UTG, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended						Nine Months Ended
	September 30,			September 30,			September 30,		September 30,
	2019			2018			2020		2019
Cash flows from operating activities:
Net income	$	13,534,601		$	22,928,102
Net income (loss)							$	(5,613,812)	$	13,534,601
Adjustments to reconcile net income to net cash used in operating activities:
Amortization (accretion) of investments		28,936			137,899			(87,559)		28,936
Other-than-temporary impairments		-			300,00
Realized investment gains, net		(10,143,014	)		(12,723,566	)		(10,708,155)		(10,143,014)
Unrealized trading (gains) losses included in income								(1,581)		0
Change in fair value of equity securities		(10,838,322	)		(22,050,489	)		14,016,065		(10,838,322)
Amortization of cost of insurance acquired		581,930			604,549			558,639		581,930
Depreciation		868,630			814,202			338,550		868,630
Stock-based compensation		246,534			246,757			218,289		246,534
Charges for mortality and administration of universal life and annuity products		(4,839,551	)		(4,948,332	)		(4,759,240)		(4,839,551)
Interest credited to account balances		3,068,614			3,177,834			3,014,030		3,068,614
Change in accrued investment income		375,806			42,511			431,837		375,806
Change in reinsurance receivables		460,659			91,579			122,415		460,659
Change in policy liabilities and accruals		(2,458,575	)		(2,613,125	)		(2,463,865)		(2,458,575)
Change in income taxes receivable (payable)		78,738			2,221,052			(458,729)		78,738
Change in other assets and liabilities, net		3,749,194			9,987,926			(3,373,186)		3,749,194
Net cash used in operating activities		(5,285,820	)		(1,783,101	)		(8,766,302)		(5,285,820)

Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities available for sale		8,563,966			54,220,638			12,253,350		8,563,966
Equity securities		10,219,197			843,260			17,071,364		10,219,197
Mortgage loans		4,824,430			4,496,554			554,787		4,824,430
Real estate		11,620,038			12,783,088			8,513,461		11,620,038
Notes receivable		4,296,998			2,559,264			3,689,060		4,296,998
Policy loans		1,324,183			1,423,014			914,651		1,324,183
Short-term investments		-			2,114,000			10,500,000		0
Total proceeds from investments sold and matured		40,848,812			78,439,818			53,496,673		40,848,812
Cost of investments acquired:
Fixed maturities available for sale		(11,655,148	)		(42,955,401	)		(9,038,928)		(11,655,148)
Equity securities		(1,323,310	)		(9,538,853	)		(12,011,489)		(1,323,310)
Trading securities		(132,518	)		-			5,584		(132,518)
Mortgage loans		(4,216,644	)		(16,453	)		(12,692,488)		(4,216,644)
Real estate		(1,729,000	)		(10,113,852	)		0		(1,729,000)
Notes receivable		(8,532,796	)		(4,000,000	)		(3,500,000)		(8,532,796)
Policy loans		(973,594	)		(1,244,976	)		(838,766)		(973,594)
Short-term investments		-			(7,549,076	)		(7,890,228)		0
Total cost of investments acquired		(28,563,010	)		(75,418,611	)		(45,966,315)		(28,563,010)
Net cash provided by investing activities		12,285,802			3,021,207			7,530,358		12,285,802

Cash flows from financing activities:
Policyholder contract deposits		3,542,562			3,548,809			3,386,396		3,542,562
Policyholder contract withdrawals		(3,578,980	)		(2,849,310	)		(3,040,660)		(3,578,980)
Purchase of treasury stock		(849,265	)		(1,217,802	)		(3,174,230)		(849,265)
Non controlling contributions (distributions) of consolidated subsidiary		(535,662	)		(247,592	)		0		(535,662)
Net cash used in financing activities		(1,421,345	)		(765,895	)		(2,828,494)		(1,421,345)

Net increase in cash and cash equivalents		5,578,637			472,211
Net increase (decrease) in cash and cash equivalents								(4,064,438)		5,578,637
Cash and cash equivalents at beginning of period		20,150,162			25,434,199			28,787,629		20,150,162
Cash and cash equivalents at end of period	$	25,728,799		$	25,906,410		$	24,723,191	$	25,728,799

See accompanying notes.

UTG, Inc.

Notes to Condensed Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet as of December 31, ~~2018,~~2019, which has been derived from audited consolidated financial statements, and the unaudited interim Condensed Consolidated Financial Statements include the accounts of UTG, Inc. (the “Parent”) and its subsidiaries (collectively with the Parent, the “Company”). All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for audited annual financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which in the opinion of Management, are necessary for a fair presentation of the results for the interim periods. The unaudited Condensed Consolidated Financial Statements included herein and these related notes should be read in conjunction with the Company’s consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. The Company’s results of operations for the three and nine months ended September 30, ~~2019~~2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019~~2020 or for any other future period.

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

This document at times will refer to the Registrant’s largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll.�� Mr. Correll holds a majority ownership of First Southern Funding, LLC (“FSF”), a Kentucky corporation, and First Southern Bancorp, Inc. (“FSBI”), a financial services holding company. FSBI operates through its 100% owned subsidiary bank, First Southern National Bank (“FSNB”). Banking activities are conducted through multiple locations within south-central and western Kentucky. Mr. Correll is Chief Executive Officer and Chairman of the Board of Directors of UTG and is currently UTG’s largest shareholder through his ownership control of FSF, FSBI and affiliates. At September 30, ~~2019,~~2020, Mr. Correll owns or controls directly and indirectly approximately ~~65.66%~~64.95% of UTG’s outstanding stock.

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

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

Note 2 – Recently Issued Accounting Standards

During the nine months ended September 30, ~~2019,~~2020, there were no additions to or changes in the critical accounting policies disclosed in the ~~2018~~2019 Form 10-K.

Note 3 – Investments

Available for Sale Securities – Fixed Maturity Securities

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

Investments in available for sale securities are summarized as follows:

September 30, 2019	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2020											Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	35,283,800	$	483,968	$	(333	)	$	35,767,435	$	44,789,865	$	1,418,625	$	0	$	46,208,490
U.S. special revenue and assessments		14,376,048		1,002,030		(99	)		15,377,979		14,356,937		1,487,743		0		15,844,680
All other corporate bonds		113,632,040		11,224,997		-			124,857,037		97,851,836		16,815,941		0		114,667,777
	$	163,291,888	$	12,710,995	$	(432	)	$	176,002,451	$	156,998,638	$	19,722,309	$	0	$	176,720,947

December 31, 2018	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2019											Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	25,649,410	$	149,006	$	(138,222	)	$	25,660,194	$	35,761,440	$	402,832	$	(35,529)	$	36,128,743
U.S. special revenue and assessments		16,350,486		334,300		(4,406	)		16,680,380		14,371,263		832,100		0		15,203,363
All other corporate bonds		118,895,973		2,569,287		(2,845,050	)		118,620,210		109,827,152		10,470,115		0		120,297,267
	$	160,895,869	$	3,052,593	$	(2,987,678	)	$	160,960,784	$	159,959,855	$	11,705,047	$	(35,529)	$	171,629,373

The amortized cost and estimated market value of debt securities at September 30, ~~2019,~~2020, by contractual maturity, is shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fixed Maturities Available for Sale September 30, 2019	Amortized Cost		Fair Value
Fixed Maturities Available for Sale September 30, 2020						Amortized Cost		Fair Value
Due in one year or less	$	2,500,083	$	2,499,750	$	26,793,810	$	27,113,305
Due after one year through five years		62,005,611		64,052,446		46,406,659		49,706,585
Due after five years through ten years		50,915,439		56,800,689		32,831,635		37,877,774
Due after ten years		47,870,755		52,649,566		24,192,862		28,870,286
Fixed maturities with no single maturity date						26,773,672		33,152,997
Total	$	163,291,888	$	176,002,451	$	156,998,638	$	176,720,947

The fair value of investments with sustained gross unrealized losses at September 30, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows:

September 30, 2019 Less than 12 months
12 months or longer
Total
Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses
U.S. Government and govt. agencies and authorities $ - - 2,499,750 (333 ) 2,499,750 $ (333 )
U.S. special revenue and assessments 2,027,140 (99)
- - 2,027,140 (99)
Total fixed maturities $ 2,027,140 (99 ) 2,499,750 (333 ) 4,526,890 $ (432 )

September 30, 2020	Less than 12 months				12 months or longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
All other corporate bonds	$	0		0		0		0		0	$	0
Total fixed maturities	$	0		0		0		0		0	$	0

December 31, 2018 Less than 12 months 12 months or longer Total
Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses
U.S. Government and govt. agencies and authorities $ 6,429,700 (49,904 ) 1,592,679 (88,318 ) 8,022,379 $ (138,222 )
U.S. special revenue and assessments 4,023,920 (4,406 ) - - 4,023,920 (4,406 )
All other corporate bonds 49,270,729 (2,033,507 ) 15,337,739 (811,543 ) 64,608,468 (2,845,050 )
Total fixed maturities $ 59,724,349 (2,087,817 ) 16,930,418 (899,861 ) 76,654,767 $ (2,987,678 )

December 31, 2019	Less than 12 months				12 months or longer				Total
	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
U.S. Government and govt. agencies and authorities	$	6,059,380		(35,529)		0		0		6,059,380	$	(35,529)
Total fixed maturities	$	6,059,380		(35,529)		0		0		6,059,380	$	(35,529)

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

	Less than 12 months	12 months or longer	Total	Less than 12 months	12 months or longer	Total
As of September 30, 2019
As of September 30, 2020
Fixed maturities	1	1	2	0	0	0
As of December 31, 2018
As of December 31, 2019
Fixed maturities	30	10	40	3	0	3

Substantially all of the unrealized losses on fixed maturities at ~~September 30, 2019 and~~ December 31, ~~2018~~2019 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position. Based upon the Company’s expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company’s evaluation of other relevant factors, the Company deems these securities to be temporarily impaired as of September 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

Net Investment Gains (Losses)

The following table presents net investment gains (losses) and the change in net unrealized gains (losses) on ~~available-for-sale~~ investments.

	Three Months Ended						Nine Months Ended						Three Months Ended				Nine Months Ended
	September 30,						September 30,						September 30,				September 30,
	2019			2018			2019			2018			2020		2019		2020		2019
Realized gains:
Sales of fixed maturities	$	-		$	11,018,711		$	116,690		$	11,392,373		$	0	$	0	$	403,215	$	116,690
Sales of equity securities		3,738,333			-			6,504,246			-			884,559		3,738,333		9,500,176		6,504,246
Sales of real estate		20,000			1,055,409			3,796,850			1,589,651			869,756		20,000		869,756		3,796,850
Other		-			-			-			-			0		0		0		0
Total realized gains		3,758,333			12,074,120			10,417,786			12,982,024			1,754,315		3,758,333		10,773,147		10,417,786
Realized losses:
Sales of fixed maturities		(30,795	)		-			(142,254	)		(258,458	)		0		(30,795)		(64,992)		(142,254)
Sales of equity securities		-			-			-			-			0		0		0		0
Sales of real estate		-			-			-			-			0		0		0		0
Other-than-temporary impairments		-			(300,000	)		-			(300,000	)		0		0		0		0
Other		-			-			(132,518	)		-			0		0		0		(132,518)
Total realized losses		(30,795	)		(300,000	)		(274,772	)		(558,458	)		0		(30,795)		(64,992)		(274,772)
Net realized investment gains (losses)		3,727,538			11,774,120			10,143,014			12,423,566			1,754,315		3,727,538		10,708,155		10,143,014
Change in fair value of equity securities:
Change in fair value of equity securities held at the end of the period		(4,046,457	)		6,689,533			10,838,322			22,050,489			(2,277,902)		(4,046,457)		(14,016,065)		10,838,322
Change in fair value of equity securities		(4,046,457	)		6,689,533			10,838,322			22,050,489			(2,277,902)		(4,046,457)		(14,016,065)		10,838,322
Net investment gains (losses)	$	(318,919	)	$	18,463,653		$	20,981,336		$	34,474,055		$	(523,587)	$	(318,919)	$	(3,307,910)	$	20,981,336
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive income:
Fixed maturities	$	3,184,769		$	1,244,302		$	12,044,690		$	(4,982,237	)	$	169,058	$	3,184,769	$	8,237,909	$	12,044,690
Equity securities		-			-			-			-
Net increase (decrease)	$	3,184,769		$	1,244,302		$	12,044,690		$	(4,982,237	)	$	169,058	$	3,184,769	$	8,237,909	$	12,044,690

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
		2020		2019		2020		2019
Net gains (losses) recognized during the period on equity securities	$	(1,393,343)	$	(308,124)	$	(4,515,889)	$	17,342,568
Less: Net gains (losses) recognized during the period on equity securities sold during the period		884,559		3,738,333		9,500,176		6,504,246
Unrealized gains (losses) recognized during the reporting period on equity securities still held at the reporting date	$	(2,277,902)	$	(4,046,457)	$	(14,016,065)	$	10,838,322

Other-Than-Temporary Impairments

The Company regularly reviews its investment securities for factors that may indicate that a decline in fair value of an investment is other than temporary. The factors considered by Management in its regular review to identify and recognize other-than-temporary impairment losses on fixed maturities include, but are not limited to: the length of time and extent to which the fair value has been less than cost; the Company’s intent to sell, or be required to sell, the debt security before the anticipated recovery of its remaining amortized cost basis; the financial condition and near-term prospects of the issuer; adverse changes in ratings announced by one or more rating agencies; subordinated credit support, whether the issuer of a debt security has remained current on principal and interest payments; current expected cash flows; whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions, including the effect of changes in market interest rates. If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security’s amortized cost basis and its fair value at the balance sheet date would be recognized by a charge to other-than-temporary losses in the Condensed Consolidated Statements of Operations.

Management regularly reviews its real estate portfolio in comparison to appraisal valuations and current market conditions for indications of other-than-temporary impairments. If a decline in value is judged by Management to be other-than-temporary, a loss is recognized by a charge to other-than-temporary impairment losses in the Consolidated Statements of Operations.

The Company did not recognize any other-than-temporary impairments during the nine ~~months~~ month periods ended September 30, 2019. During the third quarter of 2018, the Company recognized an other-than-temporary impairment on real estate. The other-than-temporary impairment was taken as a result of Management's assessment and determination of value of the real estate. The real estate was written down to better reflect its current expected value.2020 or 2019.

Cost Method Investments

The Company held equity investments with an aggregate cost of ~~$11,289,805~~$14,417,247 and ~~$12,118,617~~$10,919,247 at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. These equity investments were not reported at fair value because it is not practicable to estimate their fair values due to insufficient information being available. Management did not identify any events or changes in circumstances that might have a significant adverse effect on the reported value of those investments. Based on Management's evaluation of the expected cash flow of the investments, and the Company's ability and intent to hold the investments for a reasonable period of time, the Company does not deem an other-than-temporary impairment necessary at September 30, ~~2019.~~2020.

Trading Securities

Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Condensed Consolidated Statements of Operations. Trading securities include exchange-traded equities and exchange-traded options. Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale. The fair value of derivatives included in trading security assets and trading security liabilities as of September 30, 2020 was $0 and $(4,003), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2019 was $0 and $0, respectively. Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only.

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

	Three Months Ended
	September 30,
		2020		2019
Net unrealized gains (losses)	$	1,581	$	0
Net realized gains (losses)		0		0
Net unrealized and realized gains (losses)	$	1,581	$	0

	Nine Months Ended
	September 30,
		2020		2019
Net unrealized gains (losses)	$	1,581	$	0
Net realized gains (losses)		0		0
Net unrealized and realized gains (losses)	$	1,581	$	0

Mortgage Loans

The Company, from time to time, acquires mortgage loans through participation agreements with FSNB. FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market. The Company is able to receive participations from FSNB for three primary reasons: 1) FSNB has already reached its maximum lending limit to a single borrower, but the borrower is still considered a suitable risk; 2) the interest rate on a particular loan may be fixed for a long period that is more suitable for UG given its asset-liability structure; and 3) FSNB’s loan growth might at times outpace its deposit growth, resulting in FSNB participating such excess loan growth rather than turning customers away. For originated loans, the Company’s Management is responsible for the final approval of such loans after evaluation. Before a new loan is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control. These criteria include, but are not limited to, a credit report, personal financial information such as outstanding debt, sources of income, and personal equity. Once the loan is approved, the Company directly funds the loan to the borrower. The Company bears all risk of loss associated with the terms of the mortgage with the borrower.

During the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the Company acquired ~~$4,216,644~~$12,692,488 and ~~$16,453~~$4,216,644 in mortgage loans, respectively. FSNB services the majority of the Company’s mortgage loan portfolio. The Company pays FSNB a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan.

During ~~2019~~2020 and ~~2018,~~2019, the maximum and minimum lending rates for mortgage loans were:

	2019		2018		2020		2019
	Maximum rate	Minimum rate	Maximum rate	Minimum rate	Maximum rate	Minimum rate	Maximum rate	Minimum rate
Farm Loans	5.00%	5.00%	5.00%	5.00%	5.00%	5.00%	5.00%	5.00%
Commercial Loans	7.50%	4.82%	7.50%	4.00%	7.50%	4.24%	7.50%	4.82%
Residential Loans	5.50%	5.50%	8.00%	8.00%	5.50%	5.50%	5.50%	5.50%

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

The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent. Management is provided with a monthly listing of loans that are 60 days or more past due along with a brief description of what steps are being taken to resolve the delinquency. All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans. Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified. Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact.

Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers’ ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices. Interest accruals are analyzed based on the likelihood of repayment. In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

A mortgage loan reserve is established and adjusted based on Management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value. The mortgage loan reserve was $0$0 at September 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

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

	September 30, 2019		December 31, 2018			September 30, 2020		December 31, 2019
In good standing	$	6,695,892	$	7,169,272	$	18,319,413	$	8,223,286
Overdue interest over 90 days		1,830,706		1,899,839		2,072,640		0
Total mortgage loans	$	8,526,598	$	9,069,111	$	20,392,053	$	8,223,286

Investment Real Estate

Real estate ~~acquired through foreclosure, consisting~~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 ~~properties obtained through foreclosure proceedings~~3 to 30 years. The Company periodically reviews its real estate held-for-investment for impairment and tests for recoverability whenever events or ~~acceptance of a deed~~changes in ~~lieu of foreclosure, is reported on an individual asset basis at~~circumstances indicate the ~~lower of cost or fair~~carrying value ~~less disposal costs. Fair value is determined~~may not be recoverable. During the nine month period ended September 30, 2020, no impairments were recognized on the ~~basis of current appraisals, comparable sales, and other estimates of value obtained principally from independent sources. When properties are acquired through foreclosure, any excess~~investment real estate.

Note 4 - Fair Value Measurements of the ~~loan balance at the time of foreclosure over~~Condensed Consolidated Financial Statements provides further information regarding the fair value of ~~the~~financial instruments that are not measured at fair value. The investment real estate ~~held as collateral~~owned by the Company is ~~recognized and charged to the Consolidated Statements of Operations. Based upon Management’s evaluation~~included in this portion of the Note 4 - Fair Value Measurements disclosure.

The following table provides an allocation of the Company's investment real estate ~~acquired through foreclosure,~~by type:

		September 30, 2020		December 31, 2019
Raw land	$	9,915,856	$	16,089,540
Commercial		5,414,238		4,908,028
Residential		2,235,678		2,251,772
Land, minerals and royalty interests		18,855,855		21,094,896
Total investment real estate	$	36,421,627	$	44,344,236

The Company’s investment real estate portfolio includes ownership in oil and gas royalties. As of September 30, 2020 and December 31, 2019, investments in oil and gas royalties represented 52% and 44%, respectively, of the total investment real estate portfolio. See Note 9 – Concentrations of Credit Risk of the Condensed Consolidated Financial Statements for additional ~~expense is recorded when necessary in an amount sufficient to reflect any declines in estimated fair value.~~ information regarding the allocation of the oil and gas investment real estate holdings by industry type.

Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Condensed Consolidated Statements of Operations. During the nine months ended September 30, 2020 and 2019, the Company acquired $0 and $1,729,000 of investment real estate, respectively.

Notes Receivable

Notes receivable represent collateral loans and promissory notes issued by the Company and are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The valuation allowance as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 was ~~$0.~~$0. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status. During the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 the Company acquired ~~$8,532,796~~$3,500,000 and ~~$4,000,000,~~$8,532,796 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.

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.

Dung the nine months ended September 30, 2020 and 2019, the Company acquired $7,890,228 and $0, respectively, in short-term investments.

Note 4 – Fair Value Measurements

~~The Company measures its assets~~Fair Value Measurements on a Recurring Basis

Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets ~~based on the framework set forth~~are measured and classified in ~~the GAAP fair value accounting guidance. The framework establishes~~accordance with a fair value hierarchy consisting of three levels based ~~upon~~on the ~~transparency~~observability of ~~information used in measuring the fair value of assets or liabilities as of the measurement date. The fair value hierarchy prioritizes the inputs in the~~ valuation ~~techniques used to measure fair value into three categories.~~inputs:

Level 1 – Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active ~~markets that the Company is able to access. Level 1 fair value is not subject to valuation adjustments.~~markets.

Level 2 – Valuation ~~is based upon~~methodologies include quoted prices for similar assets and liabilities in active markets or quoted prices for identical, quoted prices for identical or similar ~~instruments~~assets or liabilities in markets that are not ~~active. In addition,~~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.

~~The Company determines~~In certain cases, the ~~existence~~inputs used to measure fair value may fall into different levels of ~~an active market for an asset or liability based on its judgment as to whether transactions for~~ the ~~asset or liability occur in~~fair value hierarchy. In such ~~market with sufficient frequency and volume to provide reliable pricing information. If~~cases, the ~~Company concludes that there has been a significant decrease~~level in the ~~volume and level of activity for an investment in relation to normal market activity for such investment, adjustments to transactions and quoted prices are made to estimate fair value.~~

The inputs used in the valuation techniques employed by the Company are provided by nationally recognized pricing services, external investment managers and internal resources. To assess these inputs, the Company’s review process includes, but is not limited to, quantitative analysis including benchmarking, initial and ongoing evaluations of methodologies used by external parties to calculate fair value ~~and ongoing evaluations of~~hierarchy within which the fair value ~~estimates~~measurement in its entirety falls is determined based on the ~~Company’s knowledge and monitoring of market conditions.~~lowest level input that is significant to the fair value measurement in its entirety.

The Company periodically reviews the pricing service provider’s policies and procedures for valuing securities. The assumptions underlying the valuations from external service providers, including unobservable inputs, are generally not readily available as thisfollowing table presents information ~~is often deemed proprietary. Accordingly, the Company is unable to obtain comprehensive information regarding these assumptions and methodologies.~~

The Company’s investments in fixed maturity securities available for sale, equity securities and trading securities assets and liabilities are carried at fair value. The following are the Company’s methodologies and valuation techniques forabout assets and liabilities measured at fair ~~value.~~value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:

September 30, 2020		Level 1		Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	46,208,490	$	0	$	0	$	0	$	46,208,490
U.S. special revenue and assessments		0		15,844,680		0		0		15,844,680
Corporate securities		0		114,667,777		0		0		114,667,777
Total fixed maturities		46,208,490		130,512,457		0		0		176,720,947
Equity securities:
Common stocks		22,790,516		16,908,050		3,051,875		22,814,521		65,564,962
Preferred stocks		0		23,066		0		0		23,066
Total equity securities		22,790,516		16,931,116		3,051,875		22,814,521		65,588,028
Total financial assets	$	68,999,006	$	147,443,573	$	3,051,875	$	22,814,521	$	242,308,975

Liabilities
Trading Securities	$	(4,003)	$	0	$	0	$	0	$	(4,003)

December 31, 2019		Level 1		Level 2		Level 3		Net Asset Value		Total
Financial assets:
Fixed maturities available for sale:
U.S. Government and government agencies and authorities	$	36,128,743	$	0	$	0	$	0	$	36,128,743
U.S. special revenue and assessments		0		15,203,363		0		0		15,203,363
Corporate securities		0		120,297,267		0		0		120,297,267
Total fixed maturities		36,128,743		135,500,630		0		0		171,629,373
Equity securities:
Common stocks		29,888,281		14,258,750		10,274,810		24,239,952		78,661,793
Total equity securities		29,888,281		14,258,750		10,274,810		24,239,952		78,661,793
Total financial assets	$	66,017,024	$	149,759,380	$	10,274,810	$	24,239,952	$	250,291,166

The following is a description of the valuation techniques used the by Company to measure assets reported at fair value on a recurring basis. There have been no significant changes in the valuation techniques utilized by the Company for the nine months ended September 30, 2020.

~~Fixed maturities available~~Available for sale mainly consist of U.S. treasury securities and corporate debt securities. The Company employs a market approach to the valuation of securities where there are sufficient market transactions involving identical or comparable assets. If sufficient market data is not available for identical or comparable assets, the Company uses an income approach to valuation. The majority of the financial instruments included in fixed maturity securitiesSale Securities

Securities classified as available for sale are ~~evaluated utilizing observable inputs; accordingly, they are categorized in either Level 1 or Level 2 of the~~recorded at fair value ~~hierarchy. However, in instances where significant inputs~~on a recurring basis. Securities classified as Level 1 utilized ~~in valuation of the securities are unobservable, the securities are categorized in Level 3 of the~~ fair value ~~hierarchy.~~

~~Corporate securities primarily include fixed rate corporate bonds. Inputs utilized in connection with~~measurements based upon quoted market prices, when available. If quoted market prices are not available, the ~~Company’s valuation techniques relating to this class of securities include~~Company obtains fair value measurements from recently executed transactions, market price quotations, benchmark yields and issuer ~~spreads. Corporate~~spreads to value Level 2 securities. In certain instances where Level 1 or Level 2 inputs are not available, securities are ~~categorized in~~classified within Level 23 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 ~~hierarchy.~~complies with accounting standard generally accepted in the United States.

~~U.S. treasury securities are based on quoted prices in active markets and are generally categorized in Level 1 of the fair value hierarchy.~~Equity Securities at Fair Value

Equity securities consist of common ~~and preferred~~ stocks mainly in private equity investments, financial institutions and publicly traded corporations. Equity securities for which there is sufficient market data are categorized as Level 1 or 2 in the fair value hierarchy. For the equity securities in which quoted market prices are not available, the Company uses industry standard pricing methodologies, including discounted cash flow models that may incorporate various inputs such as payment expectations, risk of the investment, market data, and health of the underlying company. The inputs are based upon Management's assumptions and available market information. When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy.

Equity Securities at Net Asset Value

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

Trading Securities

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

Change in Level 3 Recurring Fair Value Measurements

The following table presents the ~~Company’s~~changes in Level 3 assets and liabilities measured at fair value ~~in the Condensed Consolidated Balance Sheet~~ on a recurring basis, asand the realized and unrealized gains (losses) related to the Level 3 assets and liabilities.

		Fixed Maturities, Available for Sale		Equity Securities at Fair Value		Equity Securities at Net Asset Value		Total
Balance at December 31, 2019	$	0	$	10,274,810	$	24,239,952	$	34,514,762
Realized gains (losses)		0		6,284,302		0		6,284,302
Unrealized gains (losses)		0		(3,850,560)		(2,809,324)		(6,659,884)
Purchases		0		1,797,500		1,415,757		3,213,257
Sales		0		(11,454,177)		(31,864)		(11,486,041)
Balance at September 30, 2020	$	0	$	3,051,875	$	22,814,521	$	25,866,396

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at September 30, ~~2019.~~2020 and December 31, 2019 may include changes in fair value that were attributable to both observable and unobservable inputs.

Level 1 Level 2 Level 3 Total
Assets
Fixed Maturities, available for sale $ 35,767,435 $ 139,812,089 $ 422,927 $ 176,002,451
Equity Securities 29,232,731 14,328,980 33,378,263 76,939,974
Total $ 65,000,166 $ 154,141,069 $ 33,801,190 $ 252,942,425

Quantitative Information About Level 3 Fair Value Measurements

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

Financial Assets		Fair Value at September 30, 2020		Fair Value at December 31, 2019	Valuation Technique
Common stocks	$	22,814,521	$	24,239,952	Net Asset Value
Common stocks		3,051,875		10,274,810	Pricing Model
Total	$	25,866,396	$	34,514,762

Uncertainty of Fair Value Measurements

The significant unobservable inputs used in the ~~Condensed Consolidated Balance Sheet on a recurring basis~~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 ~~December 31, 2018.~~the reporting date.

Equity Securities at Fair Value

Level 1 Level 2 Level 3 Total
Assets
Fixed Maturities, available for sale $ 25,660,194 $ 134,865,746 $ 434,844 $ 160,960,784
Equity Securities 27,634,283 10,557,031 29,473,168 67,664,482
Total $ 53,294,477 $ 145,422,777 $ 29,908,012 $ 228,625,266

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.

~~The following table provides reconciliations for Level 3 assets measured~~Investments in Certain Entities Carried at ~~fair value~~Fair Value Using Net Asset Value per Share

Investment Company		Fair Value at September 30, 2020		Unfunded Commitments	Redemption Frequency	Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	18,482,622	$	0	Quarterly	45 days
Non-Reedemable		4,331,899		2,295,675	n/a	n/a
Total	$	22,814,521	$	2,295,675

Investment Company		Fair Value at September 30, 2019		Unfunded Commitments	Redemption Frequency	Redemption Notice Period
Common Stocks
Growth Equity
Redeemable	$	21,270,734	$	0	Quarterly	45 days
Non-Reedemable		2,969,218		163,750	n/a	n/a
Total	$	24,239,952	$	163,750

Fair Value Measurements on a ~~recurring basis. Transfers into and out of Level 3 are recognized as of the end of the quarter in which they occur.~~

Fixed Maturities,
Available for Sale
Equity Securities Total
Balance at December 31, 2018 $ 434,844 $ 29,473,168 $ 29,908,012
Total unrealized gain or (losses):
Included in net income (loss) - 5,937,050 5,937,050
Included in other comprehensive income - - -
Purchases - 275,720 275,720
Sales (11,917 ) (2,307,675 ) (2,319,592 )
Balance at September 30, 2019 $ 422,927 $ 33,378,263 $ 33,801,190

September 30, 2019 December 31, 2018
Change in fair value of equity securities included in net income (loss) relating to assets held
$
5,937,050
$
4,633,751

The Level 3 securities include collateralized debt obligations of trust preferred securities issued by banks and insurance companies and certain equity securities with unobservable inputs. The Company computed fair value of Level 3 equity investments based on a review of current financial information, earnings trends and similar companies in the same industries.

~~There were no transfers in or out of Level 3 as of September 30, 2019. Transfers occur when there is a change in the availability of observable market information.~~Nonrecurring Basis

Certain assets are not carried at fair value on a recurring ~~basis, including~~basis. Accordingly, such investments ~~such as mortgage loans~~are only included in the fair value hierarchy disclosure when the investment is subject to re-measurement at fair value after initial recognition and ~~policy loans.~~the resulting re-measurement is reflected in the Consolidated Financial Statements. The Company did not recognize any re-measurements or impairments of financial instruments at September 30, 2020 or December 31, 2019.

Fair Value Information About Financial Instruments Not Measured at Fair Value

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

The following table presents the carrying ~~values~~amount and estimated fair values ~~of certain~~ of the Company’s financial instruments not ~~recorded~~measured at fair value inand indicates the ~~Consolidated Balance Sheets are shown below. Because~~level in the fair value ~~for all Consolidated Balance Sheet items are not required to be disclosed,~~hierarchy of the ~~aggregate~~estimated fair value ~~amounts presented below are not reflective~~measurement based on the observability of the ~~underlying value of the Company.~~inputs used:

	September 30, 2019				December 31, 2018					Carrying	Estimated
Assets	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Equity securities	$	11,289,805	$	11,289,805	$	12,118,617	$	12,118,617
September 30, 2020										Amount	Fair Value	Level 1	Level 2	Level 3
Common stock, at cost									$	5,860,000	5,860,000	0	0	5,860,000
Preferred stock, at cost										8,557,247	8,557,247	0	0	8,557,247
Mortgage loans on real estate		8,526,598		8,526,598		9,069,111		9,069,111		20,392,053	20,614,085	0	0	20,614,085
Investment real estate		45,796,423		45,796,423		52,518,577		52,518,577		36,421,627	81,351,608	0	0	81,351,608
Notes receivable		27,953,110		27,953,110		23,717,312		23,717,312		19,298,398	22,380,946	0	0	22,380,946
Policy loans		8,853,633		8,853,633		9,204,222		9,204,222		8,727,991	8,727,991	0	0	8,727,991
Cash and cash equivalents		25,728,799		25,728,799		20,150,162		20,150,162

		Carrying	Estimated
December 31, 2019		Amount	Fair Value	Level 1	Level 2	Level 3
Common stock, at cost	$	7,875,145	7,875,145	0	0	7,875,145
Preferred stock, at cost		3,044,102	3,044,102	0	0	3,044,102
Mortgage loans on real estate		8,223,286	7,531,094	0	0	7,531,094
Investment real estate		44,344,236	88,483,424	0	0	88,483,424
Notes receivable		19,487,458	19,332,472	0	0	19,332,472
Policy loans		8,803,876	8,803,876	0	0	8,803,876

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

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

A portion of the mortgage loans balance consists of discounted mortgage loans. The Company has historically purchased non-performing discounted mortgage loans at a deep discount through an auction process led by the Federal Government. In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company. Accordingly, the Company records its investment in the discounted loans at its original purchase price, which Management believes approximates fair value. The inputs used to measure the fair value of our discounted mortgage loans are classified as Level 3 within the fair value ~~hierarchy~~hierarchy.

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

~~Notes~~The fair values of notes receivable are ~~carried at their unpaid principal balances, which approximates fair value.~~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 ~~loans~~notes receivable are classified as Level 3 within the fair value ~~hierarchy.~~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 amount of cash and cash equivalents in the Condensed Consolidated Balance Sheets approximates fair value given the highly liquid nature of the instruments. The inputs used to measure the fair value of our cash and cash equivalents are classified as Level 1 within the fair value hierarchy.

The carrying amount of short term investments in the Condensed Consolidated Balance Sheets approximates fair value. The inputs used to measure the fair value of our short term investments are classified as Level 3 within the fair value hierarchy.

Note 5 – Credit Arrangements

Instrument	Issue Date	Maturity Date	Revolving Credit Limit		December 31, 2018		Borrowings		Repayments		September 30, 2019		Issue Date	Maturity Date	Revolving Credit Limit		December 31, 2019		Borrowings		Repayments		September 30, 2020
Lines of Credit:	Lines of Credit:												Lines of Credit:
UTG	11/20/2013	11/20/2019	$	8,000,000		-		-		-		-	11/20/2013	11/20/2020	$	8,000,000		0		0		0		0
UG	6/2/2015	5/8/2020		10,000,000		-		-		-		-	6/2/2015	5/7/2021		10,000,000		0		0		0		0

The UTG line of credit carries interest at a fixed rate of ~~5.125%~~4.040% and is payable ~~monthly.~~monthly. As collateral, UTG has pledged 100% of the common voting stock of its wholly owned subsidiary, Universal Guaranty Life Insurance Company.

During May of ~~2019,~~2020, 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 ~~is currently in the process~~has pledged bonds with a collateral lendable value of ~~renewing the CMA.~~$12,617,556.

Note 6 – Shareholders’ Equity

Stock Repurchase Program – The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG's common stock. At a meeting of the Board of Directors in ~~June~~September of ~~2019,~~2020, the Board of Directors of UTG authorized the repurchase of up to an additional ~~$2.5~~$1.5 million of UTG's common stock, for a total repurchase of up to ~~$18.5~~$20 million of UTG's common stock in the open market or in privately negotiated transactions. Company Management has broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. Open market purchases are made based on the last available market price but may be limited. During the nine months ended September 30, ~~2019,~~2020, the Company repurchased ~~27,498~~107,822 shares through the stock repurchase program for ~~$849,265.~~$3,174,230. Through September 30, ~~2019,~~2020, UTG has spent ~~$14,712,994~~$17,947,326 in the acquisition of ~~1,167,604~~1,277,180 shares under this program.

During ~~2019,~~2020, the Company issued ~~8,188~~6,664 shares of stock to management and employees as compensation at a cost of ~~$246,534.~~$218,289. These awards are determined at the discretion of the Board of Directors.

During the third quarter of 2020, the Company purchased 88,341 shares from Cumberland Lake Shell, Inc at a price of $29 per share for a total cost of $2,561,889. This single transaction represented a majority of the third quarter activity related to the share repurchase program.

Earnings Per Share Calculations

Earnings per share are based on the weighted average number of common shares outstanding during each period. For the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, diluted earnings per share were the same as basic earnings per share since the Company had no dilutive instruments outstanding.

Note 7 – Commitments and Contingencies

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

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

The following table represents the total funding commitments and the unfunded commitment as of September 30, ~~2019~~2020 related to certain investments:

	Total Funding Commitment		Unfunded Commitment			Total Funding Commitment		Unfunded Commitment
RLF III, LLC	$	4,000,000	$	398,120	$	4,000,000	$	398,120
Sovereign’s Capital, LP Fund I		500,000		24,493		500,000		20,000
Sovereign's Capital, LP Fund II		1,000,000		158,596		1,000,000		158,596
Sovereign's Capital, LP Fund III		1,000,000		800,000		3,000,000		2,137,079
Barton Springs Music, LLC		1,750,000		1,064,750
Macritchie Storage II, LP						7,000,750		1,840,485
Garden City Companies, LLC						2,000,000		1,956,688
Carrizo Springs Music, LLC						2,500,000		1,115,000
Modern Distributors, Inc.						7,200,000		3,700,000

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

During 2012, the Company committed to invest in Sovereign’s Capital, LP Fund I (“Sovereign’s”), which invests in companies in emerging markets. Sovereign’s makes capital calls to investors as funds are needed.

During 2015, the Company committed to invest in Sovereign’s Capital, LP Fund II (“Sovereign’s II”), which invests in companies in emerging markets. Sovereign’s II makes capital calls to investors as funds are needed.

During 2018, the Company committed to invest in Sovereign’s Capital, LP Fund III (“Sovereign’s III”), which invests in companies in emerging markets. Sovereign’s III makes capital calls to investors as funds are needed.

During 2018, the Company committed to fund a mortgage loan for Macritchie Storage II, LP ("Macritchie"). Macritchie makes draw requests on the loan as funds are needed to fund the construction project.

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

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

During 2020, the Company committed to fund a collateral loan for Modern Distributors, Inc. (“Modern Distributors”). Modern Distributors makes draw requests on the loan as funds are needed to fund a construction project.

Note 8 – Other Cash Flow Disclosures

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

	Three Months Ended						Three Months Ended
	September 30,						September 30,
	2019			2018			2020		2019
Interest		$	-		$	-	$	0	$	0
Federal income tax			-			-		419,000		0

	Nine Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2020		2019
Interest		$	-		$	-	$	0	$	0
Federal income tax			1,106,000			67,000		2,529,000		1,106,000

Note 9 – Concentrations of Credit Risk

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

Because UTG serves primarily individuals located in four states, the ability of our customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of September 30, ~~2019~~2020 and ~~2018~~2019 , approximately ~~56%~~55% and ~~55%~~56%, respectively, of the Company’s total direct premium was collected from Illinois, Ohio, Texas and West Virginia. Thus, results of operations are heavily dependent upon the strength of these economies.

The Company reinsures that portion of insurance risk which is in excess of its retention limits. Retention limits range up to $125,000 per life. Life insurance ceded represented 20% of total life insurance in force at September 30, ~~2019~~2020 and December 31, ~~2018.~~2019. Insurance ceded represented 37% ~~and 33%~~ of premium income for the ~~three~~nine months ended September 30, ~~2019~~2020 and ~~2018, respectively~~.2019. The Company would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations.

The Company owns a variety of investments associated with the oil and gas industry. These investments represent approximately ~~24%~~17% and 25% of the Company's total invested assets as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The following table provides an allocation of the oil and gas investments by type.

		September 30, 2020		December 31, 2019
Land, mineral, and royalty interests	$	57,246,945	$	80,182,100
Transportation		0		3,812,565
Exploration		1,258,750		2,824,810
Total	$	58,505,695	$	86,819,475

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

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

The following is ~~Management’s~~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”~~"Company"). The following discussion of the financial condition and results of operations of the Company should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company and the related Notes thereto appearing in the ~~Company’s~~Company's annual report on Form 10-K for the year ended December 31, ~~2018,~~2019, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

Cautionary Statement Regarding Forward-Looking Statements

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

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

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

Overview

UTG, Inc., a Delaware corporation, is a life insurance holding company. The ~~Company’s~~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. The Company's focus for the future is the servicing of the existing insurance policies in force.

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

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ significantly from those estimates. The Company has identified certain estimates that involve a higher degree of judgment and are subject to a significant degree of variability. The Company’s critical accounting policies and the related estimates considered most significant by Management are disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. Management has identified the accounting policies related to cost of insurance acquired, assumptions and judgments utilized in determining if declines in fair values of investments are other-than-temporary, and valuation methods for investments that are not actively traded as those, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company’s Condensed Consolidated Financial Statements and this Management’s Discussion and Analysis.

During the nine months ended September 30, ~~2019,~~2020, there were no additions to or changes in the critical accounting policies disclosed in the ~~2018~~2019 Form 10-K.

Results of Operations

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

On a consolidated basis, the Company reported a net loss attributable to common shareholders’ of approximately $(5.7) million for the nine-month period ended September 30, 2020 and a net loss attributable to common shareholders’ of approximately $(2.4) million for the three-month period ended September 30, 2020. For the nine-month period ended September 30, 2019, the Company reported net income attributable to common shareholders’ of approximately $13.2 million ~~for the nine-month period ended September 30, 2019~~ and a net loss attributable to common shareholders’ of approximately ~~($1.1)~~$(1.1) million for the three-month period ended September 30, 2019. For the nine-month period ended September 30, 2018, the Company reported net income attributable to common shareholders’ of approximately $22.7 million and net income attributable to common shareholders’ of approximately $12 million for the three-month period ended September 30, 2018.

Revenues

The Company reported total revenues of approximately ~~$35.2~~$9.9 million for the nine months ended September 30, ~~2019,~~2020, a decrease of approximately ~~$14.1~~$25.2 million as compared to the same period in ~~2018.~~ 2019. The Company reported total revenues of approximately $4.3 million for the three months ended September 30, 2019, a decrease of approximately $18.4 million as compared to the three month period ended September 30, 2018. The variance in the total revenues for the third quarter and year to date 2019, as compared to the prior year, are mainly attributable to the amounts reported for realized investment gains and losses and the change in the fair value of equity securities.The variance in total revenues from the prior year to the current year is mainly attributable to the change in the fair value of equity securities between periods. The Company reported total revenues of approximately ~~$11.2~~$3.3 million for the three months ended September 30, 2020, a decrease of ~~unrealized losses~~approximately $954,000 as compared to the three-month period ended September 30, 2019. For the quarter, the fluctuations are also largely related to the change in the fair value of equity securities ~~combined with $2.6~~between the periods that is reported as a component of total revenue on the Condensed Consolidated Statements of Operations.

The Company reported revenue before net investment gains of approximately $13.2 million ~~less~~and $14.2 million for the nine months ended September 30, 2020 and 2019, respectively. Revenue before net investment gains decreased only slightly when comparing the current year and prior year results and is due to minor decreases in premium and policy fee revenue and net ~~realized gains.~~investment income. For the ~~quarter,~~three months ended September 30, 2020, the ~~fluctuations relate to~~Company reported revenue before net investment gains and losses of $3.9 million, down from $4.6 million from the ~~sale of certain stocks that resulted~~same period in ~~$3.7 million of realized gains combined with the change in the fair value of equity securities.~~2019.

Premium and policy fee revenues, net of reinsurance, ~~decreased approximately 3% when comparing~~are down 10% for the ~~nine-month period~~three months ended September 30, ~~2019~~2020 compared to the same period in ~~2018. Premium~~2019. For the nine months ended September 30, 2020, premium and policy fee revenues, net of reinsurance ~~decreased by approximately 6% when comparing the third quarter of 2019~~are down 8% compared to ~~the same quarter in 2018. The Company writes minimal new business.~~2019. Premium and policy fee revenues, net of reinsurance, represented ~~15% and 11%~~37% of the Company’s revenues before net investment gains (losses) as of September 30, 2020 and 2019, ~~and 2018,~~ respectively. The decline in premiums is not unusual as the Company is not actively marketing new business.

The following table summarizes our investment performance.

	Three Months Ended							Nine Months Ended							Three Months Ended				Nine Months Ended
	September 30,							September 30,							September 30,				September 30,
	2019				2018			2019			2018				2020		2019		2020		2019
Net investment income		$	2,818,669			$	2,309,470		$	8,632,402		$	8,996,566		$	2,231,360	$	2,818,669	$	8,083,200	$	8,632,402
Net investment gains (losses)		$	(318,919	)		$	18,463,653		$	20,981,336		$	34,474,055		$	(523,587)	$	(318,919)	$	(3,307,910)	$	20,981,336
Change in net unrealized investment gains (losses) on available-for-sale securities, pre-tax		$	3,184,769			$	1,244,302		$	12,044,690		$	(4,982,237	)	$	169,058	$	3,184,769	$	8,237,909	$	12,044,690

The Company reported total net investment losses of approximately ~~$319,000~~$(524,000) and ~~gains of $21~~$(3.3) million for the ~~three~~three- and ~~nine-months~~nine-month periods ended September 30, ~~2019,~~2020, respectively. For the ~~three~~three- and ~~nine-months~~nine-month periods ended September 30, ~~2018,~~2020, the Company reported ~~net investment gains of $18.5~~approximately $1.8 million and ~~$34.5~~$10.7 million, ~~respectively. For the third quarter of 2019,~~respectively, in net realized investment gains ~~consisted~~comprised mainly from the sale of ~~approximately $3.7 million from equities sold. The same period~~equity securities.

During 2019, the Company received an offer to purchase investments in ~~2018 had total realized investment gains~~certain music royalties held in the form of ~~$12.1 million, which is largely~~equity investments. As a result of this event, the Company elected to change its valuation methodology from using discounted ~~bonds that were sold~~cash flow models to estimate fair value to marking the investment to the offer price to estimate the fair value. The change in ~~the third quarter, resulting~~methodology resulted in ~~realized gains~~recording an unrealized gain on investment of approximately ~~$10 million.~~ $3.3 million during the year ended December 31, 2019. The investments were then sold during the first quarter of 2020. The Company recognized a gain of approximately $6.3 million on the sale.

The Company also sold ~~three parcels~~equity securities in the area of ~~real estate in 2018~~oil & gas that resulted in ~~$1.3~~a realized gain of $3.2 million ~~of realized gains.~~during second quarter 2020.

~~Also included~~In addition, in the total net ~~investments~~investment gains are unrealized gains (losses) related to the change in the fair value of equity securities. The Company reported unrealized equity ~~losses~~gains (losses) of $4$(2.3) million and ~~gains of $10.8~~$(14) million for the three and ~~nine months~~nine-months ended September 30, ~~2019.~~ 2020, respectively. For the three and ~~nine months~~nine-months ended September 30, ~~2018,~~2019, the Company reported ~~a change in fair value of~~$(4.1) million and $10.8 million, respectively.

The Company holds certain investments that have been negatively impacted by ongoing market reactions to the pandemic. These investments primarily relate to marketable equity securities, of $6.7 million and $22.1 million. This line item is affected by changes in the market value of the Company’s equity holdings and when equities are sold as occurred in the second and third quarters of 2019. The Company has seen significant unrealized gains on its equity investments during 2018 and 2019. Significant portions of these gains are from two equity holdings, bothparticularly in the area of oil and gas. ~~While~~The drop in the markets in March, resulted in an estimated unrealized losses of approximately $(24.7) million for the three months ending March 31, 2020. Since the end of the first quarter 2020, the Company ~~has had very strong~~experienced a partial rebound on these investments of approximately $11 million in unrealized ~~gains during 2018~~gains.

The Company recognized and ~~2019,~~disclosed in prior filings that a pullback in the stock market, particularly in the oil and gas arena, could slow these gains or even result in future-period unrealized losses. ~~During the third quarter of 2019, these securities produced unrealized losses of approximately $3 million; however,~~ Management believes these ~~equities~~equity investments continue to be solid ~~investments.~~

investments for the Company and have further growth potential. However, current market conditions remain volatile and Management anticipates the Company will continue experience significant fluctuations in this line item in future periods.

The following table reflects net investment income of the Company:

	Three Months Ended September 30,						Nine Months Ended September 30,							Three Months Ended September 30,				Nine Months Ended September 30,
	2019			2018			2019			2018				2020		2019		2020		2019

Fixed maturities available for sale	$	1,445,341		$	1,887,731		$	4,371,895		$	5,650,502		$	1,301,923	$	1,445,341	$	4,023,342	$	4,371,895
Equity securities		287,462			431,176			1,256,794			1,303,489			238,082		287,462		1,182,308		1,256,794
Trading securities		-			-			-			-			1,581		-		1,581		-
Mortgage loans		83,528			267,137			369,132			673,209			147,202		83,528		392,286		369,132
Real estate		881,705			531,892			2,141,339			2,396,586			563,306		881,705		2,805,810		2,141,339
Notes receivable		485,288			599,622			1,435,947			1,133,129			244,473		485,288		783,406		1,435,947
Policy loans		149,979			156,520			460,995			485,630			139,602		149,979		444,280		460,995
Short term		-			236,397			-			331,898
Cash and cash equivalents		58,573			6,109			146,435			11,863			284		(1,407)		53,458		2,815
Short-term														38,429		59,980		141,509		143,620
Total consolidated investment income		3,391,876			4,116,584			10,182,537			11,986,306			2,674,882		3,391,876		9,827,980		10,182,537
Investment expenses		(573,207	)		(1,807,114	)		(1,550,135	)		(2,989,740	)		(443,522)		(573,207)		(1,744,780)		(1,550,135)
Consolidated net investment income	$	2,818,669		$	2,309,470		$	8,632,402		$	8,996,566		$	2,231,360	$	2,818,669	$	8,083,200	$	8,632,402

Net investment income represented ~~25% and 18%~~61% of the Company’s ~~total revenues~~revenue before net investment gains (losses) as of September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The Company reported net investment income of approximately ~~$8.6~~$8.1 million for the ~~nine months~~nine-month period ended September 30, 2020, comparable to 2019 ~~a decrease of approximately 4% compared to the same period in 2018.~~net investment income. For the three month period ended September 30, ~~2019,~~2020, net investment income ~~increased~~decreased approximately ~~22%~~21%, compared to the same quarter in ~~2018. This is largely attributable to reduced investment expenses.~~2019. When comparing the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, income from investing activities was comparable in the majority of the investment categories, with the largest variance being found in the ~~fixed maturities~~real estate and ~~short term investment~~notes receivable categories.

~~Income~~Earnings from ~~fixed maturities was down approximately 23% for~~ the ~~nine months~~real estate portfolio are expected to vary depending on the activities of the subsidiaries and the potential distributions that will occur. For the nine-months ended September 30, ~~2019 when~~2020, real estate earnings were up approximately 31% compared to the ~~nine months ended September 30, 2018. In the third~~same period in 2019. Excluding a one-time event that resulted in $1.2 million in earnings during second quarter 2020, real estate income is lower compared to that of 2018, the Company sold a substantial bond holding. The bond holding was initially acquired over a period of time in 2016 at a deep discount, with an average cost of 25% of its par value. At the time of sale, management had determined the value of the security had recovered sufficiently enough and the time was right to sell a majority of the holding, realizing a gain of approximately $10 million. The proceeds from the sale were replaced with higher-rated, lower-yielding bonds.

During 2018, the Company held a short term note receivable that produced investment income of $331,898. The Company has not invested in any similar such short term investments during 2019 and is therefore not reporting any income from short term investments during the current year.2019.

For the nine-months ended September 30, ~~2019, investment expenses were~~2020, notes receivable income is down ~~approximately 49% when~~45% compared to ~~the same period in 2018.~~September 30, 2019. The ~~variance~~decrease is ~~due to a one-time fee bonus of $1.5 million paid as~~ a result of ~~the sale of certain discounted bonds~~fewer average outstanding notes receivable, and consequently, a reduction in ~~the third quarter of 2018.~~interest income.

In summary, the Company’s basis for future revenue growth 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 ~~$17.9~~$17.2 million for the nine ~~months~~month period ended September 30, ~~2019,~~2020, a decrease of approximately ~~10%~~4% from the same period in ~~2018.~~2019. For the three month period ended September 30, ~~2019,~~2020, total benefits and other expenses ~~decreased~~increased approximately ~~18%~~9%, compared to the same quarter in ~~2018.~~2019. Benefits, claims and settlement expenses represented approximately ~~65%~~58% and ~~64%~~61% of the Company’s total expenses for the three and nine months ended September 30, ~~2019,~~2020, respectively. The other major expense category of the Company is operating expenses, which represented approximately ~~33%~~39% and 36% of the Company’s total expenses for the three and nine ~~months~~month periods ended September 30, ~~2019.~~2020, respectively.

Life benefits, claims and settlement expenses, net of reinsurance benefits and claims, decreased approximately 4%9% in the nine ~~months~~month period ended September 30, ~~2019,~~2020, compared to the same period in ~~2018.~~2019. For the three months ended September 30, ~~2019,~~2020, life benefits, claims and settlement expenses, net of reinsurance benefits and claims ~~increased approximately 5%, compared~~are comparable to that of the same quarter in ~~2018. Policy claims vary from period to period and therefore,~~2019. Overall, the decrease is not considered unusual by Management as fluctuations in mortality are to be ~~expected and are not considered unusual by Management.~~expected.

Net amortization of cost of insurance acquired decreased 4% during the three month and nine ~~months~~month periods ended September 30, ~~2019~~2020 compared to the same period in ~~2018.~~2019. 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.

Operating expenses ~~decreased approximately 43%~~increased by 32% for the three-month period ended September 30, ~~2019~~2020 compared to that of the same period in ~~2018.~~2019. For the ~~nine months~~nine-months ended September 30, ~~2019~~2020 operating expenses ~~decreased approximately 19%~~increased by 6% compared to that of the same period in ~~2018. The variance is mainly attributable to a decrease in charitable~~2019. Charitable contributions are primarily the reason for the increase during the quarter and salary expenses. Earnings in the prior year resulted in a higher accrual for salary expense in anticipation of annual performance bonuses for both management and staff. The significant realized gains from the sale of discounted bonds in third quarter 2018 was the primary driver of this variation.

year-to-date. Charitable contributions are a function of the Company’s taxable earnings. UTG has a strong philanthropic program and the Company generally allocates a portion of its earnings to be ~~sued~~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. Otherwise, expenses were comparable in the remainder of the major expense categories.

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

Financial Condition

Investment Information

Investments represent approximately 85% and 84% of total assets at September 30, ~~2019~~2020 and December 31, ~~2018.~~2019, respectively. Accordingly, 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 that it is permitted to make and the amount of funds that may be used for any one type of investment. ~~In light of~~Considering these statutes and regulations, the majority of the Company’s investment portfolio is invested in a diverse set of securities.

As of September 30, ~~2019,~~2020, 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, with changes in market value charged directly to shareholders' equity. Changes in the market value of available for sale securities resulted in net unrealized gains of ~~$2.5 million~~$169,000 and ~~$9.5~~$8.2 million for the three and ~~nine months~~nine-month periods ended September 30, ~~2019,~~2020, respectively. The variance in the net unrealized gains and losses is the result of normal market fluctuations and ~~changes in~~lower interest rates.

Capital Resources

Total shareholders’ equity ~~increased~~decreased by approximately ~~20%~~2% as of September 30, ~~2019~~2020 compared to December 31, ~~2018.~~2019. The ~~increase in total shareholders’ equity~~decrease is largely attributable to the net ~~income reported~~loss of $(5.7) million and the net decrease of additional paid-in capital of $(3.0) million for the ~~period of $13.2 million and an~~nine-months ended September 30, 2020. However, the decrease was offset by the increase ~~of $9.5 million of~~in accumulated other comprehensive ~~income.~~income of $6.2 million, resulting in a net decrease of $(2.3) million.

The Company’s investments are predominately in fixed maturity investments such as bonds. ~~Changes in the current interest rate an~~dThe Company carries all of its fixed maturity holdings as available for sale, which are reported in the Condensed Consolidated Financial Statements at their market value.

During the third quarter of 2020, the Company purchased 88,341 shares from Cumberland Lake Shell, Inc. at a price of $29 per share for a total cost of $2,561,889. This single transaction represented a majority of the third quarter activity related to the share repurchase program. Note 6 – Shareholders’ Equity provides additional information regarding the Company’s stock repurchase program.

Liquidity

The Company has two principal needs for cash - the insurance company’s contractual obligations to policyholders and the payment of operating expenses. Cash and cash equivalents represented 6% and 5%7% of total assets as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. Fixed maturities, as a percentage of total assets, were approximately ~~42%~~43% and 41% as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

The Company currently has access to funds for operating liquidity. UTG has an $8,000,000 revolving credit note with Illinois National Bank. At September 30, ~~2019,~~2020, the Company had no outstanding borrowings against the UTG line of credit. UG has a $10 million line of credit with the Federal Home Loan Bank. At September 30, ~~2019,~~2020, the Company had no outstanding borrowings against the UG line of credit.

Future policy benefits are primarily long-term in nature and therefore, the Company's investments are predominantly in long-term ~~fixed maturity investments such as bonds~~ and ~~mortgage loans which~~ provide sufficient return to cover these obligations. Many of the Company's products contain surrender charges and other features ~~which~~that reward persistency and penalize the early withdrawal of funds.

Net cash used in operating activities was approximately $8.8 million and $5.3 million for the ~~nine months~~nine-months ended September 30, 2020 and 2019, ~~and approximately $1.8 million for~~respectively. The difference between periods is largely a result of change in the ~~same period of 2018.~~deferred income taxes. Sources of operating cash flows of the Company, as with most insurance entities, is comprised primarily of premiums received on life insurance products and income earned on investments. Uses of operating cash flows consist primarily of payments of benefits to policyholders and beneficiaries and operating expenses. The Company has not marketed any significant new products for several years. As such, premium revenues continue to decline. Management anticipates future cash flows from operations to remain similar to historic trends.

Net cash provided by investing activities was approximately ~~$12.3~~$7.5 million and $3$12.3 million for the ~~nine months~~nine-month period ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The net cash provided by investing activities is expected to vary from quarter to quarter depending on market conditions and management’s ability to find and negotiate favorable investment ~~contracts.~~arrangements.

UTG is a holding Company that has no day-to-day operations of its own. Funds required to meet its expenses ~~generally~~and general costs associated with maintaining the Company in good standing with states in which it does business ~~and the servicing of its debt,~~ are primarily provided by its subsidiaries. On a parent only basis, 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. At September 30, ~~2019,~~2020, substantially all of the consolidated shareholders’ equity represented net assets of its subsidiary. The Company's insurance subsidiary has maintained adequate statutory capital and surplus. The payment of cash dividends to shareholders by UTG is not legally restricted. However, the state insurance department regulates insurance Company dividend payments where the Company is domiciled. No dividends were paid to shareholders in ~~2018~~2019 or the nine months ended September 30, ~~2019.~~2020.

UG is an Ohio domiciled insurance company, which requires notification within five business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend. Ordinary dividends are defined as the greater of: a) prior year statutory net income or b) 10% of statutory capital and surplus. For the year ended December 31, ~~2018,~~2019, UG had statutory net income of approximately ~~$6.2~~$8.3 million. At December 31, ~~2018~~2019 UG’s statutory capital and surplus amounted to approximately ~~$60~~$66 million. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. During ~~2018,~~2019, UG paid UTG ordinary dividends of $5$6 million. During the ~~nine month period ended September 30, 2019,~~second quarter of 2020, UG paid UTG ~~dividends of $4.5 million. During October of 2019, UG paid UTG a~~an ordinary dividend of ~~$1.5 million.~~$1 million and another $2 million dividend in the third quarter. UTG used the dividends received during ~~2018~~2019 and ~~2019~~2020 to purchase outstanding shares of UTG stock and for general operations of the Company.

ITEM 4. CONTROLS AND PROCEDURES

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

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

NONE

ITEM 1A. RISK FACTORS

NONE

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

NONE

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

NONE

ITEM 4. MINE SAFETY DISCLOSURES

NONE

ITEM 5. OTHER INFORMATION

NONE

ITEM 6. EXHIBITS

Exhibit Number	Description
*31.1	Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1	Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2	Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101	Interactive Data File

*~~Filed herewith~~

~~EXHIBIT INDEX~~

~~Exhibit Number~~	~~Description~~
*~~31.1~~	~~Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
*~~31.2~~	~~Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~
*~~32.1~~	~~Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
*~~32.2~~	~~Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~
**101	~~Interactive Data File~~

* Filed herewith

SIGNATURES

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

UTG, INC.

(Registrant)

Date:	November ~~12, 2019~~13, 2020	By	/s/ James P. Rousey
			James P. Rousey
			President and Director

Date:	November ~~12, 2019~~13, 2020	By	/s/ Theodore C. Miller
			Theodore C. Miller
			Senior Vice President and Chief Financial Officer

	UTG, INC.
	(Exact name of registrant as specified in its charter)

Delaware		20-2907892
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

	205 NORTH DEPOT STREET
	STANFORD, KY 40484
	(Address of principal executive offices) (Zip Code)

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

Large accelerated filer □	Accelerated filer □

Non-accelerated filer □	Smaller reporting company ⌧

	Emerging growth company □

PART I. Financial Information	3
Item 1. Financial Statements	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Income (Loss)	5
Condensed Consolidated Statements of Shareholders' Equity	6
Condensed Consolidated Statements of Cash Flows	8
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1822
Item 4. Controls and Procedures	2327
PART II. Other Information	2327
Item 1. Legal Proceedings	2327
Item 1A. Risk Factors	2327
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2327
Item 3. Defaults Upon Senior Securities	2327
Item 4. Mine Safety Disclosures	2327
Item 5. Other Information	2327
Item 6. Exhibits	23
~~Exhibit Index~~	24 27
Signatures	2428

		September 30, 2019		December 31, 2018*		September 30, 2020		December 31, 2019*
ASSETS	ASSETS					ASSETS
Investments:
Investments available for sale:
Fixed maturities, at fair value (amortized cost $163,291,888 and $160,895,869)		$	176,002,451	$	160,960,784
Equity securities, at fair value (cost $32,549,036 and $34,885,107)			76,939,974		67,664,482
Fixed maturities, at fair value (amortized cost $156,998,638 and $159,959,855)						$	176,720,947	$	171,629,373
Equity securities, at fair value (cost $33,521,163 and $32,578,862)							65,588,029		78,661,793
Equity securities, at cost			11,289,805		12,118,617		14,417,247		10,919,247
Mortgage loans on real estate at amortized cost			8,526,598		9,069,111		20,392,053		8,223,286
Investment real estate			45,796,423		52,518,577		36,421,627		44,344,236
Notes receivable			27,953,110		23,717,312		19,298,398		19,487,458
Policy loans			8,853,633		9,204,222		8,727,991		8,803,876
Short-term investments							7,973,910		10,442,173
Total investments			355,361,994		335,253,105		349,540,202		352,511,442

Cash and cash equivalents			25,728,799		20,150,162		24,723,191		28,787,629
Accrued investment income			1,744,076		2,119,882		1,247,946		1,679,783
Reinsurance receivables:
Future policy benefits			25,741,028		26,117,936		25,412,611		25,655,161
Policy claims and other benefits			3,970,131		4,053,882		4,262,277		4,142,142
Cost of insurance acquired			5,040,297		5,622,227		4,287,682		4,846,321
Property and equipment, net of accumulated depreciation			447,905		688,567		367,999		427,736
Income tax receivable			200,595		279,333		145,067		0
Other assets			636,478		1,263,242		764,344		695,517
Total assets		$	418,871,303	$	395,548,336	$	410,751,319	$	418,745,731

LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Future policyholder benefits		$	250,008,948	$	253,852,368	$	245,084,324	$	249,264,308
Policy claims and benefits payable			3,769,383		4,267,481		3,811,781		3,631,666
Other policyholder funds			407,283		372,072		402,225		404,177
Dividend and endowment accumulations			14,649,215		14,608,838		14,764,957		14,626,475
Income taxes payable							0		313,662
Deferred income taxes			14,264,938		9,113,480		11,343,548		13,222,604
Trading securities, at fair value (proceeds $5,584 and $0)							4,003		0
Other liabilities			6,763,117		6,257,387		6,172,576		5,785,933
Total liabilities			289,862,884		288,471,626		281,583,414		287,248,825

Shareholders' equity:
Common stock - no par value, stated value $.001 per share. Authorized 7,000,000 shares - 3,276,560 and 3,295,870 shares outstanding			3,277		3,296
Common stock - no par value, stated value $0.001 per share. Authorized 7,000,000 shares - 3,176,672 and 3,277,830 shares outstanding							3,177		3,279
Additional paid-in capital			35,965,153		36,567,865		33,056,562		36,012,401
Retained earnings			82,949,194		69,708,901		80,266,031		85,979,678
Accumulated other comprehensive income			9,597,996		62,495		15,218,666		8,977,914
Total UTG shareholders' equity			128,515,620		106,342,557		128,544,436		130,973,272
Noncontrolling interests			492,799		734,153		623,469		523,634
Total shareholders' equity			129,008,419		107,076,710		129,167,905		131,496,906
Total liabilities and shareholders' equity		$	418,871,303	$	395,548,336	$	410,751,319	$	418,745,731

Three Months Ended September 30, 2019	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income		Noncontrolling Interest			Total Shareholders' Equity
Three Months Ended September 30, 2020																		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interest		Total Shareholders' Equity

Balance at June 30, 2019	$	3,286		$	36,253,067		$	84,065,838		$	7,057,702	$	749,916		$	128,129,809
Balance at June 30, 2020																		$	3,272	$	35,780,640	$	82,712,737	$	15,085,110	$	589,388	$	134,171,147
Common stock issued during year		-			-			-			-		-			-			0		0		0		0		0		0
Treasury shares acquired		(9	)		(287,914	)		-			-		-			(287,923	)		(95)		(2,724,078)		0		0		0		(2,724,173)
Net income attributable to common shareholders		-			-			(1,116,644	)		-		-			(1,116,644	)
Net income (loss) attributable to common shareholders																			0		0		(2,446,706)		0		0		(2,446,706)
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		-			-			-			2,540,294		-			2,540,294			0		0		0		133,556		0		133,556
Contributions		-			-			-			-		-			-			0		0		0		0		0		0
Distributions		-			-			-			-		(289,912	)		(289,912	)		0		0		0		0		0		0
Gain attributable to noncontrolling interest		-			-			-			-		32,795			32,795			0		0		0		0		34,081		34,081
Balance at September 30, 2019	$	3,277		$	35,965,153		$	82,949,194		$	9,597,996	$	492,799		$	129,008,419
Balance at September 30, 2020																		$	3,177	$	33,056,562	$	80,266,031	$	15,218,666	$	623,469	$	129,167,905

Nine Months Ended September 30, 2019	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interest			Total Shareholders' Equity
Nine Months Ended September 30, 2020																	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interest		Total Shareholders' Equity

Balance at December 31, 2018	$	3,296		$	36,567,865		$	69,708,901	$	62,495	$	734,153		$	107,076,710
Balance at December 31, 2019																	$	3,279	$	36,012,401	$	85,979,678	$	8,977,914	$	523,634	$	131,496,906
Common stock issued during year		7			246,527			-		-		-			246,534			7		218,282		0		0		0		218,289
Treasury shares acquired		(26	)		(849,239	)		-		-		-			(849,265	)		(109)		(3,174,121)		0		0		0		(3,174,230)
Net income attributable to common shareholders		-			-			13,240,293		-		-			13,240,293
Net income (loss) attributable to common shareholders																		0		0		(5,713,647)		0		0		(5,713,647)
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		-			-			-		9,535,501		-			9,535,501			0		0		0		6,240,752		0		6,240,752
Contributions		-			-			-		-		-			-			0		0		0		0		0		0
Distributions		-			-			-		-		(535,662	)		(535,662	)		0		0		0		0		0		0
Gain attributable to noncontrolling interest		-			-			-		-		294,308			294,308			0		0		0		0		99,835		99,835
Balance at September 30, 2019	$	3,277		$	35,965,153		$	82,949,194	$	9,597,996	$	492,799		$	129,008,419
Balance at September 30, 2020																	$	3,177	$	33,056,562	$	80,266,031	$	15,218,666	$	623,469	$	129,167,905

Three Months Ended September 30, 2018	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income			Noncontrolling Interest		Total Shareholders' Equity
Three Months Ended September 30, 2019																	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interest		Total Shareholders' Equity

Balance at June 30, 2018	$	3,305		$	36,829,530		$	68,123,778	$	9,665,033		$	804,122	$	115,425,768
Balance at June 30, 2019																	$	3,286	$	36,253,067	$	84,065,838	$	7,057,702	$	749,916	$	128,129,809
Common stock issued during year		-			-			-		-			-		-			0		0		0		0		0		0
Treasury shares acquired		(9	)		(264,374	)		-		-			-		(264,383	)		(9)		(287,914)		0		0		0		(287,923)
Net income attributable to common shareholders		-			-			11,937,543		-			-		11,937,543			0		0		(1,116,644)		0		0		(1,116,644)
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		-			-			-		(7,721,782	)		-		(7,721,782	)		0		0		0		2,540,294		0		2,540,294
Contributions		-			-			-		-			-		-			0		0		0		0		0		0
Distributions		-			-			-		-			-		-			0		0		0		0		(289,912)		(289,912)
Gain attributable to noncontrolling interest		-			-			-		-			32,078		32,078			0		0		0		0		32,795		32,795
Balance at September 30, 2018	$	3,296		$	36,565,156		$	80,061,321	$	1,943,251		$	836,200	$	119,409,224
Balance at September 30, 2019																	$	3,277	$	35,965,153	$	82,949,194	$	9,597,996	$	492,799	$	129,008,419

Nine Months Ended September 30, 2018	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income			Noncontrolling Interest			Total Shareholders' Equity
Nine Months Ended September 30, 2019																		Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income		Noncontrolling Interest		Total Shareholders' Equity

Balance at December 31, 2017	$	3,333		$	37,536,164		$	39,040,456	$	32,952,338		$	899,227		$	110,431,518
Adoption of Accounting Standards Update No 2016-01		-			-			18,277,328		(18,277,328	)		-			-
January 1, 2018		3,333			37,536,164			57,317,784		14,675,010			899,227			110,431,518
Balance at December 31, 2018																		$	3,296	$	36,567,865	$	69,708,901	$	62,495	$	734,153	$	107,076,710
Common stock issued during year		10			246,747			-		-			-			246,757			7		246,527		0		0		0		246,534
Treasury shares acquired		(47	)		(1,217,755	)		-		-			-			(1,217,802	)		(26)		(849,239)		0		0		0		(849,265)
Net income attributable to common shareholders		-			-			22,743,537		-			-			22,743,537			0		0		13,240,293		0		0		13,240,293
Unrealized holding income on securities net of noncontrolling interest and reclassification adjustment and taxes		-			-			-		(12,731,759	)		-			(12,731,759	)		0		0		0		9,535,501		0		9,535,501
Contributions		-			-			-		-			-			-			0		0		0		0		0		0
Distributions		-			-			-		-			(247,592	)		(247,592	)		0		0		0		0		(535,662)		(535,662)
Gain attributable to noncontrolling interest		-			-			-		-			184,565			184,565			0		0		0		0		294,308		294,308
Balance at September 30, 2018	$	3,296		$	36,565,156		$	80,061,321	$	1,943,251		$	836,200		$	119,409,224
Balance at September 30, 2019																		$	3,277	$	35,965,153	$	82,949,194	$	9,597,996	$	492,799	$	129,008,419