
) |
( |
) |
||||
Reserves adjustment |
||||||||
Federal tax DAC |
( |
) |
( |
) |
||||
Loan loss reserve |
( |
) |
( |
) |
||||
Deferred tax liability |
$ |
$ |
||||||
At December 31, 2024 and 2023, the Company had gross deferred tax assets of $2,175,830 and $1,939,816 , respectively, and gross deferred tax liabilities of $25,247,891 and $14,366,656 , respectively, resulting from temporary differences primarily related to the life insurance subsidiary. A valuation allowance is to be provided when it is more likely than not that deferred tax assets will not be realized by the Company. No valuation allowance has been recorded relating to the Company’s deferred tax assets since, in Management’s judgment, the Company will more likely than not have sufficient taxable income in future periods to fully realize its existing deferred tax assets.
The Company’s Federal income tax returns are periodically audited by the Internal Revenue Service (“IRS”). There are currently no examinations in process, nor is Management aware of any pending examination by the IRS. The Company follows the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board (“FASB”) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently need to be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company has evaluated its tax positions, expiring statutes of limitations, changes in tax law and new authoritative rulings and believes that no disclosure relative to a provision of income taxes is necessary, at this time, to cover any uncertain tax positions. Tax years that remain subject to examination are the years ended December 31, .
The Company classifies interest and penalties on underpayment of income taxes as income tax expense. No interest or penalties were included in the reported income taxes for the years presented. The Company is not aware of any potential or proposed changes to any of its tax filings.
Note 7 – Credit Arrangements
At December 31, 2024 and 2023, the Company had the following line of credit available:
Instrument |
Issue Date |
Maturity Date |
Revolving Credit Limit |
December 31, 2023 |
Borrowings |
Repayments |
December 31, 2024 |
|||||||||||||||
Line of Credit: |
||||||||||||||||||||||
UG - CMA |
$ |
$ |
||||||||||||||||||||
UTG had a variable rate revolving line of credit that expired on November 20, 2024. As collateral, UTG had pledged 100 % of the common voting stock of its wholly owned subsidiary, Universal Guaranty Life Insurance Company ("UG") . The Company had not utilized the line of credit in several years. Management determined the line was no longer needed at this time.
During October of 2024, the Federal Home Loan Bank approved UG’s Cash Management Advance Application (“CMA”). The CMA gives the Company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity. The Company has pledged bonds with a collateral lendable value of $21,371,910 . During the fourth quarter of 2023, the Company borrowed $19 million and planned to utilize the funds for investing activities. The variable interest rate on the borrowed funds was 5.47 %. During the first quarter of 2024, the Company repaid the entire outstanding principal balance.
Note 8 – Commitments and Contingencies
The insurance industry has experienced a number of civil jury verdicts which have been returned against life and health insurers in the jurisdictions in which the Company does business involving the insurers’ sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against the insurer, including material amounts of punitive damages. In some states, juries have substantial discretion in awarding punitive damages in these circumstances. In the normal course of business, the Company is involved from time to time in various legal actions and other state and federal proceedings. Management is of the opinion that the ultimate disposition of the matters will not have a materially adverse effect on the Company’s results of operations or financial position.
Under the insurance guaranty fund laws in most states, insurance companies doing business in a participating state can be assessed up to prescribed limits for policyholder losses incurred by insolvent or failed insurance companies. Although the Company cannot predict the amount of any future assessments, most insurance guaranty fund laws currently provide that an assessment may be excused or deferred if it would threaten an insurer’s financial strength. Mandatory assessments may be partially recovered through a reduction in future premium tax in some states. The Company does not believe such assessments will be materially different from amounts already provided for in the consolidated financial statements, though the Company has no control over such assessments.
Mortgage Loan Commitments - The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $745,561 and $878,132 at December 31, 2024 and 2023, respectively.
Notes Receivable Commitments - The Company commits to lend funds under notes receivable funding commitments. The amounts of these notes receivable commitments were $3,250,000 and $2,800,000 at December 31, 2024 and 2023, respectively.
Commitments to Fund Limited Liability Company and Limited Partnership Investments - The Company commits to fund investments in limited liability companies and limited partnership. The amounts of the unfunded commitments were $14,316,279 and $16,153,903 at December 31, 2024 and 2023, respectively.
Note 9 – 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 December of 2024, 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 $24 million of UTG’s common stock in the open market or in privately negotiated transactions since inception of the program. 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 2024, the Company repurchased 23,961 shares through the stock repurchase program for $648,152 . Through December 31, 2024, UTG has spent $20,839,555 in the acquisition of 1,380,820 shares under this program.
Director Compensation - Effective January 1, 2018, a compensation arrangement was approved whereby each outside Director annually received $5,000 as a retainer and $2,500 per meeting attended. The compensation is be paid in the form of UTG, Inc. common stock. The value is determined annually on the close of business December 20th or the next business day should December 20th be a weekend or holiday, based on the activity of the year just ending. Reasonable travel expenses are reimbursed in cash as incurred. UTG’s Director Compensation policy provides that Directors who are employees of UTG or its affiliates do not receive any compensation for their services as Directors except for reimbursement for reasonable travel expenses for attending each meeting.
In December of 2024, the Company issued 4,539 shares of its common stock as compensation to the Directors. The shares were valued at $28.09 per share, the market value at the date of issue. During 2024, the Company recorded $127,501 in operating expense related to the stock issuance. In December of 2023, the Company issued 4,246 shares of its common stock as compensation to the Directors. The shares were valued at $30.01 per share, the market value at the date of issue. During 2023, the Company recorded $127,422 in operating expense related to the stock issuance.
Other Compensation - During 2024, the Company issued 11,867 shares of stock to management and employees as compensation at a cost of $349,312 . During 2023, The Company issued 26,911 shares of stock to management and employees as compensation at a cost of $674,390 . These awards are determined at the discretion of the Board of Directors.
Earnings Per Share - The following is a reconciliation of basic and diluted weighted average shares outstanding used in the computation of basic and diluted earnings per share:
2024 |
2023 |
|||||||
Basic weighted average shares outstanding |
||||||||
Weighted average dilutive options outstanding |
||||||||
Diluted weighted average shares outstanding |
||||||||
The computation of diluted earnings per share is the same as basic earnings per share for the years ending December 31, 2024 and 2023, as there were no outstanding securities, options or other offers that give the right to receive or acquire common shares of UTG.
Statutory Restrictions - Restrictions exist on the flow of funds to UTG from its insurance subsidiary. Statutory regulations require life insurance subsidiaries to maintain certain minimum amounts of capital and surplus. UG is required to maintain minimum statutory surplus of $2,500,000 . At December 31, 2024, substantially all of the consolidated shareholders’ equity represents net assets of UTG’s subsidiaries.
UG is domiciled in the state of Ohio. Ohio requires notification within 5 business days to the insurance commissioner following the declaration of any ordinary dividend and at least 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. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. UG paid ordinary dividends of $0 million and $2 million to UTG in 2024 and 2023, respectively. No extraordinary dividends were paid during the two year period. UTG used the dividends received in 2023 to purchase outstanding shares of UTG stock and for general operations of the Company.
Note 10 - Statutory Accounting
The insurance subsidiary prepares its statutory-based financial statements in accordance with accounting practices prescribed or permitted by the Ohio Department of Insurance. These principles differ significantly from accounting principles generally accepted in the United States of America. “Prescribed” statutory accounting practices include state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (NAIC). “Permitted” statutory accounting practices encompass all accounting practices that are not prescribed; such practices may differ from state to state, from company to company within a state, and may change in the future.
The following table reflects UG’s statutory basis net income and capital and surplus (shareholders’ equity) as of December 31:
2024 |
2023 |
|||||||
Net income |
$ |
$ |
||||||
Capital and surplus |
||||||||
Note 11 – Related Party Transactions
The articles of incorporation of UG contain the following language under item 12 relative to related party transactions:
A director shall not be disqualified from-dealing with or contracting with the corporation as vendor, purchaser; employee, agent or otherwise; nor, in the absence of fraud, shall any transaction or contract or act of this corporation be void or in any way affected or invalidated by the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder, director or officer is in any way interested in such transaction or contract or act, provided the fact that such director or such firm or such corporation so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction or act shall be taken: nor shall any such director be accountable or responsible to the company for or in respect to such transaction or contract or act of. this corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such action or contract; and any such director may be counted in determining the existence of a quorum of any meeting of the Board of Directors of the company which shall authorize or take action in respect to any such contract or transaction or act and may vote thereat to authorize, ratify, or approve any such contract or transaction or act, with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer were not interested in such transaction or contract or act.
On February 20, 2003, UG purchased $4 million of a trust preferred security offering issued by First Southern Bancorp, Inc. (“FSBI”). The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515 %. The Company received dividends of $165,590 and $165,137 during 2024 and 2023, respectively.
On March 30, 2009, UG purchased $1 million of FSBI common stock. The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement.
UTG has a 30.10 % ownership interest in an aircraft that is jointly owned with First Southern National Bank and Bandyco, LLC. Bandyco, LLC is affiliated with the Estate of Ward F. Correll. Mr. Correll is the father of Jesse Correll and a former director of the Company. The aircraft is used for business related travel by various officers and employees of the Company. For years 2024 and 2023, UTG paid $332,445 and $307,442 for costs associated with the aircraft, respectively.
Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiary. Under this arrangement, the subsidiary pays its proportionate share of expenses, based on an allocation formula. During 2024 and 2023, UG paid $7,480,761 and $7,910,324 , respectively, in expenses. The Ohio Department of Insurance has approved the cost sharing agreement and it is Management’s opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.
The Company from time to time acquires mortgage loans through participation agreements with FSNB. FSNB services the Company’s mortgage loans including those covered by the participation agreements. The Company pays a 0.25 % servicing fee on these loans and a one-time fee at loan origination of 0.50 % of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $20,137 and $18,694 in servicing fees and $26,665 and $18,630 in origination fees to FSNB during 2024 and 2023, respectively.
Effective January 1, 2017, UTG entered into a shared services contract with FSNB. Pursuant to the terms of the agreement, UTG and FSNB will utilize the services of the other’s staff in certain instances for the betterment of both entities. Personnel within departments, such as accounting, human resources, and information technology, are shared between the entities. Costs of these resources are then reimbursed between the companies. The shared services arrangement provides benefits to both parties such as access to a greater pool of knowledgeable staff, efficiencies from elimination of redundancies and more streamlined operations.
The Company reimbursed expenses incurred by employees of FSNB relating to salaries, travel and other costs incurred on behalf of or relating to the Company and received reimbursements from FSNB. The Company paid $1,217,395 and $1,337,096 in 2024 and 2023, respectively to FSNB in net reimbursement of such costs.
Effective July 1, 2018, the Company assumed the employees of several smaller entities owned or associated with UTG. The purpose of this was to support the continued efforts to further streamline operations amongst associated entities. The salaries, benefits, and payroll related processing fees are 100 % reimbursed by the associated entities on a monthly basis. During 2024 and 2023, the Company received reimbursements of $1,605,028 and $1,438,450 , respectively. These costs are eliminated for consolidation of these entities, where applicable.
The Company rents a portion of the first floor and second floor of an 8,000 square foot, two-story office building, located in Stanford, KY. The first floor of the building is occupied by UTG and FSNB employees that are included in the shared services agreement between the two entities. The second floor is occupied by the customer service call centers for both UTG and FSNB employees. The building is owned by FSNB and UTG pays $2,000 per month in rent to FSNB for the portion of the building occupied by UTG employees. The Company paid rent of $24,000
As previously disclosed in the Notes Receivable section of Note 2 - Investments, several of the Company’s notes have participation agreements in place with third parties. Certain participation agreements are with FSF, a related party. The participation agreements are sold without recourse and assigned to the participant based on their pro-rata share of the principal, interest and collateral as specified in the participation agreements. The undivided participations in the notes receivable range from 20 % - 50 %. The total amount of loans participated to FSF was $0 and $60,031 as of December 31, 2024 and 2023, respectively.
During the 4th quarter of 2023, UTG entered into a loan participation agreement with FSNB to fund a commercial mortgage loan issued to a company that is owned/managed by a member of UTG’s Board of Directors. UG had a 9 % interest in the participated loan and agreed to fund up to $1,482,300 . The loan was fully repaid in 2024.
Note 12 – Other Cash Flow Disclosures
On a cash basis, the Company paid the following expenses for the periods ended December 31:
2024 |
2023 |
|||||||
Interest |
$ |
$ |
||||||
Federal income tax |
||||||||
Note 13 - Concentrations
The Company maintains cash balances in financial institutions that at times may exceed federally insured limits. The Company maintains its primary operating cash accounts with First Southern National Bank, an affiliate of the largest shareholder of UTG, Mr. Jesse T. Correll, the Company’s CEO and Chairman. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Because UTG serves primarily individuals located in three states, the ability of our customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of December 31, 2024 and 2023, approximately 52 % and 51 %, respectively, of the Company’s total direct premium was collected from Illinois, Ohio, and Texas. Thus, results of operations are heavily dependent upon the strength of these economies.
The Company reinsures that portion of insurance risk which is in excess of its retention limits. Retention limits range up to $125,000 per life. Life insurance ceded represented 20 30 % and 40 % of premium income for 2024 and 2023, respectively. The Company would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations.
The Company owns a variety of investments associated with the oil and gas industry. These investments represented approximately 34 % and 28 % of the Company’s total invested assets at December 31, 2024 and 2023, respectively. The following table provides an allocation of the oil and gas investments by type as of December 31:
2024 |
Land, Minerals & Royalty Interests |
Exploration |
Total |
|||||||||
Fixed maturities, at fair value |
$ |
$ |
$ |
|||||||||
Equity securities, at fair value |
||||||||||||
Equity securities, at cost |
||||||||||||
Investment real estate |
||||||||||||
Notes receivable |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
2023 |
Land, Minerals & Royalty Interests |
Exploration |
Total |
|||||||||
Fixed maturities, at fair value |
$ |
$ |
$ |
|||||||||
Equity securities, at fair value |
||||||||||||
Equity securities, at cost |
||||||||||||
Investment real estate |
||||||||||||
Notes receivable |
||||||||||||
Total |
$ |
$ |
$ |
|||||||||
As of December 31, 2024 and 2023, the Company owned four equity securities that represented approximately 81 % and four securities that represented approximately 73 %, respectively, 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.
Note 14 – Segment Information
The Company is organized into a reportable segment: insurance distribution. The Company derives its revenue entirely from within the United States and manages business activities on a consolidated basis. The Company’s chief operating decision maker is its Chief Executive Officer.
The accounting policies of the insurance distribution segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker uses net income or loss, as reported on the Consolidated Statements of Operations, to assess performance and allocate resources for the insurance distribution segment. The significant segment expense categories regularly provided to the chief operating decision maker are the same as those included on the Consolidated Statements of Operations. The measure of segment assets is total assets as reported on the Consolidated Balance Sheets.
The chief operating decision maker uses net income or loss to assess performance by examining period-over-period trends and monitoring budget versus actual results.
Note 15 – Selected Quarterly Financial Data
As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item.
Note 16 – Revision of Previously Issued Consolidated Financial Statements
The Company identified an error in its previously issued Consolidated Financial Statements related to the classification of certain investment types on the Consolidated Balance Sheets. The impact of the error to the prior period’s Consolidated Financial Statements was not considered to be material. Certain exchange traded funds ("ETFs") were previously classified as fixed maturities, available for sale. To comply with GAAP reporting requirements, the Company has reclassified $24,325,291 of exchange traded funds out of fixed maturities, available for sale, to equity securities, at fair value.
Management evaluated this error in accordance with SEC Staff Accounting Bulletin Number 99, Materiality, which is since codified in ASC 250 – Accounting Changes and Error Corrections, and concluded it was not material to any previously reported financial statements. However, in order to improve the consistency and comparability of the consolidated financial statements, Management will revise the consolidated financial statements and related disclosures to correct the error in future filings
As Previously |
||||||||||||
December 31, 2023 |
Reported |
Adjustments |
As Restated |
|||||||||
Consolidated Balance Sheets |
||||||||||||
Fixed maturities, at fair value |
$ |
$ |
( |
) |
$ |
|||||||
Equity securities, at fair value |
||||||||||||
Equity securities, at cost |
||||||||||||
Retained earnings |
( |
) |
||||||||||
Accumulated other comprehensive loss |
( |
) |
( |
) |
||||||||
Consolidated Statements of Operations |
||||||||||||
Net investment income |
$ |
$ |
( |
) |
$ |
|||||||
Change in fair value of equity securities |
( |
) |
( |
) |
||||||||
Income tax expense (benefit) |
( |
) |
||||||||||
Net income attributable to common shareholders |
||||||||||||
Basic income per share |
||||||||||||
Diluted income per share |
||||||||||||
Consolidated Statements of Comprehensive Income (Loss) |
||||||||||||
Net income |
$ |
$ |
$ |
|||||||||
Unrealized holding gains (losses) arising during the period, pre-tax |
( |
) |
||||||||||
Tax (expense) benefit on unrealized holding gains (losses) arising during the period |
( |
) |
( |
) |
||||||||
Unrealized holding gains (losses) during period, net of tax |
( |
) |
||||||||||
Subtotal: Other comprehensive income (loss), net of tax |
( |
) |
||||||||||
Consolidated Statements of Cash Flows |
||||||||||||
Net income |
$ |
$ |
$ |
|||||||||
Accretion of investments |
( |
) |
( |
) |
||||||||
Change in fair value of equity securities |
( |
) |
||||||||||
Change in deferred income taxes |
||||||||||||
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) that are designed to ensure that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in our Exchange Act reports is accumulated and communicated to Management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our Management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2024 and, based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.
Management’s Report on Internal Controls Over Financial Reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
The Company’s Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making the assessment, Management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on Management’s assessment, Management concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective.
This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report.
Changes in Internal Controls
There have been no changes in the Company’s internal control over financial reporting since December 31, 2024, in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15(e) and 15d-15(e), that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The Board of Directors
In accordance with the laws of Delaware and the Certificate of Incorporation and Bylaws of UTG, as amended, UTG is managed by its executive officers under the direction of the Board of Directors. The Board elects executive officers, evaluates their performance, works with management in establishing business objectives and considers other fundamental corporate matters, such as the issuance of stock or other securities, the purchase or sale of a business and other significant corporate business transactions. In the fiscal year ended December 31, 2024, the Board met five times. During 2024, all Directors attended at least 75% of all meetings of the Board and meetings of committees of the Board. Our Board of Directors does not have a policy requiring directors to attend annual meetings of shareholders. All Board members attended our 2024 annual shareholders’ meeting, except for Howard L. Dayton, Jr,, Thomas F. Darden II, April R. Chapman and Peter L. Ochs.
The Board of Directors has an Audit Committee consisting of Messrs. Molnar, Harmon, and Cortines. Our Board has determined that each of the members of the Audit Committee meets the criteria for independence under the NASDAQ listing standards. The Audit Committee performs such duties as outlined in the Company’s Audit Committee Charter. The Audit Committee reviews and acts or reports to the Board with respect to various auditing and accounting matters, the scope of the audit procedures and the results thereof, internal accounting and control systems of UTG, the nature of services performed for UTG and the fees to be paid to the independent auditors, the performance of UTG's independent and internal auditors and the accounting practices of UTG. The Audit Committee also recommends to the full Board of Directors the auditors to be appointed by the Board. The Audit Committee met four times in 2024.
The Board has reviewed the qualifications of each member of the audit committee and determined one member of the committee, Gabriel Molnar, meets the definition of an “audit committee financial expert” as defined in Item 407 of Regulation S-K.
The Board of Directors has a Compensation Committee consisting of Messrs. Darden, Cortines, and Ochs. Our Board has determined that each of the members of the Compensation Committee meets the criteria for independence under the NASDAQ listing standards. The Compensation Committee performs such duties as outlined in the Company’s Compensation Committee Charter. The Compensation Committee reviews and acts or reports to the Board with respect to various compensation matters relative to the Company’s executive officers. The Compensation Committee has the authority to delegate appropriate matters to subcommittees as the Committee may determine in its discretion. The Compensation Committee met one time in 2024.
Under UTG’s By-Laws, the Board of Directors should be comprised of at least six and no more than eleven Directors. At December 31, 2024, the Board consisted of eight Directors. Shareholders elect Directors to serve for a period of one year at UTG’s annual shareholders’ meeting.
The Board of Directors does not have a formal nominating committee, or a committee that performs similar functions, and does not have a nominating committee charter. The Board has concluded that the nominating process should not be limited to certain members so that a comprehensive selection of candidates can be considered. Therefore, the nomination process is conducted by the full Board of Directors. The Board of Directors has not adopted a formal policy with regard to the consideration of Director candidates recommended by shareholders. Candidates for nomination have been recommended by an executive officer or director and considered by the Board of Directors. Generally, candidates have been persons who have been known to one or more of our Board members. The Board of Directors will, however, consider nominees recommended by shareholders. Shareholders wishing to recommend candidates for Board membership must submit the recommendations in writing to the Secretary of the Company at least 90 days prior to a date corresponding to the previous year’s Annual Meeting, with the submitting shareholder’s name and address and pertinent information about the proposed nominee similar to that set forth for directors named herein. The Board does not evaluate potential nominees for director differently based on whether they are recommended by a shareholder.
The Board of Directors has not adopted specific minimum qualifications that it believes must be met by a person it recommends for nomination as a director. Proposed nominees will be considered in light of their potential contributions to the Board, their backgrounds, their independence and such other factors as the Board considers appropriate. We do not have a specific policy relating to the consideration of diversity in identifying director candidates. However, the Board of Directors does consider the diversity of our Board when identifying director candidates. The amount of consideration given to diversity varies with the Boards’ determination of whether we would benefit from expanding the Board’s diversity in a particular area. We believe this policy has been effective in identifying candidates with the diverse business experience necessary to lead our Company.
Our directors have demonstrated significant achievement and generally have significant management experience in one or more fields of business, professional, governmental, community or academic endeavors. Our directors have sound judgement as a result of their management or policy making experience and demonstrate an ability to function effectively in an oversight role. Given the tenure of most of the directors on our Board, they have a general appreciation regarding major issues facing the Company. These experiences make each of our directors well qualified to be a member of the Company’s Board of Directors.
The Board of Directors has provided a process for shareholders to send communications directly to the Board. These communications can be sent to Jesse Correll, Chairman of the Board, CEO, and President of UTG, at the corporate headquarters at 205 North Depot Street, Stanford, Kentucky 40484.
Our Board of Directors is led by Jesse Correll, our Chairman of the Board, CEO, and President. The decision as to who should serve as Chairman of the Board, and who should serve as Chief Executive Officer, and whether those offices should be combined or separate, is properly the responsibility of our Board of Directors. The Board of Directors believes that the most effective leadership structure for us at this time is for Mr. Correll to serve as both Chairman of the Board and Chief Executive Officer. Our Board does not have a lead independent director and does not believe that designating a lead independent director would be necessary or helpful at this time.
Our Board of Directors oversees our risk management in cooperation with management. The Board and management regularly assess and communicate regarding risks confronting the Company, including transaction specific risks, macroeconomic trends, industry developments, and risk factors unique to our business. The members of the Audit Committee also discuss various financial reporting and accounting risk factors with our independent audit firm.
Section 16(a) Beneficial Ownership Reporting Compliance
Directors and officers of UTG file periodic reports regarding ownership of Company securities with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934 as amended, and the rules promulgated there under. UTG is not aware of any individuals who filed late with the Securities and Exchange Commission during 2024. SEC filings may be viewed from the Company’s Web site www.utgins.com.
Audit Committee Report to Shareholders
In connection with the December 31, 2024 financial statements, the audit committee: (1) reviewed and discussed the audited financial statements with Management; (2) discussed with the independent auditors the matters required by Statement on Auditing Standards No. 61, Communications with Audit Committees, as amended, (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and (3) received the written disclosures and the letter from its independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the audit committee concerning independence, and has discussed with the independent auditors their independence. Based upon these reviews and discussions, the audit committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K filed with the SEC for the last fiscal year.
Members of the Company’s Audit Committee:
Gabriel J. Molnar |
Committee Chairman |
Thomas E. Harmon |
|
John M. Cortines |
The following information with respect to business experience of the Board of Directors has been furnished by the respective Directors or obtained from the records of UTG.
Name, Age |
Position with the Company, Business Experience and Other Directorships |
Jesse T. Correll, 68 |
Chairman of UTG and Universal Guaranty Life Insurance Company since 2000; Director of UTG since 1999; Chairman of First Southern Bancorp, Inc. since 1988; President and CEO of First Southern Bancorp, Inc. from 1988-2015 and 2023 to present; Manager and President of First Southern Funding, LLC since 1992; President, Director of The River Foundation since 1990; Board member of Crown Financial Ministries from 2004 to 2009; Friends of the Good Samaritans since 2005; Generous Giving from 2006 to 2009; the National Christian Foundation since 2006; Centre Board of Trustees from 2015 to 2022; and Cumberland Lake Shell, Inc. since 2017. |
Preston H. Correll, 44 |
Preston, along with his wife Rachel, and three children own and operate St. Asaph Farm in Stanford, Kentucky where they focus on sustainable farming and raising natural meat. He is also co-founder of Marksbury Farm Market based in Bryantsville, Kentucky. He has been involved with The Good Samaritan School in Delhi, India since 2003 and serves on the board of the Friends of the Good Samaritans. Director of UTG, Inc. since December 2018. |
John M. Cortines, 36 |
Mr. Cortines serves as the Director of Grantmaking at the Maclellan Foundation. He is the author of multiple books on money, faith, and generosity. Prior to entering the nonprofit sector, he worked in the oil and gas industry as an engineer for Chevron Corporation. Mr. Cortines is a graduate of Harvard Business School (MBA), King Abdullah University of Science and Technology (MS), and Texas A&M University (BS). Director of UTG, Inc. since December 2018. |
Thomas F Darden, II, 70 |
Mr. Darden is the Founder and Chief Executive Officer of Cherokee, an investment company that invests in both private equity and venture capital. Beginning in 1984, Mr. Darden served for 16 years as the Chairman of Cherokee Sanford Group, a brick manufacturing and soil remediation company. From 1981 to 1983, he was a consultant with Bain & Company in Boston. From 1977 to 1978, he worked as an environmental planner for the Korea Institute of Science and Technology in Seoul, where he was a Henry Luce Foundation Scholar. Mr. Darden is on the Boards of Shaw University, the Institute for The Environment at the University of North Carolina and the Board of Governors of the Research Triangle Institute. Mr. Darden earned a Masters in Regional Planning from the University of North Carolina, a Juris Doctor from Yale Law School and a Bachelor of Arts from the University of North Carolina, where he was a Morehead Scholar. |
Howard L. Dayton, Jr., 81 |
In 1985, Mr. Dayton founded Crown Ministries in Longwood, Florida. Crown Ministries merged with Christian Financial Concepts in September 2000 to form Crown Financial Ministries, the world’s largest financial ministry. He served as Chief Executive Officer from 1985 to 2007 and in 2009 founded Compass - Finances God’s Way. Mr. Dayton is a graduate of Cornell University. He developed The Caboose, a successful railroad-themed restaurant in Orlando, FL in 1969. In 1972 he began his commercial real estate development career, specializing in office development in the Central Florida area. He has authored five popular small group studies, produced several video series, and was the host for the nationally syndicated radio programs MoneyWise and HeyHoward. Asbury University named their business school the Howard Dayton School of Business. Mr. Dayton became a Director of UTG, Inc. in December 2005. |
Thomas E. Harmon, 70 |
Director of UTG and Universal Guaranty Life Insurance Company since March 2016. Mr. Harmon is the previous owner and President of Harmon Foods, Inc., a chain of retail supermarkets, for the past 40 years. Mr. Harmon recently sold the operating parts of Harmon Foods, Inc. now managing the assets of Harmon Foods. Mr. Harmon has been active in many charitable organizations over the years, most recently serving as a Board Member with Amigos En Cristo Ministries, an organization serving one of the most disadvantaged parts of the world – Juarez, Mexico. |
Gabriel J. Molnar, 38 |
Mr. Molnar is the Chief Financial Officer at Capstone Realty Inc., a commercial real estate development company in Louisville, Kentucky. Mr. Molnar is a licensed CPA and real estate broker in Kentucky. Prior to Capstone, Mr. Molnar worked as a Financial Analyst with Procter & Gamble and as a public company auditor and healthcare consultant with PricewaterhouseCoopers. Mr. Molnar received a MBA from the Owen Graduate School of Management at Vanderbilt University and is also a graduate of Asbury University in Wilmore, Kentucky. |
Peter L. Ochs, 73 |
Mr. Ochs is founder of Capital III, a private equity investment firm located in Wichita, Kansas. Capital III provides impact investment capital and management with investments in manufacturing, real estate, energy, and education with a geographical focus on the US and Latin America. Prior to founding Capital III, Mr. Ochs spent 8 years in the commercial banking industry. Mr. Ochs graduated from the University of Kansas with a degree in business and finance. He currently serves on the boards of UTG, Inc., the American Independence Funds, and Trinity Academy. |
Executive Officers of UTG
More detailed information on the following executive officers of UTG appears under “Directors”:
Jesse T. Correll |
Chairman of the Board, Chief Executive Officer, and President |
Other executive officers of UTG are set forth below:
Name, Age |
Position with UTG and Business Experience |
Theodore C. Miller, 62 |
Senior Vice President and Chief Financial Officer of UTG, Inc. and Universal Guaranty Life Insurance Company since 1997; Senior Vice President and Chief Financial Officer of subsidiary companies since 1997; and Chief Financial Officer of First Southern Bancorp, Inc. and First Southern National Bank since 2016. |
Daniel T. Roberts, 42 |
Vice President of UTG, Inc and Universal Guaranty Life Insurance Company since February 2023. President of Universal Guaranty Life Insurance Company since September 2023; Vice President of First Southern Bancorp, Inc. and First Southern National Bank since 2023 and served in various capacities since 2016. |
Douglas P. Ditto, 69 |
Vice President of UTG, Inc. and Universal Guaranty Life Insurance Company since June 2009; Chief Investment Officer from 2009 to 2012; Assistant Vice President from June 2003 to June 2009; Executive Vice President of First Southern Bancorp, Inc. since March 1985. |
Code of Ethics
The Company has adopted a Code of Ethics and Business Conduct for our Directors, officers (including our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, and persons performing similar function) and employees. The Code of Business Conduct and Ethics is available to our shareholders by requesting a free copy of the Code of Business Conduct and Ethics by writing to us at UTG, Inc., 205 North Depot Street, Stanford, Kentucky 40484.
Item 11. Executive Compensation
Executive Compensation Table
The following table sets forth certain information regarding compensation paid to or earned by UTG’s Chief Executive Officer, and each of UTG’s two most highly compensated executive officers whose salary plus bonus exceeded $100,000 during UTG’s last fiscal year:
Name and Principal position |
Year |
Salary |
Bonus |
Stock Awards (1) |
All Other Compensation (2) |
Total |
|||||||||||||||
Jesse T. Correll Chief Executive Officer |
2024 |
$ |
217,500 |
$ |
9 |
$ |
234,991 |
$ |
13,050 |
$ |
465,550 |
||||||||||
2023 |
217,500 |
6 |
289,994 |
13,050 |
520,550 |
||||||||||||||||
Douglas P. Ditto Vice President |
2024 |
187,500 |
200,000 |
0 |
11,250 |
398,750 |
|||||||||||||||
2023 |
187,500 |
99,991 |
150,009 |
11,250 |
448,750 |
||||||||||||||||
Theodore C. Miller Chief Financial Officer |
2024 |
117,500 |
69,900 |
30,100 |
7,050 |
224,550 |
|||||||||||||||
2023 |
117,292 |
49,880 |
50,120 |
7,038 |
224,330 |
||||||||||||||||
Casey Willis (3) Vice President |
2024 |
200,000 |
300,000 |
49,998 |
12,000 |
561,998 |
|||||||||||||||
2023 |
200,000 |
274,800 |
50,120 |
12,000 |
536,920 |
||||||||||||||||
(1) |
Stock awards in the form of an annual bonus of 11,726 and 21,958 shares were issued in 2024 and 2023, respectively. |
(2) |
All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan |
(3) |
Casey Willis is not deemed to be an executive officer. |
Outstanding Equity Awards at Fiscal Year End
As of December 31, 2024, there were no unexercised options, stock that has not vested or equity incentive plan awards outstanding for any of the above named executive officers.
Compensation of Directors
Effective January 1, 2018, a new compensation arrangement was approved whereby each outside Director annually receives $5,000 as a retainer and $2,500 per meeting attended. The compensation, however, is paid in UTG Common Stock. The value is determined annually on the close of business December 20th or the next business day should December 20th be a weekend or holiday, based on the activity of the year just ending. Reasonable travel expenses are reimbursed in cash as incurred. UTG's Director Compensation policy provides that Directors who are employees of UTG or its affiliates do not receive any compensation for their services as Directors except for reimbursement for reasonable travel expenses for attending each meeting. The following table reflects compensation paid to all Directors who served in 2024.
Name |
Fees Earned or Paid in Cash |
Stock Awards (1) |
All Other Compensation (2) |
Total |
||||||||||||
Jesse T. Correll, Chief Executive Officer |
$ |
0 |
$ |
0 |
$ |
0 |
$ |
0 |
||||||||
April R. Chapman, Director (3) |
0 |
5,000 |
0 |
5,000 |
||||||||||||
Preston H. Correll, Director |
0 |
17,500 |
5,000 |
22,500 |
||||||||||||
John M. Cortines, Director |
0 |
17,500 |
0 |
17,500 |
||||||||||||
Thomas F. Darden, II, Director |
0 |
17,500 |
0 |
17,500 |
||||||||||||
Howard L. Dayton, Director |
0 |
17,500 |
0 |
17,500 |
||||||||||||
Thomas E. Harmon, Director |
0 |
17,500 |
0 |
17,500 |
||||||||||||
Gabriel J. Molnar, Director |
0 |
17,500 |
5,000 |
22,500 |
||||||||||||
Peter L. Ochs, Director |
0 |
17,500 |
0 |
17,500 |
||||||||||||
(1) Market value of stock on earned date was $28.09 per share.
(2) Other Compensation represents payment for consulting services performed relative to management enrichment.
(3) Resigned from Board effective June 28, 2024
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Principal Holders of Securities
The following tabulation sets forth the name and address of the entity known to be the beneficial owners of more than 5% of UTG’s Common Stock and shows: (i) the total number of shares of Common Stock beneficially owned by such person as of February 1, 2025 and the nature of such ownership; and (ii) the percent of the issued and outstanding shares of Common Stock so owned as of the same date.
Title |
Amount |
Percent |
|
of |
Name and Address |
and Nature of |
Of |
Class |
of Beneficial Owner (2) |
Beneficial Ownership |
Class (1) |
Common |
Jesse T. Correll |
154,312 |
(3)(5) |
4.9% |
Stock, no |
First Southern Bancorp, Inc. |
1,406,785 |
(3)(4)(5) |
44.6% |
par value |
First Southern Funding, LLC |
400,000 |
(3)(4)(5) |
12.7% |
First Southern Holdings, LLC |
1,201,876 |
(3)(4)(5) |
38.1% |
|
WCorrell, Limited Partnership |
72,750 |
(3)(5) |
2.3% |
|
Cumberland Lake Shell, Inc. |
128,750 |
(5) |
4.1% |
(1) The percentage of shares owned is based on 3,157,376 shares of Common Stock outstanding as of February 1, 2025. |
(2) The address for each of Jesse Correll, First Southern Bancorp, Inc. (“FSBI”), First Southern Funding, LLC (“FSF”), First Southern Holdings, LLC (“FSH”), and WCorrell, Limited Partnership (“WCorrell LP”), is 205 North Depot Street, Stanford, Kentucky 40484. The address for Cumberland Lake Shell, Inc. (“CLS”) is P.O. Box 430, 150 Railroad Drive, Somerset, Kentucky 42502. |
(3) The share ownership of Jesse Correll listed includes 81,562 shares of Common Stock owned by him individually. The share ownership of Mr. Correll also includes 72,750 shares of Common Stock held by WCorrell, Limited Partnership, a limited partnership in which Jesse Correll serves as managing general partner and as such, has sole voting and dispositive power over the shares held by the entity. In addition, by virtue of his ownership of voting securities of FSF and FSBI, and in turn, their ownership of 100% of the outstanding membership interests of FSH (the holder of 1,201,876 shares of Common Stock), Mr. Correll may be deemed to beneficially own the total number of shares of Common Stock owned by FSH, and may be deemed to share with FSH the right to vote and to dispose of such shares. Mr. Correll owns approximately 78% of the outstanding membership interests of FSF. Additionally, Mr. Correll owns directly approximately 44%, companies he controls own approximately 17%, and he has the power to vote but does not own an additional 2% of the outstanding voting stock of FSBI. FSBI and FSF in turn own 99% and 1%, respectively, of the outstanding membership interests of FSH. |
(4) The share ownership of FSBI consists of 204,909 shares of Common Stock held by FSBI directly and 1,201,876 shares of Common Stock held by FSH of which FSBI is a 99% member and FSF is a 1% member. As a result, FSBI may be deemed to share the voting and dispositive power over the shares held by FSH. |
(5) According to the Schedule 13D, as amended, filed April 17, 2024, Jesse Correll, FSBI, FSF and FSH, have agreed in principle to act together for the purpose of acquiring or holding equity securities of UTG. In addition, because of their relationship with these Reporting Persons, Cumberland Lake Shell, Inc. and WCorrell Limited Partnership may also be deemed to be members of this group. Therefore, each may be deemed to have acquired beneficial ownership of the equity securities of UTG beneficially owned by each of the Reporting Persons. |
Security Ownership of Management of UTG
The following tabulation shows with respect to each of the Directors of UTG, UTG’s Chief Executive Officer and each of UTG’s two most highly compensated executive officers whose salary plus bonus exceeded $100,000 for fiscal 2024, and with respect to all executive officers and Directors of UTG as a group: (i) the total number of shares of Common Stock beneficially owned by such person as of February 1, 2025 and the nature of such ownership; and (ii) the percent of the issued and outstanding shares of stock so owned as of the same date.
Title of |
Name and Address of |
Amount and Nature of |
Percent of |
Class |
Beneficial Owner |
Beneficial Ownership |
Class (1) |
UTG’s |
Jesse T. Correll |
Stanford, KY |
2,089,847 |
(2) |
66.2% |
Common |
Preston H. Correll |
Stanford, KY |
3,482 |
(3) |
* |
Stock, no |
John M. Cortines |
Georgetown, TN |
4,533 |
(4) |
* |
Par value |
Thomas F. Darden, II |
Raleigh, NC |
64,014 |
2.0% |
|
Howard L. Dayton, Jr. |
Sanford, FL |
11,797 |
* |
||
Douglas P. Ditto |
Danville, KY |
50,394 |
(6) |
1.5% |
|
Thomas E. Harmon |
Springfield, IL |
4,643 |
* |
||
Theodore C. Miller |
Stanford, KY |
16,292 |
* |
||
Gabriel J. Molnar |
Louisville, KY |
4,067 |
* |
||
Peter L. Ochs |
Valley Center, KS |
8,534 |
(7) |
* |
|
Daniel Roberts |
Stanford, KY |
1,856 |
(8) |
* |
|
All Directors and executive officers as a group (eleven in number) |
2,260,096 |
71.6% |
|||
* Less than 1%
(1) The percentage of outstanding shares for UTG is based on 3,157,376 shares of Common Stock outstanding as of February 1, 2025.
(2) The share ownership of Jesse Correll listed includes 81,562 shares of Common Stock owned by him individually. The share ownership of Mr. Correll also includes 72,750 shares of Common Stock held by WCorrell, Limited Partnership, a limited partnership in which Jesse Correll serves as managing general partner and as such, has sole voting and dispositive power over the shares held by the entity. In addition, by virtue of his ownership of voting securities of FSF and FSBI, and in turn, their ownership of 100% of the outstanding membership interests of FSH (the holder of 1,201,876 shares of Common Stock), Mr. Correll may be deemed to beneficially own the total number of shares of Common Stock owned by FSH, and may be deemed to share with FSH the right to vote and to dispose of such shares. Mr. Correll owns approximately 78% of the outstanding membership interests of FSF. Additionally, Mr. Correll owns directly approximately 44%, companies he controls own approximately 17%, and he has the power to vote but does not own an additional 2% of the outstanding voting stock of FSBI. FSBI and FSF in turn own 99% and 1%, respectively, of the outstanding membership interests of FSH
(3) Includes 3 shares held in street name.
(4) Includes 848 shares held in spouse’s IRA and 1,881 shares held in street name.
(5) Includes 473 shares held in street name.
(6) Includes 1,600 shares held in a retirement account, 800 shares in street name, and 2,000 shares held by two of his children, and 1,000 held by a third child.
(7) Includes 2,000 shares held in a trust for benefit of named individual.
(8) Includes 460 shares held in a retirement account.
Except as indicated above, the foregoing persons hold sole voting and investment power.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The Board of Directors determined that seven of the eight current Directors are “independent” as defined by Rule 5605 of the NASDAQ listing standards. The independent Directors are, Preston H. Correll, John M. Cortines, Thomas F. Darden, Howard L. Dayton, Jr., Thomas E. Harmon, Gabriel J. Molnar, and Peter L. Ochs.
The articles of incorporation of UG contain the following language under item 12 relative to related party transactions:
A director shall not be disqualified from-dealing with or contracting with the corporation as vendor, purchaser; employee, agent or otherwise; nor, in the absence of fraud, shall any transaction or contract or act of this corporation be void or in any way affected or invalidated by the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder, director or officer is in any way interested in such transaction or contract or act, provided the fact that such director or such firm or such corporation so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction or act shall be taken: nor shall any such director be accountable or responsible to the company for or in respect to such transaction or contract or act of this corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such action or contract; and any such director may be counted in determining the existence of a quorum of any meeting of the Board of Directors of the company which shall authorize or take action in respect to any such contract or transaction or act and may vote thereat to authorize, ratify, or approve any such contract or transaction or act, with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer were not interested in such transaction or contract or act.
On February 20, 2003, UG purchased $4 million of a trust preferred security offering issued by First Southern Bancorp, Inc. (“FSBI”). The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515%. The Company received dividends of $165,590 and $165,137 during 2024 and 2023, respectively.
On March 30, 2009, UG purchased $1 million of FSBI common stock. The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement.
UTG has a 30.10% ownership interest in an aircraft that is jointly owned with First Southern National Bank and Bandyco, LLC. Bandyco, LLC is affiliated with the Estate of Ward F. Correll. Mr. Correll is the father of Jesse Correll and a former director of the Company. The aircraft is used for business related travel by various officers and employees of the Company. For years 2024 and 2023, UTG paid $332,445 and $307,442 for costs associated with the aircraft, respectively.
Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiary. Under this arrangement, the subsidiary pays its proportionate share of expenses, based on an allocation formula. During 2024 and 2023, UG paid $7,480,761 and $7,910,324, respectively, in expenses. The Ohio Department of Insurance has approved the cost sharing agreement and it is Management’s opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.
The Company from time to time acquires mortgage loans through participation agreements with FSNB. FSNB services the Company’s mortgage loans including those covered by the participation agreements. The Company pays a 0.25% servicing fee on these loans and a one-time fee at loan origination of 0.50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $20,137 and $18,694 in servicing fees and $26,665 and $18,630 in origination fees to FSNB during 2024 and 2023, respectively.
Effective January 1, 2017, UTG entered into a shared services contract with FSNB. Pursuant to the terms of the agreement, UTG and FSNB will utilize the services of the other’s staff in certain instances for the betterment of both entities. Personnel within departments, such as accounting, human resources, and information technology, are shared between the entities. Costs of these resources are then reimbursed between the companies. The shared services arrangement provides benefits to both parties such as access to a greater pool of knowledgeable staff, efficiencies from elimination of redundancies and more streamlined operations.
The Company reimbursed expenses incurred by employees of FSNB relating to salaries, travel and other costs incurred on behalf of or relating to the Company and received reimbursements from FSNB. The Company paid $1,217,395 and $1,337,096 in 2024 and 2023, respectively to FSNB in net reimbursement of such costs.
Effective July 1, 2018, the Company assumed the employees of several smaller entities owned or associated with UTG. The purpose of this was to support the continued efforts to further streamline operations amongst associated entities. The salaries, benefits, and payroll related processing fees are 100% reimbursed by the associated entities on a monthly basis. During 2024 and 2023, the Company received reimbursements of $1,605,028 and $1,438,450, respectively. These costs are eliminated for consolidation of these entities, where applicable.
The Company rents a portion of the first floor and second floor of an 8,000 square foot, two-story office building, located in Stanford, KY. The first floor of the building is occupied by UTG and FSNB employees that are included in the shared services agreement between the two entities. The second floor is occupied by the customer service call centers for both UTG and FSNB employees. The building is owned by FSNB and UTG pays $2,000 per month in rent to FSNB for the portion of the building occupied by UTG employees. The Company paid rent of $24,000 to FSNB in 2024 and 2023.
As previously disclosed in the Notes Receivable section of Note 2 - Investments, several of the Company’s notes have participation agreements in place with third parties. Certain participation agreements are with FSF, a related party. The participation agreements are sold without recourse and assigned to the participant based on their pro-rata share of the principal, interest and collateral as specified in the participation agreements. The undivided participations in the notes receivable range from 20% - 50%. The total amount of loans participated to FSF was $0 and $60,031 as of December 31, 2024 and 2023, respectively.
During the 4th quarter of 2023, UTG entered into a loan participation agreement with FSNB to fund a commercial mortgage loan issued to a company that is owned/managed by a member of UTG’s Board of Directors. UG had a 9% interest in the participated loan and agreed to fund up to $1,482,300. The loan was fully repaid in 2024.
Item 14. Principal Accountant Fees and Services
The Audit Committee is required to be directly responsible for the appointment, compensation and retention of the Company’s independent registered public accounting firm. The Audit Committee appointed Kerber, Eck & Braeckel LLP (“KEB”) as the Company’s independent registered public accounting firm for the years ended December 31, 2024 and 2023.
Amounts paid to, or billed by, the Company’s principal accountant, during the two most recent fiscal years by category were as follows:
Audit Fees - Audit fees paid for these audit services in the fiscal years ended 2024 and 2023 totaled $143,000 and $130,000 respectively. Fees billed for the quarterly reviews of the Company’s financial statements totaled $39,375 and $37,500 for the years 2024 and 2023, respectively.
Audit Related Fees - No audit related fees were incurred by the Company from KEB for the years ended 2024 and 2023.
Tax Fees – For the years ended 2024 and 2023, the Company paid $17,500 and $20,475, respectively, relating to certain tax advice and electronic filing of certain federal and state income tax returns of the Company.
All Other Fees – For the years ended December 31, 2024 and 2023, the Company paid $12,500 and $20,475, respectively, for the audit of the Company's employee benefit plan. During 2024, the Company paid no other fees to KEB.
Item 15. Exhibit and Financial Statement Schedules
(a) |
The following documents are filed as a part of the report: |
(1) |
Financial Statements: |
Included in Part II, Item 8 of this Report. |
|
(2) |
Financial Statement Schedules |
The financial statement schedules have been omitted as they are deemed inapplicable or not required by Regulation S-X. |
(a)(3) & (b) |
Exhibits The following are exhibits to this report, and if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included: |
Exhibit Number |
Description |
3.1 |
Certificate of Incorporation of the Registrant and all amendments thereto [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 3.1]. |
3.2 |
By-Laws for the Registrant and all amendments thereto [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 3.2]. |
4.1 |
UTG’s Agreement pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K with respect to long-term debt instruments [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 4.1]. |
10.1 |
Amendment to Reinsurance Agreement between Universal Guaranty Life Insurance Company and Optimum Re Insurance Company originally with Business Men’s Assurance Company of America. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2015 originally filed as Exhibit 10.2]. |
10.2 |
Reinsurance Agreement between Universal Guaranty Life Insurance Company and Swiss RE originally with Life Reassurance Corporation of America. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2015 originally filed as Exhibit 10.3]. |
10.3 |
Assumption Reinsurance Agreement between Universal Guaranty Life Insurance Company and Park Avenue Life Insurance Company formerly known as First International Life Insurance Company. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2015 originally filed as Exhibit 10.4]. |
10.5 |
Commercial pledge agreement dated November 20, 2012, between UTG, Inc. and Illinois National Bank. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2012 originally filed as Exhibit 10.20]. |
10.6 |
Administrative Services and Cost Sharing Agreement dated as of January 1, 2007 between UTG, Inc. and Universal Guaranty Life Insurance Company [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.11]. |
10.7 |
Agreement regarding Mortgage Loans by and between First Southern National Bank and Universal Guaranty Life Insurance Company [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.12]. |
10.8 |
Universal Guaranty Participation Agreement-Purchased Loan [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.13]. |
10.9 |
Universal Guaranty Participation Agreement-Originated Loan [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.14]. |
10.10 |
Management Data, Inc. Software License Agreement [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2014 originally filed as Exhibit 10.16]. |
10.12 |
Aircraft Joint Ownership Agreement by and among Bandyco, LLC, First Southern National Bank and UTG, Inc. dated August 11, 2014 [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2014 originally filed as Exhibit 10.18]. |
Promissory Note dated November 20, 2023, between UTG, Inc. and Illinois National Bank. |
|
10.14 |
Shared Services Agreement between UTG, Inc. and FSNB effective January 1, 2017. [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2018 originally filed as Exhibit 10.14]. |
Amendments to the Shared Services Agreement between UTG, Inc. and FSNB. Amendment #6 to the Shared Services Agreement effective March 1, 2023. [Prior amendments incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2018 originally filed as Exhibits 10.15, 10.16 and 10.17 and for the year ended December 31, 2023 filed as Exhibit 10.15]. |
|
*14.1 |
Code of Ethics and Business Conduct [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2023 originally filed as Exhibit 14.1]. |
*14.2 |
Code of Ethical Conduct for Senior Financial Officers [Incorporated by reference to the Registrant’s form 10-K, for the year ended December 31, 2023 originally filed as Exhibit 14.2]. |
*21.1 |
List of Subsidiaries of the Registrant. |
*31.1 |
Certificate of Jesse T. Correll, Chairman of the Board Chief Executive Officer, and President of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
*31.2 |
Certificate of Theodore C. Miller, Chief Financial Officer 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, Chairman of the Board, Chief Executive Officer, and President 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. |
*99.1 |
|
*99.2 |
|
*99.3 |
|
*99.4 |
|
*101.INS |
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
*101.SCH |
Inline XBRL Taxonomy Extension Schema Document. |
*101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
*101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
*101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
*101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
* Filed herewith
Item 16. Form 10-K Summary
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(D) of the Securities Exchange Act of 1934, UTG, Inc. has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
UTG, Inc. |
||||
By: |
/s/ Jesse T. Correll |
|||
Jesse T. Correll |
||||
Chairman of the Board, Chief Executive Officer, President and Director |
||||
(Principal Executive Officer) |
||||
Date: March 26, 2025
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Jesse T. Correll |
By: /s/ Thomas E. Harmon |
|
Jesse T. Correll Chairman of the Board, Chief Executive Officer, President and Director (Principal Executive Officer) |
Thomas Harmon Director |
|
By: /s/ Preston H. Correll |
By: /s/ Cabriel J. Molnar |
|
Preston H. Correll Director |
Gabriel J. Molnar Director |
|
By: /s/ John M. Cortines |
By: /s/ |
|
John M. Cortines Director |
Peter L. Ochs Director |
|
By: /s/ Thomas F. Darden II |
By: /s/ Theodore C. Miller |
|
Thomas F. Darden II Director |
Theodore C. Miller Chief Financial Officer and Senior Vice President (Principal Financial and Accounting Officer.) |
|
By: /s/ |
||
Howard L. Dayton Director |
Exhibit 10.13
PROMISSORY NOTE
|
Principal
$8,000,000.00
|
Loan Date
11-20-2023
|
Maturity
11-20-2024
|
Loan No.
72957158-40000
|
Call / Coll
C / 3
|
Account
72957158
|
Initials
TWG
|
|
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing "***" has been omitted due to text length limitations.
|
||||||
|
Borrower:
|
UTG, INC.
|
Lender:
|
INB NATIONAL ASSOCIATION
|
||
|
C/O TED MILLER / 111 WEST MAIN STREET
|
MAIN BRANCH
|
||||
|
STANFORD, KY 40484
|
322 E. CAPITOL
|
||||
|
SPRINGFIELD, IL 62701
|
|||||
|
Principal Amount: $8,000,000.00
|
Interest Rate: 7.750%
|
Date of Note: November 20, 2023
|
|||
PROMISE TO PAY. UTG, INC. ( "Borrower" ) promises to pay to INB, National Association ( "Lender"), or order, in lawful money of the
UnitedStates of America, the principal amount of Eight Million & 00/100 Dollars ( $8,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on November 20, 2024. In addition. Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning December 20,2023, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Borrower will pay Lender at Lender 's address shown above or at such other place as Lender may designate in writing.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the Prime Rate of interest listed in the Money Rates Table of the Wall Street Journal (the "Index"). The Index is not necessarily the lowest rate charged by Lender on its loans. Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each month. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 8.500% per annum. Interest on the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of 0.750 percentage points under the Index (the "Margin"), adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate of 7.750%. If Lender determines, in its sole discretion, that the Index has become unavailable or unreliable, either temporarily, indefinitely, or permanently, during the term of this Note, Lender may amend this Note by designating a substantially similar substitute index. Lender may also amend and adjust the Margin to accompany the substitute index. The change to the Margin may be a positive or negative value, or zero. In making these amendments, Lender may take into consideration any then-prevailing market convention for selecting a substitute index and margin for the specific Index that is unavailable or unreliable. Such an amendment to the terms of this Note will become effective and bind Borrower 10 business days after Lender gives written notice to Borrower without any action or consent of the Borrower. NOTICE: Under no circumstances will the interest rate on this Note be less than 6.000% per annum or more than the maximum rate allowed by applicable law.
INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/365 simple interest basis; that is, by applying the ratio
of the interest rate over the number of days in a year
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, early
payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations, or as full satisfaction of a disputed amount must be mailed or delivered to: INB, National Association, 322 E. Capitol
Springfield, IL 62701.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $25.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 9.000 percentage point margin ("Default Rate Margin"). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this Note.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower’s ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents.
Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
(366 during leap years ), multiplied by the outstanding principal balance, multiplied by the actual number of days the principal
balance is outstanding. All interest payable under this Note is computed using this method.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, early
payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations, or as full satisfaction of a disputed amount must be mailed or delivered to: INB, National Association, 322 E. Capitol
Springfield, IL 62701.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or $25.00, whichever is greater.
INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest rate on this Note shall be increased by adding an additional 9.000 percentage point margin ("Default Rate Margin"). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable law.
DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note:
Payment Default. Borrower fails to make any payment when due under this Note.
Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower’s ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents.
False Statements. Any warranty,
representation or statement made or furnished to Lender by borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.
Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture
Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self -help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral
securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall Initial
Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
Cure Provisions. If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after Lender sends written notice to Borrower demanding cure of such default: (1) cures the default within ten (10) days; or (2) if the cure requires more than ten (10) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.
ATTORNEYS ' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Illinois without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Illinois.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of SANGAMON County, State of Illinois.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and empowers any attorney-at-law to appear in any court of record and to confess judgment against Borrower for the unpaid amount of this Note as evidenced by an affidavit signed by an officer of Lender setting forth the amount then due, attorneys' fees plus costs of suit, and to release all errors, and waive all rights of appeal. If a copy of this Note, verified by an affidavit, shall have been filed in the proceeding, it will not be necessary to file the original as a warrant of attorney. Borrower waives the right to any stay of execution and the benefit of all
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Note is secured by a Commercial Pledge Agreement dated November 20, 2013.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note, as well as directions for payment from Borrower's accounts, may be requested orally or in writing by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be confirmed in writing. Borrower agrees to be liable for all sums either: (A ) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print -outs.
SECURITY INTEREST IN DEPOSIT ACCOUNTS. Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's deposit accounts with Lender (whether checking, savings, or some other account), including without limitation all deposit accounts held jointly with someone else and all deposit accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such deposit accounts.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower makes a payment on Borrower 's loan and the check or preauthorized charge with which Borrower pays is later dishonored. If your payment is returned unpaid, you authorize INB, National Association to make a one-time electronic fund transfer from your account to collect a fee of $25.00.
LOAN AGREEMENT. This Note is issued in connection with a Business Loan Agreement dated November 20, 2023 between Borrower and Lender and the terms and conditions of said Business Loan Agreement are expressly incorporated herein and made a part of this Note by
reference.
UNCONDITIONAL CANCELABLE COMMITMENT. The line of credit feature provided for in this Note and the Related Documents, including the Business Loan Agreement (Asset Based), may be unconditionally cancelable, without cause, at any time by the Lender, to the extent permitted by applicable law.
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.
not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in
its sole discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.
Insecurity. Lender in good faith believes itself insecure.
Cure Provisions. If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after Lender sends written notice to Borrower demanding cure of such default: (1) cures the default within ten (10) days; or (2) if the cure requires more than ten (10) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.
LENDER 'S RIGHTS. Upon default, Lender may
declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.
ATTORNEYS ' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, including attorneys' fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.
JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.
GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of Illinois without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of Illinois.
CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of SANGAMON County, State of Illinois.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and empowers any attorney-at-law to appear in any court of record and to confess judgment against Borrower for the unpaid amount of this Note as evidenced by an affidavit signed by an officer of Lender setting forth the amount then due, attorneys' fees plus costs of suit, and to release all errors, and waive all rights of appeal. If a copy of this Note, verified by an affidavit, shall have been filed in the proceeding, it will not be necessary to file the original as a warrant of attorney. Borrower waives the right to any stay of execution and the benefit of all
exemption laws now or hereafter in effect. No single exercise of the foregoing warrant and power to confess judgment will be deemed to exhaust
the power, whether or not any such exercise shall be held by any court to be invalid, voidable, or void; but the power will continue undiminished and may be exercised from time to time as Lender may elect until all amounts owing on this
Note have been paid in full. Borrower hereby waives and releases any and all claims or causes of action which Borrower might have against any attorney acting under the terms of authority which Borrower has granted herein arising out of
or connected with the confession of judgment hereunder.
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph.
COLLATERAL. Borrower acknowledges this Note is secured by a Commercial Pledge Agreement dated November 20, 2013.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note, as well as directions for payment from Borrower's accounts, may be requested orally or in writing by Borrower or by an authorized person. Lender may, but need not, require that all oral requests be confirmed in writing. Borrower agrees to be liable for all sums either: (A ) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print -outs.
SECURITY INTEREST IN DEPOSIT ACCOUNTS. Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lender all Borrower's right, title and interest in and to, Borrower's deposit accounts with Lender (whether checking, savings, or some other account), including without limitation all deposit accounts held jointly with someone else and all deposit accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, and all trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on this Note against any and all such deposit accounts.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower makes a payment on Borrower 's loan and the check or preauthorized charge with which Borrower pays is later dishonored. If your payment is returned unpaid, you authorize INB, National Association to make a one-time electronic fund transfer from your account to collect a fee of $25.00.
LOAN AGREEMENT. This Note is issued in connection with a Business Loan Agreement dated November 20, 2023 between Borrower and Lender and the terms and conditions of said Business Loan Agreement are expressly incorporated herein and made a part of this Note by
reference.
UNCONDITIONAL CANCELABLE COMMITMENT. The line of credit feature provided for in this Note and the Related Documents, including the Business Loan Agreement (Asset Based), may be unconditionally cancelable, without cause, at any time by the Lender, to the extent permitted by applicable law.
PRIOR NOTE. This Promissory Note is a
renewal of, extension of, refinancing of, modification of and substitution for Promissory Note dated November 20, 2022 in the original principal amount of $8,000,000.00, which was a renewal of, extension of, refinancing of,
modification of and substitution for Promissory Note dated November 20, 2012 in the original principal amount of $8,000,000.00, as amended from time to time
SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE.
BORROWER AGREES TO THE TERMS OF THE NOTE.
BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER:
|
BORROWER:
UTG, INC.
|
|||||||
|
By:
|
/s/ Theodore C. Miller
|
By:
|
/s/ Julie Abel
|
||||
|
THEODORE C. MILLER, CFO/Secretary of UTG, INC.
|
JULIE ABEL Vice President/Treasurer of UTG, INC.
|
||||||
Exhibit 21.1
|
LIST OF SUBSIDIARIES
|
|||||
|
Subsidiary Name
|
State of Incorporation
|
||||
|
BCG Land, LLC
|
Kentucky
|
||||
|
Bella Terra, LLC
|
Alabama
|
||||
|
Bluebird, Ltd Co
|
Kentucky
|
||||
|
Bluegrass Land & Minerals, LLC
|
Kentucky
|
||||
|
Cerulean at the Bluebird, LLC
|
Kentucky
|
||||
|
Collier Beach, LLC
|
South Carolina
|
||||
|
Consolidated Timberland, LLC
|
Georgia
|
||||
|
Cumberland Woodlands, LLC
|
Kentucky
|
||||
|
Esther's Wellhouse, LLC
|
Kentucky
|
||||
|
Imperial Plan, Inc.
|
Texas
|
||||
|
Mama Devechio's Pizzeria, LLC
|
Kentucky
|
||||
|
Midland Superblock Partners, LLC
|
Texas
|
||||
|
Red River Gorge Properties, LLC
|
Kentucky
|
||||
|
Stanford Wilderness Road, LLC
|
Kentucky
|
||||
|
The Inn at Wilderness Road, LLC
|
Kentucky
|
||||
|
Universal Guaranty Life Insurance Company
|
Ohio
|
||||
|
|
Franklin Forest, LLC
|
| Tennessee | ||
Exhibit 31.1
|
CERTIFICATIONS
|
|||||||||||
|
I, Jesse T. Correll, Chairman of the Board, Chief Executive Officer, President and Director of UTG, Inc., certify that:
|
|||||||||||
|
1.
|
I have reviewed this annual report on Form 10-K of the registrant, UTG, Inc.;
|
||||||||||
|
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||||||||||
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||||||||||
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
|
||||||||||
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||||||||||
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||||||||||
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||||||||||
|
d.
|
Disclosed in this report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
||||||||||
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
||||||||||
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
||||||||||
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls
over financial reporting.
|
||||||||||
|
Date: March 26, 2025
|
By
|
/s/ Jesse T. Correll
|
|||||||||
|
Chairman of the Board, Chief Executive Officer, President and Director
|
|||||||||||
|
(Principal Executive Officer)
|
|||||||||||
Exhibit 31.2
|
CERTIFICATIONS
|
|||||||
|
I, Theodore C. Miller, Chief Financial Officer and Senior Vice President of UTG, Inc., certify that:
|
|||||||
|
1.
|
I have reviewed this annual report on Form 10-K of the registrant, UTG, Inc.;
|
||||||
|
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||||||
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||||||
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
|
||||||
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||||||
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||||||
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||||||
|
d.
|
Disclosed in this report any changes in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
||||||
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
||||||
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
||||||
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls
over financial reporting.
|
||||||
|
Date: March 26, 2025
|
By
|
/s/ Theodore C. Miller
|
|
Chief Financial Officer and Senior Vice President
|
||
|
(Principal Financial and Accounting Officer)
|
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of UTG, Inc. (the "Company") for the period ended December 31, 2024, as filed with the Securities and
Exchange Commission on the date hereof (the "Report") I, Jesse T. Correll, Chairman of the Board, Chief Executive Officer, President and Director of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of my knowledge:
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date:
|
March 26, 2025
|
By:
|
/s/ Jesse T. Correll
|
|
Jesse T. Correll
|
|||
|
Chairman of the Board, Chief Executive Officer,
|
|||
|
President and Director (Principal Executive Officer)
|
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of UTG, Inc. (the "Company") for the period ended December 31, 2024 as filed with the Securities and
Exchange Commission on the date hereof (the "Report") I, Theodore C. Miller, Chief Financial Officer and Senior Vice President of the Company, certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that,
to the best of my knowledge:
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date:
|
March 26, 2025
|
By:
|
/s/ Theodore C. Miller
|
|
Theodore C. Miller
|
|||
|
Chief Financial Officer and Senior Vice President
|
|||
| (Principal Financial and Accounting Officer) |
Amendment #7
Dated and Effective: January 1, 2024
To the
SHARED SERVICES AGREEMENT
By and between
FIRST SOUTHERN NATIONAL BANK
And
UTG, INC.
Dated
January 1, 2017
Purpose: To amend and replace Item 1-Services of above said agreement in its entirety.
|
1.
|
Services. During the term of this Agreement, the
parties hereby agree to share personnel and the employee costs of certain groups of employees of both entities. The initial Shared Services of the two entities shall be as follows:
|
|
FSNB percentage
|
UTG percentage
|
|
|
Accounting
|
50%
|
50%
|
|
CLG
|
*
|
*
|
|
Human Resources
|
85%
|
15%
|
|
People & Culture
|
75%
|
25%
|
|
Information Technology
|
50%
|
50%
|
|
Investments
|
50%
|
50%
|
|
Leadership
|
*
|
*
|
|
Marketing
|
75%
|
25%
|
|
Real Estate
|
50%
|
50%
|
|
Grounds
|
50%
|
50%
|
*See attached allocations per Exhibit A.
The Shared Services of each entity shall include the base pay, bonuses paid, payroll related taxes and costs of employee benefits
provided for each individual covered.
Allocated costs shall first be reduced for reimbursements, if any, received from other entities or third parties.
Additional employees or groups of employees may be added as shared services upon mutual agreement of both parties and attached hereto as
an addendum to this Agreement.
Corporate performance-based bonuses or awards are specifically excluded from this formula and sharing arrangement. Such bonuses or
awards shall be borne entirely by the individual entity and determined exclusively by the management of each entity. Individuals covered under this agreement may receive such corporate performance-based bonuses from either or both entities.
IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed by their officers thereunto duly authorized as of the date first above written.
UTG, INC. FIRST SOUTHERN NATIONAL BANK
By: _/s/Theodore C. Miller______________
By: _/s/ Tommy Roberts________________
Theodore C. Miller Tommy Roberts
Sr. Vice President CEO
Attest: Attest:
__/s/Bradley J. Betack_____________ _/s/Bradley J. Betack__________________
Bradley J. Betack Bradley J. Betack
Secretary Secretary
Shared Services Agreement FSNB/UTG Exhibit A
CLG
|
Name
|
FSNB %
|
UTG %
|
||
|
Joe Hafley
|
80%
|
20%
|
||
|
Shay Pendygraft
|
20%
|
80%
|
||
|
Leah Baker
|
20%
|
80%
|
||
|
Mike Taylor
|
80%
|
20%
|
Leadership
|
Name
|
FSNB %
|
UTG %
|
||
|
Jess Correll
|
25%
|
75%
|
||
|
Doug Ditto
|
25%
|
75%
|
||
|
Cynthia Woodcock
|
25%
|
75%
|
||
|
Daniel Roberts
|
50%
|
50%
|
||
|
Candice Brown
|
50%
|
50%
|
||
|
Suzanne Short
|
50%
|
50%
|
||
|
Sara Downey
|
50%
|
50%
|
||
|
Carrie Davis
|
50%
|
50%
|
||
|
Christopher Davis
|
75%
|
25%
|
||
|
Max Appel
|
85%
|
15%
|
||
|
Brad Betack
|
50%
|
50%
|
||
|
Julie Cox
|
50%
|
50%
|
||
|
Denise Henderson
|
25%
|
75%
|
POLICY NAME: Code
of Ethics and Conduct
BOARD APPROVED: June 28, 2024
LAST REVIEWED: June 13, 2024
LAST REVISION: November 23, 2022
OWNER: Julie Abel
Code of Ethics and Conduct
UTG, Inc. (“UTG” or the “Company”) is committed to operating its business with honesty, integrity and the highest level of ethical conduct. This Code of
Conduct and Ethics covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide the directors, officers, and employees of the Company. All Company directors,
officers, and employees should conduct themselves accordingly and seek to avoid even the appearance of improper behavior in any way relating to the Company. In appropriate circumstances, this Code should also be provided to an followed by the
Company’s agents and representatives, including consultants.
Any director or officer who has questions about this Code should consult with the Chief Executive Officer, the Chief Financial Officer, or legal counsel as
appropriate in the circumstances. If an employee has any questions about this Code, the employee should ask his or her supervisor how to handle the situation.
This Code is supplemented by other policies, some of which are referenced throughout this document. The Company may change the Code and these other
policies without advance notice at any time. The Company also retains the sole right to administer and interpret all such policies.
Scope of Code
This Code is intended to deter wrongdoing and to promote the following:
|
•
|
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional
relationships;
|
|
•
|
Full, fair, accurate, timely, and understandable disclosure in reports and documents the Company files with, or submits to, the Securities and
Exchange Commissions (the “SEC”), the state Departments of Insurance (the “DOI”), other regulatory bodies, and other communications made by the Company;
|
|
•
|
Compliance with applicable governmental laws, rules, and regulations;
|
|
•
|
The prompt internal reporting of violations of this Code to the appropriate person or persons identified in this Code;
|
|
•
|
Accountability for adherence to this Code; and
|
|
•
|
Adherence to a high standard of business ethics.
|
Compliance with Laws, Rules and Regulations
The Company is committed to full compliance with the laws of all jurisdictions in which UTG conducts business. All directors,
officers, and employees should respect and obey all laws, rules, and regulations applicable to the business and operations of the Company. Although directors, officers, and employees are not expected to know all of the details of these laws, rules,
and regulations, it is important to know enough to determine when to seek advice from supervisors, managers, officers or other appropriate Company personnel. Engaging in unfair or dishonest conduct is a violation of this Code and will negatively
affect the Company’s reputation.
Conflicts of Interest
A “conflict of interest” exists when an individual’s private interest interferes in any way – or even appears to conflict – with the interests of the
Company. A conflict of interest situation can arise when a director, officer, or employee takes actions or has interests that may make it difficult to perform his or her work on behalf of the Company in an objective and effective manner. Conflicts of
interest may also arise when a director, officer, or employee, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company. Loans to, or guarantees of obligations of, employees and their
family members may create conflicts of interest.
Service to the Company should never be subordinated to personal gain and advantage. Conflicts of interest, whenever possible, should be avoided. In
particular, clear conflict of interest situations involving directors, officers, and employees who occupy supervisory positions or who have discretionary authority in dealing with any third party may include the following:
|
•
|
Any consulting or employment relationship with any customer, supplier, or competitor;
|
|
•
|
Any outside business activity that detracts from an individual’s ability to devote appropriate time and attention to his or her responsibilities
to the Company;
|
|
•
|
Any action that will require payment from corporate funds if such expenditure is not authorized or reimbursable under Company policy;
|
|
•
|
Any use of Company property, information, resource or position for personal gain or to compete with the Company in any way;
|
|
•
|
The receipt of non-nominal gifts or excessive entertainment from any organization with which the Company has current or prospective business
dealings;
|
|
•
|
Being in the position of supervising, reviewing, or having any influence on the job evaluation, pay, or benefit of any family member; and
|
|
•
|
Selling anything to the Company or buying anything from the Company, except on the same terms and conditions as comparable directors, officers,
or employees are permitted to so purchase or sell.
|
Conflicts of interest are prohibited as a matter of Company policy, except under guidelines approved by the Board of Directors. Conflicts of interest may
not always be clear-cut and further review and discussion may be appropriate. Any director or officer who becomes aware of a conflict or potential conflict should bring it to the attention of the Chief Executive Officer, the Chief Financial Officer,
or legal counsel as appropriate in the circumstances. Any employee who becomes aware of conflict or potential conflict should bring it to the attention of a supervisor, manager, or other appropriate personnel.
Insider Trading
Directors, officers, and employees who have access to confidential information relating to the Company are not permitted to use or share that information
for stock trading purposes or for any other purpose except the conduct of the Company’s business. All non-public information about the Company should be considered confidential information. To use non-public information for personal financial benefit
or to “tip” others who might make an investment decision on the basis of this information is not only unethical and against Company policy but is also illegal. Directors, officers, and employees also should comply with insider trading standards and
procedures adopted by the Company. If a question arises, the directors, officer, or employee should consult with the Company’s Chief Financial Officer.
Corporate Opportunities
Directors, officers, and employees are prohibited from taking for themselves personally or directing to a third party any opportunity
that is discovered through the use of corporate property, information, or position without the consent of the Board of Directors. No director, officer, or employee may use corporate property, information, or position for improper personal gain, and
no director, officer, or employee may compete with the Company directly or indirectly. Directors, officers, and employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.
Competition and Fair Dealing
Each director, officer, or employee should endeavor to respect the rights of and deal fairly with the Company’s customers, suppliers,
service providers, competitors, and employees. No director, officer, or employee should take unfair advantage of anyone relating to the Company’s business or operations through manipulation, concealment, or abuse of privileged information,
misrepresentation of material facts, or any unfair dealing practice.
Antitrust –Any conduct that constitutes price fixing or agreeing with competitors as to the nature, extent or means of competition, or boycotting a vendor or customer in any market, is prohibited.
Other conduct such as (1) making false statements about competitors or their products or services; (2) entering into an agreement (in certain circumstances) that requires a customer to use a Company product on an exclusive basis or tying the purchase
of one company product to the purchase of another product; or (3) illegally obtaining the confidential information of a competitor, is inconsistent with UTG’s commitment to honesty and integrity and is a violation of this Code.
Violation of U.S. antitrust laws is a serious offense and can result in severe disciplinary action including termination, as well as prosecution leading to
fines and imprisonment. All employees are responsible for full compliance with these antitrust laws.
Gifts and Entertainment –The purpose of business gifts and entertainment is a commercial setting is to create good will and sound working relationships, not to gain unfair
advantage.
Gifts – No director, officer,
or employee, family member of a director, officer, or employee, or agent shall accept any gift from or give any gift to any third party beyond those courtesies deemed to be customary, reasonable and proper under the particular business
circumstances. As a general rule, accepting or giving a gift having a value in excess of US $250, in any individual situation, is considered beyond what is customary, reasonable and proper. Inexpensive gifts of a promotional nature or social
invitations that are considered customary, reasonable and proper under the business circumstances (such as a business meal) may be accepted. However, employees must decline:
|
•
|
Anything offered as a “quid pro quo” (as part of an agreement to do, or not to do, anything in return for the gift);
|
|
•
|
Any gift of cash or cash equivalents (such as gift certificates, loans, stock, stock options, etc.); or
|
|
•
|
Participating in any activity that they know would cause the person or party offering the gift or entertainment to violate any law, rule,
regulation or the specific ethical standards of their own employer.
|
Entertainment – Providing or accepting entertainment in the course of an employee’s work-related activities must always have a legitimate business purpose and should not compromise the
business judgment, impartiality or loyalty of those being entertained.
Directors, officers, and employees, family members of directors, officers, or employees, or agents may accept a reasonable level of entertainment from
business partners with whom UTG has or is seeking a business relationship. The term “reasonable” can vary depending upon the situation and the level and/or corporate positions of the parties involved, but in no event should the value of such
entertainment, in any individual situation, exceed $250. Directors, officers, or employees may provide a reasonable level of entertainment to business partners, customers or other third parties with whom UTG has or is seeking a business relationship.
Any entertainment, in any individual situation, with a value exceeding $250 shall be approved, in advance whenever possible, by a member of management Such entertainment must not be offered if the director, officer, or employee knows that it would
be prohibited by the specific policies of the other party. Frequent business entertainment or gifts, given to or received from the same party, even if within the acceptable monetary threshold in each instance, may still be considered a conflict of
interest.
A director or officer should discuss with the Chief Executive Officer or Chief Financial Officer, and an employee should discuss with his or her
supervisor, any entertainment, gifts or proposed gifts that the individual is not certain are appropriate.
Maintaining an Appropriate and Secure Work Environment
Human Capital– UTG is committed to protecting human resource assets by providing a work environment that is safe and free from discrimination and harassment that may affect an employee's
terms or conditions of employment. The Company is committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment of any kind.
Violence-Free Workplace –. Violence and threatening behavior are not permitted. The Violent Crime Control Act – Federal law makes it a crime for a financial institution to employ or do business with persons who have been convicted of certain crimes including felonies involving dishonesty or a breach of trust. Any director,
officer, or employee who has been convicted of a felony after the commencement of his employment at UTG must notify the Company of that fact. Failure to notify the Company is a serious violation of this Code and is grounds for termination of
employment.
Safety – UTG is dedicated to providing a secure working environment for officers, directors, and employees and establishing programs to ensure protection of employees, property and other
assets. Employees should secure all personal and Company valuables at all times and report incidences of theft to a supervisor. Emergency situations should be reported immediately to a supervisor or Human Resources.
Drug-Free Workplace and Workforce – Directors, officers, and employees should report to work to perform their duties, free from the influence of illegal drugs or alcohol. The selling,
distributing, purchasing, possessing, or consuming of illegal drugs in the workplace or while otherwise engaged in Company business will not be tolerated.
Privacy – UTG values the trust of its customers and is committed to the responsible management, use and protection of data it maintains about them. Respecting the privacy of the Company’s
customers and protecting the security and confidentiality of their personal information is a top priority. Federal and state laws, including the Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act, restrict the ways in
which UTG can share customer information within and outside the Company. UTG has adopted a privacy policy to comply with these laws, to which the Company and all employees must adhere.
Company Funds and Assets – Maintaining Accurate and Complete Records
The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions.
It is the responsibility of each director, officer, and employee to ensure and protect the integrity of all Company assets. The Company
is committed to maintaining a system of internal controls) that ensures compliance with all applicable laws, rules and regulations and promotes the full, fair, accurate, timely and understandable disclosure of information in all of the periodic
reports and documents that the Company is required to file with regulatory and governmental authorities or that is contained in communications to the public.
Travel and Expense Reimbursement – Directors, officers, and employees must
maintain accurate and complete records of all transactions in connection with personal reimbursement of business expenses.. Employees must never misrepresent facts or falsify records. If a director, officer or employee is not sure whether a certain
expense is legitimate, the officer or employee should ask his or her supervisor or the Financial Accounting Department.
Financial Reporting – All payments and other financial transactions must be properly authorized by management, and accurately and completely recorded in the books and
records of the Company consistent with generally accepted accounting principles and established Company policies and procedures. No undisclosed or unrecorded funds may be established for any purpose, nor may Company funds be placed in any personal or
non-corporate account. Any deviation from generally accepted accounting standards and established Company policies is strictly prohibited. Any attempt to fraudulently influence, coerce, mislead, manipulate or interfere with the auditing of the
Company’s financial statements is a violation of this Code and federal law.
The Company maintains orderly processes and procedures that must be followed to assure full, fair, accurate and timely disclosures to its shareholders and
regulatory authorities and other public communications in keeping with its obligation under applicable law. In the event that any existing or proposed Company policy, procedure, or practice, including all financial, accounting and auditing
practices, causes a concern regarding any possible non-compliance, the employee should immediately bring that issue to the attention of his or her supervisor or other management.
Company Records – All of the Company’s books, records, accounts, and financial statements must be maintained in reasonable detail, must appropriately reflect the Company’s transactions, and
must conform to both the applicable legal requirements and the Company’s system of internal controls. Officers and employees are prohibited from
tampering with, manipulating, altering, removing or destroying records prior to the prescribed retention periods specified in the Company’s record retention policies or as required by law. Business agreements should be documented properly in writing,
signed by the appropriate parties, and contain all terms agreed upon in accordance with all applicable corporate policies and applicable law.
Directors, officers and employees are prohibited from:
|
•
|
Violating any laws, external accounting requirements and Company procedures for reporting information of all types;
|
|
•
|
Making a false or misleading entry in a Company report or record;
|
|
•
|
Knowingly altering, destroying, mutilating or concealing any record or document, or attempting to do so, in order to impair the record’s
integrity or availability for use in an official proceeding; and
|
|
•
|
Selling, transferring or disposing of Company assets without proper documentation and authorization.
|
Business records and communications often become public, and the Company and its officers and employees in their capacity with the Company should avoid
exaggeration, derogatory remarks, guesswork, or inappropriate characterizations of people and companies that can be misunderstood. Officers and employees should use care and good judgment when creating all correspondence, voicemail, e-mail, and
written documents on behalf of the Company to avoid inaccuracy or offensive language.
Officers and employees should create and maintain documents and records in the normal course of business as required by applicable laws, rules and
regulations or a specific Company policy. Company records should be kept for the appropriate time period needed to comply with applicable laws and regulations, as well as the Company’s record retention policies. In accordance with those policies, in
the event of litigation or governmental investigation, directors, officers, and employees should consult with the Company’s Chief Financial Officer or legal counsel before taking any action because it is critical that any impropriety or possible
appearance of impropriety be avoided.
Protection and Proper Use of Company Assets
The Company has many valuable assets — including its people, property, information and reputation. It is the responsibility of the directors, officers, and
employees to preserve and protect these assets, and to use them only in ways that promote the best interests of the Company. Theft, carelessness, and waste have a direct impact on the Company’s profitability. Any suspected incident of fraud or theft
should be immediately reported for investigation. Company assets should be used for legitimate business purposes and should not be used for non-Company business. The Company’s Acceptable Use of Assets Policy provides clear parameters for the
appropriate use of information technology provided by the Company and its subsidiaries.
The obligation to protect the Company’s assets includes its proprietary information. Proprietary information includes intellectual property, marketing
plans, databases, records, salary information, and any unpublished financial data and reports. Unauthorized use or distribution of this information would violate Company policy. It could also be illegal and result in civil or even criminal penalties.
Directors, officers, or employees leaving the Company, voluntarily or otherwise, are prohibited from removing, copying or disclosing any Company
information, in whatever form, that is proprietary and/or confidential. Directors, officers and employees must not permit the unauthorized reproduction of software or other copyrighted or trademarked materials, or any other unauthorized use or misuse
of any intellectual property belonging to or used by the Company.
Confidentiality
Directors, officers, and employees must maintain the confidentiality of confidential information entrusted to them by the Company or its employees,
customers, suppliers, joint venture partners, or others with who the Company is considering a business or other transaction except when disclosure is authorized by an executive officer or required or mandated by laws or regulations. Confidential
information includes all non-public information that might be useful or helpful to competitors or harmful to the Company or its customers and suppliers, if disclosed.
Anyone given access to such records must safeguard them and maintain the confidentiality of any information contained in those records. The obligation to
preserve confidential information continues even after employment ends.
Integrity in Government Relationships
The U.S. Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign government
or foreign political candidates in order to obtain or retain business. It is strictly prohibited to make illegal payments to government officials of any country.
In addition, the U.S. government has a number of laws and regulations regarding business gratuities that may be accepted by U.S.
government personnel. The promise, offer, or delivery to an official or employee of the U.S. government of a gift, favor, or other gratuity in violation of these rules would not only violate Company policy but could also be a criminal offense. State
and local governments, as well as foreign governments, may have similar rules.
When representing the Company, directors, officers, and employees must use care in all contacts and dealings with government officials
and their employees and must comply with all applicable laws, rules, regulations and corporate policies.
Economic and Trade Sanctions/OFAC
UTG must also comply with the various economic and trade sanctions programs
administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). These sanctions programs prohibit a variety of commercial activities, including specific rules relating to insurance transactions, with specified countries as
well as specific entities and individuals included on OFAC’s list entitled “Specially Designated Nationals and Blocked Persons” which can be found at the OFAC website at http://www.treas.gov/ofac/. All employees must understand the obligations under these policies to ensure that prohibited transactions do not occur.
Anti-Money Laundering (USA PATRIOT Act)
UTG is committed to complying with all applicable laws and regulations aimed at deterring terrorists and other criminals from using our free enterprise
system to fund terrorist and other criminal activities, including the USA PATRIOT Act of 2001. Money laundering is the process of engaging in a financial transaction, or a series of transactions, that involves funds used for or derived from criminal
activities. The USA PATRIOT Act makes it mandatory for financial services companies to have an anti-money laundering program that contains four basic components:
|
•
|
Internal Policies, Procedures and Controls;
|
|
•
|
Designation of a Compliance Officer;
|
|
•
|
An Independent Audit Function; and
|
|
•
|
Ongoing Employee Training
|
UTG is committed to meeting these requirements. All employees and business partners must comply fully with the laws and regulations
designed to combat money laundering and the financing of terrorism. Under no circumstances may any employee knowingly facilitate or participate in any money laundering activity. Any employee who does so will be subject to severe disciplinary action,
including possible termination of employment, and may be referred to federal or state law enforcement and regulatory agencies for consideration of civil and criminal penalties.
Investigations and Legal Proceedings
Employees who become aware of a governmental investigation that concerns any business operation of the Company must not conduct their own investigations.
It is the responsibility of the Company’s senior management to determine whether to conduct an internal investigation, as well as to determine the scope and methods to be employed in conducting any such investigation. Most investigations involve
complex legal and business issues and an employee attempting to investigate such matters may compromise the integrity of the investigation. If the results of any internal or governmental investigation warrant corrective action, senior management will
determine the appropriate steps to be taken and will be responsible for implementation of any such remedial or preventative measures.
Participation in an Investigation – All directors,
officers, and employees have the duty to cooperate fully with any internal investigation conducted by the Company. Directors, officers and employees must be truthful in all dealings with internal or governmental investigators, and must not:
|
•
|
Destroy, alter, or conceal any documents or other potentially relevant evidence in anticipation of, or in reaction to, a
request from any governmental or regulatory authority or any court;
|
|
•
|
Lie or otherwise make misleading statements in connection with any federal, state or local government or law enforcement agency investigation, or
any internal investigation by the Company;
|
|
•
|
Obstruct, fraudulently influence or impede any external or internal investigation or inquiry or make any improper attempt to do so; and
|
|
•
|
Attempt to cause any other Company employee or any third party to destroy evidence, to provide false or misleading information or otherwise to
obstruct any investigation.
|
This Code does not prohibit a director, officer or employee from providing information or assisting in an investigation conducted by a
federal regulatory or law enforcement agency, any member of Congress or any committee of Congress, or a supervisor of the employee (or another Company official who has the authority to investigate the alleged misconduct) in connection with conduct
that the employee reasonably believes constitutes a violation of criminal fraud statutes or any rule or regulation of the Securities and Exchange Commission. If any employee becomes involved as a third party in any federal, state or local law
enforcement agency investigation or inquiry, in a matter not related to Company business (e.g., as a witness to a crime or accident), the director, officer, or employee is encouraged to cooperate fully with the proper authorities.
Communications
Contact with the
News Media – All requests for interviews and/or comments from national and local news media should be referred immediately to the
Executive Department.
Contact with Investors – All requests for financial information about UTG and its subsidiaries received from investors should be directed to the Executive Department.
Reporting Violations of the Code
Violations of this Code of Ethics could result in discipline up to and including termination.
Where to Report Violations – Violations of this Code may be reported using one or more of the following methods:
| 1. |
Talk to a supervisor. Whenever possible, employees should discuss the matter
with their supervisor. Employees and supervisors are encouraged to work together to achieve a fair resolution of the alleged violation, problem or issue. Supervisors also have a responsibility to document the reported issue and to provide a
copy of the report to senior management. If the issue remains unresolved to the satisfaction of the reporting person, or if a particular situation does not allow that employee to seek assistance from his direct supervisor, he should contact
senior management.
|
| 2. |
Operating Committee. If an employee’s supervisor is involved in the
reportable incident or if the supervisor is otherwise unapproachable, the employee should seek out a member of the UTG Operating Committee.
|
|
3.
|
Contact the Audit Committee of the UTG Board of Directors.
The Audit Committee members and their phone numbers are listed below:
|
|
John Cortines
|
Thomas Harmon
|
Gabriel Molnar
|
|||
|
7728 Strawberry Estates Drive
|
13 Forest Ridge
|
12910 Shelbyville Rd. #200
|
|||
|
Georgetown, TN 37336
|
Springfield, IL 62712
|
Louisville, KY 40243
|
|||
|
407-650-3663
|
217-243-8615
|
502-254-5001
|
IN ALL CASES, REPORTS WILL BE TREATED AS CONFIDENTIALLY AS POSSIBLE.
Prohibition Against Retaliation – The Company prohibits retaliation against an individual for reporting an activity that the director, officer, or employee, in good faith, believes
to be a violation of any law, rule, regulation or provision of this Code. Retaliation or reprisals against employees are considered a violation of this Code. Any director, officer, or employee who believes he or she is the subject of any form of
retaliation should report the matter to a supervisor, a member of the Operating Committee or a member of the Audit Committee. Further, federal law makes it a crime to retaliate against a person (including with respect to their employment) for
providing truthful information to a law enforcement agency or officer relating to the possible commission of any federal crime.
Certification Requirements
Every employee is responsible for maintaining the standards of ethical conduct as set forth in this Code. To help
ensure compliance with the Code, UTG requires all employees to certify, upon initial employment and at the time a new or substantially revised code is distributed, that they have received and read the Code and fully understand their responsibilities
to comply with the Code.
An initial certification form will be distributed for completion soon after employees complete Company-provided training on the Code. New employees will
receive training on the Code upon joining the Company. Employees also will receive additional training on the Code whenever a new or substantially enhanced version of the Code is adopted. Periodic training will be conducted for all employees as
necessary. Managers and supervisors are responsible for ensuring that all employees under their supervision have undergone any required training.
The UTG senior management will monitor the training and certification process for adequacy and compliance. Failure to comply with the required
certification process or the requirements of the Code will result in appropriate disciplinary action, up to and including termination of employment. The Certification Form is immediately following.
UTG and Subsidiaries
Code of Ethics and Business Conduct
Certification Form
THE SIGNING OF THIS FORM IS A REQUIREMENT FOR ALL DIRECTORS, OFFICERS, AND EMPLOYEES UPON INITIAL EMPLOYMENT AND AT THE TIME A NEW OR SUBSTANTIALLY REVISED
CODE IS DISTRIBUTED.
I hereby certify and acknowledge that:
I have received and read UTG’s Code of Ethics and Conduct. I fully understand my responsibility to comply with the Code.
I recognize that failure to comply with the provisions of the Code may subject me to appropriate disciplinary action, up to and including termination of
employment.
______________________________ ____________________________________
(Date) (Signature of Director, Officer, or Employee)
Please return this form to your immediate supervisor or the person otherwise designated by the Company to collect this document.
CHARTER NAME: Audit Charter
BOARD APPROVED: December 11, 2024
LAST REVIEWED: September 23, 2024
LAST REVISION: March 11, 2019
OWNER: Julie Abel
Charter of the Audit Committee of the Board of Directors
|
I.
|
Purpose
|
The Audit Committee (the “Committee”) is appointed by the Board of Directors (the “Board”) to assist the Board in fulfilling its
responsibility to oversee the quality and integrity of the Company’s financial reporting and the audits of the financial statements of the Company. The Audit Committee’s primary purpose is to assist the Board in oversight of:
|
◾
|
The integrity of the Company’s financial statements and internal controls;
|
|
◾
|
The Company’s compliance with legal and regulatory requirements;
|
|
◾
|
The qualifications and independence of the Company’s independent registered public accounting firm; and
|
|
◾
|
The performance of the Company’s internal audit function and independent registered public accounting firm.
|
|
II.
|
Composition
|
The Audit Committee shall be comprised of one or more members of the Board. Committee members will be appointed by the Board to serve
until their successors are elected. Unless a chairperson is elected by the full Board, the members of the Committee may designate a chairperson by majority vote. All members of the Committee shall meet the independence criteria and have the
qualifications set forth in Rule 10A-3 of the Securities Exchange Act of 1934 (the “Exchange Act”).
Accordingly, all of the members of the Committee shall be directors:
|
◾
|
Who do not accept any direct or indirect consulting, advisory or compensatory fee from the Company other than for board
service or in respect of retirement or deferred compensation for prior service, who are not an “affiliated person” within the meaning of Rule 10A-3 under the Exchange Act; and
|
|
◾
|
Who have a basic understanding of finance and accounting and are able to read and understand fundamental financial statements and the
regulatory requirements of the Company’s industry.
|
It is desirable, but not mandatory that at least one member of the Committee shall have accounting or related financial management
expertise, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial
oversight responsibilities. The above is not intended to require a Committee member to meet the SEC definition of a “financial expert”.
|
III.
|
Meetings
|
The Committee shall meet as often as deemed necessary or appropriate in its judgment, generally at least twice annually, either in
person or by phone. Any member of the Committee may call meetings of the Committee.
At least annually, the Committee should meet privately in executive session with management, the independent auditors, and as a
Committee to discuss any matters that the Committee or each of the groups believes should be discussed. The Committee may ask members of management or others to attend meetings and provide pertinent information as necessary.
In addition, the Committee, or at least its Chair, should communicate with management and the independent auditors annually, at a
minimum, to review the Company’s financial statements and significant audit findings.
|
IV.
|
Responsibilities and Duties
|
Documents/Reports/Accounting Information Review
|
◾
|
Review and reassess the adequacy of this Charter at least annually and submit the charter to the Board of Directors for
approval.
|
|
◾
|
Review the Company’s annual audited financial statements prior to filing or distribution. Review should include discussion
with management and independent auditors of significant issues regarding accounting principles, practices, and judgments.
|
|
◾
|
Recommend to the board whether the financial statements should be included in the annual report on Form 10-K.
|
Independent Registered Public Accounting Firm and Audit Process
|
◾
|
Appoint, compensate, retain, and oversee the work performed by the independent auditor retained for the purpose of
preparing or issuing an audit report or related work. Review the performance and independence of the independent auditor and remove the independent auditor if circumstances warrant. The independent auditor will report directly to the
Audit Committee and the Audit Committee will oversee the resolution of disagreements between management and the independent auditor if they arise.
|
|
◾
|
On an annual basis, the Committee should review and discuss with the independent auditors all significant relationships
they have with the Company that could impair the auditors’ independence.
|
|
◾
|
Review and approve both audit and nonaudit services to be provided by the independent auditor. The authority to grant
approvals may be delegated to one or more designated members of the Audit Committee, whose decisions will be presented to the full Audit Committee at its next meeting.
|
|
◾
|
Discuss with the independent auditor the matters required to be discussed under the standards of the PCAOB.
|
|
◾
|
Review with the independent auditor any problems or difficulties and management’s response.
|
|
◾
|
Hold timely discussions with the independent auditor regarding the following:
|
|
o
|
Critical accounting policies and practices
|
|
o
|
Other material written communications between the independent auditor and management, including, but not limited to, the
management letter and schedule of unadjusted differences.
|
|
◾
|
At least annually, obtain and review a report by the independent auditor describing:
|
|
o
|
The independent auditor’s internal quality-control procedures
|
|
o
|
Any material issues raised by the most recent internal quality-control review or peer review, or by any inquiry or
investigation by governmental or professional authorities within the preceding five years with respect to independent audits carried out by the independent auditor, and any steps taken to deal with such issues
|
|
o
|
All relationships between the independent auditor and the Company, addressing the matters set forth in PCAOB Rule 3526.
|
Financial Reporting Processes, Accounting Policies, and Internal Control Structure
|
◾
|
Periodically review the adequacy and effectiveness of the Company’s disclosure controls and procedures and the Company’s
internal control over financial reporting, including any significant deficiencies and significant changes in internal controls.
|
|
◾
|
Understand the scope of the internal auditor’s review of internal control over financial reporting and obtain a report on
significant findings and recommendations, together with management responses.
|
|
◾
|
Receive and review any disclosure from the Company’s CEO and CFO made in connection with the certification of the Company’s
quarterly and annual reports filed with the SEC of: a) significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s
ability to record, process, summarize, and report financial data; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control.
|
|
◾
|
Review major issues regarding accounting principles and financial statement presentations, including any significant
changes in the Company’s selection or application of accounting principles; major issues as to the adequacy of the Company’s internal controls; and any special audit steps adopted in light of material control deficiencies.
|
|
◾
|
Annually review a summary of director and officers’ related party transactions and potential conflicts of interest.
|
|
◾
|
Oversee the receipt, retention, and treatment of complaints regarding accounting, internal accounting controls, or auditing
matters, including the confidential, anonymous submission by Company employees regarding questionable accounting or auditing matters.
|
Ethical Compliance, Legal Compliance, and Risk Management
|
◾
|
Review, with the Company’s counsel or other appropriate individuals, legal compliance and legal matters that could have a
significant impact on the Company’s financial statements.
|
|
◾
|
Discuss policies with respect to risk assessment and risk management, including appropriate guidelines and policies to
govern the process, as well as the Company’s major financial risk exposures and the steps management has undertaken to control them.
|
Reporting and Other Responsibilities
|
◾
|
Review, with management, the Company’s finance function, including its annual Plan, organization, and quality of personnel.
|
|
◾
|
Perform other activities consistent with this Charter, the Company’s bylaws, and governing laws that the Board or Audit Committee determines
are necessary or appropriate.
|
|
V.
|
Procedures
|
The Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and
personnel of the Company. The Committee shall have the authority and sufficient funding to retain outside legal counsel, accountants or other experts as it determines necessary and appropriate to assist the Committee in carrying out its functions,
without obtaining the approval of the Board or management.
|
VI.
|
Limitation of Audit Committee’s Role
|
While the Committee has the oversight responsibility set forth in this Charter, it does not have the duty to plan or conduct audits or
to determine that the Company’s financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibility of management and
the independent registered public accounting firm. In addition, the Committee recognizes that the Company’s management, internal audit staff and the independent registered public accounting firm, devote more time to reviewing or analyzing the
Company’s business and its operations and as a result, have more knowledge and detailed information concerning the Company than members of the Committee. Consequently, in carrying out its oversight responsibilities, the Committee is not providing
any expert or special assurance as to the Company’s financial statements or any professional certification as to the quality or adequacy of the independent registered public accounting firm.
POLICY NAME: Code of
Ethics for the Chief Executive Officer and Senior Financial Officers
BOARD APPROVED: June 28, 2024
LAST REVIEWED: June 13, 2024
LAST REVISION: March 14, 2022
OWNER: Julie Abel
The Company has a Code of Ethics and Conduct applicable to all officers, directors, and employees of the Company. The Chief Executive Officer (“CEO”) and
all senior financial officers, including the Chief Financial Officer (“CFO”) and principal accounting officer, are bound by the provisions set forth therein relating to ethical conduct, conflicts of interest, and compliance with law. In addition to
the Code of Ethics and Conduct, the CEO and senior financial officers are subject to the following additional specific policies:
To the best of each senior financial officer’s knowledge and ability they will:
|
1.
|
The CEO and all senior financial officers are responsible for full, fair, accurate, timely and understandable disclosure in the periodic reports
required to be filed by the Company with the SEC, Departments of Insurance, and other regulatory agencies. Accordingly, it is the responsibility of the CEO and each senior financial officer to promptly bring to the attention of the Audit
Committee any material information of which he or she may become aware that affects the disclosures made by the Company in its public filings or otherwise assist the Audit Committee in fulfilling their responsibilities.
|
|
2.
|
The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have
concerning (a) significant deficiencies in the design or operation of internal controls that could adversely affect the Company’s ability to record, process, summarize, and report financial data or (b) any fraud, whether or not material,
that involves management or other employees who have a significant role in the Company’s financial reporting, disclosures, or internal controls.
|
|
3.
|
The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have
concerning any violation of this Code or the Company’s Code of Ethics and Conduct, including any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have
a significant role in the Company’s financial reporting, disclosures, or internal controls.
|
|
4.
|
The CEO and each senior financial officer shall promptly bring to the attention of the Audit Committee any information he or she may have
concerning evidence of a material violation of the securities or other laws, rules, or regulations applicable to the Company and the operation of its business, by the Company or any agent thereof, or of violation of the Code of Ethics and
Conduct or of these additional procedures.
|
|
5.
|
The Board of Directors shall determine, or designate appropriate persons to determine, appropriate actions to be taken in the event of violations
of the Code of Ethics and Conduct or of these additional procedures by the CEO and the Company’s senior financial officers. Such actions shall be reasonably designed to deter wrongdoing and to promote accountability for adherence to the
Code of Ethics and Conduct and to these additional procedures, and may include written notices to the individual involved
|
that the Board has determined that there has been a violation, censure by the Board, demotion or re-assignment of the individual
involved, suspension with or without pay or benefits (as determined by the Board), and termination of the individual’s employment. In determining the appropriate action in the particular case, the Board of Directors or such designee shall take into
account all relevant information, including the nature and severity of the violation, whether the violation was a single occurrence or repeated occurrences, whether the violation appears to have been intentional or inadvertent, whether the
individual in question had been advised prior to the violation as to the proper course of action, and whether or not the individual in question had committed other violations in the past.
P O L I C Y
POLICY NAME: Whistleblower Policy
BOARD APPROVED: March 27, 2024
LAST REVIEW: March 4, 2024
LAST REVISION: March 8, 2023
OWNER Julie Abel
All UTG, Inc. employees are encouraged to report either orally or in writing to their immediate supervisor, or alternate line of
authority as hereinafter described, all evidence of activity by a UTG department or employee that may constitute:
|
•
|
Instances of Corporate fraud;
|
|
•
|
Unethical business conduct;
|
|
•
|
A violation of State or Federal law; or
|
|
•
|
Substantial and
specific danger to the employee’s or public’s health and safety
|
Any UTG employee who in good faith reports such incidents as described above will be protected from threats of retaliation,
discharge, or other types of discrimination including but not limited to compensation or terms and conditions of employment that are directly related to the disclosure of such reports. In addition, no employee may be adversely affected because
the employee refused to carry out a directive which, in fact, constitutes corporate fraud or is a violation of State or Federal law.
Any employee who wants to report evidence of alleged improper activity as described should contact his/her immediate supervisor, or the supervisor’s manager. In instances where the employee is not satisfied with the supervisor or manager’s response or is uncomfortable for any reason addressing such concerns to their supervisor or the manager of such supervisor, the employee may contact any Executive Officer of the Company. If the
employee is uncomfortable for any reason contacting an Executive Officer, the employee may contact a member of the Audit Committee of the Board of Directors. The contact information for the Audit Committee members will be posted on the Company
web site. Employees are encouraged to provide as much specific information as possible including names, dates, places, and events that took place, the employee’s
perception of why the incident(s) may be a violation, and what action the employee recommends be taken. Anonymous written or telephonic communications will be accepted. Employees who choose to identify themselves will receive a reply to
their report within 20 working days or as soon as practicable thereafter.
|
Audit Committee Members
|
||
|
John Cortines
7728 Strawberry Estates Dr. Georgetown, TN 37336 972-832-1062 |
Gabriel Molnar
12910 Shelbyville Rd. #200 Louisville, KY 40243 502-254-5001 |
|
|
Thomas Harmon
13 Forest Ridge
Springfield, IL 62712
217-243-8615
|
||
CHARTER NAME: Charter of the Compensation Committee of the Board of Directors
BOARD APPROVED: December 11, 2024
LAST REVIEWED: September 25, 2024
LAST REVISION: November 30, 2022
OWNER: Julie Abel
I. Compensation Committee Purpose
The Compensation Committee of the Board of Directors (the “Board”) of UTG, Inc. (“UTG” or the “Company”) is appointed by the Board to
discharge the Board’s responsibilities relating to compensation of the Company’s Chief Executive Officer (the “CEO”), the Company’s executive officers and other senior executives of the Company (the “Senior Executives”). The Committee has overall
responsibility for approving and evaluating all compensation plans, policies and programs of the Company as they affect the CEO, the Executive Officers, and the Senior Executives.
II. Compensation Committee Composition
The Committee shall have at least two members. The members of the Committee shall be determined at the first meeting of the Board to
be held following the annual general meeting of shareholders or as soon thereafter as practicable. Vacancies on the Committee shall be filled by like vote of the Board at the next meeting of the Board following the occurrence of the vacancy or as
soon thereafter as practicable. A member may be removed from the Committee at any time, with or without cause, by the Board.
Each member of the Committee must satisfy such criteria of independence as the Board may establish and such additional regulatory or
listing requirements as the Board may determine to be applicable or appropriate. Accordingly, each member must qualify as a “non-employee director” under Rule 16b-3 of the Securities and Exchange Commission (the “SEC”) and may not be part of a
compensation committee interlock within the meaning of SEC Regulation S-K. Members of the Committee should be suitably knowledgeable in matters pertaining to executive compensation.
The Committee may form, and delegate its authority to subcommittees as it deems appropriate. The Committee also may delegate
compensation functions to the Company’s human resources personnel and to external advisors, as it deems appropriate. The Board may appoint the Committee’s Chairperson, but if the Board has not appointed a Chairperson, the Committee shall elect a
Chairperson from among its members.
III. Compensation Committee Meetings
The Compensation Committee shall meet as often as may be deemed necessary or appropriate in its judgment, but not less frequently than
1 time annually, either in person or telephonically, and at such times and places as the Committee shall determine. The Committee may request any officer or employee of the Company or the Company’s outside counsel to attend a meeting of the
Compensation Committee or to meet with any members of, or consultants to, the Committee. The Compensation Committee shall report its activities to the Board regularly.
V. Compensation Committee Responsibilities and Duties
The Committee shall have the following responsibilities:
|
•
|
Annually review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals
and objectives, and recommend to the Board the CEO’s overall compensation levels based on this evaluation. In evaluating the incentive components of CEO
|
compensation, the Compensation Committee shall consider the Company’s performance and relative shareholder return, the value of
similar incentive awards to CEOs at comparable companies, and the awards given to the CEO in past years. Notwithstanding the foregoing, if any grant or award to the CEO is intended to qualify for the performance-based compensation exemption from
the limitations on deductibility of executive compensation imposed by Section 162(m) of the Internal Revenue Code or any successor thereto, the Compensation Committee, or any independent subcommittee thereof, rather than the Board, shall approve
such award, but it may refer such award to the Board for ratification.
|
•
|
At least annually, review and approve the annual base salaries and annual incentive opportunities of the CEO and the Senior Executives. In
addition, periodically and as and when appropriate, review and approve the following as they affect the CEO and the Senior Executives: (a) all other incentive awards and opportunities, including both cash-based and equity-based awards and
opportunities; (b) any employment agreements and severance arrangements; and (c) any change-in-control agreements and change-in-control provisions affecting any elements of compensation and benefits. Finally, the Compensation Committee
shall review and approve any special or supplemental compensation and benefits for the CEO and the Senior Executives and persons who formerly served as the CEO and/or as Senior Executives, including supplemental retirement benefits and
the perquisites provided to them during and after employment.
|
|
•
|
Monitor the Company’s compliance with the requirements under the Sarbanes-Oxley Act of 2002 relating to 401(k) plans and loans to directors and
officers and with all other applicable laws affecting employee compensation and benefits.
|
|
•
|
Monitor and evaluate matters relating to the compensation and benefits structure of the Company as the Compensation Committee deems
appropriate, including: (a) provide guidance to senior management on significant issues affecting compensation philosophy or policy, and (b) evaluate whether the risks arising from the Company’s compensation policies and practices for its
employees would be reasonably likely to have a material adverse effect on the Company.
|
|
•
|
May form and delegate authority to subcommittees when appropriate.
|
|
•
|
Review and reassess the adequacy of this Charter periodically and recommend any proposed changes to the Board for approval.
|
|
•
|
Consult with the Chief Executive Officer and advise the Board with respect to senior management succession planning.
|
V. Outside Advisors
The Compensation Committee shall have the authority to retain such outside consultants or advisors as it determines appropriate to
assist it in the performance of its functions, or to advise or inform the Committee, including sole authority to retain and terminate any compensation consultant used to assist the Committee in the evaluation of director, CEO or senior executive
compensation, and to approve the consultant’s fees and other retention terms.
POLICY NAME: Charter of the Investment Committee of the Board of Directors
BOARD APPROVED: September 6, 2024
LAST REVIEWED: August 12, 2024
LAST REVISION: August 12, 2024
OWNER: Chief Investment Officer
I. Investment Committee Purpose
The purpose of the Investment Committee (the “Committee”) of the Board of Directors (the “Board”) of UTG, Inc. (the “Company”) shall
be to oversee the Company’s investment transactions, management, policies and guidelines, including review of investment manager selection, establishment of investment benchmarks, review of investment performance and oversight of investment risk
management exposure policies and guidelines.
II. Investment Committee Composition
The Committee shall be comprised of three or more directors. The members of the Committee shall be determined at the first meeting of
the Board to be held following the annual general meeting of shareholders or as soon thereafter as practicable. Vacancies on the Committee shall be filled by like vote of the Board at the next meeting of the Board following the occurrence of the
vacancy or as soon thereafter as practicable. A member may be removed from the Committee at any time, with or without cause, by the Board.
The Committee may form, and delegate its authority to subcommittees as it deems appropriate. The Committee also may delegate
investment functions to the Company’s investment personnel and to external managers, as it deems appropriate. The Board may appoint the Committee’s Chairperson, but if the Board has not appointed a Chairperson, the Committee shall elect a
Chairperson from among its members.
III. Investment Committee Meetings
The Committee shall establish a regular meeting schedule, which shall be a least two times annually or more frequently as
circumstances require. The Chairperson of the Committee or a majority of the members of the Committee may also call a special meeting of the Committee.
A majority of the members of the Committee present in person or by means of a conference telephone or other communications equipment
by means of which all persons participating in the meeting can hear each other shall constitute a quorum. All actions of the Committee will require the vote of a majority of its members present at the meeting of the Committee at which a quorum is
present. The Committee shall maintain minutes of its meetings and shall regularly report on its actions to the Board.
The Committee may form subcommittees for any purpose that the Committee deems appropriate and may delegate to such subcommittees such
power and authority as the Committee deems appropriate; provided, however, that no subcommittee shall consist of fewer than two members; and provided further that the Committee shall not delegate to the subcommittee any power or authority required
by any law, regulation or listing standard to be exercised by the Committee as a whole.
The Committee shall have access to any of the books and records of the Company that the Committee shall consider relevant to carrying
out its duties and may require any officer or employee of the Company to attend meetings of the Committee and provide to it any information available to the Company relevant to the Committee’s activities, except as the Board may otherwise direct.
IV. Investment Committee Responsibilities and Duties
The Committee shall have the following responsibilities:
|
•
|
Establish and periodically review the Company’s investment policies and guidelines.
|
|
•
|
Undertake periodic review and amendment to the Investment Committee Charter.
|
|
•
|
Oversee and periodically review the performance of the Company’s investments, including the impact on such performance of the Company’s investment
policies and guidelines.
|
|
•
|
Periodically review the structure, approach and effectiveness of the Company’s investment function, including the performance of, and allocation
of responsibilities between, Company personnel and third-party advisers.
|
|
•
|
Select the Company’s money managers and investment advisers, monitor their performance and, when appropriate, terminate their engagement.
|
|
•
|
Authorize investments, either on an ad hoc basis or as standing authorities, and ratifying investments made pursuant to delegated authorities.
|
|
•
|
Monitor on an ongoing basis the performance of the Company’s investment advisers and retain and terminate such advisers as it deems appropriate.
|
V. Outside Advisors
The Committee may conduct or authorize investigations into or studies of matters within the Committee’s scope of responsibilities, and
may retain, at the Company’s expense, such independent counsel or other advisers as it deems necessary for the proper performance of its responsibilities. The Company’s Chief Investment Officer, with the approval of the Chief Executive Officer,
and the Committee shall each have the authority to retain or terminate any consultant or adviser retained at the direction of the Committee or the Company’s Chief Investment Officer to assist the Committee in carrying out its responsibilities,
including authority to approve the fees or other compensation, and other retention terms, of such consultant or adviser, such fees or other compensation to be borne by the Company.