First Quarter 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 AND 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2007

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to _________________

Commission File No. 0-16867

UTG, INC.

(Exact name of registrant as specified in its charter)

DELAWARE 20-2907892

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

5250 SOUTH SIXTH STREET

P.O. BOX 5147

SPRINGFIELD, IL 62705

(Address of principal executive offices) (Zip Code)

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

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 [ ]

The number of shares outstanding of the registrant’s common stock as of May 1, 2007, was 3,857,861.

UTG, INC. AND SUBSIDIARIES

(The “Company”)

TABLE OF CONTENTS

PART 1. FINANCIALINFORMATION……………………………………………………………………………………. .........................3

ITEM 1. FINANCIAL STATEMENTS. ..................................................................................................................................................... 3

Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006................................................................................... 3

Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006..................................................... 4

Consolidated Statement of Changes in Shareholders’ Equity and Comprehensive Income

for the three months ended March 31, 2007........................................................................................................................... 5

Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006.................................................... 6

Notes to Consolidated Financial Statements.................................................................................................................................... 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS..........................................................................................................................................................................................13

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................................... ....... 17

ITEM 4. CONTROLS AND PROCEDURES..........................................................................................................................................18

PART II. OTHER INFORMATION……………………………………………………………………………….………....................... 19

ITEM 1. LEGAL PROCEEDINGS............................................................................................................................................................ ....... 19

ITEM 2. CHANGE IN SECURITIES............................................................................................................................................................... 19

ITEM 3. DEFAULTS UPON SENIOR SECURITIES...................................................................................................................................... 19

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................................................ ............19

ITEM 5. OTHER INFORMATION................................................................................................................................................................ .19

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................................................................................................................................. .19

SIGNATURES………………………………………………………………………………………………………………….....................19

EXHIBIT INDEX.......................................................................................................................................................................................... .21

PART 1. FINANCIAL INFORMATION Item 1. Financial Statements UTG, Inc. AND SUBSIDIARIES

Consolidated Balance Sheets (Unaudited)

	March 31,	December 31,
ASSETS	2007	2006*

Investments:
Fixed maturities at amortized cost
(market $6,211,825 and $6,244,373)	$ 6,215,920	$ 6,274,913
Investments held for sale:
Fixed maturities, at market (cost $224,222,949 and $235,054,655)	223,519,703	233,229,129
Equity securities, at market (cost $9,908,223 and $10,031,148)	15,784,167	16,305,591
Mortgage loans on real estate at amortized cost	31,366,481	32,015,446
Investment real estate, at cost, net of accumulated depreciation	46,197,351	43,975,642
Policy loans	15,921,251	15,931,525
Short-term investments	48,948	47,879
	339,053,821	347,780,125

Cash and cash equivalents	17,484,829	8,472,553
Securities of affiliate	4,000,000	4,000,000
Accrued investment income	2,550,185	2,824,975
Reinsurance receivables:
Future policy benefits	76,421,516	73,770,732
Policy claims and other benefits	5,132,748	5,040,219
Cost of insurance acquired	31,655,108	32,808,159
Deferred policy acquisition costs	1,146,298	1,188,888
Property and equipment, net of accumulated depreciation	3,064,559	3,129,331
Income taxes receivable, current	349,853	219,956
Other assets	3,855,649	3,496,856
Total assets	$ 484,714,566	$ 482,731,794

LIABILITIES AND SHAREHOLDERS' EQUITY

Policy liabilities and accruals:
Future policy benefits	$ 351,619,671	$ 351,587,689
Policy claims and benefits payable	4,791,830	3,330,945
Other policyholder funds	1,156,252	1,124,045
Dividend and endowment accumulations	14,082,177	14,091,257
Deferred income taxes	17,103,998	16,480,068
Notes payable	24,223,083	22,990,081
Other liabilities	8,939,839	8,587,166
Total liabilities	421,916,850	418,191,251
Minority interests in consolidated subsidiaries	18,282,224	19,514,151

Shareholders' equity:
Common stock - no par value, stated value $.001 per share
Authorized 7,000,000 shares - 3,860,398 and 3,842,687 shares issued
after deducting treasury shares of 366,123 and 360,888	3,861	3,843
Additional paid-in capital	42,099,032	41,813,690
Retained earnings (accumulated deficit)	(600,094)	232,371
Accumulated other comprehensive income	3,012,693	2,976,488
Total shareholders' equity	44,515,492	45,026,392
Total liabilities and shareholders' equity	$ 484,714,566	$ 482,731,794

* Balance sheet audited at December 31, 2006.
See accompanying notes.

UTG, Inc.
AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

	Three Months Ended
	March 31, 2007	March 31, 2006

Revenues:

Premiums and policy fees	$ 6,158,419	$ 4,165,766
Reinsurance premiums and policy fees	(1,181,916)	(737,994)
Net investment income	4,286,925	2,539,174
Realized investment gains (losses), net	(315,758)	3,163,693
Other income	526,673	698,650
	9,474,343	9,829,289

Benefits and other expenses:

Benefits, claims and settlement expenses:
Life	7,422,091	5,393,244
Reinsurance benefits and claims	(715,277)	(691,225)
Annuity	285,678	205,531
Dividends to policyholders	339,670	189,552
Commissions and amortization of deferred
policy acquisition costs	(210,357)	(13,474)
Amortization of cost of insurance acquired	1,153,051	629,991
Operating expenses	2,116,006	1,724,197
Interest expense	279,150	0
	10,670,012	7,437,816

Income (loss) before income taxes, minority interest
and equity in earnings of investees	(1,195,669)	2,391,473

Income tax (expense) credit	149,769	(723,827)
Minority interest in loss of
consolidated subsidiaries	213,435	11,676

Net income(loss)	$ (832,465)	$ 1,679,322

Basic income (loss) per share from continuing
operations and net income (loss)	$ (0.22)	$ 0.43

Diluted loss per share from continuing
operations and net income (loss)	$ (0.22)	$ 0.43

Basic weighted average shares outstanding	3,848,606	3,890,404

Diluted weighted average shares outstanding	3,848,606	3,890,404
See accompanying notes.

UTG, Inc.
AND SUBSIDIARIES
Consolidated Statement of Changes in Shareholders' Equity and Comprehensive Income
For the three months ended March 31, 2007 (Unaudited)


Common stock
Balance, beginning of year								$ 3,843
Issued during year								23
Purchase treasury shares								(5)
Balance, end of period								3,861

Additional paid-in capital
Balance, beginning of year								41,813,690
Issued during year								327,875
Purchase treasury shares								(42,533)
Balance, end of period								42,099,032

Accumulated deficit
Balance, beginning of year								232,371
Net loss								(832,465)
Balance, end of period								(600,094)

Accumulated other comprehensive income
Balance, beginning of year								2,976,488
Other comprehensive income
Unrealized holding gains on securities
net of minority interest,
reclassification adjustment and taxes								36,205

Balance, end of period								3,012,693

Total shareholders' equity, end of period								$ 44,515,492



Comprehensive income
Net loss								$ (832,465)
Unrealized holding gains on securities
net of minority interest,
reclassification adjustment and taxes								36,205

Total comprehensive loss								$ (796,260)
See accompanying notes.

UTG, Inc.
AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

	Three Months Ended
	March 31, 2007	March 31, 2006

Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income (loss)	$ (832,465)	$ 1,679,322
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Amortization/accretion of fixed maturities	(681,841)	120,865
Realized investment gains (losses)	315,758	(3,163,073)
Amortization of deferred policy acquisition costs	42,590	58,619
Amortization of cost of insurance acquired	1,153,051	629,991
Depreciation	161,577	590,295
Minority interest	(213,435)	(11,676)
Change in accrued investment income	274,790	(139,218)
Change in reinsurance receivables	(2,743,313)	(104,746)
Change in policy liabilities and accruals	2,030,185	1,344,262
Charges for mortality and administration of
universal life and annuity products	(2,204,223)	(2,445,519)
Interest credited to account balances	1,364,172	1,320,200
Change in income taxes payable	395,268	714,413
Change in other assets and liabilities, net	(5,979)	2,046,331
Net cash provided by (used in) operating activities	(943,865)	2,640,066

Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities held for sale	31,482,161	1,225,614
Fixed maturities matured	60,329	1,422,043
Equity securities	140,250	4,269,674
Mortgage loans	1,620,530	1,318,967
Real estate	510,489	75,095
Policy loans	1,016,180	934,195
Short-term	0	0
Total proceeds from investments sold and matured	34,829,939	9,245,588
Cost of investments acquired:
Fixed maturities held for sale	(21,024,943)	(2,135,700)
Fixed maturities matured	0	(1,310,673)
Equity securities	(17,466)	0
Mortgage loans	(962,365)	(870,000)
Real estate	(2,826,003)	(1,644,311)
Policy loans	(1,005,906)	(677,981)
Short-term	(105)	(2,168)
Total cost of investments acquired	(25,836,788)	(6,640,833)
Purchase of property and equipment	(3,000)	(166,914)
Net cash provided by investing activities	8,990,151	2,437,841

Cash flows from financing activities:
Policyholder contract deposits	2,248,383	2,234,210
Policyholder contract withdrawals	(1,922,523)	(1,743,895)
Payments on notes payable	(500,000)	0
Proceeds from notes payable	1,733,002	0
Purchase of stock of affiliates	(878,232)	0
Issuance of common stock	327,898	0
Purchase of treasury stock	(42,538)	(90,375)
Net cash provided by financing activities	965,990	399,940

Net increase in cash and cash equivalents	9,012,276	5,477,847
Cash and cash equivalents at beginning of period	8,472,553	12,204,087
Cash and cash equivalents at end of period	$ 17,484,829	$ 17,681,934

See accompanying notes.

UTG, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared by UTG, Inc. (“UTG”) and its consolidated subsidiaries (“Company”) pursuant to the rules and regulations of the Securities and Exchange Commission. Although the Company believes the disclosures are adequate to make the information presented not be misleading, it is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto presented in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2006.

The information furnished reflects, in the opinion of the Company, all adjustments (which include only normal and recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. Operating results for interim periods are not necessarily indicative of operating results to be expected for the year or of the Company’s future financial condition.

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 that owns 100% of First Southern National Bank (“FSNB”), which operates 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 March 31, 2007 Mr. Correll owns or controls directly and indirectly approximately 68% of UTG’s outstanding stock.

At March 31, 2007, consolidated subsidiaries of UTG, Inc. were as depicted on the following organizational chart.

2. INVESTMENTS

As of March 31, 2007 and December 31, 2006, fixed maturities and fixed maturities held for sale represented 68% and 69%, respectively, of total invested assets. As prescribed by the various state insurance department statutes and regulations, the insurance companies’ investment portfolio is required to be invested in investment grade securities to provide ample protection for policyholders. 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. As of March 31, 2007, 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 investments held for sale are carried at market, with changes in market value directly charged to shareholders’ equity. To provide additional flexibility and liquidity, the Company has categorized almost all fixed maturity investments acquired since 2000 as available for sale.

3. NOTES PAYABLE

At March 31, 2007 and December 31, 2006, the Company had $ 24,223,083 and $ 22,990,081, respectively of long-term debt outstanding.

On December 8, 2006, UTG borrowed funds from First Tennessee Bank National Association through execution of an $ 18,000,000 promissory note. The note is secured by the pledge of 100% of the common stock of UG. The promissory note carries a variable rate of interest based on the 3 month LIBOR rate plus 180 basis points. The initial rate was 7.15%. Interest is payable quarterly. Principal is payable annually beginning at the end of the second year in five installments of $ 3,600,000. The loan matures on December 7, 2012. The Company borrowed $ 859,140 in 2007 and has made no payments. The remaining available balance can be drawn any time over the next twelve months and is anticipated to be utilized in the purchase of the stock put option shares as they may be presented to UTG, Inc. for purchase.

In addition to the above promissory note, First Tennessee Bank National Association also provided UTG, Inc. with a $ 5,000,000 revolving credit note. This note is for a one-year term and may be renewed by consent of both parties. The credit note is to provide operating liquidity for UTG, Inc. and replaces a previous line of credit provided by Southwest Bank. Interest bears the same terms as the above promissory note. The collateral held on the above note also secures this credit note. UTG, Inc. has no borrowings against this note at this time.

On June 1, 2005, UG was extended a $ 3,300,000 line of credit from the FNBT. The LOC is for a one-year term from the date of issue. 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. During 2007, UG had borrowings from the LOC of $ 500,000 and repayments of $ 500,000. At March 31, 2007 and December 31, 2006, the Company had no outstanding borrowings attributable to this LOC.

AC and TI each have a line of credit in place through Frost National Bank for $210,000 and $160,000, respectively. These lines have been in place since 2004. The lines are for one year terms, interest payable quarterly at a floating interest rate which is the Lender’s prime rate. Principal is due upon maturity. The lines are to provide additional short term operating liquidity to the two companies. At March 31, 2007, there are no outstanding balances on either of these lines of credit.

On October 1, 2005, a partnership investment of HVP was extended a $ 5,000,000 promissory note from First Southern National Bank. The note is due three-years from the date of issue. Borrowings under the note bear interest at the rate of one percent in excess of the prime rate as published in the Wall Street Journal. At March 31, 2007, the Company had $ 5,000,000 outstanding borrowings attributable to this note.

On October 1, 2005, a partnership investment of HVP was extended a $ 2,000,000 promissory note from First Southern National Bank. The note is due three-years from the date of issue. Borrowings under the note bear interest at the rate of one percent in excess of the prime rate as published in the Wall Street Journal. At March 31, 2007, the Company had $ 2,000,000 outstanding borrowings attributable to this note.

On February 21, 2006, a partnership investment of HVP was extended a $ 1,000,000 promissory note from First Southern National Bank. The note is due October 31, 2008. Borrowings under the note bear interest at the rate of one percent in excess of the prime rate as published in the Wall Street Journal. At March 31, 2007, the Company had $ 1,000,000 outstanding borrowings attributable to this note.

The consolidated scheduled principal reductions on the notes payable for the next five years are as follows:

Year Amount

2007 $ 0

2008 10,900,000

2009 3,600,000

2010 3,600,000

2011 3,600,000

4. 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 UTG, 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.

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(s) paid to acquire such shares from the Holding Company at the time they were sold pursuant to the Plan 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 closing sale of such shares to UTG occurs. The consolidated statutory net earnings per Share shall be computed as the net income of the Holding Company and its subsidiaries on a consolidated basis in accordance with statutory accounting principles applicable to insurance companies, as computed by the Holding Company, except that earnings of insurance companies or block of business acquired after the original plan date, November 1, 2002, shall be adjusted to reflect the amortization of intangibles established at the time of acquisition in accordance with generally accepted accounting principles (GAAP), less any dividends paid to shareholders. The calculation of net earnings per Share shall be performed on a monthly basis using the number of common shares of the Holding Company outstanding as of the end of the reporting period. The purchase price for any Shares purchased hereunder shall be paid in cash within 60 days from the date of purchase subject to the receipt of any required regulatory approvals as provided in the Agreement.

The original issue price of shares at the time this program began was established at $12.00 per share. At March 31, 2007, UTG had 124,440 shares outstanding that were issued under this program with a value of $ 14.26 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. This program can be terminated at any time. Open market purchases are generally limited to a maximum per share price of $8.00. Through April 30, 2007, UTG has spent $ 2,525,194 in the acquisition of 370,327 shares under this program.

C. Earnings Per Share Calculations

Earnings per share are based on the weighted average number of common shares outstanding during each period, retroactively adjusted to give effect to all stock splits, in accordance with Statement of Financial Accounting Standards No. 128. At March 31, 2007, diluted earnings per share were the same as basic earnings per share since the UTG had no dilutive instruments outstanding.

5. 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. 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. The contract was amended during 2006 for a five year period ended 2011. Under the contract, the Company is required to pay $ 8,333 per month in software maintenance costs and a per-policy charge in offsite data center costs, with a minimum of $ 14,000 per month, for a five-year period from the date of the agreement.

In December 2006, the Company entered into an agreement with the certain individual shareholders of Acap. This agreement allows the Company (through a put option arrangement) to buy up to 264 shares of common stock of Acap at any time between the date of the agreement and December 2007. The price of the share purchase was determined by a pre-set formula, which the Company believes approximates fair value, at the time such shares might be put.

On December 31, 2006, the Company entered into a 100% coinsurance agreement whereby the insurance subsidiaries, AC and TI, ceded all of their A&H business to an unaffiliated third party. As part of the agreement, AC and TI remain contingently liable for claims incurred prior to the effective date of the agreement, for a period of one year. At the end of the one year period, an accounting of these claims shall be produced. Any difference in the actual claims to the claim reserve liability transferred shall be refunded to / paid by AC and TI.

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 March 31, 2007.

6. OTHER CASH FLOW DISCLOSURE

On a cash basis, the Company paid $ 273,270 and $ 0 in interest expense during the first three months of 2007 and 2006, respectively. The Company paid $ 166,401 and $ 150,000 in federal income tax during the first three months of 2007 and 2006, respectively.

7. 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 UTG, and its largest shareholder, Chairman and CEO, Jesse Correll. The Company holds approximately $ 6,000 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.

8. COMPREHENSIVE INCOME

				Tax
		Before-Tax		(Expense)		Net of Tax
March 31, 2007		Amount		or Benefit		Amount

Unrealized holding losses during
Period	$	811,711	$	(284,099)	$	527,612
Less: reclassification adjustment
for losses realized in net income		(756,011)		264,604		(491,407)
Net unrealized losses		55,700		(19,495)		36,205
Change in other comprehensive income (loss)	$	55,700	$	(19,495)	$	36,205

9. NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board (“FASB”) issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115. The statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company will account for all qualifying financial instruments in accordance with the requirements of Statement No. 159.

10. SUBSEQUENT EVENT

The Company is currently negotiating an agreement to sell its 50% interest in Harbor Village Partners, LP, an upscale gated-community residential development located outside Dallas, Texas. Under the terms of the agreement, the Company will receive $3,400,000 at closing, a put option to receive another $1,000,000 one year from closing and the right to receive approximately 10% of the future gains from the project up to $1,400,000. Management has not placed any value on the future potential gains or losses of the project in its determination of current gain or loss on the sale. This transaction is expected to close sometime in May 2007. The Company anticipates recording a net loss after taxes of between $650,000 and $800,000 from this sale transaction during the second quarter 2007. Management determined it was in the Company’s long term best interest to divest of this investment due to new perceived risks that management was no longer comfortable with over the long term development of the project.

ITEM 2. 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. This analysis should be read in conjunction with the consolidated financial statements and related notes that appear elsewhere in this report. The Company reports financial results on a consolidated basis. The consolidated financial statements include the accounts of UTG and its subsidiaries at March 31, 2007.

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.

Update on Critical Accounting Policies

In our Form 10-K for the year ended December 31, 2006, we identified the accounting policies that are critical to the understanding of our results of operations and our financial position. They relate to deferred acquisition costs (DAC), cost of insurance acquired, assumptions and judgments utilized in determining if declines in fair values of investments are other-than-temporary, and valuation methods for investments that are not actively traded.

We believe that these policies were applied in a consistent manner during the first three months of 2007.

Acquisition of Company

In December 2006, the Company completed an acquisition transaction whereby it acquired a controlling interest in Acap Corporation, which owns two life insurance subsidiaries (AC and TI). The acquisition resulted in an increase of approximately $90,000,000 in invested assets, $160,000,000 in total assets and 200,000 additional policies to administer. The acquisition had a material impact on many of the balance sheet and income statement line items. The income statement for the period ended March 31, 2006 does not reflect the operating results of the acquired entities. The following analysis and discussion considers the overall changes when comparing 2007 results to 2006 and the impact of the new entities to the Company.

Results of Operations

(a) Revenues

The Company experienced an increase of approximately $ 1,556,000 in premiums and policy fee revenues, net of reinsurance premiums and policy fees, when comparing the first three months of 2007 to the same period in 2006. The majority of this increase, $ 1,076,000, is related to the acquisition of the two life insurance subsidiaries at the end of 2006. The remaining increase relates to the timing of reinsurance premiums paid during the reporting period. The Company currently writes little new business. Unless the Company acquires a block of in-force business or significantly increases its marketing, management expects premium revenue to continue to decline at a similar rate, which is consistent with prior experience.

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. AC and TI have as small agency force which continues to write new business on existing products. 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. 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 76% when comparing the first three months of 2007 to the same period in 2006. The increase in investment income was only 14% excluding the investment income of the new entities. While there has not been a significant increase in the national prime rate during the last several months, the Company has benefited from our efforts to lengthen the average life of the bond portfolio. In recent years, the Company has evaluated the bond portfolio for interest rate risks and its correlation to the expected liabilities of the life companies. Interest rates on long-term bonds available in the marketplace have not increased as significantly as prevailing bank prime rates. The Company will continue to lengthen the life of the bond portfolio, while monitoring interest and extension risk. In addition, the Company has begun to evaluate the debt securities acquired with the acquired life companies in order to match the bond portfolio to the investment strategy of the Company.

Also in response to the interest rate environment in the bond market, the Company increased its investment in mortgage loans in previous years to improve earnings potential. The balance of mortgage loan investments remained approximately 9% of total invested assets at March 31, 2007, which is consistent with December 31, 2006. This has allowed the Company to obtain higher yields than available in the bond market, lengthen the overall portfolio average life and still maintain a conservative investment portfolio. The mortgage loan inventory has remained level during the first three months of 2007. These loans have an average loan to value rate of 50% and an average yield of 6.97%.

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%. The Company has lowered all rate-adjustable products to their guaranteed minimums. The guaranteed minimum crediting rates on these products range from 3% to 5.5%. If short-term interest rates continue to rise, the Company does not expect to increase guaranteed crediting rates, which will improve both net investment income and net income.

The Company had realized investment losses of $ 315,758 in the first three months of 2007 compared to net realized investment gains of $ 3,163,693 for the same period in 2006. In 2007, the net realized losses primarily originated from the liquidation of certain debt securities in anticipation of the completion of a real estate investment opportunity. The net realized gains in 2006 were primarily comprised of net realized gains from the disposal of certain equity securities.

Other income decreased 25%, or $171,977, when comparing the first three months of 2007 to the same period in 2006. The majority of the revenue in this line item comes from the Company performing administrative work as a third party administrator (“TPA”) for unaffiliated life insurance companies, and as such, receives monthly fees based on policy in force counts and certain other activity indicators such as number of premium collections performed. During the first three months of 2007 and 2006, the Company received $ 451,193 and $ 444,519 respectively, for this work. These TPA revenue fees are included in the line item “other income” on the Company’s consolidated statements of operations. In 2006, the Company completed a conversion project for one of its TPA clients, receiving approximately $ 200,000 in additional revenue that accounts for the difference between 2007 and 2006. The Company intends to pursue other TPA arrangements through its alliance with Fiserv Life Insurance Solutions (Fiserv LIS), to provide TPA services to insurance companies seeking business process outsourcing solutions. Fiserv LIS is responsible for the marketing and sales function for the alliance, as well as providing the data center operations. UTG will staff the administration effort. Management believes this alliance with Fiserv LIS positions the Company to generate additional revenues by utilizing the Company’s current excess capacity, administrative services, and implementation of the new Fiserv LIS “ID3” software system. In addition, due to ongoing regulatory changes and the fact the Company is repositioning itself for future growth; the Company believes implementation of the “ID3” software system is critical in order to proceed in the Company’s new direction of TPA services. Fiserv LIS 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.

(b) Expenses

Life benefits, claims and settlement expenses net of reinsurance benefits and claims, increased approximately 43% in the first three months of 2007 compared to the same period in 2006. Eliminating the impact of the acquired companies, life benefit expenses increased approximately 19% in 2007. Mortality expense in UG was 50% higher for the first three months of 2007 than for the same period of 2006. Policy claims vary from period to period and therefore, fluctuations in mortality are to be expected and are not considered unusual by management. Overall, reserves continue to increase on in-force policies as the average age of the insured increases.

Commissions and amortization of deferred policy acquisition costs decreased 93%, or approximately $ 12,000, for the first three months of 2007 compared to the same period in 2006, excluding the impact of the acquired companies. The most significant factor in the 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. Commissions paid will continue to decline as terminated agents discontinue their association with the Company. Depending upon the nature of the contract that the agent has with the Company, the agent may become vested; a process which allows them to continue to receive commissions for a certain period even after the agent has discontinued his association with the Company. Over time, fewer and fewer agents have remained vested, further reducing the commissions payable by the Company. 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 either of the periods reported.

Operating expenses increased 23% in the first three months of 2007 compared to the same period in 2006. The increase in operating expenses is primarily related to the increase in activity related to the new companies acquired at the end of 2006. These costs include such items as new staff, postage and supplies. The Company continually monitors expenditures looking for savings opportunities. Management places significant emphasis on expense monitoring and cost containment. Maintaining administrative efficiencies directly impacts net income.

(c) Net income

The Company had a net loss of $ 832,465 in the first three months of 2007 compared to a net gain of $ 1,679,322 for the same period in 2006. The net loss in 2007 is mainly attributable to the increase in benefit expenses. The net gain in 2006 was mainly attributable to the sale of certain equity securities and increased TPA revenues.

Financial Condition

Total shareholders’ equity declined approximately $ 511,000 as of March 31, 2007 compared to December 31, 2006. The decrease is attributable the Company’s current period loss. The loss was partially offset by an increase in market value of the debt investments of approximately $ 36,000, net of deferred taxes, that was included in the accumulated other comprehensive income. In addition, the Company issued approximately $ 328,000 of common stock during the period under the Employee and Director Stock Purchase Program.

Investments represent approximately 70% and 72% of total assets at March 31, 2007 and December 31, 2006, respectively. Accordingly, investments are the largest asset group of the Company. The Company's insurance subsidiaries are regulated by insurance statutes and regulations as to the type of investments that they are 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, the majority of the Company’s investment portfolio is invested in high quality, low risk investments.

As of March 31, 2007, 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 since 2000 as available for sale.

Liquidity and Capital Resources

The Company has three principal needs for cash - the insurance companies' contractual obligations to policyholders, the payment of operating expenses and debt reduction. Cash and cash equivalents as a percentage of total assets were approximately 4% and 2% as of March 31, 2007, and December 31, 2006, respectively. Fixed maturities as a percentage of total assets were approximately 47% and 50% as of March 31, 2007 and December 31, 2006, respectively.

Future policy benefits are primarily long-term in nature and therefore, the Company's investments are predominantly in long-term fixed maturity investments such as bonds and mortgage loans which provide sufficient return to cover these obligations. The Company has the ability and intent to hold these investments to maturity; consequently, the Company's investment in fixed maturities held to maturity is 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.

Net cash provided by (used in) operating activities was $ (943,865) and $ 2,640,066 for the three months ending March 31, 2007 and 2006, respectively.

Net cash provided by investing activities was $ 8,990,151 and $ 2,437,841 for the three-month periods ending March 31, 2007 and 2006, respectively. The most significant aspects of cash provided by (used in) investing activities are the sale of certain debt securities and the fixed maturity transactions. During the current quarter, the Company sold $ 31,482,161 of certain debt securities for a net loss of $ 491,407. Fixed maturities of $ 2,647,657 were either sold or matured in the first three months of 2006. In addition, the Company purchased $ 21,024,943 and $ 2,135,700 of fixed maturities in 2007 and 2006, respectively.

Net cash provided by financing activities was $ 965,990 and $ 399,940 for the three month periods ending March 31, 2007 and 2006, respectively. Policyholder contract deposits increased less than 1% in the first three months of 2007 compared to the same period in 2006. Policyholder contract withdrawals increased 10% in the first three months of 2007 compared to the same period in 2006. The acquired companies have minimal policyholder contract activity.

At March 31, the Company had $ 24,223,083 of long-term debt outstanding. The acquisition of Acap Corporation accounted for a majority of the activity in this area during 2006. At March 31, 2006, the Company had no short-term debt outstanding, respectively.

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 subsidiaries and earnings received on cash balances. At March 31, 2007, substantially all of the consolidated shareholders equity represents net assets of its subsidiaries. The Company's insurance subsidiaries have maintained adequate statutory capital and surplus and have 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. No dividends were paid to shareholders in 2006.

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, 2006, UG’s total statutory capital and surplus amounted to $ 31,209,934. At December 31, 2006, UG had a statutory gain from operations of $ 5,162,322. Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation.

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

Accounting Developments

ITEM 3. 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 and its variable rate debt outstanding. The Company’s exposure to equity prices and foreign currency exchange rates is immaterial. The information presented below is in U.S. dollars, the Company’s reporting currency.

Interest rate risk

The Company’s exposure to interest rate changes results from a significant holding of fixed maturity investments and mortgage loans on real estate, all of which comprised approximately 82% of the investment portfolio as of March 31, 2007. These investments are mainly exposed to changes in treasury rates. The fixed maturities investments include U.S. government bonds, securities issued by government agencies, mortgage-backed bonds and corporate bonds. Approximately 80% of the fixed maturities we owned at March 31, 2006 are instruments of the United States government or are backed by U.S. government agencies or private corporations carrying the implied full faith and credit backing of the U.S. government.

To manage interest rate risk, the Company performs periodic projections of asset and liability cash flows to evaluate the potential sensitivity of the investments and liabilities. Management assesses interest rate sensitivity with respect to the available-for-sale fixed maturities investments using hypothetical test scenarios that assume either upward or downward 100-basis point shifts in the prevailing interest rates. The following tables set forth the potential amount of unrealized gains (losses) that could be caused by 100-basis point upward and downward shifts on the available-for-sale fixed maturities investments as of March 31, 2007:

Decreases in Interest Rates		Increases in Interest Rates
200 Basis Points	100 Basis Points	100 Basis Points	200 Basis Points	300 Basis Points
$ 4,699,000	$ 1,470,000	$ (8,518,000)	$ (13,289,000)	$ (18,016,000)

While the test scenario is for illustrative purposes only and does not reflect our expectations regarding future interest rates or the performance of fixed-income markets, it is a near-term change that illustrates the potential impact of such events. Due to the composition of the Company’s book of insurance business, management believes it is unlikely that the Company would encounter large surrender activity due to a significant interest rate increase. Such an increase would force the Company to dispose fixed maturities at a loss.

There are no fixed maturities or other investments that management classifies as trading instruments. At March 31, 2007 and December 31, 2006, there were no investments in derivative instruments.

The Company currently has $ 24,223,083 debt outstanding.

ITEM 4. 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 II. OTHER INFORMATION.

ITEM 1. LEGAL PROCEEDINGS.

NONE

ITEM 2. CHANGE IN SECURITIES.

NONE

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

NONE

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

NONE

ITEM 5. OTHER INFORMATION.

NONE

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibits

Exhibit Number Description

31.1 Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as

required pursuant to Section 302

31.2 Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate

Secretary of UTG, as required pursuant to Section 302

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

REPORTS ON FORM 8-K

NONE

SIGNATURES

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

UTG, INC.

(Registrant)

Date: May 10, 2007 By /s/ James P. Rousey

James P. Rousey

President, and Director

Date: May 10, 2007 By /s/ Theodore C. Miller

Theodore C. Miller

Senior Vice President

and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number Description

31.1 Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as

required pursuant to Section 302

31.2 Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate

Secretary of UTG, as required pursuant to Section 302

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