utg10k2004

10-K 1 utg2004.htm 2004 10K utg10k2004

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
     [X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the fiscal year ended December 31, 2004
                                       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

                            UNITED TRUST GROUP, INC.
             (Exact name of registrant as specified in its charter)
ILLINOIS                                                                                       37-1172848
(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:
                                                                                    Name of each exchange
Title of each class                                                                   on which registered
None                                                                                                 None

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

                               Title of each class
                   Common Stock, stated value $ .02 per share

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 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 an  accelerated  filer (as
defined by Rule 12b-2 of the Act). Yes [ ] No [X]

As  of  June  30,  2004,  shares  of  the  Registrant's  common  stock  held  by
non-affiliates  (based upon the price of the last sale of $ 5.50 per share), had
an aggregate market value of approximately $ 7,256,893.

At March 22, 2005 the  Registrant  had  3,955,355  outstanding  shares of Common
Stock, stated value $ .02 per share.

DOCUMENTS INCORPORATED BY REFERENCE:  None



                            UNITED TRUST GROUP, INC.
                                   FORM 10-K
                          YEAR ENDED DECEMBER 31, 2004


                               TABLE OF CONTENTS



PART I.........................................................................3

   ITEM 1.   BUSINESS..........................................................3
   ITEM 2.   PROPERTIES.......................................................15
   ITEM 3.   LEGAL PROCEEDINGS................................................15
   ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............15


PART II.......................................................................16

   ITEM 5.   MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
                 SHAREHOLDER MATTERS..........................................16
   ITEM 6.   SELECTED FINANCIAL DATA..........................................17
   ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                 AND RESULTS OF OPERATIONS....................................18
   ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  .....28
   ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................30
   ITEM 9.   DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                 FINANCIAL DISCLOSURE.........................................61
   ITEM 9A.  CONTROLS AND PROCEDURES..........................................61



PART III......................................................................63

   ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF UTG..........................63
   ITEM 11.  EXECUTIVE COMPENSATION...........................................65
   ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...68
   ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................71
   ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES...........................72


PART IV.......................................................................73

   ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..74








                                     PART I

ITEM 1.  BUSINESS

FORWARD-LOOKING INFORMATION

Any  forward-looking  statement contained herein or in any other oral or written
statement  by the Company or any of its  officers,  directors  or  employees  is
qualified by the fact that actual  results of the Company may differ  materially
from those  projected  in  forward-looking  statements.  Additional  information
concerning  factors that could cause actual  results to differ from those in the
forward-looking statements is contained in "Management's Discussion and Analysis
of Financial Condition and Results of Operations."


OVERVIEW

United Trust Group, Inc. (the  "Registrant") was incorporated in 1984, under the
laws of the State of  Illinois to serve as an  insurance  holding  company.  The
Registrant  and its  subsidiaries  (the  "Company")  have  only one  significant
industry segment - insurance. The Company's dominant business is individual life
insurance, which includes the servicing of existing insurance business in force,
the  solicitation  of new individual  life  insurance,  the acquisition of other
companies in the insurance business,  and the administration  processing of life
insurance business for other entities.

At December 31,  2004, significant majority-owned subsidiaries of the Registrant
were as depicted on the following organizational chart:

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 four 100% owned subsidiary banks
including First Southern National Bank (FSNB). Banking activities are conducted
through multiple locations within 10 counties in the state of 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, 2004, Mr. Correll owns or controls directly
and indirectly approximately 66% of UTG's outstanding stock.

UTG is a life insurance holding company. The focus of UTG is the acquisition of
other companies in similar lines of business and management of the insurance
subsidiary. UTG has no activities outside the life insurance focus. The UTG
companies became members of the same affiliated group through a history of
acquisitions in which life insurance companies were involved.

UG is a wholly owned life insurance subsidiary of UTG, which operates in the
individual life insurance business. The primary focus of the insurance company
has been the servicing of existing insurance business in force and the
solicitation of new insurance business. In addition, UG provides insurance
administrative services for other non-related entities.

REC is a wholly owned subsidiary of UTG, which was incorporated under the laws
of the State of Delaware on June 1, 1971, for the purpose of dealing and
brokering in securities. REC acts as an agent for its customers by placing
orders of mutual funds and variable annuity contracts which are placed in the
customers' names, the mutual fund shares and variable annuity accumulation units
are held by the respective custodians, and the only financial involvement of REC
is through receipt of commission (load). REC functions at a minimum
broker-dealer level. It does not maintain any of its customer accounts nor
receives customer funds directly. Operating activity of REC accounts for less
than $ 28,000 of earnings annually.

NORTH PLAZA is a wholly owned subsidiary of UG, which owns for investment
purposes, a shopping center in Somerset, Kentucky, approximately 14,000 acres of
timberland in Kentucky, and a 50% partnership interest in an additional 11,000
acres of Kentucky timberland. Operating activity of North Plaza accounts for
less than $ 100,000 of earnings annually. The timberland is harvested and in
various stages of maturity. The property is carried at approximately
$ 7,400,000.

HAMPSHIRE PLAZA is a 67% owned subsidiary of UG, which owns for investment
purposes, a property consisting of a 254,228 square foot office tower, and
72,382 square foot attached retail plaza totaling 326,610 square feet along with
an attached 349 space parking garage, in New Hampshire. In 2004, the Company
obtained new lease agreements whereby approximately 58% of the building is now
leased. At December 31, 2004, the property was carried at approximately
$ 13,400,000. Operating activity of Hampshire Plaza accounted for approximately
$ 547,000 of income in the current year.

HP GARAGE is a 67% owned subsidiary of UG, which owns for investment purposes, a
property consisting of a 578 space parking garage, in New Hampshire. Operating
activity of HP Garage accounted for approximately $ 68,000 of earnings in the
current year.

HISTORY

UTG was incorporated December 14, 1984, as an Illinois corporation. The original
name was United Trust, Inc. (UTI). The name was changed in 1999 following a
merger with United Income Inc. (UII). During its first two and one-half years,
UTG was engaged in an intrastate public offering of its securities, raising over
$ 12,000,000 net of offering costs. In 1986, UTG formed a life insurance
subsidiary and by 1987 began selling life insurance products. Over the next
several years, UTG acquired several additional holding and life insurance
companies. UTG has taken several steps to streamline and simplify the corporate
structure following the acquisitions, including dissolution of intermediate
holding companies and mergers of several life insurance companies.

In March 2005, UTG's Board of Directors adopted a proposal to change the state
of incorporation of UTG from Illinois to Delaware by merging UTG with and into a
wholly-owned Delaware subsidiary (the "reincorporation merger"). The Board of
Directors and management of UTG believe that reincorporation in Delaware would
be beneficial to the Company because Delaware corporate law is more
comprehensive, widely used and extensively interpreted than other state
corporate laws, including Illinois corporate law. The reincorporation merger
would effect only a change in UTG's legal domicile and certain other changes of
a legal nature. It would not result in any change in UTG's business, management,
fiscal year, assets or liabilities or location of its principal facilities. The
Board of Directors intends to submit the reincorporation proposal to its
shareholders for approval at the 2005 annual meeting of shareholders to be held
on June 15, 2005. If approved by shareholders, UTG expects that the
reincorporation merger would be effected as soon as reasonably practicable
following the annual meeting.

PRODUCTS

UG's current product portfolio consists of a limited number of life insurance
product offerings, with a goal of enough variety to provide for the needs of the
general public and existing policyholders. The products are designed to be
competitive in the marketplace.

Historically, UG's primary universal life insurance product was referred to as
the "UL90A". It was issued for ages 0 - 65 and had a minimum face amount of
$ 25,000. The administrative load is based on the issue age, sex and rating
class of the policy. Policy fees vary from $ 1 per month in the first year to
$ 4 per month in the second and third years and $ 3 per month each year
thereafter. The UL90A currently credits 4.5% interest with a 4.5% guaranteed
interest rate. Partial withdrawals, subject to a remaining minimum $ 500 cash
surrender value and a $ 25 fee, are allowed once a year after the first
duration. Policy loans are available at 7.4% interest in advance. The policy's
accumulated fund will be credited the guaranteed interest rate in relation to
the amount of the policy loan. Surrender charges are based on a percentage of
target premiums starting at 120% for years 1-5 then grading downward to zero in
year 15. This policy contains a guaranteed interest credit bonus for the
long-term policyholder. From years 10 through 20, additional interest bonuses
can be earned if certain criteria are met, primarily relating to the total
amount of premiums paid and amount of accumulated value, with a total in the
twentieth year of 1.375%. The bonus is credited from the policy issue date and
is contractually guaranteed.

In 2003 UG replaced its "Century 2000" product with a new universal life
contract; the "Legacy" product. This product was designed for use with several
distribution channels including the Company's own internal agents, bank
agent/employees and through personally producing general agents "PPGA". Similar
to the UL90A, this policy is issued for ages 0 - 65, in face amounts with a
minimum of $ 25,000. But unlike the Century 2000 this product was designed with
level commissions. The Legacy product has a current declared interest rate of
4.0%, which is equal to its guaranteed rate. After five years the guaranteed
rate drops to 3.0%. During the first five years the policy fee will be $ 6.00
per month on face amounts less than $ 50,000 and $ 5.00 per month for larger
amounts. After the first five years the Company may increase this rate but not
more than $ 8.00 per month. The policy has other loads that vary based upon
issue age and risk classification. Partial withdrawals, subject to a remaining
minimum $ 500 cash surrender value and a $ 25 fee, are allowed once a year after
the first duration. Policy loans are available at 7.4% interest in advance. The
policy's accumulated fund will be credited the guaranteed interest rate in
relation to the amount of the policy loan. Surrender charges are based on a
percentage of target premiums starting at 100% for years 1 and 2 then grading
downward to zero in year 5.

Also available are a number of traditional whole life policies. The Company's
Ten Pay Whole Life Insurance product has a level face amount. The level premium
is payable for the first ten policy years. This policy 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 and at a minimum face
amount of $5,000. There is no policy fee.

The Preferred Whole Life Insurance product also has a level face amount and
level premium, although the premiums are payable for life on this product. Issue
ages are 0-65 and the minimum face amount is $25,000. There is no policy fee.
Unlike the Ten Pay, this product has several optional riders available:
Accidental Death rider, Children's Term Insurance rider, Terminal Illness rider
and/or Waiver of Premium rider.

The Tradition is a fixed premium whole life insurance policy. Premiums are level
and payable for life. Issue ages are 0-80. The minimum face amount is the
greater of $10,000 or the amount of coverage provided by a $100 annual premium.
There is a $30 policy fee. This product has the same optional riders as the
Preferred Whole Life, listed above.

Our newest product is called Kid Kare. This is a single premium level term
policy to age 21. A face amount of $5,000 can be purchased for a single premium
of $250, and a $10,000 face amount requires a premium of $500. The policy is
issued from ages 0-15 and has conversion privileges at age 21. There is no
policy fee.

The Horizon Annuity completes our product portfolio. This product is issued to
ages 0-80. The minimum annual premium in the first year is $2,000, with premiums
being optional in all other years. There is a maintenance fee of $18 beginning
in the second policy year. This fee is waived if the annuity value is at least
$2,000. This policy has a decreasing surrender charge for the first five years
of the contract.

Products currently in development include a decreasing term policy and a level
term policy. The decreasing term policy will be convertible to age 65 or the
policy anniversary prior to expiry. Terms of 10, 15, 20 25 and 30 years will be
available. Each term period has it's own issue age criteria. The level term
policy will be renewable to age 70 and convertible to age 65. Issue ages for the
level term policy will be 18-60.

The Company's actual experience for earned interest, persistency and mortality
varies from the assumptions applied to pricing and for determining premiums.
Accordingly, differences between the Company's actual experience and those
assumptions applied may impact the profitability of the Company. The Company
monitors investment yields, and when necessary adjusts credited interest rates
on its insurance products to preserve targeted interest spreads. Credited rates
are reviewed and established by the Board of Directors of UG. Currently, all
crediting rates have been reduced to the respective product guaranteed interest
rate.

The Company has a variety of policies in force different from those being
marketed. Interest sensitive products, including universal life and excess
interest whole life ("fixed premium UL"), account for 59% of the insurance in
force. Approximately 20% of the insurance in force is participating business,
which represents policies under which the policyowner shares in the insurance
company's statutory divisible surplus. The Company's average persistency rate
for its policies in force for 2004 and 2003 has been 94.6% and 94.9%,
respectively.

Interest sensitive life insurance products have characteristics similar to
annuities with respect to the crediting of a current rate of interest at or
above a guaranteed minimum rate and the use of surrender charges to discourage
premature withdrawal of cash values. Universal life insurance policies also
involve variable premium charges against the policyholder's account balance for
the cost of insurance and administrative expenses. Interest-sensitive whole-life
products generally have fixed premiums. Interest-sensitive life insurance
products are designed with a combination of front-end loads, periodic variable
charges, and back-end loads or surrender charges.

Traditional life insurance products have premiums and benefits predetermined at
issue; the premiums are set at levels that are designed to exceed expected
policyholder benefits and insurance company expenses. Participating business is
traditional life insurance with the added feature that the policyholder may
share in the divisible surplus of the insurance company through policyholder
dividend. This dividend is set annually by the Board of Directors of UG and is
completely discretionary.

MARKETING

The Company has not actively marketed life products in the past several years.
Management currently places little emphasis on new business production,
believing resources could be better utilized in other ways. Current sales
primarily represent sales to existing customers through additional insurance
needs or conservation efforts. In 2001, the Company increased its emphasis on
policy retention in an attempt to improve current persistency levels. In this
regard, several of the home office staff have become licensed insurance agents
enabling them broader abilities when dealing with the customer in regard to
his/her existing policies and possible alternatives. The conservation efforts
described above have been generally positive. Management will continue to
monitor these efforts and make adjustments as seen appropriate to enhance the
future success of the program.

At year-end 2004, the Company retired its universal life product commonly
referred to as the UL90A. This product had been offered since 1990. Sales of
this product have been extremely low in recent periods. Management concluded the
product had run its life cycle and discontinued its offering. The Company has
introduced new and updated products in recent periods including the Horizon
Annuity, the Legacy and Kid Kare. The company is currently working on
development of a level term and decreasing term product. Management has no
current plans to increase marketing efforts. New product development is
anticipated to be utilized in conservation efforts and sales to existing
customers. Such sales are not expected to be material.

Excluding licensed home office personnel, UG has 15 general agents. UG primarily
markets its products in the Midwest region with most sales in the states of
Ohio, Illinois and West Virginia. UG is licensed to sell life insurance in
Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota,
Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South
Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, West
Virginia and Wisconsin.

In 2004, $ 17,161,576 of total direct premium was collected by the insurance
subsidiary. Ohio accounted for 27%, Illinois accounted for 19%, and West
Virginia accounted for 11% of total direct premiums collected. No other state
accounted for more than 5% of direct premiums collected.

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, 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.

The Company requires blood samples to be drawn with individual insurance
applications for coverage over $ 45,000 (age 46 and above) or $ 95,000 (ages
16-45). Blood samples are tested for a wide range of chemical values and are
screened for antibodies to the HIV virus. Applications also contain questions
permitted by law regarding the HIV virus, which must be answered by the proposed
insureds.

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 law 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 3.0%
to 9.25% 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. Current mortality rate
assumptions are based on 1975-80 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. Interest crediting rates for universal life
and interest sensitive products range from 4.0% to 5.5% for the years ended
December 31, 2004, 2003 and 2002.

REINSURANCE

As is customary in the insurance industry, the insurance subsidiary of the
Company 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. At
December 31, 2004, the Company had gross insurance in force of $ 3.141 billion
of which approximately $ 531 million was ceded to reinsurers.

The Company's reinsured business is ceded to numerous reinsurers. The Company
monitors the solvency of its reinsurers in seeking to minimize the risk of loss
in the event of a failure by one of the parties. The primary reinsurers of the
Company are large, well capitalized entities.

Currently, the Company is utilizing reinsurance agreements with Generali USA
Life Reassurance Company, (Generali) and Swiss Re Life and Health America
Incorporated (SWISS RE). Generali and SWISS RE currenty 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 the Company. The agreements are a yearly renewable term
(YRT) treaty where the Company cedes amounts above its retention limit of
$ 100,000 with a minimum cession of $ 25,000.

In addition to the above reinsurance agreements, the Company entered into
reinsurance agreements with Optimum Re Insurance Company (Optimum) during 2004
to provide reinsurance on new products released for sale in 2004. The agreements
are yearly renewable term (YRT) treaties where the Company cedes amounts above
its retention limit of $100,000 with a minimum cession of $25,000 as has been a
Company practice for the last several years with its reinsurers. Also, effective
January 1, 2005, Optimum became the reinsurer of 100% of the accidental death
benefits (ADB) in force of the Company. Previously, Generali provided this
coverage. This coverage is renewable annually at the Company's option. Optimum
specializes in reinsurance agreements with small to mid-size carriers such as
the Company. Optimum currently holds an "A" (Excellent) rating from A.M. Best.

UG entered a coinsurance agreement with Park Avenue Life Insurance Company
(PALIC) as of September 30, 1996. Under the terms of the agreement, UG ceded to
PALIC substantially all of its paid-up life insurance policies. Paid-up life
insurance generally refers to non-premium paying life insurance policies. PALIC
and its ultimate parent The Guardian Life Insurance Company of America
(Guardian), currently hold an "A" (Excellent), and "A+" (Superior) rating,
respectively, from A.M. Best, an industry rating company. The PALIC agreement
accounts for approximately 68% of the reinsurance reserve credit, as of
December 31, 2004.

On September 30, 1998, UG entered into a coinsurance agreement with The
Independent Order of Vikings, an Illinois fraternal benefit society (IOV). 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, 2004, the IOV insurance
in-force was approximately $ 1,686,000, with reserves being held on that amount
of approximately $ 393,000.

On June 1, 2000, UG assumed an already existing coinsurance agreement, dated
January 1, 1992, between Lancaster Life Reinsurance Company, an Arizona
corporation (LLRC) and Investors Heritage Life Insurance Company, a corporation
organized under the laws of the Commonwealth of Kentucky (IHL). Under the terms
of the agreement, LLRC agreed to assume from IHL a 90% quota share of new issues
of credit life and accident and health policies that have been written on or
after January 1, 1992 through various branches of the First Southern National
Bank. The maximum amount of credit life insurance that can be assumed on any one
individual's life is $ 15,000. UG assumed all the rights and obligations
formerly held by LLRC as the reinsurer in the agreement. LLRC liquidated its
charter immediately following the transfer. At December 31, 2004, IHL has
insurance in-force of approximately $ 2,295,000, with reserves being held on
that amount of approximately $ 33,000.

The Company does not have any short-duration reinsurance contracts. The effect
of the Company's long-duration reinsurance contracts
on premiums earned in 2004, 2003 and 2002 was as follows:

Shown in thousands
---------------------------------------------------------
2004 2003 2002
Premiums Premiums Premiums
Earned Earned Earned
---------------- ---------------- ----------------
Direct $ 17,238 $ 18,087 $ 18,597
Assumed 38 34 96
Ceded (3,036) (2,896) (2,701)
---------------- ---------------- ----------------
Net premiums $ 14,240 $ 15,225 $ 15,992
================ ================ ================

INVESTMENTS

Investment income represents a significant portion of the Company's total
income. 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 reflects net investment income by type of investment.

December 31,
----------------------------------------------------------
2004 2003 2002
--------------- ---------------- ----------------
Fixed maturities and fixed maturities
held for sale $ 7,060,761 $ 8,418,969 $ 10,302,735
Equity securities 657,609 456,361 131,778
Mortgage loans 1,209,358 1,522,700 1,749,935
Real estate 5,335,530 2,832,171 3,261,043
Policy loans 918,562 949,770 965,227
Short-term investments 80,241 11,161 26,522
Cash 111,986 137,478 211,293
--------------- ---------------- ----------------
Total consolidated investment income 15,374,047 14,328,610 16,648,533
Investment expenses (4,953,161) (4,058,110) (3,133,731)
---------------- ---------------- ----------------
Consolidated net investment income $ 10,420,886 $ 10,270,500 $ 13,514,802
=============== ================ ================

At December 31, 2004, the Company had a total of $ 805,787 in investment real
estate, which did not produce income during 2004.

The following table summarizes the Company's fixed maturities distribution at
December 31, 2004 and 2003 by ratings category as issued by Standard and Poor's,
a leading ratings analyst.

Fixed Maturities
Rating % of Portfolio
----------------------
2004 2003
---------- ----------
Investment Grade
AAA 82% 82%
AA 1% 1%
A 13% 12%
BBB 4% 4%
Below investment grade 0% 1%
---------- ----------
100% 100%
========== ==========

The following table summarizes the Company's fixed maturities and fixed
maturities held for sale by major classification.

Carrying Value
--------------------------------------------------
2004 2003
-------------------- --------------------
U.S. government and government agencies $ 49,434,111 $ 42,023,692
States, municipalities and political subdivisions 2,625,737 6,520,332
Collateralized mortgage obligations 79,701,893 89,195,177
Public utilities 0 5,397,880
Corporate 28,405,561 22,977,808
-------------------- --------------------
$ 160,167,302 $ 166,114,889
==================== ====================

The following table shows the composition, average maturity and yield of the
Company's investment portfolio at December 31, 2004.

Average
Carrying Average Average
Investments Value Maturity Yield
----------------------------------- ---------------- ------------------ ------------

Fixed maturities and fixed
maturities held for sale $ 163,141,096 5 years 4.33%
Equity securities 20,880,669 Not applicable 3.15%
Mortgage Loans 23,719,192 5 years 5.10%
Investment real estate 26,458,953 Not applicable 20.17%
Policy loans 13,035,574 Not applicable 7.05%
Short-term investments 37,083 Not applicable 8.25%
Cash and cash equivalents 10,304,600 On demand 1.84%
----------------
Total Investments and Cash
and cash equivalents $ 257,577,167 4.05%
================

At December 31, 2004, fixed maturities and fixed maturities held for sale have a
combined market value of $ 160,291,675. Fixed maturities held to maturity are
carried at amortized cost. Management has the ability and intent to hold these
securities until maturity. Fixed maturities held for sale are carried at market.

The Company holds $ 39,489 in short-term investments. Management monitors its
investment maturities, which in their opinion is sufficient to meet the
Company's cash requirements. Fixed maturities of $ 9,016,462 mature in one year
and $ 55,006,074 mature in two to five years.

The Company holds $ 20,722,415 in mortgage loans, which represents approximately
7% of the total assets. All mortgage loans are first position loans. 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. Loans issued are
limited to no more than 80% of the appraised value of the property and must be
first position against the collateral.

The Company has one mortgage loan in the process of foreclosure, with a balance
due of $ 1,401,345 at December 31, 2004. The Company has no loans under a
repayment plan or restructuring. Letters are sent to each mortgagee when the
loan becomes 30 days or more delinquent. Loans 90 days or more delinquent are
placed on a non-performing status and classified as delinquent loans. Reserves
for loan losses are established based on management's analysis of the loan
balances compared to the expected realizable value should foreclosure take
place. Loans are placed on a non-accrual status based on a quarterly analysis of
the likelihood of repayment. All delinquent and troubled loans held by the
Company are loans, which were held in portfolios by acquired companies at the
time of acquisition. Management believes the current internal controls
surrounding the mortgage loan selection process provide a quality portfolio with
minimal risk of foreclosure and/or negative financial impact.

The Company has in place a monitoring system to provide management with
information regarding potential troubled loans. Management is provided with a
monthly listing of loans that are 30 days or more past due along with a brief
description of what steps are being taken to resolve the delinquency. Quarterly,
coinciding with external financial reporting, the Company determines how each
delinquent loan should be classified. All loans 90 days or more past due are
classified as delinquent. Each delinquent loan is reviewed to determine the
classification and status the loan should be given. 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.

In the past few years the Company has invested more of its funds in mortgage
loans. This is the result of increased mortgage opportunities available through
FSNB, an affiliate of Mr. Jesse T. Correll. Mr. Correll is the CEO and Chairman
of the Board of Directors of UTG and is, directly and through his affiliates,
its largest shareholder. FSNB has been able to provide the Company with
expertise and experience in underwriting commercial and residential mortgage
loans, which provide more attractive yields than the traditional bond market.
During 2004, 2003 and 2002 the Company issued approximately $ 2,627,000,
$ 11,405,000 and $ 6,920,000 in new mortgage loans, respectively. These new
loans were originated through FSNB and funded by the Company through
participation agreements with FSNB. FSNB services all the mortgage loans 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 amount to cover
costs incurred by FSNB relating to the processing and establishment of the loan.
UG paid $ 45,468, $ 63,214 and $ 70,140 in servicing fees and $ 0, $ 13,821 and
$ 35,127 in origination fees to FSNB during 2004, 2003 and 2002, respectively.

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.

In addition, the Company also attempts to ensure that current and adequate
insurance on the properties underlying the mortgages is being maintained. The
Company requires proof of insurance on each loan and further requires to be
shown as a lien holder on the policy so that any change in coverage status is
reported to the Company. Proof of payment of real estate taxes is another
monitoring technique utilized by the Company. Management believes a change in
insurance status or non-payments of real estate taxes are indicators that a loan
is potentially troubled. Correspondence with the mortgagee is performed to
determine the reasons for either of these events occurring.

The following table shows a distribution of the Company's mortgage loans by type.

Mortgage Loans Amount % of Total
------------------------------------------------------ ---------------- -------------
Commercial - insured or guaranteed $ 3,832,838 19%
Commercial - all other 16,807,574 81%
Residential - insured or guaranteed 53,210 0%
Residential - all other 28,793 0%

The following table shows a geographic distribution of the Company's mortgage
loan portfolio and investment real estate.

Mortgage Real
Loans Estate
------------ ----------
Alabama 15% 0%
Colorado 15% 0%
Illinois 7% 3%
Indiana 3% 0%
Kentucky 40% 36%
New Hampshire 0% 61%
Texas 20% 0%
Virginia 0% 0%
------------ ----------
Total 100% 100%
============ ==========

The following table summarizes delinquent mortgage loan holdings of the Company.

Delinquent
90 days or more 2004 2003 2002
----------------------------------- ------------- ------------- -------------
Non-accrual status $ 167,148 $ 179,204 $ 171,300
Other 0 0 0
Reserve on delinquent
Loans (120,000) (120,000) (120,000)
------------- ------------- -------------
Total delinquent $ 47,148 $ 59,204 $ 51,300
============= ============= =============
Interest income past due
(delinquent loans) $ 0 $ 0 $ 0
============= ============= =============

In process of restructuring $ 0 $ 0 $ 0
Restructuring on other
than market terms 0 0 0
Other potential problem
Loans 0 0 1,709
------------- ------------- -------------
Total problem loans $ 0 $ 0 $ 1,709
============= ============= =============
Interest income foregone
(restructured loans) $ 0 $ 0 $ 0
============= ============= =============

In process of foreclosure $ 1,401,345 $ 1,423,804 $ 0
------------- ------------- -------------
Total foreclosed loans $ 1,401,345 $ 1,423,804 $ 0
============= ============= =============
Interest income foregone
(restructured loans) $ 0 $ 0 $ 0
============= ============= =============

See Item 2, Properties, for description of real estate holdings.

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.

The Company has not placed an emphasis on new business production. Costs
associated with supporting new business can be significant. In recent years, the
insurance industry as a whole has experienced a decline in the total number of
agents who sell insurance products; therefore competition has intensified for
top producing sales agents. The relatively small size of the Company, and the
resulting limitations, has made it challenging to compete in this area. The
number of agents marketing the Company's products has reduced to a negligible
number.

The Company performs administrative work as a third party administrator (TPA)
for unaffiliated life insurance companies. During the year ended 2004, the
Company obtained an additional contract for these services, which should provide
approximately $ 360,000 additional annual revenues. These TPA revenue fees are
included in the line item "other income" on the Company's consolidated
statements of operations. The Company intends to continue to pursue other TPA
arrangements through its alliance with Fiserv Life Insurance Solutions (Fiserv).
Through this alliance, the Company provides TPA services to insurance companies
seeking business process outsourcing solutions. Fiserv is responsible for the
marketing and sales function for the alliance, as well as providing the
datacenter operations. UTG staffs the administration effort. Management believes
this alliance with Fiserv positions the Company to generate additional revenues
by utilizing the Company's current excess capacity and administrative services.
Fiserv is a unit of Fiserv, Inc. (Nasdaq: FISV) which is an independent,
full-service provider of integrated data processing and information management
systems to the financial industry, headquartered in Brookfield, Wisconsin.

The Company has considered the feasibility of a marketing opportunity with First
Southern National Bank (FSNB) an affiliate of UTG's largest shareholder.
Management has considered various products including annuity type products,
mortgage protection products and existing insurance products, as a possibility
to market to all banking customers. This marketing opportunity has potential and
is believed to be a viable niche. The Company has recently designed the
"Horizon" annuity product as well as the "Legacy" life product, which are both
to be used in marketing efforts by FSNB. The introduction of these new products
is currently not expected to produce significant premium writings.

GOVERNMENT REGULATION

Insurance companies are subject to regulation and supervision in all the states
where they do business. Generally the state supervisory agencies have broad
administrative powers relating to granting and revoking licenses to transact
business , license agents, approving forms of policies used, regulating trade
practices and market conduct, the form and content of required financial
statements, reserve requirements, permitted investments, approval of dividends
and in general, the conduct of all insurance activities. Insurance regulation is
concerned primarily with the protection of policyholders. The Company cannot
predict the impact of any future proposals, regulations or market conduct
investigations. UG is domiciled in the state of Ohio.

Insurance companies must also file detailed annual reports on a statutory
accounting basis with the state supervisory agencies where each does business;
(see Note 6 to the consolidated financial statements) regarding statutory equity
and income from operations. These agencies may examine the business and accounts
at any time. Under the rules of the National Association of Insurance
Commissioners (NAIC) and state laws, the supervisory agencies of one or more
states examine a company periodically, usually at three to five year intervals.

Most states also have insurance holding company statutes, which require
registration and periodic reporting by insurance companies controlled by other
corporations licensed to transact business within their respective
jurisdictions. The insurance subsidiary is subject to such legislation and
registered as controlled insurers in those jurisdictions in which such
registration is required. Statutes vary from state to state but typically
require periodic disclosure, concerning the corporation that controls the
registered insurers and all subsidiaries of such corporation. In addition, prior
notice to, or approval by, the state insurance commission of material
transactions with affiliates, including transfers of assets, reinsurance
agreements, management agreements (see Note 9 to the consolidated financial
statements), and payment of dividends (see Note 2 to the consolidated financial
statements) in excess of specified amounts by the insurance subsidiary, within
the holding company system, are required.

Risk-based capital requirements and state guaranty fund laws are discussed in
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations".

EMPLOYEES

At December 31, 2004, UTG and its subsidiaries had 52 full-time equivalent
employees. UTG's operations are headquartered in Springfield, Illinois.

ITEM 2. PROPERTIES

The following table shows a breakout of property, net of accumulated
depreciation, owned and occupied by the Company and the distribution of real
estate by type.

Property owned Amount % of Total
Home Office $ 1,758,587 6%

Investment real estate
Commercial 27,386,294 91%
Residential development 805,787 3%
28,192,081 94%

Grand total $ 29,950,668 100%

Total investment real estate holdings represent approximately 9% of the total
assets of the Company net of accumulated depreciation of $ 2,872,199 and
$ 1,729,001 at year-end 2004 and 2003 respectively. 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, and are carried at $ 1,758,587. Currently, the facilities
occupied by the Company are adequate relative to the Company's present
operations.

Commercial property mainly consists of North Plaza, Hampshire Plaza and
Hampshire Plaza Garage. See Item 1, "Business" for additional information
regarding descriptions and operating results of these properties.

Residential development property is primarily located in Springfield, Illinois,
and consists of two parcels. The Company has no current plans to further develop
these parcels. The properties are located in a growing area of the community and
are currently being marketed for sale.

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. There were no
proceedings pending as of December 31, 2004.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of UTG's shareholders during the
fourth quarter of 2004.

PART II

ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

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

The following table shows the high and low bid quotations 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 NASDAQ web site, which also provides quotes for
over-the-counter traded securities such as UTG.

2004 2003
PERIOD High Low High Low

First quarter 6.250 5.550 7.000 6.800
Second quarter 6.250 5.500 8.000 6.850
Third quarter 5.600 5.100 7.150 6.700
Fourth quarter 6.000 5.100 7.490 5.800

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 2 in the accompanying consolidated financial statements for
information regarding dividend restrictions, including applicable restrictions
on the ability of the Company's life insurance subsidiary to pay dividends up to
the Registrant.

As of March 22, 2005 there were 9,306 record holders of UTG common stock.

The following table reflects the Company's Employee and Director Stock Purchase
Plan Information:

--------------------------------- ------------------------------ ------------------------------- ------------------------------
Plan category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding options, remaining available for
outstanding options, warrants and rights future issuance under
warrants and rights employee and director stock
purchase plans (excluding
securities reflected in
column (a))
(a) (b) (c)
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Employee and Director Stock
Purchase plans approved by
security holders
310,123
0 0
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Employee and Director Stock
Purchase plans not approved by
security holders

0 0 0
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Total 0 0 310,123
--------------------------------- ------------------------------ ------------------------------- ------------------------------

On March 26, 2002, the Board of Directors of UTG adopted, and on June 11, 2002,
the shareholders of UTG approved the United Trust Group, Inc. Employee and
Director Stock Purchase Plan. The Plan allows for the issuance of up to 400,000
shares of UTG common stock. The plan's purpose is to encourage ownership of UTG
stock by eligible directors and employees of UTG and its subsidiary by providing
them with an opportunity to invest in shares of UTG common stock. The plan is
administered by the Board of Directors of UTG.

A total of 400,000 shares of common stock may be purchased under the plan,
subject to appropriate adjustment for stock dividends, stock splits or similar
recapitalizations resulting in a change in shares of UTG. The plan is not
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code. During 2004 and 2003, the Board of Directors of UTG
approved offerings under the plan to qualified individuals. For the years ended
December 31, 2004 and 2003, four individuals purchased 14,440 and eight
individuals purchased 58,891 shares of UTG common stock, respectively. Each
participant under the plan executed a "stock restriction and buy-sell
agreement", which among other things provides UTG with a right of first refusal
on any future sales of the shares acquired by the participant under this plan.

The purchase price of shares repurchased under the stock restriction and
buy-sell agreement shall be computed, on a per share basis, equal to the sum of
(i) the original purchase price paid to acquire such shares from UTG and (ii)
the consolidated statutory net earnings (loss) per share of such shares during
the period from the end of the month next preceding the month in which such
shares were acquired pursuant to the plan, to the end of the month next
preceding the month in which the sale of such shares to UTG occurs. At
December 31, 2004, UTG had 89,877 shares outstanding that were issued under this
program with a value of $ 11.63 per share pursuant to the above formula.

The Company has no other stock plans.

ITEM 6. SELECTED FINANCIAL DATA

The following selected historical consolidated financial data should be read in
conjunction with "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Item 8 - Financial Statements and
Supplementary Data" and other financial information included elsewhere in this
Form 10-K.

FINANCIAL HIGHLIGHTS
(000's omitted, except per share data)
2004 2003 2002 2001 2000
------------- ----------- ----------- ------------ ------------
Premium income
net of reinsurance $ 14,140 $ 15,023 $ 15,832 $ 17,141 $ 19,490
Total revenues $ 25,467 $ 26,488 $ 30,177 $ 33,313 $ 35,747
Net income (loss)* $ (276) $ (6,396) $ 1,339 $ 2,308 $ (696)
Basic income (loss) per share $ (0.07) $ (1.67) $ 0.38 $ 0.62 $ (0.17)
Total assets $ 317,868 $ 311,557 $ 320,494 $ 328,939 $ 333,035
Total long-term debt $ 0 $ 2,290 $ 2,995 $ 4,401 $ 1,817
Dividends paid per share NONE NONE NONE NONE NONE

* Includes equity earnings of investees.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The purpose of this section is to discuss and analyze the Company's consolidated
results of operations, financial condition and liquidity and capital resources
for the three years ended December 31, 2004. This analysis should be read in
conjunction with the consolidated financial statements and related notes, which
appear elsewhere in this Form 10-K. The Company reports financial results on a
consolidated basis. The consolidated financial statements include the accounts
of UTG and its subsidiaries at December 31, 2004.

Cautionary Statement Regarding Forward-Looking Statements

Any forward-looking statement contained herein or in any other oral or written
statement by the Company or any of its officers, directors or employees is
qualified by the fact that actual results of the Company may differ materially
from any such statement due to the following important factors, among other
risks and uncertainties inherent in the Company's business:

1. Prevailing interest rate levels, which may affect the ability of the
Company to sell its products, the market value of the Company's investments
and the lapse ratio of the Company's policies, notwithstanding product
design features intended to enhance persistency of the Company's products.

2. Changes in the federal income tax laws and regulations which may affect the
relative tax advantages of the Company's products.

3. Changes in the regulation of financial services, including bank sales and
underwriting of insurance products, which may affect the competitive
environment for the Company's products.

4. Other factors affecting the performance of the Company, including, but not
limited to, market conduct claims, insurance industry insolvencies,
insurance regulatory initiatives and developments, stock market
performance, an unfavorable outcome in pending litigation, and investment
performance.

Critical Accounting Policies

General

We have identified the accounting policies below as critical to the
understanding of our results of operations and our financial position. The
application of these critical accounting policies in preparing our financial
statement 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 to the consolidated financial
statements.

DAC and Cost of Insurance Acquired

Deferred acquisition costs (DAC) and cost ofinsurance acquired reflect our
expectations about the future experience of the existing business in-force. The
primary assumptions regarding future experience that can affect the carrying
value of DAC and cost of insurance acquired balances include mortality, interest
spreads and policy lapse rates. Significant changes in these assumptions can
impact amortization of DAC and cost of insurance acquired in both the current
and future periods, which is reflected in earnings.

Investments

We regularly monitor our investment portfolio to ensure that investments that
may be other than temporarily impaired are identified in a timely manner and
properly valued, and that any impairments are charged against earnings in the
proper period.

Valuing our investment portfolio involves a variety of assumptions and
estimates, particularly for investments that are not actively traded. We rely on
external pricing sources for highly liquid publicly traded securities. Many
judgments are involved in timely identifying and valuing securities, including
potentially impaired securities. Inherently, there are risks and uncertainties
involved in making these judgments. Changes in circumstances and critical
assumptions such as a continued weak economy, a more pronounced economic
downturn or unforeseen events which affect one or more companies, industry
sectors or countries could result in write downs in future periods for
impairments that are deemed other than temporary.

Results of Operations

(a) Revenues

Premiums and policy fee revenues, net of reinsurance premiums and policy fees,
decreased 6% when comparing 2004 to 2003 and 5% from 2003 to 2002. The Company
continues to write very little new business, as Management places modest
emphasis on new business production. Unless the Company acquires a block of
in-force business, management expects premium revenue to continue to decline at
a rate consistent with prior experience. The Company's average persistency rate
for all policies in force for 2004, 2003 and 2002 was approximately 94.6%,
94.9%, and 93.6%, respectively. Persistency is a measure of insurance in force
retained in relation to the previous year.

The Company's primary source of new business production comes from the
conservation effort implemented several years ago. This effort was an attempt to
improve the persistency rate of insurance company's policies. Several of the
customer service representatives of the Company are also licensed insurance
agents, allowing them to offer other products within the Company's portfolio to
existing customers. Additionally, stronger efforts have been made in policy
retention through more personal contact with the customer including telephone
calls to discuss alternatives and reasons for a customer's request to surrender
their policy. Previously, the Company's agency force was primarily responsible
for conservation efforts. With the decline in the number of agents, their
ability to reach these customers diminished, making conservation efforts
difficult. The conservation efforts described above have been generally
positive. Management will continue to monitor these efforts and make adjustments
as seen appropriate to enhance the future success of the program. In 2003, the
Company replaced its original universal life product with a new universal life
contract referred to as "the Legacy". This product was designed for use with
several distribution channels including the Company's own internal agents, bank
agent/employees and through personally producing general agents "PPGA". In
addition, the Company has introduced other new and updated products in recent
periods including the Horizon Annuity and Kid Kare (as single premium, child
term policy). The company is currently working on development of a level term
and decreasing term product. Management has no current plans to increase
marketing efforts. New product development is anticipated to be utilized in
conservation efforts and sales to existing customers. Such sales are not
expected to be material.

The Company has considered the feasibility of a marketing opportunity with First
Southern National Bank (FSNB) an affiliate of UTG's largest shareholder,
Chairman and CEO, Mr. Jesse T. Correll. Management has considered various
products including annuity type products, mortgage protection products and
existing insurance products, as potential products that could be marketed to
banking customers. This marketing opportunity has potential and is believed to
be a viable niche. This potential is in the very early states of consideration.
Management will proceed cautiously and may even determine not to proceed. The
introduction of new products is not expected to produce significant premium
writings. The Company is currently looking at other types of products to
compliment the existing offerings.

Net investment income increased 1% when comparing 2004 to 2003 and decreased 24%
when comparing 2003 to 2002. The overall gross investment yields for 2004, 2003
and 2002, are 6.06%, 5.73% and 6.66%, respectively. The decline in investment
yield during 2003 was directly affected by the decline in the national prime
rate, which was 4.00% at December 31, 2003. The national prime rate increased to
5.25% at December 31, 2004; however, the lower yield in recent years has
resulted in reduced earnings on short-term funds as well as on longer-term
investments acquired during the reporting period. Through this period,
Management shortened the length of the Company's portfolio and maintained a
conservative investment philosophy. As such, following an analysis of current
holdings during the first half of 2004, the Company liquidated approximately
$ 39,000,000 of its collateralized mortgage obligation and mortgage backed bond
portfolio in order to limit its interest rate and extension risk. In addition,
there were $ 48,000,000 in bonds that matured or were called during 2004. The
result of these transactions caused an excess of cash invested in short-term
money market funds during parts of 2004. The Company began reinvesting this cash
during the second quarter primarily in governmental and agency bonds at current
lower yields. Although this hurts investment earnings in the short run, the
Company has not had to write off any investment losses due to excessive risk.
Many insurance companies have suffered significant losses in their investment
portfolios as a result of corporate defaults and bankruptcies in the last few
years; however, because of the Company's conservative investment philosophy the
Company has so far avoided such significant losses. The Company's corporate
holdings are relatively small compared to the insurance industry. Recent periods
investments acquired include a very limited amount in corporate securities.

In addition to the changing interest rate environment, the Company benefited
from improved earnings on its real estate investment in Hampshire Plaza. New
tenant leases during the year resulted in an increase in earnings on this
investment, with 2004 being the first year of ownership to show positive
results. The property is expected to continue showing positive results in future
periods. This parcel was acquired two years ago with an original projection of
two years of unprofitable results. Actual results have been better than
originally projected as a result of leasing vacant space quicker. This property
reflected an increase in investment income of approximately $992,000 in 2004 as
compared to 2003.

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. The Company
monitors investment yields, and when necessary adjusts credited interest rates
on its insurance products to preserve targeted interest spreads, ranging from 1%
to 2%. In previous years, the Board of Directors lowered crediting rates to
their guaranteed minimum rates, and as such, cannot lower them any further.
These adjustments were in response to the continued declines in interest rates
in the marketplace described above. 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 won't be able to lower rates and both net
investment income and net income will be impacted negatively.

Realized investment gains, net of realized losses, were $ (20,648), $ 485,436
and $ 13,634 in 2004, 2003 and 2002, respectively. As previously discussed, the
Company sold several of its collateralized mortgage obligation bonds during 2004
and realized a nominal net loss on these securities. The primary source for the
2003 gain is from the sale of two investments. The Company sold one common stock
holding, realizing a gain of $ 165,262 and one real estate holding, realizing a
gain of $ 211,352. During 2002, the modest realized gain consisted primarily of
real estate sales on residential development property the Company owned in
Springfield, Illinois.

The Company performs administrative work as a third party administrator (TPA)
for unaffiliated life insurance companies. 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
entered into a new contract mid-year 2004, which should provide approximately
$ 360,000 additional annual revenues. For the years ended 2004, 2003 and 2002,
the Company received $ 719,053, $ 571,298, and $ 521,782 for this work,
respectively. These TPA revenue fees are included in the line item "other
income" on the Company's consolidated statements of operations. The Company
intends to continue to pursue other TPA arrangements, through an alliance with
Fiserv (Fiserv) to insurance companies seeking business process outsourcing
solutions. Fiserv will be responsible for the marketing and sales function for
the alliance, as well as providing the datacenter operations. UTG will staff the
administration effort. Management believes this alliance with Fiserv positions
the Company to generate additional revenues by utilizing the Company's current
excess capacity and administrative services. Fiserv is a unit of Fiserv, Inc.
(Nasdaq: FISV) which is an independent, full-service provider of integrated data
processing and information management systems to the financial industry,
headquartered in Brookfield, Wisconsin. Management believes this area is a
growing market and the Company is well positioned to serve this market.

(b) Expenses

Benefits, claims and settlement expenses net of reinsurance benefits and claims,
decreased $ 2,307,898 from 2003 to 2004 and increased $ 1,631,372 from 2002 to
2003. The significant fluctuations between the three years relates primarily to
changes in the Company's policyholder reserves, or future policy benefits.
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. Fluctuations
in death claim experience from year to year also typically have a significant
impact on variances in this line item. Death claims were approximately $240,000
less in 2004 as compared to 2003. Direct (prior to reinsurance) death claims
were approximately $ 1,024,000 less in 2004 than in 2003. There is no single
event that caused the mortality variances. Policy claims vary from year to year
and therefore, fluctuations in mortality are to be expected and are not
considered unusual by management. Policy surrender benefits decreased
approximately $ 546,000 during the year 2004 compared to the same period in 2003
and $ 980,000 during the year 2003 compared to the same period in 2002. As
discussed above, stronger efforts have been made in policy retention through
more personal contact with customers including telephone calls to discuss
alternatives and reasons for a request to surrender their policy. The short-term
impact of such fewer 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. Therefore, a decline in
current period surrenders results in an overall increase in the policy benefits
number in the current period. The benefit of fewer policy surrenders is
primarily received over a longer time period through the retention of the
Company's asset base.

Commissions and amortization of deferred policy acquisition costs decreased 1%
in 2004 compared to 2003 and decreased 60% in 2003 compared to 2002. The most
significant factor in the continuing decrease is attributable to the Company
paying fewer commissions, since the Company writes very little new business and
renewal premiums on existing business continue to decline. Another factor of the
decrease is attributable to normal amortization of the deferred policy
acquisition costs asset. The Company reviews the recoverability of the asset
based on current trends and known events compared to the assumptions used in the
establishment of the original asset. No impairments were recorded in any of the
three periods reported.

Net amortization of cost of insurance acquired increased 10% in 2004 compared to
2003 and decreased 12% in 2003 compared to 2002. Cost of insurance acquired is
established 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 cash
flows from the acquired policies. Cost of insurance acquired is comprised of
individual life insurance products including whole life, interest sensitive
whole life and universal life insurance products. 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 in the amortization calculation are 9% on
approximately 25% of the balance and 15% on the remaining balance. The interest
rates vary due to risk analysis performed at the time of acquisition on the
business acquired. 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. Persistency is a measure of insurance in force retained in relation to
the previous year. The Company's average persistency rate for all policies in
force for 2004, 2003 and 2002 has been approximately 94.6%, 94.9% and 93.6%,
respectively. Based on the projected future profits of the insurance in-force
during 2003, the Company wrote off an additional $ 5,000,000 of cost of
insurance acquired. This write-off is primarily the result of continued
tightening of interest rate spreads of the Company. The Company continues to
analyze these projections to determine the adequacy of present values assigned
to future cash flows.

Operating expenses decreased 30% in 2004 compared to 2003 and increased 29% in
2003 compared to 2002. During 2003, the Company paid $ 1,950,000 in settlement
of a lawsuit. In addition, the Company maintained a $ 75,000 accrual during 2004
to cover expected future costs regarding this matter. Additional expense
reductions have been made in the normal course of business, as the Company
continually monitors expenditures looking for savings opportunities. These
expense reductions have been partially offset by increased operating costs of
approximately $ 285,000 attributable to the Company's conversion of its existing
business and TPA clients to "ID3", a software system owned by Fiserv and
utilized by the Company. Conversion costs to date include fees for initial
licensing, consultation, and training.

Interest expense declined 52% comparing 2004 to 2003 and 38% comparing 2003 to
2002. The Company repaid $ 2,289,776, $ 705,499 and $ 1,405,395 in outside debt
in 2004, 2003 and 2002 respectively, through operating cash flows and dividends
received from its subsidiary UG. At December 31, 2004, UTG had no debt
outstanding for the first time since 1992.

Deferred taxes are established to recognize future tax effects attributable to
temporary differences between the financial statements and the tax return. As
these differences are realized in the financial statement or tax return, the
deferred income tax established on the difference is recognized in the financial
statements as an income tax expense or credit.

The Company had a net income (loss) of $ (275,617), $ (6,396,490), and
$ 1,338,795 in 2004, 2003 and 2002 respectively. Significant one-time charges
and accruals to operating expenses, combined with an additional write-off of
cost of insurance acquired and lower interest rates during 2003 as previously
described, were the primary differences in the 2004 to 2003 results. The Company
continues to monitor and adjust those items within its control.

Financial Condition

(a) Assets

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 it is permitted to make, and the amount of funds that may be used
for any one type of investment. In light of these statutes and regulations, and
the Company's business and investment strategy, the Company generally seeks to
invest in United States government and government agency securities and other
high quality low risk investments. Many insurance companies have suffered
significant losses in their investment portfolios in the last couple of years;
however, because of the Company's conservative investment philosophy the Company
has so far largely avoided such significant losses. The Company has not written
off any investment losses in these turbulent economic times.

At December 31, 2004, the carrying value of fixed maturity securities in default
as to principal or interest was immaterial in the context of consolidated assets
or shareholders' equity. The Company has identified securities it may sell and
classified them as "investments held for sale". Investments held for sale are
carried at market, with changes in market value charged directly to
shareholders' equity. To provide additional flexibility and liquidity, the
Company has categorized almost all fixed maturity investments acquired in recent
periods as available for sale.

The following table summarizes the Company's fixed maturities distribution at
December 31, 2004 and 2003 by ratings category as issued by Standard and Poor's,
a leading ratings analyst.

In previous years the Company has invested more of its funds in mortgage loans.
This is the result of increased mortgage opportunities available through FSNB,
an affiliate of Mr. Jesse T. Correll. Mr. Correll is the CEO and Chairman of the
Board of Directors of UTG, and directly and indirectly through affiliates, its
largest shareholder. 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.
During 2004, 2003 and 2002 the Company issued approximately $ 2,627,000,
$ 11,405,000 and $ 6,920,000 respectively, in new mortgage loans. These new
loans were originated through FSNB and funded by the Company through
participation agreements with FSNB. FSNB services the loans covered by these
participation agreements. 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 amount
to cover costs incurred by FSNB relating to the processing and establishment of
the loan. UG paid $ 45,468, $ 63,214 and $ 70,140 in servicing fees and $ 0,
$ 13,821 and $ 35,127 in origination fees to FSNB during 2004, 2003 and 2002,
respectively. The Company anticipates these opportunities to continue to be
available and will pursue those investments that provide attractive yields.

Total investment real estate holdings represent approximately 9% and 8% of the
total assets of the Company, net of accumulated depreciation, at year-end 2004
and 2003 respectively. Total investment real estate is separated into commercial
and residential categories.

Policy loans remained consistent for the periods presented. Industry experience
for policy loans indicates that few policy loans are ever repaid by the
policyholder, other than through termination of the policy. Policy loans are
systematically reviewed to ensure that no individual policy loan exceeds the
underlying cash value of the policy.

Deferred policy acquisition costs decreased 21% in 2004 compared to 2003.
Deferred policy acquisition costs, which vary with, and are primarily related to
producing new business, are referred to as DAC. DAC consists primarily of
commissions and certain costs of policy issuance and underwriting, net of fees
charged to the policy in excess of ultimate fees charged. To the extent these
costs are recoverable from future profits, the Company defers these costs and
amortizes them with interest in relation to the present value of expected gross
profits from the contracts, discounted using the interest rate credited by the
policy. The Company had $ 5,000 in policy acquisition costs deferred, $ 10,000
in interest accretion and $ 447,380 in amortization in 2004, and had $ 61,000 in
policy acquisition costs deferred, $ 17,000 in interest accretion and $ 417,844
in amortization in 2003.

Cost of insurance acquired decreased 13% in 2004 compared to 2003. 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 cash flows 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. In 2004 and 2003
amortization decreased the asset by $ 1,869,135 and $ 1,695,328, respectively.
In 2003, the balance was reduced by an additional $ 5,000,000 as a direct
charge-off of unamortized asset over the projected future profits. Also, the
balance was reduced $ 8,409,722 in 2002 as a result of the valuation adjustment
attributable to the acquisition of the minority positions of FCC through its
merger with and into UTG.

(b) Liabilities

Total liabilities increased less than 1% in 2004 compared to 2003. Policy
liabilities and accruals, which represented 94% and 95% of total liabilities at
year end 2004 and 2003, respectively, decreased slightly during the current
year. The decrease is attributable to a decrease in the outstanding policy
benefit claims at the end of the year.

The Company had $ 0 and $ 2,289,776 in outstanding notes payable as of December
31, 2004 and 2003, respectively. The Company has two lines of credit available
for operating liquidity or acquisitions of additional lines of business. The
Company's long-term debt is discussed in more detail in Note 11 to the
consolidated financial statements, which is incorporated herein by this
reference.

Total shareholders' equity increased 12% in 2004 compared to 2003. This is
primarily due to significant increases in the unrealized gains on the Company's
equity investments. Unrealized gains increased by $ 5,112,145 during 2004. This
increase in unrealized gains is partially offset by the net loss from operations
during the year of $ (275,617). Other factors that impacted shareholders' equity
included issuance of shares from an employee and director stock purchase plan
which was approved and implemented in 2002 of $ 167,360 and treasury shares
purchased and retirements totaling $ (299,057).

The Company's current and merged insurance subsidiaries are assessed
contributions by life and health guaranty associations in almost all states to
indemnify policyholders of failed companies. In several states the company may
reduce premium taxes paid to recover a portion of assessments paid to the
states' guaranty fund association. This right of "offset" may come under review
by the various states, and the company cannot predict whether and to what extent
legislative initiatives may affect this right to offset. In addition, some state
guaranty associations have adjusted the basis by which they assess the cost of
insolvencies to individual companies. The Company believes that its reserve for
future guaranty fund assessments is sufficient to provide for assessments
related to known insolvencies. This reserve is based upon management's current
expectation of the availability of this right of offset, known insolvencies and
state guaranty fund assessment bases. However, changes in the basis whereby
assessments are charged to individual companies and changes in the availability
of the right to offset assessments against premium tax payments could materially
affect the Company's results.

Each year, the NAIC calculates financial ratio results (commonly referred to as
IRIS ratios) for each insurance company. These ratios compare key financial data
pertaining to the statutory balance sheet and income statement. The results are
then compared to pre-established normal ranges determined by the NAIC. Results
outside the range typically require explanation to the domiciliary insurance
department. At year-end 2004, UG had four ratios outside the normal range. These
ratios are discussed in more detail in the Regulatory Environment discussion
included in this Item 7.

Liquidity and Capital Resources

The Company has two principal needs for cash - the insurance companies'
contractual obligations to policyholders and the payment of operating expenses.
Cash and cash equivalents as a percentage of total assets were 4% and 3% as of
December 31, 2004 and 2003, respectively. Fixed maturities as a percentage of
total invested assets were 50% and 68% as of December 31, 2004 and 2003,
respectively.

The Company's investments are predominantly in fixed maturity investments such
as bonds and mortgage loans, which provide sufficient return to cover future
obligations. The Company carries certain of its fixed maturity holdings as held
to maturity which are reported in the financial statements at their amortized
cost.

Many of the Company's products contain surrender charges and other features
which reward persistency and penalize the early withdrawal of funds. With
respect to such products, surrender charges are generally sufficient to cover
the Company's unamortized deferred policy acquisition costs with respect to the
policy being surrendered.

Cash provided by (used in) operating activities was $ (45,950), $ (933,048) and
$ 467,034 in 2004, 2003 and 2002, respectively. Reporting regulations require
cash inflows and outflows from universal life insurance products to be shown as
financing activities when reporting on cash flows. The net cash provided by
operating activities plus policyholder contract deposits less policyholder
contract withdrawals equaled $ 1,754,504 in 2004, $ 1,504,703 in 2003 and
$ 2,798,799 in 2002. Management utilizes this measurement of cash flows as an
indicator of the performance of the Company's insurance operations.

Cash provided by (used in) investing activities was $ 3,776,714, $ (15,846,714)
and $ 7,833,788 for 2004, 2003 and 2002, respectively. The most significant
aspect of cash provided by (used in) investing activities is the fixed maturity
transactions. Fixed maturities account for 82%, 82% and 78% of the total cost of
investments acquired in 2004, 2003 and 2002, respectively.

Net cash provided by (used in) financing activities was $ (621,019), $ 1,487,041
and $ (473,692) for 2004, 2003 and 2002, respectively. The Company paid off the
remaining balance of its outstanding debt in 2004. Such payments are included
within this category. In addition, in 2001 the Board of Directors of the Company
authorized a repurchase program of UTG's common stock and the purchase of stock
is still pursued as it becomes available. In addition, in 2002 this category
includes payments made to former FCC shareholders for shares they owned prior to
the merger of FCC into UTG.

Policyholder contract deposits decreased 5% in 2004 compared to 2003 and 8% in
2003 compared to 2002. The decrease in policyholder contract deposits relates to
the declining in force business of the Company. New premium production of
interest sensitive type policies has been negligible in recent periods.
Management anticipates continued moderate declines in contract deposits.
Policyholder contract withdrawals have increased 2% in 2004 compared to 2003 and
decreased 11% in 2003 compared to 2002. The change in policyholder contract
withdrawals is not attributable to any one significant event. Factors that
influence policyholder contract withdrawals are fluctuation of interest rates,
competition and other economic factors.

During 2004, the Company paid in full the remaining debt owed to two former
officers and directors of the Company and their respective families as a result
of an April 2001 stock purchase transaction. These notes were paid from a draw
on a line of credit, which was also repaid in 2004. As of December 31, 2004, the
Company has no outstanding notes payable.

The Company has two lines of credit available for future use. The Company has a
$ 3,300,000 line of credit (LOC) available from the First National Bank of the
Cumberlands (FNBC) located in Livingston, Tennessee. The interest rate on the
LOC is variable and indexed to be the lowest of the U.S. prime rates as
published in the Wall Street Journal, with any interest rate adjustments to be
made monthly. At December 31, 2004, the Company had no outstanding borrowings
attributable to this LOC. During 2004 and 2003, the Company had no borrowings
against this LOC. During 2002 the Company had total borrowings of $ 1,600,000 on
this LOC, which were all repaid during the year.

The second LOC available to the Company is a $ 5,000,000 line of credit (LOC)
extended from Southwest Bank of St. Louis. As collateral for any draws under the
line of credit, the Company pledged 100% of the common stock of its insurance
subsidiary UG. Borrowings under the LOC bear interest at the rate of 0.25% in
excess of Southwest Bank of St. Louis' prime rate. At December 31, 2004, the
Company had no outstanding borrowings attributable to this LOC. During 2004, the
Company had total borrowings of $ 2,275,000, which were repaid during the year.
In addition, during 2002 the Company had total borrowings of $ 400,000 on this
LOC which were all repaid during the year.

During 2002, UTG and Fiserv formed an alliance between their respective
organizations to provide third party administration (TPA) services to insurance
companies seeking business process outsourcing solutions. Fiserv will be
responsible for the marketing and sales function for the alliance, as well as
providing the operations processing service for the Company. The Company will
staff the administration effort. To facilitate the alliance, the Company has
converted part of its existing business and all TPA clients to "ID3", a software
system owned by Fiserv to administer an array of life, health and annuity
products in the insurance industry. Fiserv is a unit of Fiserv, Inc. (Nasdaq:
FISV) which is an independent, full-service provider of integrated data
processing and information management systems to the financial industry,
headquartered in Brookfield, Wisconsin. In addition, the Company entered into a
five-year contract with Fiserv for services related to their purchase of the
"ID3" software system. Under the contract, the Company is required to pay
$ 12,000 per month in software maintenance costs and a monthly fee for offsite
data center costs, based on the number and type of policies being administered
the ID3 software system for a five-year period from the date of the signing.

On November 20, 1998, FSF and affiliates acquired 929,904 shares of common stock
of UTG from UTG and certain UTG shareholders. As consideration for the shares,
FSF paid UTG $ 10,999,995 and certain shareholders of UTG $ 999,990 in cash.
Included in the stock acquisition agreement was an earnings covenant whereby UTG
warrants UTG and its subsidiaries and affiliates would have future earnings of
at least $ 30,000,000 for a five-year period beginning January 1, 1998. Such
earnings were computed based on statutory results excluding inter-company
activities such as inter-company dividends plus realized and unrealized gains
and losses on real estate, mortgage loans and unaffiliated common stocks. At the
end of the covenant period, an adjustment was to be made equal to the difference
between the then market value and statutory carrying value of real estate still
owned that existed at the beginning of the covenant period. If UTG did not meet
the covenant requirements, any shortfall would first be reduced by the actual
average tax rate for UTG for the period, and then will be further reduced by
one-half of the percentage, if any, representing UTG's ownership percentage of
the insurance company subsidiaries. This result would then be reduced by
$ 250,000. The remaining amount would be paid by UTG in the form of UTG common
stock valued at $ 15.00 per share with a maximum number of shares to be issued
of 500,000. However, there was to be no limit to the number of shares
transferred to the extent that there are legal fees, settlements, damage
payments or other losses as a result of certain legal action taken. The price
and number of shares was adjusted for any applicable stock splits, stock
dividends or other recapitalizations. For the five-year period starting
January 1, 1998 and ending December 31, 2003, the Company had total earnings of
$ 17,011,307 applicable to this covenant. Therefore, UTG did not meet the
earnings requirements stipulated, and during 2003, UTG was required to issue
500,000 additional shares to FSF or its assigns.

UTG is a holding company that has no day-to-day operations of its own. Funds
required to meet its expenses, generally costs associated with maintaining the
Company in good standing with states in which it does business, are primarily
provided by its subsidiaries. On a parent only basis, UTG's cash flow is
dependent on management fees received from its insurance subsidiary and earnings
received on cash balances. On December 31, 2004, substantially all of the
consolidated shareholders equity represents net assets of its subsidiary. The
Company's insurance subsidiary has maintained adequate statutory capital and
surplus and has not used surplus relief or financial reinsurance, which have
come under scrutiny by many state insurance departments. The payment of cash
dividends to shareholders is not legally restricted. However, the state
insurance department regulates insurance company dividend payments where the
company is domiciled.

UG is an Ohio domiciled insurance company, which requires five days prior
notification to the insurance commissioner for the payment of an ordinary
dividend. Ordinary dividends are defined as the greater of: a) prior year
statutory earnings or b) 10% of statutory capital and surplus. At December 31,
2004 UG statutory shareholders' equity was $ 21,860,401. At December 31, 2004,
UG statutory loss from operations was $ (762,152). 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 a dividend of $ 2,275,000 to UTG in 2004, of which $ 974,180 was considered
to be an extraordinary dividend.

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

REGULATORY ENVIRONMENT

Currently, UG, the insurance subsidiary, is subject to government regulation in
each of the states in which it conducts business. Such regulation is vested in
state agencies having broad administrative power dealing with all aspects of the
insurance business, including the power to: (i) grant and revoke licenses to
transact business; (ii) regulate and supervise trade practices and market
conduct; (iii) establish guaranty associations; (iv) license agents; (v) approve
policy forms; (vi) approve premium rates for some lines of business; (vii)
establish reserve requirements; (viii) prescribe the form and content of
required financial statements and reports; (ix) determine the reasonableness and
adequacy of statutory capital and surplus; and (x) regulate the type and amount
of permitted investments. Insurance regulation is concerned primarily with the
protection of policyholders. The Company cannot predict the impact of any future
proposals, regulations or market conduct investigations. UG is domiciled in the
state of Ohio.

The insurance regulatory framework continues to be scrutinized by various
states, the federal government and the National Association of Insurance
Commissioners (NAIC). The NAIC is an association whose membership consists of
the insurance commissioners or their designees of the various states. The NAIC
has no direct regulatory authority over insurance companies. However, its
primary purpose is to provide a more consistent method of regulation and
reporting from state to state. This is accomplished through the issuance of
model regulations, which can be adopted by individual states unmodified,
modified to meet the state's own needs or requirements, or dismissed entirely.

Most states also have insurance holding company statutes, which require
registration and periodic reporting by insurance companies controlled by other
corporations licensed to transact business within their respective
jurisdictions. The insurance subsidiary is subject to such legislation and
registered as controlled insurers in those jurisdictions in which such
registration is required. Statutes vary from state to state but typically
require periodic disclosure, concerning the corporation that controls the
registered insurers and all subsidiaries of such corporation. In addition, prior
notice to, or approval by, the state insurance commission of material
intercorporate transfers of assets, reinsurance agreements, management
agreements (see Note 9 to the consolidated financial statements), and payment of
dividends (see Note 2 to the consolidated financial statements) in excess of
specified amounts by the insurance subsidiary, within the holding company
system, are required.

Each year, the NAIC calculates financial ratio results (commonly referred to as
IRIS ratios) for each company. These ratios compare various financial
information, pertaining to the statutory balance sheet and income statement. The
results are then compared to pre-established normal ranges determined by the
NAIC. Results outside the range typically require explanation to the domiciliary
insurance department.

At year-end 2004, UG had four ratios outside the normal range. Each of the
ratios outside the normal range was anticipated by Management, based upon the
operating results of the Company. The first ratio addresses significant
variations in capital of the life company. The variance from normal was the
result of the contribution of capital, North Plaza of Somerset, to the insurance
company from its parent. The second ratio compares net income with total income,
including realized capital gains and losses. Any ratio that results in a
negative value will be considered outside the normal range. As expected with the
current year loss by the insurance subsidiary, this ratio was outside the normal
range. The third ratio was slightly outside the normal range, as it relates to
net investment income. As discussed in previous sections of this report,
investment income has been hindered by declining interest rates in recent years
and the average life of the investment portfolio. The fourth ratio outside the
normal range relates to the current year change in premium. As previously
discussed, premium revenues have declined in recent periods. In addition to this
factor, the Company paid additional reinsurance premiums during the current year
that were due in previous periods.

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. In addition,
the formula defines new minimum capital standards that will supplement the
current system of low fixed minimum capital and surplus requirements on a
state-by-state basis. Regulatory compliance is determined by a ratio of the
insurance company's regulatory total adjusted capital, as defined by the NAIC,
to its authorized control level RBC, as defined by the NAIC. Insurance companies
below specific trigger points or ratios are classified within certain levels,
each of which requires specific corrective action. The levels and ratios are as
follows:

Ratio of Total Adjusted Capital to
Authorized Control Level RBC
Regulatory Event (Less Than or Equal to)

Company action level 2*
Regulatory action level 1.5
Authorized control level 1
Mandatory control level 0.7

* Or, 2.5 with negative trend.

At December 31, 2004, the insurance subsidiary has a ratio that is in excess of
4, which is 400% of the authorized control level; accordingly, the insurance
subsidiary meets the RBC requirements.

On July 30, 2002, President Bush signed into law the "SARBANES-OXLEY" Act of
2002 ("the Act"). This Law, enacted in response to several high-profile business
failures, was developed to provide meaningful reforms that protect the public
interest and restore confidence in the reporting practices of publicly traded
companies. The implications of the Act to public companies, (which includes UTG)
are vast, widespread, and evolving. Many of the new requirements will not take
effect or full effect until after calendar-year-end companies have completed
their 2004 annual reports. The Company has implemented requirements affecting
the current reporting period, and is continually monitoring, evaluating, and
planning implementation of requirements that will need to be taken into account
in future reporting periods.

ACCOUNTING AND LEGAL DEVELOPMENTS

The Financial Accounting Standards Board ("FASB") has issued Statement No. 132
(revised 2003), Employers' Disclosures about Pensions and Other Postretirement
Benefits (an amendment of FASB Statements 87, 88 and 106). Statement No. 132 was
developed to address concerns of users of financial statements regarding their
need for more information about pension plan assets, obligations, benefit
payment, contributions and net benefit costs. This statement was effective at
the beginning of the first interim period beginning after December 15, 2003. The
adoption of Statement 132 (revised 2003) did not affect the Company's financial
position or results of operations, since the Company has no such plans that meet
the provisions of this statement.

The Financial Accounting Standards Board ("FASB") has issued Statement No. 151,
Inventory Costs--an amendment of ARB No. 43, Chapter 4. This Statement amends the
guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). This Statement requires that those items
be recognized as current-period charges regardless of whether they meet the
criterion of "so abnormal." In addition, this Statement requires that allocation
of fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. This statement is effective for financial
statements for fiscal years beginning after June 15, 2005. The adoption of
Statement 151 does not currently affect the Company's financial position or
results of operations, since the Company has no inventory costs that meet the
provisions of this statement.

The Financial Accounting Standards Board ("FASB") has issued Statement No. 152,
Accounting for Real Estate Time-Sharing Transactions. Statement No. 152 amends
FASB Statement No. 66, Accounting for Sales of Real Estate, to reference the
financial accounting and reporting guidance for real estate time-sharing
transactions that is provided in AICPA Statement of Position (SOP) 04-2,
Accounting for Real Estate Time-Sharing Transactions. Statement No. 152 also
amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations
of Real Estate Projects, to state that the guidance for (a) incidental
operations and (b) costs incurred to sell real estate projects does not apply to
real estate time-sharing transactions. This statement is effective for financial
statements for fiscal years beginning after June 15, 2005. The adoption of
Statement 152 does not currently affect the Company's financial position or
results of operations, since the Company has no real estate interests that meet
the provisions of this statement.

The Financial Accounting Standards Board ("FASB") has issued Statement No. 153,
Exchanges of Nonmonetary Assets. Statement No. 153 amends APB Opinion No. 29,
Accounting for Nonmonetary Transactions, to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it with a
general exception for exchanges of nonmonetary assets that do not have
commercial substance. This statement is effective for financial statements for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005. The Company's will account for all future nonmonetary asset exchanges in
accordance with the requirements of Statement No. 153.

The Financial Accounting Standards Board ("FASB") has issued Statement No. 123
(revised 2004), Share Based Payment. Statement No. 123 establishes standards for
the accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in which an
entity incurs liabilities in exchange for goods or services that are based on
the fair value of the entity's equity instruments or that may be settled by the
issuance of those equity instruments. This statement is effective as of the
beginning of the first interim or annual reporting period that begins after
June 15, 2005. The Company's will account for all future share based payments in
accordance with the requirements of Statement No. 123.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk relates, broadly, to changes in the value of financial instruments
that arise from adverse movements in interest rates, equity prices and foreign
exchange rates. The Company is exposed principally to changes in interest rates
which affect the market prices of its fixed maturities available for sale. The
Company's exposure to equity prices and foreign currency exchange rates is
immaterial. The information is presented in U.S. Dollars, the Company's
reporting currency.

Interest rate risk

The Company could experience economic losses if it were required to liquidate
fixed income securities available for sale during periods of rising and/or
volatile interest rates. The Company attempts to mitigate its exposure to
adverse interest rate movements through staggering the maturities of its fixed
maturity investments and through maintaining cash and other short term
investments to assure sufficient liquidity to meet its obligations and to
address reinvestment risk considerations.

Tabular presentation

The Company does not have long-term debt that is sensitive to changes in
interest rates or derivative financial instruments or interest rate swap
contracts.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Listed below are the financial statements included in this Part of the Annual
Report on SEC Form 10-K:

Page No.
UNITED TRUST GROUP, INC. AND CONSOLIDATED SUBSIDIARIES

Independent Auditors' Report for the
years ended December 31, 2004, 2003, 2002.................................31

Consolidated Balance Sheets..................................................32

Consolidated Statements of Operations........................................33

Consolidated Statements of Shareholders' Equity..............................34

Consolidated Statements of Cash Flows........................................35

Notes to Consolidated Financial Statements............................... 36-60

Independent Auditors' Report

Board of Directors and Shareholders
UNITED TRUST GROUP, INC.

We have audited the accompanying consolidated balance sheets of UNITED
TRUST GROUP, INC. (an Illinois corporation) and subsidiaries as of December 31,
2004 and 2003, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period
ended December 31, 2004. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
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
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of UNITED TRUST
GROUP, INC. and subsidiaries as of December 31, 2004 and 2003, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 2004, in conformity
with accounting principles generally accepted in the United States of America.

We have also audited Schedule I as of December 31, 2004, and Schedules II,
IV and V as of December 31, 2004 and 2003, of UNITED TRUST GROUP, INC. and
subsidiaries and Schedules II, IV and V for each of the three years in the
period then ended. In our opinion, these schedules present fairly, in all
material respects, the information required to be set forth therein.

KERBER, ECK & BRAECKEL LLP

Springfield, Illinois
March 11, 2005

UNITED TRUST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 2004 and 2003

ASSETS

2004 2003
--------------- ---------------
Investments:
Fixed maturities held to maturity, at amortized cost
(market $12,097,708 and $27,440,277) $ 11,973,415 $ 26,724,507
Investments held for sale:
Fixed maturities, at market (cost $147,217,453 and $139,248,547) 148,193,887 139,390,382
Equity securities, at market (cost $15,216,214 and $7,209,443) 24,399,172 9,362,165
Mortgage loans on real estate at amortized cost 20,722,415 26,715,968
Investment real estate, at cost, net of accumulated depreciation 28,192,081 24,725,824
Policy loans 12,844,748 13,226,399
Short-term investments 39,489 34,677
--------------- ---------------
246,365,207 240,179,922

Cash and cash equivalents 11,859,472 8,749,727
Securities of affiliate 4,000,000 4,000,000
Accrued investment income 1,678,393 1,961,552
Reinsurance receivables:
Future policy benefits 32,422,529 32,789,725
Policy claims and other benefits 3,959,569 4,120,299
Cost of insurance acquired 12,747,532 14,616,667
Deferred policy acquisition costs 1,685,263 2,122,643
Property and equipment, net of accumulated depreciation 2,172,636 2,450,109
Income taxes receivable, current 181,683 212,197
Other assets 795,800 354,292
--------------- ---------------
Total assets $ 317,868,084 $ 311,557,133
=============== ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits $ 235,592,973 $ 236,192,132
Policy claims and benefits payable 1,879,566 2,541,735
Other policyholder funds 1,323,668 1,038,063
Dividend and endowment accumulations 12,526,390 12,626,515
Deferred income taxes 8,561,010 6,763,648
Notes payable 0 2,289,776
Other liabilities 7,405,434 5,557,215
--------------- ---------------
Total liabilities 267,289,041 267,009,084
Minority interests in consolidated subsidiaries 6,127,938 4,851,410

Shareholders' equity:
Common stock - no par value, stated value $.02 per share.
Authorized 7,000,000 shares - 3,965,533 and 4,004,666 shares issued
and outstanding after deducting treasury shares of 227,709 and 174,136 79,315 80,008
Additional paid-in capital 42,590,820 42,672,189
Accumulated deficit (4,897,572) (4,621,955)
Accumulated other comprehensive income 6,678,542 1,566,397
--------------- ---------------
Total shareholders' equity 44,451,105 39,696,639
--------------- ---------------
Total liabilities and shareholders' equity $ 317,868,084 $ 311,557,133
=============== ===============

See accompanying notes.

UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Years Ended December 31, 2004

2004 2003 2002
--------------- ---------------- ----------------

Revenues:

Premiums and policy fees $ 17,275,708 $ 18,121,018 $ 18,693,022
Reinsurance premiums and policy fees (3,135,279) (3,097,980) (2,861,445)
Net investment income 10,420,886 10,270,500 13,514,802
Realized investment gains (losses), net (20,648) 485,436 13,634
Other income 926,212 709,384 817,186
--------------- ---------------- ----------------
25,466,879 26,488,358 30,177,199

Benefits and other expenses:

Benefits, claims and settlement expenses:
Life 18,942,272 22,175,842 20,393,044
Reinsurance benefits and claims (2,268,869) (3,194,541) (3,043,115)
Annuity 1,111,998 1,122,707 1,151,973
Dividends to policyholders 980,306 966,668 984,346
Commissions and amortization of deferred
policy acquisition costs 309,776 311,939 785,861
Amortization of cost of insurance acquired 1,869,135 6,695,328 1,515,450
Operating expenses 5,312,747 7,566,780 5,876,456
Interest expense 77,453 162,179 263,441
--------------- ---------------- ----------------
26,334,818 35,806,902 27,927,456
--------------- ---------------- ----------------

Income (loss) before income taxes
and minority interest (867,939) (9,318,544) 2,249,743
Income tax benefit (expense) 797,716 2,699,493 (479,355)
Minority interest in (income) loss
of consolidated subsidiaries (205,394) 222,561 (431,593)
--------------- ---------------- ----------------

Net income (loss) $ (275,617) $ (6,396,490)$ 1,338,795
=============== ================ ================

Basic income (loss) per share from continuing
operations and net income (loss) $ (0.07) $ (1.67)$ 0.38
=============== ================ ================

Diluted income (loss) per share from continuing
operations and net income (loss) $ (0.07) $ (1.67)$ 0.33
=============== ================ ================

Basic weighted average shares outstanding 3,986,731 3,839,947 3,505,424
=============== ================ ================

Diluted weighted average shares outstanding 3,986,731 3,839,947 4,005,424
=============== ================ ================

See accompanying notes.

UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Years Ended December 31, 2004

2004 2003 2002
-------------------------- ------------------------- ------------

Common stock
Balance, beginning of year $ 80,008 $ 70,726 $ 70,996
Issued during year 289 10,331 1,177
Treasury shares acquired (1,066) (532) (1,447)
Reclassification under FAS 150 84 0 0
Retired during year 0 (433) 0
Cumulative change in accounting principal 0 (84) 0
------------ ----------- -----------
Balance, end of year $ 79,315 $ 80,008 $ 70,726
============ =========== ===========

Additional paid-in capital
Balance, beginning of year $ 42,672,189 $ 42,976,344 $ 42,789,636
Issued during year 167,071 185,574 705,514
Treasury shares acquired (297,991) (181,817) (518,806)
Reclassification under FAS 150 49,551 0 0
Retired during year 0 (258,361) 0
Cumulative change in accounting principal 0 (49,551) 0
------------ ----------- -----------
Balance, end of year $ 42,590,820 $ 42,672,189 $ 42,976,344
============ =========== ===========

Retained earnings (accumulated deficit)
Balance, beginning of year $ (4,621,955) $ 1,774,535 $ 435,740
Net income (loss) (275,617) $ (275,617) (6,396,490) $ (6,396,490) 1,338,795 $ 1,338,795
------------ ----------- -----------
Balance, end of year $ (4,897,572) $ (4,621,955) $ 1,774,535
============ =========== ===========

Accumulated other comprehensive income
Balance, beginning of year $ 1,566,397 $ 2,771,941 $ 908,744
Other comprehensive income (loss)
Unrealized holding gain (loss) on securities
net of minority interest and
reclassification adjustment and taxes 5,112,145 5,112,145 (1,205,544) (1,205,544) 1,863,197 1,863,197
------------ ----------- ----------- ------------ ----------- -----------
Comprehensive income (loss) $ 4,836,528 $ (7,602,034) $ 3,201,992
=========== ============ ===========
Balance, end of year $ 6,678,542 $ 1,566,397 $ 2,771,941
============ =========== ===========

Total shareholders' equity, end of year $ 44,451,105 $ 39,696,639 $ 47,593,546
============ =========== ===========

See accompanying notes.

UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 2004

2004 2003 2002
--------------- --------------- --------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income (loss) $ (275,617) $ (6,396,490) $ 1,338,795
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities net of changes in assets and liabilities
resulting from the sales and purchases of subsidiaries:
Amortization/accretion of fixed maturities 604,608 978,307 513,308
Realized investment (gains) losses, net 20,648 (485,436) (13,634)
Amortization of deferred policy acquisition costs 442,380 400,844 714,432
Amortization of cost of insurance acquired 1,869,135 6,695,328 1,515,450
Depreciation 1,617,116 1,052,964 835,538
Minority interest 205,394 (222,561) 431,593
Charges for mortality and administration
of universal life and annuity products (9,281,555) (9,083,778) (8,660,548)
Interest credited to account balances 5,332,145 5,478,488 5,468,318
Policy acquisition costs deferred (5,000) (61,000) (69,000)
Change in accrued investment income 283,159 491,288 550,020
Change in reinsurance receivables 527,926 (100,703) 1,010,146
Change in policy liabilities and accruals 1,073,108 3,163,696 (2,279,449)
Change in income taxes payable (924,815) (2,877,425) 413,476
Change in other assets and liabilities, net (1,534,582) 33,430 (1,301,411)
--------------- --------------- --------------
Net cash provided by (used in) operating activities (45,950) (933,048) 467,034
--------------- --------------- --------------

Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities held for sale 70,893,152 73,314,066 29,748,521
Fixed maturities matured 16,098,477 36,065,715 19,957,888
Equity securities 25,569 167,734 0
Mortgage loans 8,620,093 8,494,201 6,472,013
Real estate 314,157 1,096,759 1,179,931
Policy loans 2,757,989 2,619,463 3,112,687
Short-term 350,000 350,000 203,706
--------------- --------------- --------------
Total proceeds from investments sold and matured 99,059,437 122,107,938 60,674,746
Cost of investments acquired:
Fixed maturities held for sale (76,377,916) (108,410,675) (37,341,428)
Fixed maturities (1,513,700) (4,283,413) (3,973,623)
Equity securities (8,033,052) (7,089,857) (185,075)
Mortgage loans (2,626,540) (11,405,342) (6,889,945)
Real estate (3,981,568) (3,722,406) (1,575,713)
Policy loans (2,376,338) (2,499,358) (2,850,735)
Short-term (353,061) (7,001) 0
--------------- --------------- --------------
Total cost of investments acquired (95,262,175) (137,418,052) (52,816,519)
Purchase of property and equipment (20,548) (536,600) (24,439)
--------------- --------------- --------------
Net cash provided by (used in) investing activities 3,776,714 (15,846,714) 7,833,788
--------------- --------------- --------------

Cash flows from financing activities:
Policyholder contract deposits 9,015,637 9,505,436 10,291,519
Policyholder contract withdrawals (7,215,183) (7,067,658) (7,959,754)
Payments of principal on notes payable (4,564,776) (705,499) (3,405,395)
Proceeds from line of credit 2,275,000 0 2,000,000
Payments from FCC merger 0 0 (1,586,500)
Issuance of common stock 167,360 195,906 706,691
Purchase of treasury stock (299,057) (441,144) (520,253)
--------------- --------------- --------------
Net cash provided by (used in) financing activities (621,019) 1,487,041 (473,692)
--------------- --------------- --------------

Net increase (decrease) in cash and cash equivalents 3,109,745 (15,292,721) 7,827,130
Cash and cash equivalents at beginning of year 8,749,727 24,042,448 16,215,318
--------------- --------------- --------------
Cash and cash equivalents at end of year $ 11,859,472 $ 8,749,727 $ 24,042,448
=============== =============== ==============

See accompanying notes.

UNITED TRUST GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. ORGANIZATION - At December 31, 2004, the significant majority-owned
subsidiaries of UNITED TRUST GROUP, INC., were as depicted on the
following organizational chart.




The  Company's  significant  accounting  policies,  consistently  applied in the
preparation  of  the  accompanying   consolidated   financial  statements,   are
summarized as follows.

     B.   NATURE OF  OPERATIONS  - United  Trust  Group,  Inc.,  is an insurance
          holding  company,  which  sells  individual  life  insurance  products
          through  its  subsidiary.   The  Company's  principal  market  is  the
          Midwestern   United  States.   The  Company's   dominant  business  is
          individual  life  insurance  which  includes the servicing of existing
          insurance  business in force,  the solicitation of new individual life
          insurance  and the  acquisition  of other  companies in the  insurance
          business.

     C.   BUSINESS  SEGMENTS - The  Company  has only one  significant  business
          segment - insurance.

     D.   BASIS OF  PRESENTATION  - The  financial  statements  of United  Trust
          Group,  Inc.,  and its  subsidiaries  have been prepared in accordance
          with accounting  principles generally accepted in the United States of
          America which differ from statutory  accounting practices permitted by
          insurance regulatory authorities.

     E.   PRINCIPLES OF  CONSOLIDATION - The consolidated  financial  statements
          include  the  accounts  of  the  Registrant  and  its   majority-owned
          subsidiaries.  All significant  intercompany accounts and transactions
          have been eliminated.

     F.   INVESTMENTS - Investments are shown on the following bases:

          Fixed maturities held to maturity - at cost, adjusted for amortization
          of premium or discount and other-than-temporary market value declines.
          The  amortized  cost of such  investments  differs  from their  market
          values;  however, the Company has the ability and intent to hold these
          investments to maturity, at which time the full face value is expected
          to be realized.

          Investments  held  for  sale - at  current  market  value,  unrealized
          appreciation  or  depreciation  is charged  directly to  shareholders'
          equity.

          Mortgage  loans on real  estate - at  unpaid  balances,  adjusted  for
          amortization  of premium or  discount,  less  allowance  for  possible
          losses.

          Real  estate -  investment  real  estate  at cost less  allowance  for
          depreciation  and, as  appropriate,  provisions  for possible  losses.
          Accumulated depreciation on investment real estate was $ 2,491,205 and
          $ 1,200,454 as of December 31, 2004 and 2003, respectively.

          Policy loans - at unpaid balances including  accumulated  interest but
          not in excess of the cash surrender value.

          Short-term  investments - at cost, which  approximates  current market
          value.

          Realized  gains and losses on sales of  investments  are recognized in
          net income on the specific identification basis.

          Unrealized gains and losses on investments carried at market value are
          recognized   in   other   comprehensive   income   on   the   specific
          identification basis.

     G.   CASH EQUIVALENTS - The Company  considers  certificates of deposit and
          other short-term  instruments with an original  purchased  maturity of
          three months or less cash equivalents.


     H.   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.

          Amounts paid, or deemed to have been paid, for  reinsurance  contracts
          are recorded as reinsurance  receivables.  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.

     I.   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 3.0% to
          9.25% 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.  Current mortality rate assumptions are based on 1975-80
          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.  Interest  crediting  rates for universal  life and interest
          sensitive  products  range  from  4.0% to 5.5%  for  the  years  ended
          December 31, 2004, 2003 and 2002, respectively.

     J.   POLICY  AND  CONTRACT  CLAIMS - 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   based  on  prior
          experience  of the  Company.  Incurred  but not  reported  claims were
          $ 899,126   and   $ 920,656   as  of   December 31,   2004  and  2003,
          respectively.


     K.   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 cash flows from the
          acquired   policies.   The  Company   utilized  9%  discount  rate  on
          approximately   25%  of  the  business   and  15%  discount   rate  on
          approximately  75% of the  business.  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 in the
          amortization  calculation are 9% on  approximately  25% of the balance
          and 15% on the  remaining  balance.  The  interest  rates  vary due to
          differences in the blocks of business.  The  amortization  is adjusted
          retrospectively  when  estimates of current or future gross profits to
          be realized from a group of products are revised.



                                                    2004                2003                 2002
                                              ----------------    -----------------    ----------------
Cost of insurance acquired,
        beginning of year                $        14,616,667  $       21,311,995   $       31,237,167
   Interest accretion                              4,002,245           4,370,526            4,570,678
   Amortization                                   (5,871,380)         (6,065,854)          (6,086,128)
                                              ----------------    -----------------    ----------------
   Net amortization                               (1,869,135)         (1,695,328)          (1,515,450)
   Impairment loss                                         0          (5,000,000)                   0
   Revaluation adjustment from
      UTG/FCC merger                                       0                   0           (8,409,722)
                                              ----------------    -----------------    ----------------
Cost of insurance acquired,
        end of year                      $        12,747,532  $       14,616,667   $       21,311,995
                                              ================    =================    ================

          Cost of insurance  acquired was tested for  impairment  as part of the
          regular reporting  process.  Due to a decline in projected future cash
          flows  from the  business  and  lower  current  investment  yields,  a
          revision of the estimated fair value of the cost of insurance acquired
          was  considered  necessary  in  2003.  This  revision  resulted  in  a
          $ 5,000,000  impairment  loss. The fair value of the cost of insurance
          acquired was estimated using the expected present value of future cash
          flows. The impairment loss is included in the consolidated  statements
          of operations  under the caption of  amortization of cost of insurance
          acquired.

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

                                                                   Interest                                Net
                                                                  Accretion      Amortization     Amortization

           2005                                                 $ 3,875,000       $ 6,084,000      $ 2,209,000
           2006                                                   3,560,000         6,422,000        2,862,000
           2007                                                   3,145,000         5,994,000        2,849,000
           2008                                                   2,730,000         5,256,000        2,526,000
           2009                                                   2,360,000         4,482,000        2,122,000


     L.   DEFERRED  POLICY  ACQUISITION  COSTS -  Commissions  and  other  costs
          (salaries of certain employees involved in the underwriting and policy
          issue  functions and medical and  inspection  fees) of acquiring  life
          insurance  products  that vary with and are  primarily  related to the
          production  of new  business  have  been  deferred.  Traditional  life
          insurance   acquisition   costs   are   being   amortized   over   the
          premium-paying  period  of  the  related  policies  using  assumptions
          consistent with those used in computing policy benefit reserves.

          For universal  life  insurance and interest  sensitive  life insurance
          products,   acquisition   costs  are  being  amortized   generally  in
          proportion  to the  present  value  of  expected  gross  profits  from
          surrender  charges and  investment,  mortality,  and expense  margins.
          Under SFAS No. 97, "Accounting and Reporting by Insurance  Enterprises
          for Certain Long-Duration  Contracts and for Realized Gains and Losses
          from the Sale of Investments,"  the Company makes certain  assumptions
          regarding the mortality, persistency,  expenses, and interest rates it
          expects to experience in future periods.  These  assumptions are to be
          best  estimates and are to be  periodically  updated  whenever  actual
          experience  and/or  expectations  for the future  change from  initial
          assumptions.   The  amortization  is  adjusted   retrospectively  when
          estimates  of current or future  gross  profits to be realized  from a
          group of products are revised.


          The following table summarizes  deferred policy  acquisition costs and
          related data for the years shown.

                                                    2004                2003                 2002
                                              ----------------    -----------------    ----------------
Deferred, beginning of year              $         2,122,643  $        2,462,487   $        3,107,919

Acquisition costs deferred:
  Commissions                                              0              56,000               49,000
  Other expenses                                       5,000               5,000               20,000
                                              ----------------    -----------------    ----------------
  Total

Interest accretion                                    10,000              17,000               55,000
Amortization charged to income                      (452,380)           (417,844)            (769,432)
                                              ----------------    -----------------    ----------------
  Net amortization

                                              ----------------    -----------------    ----------------
  Change for the year                               (437,380)           (339,844)            (645,432)
                                              ----------------    -----------------    ----------------

Deferred, end of year                    $         1,685,263  $        2,122,643   $        2,462,487
                                              ================    =================    ================



          Estimated  net  amortization  expense of deferred  policy  acquisition
          costs for the next five years is as follows:

                                          Interest                              Net
                                          Accretion          Amortization       Amortization
                                          --------------     ---------------    ----------------

              2005                        12,000             280,000            268,000
              2006                        10,000             245,000            235,000
              2007                         9,000             219,000            210,000
              2008                         7,000             207,000            200,000
              2009                         6,000             180,000            174,000


     M.   PROPERTY AND EQUIPMENT -  Company-occupied  property,  data processing
          equipment and  furniture and office  equipment are stated at cost less
          accumulated   depreciation   of   $ 6,336,241   and   $ 6,038,220   at
          December 31, 2004 and 2003, 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
          $ 298,021,  $ 149,664,  and $ 280,148 for the years ended December 31,
          2004, 2003, and 2002, respectively.

     N.   INCOME TAXES - Income taxes are reported under  Statement of Financial
          Accounting Standards Number 109. Deferred income taxes are recorded to
          reflect the tax consequences on future periods of differences  between
          the tax bases of assets and liabilities and their financial  reporting
          amounts at the end of each such period.

     O.   EARNINGS  PER SHARE -  Earnings  per share  (EPS) are  reported  under
          Statement of Financial  Accounting Standards Number 128. The objective
          of both basic EPS and diluted EPS is to measure the  performance of an
          entity over the  reporting  period.  Basic EPS is computed by dividing
          income  available  to  common  stockholders  (the  numerator)  by  the
          weighted-average number of common shares outstanding (the denominator)
          during the period.  Diluted EPS is similar to the computation of basic
          EPS except that the  denominator is increased to include the number of
          additional  common  shares  that  would have been  outstanding  if the
          dilutive  potential  common shares had been issued.  In addition,  the
          numerator  also is  adjusted  for any  changes  in income or loss that
          would result from the assumed  conversion  of those  potential  common
          shares.

     P.   TREASURY  SHARES - The Company  holds  227,709  and 174,136  shares of
          common stock as treasury  shares with a cost basis of $ 1,675,097  and
          $ 1,376,039 at December 31, 2004 and 2003, respectively.

     Q.   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.

     R.   PARTICIPATING INSURANCE - Participating business represents 20% of the
          ordinary  life  insurance  in force  at  December 31,  2004 and  2003,
          respectively.  Premium income from participating  business  represents
          22%, 23%, and 25% of total  premiums for the years ended  December 31,
          2004, 2003 and 2002, respectively.  The amount of dividends to be paid
          is determined annually by the respective insurance  subsidiary's Board
          of Directors.  Earnings  allocable to participating  policyholders are
          based on legal requirements that vary by state.

     S.   RECLASSIFICATIONS  - Certain prior year amounts have been reclassified
          to conform to the 2004  presentation.  Such  reclassifications  had no
          effect on previously reported net income or shareholders' equity.

     T.   USE OF ESTIMATES - In preparing  financial  statements  in  conformity
          with accounting  principles generally accepted in the United States of
          America, management is required to make estimates and assumptions that
          affect the reported amounts of assets and liabilities,  the disclosure
          of  contingent  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.


2. SHAREHOLDER DIVIDEND RESTRICTION

At December 31,  2004,  substantially all of consolidated  shareholders'  equity
represents  net assets of UTG's  subsidiaries.  The payment of cash dividends to
shareholders  by UTG is not legally  restricted.  However,  the state  insurance
department  regulates  insurance  company dividend payments where the company is
domiciled. UG's dividend limitations are described below.

Ohio domiciled  insurance  companies require five days prior notification to the
insurance  commissioner  for  the  payment  of an  ordinary  dividend.  Ordinary
dividends are defined as the greater of: a) prior year statutory  earnings or b)
10% of statutory capital and surplus.  For the year ended December 31,  2004, UG
had a statutory loss from operations of $ 762,152.  At  December 31,  2004, UG's
statutory capital and surplus amounted to $ 21,860,401.  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 a dividend of $ 2,275,000 to UTG in 2004, of which $ 974,180 was considered
to be an extraordinary dividend.


3. INCOME TAXES

Until 1984,  the  insurance  company was taxed under the  provisions of the Life
Insurance Company Income Tax Act of 1959 as amended by the Tax Equity and Fiscal
Responsibility  Act of 1982. These laws were superseded by the Deficit Reduction
Act of 1984. All of these laws are based  primarily upon statutory  results with
certain  special  deductions  and other items  available  only to life insurance
companies. Under the provision of the pre-1984 life insurance company income tax
regulations, a portion of "gain from operations" of a life insurance company was
not subject to current  taxation but was  accumulated,  for tax  purposes,  in a
special tax memorandum account  designated as "policyholders'  surplus account".
Federal income taxes will become payable on this account at the then current tax
rate when and if distributions  to shareholders,  other than stock dividends and
other limited exceptions, are made in excess of the accumulated previously taxed
income maintained in the "shareholders surplus account".  At December 31,  2004,
the balances of the shareholders' surplus account and the untaxed balance for UG
were $ 27,099,356 and $ 4,363,821, respectively.

The payment of taxes on this income is not  anticipated;  and,  accordingly,  no
deferred taxes have been established.

The life  insurance  company and the  non-insurance  companies of the group file
separate federal income tax returns.

Life insurance  company taxation is based primarily upon statutory  results with
certain  special  deductions  and other items  available  only to life insurance
companies. Income tax expense (benefit) consists of the following components:


                                          2004                 2003               2002
                                      ---------------    ----------------   ---------------
Current tax expense                 $        147,358   $        197,732    $        7,893
Deferred tax (benefit) expense              (945,074)        (2,897,225)          471,462
                                      ----------------   -----------------  ----------------
                                    $       (797,716)  $     (2,699,493)   $      479,355
                                      ================   =================  ================

The Company's life insurance subsidiary has net operating loss carryforwards for
federal income tax purposes expiring as follows:


                         UG
                         -------------
2014                         965,080
2016                           1,806
2017                           5,078
2018                       2,992,288
2019                       2,101,569
                         -------------
TOTAL               $      6,065,821
                         =============


The  Company  has  established  a  deferred  tax  asset of  $ 2,123,037  for its
operating loss  carryforwards and has established no allowance in the current or
prior years.

UG has a net operating loss carryforward of $ 6,065,821 at December 31, 2004. UG
must average taxable income of approximately $ 404,388 over the next 15 years to
fully realize its net operating loss  carryforward.  Management  believes future
earnings  of UG will be  sufficient  to fully  utilize  the net  operating  loss
carryforwards.  Therefore, management has established no allowance for potential
uncollectibility of its loss carryforwards in the current year.




The following table shows the  reconciliation of net income to taxable income of
UTG:


                                                       2004               2003               2002
                                                 ---------------    ---------------    ----------------
Net income (loss)                           $         (275,617)$       (6,396,490)$        1,338,795
Federal income tax provision                           105,098            263,992            327,472
Loss (gain) of subsidiaries                            803,662          6,723,981           (700,226)
                                                 ---------------    ---------------    ----------------
Taxable income                              $          633,143  $         591,483  $         966,041
                                                 ===============    ===============    ================


The  expense or  (credit)  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:


                                                                2004               2003               2002
                                                           ---------------    ---------------    ----------------
Tax computed at statutory rate                        $        (303,779)  $     (3,183,594)  $        728,618
Changes in taxes due to:
  Current year expense previously deducted                            0            175,000                  0
  Tax reserve adjustment                                       (202,225)           150,831            123,512
  Benefit of prior losses                                             0                  0           (309,710)
  Dividend received deduction                                  (161,114)                 0                  0
  Tax deferred acquisition costs                               (134,324)                 0                  0
  Other                                                           3,726            158,270            (63,065)
                                                           ---------------    ---------------    ----------------
Income tax expense (benefit)                          $        (797,716)  $     (2,699,493)  $        479,355
                                                           ===============    ===============    ================

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

                                                  2004                  2003
                                            ----------------      ---------------
Investments                           $         5,289,610   $         2,514,031
Cost of insurance acquired                      4,461,636             5,115,833
Deferred policy acquisition costs                 589,842               742,925
Management/consulting fees                       (289,877)             (304,038)
Future policy benefits                           (646,374)           (1,145,126)
Gain on sale of subsidiary                      2,312,483             2,312,483
Net operating loss carryforward                (2,123,037)           (1,304,864)
Federal tax DAC                                (1,033,272)           (1,167,596)
                                            ----------------      ---------------
Deferred tax liability                $         8,561,010   $         6,763,648
                                            ================      ===============




4.   ANALYSIS OF INVESTMENTS, INVESTMENT INCOME AND INVESTMENT GAIN

A.   NET INVESTMENT  INCOME - The following table reflects net investment income
     by type of investment:

                                                                      December 31,
                                               ----------------------------------------------------------
                                                        2004               2003               2002
                                                 ---------------    ----------------   ----------------
Fixed maturities and fixed maturities
  held for sale                              $        7,060,761 $        8,418,969  $      10,302,735
Equity securities                                       657,609            456,361            131,778
Mortgage loans                                        1,209,358          1,522,700          1,749,935
Real estate                                           5,335,530          2,832,171          3,261,043
Policy loans                                            918,562            949,770            965,227
Short-term investments                                   80,241             11,161             26,522
Cash                                                    111,986            137,478            211,293
                                                 ---------------    ----------------   ----------------
Total consolidated investment income                 15,374,047         14,328,610         16,648,533
Investment expenses                                  (4,953,161)        (4,058,110)        (3,133,731)
                                                ----------------   ----------------    ----------------
Consolidated net investment income           $       10,420,886 $       10,270,500  $      13,514,802
                                                 ===============    ================   ================

At  December 31,  2004, the Company had a total of $ 805,787 in investment  real
estate, which did not produce income during 2004.

The  following  table  summarizes  the  Company's  fixed  maturity  holdings and
investments held for sale by major classifications:

                                                                                  Carrying Value
                                                                     ----------------------------------------
                                                                             2004                 2003
                                                                          ---------------      --------------
 Investments held for sale:
     Fixed maturities
         U.S. Government, government agencies and authorities        $    41,632,843     $     31,347,586
         State, municipalities and political subdivisions                    177,444              177,963
         Collateralized mortgage obligations                              79,643,440           89,117,375
         All other corporate bonds                                        26,740,160           18,747,458
                                                                          ---------------      --------------
                                                                     $   148,193,887    $     139,390,382
                                                                          ===============      ==============

     Equity securities
         Banks, trust and insurance companies                        $    19,706,511     $      1,517,159
         Industrial and miscellaneous                                      4,692,661            7,845,006
                                                                          ---------------      --------------
                                                                     $    24,399,172     $      9,362,165
                                                                          ===============      ==============



                                                                                  Carrying Value
                                                                    ----------------------------------------
                                                                             2004                 2003
                                                                          ---------------      --------------

 Fixed maturities held to maturity:
     U.S. Government, government agencies and authorities            $    7,801,268      $    10,676,106
     State, municipalities and political subdivisions                     2,448,293            6,342,369
     Collateralized mortgage obligations                                     58,453               77,802
     Public utilities                                                     0                    5,397,880
     All other corporate bonds                                            1,665,401            4,230,350
                                                                        ---------------      --------------
                                                                     $   11,973,415 $         26,724,507
                                                                        ===============      ==============

 Securities of affiliate                                             $    4,000,000 $          4,000,000
                                                                        ===============      ==============

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 following  table  summarizes  securities  held, at amortized  cost, that are
below investment grade by major classification:

     Below Investment
     Grade Investments                 2004              2003
 -----------------------------     --------------    ------------
Public Utilities              $             0    $    1,001,673
CMO                                    15,764            24,984
Corporate                           2,123,028         1,818,673
                                   -------------     ------------
Total                         $     2,138,792    $    2,845,330
                                   =============     ============




B.   INVESTMENT SECURITIES

The amortized  cost and estimated  market  values of  investments  in securities
including investments held for sale are as follows:


                                          Cost or            Gross            Gross              Estimated
                                          Amortized          Unrealized       Unrealized         Market
2004                                      Cost               Gains            Losses             Value
------------------------------------      --------------     -------------    ---------------    --------------
Investments held for sale:
  Fixed maturities
  U.S. Government and govt.
    agencies and authorities        $     41,377,077    $      384,193   $       (128,427) $     41,632,843
  States, municipalities and
    political subdivisions                   162,025            15,419                  0           177,444
  Collateralized mortgage
    obligations                           79,634,753           459,508           (450,821)       79,643,440
  Public utilities                                 0                 0                  0                 0
  All other corporate bonds               26,043,598           792,693            (96,131)       26,740,160
                                        --------------     -------------    ---------------    --------------
                                         147,217,453         1,651,813           (675,379)      148,193,887
  Equity securities                       15,216,214        10,214,201         (1,031,243)       24,399,172
                                        --------------     -------------    ---------------    --------------
  Total                             $    162,433,667    $   11,866,014   $     (1,706,622) $    172,593,059
                                        ==============     =============    ===============    ==============

Fixed maturities held to maturity:
  U.S. Government and govt.
    agencies and authorities        $      7,801,268    $       43,237   $        (40,910) $      7,803,595
  States, municipalities and
    political subdivisions                 2,448,293           116,815                  0         2,565,108
  Collateralized mortgage
    obligations                               58,453               661             (1,343)           57,771
  Public utilities                                 0                 0                            0       0
  All other corporate bonds                1,665,401            26,833            (20,920)        1,671,314
                                        --------------     -------------    ---------------    --------------
  Total                             $     11,973,415    $      187,546   $        (63,173) $     12,097,788
                                        ==============     =============    ===============    ==============

Securities of affiliate             $      4,000,000    $            0   $              0  $      4,000,000
                                        ==============     =============    ===============    ==============







                                        Cost or            Gross            Gross              Estimated
                                        Amortized          Unrealized       Unrealized         Market
2003                                    Cost               Gains            Losses             Value
------------------------------------    --------------     -------------    ---------------    --------------
Investments held for sale:
  Fixed maturities
  U.S. Government and govt.
    agencies and authorities        $     30,850,682    $      642,756   $       (145,852) $    31,347,586
  States, municipalities and
    political subdivisions                   160,271            17,692                  0          177,963
  Collateralized mortgage
    obligations                           90,353,657           429,542         (1,665,824)      89,117,375
  Public utilities                                 0                 0                  0                0
  All other corporate bonds               17,883,937           886,396            (22,875)      18,747,458
                                        --------------     -------------    ---------------    --------------
                                         139,248,547         1,976,386         (1,834,551)     139,390,382
  Equity securities                        7,209,443         2,152,722                  0        9,362,165
                                        --------------     -------------    ---------------    --------------
  Total                             $    146,457,990   $     4,129,708   $     (1,834,551) $   148,752,757
                                        ==============     =============    ===============    ==============

Fixed maturities held to maturity:
  U.S. Government and govt.
    agencies and authorities        $     10,676,106    $      229,788   $              0  $    10,905,894
  States, municipalities and
    political subdivisions                 6,342,369           231,132            (12,919)       6,560,582
  Collateralized mortgage
    obligations                               77,802               875               (444)          78,233
  Public utilities                         5,397,880           100,056                  0        5,497,936
  All other corporate bonds                4,230,350           188,071            (20,789)       4,397,632
                                        --------------     -------------    ---------------    --------------
  Total                             $     26,724,507    $      749,922   $        (34,152) $    27,440,277
                                        ==============     =============    ===============    ==============

Securities of affiliate             $      4,000,000     $           0   $              0  $     4,000,000
                                        ==============     =============    ===============    ==============





The amortized cost and estimated market value of debt securities at December 31,
2004, by contractual  maturity,  is shown below. Expected maturities will differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties.


    Fixed Maturities Held for Sale                                       Estimated
                                                     Amortized            Market
         December 31, 2004                             Cost                Value
---------------------------------------------      --------------      --------------
Due in one year or less                      $       3,974,952     $     4,016,732
Due after one year through five years               49,501,280          50,431,776
Due after five years through ten years               7,018,679           7,085,760
Due after ten years                                  7,087,789           7,016,180
Collateralized mortgage obligations                 79,634,753          79,643,439
                                                   --------------      --------------
Total                                        $     147,217,453   $     148,193,887
                                                   ==============      ==============



                                                                         Estimated
    Fixed Maturities Held to Maturity                Amortized            Market
         December 31, 2004                             Cost                Value
---------------------------------------------      --------------      --------------
Due in one year or less                      $       5,041,510     $     5,075,216
Due after one year through five years                5,504,794           5,534,706
Due after five years through ten years                 751,410             771,845
Due after ten years                                    617,248             658,250
Collateralized mortgage obligations                     58,453              57,771
                                                   --------------      --------------
Total                                        $      11,973,415    $     12,097,788
                                                   ==============      ==============

An analysis of sales, maturities and principal repayments of the Company's fixed
maturities portfolio for the years ended December 31,  2004, 2003 and 2002 is as
follows:






                                           Cost or            Gross             Gross             Proceeds
                                          Amortized           Realized         Realized             From
   Year ended December 31, 2004             Cost               Gains            Losses              Sale
-------------------------------------    ---------------    -------------    ---------------    ---------------
Scheduled principal repayments,
   Calls and tenders:
     Held for sale                   $   25,119,862      $       8,062    $        (2,098)   $   25,125,826
     Held to maturity                    16,099,278                  0               (801)       16,098,477
   Sales:
      Held for sale                      45,840,981            278,896           (352,551)       45,767,326
      Held to maturity                            0                  0                  0                 0
                                         ---------------    -------------    ---------------    ---------------
  Total                              $   87,060,121      $     286,958    $      (355,450)   $   86,991,629
                                         ===============    =============    ===============    ===============








                                           Cost or            Gross             Gross             Proceeds
                                          Amortized           Realized         Realized             From
   Year ended December 31, 2003             Cost               Gains            Losses              Sale
-------------------------------------   ---------------    -------------    ---------------    ---------------
Scheduled principal repayments,
   Calls and tenders:
     Held for sale                   $   60,702,967     $      2,283      $      (13,872)   $   60,691,378
     Held to maturity                    30,923,388                0                (227)       30,923,161
   Sales:
      Held for sale                      12,863,340                0            (240,652)       12,622,688
      Held to maturity                    4,825,213          319,980              (2,639)        5,142,554
                                        ---------------    -------------    ---------------    ---------------
  Total                              $  109,314,908     $    322,263      $     (257,390)   $  109,379,781
                                        ===============    =============    ===============    ===============






                                         Cost or            Gross            Gross              Proceeds
                                         Amortized          Realized         Realized           From
Year ended December 31, 2002             Cost               Gains            Losses             Sale
-------------------------------------   ---------------    -------------    ---------------    ---------------
Scheduled principal repayments,
   Calls and tenders:
     Held for sale                   $   29,746,832     $      1,689      $            0    $   29,748,521
     Held to maturity                    20,071,850            7,782              (6,744)       20,072,888
   Sales:
      Held for sale                               0                0                   0                 0
      Held to maturity                            0                0                   0                 0
                                        ---------------    -------------    ---------------    ---------------
  Total                              $   49,818,682     $      9,471      $       (6,744)   $   49,821,409
                                        ===============    =============    ===============    ===============

     Annually,  the Company completes an analysis of sales of securities held to
     maturity to further assess the issuer's  creditworthiness of fixed maturity
     holdings.  Based on this  analysis,  certain issues were sold that had been
     classified as held to maturity.  The Company  considers these  transactions
     rare and non recurring.

C.   INVESTMENTS  ON  DEPOSIT - At  December 31,  2004,  investments  carried at
     approximately  $ 5,939,498  were on deposit  with various  state  insurance
     departments.


5.   DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The financial  statements  include various  estimated fair value  information at
December 31,  2004 and 2003,  as required by Statement  of Financial  Accounting
Standards 107, Disclosure about Fair Value of Financial  Instruments (SFAS 107).
Such  information,  which pertains to the Company's  financial  instruments,  is
based on the  requirements  set forth in that  Statement and does not purport to
represent the aggregate net fair value of the Company.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial  instrument  required to be valued by SFAS 107 for which
it is practicable to estimate that value:

(a)  Cash and Cash equivalents

The carrying amount in the financial statements  approximates fair value because
of  the  relatively  short  period  of  time  between  the  origination  of  the
instruments and their expected realization.

(b)  Fixed maturities and investments held for sale

Quoted market  prices,  if available,  are used to determine the fair value.  If
quoted  market  prices are not  available,  management  estimates the fair value
based  on the  quoted  market  price  of a  financial  instrument  with  similar
characteristics.

(c)  Mortgage loans on real estate

The fair values of  mortgage  loans are  estimated  using  discounted  cash flow
analyses and interest  rates being offered for similar  loans to borrowers  with
similar credit ratings.

(d)  Policy loans

It is not  practical  to estimate the fair value of policy loans as they have no
stated  maturity  and their  rates are set at a fixed  spread to related  policy
liability  rates.  Policy loans are carried at the  aggregate  unpaid  principal
balances in the consolidated  balance sheets, and earn interest at rates ranging
from 4% to 8%.  Individual  policy  liabilities  in all  cases  equal or  exceed
outstanding policy loan balances.

(e)  Short-term investments

For short-term instruments, the carrying amount is a reasonable estimate of fair
value.  Short-term  instruments  represent  collateral loans and certificates of
deposit with various banks that are protected under FDIC.

(f)  Notes payable

For  borrowings  subject to  floating  rates of  interest,  carrying  value is a
reasonable  estimate of fair  value.  For fixed rate  borrowings  fair value was
determined  based on the borrowing rates currently  available to the Company for
loans with similar terms and average maturities.

The estimated fair values of the Company's financial  instruments required to be
valued by SFAS 107 are as follows as of December 31:


                                                   2004                                2003
                                    -------------------------------------------------------------------------
                                                          Estimated                            Estimated
                                        Carrying            Fair             Carrying            Fair
Assets                                   Amount             Value             Amount             Value
                                      --------------     --------------    ---------------    ---------------
Fixed maturities                   $   11,973,415    $    12,097,788    $   26,724,507     $   27,440,277
Fixed maturities held for sale        148,193,887        148,193,887       139,390,382        139,390,382
Equity securities                      20,399,172         20,399,172         9,362,165          9,362,165
Securities of affiliate                 4,000,000          4,000,000         4,000,000          4,000,000
Mortgage loans on real estate          20,722,415         20,816,955        26,715,968         26,853,183
Investment in real estate              28,192,081         28,192,081        24,725,824         24,725,824
Policy loans                           12,844,748         12,844,748        13,226,399         13,226,399
Short-term investments                     39,489             39,489            34,677             34,677

Liabilities
Notes payable                                   0                  0         2,289,776          2,390,810




6.   STATUTORY EQUITY AND INCOME FROM OPERATIONS

The  Company's  insurance  subsidiary  is  domiciled  in Ohio and  prepares  its
statutory-based  financial  statements in accordance with  accounting  practices
prescribed  or  permitted by the Ohio  insurance  department.  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.  UG's total
statutory shareholders' equity was $ 21,860,401 and $ 13,008,198 at December 31,
2004 and 2003, respectively.  The Company's life insurance subsidiary reported a
statutory  operating  income  (loss)  before taxes  (exclusive  of  intercompany
dividends) of approximately $ (762,000), $ (1,461,000) and $ 2,700,000 for 2004,
2003 and 2002, respectively.


7.   REINSURANCE

As is customary in the  insurance  industry,  the  insurance  subsidiary  of the
Company  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. At
December 31,  2004, the Company had gross  insurance in force of $ 3.141 billion
of which approximately $ 531 million was ceded to reinsurers.

The Company's  reinsured business is ceded to numerous  reinsurers.  The Company
monitors the solvency of its  reinsurers in seeking to minimize the risk of loss
in the event of a failure by one of the parties.  The primary  reinsurers of the
Company are large, well capitalized entities.

Currently,  the Company is utilizing  reinsurance  agreements  with Generali USA
Life  Reassurance  Company,  (Generali)  and  Swiss Re Life and  Health  America
Incorporated (SWISS RE). Generali and SWISS RE currenty 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 cover
most new business of the Company.  The  agreements  are a yearly  renewable term
(YRT)  treaty  where the Company  cedes  amounts  above its  retention  limit of
$ 100,000 with a minimum cession of $ 25,000.

In addition  to the above  reinsurance  agreements,  the  Company  entered  into
reinsurance  agreements with Optimum Re Insurance  Company (Optimum) during 2004
to provide reinsurance on new products released for sale in 2004. The agreements
are yearly  renewable  term (YRT) treaties where the Company cedes amounts above
its retention  limit of $100,000 with a minimum cession of $25,000 as has been a
Company practice for the last several years with its reinsurers. Also, effective
January 1, 2005,  Optimum became the reinsurer of 100% of the  accidental  death
benefits  (ADB) in force of the  Company.  Previously,  Generali  provided  this
coverage.  This coverage is renewable annually at the Company's option.  Optimum
specializes in reinsurance  agreements  with small to mid-size  carriers such as
the Company. Optimum currently holds an "A-" (Excellent) rating from A.M. Best.

UG entered a  coinsurance  agreement  with Park  Avenue Life  Insurance  Company
(PALIC) as of September 30,  1996. Under the terms of the agreement, UG ceded to
PALIC  substantially  all of its paid-up life insurance  policies.  Paid-up life
insurance generally refers to non-premium paying life insurance policies.  PALIC
and  its  ultimate  parent  The  Guardian  Life  Insurance  Company  of  America
(Guardian),  currently  hold an "A"  (Excellent),  and "A+"  (Superior)  rating,
respectively,  from A.M. Best, an industry rating  company.  The PALIC agreement
accounts  for  approximately  68%  of  the  reinsurance  reserve  credit,  as of
December 31, 2004.

On  September 30,  1998,  UG  entered  into a  coinsurance  agreement  with  The
Independent Order of Vikings, an Illinois fraternal benefit society (IOV). 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,  2004,  the IOV  insurance
in-force was approximately $ 1,686,000,  with reserves being held on that amount
of approximately $ 393,000.

On June 1,  2000, UG assumed an already existing  coinsurance  agreement,  dated
January 1,  1992, between Lancaster Life Reinsurance  Company (LLRC), an Arizona
corporation and Investors  Heritage Life Insurance  Company (IHL), a corporation
organized under the laws of the Commonwealth of Kentucky. Under the terms of the
agreement,  LLRC  agreed to assume  from IHL a 90% quota  share of new issues of
credit life and accident and health  policies that have been written on or after
January 1,  1992 through various  branches of the First Southern  National Bank.
The  maximum  amount of credit  life  insurance  that can be  assumed on any one
individual's  life is  $ 15,000.  UG  assumed  all the  rights  and  obligations
formerly held by LLRC as the reinsurer in the  agreement.  LLRC  liquidated  its
charter  immediately  following  the transfer.  At  December 31,  2004,  IHL has
insurance  in-force of  approximately  $ 2,295,000,  with reserves being held on
that amount of approximately $ 33,000.

The Company does not have any short-duration  reinsurance contracts.  The effect
of the Company's long-duration reinsurance contracts on premiums earned in 2004,
2003 and 2002 was as follows:


                                            Shown in thousands
                          -----------------------------------------------------
                               2004              2003               2002
                             Premiums          Premiums           Premiums
                              Earned            Earned             Earned
                          ----------------  ----------------   ----------------
Direct                $            17,238  $         18,087  $         18,597
Assumed                                38                34                96
Ceded                              (3,036)           (2,896)           (2,701)
                          ----------------  ----------------  ----------------
Net premiums          $            14,240  $         15,225  $         15,992
                          ================  ================  ================


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.

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.

On June 10,  2002 UTG and Fiserv  formed an alliance  between  their  respective
organizations to provide third party  administration (TPA) services to insurance
companies  seeking  business  process  outsourcing  solutions.  Fiserv  will  be
responsible  for the marketing and sales  function for the alliance,  as well as
providing the operations  processing  service for the Company.  The Company will
staff the administration  effort. To facilitate the alliance,  the Company plans
to convert its  existing  business and TPA clients to "ID3",  a software  system
owned by Fiserv to administer an array of life,  health and annuity  products in
the insurance industry. Fiserv is a unit of Fiserv, Inc. (Nasdaq: FISV) which is
an  independent,   full-service  provider  of  integrated  data  processing  and
information  management  systems to the  financial  industry,  headquartered  in
Brookfield, Wisconsin.

In June 2002,  the Company  entered  into a five-year  contract  with Fiserv for
services  related  to its  purchase  of the  "ID3"  software  system.  Under the
contract,  the  Company  is  required  to pay  $ 12,000  per  month in  software
maintenance  costs and  $ 5,000  per month in offsite  data  center  costs for a
five-year period from the date of the signing.

On April 25,  2003 the Company  entered  into an  agreement  with Fiserv for the
conversion of the two TPA client  companies to the "ID3" system.  The conversion
was  successfully  completed in December 2003 utilizing  Company  personnel with
onsite training and guidance provided by Fiserv.  During 2004, the Company began
the conversion of the remaining  insurance business to the "ID3" software system
and successfully completed the first phase of this project. The remaining blocks
of business will be completed during 2005.

In the normal  course of business  the Company is involved  from time to time in
various  legal  actions and other state and federal  proceedings.  There were no
proceedings pending or threatened as of December 31, 2004.


9.       RELATED PARTY TRANSACTIONS

On  September 1,  2004,  UTG  contributed  the common stock of its  wholly-owned
subsidiary, North Plaza, to its life insurance subsidiary, UG. The contribution,
which  received  prior  approval by the  regulatory  authorities,  increased the
capital of the life insurance subsidiary by $ 7,857,794.

On February 20, 2003, UG purchased  $ 4,000,000  of a trust  preferred  security
offering issued by 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 $ 264,842 and $ 226,104 of dividends
in 2004 and 2003, respectively.

On June 18,  2003,  UG entered  into a lease  agreement  with  Bandyco,  LLC, an
affiliated  entity,  for a one-sixth  interest in an aircraft.  Bandyco,  LLC is
affiliated  with Ward F.  Correll,  who is a director of the Company.  The lease
term is for a period of five years at a total cost of  $ 523,831  per year.  The
Company  is  responsible  for its  share of  annual  non-operational  costs,  in
addition to the operational costs as are billable for specific use.

On November 6,  2003, UG purchased real estate at a cost of $ 2,220,256  from an
outside  third party through the formation of an LLC in which UG is a two-thirds
owner.  The other  one-third  partner  is  Millard  V.  Oakley,  who is a former
Director of UTG. Hampshire Plaza Garage is a 578 space parking garage located in
New Hampshire.

On March 26, 2002, the Board of Directors of UTG adopted, and on June 11,  2002,
the  shareholders  of UTG approved,  the United Trust Group,  Inc.  Employee and
Director  Stock  Purchase  Plan (See Note 10.A.  to the  consolidated  financial
statements).

On November 20, 1998, FSF and affiliates acquired 929,904 shares of common stock
of UTG from UTG and certain UTG  shareholders.  As consideration for the shares,
FSF paid UTG  $ 10,999,995  and certain  shareholders  of UTG $ 999,990 in cash.
Included in the stock acquisition  agreement is an earnings covenant whereby UTG
warrants UTG and its subsidiaries and affiliates will have future earnings of at
least  $ 30,000,000 for a five-year period beginning  January 1,  1998 (See Note
10.C. to the consolidated financial statements).

At the March 2003 Board of Directors  meeting,  the  Appalachian  Life Insurance
Company (APPL) and UG Boards  reaffirmed the merger of APPL with and into UG and
approved the final merger  documents.  Upon  receiving the necessary  regulatory
approvals,  the merger of Abraham Lincoln  Insurance Company (ABE) and APPL with
and into UG was consummated  effective July 1, 2003. ABE and APPL were each 100%
owned subsidiaries of UG prior to the merger. Management of the Company believes
the  completion  of the mergers will provide the Company  with  additional  cost
savings.  These cost savings result from  streamlining the Company's  operations
and organizational  structure from three life insurance subsidiaries to one life
insurance subsidiary,  UG. Thus, the Company will further improve administrative
efficiency.

On  January 1,  1993,  UTG  entered an  agreement  with UG pursuant to which UTG
provided management services necessary for UG to carry on its business.  UG paid
$ 5,625,451,  $ 5,906,406  and  $ 3,025,194  to  UTG in  2004,  2003  and  2002,
respectively, under this arrangement.

ABE paid fees to FCC pursuant to a cost sharing and  management  fee  agreement.
FCC provided management services for ABE to carry on its business. The agreement
required ABE to pay a percentage of the actual expenses incurred by FCC based on
certain activity indicators of ABE business to the business of all the insurance
company  subsidiaries  plus a management fee based on a percentage of the actual
expenses  allocated  to ABE.  ABE paid  fees of  $ 188,494  in 2002  under  this
agreement.  ABE  paid  fees  of  $ 165,269  and  $ 170,729  in  2003  and  2002,
respectively, to UTG under this agreement.

APPL had a  management  fee  agreement  with FCC  whereby FCC  provided  certain
administrative  duties,  primarily data processing and investment  advice.  APPL
paid fees of $ 222,000  during 2002 to FCC under this agreement.  APPL paid fees
of $ 222,000 and $ 222,000 to UTG during 2003 and 2002, respectively, under this
agreement.

Respective domiciliary insurance departments have approved the agreements of the
insurance companies 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.

Since the Company's affiliation with FSF, UG has acquired mortgage loans through
participation  agreements  with FSNB.  FSNB  services the loans covered by these
participation  agreements.  UG pays a .25%  servicing  fee on these  loans and a
one-time fee at loan  origination  of .50% of the original  loan amount to cover
costs incurred by FSNB relating to the processing and establishment of the loan.
UG paid $ 45,468,  $ 63,214 and $ 70,140 in servicing fees and $ 0, $ 13,821 and
$ 35,127 in origination fees to FSNB during 2004, 2003 and 2002, respectively.

The Company reimbursed expenses incurred by Mr. Jesse T. Correll and Mr. Randall
L.  Attkisson  relating  to travel  and  other  costs  incurred  on behalf of or
relating to the  Company.  The Company paid  $ 50,098,  $ 20,238 and $ 74,621 in
2004,  2003  and  2002,   respectively  to  First  Southern  Bancorp,   Inc.  in
reimbursement  of such costs. In addition,  beginning in 2001, the Company began
reimbursing FSBI a portion of salaries and pension costs for Mr. Correll and Mr.
Attkisson.  The  reimbursement  was approved by the UTG Board of  Directors  and
totaled $ 160,440, $ 151,440 and $ 169,651 in 2004, 2003 and 2002, respectively,
which included salaries and other benefits.




10.  CAPITAL STOCK TRANSACTIONS

A.   EMPLOYEE AND DIRECTOR STOCK PURCHASE PROGRAM

On March 26, 2002, the Board of Directors of UTG adopted, and on June 11,  2002,
the  shareholders  of UTG approved,  the United Trust Group,  Inc.  Employee and
Director Stock  Purchase  Plan. The plan's purpose is to encourage  ownership of
UTG stock by eligible  directors  and employees of UTG and its  subsidiaries  by
providing them with an opportunity to invest in shares of UTG common stock.  The
plan is administered by the Board of Directors of UTG. A total of 400,000 shares
of  common  stock  may be  purchased  under the  plan,  subject  to  appropriate
adjustment  for  stock  dividends,  stock  splits or  similar  recapitalizations
resulting  in a change in shares of UTG.  The plan is not intended to qualify as
an "employee  stock  purchase  plan" under  Section 423 of the Internal  Revenue
Code.

During 2004 and 2003, the Board of Directors of UTG approved offerings under the
plan to qualified individuals.  For the years ended December 31,  2004 and 2003,
four individuals  purchased 14,440 and eight individuals purchased 58,891 shares
of UTG common stock,  respectively.  Each participant  under the plan executed a
"stock  restriction and buy-sell  agreement",  which among other things provides
UTG with a right of first refusal on any future sales of the shares  acquired by
the participant under this plan.

The  purchase  price of  shares  repurchased  under the  stock  restriction  and
buy-sell agreement shall be computed,  on a per share basis, equal to the sum of
(i) the  original  purchase  price paid to acquire such shares from UTG and (ii)
the  consolidated  statutory net earnings (loss) per share of such shares during
the  period  from the end of the month  next  preceding  the month in which such
shares  were  acquired  pursuant  to the  plan,  to the  end of the  month  next
preceding  the  month  in  which  the  sale of such  shares  to UTG  occurs.  At
December 31, 2004, UTG had 89,877 shares outstanding that were issued under this
program with a value of $ 11.63 per share pursuant to the above formula.

B.   STOCK REPURCHASE PROGRAM

On June 5,  2001, the Board of Directors of UTG authorized the repurchase in the
open  market or in  privately  negotiated  transactions  of up to $ 1 million of
UTG's common stock.  On June 16,  2004, an additional $ 1 million was authorized
for repurchasing  shares.  Repurchased  shares are available for future issuance
for  general  corporate  purposes.  Through  February 24,  2005,  UTG has  spent
$ 1,181,691 in the acquisition of 181,316 shares under this program.

C.   SHARES ACQUIRED BY FSF AND AFFILIATES WITH OPTIONS GRANTED

On November 20, 1998, FSF and affiliates acquired 929,904 shares of common stock
of UTG from UTG and certain UTG  shareholders.  As consideration for the shares,
FSF paid UTG  $ 10,999,995  and certain  shareholders  of UTG $ 999,990 in cash.
Included in the stock acquisition agreement was an earnings covenant whereby UTG
warranted UTG and its  subsidiaries and affiliates would have future earnings of
at least  $ 30,000,000 for a five-year period  beginning  January 1,  1998. Such
earnings  were  computed  based on  statutory  results  excluding  inter-company
activities such as  inter-company  dividends plus realized and unrealized  gains
and losses on real estate, mortgage loans and unaffiliated common stocks. At the
end of the covenant period, an adjustment was to be made equal to the difference
between the then market value and statutory  carrying value of real estate still
owned that existed at the beginning of the covenant period.  If UTG did not meet
the covenant  requirements,  any shortfall  would first be reduced by the actual
average  tax rate for UTG for the period,  and then would be further  reduced by
one-half of the percentage,  if any,  representing UTG's ownership percentage of
the  insurance  company  subsidiaries.  This  result  would  then be  reduced by
$ 250,000.  The remaining  amount would be paid by UTG in the form of UTG common
stock  valued at $ 15.00 per share with a maximum  number of shares to be issued
of  500,000.  However,  there  was  to be no  limit  to  the  number  of  shares
transferred  to the  extent  that there were  legal  fees,  settlements,  damage
payments or other losses as a result of certain  legal action  taken.  The price
and  number of shares  was  adjusted  for any  applicable  stock  splits,  stock
dividends  or  other  recapitalizations.   For  the  five-year  period  starting
January 1, 1998 and ending December 31,  2003, the Company had total earnings of
$ 17,011,307  applicable  to this  covenant.  Therefore,  UTG did not  meet  the
earnings  requirements  stipulated,  and during 2003,  UTG was required to issue
500,000 additional shares to FSF or its assigns.




D.   EARNINGS PER SHARE CALCULATIONS

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted EPS computations as presented on the income statement.

                                                                      For the year ended December 31, 2004
                                                        ---------------- ----- ------------------ ---- -----------------
                                                        Income(Loss)           Shares                  Per-Share
                                                        (Numerator)            (Denominator)           Amount
                                                        ----------------       ------------------      -----------------
Basic EPS
Income available to common shareholders         $            (275,619)                3,986,731   $              (.07)
                                                                                                       =================

Effect of Dilutive Securities
Options                                                             0                         0
                                                        ----------------       ------------------

Diluted EPS
Income available to common shareholders and     $
assumed conversions                                          (275,619)                3,986,731   $             (0.07)
                                                        ================       ==================      =================


                                                                      For the year ended December 31, 2003
                                                        ------------------ --- ------------------ ---- -----------------
                                                        Income (Loss)          Shares                  Per-Share
                                                        (Numerator)            (Denominator)           Amount
                                                        ------------------     ------------------      -----------------
Basic EPS
Income available to common shareholders         $          (6,396,490)                3,839,947   $             (1.67)
                                                                                                       =================

Effect of Dilutive Securities
Options                                                             0                         0
                                                        ------------------     ------------------

Diluted EPS
Income available to common shareholders and     $
assumed conversions                                        (6,396,490)                3,839,947   $             (1.67)
                                                        ==================     ==================      =================


                                                                      For the year ended December 31, 2002
                                                        --------------- ------ ------------------ ---- -----------------
                                                        Income                 Shares                  Per-Share
                                                        (Numerator)            (Denominator)           Amount
                                                        ---------------        ------------------      -----------------
Basic EPS
Income available to common shareholders         $           1,338,795                 3,505,424   $              0.38
                                                                                                       =================

Effect of Dilutive Securities
Earnings covenant                                                   0                   500,000
Options                                                             0                         0
                                                        ---------------        ------------------

Diluted EPS
Income available to common shareholders and     $
assumed conversions                                         1,338,795                 4,005,424   $              0.33
                                                        ===============        ==================      =================


In  accordance  with  Statement of Financial  Accounting  Standards No. 128, the
computation  of diluted  earnings  per share is the same as basic  earnings  per
share for the years ending  December 31,  2004 and 2003, since the Company had a
loss  from  continuing  operation  for  the  year  presented,  and  any  assumed
conversion,  exercise,  or  contingent  issuance  of  securities  would  have an
antidilutive  effect on earnings per share.  At  December 31,  2002,  UTG had an
obligation to issue to FSF or its assigns 500,000 shares of UTG common stock, as
the result of a failed  earnings  covenant (See note 10.C.  to the  consolidated
financial  statements).  As such, the computation of diluted  earnings per share
differs from basic earnings per share for the year ending December 31, 2002.


11.  NOTES PAYABLE

At December 31, 2004, the Company had no long-term debt outstanding. At December
31, 2003, the Company had $ 2,289,776 in long-term debt outstanding.

The notes payable were incurred in April 2001 to  facilitate  the  repurchase of
common stock owned  primarily by two former  Officers and  Directors of UTG, and
members of their  respective  families.  These notes bore  interest at the fixed
rate of 7% per annum (paid  quarterly)  with payments of principal to be made in
five  equal  installments.  UTG has paid the entire  principal  balance on these
notes.

During 2001, UTG was extended a $ 3,300,000  line of credit (LOC) from the First
National Bank of the Cumberlands  (FNBC) located in Livingston,  Tennessee.  The
LOC was for a one-year  term from the date of issue.  Upon  maturity the Company
has renewed the LOC for an additional  one-year  term.  The interest rate on the
LOC is  variable  and  indexed  to be the  lowest  of the  U.S.  prime  rates as
published in the Wall Street Journal,  with any interest rate  adjustments to be
made monthly. No borrowings were incurred during 2004 and 2003.

During 2002, UTG was extended a $ 5,000,000  line of credit (LOC) from Southwest
Bank of St. Louis.  The LOC expired one year from the date of issue and has been
renewed for an additional  term.  As collateral  for any draws under the line of
credit,  UTG pledged 100% of the common stock of its insurance  subsidiary,  UG.
Borrowings  under the LOC will bear  interest  at the rate of 0.25% in excess of
Southwest  Bank of St. Louis' prime rate.  At  December 31,  2004 and 2003,  the
Company had no outstanding borrowings attributable to this LOC. During 2004, UTG
drew $ 2,275,000 on this LOC to repay the outstanding  principal balances on the
notes payable describe above. The entire draw was repaid during 2004.


12.  OTHER CASH FLOW DISCLOSURES

On a cash basis, the Company paid $ 77,453, $ 162,179, and $ 263,441 in interest
expense  for the years  2004,  2003 and 2002,  respectively.  The  Company  paid
$ 110,000,  $ 175,000,  and  $ 60,290 in federal  income tax for 2004,  2003 and
2002, respectively.

As of  December 31,  2004, the Company has $ 450,250 that has not been disbursed
to former minority  shareholders of FCC in connection with FCC's merger with and
into UTG.  The  total  consideration  to be paid by the  Company  to the  former
minority  shareholders as a result of the merger is $ 2,480,000  (See Note 15 to
the consolidated financial statements).

At  December 31,  2004,  the  Company  acquired  $ 2,990,928  in fixed  maturity
investments  for which the cash had not yet been  paid.  The  payable  for these
securities is included in the line item "Other  liabilities" on the consolidated
balance sheet.


13.  CONCENTRATION OF CREDIT RISK

The Company maintains cash balances in financial  institutions that at times may
exceed federally  insured limits.  The Company  maintains its primary  operating
cash accounts  with First  Southern  National  Bank, an affiliate of the largest
shareholder  of UTG, Mr. Jesse T. Correll,  the  Company's CEO and Chairman.  In
aggregate at  December 31,  2004 these accounts have no balances for which there
are no pledges or guarantees  outside FDIC insurance limits. 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.


14.  NEW ACCOUNTING STANDARDS

The Financial  Accounting  Standards Board ("FASB") has issued Statement No. 132
(revised 2003),  Employers'  Disclosures about Pensions and Other Postretirement
Benefits (an amendment of FASB Statements 87, 88 and 106). Statement No. 132 was
developed to address concerns of users of financial  statements  regarding their
need for more  information  about  pension  plan  assets,  obligations,  benefit
payment,  contributions  and net benefit costs.  This statement was effective at
the beginning of the first interim period beginning after December 15, 2003. The
adoption of Statement 132 (revised 2003) did not affect the Company's  financial
position or results of operations, since the Company has no such plans that meet
the provisions of this statement.

The Financial  Accounting Standards Board ("FASB") has issued Statement No. 151,
Inventory Costs--an amendment of ARB No. 43, Chapter 4. This Statement amends the
guidance  in ARB  No.  43,  Chapter  4,  "Inventory  Pricing,"  to  clarify  the
accounting  for abnormal  amounts of idle facility  expense,  freight,  handling
costs, and wasted material (spoilage).  This Statement requires that those items
be  recognized  as  current-period  charges  regardless of whether they meet the
criterion of "so abnormal." In addition, this Statement requires that allocation
of fixed production  overheads to the costs of conversion be based on the normal
capacity of the production facilities. This statement is effective for financial
statements  for fiscal years  beginning  after  June 15,  2005.  The adoption of
Statement 151 does not  currently  affect the  Company's  financial  position or
results of  operations,  since the Company has no inventory  costs that meet the
provisions of this statement.

The Financial  Accounting Standards Board ("FASB") has issued Statement No. 152,
Accounting for Real Estate Time-Sharing  Transactions.  Statement No. 152 amends
FASB  Statement No. 66,  Accounting  for Sales of Real Estate,  to reference the
financial  accounting  and  reporting  guidance  for  real  estate  time-sharing
transactions  that is  provided  in AICPA  Statement  of  Position  (SOP)  04-2,
Accounting  for Real Estate  Time-Sharing  Transactions.  Statement No. 152 also
amends FASB Statement No. 67, Accounting for Costs and Initial Rental Operations
of Real  Estate  Projects,  to  state  that  the  guidance  for  (a)  incidental
operations and (b) costs incurred to sell real estate projects does not apply to
real estate time-sharing transactions. This statement is effective for financial
statements  for fiscal years  beginning  after  June 15,  2005.  The adoption of
Statement 152 does not  currently  affect the  Company's  financial  position or
results of operations,  since the Company has no real estate interests that meet
the provisions of this statement.

The Financial  Accounting Standards Board ("FASB") has issued Statement No. 153,
Exchanges of  Nonmonetary  Assets.  Statement No. 153 amends APB Opinion No. 29,
Accounting  for  Nonmonetary  Transactions,   to  eliminate  the  exception  for
nonmonetary  exchanges  of  similar  productive  assets and  replaces  it with a
general  exception  for  exchanges  of  nonmonetary  assets  that  do  not  have
commercial  substance.  This statement is effective for financial statements for
nonmonetary asset exchanges occurring in fiscal periods beginning after June 15,
2005.  The Company will account for all future  nonmonetary  asset  exchanges in
accordance with the requirements of Statement No. 153.

The Financial  Accounting  Standards Board ("FASB") has issued Statement No. 123
(revised 2004), Share Based Payment. Statement No. 123 establishes standards for
the  accounting  for  transactions  in  which an  entity  exchanges  its  equity
instruments  for goods or services.  It also addresses  transactions in which an
entity  incurs  liabilities  in exchange for goods or services that are based on
the fair value of the entity's equity  instruments or that may be settled by the
issuance of those  equity  instruments.  This  statement  is effective as of the
beginning  of the first  interim or annual  reporting  period that begins  after
June 15,  2005.  The Company will account for all future share based payments in
accordance with the requirements of Statement No. 123.


15.  MERGER OF UNITED TRUST GROUP, INC. AND FIRST COMMONWEALTH CORPORATION

On May 21, 2002, at a special meeting of shareholders,  the shareholders of FCC,
then an 82%  owned  subsidiary  of  UTG,  voted  on and  approved  that  certain
Agreement and Plan of Reorganization  and related Plan of Merger,  each dated as
of June 5, 2001,  between UTG, and FCC (collectively,  the "Merger  Agreement"),
and the merger  contemplated  thereby in which FCC would be merged with and into
UTG, with UTG being the surviving  corporation of the merger.  The merger became
effective on June 12,  2002.  Pursuant to the terms and conditions of the Merger
Agreement,  each share of FCC stock  outstanding  at the  effective  time of the
merger  (other  than  shares held by UTG or shares held in treasury by FCC or by
any of its subsidiaries) was at such time automatically converted into the right
to receive  $ 250 in cash per share.  This allowed UTG to acquire the  remaining
common  shares  (approximately  18%) of FCC  that  UTG did not own  prior to the
effective time of the merger.

The following table summarizes  certain  unaudited  operating  results of UTG as
though the merger  transaction had taken place at the beginning of the reporting
periods ending on December 31, 2002.



                                                                     December 31,
                                                                        2002
                                                                 --------------------
         Total revenues                                      $        30,064,644
         Total benefits and other expenses                   $        27,927,456
         Operating income                                    $         2,137,188
         Net Income                                          $         1,394,218
         Basic earnings per share                            $              0.40
         Diluted earnings per share                          $              0.35

16.      COMPREHENSIVE INCOME

                                                                                     Tax
                                                              Before-Tax           (Expense)           Net of Tax
              2004                                              Amount             or Benefit            Amount
              ------------------------------------------    ----------------   -------------------   ---------------

              Unrealized holding gains during
                  period                                $      7,896,605       $    (2,763,812)     $    5,132,793

              Less: reclassification adjustment
                  for gains realized in net income               (31,766)              (11,118)            (20,648)

                                                            ----------------   -------------------   ---------------
              Net unrealized gains                             7,864,838            (2,752,693)          5,112,145
                                                            ----------------   -------------------   ---------------
              Other comprehensive income                $      7,864,838       $    (2,752,693)     $    5,112,145
                                                            ================   ===================   ===============


                                                                                     Tax
                                                              Before-Tax           (Expense)           Net of Tax
              2003                                              Amount             or Benefit            Amount
              ------------------------------------------    ----------------   -------------------   ---------------

              Unrealized holding losses during
                  period                                $     (1,941,662)   $          679,582      $   (1,262,080)
              Less: reclassification adjustment
                  for losses realized in net income               86,979               (30,443)             56,536
                                                            ----------------   -------------------   ---------------

              Net unrealized losses                           (1,854,683)              649,139          (1,205,544)
                                                            ----------------   -------------------   ---------------
              Other comprehensive deficit               $     (1,854,683)   $          649,139      $   (1,205,544)
                                                            ================   ===================   ===============

                                                                                     Tax
                                                              Before-Tax           (Expense)           Net of Tax
              2002                                              Amount             or Benefit            Amount
              ------------------------------------------    ----------------   -------------------   ---------------

              Unrealized holding gains during
                  period                                $      2,868,146     $      (1,003,851)  $       1,864,295
              Less: reclassification adjustment
                  for gains realized in net income                (1,689)                  591              (1,098)
                                                            ----------------   -------------------   ---------------
              Net unrealized gains                             2,866,457           (1,003,260)           1,863,197
                                                            ----------------   -------------------   ---------------
              Other comprehensive income                $      2,866,457     $      (1,003,260)     $    1,863,197
                                                            ================   ===================   ===============



In 2004,  2003 and 2002,  the Company  established  a deferred tax  liability of
$ 3,555,787,  $ 803,095 and $ 1,170,197,  respectively, for the unrealized gains
based on the applicable United States statutory rate of 35%.



17.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

                                                                              2004
                                    -------------------- --------------------- --------------------- --------------------
                                                1st                  2nd                   3rd                   4th
                                         ---------------       ---------------       ---------------      ---------------

Premiums and policy fees, net       $        3,874,145   $         3,671,667  $         3,389,672   $        3,204,945
Net investment income                        1,831,077             2,734,854            2,865,198            2,989,757
Total revenues                               5,833,347             6,607,203            6,429,302            6,597,027
Policy benefits including
  dividends                                  5,172,042             4,923,292            4,467,013            4,203,360
Commissions and
  amortization of DAC and COI                  493,284               505,872              544,678              635,077
Operating expenses                           1,397,448             1,432,013            1,319,472            1,163,814
Operating income                            (1,255,061)             (278,683)              71,029              594,776
Net income                                    (874,195)               66,841              141,264              390,473
Basic earnings per share                         (0.22)                 0.02                 0.04                 0.09
Diluted earnings per
  share                                          (0.22)                 0.02                 0.04                 0.09

                                                                              2003
                                    -------------------- --------------------- --------------------- --------------------
                                                1st                  2nd                   3rd                   4th
                                         ---------------       ---------------       ---------------      ---------------

Premiums and policy fees, net       $        3,883,003   $         4,093,239  $         3,686,584   $        3,360,212
Net investment income                        2,888,444             3,231,542            2,462,813            1,687,701
Total revenues                               7,185,509             7,811,693            6,498,785            4,992,371
Policy benefits including
  dividends                                  5,520,920             4,931,443            5,516,224            5,102,089
Commissions and
 amortization of DAC and COI                   544,139               441,914              513,488            5,507,726
Operating expenses                           1,169,139             3,500,807            1,451,973            1,444,861
Operating income (loss)                        (90,406)           (1,102,433)          (1,023,300)          (7,102,405)
Net income (loss)                             (494,124)             (669,492)            (464,142)          (4,768,732)
Basic earnings (loss) per share                   0.14)                (0.17)               (0.12)               (1.24)
Diluted earnings (loss) per
  share                                          (0.12)                (0.17)               (0.12)               (1.24)
                                                                              2002
                                    -------------------- --------------------- --------------------- --------------------
                                                1st                  2nd                   3rd                   4th
                                         ---------------       ---------------       ---------------      ---------------

Premiums and policy fees, net       $        4,276,861   $         4,388,284  $         3,725,823   $        3,440,609
Net investment income                        3,396,613             3,383,548            3,294,038            3,440,603
Total revenues                               7,882,176             7,994,915            7,211,394            7,088,714
Policy benefits including
  dividends                                  4,835,106             4,609,999            5,110,590            4,930,553
Commissions and
  amortization of DAC and COI                  688,618               578,688              501,283              532,722
Operating expenses                           1,530,433             1,649,134            1,441,502            1,255,387
Operating income                               755,809             1,095,700               86,789              311,445
Net income (loss)                              477,034               722,679              327,499             (188,417)
Basic earnings (loss) per share                   0.14                  0.21                 0.08                (0.05)
Diluted earnings (loss) per
  share                                           0.12                  0.18                 0.08                (0.05)



ITEM 9.  DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

NONE


ITEM 9A.  CONTROLS AND PROCEDURES

Within  the 90 days  prior  to the  filing  date of this  quarterly  report,  an
evaluation was performed under the supervision and with the participation of the
Company's  management,  including the President and Chief Executive Officer (the
"CEO") and the Chief Financial  Officer (the "CFO"), of the effectiveness of the
design and operation of the Company's disclosure controls and procedures.  Based
on that  evaluation,  the  Company's  management,  including  the  CEO and  CFO,
concluded that the Company's  disclosure  controls and procedures were effective
in  alerting  them on a timely  basis to  material  information  relating to the
Company  required to be  included in the  Company's  periodic  reports  filed or
submitted under the Securities Exchange Act of 1934, as amended. There have been
no significant  changes in the Company's  internal  controls or in other factors
that could significantly  affect internal controls subsequent to the date of the
evaluation.




                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF UTG

The Board Of Directors

In accordance with the laws of Illinois 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, 2004, the Board met 4 times. All directors attended at least 75% of
all meetings of the board, except Mr. John Albin and Mr. Ward Correll.

The Board of  Directors  has an Audit  Committee  consisting  of Messrs.  Perry,
Albin, and Brinck.  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 twice in 2004.

The Board has reviewed the  qualifications of each member of the audit committee
and  determined no member of the committee  meets the definition of a "financial
expert".  The Board concluded  however,  that each member of the committee has a
proven  track  record as a  successful  businessman,  each  operating  their own
company  and  their  experience  as  businessmen  provide a  knowledge  base and
experience adequate for participation as a member of the committee.

The compensation of UTG's executive  officers is determined by the full Board of
Directors (see report on Executive Compensation).

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, 2004. the Board consisted of
eight directors.  Shareholders elect Directors to serve for a period of one year
at UTG's Annual Shareholders' meeting.

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  thereunder.  During 2004, UTG was aware of the following individual
who filed a late  Form 4,  statement  of  changes  in  beneficial  ownership  of
securities,  with the Securities and Exchange  Commission;  Thomas F Darden, II,
director. This individual reported a purchase of 4,315 shares of UTG stock.


Audit Committee Report To Shareholders

In  connection  with the  December  31,  2004  financial  statements,  the audit
committee:  (1) reviewed and discussed  the audited  financial  statements  with
management; (2) discussed with the auditors the matters required by Statement on
Auditing  Standards No. 61; and (3) received and discussed with the auditors the
matters  required by Independence  Standards  Board  Statement No.1.  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.

                  William W. Perry - Committee Chairman
                  John S. Albin
                  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.


Directors

Name, Age                  Position with the Company, Business Experience and Other Directorships

John S. Albin, 76

                    Director  of UTG since  1984;  farmer in  Douglas  and Edgar
                    counties,  Illinois,  since  1951;  Chairman of the Board of
                    Longview  State  Bank  from 1978 to 2005;  President  of the
                    Longview Capitol Corporation,  a bank holding company, since
                    1978;  Chairman of First  National Bank of Ogden,  Illinois,
                    from 1987 to 2005;  Chairman  of the State Bank of  Chrisman
                    from  1988 to  2005;  Chairman  of  First  National  Bank in
                    Georgetown  from 1994 to 2005;  Director  and  Secretary  of
                    Illini  Community   Development   Corporation   since  1990;
                    Commissioner of Illinois Student Assistance  Commission from
                    1996 to 2002.

Randall L. Attkisson, 59

                    Director of UTG since 1999;  President  and Chief  Operating
                    Officer  of  UTG  since  2001;   Chief  Financial   Officer,
                    Treasurer,  Director of First Southern Bancorp,  Inc, a bank
                    holding company,  since 1986;  Treasurer,  Director of First
                    Southern  Funding,  LLC since  1992;  Director  of  Kentucky
                    Christian  Foundation  since  2002;  Director  of The  River
                    Foundation,   Inc.  since  1990;  President  of  Randall  L.
                    Attkisson & Associates  from 1982 to 1986;  Commissioner  of
                    Kentucky  Department  of Banking &  Securities  from 1980 to
                    1982;  Self-employed  Banking  Consultant in Miami,  FL from
                    1978 to 1980.

Joseph A. Brinck, II, 49

                    Director of UTG since 2003; CEO of Stelter & Brinck,  LTD, a
                    full  service   combustion   engineering  and  manufacturing
                    company from 1979 to present; President of Superior Thermal,
                    LTD  from  1990 to  present.  Currently  holds  Professional
                    Engineering   Licenses  in  Ohio,   Kentucky,   Indiana  and
                    Illinois.

Jesse T. Correll, 48

                    Chairman  and CEO of UTG since  2000;  Director of UTG since
                    1999;  Chairman,   President,  Director  of  First  Southern
                    Bancorp,  Inc.  since  1983;  President,  Director  of First
                    Southern Funding, LLC since 1992; President, Director of The
                    River  Foundation  since 1990;  Director  of Thomas  Nelson,
                    Inc.,  a premier  publisher  of Bibles and  Christian  Books
                    since 2001; Director of Computer Services, Inc., provider of
                    bank technology  products and services since 2001;  Director
                    of Global Focus since 2001;  Young Life  Dominican  Republic
                    Committee  Member  since 2000.  Jesse  Correll is the son of
                    Ward Correll.

Ward F. Correll, 76

                    Director of UTG since 2000; President, Director of Tradeway,
                    Inc.  of  Somerset,  KY since 1973;  President,  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 1988;  Director of First Southern  Funding,  LLC since
                    1991;  Director  of The River  Foundation  since  1990;  and
                    Director First Southern  Insurance  Agency since 1987.  Ward
                    Correll is the father of Jesse Correll.

Thomas F. Darden, 50

                    Mr.  Darden  is the  Chief  Executive  Officer  of  Cherokee
                    Investment  Partners,  a  private  equity  fund with over $1
                    billion of capital for  investing in  brownfields.  Cherokee
                    has offices in North Carolina, Colorado, New Jersey, London,
                    Toronto and  Montreal.  Beginning in 1984,  he served for 16
                    years as the Chairman of Cherokee Sanford Group, the largest
                    privately-held  brick  manufacturing  company  in the United
                    States  and   previously   the   Southeast's   largest  soil
                    remediation  company.  From 1981 to 1983,  Mr.  Darden was a
                    consultant with Bain & Company in Boston. From 1977 to 1978,
                    he  worked  as  an  environmental   planner  for  the  Korea
                    Institute of Science and Technology in Seoul, where he was a
                    Henry Luce Foundation  Scholar.  Mr. Darden is on the Boards
                    of Shaw  University and the  University of North  Carolina's
                    environmental department. He is on the Board of Directors of
                    the  National  Brownfield  Association  and on the  Board of
                    Trustees of North  Carolina  Environmental  Defense.  He was
                    Chairman of the  Research  Triangle  Transit  Authority  and
                    served two terms on the N.C. Board of Transportation through
                    appointments  by the  Governor and the Speaker of the House.
                    Mr. Darden is a director of Winston Hotels,  Inc. (NYSE) and
                    serves  on the  Board  of  Governors  of  Research  Triangle
                    Institute in Research Triangle Park, NC. Mr. Darden earned a
                    Masters in Regional  Planning  from the  University of North
                    Carolina at Chapel  Hill, a JD from Yale Law School and a BA
                    from the University of North Carolina at Chapel Hill,  where
                    he was a Morehead  Scholar.  His 1976  undergraduate  thesis
                    analyzed the environmental impact of third world development
                    and his 1981 Yale thesis addressed  interstate acid rain air
                    pollution. Mr. Darden and his wife Jody have three children,
                    ages 16 to 25.

William W. Perry, 48

                    Director of UTG since 2001; Owner of SES Investments,  Ltd.,
                    an oil and gas investments company since 1991;  President of
                    EGL Resources, Inc., an oil and gas operations company based
                    in Texas and New  Mexico  since  1992;  President  of a real
                    estate investment company;  Chairman of Perry & Perry, Inc.,
                    a Texas oil and gas consulting company since 1977;  Director
                    of Young Life  Foundation  and  involved  with Young Life in
                    various  capacities;  Director  of  Abel-Hangar  Foundation,
                    Director  of  University  of Oklahoma  Associates;  Midland,
                    Texas city council member since 2002

James P. Rousey, 46

                    Executive Vice President,  Chief Administrative  Officer and
                    Director  of UTG  since  September  2001;  Regional  CEO and
                    Director of First Southern  National Bank from 1988 to 2001.
                    Board  Member  with the  Illinois  Fellowship  of  Christian
                    Athletes since 2001.


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

Randall L. Attkisson   President and Chief Operating Officer

James P. Rousey        Executive Vice President and Chief Administrative Officer

Other executive officers of UTG are set forth below:

Name, Age                  Position with UTG and Business Experience

Theodore C. Miller, 42

                    Corporate   Secretary  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.

Code Of Ethics

We have  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  functions)  and employees.  Our Code of Business  Conduct and Ethics is
available to our  stockholders by requesting a free copy of the Code of Business
Conduct and Ethics by writing to us at United Trust Group,  5250 South Sixth St,
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 the
executive officers of UTG whose salary plus bonus exceeded $100,000 during UTG's
last fiscal year:



                           SUMMARY COMPENSATION TABLE


Name and                                             Annual Compensation            Other Annual            All Other (1)
Principal Position               Year           Salary ($)           Bonus ($)    Compensation ($)         Compensation ($)

Jesse T. Correll (2)              2004              75,720                -                 -                   4,500
Chairman of the Board             2003              75,720                -                 -                   4,500
Chief Executive Officer           2002              75,000                -                 -                   4,500

Randall L. Attkisson              2004              75,720                -                 -                   4,500
President                         2003              75,720                -                 -                   4,500
                                  2002              75,000                -                 -                   4,500

Theodore C. Miller                2004             100,000                -                 -                   3,000
Corporate Secretary               2003             100,000            3,000                 -                   3,000
Senior Vice President             2002             100,000                -                 -                   3,000
Chief Financial Officer

James P. Rousey                   2004             135,000                -                 -                   1,519
Executive Vice President          2003             135,000                -                 -                   2,025
Chief Administrative Officer      2002             135,000           10,000                 -                   2,025
Member of the Board

Douglas A. Dockter (3)            2004             100,000            1,000                 -                   2,700
Vice President                    2003             100,000            4,000                 -                   2,689
                                  2002              95,000                -                 -                   2,316


(1)  All Other  Compensation  consists of matching  contributions  to a Employee
     Savings Trust 401(k) Plan.

(2)  On March 27, 2000, Mr. Jesse T. Correll assumed the position as Chairman of
     the Board and Chief Executive Officer of UTG and each of its affiliates. In
     March  2001,  the Board of  Directors  approved  an annual  salary  for Mr.
     Correll of $75,000, with payments to begin on April 1, 2001.

(3)  Mr. Douglas A. Dockter is not  considered an executive  officer of UTG, but
     is included in this table pursuant to compensation disclosure requirements.

Option/SAR Grants/Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End
Option/SAR Values

At December  31, 2004 there were no shares of the common stock of UTG subject to
unexercised options held by the named executive officers.  There were no options
or stock  appreciation  rights granted to the named  executive  officers for the
past three fiscal years.

Compensation of Directors

UTG's standard  arrangement for the compensation of directors provides that each
director shall receive an annual retainer of $2,400,  plus $300 for each meeting
attended and  reimbursement  for  reasonable  travel  expenses.  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.

Employment Contracts

There are no employment  agreements in effect with any executive officers of the
Company.



Compensation Committee Interlocks and Insider Participation

UTG does not have a  compensation  committee and decisions  regarding  executive
officer  compensation  are  made by the  full  Board of  Directors  of UTG.  The
following  persons  served as directors of UTG during 2004 and were  officers or
employees of UTG or its  affiliates  during 2004:  Jesse T. Correll,  Randall L.
Attkisson and James P. Rousey. Accordingly,  these individuals have participated
in  decisions  related to  compensation  of  executive  officers  of UTG and its
subsidiaries.

During 2004,  Jesse T. Correll and Randall L. Attkisson,  executive  officers of
UTG and UG, were also members of the Board of Directors of UG.

Jesse T.  Correll and Randall L.  Attkisson  are each  directors  and  executive
officers of FSBI and participate in compensation decisions of FSBI. FSBI owns or
controls directly and indirectly  approximately  46.5% of the outstanding common
stock of UTG.

Performance Graph

The following graph compares the cumulative  total  shareholder  return on UTG's
Common  Stock  during the five  fiscal  years ended  December 31,  2004 with the
cumulative total return on the NASDAQ Composite Index Performance and the NASDAQ
Insurance  Index (1). The graph assumes that $ 100 was invested on  December 31,
1999 in each of the Company's  common stock, the NASDAQ Composite Index, and the
NASDAQ Insurance Stock Index, and that any dividends were reinvested.


(1)  The  Company  selected  the  NASDAQ  Composite  Index   Performance  as  an
     appropriate  comparison  since  during  the  time  period  reflected,   the
     Company's  Common Stock was traded on the NASDAQ  Small Cap exchange  under
     the sign "UTGI" until December 31,  2001. Furthermore, the Company selected
     the NASDAQ Insurance Stock Index as the second comparison  because there is
     no similar single "peer company" in the NASDAQ system with which to compare
     stock performance and the closest additional  line-of-business  index which
     could be found was the NASDAQ  Insurance Stock Index.  Trading  activity in
     the Company's Common Stock is limited, which may be due in part as a result
     of the Company's low profile.  The Return Chart is not intended to forecast
     or be indicative of possible  future  performance  of the Company's  Common
     Stock.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

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 March 22, 2005 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                              185,454        (3)              4.7%
Stock, no         First Southern Bancorp, Inc.                1,739,072     (3)(4)             44.0%
par value         First Southern Funding, LLC                   335,453     (3)(4)              8.5%
                  First Southern Holdings, LLC                1,483,791     (3)(4)             37.5%
                  First Southern Capital Corp., LLC             237,333     (3)(4)              6.0%
                  First Southern Investments, LLC                24,086                         0.6%
                  Ward F. Correll                                98,523        (5)              2.5%
                  WCorrell, Limited Partnership                  72,750        (3)              1.8%
                  Cumberland Lake Shell, Inc.                    98,523        (5)              2.5%

                  Total(6)                                    2,619,921                        66.2%

(1)  The percentage of outstanding shares is based on 3,955,355 shares of Common
     Stock outstanding as of March 22, 2005.

(2)  The  address  for each of  Jesse  Correll,  First  Southern  Bancorp,  Inc.
     ("FSBI"), First Southern Funding, LLC ("FSF"), First Southern Holdings, LLC
     ("FSH"),   First  Southern  Capital  Corp.,  LLC  ("FSC"),  First  Southern
     Investments,  LLC ("FSI"),  and WCorrell,  Limited  Partnership  ("WCorrell
     LP"), is P.O. Box 328, 99 Lancaster Street,  Stanford,  Kentucky 40484. The
     address for each of Ward Correll and Cumberland Lake Shell, Inc. ("CLS") is
     P.O. Box 430, 150 Railroad Drive, Somerset, Kentucky 42502.

(3)  The share  ownership of Jesse Correll  listed  includes  112,704  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 it.

     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  directly),  and may be deemed to share  with FSH (as well as FSBI)
     the  right  to  vote  and to  dispose  of such  shares.  Mr.  Correll  owns
     approximately 79% of the outstanding  membership  interests of FSF; he owns
     directly  approximately  50%,  companies he controls own approximately 14%,
     and he has the  power  to vote but  does  not own an  additional  3% of the
     outstanding  voting  stock  of  FSBI.  FSBI and FSF in turn own 99% and 1%,
     respectively,  of the outstanding  membership interests of FSH. Mr. Correll
     is also a manager of FSC and thereby may also be deemed to beneficially own
     the total  number of shares of Common Stock owned by FSC, and may be deemed
     to share  with it the  right to vote and to  dispose  of such  shares.  The
     aggregate number of shares of Common Stock held by these other entities, as
     shown in the above table, is 1,976,405 shares.

(4)  The share ownership of FSBI consists of 255,281 shares of Common Stock held
     by FSBI directly  (which FSBI acquired by virtue of its merger with Dyscim,
     LLC) and  1,483,791  shares of Common  Stock held by FSH of which FSBI is a
     99% member and FSF is a 1% member, as further described below. As a result,
     FSBI may be deemed to share  the  voting  and  dispositive  power  over the
     shares held by FSH.

(5)  Represents  the shares of Common Stock held by CLS, all of the  outstanding
     voting  shares  of which are owned by Ward F.  Correll  and his wife.  As a
     result,  Ward F. Correll may be deemed to share the voting and  dispositive
     power over these shares.

(6)  According to the most recent  Schedule  13D, as amended,  filed  jointly by
     each of the entities and persons listed above,  Jesse Correll,  FSBI,  FSF,
     FSH, FSC, and FSI, 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.


Security Ownership Of Management Of UTG

The  following  tabulation  shows with respect to each of the  directors of UTG,
with respect to UTG's chief executive  officer and President,  and each of UTG's
executive  officers whose salary plus bonus  exceeded  $100,000 for fiscal 2004,
and with respect to all executive  officers and directors of UTG as a group: (i)
the total  number of shares of all classes of stock of UTG or any of its parents
or subsidiaries,  beneficially  owned as of March 1, 2005 and the nature of such
ownership; and (ii) the percent of the issued and outstanding shares of stock so
owned, and granted stock options available as of the same date.

 Title                 Directors, Named Executive                   Amount                        Percent
  of                   Officers, & All Directors &               and Nature of                      of
Class                 Executive Officers as a Group                Ownership                     Class (1)

UTG's                 John S. Albin                                  10,503  (4)                   *
Common                Randall L. Attkisson                                0  (2)                   *
Stock, no             Joseph A. Brinck, II                                0                        *
par value             Jesse T. Correll                            2,497,312  (3)                  63.1%
                      Ward F. Correll                                98,523  (5)                   2.4%
                      Thomas F. Darden                               21,095  (6)                   *
                      Theodore C. Miller                             10,000  (6)                   *
                      William W. Perry                               30,000  (6)                   *
                      James P. Rousey                                     0                        *
                      All directors and executive officers
                      as a group (ten in number)                  2,667,433                       67.4%

(1)  The percentage of outstanding  shares for UTG is based on 3,955,355  shares
     of Common Stock outstanding as of March 22, 2005.

(2)  Randall L.  Attkisson is an associate and business  partner of Mr. Jesse T.
     Correll and holds minority ownership  positions in certain of the companies
     listed as owning UTG Common Stock  including First Southern  Bancorp,  Inc.
     Ownership  of  these  shares  is  reflected  in the  ownership  of Jesse T.
     Correll.

(3)  The share ownership of Mr. Correll  includes 112,704 shares of United Trust
     Group  common  stock owned by him  individually,  255,281  shares of United
     Trust Group common stock held by First Southern  Bancorp,  Inc. and 335,453
     shares of United Trust Group common stock owned by First Southern  Funding,
     LLC. The share  ownership of Mr.  Correll also  includes  72,750  shares of
     United Trust Group common stock held by WCorrell,  Limited  Partnership,  a
     limited partnership in which Mr. Correll serves as managing general partner
     and, as such, has sole voting and dispositive power over the shares held by
     it. In addition,  by virtue of his ownership of voting  securities of First
     Southern Funding, LLC and First Southern Bancorp,  Inc., and in turn, their
     ownership of 100% of the outstanding membership interests of First Southern
     Holdings,  LLC (the holder of 1,483,791 shares of United Trust Group common
     stock),  Mr. Correll may be deemed to beneficially  own the total number of
     shares of United Trust Group common stock owned by First Southern Holdings,
     and may be deemed to share with First  Southern  Holdings the right to vote
     and to dispose of such shares.  Mr. Correll owns  approximately  79% of the
     outstanding  membership  interests  of  First  Southern  Funding;  he  owns
     directly  approximately  50%,  companies he controls own approximately 14%,
     and he has the  power  to vote but  does  not own an  additional  3% of the
     outstanding voting stock of First Southern Bancorp.  First Southern Bancorp
     and First  Southern  Funding in turn own 99% and 1%,  respectively,  of the
     outstanding membership interests of First Southern Holdings. Mr. Correll is
     also a manager of First Southern  Capital Corp.,  LLC, and thereby may also
     be deemed to  beneficially  own the  237,333  shares of United  Trust Group
     common  stock held by First  Southern  Capital,  and may be deemed to share
     with it the right to vote and to dispose of such shares. Share ownership of
     Mr.  Correll in United  Trust Group  common  stock does not include  24,086
     shares  of  United  Trust  Group  common  stock  held  by  First   Southern
     Investments, LLC.

(4)  Includes 392 shares owned directly by Mr. Albin's spouse.

(5)  Cumberland Lake Shell,  Inc. owns 98,523 shares of UTG Common Stock, all of
     the outstanding voting shares of which are owned by Ward F. Correll and his
     wife.  As a result  Ward F.  Correll  may be deemed to share the voting and
     dispositive power over these shares. Ward F. Correll is the father of Jesse
     T.  Correll.  There are 72,750 shares of UTG Common Stock owned by WCorrell
     Limited  Partnership in which Jesse T. Correll  serves as managing  general
     partner and, as such, has sole voting and dispositive power over the shares
     of Common Stock held by it. The aforementioned  72,750 shares are deemed to
     be beneficially owned by and listed under Jesse T. Correll in this section.

(6)  Shares subject to UTG Employee and Director Stock Purchase Plan.

* Less than 1%.

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

The following table reflects the Company's  Employee and Director Stock Purchase
Plan Information:


--------------------------------- ------------------------------ ------------------------------- ------------------------------
Plan category                     Number of securities to be     Weighted-average exercise       Number of securities
                                  issued upon exercise of        price of outstanding options,   remaining available for
                                  outstanding options,           warrants and rights             future issuance under
                                  warrants and rights                                            employee and director stock
                                                                                                 purchase plans (excluding
                                                                                                 securities reflected in
                                                                                                 column (a))
                                               (a)                                (b)                           (c)
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Employee and director stock
purchase plans approved by
security holders
                                                                                                             310,123
                                                     0                              0
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Employee and director stock
purchase plans not approved by
security holders

                                                     0                              0                              0
--------------------------------- ------------------------------ ------------------------------- ------------------------------
Total                                                0                              0                        310,123
--------------------------------- ------------------------------ ------------------------------- ------------------------------


On March 26,  2002, the Board of Directors of UTG adopted, and on June 11, 2002,
the  shareholders  of UTG approved the United  Trust  Group,  Inc.  Employee and
Director  Stock Purchase Plan. The Plan allows for the issuance of up to 400,000
shares of UTG common stock. The plan's purpose is to encourage  ownership of UTG
stock by eligible directors and employees of UTG and its subsidiary by providing
them with an  opportunity  to invest in shares of UTG common stock.  The plan is
administered by the Board of Directors of UTG.

A total of  400,000  shares of common  stock  may be  purchased  under the plan,
subject to appropriate  adjustment for stock dividends,  stock splits or similar
recapitalizations  resulting  in a  change  in  shares  of UTG.  The plan is not
intended to qualify as an "employee  stock  purchase  plan" under Section 423 of
the Internal  Revenue Code.  During 2004 and 2003, the Board of Directors of UTG
approved offerings under the plan to qualified individuals.  For the years ended
December 31,  2004  and  2003,  four  individuals  purchased  14,440  and  eight
individuals  purchased  58,891  shares of UTG common stock,  respectively.  Each
participant   under  the  plan  executed  a  "stock   restriction  and  buy-sell
agreement",  which among other things provides UTG with a right of first refusal
on any future sales of the shares acquired by the participant under this plan.

The  purchase  price of  shares  repurchased  under the  stock  restriction  and
buy-sell agreement shall be computed,  on a per share basis, equal to the sum of
(i) the  original  purchase  price paid to acquire such shares from UTG and (ii)
the  consolidated  statutory net earnings (loss) per share of such shares during
the  period  from the end of the month  next  preceding  the month in which such
shares  were  acquired  pursuant  to the  plan,  to the  end of the  month  next
preceding  the  month  in  which  the  sale of such  shares  to UTG  occurs.  At
December 31, 2004, UTG had 89,877 shares outstanding that were issued under this
program with a value of $ 11.63 per share pursuant to the above formula.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On  September 1,  2004,  UTG  contributed  the common stock of its  wholly-owned
subsidiary, North Plaza, to its life insurance subsidiary, UG. The contribution,
which  received  prior  approval by the  regulatory  authorities,  increased the
capital of the life insurance subsidiary by $ 7,857,794.

On February 20, 2003, UG purchased  $ 4,000,000  of a trust  preferred  security
offering issued by 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 $ 264,841 and $ 226,104 of dividends
in 2004 and 2003, respectively.

On June 18,  2003,  UG entered  into a lease  agreement  with  Bandyco,  LLC, an
affiliated  entity,  for a one-sixth  interest in an aircraft.  Bandyco,  LLC is
affiliated  with Ward F.  Correll,  who is a director of the Company.  The lease
term is for a  period  of five  years at a cost of  $ 523,831.  The  Company  is
responsible  for its share of annual  non-operational  costs, in addition to the
operational costs as are billable for specific use.

On November 6,  2003, UG purchased real estate at a cost of $ 2,220,256  from an
outside  third party through the formation of an LLC in which UG is a two-thirds
owner.  The other  one-third  partner  is  Millard  V.  Oakley,  who is a former
Director of UTG. Hampshire Plaza Garage is a 578 space parking garage located in
New Hampshire.

On March 26, 2002, the Board of Directors of UTG adopted, and on June 11,  2002,
the  shareholders  of UTG approved,  the United Trust Group,  Inc.  Employee and
Director  Stock  Purchase  Plan (See Note 10.A.  to the  consolidated  financial
statements).

On November 20, 1998, FSF and affiliates acquired 929,904 shares of common stock
of UTG from UTG and certain UTG  shareholders.  As consideration for the shares,
FSF paid UTG  $ 10,999,995  and certain  shareholders  of UTG $ 999,990 in cash.
Included in the stock acquisition  agreement is an earnings covenant whereby UTG
warrants UTG and its subsidiaries and affiliates will have future earnings of at
least  $ 30,000,000 for a five-year period beginning  January 1,  1998 (See Note
10.C. to the consolidated financial statements).

At the March 2003 Board of Directors  meeting,  the  Appalachian  Life Insurance
Company (APPL) and UG Boards  reaffirmed the merger of APPL with and into UG and
approved the final merger  documents.  Upon  receiving the necessary  regulatory
approvals,  the merger of Abraham Lincoln  Insurance Company (ABE) and APPL with
and into UG was consummated  effective July 1, 2003. ABE and APPL were each 100%
owned subsidiaries of UG prior to the merger. Management of the Company believes
the  completion  of the mergers will provide the Company  with  additional  cost
savings.  These cost savings result from  streamlining the Company's  operations
and organizational  structure from three life insurance subsidiaries to one life
insurance subsidiary,  UG. Thus, the Company will further improve administrative
efficiency.

On  January 1,  1993,  UTG  entered an  agreement  with UG pursuant to which UTG
provided management services necessary for UG to carry on its business.  UG paid
$ 5,625,451,  $ 5,906,406  and  $ 3,025,194  to  UTG in  2004,  2003  and  2002,
respectively, under this arrangement.

ABE paid fees to FCC pursuant to a cost sharing and  management  fee  agreement.
FCC provided management services for ABE to carry on its business. The agreement
required ABE to pay a percentage of the actual expenses incurred by FCC based on
certain activity indicators of ABE business to the business of all the insurance
company  subsidiaries  plus a management fee based on a percentage of the actual
expenses  allocated  to ABE.  ABE paid  fees of  $ 188,494  in 2002  under  this
agreement.  ABE  paid  fees  of  $ 165,269  and  $ 170,729  in  2003  and  2002,
respectively, to UTG under this agreement.

APPL had a  management  fee  agreement  with FCC  whereby FCC  provided  certain
administrative  duties,  primarily data processing and investment  advice.  APPL
paid fees of  $ 222,000  during  2002  under this  agreement.  APPL paid fees of
$ 222,000  and $ 222,000 to UTG during 2003 and 2002,  respectively,  under this
agreement.

Respective domiciliary insurance departments have approved the agreements of the
insurance companies 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.

Since the Company's affiliation with FSF, UG has acquired mortgage loans through
participation  agreements  with FSNB.  FSNB  services the loans covered by these
participation  agreements.  UG pays a .25%  servicing  fee on these  loans and a
one-time fee at loan  origination  of .50% of the original  loan amount to cover
costs incurred by FSNB relating to the processing and establishment of the loan.
UG paid $ 45,468,  $ 63,214 and $ 70,140 in servicing fees and $ 0, $ 13,821 and
$ 35,127 in origination fees to FSNB during 2004, 2003 and 2002, respectively.

The Company reimbursed expenses incurred by Mr. Jesse T. Correll and Mr. Randall
L.  Attkisson  relating  to travel  and  other  costs  incurred  on behalf of or
relating to the  Company.  The Company paid  $ 50,098,  $ 20,238 and $ 74,621 in
2004,  2003  and  2002,   respectively  to  First  Southern  Bancorp,   Inc.  in
reimbursement  of such costs. In addition,  beginning in 2001, the Company began
reimbursing FSBI a portion of salaries and pension costs for Mr. Correll and Mr.
Attkisson.  The  reimbursement  was approved by the UTG Board of  Directors  and
totaled $ 160,960, $ 151,440 and $ 169,651 in 2004, 2003 and 2002, respectively,
which included salaries and other benefits.


ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES

Kerber,  Eck and  Braeckel  LLP ("KEB")  served as UTG's  independent  certified
public  accounting  firm for the fiscal  year ended  December  31,  2004 and for
fiscal year ended December 31, 2003. In serving its primary  function as outside
auditor for UTG, KEB performed  the following  audit  services:  examination  of
annual consolidated financial statements; assistance and consultation on reports
filed  with  the  Securities  and  Exchange   Commission;   and  assistance  and
consultation  on  separate  financial  reports  filed  with the State  insurance
regulatory authorities pursuant to certain statutory requirements.

Audit Fees.  Audit fees billed for these audit services in the fiscal year ended
December  31,  2004 and  December  31,  2003  totaled  $ 99,970  and  $ 115,000,
respectively  and audit fees  billed  for  quarterly  reviews  of the  Company's
financial  statements  totaled $ 12,014 and $ 13,909 for the year 2004 and 2003,
respectively.

Audit  Related Fees. No audit related fees were incurred by the Company from KEB
for the fiscal years ended December 31, 2004 and December 31, 2003.

Tax Fees. KEB did not render any services related to tax compliance,  tax advice
or tax planning  for the fiscal  years ended  December 31, 2004 and December 31,
2003.

All Other Fees. No other  services  besides the audit services  described  above
were  performed by, and therefore no other fees were billed by, KEB for services
in the fiscal years ended December 31, 2004 and December 31, 2003.

The audit  committee of the Company  appoints the independent  certified  public
accounting firm, with the appointment approved by the entire Board of Directors.
Non-audit related services to be performed by the firm are to be approved by the
audit  committee  prior to  engagement.  The  Company had no  non-audit  related
services  performed  by KEB for the fiscal  years  ended  December  31, 2004 and
December 31, 2003.




                                     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

              Schedule I - Summary of Investments - other than invested in related parties.

              Schedule II - Condensed financial information of registrant

              Schedule IV - Reinsurance

              Schedule V - Valuation and qualifying accounts


               NOTE: Schedules other than those listed above are omitted because
               they are not  required or the  information  is  disclosed  in the
               financial statements or footnotes.


(B)  Exhibits:

              Index to Exhibits incorporated herein by this reference (See pages 73 and 74).



                                INDEX TO EXHIBITS

 Exhibit
 Number


2(a) (4)  Articles  of  Merger of First  Commonwealth  Corporation,  A  Virginia
     Corporation with and into United Trust Group, Inc., An Illinois Corporation
     dated as of May 30, 2002, including exhibits thereto.

3(a) (5) Articles of Incorporation of the Registrant and all amendments thereto.

3(b) (5) By-Laws for the Registrant and all amendments thereto.

4(a) (4) UTG's Agreement  pursuant to Item  601(b)(4)(iii)(A)  of Regulation S-K
     with respect to long-term debt instruments.

10(a)(2)  Coinsurance  Agreement  dated  September 30,  1996  between  Universal
     Guaranty Life  Insurance  Company and First  International  Life  Insurance
     Company, including assumption reinsurance agreement exhibit and amendments.

10(b)(1)  Management  and  Consultant  Agreement  dated  as of  January 1,  1993
     between  First   Commonwealth   Corporation  and  Universal  Guaranty  Life
     Insurance Company.

10(c)(1)  Management  Agreement  dated  December 20, 1981  between  Commonwealth
     Industries Corporation, and Abraham Lincoln Insurance Company.

10(d)(1) Reinsurance Agreement dated January 1,  1991 between Universal Guaranty
     Life Insurance Company and Republic Vanguard Life Insurance Company.

10(e)(1)  Reinsurance  Agreement  dated  July 1,  1992 between  United  Security
     Assurance Company and Life Reassurance Corporation of America.

10(f)(1)  Agreement  dated  June 16,  1992  between  John K.  Cantrell and First
     Commonwealth Corporation.

10(g)(1) Stock Purchase  Agreement  dated February 20, 1992 between United Trust
     Group, Inc. and Sellers.

10(h)(1) Amendment No. One dated April 20, 1992 to the Stock Purchase  Agreement
     between the Sellers and United Trust Group, Inc.

10(i)(1) Security  Agreement  dated  June 16,  1992 between  United Trust Group,
     Inc. and the Sellers.

10(j)(1) Stock  Purchase  Agreement  dated  June 16,  1992 between  United Trust
     Group, Inc. and First Commonwealth Corporation

10(k)(3) Universal note and security  agreement dated November 15, 2001, between
     United Trust Group, Inc. and First National Bank of the Cumberlands.












                                INDEX TO EXHIBITS

 Exhibit
 Number

10(l)(3) Line of credit agreement dated November 15, 2001,  between United Trust
     Group, Inc. and First National Bank of the Cumberlands.

10(m)(4) United Trust Group,  Inc. Employee and Director Stock Purchase Plan and
     form of related Stock Restriction and Buy-Sell Agreement.

21(a) (5) List of Subsidiaries of the Registrant.

31.1 Certificate    of    Chief    Executive    Officer    pursuant    to   Rule
     13a-14(a)/15d-14(a).

31.2 Certificate    of    Chief    Financial    Officer    pursuant    to   Rule
     13a-14(a)/15d-14(a).

32.1 Certificate of Jesse T. Correll,  Chief  Executive  Officer and Chairman of
     the Board of UTG, as required pursuant to 18 U.S.C. Section 1350.

32.2 Certificate of Theodore C. Miller,  Chief  Financial  Officer,  Senior Vice
     President and Corporate Secretary of UTG, as required pursuant to 18 U.S.C.
     Section 1350.

99(a) (3) Audit Committee Charter.





Footnote:

     (1)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 1993.

     (2)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 1996.

     (3)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 2001.

     (4)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 2002.

     (5)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 2003.




                            UNITED TRUST GROUP, INC.
                       SUMMARY OF INVESTMENTS - OTHER THAN
                         INVESTMENTS IN RELATED PARTIES
                             As of December 31, 2004

                                                                                                      Schedule I

                          Column A                            Column B           Column C           Column D
--------------------------------------------------------------------------    ----------------   ----------------

                                                                                                    Amount at
                                                                                                   Which Shown
                                                                                                   in Balance
                                                                Cost               Value              Sheet
                                                           ---------------    ----------------   ----------------
Fixed maturities:
    Bonds:
       United States Government and
          government agencies and authorities            $      7,801,268   $       7,803,595  $       7,801,268
       State, municipalities, and political
          subdivisions                                          2,448,293           2,565,108          2,448,293
       Collateralized mortgage obligations                         58,453              57,771             58,453
       Public utilities                                                 0                   0                  0
       All other corporate bonds                                1,665,401           1,671,314          1,665,401
                                                           ---------------    ----------------   ----------------
    Total fixed maturities                                     11,973,415   $      12,097,788         11,973,415
                                                                              ================

Investments held for sale:
    Fixed maturities:
       United States Government and
          government agencies and authorities                  41,377,077   $      41,632,843         41,632,843
       State, municipalities, and political
          subdivisions                                            162,025             177,444            177,444
       Collateralized mortgage obligations                     79,634,753          79,643,440         79,643,440
       Public utilities                                                 0                   0                  0
       All other corporate bonds                               26,043,598          26,740,160         26,740,160
                                                           ---------------    ----------------   ----------------
                                                              147,217,453   $     148,193,887        148,193,887
                                                                              ================

    Equity securities:
       Banks, trusts and insurance companies                    4,501,676   $       4,692,661          4,692,661
       All other corporate securities                          10,714,538          19,706,511         19,706,511
                                                           ---------------    ----------------   ----------------
                                                               15,216,214   $      24,399,172         24,399,172
                                                                              ================


Mortgage loans on real estate                                  20,722,415                             20,722,415
Investment real estate                                         28,192,081                             28,192,081
Real estate acquired in satisfaction of debt                            0                                      0
Policy loans                                                   12,844,748                             12,844,748
Other long-term investments                                             0                                      0
Short-term investments                                             39,489                                 39,489
                                                           ---------------                       ----------------
    Total investments                                    $    236,205,815                      $     246,365,207
                                                           ===============                       ================





UNITED TRUST GROUP, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                              Schedule II
NOTES TO CONDENSED FINANCIAL INFORMATION


(a)  The condensed financial  information should be read in conjunction with the
     consolidated financial statements and notes of United Trust Group, Inc. and
     Consolidated Subsidiaries.





                            UNITED TRUST GROUP, INC.
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                           PARENT ONLY BALANCE SHEETS
                        As of December 31, 2004 and 2003

                                                                                           Schedule II


                                                                         2004                2003
                                                                    ----------------    ---------------

ASSETS

    Investment in affiliates                                      $      46,758,363   $     44,724,882
    Cash and cash equivalents                                               502,375            439,734
    FIT recoverable                                                          10,051                988
    Accrued interest income                                                  26,751             26,058
    Receivable from affiliates, net                                         391,694             18,477
    Other assets                                                            366,682            471,448
                                                                    ----------------    ---------------
          Total assets                                            $      48,055,916   $     45,681,587
                                                                    ================    ===============




LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
    Notes payable                                                 $               0   $      2,289,776
    Deferred income taxes                                                 2,022,606          2,008,445
    Other liabilities                                                     1,582,205          1,686,727
                                                                    ----------------    ---------------
          Total liabilities                                               3,604,811          5,984,948




Shareholders' equity:
    Common stock, net of treasury shares                                     79,315             80,008
    Additional paid-in capital, net of treasury                          42,590,820         42,672,189
    Accumulated other comprehensive
        income of affiliates                                              6,678,542          1,566,397
    Accumulated deficit                                                  (4,897,572)        (4,621,955)
                                                                    ----------------    ---------------
          Total shareholders' equity                                     44,451,105         39,696,639
                                                                    ----------------    ---------------
          Total liabilities and shareholders' equity              $      48,055,916   $     45,681,587
                                                                    ================    ===============








                            UNITED TRUST GROUP, INC.
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                      PARENT ONLY STATEMENTS OF OPERATIONS
                       Three Years Ended December 31, 2004

                                                                                                        Schedule II

                                                                   2004               2003               2002
                                                              ---------------    ----------------   ----------------

Revenues:

    Management fees from affiliates                        $       5,790,843  $        6,031,472 $        6,510,753
    Other income from affiliates                                           0                   0                  0
    Interest income from affiliates                                        0                   0            324,467
    Interest income                                                    4,933               7,904             11,215
    Other income                                                           0              50,137             52,163
                                                              ---------------    ----------------   ----------------
                                                                   5,795,776           6,089,513          6,898,598


Expenses:

    Interest expense                                                  77,453             162,179            263,441
    Operating expenses                                             5,085,180           5,335,851          5,669,116
                                                              ---------------    ----------------   ----------------
                                                                   5,162,633           5,498,030          5,932,557
                                                              ---------------    ----------------   ----------------

    Operating income                                                 633,143             591,483            966,041

    Income tax expense                                              (105,098)           (263,992)          (327,472)
    Equity in income (loss) of subsidiaries                         (803,662)         (6,723,981)           700,226
                                                              ---------------    ----------------   ----------------
          Net income (loss)                                $        (275,617) $       (6,396,490)$        1,338,795
                                                              ===============    ================   ================


Basic income (loss) per share from continuing
   operations and net income (loss)                        $           (0.07) $            (1.67)$             0.38
                                                              ===============    ================   ================

Diluted income (loss) per share from continuing
operations and net income (loss)                           $           (0.07) $            (1.67)$             0.33
                                                              ===============    ================   ================

Basic weighted average shares outstanding                          3,986,731           3,839,947          3,505,424
                                                              ===============    ================   ================

Diluted weighted average shares outstanding                        3,986,731           3,839,947          4,005,424
                                                              ===============    ================   ================






                            UNITED TRUST GROUP, INC.
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                      PARENT ONLY STATEMENTS OF CASH FLOWS
                       Three Years Ended December 31, 2004
                                                                                                               Schedule II

                                                                         2004                2003               2002
                                                                    ----------------    ---------------    ----------------

Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
   Net income (loss)                                              $        (275,617)  $     (6,396,490)  $       1,338,795
   Adjustments to reconcile net income (loss) to
     net cash provided by (used in) operating activities:
    Equity in (income) loss of subsidiaries                                 803,662          6,723,981            (700,226)
    Depreciation                                                            104,766             52,383                   0
    Change in FIT recoverable                                                (9,063)             9,981              22,817
    Change in accrued interest income                                          (693)           (26,058)             64,331
    Change in indebtedness (to) from affiliates, net                       (373,217)             4,787             674,524
    Change in deferred income taxes                                          14,161             79,011             327,472
    Change in other assets and liabilities                                  (54,885)        (1,000,625)           (226,075)
                                                                    ----------------    ---------------    ----------------
Net cash provided by (used in) operating activities                         209,114           (553,030)          1,501,638
                                                                    ----------------    ---------------    ----------------

Cash flows from investing activities:
    Payments received on notes receivable from affiliates                         0                  0             800,000
                                                                    ----------------    ---------------    ----------------
Net cash provided by investing activities                                         0                  0             800,000
                                                                    ----------------    ---------------    ----------------

Cash flows from financing activities:
    Purchase of treasury stock                                             (299,057)          (441,143)           (520,253)
    Issuance of common stock                                                167,360            195,905             706,691
    Payments on notes payable                                            (4,564,776)          (705,499)         (3,405,395)
    Proceeds from line of credit                                          2,275,000                  0           2,000,000
    Dividend received from subsidiary                                     2,275,000            600,000           1,400,000
    Cash received in FCC merger                                                   0                  0              69,187
    Payments made from FCC merger                                                 0                  0          (1,586,500)
                                                                    ----------------    ---------------    ----------------
Net cash used in financing activities                                      (146,473)          (350,737)         (1,336,270)
                                                                    ----------------    ---------------    ----------------

Net increase (decrease) in cash and cash equivalents                         62,641           (903,767)            965,368
Cash and cash equivalents at beginning of year                              439,734          1,343,501             378,133
                                                                    ----------------    ---------------    ----------------
Cash and cash equivalents at end of year                          $         502,375   $        439,734   $       1,343,501
                                                                    ================    ===============    ================











                            UNITED TRUST GROUP, INC.
                                   REINSURANCE
          As of December 31, 2004 and the year ended December 31, 2004

                                                                                                                Schedule IV



----------------------------------------------------------------------------------------------------------------------------


            Column A                 Column B           Column C            Column D           Column E          Column F
                                  ----------------   ----------------    ---------------    ---------------    -------------

                                                                                                                Percentage
                                                        Ceded to            Assumed                             of amount
                                                          other            from other                           assumed to
                                   Gross amount         companies          companies          Net amount           net

----------------------------------------------------------------------------------------------------------------------------






Life insurance
   in force                     $   2,145,096,000  $     531,146,000   $    995,939,000   $  2,609,889,000            38.2%
                                  ================   ================    ===============    ===============



Premiums and policy fees:

   Life insurance               $      17,161,525  $       3,111,559   $         26,273   $     14,076,239             0.2%

   Accident and health
     insurance                             76,595             23,720             11,315             64,190            17.6%
                                  ----------------   ----------------    ---------------    ---------------

                                $      17,238,120  $       3,135,279   $         37,588   $     14,140,429             0.3%
                                  ================   ================    ===============    ===============

















                            UNITED TRUST GROUP, INC.
                                   REINSURANCE
          As of December 31, 2003 and the year ended December 31, 2003

                                                                                                                Schedule IV



----------------------------------------------------------------------------------------------------------------------------


            Column A                 Column B           Column C            Column D           Column E          Column F
                                  ----------------   ----------------    ---------------    ---------------    -------------

                                                                                                                Percentage
                                                        Ceded to            Assumed                             of amount
                                                          other            from other                           assumed to
                                   Gross amount         companies          companies          Net amount           net

----------------------------------------------------------------------------------------------------------------------------






Life insurance
   in force                     $   2,289,738,000  $     580,145,000   $  1,273,735,000   $  2,983,328,000            42.7%
                                  ================   ================    ===============    ===============



Premiums and policy fees:

   Life insurance               $      18,000,036  $       3,062,361   $         25,026   $     14,962,701             0.2%

   Accident and health
     insurance                             86,856             35,619              9,100             60,337            15.1%
                                  ----------------   ----------------    ---------------    ---------------

                                $      18,086,892  $       3,097,980   $         34,126   $     15,023,038             0.2%
                                  ================   ================    ===============    ===============

















                            UNITED TRUST GROUP, INC.
                                   REINSURANCE
          As of December 31, 2002 and the year ended December 31, 2002

                                                                                                        Schedule IV



--------------------------------------------------------------------------------------------------------------------


           Column A                Column B          Column C          Column D          Column E        Column F
                                ---------------   ---------------   ---------------   ---------------   ------------

                                                                                                        Percentage
                                                     Ceded to          Assumed                           of amount
                                                      other           from other                        assumed to
                                  Gross amount      companies         companies         Net amount          net

--------------------------------------------------------------------------------------------------------------------






Life insurance
   in force                   $  2,440,716,000  $    560,356,000  $  1,553,748,000  $  3,434,108,000          45.2%
                                ===============   ===============   ===============   ===============



Premiums and policy fees:

   Life insurance             $     18,454,030  $      2,829,619  $         73,979  $     15,698,390           0.5%

   Accident and health
     insurance                         130,905            31,826            22,135           121,214          18.3%
                                ---------------   ---------------   ---------------   ---------------

                              $     18,584,935  $      2,861,445  $         96,114  $     15,819,604           0.6%
                                ===============   ===============   ===============   ===============
















                            UNITED TRUST GROUP, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
         As of and for the years ended December 31, 2004, 2003, and 2002

                                                                                                           Schedule V

                                                     Balance at         Additions
                                                      Beginning          Charges                             Balances at
                  Description                         Of Period         and Expenses       Deductions       End of Period
---------------------------------------------------------------------------------------------------------------------------


December 31, 2004
.
Allowance for doubtful accounts -
     mortgage loans                              $         120,000 $                0 $                0 $         120,000




December 31, 2003

Allowance for doubtful accounts -
     mortgage loans                              $         120,000 $                0 $                0 $         120,000




December 31, 2002

Allowance for doubtful accounts -
    mortgage loans                               $         120,000 $                0 $                0 $         120,000




                                   SIGNATURES

     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.

                            UNITED TRUST GROUP, INC.
                                  (Registrant)

 /s/   John S. Albin                                              March 24, 2005
John S. Albin, Director


/s/  Randall L. Attkisson                                         March 24, 2005
Randall L. Attkisson, President, Chief
  Operating Officer and Director


/s/  Joseph A. Brinck                                             March 24, 2005
Joseph A. Brinck, Director


/s/  Jesse T. Correll                                             March 24, 2005
Jesse T. Correll, Chairman of the Board,
  Chief Executive Officer and Director


/s/  Ward F. Correll                                              March 24, 2005
Ward F. Correll, Director


                                                                  March 24, 2005
Thomas F. Darden, Director


s/  William W. Perry                                              March 24, 2005
William W. Perry, Director


/s/  James P. Rousey                                              March 24, 2005
James P. Rousey, Chief Administrative
  Officer and Director


/s/  Theodore C. Miller                                           March 24, 2005
Theodore C. Miller, Corporate Secretary
  and Chief Financial Officer