UTGN 10-K Annual Report Dec. 31, 2015

UTG INC

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10-K 1 utg10k2015.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2015
	or
[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _____________ to ______________

Commission File Number 0-16867

	UTG, INC.
	(Exact name of registrant as specified in its charter)
Delaware		20-2907892
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

5250 South Sixth Street, Springfield, IL		62703
(Address of principal executive offices)		(Zip code)

Registrant's telephone number, including area code: (217) 241-6300

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

Securities registered pursuant to Section 12(g) of the Act:

Title of class

Common Stock, stated value $.001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10- K. [ ]

Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	[ ]	Accelerated Filer	[ ]
Non Accelerated Filer	[ ]	Smaller Reporting Company	[X]

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act). Yes [ ] No [X]

As of June 30, 2015 , shares of the Registrant's common stock held by non-affiliates (based upon the price of the last sale of $ 15.50 per share), had an aggregate market value of approximately $ 20,299,808 .

At February 19, 2016 the Registrant had 3,709,087 outstanding shares of common stock, stated value $.001 per share.

Documents incorporated by reference: None

UTG, Inc.

Form 10-K

Year Ended December 31, 2015

TABLE OF CONTENTS

PART I	4
Item 1. Business	4
Item 1A. Risk Factors	9
Item 1B. Unresolved Staff Comments	9
Item 2. Properties	9
Item 3. Legal Proceedings	9
Item 4. Mine Safety Disclosures	9
PART II	10
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6. Selected Financial Data	11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	20
Item 8. Financial Statements and Supplementary Data	20
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	49
Item 9A. Controls and Procedures	49
Item 9B. Other Information	49
PART III	50
Item 10. Directors, Executive Officers and Corporate Governance	50
Item 11. Executive Compensation	54
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	55
Item 13. Certain Relationships and Related Transactions, and Director Independence	58
Item 14. Principal Accounting Fees and Services	58
PART IV	59
Item 15. Exhibits and Financial Statement Schedules	59

Forward-Looking Statements

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

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

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

PART I

Item 1. Business

Business Overview

UTG, Inc. (the "Registrant", "Company" or "UTG") is an insurance holding company incorporated in the state of Delaware in 2005. Its primary direct subsidiary is Universal Guaranty Life Insurance Company ("UG"). The Registrant and its primary subsidiary have only one significant segment, insurance. The Company's dominant business is individual life insurance, which includes the servicing of existing insurance business in-force, the acquisition of other companies in the insurance business, and the administration processing of life insurance business for other entities.

The holding company has no significant business operations of its own and relies on fees, dividends and other distributions from its operating subsidiary as the principal source of cash flows to meet its obligations. Additional information regarding the cash flow and liquidity needs of the holding company can be found in the Liquidity and Capital Resources section of the Management's Discussion and Analysis of Financial Conditions and Results of Operations.

UG has several wholly-owned and majority-owned subsidiaries. The subsidiaries were formed to hold certain real estate and other investments. The investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG.

Increased global IT security threats and more sophisticated and targeted computer crime pose a risk to the security of systems and networks and the confidentiality, availability and integrity of data. Although the Company makes efforts to maintain the security and integrity of the networks and systems, there can be no assurance that the security efforts will be effective or that attempted security breaches or disruptions would not be successful or damaging. In the event a security breach or failure results in the disclosure of sensitive third party data or the transmission of harmful/malicious code to third parties, the Company could be subject to liability claims. The Company does not currently carry insurance coverage against such liabilities. Depending on their nature and scope, such threats also could potentially lead to improper use of our systems and networks, manipulation and destruction of data, loss of trade secrets, system downtimes and operational disruptions, which in turn, could adversely affect our reputation, competitiveness and results of operations.

This document at times will refer to the Registrant's largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll. Mr. Correll holds a majority ownership of First Southern Funding LLC, a Kentucky corporation, ("FSF") and First Southern Bancorp, Inc. ("FSBI"), a financial services holding company. FSBI operates through its 100% owned subsidiary bank, First Southern National Bank ("FSNB"). Banking activities are conducted through multiple locations within south-central and western Kentucky. Mr. Correll is Chief Executive Officer and Chairman of the Board of Directors of UTG and is currently UTG's largest shareholder through his ownership control of FSF, FSBI and affiliates. At December 31, 2015 , Mr. Correll owns or controls directly and indirectly approximately 57.61 % of UTG's outstanding stock.

UTG's website is: www.utgins.com . Information regarding the Company, including recent filings with the Securities and Exchange Commission, are accessible via this website.

Insurance

UG's product portfolio consists of a limited number of life insurance product offerings. All of the products are individual life insurance products, with design variations from each other to provide choices to the customer. These variations generally center around the length of the premium paying period, length of the coverage period and whether the product accumulates cash value or not.

While the Company does not actively sell any new policies today, it has the following products available for issue:

Ten Pay Whole Life – This traditional insurance product has a level face amount and level premium is payable for the first ten policy years. This product is available for issue ages 0-65, and has a minimum face amount of $10,000. This policy can be used in conversion situations, where it is available up to age 75 at a minimum face amount of $5,000.

Tradition – The Tradition policy is a fixed premium whole life insurance policy. Premiums are level and payable for life. Issue ages are 0-75. The minimum face amount is the greater of $10,000 or the amount of coverage provided by a $100 annual premium.

Kid Kare – The Kid Kare product is a single premium level term policy to age 21. The product is sold in units, with one unit equal to a face amount of $5,000 for a single premium of $250. The policy is issued from ages 0-15 and has conversion privileges at age 21.

Reinsurance

As is customary in the insurance industry, the insurance subsidiary cedes insurance to, and assumes insurance from, other insurance companies under reinsurance agreements. Reinsurance agreements are intended to limit a life insurer's maximum loss on a large or unusually hazardous risk or to obtain a greater diversification of risk. The ceding insurance company remains primarily liable with respect to ceded insurance should any reinsurer be unable to meet the obligations assumed by it. However, it is the practice of insurers to reduce their exposure to loss to the extent that they have been reinsured with other insurance companies. The Company sets a limit on the amount of insurance retained on the life of any one person. The Company will not retain more than $125,000, including accidental death benefits, on any one life.

The Company's reinsured business is ceded to numerous reinsurers. The Company monitors the solvency of its reinsurers in seeking to minimize the risk of loss in the event of a failure by one of the parties. The Company is primarily liable to the insureds even if the reinsurers are unable to meet their obligations. The primary reinsurers of the Company are large, well-capitalized entities. See

Note 4 – Reinsurance in the Notes to the Consolidated Financial Statements for additional information regarding the Company's reinsurance activities.

Underwriting

The underwriting procedures of the insurance subsidiary are established by Management. Insurance policies are issued by the Company based upon underwriting practices established for each market in which the Company operates. Most policies are individually underwritten. Applications for insurance are reviewed to determine additional information required to make an underwriting decision, which depends on the amount of insurance applied for and the applicant's age and medical history. Additional information may include inspection reports, medical examinations, and statements from doctors who have treated the applicant in the past and, where indicated, special medical tests. After reviewing the information collected, the Company either issues the policy as applied for, issues with an extra premium charge because of unfavorable factors, or rejects the application. Substandard risks may be referred to reinsurers for full or partial reinsurance of the substandard risk.

Reserves

The applicable insurance laws under which the insurance subsidiary operates require that the insurance company report policy reserves as liabilities to meet future obligations on the policies in-force. These reserves are the amounts which, with the additional premiums to be received and interest thereon compounded annually at certain assumed rates, are calculated in accordance with applicable laws to be sufficient to meet the various policy and contract obligations as they mature. These laws specify that the reserves shall not be less than reserves calculated using certain mortality tables and interest rates.

The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiary's experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2% to 6% for life insurance and 2.5% to 7.5% for annuities. Benefit reserves for traditional life insurance policies include certain deferred profits on limited-payment policies that are being recognized in income over the policy term. Policy benefit claims are charged to expense in the period that the claims are incurred. The mortality rate assumptions for policies currently issued by the Company are based on 2001 select and ultimate tables. Withdrawal rate assumptions are based upon Linton B or Linton C, which are industry standard actuarial tables for forecasting assumed policy lapse rates.

Benefit reserves for universal life insurance and interest sensitive life insurance products are computed under a retrospective deposit method and represent policy account balances before applicable surrender charges. Policy benefits and claims that are charged to expense include benefit claims in excess of related policy account balances.

Investments

Investments are subject to applicable state insurance laws and regulations, which limit the concentration of investments in any one category or class and further limit the investment in any one issuer. Generally, these limitations are imposed as a percentage of statutory assets or percentage of statutory capital and surplus of each company.

The following table summarizes the Company's fixed maturities distribution at December 31, 2015 by ratings category as issued by Standard and Poor's, a leading ratings analyst.


Rating		2015
Investment Grade
AAA		8%
AA		16%
A		31%
BBB		38%
Below Investment Grade		7%
		100%

The following table shows the composition, average maturity and current yield on the average carrying value of the Company's investment portfolio at December 31, 2015 .

	Average
	Carrying		Average	Average
Investments	Value		Maturity	Yield

Fixed maturities held for sale	$	191,300,277	10.8 years		4.47	%
Equity securities		43,340,671	Not applicable		3.94	%
Trading securities		1,886,894	Not applicable		(22.74	)%
Mortgage loans		20,465,956	22 years		27.85	%
Investment real estate		49,328,601	Not applicable		2.99	%
Notes receivable		8,105,234	Not applicable		9.72	%
Policy loans		10,894,364	Not applicable		6.61	%
Short-term investments		2,191,091	On demand		31.95	%
Total Investments	$	327,513,088			5.85	%

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.

The Company began purchasing discounted commercial mortgage loans in 2009. Management has extensive background and experience in the analysis and valuation of commercial real estate. The discounted loans are available through the FDIC's sale of assets of closed banks and from banks wanting to reduce their loan portfolios. The loans are available on a loan by loan bid process. Once a loan has been acquired, contact is made with the appropriate individuals to begin a dialog with a goal of determining the borrower's willingness to work together. There are generally three paths a discounted loan will take: the borrowers pay as required; a settlement is reached with the loan being paid off at a discounted value; or the loan is foreclosed.

During 2015 and 2014 , the Company acquired approximately $ 10.4 million and $ 2.3 million in mortgage loans, respectively, including both regular participation mortgage loans as well as discounted mortgage loans. FSNB services a majority of the mortgage loan portfolio of the Company. 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.

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 negative financial impact.

Management has conservatively decided to place the loans in the discounted mortgage loan portfolio on a non-accrual status, due to the instability of the borrowers.

On the remainder of the mortgage loan portfolio, 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 Company acquired the discounted mortgage loans at below contract value, and believes that it will fully recover its carrying value upon disposal, therefore no reserve for delinquent loans is deemed necessary. The loan portfolio since purchase is performing very well with a majority of the loans currently paying. Those not currently paying are being vigorously worked by Management. The current discounted commercial mortgage loan portfolio has an average price of 39 % of face value and Management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased. The mortgage loan reserve was $ 0 at December 31, 2015 and 2014 .

The following table shows a distribution of the Company's mortgage loans and discounted mortgage loans by type as of December 31, 2015 :

Mortgage Loans	Amount		% of Total

Commercial – all other	$	15,924,512		90	%
Residential – all other		1,845,418		10	%
Total	$	17,769,930		100	%

The following table shows a geographic distribution of the Company's mortgage loan portfolio including discounted mortgage loans and investment real estate as of December 31, 2015 :

	Mortgage Loans	Real Estate

Arizona	12%	2%
California	0%	1%
Colorado	0%	3%
Florida	15%	26%
Georgia	0%	6%
Kentucky	23%	31%
Nevada	17%	0%
Ohio	1%	0%
South Carolina	0%	4%
Texas	0%	15%
Tennessee	16%	0%
West Virginia	16%	12%
Total	100%	100%

See Note 2 – Investments in the Notes to the Consolidated Financial Statements and Management's Discussion and Analysis for additional information regarding the Company's investments.

Competition

The insurance business is a highly competitive industry and there are a number of other companies, both stock and mutual, doing business in areas where the Company operates. Many of these competing insurers are larger, have more diversified and established lines of insurance coverage, have substantially greater financial resources and brand recognition, as well as a greater number of agents. Other significant competitive factors in the insurance industry include policyholder benefits, service to policyholders, and premium rates.

In recent years, the Company has not placed an emphasis on new business production. Costs associated with supporting new business can be significant. Current sales primarily represent sales to existing customers through additional insurance needs or conservation efforts. The Company currently encourages policy retention as opposed to new sales in an attempt to maintain or improve current persistency levels.

The Company performs administrative work as a third party administrator (TPA) for unaffiliated life insurance companies. The Company intends to continue to pursue other TPA arrangements. The Company provides TPA services to insurance companies seeking business process outsourcing solutions. Management believes the Company is positioned to generate additional revenues by utilizing the Company's current excess capacity and administrative services.

Regulation

Holding Company - States have enacted legislation requiring registration and periodic reporting by insurance companies domiciled within their respective jurisdictions that control or are controlled by other corporations so as to constitute a holding company system. Insurance holding company system statutes and regulations impose various limitations on investments in subsidiaries, and may require prior regulatory approval for material transactions between insurers and affiliates and for the payment of certain dividends and other distributions.

Insurance - Insurance companies are subject to regulation and supervision in the states in which they do business. Generally the state supervisory agencies have broad administrative powers relating to granting and revoking licenses to transact business, licensing agents, approving policy forms, regulating trade practices, approving certain premium rates, setting minimum reserve and loss ratio requirements, determining the form and content of required financial statements, and prescribing the type and amount of investments permitted. Insurance companies are also required to file detailed annual reports with supervisory agencies, and records of their business are subject to examination at any time. Under the rules of the National Association of Insurance Commissioners ("NAIC"), insurance companies are examined periodically by one or more of the supervisory agencies.

Risk-Based Capital - The NAIC requires a risk-based capital formula be applied to all life and health insurers. The risk-based capital formula is a threshold formula rather than a target capital formula. It is designed only to identify companies that require regulatory attention and is not to be used to rate or rank companies that are adequately capitalized. UTG's insurance subsidiary, UG, is more than adequately capitalized under the risk-based capital formula.

Guaranty Assessments – State guaranty laws provide for assessments from insurance companies to be placed into a fund which is used, in the event of failure or insolvency of an insurance company, to fulfill the obligations of that company to its policyholders. The amount which a company is assessed is determined according to the extent of these unsatisfied obligations in each state. Assessments are recoverable to a great extent as offsets against state premium taxes.

Personnel

At December 31, 2015 , UTG and its subsidiaries had 42 full-time employees. UTG's operations are headquartered in Springfield, Illinois.

Item 1A. Risk Factors

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and Item 10(f)(1) of Regulation S-K, the Company has elected to comply with certain scaled disclosure reporting obligations, and therefore does not have to provide the information required by this item.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

The Company owns an office complex in Springfield, Illinois, which houses the primary insurance operations. The office buildings in this complex contain 57,000 square feet of office and warehouse space.

Item 3. Legal Proceedings

In the normal course of business the Company is involved, from time to time, in various legal actions and other state and federal proceedings. Management is of the opinion that the ultimate disposition of these matters will not have a material adverse effect on the Company's results of operations or financial position.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrnat's Common Equity, Related Stockholders Matters and Issuer Purchaes of Equity Securities

The Registrant is a public company whose common stock is traded in the over-the-counter market. Over-the-counter quotations can be obtained using the UTGN stock symbol.

The following table shows the high and low closing prices for each quarterly period during the past two years, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The quotations below were acquired from the Yahoo Finance web site, which also provides quotes for over-the-counter traded securities such as UTG.

	2015		2014

Period	High	Low	High	Low

First quarter	14.25	13.05	12.50	11.25
Second quarter	15.99	13.50	12.50	10.55
Third quarter	19.00	14.80	14.13	12.25
Fourth quarter	17.00	14.36	14.50	13.55

UTG has not declared or paid any dividends on its common stock in the past two fiscal years, and has no current plans to pay dividends on its common stock as it intends to retain all earnings for investment in and growth of the Company's business. See Note 9 – Shareholders' Equity in the Notes to the Consolidated Financial Statements for information regarding dividend restrictions, including applicable restrictions on the ability of the Company's life insurance subsidiary to pay dividends.

As of February 19, 2016 there were 6,324 record holders of UTG common stock.

Purchases of Equity Securities

The following table provides information with respect to purchases we made of our common stock during the three months ended December 31, 2015 and total repurchases:

	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program		Maximum Number of Shares That May Yet Be Purchased Under the Program			Approximate Dollar Value That May Yet Be Purchased Under the Program
Oct. 1 through Oct. 31, 2015		80	$	16.63		80		N/	A	$	1,724,840
Nov. 1 through Nov. 30, 2015		42	$	16.50		42		N/	A	$	1,724,147
Dec. 1 through Dec. 31, 2015		1,949	$	14.82		1,949		N/	A	$	1,695,266
Total		2,071				2,071

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 on June 3, 2015 , the Board of Directors of UTG authorized the repurchase of up to an additional $ 1,000,000 of UTG's common stock, for a total repurchase of $ 8,000,000 . Repurchased shares are available for future issuance for general corporate purposes. This program can be suspended or terminated at any time without further notice. Open market purchases are made based on the last available market price and are generally limited to a maximum per share price of the most recent reported per share GAAP equity book value of the Company. During 2015 , the Company repurchased 25,919 shares through the stock repurchase program for $ 375,207 . Through December 31, 2015 , UTG has spent $ 6.5 million in the acquisition of 688,617 shares under this program.

On July 20, 2015 the Board of Directors of UTG also clarified and amended the terms on which UTG may repurchase shares in the program and gave Company Management broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. The program may be suspended or terminated at any time without further notice.

Stock Performance Graph

Item 6. Selected Financial Data

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is Management's discussion and analysis of the financial condition and results of operations of UTG, Inc. and its subsidiaries (collectively with the Parent, the "Company") for the years ended December 31, 2015 and 2014 . This discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report.

Cautionary Statement Regarding Forward-Looking Statements

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.

Overview

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

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

Critical Accounting Policies

We have identified the accounting policies below as critical to the understanding of our results of operations and our financial condition. The application of these critical accounting policies in preparing our consolidated financial statements requires Management to use significant judgments and estimates concerning future results or other developments including the likelihood, timing or amount of one or more future transactions or amounts. Actual results may differ from these estimates under different assumptions or conditions. On an on-going basis, we evaluate our estimates, assumptions and judgments based upon historical experience and various other information that we believe to be reasonable under the circumstances. For a detailed discussion of other significant accounting policies, see Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements.

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

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

Valuation of Securities – The Company's investment portfolio consists of fixed maturities, equity securities, trading securities, mortgage loans and real estate to provide funding of future policy contractual obligations. The Company's fixed maturities and equity securities are classified as available-for-sale. Available-for-sale investments are carried at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss) in the Consolidated Balance Sheets.

The Company's trading securities are carried at fair value with unrealized gains and losses reported in income in the Consolidated Statements of Operations. Fair value is the price that the Company would expect to receive upon sale of the asset in an orderly transaction.

Mortgage loans on real estate are carried at their unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. A portion of the mortgage loan balance consists of discounted mortgage loans that were purchased at deep discounts through an auction process led by the Federal Government. In general, the discounted mortgage 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 mortgage loans at its original purchase price adjusted for any principal receipts received.

Investment real estate held for sale is reported at the lower of cost or fair value less cost to sell. Expenses to maintain the property are expensed as incurred.

While the available-for-sale securities are generally expected to be held to maturity, they are classified as available-for-sale and are sold periodically to manage risk. Although a majority of the investment portfolio is classified as available-for-sale, the Company has the ability and intent to hold the securities until maturity. See Note 2 – Investments in the Notes to the Consolidated Financial Statements for detailed disclosures regarding the Company's investment portfolio.

Impairment of Investments – The Company continually monitors the investment portfolio for investments that have become impaired in value, where fair value has declined below carrying value. While the value of the investments in the Company's portfolio continuously fluctuate due to market conditions, an other-than-temporary impairment charge is recorded only when a security has experienced a decline in fair market value which is deemed to be other than temporary. The policies and procedures the Company uses to evaluate and account for impairments of investments are disclosed in Note 1 – Summary of Significant Accounting Policies and Note 2 – Investments in the Notes to the Consolidated Financial Statements. The Company makes every effort to appropriately assess the status and value of the securities with the information available regarding an other-than-temporary impairment. However, it is difficult to predict the future prospects of a distressed or impaired security.

Deferred Income Taxes – The provision for deferred income taxes is based on the asset and liability method of accounting for income taxes. Under this method, deferred income taxes are recognized by applying enacted statutory tax rates to temporary differences between amounts reported in the Consolidated Financial Statements and the tax basis of existing assets and liabilities. A valuation allowance is recognized for the portion of deferred tax assets that, in Management's judgment, is not likely to be realized. The effect on deferred income taxes of a change in tax rates or laws is recognized in income tax expense in the period that includes the enactment date. Refer to Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements for detailed information regarding the Company's significant accounting policies.

Results of Operations

On a consolidated basis, the Company had net income attributable to common shareholders of $ 900,000 and $ 7 million in 2015 and 2014 , respectively. In 2015 , income before income taxes was $ 273,000 compared to $ 11.1 million in 2014 . Total revenue was $ 28.8 million in 2015 and $ 43.6 million in 2014 .

One-time events, primarily reflected in realized gains, comprise a substantial portion of the net income and revenue reported by the Company during 2015 and 2014 . The magnitude of realized investment gains and losses in a given year is a function of the timing of trades of investments relative to the markets themselves as well as the recognition of any impairments on investments. Future earnings will be significantly negatively impacted should earnings from these one-time items not be realizable in a future period. While Management believes there remain additional investments with such one-time earnings, when or if realized remains uncertain.

Total benefits and other expenses paid in 2015 were $ 28.5 million compared to $ 32.5 million in 2014 .

Revenues

Premiums and policy fee revenues, net of reinsurance premiums and policy fees, decreased approximately 5 % when comparing 2015 to 2014 . The Company writes very little new business. Unless the Company acquires a new company or a block of in-force business, Management expects premium revenue to continue to decline on the existing block of business at a rate consistent with prior experience. The Company's average persistency rate for all policies in-force for 2015 and 2014 was approximately 96.2 % and 96.6 %, respectively. Persistency is a measure of insurance in-force retained in relation to the previous year.

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

	2015			2014

Fixed maturities	$	8,559,938		$	8,225,640
Equity securities		1,708,786			3,255,611
Trading securities		(429,161	)		(476,578	)
Mortgage loans		5,700,492			4,592,853
Real estate		1,474,726			8,355,153
Notes receivable		787,658			340,000
Policy loans		720,544			760,715
Cash and cash equivalents		681			505
Short-term		699,357			70,578
Total consolidated investment income		19,223,021			25,124,477
Investment expenses		(3,663,086	)		(8,774,758	)
Consolidated net investment income	$	15,559,935		$	16,349,719

The Company's gross investment income and net investment income were down approximately 23 % and 5 %, respectively, when comparing the current and prior year results. Investment expenses were down approximately 58 % when comparing the current and prior year results. The variance in investment income, when comparing the current and prior year results, is mainly attributable to fluctuations in the earnings of the equity securities, real estate and short term investment portfolios.

During the current year, the Company reported income of $ 1.7 million from equity securities portfolio, a decrease of 48 % in comparison to the prior year. During 2014, the interest rate on one of the Company's preferred stocks increased substantially, according to the terms of the contractual agreement, causing the increase in income reported in the equity securities portfolio. This specific preferred stock was redeemed in subsequent quarters; therefore, no longer providing the high interest rate yield.

The Company's real estate investment portfolio produced income of approximately $ 1.5 million and $ 8.4 million during 2015 and 2014 , respectively. During 2014, one of the Company's consolidated subsidiaries sold all of the real estate it owned. Historically, this real estate generated annual rental income of approximately $6.7 million. As a result of the sale, the Company no longer recognizes rental income from this real estate.

Income from the short term investment portfolio increased approximately $ 630,000 in comparison to the prior year. During 2016, the Company financed a short-term note receivable. The note was fully repaid during the fourth quarter of 2015 and the Company recognized income of approximately $ 443,000 at the time of payoff.

The Company's investment expenses decreased approximately 58 % or $ 5 million when comparing the 2015 and 2014 results. Investment expenses are expected to vary from year to year depending on the resources utilized by the Company to maintain and work the investment portfolio. As mentioned above, during 2014 , one of the Company's consolidated subsidiaries sold the real estate it owned. This real estate generated investment expenses related to its operations of approximately $ 4.7 million during 2014 . As a result of the sale, the Company did not incur similar expenses during 2015 .

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

	2015			2014

Fixed maturities available for sale	$	1,248,240		$	1,278,743
Equity securities		780,396			2,645,216
Real estate		5,968,558			13,297,119
Equity securities – OTTI		(3,515,700	)		(126,959	)
Real estate – OTTI		(54,901	)		(35,946	)
Consolidated net realized investment gains	$	4,426,593		$	17,058,173

The Company's net realized investment gains were approximately $ 12.6 million lower when comparing the current and prior year results and is primarily attributable to the Company recognizing fewer gains in the equity and real estate investments portfolios during the current year. Furthermore, the Company recognized significantly more other than temporary impairments (OTTI) in the current year as compared to the prior year.

The gain reported in the equity securities portfolio during 2015 and 2014 is mainly the result of the redemption of a certain preferred stock owned by the Company. During 2014 , the Company recognized gains totaling approximately $ 1.9 million from the redemption of a portion of this preferred stock. In 2015 , the remaining portion of this preferred stock was redeemed, producing a gain of approximately $ 972,000 .

The 2015 realized gains from real estate are mainly attributable to the sale of three real estate parcels, which produced net gains of approximately $ 5 million . The Company reported net gains of approximately $13.3 million during 2014 from the sale of real estate. During the fourth quarter of 2014, a majority owned subsidiary of UG, HPG Acquisitions, LLC ("HPG"), sold all of the real estate it owned in Midland, Texas and recognized a gain of approximately $10.1 million. The sale of this real estate is the main reason for the fluctuation in the non-controlling interest balance reported on the Consolidated Statements of Operations. During the third quarter of 2014, the Company recognized a gain of approximately $3.1 million from the sale of real estate held by one of UG's wholly owned subsidiaries. Gains from the sale of real estate are the result of one-time events and are expected to vary from year to year.

During 2015 and 2014 , realized gains were offset by other-than-temporary impairments of approximately $ 3.6 million and $ 163,000 , respectively. The other-than-temporary impairments were taken as a result of Management's assessment and consideration of the length of time the securities have remained in an unrealized loss position and as a result of management's analysis and determination of value. The investments were written down to better reflect their current expected fair value.

Other Income

Other income, which mainly consists of fees charged for third party administration ("TPA") services, decreased approximately $ 1 million when comparing the 2015 and 2014 results reported by the Company. The Company receives monthly fees based on policy in-force counts and certain other activity indicators, such as number of premium collections performed, or services performed. The Company provides TPA services to insurance companies seeking business process outsourcing solutions.

During the fourth quarter of 2014, Management did not renew its largest third party administration contract as a result of thin profit margins associated with this contract coupled with its labor intensity. The non-renewal of this contract did not have a material financial impact as the Company has recognized operating expense reductions similar to the lost revenues.

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 $ 28.5 million and $ 32.5 million for the twelve-month period ended December 31, 2015 and 2014 , respectively. Benefits, claims and settlement expenses represented approximately 66 % and 60 % of the Company's total expenses for 2015 and 2014 , respectively. The other major expense category of the Company is operating expenses, which represented 31 % and 33 % of the Company's total expenses for 2015 and 2014 , respectively.

Benefits, claims and settlement expenses, net of reinsurance benefits, decreased approximately 4 % in 2015 compared to 2014 . The decrease primarily relates to changes in the Company's death claim experience. Policy claims vary from year to year and therefore, fluctuations in mortality are to be expected and are not considered unusual by Management.

In early 2013, the Company began a proactive analysis of its in-force business to try to reconnect with lost customers and verify its customers are not deceased. In some instances, the Company found that the customer was indeed deceased, but no notification or claim was presented to the Company. During 2014, the Company paid approximately $1.2 million in death claim benefits as a result of this action. This project was completed during the second quarter of 2014 and contributed to higher benefit expenses in 2014, compared to 2015.

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

The short-term impact of policy surrenders is negligible since a reserve for future policy benefits payable is held which is, at a minimum, equal to and generally greater than the cash surrender value of a policy. The benefit of fewer policy surrenders is primarily received over a longer time period through the retention of the Company's asset base.

Operating expenses decreased approximately 17 % in 2015 compared to 2014 . When analyzing 2014 and 2015 operating expenses, expenses were down slightly in the majority of the categories, and significantly in two categories, information technology and charitable contributions. As previously mentioned in the Results of Operations – Other Income section of the MD&A, the Company did not renew its largest third party administration contract. The non-renewal of this contract allowed the Company to recognize cost saving measures therefore reducing operating expenses incurred by the Company during 2015.

Information technology expenses decreased approximately 29 % compared to the prior year. Information technology expenses were higher in the prior year as a result of additional expenses incurred in relation to the conversion to a new administrative system. Following an extensive analysis of administrative systems available in the market place, early in 2014 the Company determined it would change its administrative system. The Company will be fully converted to the new system during the first quarter of 2016. Management believes this system change will better position the Company for the future by providing a more modern and flexible operating system while reducing ongoing operating costs.

Charitable contributions decreased approximately 63 % when comparing current and prior year expenditures. As mentioned above in the Overview section of the Management Discussion and Analysis, UTG has a strong philanthropic program. The Company generally allocates a portion of its earnings to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. Charitable contributions made by the Company are expected to vary from year to year depending on the earnings of the Company.

Net amortization of cost of insurance acquired decreased approximately 8 % when comparing current and prior year activity. Cost of insurance acquired is established when an insurance company is acquired or when the Company acquires a block of in-force business. The Company assigns a portion of its cost to the right to receive future profits from insurance contracts existing at the date of the acquisition. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates may vary due to risk analysis performed at the time of acquisition on the business acquired. The Company utilizes a 12% discount rate on the remaining unamortized business. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised. Amortization of cost of insurance acquired is particularly sensitive to changes in interest rate spreads and persistency of certain blocks of insurance in-force. This expense is expected to decrease, unless the Company acquires a new block of business.

Management has been working on a plan and has made the determination it is in the Company's best long term interest to relocate its main operations from Springfield, Illinois to Stanford, Kentucky. The Company's majority shareholder, Jess Correll, headquarters his other operating entities in Stanford, Kentucky. Management believes this move will provide the Company with significant synergies, improve efficiencies and reduce overall operating expenses. The relocation is anticipated to occur during the third quarter of 2016. Significant time and planning has been put into this relocation to help ensure as smooth a transition as possible.

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

Financial Condition

Investment Information

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

The following table reflects, by investment category, the investments held by the Company as of December 31 :

	2015		As a % of Total Investments			As a % of Total Assets

Fixed maturities	$	185,119,097		58	%		49	%
Equity securities		45,685,340		15	%		12	%
Mortgage loans		17,769,930		6	%		5	%
Real estate		47,650,102		15	%		13	%
Notes receivable		10,597,907		3	%		3	%
Policy loans		10,684,244		3	%		3	%
Total investments	$	317,506,620		100	%		85	%

	2014		As a % of Total Investments			As a % of Total Assets

Fixed maturities	$	197,481,456		59	%		49	%
Equity securities		40,996,002		12	%		10	%
Trading securities		3,826,250		1	%		1	%
Mortgage loans		23,161,982		7	%		6	%
Real estate		51,007,101		15	%		13	%
Notes receivable		5,612,560		2	%		1	%
Policy loans		11,104,485		3	%		3	%
Short-term		4,382,181		1	%		1	%
Total investments	$	337,572,017		100	%		84	%

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

The Company's total investments represented 85 % and 84 % of the Company's total assets as of December 31 , 2015 and 2014 , respectively. Fixed maturities consistently represented a substantial portion, 49 %, of the total investments during 2014 and 2015 . The overall investment mix, as percentage of total investments, remained fairly consistent when comparing the investments held as of December 31, 2015 and 2014 .

As of December 31, 2015 , 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 losses of approximately $( 7.2 ) million during 2015 and net unrealized gains of approximately $ 4.2 million during 2014 . The variance in the net unrealized gains and losses is the result of normal market fluctuations mainly related to higher interest rates.

During 2015 , the trading securities asset balance decreased while the equity securities balance increased. As disclosed in

Note 2 - Investment of the Consolidated Financial Statements, as of June 30, 2015, the Company reclassified its remaining exchange-traded equity trading security to the available for sale category. The fair value of the security at the time of the reclassification was $ 3,224,000. Trading securities are purchased and held primarily for purposes of selling them in the near term and reflect active and frequent buying and selling. Management analyzed the recent buying and selling activity related to the exchange-traded equity and deems the available for sale category to better reflect Management's intent for this security going forward. Through June 30, 2015, unrealized gains and losses from this exchange-traded equity were recorded as a component of earnings. Future unrealized gains/losses will be reported as a component of comprehensive income.

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

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

Liquidity

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

Parent Company Liquidity

UTG is a holding company that has no day-to-day operations of its own. Cash flows from UTG's insurance subsidiary, UG, are used to pay costs associated with maintaining the Company in good standing with states in which it does business and purchasing outstanding shares of UTG stock. UTG's cash flow is dependent on management fees received from its insurance subsidiary, stockholder dividends from its subsidiary and earnings received on cash balances. As of December 31, 2015 and 2014 , substantially all of the consolidated shareholders' equity represents net assets of its subsidiaries. In 2015 , the Parent company received $ 4 million in dividends from its insurance subsidiary and $ 4.8 million in 2014 . Certain restrictions exist on the payment of dividends from the insurance subsidiary to the Parent company. For further information regarding the restrictions on the payment of dividends by the insurance subsidiary, see Note 9 – Shareholders' Equity in the Notes to the Consolidated Financial Statements. Although these restrictions exist, dividend availability from the insurance subsidiary has historically been sufficient to meet the cash flow needs of the Parent company.

Insurance Subsidiary Liquidity

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

Short-Term Borrowings

An additional source of liquidity to the Parent company and its subsidiaries is the line of credit facilities extended to them. As of December 31, 2015 , the Company and its subsidiaries had available $ 18 million in line of credit facilities. As of December 31, 2014 , the Company and its subsidiaries had available $ 8 million in line of credit facilities. For additional information regarding the line of credit facilities, see Note 7 – Credit Arrangements in the Notes to the Consolidated Financial Statements.

The Company expects to have readily available funds for the foreseeable future to conduct its operations and to maintain target capital ratios in the insurance subsidiary through internally generated cash flow and the credit facilities. In the unlikely event that more liquidity is needed, the Company could generate additional funds through such sources as a short-term credit facility and intercompany borrowing.

Consolidated Liquidity

Cash used in operating activities was approximately $ 11.1 million and $ 13.6 million in 2015 and 2014 , respectively. Sources of operating cash flows of the Company, as with most insurance entities, is comprised primarily of premiums received on life insurance products and income earned on investments. Uses of operating cash flows consist primarily of payments of benefits to policyholders and beneficiaries and operating expenses. The Company has not marketed any significant new products for several years. As such, premium revenues continue to decline. Management anticipates future cash flows from operations to remain similar to historic trends.

During 2015 , the Company's investing activities provided net cash of approximately $ 13.6 million . During 2014 , the Company's investing activities provided net cash of approximately $ 34.3 million . Proceeds from investments sold decreased approximately 39 % or $ 50 million when comparing 2015 to 2014 . Investment purchases decreased approximately 30 % or $ 27.3 million . The net cash provided by investing activities is expected to vary from year to year depending on market conditions and management's ability to find and negotiate favorable investment contracts.

Net cash used in financing activities was approximately $( 4.6 ) million and $( 26.5 ) million during 2015 and 2014 , respectively. During 2015, the Company made principal payments on its outstanding debt of approximately $ 4.4 million and as of December 31, 2015 the Company had no debt outstanding with third parties. During 2014 , the Company made principal payments on its outstanding debt of approximately $ 16.3 million . As a result of the 2014 principal payments made, UTG, as well as one of its subsidiaries, HPG Acquisitions, LLC, fully repaid their outstanding debt.

The Company had cash and cash equivalents of approximately $ 11.8 million and $ 14 million as of December 31, 2015 and 2014 , respectively. The Company has a portfolio of marketable fixed and equity securities that are available for sale, if an unexpected event were to occur. These securities had a fair value of approximately $231 million and $ 238 million at December 31, 2015 and 2014 , respectively. However, the strong cash flows from investing activities, investment maturities and the availability of the line of credit facilities make it unlikely that the Company would need to sell securities for liquidity purposes. See Note 2 – Investments in the Notes to the Consolidated Financial Statements for detailed disclosures regarding the Company's investment portfolio.

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

Capital Resources

The Company's capital structure consists of short-term debt, long-term debt and shareholders' equity. A complete analysis and description of the short-term and long-term debt issues outstanding as of December 31, 2015 and 2014 are presented in Note 7 – Credit Arrangements in the Notes to the Consolidated Financial Statements.

The Company had no outstanding debt as of December 31, 2015 and $ 4.4 million of outstanding debt as of December 31, 2014 . The 2014 outstanding debt belonged to UTG Avalon, LLC, a wholly owned subsidiary of UG. See Note 7 – Credit Arrangements in the Notes to the Consolidated Financial Statements for detailed disclosures regarding the Company's notes payable.

The NAIC's risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. The risk-based capital (RBC) formula measures the adequacy of statutory capital and surplus in relation to investment and insurance risks such as asset quality, mortality and morbidity, asset and liability matching and other business factors. The RBC formula is used by state insurance regulators as an early warning tool to identify, for the purpose of initiating regulatory action, insurance companies that potentially are inadequately capitalized.

At December 31, 2015 , UG has a ratio of approximately 4.74 , which is 474 % of the authorized control level. Accordingly, the Company meets the RBC requirements.

Shareholders' equity was approximately $ 77 million and $ 83.6 million as of December 31, 2015 and 2014 , respectively. Total shareholders' equity decreased approximately 8 % in 2015 compared to 2014 . The decrease is primarily attributable to the change in accumulated other comprehensive income (loss). As of December 31, 2015 , the Company reported an accumulated other comprehensive loss of approximately $( 1.2 ) million and accumulated other comprehensive income of approximately $ 6.9 million as of December 31, 2014 . The change in accumulated other comprehensive income (loss) is mainly attributable to the net unrealized holding losses of approximately $( 7.2 ) million during 2015 compared to net unrealized holding gains of $ 4.2 million reported during 2014 . As previously discussed in the above in the Financial Condition – Investment Information section of the MD&A, the variance in the net unrealized gains and losses is the result of normal market fluctuations mainly related to higher interest rates.

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

New Accounting Pronouncements

See Note 1 – Summary of Significant Account Policies in the Notes to the Consolidated Financial Statements for information regarding new accounting pronouncements.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements, financing activities or other relationships with unconsolidated entities or other persons.

Contractual Obligations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

Index to Financial Statements

	Page No.
UTG, Inc. and Consolidated Subsidiaries
Report of Independent Registered Public Accounting Firm	21
Consolidated Balance Sheets	22
Consolidated Statements of Operations	23
Consolidated Statements of Comprehensive Income	24
Consolidated Statements of Shareholders' Equity	25
Consolidated Statements of Cash Flows	26
Notes to Consolidated Financial Statements	27

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of UTG, Inc. and Subsidiaries

Springfield, Illinois

We have audited the accompanying consolidated balance sheets of UTG, Inc. and subsidiaries (a Delaware corporation, the "Company") as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity, and cash flows for each of the years in the two-year period ended December 31, 2015. The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of UTG, Inc. and subsidiaries as of December 31, 2015 and 2014, and the consolidated results of their operations and their consolidated cash flows for each of the years in the two-year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.

/s/ Brown Smith Wallace, LLC

St. Louis, Missouri

March 25, 2016

UTG, Inc.

Consolidated Balance Sheets

As of December 31, 2015 and 2014

ASSETS

	2015			2014

Investments:
Investments available for sale:
Fixed maturities, at fair value (amortized cost $188,647,671 and $188,634,364)	$	185,119,097		$	197,481,456
Equity securities, at fair value (cost $43,954,737 and $39,275,638)		45,685,340			40,996,002
Trading securities, at fair value (cost $0 and $5,179,850)		0			3,826,250
Mortgage loans on real estate at amortized cost		17,769,930			23,161,982
Investment real estate		47,650,102			51,007,101
Notes receivable		10,597,907			5,612,560
Policy loans		10,684,244			11,104,485
Short-term investments		0			4,382,181
Total investments		317,506,620			337,572,017

Cash and cash equivalents		11,822,615			13,977,443
Accrued investment income		2,821,338			2,662,865
Reinsurance receivables:
Future policy benefits		27,462,830			27,906,905
Policy claims and other benefits		3,553,978			3,788,294
Cost of insurance acquired		8,140,379			9,047,984
Property and equipment, net of accumulated depreciation		2,016,611			2,475,829
Income taxes recoverable		619,043			0
Other assets		3,283,681			2,468,901
Total assets	$	377,227,095		$	399,900,238

LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits	$	269,119,859		$	275,044,909
Policy claims and benefits payable		3,759,565			3,208,324
Other policyholder funds		457,774			341,248
Dividend and endowment accumulations		14,233,644			14,239,054
Income taxes payable		0			1,933,243
Deferred income taxes		3,405,467			9,413,794
Notes payable		0			4,400,000
Trading securities, at fair value (proceeds $108,881 and $464,215)		28,609			23,853
Other liabilities		9,234,675			7,723,213
Total liabilities		300,239,593			316,327,638

Shareholders' equity:
Common stock - no par value, stated value $0.001 per share. Authorized 7,000,000 shares - 3,699,447 and 3,706,780 shares issued and outstanding		3,699			3,706
Additional paid-in capital		43,002,670			43,122,944
Retained earnings		33,062,282			32,145,662
Accumulated other comprehensive income		(1,183,552	)		6,853,974
Total UTG shareholders' equity		74,885,099			82,126,286
Noncontrolling interest		2,102,403			1,446,314
Total shareholders' equity		76,987,502			83,572,600
Total liabilities and shareholders' equity	$	377,227,095		$	399,900,238

See accompaning notes.

UTG, Inc.

Consolidated Statements of Operations

As of December 31, 2015 and 2014

	2015			2014

Revenues:

Premiums and policy fees	$	11,164,857		$	11,667,248
Reinsurance premiums and policy fees		(3,090,503	)		(3,126,914	)
Net investment income		15,559,935			16,349,719
Other income		707,069			1,676,602
Revenues before realized gains (losses)		24,341,358			26,566,655
Realized investment gains (losses), net:
Other-than-temporary impairments		(3,570,601	)		(162,905	)
Other realized investment gains, net		7,997,194			17,221,078
Total realized investment gains, net		4,426,593			17,058,173
Total revenues		28,767,951			43,624,828

Benefits and other expenses:

Benefits, claims and settlement expenses:
Life		20,245,920			21,404,297
Ceded Reinsurance benefits and claims		(2,919,064	)		(2,855,202	)
Annuity		996,485			597,792
Dividends to policyholders		446,567			479,158
Commissions and amortization of deferred policy acquisition costs		(168,533	)		432,695
Amortization of cost of insurance acquired		907,605			985,650
Operating expenses		8,916,771			10,776,690
Interest expense		68,876			677,079
Total benefits and other expenses		28,494,627			32,498,159

Income before income taxes		273,324			11,126,669
Income tax benefit (expense)		932,715			(1,082,927	)

Net income		1,206,039			10,043,742

Net income attributable to noncontrolling interest		(289,419	)		(3,067,726	)

Net income attributable to common shareholders':	$	916,620		$	6,976,016

Amounts attributable to common shareholders':

Basic income per share	$	0.25		$	1.86

Diluted income per share	$	0.25		$	1.86

Basic weighted average shares outstanding		3,704,322			3,750,239

Diluted weighted average shares outstanding		3,704,322			3,750,239

See accompanying notes.

UTG, Inc.

Consolidated Statements of Comprehensive Income

For the Years Ended December 31, 2015 and 2014

	2015			2014

Net Income	$	1,206,039		$	10,043,742

Other comprehensive income (loss):

Unrealized holding gains (losses) arising during period, pre-tax		(11,117,183	)		6,501,163
Tax (expense) benefit on unrealized holding gains (losses) arising during the period		3,891,014			(2,275,407	)
Unrealized holding gains (losses) arising during period, net of tax		(7,226,169	)		4,225,756

Less reclassification adjustment for gains included in net income		(1,248,241	)		(1,278,743	)
Tax expense for gains included in net income		436,884			447,560
Reclassification adjustment for gains included in net income, net of tax		(811,357	)		(831,183	)
Subtotal: Other comprehensive income (loss), net of tax		(8,037,526	)		3,394,573

Comprehensive income (loss)		(6,831,487	)		13,438,315

Less comprehensive income attributable to no controlling interest		(289,419	)		(3,067,726	)

Comprehensive income (loss) attributable to UTG, Inc.	$	(7,120,906	)	$	10,370,589

See accompanying notes.

UTG, Inc.

Consolidated Statements of Shareholders' Equity

Year ended December 31, 2015	Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total Shareholders' Equity

Balance at January 1, 2015	$	3,706		$	43,122,944		$	32,145,662	$	6,853,974		$	1,446,314		$	83,572,600
Common stock issued during year		19			254,908			0		0			0			254,927
Treasury shares acquired		(26	)		(375,182	)		0		0			0			(375,208	)
Net income attributable to common shareholders		0			0			916,620		0			0			916,620
Unrealized holding loss on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		(8,037,526	)		0			(8,037,526	)
Contributions		0			0			0		0			1,124,217			1,124,217
Distributions		0			0			0		0			(757,547	)		(757,547	)
Gain attributable to noncontrolling interest		0			0			0		0			289,419			289,419
Balance at December 31, 2015	$	3,699		$	43,002,670		$	33,062,282	$	(1,183,552	)	$	2,102,403		$	76,987,502

Year ended December 31, 2014		Common Stock			Additional Paid-In Capital			Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Total Shareholders' Equity
Balance at January 1, 2014	$	3,776		$	44,050,778		$	25,169,646	$	3,459,401		$	5,183,840		$	77,867,441
Common stock issued during year		4			68,943			0		0			0			68,947
Treasury shares acquired		(74	)		(996,777	)		0		0			0			(996,851	)
Net income attributable to common shareholders		0			0			6,976,016		0			0			6,976,016
Unrealized holding loss on securities net of noncontrolling interest and reclassification adjustment and taxes		0			0			0		3,394,573			0			3,394,573
Contributions		0			0			0		0			185,689			185,689
Distributions		0			0			0		0			(6,990,941	)		(6,990,941	)
Gain attributable to noncontrolling interest		0			0			0		0			3,067,726			3,067,726
Balance at December 31, 2014	$	3,706		$	43,122,944		$	32,145,662	$	6,853,974		$	1,446,314		$	83,572,600

See accompanying notes.

UTG, INC.

Consolidated Statements of Cash Flows

As of December 31, 2015 and 2014

	2015			2014

Cash flows from operating activities:
Net income attributable to common shares	$	916,620		$	6,976,016
Adjustments to reconcile net income to net cash used in operating activities
resulting from the sales and purchases of subsidiaries:
Amortization (accretion) of investments		(2,753,269	)		(2,161,508	)
Realized investment gains, net		(4,426,593	)		(17,058,173	)
Unrealized trading (gains) losses included in income		945,128			722,573
Realized trading (gains) losses included in income		0			143,957
Amortization of deferred policy acquisition costs		0			369,786
Amortization of cost of insurance acquired		907,605			985,650
Depreciation		814,336			1,303,829
Net income attributable to noncontrolling interest		289,419			3,067,726
Charges for mortality and administration of universal life and annuity products		(6,640,391	)		(6,651,876	)
Interest credited to account balances		4,835,215			4,985,077
Change in accrued investment income		(158,473	)		(229,926	)
Change in reinsurance receivables		678,391			998,863
Change in policy liabilities and accruals		(3,132,596	)		(5,123,893	)
Change in income taxes receivable (payable)		(2,552,286	)		3,229,286
Change in other assets and liabilities, net		(871,642	)		(5,197,626	)
Net cash used in operating activities		(11,148,536	)		(13,640,239	)

Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities available for sale		22,484,522			44,228,405
Equity securities available for sale		8,087,827			14,686,816
Trading securities		125,774			1,992,704
Mortgage loans		20,140,224			9,040,925
Real estate		19,829,665			53,674,168
Policy loans		3,102,284			3,322,613
Short-term investments		4,482,329			960,148
Total proceeds from investments sold and matured		78,252,625			127,905,779
Cost of investments acquired:
Fixed maturities available for sale		(21,733,834	)		(60,986,549	)
Equity securities available for sale		(12,278,232	)		(12,963,380	)
Trading securities		(463,895	)		(371,388	)
Mortgage loans		(13,774,698	)		(2,348,890	)
Real estate		(8,650,084	)		(7,424,311	)
Notes receivable		(4,985,347	)		0
Policy loans		(2,682,043	)		(2,566,138	)
Short-term investments		(100,149	)		(5,342,329	)
Total cost of investments acquired		(64,668,282	)		(92,002,985	)
Purchase of property and equipment		0			(1,600,000	)
Net cash provided by investing activities		13,584,343			34,302,794

Cash flows from financing activities:
Policyholder contract deposits		5,189,311			5,304,502
Policyholder contract withdrawals		(5,514,232	)		(6,323,472	)
Proceeds from notes payable/line of credit		0			1,600,000
Payments of principal on notes payable/line of credit		(4,400,000	)		(16,297,534	)
Purchase of treasury stock		(120,281	)		(927,904	)
Non controlling contributions/(distributions) of consolidated subsidiary		254,567			(6,833,748	)
Sale of block of business		0			(3,045,574	)
Net cash used in financing activities		(4,590,635	)		(26,523,730	)

Net decrease in cash and cash equivalents		(2,154,828	)		(5,861,175	)
Cash and cash equivalents at beginning of year		13,977,443			19,838,618
Cash and cash equivalents at end of year	$	11,822,615		$	13,977,443

See accompanying notes.

UTG, Inc.

Notes to Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies

Business – UTG, Inc. is an insurance holding company. The Company's dominant business is individual life insurance, which includes the servicing of existing insurance in-force and the acquisition of other companies in the life insurance business. UTG and its subsidiaries are collectively referred to as the "Company".

This document at times will refer to the Registrant's largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll. Mr. Correll holds a majority ownership of First Southern Funding, LLC ("FSF"), a Kentucky corporation, and First Southern Bancorp, Inc. ("FSBI"), a financial services holding company. FSBI operates through its 100.00 %owned subsidiary bank, First Southern National Bank ("FSNB"). Banking activities are conducted through multiple locations within south-central and western Kentucky. Mr. Correll is Chief Executive Officer and Chairman of the Board of Directors of UTG and is currently UTG's largest shareholder through his ownership control of FSF, FSBI and affiliates. At December 31, 2015 , Mr. Correll owns or controls directly and indirectly approximately 57.61 % of UTG's outstanding stock.

UTG's life insurance subsidiary has several wholly-owned and majority-owned subsidiaries. The subsidiaries were formed to hold certain real estate and other investments. The investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG.

Basis of Presentation – The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"), under guidance issued by the Financial Accounting Standards Board ("FASB"). The preparation of financial statements in accordance with GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the Registrant and its wholly and majority-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated during consolidation.

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

Investments – The Company reports its investments as follows:

Fixed Maturity Investments – The Company classifies its fixed maturity investments, which include bonds, as available for sale. Investments classified as available for sale are carried at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income. Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. Net realized gains and losses on sales of available for sale securities, and unrealized losses considered to be other-than-temporary, are recorded to net realized investment gains (losses) in the Consolidated Statements of Operations.

Equity Securities – Investments in equity securities, which include common and preferred stocks, are reported at fair value with unrealized gains and losses, net of deferred taxes, reflected directly in accumulated other comprehensive income (loss).

Trading Securities – Trading security investments are reported at fair value with gains and losses resulting from changes in fair value recognized in earnings. Trading securities include exchange traded equities and exchange traded options.

Mortgage Loans on Real Estate – Mortgage loans on real estate are reported at their unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Included in the mortgage loans balance is discounted mortgage loans on real estate. Discounted mortgage loans on real estate are loans that the Company purchased at a deep discount through an auction process led by the Federal Government or other intermediary. 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 adjusted for any principal receipts received. Management works with the borrower to reach a settlement on the loan or they foreclose on the underlying collateral which is primarily commercial real estate. For cash payments received during the work out process, the Company records these payments to interest income on a cash basis. For loan settlements reached, the Company records the amount in excess of the carrying amount of the loan as a discount accretion to investment income at the closing date. Management reviews the discount loan portfolio regularly for impairment. If an impairment is identified (after consideration of the underlying collateral), the Company records an impairment to earnings in the period the information becomes known.

Investment Real Estate – Investment real estate held for sale is reported at the lower of cost or fair value less cost to sell. Expenses to maintain the property are expensed as incurred.

Notes Receivable – Notes receivable are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

Policy Loans – Policy loans are reported at their unpaid balances, including accumulated interest, but not in excess of the cash surrender value of the related policy.

Short-Term Investments – Short-term investments are reported at amortized cost, which approximates fair value.

Gains and Losses – Realized gains and losses include sales of investments and investment impairments. If any, other-than-temporary impairments in fair value are recognized in net income on the specific identification basis.

Fair Value – Fair values for cash, short-term investments, short-term debt, receivables and payables approximate carrying value. Fair values for fixed maturities, equity securities and certain other assets are determined in accordance with specific accounting guidance. Fair values are based on quoted market prices, where available. Otherwise, fair values are based on quoted market prices of comparable instruments in active markets, quotes in inactive markets, or other observable criteria. Mortgage loans on real estate are estimated using discounted cash flow analyses. Discounted mortgage loans on real estate are reported at original purchase price, which Management believes approximates fair value. For more specific information regarding the Company's measurements and procedures in valuing financial instruments , see Note 3 – Fair Value Measurements .

Impairment of Investments – The Company evaluates its investment portfolio for other-than-temporary impairments as described in Note 2 – Investments . If a security is deemed to be other-than-temporarily impaired, the cost basis of the security is written down to fair value and is treated as a realized loss.

Current accounting guidance states that if an entity intends to sell or if it is more likely than not that it will be required to sell an impaired security prior to recovery of its cost basis, the security is to be considered other-than-temporarily impaired and the full amount of impairment must be charged to earnings. Otherwise, losses on fixed maturities which are other-than-temporarily impaired are separated into two categories, the portion of the loss which is considered credit loss and the portion of the loss which is due to other factors. The credit loss portion is charged to earnings while the loss due to other factors is charged to other comprehensive income.

Cash Equivalents – The Company considers certificates of deposit and other short-term instruments with an original purchased maturity of three months or less to be cash equivalents.

Cash – Cash consists of balances on hand and on deposit in banks and financial institutions.

Reinsurance - In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts. The Company retains a maximum of $125,000 of coverage per individual life.

Reinsurance receivables are recognized in a manner consistent with the liabilities relating to the underlying reinsured contracts. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies.

Cost of Insurance Acquired - When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.

Property and Equipment - Company-occupied property, data processing equipment and furniture and office equipment are stated at cost less accumulated depreciation of $3,323,718 and $3,868,331 at December 31, 2015 and 2014, respectively. Depreciation is computed on a straight-line basis for financial reporting purposes using estimated useful lives of three to thirty years. Depreciation expense was $139,218 and $309,279 for the years ended December 31, 2015 and 2014, respectively.

Future Policy Benefits and Expenses - The liabilities for traditional life insurance and accident and health insurance policy benefits are computed using a net level method. These liabilities include assumptions as to investment yields, mortality, withdrawals, and other assumptions based on the life insurance subsidiary's experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2% to 6% for life insurance and 2.5% to 7.50% for annuities. Benefit reserves for traditional life insurance policies include certain deferred profits on limited-payment policies that are being recognized in income over the policy term. Policy benefit claims are charged to expense in the period that the claims are incurred. The mortality rate assumptions for policies currently issued by the Company are based on 2001 select and ultimate tables. Withdrawal rate assumptions are based upon Linton B or C, which are industry standard actuarial tables for forecasting assumed policy lapse rates.

Policy Claims and Benefits Payable - Policy and contract claims include provisions for reported claims in process of settlement, valued in accordance with the terms of the policies and contracts, as well as provisions for claims incurred and unreported. The estimate of incurred and unreported claims is based on prior experience. The Company makes an estimate after careful evaluation of all information available to the Company. There is no certainty the stated liability for policy claims and benefits payable, including the estimate for incurred but unreported claims, will be the Company's ultimate obligation.

Income Taxes – Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement book values and tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. More information concerning income taxes is provided in Note 6 – Income Taxes.

Earnings Per Share – The objective of both basic earnings per share ("EPS") and diluted EPS is to measure the performance of an entity over the reporting period. The Company presents basic and diluted EPS on the face of the Consolidated Statements of Operations. Basic EPS is computed by dividing income available to common shareholders by the weighted average common shares outstanding for the period. Diluted EPS is calculated by adding to shares outstanding the additional net effect of potentially dilutive securities or contracts, such as stock options, which could be exercised or converted into common shares.

Recognition of Revenues and Related Expenses - Premiums for traditional life insurance products, which include those products with fixed and guaranteed premiums and benefits, consist principally of whole life insurance policies, and certain annuities with life contingencies are recognized as revenues when due. Limited payment life insurance policies defer gross premiums received in excess of net premiums, which is then recognized in income in a constant relationship with insurance in-force. Accident and health insurance premiums are recognized as revenue pro rata over the terms of the policies. Benefits and related expenses associated with the premiums earned are charged to expense proportionately over the lives of the policies through a provision for future policy benefit liabilities and through deferral and amortization of deferred policy acquisition costs. For universal life and investment products, generally there is no requirement for payment of premium other than to maintain account values at a level sufficient to pay mortality and expense charges. Consequently, premiums for universal life policies and investment products are not reported as revenue, but as deposits. Policy fee revenue for universal life policies and investment products consists of charges for the cost of insurance and policy administration fees assessed during the period. Expenses include interest credited to policy account balances and benefit claims incurred in excess of policy account balances.

Recently Issued Accounting Standards

Accounting Standards Update (ASU) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities – ASU 2016-01 makes targeted improvements to existing U.S. GAAP for financial instruments, including requiring equity investments (except those accounted for under the equity method of accounting, or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; requiring entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requiring separate presentation of financial assets and financial liabilities by measurement category and form of financial asset and requiring entities to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk (also referred to as "own credit") when the organization has elected to measure the liability at fair value in accordance with the fair value option. The new guidance is effective for public companies for fiscal years beginning after December 15, 2017. Early adoption of the own credit provision is permitted. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

Accounting Standards Update (ASU) 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes – ASU 2015-17 simplifies the presentation of deferred income taxes to require that deferred tax assets and liabilities be classified as non-current in a classified balance sheet. Current U.S. GAAP requires an entity to separate deferred income tax assets and liabilities into current and non-current amounts in a classified balance sheet. The current requirement that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments of this Update. For public companies, the guidance is ASC 2015-17 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.

Accounting Standards Update (ASU) 2015-02, C onsolidation (Topic 810): Amendments to the Consolidation Analysis – ASU 2015-02 makes changes to both the variable interest model and voting interest model and eliminates the indefinite deferral of FASB Statement No. 167, included in ASU 2010-10, for certain investment funds. All reporting entities that hold a variable interest in other legal entities will need to re-evaluate their consolidation conclusions as well as disclosure requirements. This ASU is effective for annual periods beginning after December 15, 2015, and early adoption is permitted, including any interim period. This is not expected to have a material impact on the financial statements of the Company.

Accounting Standards Update (ASU) 2015-01, Income Statement – Extraordinary and Unusual Items – ASU 2015-01 removes the concept of extraordinary items from U.S. GAAP. Under the existing guidance, an entity is required to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual and occurs infrequently. This separate, net-of-tax presentation will no longer be allowed. The existing requirement to separately disclose events or transactions that are unusual or occur infrequently on a pre-tax basis within continuing operations in the income statement has been retained. The new guidance requires similar separate presentation of items that are both unusual and infrequent. The new standard is effective for periods beginning after December 15, 2015. Early adoption is permitted, but only as of the beginning of the fiscal year of adoption. Upon adoption, the Company will present transactions that are both unusual and infrequent, if any, on a pre-tax basis within continuing operations in the Consolidated Statements of Operations.

Reclassifications – Certain reclassifications have been made to the 2014 consolidated financial statements to make them comparable to the current year consolidated financial statements.

Note 2 – Investments

Available for Sale Securities – Fixed Maturity and Equity Securities

The following tables provide a summary of fixed maturities available for sale and equity securities by original or amortized cost and estimated fair value:

December 31, 2015	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value

Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	20,336,681	$	1,441,890	$	(32,083	)	$	21,746,488
U.S. special revenue and assessments		1,137,546		7,843		(2,550	)		1,142,839
All other corporate bonds		167,173,444		3,762,156		(8,705,830	)		162,229,770
		188,647,671		5,211,889		(8,740,463	)		185,119,097
Equity securities		43,954,737		2,119,205		(388,602	)		45,685,340
Total	$	232,602,408	$	7,331,094	$	(9,129,065	)	$	230,804,437

December 31, 2014	Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value

Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	23,036,161	$	1,970,791	$	(50,184	)	$	24,956,768
States, municipalities and political subdivisions		95,000		2,385		0			97,385
U.S. special revenue and assessments		1,137,702		13,739		(202,930	)		948,511
Collateralized mortgage obligations		1,005,081		92,091		(6	)		1,097,166
Public utilities		399,927		55,913		0			455,840
All other corporate bonds		162,960,493		8,624,486		(1,659,193	)		169,925,786
		188,634,364		10,759,405		(1,912,313	)		197,481,456
Equity securities		39,275,638		2,260,855		(540,491	)		40,996,002
Total	$	227,910,002	$	13,020,260	$	(2,452,804	)	$	238,477,458

The following table provides a summary of fixed maturities by contractual maturity as of December 31, 2015. Actual maturities could differ from contractual maturities due to call or prepayment provisions:

Fixed Maturities Available for Sale December 31, 2015	Amortized Cost		Estimated Fair Value

Due in one year or less	$	3,961,534	$	4,000,512
Due after one year through five years		23,444,519		24,343,844
Due after five years through ten years		64,352,687		62,094,221
Due after ten years		96,888,931		94,680,520
Total	$	188,647,671	$	185,119,097

By insurance statute, the majority of the Company's investment portfolio is invested in investment grade securities to provide ample protection for policyholders.

Below investment grade debt securities generally provide higher yields and involve greater risks than investment grade debt securities because their issuers typically are more highly leveraged and more vulnerable to adverse economic conditions than investment grade issuers. In addition, the trading market for these securities is usually more limited than for investment grade debt securities. Debt securities classified as below-investment grade are those that receive a Standard & Poor's rating of BB+ or below.

The Company held below investment grade investments with an estimated market value of $13,352,934 and $9,142,063 as of December 31, 2015 and 2014, respectively. The investments are all classified as "All other corporate bonds".

The fair value of investments with sustained gross unrealized losses at December 31, 2015 and 2014 are as follows:

December 31, 2015	Less than 12 months			12 months or longer			Total

	Fair value		Unrealized losses	Fair value		Unrealized losses	Fair value		Unrealized losses
U.S. Government and govt. agencies and authorities	$	4,966,210	(32,083)	$	0	0	$	4,966,210	(32,083)
U.S. special revenue and assessments		984,770	(2,550)		0	0		984,770	(2,550)
All other corporate bonds		85,734,097	(5,255,276)		19,400,640	(3,450,554)		105,134,737	(8,705,830)
Total fixed maturities	$	91,685,077	(5,289,909)	$	19,400,640	(3,450,554)	$	111,085,717	(8,740,463)

Equity securities	$	4,741,132	(388,602)	$	0	0	$	4,741,132	(388,602)

December 31, 2014	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		0	0		4,947,265	(50,184)		4,947,265	(50,184)
U.S. special revenue and assessments		0	0		784,390	(202,930)		784,390	(202,930)
Collateralized mortgage obligations		0	0		1,012	(6)		1,012	(6)
All other corporate bonds	$	28,954,477	(416,560)	$	3,535,206	(1,242,633)	$	32,489,683	(1,659,193)
Total fixed maturities	$	28,954,477	(416,560)	$	9,267,873	(1,495,753)	$	38,222,350	(1,912,313)

Equity securities	$	6,067,132	(540,491)	$	0	0	$	6,067,132	(540,491)

The following table provides additional information regarding the number of securities that were in an unrealized loss position for greater than or less than twelve months:

	Less than 12 months	12 months or longer	Total
As of December 31, 2015
Fixed maturities	40	9	49
Equity securities	9	0	9
As of December 31, 2014
Fixed maturities	18	7	25
Equity securities	25	0	25

Substantially all of the unrealized losses on fixed maturities available for sale at December 31, 2015 and 2014 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase. The unrealized losses on equity investments were primarily attributable to normal market fluctuations. 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 December 31, 2015 and 2014

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 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 December 31, 2015 was $0 and $(28,609), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of December 31, 2014 was $6,250 and $(23,853), 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.

As of June 30, 2015, the Company reclassified its remaining exchange-traded equity trading security to the available for sale category. The fair value of the security at the time of the reclassification was $3,224,000 . Trading securities are purchased and held primarily for purposes of selling them in the near term and reflect active and frequent buying and selling. Management analyzed the recent buying and selling activity related to the exchange-traded equity and deems the available for sale category to better reflect Management's intent for this security going forward. Through June 30, 2015, unrealized gains and losses from this exchange-traded equity were recorded as a component of earnings. Subsequent unrealized gains/losses are reported as a component of comprehensive income.

The following table reflects trading securities revenue charged to net investment income for the periods ended December 31:

	2015				2014

Net unrealized gains (losses)		$	945,128			$	(722,573	)
Net realized gains (losses)			(515,967	)			245,995
Net unrealized and realized gains (losses)		$	429,161			$	(476,578	)

Mortgage Loans on Real Estate

Approximately 30 % and 39 % of the mortgage loan portfolio consists of discounted commercial mortgage loans as of December 31, 2015 and 2014, respectively. The Company began purchasing discounted commercial mortgage loans in 2009. Management has extensive background and experience in the analysis and valuation of commercial real estate. The discounted loans are available through the FDIC's sale of assets of closed banks and from banks wanting to reduce their loan portfolios. The loans are available on a loan by loan bid process. Once a loan has been acquired, contact is made with the appropriate individuals to begin a dialog with a goal of determining the borrower's willingness to work together. There are generally three paths a discounted loan will take: the borrowers pay as required; a settlement is reached with the loan being paid off at a discounted value; or the loan is foreclosed.

During 2015 and 2014, the Company acquired $13,774,698 and $2,348,890 in mortgage loans, respectively, including both regular participation mortgage loans as well as discounted mortgage loans. 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 2015 and 2014, the maximum and minimum lending rates for mortgage loans were:

	2015		2014
	Maximum rate	Minimum rate	Maximum rate	Minimum rate

Commercial Loans	8.00 %	4.00 %	10.00 %	3.91 %
Residential Loans	8.00 %	3.00 %	8.00 %	7.00 %

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

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. Given the uncertainty of the current market, Management has taken a conservative approach with the discounted mortgage loans and has classified all discounted mortgage loans held as non-accrual. In such status, the Company is not recording any accrued interest income nor is it recording any accrual of discount on the loans held. The Company records repayments on loans as discount accrual when the loan basis has been paid in full.

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 Company acquired the discounted mortgage loans at below contract value, and believes that it will fully recover its carrying value upon disposal, therefore no reserve for delinquent loans is deemed necessary. Those not currently paying are being vigorously worked by Management. The current discounted commercial mortgage loan portfolio has an average price of 39.0 % of face value and Management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased. The mortgage loan reserve was $0 at December 31, 2015 and 2014.

The following table summarizes the number of loans held in the discounted mortgage loan portfolio and the carrying value of the loans as of December 31, 2015:

Payment Frequency	Number of Loans		Carrying Value

No payments received		8	$	0
One-time payment received		1		0
Irregular payments received		2		20,834
Periodic payments received		7		5,347,215
Total		18	$	5,368,049

The following table summarizes the mortgage loan holdings of the Company for the periods ended December 31:

	2015		2014

In good standing	$	14,701,228	$	14,443,455
Overdue interest over 90 days		20,834		3,130,290
Restructured		126,118		1,104,972
In process of foreclosure		2,921,750		4,483,265
Total mortgage loans	$	17,769,930	$	23,161,982
Total foreclosed loans during the year	$	0	$	56,576

Investment Real Estate

Real estate acquired through foreclosure, consisting of properties obtained through foreclosure proceedings or acceptance of a deed in lieu of foreclosure, is reported on an individual asset basis at the lower of cost or fair value, less disposal costs. Fair value is determined 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 of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is recognized and charged to the Consolidated Statements of Operations. Based upon Management's evaluation of the real estate acquired through foreclosure, additional expense is recorded when necessary in an amount sufficient to reflect any declines in estimated fair value. Gains and losses recognized on the disposition of the properties are recorded as realized gains and losses in the Consolidated Statements of Operations.

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 December 31, 2015 and 2014 was $ 0 . Interest accruals are analyzed based on the likelihood of repayment. The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

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.

Analysis of Investment Operations

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

	2015			2014

Fixed maturities	$	8,559,938		$	8,225,640
Equity securities		1,708,786			3,255,611
Trading securities		(429,161	)		(476,578	)
Mortgage loans		5,700,492			4,592,853
Real estate		1,474,726			8,355,153
Notes receivable		787,658			340,000
Policy loans		720,544			760,715
Cash and cash equivalents		681			505
Short-term		699,357			70,578
Total consolidated investment income		19,223,021			25,124,477
Investment expenses		(3,663,086	)		(8,774,758	)
Consolidated net investment income	$	15,559,935		$	16,349,719

The following table reflects the Company's net realized investments gains and losses for the periods ended December 31:

2015	Gross Realized Gains		Gross Realized (Losses)		Net Realized Gains (Losses)

Fixed maturities	$	1,289,455	$	(41,215)	$	1,248,240
Real estate		5,968,558		0		5,968,558
Common stock		48,165		(238,794)		(190,629)
Preferred stock		971,662		(637)		971,025
Real estate – OTTI		0		(54,901)		(54,901)
Common stock – OTTI		0		(3,515,700)		(3,515,700)
Total realized gains (losses)	$	8,277,840	$	(3,851,247)	$	4,426,593

2014	Gross Realized Gains		Gross Realized (Losses)		Net Realized Gains (Losses)

Fixed maturities	$	2,414,160	$	(1,135,417)	$	1,278,743
Real estate		14,757,451		(1,460,332)		13,297,119
Common stock		673,821		(14,908)		658,913
Preferred stock		1,986,303		0		1,986,303
Real estate – OTTI		0		(35,946)		(35,946)
Common stock – OTTI		0		(126,959)		(126,959)
Total realized gains (losses)	$	19,831,735	$	(2,773,562)	$	17,058,173

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 Consolidated Statements of Operations.

Equity securities may experience other-than-temporary impairments in the future based on the prospects for full recovery in value in a reasonable period of time and the Company's ability and intent to hold the security to recovery. If a decline in fair value is judged by Management to be other-than-temporary or Management does not have the intent or ability to hold a security, a loss is recognized by a charge to other-than-temporary impairment losses in the 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.

Based on Management's review of the investment portfolio, the Company recorded the following losses for other-than-temporary impairments in the Consolidated Statements of Operations for the periods ended December 31:

	2015		2014

Other than temporary impairments:
Common stock	$	3,515,700	$	126,959
Real estate		54,901		35,946
Total other than temporary impairments	$	3,570,601	$	162,905

The other-than-temporary impairments recognized during 2015 and 2014 were taken as a result of Management's assessment and consideration of the length of time the securities have remained in an unrealized loss position and as a result of management's analysis and determination of value. The investments were written down to better reflect their current expected market value.

Investments on Deposit

The Company had investments with a fair value of $8,932,241 and $10,635,716 on deposit with various state insurance departments as of December 31, 2015 and 2014, respectively.

Note 3 – Fair Value Measurements

The Company measures its assets and liabilities recorded at fair value in the Consolidated Balance Sheets based on the framework set forth in the GAAP fair value accounting guidance. The framework establishes a fair value hierarchy of three levels based upon the transparency 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.

Level 1 – Valuation is based upon quoted prices 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.

Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar instruments in markets that are not active. In addition, 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 the existence of an active market for an asset or liability based on its judgment as to whether transactions for the asset or liability occur in such market with sufficient frequency and volume to provide reliable pricing information. If the Company concludes that there has been a significant decrease 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 fair value estimates based on the Company's knowledge and monitoring of market conditions.

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 this 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 available for sale and trading securities assets and liabilities are carried at fair value. The following are the Company's methodologies and valuation techniques for assets and liabilities measured at fair value.

Fixed maturities 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 securities available for sale are evaluated utilizing observable inputs; accordingly, they are categorized in either Level 1 or Level 2 of the fair value hierarchy. However, in instances where significant inputs 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 the Company's valuation techniques relating to this class of securities include recently executed transactions, market price quotations, benchmark yields and issuer spreads. Corporate securities are categorized in Level 2 of the fair value hierarchy.

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 available for sale consist of common and preferred stocks mainly in private equity investments and financial institutions. 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 transaction price is used as the best estimate of fair value at inception. When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected exit values. The Company performs ongoing reviews of the underlying investments. The reviews consist of the evaluations of expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy.

Securities designated as trading securities consist of exchange-traded equities and exchange-traded options. These securities are primarily valued at quoted active market prices, and are therefore categorized as Level 1 in the fair value hierarchy.

The following table presents the Company's assets and liabilities measured at fair value in the consolidated balance sheet on a recurring basis as of December 31, 2015.

	Level 1		Level 2		Level 3		Total

Assets
Fixed Maturities, available for sale	$	10,459,758	$	173,632,645	$	1,026,694	$	185,119,097
Equity Securities, available for sale		13,312,331		5,567,061		26,805,948		45,685,340
Total		23,772,089		179,199,706		27,832,642		230,804,437

Liabilities
Trading Securities	$	28,609	$	0	$	0	$	28,609

The following table presents the Company's assets and liabilities measured at fair value in the consolidated balance sheet on a recurring basis as of December 31, 2014.

	Level 1		Level 2		Level 3		Total

Assets
Fixed Maturities, available for sale	$	13,374,878	$	183,236,853	$	869,725	$	197,481,456
Equity Securities, available for sale		4,756,292		7,361,076		28,878,634		40,996,002
Trading Securities		3,826,250		0		0		3,826,250
Total	$	21,957,420	$	190,597,929	$	29,748,359	$	242,303,708

Liabilities
Trading Securities	$	23,853	$	0	$	0	$	23,853

The following table provides reconciliations for Level 3 assets measured at fair value 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, Available for Sale			Total

Balance at December 31, 2014	$	869,725		$	28,878,634		$	29,748,359
Transfers in to Level 3		0			0			0
Total unrealized gains or (losses):
Included in realized gains (losses)		67,905			-			67,905
Included in other comprehensive income		210,819			270,670			481,489
Purchases		0			1,920,607			1,920,607
Sales		(121,755	)		(4,263,963	)		(4,385,718	)
Balance at December 31, 2015	$	1,026,694		$	26,805,948		$	27,832,642

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 December 31, 2015. Transfers occur when there is a lack of observable market information.

Certain assets are not carried at fair value on a recurring basis, including investments such as mortgage loans and policy loans. 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 carrying values and estimated fair values of certain of the Company's financial instruments not recorded at fair value in the Consolidated Balance Sheets are shown below. Because the fair value for all Consolidated Balance Sheet items are not required to be disclosed, the aggregate fair value amounts presented below are not reflective of the underlying value of the Company.

	December 31, 2015				December 31, 2014
Assets	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value

Mortgage loans on real estate	$	17,769,930	$	17,775,178	$	23,161,982	$	23,337,728
Investment real estate		47,650,102		47,650,102		51,007,101		51,007,101
Notes receivable		10,597,907		10,597,907		5,612,560		5,612,560
Policy loans		10,684,244		10,684,244		11,104,485		11,104,485
Cash and cash equivalents		11,822,615		11,822,615		13,977,443		13,977,443
Short term investments		0		0		4,382,181		4,382,181
Liabilities
Notes payable		0		0		4,400,000		4,400,000

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

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

Notes receivable are carried at their unpaid principal balances, which approximates fair value. The inputs used to measure the fair value of the loans are classified as Level 3 within the fair value hierarchy.

Policy loans are carried at the aggregate unpaid principal balances in the Consolidated Balance Sheets which approximate fair value, and earn interest at rates ranging from 4% to 8%. Individual policy liabilities in all cases equal or exceed outstanding policy loan balances. The inputs used to measure the fair value of our policy loans are classified as Level 3 within the fair value hierarchy.

The carrying amount of cash and cash equivalents in the 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 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.

The carrying value is a reasonable estimate of fair value for notes payable subject to floating rates of interest. The fair value of notes payable with fixed rate borrowings is determined based on the borrowing rates currently available to the Company for loans with similar terms and average maturities. The inputs used to measure the fair value of our notes payable are classified as Level 2 within the fair value hierarchy.

Note 4 - Reinsurance

Most recently, UG utilized reinsurance agreements with Optimum Re Insurance Company ("Optimum"), and Swiss Re Life and Health America Incorporated ("SWISS RE"). Optimum and SWISS RE currently hold an " A- " (Excellent) and " A+ " (Superior) rating, respectively, from A.M. Best, an industry rating company. The reinsurance agreements were effective December 1, 1993, and covered most new business of UG. Under the terms of the agreements, UG cedes risk amounts above its retention limit of $100,000 with a minimum cession of $25,000. Ceded amounts are shared equally between the two reinsurers on a yearly renewable term ("YRT") basis, a common industry method. The treaty is self-administered; meaning the Company records the reinsurance results and reports them to the reinsurers.

Also, Optimum is the reinsurer of 100% of the accidental death benefits ("ADB") in force of UG. This coverage is renewable annually at the Company's option. Optimum specializes in reinsurance agreements with small to mid-size carriers such as UG.

UG entered into a coinsurance agreement with Park Avenue Life Insurance Company ("PALIC") effective September 30, 1996. Under the terms of the agreement, UG ceded to PALIC substantially all of its then in-force paid-up life insurance policies. Paid-up life insurance generally refers to non-premium paying life insurance policies. Under the terms of the agreement, UG sold 100 % of the future results of this block of business to PALIC through a coinsurance agreement. UG continues to administer the business for PALIC and receives a servicing fee through a commission allowance based on the remaining in-force policies each month. PALIC has the right to assumption reinsure the business, at its option, and transfer the administration. The Company is not aware of any such plans. PALIC's ultimate parent, The Guardian Life Insurance Company of America ("Guardian"), currently holds an " A++ " (Superior) rating from A.M. Best. The PALIC agreement accounts for approximately 63 % of UG's reinsurance reserve credit, as of December 31, 2015 and 2014 .

At December 31, 1992, UG (formerly American Capitol) entered into a reinsurance agreement with Canada Life Assurance Company ("the Canada Life agreement") that fully reinsured virtually all of its traditional life insurance policies. The reinsurer's obligations under the Canada Life agreement were secured by assets withheld by UG representing policy loans and deferred and uncollected premiums related to the reinsured policies. UG continues to administer the reinsured policies. At December 31, 2013, the Canada Life agreement had insurance in-force of approximately $6,815,000, with no reserve credit being taken on that amount. The Canada Life agreement was fully repaid in August 2012. With the reinsurance recaptured by the Company, a 15 % profit share will continue to be paid to the reinsurer going forward relative to the block of business. Effective July 1, 2014, the Company acquired the 15% profit share on this block of business from Canada Life for $300,000. This payment effectively settled any future obligations of the Company to the reinsurer under this agreement.

During 2014, the Company disposed of a block of business through an assumption reinsurance agreement, whereby the Company transferred cash of $3,000,000 and extinguished reserves of $3,600,000 and reduced cost of insurance acquired by $600,000.

On September 30, 1998, UG entered into a coinsurance agreement with The Independent Order of Vikings, (IOV) an Illinois fraternal benefit society. Under the terms of the agreement, UG agreed to assume, on a coinsurance basis, 25% of the reserves and liabilities arising from all in-force insurance contracts issued by the IOV to its members. At December 31, 2015, the IOV insurance in-force assumed by UG was approximately $1,451,000, with reserves being held on that amount of approximately $350,000. At December 31, 2014, the IOV insurance in-force assumed by UG was approximately $1,503,000, with reserves being held on that amount of approximately $346,000.

The Company does not have any short-duration reinsurance contracts. The effect of the Company's long-duration reinsurance contracts on premiums earned in 2015 and 2014 were as follows:

	2015 Premiums Earned			2014 Premiums Earned

Direct	$	11,140,000		$	11,642,000
Assumed		25,000			26,000
Ceded		(3,091,000	)		(3,127,000	)
Net Premiums	$	8,074,000		$	8,541,000

Note 5 – Cost of Insurance Acquired

When an insurance company is acquired, the Company assigns a portion of its cost to the right to receive future cash flows from insurance contracts existing at the date of the acquisition. The cost of policies purchased represents the actuarially determined present value of the projected future profits from the acquired policies. Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates utilized may vary due to differences in the blocks of business. The interest rate utilized in the amortization calculation of the remaining cost of insurance acquired is 12%. The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.

	2015			2014

Cost of insurance acquired, beginning of year	$	9,047,984		$	10,636,412
Sale of block of business		0			(602,778	)
Interest accretion		1,180,703			1,298,980
Amortization		(2,088,308	)		(2,284,630	)
Net amortization		(907,605	)		(985,650	)
Cost of insurance acquired, end of year	$	8,140,379		$	9,047,984

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

	Interest Accretion	Amortization	Net Amortization
2016	1,072,000	1,945,000	873,000
2017	967,000	1,806,000	839,000
2018	866,000	1,672,000	806,000
2019	770,000	1,546,000	776,000
2020	677,000	1,421,000	744,000

Note 6 – Income Taxes

UTG and UG file separate federal income tax returns.

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

	2015				2014

Current tax		$	747,714			$	3,233,286
Deferred tax			(1,680,429	)			(2,150,359	)
Income tax expense (benefit)		$	(932,715	)		$	1,082,927

The expense for income differed from the amounts computed by applying the applicable United States statutory rate of 35% before income taxes as a result of the following differences:

	2015			2014

Tax computed at statutory rate	$	95,663		$	3,894,334
Changes in taxes due to:
Non-controlling interest		(101,297	)		(1,073,704	)
Current period loss for which no tax benefit was recognized		17,693			17,401
Small company deduction		(552,694	)		(134,653	)
Dividend received deduction		(100,349	)		(1,414,353	)
Other		(291,731	)		(206,098	)
Income tax expense (benefit)	$	(932,715	)	$	1,082,927

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

	2015			2014

Investments	$	(2,735,072	)	$	2,728,928
Cost of insurance acquired		2,849,133			3,166,794
Management/consulting fees		(55,125	)		(57,454	)
Future policy benefits		1,546,770			1,778,105
Deferred gain on sale of subsidiary		2,312,483			2,312,483
Other liabilities		27,406			(127,461	)
Federal tax DAC		(540,128	)		(387,601	)
Deferred tax liability	$	3,405,467		$	9,413,794

At December 31, 2015 and 2014, the Company had gross deferred tax assets of $4,896,464 and $2,405,249, respectively, and gross deferred tax liabilities of $8,301,931 and $11,819,043, respectively, resulting from temporary differences primarily related to the life insurance subsidiary. A valuation allowance is to be provided when it is more likely than not that deferred tax assets will not be realized by the Company. No valuation allowance has been recorded (except as noted below) relating to the Company's deferred tax assets since, in Management's judgment, the Company will more likely than not have sufficient taxable income in future periods to fully realize its existing deferred tax assets.

As of December 31, 2015 and 2014 , the Company had a deferred tax asset of $35,094 and $17,401, respectively, relating to a net operating loss carryforward. The Company established an allowance of $35,094 and $17,401 against this deferred tax asset as of December 31, 2015 and 2014 , respectively. The Company also has a deferred tax asset of $118,693 and $0 relating to an AMT tax carryforward as of December 31, 2015 and 2014 , respectively. The Company established an allowance of $118,693 against this deferred tax asset as of December 31, 2015 . The allowances were established based on Management's assessment of the recoverability of these deferred assets.

The Company's Federal income tax returns are periodically audited by the Internal Revenue Service ("IRS"). In February 2011, the IRS audited UTG's 2009 federal income tax return. The examination was closed with no adjustments to the return. There are currently no examinations in process, nor is Management aware of any pending examination by the IRS. The Company follows the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board ("FASB") ASC 740, Income Taxes . Using that guidance, tax positions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities. Such tax positions initially and subsequently need to be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts. The Company has evaluated its tax positions, expiring statutes of limitations, changes in tax law and new authoritative rulings and believes that no disclosure relative to a provision of income taxes is necessary, at this time, to cover any uncertain tax positions.

The Company classifies interest and penalties on underpayment of income taxes as income tax expense. No interest or penalties were included in the reported income taxes for the years presented. The Company is not aware of any potential or proposed changes to any of its tax filings.

Note 7 – Credit Arrangements

At December 31, 2015 and 2014, the Company had the following outstanding debt:

			Outstanding Principal Balance
Instrument	Issue Date	Maturity Date	December 31, 2015			December 31, 2014
Promissory Note:
UTG Avalon	12/29/2014	4/1/2018		$	0		$	4,400,000

Instrument	Issue Date	Maturity Date	Revolving Credit Limit			December 31, 2014			Borrowings		Repayments		December 31, 2015

Lines of Credit:
UTG	11/20/2013	11/20/2015		$	8,000,000		$	0		0		0		$	0
UG	6/2/2015	5/19/2016			10,000,000			0		0		0			0

The UTG Avalon promissory note issued on December 29, 2014 carried interest at a rate of 3.50 % with interest payable quarterly beginning in July of 2015. The interest is a variable rate that is equal to the lowest of the U.S. Prime Rates as published in the money section of the Wall Street Journal. The interest rate is subject to change monthly and any change in interest rate is effective the first day of the month following the rate change. Principal is due upon maturity of the note. This note was fully repaid during the third quarter of 2015. The principal payments were paid by UTG and as a result of the payments; intercompany promissory notes receivable/payable were established.

The UTG line of credit carries interest at a fixed rate of 3.75 % and is payable monthly. As collateral, UTG has pledged 100% of the common voting stock of its wholly owned subsidiary, Universal Guaranty Life Insurance Company ("UG").

During June of 2015 , 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.

Note 8 – Commitments and Contingencies

The insurance industry has experienced a number of civil jury verdicts which have been returned against life and health insurers in the jurisdictions in which the Company does business involving the insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial judgments against the insurer, including material amounts of punitive damages. In some states, juries have substantial discretion in awarding punitive damages in these circumstances. In the normal course of business, the Company is involved from time to time in various legal actions and other state and federal proceedings. Management is of the opinion that the ultimate disposition of the matters will not have a material 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 financial statements, though the Company has no control over such assessments.

Within the Company's trading accounts, certain trading securities carried as liabilities represent 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 following table represents the total funding commitments and the unfunded commitment as of December 31, 2015 related to certain investments:

	Total Funding Commitment		Unfunded Commitment
RLF III, LLC	$	4,000,000	$	398,120
Llano Music, LLC		4,000,000		1,179,000
Sovereign's Capital, LP Fund I		500,000		125,000
UGLIC, LLC		1,600,000		120,000
Sovereign's Capital, LP Fund II		1,000,000		810,000

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 2010, the Company made a commitment to invest in Llano Music, LLC ("Llano"), which invests in music royalties. The Company increased its funding commitment by $2,000,000 during 2014. Llano made capital calls to its investors as funds are needed to acquire the royalty rights. The Llano funding commitment expired in January of 2016. Upon expiration of the Llano funding commitment, the Company committed funds to a related entity, Barton Springs Music, LLC, which also invests in music royalties.

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 2014, the Company committed to invest in UGLIC, LLC, which purchases real estate tax receivables. UGLIC, LLC makes capital calls as funds are needed for additional purchases.

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.

Note 9 – Shareholders' Equity

Stock Repurchase Program – The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG's common stock. At a meeting of the Board of Directors on June 3, 2015 , the Board of Directors of UTG authorized the repurchase of up to an additional $1,000,000 of UTG's common stock, for a total, repurchase of $8,000,000. Repurchased shares are available for future issuance for general corporate purposes. This program can be suspended or terminated at any time without further notice. Open market purchases are made based on the last available market price and are generally limited to a maximum per share price of the most recent reported per share GAAP equity book value of the Company. During 2015, the Company repurchased 25,919 shares through the stock repurchase program for $375,207. Through December 31, 2015, UTG has spent $6.5 million in the acquisition of 688,617 shares under this program.

Director Compensation - Effective September 18, 2013, each outside Director will annually receive $8,000 as a retainer and $1,000 per meeting attended. The compensation, however, shall be paid in UTG common stock. The value will be determined annually on the close of business December 20th or the next business day should December 20 ^th be a weekend or holiday, based on the activity of the year just ending. UTG's director compensation policy also provides that Directors who are employees of UTG or its affiliates do not receive any compensation for their services as Directors except for reimbursement for reasonable travel expenses for attending each meeting. In December of 2015 , the Company issued 4,245 shares of its common stock as compensation to the Directors. The shares were valued at $14.36 per share, the market value at the date of issue. During 2015 , the Company recorded $60,958 in operating expense related to the stock issuance. In December of 2014 , the Company issued 4,755 shares of its common stock as compensation to the Directors. The shares were valued at $14.50 per share, the market value at the date of issue. During 2014 , the Company recorded $68,948 in operating expense related to the stock issuance.

Earnings Per Share - The following is a reconciliation of basic and diluted weighted average shares outstanding used in the computation of basic and diluted earnings per share:

	2015	2014
Basic weighted average shares outstanding	3,704,322	3,750,239
Weighted average dilutive options outstanding	0	0
Diluted weighted average shares outstanding	3,704,322	3,750,239

The computation of diluted earnings per share is the same as basic earnings per share for the years ending December 31, 2015 and 2014, as there were no outstanding securities, options or other offers that give the right to receive or acquire common shares of UTG.

Statutory Restrictions – Restrictions exist on the flow of funds to UTG from its insurance subsidiary. Statutory regulations require life insurance subsidiaries to maintain certain minimum amounts of capital and surplus. UG is required to maintain minimum statutory surplus of $2,500,000. At December 31, 2015, substantially all of the consolidated shareholders' equity represents net assets of UTG's subsidiaries.

UG is domiciled in the state of Ohio. Ohio requires notification within 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. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. UG paid ordinary dividends of $4,000,000 and $4,800,000 to UTG in 2015 and 2014,respectively. No extraordinary dividends were paid during the two year period. UTG used the dividends received during 2014 and 2015 to purchase outstanding shares of UTG stockand for general operations of the Company.

UG is domiciled in the state of Ohio. Ohio 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. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation. UG paid ordinary dividends of $4,000,000 and $4,800,000 to UTG in 2015 and 2014, respectively. No extraordinary dividends were paid during the two year period. UTG used the dividends received during 2014 and 2015 to purchase outstanding shares of UTG stock and for general operations of the Company.

Note 10 - Statutory Accounting

The insurance subsidiary prepares its statutory-based financial statements in accordance with accounting practices prescribed or permitted by the Ohio Department of Insurance. These principles differ significantly from accounting principles generally accepted in the United States of America. "Prescribed" statutory accounting practices include state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (NAIC). "Permitted" statutory accounting practices encompass all accounting practices that are not prescribed; such practices may differ from state to state, from company to company within a state, and may change in the future.

The following table reflects UG's statutory basis net income and capital and surplus (shareholders' equity) as of December 31:

	2015			2014

Net income (loss)		$	306,059		$	12,200,025
Capital and surplus			39,752,432			41,146,686

Note 11 – Related Party Transactions

On February 20, 2003, UG purchased $4,000,000 of a trust preferred security offering issued by First Southern Bancorp, Inc. ("FSBI"). The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515 %. The Company received dividends of $264,219 during 2015 and 2014. On March 30, 2009, UG purchased $1,000,000 of FSBI common stock. The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement.

On September 28, 2011 UTG entered a joint ownership agreement with Bandyco, LLC and First Southern National Bank, for an 8.08 % interest in an aircraft. Bandyco, LLC is affiliated with Ward F Correll, who is a Director of the Company. The Company paid a monthly operational fee of $25,000 through July of 2014 when the aircraft was sold. During July of 2014, the Company acquired a different aircraft. UTG paid $1,600,000 in the acquisition of the aircraft, increasing the Company's ownership interest to 30.10 %. The aircraft is used for business related travel by various officers and employees of the Company. For years 2015 and 2014, UTG paid $255,920 and $879,453 for costs associated with the aircraft, respectively.

Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiary. Under this arrangement, the subsidiary pays its proportionate share of expenses, based on an allocation formula. During 2015 and 2014, UG paid $6,867,882 and $8,902,568, respectively, in expenses. The Ohio Department of Insurance has approved the cost sharing agreement and it is Management's opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.

The Company from time to time acquires mortgage loans through participation agreements with FSNB. FSNB services the Company's mortgage loans including those covered by the participation agreements. The Company pays a 0.25 % servicing fee on these loans and a one-time fee at loan origination of 0.50 % of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan. The Company paid $11,622 and $33,894 in servicing fees and $25,000 and $0 in origination fees to FSNB during 2015 and 2014, respectively.

The Company reimbursed expenses incurred by employees of FSNB relating to salaries, travel and other costs incurred on behalf of or relating to the Company. The Company paid $324,918 and $325,479 in 2015 and 2014, respectively to FSNB in reimbursement of such costs. In addition, the Company reimburses FSNB a portion of salaries and pension costs for Mr. Correll and Mr. Ditto. The reimbursement was approved by the UTG Board of Directors and totaled $349,351 and $332,725 in 2015 and 2014, respectively, which included salaries and other benefits.

As previously disclosed in the Notes Receivable section of Note 2 – Investments, several of the Company's notes have participation agreements in place with third parties. Certain participation agreements are with FSF, a related party. The participation agreements are sold without recourse and assigned to the participant based on their pro-rata share of the principal, interest and collateral as specified in the participation agreements. The undivided participations in the notes receivable range from 20% - 50% . T he total amount of loans participated to FSF were $3,170,000 and $0 as of December 31, 2015 and 2014 , respectively. One of the participat ed notes receivable was fully repaid during the first quarter of 2016 reducing the outstanding participating notes receivable balance with FSF to $670,000.

Note 12 – Other Cash Flow Disclosures

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

	2015			2014

Interest		$	70,141		$	635,664
Federal income tax			3,300,000			4,000

During the fourth quarter of 2014, UG's wholly-owned subsidiary, UTG Avalon, LLC, entered into a noncash transaction whereby the subsidiary obtained a promissory note in the amount of $4.4 million and utilized the note to repay a prior line of credit.

Note 13 - Concentrations

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

Because UTG serves primarily individuals located in four states, the ability of our customers to pay their insurance premiums is impacted by the economic conditions in these areas. As of December 31, 2015 and 2014, approximately 54% of the Company's total direct premium was collected from Illinois, Ohio, Texas and West Virginia. Thus, results of operations are heavily dependent upon the strength of these economies.

The Company reinsures that portion of insurance risk which is in excess of its retention limits. Retention limits range up to $125,000 per life. Life insurance ceded represented 21% of total life insurance in force at December 31, 2015 and 2014. Insurance ceded represented 31% and 29% of premium income for 2015 and 2014, respectively. The Company would be liable for the reinsured risks ceded to other companies to the extent that such reinsuring companies are unable to meet their obligations.

Note 14 – Selected Quarterly Financial Data

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) that are designed to ensure that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our disclosure controls and procedures are also designed to ensure that information required to be disclosed in our Exchange Act reports is accumulated and communicated to Management, including our Principal Executive Officer and Principal Financial Officers, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our Management, with the participation of our Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as of December 31, 2015 and, based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that, as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective at a reasonable assurance level.

Management's Report on Internal Controls Over Financial Reporting

Our Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

The Company's Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2015 . In making the assessment, Management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework. Based on Management's assessment, Management concluded that, as of December 31, 2015 , the Company's internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only Management's report in this Annual Report.

Changes in Internal Controls

There have been no changes in the Company's internal control over financial reporting since December 31, 2015 , in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a-15(e) and 15d-15(e), that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. The Company's process for evaluating controls and procedures is continuous and encompasses constant improvement of the design and effectiveness of established controls and procedures and the remediation of any deficiencies, which may be identified during this process.

Item 9B. Other Information

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The Board of Directors

In accordance with the laws of Delaware and the Certificate of Incorporation and Bylaws of UTG, as amended, UTG is managed by its executive officers under the direction of the Board of Directors. The Board elects executive officers, evaluates their performance, works with management in establishing business objectives and considers other fundamental corporate matters, such as the issuance of stock or other securities, the purchase or sale of a business and other significant corporate business transactions. In the fiscal year ended December 31, 2015, the Board met five times. During 2015, all Directors attended at least 75% of all meetings of the Board and meetings of committees of the Board. Our Board of Directors does not have a policy requiring directors to attend annual meetings of shareholders. All seven Board members attended our 2015 annual shareholder's meeting.

The Board of Directors has an Audit Committee consisting of Messrs. Attkisson and Brinck. Our Board has determined that each of the members of the Audit Committee meets the criteria for independence under the NASDAQ listing standards. The Audit Committee performs such duties as outlined in the Company's Audit Committee Charter. The Audit Committee reviews and acts or reports to the Board with respect to various auditing and accounting matters, the scope of the audit procedures and the results thereof, internal accounting and control systems of UTG, the nature of services performed for UTG and the fees to be paid to the independent auditors, the performance of UTG's independent and internal auditors and the accounting practices of UTG. The Audit Committee also recommends to the full Board of Directors the auditors to be appointed by the Board. The Audit Committee met four times in 2015.

The Board has reviewed the qualifications of each member of the audit committee and determined one member of the committee, Randy Attkisson, meets the definition of an "audit committee financial expert" as defined in Item 407 of Regulation S-K.

The Board of Directors has a Compensation Committee consisting of Messrs. Dayton and Brinck. Our Board has determined that each of the members of the Compensation Committee meets the criteria for independence under the NASDAQ listing standards. The Compensation Committee performs such duties as outlined in the Company's Compensation Committee Charter. The Compensation Committee reviews and acts or reports to the Board with respect to various compensation matters relative to the Company's executive officers. The Compensation Committee has the authority to delegate appropriate matters to subcommittees as the Committee may determine in its discretion. The Compensation Committee met two times in 2015.

Under UTG's By-Laws, the Board of Directors should be comprised of at least six and no more than eleven Directors. At December 31, 2015, the Board consisted of eight Directors. Shareholders elect Directors to serve for a period of one year at UTG's annual shareholders' meeting.

The Board of Directors does not have a formal nominating committee, or a committee that performs similar functions, and does not have a nominating committee charter. The Board has concluded that the nominating process should not be limited to certain members so that a comprehensive selection of candidates can be considered. Therefore, the nomination process is conducted by the full Board of Directors. The Board of Directors has not adopted a formal policy with regard to the consideration of Director candidates recommended by shareholders. Candidates for nomination have been recommended by an executive officer or director, and considered by the Board of Directors. Generally, candidates have been persons who have been known to one or more of our Board members. The Board of Directors will, however, consider nominees recommended by shareholders. Shareholders wishing to recommend candidates for Board membership must submit the recommendations in writing to the Secretary of the Company at least 90 days prior to a date corresponding to the previous year's Annual Meeting, with the submitting shareholder's name and address and pertinent information about the proposed nominee similar to that set forth for nominees named herein. The Board does not evaluate potential nominees for director differently based on whether they are recommended by a shareholder.

The Board of Directors has not adopted specific minimum qualifications that it believes must be met by a person it recommends for nomination as a director. Proposed nominees will be considered in light of their potential contributions to the Board, their backgrounds, their independence and such other factors as the Board considers appropriate. We do not have a specific policy relating to the consideration of diversity in identifying director candidates. However, the Board of Directors does consider the diversity of our Board when identifying director candidates. The amount of consideration given to diversity varies with the Boards' determination of whether we would benefit from expanding the Board's diversity in a particular area. We believe this policy has been effective in identifying candidates with the diverse business experience necessary to lead our Company.

Our directors have demonstrated significant achievement and generally have significant management experience in one or more fields of business, professional, governmental, community or academic endeavors. Our directors have sound judgement as a result of their management or policy making experience and demonstrate an ability to function effectively in an oversight role. Given the tenure of most of the directors on our Board, they have a general appreciation regarding major issues facing the Company. These experiences make each of our directors well qualified to be a member of the Company's Board of Directors.

The Board of Directors has provided a process for shareholders to send communications directly to the Board. These communications can be sent to James Rousey, President and Director of UTG, at the corporate headquarters at 5250 South Sixth Street, Springfield, Illinois 62703.

Our Board of Directors is led by Jesse Correll, our Chairman of the Board and Chief Executive Officer. The decision as to who should serve as Chairman of the Board, and who should serve as Chief Executive Officer, and whether those offices should be combined or separate, is properly the responsibility of our Board of Directors. The Board of Directors believes that the most effective leadership structure for us at this time is for Mr. Correll to serve as both Chairman of the Board and Chief Executive Officer. Our Board does not have a lead independent director and does not believe that designating a lead independent director would be necessary or helpful at this time.

Our Board of Directors oversees our risk management in cooperation with management. The Board and management regularly assess and communicate regarding risks confronting the Company, including transaction specific risks, macroeconomic trends, industry developments, and risk factors unique to our business. The members of the Audit Committee also discuss various financial reporting and accounting risk factors with our independent audit firm.

Section 16(a) Beneficial Ownership Reporting Compliance

Directors and officers of UTG file periodic reports regarding ownership of Company securities with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934 as amended, and the rules promulgated there under. UTG is not aware of any individuals who filed late with the Securities and Exchange Commission during 2015. SEC filings may be viewed from the Company's Web site www.utgins.com .

Audit Committee Report to Shareholders

In connection with the December 31, 2015 financial statements, the audit committee: (1) reviewed and discussed the audited financial statements with Management; (2) discussed with the independent auditors the matters required by Statement on Auditing Standards No. 61, Communications with Audit Committees, as amended, (AICPA, Professional Standards , Vol. 1 AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and (3) received the written disclosures and the letter from its independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm's communications with the audit committee concerning independence, and has discussed with the independent auditors their independence. Based upon these reviews and discussions, the audit committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K filed with the SEC for the last fiscal year.

Members of the Company's Audit Committee:

Randall L. Attkisson	Committee Chairman
Joseph A. Brinck, II

The following information with respect to business experience of the Board of Directors has been furnished by the respective Directors or obtained from the records of UTG.

Name, Age	Position with the Company, Business Experience and Other Directorships
Randall L. Attkisson, 70	Director of UTG since 1999; Director of First Southern Bancorp, Inc., a bank holding company, since 1986; Board Chairman of Metro Leadership Foundation since 2014; and Partner of Bluegrass Financial Holdings Subs/Affiliates since 2008.
Joseph A. Brinck, II, 60	Director of UTG since 2003; CEO of Stelter & Brinck, LTD, a full service combustion engineering and manufacturing company from 1983 to present; Salesman at Stelter & Brinck, LTD from 1979 to 1983; President of Superior Thermal, LTD from 1990 to present; President of Sanctity of Life Foundation since 2001 and Vice President of Ruah Woods Ministry since 2009. Currently holds Professional Engineering License in Kentucky.
Jesse T. Correll, 59	Chairman and CEO of UTG and Universal Guaranty Life Insurance Company since 2000; Director of UTG since 1999; Chairman, President, CEO of First Southern Bancorp, Inc. since 1988; Manager and President of First Southern Funding, LLC since 1992; President, Director of The River Foundation since 1990; Board member of Crown Financial Ministries from 2004 to 2009; Friends of the Good Samaritans since 2005; Generous Giving from 2006 to 2009 and the National Christian Foundation since 2006. Jesse Correll is the son of Ward and Regina Correll.
Ward F. Correll, 87	Director of UTG since 2000; President, Director of Tradeway, Inc. of Somerset, KY since 1973; Director of Cumberland Lake Shell, Inc. of Somerset, KY since 1971; President, Director of Tradewind Shopping Center, Inc. of Somerset, KY since 1966; Director of First Southern Bancorp since 1987; Director of First Southern Funding, LLC since 1991; Director of The River Foundation since 1990; and Director of First Southern Insurance Agency since 1987. Ward Correll is the father of Jesse Correll.
Brian J. Crall, 56	Director of UTG since 2015; Mr. Crall owns and is the President of foreClarity!, LLC. The Company was formed in 2012 and specializes in executive development, organizational development, strategic planning and public policy development. Mr. Crall also serves on the Board of Directors of MainSource Financial Group and from 2009 to 2012 Mr. Crall served as the Chief Executive Officer of CMD Holding, LLC, the holding company for CMD Health, Inc., a health insurance company and ClubMD, LLC, a series of primary care medical homes. From July 2008 to March 2009, Mr. Crall served as the Resource Director for the YMCA of the USA. Mr. Crall also served as the Personnel Cabinet Secretary for the Commonwealth of Kentucky from June 2006 to January 2007 and the Deputy Secretary of the Executive Cabinet, Office of the Governor of the Commonwealth of Kentucky from April 2004 to June 2006. During this time Mr. Crall served as a Director for the Kentucky Retirement System, a $15 billion retirement fund serving the employees of the state of Kentucky, and the Kentucky Deferred Compensation Authority, a $1.3 billion deferred compensation plan serving the employees of the Commonwealth of Kentucky. Additionally, Mr. Crall served as CEO of Progress Printing Company from July 2000 until April 2004, and was the 13 ^th District State Representative in the state of Kentucky from January 1995 until April 2004. Mr. Crall was CEO of the Owensboro Family YMCA from November 1986 through June 2000 and has been active in several civic and charitable organizations, including the Kentucky Youth Association, Habitat for Humanity, Owensboro Chamber of Commerce and the Fellowship of Christian Athletes. Mr. Crall became a Director of UTG, Inc. in December 2015.
Howard L. Dayton, Jr., 72	In 1985, Mr. Dayton founded Crown Ministries in Longwood, Florida. Crown Ministries merged with Christian Financial Concepts in September 2000 to form Crown Financial Ministries, the world's largest financial ministry. He served as Chief Executive Officer from 1985 to 2007 and in 2009 founded Compass - Finances God's Way. Mr. Dayton is a graduate of Cornell University. He developed The Caboose, a successful railroad-themed restaurant in Orlando, FL in 1969. In 1972 he began his commercial real estate development career, specializing in office development in the Central Florida area. He has authored five popular small group studies, produced several video series, and is the host for the nationally syndicated radio programs MoneyWise and HeyHoward. Asbury University named their business school the Howard Dayton School of Business. Mr. Dayton became a Director of UTG, Inc. in December 2005.
Peter L. Ochs, 64	Mr. Ochs is founder of Capital III, a private equity investment firm located in Wichita, Kansas. Capital III provides impact investment capital and management with investments in manufacturing, real estate, energy, and education with a geographical focus on the US and Latin America. Prior to founding Capital III, Mr. Ochs spent 8 years in the commercial banking industry. Mr. Ochs graduated from the University of Kansas with a degree in business and finance. He currently serves on the boards of UTG, Inc., the American Independence Funds, and Trinity Academy.
James P. Rousey, 57	President of UTG and Universal Guaranty Life Insurance Company since September 2006; Director of UTG and Universal Guaranty Life Insurance Company since September 2001; Chair of ACLI Forum 500 since November 2015; Member of Board of Governors of ACLI since November 2014; Regional CEO and Director of First Southern National Bank from 1988 to 2001. Board Member with the Illinois Fellowship of Christian Athletes from 2001-2005; Board Member with Contact Ministries from 2007-2011; Board Member with Amigos En Cristo, Inc. from 2007-2009.

Executive Officers of UTG

More detailed information on the following executive officers of UTG appears under "Directors":

Jesse T. Correll	Chairman of the Board and Chief Executive Officer
James P. Rousey	President

Other executive officers of UTG are set forth below:

Name, Age	Position with UTG and Business Experience
Theodore C. Miller, 53	Corporate Secretary of UTG, Inc. and Universal Guaranty Life Insurance Company since December 2000; Senior Vice President and Chief Financial Officer since July 1997; Vice President since October 1992 and Treasurer from October 1992 to December 2003; Vice President and Controller of certain affiliated companies from 1984 to 1992; Vice President and Treasurer of certain affiliated companies from 1992 to 1997; Senior Vice President and Chief Financial Officer of subsidiary companies since 1997; Corporate Secretary of subsidiary companies since 2000.
Douglas P. Ditto, 60	Vice President of UTG, Inc. and Universal Guaranty Life Insurance Company since June 2009; Chief Investment Officer from 2009 to 2012; Assistant Vice President from June 2003 to June 2009; Chief Executive Officer, and Executive Vice President of First Southern Bancorp, Inc. since March 1985.

Code of Ethics

The company has adopted a Code of Business Conduct and Ethics for our Directors, officers (including our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, and persons performing similar function) and employees. The Code of Business Conduct and Ethics is available to our shareholder by requesting a free copy of the Code of Business Conduct and Ethics by writing to us as UTG, Inc., 5250 South Sixth Street, Springfield, Illinois 62703.

Item 11. Executive Compensation

Executive Compensation Table

The following table sets forth certain information regarding compensation paid to or earned by UTG's Chief Executive Officer and President, and each of UTG's two most highly compensated executive officers whose salary plus bonus exceeded $100,000 during UTG's last fiscal year:

Name and Principal position	Year	Salary	Bonus	Stock Awards (3)	All Other Compensation		Total
Jesse T. Correll Chief Executive Officer	2015	$175,000		$91,989	$7,269	(1)	$274,258
	2014	$175,000	0	0	$7,000	(1)	$182,000
James P. Rousey President	2015	$165,000	$92,000		$3,218	(2)	$260,218
	2014	$165,000	0	0	$2,475	(2)	$167,475
Douglas P. Ditto Vice President	2015	$120,000		$76,991	$4,985	(1)	$201,976
	2014	$120,000	0	0	$4,800	(1)	$124,800

(1)	All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan.
(2)	All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan of $3,218 and $2,475 during 2015 and 2014 respectively.
(3)	Stock awards in the form of an annual bonus of 12,517 shares were issued in 2015. No stock awards were issued in 2014.

Outstanding Equity Awards at Fiscal Year End

As of December 31, 2015 , there were no unexercised options, stock that has not vested or equity incentive plan awards outstanding for any of the above named executive officers.

Compensation of Directors

Effective September 18, 2013 a new compensation arrangement was approved whereby each outside Director annually received $8,000 as a retainer and $1,000 per meeting attended. The compensation, however, is paid in UTG Common Stock. The value is determined annually on the close of business December 20th or the next business day should December 20 ^th be a weekend or holiday, based on the activity of the year just ending. Reasonable travel expenses are reimbursed in cash as incurred. UTG's Director compensation policy provides that Directors who are employees of UTG or its affiliates do not receive any compensation for their services as Directors except for reimbursement for reasonable travel expenses for attending each meeting. The following table reflects compensation paid to all Directors who served in 2015.

Name	Fees Earned or Paid in Cash	Stock Awards (2)	All Other Compensation	Total
Jesse T. Correll Chief Executive Officer	$0			$0
James P. Rousey President	$0			$0
Randall L. Attkisson Director	$0	$12,996		$12,996
Joseph A. Brinck, II Director	$0	$11,000		$11,000
Ward F. Correll Director	$0	$9,995		$9,995
Brian J. Crall Director	$0	$2,987		$2,987
Peter L. Ochs Director	$0	$11,991		$11,991
Howard L. Dayton Director	$0	$11,991	$5,000 (1)	$16,991

(1) Other Compensation represents payment for consulting services performed relative to management enrichment.

(2) Market value of stock on earned date was $ 14.50 per share.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Principal Holders of Securities

The following tabulation sets forth the name and address of the entity known to be the beneficial owners of more than 5% of UTG's Common Stock and shows: (i) the total number of shares of Common Stock beneficially owned by such person as of February 19, 2016 and the nature of such ownership; and (ii) the percent of the issued and outstanding shares of Common Stock so owned as of the same date.

Title		Amount	Percent
of	Name and Address	and Nature of	Of
Class	of Beneficial Owner (2)	Beneficial Ownership	Class (1)

Common	Jesse T. Correll	115,692	(3)(6)	3.1%
Stock, no	First Southern Bancorp, Inc.	1,406,785	(3)(4)(6)	37.9%
par value	First Southern Funding, LLC	341,997	(3)(4)(6)	9.2%
	First Southern Holdings, LLC	1,201,876	(3)(4)(6)	32.3%
	Ward F. Correll	270,825	(5)(6)	7.3%
	WCorrell, Limited Partnership	72,750	(3)(6)	2.0%
	Cumberland Lake Shell, Inc.	257,501	(5)(6)	6.9%
	Eric L. Oliver	300,000	(7)	8.1%

(1)	The percentage of shares owned is based on 3,709,087 shares of Common Stock outstanding as of February 19, 2016.
(2)	The address for each of Jesse Correll, First Southern Bancorp, Inc. ("FSBI"), First Southern Funding, LLC ("FSF"), First Southern Holdings, LLC ("FSH"), and WCorrell, Limited Partnership ("WCorrell LP"), is 205 North Depot Street, Stanford, Kentucky 40484. The address for each of Ward F. Correll and Cumberland Lake Shell, Inc. ("CLS") is P.O. Box 430, 150 Railroad Drive, Somerset, Kentucky 42502. The address for Eric L. Oliver is 400 Pine Street, Suite 1010, Abilene, Texas 79601.
(3)	The share ownership of Jesse Correll listed includes 42,942 shares of Common Stock owned by him individually. The share ownership of Mr. Correll also includes 72,750 shares of Common Stock held by WCorrell, Limited Partnership, a limited partnership in which Jesse Correll serves as managing general partner and as such, has sole voting and dispositive power over the shares held by the entity.
	In addition, by virtue of his ownership of voting securities of FSF and FSBI, and in turn, their ownership of 100% of the outstanding membership interests of FSH, Jesse Correll may be deemed to beneficially own the total number of shares of Common Stock owned by FSH (as well as the shares owned by FSBI and FSF directly), and may be deemed to share with FSH (as well as FSBI and FSF directly) the right to vote and to dispose of such shares. Mr. Correll owns approximately 75.70% of the outstanding membership interests of FSF; he owns directly approximately 46.99%, companies he controls own approximately 14.08%, and he has the power to vote but does not own an additional 2% of the outstanding voting stock of FSBI. FSBI and FSF in turn own 99% and 1%, respectively, of the outstanding membership interests of FSH.
(4)	The share ownership of FSBI consists of 204,909 shares of Common Stock held by FSBI directly and 1,201,876 shares of Common Stock held by FSH of which FSBI is a 99% member and FSF is a 1% member. As a result, FSBI may be deemed to share the voting and dispositive power over the shares held by FSH.
(5)	Includes 257,501 shares of Common Stock held by CLS, all of the outstanding voting shares of which are owned by Ward F. Correll.
(6)	According to the Schedule 13D, as amended, filed November 17, 2014, Jesse Correll, FSBI, FSF and FSH, have agreed in principle to act together for the purpose of acquiring or holding equity securities of UTG. In addition, the Schedule 13D indicates that because of their relationships with Jesse Correll and these other entities, Ward Correll, CLS and WCorrell, Limited Partnership may also be deemed to be members of this group. Because the Schedule 13D indicates that for its purposes, each of these entities and persons may be deemed to have acquired beneficial ownership of the equity securities of UTG beneficially owned by the other entities and persons, each has been identified and listed in the above tabulation.
(7)	Shares held in entities controlled by Eric Oliver according to the Schedule 13G filed September 5, 2012.

Security Ownership of Management of UTG

The following tabulation shows with respect to each of the Directors of UTG, UTG's Chief Executive Officer and President, and each of UTG's two most highly compensated executive officers whose salary plus bonus exceeded $100,000 for fiscal 2015, and with respect to all executive officers and Directors of UTG as a group: (i) the total number of shares of Common Stock beneficially owned by such person as of February 19, 2016 and the nature of such ownership; and (ii) the percent of the issued and outstanding shares of stock so owned as of the same date.

Title of	Name and Address of	Amount and Nature of	Percent of
Class	Beneficial Owner	Beneficial Ownership	Class (1)

UTG's	Randall L. Attkisson	Louisville, KY	2,290		*
Common	Joseph A. Brinck, II	Cincinnati, OH	14,376		*
Stock, no	Jesse T. Correll	Stanford, KY	1,864,474	(2)	50.3%
par value	Ward F. Correll	Somerset, KY	270,825	(3)	7.3%
	Brian J. Crall	Nicholasville, KY	633	(4)	*
	Howard L. Dayton, Jr.	Sanford, FL	6,295		*
	Douglas P. Ditto	Danville, KY	16,134	(5)	*
	Theodore C. Miller	Springfield, IL	12,292		*
	Peter L. Ochs	Valley Center, KS	4,058	(6)	*
	James P. Rousey	Hustonville, KY	7,276		*
	All Directors and executive officers as a group (ten in number)		2,198,653		59.3%

* Less than 1%

(1)	The percentage of outstanding shares for UTG is based on 3,709,087 shares of Common Stock outstanding as of February 19, 2016.
(2)	The share ownership of Mr. Jesse Correll includes 42,942 shares of Common Stock owned by him individually, 204,909 shares of Common Stock held by FSBI and 341,997 shares of Common Stock owned by FSF. The share ownership of Mr. Correll also includes 72,750 shares of Common Stock held by WCorrell, Limited Partnership, a limited partnership in which Mr. Correll serves as managing general partner. Mr. Correll has sole voting and dispositive power over the shares held by these entities. In addition, by virtue of his ownership of voting securities of FSF and FSBI, and in turn, their ownership of 100% of the outstanding membership interests of FSH (the holder of 1,201,876 shares of Common Stock), Mr. Correll may be deemed to beneficially own the total number of shares of Common Stock owned by FSH, and may be deemed to share with FSH the right to vote and to dispose of such shares. Mr. Correll owns approximately 75.5% of the outstanding membership interests of FSF; he owns directly approximately 47.0%, companies he controls own approximately 14.1%, and he has the power to vote but does not own an additional 2% of the outstanding voting stock of FSBI. FSBI and FSF in turn own 99% and 1%, respectively, of the outstanding membership interests of FSH.
(3)	The share ownership of Mr. Correll includes 13,324 shares of Common Stock owned by him individually and 257,501 shares of Common Stock owned by Cumberland Lake Shell, Inc., all of the outstanding voting shares of which are owned by Ward F. Correll. Ward F. Correll is the father of Jesse T. Correll.
(4)	Includes 425 shares held in spouse's IRA.
(5)	Includes 1,600 shares held in a retirement account.
(6)	Includes 2,000 shares held in a trust for benefit of named individual.

Except as indicated above, the foregoing persons hold sole voting and investment power.

Item 13. Certain Relationships and Related Transactions and Director Independence

The Board of Directors determined that four of the eight current Directors are "independent" as defined by Rule 5605 of the NASDAQ listing standards. The independent Directors are Randall L. Attkisson, Joseph A. Brinck, II, Howard L. Dayton, Jr., and Peter L. Ochs.

On February 20, 2003, UG purchased $4,000,000 of a trust preferred security offering issued by First Southern Bancorp, Inc. ("FSBI"). The security has a mandatory redemption after 30 years with a call provision after 5 years. The security pays a quarterly dividend at a fixed rate of 6.515%. The Company received dividends of $264,219 during 2015 and 2014. On March 30, 2009, UG purchased $1,000,000 of FSBI common stock. The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement.

On September 28, 2011 UTG entered a joint ownership agreement with Bandyco, LLC and First Southern National Bank, for an 8.08% interest in an aircraft. Bandyco, LLC is affiliated with Ward F Correll, who is a Director of the Company. The Company paid a monthly operational fee of $25,000 through July of 2014 when the aircraft was sold. During July of 2014, the Company acquired a different aircraft. UTG paid $1,600,000 in the acquisition of the aircraft, increasing the Company's ownership interest to 30.1%. The aircraft is used for business related travel by various officers and employees of the Company. For years 2015 and 2014, UTG paid $255,920 and $879,453 for costs associated with the aircraft, respectively.

The Company from time to time acquires mortgage loans through participation agreements with FSNB. FSNB services the Company's mortgage loans including those covered by the participation agreements. The Company pays a .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. The Company paid $11,622 and $33,894 in servicing fees and $25,000 and $0 in origination fees to FSNB during 2015 and 2014, respectively.

As previously disclosed in the Notes Receivable section of Note 2 – Investments, several of the Company's notes have participation agreements in place with third parties. Certain participation agreements are with FSF, a related party. The participation agreements are sold without recourse and assigned to the participant based on their pro-rata share of the principal, interest and collateral as specified in the participation agreements. The undivided participations in the notes receivable range from 20% - 50%. The total amount of loans participated to FSF were $3,170,000 and $0 as of December 31, 2015 and 2014, respectively. One of the participated notes receivable was fully repaid during the first quarter of 2016 reducing the outstanding participating notes receivable balance with FSF to $670,000.

Item 14. Principal Accounting Fees and Services

The Audit Committee is required to be directly responsible for the appointment, compensation and retention of the Company's independent registered public accounting firm. The Audit Committee appointed Brown Smith Wallace, LLC ("BSW") as the Company's independent registered public accounting firm for the fiscal years ended December 31, 2015 and 2014.

Amounts paid to, or billed by, the Company's principal accountant, during the two most recent fiscal years by category were as follows:

Audit Fees - Audit fees paid for these audit services in the fiscal years ended December 31, 2015 and 2014 totaled $114,000 and $115,750, respectively. Fees billed for the quarterly reviews of the Company's financial statements totaled $22,147 and $20,400 for the years 2015 and 2014, respectively.

Audit Related Fees - No audit related fees were incurred by the Company from BSW for the years ended December 31, 2015 and 2014.

Tax Fees – For the years ended December 31, 2015 and 2014, the Company paid $11,740 and $11,000, respectively, to BSW relating to certain tax advice and electronic filing of certain federal and state income tax returns of the Company.

All Other Fees – During 2015, the Company paid fees of $4,000 to BSW for services rendered in relation to the Ohio Department of Insurance examination of UG. The Company paid no other fees to BSW for other services for the year ended December 31, 2014.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	The following documents are filed as a part of the report:

(1)	Financial Statements:
	See Item 8, Index to Financial Statements
(2)	Financial Statement Schedules
	NOTE: The financial statement schedules have been omitted as they are deemed inapplicable or not required by Regulation S-X.

(b)	Exhibits: The following are exhibits to this report, and if incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included:

Exhibit Number	Description
3.1	Certificate of Incorporation of the Registrant and all amendments thereto [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 3.1]
3.2	By-Laws for the Registrant and all amendments thereto [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 3.2]
4.1	UTG's Agreement pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K with respect to long-term debt instruments [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 4.1]
*10.2	Amendment to Reinsurance Agreement between Universal Guaranty Life Insurance Company and Optimum Re Insurance Company originally with Business Men's Assurance Company of America.
*10.3	Reinsurance Agreement between Universal Guaranty Life Insurance Company and Swiss RE originally with Life Reassurance Corporation of America.
*10.4	Assumption Reinsurance Agreement between Universal Guaranty Life Insurance Company and Park Avenue Life Insurance Company formerly known as First International Life Insurance Company.
10.5	Aircraft Lease Agreement [Incorporated by reference to the Registrant's Form 10-K, for the year ended December 31, 2010 originally filed as Exhibit 10.14].
10.7	StoneRiver Master Agreement [Incorporated by reference to the Registrant's Form 10-K, for the year ended December 31, 2011 originally filed as Exhibit 10.18].
10.9	Commercial pledge agreement dated November 20, 2012, between UTG, Inc. and Illinois National Bank. [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2012 originally filed as Exhibit 10.20]
10.10	Promissory Note dated March 4, 2013, between HPG Acquisitions, LLC and First National Bank of Tennessee [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2012 originally filed as Exhibit 10.21]
10.11	Administrative Services and Cost Sharing Agreement dated as of January 1, 2007 between UTG, Inc. and Universal Guaranty Life Insurance Company [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.11]
10.12	Agreement regarding Mortgage Loans by and between First Southern National Bank and Universal Guaranty Life Insurance Company [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.12]
10.13	Universal Guaranty Participation Agreement-Purchased Loan [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.13]
10.14	Universal Guaranty Participation Agreement-Originated Loan [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.14]
10.15	Line of Credit dated March 28, 2013, between UTG Avalon, LLC and First Southern Funding [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 10.15]
10.16	Management Data, Inc. Software License Agreement [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2015].
10.17	Note dated December 29, 2014, between UTG Avalon, LLC and First National Bank of Tennessee [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2015].
10.18	Aircraft Joint Ownership Agreement by and among Bandyco, LLC, First Southern National Bank and UTG, Inc. dated August 11, 2014 [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2015].
*10.19	Promissory Note dated November 20, 21015, between UTG, Inc. and Illinois National Bank.
14.1	Code of Ethics and Business Conduct [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 14.1]
14.2	Code of Ethical Conduct for Senior Financial Officers [Incorporated by reference to the Registrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 14.2]
*21.1	List of Subsidiaries of the Registrant.
*31.1	Certificate 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	Certificate 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
*99.1	Audit Committee Charter.
99.2	Whistleblower Policy [Incorporated by reference to theRegistrant's form 10-K, for the year ended December 31, 2013 originally filed as Exhibit 99.2].
*99.3	Compensation Committee Charter.
*99.4	Investment Committee Charter.
*101	Interactive Data File

* Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(D) of the Securities Exchange Act of 1934, UTG, Inc. has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

				UTG, Inc.


By:				/s/ Jesse T. Correll
				Jesse T. Correll
		Chairman and Chief Executive Officer and Director


By:				/s/ Theodore C. Miller
				Theodore C. Miller
	Senior Vice President, Chief Financial Officer and Secretary
			(principal financial and accounting officer)

Date: March 25, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By: /s/ Randall L. Attkisson		By: /s/ Howard L. Dayton
Randall L. Attkisson Director		Howard L. Dayton Director

By: /s/ Joseph A. Brinck		By: /s/ Peter L. Ochs
Joseph A. Brinck Director		Peter L. Ochs Director

By: /s/ Jesse T. Correll		By: /s/ James P. Rousey
Jesse T. Correll Chairman of the Board, Chief Executive Officer and Director		James P. Rousey President and Director

By:		By: /s/ Theodore C. Miller
Ward F. Correll Director		Theodore C. Miller Corporate Secretary and Chief Financial Officer

By: /s/ Brian J. Crall
Brian J. Crall Director

TABLE OF CONTENTS

Part I Item 1. Business Note 4 Reinsurance Note 2 Investments Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Properties Item 3. Legal Proceedings Item 4. Mine Safety Disclosures Part II Item 5. Market For Registrnat's Common Equity, Related Stockholders Matters and Issuer Purchaes Of Equity Securities Note 9 Shareholders' Equity Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis Of Financial Condition and Results Of Operations Note 1 Summary Of Significant Accounting Policies Note 2 - Investment Note 7 Credit Arrangements Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Note 3 Fair Value Measurements Note 4 - Reinsurance Note 5 Cost Of Insurance Acquired Note 6 Income Taxes Note 8 Commitments and Contingencies Note 10 - Statutory Accounting Note 11 Related Party Transactions Note 12 Other Cash Flow Disclosures Note 13 - Concentrations Note 14 Selected Quarterly Financial Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information Part III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions and Director Independence Item 14. Principal Accounting Fees and Services Part IV Item 15. Exhibits and Financial Statement Schedules

UTGN 10-K Fiscal year ended Dec. 31, 2015