UTG, Inc. Annual Report 2023

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FY2023 Annual Report · UTG, Inc.

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2023 Annual Report

M I S S I O N STATEMENT

The UTG family enriches the lives of others
through the giving of our time, talent,
treasure, and touch.

CORPORATE VALUES

GROW
We grow our family and communities
economically, socially, and spiritually.

INTEGRITY
Do the right thing.

VALUE
We value everyone by treating them
with dignity, honesty, and respect.

EVOLVE
We strive for excellence in all we do through
continuous learning and embracing change.

2 Business Overview

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, 2023, Mr. Correll owns or controls directly
and indirectly approximately 66% of UTG’s outstanding stock.

At December 31, 2023, the Company had consolidated assets of $442 million, consolidated
liabilities of $280 million and total shareholders’ equity of $163 million. The Company’s consolidated
liabilities include policyholder liabilities and accruals of $243 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following

Management’s

of
The
operations of UTG, Inc. and its subsidiaries (collectively with the Parent, the “Company”) for the
years ended
2022. This discussion should be read in conjunction with the
consolidated financial statements and notes thereto included elsewhere in this report.

December 31, 2023

discussion

condition

financial

analysis

results

and

the

and

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.

On February 21, 2023, Mr. James Rousey submitted a letter of resignation stating his desire to
retire. In this regard, he retired as President of UTG, Inc. and its subsidiary, Universal Guaranty
Life Insurance Company as well as his position as a Director of both entities. This was effective as
of the date of the letter. The Board of Directors of UTG, Inc. and Universal Guaranty Life Insurance
Company formally accepted the resignation letter on February 22, 2023. Mr. Jesse Correll, CEO
and Chairman of the Board of the companies, assumed the title of President initially. At the
September 2023 Board of Directors meeting, the Board appointed Mr. Daniel Roberts as President
of Universal Guaranty Life Insurance Company. Mr. Correll continues to hold the President title for
UTG, Inc. Mr. Roberts was previously a Vice President with both companies.

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.

–

Because of the long-term nature of insurance contracts, the insurance
Future Policy Benefits
company is liable for policy benefit payments that will be made in the future. The liability for future
policy
insurance
life
actuarial
Summary
–
industry. The accounting policies for determining this liability are disclosed in Note 1
of Significant Accounting Policies in the Notes to the Consolidated Financial Statements.

determined

procedures

standard

common

benefits

the

–

The costs of acquiring blocks of insurance from other companies
Cost of Insurance Acquired
or through the acquisition of other companies are deferred and recorded as deferred acquisition
costs. The deferred amounts are recorded as an asset and amortized to expense in a systematic
manner as indicated in Note 1
Summary of Significant Accounting Policies in the Notes to the
Consolidated Financial Statements.

–

The Company’s investment portfolio consists of fixed maturities, equity
Valuation of Securities
securities, trading securities, mortgage loans, notes receivable and real estate to provide funding
of future policy contractual obligations.

–

net

and

gains

taxes,

losses,

deferred

unrealized

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
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
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").

accumulated

periodically

Although

reflected

manage

directly

fixed

risk.

sold

and

are

the

all

Equity Securities at Fair Value
preferred stocks, are reported at fair value with unrealized gains and losses reported as a
component of net income (loss).

Investments in equity securities, which include common and

–

Equity Securities at Cost
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.

These investments are reported at their

–

allowances

established

Estate
for

Loans
balances,

Mortgage
amortization

Real
adjusted
are

loans
of
impaired

Mortgage
principal
Valuation
principal and interest will not be collected.
purchase
or
cost,
amortized
financing receivables, that
being presented at the net amount expected to be collected. See Note 2
discussion of the ACL.

unpaid
their
estate
allowances.
discount
contractual
is
The Company recognizes an ACL in earnings at time of
at
carried
such
of
basis
loans
mortgage
Investments for further

on
lifetime
amortized
the
not expect to collect, resulting

on
that
the Company

expected
represents
does

at
valuation
that

premium
loans

and
probable

based
amount

credit
portion

loss
the

origination

cost
in

mortgage

real
or

reported

when

loans

are

for

Real

Estate
–
Depreciation

estate
computed
3

Investment
accumulated
stated
Real
purposes
for
is
depreciation.
30 years. Real estate for which the Company commits to a plan
using estimated useful lives of
to
in
condition,
is
comparison
held-for-sale.
stated at lower of depreciated cost or estimated fair value less expected disposition costs and is
not depreciated.

held-for-investment
on

price,
held-for-sale

to
actively
fair

and
year
estimated

cost
at
financial

its
in
classified

markets
is

straight-line-basis

current
as

a
estate

reasonable

for
Real

reporting

one
its

value,

within

less

sell

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 $2.0 million and $34.3 million in 2023 and 2022, respectively. In 2023, income
before income taxes was approximately $2.0 million compared to $44.0 million in 2022. Total
revenues were approximately $25.4 million in 2023 and $70.0 million in 2022.
One-time events, primarily reflected in realized gains, comprise a substantial portion of the net
income and revenue reported by the Company during 2023 and 2022. 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 $(3.8) million
and $33.7 million for the years ended December 31, 2023 and 2022, 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 2023 were approximately $23.5 million compared to
$25.8 million in 2022.

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 6% when comparing 2023 to 2022. 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 2023 and 2022 was approximately 96.7% and 96.8%, 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 3.3% and 3.2% for 2023 and 2022, respectively.

The following table summarizes the Company’s investment performance for the years ended
December 31:

Net investment income
Net realized investment gains
Change in fair value of equity
securities

2023
14,141,809 $

9,463,843
(3,830,793)

2022

20,811,471
14,168,911
33,690,712

The following table reflects net investment income of the Company for the years ended
December 31:

Fixed maturities
Equity securities
Trading 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

2023
4,184,070 $
2,710,201
0
1,115,145
8,318,201
1,371,973
433,556
1,007,840
529,125
19,670,111
(5,528,302)
14,141,809 $

2022
4,318,591
6,157,942
(13,283)
1,580,647
11,640,759
933,886
489,823
203,250
5,056
25,316,671
(4,505,200)
20,811,471

Net investment income represented 71% and 78% of the Company’s revenue before net
investment gains (losses) as of December 31, 2023 and 2022, respectively. Income from the fixed
maturities, equity securities, and real estate portfolios represented 77% and 87%, respectively, of
the gross investment income reported by the Company for 2023 and 2022.

Since the start of 2022, we have seen more volatility in the U.S. markets in general and have seen
an increase in bonds yields. This is due to the Federal Open Market Committee (“FOMC”)
aggressively raising interest rates to fight the inflation that is currently being experienced. As of
December 31, 2023, the interest rate environment experienced eleven rate increases totaling
5.25% over the past two years. While these actions had a negative impact on some of our
investments that we currently own, this will also allow for better yields on future investments
acquired as current investments mature.

Earnings from the fixed maturities investment portfolio represented 30% and 21% of the total
consolidated net investment income for the years ended December 31, 2023 and 2022,
respectively. When comparing earnings from the fixed maturities portfolio for the years ended
December 31, 2023 and 2022 income was down approximately 3%. The decrease is due to the
maturity of certain fixed maturity investments during 2023. 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, 2023 and 2022, fixed maturities represented 29% and 30%,
respectively, of the total investments owned by the Company.

Earnings from the equity securities portfolio represented 19% and 30% of the total consolidated
net investment income for the years ended December 31, 2023 and 2022, respectively. Earnings
were down approximately $3.4 million when comparing current year and prior year results. The
2022 investment income from equity securities was exceptionally high, and the result of dividends
from oil and gas equity securities. While the oil and gas equity securities continued to pay dividends
in 2023, they were down substantially from the prior year.

Earnings from the real estate portfolio represented 59% and 56% of the total consolidated net
investment income for the years ended December 31, 2023 and 2022, respectively. Earnings were
down about $3.3 million when comparing current year and prior year results.

During 2023, the Company received $550,000 of income from timber sales as compared to $2.3
million in the prior year. Included in the 2023 and 2022 real estate income is approximately $4.2
million and $10.4 million of income from oil and gas royalty distributions, respectively. Income from
oil and gas royalties represented approximately 50% and 55% of the real estate income for 2023
and 2022, respectively.

Earnings from the equity securities and real estate investment portfolios are primarily related to the
oil and gas and timber industries. In 2022, we experienced the reopening of the world economies
post-COVID, and the demand for oil and gas and other commodities substantially increased, which
resulted in increases in prices in the marketplace. Add to this the Russian invasion of Ukraine, and
more upward pricing pressure was felt. In 2022, oil averaged $95 per barrel compared to an
average price of $78 in 2023. Earnings from the real estate investment portfolio are expected to
vary depending on the real estate activities and the potential distributions that may occur.

The following table reflects net realized investment gains (losses) for the years ended December
31:

Fixed maturities available for sale
Equity securities
Real estate
Short term investments
Equity securities - OTTI
Consolidated net realized investment gains

Change in fair value of equity securities -
held
Change in fair value of equity securities -
sold

2023

58,333 $

812,035
8,577,155
16,320
0
9,463,843

2022

(528)
8,877,148
5,292,291
0
(5,000,000)
9,168,911

(5,875,079)

19,212,045

2,044,286

14,478,667

Total change in fair value of equity securities

(3,830,793)

33,690,712

Net investment gains

5,633,050 $ 42,859,623

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 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 several small equity securities
holdings.

The total gains from equity securities sold in 2022 were approximately $23.4 million, of which $8.9
million is being reported as gains from equity securities and $14.5 million is reported as a
component of the change in the fair value of equity securities. The disposal of two equity securities
represented 89% of the total gains from the equity securities portfolio. The Company fully disposed
of one equity security that produced a realized gain of $6.6 million in 2022. The Company disposed
of 7,500 shares of an equity security, associated with the oil and gas industry, producing a realized
gain of $14.3 million. The Company still owns 5,000 shares of this equity security as of December
31, 2022. This disposal will impact future dividend earnings of the Company as it represented a
significant portion of the 2022 investment income from equity securities.

The Company reported a change in fair value of equity securities of approximately $(3.8) million
and $33.7 million for the years ended December 31, 2023 and 2022, 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.

Year to date, the Company has seen negative results in its equity investments. However, most all
the negative results occurred in the first quarter of 2023. Since that time, we reported a slight
rebound, and it appears to be the result of market stabilization. Equity investments primarily in the
oil and gas area represent almost all of the unrealized losses reported in 2023. The Company
experienced significant unrealized gains on these same investments in 2022. Oil prices declined
in early 2023 as concerns of recession intensified leading to a reduction in world demand for oil
temporarily causing the price to decline. Periodic pull backs and downward market adjustments
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 2022, the Company recognized an other-than-temporary impairments of $5 million on an equity
security. The other-than-temporary impairment recognized during 2023 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 2023, the Company sold several pieces of real estate 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. During 2022,
the Company sold a real estate parcel in Kentucky that produced a gain of $3.0 million and a parcel
in Georgia that produced a gain of $812,000.

Expenses

The Company reported total benefits and other expenses of approximately $23.5 million and $25.8
million for the years ended December 31, 2023 and 2022, respectively. Benefits, claims and
settlement expenses represented approximately 62% and 57% of the Company’s total expenses
for 2023 and 2022, respectively. The other major expense category of the Company is operating
expenses, which represented 36% and 41% of the Company’s total expenses for 2023 and 2022,
respectively.

Life benefits, claims and settlement expenses, net of reinsurance benefits, were comparable for
2022 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.

Early in the COVID-19 pandemic, the Company implemented a process to monitor death claims
resulting from COVID-19. Prior to the pandemic, death benefits were $12.6 million, $12.8 million
and $12.4 million in 2017, 2018 and 2019, respectively. During the three plus years of the
pandemic, total death benefits were $14.3 million, $16.0 million, and $13.3 million in 2020, 2021,
and 2022, respectively. Death benefits of the Company have been higher than recent past
experience, even when adjusting for the identified COVID-19 claims. This anomaly showed
throughout the entire U.S. insurance industry. Industry experts believe this increase in death
benefits, while not always directly related to COVID-19, were caused indirectly by the pandemic
due to delays in medical care as a result of the lockdown in 2020 and then later, people’s fears of
seeking out treatment and trouble making up appointments. This is further compounded by
depression from isolation. In the latter half of 2022, claims appeared to be moving back to pre-
pandemic levels. This has continued throughout 2023. While we believe our mortality experience
has returned to pre-pandemic norms, we cannot be absolutely certain at this time. During 2023,
the Company paid approximately $75,000 of claims associated with COVID.

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 96.7% in
2023 compared to 96.8% in 2022. 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 decreased approximately 20% or $2.1 million in 2023 as compared to that of
the same period in 2022. When comparing 2023 and 2022 expenses, two expense categories make
up the majority of the decline - charitable contributions and aircraft maintenance.

Charitable expenses fluctuate based on reported taxable income of the Company. Repairs and
maintenance expenses related to an aircraft partially owned by the Company were down
approximately 73% when comparing 2023 and 2022 activity. In 2022, there were significant
maintenance needs that were addressed. 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 2023, the
Company paid approximately $582,000 in charitable donations as compared to $2.1 million in 2022.

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.

Investment Information

Financial Condition

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:

Fixed maturities
Equity securities, at fair value
Equity securities, at cost
Mortgage loans
Real estate
Notes receivable
Policy loans
Short-term investments
Total investments

2023
$ 105,909,836
156,550,812
15,977,368
15,318,176
21,975,120
14,009,225
6,018,248
29,132,236
$ 364,891,021

2022

$ 110,813,059
150,053,686
21,891,896
30,698,694
26,225,799
14,424,127
6,567,434
3,596,941
$ 364,271,636

As a % of
Total
Investments

As a % of
Total Assets

29%
43%
4%
4%
6%
4%
2%
8%
100%

24%
35%
4%
3%
5%
3%
1%
7%
82%

As a % of
Total
Investments

As a % of
Total Assets

31%
41%
6%
8%
7%
4%
2%
1%
100%

25%
34%
5%
7%
6%
3%
1%
1%
82%

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 83% and 81% of the Company’s total assets as of
December 31, 2023 and 2022, respectively. Fixed maturities and equity securities, at fair value,
consistently represent the majority, of the Company’s total investments – 72% in 2023 and 2022.
The overall investment mix, as a percentage of total investments, remained fairly consistent when
comparing the respective investments held as of December 31, 2023 and 2022.

As of December 31, 2023, 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 $2.2 million and $(17.4) million as of
December 31, 2023 and 2022, 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.

In the first quarter of 2023, the Company adopted ASU No. 2016-13, Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASCD 326). This
standard replaced the incurred loss methodology with an expected loss methodology that is
referred to as the current expected credit loss ("CECL") methodology. CECL requires an estimate
of credit losses for the remaining estimated life of the financial asset using historical experience,
current conditions, and reasonable and supportable forecasts and generally applies to financial
assets measured at amortized cost, including loan receivables and held-to-maturity debt securities,
and some off-balance sheet credit exposure such as unfunded commitments to extend credit.
Financial assets measured at amortized cost will be presented at the net amount expected to be
collected by using an allowance for credit losses.

The Company adopted ASC 326 and all related subsequent amendments thereto using the
modified retrospective approach for all financial assets measured at amortized cost and off-balance
sheet credit exposure. The transition adjustment of the adoption of CECL included an increase in
the allowance for credit losses on loans of $524,000, which is presented as a reduction to net loans
outstanding, and an increase in the allowance for credit losses on unfunded commitments of
$51,000, which is recorded within other liabilities. The Company recorded a net decrease to
retained earnings of $454,250 as of January 1, 2023 for the cumulative effect of adopting CECL,
which reflects the transition adjustments noted above, net of the applicable deferred tax assets
recorded. Results for reporting periods beginning after January 1, 2023 are presented under CECL
while prior period amounts continue to be reported in accordance with previously applicable
accounting standards ("Incurred Loss").

The updated guidance also amended the current other-than-temporary model for available-for-sale
securities and requires the recognition of impairments relating to credit losses through an allowance
account and limits the amount of credit loss to the difference between a security’s amortized costs
basis and its fair value. In addition, the length of time a security has been in an unrealized loss
position will no longer impact the determination of whether a credit loss exists. See Note 1 –
Recently Issued Accounting Standards – of the Consolidated Financial Statements for further
information on this topic.

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, 2023 and 2022, substantially all of the consolidated shareholders’ equity represents net assets
of its subsidiaries. In 2023, the Parent company received $2 million in dividends from its insurance
subsidiary and $3 million in 2022. 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 2023, the Federal Home Loan Bank approved 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 $20.3 million. During the fourth
quarter of 2023, the Company borrowed $19 million and planned to utilize the funds for investing
activities. The interest rate on the borrowed funds is variable and currently is 5.47%. During the
first quarter of 2024, the Company repaid the entire outstanding principal balance.

Consolidated Liquidity

Cash used in operating activities was approximately $9.8 million and $5.3 million in 2023 and 2022,
respectively. Sources of operating cash flows of the Company, as with most insurance entities, is
comprised primarily of premiums received on life insurance products and income earned on
investments. Uses of operating cash flows consist primarily of payments of benefits to
policyholders and beneficiaries and operating expenses. The Company has not marketed any
significant new products for several years. As such, premium revenues continue to decline.
Management anticipates future cash flows from operations to remain similar to historic trends.

During 2023 and 2022, the Company’s investing activities provided net cash of approximately $6.9
million and $26.2 million, respectively. The Company recognized proceeds of approximately $79.6
million and $79.7 million from investments sold and matured in 2023 and 2022, respectively. The
Company used approximately $(72.7) million and $(53.5) million to acquire investments during
2023 and 2022, 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 $1.2 million and $6.4 million during 2023
and 2022, respectively. As of December 31, 2023 and 2022, the Company had $19 million in debt
outstanding with third parties.

The Company had cash and cash equivalents of approximately $41.2 million and $45.3 million as
of December 31, 2023 and 2022, 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 $103.4 million and $108.3 million at December 31, 2023 and 2022,
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, 2023 and 2022 are presented in Note 7 – Credit Arrangements
in the Notes to the Consolidated Financial Statements.

The Company had $19 million of debt outstanding as of December 31, 2023 and 2022.

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, 2023, UG has a ratio of approximately 6.19, which is 619% 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 March

of 2022, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million
of UTG’s common stock, for a total repurchase of $22 million of UTG’s common stock in the open
market or in privately negotiated transactions. Company Management has broad authority to
operate the program, including the discretion of whether to purchase shares and the ability to
suspend or terminate the program. Open market purchases are made based on the last available
market price but may be limited. During 2023, the Company repurchased 30,646 shares through
the stock repurchase program for $881,966. Through December 31, 2023, UTG has spent
$20,191,403 in the acquisition of 1,356,859 shares under this program.

Total shareholders’ equity was approximately $161.7 million and $158.0 million as of December
31, 2023 and 2022, respectively. Total shareholders' equity increased approximately 2% in 2023
as compared to 2022. The increase is primarily attributable to net income from operations. As of
December 31, 2023 and 2022, the Company reported accumulated other comprehensive loss of
approximately $(4.9) million and $(7.1) million, respectively.

For the period ended December 31, 2023, the Company recognized an increase in accumulated
other comprehensive income of approximately $2.2 million and a decrease in accumulated other
comprehensive income of approximately $(17.4) million for the same period in the prior year. The
fluctuations in accumulated other comprehensive income (loss) are the result of unrealized gains
(losses) on fixed maturity securities. 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.

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

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.

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, 2023. 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
financial reporting was effective.

concluded

that,

December

31,

2023,

the

Company’s

internal

control

over

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
only
Commission
Securities
Management’s report in this Annual Report.

Exchange

Company

provide

permit

rules

and

that

the

Changes in Internal Controls

the

have

been

changes

Company’s

since
There
December 31, 2023, 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,
for
evaluating controls and procedures is continuous and encompasses constant improvement of the
design
any
deficiencies, which may be identified during this

and
process.

effectiveness

remediation

established

Company’s

procedures

reporting.

reporting

financial

process

controls

internal

control

over

The

and

the

Kerber, Eck & Braeckel LLP
3200 Robbins Road
Suite 200A
Springfield, IL 62704

P 217.789.0960
F 217.789.2822

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 sheet of UTG, Inc. and Subsidiaries (the
Company) as of December 31, 2023, and the related consolidated statements of operations,
comprehensive
the
related notes (collectively referred to as the financial statements). In our opinion, the financial
statements
of
December 31, 2023, and the results of its operations and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of America.

shareholders

Company

respects,

financial

material

position

present

income

equity,

ended,

(loss),

fairly,

flows

cash

then

year

and

the

for

all

opinion

Basis for Opinion
These financial statements are the responsibility of
the Companys management. Our responsibility is
statements based on our audit. We are a public
to
financial
on
express
accounting
States)
Company
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal
Exchange
and
securities
Commission and the PCAOB.

Companys
the

an
firm

regulations

Accounting

applicable

registered

Securities

Oversight

(United

Public

Board

rules

laws

with

and

the

and

audit

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that
we
financial
plan
statements
not
is
financial
required
perform,
to
to
reporting.
over
financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the
Companys internal control over financial reporting. Accordingly, we express no such opinion.

obtain
misstatement,
engaged
we

reasonable
whether
an
obtain

perform
free
of
nor
of

assurance
error
of
its

material
were
we
our audit,

the
Company
over

whether
The
control

about
or
internal

to
are required

are
have,
As
part

to
audit
an

understanding

internal

control

fraud.

due

error

whether

Our audit included performing procedures to assess the risks of material misstatement of the financial
statements,
risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in
and
significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audit provides a reasonable basis for our opinion.

statements.

procedures

accounting

performing

evaluating

principles

included

financial

respond

fraud,

those

audit

used

that

also

and

Our

the

kebcpa.com

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 includes
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 in an investment company. These methods at times depend on key inputs and assumptions
crucial to determining fair value that may not be observable requires managerial judgment and
estimation. Last, the disclosure of this information in the Companys 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 so that 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 managements 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

18 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 managements 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 Companys 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 Companys 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 subsidiarys experience
adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations.
The Companys future policy benefits liability was $ 223.8 million as of December 31, 2023.

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

19 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 managements 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 managements consulting actuarial specialist and
reviewed her qualifications as appointed consulting actuary

We have served as the Companys auditor since 2023.

Springfield, Illinois
March 29, 2024

20 .

armanmo

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Shareholders of UTG, Inc. and Subsidiaries:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of UTG, Inc. and Subsidiaries (collectively the
"Company" or "UTG ") as of December 31, 2022,
the related consolidated statements of operations,
comprehensive income (loss), shareholders' equity, and cash flows, for the year ended December 31, 2022, and
the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position
of the Company as of December 31, 2022, and the results of their operations and their cash flows for the year
ended December 31, 2022, 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 consolidated financial statements based on our audit. 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 audit 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 consolidated financial statements are
free of material misstatement, whether due to error or fraud.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated 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 consolidated financial statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of
the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/hnuutim AJL'P

ArmaninoLlp
St. Louis, Missouri

We began serving as the Company's auditors in 2005. In 2023, we became the predecessor auditor.

March 24, 2023, except for the effects of the tables reflecting the impact of the revisions as of and for the year
ended December 31, 2022, discussed in Note 15 (not presented herein) to the consolidated financial statements
appearing under Item 8 of the Company's annual report (Form 10-K ) as to which the date is March 29, 2024.

21 UTG, Inc.
Consolidated Balance Sheets
As of December 31, 2023 and 2022

ASSETS

2023

2022

Investments:

Investments available for sale:

Fixed maturities, at fair value (amortized cost $109,554,738 and $117,279,820)

Held to maturity redeemable preferred stock, at amortized cost
Equity securities, at fair value (cost $89,387,893 and $77,015,688)
Equity securities, at cost

Mortgage loans on real estate at amortized cost
(net of credit loss reserve of $274,000 and $0)
Investment real estate, net
Notes receivable (net of credit loss reserve of $250,000 and $0)
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

Income taxes payable
Deferred income taxes
Notes payable
Other liabilities
Total liabilities

Shareholders' equity:
Common stock - no par value, stated value $0.001 per share. Authorized 7,000,000

shares - 3,165,320 and 3,164,809 shares issued and outstanding

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.

103,409,836$
2,500,000
156,550,812
15,977,368

15,318,176
21,975,120
14,009,225
6,018,248
29,132,236
364,891,021

41,185,196
2,001,064

23,847,623
4,734,575
2,036,896
2,128,027
884,531
441,708,933 $

223,757,860 $
4,188,917
260,892
14,749,258
0
12,426,840
19,000,000
5,635,373
280,019,140

3,167
32,613,817
133,491,797
(4,882,317)
161,226,464
463,329
161,689,793
441,708,933 $

108,313,059
2,500,000
150,053,686
21,891,896

30,698,694
26,225,799
14,424,127
6,567,434
3,596,941
364,271,636

45,290,385
1,371,677

24,318,030
4,638,857
2,698,153
0
4,945,627
447,534,365

229,582,664
4,072,879
318,096
14,802,746
4,189,081
11,582,138
19,000,000
5,958,385
289,505,989

3,166
32,693,972
131,989,352
(7,111,586)
157,574,904
453,472
158,028,376
447,534,365

UTG, Inc.
Consolidated Statements of Operations
For the Years Ended December 31, 2023 and 2022

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 (benefit)

Net income

2023

2022

7,918,235
(2,553,010)
14,141,809
280,303
19,787,337

0
9,463,843
(3,830,793)
5,633,050
25,420,387

16,089,474
(2,882,312)
1,029,885
302,685
(102,971)
661,257
8,368,135
28,389
23,494,542

1,925,845
(144,247)

8,384,604
(2,697,382)
20,811,471
350,519
26,849,212

(5,000,000)
14,168,911
33,690,712
42,859,623
69,708,835

15,703,526
(2,449,533)
1,029,156
311,400
(116,571)
688,348
10,497,302
108,722
25,772,350

43,936,485
9,572,139

2,070,092

34,364,346

Net income attributable to noncontrolling interest

(113,397)

(106,341)

Net income attributable to common shareholders

1,956,695

34,258,005

Amounts attributable to common shareholders:

Basic income per share

Diluted income per share

0.62

10.81

Basic weighted average shares outstanding

3,176,757

3,167,719

Diluted weighted average shares outstanding

3,176,757

3,167,719

See accompanying notes.

UTG, Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2023 and 2022

2023

2022

Net income

2,070,092

34,364,346

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

2,867,943

(21,981,097)

(592,591)
2,275,352

4,615,943
(17,365,154)

Less reclassification adjustment for (gains) losses included in net
income
Tax expense (benefit) for (gains) losses included in net income
Reclassification adjustment for (gains) losses included in net income,

net of tax

Subtotal: Other comprehensive income (loss), net of tax

(58,333)
12,250

(46,083)
2,229,269

528
(111)

417
(17,364,737)

Comprehensive income

4,299,361

16,999,609

Less comprehensive income attributable to noncontrolling interests

(113,397)

(106,341)

Comprehensive income attributable to UTG, Inc.

4,185,964

16,893,268

See accompanying notes.

UTG, Inc. Consolidated Statements of Shareholders’ Equity Year ended December 31, 2023 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest Total Shareholders' Equity Balance at January 1, 2023 $ 3,166 32,693,972 131,989,352 (7,111,586) 453,472 158,028,376 Adoption of new accounting standard 0 0 (454,250) 0 0 (454,250) 3,166 32,693,972 131,535,102 (7,111,586) 453,472 157,574,126 Common stock issued during year 31 801,781 0 0 0 801,812 Treasury shares acquired and retired (30) (881,936) 0 0 0 (881,966) Net income attributable to common shareholders 0 0 1,956,695 0 0 1,956,695 Unrealized holding gain on securities net of noncontrolling interest and reclassification adjustment and taxes 0 0 0 2,229,269 0 2,229,269 Distributions 0 0 0 0 (103,540) (103,540) Gain attributable to noncontrolling interest 0 0 0 0 113,397 113,397 Balance at December 31, 2023 $ 3,167 32,613,817 133,491,797 (4,882,317) 463,329 161,689,793 Year ended December 31, 2022 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interest Total Shareholders' Equity Balance at January 1, 2022 $ 3,167 32,780,587 97,731,347 10,253,151 476,555 141,244,807 Common stock issued during year 23 599,169 0 0 0 599,192 Treasury shares acquired and retired (24) (685,784) 0 0 0 (685,808) Net income attributable to common shareholders 0 0 34,258,005 0 0 34,258,005 Unrealized holding loss on securities net of noncontrolling interest and reclassification adjustment and taxes 0 0 0 (17,364,737) 0 (17,364,737) Distributions 0 0 0 0 (128,824) (128,824) Gain attributable to noncontrolling interest 0 0 0 0 105,741 105,741 Balance at December 31, 2022 $ 3,166 32,693,972 131,989,352 (7,111,586) 453,472 158,028,376 See accompanying notes.25

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2023 and 2022

UTG, Inc.

Cash flows from operating activities:

Net income
Adjustments to reconcile net income to net cash used in operating

activities:
Amortization (accretion) of investments
Other-than-temporary impairments
Realized investment gains, net
Change in fair value of equity securities
Unrealized trading losses included in income
Realized trading losses included in income
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.

2023

2022

2,070,092

34,364,346

(314,042)
0
(9,463,843)
3,830,793
0
0
661,257
372,861
728,887
801,812

(5,692,118)
3,646,515
(629,387)
374,689
(3,535,674)
(6,317,108)
3,679,893
(9,785,373)

7,558,333
7,838,385
0
17,770,810
16,531,219
4,944,143
1,453,634
23,490,815
79,587,339

0
(12,454,268)
0
(2,654,293)
(3,417,744)
(4,779,241)
(904,446)
(48,473,476)
(72,683,468)
6,903,871

4,056,116
(4,294,297)
21,500,000
(21,500,000)
(881,966)

(103,540)
(1,223,687)
(4,105,189)
45,290,385
41,185,196

138,587
5,000,000
(14,168,911)
(33,690,712)
1,086
12,197
688,348
2,517,685
2,032,627
599,192

(5,943,417)
3,767,177
(107,518)
210,672
(2,836,498)
5,164,454
(3,083,634)
(5,334,319)

13,128,136
36,126,454
17,983
3,655,779
12,659,854
12,329,505
1,752,613
0
79,670,324

(2,614,165)
(27,523,161)
(32,382)
(5,158,911)
(4,586,280)
(9,030,657)
(929,549)
(3,591,885)
(53,466,990)
26,203,334

4,555,115
(5,106,391)
58,500,000
(63,500,000)
(685,808)

(128,824)
(6,365,908)
14,503,107
30,787,278
45,290,385

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, 2023, 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.

Business Segments – The Company has only one business segment – life insurance.

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.

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% to 6.0% as of December 31, 2023 and 2022.

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

The following Accounting Standard Update ("ASU)") was adopted in 2023:

In the first quarter of 2023, the Company adopted ASU No. 2016-13, Financial Instruments - Credit
Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This
standard replaced the incurred loss methodology with an expected loss methodology that is
referred to as the current expected credit loss ("CECL") methodology. CECL requires an estimate
of credit losses for the remaining estimated life of the financial asset using historical experience,
current conditions, and reasonable and supportable forecasts and generally applies to financial
assets measured at amortized cost, including loan receivables and held-to-maturity debt securities,
and some off-balance sheet credit exposure such as unfunded commitments to extend credit.
Financial assets measured at amortized cost will be presented at the net amount expected to be
collected by using an allowance for credit losses.

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, 2023 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.
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 updated 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. 2023-07, Segment Reporting (Topic 280) -
Improvements to Reportable Segment Disclosures. ASU 2023-07 is intended to improve
disclosures about a public entity's reportable segments and addresses requests from investors and
other allocators of capital for additional, more detailed information about a reportable segment's
expenses. This ASU applies to all public entities that are required to report segment information in
accordance with Topic 280. All public entities will be required to report segment information in
accordance with the new guidance starting in annual periods beginning after December 15, 2023.
The Company does not expect ASU 2023-07 to have a material impact 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 currently evaluating the impact that the adoption of
this guidance will have on its consolidated financial statements.

Reclassifications - Certain reclassifications have been made to the 2022 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, 2023. The Company has elected to reclassify $8.7 million out of investment in real
estate, net, into equity securities, at cost and to reclassify $2.5 million out of equity securities, at
cost, to a new item titled held to maturity, redeemable preferred stock, at amortized cost. There
were no revisions to the Consolidated Statements of Operations or the Consolidated Statements
of Shareholders’ Equity. There were no changes to net income attributable to common
shareholders or total shareholders’ equity.

Revision of previously issued financial statements – The Company identified an error in its
previously issued Consolidated Financial Statements related to the presentation of the
Consolidated Statements of Comprehensive Income (Loss). The impact of the error to the prior
period’s Consolidated Financial Statements was not considered to be material. In order to improve
the consistency and comparability of the Consolidated Financial Statements, Management revised
the Consolidated Financial Statements to include the revision discussed herein. See Note 15 -
Revision of Previously Issued Consolidated Financial Statements for details of the revision.

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:

2023
U.S. Government and govt.
agencies and authorities
U.S. special revenue and

assessments

All other corporate bonds
Redeemable preferred stock
Total

2022
U.S. Government and govt.
agencies and authorities
U.S. special revenue and

assessments

All other corporate bonds
Redeemable preferred stock
Total

Original or
Amortized
Cost
$ 14,316,976 $

Gross
Unrealized
Gains

0 $

Gross
Unrealized
Losses
(729,197)

Estimated
Fair
Value

13,587,779

7,528,985

(220,527)

7,308,458

87,708,777
2,500,000

89,004
0

(5,284,182)
0

82,513,599
2,500,000

$ 112,054,738

$ 89,004

$ (6,233,906)

105,909,836

Original or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

$ 18,315,321 $

0 $ (1,104,146)

17,211,175

7,535,018
91,429,481
2,500,000

65,529
0

(335,918)
(7,592,226)
0

7,199,100
83,902,784
2,500,000

$ 119,779,820

$ 65,529

$ (9,032,290)

110,813,059

(1) The Company has elected to reclassify certain investments to conform with the
presentation for the year ended December 31, 2023. These reclassifications had no impact
on previously reported net income.

The amortized cost and estimated fair value of fixed maturity securities at December 31, 2023, by
contractual maturity date, is shown below.

Fixed Maturity Securities
December 31, 2023

Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Fixed maturities with no single maturity date
Total

Amortized
Cost
10,990,370
45,486,425
6,664,901
21,851,378
27,061,664
112,054,738

Estimated
Fair Value

10,832,220
44,009,137
6,664,497
20,078,690
24,325,292
105,909,836

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
leveraged
debt securities because their issuers typically are
and more vulnerable to adverse economic conditions than investment grade issuers. In addition,
the
debt
securities. Debt securities classified as below-investment grade are those that receive a Standard
& Poor’s rating of BB+ or below.

investment

securities

usually

market

trading

limited

highly

grade

these

than

for

The Company held below investment grade investments with an estimated market value of $0
of

December 31, 2023

2022.

and

following table presents the estimated

The
securities in an unrealized loss position as of December 31:

fair value

and gross unrealized losses of fixed maturity

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

$ 1,497,390

(3,696)

$ 12,090,389

(725,501)

$ 13,587,779

(729,197)

0
544,610

0
(2,319)

7,308,458

73,678,567

(220,527)
(5,281,863)

7,308,458

(220,527)
74,223,177 (5,284,182)

Total fixed maturities

$ 2,042,000

(6,015)

$ 93,077,414

(6,227,891)

$ 95,119,414

(6,233,906)

2022

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

$ 17,211,175

(1,104,146)

assessments

All other corporate bonds
Total fixed maturities

7,199,100
80,144,564
$ 104,554,839

(335,918)
(7,592,226)
(9,032,290) $

0
0
0

17,211,175

(1,104,146)

0
0
0

7,199,100
(335,918)
80,144,564 (7,592,226)
$ 104,554,839 (9,032,290)

(1) The Company has elected to reclassify certain investments to conform with the

presentation for the year ended December 31, 2023. These reclassifications had no
impact on previously reported net income.

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

As of December 31, 2023

Fixed maturities

As of December 31, 2022

Fixed maturities

Total

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, 2023 and
2022 are attributable to changes in market interest rates and general disruptions in the credit
market subsequent to purchase. At December 31, 2023, 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, 2023.

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, 2023 and December 31, 2022:

Unrealized appreciation (depreciation)

on available-for-sale securities

Deferred income taxes
Net
unrealize
(depreciation)
securities

d
o

appreciation
available-for-sale

December 31, 2023

December 31, 2022

(6,144,902) $
1,290,429

(8,966,761)
1,883,020

(4,854,473) $

(7,083,741)

Cost Method Investments

The Company held equity investments with an aggregate cost of $15,977,368 and $21,891,896 at
December 31, 2023 and 2022, 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 $5 million on one security during the fourth quarter of 2022. 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 2023 and 2022, the Company acquired $2,654,293 and $5,158,911 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 2023 and 2022, the maximum and minimum lending rates for mortgage loans were:

Farm loans
Commercial loans
Residential loans

2023

2022

Maximum
rate
5.00 %
8.75 %
5.00 %

Minimum
rate
5.00 %
4.00 %
4.15 %

Maximum

Minimum

rate
5.00 %
7.00 %
5.00 %

rate
4.50 %
4.00 %
4.15 %

Most mortgage loans are first position loans. Loans issued are generally limited to no more than
80% of the appraised value of the property.

The Company has in place a monitoring system to provide Management with information regarding
potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or
more delinquent. Management is provided with a monthly listing of loans that are 60 days or more
past due. 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:

In good standing
Total mortgage loans

2023
$ 15,318,176
$ 15,318,176

Total foreclosed loans during the year

2022
30,698,694
30,698,694

$
$

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 2023 and 2022, the Company
acquired $4,779,241 and $9,030,657 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:

Notes receivable
Less allowance for credit losses
Total notes receivable, net

Short-Term Investments

December 31,
2023
14,259,225
(250,000)
14,009,225

December 31,
2022
14,424,127
0
14,424,127

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 2023 and 2022, the Company acquired $48,473,476 and $3,591,885, 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.

Notes Receivable

The following is a summary of the notes receivable outstanding and the related allowance for
credit losses:

Notes receivable
Less allowance for credit losses
Total notes receivable, net

Short-Term Investments

December 31,
2023
14,259,225
(250,000)
14,009,225

December 31,
2022
14,424,127
0
14,424,127

During 2023 and 2022, the Company acquired $48,473,476 and $3,591,885, respectively, in short-
term investments.

Allowance for Credit Loss - Loans

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 a any third-party guarantees. The
allowance for unfunded commitments as of December 31, 2023 and 2022 is $51,000 and $0,
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.

Analysis of Investment Operations

The following table reflects the Company’s net investment income for the periods ended December
31:

2023

4,184,070
2,710,201
0
1,115,145
8,318,201
1,371,973
433,556
1,007,840
529,125
19,670,111
(5,528,302)
14,141,809

2022

4,318,591
6,157,942
(13,283)
1,580,647
11,640,759
933,886
489,823
203,250
5,056
25,316,671
(4,505,200)
20,811,471

(1) The Company has elected to reclassify certain investments to conform with the

presentation for the year ended December 31, 2023. These reclassifications had no
impact on previously reported net income.

The following table presents net investment gains (losses) and the change in net unrealized gains
on investments for the periods ended December 31:

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 fixed maturities
Sales of equity securities
Sales of real estate
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

2023

2022

58,333
820,001
8,577,155
23,509
9,478,998

0
(7,966)
0
(7,189)
0
(15,155)
9,463,843

4,683
8,986,784
5,326,838
0
14,318,305

(5,211)
(109,636)
(34,547)
0
(5,000,000)
(5,149,394)
9,168,911

(3,830,793)
(3,830,793)
5,633,050

33,690,712
33,690,712
42,859,623

$
$

2,867,943
2,867,943

$ (21,981,097)
$ (21,981,097)

The Company had investments with a fair value of $7,959,076 and $7,771,724 on deposit with
various state insurance departments as of December 31, 2023 and 2022, 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:

2023
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

2022
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

Level 1

Level 2

Level 3

Total

13,587,77
9

13,587,779

0
0
13,587,77
9

35,819,97
3

0
35,819,97
3
29,132,23
6
78,539,98
8

7,308,458
82,513,599

89,822,057

0
0

7,308,458
82,513,599

103,409,836

5,329,080

2,807,634

43,956,687

57,604,806

5,329,080

60,412,440

101,561,493

29,132,236

$ 95,151,137

$ 60,412,440

$ 234,103,565

Level 1

Level 2

Level 3

Total

$ 17,211,175

17,211,175

0
0
17,211,175

7,199,100
83,902,784
91,101,884

0
0
0

7,199,100
83,902,784
108,313,059

45,999,477
0
45,999,477
3,596,941
$ 66,807,593

6,651,800
0
6,651,800
0
$ 97,753,684

0
7,967,643
7,967,643
0
7,967,643

52,651,277
7,967,643
60,618,920
3,596,941
$ 172,528,920

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, 2023 and 2022, the estimated fair value of such investments was $54,989,319
and $89,434,766, 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 unrealized gains (losses) related to the Level 3 assets and
liabilities.

Balance at December 31,
2022
Realized gains (losses)
Unrealized gains (losses)
Purchases
Sales
Transfers in to Level 3
Transfers out of Level 3
Balance at December 31,
2023

Investments in
Common
Stocks

Investments in

Limited Liability
Companies

0
0
211,449
0
0
2,596,185
0

7,967,643
0
15,211,945
5,683,029
(166,250)
28,908,439
0

Total

7,967,643
0
15,423,394
5,683,029
(166,250)
31,504,624
0

2,807,634

57,604,806

60,412,440

Both observable and unobservable inputs may be used to determine the fair values of positions
classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments
held at December 31, 2023 and 2022 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 2023, transfers in to Level 3 included limited liability companies classified as equity securities for
which valuation techniques changed due to the availability of data.

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

liability

Limited
companies
Common stocks
Total

Fair Value at
December 31, 2023

Fair Value at
December 31, 2022

57,604,806
2,807,634
60,412,440

7,967,643

0
7,967,643

Valuation
Technique
Pricing Model

Pricing Model

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
Equity securities
Growth equity
Redeemable
Limited partnership
Non-redeemable
Limited liability
companies
Limited partnerships
Total

Investment Category
Equity securities
Growth equity
Redeemable
Limited partnership
Non-redeemable
Common stock
Limited liability
companies
Limited partnerships
Total

Fair Value at
December 31,
2023

Unfunded
Commitments

Redemption
Frequency

Redemption
Notice
Period

34,081,797

Quarterly

11,960,929

9,464,608

8,946,593
54,989,319

2,410,599
11,875,207

n/a

Fair Value at
December 31,
2022

Unfunded
Commitments

Redemption
Frequency

Redemption
Notice Period

43,724,562

49,343

Quarterly

12,074,829
25,243,953

8,391,422
89,434,766

0
4,931,498

2,799,026
7,779,867

n/a
n/a

n/a

n/a
n/a

n/a

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 on October 5, 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 on October 15, 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 on July 1, 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 a Limited Liability Company ("LLC") that was formed under the laws of
the state of Delaware. The LLC was organized solely for the purpose owning, managing,
supervising and disposing of the investment. The Partnership will continue in existence for the
investment period (subject to extension), unless sooner terminated by operation of law or pursuant
to any provision of the Limited Partnership Agreement. In 2022, 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”) on April 6, 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”) on September 5, 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 September 29, 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 LP that was formed pursuant to the laws of the state of Delaware under
a limited partnership agreement on October 27, 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.

The Company invested in a LLC that was formed as an Alabama Limited Liability Company on April
6, 2022. The Limited Liability Company Agreement provides for the LLC to continue until dissolved,
unless terminated earlier through terms specified in the Operating Agreement. The purpose of
Trivela is to (1) acquire, own and operate football (soccer) clubs (each a “Target Company”) (2)
establish investment vehicles for the acquisition of Target Companies (3) sponsor private
placements of securities on behalf of each investment vehicle (4) manage the operations of each
investment vehicle & Target Company on a fee for services basis (5) engage in any lawful act or
activity incidental to the Business as reasonably determined by the managers. The Company
entered into a Limited Liability Company Agreement to invest in Trivela Group, LLC.

The Company invested in a LLC that was formed as an Alabama Limited Liability Company on April
15, 2022. The Limited Liability Company Agreement provides for the LLC to continue until
dissolved, unless terminated earlier through terms specified in the Operating Agreement. The LLC
invests in sports clubs and real estate. In 2022, The Company entered into a Limited Liability
Company Agreement to invest in this LLC.

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, 2023 and 2022.

Fair Value Information About Financial Instruments Not Measured at Fair Value

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:

2023
Assets
Held to maturity redeemable

preferred stock

Equity securities, at cost
Mortgage loans on real

estate

Investment real estate
Notes receivable
Policy loans
Accrued investment income

Liabilities
Policy claims and benefits

payable

Dividend and endowment

accumulations

Notes payable

Carrying
Amount

Estimated
Fair Value

Level 1

Level 2

Level 3

2,500,000
15,977,368
15,318,176

2,500,000
15,977,368
14,447,026

21,975,120
14,009,225
6,018,248
2,001,064

62,899,838
14,189,147
6,018,248
2,001,064

4,188,917

14,749,258
19,000,000

0
0
0

0
0
0
0

0
0

0
0
0

0
0
0
0

0
19,000,00
0

2,500,000
15,977,368

14,447,026
62,899,838
14,189,147
6,018,248
2,001,064

4,188,917

14,749,258

2022
Assets
Held to maturity redeemable

preferred stock

Equity securities, at cost
Mortgage loans on real

estate

Investment real estate
Notes receivable
Policy loans
Accrued investment income

Liabilities
Policy claims and benefits

payable

Dividend and endowment

accumulations

Notes payable

Carrying
Amount

Estimated
Fair Value

Level 1

Level 2

Level 3

2,500,000
21,891,896
30,698,694

2,500,000
21,891,896
29,735,873

26,225,799
14,424,127
6,567,434
1,371,677

4,072,879
14,802,746

19,000,000

74,026,290
14,812,523
6,567,434
1,371,677

4,072,879

14,802,746
19,000,000

0
0
0

0
0
0
0

0
0

0
0
0

0
0
0
0

0
19,000,000

2,500,000
21,891,896

29,735,873
74,026,290
14,812,523
6,567,434
1,371,677

4,072,879

14,802,746
0

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

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

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

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

Policy loans are carried at the aggregate unpaid principal balances in the 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 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 our 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, 2023, the
Company had gross insurance in-force of approximately $847 million of which approximately $172
million was ceded to reinsurers. As December 31, 2022, the Company had gross insurance in-
force of approximately $897 million of which approximately $184 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% of UG’s reinsurance reserve credit, as of December 31, 2023 and 2022.

The Company does not have any short-duration reinsurance contracts. The effect of the
Company’s long-duration reinsurance contracts on premiums earned in 2023 and 2022 were as
follows:

Direct
Assumed
Ceded
Net Premiums

2023
Premiums Earned
7,918,235
$
0
(2,553,010)
5,365,225

2022

Premiums Earned
8,384,604
$
0
(2,697,382)
5,687,222

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.

Cost of insurance acquired, beginning of year

2,698,153

3,386,501

2023

2022

Interest accretion
Amortization
Net amortization

Cost of insurance acquired, end of year

418,722
(1,079,979)
(661,257)
2,036,896

501,324
(1,189,672)
(688,348)
2,698,153

Estimated net amortization expense of cost of insurance acquired for the next four years is as
follows:

2024
2025
2026
2027

Interest
Accretion

339,372
263,074
189,374
116,157

Amortization
975,187
877,240
799,520
292,926

Net
Amortization
635,815
614,166
610,146
176,769

Note 6 – Income Taxes

UTG and UG file separate federal income tax returns.

Income tax expense (benefit) consists of the following components:

Current tax expense

(benefit)
Deferred tax
Income tax expense
(benefit)

2023

2022

(517,108)
372,861

7,054,454
2,517,685

(144,247)

9,572,139

The expense for income taxes differed from the amounts computed by applying the applicable
United States statutory rate of 21% as of December 31, 2023 and 2022, before income taxes as a
result of the following differences:

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 (benefit)

2023

2022

404,427

9,226,662

(23,813)
(109,642)
(106,797)
(308,422)
(144,247)

(22,332)
(142,790)
(170,123)
680,722
9,572,139

The following table summarizes the major components that comprise the net deferred tax liability
as reflected in the balance sheets:

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

2023
11,862,470
427,748
(7,899)
(697,024)
1,387,490
(284,350)
96,105
(236,950)
(120,750)
12,426,840

2022

10,794,061
566,612
(8,206)
(718,338)
1,387,490
(330,488)
144,158
(253,151)
0
11,582,138

At December 31, 2023 and 2022, the Company had gross deferred tax assets of $1,939,816 and
$1,808,474, respectively, and gross deferred tax liabilities of $14,366,656 and $13,390,612,
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, 2020, 2021, 2022 and 2023.

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, 2023 and 2022, the Company had the following lines of credit available:

Issue Date

Maturity
Date

Revolving
Credit Limit

December
31, 2022

Borrowings Repayments

December
31, 2023

11/20/2013

11/20/2024

8,000,000

0 $

10/21/2021

10/4/2024

25,000,000

19,000,000

21,500,000

19,000,000

Instrument
Lines of
Credit:

UTG
UG -
CMA

has

variable

the
UTG
common voting stock of its wholly owned subsidiary, Universal Guaranty Life Insurance Company
("UG").

collateral,

revolving

pledged

credit.

100%

UTG

rate

has

line

During October of 2023, 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 $20,258,602. During the fourth quarter of 2023,
the
The
interest rate on the borrowed funds is variable and currently is 5.47%. During the first quarter of
2024, the Company repaid the entire outstanding principal balance.

Company

borrowed

activities.

investing

planned

million

utilize

funds

and

$19

the

for

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 $878,132 and $0 at
December 31, 2023 and 2022, respectively.

Notes Receivable Commitments - The Company commits to lend funds under notes receivable
funding commitments. The amounts of these notes receivable commitments were $2,800,000 and
$4,109,343 at December 31, 2023 and 2022, 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 $16,153,903 and $14,443,510 at December 31, 2023
and 2022, 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 March of 2022, the Board of Directors of UTG authorized the repurchase
of up to an additional $2 million of UTG’s common stock, for a total repurchase of $22 million of
UTG’s common stock in the open market or in privately negotiated transactions. Company
Management has broad authority to operate the program, including the discretion of whether to
purchase shares and the ability to suspend or terminate the program. Open market purchases are
made based on the last available market price but may be limited. During 2023, the Company
repurchased 30,646 shares through the stock repurchase program for $881,966. Through
December 31, 2023, UTG has spent $20,191,403 in the acquisition of 1,356,859 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 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.
In December of 2022, the Company issued 4,485 shares of its common stock as compensation to
the Directors. The shares were valued at $25.06 per share, the market value at the date of issue.
During 2022, the Company recorded $112,394 in operating expense related to the stock issuance.

Other Compensation - During 2023, the Company issued 26,911 shares of stock to management
and employees as compensation at a cost of $674,390. During 2022, The Company issued 17,963
shares of stock to management and employees as compensation at a cost of $486,798. 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:

Basic weighted average shares outstanding
Weighted average dilutive options outstanding
Diluted weighted average shares outstanding

2023
3,176,757
0
3,176,757

2022
3,167,719
0
3,167,719

The computation of diluted earnings per share is the same as basic earnings per share for the
years ending December 31, 2023 and 2022, 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, 2023, 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 ten calendar
days prior to payment of such dividend. Ordinary dividends are defined as the greater of: a) prior
year statutory net income or b) 10% of statutory capital and surplus. 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 $2
million and $3 million to UTG in 2023 and 2022, respectively. No extraordinary dividends were paid
during the two year period. UTG used the dividends received during 2023 and 2022 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:

Net income
Capital and surplus

2023
8,320,315
91,828,094

2022
18,782,335
93,269,301

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 $165,137 during 2023 and 2022.

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 2023 and 2022, UTG
paid $307,442 and $553,533 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 2023 and 2022, UG paid $7,910,324 and
$7,862,902, 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 $18,694 and $24,146 in servicing
fees and $18,630 and $0 in origination fees to FSNB during 2023 and 2022, 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 $1,337,096 and $895,317 in 2023 and 2022, 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 2023 and 2022, the
Company received reimbursements of $1,438,450 and $1,134,315, 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 2023 and
2022.

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 $60,031 and $79,674
as of December 31, 2023 and 2022, respectively.

During 2022, FSF sold all of its membership interest in three limited liability companies (“LLC”) to
a wholly-owned subsidiary of UTG at a price of $1 per entity. The three LLCs are listed on the
Company’s organization chart as wholly-owned subsidiaries of Stanford Wilderness Road, LLC.

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 has a 9% interest in the participated loan and has agreed to fund up to
$1,482,300. As of December 31, 2023, $604,169 had been drawn on the loan.

Note 12 – Other Cash Flow Disclosures

On a cash basis, the Company paid the following expenses for the periods ended December 31:

Interest
Federal income tax

2023

44,814
5,800,000

2022

83,995
1,890,000

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, 2023 and 2022, approximately 51% and 50%, 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% of total life
insurance in-force at December 31, 2023 and 2022. Insurance ceded represented 40% of premium
income for 2023 and 2022. 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 28% and 31% of the Company’s total invested assets at
December 31, 2023 and 2022, respectively. The following table provides an allocation of the oil
and gas investments by type as of December 31:

2023
Fixed maturities, at fair
value
Equity securities, at fair
value
Equity securities, at cost
Investment real estate
Notes receivable
Total

Land, Minerals &
Royalty Interests

Exploration

Total

1,075,240

84,066,203
5,826,381
7,383,851
2,000,000
99,276,435

0
0
0
0
1,075,240

84,066,203
5,826,381
7,383,851
2,000,000
$ 100,351,675

2022
Fixed maturities, at fair
value
Equity securities, at fair
value
Equity securities, at cost
Investment real estate
Notes receivable
Total

Land, Minerals &
Royalty Interests

Exploration

Total

1,060,710

86,811,806
13,840,908
7,931,628
1,950,657
110,534,999

0
0
0
0
1,060,710

86,811,806
13,840,908
7,931,628
1,950,657
111,595,709

(1) The Company has elected to reclassify certain investments to conform with the

presentation for the year ended December 31, 2023. These reclassifications had no
impact on previously reported net income.

As of December 31, 2023 and 2022, the Company owned four equity securities that represented
approximately 73% and three securities that represented approximately 58%, 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 – Selected Quarterly Financial Data

Note 15 – Revision of Previously Issued Consolidated Financial Statements

The Company identified an error in its previously issued December 31, 2022 Consolidated Financial
Statements related to the presentation of the Consolidated Statements of Comprehensive Income
(Loss). 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. There were no revisions to the Consolidated Balance Sheet, Statements
of Operations, Statements of Shareholders’ Equity or the Consolidated Statements of Cash Flows.
There were no changes to net income attributable to common shareholders or total shareholders’
equity.

Consolidated Statements of
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
Subtotal: Other
income (loss), net of tax
Comprehensive income
Comprehensive income attributable
to UTG, Inc.

comprehensive

December 31, 2022

As Previously
Reported

Adjustments

As Revised

(27,824,173)

5,843,076

(21,981,097)

5,843,076

(1,227,133)

4,615,943

(21,981,097)

4,615,943

(17,365,154)

(21,980,680)
12,383,666

4,615,943
4,615,943

(17,364,737)
16,999,609

12,277,325

4,615,943

16,893,268

BOARD OF DIRECTORS

EXECUTIVE OFFICERS

Jesse T. Correll
Chairman of the Board,
Chief Executive Officer, and President

Theodore C. Miller
Senior Vice President,
Chief Financial Officer

Douglas P. Ditto
Vice President

Daniel T. Roberts
Vice President

April R. Chapman
Chief Executive Officer of Generous Giving

Jesse T. Correll
Chairman, President and Director
of First Southern Bancorp, Inc.

Preston H. Correll
Founder, Marksbury Farm Market and
Owner, St. Asaph Farm

John M. Cortines
Director of Generosity, Maclellan Foundation

Thomas F. Darden, II
Founder and Chief Executive Officer
of Cherokee

Howard L. Dayton, Jr.
Founder and Chief Executive Officer of
Compass – finances God’s way

Thomas E. Harmon
Owner and President of Harmon Foods, Inc.

Gabriel J. Molnar
Chief Financial Officer, Capstone Realty, Inc.

Peter L. Ochs
Founder of Capital III and
Founding Member of Trinity Academy

SHAREHOLDER INFORMATION

Annual Meeting

The 2024 Annual Meeting of Shareholders will be held on Friday, June 28, 2024 at 9:30 a.m. eastern
time at 205 North Depot Street, Stanford, Kentucky 40484. All shareholders are welcome to attend
and to take part in the discussion of Company affairs.

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.

2023

2022

Period

High

Low

High

Low

First quarter
Second quarter
Third quarter
Fourth quarter

26.75
38.63
38.63
34.00

24.18
26.00
29.60
30.01

30.00
29.00
33.28
33.28

27.10
23.00
23.60
25.06

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, 2024 there were 4,139 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, 2023 and total repurchases:

Total
Number of
Shares
Purchased

Oct. 1 through Oct. 31, 2023
Nov. 1 through Nov. 30, 2023
Dec. 1 through Dec. 31, 2023
Total

1,411 $
1,311 $
1,061 $
3,783

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

1,411
1,311
1,061
3,783

N/A
N/A
N/A

$
$
$

1,879,781
1,840,438
1,808,597

Average
Price
Paid Per
Share

32.41
30.01
30.01

The Board of Directors of UTG has authorized the repurchase in the open market or in privately
negotiated transactions of UTG’s common stock. At a meeting of the Board of Directors in March
of 2022, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million
of UTG’s common stock, for a total repurchase of $22 million of UTG’s common stock in the open
market or in privately negotiated transactions. Company Management has broad authority to
operate the program, including the discretion of whether to purchase shares and the ability to
suspend or terminate the program. Open market purchases are made based on the last available
market price but may be limited. During 2023, the Company repurchased 30,646 shares through
the stock repurchase program for $881,966. Through December 31, 2023, UTG has spent
$20,191,403 in the acquisition of 1,356,859 shares under this program.

Corporate Office
205 North Depot Street
Stanford, KY 40484
(217) 241-6300

Corporate Website
www.utgins.com

Shareholder Services
The Company acts as its own transfer agent. Communications regarding stock transfer, lost
certificates or changes of address should be directed to the Stock Transfer Department at the
corporate office address above or telephone (217) 241-6410.

Certified Public Accountants
Kerber, Eck & Braeckel LLP
Springfield, IL 62704

Request for Information
Shareholders may receive a copy, without charge, of the annual report, Form 10-K, or Form 10-Q
upon written request. Copies of Form 10-K or Form 10-Q are also available electronically at the
Securities and Exchange Commission’s Web site address at www.sec.gov.