UTG, Inc.
Annual Report 2024

Plain-text annual report

2024 Annual Report 1 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 (“FSF”), a Kentucky corporation, and First Southern Bancorp, Inc. (“FSBI”), a financial services holding company. FSBI operates through its 100% owned subsidiary bank, First Southern National Bank (“FSNB”). Banking activities are conducted through multiple locations within south-central and western Kentucky. Mr. Correll is Chief Executive Officer, President, and Chairman of the Board of Directors of UTG and is currently UTG’s largest shareholder through his ownership control of FSF, FSBI and affiliates. At December 31, 2024, Mr. Correll owns or controls directly and indirectly approximately 66% of UTG’s outstanding stock. At December 31, 2024, the Company had consolidated assets of $477 million, consolidated liabilities of $266 million and total shareholders’ equity of $211 million. The Company’s consolidated liabilities include policyholder liabilities and accruals of $237 million. The Company’s principal executive office is located at 205 North Depot Street, Stanford, Kentucky 40484. The Company’s telephone number is 217-241-6300. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is Management’s discussion and analysis of the financial condition and results of operations of UTG, Inc. and its subsidiaries (collectively with the Parent, the “Company”) for the years ended December 31, 2024 and 2023. This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. Cautionary Statement Regarding Forward-Looking Statements This report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by those laws. We have based our forward- looking statements on our current expectations and projections about future events. Our forward- looking statements include information about possible or assumed future results of operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as the growth of our business and operations, our business strategy, competitive strengths, goals, plans, future capital expenditures and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” 3 “believe,” “estimate,” “expect,” “intend,” “plan,” “probably,” or similar expressions, we are making forward-looking statements. Numerous risks and uncertainties may impact the matters addressed by our forward-looking statements, any of which could negatively and materially affect our future financial results and performance. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions, and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements that are included in this report, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved. In light of these risks, uncertainties and assumptions, any forward-looking event discussed in this report may not occur. Our forward-looking statements speak only as of the date made, and we undertake no obligation to update or review any forward-looking statement, whether as a result of new information, future events or other developments, unless the securities laws require us to do so. Overview UTG, Inc., a Delaware corporation, is a life insurance holding company. The Company’s dominant business is individual life insurance, which includes the servicing of existing insurance policies in- force, the acquisition of other companies in the life insurance business, the acquisition of blocks of business and the administration and processing of life insurance business for other entities. UTG has a strong philanthropic program. The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. The Company also encourages its staff to be involved on a personal level through monetary giving, volunteerism and use of their talents to assist those less fortunate than themselves. Through these efforts, the Company hopes to make a positive difference in the local community, state, nation, and world. Critical Accounting Policies We have identified the accounting policies below as critical to the understanding of our results of operations and our financial condition. The application of these critical accounting policies in preparing our consolidated financial statements requires Management to use significant judgments and estimates concerning future results or other developments including the likelihood, timing or amount of one or more future transactions or amounts. Actual results may differ from these estimates under different assumptions or conditions. On an on-going basis, we evaluate our estimates, assumptions and judgments based upon historical experience and various other information that we believe to be reasonable under the circumstances. For a detailed discussion of other significant accounting policies, see Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements. Future Policy Benefits – Because of the long-term nature of insurance contracts, the insurance company is liable for policy benefit payments that will be made in the future. The liability for future policy benefits is determined by standard actuarial procedures common to the life insurance industry. The accounting policies for determining this liability are disclosed in Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements. Valuation of Securities – The Company’s investment portfolio consists of fixed maturities, equity securities, mortgage loans, notes receivable and real estate to provide funding of future policy contractual obligations. 4 Fixed Maturity Investments – The Company classifies its fixed maturity investments, which include bonds, as available for sale. Investments classified as available for sale are carried at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. While the available-for- sale fixed maturity securities are generally expected to be held to maturity, they are classified as available-for-sale and are sold periodically to manage risk. Although all of the fixed maturity securities are classified as available-for-sale, the Company has the ability and intent to hold the securities until maturity. The Company has an evaluation process in place to monitor fixed maturity securities available for sale for credit loss. See Note 2 - Investments for further disclosure of the allowance for credit loss (“ACL”). Equity Securities at Fair Value – Investments in equity securities, which include common and preferred stocks, are reported at fair value with unrealized gains and losses reported as a component of net income (loss). Equity Securities at Cost – These investments are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Mortgage Loans on Real Estate – Mortgage loans on real estate are reported at their unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on mortgage loans carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL. Investment Real Estate – Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is computed on a straight-line-basis for financial reporting purposes using estimated useful lives of 3 to 30 years. Real estate for which the Company commits to a plan to sell within one year and actively markets in its current condition, for a reasonable price, in comparison to its estimated fair value, is classified as held-for-sale. Real estate held-for-sale is stated at lower of depreciated cost or estimated fair value less expected disposition costs and is not depreciated. Notes Receivable – Notes receivable are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on notes receivable carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in notes receivable being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL. Deferred Income Taxes – The provision for deferred income taxes is based on the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates to temporary differences between amounts reported in the Consolidated Financial Statements and the tax basis of existing assets and liabilities. A valuation allowance is recognized for the portion of deferred tax assets that, in Management’s judgment, is not likely to be realized. 5 Results of Operations On a consolidated basis, the Company had net income attributable to common shareholders of approximately $49.3 million and $2.7 million in 2024 and 2023, respectively. In 2024, income before income taxes was approximately $62.2 million compared to $2.8 million in 2023. Total revenues were approximately $84.9 million in 2024 and $26.3 million in 2023. One-time events, primarily reflected in realized gains, comprise a substantial portion of the net income and revenue reported by the Company during 2024 and 2023. The magnitude of realized investment gains and losses in a given year is a function of the timing of trades of investments relative to the markets themselves as well as the recognition of any impairments on investments. Future earnings will be significantly negatively impacted should earnings from these one-time items not be realizable in a future period. While Management believes there remain additional investments with such one-time earnings, when or if realized remains uncertain. The Company reported a change in fair value of equity securities of approximately $56.8 million and $(2.9) million for the years ended December 31, 2024 and 2023, respectively. This line item is material to the results reported in the Consolidated Statements of Operations. This line item can also be extremely volatile, reflecting changes in the stock market. These results can be material and volatile, most of the equity holdings of the Company were acquired with a long-term view, thus making these intermediate changes in value of less concern to Management. Management monitors its equity holdings looking more at the specific entity and market it is in relative to performance and less to changes due to general market swings that occur over the holding period of the investment. Total benefits and other expenses paid in 2024 were approximately $22.7 million compared to $23.5 million in 2023. In summary, the Company’s basis for future revenue is expected to come from the following primary sources: Conservation of business currently in-force, the maximization of investment earnings and the acquisition of other companies or policy blocks in the life insurance business. Management has placed a significant emphasis on the development of these revenue sources to enhance these opportunities. Revenues Premiums and policy fee revenues, net of reinsurance premiums and policy fees, declined approximately 1% when comparing 2024 to 2023. The Company writes very little new business. Unless the Company acquires a new company or a block of in-force business, Management expects premium revenue to continue to decline on the existing block of business at a rate consistent with prior experience. The Company’s average persistency rate for all policies in-force for 2024 and 2023 was approximately 96.6% and 96.7%, respectively. Persistency is a measure of insurance in-force retained in relation to the previous year. A positive impact on premium income is the consistency of the lapse percentage. Persistency of the business has been consistent over the last several years. The lapse percentages were 3.4% and 3.3% for 2024 and 2023, respectively. The following table summarizes the Company’s investment performance for the years ended December 31: 2024 2023 Net investment income $ 16,093,592 $ 14,053,528 Net realized investment gains 7,356,275 9,463,843 Change in fair value of equity securities 56,839,751 (2,856,543) 6 The following table reflects net investment income of the Company for the years ended December 31: 2024 2023 Fixed maturities, available for sale $ 2,652,249 $ 2,932,220 Fixed maturities, held to maturity 167,536 165,137 Equity securities 4,233,674 3,708,633 Mortgage loans 952,084 1,115,145 Real estate 8,958,452 8,318,201 Notes receivable 1,341,095 1,371,973 Policy loans 412,701 433,556 Cash and cash equivalents 1,668,712 1,007,840 Short-term investments 661,962 529,125 Total consolidated investment income 21,048,465 19,581,830 Investment expenses (4,954,873) (5,528,302) Consolidated net investment income $ 16,093,592 $ 14,053,528 Net investment income represented 74% and 71% of the Company’s revenue before net investment gains (losses) as of December 31, 2024 and 2023, respectively. Income from the fixed maturities, equity securities, and real estate portfolios represented 76% and 77%, respectively, of the gross investment income reported by the Company for 2024 and 2023. Beginning in March 2022 and ending in July 2023, the Federal Open Market Committee (“FOMC”) aggressively raised interest rates to fight inflation. During this time period, the interest rate environment experienced eleven rate increases totaling 5.50%, including four increases during the first part of 2023. While these actions had a negative impact on some of our investments currently owned, this has also allowed for better yields on cash balances and recent investments acquired as investments mature. In the second half of 2024, the FOMC cut the interest rate 3 times for a total of 1% making the current rate 4.50%. The Company anticipates a similar decline in earnings on cash balances and any new investments that are acquired as investments mature. Earnings from the fixed maturities investment portfolio represented 17% and 22% of the total consolidated net investment income for the years ended December 31, 2024 and 2023, respectively. When comparing earnings from the fixed maturities portfolio for the years ended December 31, 2024 and 2023 income was down approximately 9%. The decrease is due to the maturity of certain fixed maturity investments during 2024. The Company’s investment in fixed maturities continues to decline as we have, for the most part, chosen not to reinvest in fixed maturities. As of December 31, 2024 and 2023, fixed maturities represented 19% and 22%, respectively, of the total investments owned by the Company. Earnings from the equity securities portfolio represented 26% of the total consolidated net investment income for the years ended December 31, 2024 and 2023, respectively. Earnings were up approximately $525,000 when comparing current year and prior year results. The 2024 increase in investment income from equity securities was mainly the result of increased dividends from oil and gas equity securities. Earnings from the real estate portfolio represented 56% and 59% of the total consolidated net investment income for the years ended December 31, 2024 and 2023, respectively. Earnings were up about $640,000 when comparing current year and prior year results. During 2024, the Company received $1.3 million of income from timber sales as compared to $550,000 in the prior year. Included in the 2024 and 2023 real estate income is approximately $3.6 million and $4.2 million of income from oil and gas royalty distributions, respectively. Income from oil and gas royalties represented approximately 41% and 50% of the real estate income for 2024 and 2023, respectively. 7 The earnings reported by the cash and short term investments represented 14% and 11% of the total consolidated net investment income reported by the Company during 2024 and 2023. The increase in earnings in this category is the result of a combination of higher cash and short term holdings in 2024 and from increased interest rates received from banks and other deposit institutions due to FOMC rate changes. With the three rate declines in 2024 moving it down 1.00%, the Company anticipates experiencing a similar decline in earnings on cash balances going forward. The following table reflects net realized investment gains (losses) for the years ended December 31: 2024 2023 Fixed maturities available for sale $ 0 $ 58,333 Equity securities 7,190,262 812,035 Real estate 166,020 8,577,155 Short term investments (7) 16,320 Equity securities - OTTI (900,149) 0 Consolidated net realized investment gains 6,456,126 9,463,843 Change in fair value of equity securities - held 52,025,699 (4,900,829) Change in fair value of equity securities - sold 4,814,052 2,044,286 Total change in fair value of equity securities 56,839,751 (2,856,543) Net investment gains $ 63,295,877 $ 6,607,300 Realized investment gains are the result of one-time events and are expected to vary from year to year. Realized gains and losses from equity securities represent the difference between the fair value at the beginning of the reporting period and the fair value at the time of sale. The total gains from equity securities sold in 2024 were approximately $12.0 million, of which $7.2 million is being reported as gains from equity securities and $4.8 million is reported as a component of the change in the fair value of equity securities. The gains were the result of selling several equity securities holdings. The total gains from equity securities sold in 2023 were approximately $2.9 million, of which $812,035 is being reported as gains from equity securities and $2.0 million is reported as a component of the change in the fair value of equity securities. The gains were the result of selling one large equity securities holding and several other small holdings. The Company reported a change in fair value of equity securities of approximately $56.8 million and $(2.9) million for the years ended December 31, 2024 and 2023, respectively. This line item is material to the results reported in the Consolidated Statements of Operations, and this line item can also be extremely volatile. While these results can be material and volatile, most of the equity holdings of the Company were acquired with a long-term view, thus making these intermediate changes in value less of a concern to Management. Management monitors its equity holdings looking more at the specific entity and market it is in relative to performance and less to changes due to general market swings that occur over the holding period of the investment. Equity investments, primarily in the oil and gas industry, represent almost all the unrealized gains reported in 2024 and unrealized losses reported in 2023. Periodic pull backs and rallies are expected by management. Management believes its current equity investments continue to be solid investments for the Company and have further growth potential; however, changes in market 8 conditions could cause volatility in market prices. In 2023, the Company saw negative results in its equity investments. However, most all the negative results occurred in the first quarter of 2023. In 2024, the Company recognized an other-than-temporary impairment of $900,149 on an equity security. The other-than-temporary impairment recognized during 2024 was taken as a result of Management’s assessment and determination of value of the investment. The investment was written down to better reflect its current expected value. During 2024, the Company sold several real estate land parcels in Kentucky and one small parcel in Illinois which makes up all of the realized gains in Real Estate. During 2023, the Company sold several smaller real estate land parcels located in Kentucky producing realized gains of approximately $940,000. Additionally, during third quarter 2023, the Company sold a large land parcel in West Virginia realizing a gain of approximately $7.6 million. In summary, the Company’s basis for future revenue is expected to come from the following primary sources: Conservation of business currently in-force, the maximization of investment earnings and the acquisition of other companies or policy blocks in the life insurance business. Management has placed a significant emphasis on the development of these revenue sources to enhance these opportunities. Expenses The Company reported total benefits and other expenses of approximately $22.7 million and $23.5 million for the years ended December 31, 2024 and 2023, respectively. Benefits, claims and settlement expenses represented approximately 56% and 62% of the Company’s total expenses for 2024 and 2023, respectively. The other major expense category of the Company is operating expenses, which represented 42% and 36% of the Company’s total expenses for 2024 and 2023, respectively. Life benefits, claims and settlement expenses, net of reinsurance benefits, were down approximately 12% when comparing 2024 and 2023. Policy claims vary from year to year and therefore, fluctuations in mortality are to be expected and are not considered unusual by Management. Changes in policyholder reserves, or future policy benefits, also impact this line item. Reserves are calculated on an individual policy basis and generally increase over the life of the policy as a result of additional premium payments and acknowledgment of increased risk as the insured continues to age. The short-term impact of policy surrenders is negligible since a reserve for future policy benefits payable is held which is, at a minimum, equal to and generally greater than the cash surrender value of a policy. The benefit of fewer policy surrenders is primarily received over a longer time period through the retention of the Company’s asset base. Overall, the Company’s persistency for business in-force remained relatively steady at 96.6% in 2024 compared to 96.7% in 2023. The Company’s actual experience for earned interest, persistency, and mortality varies from the assumptions applied to pricing and for determining premiums. Accordingly, differences between the Company’s actual experience and those assumptions applied may affect the profitability of the Company. Interest crediting rates on adjustable rate policies have been reduced to their guaranteed minimum rates, and as such, cannot be lowered any further. Operating expenses increased approximately 13% or $1.1 million in 2024 as compared to that of the same period in 2023. When comparing 2024 and 2023 expenses, there is one expense item that comprises the majority of the increase, charitable contributions. Charitable expense was approximately $690,000 more when comparing 2024 and 2023. Charitable expense fluctuates 9 based on reported taxable income of the Company. Expenses in the remaining categories were comparable between years. As mentioned above in the Overview section of the Management Discussion and Analysis, UTG has a strong philanthropic program. The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. Charitable contributions made by the Company are expected to vary from year to year depending on the earnings of the Company. In 2024, the Company paid approximately $1.3 million in charitable donations as compared to $582,000 in 2023. Net amortization of cost of insurance acquired decreased approximately 4% when comparing current and prior year activity. Cost of insurance acquired is established when an insurance company is acquired or when the Company acquires a block of in-force business. The Company assigns a portion of its cost to the right to receive future profits from insurance contracts existing at the date of the acquisition. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates may vary due to risk analysis performed at the time of acquisition on the business acquired. The Company utilizes a 12% discount rate on the remaining unamortized business. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. Amortization of cost of insurance acquired is particularly sensitive to changes in interest rate spreads and persistency of certain blocks of insurance in-force. This expense is expected to decrease unless the Company acquires a new block of business. Management continues to place significant emphasis on expense monitoring and cost containment. Maintaining administrative efficiencies directly impacts net income. Financial Condition Investment Information Investments are the largest asset group of the Company. The Company’s insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments they are permitted to make, and the amount of funds that may be used for any one type of investment. The following table reflects, by investment category, the investments held by the Company as of December 31: 2024 As a % of Total Investments As a % of Total Assets Fixed maturities, available for sale $ 76,480,086 19% 16% Fixed maturities, held to maturity 2,500,000 1% 1% Equity securities, at fair value 234,506,227 59% 49% Equity securities, at cost 21,203,393 5% 4% Mortgage loans 16,277,981 4% 3% Real estate 28,615,602 7% 6% Notes receivable 12,672,175 3% 3% Policy loans 5,692,565 1% 1% Short-term investments 1,954,687 1% 1% Total investments $ 399,902,716 100% 84% 10 2023 As a % of Total Investments As a % of Total Assets Fixed maturities, available for sale $ 79,084,545 22% 18% Fixed maturities, held to maturity 2,500,000 1% 1% Equity securities, at fair value 178,625,485 50% 41% Equity securities, at cost 18,227,986 4% 4% Mortgage loans 15,318,176 4% 3% Real estate 21,975,120 6% 5% Notes receivable 14,009,225 4% 3% Policy loans 6,018,248 2% 1% Short-term investments 29,132,236 7% 7% Total investments $ 364,891,021 100% 83% The Company's investments are generally managed to match related insurance and policyholder liabilities. The comparison of investment return with insurance or investment product crediting rates establishes an interest spread. Interest crediting rates on adjustable rate policies have been reduced to their guaranteed minimum rates, and as such, cannot be lowered any further. Policy interest crediting rate changes and expense load changes become effective on an individual policy basis on the next policy anniversary. Therefore, it takes a full year from the time the change was determined for the full impact of such change to be realized. If interest rates decline in the future, the Company will not be able to lower rates and both net investment income and net income will be impacted negatively. The Company’s total investments represented 84% and 83% of the Company’s total assets as of December 31, 2024 and 2023, respectively. Fixed maturities and equity securities, at fair value, consistently represented a substantial portion, 79% and 73%, of the total investments during 2024 and 2023, respectively. The overall investment mix, as a percentage of total investments, remained fairly consistent when comparing the respective investments held as of December 31, 2024 and 2023. As of December 31, 2024, the carrying value of fixed maturity securities in default as to principal or interest was immaterial in the context of consolidated assets, shareholders’ equity or results from operations. To provide additional flexibility and liquidity, the Company has identified all fixed maturity securities as "investments available-for-sale". Investments available-for-sale are carried at market value, with changes in market value charged directly to the other comprehensive income component of shareholders' equity. Changes in the market value of available for sale securities resulted in net unrealized gains (losses) of approximately $(222,000) and $1.6 million as of December 31, 2024 and 2023, respectively. The variance in the net unrealized gains and losses is the result of normal market fluctuations mainly related to changes in interest rates in the marketplace. Management continues to view the Company’s investment portfolio with utmost priority. Significant time has been spent internally researching the Company’s risk and communicating with outside investment advisors about the current investment environment and ways to ensure preservation of capital and mitigate losses. Management has put extensive efforts into evaluating the investment holdings. Additionally, members of the Company’s Board of Directors and investment committee have been solicited for advice and provided with information. Management reviews the Company’s entire portfolio on a security level basis to be sure all understand our holdings, potential risks and underlying credit supporting the investments. Management intends to continue its close monitoring of its bond holdings and other investments for possible deterioration or market condition changes. Future events may result in Management’s determination that certain current investment holdings may need to be sold which could result in gains or losses in future periods. 11 Liquidity Liquidity provides the Company with the ability to meet on demand the cash commitments required by its business operations and financial obligations. The Company’s liquidity is primarily derived from cash balances, a portfolio of marketable securities and line of credit facilities. The Company has two principal needs for cash – the insurance company’s contractual obligations to policyholders and the payment of operating expenses. Parent Company Liquidity UTG is a holding company that has no day-to-day operations of its own. Cash flows from UTG’s insurance subsidiary, UG, are used to pay costs associated with maintaining the Company in good standing with states in which it does business and purchasing outstanding shares of UTG stock. UTG's cash flow is dependent on management fees received from its insurance subsidiary, stockholder dividends from its subsidiary and earnings received on cash balances. As of December 31, 2024 and 2023, substantially all of the consolidated shareholders’ equity represents net assets of its subsidiaries. In 2024, the Parent company received no dividends from its insurance subsidiary and received $2 million in 2023. Certain restrictions exist on the payment of dividends from the insurance subsidiary to the Parent company. For further information regarding the restrictions on the payment of dividends by the insurance subsidiary, see Note 9 – Shareholders’ Equity in the Notes to the Consolidated Financial Statements. Although these restrictions exist, dividend availability from the insurance subsidiary has historically been sufficient to meet the cash flow needs of the Parent company. Insurance Subsidiary Liquidity Sources of cash flows for the insurance subsidiary primarily consist of premium and investment income. Cash outflows from operations include policy benefit payments, administrative expenses, taxes and dividends to the Parent company. Short-Term Borrowings During October of 2024, the Federal Home Loan Bank approved the renewal of UG’s Cash Management Advance Application (“CMA”). The CMA is a source of overnight liquidity utilized to address the day-to-day cash needs of a Company. The CMA gives the company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity. The Company has pledged bonds with a collateral lendable value of $21.4 million as of December 31, 2024. During the fourth quarter of 2023, the Company borrowed $19 million and planned to utilize the funds for investing activities. During the first quarter of 2024, the Company repaid the entire outstanding principal balance. Consolidated Liquidity Cash used in operating activities was approximately $1.6 million and $9.8 million in 2024 and 2023, respectively. Sources of operating cash flows of the Company, as with most insurance entities, is comprised primarily of premiums received on life insurance products and income earned on investments. Uses of operating cash flows consist primarily of payments of benefits to policyholders and beneficiaries and operating expenses. The Company has not marketed any significant new products for several years. As such, premium revenues continue to decline with the exception of fluctuations in reinsurance premiums. Management anticipates future cash flows from operations to remain similar to historic trends. During 2024 and 2023, the Company’s investing activities provided net cash of approximately $26.5 million and $6.9 million, respectively. The Company recognized proceeds of approximately $71.8 12 million and $79.6 million from investments sold and matured in 2024 and 2023, respectively. The Company used approximately $(45.3) million and $(72.7) million to acquire investments during 2024 and 2023, respectively. The net cash provided by investing activities is expected to vary from year to year depending on market conditions and management’s ability to find and negotiate favorable investment contracts. Net cash used in financing activities was approximately $(20.9) million and $(1.2) million during 2024 and 2023, respectively. As of December 31, 2024 and 2023, the Company had $0 and $19 million, respectively, in debt outstanding with third parties. The Company had cash and cash equivalents of approximately $45.3 million and $41.2 million as of December 31, 2024 and 2023, respectively. The Company has a portfolio of marketable fixed maturity securities that could be sold, if an unexpected event were to occur. These securities had a fair value of approximately $76.5 million and $79.1 million at December 31, 2024 and 2023, respectively. However, the strong cash flows from investing activities, investment maturities and the availability of the line of credit facilities make it unlikely that the Company would need to sell securities for liquidity purposes. See Note 2 – Investments in the Notes to the Consolidated Financial Statements for detailed disclosures regarding the Company’s investment portfolio. Management believes the overall sources of liquidity available will be sufficient to satisfy its financial obligations. Capital Resources The Company’s capital structure consists of available short-term debt, long-term debt and shareholders’ equity. A complete analysis and description of the short-term and long-term debt issues available as of December 31, 2024 and 2023 are presented in Note 7 – Credit Arrangements in the Notes to the Consolidated Financial Statements. The Company had $0 and $19 million of debt outstanding as of December 31, 2024 and 2023, respectively. The NAIC's risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. The risk-based capital (RBC) formula measures the adequacy of statutory capital and surplus in relation to investment and insurance risks such as asset quality, mortality and morbidity, asset and liability matching and other business factors. The RBC formula is used by state insurance regulators as an early warning tool to identify, for the purpose of initiating regulatory action, insurance companies that potentially are inadequately capitalized. At December 31, 2024, UG has a ratio of approximately 4.90, which is 490% of the authorized control level. Accordingly, the Company meets the RBC requirements. The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG’s common stock. At a meeting of the Board of Directors in December of 2024, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million of UTG’s common stock, for a total repurchase of $24 million of UTG’s common stock in the open market or in privately negotiated transactions since inception of the program. Company Management has broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. Open market purchases are made based on the last available market price but may be limited. During 2024, the Company repurchased 23,961 shares through the stock repurchase program for $648,152. Through December 31, 2024, UTG has spent $20,839,555 in the acquisition of 1,380,820 shares under this program. 13 Total shareholders’ equity was approximately $210.6 million and $161.7 million as of December 31, 2024 and 2023, respectively. Total shareholders' equity increased approximately 30% in 2024 as compared to 2023. The increase is primarily attributable to net income from operations. As of December 31, 2024 and 2023, the Company reported accumulated other comprehensive loss of approximately $(2.9) million and $(2.7) million, respectively. New Accounting Pronouncements See Note 1 – Summary of Significant Account Policies in the Notes to the Consolidated Financial Statements for information regarding new accounting pronouncements Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements, financing activities or other relationships with unconsolidated entities or other persons. Contractual Obligations As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item. Management’s Report on Internal Controls Over Financial Reporting Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making the assessment, Management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on Management’s assessment, Management concluded that, as of December 31, 2024, the Company’s internal control over financial reporting was effective. This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this Annual Report. Changes in Internal Controls There have been no changes in the Company’s internal control over financial reporting since December 31, 2024, in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15(e) and 15d-15(e), that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company’s process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process. 14 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of UTG, Inc. and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of UTG, Inc. and Subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 15 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Classification, Valuation and Disclosure of Investments in Equity Securities – Refer to Notes 1 and 3 Critical Audit Matter Description The Company invests in numerous equity securities including common stocks, limited partnerships and limited liability companies that are not publicly traded and may not have readily determinable fair values. These investments require a detailed analysis of the type of investment on an investment by investment basis to determine the appropriate classification of the investment as to whether the investment should be reported using the cost basis, the equity method or whether the investment should be reported at fair value based on the accounting literature. Since these investments are not publicly traded, the Company employs various methods in determining the appropriate valuation of the investments reported at fair value. These methods at times include utilizing industry specialists in assisting them in determining the fair value method and at other times, management is able to utilize the practical expedient of net asset value when the investment is an investment company. These methods at times depend on key inputs and assumptions crucial to determining fair value that may not be observable requiring managerial judgment and estimation. Last, the disclosure of this information in the Company’s financial statements can be challenging to management due to the volume of data and information needed to appropriately provide the necessary and generally accepted information for a reader to understand the classification and valuation decisions made by management. The audit of these equity investments requires a substantial amount of time and effort in order to obtain the necessary audit evidence and opine on management’s classification, valuation and disclosure of the investments. How the Critical Audit Matter was Addressed in the Audit Our audit procedures related to the equity investments that are not publicly traded included the following procedures, among others:  We gained an understanding of the processes and procedures utilized by management to classify these investments and determine their values 16  We obtained documentation supporting the investments including purchase agreements, partnership agreements and limited liability company operating agreements as appropriate for each investment  We discussed and documented management’s determination of the classification of each investment as to cost method, equity method or fair value, including whether management asserted significant influence over operations of the investment  We obtained confirmation of the investment from investment entity personnel, and if appropriate, audited financial statements of the investment entity  We obtained and discussed valuation information from industry specialists when appropriate and when utilized by management in determining the fair value of an equity investment and considered and evaluated the valuation information provided by the specialist in concluding on the fair value estimated by management for financial reporting  For a selection of equity investments, we recalculated the Company’s valuation based on information obtained via confirmation, agreements and/or valuation specialists  We obtained and accumulated detailed information on the investments provided by management for disclosure of these investments in the financial statements and agreed this information to the documents obtained as a part of our audit procedures for purposes of classification and valuation Future Policy Benefits – Refer to Note 1 Critical Audit Matter Description Liabilities for amounts payable under the Company’s life insurance products are recorded as future policy benefits liabilities. Such liabilities are established based on actuarial assumptions at the time policies are issued, or in the case of contracts acquired by purchase, at the purchase date. The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiary’s experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company’s future policy benefits liability was $ 218.3 million as of December 31, 2024. The audit of future policy benefits requires the utilization of an actuarial specialist when considering the complex methods, assumptions and models management utilizes in determining the value of these liabilities. How the Critical Audit Matter was Addressed in the Audit Our audit procedures related to the liability for future policy benefits included the following procedures, among others:  We gained an understanding of the processes utilized and controls implemented in determining the valuation of future policy benefits 17  We tested the underlying data used by management in developing the valuation and the completeness and accuracy of the data  We performed various analytical procedures  We obtained an opinion from management’s actuarial specialist confirming that the actuarial assumptions and methodologies used were reasonable and in accordance with presently accepted actuarial standards  We confirmed the independence of management’s consulting actuarial specialist and reviewed her qualifications as appointed consulting actuary We have served as the Company’s auditor since 2023. Springfield, Illinois March 25, 2025 18 UTG, Inc. Consolidated Balance Sheets As of December 31, 2024 and 2023 ASSETS 2024 2023 (as restated) Investments: Investments available for sale: Fixed maturities, at fair value (amortized cost $80,204,532 and $82,493,075) $ 76,480,086 $ 79,084,545 Held to maturity redeemable preferred stock, at amortized cost 2,500,000 2,500,000 Equity securities, at fair value (cost $117,599,471 and $113,744,429) 234,506,227 178,625,485 Equity securities, at cost 21,203,393 18,227,986 Mortgage loans on real estate at amortized cost (net of credit loss reserve of $235,000 and $274,000) 16,277,981 15,318,176 Investment real estate, net 28,615,602 21,975,120 Notes receivable (net of credit loss reserve of $195,000 and $250,000) 12,672,175 14,009,225 Policy loans 5,692,565 6,018,248 Short-term investments 1,954,687 29,132,236 Total investments 399,902,716 364,891,021 Cash and cash equivalents 45,263,967 41,185,196 Accrued investment income 1,264,416 2,001,064 Reinsurance receivables: Future policy benefits 23,525,945 23,847,623 Policy claims and other benefits 4,480,091 4,734,575 Cost of insurance acquired 1,401,081 2,036,896 Income taxes receivable 790,608 2,128,027 Other assets 317,981 884,531 Total assets $ 476,946,805 $ 441,708,933 LIABILITIES AND SHAREHOLDERS' EQUITY Policy liabilities and accruals: Future policy benefits $ 218,284,203 $ 223,757,860 Policy claims and benefits payable 3,847,214 4,188,917 Other policyholder funds 181,541 260,892 Dividend and endowment accumulations 14,628,119 14,749,258 Deferred income taxes 23,072,061 12,426,840 Notes payable 0 19,000,000 Other liabilities 6,339,303 5,635,373 Total liabilities 266,352,441 280,019,140 Shareholders' equity: Common stock - no par value, stated value $0.001 per share. Authorized 7,000,000 shares - 3,157,765 and 3,165,320 shares issued and outstanding 3,159 3,167 Additional paid-in capital 32,442,486 32,613,817 Retained earnings 180,631,577 131,330,062 Accumulated other comprehensive loss (2,942,313) (2,720,582) Total UTG shareholders' equity 210,134,909 161,226,464 Noncontrolling interest 459,455 463,329 Total shareholders' equity 210,594,364 161,689,793 Total liabilities and shareholders' equity $ 476,946,805 $ 441,708,933 19 See accompanying notes UTG, Inc. Consolidated Statements of Operations For the Years Ended December 31, 2024 and 2023 2024 2023 (as restated) Revenue: Premiums and policy fees $ 7,567,703 $ 7,918,235 Ceded reinsurance premiums and policy fees (2,280,397) (2,553,010) Net investment income 16,093,592 14,053,528 Other income 236,846 280,303 Revenues before net investment gains (losses) 21,617,744 19,699,056 Net investment gains (losses): Other-than-temporary impairments (900,149) 0 Other realized investment gains, net 7,356,275 9,463,843 Change in fair value of equity securities 56,839,751 (2,856,543) Total net investment gains 63,295,877 6,607,300 Total revenues 84,913,621 26,306,356 Benefits and other expenses: Benefits, claims and settlement expenses: Life 13,740,517 16,089,474 Ceded reinsurance benefits and claims (2,323,619) (2,882,312) Annuity 1,021,454 1,029,885 Dividends to policyholders 287,779 302,685 Commissions (109,946) (102,971) Amortization of cost of insurance acquired 635,815 661,257 Operating expenses 9,429,857 8,368,135 Interest expense 11,600 28,389 Total benefits and other expenses 22,693,457 23,494,542 Income before income taxes 62,220,164 2,811,814 Income tax expense 12,818,983 41,807 Net income 49,401,181 2,770,007 Net income attributable to noncontrolling interest (99,666) (113,397) Net income attributable to common shareholders $ 49,301,515 $ 2,656,610 Amounts attributable to common shareholders: Basic income per share $ 15.57 $ 0.84 Diluted income per share $ 15.57 $ 0.84 Basic weighted average shares outstanding 3,165,541 3,176,757 Diluted weighted average shares outstanding 3,165,541 3,176,757 See accompanying notes. 20 UTG, Inc. Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, 2024 and 2023 2024 2023 Net income $ 49,401,181 $ 2,770,007 Other comprehensive income (loss): Unrealized holding gains (losses) arising during period, pre-tax (288,074) 1,981,974 Tax (expense) benefit on unrealized holding gains (losses) arising during the period 66,343 (406,537) Unrealized holding gains (losses) arising during period, net of tax (221,731) 1,575,437 Less reclassification adjustment for (gains) losses included in net income 0 (58,333) Tax expense (benefit) for (gains) losses included in net income 0 12,250 Reclassification adjustment for (gains) losses included in net income, net of tax 0 (46,083) Subtotal: Other comprehensive income (loss), net of tax (221,731) 1,529,354 Comprehensive income 49,179,450 4,299,361 Less comprehensive income attributable to noncontrolling interests (99,666) (113,397) Comprehensive income attributable to UTG, Inc. $ 49,079,784 $ 4,185,964 See accompanying notes. 21 UTG, Inc. Consolidated Statements of Shareholders’ Equity Year ended December 31, 2024 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolli ng Interest Total Shareholders' Equity Balance at January 1, 2024 $ 3,167 32,613,817 131,330,062 (2,720,582) 463,329 161,689,793 Common stock issued during year 16 476,797 0 0 0 476,813 Treasury shares acquired and retired (24) (648,128) 0 0 0 (648,152) Net income attributable to common shareholders 0 0 49,301,515 0 0 49,301,515 Unrealized holding loss on securities net of noncontrolling interest and reclassification adjustment and taxes 0 0 0 (221,731) 0 (221,731) Distributions 0 0 0 0 (103,540) (103,540) Gain attributable to noncontrolling interest 0 0 0 0 99,666 99,666 Balance at December 31, 2024 $ 3,159 32,442,486 180,631,577 (2,942,313) 459,455 210,594,364 Year ended December 31, 2023 (as restated) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolli ng 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 Prior period adjustment 0 0 (2,861,650) 2,861,650 0 0 Adoption of new accounting standard 0 0 (454,250) 0 0 (454,250) 3,166 32,693,972 128,673,452 (4,249,936) 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 2,656,610 0 0 2,656,610 Unrealized holding gain on securities net of noncontrolling interest and reclassification adjustment and taxes 0 0 0 1,529,354 0 1,529,354 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 32,613,817 131,330,062 (2,720,582) 463,329 161,689,793 See accompanying notes. 22 UTG, Inc. Consolidated Statements of Cash Flows For the Years Ended December 31, 2024 and 2023 2024 2023 (as restated) Net income $ 49,401,181 $ 2,770,007 Adjustments to reconcile net income to net cash used in operating activities: Accretion of investments (344,267) (225,762) Other-than-temporary impairments 900,149 0 Realized investment gains, net (7,356,275) (9,463,843) Change in fair value of equity securities (56,839,751) 2,856,543 Amortization of cost of insurance acquired 635,815 661,257 Provision for deferred income tax expense 10,711,564 558,916 Depreciation and depletion 1,905,768 728,887 Stock-based compensation 476,813 801,812 Charges for mortality and administration of universal life and annuity products (5,472,812) (5,692,118) Interest credited to account balances 3,564,187 3,646,515 Change in accrued investment income 736,648 (629,387) Change in reinsurance receivables 576,162 374,689 Change in policy liabilities and accruals (3,005,006) (3,535,674) Change in income taxes receivable (payable) 1,337,419 (6,317,108) Change in other assets and liabilities, net 1,204,314 3,679,893 Net cash used in operating activities (1,568,091) (9,785,373) Cash flows from investing activities: Proceeds from investments sold and matured: Fixed maturities available for sale 11,000,000 7,558,333 Equity securities 19,742,295 7,838,385 Trading securities 102,699 0 Mortgage loans 4,512,139 17,770,810 Real estate 3,223,290 16,531,219 Notes receivable 2,197,052 4,944,143 Policy loans 1,283,752 1,453,634 Short-term investments 29,750,000 23,490,815 Total proceeds from investments sold and matured 71,811,227 79,587,339 Cost of investments acquired: Fixed maturities available for sale (9,040,152) 0 Equity securities (15,468,580) (12,454,268) Trading securities (102,699) 0 Mortgage loans (5,421,945) (2,654,293) Real estate (11,603,519) (3,417,744) Notes receivable (805,000) (4,779,241) Policy loans (958,071) (904,446) Short-term investments (1,910,488) (48,473,476) Total cost of investments acquired (45,310,454) (72,683,468) Net cash provided by investing activities 26,500,773 6,903,871 Cash flows from financing activities: Policyholder contract deposits 3,931,531 4,056,116 Policyholder contract withdrawals (5,033,750) (4,294,297) Proceeds from notes payable/line of credit 0 21,500,000 Payments of principal on notes payable/line of credit (19,000,000) (21,500,000) Purchase of treasury stock (648,152) (881,966) Noncontrolling contributions/(distributions) of consolidated subsidiary (103,540) (103,540) Net cash used in financing activities (20,853,911) (1,223,687) Net increase (decrease) in cash and cash equivalents 4,078,771 (4,105,189) Cash and cash equivalents at beginning of year 41,185,196 45,290,385 Cash and cash equivalents at end of year $ 45,263,967 $ 41,185,196 See accompanying notes. 23 Notes to Consolidated Financial Statements Note 1 – Summary of Significant Accounting Policies Business – UTG, Inc. is an insurance holding company. The Company’s dominant business is individual life insurance, which includes the servicing of existing insurance in-force and the acquisition of other companies in the life insurance business. UTG and its subsidiaries are collectively referred to as the “Company”. This document at times will refer to the Registrant’s largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll. Mr. Correll holds a majority ownership of First Southern Funding, LLC (“FSF”), a Kentucky corporation, and First Southern Bancorp, Inc. (“FSBI”), a financial services holding company. FSBI operates through its 100% owned subsidiary bank, First Southern National Bank (“FSNB”). Banking activities are conducted through multiple locations within south-central and western Kentucky. Mr. Correll is Chief Executive Officer, President, and Chairman of the Board of Directors of UTG and is currently UTG’s largest shareholder through his ownership control of FSF, FSBI and affiliates. At December 31, 2024, Mr. Correll owns or controls directly and indirectly approximately 66% of UTG’s outstanding stock. UTG’s life insurance subsidiary has several wholly-owned and majority-owned subsidiaries. The subsidiaries were formed to hold certain real estate and other investments. The investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG. Basis of Presentation – The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), under guidance issued by the Financial Accounting Standards Board (“FASB”). The preparation of financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the Registrant and its wholly and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated during consolidation. Financial Information about Segments - The Financial Accounting Standards Board (“FASB”) guidance requires a “management approach” in the presentation of business segments based on how management internally evaluates the operating performance of business units. The Company has evaluated our operations and has determined there is not definitive segregation between corporate and insurance operations or between life and annuity operations. Therefore, the Company reports only consolidated operations. Investments – The Company reports its investments as follows: Investments in Fixed Maturity Securities – The Company classifies its investments in fixed maturity securities on the acquisition date and at each balance sheet date. Securities classified as held-to- maturity consist of redeemable preferred stock, and are carried at amortized cost, reflecting the ability and intent to hold the securities to maturity. Securities classified as available-for-sale consist of bonds and are carried at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. The Company has an evaluation process in place to monitor fixed maturity 24 securities available for sale for credit loss. See Note 2 - Investments for further disclosure of the allowance for credit loss (“ACL”). Equity Securities at Fair Value – Investments in equity securities, which include common and perpetual preferred stocks, are reported at fair value with unrealized gains and losses reported as a component of net income (loss). Equity Securities at Cost – These investments are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Mortgage Loans on Real Estate – Mortgage loans on real estate are reported at their unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on mortgage loans carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in mortgage loans being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL. Investment Real Estate – Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is computed on a straight-line-basis for financial reporting purposes using estimated useful lives of 3 to 30 years. Real estate for which the Company commits to a plan to sell within one year and actively markets in its current condition, for a reasonable price, in comparison to its estimated fair value, is classified as held-for-sale. Real estate held-for-sale is stated at lower of depreciated cost or estimated fair value less expected disposition costs and is not depreciated. At December 31, 2024 and 2023, the Company did not hold any investment real estate held-for-sale. Notes Receivable – Notes receivable are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. The Company recognizes an ACL in earnings at time of purchase or origination based on expected lifetime credit loss on notes receivable carried at amortized cost, in an amount that represents the portion of the amortized cost basis of such financing receivables, that the Company does not expect to collect, resulting in notes receivable being presented at the net amount expected to be collected. See Note 2 - Investments for further discussion of the ACL. Policy Loans – Policy loans are reported at their unpaid balances, including accumulated interest, but not in excess of the cash surrender value of the related policy. Short-Term Investments – Short-term investments have remaining maturities exceeding three months and under 12 months at the time of purchase and are stated at amortized cost, which approximates fair value. Gains and Losses – Realized gains and losses include sales of investments and investment impairments. If any, other-than-temporary impairments in fair value are recognized in net income on the specific identification basis. Fair Value – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Subsequent to initial recognition, fair values are based on unadjusted quoted prices for identical assets or liabilities 25 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. 26 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, 2024 and 2023. Policy Claims and Benefits Payable - Policy and contract claims include provisions for reported claims in process of settlement, valued in accordance with the terms of the policies and contracts, as well as provisions for claims incurred and unreported. The estimate of incurred and unreported claims is based on prior experience. The Company makes an estimate after careful evaluation of all information available to the Company. There is no certainty the stated liability for policy claims and benefits payable, including the estimate for incurred but unreported claims, will be the Company’s ultimate obligation. Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax impact attributable to differences between the financial statement book values and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. More information concerning income taxes is provided in Note 6 – Income Taxes. Earnings Per Share – The objective of both basic earnings per share (“EPS”) and diluted EPS is to measure the performance of an entity over the reporting period. The Company presents basic and diluted EPS on the face of the Consolidated Statements of Operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is calculated by adding to shares outstanding the additional net effect of potentially dilutive securities or contracts, such as stock options, which could be exercised or converted into common shares. Recognition of Revenues and Related Expenses - Premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits, consist principally of whole life insurance policies, and certain annuities with life contingencies are recognized as revenues when due. Limited payment life insurance policies defer gross premiums received in excess of net premiums, which is then recognized in income in a constant relationship with insurance in-force. Accident and health insurance premiums are recognized as revenue pro rata over the terms of the policies. Benefits and related expenses associated with the premiums earned are charged to expense proportionately over the lives of the policies through a provision for future policy benefit liabilities and through deferral and amortization of deferred policy acquisition costs. For universal life and investment products, generally there is no requirement for payment of premium other than to maintain account values at a level sufficient to pay mortality and expense charges. Consequently, premiums for universal life policies and investment products are not reported as revenue, but as deposits. Policy fee revenue for universal life policies and investment products consists of charges for the cost of insurance and policy administration fees assessed during the period. Expenses include interest credited to policy account balances and benefit claims incurred in excess of policy account balances. Recently Issued Accounting Standards ASUs not listed below were assessed and either determined to be not applicable or are not expected to have a material impact on the Company’s consolidated financial statements or disclosures. ASUs issued but not yet adopted as of December 31, 2024 that are currently being assessed and may or may not have a material impact on the Company’s consolidated financial statements or disclosures are disclosed below: 27 The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. 'This ASU requires public companies to disclose, in the notes to financial statements, specified information about certain costs and expenses at each interim and annual reporting period. Specifically, they will be required to: Disclose the amounts of (a) purchases of inventory; (b) employee compensation; (c) depreciation; (d) intangible asset amortization; and (e) depreciation, depletion, and amortization recognized as part of oil- and gas-producing activities (or other amounts of depletion expense) included in each relevant expense caption. Include certain amounts that are already required to be disclosed under current generally accepted accounting principles (GAAP) in the same disclosure as the other disaggregation requirements. Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026. Accounting Standards Update No. 2025-01 amended the effective date of ASU No. 2024-03 to clarify that all public entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods after December 15, 2027. The Company is evaluating the impact of the guidance on its consolidated financial statements. The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. Amendments in this update require that public business entities, on an annual basis: (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments in this update require that all entities disclose on an annual basis the following information about income taxes: (1) the amounts of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds received) is equal to or greater than 5% of total income taxes paid (net of refunds received). ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024. The Company is evaluating the impact of the guidance on its consolidated financial statements. The FASB issued Accounting Standards Update No. 2022-05, Financial Services-Insurance (Topic 944): Transition for Sold Contracts. ASU 2022-05 amends transition guidance in ASU No. 2018- 12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long- Duration Contracts (LDTI), for contracts that have been derecognized because of a sale or disposal of individual or a group of contracts or legal entities before the LDTI effective date. This ASU amends the LDTI transition guidance to allow an insurance entity to make an accounting policy election to exclude certain contracts or legal entities from applying the LDTI guidance when, as of the LDTI effective date, (a) the insurance contracts have been derecognized because of a sale or disposal and (b) the insurance entity has no significant continuing involvement with the derecognized contracts. See below for further analysis regarding ASU No. 2018-12. The FASB issued Accounting Standards Update No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts or ASU 2018-12. ASU 2018-12 significantly changes how insurers account for long-duration insurance contracts. The new guidance will require insurers to review and update, if necessary, the assumptions used to measure insurance liabilities periodically, rather than retain assumptions used at contract inception. The updated guidance also changes the recognition and measurement of deferred acquisition costs (DAC) and created a new category of benefit features called market risk benefits (MRB) that will be measured at fair value. The guidance also significantly expands the disclosure requirements for long-duration contracts. The ASU was originally effective for fiscal years, and interim periods within those years, for years beginning after December 15, 2020, and early adoption is permitted. The guidance on measuring the liabilities for future policy benefits and DAC will be adopted on a modified retrospective basis as of the earliest period presented in the year of 28 adoption. The guidance on MRB will be adopted on a retrospective basis as of the earliest period presented in the year of adoption. In November of 2019, the FASB issued ASU 2019-09, which delayed the effective date of ASU 2018-12 to fiscal years beginning after December 15, 2024, for smaller reporting companies. The Company is evaluating the impact on the consolidated financial statements. Reclassifications - Certain reclassifications have been made to the 2023 Consolidated Financial Statements to make them comparable to the current year Consolidated Financial Statements. The Company has elected to reclassify certain investments on the Consolidated Balance Sheets and related footnotes for prior periods to conform with the presentation in the fiscal year ended December 31, 2024 Consolidated Financial Statements. Revision of previously issued financial statements – The Company identified an error in its previously issued Consolidated Financial Statements related to the classification of certain investment types on the Consolidated Balance Sheets. The impact of the error to the prior period’s Consolidated Financial Statements was not considered to be material. See Note 16 - Revision of Previously Issued Consolidated Financial Statements for details of the revision. Subsequent Events - Management has evaluated subsequent events for recognition and disclosure in the consolidated financial statements through the date the consolidated financial statements were available to be issued. The Company did not identify any subsequent events requiring recognition or disclosure. Note 2 – Investments Investment Risks and Uncertainties Investments are exposed to the following primary sources of risk: credit, interest rate, liquidity, market valuation, currency and real estate risk. The financial statement risks, stemming from such investment risks, are those associated with the determination of estimated fair values, the diminished ability to sell certain investments in times of strained market conditions, the recognition of ACL and impairments, and the recognition of income on certain investments. The use of different methodologies, assumptions and inputs relating to these financial statement risks may have a material effect on the amounts presented within the Consolidated Financial Statements. The determination of ACL and impairments is highly subjective and is based upon quarterly evaluations and assessments of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Investment in Fixed Maturity Securities The Company’s insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments they are permitted to make, and the amount of funds that may be used for any one type of investment. 29 Investments in fixed maturity securities are summarized by type as follows for the years ended December 31: 2024 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, at fair value U.S. Government and govt. agencies and authorities $ 21,354,053 $ 1,484 $ (473,243) $ 20,882,294 U.S. special revenue and assessments 7,522,751 0 (288,560) 7,234,191 All other corporate bonds 51,327,728 47,632 (3,011,759) 48,363,601 Total fixed maturities, at fair value $ 80,204,532 $ 49,116 $ (3,773,562) $ 76,480,086 Held to maturity redeemable preferred stock, at amortized cost $ 2,500,000 $ 0 $ 0 $ 2,500,000 2023 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Fixed maturities, at fair value U.S. Government and govt. agencies and authorities $ 14,316,976 $ 0 $ (729,197) $ 13,587,779 U.S. special revenue and assessments 7,528,985 0 (220,527) 7,308,458 All other corporate bonds 60,647,114 89,002 (2,547,808) 58,188,308 Total fixed maturities, at fair value $ 82,493,075 $ 89,002 $ (3,497,532) $ 79,084,545 Held to maturity redeemable preferred stock, at amortized cost $ 2,500,000 $ 0 $ 0 $ 2,500,000 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, 2024 Amortized Cost Estimated Fair Value Due in one year or less $ 10,019,145 $ 9,957,350 Due after one year through five years 45,640,691 44,544,266 Due after five years through ten years 4,371,713 4,227,940 Due after ten years 20,172,983 17,750,530 Total $ 80,204,532 $ 76,480,086 Actual maturities may differ from contractual maturities due to the exercise of call or prepayment options. By insurance statute, the majority of the Company’s investment portfolio is invested in investment grade securities to provide ample protection for policyholders. Below investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. Debt securities classified as below-investment grade are those that receive a Standard & Poor’s rating of BB+ or below. The Company held below investment grade investments with an estimated market value of $0 as of December 31, 2024 and 2023. 30 The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities in an unrealized loss position as of December 31: 2024 Less than 12 months 12 months or longer Total Estimated fair value Unrealized losses Estimated fair value Unrealized losses Estimated fair value Unrealized losses U.S. Government and govt. agencies and authorities $ 10,022,087 (19,341) $ 10,360,047 (453,902) $ 20,382,134 (473,243) U.S. special revenue and assessments 0 0 7,234,191 (288,560) 7,234,191 (288,560) All other corporate bonds 6,457,282 (38,492) 38,176,295 (2,973,267) 44,633,577 (3,011,759) Total fixed maturities $ 16,479,369 (57,833) $ 55,770,533 (3,715,729) $ 72,249,902 (3,773,562) 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 $ 1,497,390 (3,696) $ 12,090,389 (725,501) $ 13,587,779 (729,197) U.S. special revenue and assessments 0 0 7,308,458 (220,527) 7,308,458 (220,527) All other corporate bonds 544,610 (2,319) 49,353,275 (2,545,489) 49,897,885 (2,547,808) Total fixed maturities $ 2,042,000 (6,015) $ 68,752,122 (3,491,517) $ 70,794,122 (3,497,532) The following table provides additional information regarding the number of securities that were in an unrealized loss position for greater than or less than twelve months: Less than 12 months 12 months or longer Total As of December 31, 2024 Fixed maturities 9 33 42 As of December 31, 2023 Fixed maturities 2 39 41 Allowance for Credit Loss - Available for Sale Securities Management considers a wide range of factors about the security issuer and uses its best judgment in evaluating the cause of the decline in the estimated fair value of the security and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the security are assumptions and estimates about the operations of the issuer and its future earnings potential. Considerations used in the credit loss evaluation process include, but are not limited to: (1) the extent to which the estimated fair value has been below amortized cost, (2) adverse conditions specifically related to a security, an industry sector, adverse change in the financial condition of the issuer of the security, (3) payment structure of the security and likelihood of the issuer being able to make payments, (4) failure of the issuer to make scheduled interest and principal payments, (5) whether the issuer, or series of issuers or an industry has suffered a catastrophic loss or has exhausted natural resources, (6) whether the Company has the intent to sell or will more likely than not be required to sell a particular security before the decline in estimated fair value below amortized cost recovers, (7) changes in the rating of the security by a rating agency, and (8) other subjective factors. Substantially all of the unrealized losses on fixed maturity securities at December 31, 2024 and 2023 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. At December 31, 2024, the Company did not intend to sell its 31 securities in an unrealized loss position, and it was not more likely than not that the Company would be required to sell these securities before the anticipated recovery of the remaining amortized cost. Therefore, the Company concluded that these securities had not incurred a credit loss and should not have an allowance for credit loss at December 31, 2024. Future provisions for credit loss will depend primarily on economic fundamentals, issuer performance, and changes in credit ratings. Net unrealized losses included in other comprehensive income (loss) for investments classified as available-for-sale, net of the effect of deferred income taxes, assuming that the depreciation had been realized as of December 31, 2024 and December 31, 2023: December 31, 2024 December 31, 2023 Unrealized appreciation (depreciation) on available-for-sale securities $ (3,724,446) $ (3,443,775) Deferred income taxes 782,133 723,193 Net unrealized appreciation (depreciation) on available-for-sale securities $ (2,942,313) $ (2,720,582) Cost Method Investments The Company held equity investments with an aggregate cost of $21,203,393 and $18,227,986 at December 31, 2024 and 2023, respectively. These equity investments were not reported at fair value because it is not practicable to estimate their fair values due to insufficient information being available. Management reviews and considers events or changes in circumstances that might have a significant adverse effect on the reported value of those investments. Based on Management’s evaluation of the equity securities reported at cost, the Company reported an other-than-temporary impairment of $900,149 on one security during the fourth quarter of 2024. The other-than- temporary impairment was taken as a result of Management’s assessment and determination of value of the investment. Mortgage Loans The Company, from time to time, acquires mortgage loans through participation agreements with FSNB. FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market. The Company is able to receive participations from FSNB for three primary reasons: 1) FSNB has already reached its maximum lending limit to a single borrower, but the borrower is still considered a suitable risk; 2) the interest rate on a particular loan may be fixed for a long period that is more suitable for UG given its asset-liability structure; and 3) FSNB’s loan growth might at times outpace its deposit growth, resulting in FSNB participating such excess loan growth rather than turning customers away. For originated loans, the Company’s Management is responsible for the final approval of such loans after evaluation. Before a new loan is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. These criteria include, but are not limited to, a credit report, personal financial information such as outstanding debt, sources of income, and personal equity. Once the loan is approved, the Company directly funds the loan to the borrower. The Company bears all risk of loss associated with the terms of the mortgage with the borrower. During 2024 and 2023, the Company acquired $5,421,945 and $2,654,293 in mortgage loans, respectively. FSNB services the majority of the Company’s mortgage loan portfolio. The Company pays FSNB a 0.25% servicing fee on these loans and a one-time fee at loan origination of 0.50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan. 32 During 2024 and 2023, the maximum and minimum lending rates for mortgage loans were: 2024 2023 Maximum rate Minimum rate Maximum rate Minimum rate Farm loans 8.00 % 8.00 % 5.00 % 5.00 % Commercial loans 10.00 % 4.00 % 8.75 % 4.00 % Residential loans 5.00 % 4.15 % 5.00 % 4.15 % Most mortgage loans are first position loans. Loans issued are generally limited to no more than 80% of the appraised value of the property. The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent. Management is provided with a monthly listing of loans that are 60 days or more past due. All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans. Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified. Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact. Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers’ ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. Interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. The following table summarizes the mortgage loan holdings of the Company for the periods ended December 31: 2024 2023 In good standing $ 16,277,981 $ 15,318,176 Total mortgage loans $ 16,277,981 $ 15,318,176 Total foreclosed loans during the year $ 0 $ 0 The following is a summary of the mortgage loans outstanding and the related allowance for credit losses: December 31, 2024 December 31, 2023 Farm $ 321,774 $ 332,417 Commercial 14,749,509 13,764,209 Residential 1,441,698 1,495,550 Total mortgage loans 16,512,981 15,592,176 Less allowance for credit losses (235,000) (274,000) Total mortgage loans, net $ 16,277,981 $ 15,318,176 There were no past due loans as of December 31, 2024 and December 31, 2023. 33 Investment Real Estate Real estate held-for-investment is stated at cost less accumulated depreciation. Depreciation is computed on a straight-line-basis for financial reporting purposes using estimated useful lives of 3 to 30 years. The Company periodically reviews its real estate held-for-investment for impairment and tests for recoverability whenever events or changes in circumstances indicate the carrying value may not be recoverable. During 2024 and 2023, no impairments were recognized on the investment real estate. Note 3 - Fair Value Measurements of the Consolidated Financial Statements provides further information regarding the fair value of financial instruments that are not measured at fair value. The investment real estate owned by the Company is included in this portion of the Note 3 - Fair Value Measurements disclosure. The following table provides an allocation of the Company’s investment real estate by type for the periods ended December 31: 2024 2023 Raw land $ 16,446,147 $ 6,971,930 Commercial 6,269,217 4,106,938 Residential 1,932,390 3,512,408 Land, minerals and royalty interests 3,967,848 7,383,844 Total investment real estate $ 28,615,602 $ 21,975,120 The Company’s investment real estate portfolio includes ownership in oil and gas royalties. As of December 31, 2024 and 2023, investments in oil and gas royalties represented 20% and 34%, respectively, of the total investment real estate portfolio. See Note 13 - Concentrations of the Consolidated Financial Statements for additional information regarding the allocation of the oil and gas investment real estate holdings by industry type. Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Consolidated Statements of Operations. During 2024 and 2023, the Company acquired $11,603,519 and $3,417,744 of investment real estate, respectively. Notes Receivable Notes receivable represent collateral loans and promissory notes issued by the Company and are reported at their unpaid principal balances, adjusted for valuation allowances. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. During 2024 and 2023, the Company acquired $805,000 and $4,779,241 of notes receivable, respectively. Before a new note is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. Once the note is approved, the Company directly funds the note to the borrower. Several of the notes have participation agreements in place, whereas the Company has reduced its investment in the note receivable by participating a portion of the note to a third party. Similar to the mortgage loans, FSNB services several of the notes receivable. The Company, and the participants in the notes, share in the risk of loss associated with the terms of the note with the borrower, based upon their ownership percentage in the note. The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. 34 The following is a summary of the notes receivable outstanding and the related allowance for credit losses: December 31, 2024 December 31, 2023 Notes receivable $ 12,867,175 $ 14,259,225 Less allowance for credit losses (195,000) (250,000) Total notes receivable, net $ 12,672,175 $ 14,009,225 Short-Term Investments Short-term investments have remaining maturities exceeding three months and under 12 months at the time of purchase and are stated at amortized cost, which approximates fair value. The short- term investments consist of United States Treasury securities. During 2024 and 2023, the Company acquired $1,910,488 and $48,473,476, respectively, in short- term investments. Allowance for Credit Loss - Loans The allowance for credit loss (“ACL”) is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when Management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The allowance for credit losses represents Management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by Management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The Company measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Company has identified the following portfolio segments - mortgage loans on real estate and notes receivable. The allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments may increase or reduce reserve levels and include adjustments for risk tolerance, loan review and audit results, asset quality and portfolio trends, industry concentrations, external factors and economic conditions. Loans that do not share risk characteristics are evaluated on an individual basis. When Management determines that foreclosure is probable and the borrower is experiencing financial difficulty, the expected credit losses are based on the fair value of collateral at the reporting date unadjusted for selling costs as appropriate. Allowance for Credit Loss - Unfunded Commitments Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit issued to meet customer financing needs. The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Company records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for 35 unfunded commitments in the Company’s income statements. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for unfunded commitments as of December 31, 2024 and 2023 is $50,000 and $51,000, respectively, and is included in other liabilities on the Company’s Consolidated Balance Sheets. Allowance for Credit Loss - Accrued Interest Accrued interest is not included in the ACL and if deemed uncollectible, it is charged against interest income when determined to be uncollectible. Allowance for Credit Loss - Summary of Activity The following is a summary of activity related to the allowance for credits loss: Allowance For Credit Losses Mortgage Notes Unfunded Loans Receivable Commitments Total January 1, 2023 $ 0 0 0 $ 0 2023 Allowance 274,000 250,000 51,000 575,000 December 31, 2023 274,000 250,000 51,000 575,000 2024 Change in Allowance (39,000) (55,000) (1,000) (95,000) December 31, 2024 $ 235,000 195,000 50,000 $ 480,000 Analysis of Investment Operations The following table reflects the Company’s net investment income for the periods ended December 31: 2024 2023 Fixed maturities, available for sale $ 2,652,249 $ 2,932,220 Fixed maturities, held to maturity 167,536 165,137 Equity securities 4,233,674 3,708,633 Mortgage loans 952,084 1,115,145 Real estate 8,958,452 8,318,201 Notes receivable 1,341,095 1,371,973 Policy loans 412,701 433,556 Cash and cash equivalents 1,668,712 1,007,840 Short-term investments 661,962 529,125 Total consolidated investment income 21,048,465 19,581,830 Investment expenses (4,954,873) (5,528,302) Consolidated net investment income $ 16,093,592 $ 14,053,528 36 The following table presents net investment gains (losses) and the change in net unrealized gains on investments for the periods ended December 31: 2024 2023 Realized gains: Sales of fixed maturities $ 0 $ 58,333 Sales of equity securities 7,190,262 820,001 Sales of real estate 166,020 8,577,155 Sales of short-term investments 0 23,509 Total realized gains 7,356,282 9,478,998 Realized losses: Sales of equity securities 0 (7,966) Sales of short-term investments (7) (7,189) Other-than-temporary impairments (900,149) 0 Total realized losses (900,156) (15,155) Net realized investment gains 6,456,126 9,463,843 Change in fair value of equity securities: Change in fair value of equity securities held at the end of the period 56,839,751 (2,856,543) Change in fair value of equity securities 56,839,751 (2,856,543) Net investment gains $ 63,295,877 $ 6,607,300 Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive income: Fixed maturities $ (288,074) $ 1,981,974 Net increase (decrease) $ (288,074) $ 1,981,974 Investments on Deposit The Company had investments with a fair value of $8,400,396 and $7,959,076 on deposit with various state insurance departments as of December 31, 2024 and 2023, respectively. Note 3 – Fair Value Measurements Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three levels based on the observability of valuation inputs: Level 1 – Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 – Valuation methodologies include quoted prices for similar assets and liabilities in active markets or quoted prices for identical, quoted prices for identical or similar assets or liabilities in markets that are not active, or the Company may use various valuation techniques or pricing models that use observable inputs to measure fair value. Level 3 – Valuation is based upon unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the Company’s own assumptions about the inputs that market participants would use in pricing the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value 37 measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used as of December 31: 2024 Level 1 Level 2 Level 3 Total Fixed maturity securities: U.S. Government and government agencies and authorities $ 20,882,294 $ 0 $ 0 $ 20,882,294 U.S. special revenue and assessments 0 7,234,191 0 7,234,191 Corporate securities 0 48,363,601 0 48,363,601 Total fixed maturities 20,882,294 55,597,792 0 76,480,086 Equity securities: Common stocks 59,125,859 5,519,600 3,064,983 67,710,442 Limited liability companies 0 0 82,654,596 82,654,596 Total equity securities 59,125,859 5,519,600 85,719,579 150,365,038 Short-term investments 1,954,687 0 0 1,954,687 Total financial assets $ 81,962,840 $ 61,117,392 $ 85,719,579 $ 228,799,811 2023 Level 1 Level 2 Level 3 Total Fixed maturity securities: U.S. Government and government agencies and authorities $ 13,587,779 $ 0 $ 0 $ 13,587,779 U.S. special revenue and assessments 0 7,308,458 0 7,308,458 Corporate securities 0 58,188,308 0 58,188,308 Total fixed maturities 13,587,779 65,496,766 0 79,084,545 Equity securities: Common stocks 60,145,264 5,329,080 2,807,634 68,281,978 Limited liability companies 0 0 57,604,806 57,604,806 Total equity securities 60,145,264 5,329,080 60,412,440 125,886,784 Short-term investments 29,132,236 0 0 29,132,236 Total financial assets $ 102,865,279 $ 70,825,846 $ 60,412,440 $ 234,103,565 Total assets included in the fair value hierarchy exclude certain equity securities that were measured at estimated fair value using the net asset value (“NAV”) per share practical expedient. At December 31, 2024 and 2023, the estimated fair value of such investments was $84,141,189 and $52,738,701, respectively. These investments are generally not readily redeemable by the investee. The following is a description of the valuation techniques used by the Company to measure assets reported at fair value on a recurring basis. 38 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. Investments in Common Stocks Investments in Limited Liability Companies Total Balance at December 31, 2023 $ 2,807,634 $ 57,604,806 $ 60,412,440 Unrealized gains 257,349 21,923,259 22,180,608 Purchases 0 3,741,594 3,741,594 Sales 0 (615,063) (615,063) Balance at December 31, 2024 $ 3,064,983 $ 82,654,596 $ 85,719,579 Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains on instruments held at December 31, 2024 and 2023 may include changes in fair value that were attributable to both observable and unobservable inputs. Assets and liabilities are transferred into Level 3 when a significant input cannot be corroborated with market observable data. This occurs when market activity decreases significantly and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred out of Level 3 when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity, a specific event, or one or more significant input(s) becoming observable. 39 In 2024, there were no transfers in or out of Level 3. Quantitative Information About Level 3 Fair Value Measurements The following table presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments and includes only those instruments for which information about the inputs is reasonably available to the Company, such as data from independent third-party valuation service providers and from internal valuation models. Financial Assets Fair Value at December 31, 2024 Fair Value at December 31, 2023 Valuation Technique Limited liability companies $ 82,654,596 $ 57,604,806 Pricing Model Common stocks 3,064,983 2,807,634 Pricing Model Total $ 85,719,579 $ 60,412,440 Uncertainty of Fair Value Measurements The significant unobservable inputs used in the determination of the fair value of assets classified as Level 3 have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements of these assets as of the reporting date. Equity Securities at Fair Value Fair market value for equity securities is derived based on unobservable inputs, such as projected normalized revenues and industry standard multiples of revenue for the equity securities valued using pricing model. Significant increases (decreases) in either of those inputs in isolation would result in a significantly higher (lower) fair value measurement. Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share The Company holds certain equity securities that are measured at estimated fair value using the NAV per share practical expedient. These investments are generally not readily redeemable by the investee. The following tables provide additional information regarding the assets carried at NAV. Investment Category Fair Value at December 31, 2024 Unfunded Commitments Redemption Frequency Redemption Notice Period Equity securities Growth equity Redeemable Limited partnership $ 52,518,353 $ 0 Quarterly 45 Non-redeemable Limited liability companies 4,802,917 2,100,000 n/a n/a Limited partnerships 26,819,919 2,025,771 n/a n/a Total $ 84,141,189 $ 4,125,771 40 Investment Category Fair Value at December 31, 2023 Unfunded Commitments Redemption Frequency Redemption Notice Period Equity securities Growth equity Redeemable Limited partnership $ 34,081,797 $ 0 Quarterly 45 Non-redeemable Limited liability companies 9,710,311 3,550,546 n/a n/a Limited partnerships 8,946,593 2,410,599 n/a n/a Total $ 52,738,701 $ 5,961,145 The following are descriptions of the Company’s assets held at NAV. The Company invested in a limited partnership that was formed under the laws of the State of Delaware in 1999, as a Delaware limited partnership (“LP”). The Limited Partnership Agreement provides for the Fund to continue until dissolved. There are significant restrictions to the dissolution process, which are outlined in the LP Agreement. The Fund invests in listed equity and fixed income securities as well as non-listed securities, including direct-owned minerals and other royalties. In 2013, UG entered into an irrevocable subscription agreement to invest in the LP. The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware in 2020. The LLC agreement provides for the Company to continue until dissolved. There are significant restrictions to the dissolution process, which are outlined in the LLC Agreement. The LLC Company was formed for the purpose of acquiring, making investments in, and owning, holding, and growing operating businesses through the United States. In 2020, UG entered into a LLC Agreement to invest in this LLC. The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware. The LLC was formed in 2020 to provide long-term investment returns. The Company will continue to operate until December 31, 2032, or until each of the investment funds in which the LLC invests terminates, unless terminated earlier or extended in accordance with the Operating Agreement. In 2020, UG completed the Subscription Agreement to become an investor in this LLC. The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware. The LLC was formed in 2022 to amplify philanthropy by primarily investing in venture capital investment funds and in direct venture capital investments of operating companies. The Company will continue to operate until December 31, 2034, or until each of the investment funds in which the LLC invests terminates, unless terminated earlier or extended in accordance with the Operating Agreement. In 2022, the Company completed the Subscription Agreement to become an investor in this LLC. The Company invested in the Limited Partnership ("LP"), a closed-end fund, formed pursuant to the laws of the state of Delaware under a limited partnership agreement in 2022, and shall dissolve upon the first to occur of either the end of the tenth anniversary of the final closing date or, if extended, upon the end of such extension(s), upon the dissolution or removal of the General Partner or upon other specific circumstances as defined in the LP Agreement. The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2012 and is scheduled to terminate on the tenth anniversary of the final closing date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the LP is to make investments in and pursue targets that educate, train, and inspire men and women in the United States and around the world to value free enterprise, business, and economics to improve the quality of their lives and the lives and the lives of those in their communities. In 2012, the Company entered into a Limited Partnership Agreement to invest in this LP. The Company is currently in the process of winding down operations. 41 The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2015 and is scheduled to terminate on the tenth anniversary of the final closing date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the LP is to make investments in and pursue targets that educate, train, and inspire men and women in the United States and around the world to value free enterprise, business, and economics to improve the quality of their lives and the lives and the lives of those in their communities. In 2015, the Company entered into a Limited Partnership Agreement to invest in this LP. The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2018 (the “Agreement”) and is scheduled to terminate on the twelfth anniversary of the Final Closing Date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the Partnership is to make investments in and pursue targets that educate, train, and inspire men and women in the United States and around the world to value free enterprise, business, and economics to improve the quality of their lives and the lives and the lives of those in their communities. In 2018, the Company entered into a Limited Partnership Agreement to invest in this LP. The Company invested in a Limited Liability Company (“LLC”) that was formed under the laws of the state of Delaware. The LLC was formed in 2021 for the purpose of investing in companies located in emerging markets. The Limited Liability Company Agreement provides for LLC to continue until dissolved, unless terminated earlier through terms specified in the Operating Agreement. In 2021, the Company entered into a Limited Liability Company Agreement to invest in the LLC. The Company invested in a closed-end LP fund that was formed pursuant to the laws of the State of Delaware under a limited partners agreement (the “Agreement”) in 2024 and is scheduled to terminate on the tenth anniversary of the final closing date, unless terminated sooner or extended in accordance with the Agreement. The purpose of the LP is to invest in fire prevention related services. In 2024, the Company entered into a Limited Partnership Agreement to invest in this LP. The Company invested in a LP that was formed pursuant to the laws of the state of Delaware under a limited partnership agreement in 2021 (the “Agreement”) and is scheduled to terminate on the tenth anniversary of the Final Closing Date, unless terminated sooner or extended in accordance with the Agreement. The Partnership is organized for the principal purposes of acquiring, holding, supervising, managing and disposing of investment in recapitalization, management buyouts, and corporate divestitures of Portfolio Companies operating in various segments of the U.S. lower middle markets. In 2022, the Company entered into a Limited Partnership Agreement to invest in this LP. Fair Value Measurements on a Nonrecurring Basis Certain assets are not carried at fair value on a recurring basis. Accordingly, such investments are only included in the fair value hierarchy disclosure when the investment is subject to re- measurement at fair value after initial recognition and the resulting re-measurement is reflected in the Consolidated Financial Statements. The Company did not recognize any re-measurements or impairments of financial instruments during the years ended December 31, 2024 and 2023. . Fair Value Information About Financial Instruments Not Measured at Fair Value Certain assets are not carried at fair value on a recurring basis. Accordingly, such investments are only included in the fair value hierarchy disclosure when the investment is subject to re- measurement at fair value after initial recognition and the resulting re-measurement is reflected in the Consolidated Financial Statements. 42 The following table presents the carrying amount and estimated fair values of the Company’s financial instruments not measured at fair value and indicates the level in the fair value hierarchy of the estimated fair value measurement based on the observability of the inputs used as of December 31: 2024 Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Assets Held to maturity redeemable preferred stock $ 2,500,000 $ 2,500,000 $ 0 $ 0 $ 2,500,000 Equity securities, at cost 21,203,393 21,203,393 0 0 21,203,393 Mortgage loans on real estate 16,277,981 15,532,707 0 0 15,532,707 Notes receivable 12,672,175 12,750,201 0 0 12,750,201 Policy loans 5,692,565 5,692,565 0 0 5,692,565 Accrued investment income 1,264,416 1,264,416 0 0 1,264,416 Liabilities Policy claims and benefits payable 3,847,214 3,847,214 0 0 3,847,214 Dividend and endowment accumulations 14,628,119 14,628,119 0 0 14,628,119 2023 Carrying Amount Estimated Fair Value Level 1 Level 2 Level 3 Assets Held to maturity redeemable preferred stock $ 2,500,000 $ 2,500,000 $ 0 $ 0 $ 2,500,000 Equity securities, at cost 18,227,986 18,227,986 0 0 18,227,986 Mortgage loans on real estate 15,318,176 14,447,026 0 0 14,447,026 Notes receivable 14,009,225 14,189,147 0 0 14,189,147 Policy loans 6,018,248 6,018,248 0 0 6,018,248 Accrued investment income 2,001,064 2,001,064 0 0 2,001,064 Liabilities Policy claims and benefits payable 4,188,917 4,188,917 0 0 4,188,917 Dividend and endowment accumulations 14,749,258 14,749,258 0 0 14,749,258 Notes payable 19,000,000 19,000,000 0 19,000,000 0 The above estimated fair value amounts have been determined based upon the following valuation methodologies. Considerable judgment was required to interpret market data in order to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts. Held to maturity redeemable preferred stock is carried at cost, which approximates fair value. Certain equity securities are reported at their cost basis, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. It is not practicable to estimate their fair values due to insufficient information being available. The fair values of mortgage loans on real estate are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings. The inputs 43 used to measure the fair value of our mortgage loans on real estate are classified as Level 3 within the fair value hierarchy. The fair values of notes receivable are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings. The inputs used to measure the fair value of the notes receivable are classified as Level 3 within the fair value hierarchy. Policy loans are carried at the aggregate unpaid principal balances in the Condensed Consolidated Balance Sheets which approximate fair value, and earn interest at rates ranging from 4% to 8%. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances. The inputs used to measure the fair value of our policy loans are classified as Level 3 within the fair value hierarchy. The carrying value of accrued investment income approximates its fair value. The carrying amounts reported for policy claims and benefits payable approximates fair value. The carrying value for dividend and endowment accumulations approximates fair value. The carrying value for notes payable is a reasonable estimate of fair value subject to floating rates of interest. The fair value of notes payable with fixed rate borrowings is determined based on the borrowing rates currently available to the Company for loans with similar terms and average maturities. The inputs used to measure the fair value of notes payable are classified as Level 2 within the fair value hierarchy. Note 4 - Reinsurance As is customary in the insurance industry, the insurance subsidiary cedes insurance to, and assumes insurance from, other insurance companies under reinsurance agreements. Reinsurance agreements are intended to limit a life insurer’s maximum loss on a large or unusually hazardous risk or to obtain a greater diversification of risk. The ceding insurance company remains primarily liable with respect to ceded insurance should any reinsurer be unable to meet the obligations assumed by it. However, it is the practice of insurers to reduce their exposure to loss to the extent that they have been reinsured with other insurance companies. The Company sets a limit on the amount of insurance retained on the life of any one person. The Company will not retain more than $125,000, including accidental death benefits, on any one life. As of December 31, 2024, the Company had gross insurance in-force of approximately $801 million of which approximately $162 million was ceded to reinsurers. As December 31, 2023, the Company had gross insurance in- force of approximately $847 million of which approximately $172 million was ceded to reinsurers. The Company’s reinsured business is ceded to numerous reinsurers. The Company monitors the solvency of its reinsurers in seeking to minimize the risk of loss in the event of a failure by one of the parties. The Company is primarily liable to the insureds even if the reinsurers are unable to meet their obligations. The primary reinsurers of the Company are large, well-capitalized entities. Most recently, UG utilized reinsurance agreements with Optimum Re Insurance Company (“Optimum”), and Swiss Re Life and Health America Incorporated (“SWISS RE”). Optimum and SWISS RE currently hold an “A” (Excellent) and “A+” (Superior) rating, respectively, from A.M. Best, an industry rating company. The reinsurance agreements were effective December 1, 1993 and covered most new business of UG. Under the terms of the agreements, UG cedes risk amounts above its retention limit of $100,000 with a minimum cession of $25,000. Ceded amounts are shared equally between the two reinsurers on a yearly renewable term (“YRT”) basis, a common industry method. The treaty is self-administered; meaning the Company records the reinsurance results and reports them to the reinsurers. 44 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, 2024 and 2023. The Company does not have any short-duration reinsurance contracts. The effect of the Company’s long-duration reinsurance contracts on premiums earned in 2024 and 2023 were as follows: 2024 2023 Premiums Earned Premiums Earned Direct $ 7,567,703 $ 7,918,235 Assumed 0 0 Ceded (2,280,397) (2,553,010) Net Premiums $ 5,287,306 $ 5,365,225 Note 5 – Cost of Insurance Acquired When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates utilized may vary due to differences in the blocks of business. The interest rate utilized in the amortization calculation of the remaining cost of insurance acquired is 12%. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. 2024 2023 Cost of insurance acquired, beginning of year $ 2,036,896 $ 2,698,153 Interest accretion 339,372 418,722 Amortization (975,187) (1,079,979) Net amortization (635,815) (661,257) Cost of insurance acquired, end of year $ 1,401,081 $ 2,036,896 45 Estimated net amortization expense of cost of insurance acquired for the next three years is as follows: Interest Accretion Amortization Net Amortization 2025 263,074 877,240 614,166 2026 189,374 799,520 610,146 2027 116,157 292,926 176,769 Note 6 – Income Taxes UTG and UG file separate federal income tax returns. Income tax expense (benefit) consists of the following components: 2024 2023 Current tax expense (benefit) $ 2,107,419 $ (517,109) Deferred tax 10,711,564 558,916 Income tax expense $ 12,818,983 $ 41,807 The expense for income taxes differed from the amounts computed by applying the applicable United States statutory rate of 21% as of December 31, 2024 and 2023, before income taxes as a result of the following differences: 2024 2023 Tax computed at statutory rate $ 13,066,234 $ 590,481 Changes in taxes due to: Non-controlling interest (20,930) (23,813) Dividend received deduction (143,534) (109,642) Oil and gas royalty's depletion (104,115) (106,797) Other, including prior year true up 21,328 (308,422) Income tax expense $ 12,818,983 $ 41,807 The following table summarizes the major components that comprise the net deferred tax liability as reflected in the balance sheets: 2024 2023 Investments $ 23,066,656 $ 11,862,470 Cost of insurance acquired 294,227 427,748 Management/consulting fees (7,596) (7,899) Future policy benefits (600,175) (697,024) Deferred gain on sale of subsidiary 1,387,490 1,387,490 Other liabilities (786,095) (284,350) Reserves adjustment 48,051 96,105 Federal tax DAC (229,697) (236,950) Loan loss reserve (100,800) (120,750) Deferred tax liability $ 23,072,061 $ 12,426,840 At December 31, 2024 and 2023, the Company had gross deferred tax assets of $2,175,830 and $1,939,816, respectively, and gross deferred tax liabilities of $25,247,891 and $14,366,656, respectively, resulting from temporary differences primarily related to the life insurance subsidiary. A valuation allowance is to be provided when it is more likely than not that deferred tax assets will not be realized by the Company. No valuation allowance has been recorded relating to the 46 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, 2021, 2022, 2023, 2024. The Company classifies interest and penalties on underpayment of income taxes as income tax expense. No interest or penalties were included in the reported income taxes for the years presented. The Company is not aware of any potential or proposed changes to any of its tax filings. Note 7 – Credit Arrangements At December 31, 2024 and 2023, the Company had the following line of credit available: Instrument Issue Date Maturity Date Revolving Credit Limit December 31, 2023 Borrowings Repayments December 31, 2024 Line of Credit: UG - CMA 10/21/2021 10/3/2025 $ 25,000,000 19,000,000 0 19,000,000 $ 0 UTG had a variable rate revolving line of credit that expired on November 20, 2024. As collateral, UTG had pledged 100% of the common voting stock of its wholly owned subsidiary, Universal Guaranty Life Insurance Company ("UG"). The Company had not utilized the line of credit in several years. Management determined the line was no longer needed at this time. During October of 2024, the Federal Home Loan Bank approved UG’s Cash Management Advance Application (“CMA”). The CMA gives the Company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity. The Company has pledged bonds with a collateral lendable value of $21,371,910. During the fourth quarter of 2023, the Company borrowed $19 million and planned to utilize the funds for investing activities. The variable interest rate on the borrowed funds was 5.47%. During the first quarter of 2024, the Company repaid the entire outstanding principal balance. Note 8 – Commitments and Contingencies The insurance industry has experienced a number of civil jury verdicts which have been returned against life and health insurers in the jurisdictions in which the Company does business involving the insurers’ sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against the insurer, including material amounts of punitive damages. In some states, juries have substantial discretion in awarding punitive damages in these circumstances. In the normal course of business, the Company is involved from time to time in various legal actions and other state and 47 federal proceedings. Management is of the opinion that the ultimate disposition of the matters will not have a materially adverse effect on the Company’s results of operations or financial position. Under the insurance guaranty fund laws in most states, insurance companies doing business in a participating state can be assessed up to prescribed limits for policyholder losses incurred by insolvent or failed insurance companies. Although the Company cannot predict the amount of any future assessments, most insurance guaranty fund laws currently provide that an assessment may be excused or deferred if it would threaten an insurer’s financial strength. Mandatory assessments may be partially recovered through a reduction in future premium tax in some states. The Company does not believe such assessments will be materially different from amounts already provided for in the consolidated financial statements, though the Company has no control over such assessments. Mortgage Loan Commitments - The Company commits to lend funds under mortgage loan commitments. The amounts of these mortgage loan commitments were $745,561 and $878,132 at December 31, 2024 and 2023, respectively. Notes Receivable Commitments - The Company commits to lend funds under notes receivable funding commitments. The amounts of these notes receivable commitments were $3,250,000 and $2,800,000 at December 31, 2024 and 2023, respectively. Commitments to Fund Limited Liability Company and Limited Partnership Investments - The Company commits to fund investments in limited liability companies and limited partnership. The amounts of the unfunded commitments were $14,316,279 and $16,153,903 at December 31, 2024 and 2023, respectively. Note 9 – Shareholders’ Equity Stock Repurchase Program - The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG’s common stock. At a meeting of the Board of Directors in December of 2024, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million of UTG’s common stock, for a total repurchase of $24 million of UTG’s common stock in the open market or in privately negotiated transactions since inception of the program. Company Management has broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. Open market purchases are made based on the last available market price but may be limited. During 2024, the Company repurchased 23,961 shares through the stock repurchase program for $648,152. Through December 31, 2024, UTG has spent $20,839,555 in the acquisition of 1,380,820 shares under this program. Director Compensation - Effective January 1, 2018, a compensation arrangement was approved whereby each outside Director annually received $5,000 as a retainer and $2,500 per meeting attended. The compensation is be paid in the form of UTG, Inc. common stock. The value is determined annually on the close of business December 20th or the next business day should December 20th be a weekend or holiday, based on the activity of the year just ending. Reasonable travel expenses are reimbursed in cash as incurred. UTG’s Director Compensation policy provides that Directors who are employees of UTG or its affiliates do not receive any compensation for their services as Directors except for reimbursement for reasonable travel expenses for attending each meeting. In December of 2024, the Company issued 4,539 shares of its common stock as compensation to the Directors. The shares were valued at $28.09 per share, the market value at the date of issue. During 2024, the Company recorded $127,501 in operating expense related to the stock issuance. In December of 2023, the Company issued 4,246 shares of its common stock as compensation to the Directors. The shares were valued at $30.01 per share, the market value at the date of issue. During 2023, the Company recorded $127,422 in operating expense related to the stock issuance. 48 Other Compensation - During 2024, the Company issued 11,867 shares of stock to management and employees as compensation at a cost of $349,312. During 2023, The Company issued 26,911 shares of stock to management and employees as compensation at a cost of $674,390. These awards are determined at the discretion of the Board of Directors. Earnings Per Share - The following is a reconciliation of basic and diluted weighted average shares outstanding used in the computation of basic and diluted earnings per share: 2024 2023 Basic weighted average shares outstanding 3,165,541 3,176,757 Weighted average dilutive options outstanding 0 0 Diluted weighted average shares outstanding 3,165,541 3,176,757 The computation of diluted earnings per share is the same as basic earnings per share for the years ending December 31, 2024 and 2023, as there were no outstanding securities, options or other offers that give the right to receive or acquire common shares of UTG. Statutory Restrictions - Restrictions exist on the flow of funds to UTG from its insurance subsidiary. Statutory regulations require life insurance subsidiaries to maintain certain minimum amounts of capital and surplus. UG is required to maintain minimum statutory surplus of $2,500,000. At December 31, 2024, substantially all of the consolidated shareholders’ equity represents net assets of UTG’s subsidiaries. UG is domiciled in the state of Ohio. Ohio requires notification within 5 business days to the insurance commissioner following the declaration of any ordinary dividend and at least 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 $0 million and $2 million to UTG in 2024 and 2023, respectively. No extraordinary dividends were paid during the two year period. UTG used the dividends received in 2023 to purchase outstanding shares of UTG stock and for general operations of the Company. Note 10 - Statutory Accounting The insurance subsidiary prepares its statutory-based financial statements in accordance with accounting practices prescribed or permitted by the Ohio Department of Insurance. These principles differ significantly from accounting principles generally accepted in the United States of America. “Prescribed” statutory accounting practices include state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (NAIC). “Permitted” statutory accounting practices encompass all accounting practices that are not prescribed; such practices may differ from state to state, from company to company within a state, and may change in the future. The following table reflects UG’s statutory basis net income and capital and surplus (shareholders’ equity) as of December 31: 2024 2023 Net income $ 7,730,512 $ 8,320,315 Capital and surplus 104,126,189 91,828,094 49 Note 11 – Related Party Transactions The articles of incorporation of UG contain the following language under item 12 relative to related party transactions: A director shall not be disqualified from-dealing with or contracting with the corporation as vendor, purchaser; employee, agent or otherwise; nor, in the absence of fraud, shall any transaction or contract or act of this corporation be void or in any way affected or invalidated by the fact that any director or any firm of which any director is a member or any corporation of which any director is a shareholder, director or officer is in any way interested in such transaction or contract or act, provided the fact that such director or such firm or such corporation so interested shall be disclosed or shall be known to the Board of Directors or such members thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract or transaction or act shall be taken: nor shall any such director be accountable or responsible to the company for or in respect to such transaction or contract or act of. this corporation or for any gains or profits realized by him by reason of the fact that he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer is interested in such action or contract; and any such director may be counted in determining the existence of a quorum of any meeting of the Board of Directors of the company which shall authorize or take action in respect to any such contract or transaction or act and may vote thereat to authorize, ratify, or approve any such contract or transaction or act, with like force and effect as if he or any firm of which he is a member or any corporation of which he is a shareholder, director or officer were not interested in such transaction or contract or act. On February 20, 2003, UG purchased $4 million of a trust preferred security offering issued by First Southern Bancorp, Inc. (“FSBI”). The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515%. The Company received dividends of $165,590 and $165,137 during 2024 and 2023, respectively. On March 30, 2009, UG purchased $1 million of FSBI common stock. The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement. UTG has a 30.10% ownership interest in an aircraft that is jointly owned with First Southern National Bank and Bandyco, LLC. Bandyco, LLC is affiliated with the Estate of Ward F. Correll. Mr. Correll is the father of Jesse Correll and a former director of the Company. The aircraft is used for business related travel by various officers and employees of the Company. For years 2024 and 2023, UTG paid $332,445 and $307,442 for costs associated with the aircraft, respectively. Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiary. Under this arrangement, the subsidiary pays its proportionate share of expenses, based on an allocation formula. During 2024 and 2023, UG paid $7,480,761 and $7,910,324, respectively, in expenses. The Ohio Department of Insurance has approved the cost sharing agreement and it is Management’s opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America. The Company from time to time acquires mortgage loans through participation agreements with FSNB. FSNB services the Company’s mortgage loans including those covered by the participation agreements. The Company pays a 0.25% servicing fee on these loans and a one-time fee at loan origination of 0.50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $20,137 and $18,694 in servicing fees and $26,665 and $18,630 in origination fees to FSNB during 2024 and 2023, respectively. Effective January 1, 2017, UTG entered into a shared services contract with FSNB. Pursuant to the terms of the agreement, UTG and FSNB will utilize the services of the other’s staff in certain instances for the betterment of both entities. Personnel within departments, such as accounting, human resources, and information technology, are shared between the entities. Costs of these 50 resources are then reimbursed between the companies. The shared services arrangement provides benefits to both parties such as access to a greater pool of knowledgeable staff, efficiencies from elimination of redundancies and more streamlined operations. The Company reimbursed expenses incurred by employees of FSNB relating to salaries, travel and other costs incurred on behalf of or relating to the Company and received reimbursements from FSNB. The Company paid $1,217,395 and $1,337,096 in 2024 and 2023, respectively to FSNB in net reimbursement of such costs. Effective July 1, 2018, the Company assumed the employees of several smaller entities owned or associated with UTG. The purpose of this was to support the continued efforts to further streamline operations amongst associated entities. The salaries, benefits, and payroll related processing fees are 100% reimbursed by the associated entities on a monthly basis. During 2024 and 2023, the Company received reimbursements of $1,605,028 and $1,438,450, respectively. These costs are eliminated for consolidation of these entities, where applicable. The Company rents a portion of the first floor and second floor of an 8,000 square foot, two-story office building, located in Stanford, KY. The first floor of the building is occupied by UTG and FSNB employees that are included in the shared services agreement between the two entities. The second floor is occupied by the customer service call centers for both UTG and FSNB employees. The building is owned by FSNB and UTG pays $2,000 per month in rent to FSNB for the portion of the building occupied by UTG employees. The Company paid rent of $24,000 to FSNB in 2024 and 2023. As previously disclosed in the Notes Receivable section of Note 2 - Investments, several of the Company’s notes have participation agreements in place with third parties. Certain participation agreements are with FSF, a related party. The participation agreements are sold without recourse and assigned to the participant based on their pro-rata share of the principal, interest and collateral as specified in the participation agreements. The undivided participations in the notes receivable range from 20% - 50%. The total amount of loans participated to FSF was $0 and $60,031 as of December 31, 2024 and 2023, respectively. During the 4th quarter of 2023, UTG entered into a loan participation agreement with FSNB to fund a commercial mortgage loan issued to a company that is owned/managed by a member of UTG’s Board of Directors. UG had a 9% interest in the participated loan and agreed to fund up to $1,482,300. The loan was fully repaid in 2024. Note 12 – Other Cash Flow Disclosures On a cash basis, the Company paid the following expenses for the periods ended December 31: 2024 2023 Interest $ 23,169 $ 44,814 Federal income tax 770,000 5,800,000 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 51 December 31, 2024 and 2023, approximately 52% and 51%, respectively, of the Company’s total direct premium was collected from Illinois, Ohio, and Texas. Thus, results of operations are heavily dependent upon the strength of these economies. The Company reinsures that portion of insurance risk which is in excess of its retention limits. Retention limits range up to $125,000 per life. Life insurance ceded represented 20% of total life insurance in-force at December 31, 2024 and 2023. Insurance ceded represented 30% and 40% of premium income for 2024 and 2023, respectively. The Company would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations. The Company owns a variety of investments associated with the oil and gas industry. These investments represented approximately 34% and 28% of the Company’s total invested assets at December 31, 2024 and 2023, respectively. The following table provides an allocation of the oil and gas investments by type as of December 31: 2024 Land, Minerals & Royalty Interests Exploration Total Fixed maturities, at fair value $ 0 $ 1,068,400 $ 1,068,400 Equity securities, at fair value 124,155,007 0 124,155,007 Equity securities, at cost 4,863,572 0 4,863,572 Investment real estate 5,677,061 0 5,677,061 Notes receivable 1,875,000 0 1,875,000 Total $ 136,570,640 $ 1,068,400 $ 137,639,040 2023 Land, Minerals & Royalty Interests Exploration Total Fixed maturities, at fair value $ 0 $ 1,075,240 $ 1,075,240 Equity securities, at fair value 84,066,203 0 84,066,203 Equity securities, at cost 5,826,381 0 5,826,381 Investment real estate 7,383,851 0 7,383,851 Notes receivable 2,000,000 0 2,000,000 Total $ 99,276,435 $ 1,075,240 $ 100,351,675 As of December 31, 2024 and 2023, the Company owned four equity securities that represented approximately 81% and four securities that represented approximately 73%, respectively, of the total investments associated with the oil and gas industry. The Company’s results of operations and financial condition have in the past been, and may in the future be, adversely affected by the degree of certain industry specific concentrations in the Company’s investment portfolio. The Company has significant exposure to investments associated with the oil and gas industry. Events or developments that have a negative effect on the oil and gas industry may adversely affect the valuation of our investments in this specific industry. The Company’s ability to sell its investments associated with the oil and gas industry may be limited. Note 14 – Segment Information The Company is organized into a single reportable segment: insurance distribution. The Company derives its revenue entirely from within the United States and manages business activities on a consolidated basis. The Company’s chief operating decision maker is its Chief Executive Officer. The accounting policies of the insurance distribution segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker uses net income or loss, as reported on the Consolidated Statements of Operations, to assess performance and allocate resources for the insurance distribution segment. The significant segment expense 52 categories regularly provided to the chief operating decision maker are the same as those included on the Consolidated Statements of Operations. The measure of segment assets is total assets as reported on the Consolidated Balance Sheets. Note 15 – Selected Quarterly Financial Data As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item. Note 16 – Revision of Previously Issued Consolidated Financial Statements The Company identified an error in its previously issued Consolidated Financial Statements related to the classification of certain investment types on the Consolidated Balance Sheets. The impact of the error to the prior period’s Consolidated Financial Statements was not considered to be material. Certain exchange traded funds ("ETFs") were previously classified as fixed maturities, available for sale. To comply with GAAP reporting requirements, the Company has reclassified $24,325,291 of exchange traded funds out of fixed maturities, available for sale, to equity securities, at fair value. Management evaluated this error in accordance with SEC Staff Accounting Bulletin Number 99, Materiality, which is since codified in ASC 250 – Accounting Changes and Error Corrections, and concluded it was not material to any previously reported financial statements. However, in order to improve the consistency and comparability of the consolidated financial statements, Management will revise the consolidated financial statements and related disclosures to correct the error in future filings. As Previously December 31, 2023 Reported Adjustments As Restated Consolidated Balance Sheets Fixed maturities, at fair value $ 103,409,836 $ (24,325,291) $ 79,084,545 Equity securities, at fair value 156,550,812 22,074,673 178,625,485 Equity securities, at cost 15,977,368 2,250,618 18,227,986 Retained earnings 133,491,797 (2,161,735) 131,330,062 Accumulated other comprehensive loss (4,882,317) 2,161,735 (2,720,582) Consolidated Statements of Operations Net investment income $ 14,141,809 $ (88,281) $ 14,053,528 Change in fair value of equity securities (3,830,793) 974,250 (2,856,543) Income tax expense (benefit) (144,247) 186,054 41,807 Net income attributable to common shareholders 1,956,695 699,915 2,656,610 Basic income per share 0.62 0.22 0.84 Diluted income per share 0.62 0.22 0.84 Consolidated Statements of Comprehensive Income (Loss) Net income $ 2,070,092 $ 699,915 $ 2,770,007 Unrealized holding gains (losses) arising during the period, pre-tax 2,867,943 (885,969) 1,981,974 Tax (expense) benefit on unrealized holding gains (losses) arising during the period (592,591) 186,054 (406,537) Unrealized holding gains (losses) during period, net of tax 2,275,352 (699,915) 1,575,437 Subtotal: Other comprehensive income (loss), net of tax 2,229,269 (699,915) 1,529,354 Consolidated Statements of Cash Flows Net income $ 2,070,092 $ 699,915 $ 2,770,007 Accretion of investments (314,042) 88,280 (225,762) Change in fair value of equity securities 3,830,793 (974,250) 2,856,543 Change in deferred income taxes 372,861 186,055 558,916 53 BOARD OF DIRECTORS EXECUTIVE OFFICERS Jesse T. Correll Jesse T. Correll Chairman, President and Director Chairman of the Board, of First Southern Bancorp, Inc. Chief Executive Officer, and President Preston H. Correll Theodore C. Miller Co-Founder, Marksbury Farm Market and Senior Vice President, Owner, St. Asaph Farm Chief Financial Officer John M. Cortines Douglas P. Ditto Director of Grantmaking, Maclellan Foundation Vice President Thomas F. Darden, II Daniel T. Roberts Founder and Chief Executive Officer Vice President of Cherokee Howard L. Dayton, Jr. Founder 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. 54 SHAREHOLDER INFORMATION Annual Meeting The 2025 Annual Meeting of Shareholders will be held on Friday, June 27, 2025 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. 2024 2023 Period High Low High Low First quarter 32.00 30.01 26.75 24.18 Second quarter 30.54 29.00 38.63 26.00 Third quarter 29.08 25.75 38.63 29.60 Fourth quarter 29.50 24.81 34.00 30.01 UTG has not declared or paid any dividends on its common stock in the past two fiscal years, and has no current plans to pay dividends on its common stock as it intends to retain all earnings for investment in and growth of the Company’s business. See Note 9 – Shareholders’ Equity in the Notes to the Consolidated Financial Statements for information regarding dividend restrictions, including applicable restrictions on the ability of the Company’s life insurance subsidiary to pay dividends. As of January 31, 2025 there were 3,988 record holders of UTG common stock. Purchases of Equity Securities The following table provides information with respect to purchases we made of our common stock during the three months ended December 31, 2024 and total repurchases: Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares That May Yet Be Purchased Under the Program Approximate Dollar Value That May Yet Be Purchased Under the Program Oct. 1 through Oct. 31, 2024 12,786 $ 25.09 12,786 N/A $ 1,161,029 Nov. 1 through Nov. 30, 2024 0 $ 0 0 N/A $ 1,161,029 Dec. 1 through Dec. 31, 2024 21 $ 27.82 21 N/A $ 3,160,445 Total 12,807 12,807 55 The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG’s common stock. At a meeting of the Board of Directors in December of 2024, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million of UTG’s common stock, for a total repurchase of $24 million of UTG’s common stock in the open market or in privately negotiated transactions since inception of the program. Company Management has broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. Open market purchases are made based on the last available market price but may be limited. During 2024, the Company repurchased 23,961 shares through the stock repurchase program for $648,152. Through December 31, 2024, UTG has spent $20,839,555 in the acquisition of 1,380,820 shares under this program. 56 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. 57

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