[X]
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
|
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the fiscal year ended December 31, 2010
|
|
or
|
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D
|
OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from _____________ to ______________
|
UTG, INC.
|
||
(Exact name of registrant as specified in its charter)
|
||
Delaware
|
20-2907892
|
|
(State or other jurisdiction of
|
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification No.)
|
5250 South Sixth Street, Springfield, IL
|
62703
|
|
(Address of principal executive offices)
|
(Zip code)
|
Securities registered pursuant to Section 12(b) of the Act:
|
|
Title of each class
|
Name of each exchange on which registered
|
None
|
None
|
Large Accelerated Filer
|
[ ]
|
Accelerated Filer
|
[ ]
|
Non Accelerated Filer
|
[ ]
|
Smaller Reporting Company
|
[X]
|
|
TABLE OF CONTENTS
|
PART I…………………………………………………………………………………………………………………...................................................................................................….
|
3
|
ITEM 1. BUSINESS………………………………………………………………………………………………...................................................................................................................…..
|
3
|
ITEM 1A. RISK FACTORS……………………………………………………………………………….………....................................................................................................................…
|
15
|
ITEM 1B. UNRESOLVED STAFF COMMENTS………………………………………………………………….................................................................................................................….
|
16
|
ITEM 2. PROPERTIES……………………………………………………………………………………………...................................................................................................................….
|
16
|
ITEM 3. LEGAL PROCEEDINGS………………………………………………………………………………….......................................................................................................................
|
17
|
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS……………………………..................................................................................................................….
|
17
|
PART II…………………………………………………………………………………………………………………...................................................................................................…
|
18
|
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUTY SECURITIES……………………………….....................................................................................................................….
|
18
|
ITEM 6. SELECTED FINANCIAL DATA…………………………………………………………………………...............................................................................................................…
|
19
|
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS……………………………………………………………………………......................................................................................................................
|
20
|
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK………………….........................................................................................................….
|
33
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA………………………………………...........................................................................................................….
|
35
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE………………………………………………………………………................................................................................................................….
|
67
|
ITEM 9A. CONTROLS AND PROCEDURES……………………………………………………………………..................................................................................................................….
|
67
|
ITEM 9B. OTHER INFORMATION……………………………………………………………………………….................................................................................................................…..
|
68
|
PART III………………………………………………………………………………………………………………....................................................................................................…..
|
69
|
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE…………………......................................................................................................................….
|
69
|
ITEM 11. EXECUTIVE COMPENSATION………………………………………………………………………......................................................................................................................
|
73
|
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS………………………………………………………...................................................................................................................…
|
78
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE……………………………………………………………………….......................................................................................................................….
|
80
|
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES……………………………………………….....................................................................................................................…
|
81
|
PART IV…………………………………………………………………………………………………………….....................................................................................................……
|
83
|
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.………………………………..………...............................................................................................................…
|
83
|
Shown in thousands
|
||||
2010
Premiums Earned
|
2009
Premiums Earned
|
|||
Direct
|
$
|
16,463
|
$
|
17,271
|
Assumed
|
36
|
163
|
||
Ceded
|
(4,108)
|
(3,932)
|
||
Net Premiums
|
$
|
12,391
|
$
|
13,502
|
December 31,
|
||||
2010
|
2009
|
|||
Fixed Maturities Held for Sale
|
$
|
5,577,292
|
$
|
8,464,738
|
Equity Securities
|
891,777
|
970,778
|
||
Trading Securities
|
5,143,204
|
13,661
|
||
Mortgage Loans
|
1,176,747
|
2,442,908
|
||
Discounted Mortgage Loans
|
12,897,978
|
987,387
|
||
Real Estate
|
6,600,327
|
6,086,901
|
||
Policy Loans
|
864,416
|
868,114
|
||
Short-term Investments
|
57,339
|
55,375
|
||
Cash
|
10,761
|
44,368
|
||
Total Consolidated Investment Income
|
33,219,841
|
19,934,230
|
||
Investment Expenses
|
(8,361,004)
|
(5,693,437)
|
||
Consolidated Net Investment Income
|
$
|
24,858,837
|
$
|
14,240,793
|
Fixed Maturities
|
||||
% of Portfolio
|
||||
Rating
|
||||
2010
|
2009
|
|||
Investment Grade
|
||||
AAA
|
74%
|
76%
|
||
AA
|
4%
|
4%
|
||
A
|
9%
|
13%
|
||
BBB
|
13%
|
6%
|
||
Below Investment Grade
|
0%
|
1%
|
||
100%
|
100%
|
Carrying Value
|
||||
2010
|
2009
|
|||
U.S. Government and government agencies and authorities
|
$
|
79,023,933
|
$
|
73,697,038
|
States, municipalities and political subdivisions
|
335,198
|
2,419,148
|
||
Collateralized mortgage obligations
|
16,674,262
|
18,821,461
|
||
Public utilities
|
987,025
|
0
|
||
All other corporate bonds
|
50,885,530
|
44,767,046
|
||
$
|
147,905,948
|
$
|
139,704,693
|
Average
|
||||||
Carrying
|
Average
|
Average
|
||||
Investments
|
Value
|
Maturity
|
Yield
|
|||
Fixed maturities held for sale
|
$
|
143,806,000
|
14 years
|
3.88%
|
||
Equity securities
|
13,604,000
|
Not applicable
|
6.56%
|
|||
Trading securities
|
28,321,000
|
Not applicable
|
12.80%
|
|||
Mortgage loans
|
19,726,000
|
1 year
|
5.97%
|
|||
Discounted mortgage loans
|
40,877,000
|
6 years
|
31.55%
|
|||
Investment real estate
|
49,353,000
|
Not applicable
|
13.37%
|
|||
Policy loans
|
14,160,000
|
Not applicable
|
6.10%
|
|||
Short-term investments and Cash and cash equivalents
|
28,338,000
|
On demand
|
0.24%
|
|||
Total Investments and Cash and Cash equivalents
|
$
|
338,185,000
|
9.82%
|
Payment Frequency
|
Number of
Loans
|
Carrying
Value
|
||
No payments received
|
47
|
$
|
26,731,110
|
|
One-time payment received
|
20
|
562,919
|
||
Irregular payments received
|
19
|
7,166,669
|
||
Periodic payments received
|
45
|
13,063,162
|
||
Total
|
131
|
$
|
47,523,860
|
Mortgage Loans
|
Amount
|
% of Total
|
||
Commercial – all other
|
$
|
58,568,145
|
98%
|
|
Residential – all other
|
1,367,302
|
2%
|
||
Total
|
$
|
59,935,447
|
100%
|
Mortgage Loans
|
Real Estate
|
||
Alabama
|
1%
|
0%
|
|
Arizona
|
7%
|
1%
|
|
California
|
2%
|
4%
|
|
Florida
|
39%
|
1%
|
|
Georgia
|
6%
|
10%
|
|
Illinois
|
0%
|
2%
|
|
Kentucky
|
7%
|
45%
|
|
Maryland
|
3%
|
0%
|
|
Michigan
|
1%
|
1%
|
|
Minnesota
|
3%
|
0%
|
|
Nevada
|
3%
|
0%
|
|
North Carolina
|
2%
|
0%
|
|
Ohio
|
9%
|
2%
|
|
Pennsylvania
|
4%
|
0%
|
|
Tennessee
|
2%
|
0%
|
|
Texas
|
7%
|
28%
|
|
Utah
|
0%
|
1%
|
|
Washington
|
0%
|
2%
|
|
West Virginia
|
4%
|
3%
|
|
Total
|
100%
|
100%
|
Category
|
2010
|
2009
|
||
In good standing
|
$
|
9,665,059
|
$
|
7,311,982
|
Overdue interest over 90 days
|
16,192,815
|
26,917,956
|
||
Restructured
|
4,306,800
|
0
|
||
In process of foreclosure
|
17,359,186
|
0
|
||
Total discounted mortgage loans
|
$
|
47,523,860
|
$
|
34,229,938
|
Total foreclosed discounted mortgage loans
|
$
|
8,939,548
|
$
|
2,262,352
|
2010
|
2009
|
|||||||
PERIOD
|
High
|
Low
|
High
|
Low
|
||||
First quarter
|
10.10
|
8.76
|
9.00
|
5.00
|
||||
Second quarter
|
10.00
|
8.80
|
8.00
|
5.00
|
||||
Third quarter
|
9.75
|
9.50
|
9.01
|
6.05
|
||||
Fourth quarter
|
10.40
|
8.75
|
11.00
|
8.76
|
Total Number of Shares
Purchased
|
Average Price Paid
Per Share
|
Total Number of Shares Purchased
as Part of Publicly Announced Program
|
Maximum Number of Shares
That May Yet Be Purchased Under the Program
|
Approximate Dollar Value That May
Yet Be Purchased Under the Program
|
|||||
Oct. 1 through Oct. 31, 2010
|
3,070
|
$
|
9.44
|
3,070
|
N/A
|
$
|
440,834
|
||
Nov. 1 through Nov. 30, 2010
|
1,428
|
9.31
|
1,428
|
N/A
|
427,535
|
||||
Dec. 1 through Dec. 31, 2010
|
13,099
|
10.29
|
13,099
|
N/A
|
292,755
|
||||
Total
|
17,597
|
10.06
|
17,597
|
FINANCIAL HIGHLIGHTS
|
||||||||||
(000’s omitted, except per share data)
|
||||||||||
2010
|
2009
|
2008
|
2007
|
2006
|
||||||
Premium income net of reinsurance
|
$
|
12,391
|
$
|
13,502
|
$
|
13,309
|
$
|
14,413
|
$
|
12,860
|
Net investment income
|
24,859
|
14,241
|
17,516
|
16,880
|
11,001
|
|||||
Total revenues
|
38,443
|
28,759
|
35,239
|
38,873
|
37,585
|
|||||
Net income (loss)
|
7,597
|
(4,290)
|
654
|
2,143
|
3,870
|
|||||
Basic income (loss) per share
|
1.97
|
(1.12)
|
0.17
|
0.56
|
1.00
|
|||||
Total assets
|
441,588
|
431,519
|
457,779
|
473,655
|
482,732
|
|||||
Total notes payable
|
10,372
|
14,403
|
15,617
|
19,914
|
22,990
|
|||||
Dividends paid per share
|
NONE
|
NONE
|
NONE
|
NONE
|
NONE
|
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.
|
(a)
|
Revenues
|
(b)
|
Expenses
|
(c)
|
Net income
|
(a)
|
Assets
|
Fixed Maturities
|
||||
% of Portfolio
|
||||
Rating
|
||||
2010
|
2009
|
|||
Investment Grade
|
||||
AAA
|
74%
|
76%
|
||
AA
|
4%
|
4%
|
||
A
|
9%
|
13%
|
||
BBB
|
13%
|
6%
|
||
Below Investment Grade
|
0%
|
1%
|
||
100%
|
100%
|
(b)
|
Liabilities
|
(c)
|
Shareholders' Equity
|
Ratio of Total Adjusted Capital to
|
||
Authorized Control Level RBC
|
||
Regulatory Event
|
(Less Than or Equal to)
|
|
Company action level
|
2.0*
|
|
Regulatory action level
|
1.5
|
|
Authorized control level
|
1.0
|
|
Mandatory control level
|
0.7
|
|
*Or, 2.5 with negative trend
|
Decrease in Interest Rates
|
Increase in Interest Rates
|
||||
200
Basis Points
|
100
Basis Points
|
100
Basis Points
|
200
Basis Points
|
300
Basis Points
|
|
$32,835,000
|
$15,086,000
|
$(12,720,000)
|
$(23,369,000)
|
$(32,687,000)
|
December 31, 2010
|
|||||||
Expected maturity date
|
|||||||
Long term debt
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
Total
|
Fair value
|
Fixed rate
|
27,008
|
943,712
|
31,586
|
34,154
|
154,368
|
1,190,828
|
1,110,156
|
Average interest rate
|
5.0%
|
5.0%
|
5.0%
|
5.0%
|
5.0%
|
5.0%
|
|
Variable rate
|
3,600,000
|
3,291,411
|
0
|
0
|
0
|
6,891,411
|
6,891,411
|
Average interest rate
|
2.0%
|
2.0%
|
N/A
|
N/A
|
N/A
|
2.0%
|
|
Short term debt
|
|||||||
Fixed rate
|
2,000,000
|
0
|
0
|
0
|
0
|
2,000,000
|
2,000,000
|
Average interest rate
|
0.25%
|
N/A
|
N/A
|
N/A
|
N/A
|
0.25%
|
|
Variable rate
|
290,000
|
0
|
0
|
0
|
0
|
290,000
|
290,000
|
Average interest rate
|
3.25%
|
N/A
|
N/A
|
N/A
|
N/A
|
3.25%
|
Page No.
|
|
UTG, INC. AND CONSOLIDATED SUBSIDIARIES
|
|
Report of Management on Internal Controls Over Financial Reporting……..….......................................................................................................................................
Report of Independent Registered Public Accounting Firm
for the years ended December 31, 2010 and 2009…………………………………………..…..….............................................................................................................
|
36
37
|
Consolidated Balance Sheets………………………………………………………………………............................................................................................................….
|
38
|
Consolidated Statements of Operations…………………………………………………..………........................................................................................................……
|
39
|
Consolidated Statements of Changes in Equity………………………………………..……….............................................................................................................…..
|
40
|
Consolidated Statements of Cash Flows……………………………………………………......…..........................................................................................................….
|
41
|
Notes to Consolidated Financial Statements……………………………………………………............................................................................................................…..
|
42-67
|
UTG, INC.
|
||||||
CONSOLIDATED BALANCE SHEETS
|
||||||
As of December 31, 2010 and 2009
|
||||||
ASSETS
|
||||||
2010
|
2009
|
|||||
Investments:
|
||||||
Investments available for sale:
|
||||||
Fixed maturities, at market (amortized cost $142,948,693 and $138,680,398)
|
$
|
147,905,948
|
$
|
139,704,693
|
||
Equity securities, at market (cost $13,940,811 and $14,316,463)
|
13,884,257
|
13,323,322
|
||||
Trading securities, at market (cost $34,183,252 and $19,043,448)
|
37,029,550
|
19,613,472
|
||||
Mortgage loans on real estate at amortized cost
|
12,411,587
|
27,041,447
|
||||
Discounted mortgage loans on real estate at amortized cost
|
47,523,860
|
34,229,937
|
||||
Investment real estate, at cost, net of accumulated depreciation
|
53,148,755
|
45,556,811
|
||||
Policy loans
|
13,976,019
|
14,343,606
|
||||
Short-term investments
|
0
|
700,000
|
||||
|
325,879,976
|
294,513,288
|
||||
Cash and cash equivalents
|
18,483,452
|
37,492,843
|
||||
Investment in unconsolidated affiliate, at fair value (cost $5,000,000 and $5,000,000)
|
5,137,700
|
5,057,762
|
||||
Accrued investment income
|
1,609,425
|
1,577,199
|
||||
Reinsurance receivables:
|
||||||
Future policy benefits
|
67,033,539
|
68,615,385
|
||||
Policy claims and other benefits
|
4,446,940
|
5,131,031
|
||||
Cost of insurance acquired
|
14,077,281
|
15,402,012
|
||||
Deferred policy acquisition costs
|
556,958
|
647,526
|
||||
Property and equipment, net of accumulated depreciation
|
1,478,935
|
1,485,253
|
||||
Income taxes receivable
|
0
|
500,305
|
||||
Other assets
|
2,883,893
|
1,096,368
|
||||
Total assets
|
$
|
441,588,099
|
$
|
431,518,972
|
||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||
Policy liabilities and accruals:
|
||||||
Future policy benefits
|
$
|
307,509,531
|
$
|
313,798,199
|
||
Policy claims and benefits payable
|
3,588,914
|
3,248,521
|
||||
Other policyholder funds
|
810,062
|
940,357
|
||||
Dividend and endowment accumulations
|
14,190,946
|
14,182,516
|
||||
Income taxes payable
|
209,888
|
0
|
||||
Deferred income taxes
|
13,381,278
|
11,950,254
|
||||
Notes payable
|
10,372,239
|
14,402,889
|
||||
Trading securities, at market (proceeds $17,387,108 and $10,590,552)
|
18,429,677
|
11,671,911
|
||||
Other liabilities
|
7,967,807
|
7,265,586
|
||||
Total liabilities
|
376,460,342
|
377,460,233
|
||||
Shareholders' equity:
|
||||||
Common stock - no par value, stated value $.001 per share.
|
|
|||||
Authorized 7,000,000 shares - 3,848,079 and 3,884,445 shares issued
|
||||||
and outstanding after deducting treasury shares of 446,929 and 410,838
|
3,848
|
3,885
|
||||
Additional paid-in capital
|
41,432,636
|
41,782,274
|
||||
Retained earnings (accumulated deficit)
|
6,335,072
|
(1,261,503)
|
||||
Accumulated other comprehensive income
|
3,679,684
|
322,156
|
||||
Total UTG shareholders' equity
|
51,451,240
|
40,846,812
|
||||
Noncontrolling interest
|
13,676,517
|
13,211,927
|
||||
Total shareholders' equity
|
65,127,757
|
54,058,739
|
||||
Total liabilities and shareholders' equity
|
$
|
441,588,099
|
$
|
431,518,972
|
UTG, INC.
|
||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||
For the Years Ended December 31, 2010 and 2009
|
||||||
2010
|
2009
|
|||||
Revenues:
|
||||||
Premiums and policy fees
|
$
|
16,498,551
|
$
|
17,434,156
|
||
Reinsurance premiums and policy fees
|
(4,107,958)
|
(3,931,963)
|
||||
Net investment income
|
24,858,837
|
14,240,793
|
||||
Other income
|
1,834,465
|
1,645,322
|
||||
Revenues before realized gains (losses)
|
39,083,895
|
29,388,308
|
||||
Realized investment gains (losses), net:
|
||||||
Other-than-temporary impairments
|
(1,478,970)
|
(2,007,174)
|
||||
Other realized investment gains, net
|
838,432
|
1,377,646
|
||||
Total realized investment losses, net
|
(640,538)
|
(629,528)
|
||||
38,443,357
|
28,758,780
|
|||||
Benefits and other expenses:
|
||||||
Benefits, claims and settlement expenses:
|
||||||
Life
|
23,833,379
|
25,633,506
|
||||
Reinsurance benefits and claims
|
(6,424,865)
|
(4,645,387)
|
||||
Annuity
|
976,755
|
810,509
|
||||
Dividends to policyholders
|
561,713
|
695,349
|
||||
Commissions and amortization of deferred
|
||||||
policy acquisition costs
|
(824,850)
|
57,313
|
||||
Amortization of cost of insurance acquired
|
1,324,731
|
4,176,539
|
||||
Operating expenses
|
8,030,984
|
7,042,585
|
||||
Interest expense
|
304,353
|
484,449
|
||||
27,782,200
|
34,254,863
|
|||||
Income (loss) before income taxes
|
10,661,157
|
(5,496,083)
|
||||
Income tax (expense) benefit
|
(2,278,245)
|
300,745
|
||||
Net income (loss)
|
8,382,912
|
(5,195,338)
|
||||
Net (income) loss attributable to noncontrolling interest
|
(786,337)
|
905,091
|
||||
Net income (loss) attributable to common shareholders'
|
$
|
7,596,575
|
$
|
(4,290,247)
|
||
Amounts attributable to common shareholders':
|
||||||
Basic income (loss) per share
|
$
|
1.97
|
$
|
(1.12)
|
||
Diluted income (loss) per share
|
$
|
1.97
|
$
|
(1.12)
|
||
Basic weighted average shares outstanding
|
3,848,079
|
3,843,113
|
||||
Diluted weighted average shares outstanding
|
3,848,079
|
3,843,113
|
||||
UTG, INC.
|
|||||||||||
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
|
|||||||||||
For The Years Ended December 31, 2010 and 2009
|
|||||||||||
2010
|
2009
|
||||||||||
Shareholders'
|
Comprehensive
|
Shareholders'
|
Comprehensive
|
||||||||
Equity
|
Income
|
Equity
|
Income
|
||||||||
Common stock
|
|||||||||||
Balance, beginning of year
|
$
|
3,885
|
$
|
3,834
|
|||||||
Issued during year
|
0
|
61
|
|||||||||
Treasury shares acquired and retired
|
(37)
|
(10)
|
|||||||||
Balance, end of year
|
$
|
3,848
|
$
|
3,885
|
|||||||
Additional paid-in capital
|
|||||||||||
Balance, beginning of year
|
$
|
41,782,274
|
$
|
41,943,229
|
|||||||
Issued during year
|
0
|
(61)
|
|||||||||
Treasury shares acquired and retired
|
(349,638)
|
(160,894)
|
|||||||||
Balance, end of year
|
$
|
41,432,636
|
$
|
41,782,274
|
|||||||
Retained earnings (accumulated deficit)
|
|||||||||||
Balance, beginning of year
|
$
|
(1,261,503)
|
$
|
3,028,744
|
|||||||
Net income (loss) attributable to common shareholders
|
7,596,575
|
$
|
7,596,575
|
(4,290,247)
|
$
|
(4,290,247)
|
|||||
Balance, end of year
|
$
|
6,335,072
|
$
|
(1,261,503)
|
|||||||
Accumulated other comprehensive income
|
|||||||||||
Balance, beginning of year
|
$
|
322,156
|
$
|
1,269,404
|
|||||||
Other comprehensive income (loss)
|
|||||||||||
Unrealized holding income (loss) on securities
|
|||||||||||
net of non controlling and
|
|||||||||||
reclassification adjustment and taxes
|
3,357,528
|
3,357,528
|
(947,248)
|
(947,248)
|
|||||||
Comprehensive income (loss)
|
$
|
10,954,103
|
$
|
(5,237,495)
|
|||||||
|
Balance, end of year
|
$
|
3,679,684
|
$
|
322,156
|
||||||
Noncontrolling Interest
|
|||||||||||
Balance, beginning of year
|
$
|
13,211,927
|
$
|
13,050,030
|
|||||||
Distributions
|
(561,493)
|
0
|
|||||||||
Gain attributable to noncontrolling interest
|
1,026,083
|
161,897
|
|||||||||
Balance, end of year
|
$
|
13,676,517
|
$
|
13,211,927
|
|||||||
Total shareholders' equity, end of year
|
$
|
65,127,757
|
$
|
54,058,739
|
UTG, INC.
|
||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||
For the Years Ended December 31, 2010 and 2009
|
||||||
2010
|
2009
|
|||||
Cash flows from operating activities:
|
||||||
Net income (loss) attributable to common shares
|
$
|
7,596,575
|
$
|
(4,290,247)
|
||
Adjustments to reconcile net income 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 investments
|
(7,530,201)
|
136,366
|
||||
Realized investment (gains) losses, net
|
640,538
|
629,528
|
||||
Unrealized trading (gains) losses included in income
|
(1,803,729)
|
511,339
|
||||
Amortization of deferred policy acquisition costs
|
90,568
|
165,944
|
||||
Amortization of cost of insurance acquired
|
1,324,731
|
4,176,539
|
||||
Depreciation
|
1,311,029
|
1,430,501
|
||||
Net income (loss) attributable to noncontrolling interest
|
786,337
|
(905,091)
|
||||
Charges for mortality and administration
|
||||||
of universal life and annuity products
|
(7,709,727)
|
(8,042,562)
|
||||
Interest credited to account balances
|
5,247,365
|
5,360,221
|
||||
Change in accrued investment income
|
(32,226)
|
268,477
|
||||
Change in reinsurance receivables
|
2,265,937
|
2,126,492
|
||||
Change in policy liabilities and accruals
|
(4,007,032)
|
(3,454,113)
|
||||
Change in income taxes payable
|
277,669
|
(1,694,210)
|
||||
Change in other assets and liabilities, net
|
(1,444,129)
|
(667,668)
|
||||
Net cash used in operating activities
|
(2,986,295)
|
(4,248,484)
|
||||
Cash flows from investing activities:
|
||||||
Proceeds from investments sold and matured:
|
||||||
Fixed maturities available for sale
|
24,718,790
|
105,310,516
|
||||
Equity securities available for sale
|
948,385
|
46,098,801
|
||||
Trading securities
|
163,891,508
|
10,590,552
|
||||
Mortgage loans
|
16,431,689
|
16,426,727
|
||||
Discounted mortgage loans
|
23,607,100
|
999,044
|
||||
Real estate
|
2,709,233
|
1,394,222
|
||||
Policy loans
|
3,468,202
|
3,902,483
|
||||
Short-term investments
|
700,000
|
0
|
||||
Total proceeds from investments sold and matured
|
236,474,907
|
184,722,345
|
||||
Cost of investments acquired:
|
||||||
Fixed maturities available for sale
|
(28,947,923)
|
(89,132,935)
|
||||
Equity securities available for sale
|
(1,333,942)
|
(27,157,177)
|
||||
Trading securities
|
(171,842,107)
|
(18,829,024)
|
||||
Mortgage loans
|
(2,489,523)
|
(424,858)
|
||||
Discounted mortgage loans
|
(38,323,757)
|
(35,799,381)
|
||||
Real estate
|
(1,778,281)
|
(6,307,090)
|
||||
Policy loans
|
(3,100,615)
|
(3,616,417)
|
||||
Short-term investments
|
0
|
(700,000)
|
||||
Total cost of investments acquired
|
(247,816,148)
|
(181,966,882)
|
||||
Purchase of property and equipment
|
(139,291)
|
(17,403)
|
||||
Sale of property and equipment
|
0
|
166,913
|
||||
Net cash provided by (used in) investing activities
|
(11,480,532)
|
2,904,973
|
||||
Cash flows from financing activities:
|
||||||
Policyholder contract deposits
|
6,632,125
|
7,039,947
|
||||
Policyholder contract withdrawals
|
(6,232,871)
|
(7,028,841)
|
||||
Proceeds from notes payable/line of credit
|
7,290,000
|
2,000,000
|
||||
Payments of principal on notes payable/line of credit
|
(11,320,650)
|
(3,213,877)
|
||||
Purchase of treasury stock
|
(349,675)
|
(160,904)
|
||||
Purchase of stock of affiliate
|
0
|
(1,000,000)
|
||||
Non controlling contribution to consolidated subsidiary
|
0
|
1,025,000
|
||||
Non controlling distributions of consolidated subsidiary
|
(561,493)
|
0
|
||||
Cash received from sale of subsidiary
|
0
|
6,365,169
|
||||
Cash of subsidiary at date of sale
|
0
|
(6,186,015)
|
||||
Net cash used in financing activities
|
(4,542,564)
|
(1,159,521)
|
||||
Net decrease in cash and cash equivalents
|
(19,009,391)
|
(2,503,032)
|
||||
Cash and cash equivalents at beginning of year
|
37,492,843
|
39,995,875
|
||||
Cash and cash equivalents at end of year
|
$
|
18,483,452
|
$
|
37,492,843
|
1.
|
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
A.
|
ORGANIZATION - At December 31, 2010, the significant majority-owned subsidiaries of UTG were as depicted on the following organizational chart.
|
B.
|
NATURE OF OPERATIONS - UTG is an insurance holding company. The Company’s dominant business is individual life insurance which includes the servicing of existing insurance business in force 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 UTG and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America.
|
E.
|
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of the Registrant and its wholly and majority-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated.
|
F.
|
INVESTMENTS - Investments are shown on the following bases:
|
Investments available for sale - at fair value, unrealized gains and losses deemed temporary, net of deferred income taxes, are credited or charged, as appropriate, directly to accumulated other comprehensive income or loss (a component of shareholders’ equity). Premiums and discounts on debt securities purchased at other than par value are amortized and accreted, respectively, to interest income in the Consolidated Statements of Operations, using the constant yield method over the period to maturity. Net realized gains and losses on sales of held for sale securities, and unrealized losses considered to be other-than-temporary, are credited or charged to net realized investment gains (losses) in the Consolidated Statements of Operations.
|
|
Mortgage loans on real estate - at unpaid principal balances, adjusted for amortization of premium or discount and valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected.
|
|
Discounted mortgage loans – during 2009 and 2010, the Company purchased non-performing loans at a deep discount through an auction process led by the federal government. In general, the discounted loans are non-performing and there is a significant amount of uncertainty surrounding the timing and amount of cash flows to be received by the Company. Accordingly, the Company records its investment in the discounted loans at its original purchase price. Management works the loans with the borrower to reach a settlement on the loan or they foreclose on the underlying collateral which is primarily commercial real estate. For cash payments received during the work out process, the Company records these payments to interest income on a cash basis. For loan settlements reached, the Company records the amount in excess of the carrying amount of the loan as a discount accretion to investment income at the closing date. Management reviews the discount loan portfolio regularly for impairment. If an impairment is identified (after consideration of the underlying collateral), the Company records an impairment to earnings in the period the information becomes known.
|
|
Real estate - investment real estate at lower of cost net of accumulated depreciation or fair value less cost to sell. Expenses to maintain the property are expensed as incurred.
|
|
Trading securities – at fair value, with gains or losses resulting from changes in fair value recognized in earnings. Trading securities include exchange traded equities and exchange traded equity options.
|
|
Policy loans - at unpaid balances including accumulated interest but not in excess of the cash surrender value of the related policy.
|
|
Short-term investments - at amortized cost, which approximates current market value.
|
|
Realized gains and losses include sales of investments, periodic changes in fair value, and write downs in value. If any, other-than-temporary declines in fair value 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.
With each reporting period, management reviews its investment portfolio for securities whose value has declined below amortized cost to assess whether the decline is other than temporary. Included in the analysis are considerations of the severity and duration of the decline in fair value, the length of time expected to recover, the financial condition of the issuer, and whether the Company either plans to sell the security or it is more-likely-than-not that it will be required to sell the security before recovery of its amortized cost. If there is deemed to be an other than temporary decline in the value of any individual equity security, the Company reclassifies the associated net unrealized loss out of accumulated other comprehensive income with a corresponding charge to equity investment income. For debt securities available for sale that are determined to have an other than temporary impairment (“OTTI”), the credit component of the OTTI is recognized in earnings and the non-credit component is recognized in accumulated other comprehensive income (loss) in situations where the Company does not intend to sell the security and it is more-likely-than-not that the Company will not be required to sell the security. Prior to January 1, 2009, unrealized losses on available for sale debt securities that were deemed to be other-than-temporary were included in current period earnings.
|
|
G.
|
CASH EQUIVALENTS - The Company considers certificates of deposit and other short-term instruments with an original purchased maturity of three months or less to be cash equivalents.
|
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.
For financial reinsurance arrangements, the Company reports the initial ceding commission received as an “other liability” on its financial statements. Financial results in subsequent periods are reported in the various line items of the income statement as with other reinsurance agreements, with the repayment amount reported in the line item “amortization of DAC”. The net impact to the statement of operations in any subsequent period represents the fees paid to the reinsurer on the current outstanding balance of the initial ceding commission.
|
|
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 subsidiaries’ experience adjusted to reflect anticipated trends and to include provisions for possible unfavorable deviations. The Company makes these assumptions at the time the contract is issued or, in the case of contracts acquired by purchase, at the purchase date. Future policy benefits for individual life insurance and annuity policies are computed using interest rates ranging from 2% to 6% for life insurance and 2.5% to 9.3% 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 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% as of December 31, 2010 and 2009.
|
|
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 $1,315,533 and $1,309,068 as of December 31, 2010 and 2009 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 profits from the acquired policies. The Company utilizes a 12% discount rate on the remaining unamortized 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 rate utilized in the amortization calculation is 12%. 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.
|
2010
|
2009
|
|||
Cost of insurance acquired, beginning of year
|
$
|
15,402,012
|
$
|
24,293,914
|
Interest accretion
|
1,870,852
|
4,885,293
|
||
Amortization
|
(3,195,583)
|
(9,061,832)
|
||
Net amortization
|
(1,324,731)
|
(4,176,539)
|
||
Disposed with the sale of Subsidiary
|
0
|
(4,715,363)
|
||
Cost of insurance acquired, end of year
|
$
|
14,077,281
|
$
|
15,402,012
|
Estimated net amortization expense of cost of insurance acquired for the next five years is as follows:
|
Interest
Accretion
|
Amortization
|
Net
Amortization
|
||||
2011
|
$
|
1,712,000
|
$
|
2,943,000
|
$
|
1,231,000
|
2012
|
1,564,000
|
2,710,000
|
1,146,000
|
|||
2013
|
1,427,000
|
2,491,000
|
1,064,000
|
|||
2014
|
1,299,000
|
2,285,000
|
986,000
|
|||
2015
|
1,181,000
|
2,088,000
|
907,000
|
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. Pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 944, "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:
|
2010
|
2009
|
|||||
Deferred, beginning of year
|
$
|
647,526
|
$
|
813,470
|
||
|
||||||
Acquisition costs deferred:
|
||||||
Commissions
|
0
|
0
|
||||
Other expenses
|
0
|
0
|
||||
Total
|
0
|
0
|
||||
Interest accretion
|
6,461
|
8,000
|
||||
Amortization charged to income
|
(97,029)
|
(173,944)
|
||||
Net amortization
|
(90,568)
|
(165,944)
|
||||
Change for the year
|
(90,568)
|
(165,944)
|
||||
Deferred, end of year
|
$
|
556,958
|
$
|
647,526
|
||
Estimated net amortization expense of deferred policy acquisition costs for the next five years is as follows:
|
Interest
|
Net
|
|||||
Accretion
|
Amortization
|
Amortization
|
||||
2011
|
$
|
6,000
|
$
|
77,000
|
$
|
71,000
|
2012
|
5,000
|
62,000
|
57,000
|
|||
2013
|
4,000
|
56,000
|
52,000
|
|||
2014
|
3,000
|
50,000
|
47,000
|
|||
2015
|
3,000
|
77,000
|
74,000
|
|||
M.
|
PROPERTY AND EQUIPMENT - Company-occupied property, data processing equipment and furniture and office equipment are stated at cost less accumulated depreciation of $3,079,922 and $2,934,312 at December 31, 2010 and 2009, 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 $175,809 and $168,553 for the years ended December 31, 2010 and 2009, respectively.
|
||||||||
N.
|
INCOME TAXES - Income taxes are reported Pursuant to FASB Codification 740-10 Section 50, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement 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. The principal assets and liabilities giving rise to such differences are deferred policy acquisition costs, differences in tax basis of invested assets, cost of insurance acquired, future policy benefits, and gains on the sale of subsidiaries.
|
||||||||
O.
|
EARNINGS PER SHARE - Earnings per share (EPS) are reported pursuant to FASB Codification 260-10 sections 5, 10, 15, 45, 50, 55, and 60. 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 net income/(loss) attributable to common shares (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 446,929 and 410,838 shares of common stock as treasury shares with a cost basis of $3,400,844 and $3,051,170 at December 31, 2010 and 2009, 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 10% of life insurance in force at December 31, 2010 and 2009. Premium income from participating business represents 16% and 24% of total premiums for the years ended December 31, 2010 and 2009, respectively. The amount of dividends to be paid is determined annually by the 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 2010 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. The following estimates have been identified as critical in that they involve a high degree of judgment and are subject to a significant degree of variability: (i) deferred acquisition cost; (ii) policy liabilities and accruals; (iii) reinsurance recoverable; (iv) other-than-temporary impairment; (v) federal income taxes; (vi) cost of insurance acquired; (vii) discounted mortgage loans on real estate; (viii) foreclosed loans held for resale; and (vix) deferred tax assets and liabilities.
|
||||||||
U.
|
IMPAIRMENT OF LONG LIVED ASSETS - The Company evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long lived assets may warrant revision or that the remaining balance of an asset may not be recoverable. The measurement of possible impairment is based on the ability to recover the balance of assets from expected future operating cash flows on an undiscounted basis. During 2010, other-than-temporary impairments of approximately $610,000 and $215,000 were recognized on bonds backed by trust preferred securities and on common stock, respectively. The other-than-temporary impairments were due to changes in expected future cash flows. Additionally, an other-than-temporary impairment of approximately $129,000 was recognized on a mortgage loan as a result of its appraisal valuation.
|
||||||||
2.
|
RECENT ACCOUNTING PRONOUNCEMENTS
|
3.
|
SHAREHOLDER DIVIDEND RESTRICTION AND MINIMUM STATUTORY CAPITAL
|
4.
|
INCOME TAXES
|
2010
|
2009
|
|||
Current tax
|
$
|
2,710,769
|
$
|
201,041
|
Deferred tax
|
(432,524)
|
(501,786)
|
||
$
|
2,278,245
|
$
|
(300,745)
|
2010
|
2009
|
|||
Tax computed at statutory rate
|
$
|
3,731,405
|
$
|
(1,923,629)
|
Changes in taxes due to:
|
||||
Utilization of capital loss carryforward
|
0
|
(344,835)
|
||
Valuation allowance
|
(147,521)
|
147,521
|
||
Minority interest
|
(276,185)
|
276,806
|
||
Utilization of net operating loss carryforward
|
0
|
(667,980)
|
||
Small company deduction
|
(986,502)
|
(65,862)
|
||
Sale of subsidiary
|
0
|
2,131,861
|
||
Other
|
(42,952)
|
145,373
|
||
Income tax expense (benefit)
|
$
|
2,278,245
|
$
|
(300,745)
|
2010
|
2009
|
|||
Investments
|
$
|
4,751,156
|
$
|
3,293,449
|
Cost of insurance acquired
|
4,927,048
|
5,390,705
|
||
Deferred policy acquisition costs
|
194,935
|
226,634
|
||
Management/consulting fees
|
(80,381)
|
(178,153)
|
||
Future policy benefits
|
2,671,913
|
2,635,289
|
||
Deferred gain on sale of subsidiary
|
2,312,483
|
2,312,483
|
||
Other liabilities
|
(304,229)
|
(493,837)
|
||
Federal tax DAC
|
(1,091,647)
|
(1,236,316)
|
||
Deferred tax liability
|
$
|
13,381,278
|
$
|
11,950,254
|
5.
|
ANALYSIS OF INVESTMENTS, INVESTMENT INCOME AND INVESTMENT GAIN
|
||||||
A.
|
NET INVESTMENT INCOME - The following table reflects net investment income by type of investment:
|
2010
|
2009
|
|||
Fixed Maturities Available for Sale
|
$
|
5,577,292
|
$
|
8,464,738
|
Equity Securities
|
891,777
|
970,778
|
||
Trading Securities
|
5,143,204
|
13,661
|
||
Mortgage Loans
|
1,176,747
|
2,442,908
|
||
Discounted Mortgage Loans
|
12,897,978
|
987,387
|
||
Real Estate
|
6,600,327
|
6,086,901
|
||
Policy Loans
|
864,416
|
868,114
|
||
Short-term Investments
|
57,339
|
55,375
|
||
Cash
|
10,761
|
44,368
|
||
Total Consolidated Investment Income
|
33,219,841
|
19,934,230
|
||
Investment Expenses
|
(8,361,004)
|
(5,693,437)
|
||
Consolidated Net Investment Income
|
$
|
24,858,837
|
$
|
14,240,793
|
2010
|
Gross
Realized
Gains
|
Gross
Realized
(Losses)
|
Net
Realized
Gains (Losses)
|
|||
Fixed Maturities Available for Sale
|
$
|
811,175
|
$
|
(3,334)
|
$
|
807,841
|
Fixed Maturities Available for Sale - OTTI
|
0
|
(610,254)
|
(610,254)
|
|||
Equity Securities
|
0
|
(21,360)
|
(21,360)
|
|||
Equity Securities - OTTI
|
0
|
(726,828)
|
(726,828)
|
|||
Real Estate
|
51,949
|
0
|
51,949
|
|||
Mortgage Loans – OTTI
|
0
|
(128,867)
|
(128,867)
|
|||
Other
|
0
|
(13,019)
|
(13,019)
|
|||
Consolidated Net Realized Losses
|
$
|
863,124
|
$
|
(1,503,662)
|
$
|
(640,538)
|
2009
|
Gross
Realized
Gains
|
Gross
Realized
(Losses)
|
Net
Realized
Gains (Losses)
|
|||
Fixed Maturities Available for Sale
|
$
|
3,996,328
|
$
|
(4,054,347)
|
$
|
(58,019)
|
Fixed Maturities Available for Sale - OTTI
|
0
|
(2,007,174)
|
(2,007,174)
|
|||
Equity Securities
|
6,273,996
|
(5,077,207)
|
1,196,789
|
|||
Real Estate
|
159,282
|
0
|
159,282
|
|||
Other
|
79,594
|
0
|
79,594
|
|||
Consolidated Net Realized Losses
|
$
|
10,509,200
|
$
|
(11,138,728)
|
$
|
(629,528)
|
B.
|
INVESTMENT SECURITIES
|
2010
|
Original or Amortized
Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Market
Value
|
||||
Investments available for sale:
|
||||||||
Fixed maturities
|
||||||||
U.S. Government and govt. agencies and authorities
|
$
|
74,596,648
|
$
|
4,427,285
|
$
|
0
|
$
|
79,023,933
|
States, municipalities and political subdivisions
|
330,000
|
5,198
|
0
|
335,198
|
||||
Collateralized mortgage obligations
|
16,170,099
|
510,840
|
(6,677)
|
16,674,262
|
||||
Public utilities
|
904,139
|
82,886
|
0
|
987,025
|
||||
All other corporate bonds
|
50,947,807
|
2,320,965
|
(2,383,242)
|
50,885,530
|
||||
142,948,693
|
7,347,174
|
(2,389,919)
|
147,905,948
|
|||||
Equity securities
|
13,940,811
|
39,700
|
(96,254)
|
13,884,257
|
||||
Total
|
$
|
156,889,504
|
$
|
7,386,874
|
$
|
(2,486,173)
|
$
|
161,790,205
|
Investment in unconsolidated affiliate
|
$
|
5,000,000
|
$
|
137,700
|
$
|
0
|
$
|
5,137,700
|
2009
|
Original or Amortized
Cost
|
Gross Unrealized Gains
|
Gross Unrealized Losses
|
Estimated Market
Value
|
||||
Investments available for sale:
|
||||||||
Fixed maturities
|
||||||||
U.S. Government and govt. agencies and authorities
|
$
|
73,298,975
|
$
|
1,773,136
|
$
|
(1,375,073)
|
$
|
73,697,038
|
States, municipalities and political subdivisions
|
2,567,650
|
44,274
|
(192,776)
|
2,419,148
|
||||
Collateralized mortgage obligations
|
17,992,385
|
829,076
|
0
|
18,821,461
|
||||
All other corporate bonds
|
44,821,388
|
1,443,401
|
(1,497,743)
|
44,767,046
|
||||
138,680,398
|
4,089,887
|
(3,065,592)
|
139,704,693
|
|||||
Equity securities
|
14,316,463
|
29,000
|
(1,022,141)
|
13,323,322
|
||||
Total
|
$
|
152,996,861
|
$
|
4,118,887
|
$
|
(4,087,733)
|
$
|
153,028,015
|
Investment in unconsolidated affiliate
|
$
|
5,000,000
|
$
|
57,762
|
$
|
0
|
$
|
5,057,762
|
|
The fair value of investments with sustained gross unrealized losses at December 31, 2010 and 2009 are as follows:
|
2010
|
Less than 12 months
|
12 months or longer
|
Total
|
||||||
Fair value
|
Unrealized losses
|
Fair value
|
Unrealized losses
|
Fair value
|
Unrealized losses
|
||||
Collateralized mortgage obligations
|
$
|
0
|
0
|
$
|
104,033
|
(6,677)
|
$
|
104,033
|
(6,677)
|
All other corporate bonds
|
13,959,305
|
(413,862)
|
2,620,277
|
(1,969,380)
|
16,579,582
|
(2,383,242)
|
|||
Total fixed maturity
|
13,959,305
|
(413,862)
|
$
|
2,724,310
|
(1,976,057)
|
$
|
16,683,615
|
(2,389,919)
|
|
Equity securities
|
$
|
1,082,748
|
(96,254)
|
$
|
0
|
0
|
$
|
1,082,748
|
(96,254)
|
2009
|
Less than 12 months
|
12 months or longer
|
Total
|
||||||
Fair value
|
Unrealized losses
|
Fair value
|
Unrealized losses
|
Fair value
|
Unrealized losses
|
||||
U.S. Government and
govt. agencies and authorities
|
$
|
46,581,332
|
(1,375,073)
|
$
|
0
|
0
|
$
|
46,581,332
|
(1,375,073)
|
States, municipalities and political subdivisions
|
0
|
0
|
1,247,224
|
(192,776)
|
1,247,224
|
(192,776)
|
|||
All other corporate bonds
|
12,305,039
|
(215,636)
|
2,514,618
|
(1,282,107)
|
14,819,657
|
(1,497,743)
|
|||
Total fixed maturity
|
58,886,371
|
(1,590,709)
|
$
|
3,761,842
|
(1,474,883)
|
$
|
62,648,213
|
(3,065,592)
|
|
Equity securities
|
$
|
908,010
|
(244,095)
|
$
|
4,474,508
|
(778,046)
|
$
|
5,382,518
|
(1,022,141)
|
2010
|
Beginning Amortized
Cost
|
OTTI Credit Loss
|
Ending Amortized Cost
|
Unrealized Loss
|
Carrying Value
|
|||||
Preferred Term Securities I
|
$
|
416,157
|
$
|
(136,935)
|
$
|
279,222
|
$
|
(206,924)
|
$
|
72,298
|
Preferred Term Securities II
|
$
|
2,161,808
|
$
|
(473,319)
|
$
|
1,688,489
|
$
|
(1,621,946)
|
$
|
66,543
|
Investors Heritage Capital Corp
|
$
|
618,348
|
$
|
(215,174)
|
$
|
403,174
|
$
|
0
|
$
|
403,174
|
|
||||||||||
Jarvis Development
|
$
|
739,610
|
$
|
(128,867)
|
$
|
730,000
|
$
|
0
|
$
|
730,000
|
SFF Royalty
|
$
|
1,934,336
|
$
|
(68,643)
|
$
|
1,865,693
|
$
|
0
|
$
|
1,865,693
|
Amen Properties, Inc.
|
$
|
1,628,432
|
$
|
(456,032)
|
$
|
1,172,400
|
$
|
0
|
$
|
1,172,400
|
2009
|
Beginning Amortized
Cost
|
OTTI Credit Loss
|
Ending Amortized Cost
|
Unrealized Loss
|
Carrying Value
|
|||||
Preferred Term Securities I
|
$
|
508,816
|
$
|
(92,659)
|
$
|
416,157
|
$
|
(99,998)
|
$
|
316,159
|
Preferred Term Securities II
|
$
|
4,076,323
|
$
|
(1,914,515)
|
$
|
2,161,808
|
$
|
(1,115,670)
|
$
|
1,046,138
|
Fixed Maturities Available for Sale
December 31, 2010
|
Amortized Cost
|
Estimated Market Value
|
||
Due in one year or less
|
$
|
10,000
|
$
|
10,113
|
Due after one year through five years
|
17,718,269
|
19,029,622
|
||
Due after five years through ten years
|
36,490,345
|
39,997,780
|
||
Due after ten years
|
72,072,217
|
71,648,908
|
||
Collateralized mortgage obligations
|
16,657,862
|
17,219,525
|
||
Total
|
$
|
142,948,693
|
$
|
147,905,948
|
December 31, 2010
|
December 31, 2009
|
|||
Type of Instrument
|
Net Realized and Unrealized Gains (Losses)
|
Net Realized and Unrealized Gains (Losses)
|
||
Equity
|
$
|
1,988,275
|
$
|
13,664
|
C.
|
INVESTMENTS ON DEPOSIT - At December 31, 2010, investments carried at approximately $6,153,000 were on deposit with various state insurance departments.
|
D.
|
DISCOUNT MORTGAGE LOANS - During the fourth quarter of 2009, the Company began purchasing discounted commercial mortgage loans. Management has extensive background and experience in the analysis and valuation of commercial real estate and believes there are significant opportunities currently available in the discounted mortgage loan arena. Experienced personnel of FSNB have also been utilized in the analysis phase. This experience dates back to discounted loans during the Resolution Trust days where such loans were being sold from defunct savings and loans in the early 1990’s. The discounted loans are available through the FDIC sale of assets of closed banks and from banks wanting to reduce their loan portfolios. The loans are available on a loan by loan bid process. Prior to placing a bid, each loan is reviewed to determine interest level utilizing such information as type of collateral, location of collateral, interest rate, current loan status and available cashflows or other sources of repayment. Once it is determined interest in the loan remains, the collateral is physically inspected. Following physical inspection, if interest still remains, a bid price is determined and a bid is submitted. Once a loan has been acquired, contact is made with the appropriate individuals to begin a dialog with a goal of determining the borrower’s willingness to work together. There are generally three paths a discounted loan will take: the borrowers pay as required; a settlement is reached with the loan being paid off at a discounted value; or the loan is foreclosed.
During the fourth quarter of 2009, the Company had acquired $118,368,661 of discounted mortgage loans at a total cost of $35,224,022, representing an average purchase price to outstanding loan of 29.8%. During 2009, the Company recorded approximately $1,000,000 in income from this loan activity. During 2010, the Company acquired an additional $111,258,867 of discounted mortgage loans at a total cost of $36,283,278, representing an average purchase price to outstanding loan of 32.6%. Additionally, during 2010, the Company settled, sold or had paid off discounted mortgage loans totaling $23,607,100. During 2010, the Company recorded approximately $12,898,000 in income from the discounted mortgage loan activity, including $7,645,258 in discount accruals. The Company is currently projecting a very positive return from on-going mortgage loan payments from the discounted commercial mortgage loan portfolio.
At December 31, 2010, the Company holds $59,935,447 in mortgage loans in total, which represents approximately 14% of the total assets. Most mortgage loans are first position loans. Loans issued are limited to no more than 80% of the appraised value of the property with the exception of one loan whose value of the security to the loan was 100%. During 2010, the Company recognized an other-than-temporary impairment of $128,867 on this loan as a result of its appraisal valuation.
|
Payment Frequency
|
Number of Loans
|
Carrying
Value
|
||
No payments received
|
47
|
$
|
26,731,110
|
|
One-time payment received
|
20
|
562,919
|
||
Irregular payments received
|
19
|
7,166,669
|
||
Periodic payments received
|
45
|
13,063,162
|
||
Total
|
131
|
$
|
47,523,860
|
Category
|
2010
|
2009
|
||
In good standing
|
$
|
9,665,059
|
$
|
7,311,982
|
Overdue interest over 90 days
|
16,192,815
|
26,917,956
|
||
Restructured
|
4,306,800
|
0
|
||
In process of foreclosure
|
17,359,186
|
0
|
||
Total discounted mortgage loans
|
$
|
47,523,860
|
$
|
34,229,938
|
Total foreclosed discounted mortgage loans
|
$
|
8,939,548
|
$
|
2,262,352
|
6.
|
DISCLOSURES ABOUT FAIR VALUES
|
2010
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||
Assets
|
||||||||
Fixed Maturities, available for sale
|
$
|
6,881,434
|
$
|
141,024,514
|
$
|
0
|
$
|
147,905,948
|
Equity Securities, available for sale
|
0
|
19,021,957
|
0
|
19,021,957
|
||||
Trading Securities
|
37,029,550
|
0
|
0
|
37,029,550
|
||||
Total
|
$
|
43,910,984
|
$
|
160,046,471
|
$
|
0
|
$
|
203,957,455
|
Liabilities
|
||||||||
Trading Securities
|
$
|
18,429,677
|
$
|
0
|
$
|
0
|
$
|
18,429,677
|
2009
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||
Assets
|
||||||||
Fixed Maturities, available for sale
|
$
|
6,831,432
|
$
|
132,873,261
|
$
|
0
|
$
|
139,704,693
|
Equity Securities, available for sale
|
15,691,037
|
2,690,047
|
0
|
18,381,084
|
||||
Trading Securities
|
19,613,472
|
0
|
0
|
19,613,472
|
||||
Total
|
$
|
42,135,941
|
$
|
135,563,308
|
$
|
0
|
$
|
177,699,249
|
Liabilities
|
||||||||
Trading Securities
|
$
|
11,671,911
|
$
|
0
|
$
|
0
|
$
|
11,671,911
|
2010
|
2009
|
|||||||
Assets
|
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
||||
Fixed maturities available for sale
|
$
|
147,905,948
|
$
|
147,905,948
|
$
|
139,704,693
|
$
|
139,704,693
|
Equity securities
|
13,884,257
|
13,884,257
|
13,323,322
|
13,323,322
|
||||
Trading securities
|
37,029,550
|
37,029,550
|
19,613,472
|
19,613,472
|
||||
Securities of affiliate
|
5,137,700
|
5,137,700
|
5,057,762
|
5,057,762
|
||||
Mortgage loans on real estate
|
12,411,587
|
12,524,140
|
27,041,447
|
27,192,239
|
||||
Discounted mortgage loans
|
47,523,860
|
49,294,797
|
34,229,937
|
34,426,249
|
||||
Policy loans
|
13,976,019
|
13,976,019
|
14,343,606
|
14,343,606
|
||||
Short term
|
0
|
0
|
700,000
|
700,000
|
||||
Liabilities
|
||||||||
Notes payable
|
10,372,239
|
10,136,433
|
14,402,889
|
14,267,364
|
||||
Trading securities
|
18,429,677
|
18,429,677
|
11,671,911
|
11,671,911
|
7.
|
STATUTORY EQUITY AND INCOME FROM OPERATIONS
|
8.
|
REINSURANCE
|
Shown in thousands
|
||||
2010
Premiums Earned
|
2009
Premiums Earned
|
|||
Direct
|
$
|
16,463
|
$
|
17,271
|
Assumed
|
36
|
163
|
||
Ceded
|
(4,108)
|
(3,932)
|
||
Net Premiums
|
$
|
12,391
|
$
|
13,502
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
10.
|
RELATED PARTY TRANSACTIONS
|
11.
|
CAPITAL STOCK TRANSACTIONS
|
A.
|
EMPLOYEE AND DIRECTOR STOCK PURCHASE PROGRAM
|
B.
|
STOCK REPURCHASE PROGRAM
|
C.
|
EARNINGS PER SHARE CALCULATIONS
|
For the Year Ended December 31, 2010
|
||||||
(Numerator)
|
Shares (Denominator)
|
Per-Share Amount
|
||||
Basic EPS
|
||||||
Income (Loss) attributable to Common Shareholders
|
$
|
7,596,575
|
3,848,079
|
$
|
1.97
|
|
Effect of Dilutive Securities
|
||||||
None
|
0
|
0
|
||||
Diluted EPS
|
||||||
Income (Loss) attributable to Common Shareholders and Assumed Conversions
|
$
|
7,596,575
|
3,848,079
|
$
|
1.97
|
For the Year Ended December 31, 2009
|
||||||
(Numerator)
|
Shares (Denominator)
|
Per-Share Amount
|
||||
Basic EPS
|
||||||
Income (Loss) attributable to Common Shareholders
|
$
|
(4,290,247)
|
3,843,113
|
$
|
(1.12)
|
|
Effect of Dilutive Securities
|
||||||
None
|
0
|
0
|
||||
Diluted EPS
|
||||||
Income (Loss) attributable to Common Shareholders and Assumed Conversions
|
$
|
(4,290,247)
|
3,843,113
|
$
|
(1.12)
|
12.
|
NOTES PAYABLE AND LINES OF CREDIT
|
Year
|
Amount
|
|
2011
|
$
|
3,627,008
|
2012
|
4,235,123
|
|
2013
|
31,586
|
|
2014
|
34,154
|
|
2015
|
36,935
|
13.
|
OTHER CASH FLOW DISCLOSURES
|
14.
|
CONCENTRATIONS
|
15.
|
COMPREHENSIVE INCOME
|
2010
|
Before Tax Amount
|
Tax
(Expense)
or Benefit
|
Net of Tax Amount
|
|||
Unrealized holding gains during period
|
$
|
4,179,985
|
$
|
(1,462,995)
|
$
|
2,716,990
|
Less: reclassification adjustment for gains realized in net income
|
985,443
|
(344,905)
|
640,538
|
|||
Other comprehensive income
|
$
|
5,165,428
|
$
|
(1,807,900)
|
$
|
3,357,528
|
2009
|
Before Tax Amount
|
Tax
(Expense)
or Benefit
|
Net of Tax Amount
|
|||
Unrealized holding losses during period
|
$
|
(2,425,809)
|
$
|
849,033
|
$
|
(1,576,776)
|
Less: reclassification adjustment for losses realized in net income
|
968,505
|
(338,977)
|
629,528
|
|||
Other comprehensive loss
|
$
|
(1,457,304)
|
$
|
510,056
|
$
|
(947,248)
|
16.
|
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
|
2010
|
||||||||||
1st
|
2nd
|
3rd
|
4th
|
|||||||
Premiums & Policy Fees, Net
|
$
|
3,156,767
|
$
|
2,429,045
|
$
|
2,649,473
|
$
|
4,155,308
|
||
Net Investment Income
|
4,322,949
|
4,875,160
|
9,659,148
|
5,989,431
|
||||||
Total Revenues
|
7,683,648
|
7,777,912
|
13,019,273
|
9,962,524
|
||||||
Policy Benefits, Including Dividends
|
4,589,416
|
4,233,116
|
4,246,015
|
5,878,435
|
||||||
Commissions & Amortization of DAC & COI
|
213,809
|
104,372
|
2,800
|
178,900
|
||||||
Operating Expenses
|
1,971,570
|
1,848,216
|
1,927,023
|
2,284,175
|
||||||
Operating Income
|
812,169
|
1,507,615
|
6,766,146
|
1,575,227
|
||||||
Net Income Attributable to Common Shareholders
|
335,191
|
1,185,300
|
4,659,519
|
1,416,565
|
||||||
Basic Earnings Per Share Attributable to Common Shareholders
|
0.09
|
0.31
|
1.20
|
0.37
|
||||||
Diluted Earnings Per Share Attributable to Common Shareholders
|
0.09
|
0.31
|
1.20
|
0.37
|
2009
|
||||||||||
1st
|
2nd
|
3rd
|
4th
|
|||||||
Premiums & Policy Fees, Net
|
$
|
4,198,571
|
$
|
3,126,692
|
$
|
3,276,486
|
$
|
2,900,444
|
||
Net Investment Income
|
3,443,283
|
3,391,781
|
3,221,707
|
4,184,022
|
||||||
Total Revenues
|
8,032,866
|
3,412,117
|
6,467,860
|
10,845,937
|
||||||
Policy Benefits, Including Dividends
|
6,888,524
|
4,689,295
|
5,345,056
|
5,571,102
|
||||||
Commissions & Amortization of DAC & COI
|
1,229,109
|
1,152,638
|
634,330
|
1,217,775
|
||||||
Operating Expenses
|
1,809,819
|
1,852,517
|
1,648,655
|
1,731,594
|
||||||
Operating Income (Loss)
|
(2,033,422)
|
(4,400,592)
|
(1,263,802)
|
2,201,733
|
||||||
Net Income (Loss) Attributable to Common Shareholders
|
(1,269,509)
|
(3,917,008)
|
(738,243)
|
1,634,513
|
||||||
Basic Earnings (Loss) Per Share Attributable to Common Shareholders
|
(0.33)
|
(1.02)
|
(0.19)
|
0.42
|
||||||
Diluted Earnings (Loss) Per Share Attributable to Common Shareholders
|
(0.33)
|
(1.02)
|
(0.19)
|
0.42
|
William W. Perry -
|
Committee Chairman
|
John S. Albin
|
|
Joseph A. Brinck, II
|
Name, Age
|
Position with the Company, Business Experience and Other Directorships
|
John S. Albin, 82
|
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 of Illini Community Development Corporation since 1990; Commissioner of Illinois Student Assistance Commission from 1996 to 2002.
|
Randall L. Attkisson, 65
|
Director of UTG since 1999; Director of ACAP Corporation and American Capitol Insurance Company since 2006; Director of Texas Imperial Life Insurance Company from 2006 to 2009; Director of First Southern Bancorp, Inc, a bank holding company, since 1986; Board Chairman of Young Life Raceway Region (Kentucky/Indiana) since 2008; Partner of Bluegrass Capital Advisors since 2008; Advisory 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, 55
|
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; President of Sanctity of Life Foundation since 2001. Currently holds Professional Engineering Licenses in Kentucky, Indiana and Illinois.
|
Jesse T. Correll, 54
|
Chairman and CEO of UTG and Universal Guaranty Life Insurance Company since 2000; Director of UTG since 1999; Chairman and CEO of ACAP Corporation and American Capitol Insurance Company since 2006; Chairman and CEO of Texas Imperial Life Insurance Company from 2006 to 2009; Chairman, President, Director of First Southern Bancorp, Inc. since 1983; Manager of First Southern Funding, LLC since 1992; President, Director of The River Foundation since 1990; Board member of Crown Financial Ministries from 2004 to 2009; Friends of the Good Samaritans since 2005; Generous Giving from 2006 to 2009 and the National Christian Foundation since 2006. Mr. Correll and his wife Angela have 3 children and 4 grandchildren. Jesse Correll is the son of Ward and Regina Correll.
|
Ward F. Correll, 82
|
Director of UTG since 2000; Director of ACAP Corporation and American Capitol Insurance Company since 2006; Director of Texas Imperial Life Insurance Company from 2006 to 2009; 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 1987; 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, 56
|
Mr. Darden is the Chief Executive Officer of Cherokee Investment Partners, a private equity fund that invests in brownfields. Cherokee made its first brownfield investment in 1990 and has since raised five funds: $50 million in 1996, $250 million in 1999, $620 million in 2003 and $1.4 billion in 2006. Cherokee has invested $750 million in 54 transactions, purchasing more than 500 sites in 35 states, 5 Canadian provinces and 4 European countries. Cherokee’s annual spending on remediating pollution on its sites exceeds $50 million. Beginning in 1984, Mr. Darden served for 16 years as the Chairman of Cherokee Sanford Group, a brick manufacturing and soil remediation company. From 1981 to 1983, he 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, the Nicholas School of the Environment at Duke University and the Institute for The Environment at the University of North Carolina. He was Chairman of the Research Triangle Transit Authority and served two terms on the N.C. Board of Transportation. Mr. Darden serves on the Board of Governors of the Research Triangle Institute. Mr. Darden earned a Masters in Regional Planning from the University of North Carolina, a Juris Doctor from Yale Law School and a Bachelor of Arts from the University of North Carolina, 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. He and his wife, Jody, have three children.
|
Howard L. Dayton, Jr., 67
|
In 1985, Mr. Dayton founded Crown Ministries in Longwood, Florida. Crown Ministries merged with Christian Financial Concepts in September 2000 to form Crown Financial Ministries, the world’s largest financial ministry. He served as Chief Executive Officer from 1985 to 2007. He recently founded Compass - Finances God’s Way. Mr. Dayton is a graduate of Cornell University. He developed The Caboose, a successful railroad-themed restaurant in Orlando, FL in 1969. In 1972 he began his commercial real estate development career, specializing in office development in the Central Florida area. He also is the author of five books, Your Money: Frustration or Freedom, Your Money Counts, Free and Clear, Your Money Map, Money and Marriage God’s Way. He also has authored five popular small group studies including Crown’s Small Group Studies and produced several video series. Mr. Dayton became a director of UTG, Inc. in December 2005.
|
Daryl J. Heald, 46
|
Mr. Heald started in commercial real estate with the Allen Morris Company and then spent four years at Triaxia Partners Consulting Firm, both in Atlanta, Georgia. He later began serving as an associate trustee and executive committee member of the Maclellan Foundation. In 2000, Daryl helped launch Generous Giving, Inc. and served as its President until January 2008, when he became Senior Vice President of the Maclellan Foundation and founded Giving Wisely. Giving Wisely seeks to serve families on their journey of generosity by helping to connect their needs and passions with knowledge, experiences, opportunities, and relationships. Daryl also serves on the boards of Crown Financial Ministries, ProVision Foundation, the Haggai Institute and is an elder at Lookout Mountain Presbyterian Church. Mr. Heald became a director of UTG, Inc. in September 2008. He holds a B.S. degree in economics from Westmont College. Daryl and his wife, Cathy, live in Lookout Mountain, Georgia with their six children.
|
Peter L. Ochs, 59
|
Mr. Ochs is founder of Capital III, a private investment banking firm located in Wichita, Kansas. The firm has acted as an intermediary in over 120 transactions since its founding in 1982. In addition the firm provides valuation services to private companies for such purposes as ESOP’s, estate planning, M & A, buy/sells, and internal planning strategies. The firm also provides both tactical and strategic planning for privately held companies. In recent years the firm has focused primarily on providing services to companies in which Mr. Ochs holds an equity interest. Since 1987, Mr. Ochs has been an active investor and officer of several privately held companies. In most cases his ownership position has represented a controlling interest in the enterprise. Companies in which he has held or still holds an investment include a community bank, a medical equipment company, a manufacturer of electrical assemblies, a sports training equipment company, a manufacturer of corporate identification products, a cable TV programming company, and a retail lifestyle clothing store. Mr. Ochs is also one of the founding members of Trinity Academy; a Christ centered college preparatory high school in Wichita. Prior to founding Capital III, Mr. Ochs spent 8 years in the commercial banking business. He graduated from the University of Kansas in 1974 with a degree in business & finance. Mr. Ochs became a director of UTG, Inc. in July 2006.
|
William W. Perry, 54
|
Director of UTG since 2001; Director of American Capitol Insurance Company since 2006, Director of Texas Imperial Life Insurance Company from 2006 to 2009; Owner of SES Investments, Ltd., an oil and gas investments company since 1991; CEO of EGL Resources, Inc., an oil and gas operations company based in Texas and New Mexico since 1992; Trustee of Abel-Hangar Foundation, Director of River Foundation; President of Milagros Foundation; Director of University of Oklahoma Associates; Mayor of Midland, Texas since January 2008; Midland, Texas City Council member from 2002-2008; Board Member of IDT Corporation since 2010; and Chairman of Genie Energy since 2010.
|
James P. Rousey, 52
|
President since September 2006, Director of UTG and Universal Guaranty Life Insurance Company since September 2001; President and Director of ACAP Corporation and American Capitol Insurance Company since 2006; President and Director of Texas Imperial Life Insurance Company from 2006 to 2009; Regional CEO and Director of First Southern National Bank from 1988 to 2001. Board Member with the Illinois Fellowship of Christian Athletes from 2001-2005; Board Member with Contact Ministries since 2007; Board Member with Amigos En Cristo, Inc from 2007-2009.
|
Jesse T. Correll
|
Chairman of the Board and Chief Executive Officer
|
James P. Rousey
|
President
|
Name, Age
|
Position with UTG and Business Experience
|
Theodore C. Miller, 48
|
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.
|
Douglas P. Ditto, 55
|
Chief Investment Officer and Vice President since June 2009; Assistant Vice President from June 2003 to June 2009; Chief Executive Officer, and Executive Vice President of First Southern Bancorp since March 1985.
|
Summary Compensation Table
|
|||||||||
Name and Principal position
|
Year
|
Salary
|
Bonus
|
Stock Awards
|
Option Awards
|
Non-Equity Incentive Plan Comp
|
Nonqualified Deferred Comp Earnings
|
All Other Comp
(1)
|
Total
|
Jesse T. Correll
Chief Executive Officer
|
2010
|
145,415
|
50,000
|
0
|
0
|
0
|
0
|
4,662 (1)
|
200,077
|
2009
|
140,550
|
0
|
0
|
0
|
0
|
0
|
4,323 (1)
|
144,873
|
|
2008
|
150,000
|
0
|
0
|
0
|
0
|
0
|
9,000 (1)
|
159,000
|
|
Randall L. Attkisson (6)
Chief Operating Officer to 7/1/08
|
2010
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
2008
|
80,769
|
0
|
0
|
0
|
0
|
0
|
4,846 (1)
|
85,615
|
|
James P. Rousey
President
|
2010
|
142,708
|
25,000
|
0
|
0
|
0
|
0
|
5,975
|
173,683
|
2009
|
140,000
|
0
|
0
|
0
|
0
|
0
|
983 (2)
|
140,983
|
|
2008
|
145,000
|
25,000
|
0
|
0
|
0
|
0
|
6,806 (2)
|
176,806
|
|
Theodore C. Miller
Secretary/Senior Vice President
|
2010
|
110,000
|
20,000
|
0
|
0
|
0
|
0
|
1,249 (3)
|
131,249
|
2009
|
110,000
|
0
|
0
|
0
|
0
|
0
|
1,490 (3)
|
111,490
|
|
2008
|
110,000
|
20,000
|
0
|
0
|
0
|
0
|
3,030 (3)
|
133,030
|
|
Douglas P. Ditto
Chief Investment Officer appointed 7/17/2009
|
2010
|
100,045
|
25,000
|
0
|
0
|
0
|
0
|
3,001 (1)
|
128,046
|
2009
|
100,000
|
0
|
0
|
0
|
0
|
0
|
3,077 (1)
|
103,077
|
|
Douglas A. Dockter (5)
Vice President
|
2010
|
100,000
|
5,500
|
0
|
0
|
0
|
0
|
2,295 (4)
|
107,795
|
2009
|
100,000
|
0
|
0
|
0
|
0
|
0
|
1,420 (4)
|
101,420
|
|
2008
|
100,000
|
0
|
0
|
0
|
0
|
0
|
2,820 (4)
|
102,820
|
(1)
|
All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan.
|
(2)
|
All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan of $575, $263 and $2,066, group life insurance premiums of $720, $720 and $720, and country club membership fees of $4,680, $0 and $4,020 during 2010, 2009 and 2008, respectively.
|
(3)
|
All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan of $529, $770 and $2,310 and group life insurance premiums of $720, $720 and $720 during 2010, 2009 and 2008, respectively.
|
(4)
|
All Other Compensation consists of matching contributions to an Employee Savings Trust 401(k) Plan of $2,084, $700 and $2,653 and group life insurance premiums of $720, $720 and $720 during 2010, 2009 and 2008 respectively.
|
(5)
|
Mr. Douglas A. Dockter is not considered an executive officer of UTG, but is included in this table pursuant to compensation disclosure requirements.
|
(6)
|
Mr. Randall L. Attkisson retired from the Company effective July 1, 2008. Mr. Attkisson remains a member of the Board of Directors.
|
Director Compensation
|
|||||||
Name
|
Fees Earned or Paid in Cash
|
Stock Awards
|
Option Awards
|
Non-Equity Incentive Plan Compensation
|
Change in Pension Value and Nonqualified Deferred Compensation Earnings
|
All Other Compensation
|
Total
|
Jesse Thomas Correll
Chief Executive Officer
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Randall Lanier Attkisson
Director
|
3,300
|
0
|
0
|
0
|
0
|
0
|
3,300
|
James Patrick Rousey
President
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
John Sanford Albin
Director
|
3,600
|
0
|
0
|
0
|
0
|
0
|
3,600
|
Joseph Anthony Brinck, II
Director
|
3,600
|
0
|
0
|
0
|
0
|
0
|
3,600
|
Ward Forrest Correll
Director
|
3,300
|
0
|
0
|
0
|
0
|
0
|
3,300
|
William Wesley Perry
Director (1)
|
3,300
|
0
|
0
|
0
|
0
|
0
|
3,300
|
Thomas Francis Darden, II
Director (1)
|
3,300
|
0
|
0
|
0
|
0
|
0
|
3,300
|
Peter Loyd Ochs
Director
|
3,300
|
0
|
0
|
0
|
0
|
0
|
3,300
|
Howard Lape Dayton
Director
|
3,600
|
0
|
0
|
0
|
0
|
0
|
3,600
|
Daryl Jack Heald
Director
|
3,000
|
0
|
0
|
0
|
0
|
0
|
3,000
|
John S. Albin
|
Howard L. Dayton
|
Randall L. Attkisson
|
Daryl J. Heald
|
Joseph A. Brinck, II
|
Peter L. Ochs
|
Jesse T. Correll
|
William W. Perry
|
Ward F. Correll
|
James P. Rousey
|
Thomas F. Darden
|
(1)
|
The Company selected the NASDAQ Composite Index Performance as an appropriate comparison. UTG was listed on the NASDAQ Small Cap exchange 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.
|
|
Principal Holders of Securities
|
Title
|
Amount
|
Percent
|
|
of
|
Name and Address
|
and Nature of
|
Of
|
Class
|
of Beneficial Owner (2)
|
Beneficial Ownership
|
Class (1)
|
Common
|
Jesse T. Correll
|
191,058
|
(3)
|
4.9%
|
Stock, no
|
First Southern Bancorp, Inc.
|
1,506,785
|
(3)(4)
|
39.1%
|
par value
|
First Southern Funding, LLC
|
341,997
|
(3)(4)
|
8.8%
|
First Southern Holdings, LLC
|
1,277,716
|
(3)(4)
|
33.1%
|
|
Ward F. Correll
|
268,906
|
(5)
|
6.9%
|
|
WCorrell, Limited Partnership
|
72,750
|
(3)
|
1.8%
|
|
Cumberland Lake Shell, Inc.
|
257,501
|
(5)
|
6.6%
|
|
Total (6)
|
2,308,746
|
59.9%
|
(1)
|
The percentage of outstanding shares is based on 3,850,680 shares of common stock outstanding as of February 15, 2011.
|
(2)
|
The address for each of Jesse Correll, First Southern Bancorp, Inc. (“FSBI”), First Southern Funding, LLC (“FSF”), First Southern Holdings, LLC (“FSH”), and WCorrell, Limited Partnership (“WCorrell LP”), is 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 118,308 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 76.52% of the outstanding membership interests of FSF; he owns directly approximately 47%, companies he controls own approximately 12%, 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.
|
|
(4)
|
The share ownership of FSBI consists of 229,069 shares of common stock held by FSBI directly (which FSBI acquired by virtue of its merger with Dyscim, LLC) and 1,277,716 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)
|
Includes 257,501 shares of common stock held by CLS, all of the outstanding voting shares of which are owned by Ward F. Correll.
|
(6)
|
According to the most recent Schedule 13D, as amended, filed jointly by each of the entities and persons listed above, Jesse Correll, FSBI, FSF and FSH, have agreed in principle to act together for the purpose of acquiring or holding equity securities of UTG. In addition, the Schedule 13D indicates that because of their relationships with Jesse Correll and these other entities, Ward Correll, CLS, and WCorrell, Limited Partnership may also be deemed to be members of this group. Because the Schedule 13D indicates that for its purposes, each of these entities and persons may be deemed to have acquired beneficial ownership of the equity securities of UTG beneficially owned by the other entities and persons, each has been identified and listed in the above tabulation.
|
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
|
5,615
|
(2)
|
*
|
Stock, no
|
Joseph A. Brinck, II
|
12,225
|
*
|
|
par value
|
Jesse T. Correll
|
2,039,840
|
(3)
|
52.9%
|
Ward F. Correll
|
268,906
|
(5)
|
6.9%
|
|
Thomas F. Darden
|
60,465
|
1.5%
|
||
Howard L. Dayton, Jr.
|
4,075
|
*
|
||
Douglas P. Ditto
|
0
|
*
|
||
Daryl J. Heald
|
21,739
|
(6)
|
||
Theodore C. Miller
|
8,557
|
*
|
||
Peter L. Ochs
|
2,000
|
(6)
|
*
|
|
William W. Perry
|
120,000
|
3.1%
|
||
James P. Rousey
|
0
|
*
|
||
All directors and executive officers
as a group (thirteen in number)
|
2,553,925
|
66.3%
|
||
(1)
|
The percentage of outstanding shares for UTG is based on 3,850,680 shares of common stock outstanding as of February 15, 2011.
|
(2)
|
Randall L. Attkisson 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. Jesse Correll includes 118,308 shares of UTG, Inc common stock owned by him individually, 229,069 shares of UTG, Inc common stock held by First Southern Bancorp, Inc. and 341,997 shares of UTG, Inc common stock owned by First Southern Funding, LLC. The share ownership of Mr. Correll also includes 72,750 shares of UTG, Inc 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 1,277,716 shares of UTG, Inc common stock), Mr. Correll may be deemed to beneficially own the total number of shares of UTG, Inc 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 76.52% of the outstanding membership interests of First Southern Funding; he owns directly approximately 47%, companies he controls own approximately 12%, 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.
|
(4)
|
Includes 392 shares owned directly by Mr. Albin’s spouse.
|
(5)
|
The share ownership of Mr. Ward Correll includes 11,405 shares of UTG, Inc. common stock owned by him individually. Cumberland Lake Shell, Inc. owns 257,501 shares of UTG Common Stock, all of the outstanding voting shares of which are owned by Ward F. Correll. 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 held in a trust for benefit of named individual
|
(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 84-85).
|
2.1
|
(1)
|
Agreement and Plan of Merger of United Trust Group, Inc., An Illinois Corporation with and into UTG, Inc., A Delaware Corporation dated as of July 1, 2005, including exhibits thereto.
|
2.2
|
(2)
|
Stock Purchase Agreement, dated August 7, 2006, between UTG, Inc. and William F. Guest and John D. Cornett
|
2.3
|
(2)
|
Amendment No. 1, dated September 6, 2006, to the Stock Purchase Agreement, dated August 7, 2007, between UTG, Inc. and William F. Guest and John D. Cornett
|
2.4
|
(2)
|
Amendment No. 2, dated November 22, 2006, to the Stock Purchase Agreement, dated August 7, 2006, as amended, between UTG, Inc. and William F. Guest and John D. Cornett.
|
3.1
|
(1)
|
Certificate of Incorporation of the Registrant and all amendments thereto.
|
3.2
|
(1)
|
By-Laws for the Registrant and all amendments thereto.
|
4.1
|
UTG’s Agreement pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K with respect to long-term debt instruments.
|
|
10.1
|
(2)
|
Amended and Restated UTG, Inc. Employee and Director Stock Purchase Plan and form of related Stock Restriction and Buy-Sell Agreement.
|
10.2
|
(2)
|
Promissory note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
|
10.3
|
(2)
|
Revolving credit note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
|
10.4
|
Change in Terms Agreement dated May 11, 2010 to the revolving credit note dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
|
|
10.5
|
(2)
|
Loan Agreement dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
|
10.6
|
(2)
|
Commercial pledge agreement dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
|
10.7
|
(2)
|
Negative pledge agreement dated December 8, 2006, between UTG, Inc. and First Tennessee Bank National Association.
|
10.8
|
(2)
|
Administrative Services and Cost Sharing Agreement dated as of January 1, 2007 between UTG, Inc and American Capitol Insurance Company
|
10.9
|
(2)
|
Administrative Services and Cost Sharing Agreement dated as of January 1, 2007 between UTG, Inc and Texas Imperial Life Insurance Company
|
10.10
|
(3)
|
Administrative Services and Cost Sharing Agreement dated as of January 1, 2007 between UTG, Inc and Universal Guaranty Life Insurance Company
|
10.11
|
Amendment to Reinsurance Agreement between Universal Guaranty Life Insurance Company and Optimum Re Insurance Company originally with Business Men’s Assurance Company of America
|
|
10.12
|
Reinsurance Agreement between Universal Guaranty Life Insurance Company and Swiss RE originally with Life Reassurance Corporation of America
|
|
10.13
|
Assumption Reinsurance Agreement between Universal Guaranty Life Insurance Company and Park Avenue Life Insurance Company formerly known as First International Life Insurance Company
|
|
10.14
|
Aircraft Lease Agreement
|
|
10.15
|
General Agreement regarding Mortgage Loans by and between First Southern National Bank and Universal Guaranty Life Insurance Company
|
|
10.16
|
Loan Participation Agreement
|
|
14.1
|
(1)
|
Code of Ethics and Business Conduct
|
14.2
|
(1)
|
Code of Ethical Conduct for Senior Financial Officers
|
21.1
|
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.
|
|
99.1
|
(1)
|
Audit Committee Charter.
|
99.2
|
(1)
|
Whistleblower Policy
|
(1)
|
Incorporated by reference from the Company’s Annual Report on Form 10-K, File No. 0-16867, as of December 31, 2005.
|
(2)
|
Incorporated by reference from the Company’s Annual Report on Form 10-K, File No. 0-16867, as of December 31, 2006
|
(3)
|
Incorporated by reference from the Company’s Annual Report on Form 10-K, File No. 0-16867, as of December 31, 2007
|
UTG, INC.
|
||||||||
SUMMARY OF INVESTMENTS - OTHER THAN
|
||||||||
INVESTMENTS IN RELATED PARTIES
|
||||||||
As of December 31, 2010
|
||||||||
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
|
$
|
0
|
$
|
0
|
$
|
0
|
||
State, municipalities, and political
|
||||||||
subdivisions
|
0
|
0
|
0
|
|||||
Collateralized mortgage obligations
|
0
|
0
|
0
|
|||||
Public utilities
|
0
|
0
|
0
|
|||||
All other corporate bonds
|
0
|
0
|
0
|
|||||
Total fixed maturities
|
0
|
$
|
0
|
|
0
|
|||
Investments held for sale:
|
||||||||
Fixed maturities:
|
||||||||
United States Government and
|
||||||||
government agencies and authorities
|
74,596,648
|
$
|
79,023,933
|
79,023,933
|
||||
State, municipalities, and political
|
||||||||
subdivisions
|
330,000
|
335,198
|
335,198
|
|||||
Collateralized mortgage obligations
|
16,170,099
|
16,674,262
|
16,674,262
|
|||||
Public utilities
|
904,139
|
987,025
|
987,025
|
|||||
All other corporate bonds
|
50,947,807
|
50,885,530
|
50,885,530
|
|||||
142,948,693
|
$
|
147,905,948
|
147,905,948
|
|||||
Equity securities:
|
||||||||
Banks, trusts and insurance companies
|
5,206,500
|
$
|
5,246,200
|
5,246,200
|
||||
All other corporate securities
|
8,734,311
|
8,638,057
|
8,638,057
|
|||||
13,940,811
|
$
|
13,884,257
|
|
13,884,257
|
||||
Trading securities:
|
34,183,252
|
37,029,550
|
37,029,550
|
|||||
Mortgage loans on real estate
|
59,935,447
|
59,935,447
|
||||||
Investment real estate
|
53,148,755
|
53,148,755
|
||||||
Real estate acquired in satisfaction of debt
|
0
|
0
|
||||||
Policy loans
|
13,976,019
|
13,976,019
|
||||||
Other long-term investments
|
0
|
0
|
||||||
Short-term investments
|
0
|
0
|
||||||
Total investments
|
$
|
318,132,977
|
$
|
325,879,976
|
(a)
|
The condensed financial information should be read in conjunction with the consolidated financial statements and notes of UTG, Inc. and Consolidated Subsidiaries.
|
UTG, INC.
|
||||||
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
|
||||||
PARENT ONLY BALANCE SHEETS
|
||||||
As of December 31, 2010 and 2009
|
||||||
Schedule II
|
||||||
2010
|
2009
|
|||||
ASSETS
|
||||||
Investment in affiliates
|
$
|
58,421,342
|
$
|
50,475,591
|
||
Cash and cash equivalents
|
(44,270)
|
292,821
|
||||
F.I.T. Recoverable
|
3,851
|
133
|
||||
Accrued interest income
|
34,601
|
89,629
|
||||
Note receivable from affiliate
|
2,682,849
|
3,259,084
|
||||
Other assets
|
24,864
|
30,643
|
||||
Total assets
|
$
|
61,123,237
|
$
|
54,147,901
|
||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||
Liabilities:
|
||||||
Notes payable
|
$
|
7,181,411
|
$
|
10,491,762
|
||
Payable to affiliate (net)
|
13,946
|
98,503
|
||||
Deferred income taxes
|
2,232,102
|
2,134,330
|
||||
Other liabilities
|
244,538
|
576,494
|
||||
Total liabilities
|
9,671,997
|
13,301,089
|
||||
Shareholders' equity:
|
||||||
Common stock, net of treasury shares
|
|
3,848
|
|
3,885
|
||
Additional paid-in capital, net of treasury
|
41,432,636
|
41,782,274
|
||||
Retained earnings (accumulated deficit)
|
6,335,072
|
(1,261,503)
|
||||
Accumulated other comprehensive
|
||||||
income of affiliates
|
|
3,679,684
|
|
322,156
|
||
Total shareholders' equity
|
51,451,240
|
40,846,812
|
||||
Total liabilities and shareholders' equity
|
$
|
61,123,237
|
$
|
54,147,901
|
UTG, INC.
|
||||||
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
|
||||||
PARENT ONLY STATEMENTS OF OPERATIONS
|
||||||
Two Years Ended December 31, 2010
|
||||||
Schedule II
|
||||||
2010
|
2009
|
|||||
Revenues:
|
||||||
Management fees from affiliates
|
$
|
6,927,158
|
$
|
6,961,100
|
||
Interest income
|
66,721
|
169,909
|
||||
Other income
|
99,708
|
105,462
|
||||
7,093,587
|
7,236,471
|
|||||
Expenses:
|
||||||
Interest expense
|
202,477
|
287,969
|
||||
Operating expenses
|
6,475,837
|
6,587,334
|
||||
6,678,314
|
6,875,303
|
|||||
Operating income
|
415,273
|
361,168
|
||||
Income tax expense
|
(131,921)
|
(126,349)
|
||||
Equity in income (loss) of subsidiaries
|
7,313,223
|
(4,525,066)
|
||||
Net income (loss)
|
$
|
7,596,575
|
$
|
(4,290,247)
|
||
Basic income (loss) per share
|
$
|
1.97
|
$
|
(1.12)
|
||
Diluted income (loss) per share
|
$
|
1.97
|
$
|
(1.12)
|
||
Basic weighted average shares outstanding
|
3,848,079
|
3,843,113
|
||||
Diluted weighted average shares outstanding
|
3,848,079
|
3,843,113
|
UTG, INC.
|
||||||
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
|
||||||
PARENT ONLY STATEMENTS OF CASH FLOWS
|
||||||
Two Years Ended December 31, 2010
|
||||||
Schedule II
|
||||||
2009
|
2009
|
|||||
Increase (decrease) in cash and cash equivalents
|
||||||
Cash flows from operating activities:
|
||||||
Net income (loss)
|
$
|
7,596,575
|
$
|
(4,290,247)
|
||
Adjustments to reconcile net income to
|
||||||
net cash provided by operating activities:
|
||||||
Equity in (income) loss of subsidiaries
|
(7,313,223)
|
4,525,066
|
||||
Depreciation
|
0
|
33,383
|
||||
Change in FIT recoverable
|
(3,718)
|
25,820
|
||||
Change in accrued interest income
|
55,028
|
(89,629)
|
||||
Change in indebtedness (to) from affiliates, net
|
(84,557)
|
(275,397)
|
||||
Change in deferred income taxes
|
97,772
|
28,667
|
||||
Change in other assets and liabilities
|
(326,177)
|
(83,940)
|
||||
Net cash provided by (used by) operating activities
|
21,700
|
(126,277)
|
||||
Cash flows from financing activities:
|
||||||
Purchase of treasury stock
|
(349,675)
|
(160,904)
|
||||
Issuance of common stock
|
0
|
0
|
||||
Issuance of note receivable
|
0
|
0
|
||||
Proceeds from repayment of note receivable
|
576,235
|
0
|
||||
Proceeds from subsidiary for acquisition
|
0
|
0
|
||||
Purchase of subsidiary
|
0
|
0
|
||||
Proceeds from notes payable
|
290,000
|
0
|
||||
Payments on notes payable
|
(3,600,351)
|
(2,692)
|
||||
Capital contribution to subsidiary
|
0
|
0
|
||||
Dividend received from subsidiary
|
2,725,000
|
0
|
||||
Net cash (used in) financing activities
|
(358,791)
|
(163,596)
|
||||
Net increase (decrease) in cash and cash equivalents
|
(337,091)
|
(289,873)
|
||||
Cash and cash equivalents at beginning of year
|
292,821
|
582,694
|
||||
Cash and cash equivalents at end of year
|
$
|
(44,270)
|
$
|
292,821
|
UTG, INC.
|
||||||||||
REINSURANCE
|
||||||||||
As of December 31, 2010 and the year ended December 31, 2010
|
||||||||||
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
|
$
|
1,764,813,341
|
$
|
433,379,000
|
$
|
2,447,659
|
$
|
1,333,882,000
|
|
0.2%
|
Premiums and policy fees:
|
||||||||||
Life insurance
|
$
|
16,429,755
|
$
|
4,094,341
|
$
|
34,687
|
$
|
12,370,101
|
0.3%
|
|
Accident and health
|
||||||||||
insurance
|
32,835
|
13,617
|
1,274
|
20,492
|
6.2%
|
|||||
$
|
16,462,590
|
$
|
4,107,958
|
$
|
35,961
|
$
|
12,390,593
|
0.3%
|
UTG, INC.
|
||||||||||
REINSURANCE
|
||||||||||
As of December 31, 2009 and the year ended December 31, 2009
|
||||||||||
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
|
$
|
1,913,335,495
|
$
|
452,781,000
|
$
|
16,255,505
|
$
|
1,476,810,000
|
|
1.1%
|
Premiums and policy fees:
|
||||||||||
Life insurance
|
$
|
17,226,647
|
$
|
3,917,325
|
$
|
162,123
|
$
|
13,471,445
|
1.2%
|
|
Accident and health
|
||||||||||
insurance
|
44,575
|
14,638
|
811
|
30,748
|
2.6%
|
|||||
$
|
17,271,222
|
$
|
3,931,963
|
$
|
162,934
|
$
|
13,502,193
|
1.2%
|
UTG, INC.
|
||||
VALUATION AND QUALIFYING ACCOUNTS
|
||||
As of and for the years ended December 31, 2010 and 2009
|
||||
Schedule V
|
||||
Balance at
|
Additions,
|
|||
Beginning
|
Charges
|
Balance at
|
||
Description
|
Of Period
|
and Expenses
|
Deductions
|
End of Period
|
December 31, 2010
|
||||
.
|
||||
Allowance for doubtful accounts -
|
||||
mortgage loans
|
$ 12,730
|
$ -
|
$ 12,730
|
$ -
|
December 31, 2009
|
||||
Allowance for doubtful accounts -
|
||||
mortgage loans
|
$ 19,730
|
$ -
|
$ 7,000
|
$ 12,730
|
UTG, Inc.
|
||||||||
By:
|
/s/ Jesse T. Correll
|
|||||||
Jesse T. Correll
|
||||||||
Chairman and Chief Executive Officer and Director
|
||||||||
By:
|
/s/ Theodore C. Miller
|
|||||||
Theodore C. Miller
|
||||||||
Senior Vice President, Chief Financial Officer and Secretary
|
||||||||
(principal financial and accounting officer)
|
By:
|
By:
|
|
John S. Albin
Director
|
Daryl J. Heald
Director
|
|
By: /s/ Randall L. Attkisson
|
By: /s/ Howard L. Dayton
|
|
Randall L. Attkisson
Director
|
Howard L. Dayton
Director
|
|
By: /s./ Joseph A. Brinck
|
By: /s/ Peter L. Ochs
|
|
Joseph A. Brinck
Director
|
Peter L. Ochs
Director
|
|
By: /s/. Jesse T. Correll
|
By: /s/ William W. Perry
|
|
Jesse T. Correll
Chairman of the Board, Chief Executive Officer and Director
|
William W. Perry
Director
|
|
By:
|
By: /s/ James P. Rousey
|
|
Ward F. Correll
Director
|
James P. Rousey
President and Director
|
|
By:
|
By: /s/ Theodore C. Miller
|
|
Thomas F. Darden
Director
|
Theodore C. Miller
Corporate Secretary and Chief Financial Officer
|
|
CERTIFICATIONS
|
|||||||
I, Jesse T. Correll, Chairman of the Board and Chief Executive Officer of UTG, Inc., certify that:
|
|||||||
1.
|
I have reviewed this annual report on Form 10-K of the registrant, UTG, Inc.;
|
||||||
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||||||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||||||
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
|
||||||
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||||||
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||||||
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||||||
d.
|
Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
||||||
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
||||||
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||||||
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
||||||
Date: March 17, 2011
|
By
|
/s/ Jesse T. Correll
|
Chairman of the Board and
|
||
Chief Executive Officer
|
CERTIFICATIONS
|
|||||||
I, Theodore C. Miller, Senior Vice President, Corporate Secretary and Chief Financial Officer of UTG, Inc., certify that:
|
|||||||
1.
|
I have reviewed this annual report on Form 10-K of the registrant, UTG, Inc.;
|
||||||
2.
|
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
||||||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
||||||
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the registrant and have:
|
||||||
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
||||||
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
||||||
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
||||||
d.
|
Disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
||||||
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
|
||||||
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||||||
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
|
||||||
Date: March 17, 2011
|
By
|
/s/ Theodore C. Miller
|
Senior Vice President, Corporate Secretary and
|
||
Chief Financial Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
March 17, 2011
|
By:
|
/s/ Jesse T. Correll
|
Jesse T. Correll
|
|||
Chairman of the Board and
|
|||
Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date:
|
March 17, 2011
|
By:
|
/s/ Theodore C. Miller
|
Theodore C. Miller
|
|||
Senior Vice President, Corporate
|
|||
Secretary and Chief Financial Officer
|
Date:
|
August 12, 2002
|
|||
By:
|
/s/ Theodore C. Miller
|
|||
Theodore C. Miller, Senior Vice President
|
||||
Corporate Secretary and Chief Financial Officer
|
1.
|
Effective December 1, 1993, the Net Amount at Risk (NAR) for the policies reinsured under this Agreement shall be calculated on a Level basis (Reinsured NAR Amount is equal to the Policy Death Benefit minus the Company’s retention). Both parties mutually agree any modifications to the NAR calculation for policies reinsured under this Agreement shall be done prospectively.
|
|
2.
|
Signatures : The terms and conditions of this Agreement are not changed in
|
|
any way except as stated herein.
|
DATE:
|
11/18/10
|
SIGNATURE:
|
/s/Theodore C Miller
|
PLACE:
|
Springfield, IL
|
NAME:
|
Theodore C Miller
|
WITNESS:
|
/s/Fritzie Wagner
|
TITLE:
|
Accounting Manager
|
DATE:
|
10/22/10
|
SIGNATURE:
|
/s/Mario Georgiev
|
PLACE:
|
DALLAS, TEXAS
|
NAME:
|
MARIO GEORGIEV
|
WITNESS:
|
/s/Jean-Claude Page
|
TITLE:
|
PRESIDENT
|
1.
|
BMA shall accept reinsurance covering the C21X plan (L019585A) on either an automatic or facultative basis
|
2.
|
BMA will not participate in the endowments, or the return of premium features, nor the cash values.
|
3.
|
THE EFFECTIVE DATE shall be November 1, 1995.
|
CEDING COMPANY
|
||
/s/Gay E Sears
|
Senior Vice President
|
|
signature
|
title
|
|
/s/Christopher J Heisler
|
Assistant Vice President
|
|
signature
|
title
|
|
11/27/95
|
||
date
|
BMA
|
||
/s/Al Rodriquez
|
Senior Vice President/Reinsurance
|
|
signature
|
title
|
|
/s/James N. Mets
|
Vice President Reinsurance Actuary
|
|
signature
|
title
|
|
12/21/95
|
||
date
|
BMA
|
UNIVERSAL GUARANTY LIFE INSURANCE COMPANY
Springfield, Illinois
hereinafter referred to as the CEDING COMPANY
|
ARTICLE | PAGE | ||
I
|
BASIS OF REINSURANCE……………………………..………………………................................................................................................…
|
1
|
|
II
|
LIABILITY………………………………………………………………………................................................................................................….
|
3
|
|
III
|
ADMINISTRATIVE REPORTING……………………...……………………...............................................................................................……
|
3
|
|
IV
|
PLANS OF REINSURANCE…………………………….……………………...............................................................................................……
|
5
|
|
V
|
REINSURANCE PREMIUM…………………………….……………………...............................................................................................……
|
5
|
|
VI
|
PREMIUM ACCOUNTING………………………………..…………………...............................................................................................……
|
6
|
|
VII
|
OVERSIGHTS………………………………………………………………….................................................................................................……
|
7
|
|
VIII
|
REDUCTIONS, TERMINATIONS AND CHANGES….……………………..............................................................................................……
|
7
|
|
IX
|
INCREASE IN RETENTION AND RECAPTURES…………………………..............................................................................................……
|
8
|
|
X
|
REINSTATEMENTS…………………………………….……………………...............................................................................................……
|
9
|
|
XI
|
EXPENSE OF ORIGINAL POLICY…………………….……………………................................................................................................……
|
9
|
|
XII
|
CLAIMS………………………………………………….……………………................................................................................................……
|
9
|
|
XIII
|
TAX CREDITS…………………………………………..……………………................................................................................................……
|
11
|
|
XIII
|
DAC TAX………………………………………………...……………………...............................................................................................……
|
11
|
|
XIV
|
INSPECTION OF RECORDS…………………………………………………...............................................................................................……
|
11
|
|
XV
|
INSOLVENCY…………………………………………………………………................................................................................................……
|
11
|
|
XVI
|
ARBITRATION…………………………………………..…………………..............................................................................................………
|
12
|
|
XVII
|
PARTIES TO AGREEMENT…………………………….…………………..............................................................................................………
|
13
|
|
XVIII
|
TERMINATION OF AGREEMENT……………………..………………….............................................................................................………
|
13
|
SCHEDULES
|
||
A
|
SPECIFICATIONS
|
|
B
|
BENEFITS AND NAR CALCULATIONS
|
|
C
|
ADDITIONAL INFORMATION AND EXCEPTIONS
|
EXHIBITS
|
||
I
|
RETENTION LIMITS
|
|
IA
|
UNDERWRITING GUIDELINES
|
|
II
|
REINSURANCE PREMIUMS
|
|
III
|
COMMISSIONS AND ALLOWANCES (COINSURANCE)
|
1.
|
REQUIREMENTS FOR AUTOMATIC REINSURANCE
|
||
A.
|
The individual risk must be a permanent resident of the United States or Canada.
|
||
B.
|
The individual risk must be underwritten by the CEDING COMPANY according to the standard underwriting practices and guidelines as shown in Exhibit IA. The CEDING COMPANY shall immediately notify BMA of any changes in underwriting practices or guidelines. Any risk falling into a category of special underwriting programs shall be excluded from this Agreement.
|
||
C.
|
Any risk offered on a facultative basis to BMA or any other reinsurer shall not qualify for automatic reinsurance.
|
||
D.
|
The maximum issue age on any risk shall be age 70. Issue ages over 70 must be submitted facultatively.
|
||
E.
|
The mortality rating on any one risk must not exceed Table 8, or 300%, or its equivalent on a flat extra premium basis. Cases exceeding Table 8, or 300%, or its equivalent must be submitted facultatively.
|
||
F.
|
The maximum amount of insurance issued and applied for in all companies on any one risk shall not exceed the Jumbo limits as stated in Schedule A.
|
||
G.
|
On any risk, the CEDING COMPANY must retain the amounts of insurance as stated in Exhibit I.
|
||
H.
|
The maximum amounts of insurance to be reinsured on any one life shall not exceed the automatic binding limits as stated in Schedule A.
|
||
I.
|
The minimum amount of insurance to be ceded shall be $5,000.
|
||
2.
|
REQUIREMENTS FOR FACULTATIVE REINSURANCE
|
||
A.
|
Plan of Insurance Listed in Schedule A:
|
||
(1)
|
If the Requirements for Automatic Reinsurance are met but the CEDING COMPANY prefers to apply for facultative reinsurance, or
|
||
(2)
|
If Requirements for Automatic Reinsurance are not met then the CEDING COMPANY must submit to BMA all the underwriting documentation relating to the insurability of the individual risk for facultative reinsurance.
|
||
B.
|
Plan of Insurance Not Listed in Schedule A:
|
||
On a Yearly Renewable Term treaty the CEDING COMPANY may submit an application for facultative reinsurance on any plan(s).
|
|||
On a Coinsurance treaty the Ceding Company cannot submit an application for facultative reinsurance on plan(s) other than the plan(s) listed in Schedule A.
|
|||
C.
|
An application for facultative reinsurance may include life insurance with or without either disability waiver of premium or accidental death or both. Only accidental death reinsurance may be submitted without an application for life insurance.
|
||
D.
|
Copies of all underwriting papers relating to the insurability of the individual risk must be sent to BMA for facultative reinsurance. After BMA has examined the underwriting papers, BMA will promptly notify the CEDING COMPANY of the underwriting offer subject to additional requirements, the final underwriting offer or declination. Any final underwriting offer on the individual risk will automatically terminate upon the earliest of:
|
||
(1)
|
The date BMA receives notice of a withdrawal/cancellation by the CEDING COMPANY,
|
||
(2)
|
120 days after the date on which the offer was made, or
|
||
(3)
|
The date specified in BMA’s approval to extend the offer.
|
||
E.
|
The minimum amount of insurance to be ceded shall be $5,000.
|
1.
|
BMA’s liability for automatic reinsurance shall begin simultaneously with the CEDING COMPANY’s liability.
|
2.
|
Except for additional coverage pertaining to conditional receipt as described in Schedule C, BMA’s liability for facultative reinsurance on individual risks shall not begin unless and until the CEDING COMPANY has accepted BMA’s final and unconditional written offer on the application for facultative reinsurance.
|
3.
|
BMA’s liability for reinsurance on individual risks shall terminate when the CEDING COMPANY’s liability terminates.
|
4.
|
As long as the original policy remains in full force, all paid-up additions and accumulated dividends shall be the liability of the CEDING COMPANY.
|
5.
|
In no event shall reinsurance under this Agreement be in force unless the insurance issued directly by the CEDING COMPANY is in force and is issued and delivered in a jurisdiction in which the CEDING COMPANY is properly licensed.
|
6.
|
The payment of reinsurance premiums in accordance with this Agreement shall be a condition precedent to the liability of BMA under reinsurance covered by this Agreement.
|
1.
|
Self-Administered Business
|
Promptly after liability for insurance has begun on an individual risk, the CEDING COMPANY shall have the responsibility of maintaining adequate records for the administration of the reinsurance account and shall furnish BMA with monthly reports, in substantial conformity with the following:
|
|
A.
|
MONTHLY NEW BUSINESS REPORT
|
(1) policy number
|
(10) amount reinsured
|
|
(2) full name of insured
|
(11) automatic/facultative indicator
|
|
(3) date of birth
|
(12) state of residence
|
|
(4) sex
|
(13) table rating
|
|
(5) issue age
|
(14) flat extra (amount + number of years)
|
|
(6) policy date
|
(15) death benefit option (UL products)
|
|
(7) underwriting classification
|
(16) net amount at risk
|
|
(8) plan of insurance
|
(17) transaction code
|
|
(9) amount issued
|
(18) currently if other than U.S.
|
B.
|
MONTHLY CONVERSION REPORT
|
The CEDING COMPANY shall furnish BMA with a separate listing of reinsurance policies that are conversions or replacements to the plan(s) as stated in Schedule A. The listing should provide the following information:
|
|
(1) 1 through 18 in 1.A above
|
(4) attained age
|
(2) original policy date
|
(5) duration
|
(3) original policy number
|
(6) effective date if other than policy date
|
C.
|
MONTHLY PREMIUM REPORT
|
At the end of each month the CEDING COMPANY shall send to BMA a listing of all reinsurance policies issued or renewing during the past month accompanied by the reinsurance premiums for such policies. The listing should be segregated into first year issues and renewals and should provide the following information:
|
(1)
|
1 through 18 in 1.A above
|
|
(2)
|
current net amount at risk
|
|
(3)
|
On Yearly Renewable Term treaties the net reinsurance premium due for each reinsured policy with the premium for life and each supplemental benefit separated.
|
|
(4)
|
On Coinsurance treaties the gross reinsurance premium, commissions, net reinsurance premium and other amounts (e.g. dividends, cash surrender values) with premium separated for life and each supplemental benefit.
|
All monthly lists shall be submitted to BMA no later than the 20th day of the following month.
|
||
D.
|
MONTHLY CHANGE REPORT
|
|
The CEDING COMPANY shall report the details of all policy terminations and changes on the reinsured policies. In addition to the data indicated in 1.A, above, the report should provide information about the nature, the effective date, and the financial result of the change with respect to reinsurance.
|
||
E.
|
MONTHLY POLICY EXHIBIT REPORT
|
|
The CEDING COMPANY shall provide a summary of new issues, terminations, recaptures, changes, death claims and reinstatements during the month and the inforce reinsurance at the end of the month.
|
||
F.
|
QUARTERLY REPORTING
|
|
1.
|
Within ten (10) days following the end of the quarter, the CEDING COMPANY shall provide BMA with Premiums Due and Unpaid. This report may be in summary form reporting totals by line of business with separate totals for first year and renewals.
|
|
2.
|
Within ten (10) days following the end of the quarter, the CEDING COMPANY shall provide BMA with totals for the reserve liability including statutory reserves by valuation basis segregated by Yearly Renewable Term and Coinsurance.
|
|
G.
|
ANNUAL INFORCE LISTING
|
|
Within ten (10) days after the close of the year, the CEDING COMPANY shall furnish BMA a listing of reinsurance in force by policy, by year of issue, segregated by Yearly Renewable Term and Coinsurance and include statutory reserves for the same.
|
||
H.
|
CLAIMS
|
|
Claims shall be reported as incurred on an individual basis.
|
||
2.
|
Individual Cession Business
|
|
Promptly after liability for reinsurance has begun on the individual risk the CEDING COMPANY shall send BMA a “Reinsurance Cession”. Based on the information on the “Reinsurance Cession”, BMA will prepare and send the CEDING COMPANY a “Reinsurance Cession Card”. When reinsurance is reduced or changed the CEDING COMPANY shall send BMA an “Amended Reinsurance Cession”.
|
1.
|
Life reinsurance shall be ceded on the basis stated in Schedule A.
|
2.
|
Copies of all life insurance policies, riders, rate manuals, benefit forms, commuted value tables and cash value tables shall be provided by the CEDING COMPANY to BMA, and BMA shall be promptly notified of any changes therein.
|
1.
|
Life Reinsurance Premiums
|
||
A.
|
Life Reinsurance Premiums Paid on a Coinsurance Basis
|
||
The CEDING COMPANY shall pay the current premium as shown in Exhibit II based on the amount of life insurance reinsured, less the allowance stated in Exhibit III. In addition, the CEDING COMPANY shall pay any substandard table extra and flat extra premiums, but shall exclude the policy fee. In the event the current premium is changed, BMA shall be notified by the CEDING COMPANY immediately.
|
|||
B.
|
Life Reinsurance Premiums on a Yearly Renewable Term Basis
|
||
The life reinsurance premium on the net amount at risk shall be based on rates shown in Exhibit II.
|
|||
For those premiums less than the net premium rate or rates based on the 1980 CSO Table at 4 ½% interest, only the latter rate or rates shall be guaranteed. Should BMA increase the reinsurance premiums to the 1980 CSO Table at 4 ½% interest, then the CEDING COMPANY shall have the right to immediately recapture any business affected by that change.
|
1.
|
Payment of Reinsurance Premium.
|
||
A.
|
The reinsurance premiums shall be paid to BMA using the rates shown in Exhibit II.
|
||
B.
|
On issues ceded by individual cessions BMA shall send the CEDING COMPANY each month two copies of a statement listing first year and renewal reinsurance premiums less refunds and allowances which are due during the current month.
|
||
C.
|
On self-administered business the CEDING COMPANY shall provide the statement to BMA using the format described in Article III Self-Administered Business.
|
||
D.
|
If a net reinsurance premium balance is payable to BMA the CEDING COMPANY shall pay this balance within forty-five (45) days after the close of that month. If the full balance is not received within the forty-five (45) day period, the reinsurance premiums for reinsurance risks listed on the statement, for which payment was not received, shall be delinquent and the liability of BMA shall cease as of the date reinsurance premium were due.
|
||
E.
|
If a net reinsurance premium balance is payable to the CEDING COMPANY, BMA shall pay this net balance within forty-five (45) days after the monthly statement was sent to the CEDING COMPANY. If the monthly statement has not been returned within forty-five (45) days, BMA shall assume the CEDING COMPANY has verified and is in agreement with the net balance and shall make payment to the CEDING COMPANY.
|
||
2.
|
Currency.
|
||
The reinsurance premiums and benefits payable under this Agreement shall be payable in the lawful money of the United States or Canada.
|
1.
|
A.
|
If in accordance with policy provisions the original policy is converted to permanent life insurance, the life risk under the converted policy which exceeds the amount of risk originally retained by the CEDING COMPANY shall continue to be reinsured with BMA.
|
B.
|
If there is a replacement where full underwriting evidence is not required according to the CEDING COMPANY regular underwriting rules, the life risk which exceeds the amount of risk originally retained by the CEDING COMPANY shall continue to be reinsured with BMA.
|
|
C.
|
If there is a replacement where full underwriting evidence is required by the CEDING COMPANY, reinsurance may be ceded to BMA subject to a written agreement between BMA and the CEDING COMPANY.
|
|
2.
|
If the amount of insurance under a policy or rider reinsured under the Agreement increases and
|
|
A.
|
The increase is subject to new underwriting evidence, the provisions of Article I shall apply to the increase in reinsurance.
|
|
B.
|
The increase is not subject to new underwriting evidence, BMA shall accept automatically the increase in reinsurance but not to exceed the automatic binding limit as stated in Schedule A.
|
|
3.
|
If the amount of insurance under a policy or rider reinsured under this Agreement is increased or reduced, any increase or reduction in reinsurance for the risk involved shall be effective on the effective date of the increase or reduction in the amount of insurance.
|
|
4.
|
If any portion of the prior insurance retained by the CEDING COMPANY on an individual life reduces or terminates, any reinsurance under this Agreement based on the same life shall also be reduced or terminated. The CEDING COMPANY shall reduce its reinsurance by applying the retention limits which were in effect at the time the policy was issued. The “reinsurance adjustment due to lapse or reduction of previous insurance” shall be effective on the same date as the lapse or reduction of prior insurance. The reinsurance to be terminated or reduced shall be determined in chronological order by the date the risk was first reinsured. Two or more policies issued the same date shall be considered one policy.
|
|
5.
|
If the insurance for a risk is shared by more than one reinsurer, BMA’s percentage of the increased or reduced reinsurance shall be the same as BMA’s percentage of initial reinsurance of the individual risk.
|
|
6.
|
If a risk reinsured under this Agreement is terminated, the reinsurance for that risk shall be terminated as of the effective date of the termination.
|
|
7.
|
For facultative reinsurance, if the CEDING COMPANY reduces the mortality rating, the reduction shall be subject to the facultative provisions of this Agreement as stated in Article I, Section 2.
|
|
8.
|
BMA shall refund all unearned reinsurance premiums not including policy fees, less applicable allowances, arising from reductions, terminations and changes as described in this Article.
|
1.
|
If the CEDING COMPANY changes its retention limits, as listed in Exhibit I, prompt written notice of the change shall be provided to BMA.
|
||
2.
|
The CEDING COMPANY shall have the option of recapturing the reinsurance under this Agreement in the event the CEDING COMPANY increases its retention limit and the policies have been in force the required length of time as stated in Schedule A. The CEDING COMPANY may exercise its option to recapture by giving written notice to BMA within ninety (90) days after the effective date of the increase in retention. If the recapture option is not exercised within ninety days (90) days after the effective date of the increase in retention the CEDING COMPANY may choose to recapture at a later date. In that case, the date of the written notification to BMA shall determine the effective date the recapture program shall begin.
|
||
3.
|
If the CEDING COMPANY exercises its option to recapture, then:
|
||
A.
|
The CEDING COMPANY shall reduce the reinsurance on all individual risks on which it retained its maximum retention for the age and mortality rating that was in effect at the time the reinsurance was ceded.
|
||
B.
|
The CEDING COMPANY shall increase its total amount of insurance on the individual risk up to its new retention by reducing the amount of reinsurance. If an individual risk is shared by more than one reinsurer, BMA’s percentage of the reduced reinsurance shall be the same as BMA’s initial percentage of reinsurance on the individual risk.
|
||
C.
|
The reduction of reinsurance shall become effective on the later of the following dates:
|
||
(1)
|
The policy anniversary date immediately following the date the recapture program is to begin as determined by paragraph 2. of this Article;
|
||
(2)
|
The number of years stated in Schedule A starting with the “policy date.”
|
||
D.
|
In the event the CEDING COMPANY overlooks any reduction in the amount of a reinsurance policy because of an increase in the CEDING COMPANY’s retention, the acceptance by BMA of reinsurance premiums under these circumstances shall not constitute a liability on the part of BMA for such reinsurance. BMA shall be liable only for a refund of premiums.
|
||
4.
|
No recapture shall be permitted for reinsurance on an individual risk if (a) the CEDING COMPANY retained less than its maximum retention for the age and mortality rating in effect at the time the reinsurance was ceded to BMA, or if (b) the CEDING COMPANY did not retain any of the individual risk.
|
1.
|
The CEDING COMPANY shall give BMA prompt notice of any claim. Copies of the proofs obtained by the CEDING COMPANY together with a statement showing the amount due or paid on such claim by the CEDING COMPANY shall be furnished to BMA at the time payment is requested.
|
2.
|
BMA shall accept the decision of the CEDING COMPANY in settling the claim and shall pay its portion to the CEDING COMPANY upon receipt of proof that the CEDING COMPANY has paid the claimant. It is agreed, however, that if a lesser amount at risk is retained by the CEDING COMPANY than the amount ceded to BMA, the CEDING COMPANY shall consult with BMA concerning its investigation and/or payment of the claim, although the final decision shall be that of the CEDING COMPANY.
|
3.
|
The CEDING COMPANY shall notify BMA of its intention to contest, compromise, or litigate a claim involving reinsurance, and BMA shall pay its share of the payment and specific claim expenses therein involved, unless it declines to be a party to the contest, compromise, or litigation in which case it shall pay the full amount of the reinsurance to the CEDING COMPANY. “Claim expenses” shall be deemed to mean only the reasonable legal and investigative expenses connected with the litigation or settlement of claims. “Claim expenses” shall not include expenses incurred in connection with a dispute or contest arising out of conflicting claims or entitlement to policy proceeds which the CEDING COMPANY admits are payable or any routine claim administrative expenses, Home Office or otherwise.
|
4.
|
In the event the amount of insurance provided by a policy or policies reinsured hereunder is increased or reduced because of a misstatement of age or sex established after the death of the insured, BMA shall share in the increase or reduction in the proportion that the net liability of BMA bore to the sum of the retained net liability of the CEDING COMPANY and the net liability of other reinsurers immediately prior to such increase or reduction. The reinsurance with BMA shall be written from commencement on the basis of the adjusted amounts using premiums and reserves at the correct ages and sex. The adjustment for the difference in premiums shall be made without interest.
|
5.
|
It is understood and agreed that the payment of a death claim by BMA shall be made in one sum regardless of the mode of settlement under the policy of the CEDING COMPANY.
|
6.
|
In no event shall BMA have any liability for any Extra-Contractual damages which are assessed against the CEDING COMPANY as a result of acts, omissions or course of conduct committed by the CEDING COMPANY or its agents, other than a good faith decision to deny claim liability, in connection with insurance reinsured under this Agreement. It is recognized that there may be special circumstances involved which indicate that BMA should participate in certain assessed damages. These circumstances are not amendable to advance specific definition, but could include those situations in which BMA was an active party in the act, omission or course of conduct which ultimately results in the assessment of such damages. The extent of such participation will be determined on a good faith assessment of culpability in each case, but all factors being equal, the division of any such assessment will generally be in the proportion of net liability borne by each party.
|
7.
|
If a claim is approved for disability waiver of premium insurance reinsured under this Agreement, the CEDING COMPANY shall continue to pay reinsurance premiums to BMA. BMA shall reimburse the CEDING COMPANY BMA’s share of the annual liability.
|
1.
|
In the event of insolvency of the CEDING COMPANY, all reinsurance shall be payable by BMA directly to the CEDING COMPANY or its liquidator, receiver, or statutory successor, on the basis of the liability of the CEDING COMPANY under the policy or policies reinsured, without diminution because of the insolvency of the CEDING COMPANY.
|
2.
|
It is agreed that the liquidator, receiver, or statutory successor of the insolvent CEDING COMPANY shall give written notice to BMA of the pending of a claim against the insolvent CEDING COMPANY on any policy reinsured within a reasonable time after such claim is filed in the insolvency proceedings. During the pendency of any such claim BMA may investigate such claim and interpose, in the proceeding where such claim is to be adjudicated, any defense or defenses which BMA may deem available to the CEDING COMPANY or its liquidator, receiver, or statutory successor. The expense thus incurred by BMA shall be chargeable, subject to court approval, against the insolvent CEDING COMPANY as part of the expense of liquidation to the extent of proportionate share of the benefit which may accrue to the CEDING COMPANY solely as a result of the defense undertaken by BMA.
|
3.
|
Where two or more reinsurers are participating in the same claim and a majority in interest elect to interpose a defense to such claim, the expense shall be apportioned in accordance with the terms of the Agreement as though such expenses had been incurred by the CEDING COMPANY.
|
4.
|
Any debts or credits, matured or unmatured, liquidated or unliquidated, in favor of or against either the CEDING COMPANY or BMA with respect to this agreement or with respect to any other claim of one party against the other are deemed mutual debts or credits, as the case may be, and shall be set off, and only the balance shall be allowed or paid.
|
1.
|
It is the intention of the CEDING COMPANY and BMA that the customs and practices of the insurance and reinsurance industry shall be given full effect in the operation and interpretation of this Agreement. The parties agree to act in all things with the highest good faith. However, if BMA and the CEDING COMPANY cannot mutually resolve a dispute or claim which arises out of or relates to this agreement, the dispute or claim shall be settled through arbitration.
|
2.
|
The arbitrators shall be impartial regarding the dispute, and shall base their decision on the terms and conditions of this agreement plus, as necessary, on the customs and practices of the insurance and reinsurance industry.
|
3.
|
There shall be three arbitrators who must be officers of life insurance companies other than the parties to this agreement or their subsidiaries. Each of the parties to this agreement shall appoint one of the arbitrators and these two arbitrators shall select the third. If a party to this agreement fails to appoint an arbitrator within thirty (30) days after the other party to this agreement has given notice of the arbitrator appointment, the American Arbitration Association shall appoint an arbitrator for the party to this Agreement that has failed to do so. Should the two arbitrators be unable to agree on the choice of the third, then the appointment of this arbitrator is left to the American Arbitration Association.
|
4.
|
Except for the appointment of arbitrators in accordance with the provisions of Section 3 of this Article, arbitration shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association which are in effect on the date of delivery of demand for arbitration. Arbitration shall be conducted in Kansas City, Missouri.
|
5.
|
Each party to this agreement shall pay part of the arbitration expenses which are apportioned to it by the arbitrators.
|
6.
|
The award agreed by the arbitrators shall be final, and judgment may be entered upon it in any court having jurisdiction.
|
1.
|
This Agreement may be terminated at any time by either party giving at least ninety (90) days written notice of termination. The day the notice is deposited in the mail addressed to the Home Office, or to an Officer of either company shall be the first day of the ninety-day (90) period.
|
2.
|
The CEDING COMPANY shall continue to cede reinsurance and BMA shall continue to accept reinsurance, as provided for by the terms of this Agreement, until the date of termination.
|
3.
|
All automatic reinsurance which became effective prior to the termination of this Agreement and all facultative reinsurance approved by BMA based upon applications received prior to termination of this Agreement shall remain in effect until its termination or expiration, unless the CEDING COMPANY and BMA mutually decide otherwise.
|
CEDING COMPANY
|
||
/s/James E Melville
|
President
|
|
signature
|
title
|
|
/s/George E Frances
|
Secretary
|
|
signature
|
title
|
|
11/15/93
|
||
date
|
BMA
|
||
/s/John Walker
|
Managing Director/Reinsurance
|
|
signature
|
title
|
|
/s/WM. Crouch
|
Reinsurance
Administrative Vice President
|
|
signature
|
title
|
|
11/24/93
|
||
date
|
1.
|
TYPE OF BUSINESS:
|
|
Life insurance issued by the CEDING COMPANY.
|
||
2.
|
TYPE OF REPORTING
|
|
Self-administered
|
||
3.
|
PLANS OF INSURANCE:
|
|
Permanent Plans, Universal Life, and Riders Term Plans
|
||
4.
|
BASIS OF REINSURANCE: Automatic Yearly Renewable Term
|
|
SURNAME ALPHABETIC DIVISION: A-Z
|
||
QUOTA SHARE: 50%
|
||
5.
|
JUMBO LIMIT:
|
|
A.
|
Life: $10,000,000
|
|
B.
|
Waiver of Premium: $5,000,000
|
|
6.
|
BINDING LIMIT:
|
|
A.
|
Life: Five (5) times the retention of the CEDING COMPANY.
|
|
B.
|
Waiver of Premium or Monthly Cost of Insurance: Amounts equal to but not exceeding the amounts payable to the CEDING COMPANY for the amount of life reinsured with BMA.
|
|
7.
|
YEARS TO RECAPTURE:
|
|
Ten (10) years
|
||
8.
|
PREMIUM TAX REIMBURSEMENT:
|
|
BMA will not reimburse premium taxes.
|
1.
|
LIFE
|
|
A.
|
Level Term Plans (twenty years or less) – The net amount at risk shall be the reinsurance face amount ceded.
|
|
B.
|
Level Term Plans (more than twenty years) or Permanent Plans -
|
|
1st Year – Full amount ceded
|
||
2nd through 10th Years – Annual decrement is equal to one-tenth of the 10th year Cash Value.
|
||
11th through 20th Years – Annual decrement is equal to one-tenth of the difference between the 10th year and the 20th year Cash Value.
|
||
Subsequent years calculated in a similar manner.
|
||
C.
|
Decreasing Term Plans – The first net amount at risk will be the reinsurance face amount ceded. Subsequent years will be determined from the commuted values schedule provided by the CEDING COMPANY.
|
|
D.
|
Universal Life Plans – The CEDING COMPANY shall furnish BMA the net amount at risk on a self-administered report.
|
|
2.
|
WAIVER OF PREMIUM OR MONTHLY COST OF INSURANCE
|
|
Reinsurance premiums in the first years are zero. Renewal reinsurance premiums to BMA are 90% of the gross disability premium charged the insured by the CEDING COMPANY on the initial amount reinsured for waiver of premium and the amount reinsured for monthly cost of insurance.
|
1.
|
This agreement includes coverage for conditional receipt liability for facultative cases sent to BMA. In no event shall BMA’s conditional receipt liability exceed $750,000.00 or the automatic binding limit specified in Schedule A, whichever is less.
|
|
BMA’s conditional receipt liability shall begin simultaneously with the CEDING COMPANY’s liability and shall cease upon:
|
||
A.
|
BMA’s declination of the risk, or
|
|
B.
|
The first acceptance by the CEDING COMPANY of an unconditional offer by a reinsurer other than BMA, or
|
|
C.
|
The expiration of 120 days from the date BMA’s facultative offer is communicated to the CEDING COMPANY.
|
|
2.
|
For policies which are underwritten as substandard, the rate charged for reinsurance will be at the standard rate plus the appropriate table rate, regardless of how the policy is treated by the CEDING COMPANY.
|
|
3.
|
Conversions will be reinsured on a point-in-scale basis using the same reinsurance rate as the original plan.
|
SUBSTANDARD
|
SUBSTANDARD
|
SUBSTANDARD
|
||||||
TABLE FLAT EXTRA
|
TABLE FLAT EXTRA
|
TABLE FLAT EXTRA
|
||||||
ISSUE AGES
|
STANDARD
|
|||||||
0-65
|
$100,000
|
$100,000
|
$100,000
|
$100,000
|
||||
65 & OVER
|
$60,000
|
$60,000
|
$60,000
|
$60,000
|
Spillover $25,000
|
ARTICLE I
|
AUTOMATIC REINSURANCE………………………………………................................................................................................................…
|
1
|
1.
|
Insurance…………………………………………………………………...................................................................................................................…
|
1
|
2.
|
Coverages………………………………………………………………….....................................................................................................................
|
2
|
3.
|
Jumbo Risk………………………………………………………………...................................................................................................................….
|
2
|
4.
|
Waiver of Disability Acceptance and Participation Limits………………................................................................................................................
|
3
|
ARTICLE II
|
FACULTATIVE REINSURANCE………………………………….…................................................................................................................…
|
3
|
ARTICLE III
|
LIABILITY……………………………………………………………..............................................................................................................…..
|
3
|
1.
|
Automatic Reinsurance Liability…………………………………………................................................................................................................…
|
3
|
2.
|
Facultative Reinsurance Liability……………………………………….................................................................................................................…..
|
4
|
ARTICLE IV
|
AMOUNT OF INSURANCE…………………………………………................................................................................................................….
|
4
|
1.
|
Amounts…………………………………………………………………..................................................................................................................….
|
4
|
2.
|
Minimum Amounts………………………………………………………..................................................................................................................…
|
5
|
3.
|
Reductions and Terminations……………………………………………...............................................................................................................….
|
5
|
4.
|
Reinstatements…………………………………………………………….................................................................................................................…
|
6
|
ARTICLE V
|
PROCEDURES FOR REINSURANCE………………………………..............................................................................................................…..
|
6
|
1.
|
Monthly Reports……………………………………………………………..................................................................................................................
|
6
|
2.
|
Facultative Reinsurance……………………………………………………..................................................................................................................
|
7
|
3.
|
Quarterly Reports…………………………………………………………..................................................................................................................…
|
8
|
ARTICLE VI
|
PREMIUMS…………………………………………………………….............................................................................................................…..
|
8
|
1.
|
Life Insurance……………………………………………………………...................................................................................................................….
|
8
|
2.
|
Disability Benefits………………………………………………………..................................................................................................................…..
|
8
|
3.
|
Preliminary Term Insurance……………………………………………….................................................................................................................…
|
9
|
4.
|
Premium Taxes……………………………………………………………..................................................................................................................…
|
9
|
5.
|
Payments…………………………………………………………………..................................................................................................................….
|
9
|
6.
|
Nonpayment of Reinsurance Premiums…………………………………...............................................................................................................….
|
9
|
7.
|
Misstatements…………………………………………………………….................................................................................................................….
|
10
|
ARTICLE VII
|
CLAIMS…………………………………………………………….……..........................................................................................................….
|
10
|
1.
|
Notice……………………………………………………………………….................................................................................................................…
|
10
|
2.
|
Company’s Decision……………………………………………………................................................................................................................……
|
10
|
3.
|
Contested Claims…………………………………………………………................................................................................................................…..
|
11
|
4.
|
Misstatements………………………………………………………...……................................................................................................................…
|
11
|
5.
|
Payment………………………………………………………………….................................................................................................................……
|
12
|
6.
|
Extra-Contractual Damages………………………………………………...............................................................................................................….
|
12
|
7.
|
Disability Waiver of Premium Insurance…………………………………..............................................................................................................…
|
12
|
ARTICLE VIII
|
INSOLVENCY……………………………………………………………...............................................................................................................
|
13
|
ARTICLE IX
|
ARBITRATION…………………………………………………………...........................................................................................................….
|
14
|
ARTICLE X
|
GENERAL PROVISIONS………………………………………………............................................................................................................…
|
15
|
1.
|
Policy Forms and Rates………………………………………………….................................................................................................................…..
|
15
|
2.
|
Reinsurance Conditions…………………………………………………................................................................................................................…..
|
15
|
3.
|
Expenses…………………………………………………………………...................................................................................................................….
|
16
|
4.
|
Errors and Omissions…………………………………………………….................................................................................................................…..
|
16
|
5.
|
Offset………………………………………………………………………......................................................................................................................
|
16
|
6.
|
Inspection…………………………………………………………………..................................................................................................................…
|
16
|
ARTICLE XI
|
RECAPTURE…………………………………………………………............................................................................................................……
|
17
|
ARTICLE XII
|
DURATION OF AGREEMENT……………………………………..................................................................................................................…..
|
17
|
ARTICLE XIII
|
EXECUTION…………………………………………………………….............................................................................................................…
|
18
|
Schedule A
|
Retention and Reinsurance Limits
|
|
Schedule B
|
Reinsurance Statement and Bulk Reporting Forms
|
|
Schedule C
|
Premiums
|
1.
|
Insurance
|
(a)
|
A jumbo risk as defined in paragraph 3 below.
|
(b)
|
A risk which has been sent to Life Re or any other reinsurer for facultative underwriting consideration.
|
2.
|
Coverages
|
3.
|
Jumbo Risk
|
Life
|
|
All Ages
|
$5,000,000
|
4.
|
Waiver of Disability Acceptance and Participation Limits
|
5.
|
Regular Limits of Retention
|
1.
|
Automatic Reinsurance Liability
|
2.
|
Facultative Reinsurance Liability
|
(a)
|
Life Re has given the Company an unconditional approval on the application for reinsurance, and
|
(b)
|
the Company has notified Life Re of its acceptance of such offer in writing within ninety (90) days.
|
1.
|
Amounts
|
R = D – X
|
|
Where:
|
D = Death Benefit
|
X = The Ceding Company’s Retention
|
2.
|
Minimum Amounts
|
3.
|
Reductions and Terminations
|
4.
|
Reinstatements
|
(a)
|
Automatic Reinsurance
A Reinsured Policy originally ceded under this Agreement on an automatic basis, that is reduced, terminated or lapsed, and later reinstated by the Company pursuant to policy provisions will be accepted for reinsurance by Life Re up to such amount as would be in force if such Reinsured Policy had not been reduced, terminated or lapsed. The Company will pay to Life Re, Life Re’s Share of any premiums and interest that the Company has received for reinstatement.
|
(b)
|
Facultative Reinsurance
A Reinsured Policy originally ceded under this Agreement on a facultative basis, that was reduced, terminated, or lapsed, will require approval by Life Re prior to reinstatement of such a policy, if the Company has retained less than 50% of the risk. Upon such approval, reinsurance for the policy will be for the amount that would be in force had the policy not been reduced, terminated, or lapsed.
|
1.
|
Monthly Reports
|
2.
|
Facultative Reinsurance
|
3.
|
Quarterly Reports
|
1.
|
Life Insurance
|
2.
|
Disability Benefits
|
3.
|
Preliminary Term Insurance
|
4.
|
Premium Taxes
|
5.
|
Payments
|
6.
|
Nonpayment of Reinsurance Premiums
|
7.
|
Misstatements
|
1.
|
Notice
|
2.
|
Company’s Decision
|
3.
|
Contested Claims
|
4.
|
Misstatements
|
5.
|
Payment
|
6.
|
Extra-Contractual Damages
|
7.
|
Disability Waiver or Premium Insurance
|
1.
|
Policy Forms and Rates
|
2.
|
Reinsurance Conditions
|
3.
|
Expenses
|
4.
|
Errors and Omissions
|
5.
|
Offset
|
6.
|
Inspection
|
Date:
|
11/15/93
|
By:
|
/s/ James E. Melville
|
|
Name:
|
James E. Melville
|
|||
Title:
|
President
|
Date:
|
October 1, 1993
|
By:
|
/s/ Stephen D. Poth
|
|
Name:
|
Stephen D. Poth
|
|||
Title:
|
Senior Vice President
|
A.
|
LIFE
|
The Company’s retention:
|
|
Life Insurance – All Ratings
|
Ages
0 – 65
65 and Over
|
Retention
$100,000
60,000
|
B.
|
WAIVER
|
Same as Life
|
A.
|
LIFE
|
Life Re’s share is 50% of 10 times the Company’s retention to a maximum of $1,000,000; of which the maximum share to Life Re is $500,000.
|
|
B.
|
WAIVER
|
Same as Life
|
BASE POLICY FORMS
|
|
1200A
|
Funder 1200 10 Year Premium Whole Life Policy
|
1203
|
Non Renewable 10 Year Term Base Plan
|
L-185 (U.G.)
|
Interest Sensitive Whole Life Insurance Policy
|
L-396 (U.G.)
|
5 Year R&C Term Policy
|
L193A
|
Small Whole Life Policy
|
REG-TERM (U.G.)
|
“Term Guard Plus” Term Life Insurance
|
U159385A
|
Universal Life Century 2000
|
UC-120
|
Universal Life Century Series (USL 100-400)
|
UC-150
|
Interest Sensitive Life contracts (ISL 100-300)
|
UL90A (U.G.)
|
Universal Life UL90A
|
RIDERS & SUPPLEMENTAL BENEFITS
|
|
R-902 (U.G.)
|
Annual Renewable Level Term (UL90A)
|
R-904 (U.G.)
|
Cov Ins Annual Renewable Level Term Rdr (UL90A)
|
R1201
|
Non Renewable 10 Year Term Rider for Funder 1200
|
R904UG93
|
Covered Insured ART Rider (UL Age Last)
|
US-125
|
Annual Renewable Level Term Rider (USL)
|
US-131
|
Annual Renewable Level Term Rider (ISL)
|
Ceding Company
|
Reinsurer
|
||||||
Treaty/Account #
|
Period Experience is for
|
||||||
Coin ___ YRT ___ Mod Co ___ Other _____
|
Interest Sensistive:
|
Yes ____
|
No ____
|
Reinsurance premium Mode:
|
Monthly __
|
Quarterly __
|
Annual __
|
In Advance __
|
In Arrears __
|
|||||
Reinsurance Reporting Mode:
|
Monthly __
|
Quarterly __
|
Annual __
|
|||||||
Contact
|
Date
|
Phone
|
SECTION I - ACCOUNTING
|
||||||||||
*** Premiums ***
|
*** Allowances ***
|
Other
Benefit
|
Total
|
|||||||
First Year
|
Renewal Year
|
First Year
|
Renewal Year
|
|||||||
Life
|
||||||||||
ADB
|
||||||||||
Waiver of Premium
|
||||||||||
Other
|
||||||||||
TOTAL
|
||||||||||
SECTION II – RESERVE INFORMATION
|
Amount of check
|
|||||||||
Amount of Rein (000)
|
Issue
Year
|
Reserves Reinsured
|
||||||||
Life
|
ADB
|
Life
|
ADB
|
Waiver
|
Subst’d
|
Deficiency
|
||||
SECTION III – POLICY EXHIBIT INFORMATION
|
|||
Current Perod
|
Year to Date
|
||
No of Amt of *
Policies Rein (000)
|
No. of Amt of *
Policies Rein (000)
|
||
A. Inforce Beg, of Period
|
A
|
||
1. New Business Auto
|
1. Auto
|
||
Fac
|
Fac
|
||
2. Conversions/Replacements-On
|
2.
|
||
3. Reinstatements
|
3.
|
||
4. Other Increases
|
4.
|
||
5. Not Taken
|
5.
|
||
a) Total Inc (1+2+3+4-5)
|
a.
|
||
6. Death
|
6.
|
||
7. Conversions/Replacements-Off
|
7.
|
||
8. Lapses
|
8.
|
||
9. Surrenders
|
9.
|
||
10. Expiry
|
10.
|
||
11. Recapture
|
11.
|
||
12.Other Decreases
|
12.
|
||
b) Total Dec (6+7+8+9+10+11+12)
|
b.
|
||
B. Inforce End of Period (A+a-b)
|
B.
|
||
*Specified Reinsurers’s Share of Liability
|
Form #TA1(4/91)
|
A.
|
The policy detail report should be broken down into the following categories:
|
1 – New Business
|
|
2 – First Year Other Than New Business*
|
|
3 - Renewals
|
|
4 – Terminations – (First year/Renewal split optional, subtotals by termination type
optional).
|
|
5 – Changes - (First year/Renewal split optional, subtotals by change type optional).
|
|
B.
|
Field Descriptions
|
||
1.
|
Insured Information
|
||
Name
|
Full name (Last, first, middle) for insured
|
||
DOB
|
Full date of birth (MM/DD/YY) for insured
|
||
Sex
|
M/F
|
||
S/N
|
Smoker habit. Up to three spaces should be allotted for this field to accommodate codes relevant to the treaty reported. Suggested codes are:
|
||
S
|
Smoker
|
||
N
|
Nonsmoker
|
||
A
|
Aggregate (or composite)
|
||
PN
|
Preferred nonsmoker
|
||
PS
|
Preferred smoker
|
||
Age
|
Actual age at issue
|
||
ST
|
State of residence
|
||
2
|
Policy Information
|
||
Policy No.
|
Ceding Company’s policy number.
|
||
Policies should be listed in numerical order.
|
|||
Plan
|
Ceding Company’s plan code.
|
||
DOI
|
Full policy date (MM/DD/YY). This is the date from which renewal processing will be driven.
|
||
DRN
|
Duration from original policy date (i.e., where attained scale rates apply to policy conversions or replacements).
|
||
A/F
|
Automatic/Facultative indicator. Business ceded on a fac/ob basis can be indicated by an “0” in this field.
|
||
Rating
|
Indicate table if substandard. 100% for standard issues.
|
||
Flat
|
Flat extra amount per thousand.
|
||
Yrs
|
Duration of flat extra (number of years).
|
||
OPT
|
For Universal Life plans only, indicate death benefit Option 1 or 2. Under Option 1, the level death benefit option, the amount at risk decreases as the cash value accumulates. Option 2 produces an increasing death benefit, equivalent to the specified amount plus the accumulated cash value. The Reinsured Net Amount at Risk remains level under this option.
|
||
COV
|
L – Basic Coverage
|
||
WP – Waiver of Premium
|
|||
ADB – Accidental Death Benefit
|
|||
DIRECT
FACE
|
Full face amount of the coverage at issue.
|
||
REINS. FACE
|
Initial amount ceded.
|
||
REINS. AAR
|
Current reinsured amount at risk.
|
||
Chg. Amt.
|
Any change to the reinsurance amount at risk since previous report should be illustrated here.
|
||
Chg. Dt.
|
Effective date of policy changes. Applies to termination and change reports, may be blank for new business and renewals.
|
||
TR
|
Transaction type (see list in Part C below).
|
||
Base Prem.
|
Gross premium due for each coverage (excluding substandard premium amounts).
|
||
SStd. Prem.
|
Gross substandard premium, i.e., multiple and/or flat extra premiums, if applicable.
|
||
Base Allow.
|
Allowance (commission) due on base premium amount.
|
||
SStd. Allow.
|
Allowance (commission) due on substandard premium amount.
|
||
Net
|
Net amount due per coverage.
|
||
C.
|
Transaction Types
|
||
Suggested alpha codes for each of the various transaction types are:
|
|||
1.
|
NB
|
New Business
|
|
2.
|
FO
|
First year other than New Business
|
|
3.
|
RL
|
Renewal
|
|
4.
|
Terminations
|
||
LP
|
Lapse
|
||
NT
|
Not Taken
|
||
SR
|
Surrender
|
||
EX
|
Expiry
|
||
DH
|
Death
|
||
RC
|
Recapture
|
||
5.
|
Changes
|
||
RS
|
Reinstatement
|
||
IC
|
Increase
|
||
DC
|
Decrease
|
||
CA
|
Conversions on
|
||
CO
|
Conversions off
|
||
RA
|
Internal Replacements on
|
||
RO
|
Internal Replacements off
|
||
ET
|
ETI
|
||
RP
|
Reduced paid Up
|
||
MS
|
Misc. (e.g. names changes, benefit additions)
|
Page
|
||
ARTICLE I
|
DEFINITIONS…………………………………...……...............................................................................................................….
|
1
|
ARTICLE II
|
BUSINESS ASSUMED…………………………..…..............................................................................................................……
|
3
|
ARTICLE III
|
ASSUMPTION CERTIFICATES……………………...............................................................................................................….
|
5
|
ARTICLE IV
|
GENERAL PROVISIONS………………………..……...............................................................................................................…
|
7
|
ARTICLE V
|
CONSIDERATION FOR ASSUMPTION
REINSURANCE………………………………..……...............................................................................................................…
|
10
|
ARTICLE VI
|
DUTY OF COOPERATION………………………...….............................................................................................................…
|
10
|
ARTICLE VII
|
ARBITRATION…………………………………..……..............................................................................................................…
|
11
|
ARTICLE VIII
|
INDEMNIFICATION……………………………..…..............................................................................................................…...
|
11
|
ARTICLE IX
|
EXECUTORY CONTRACT AND INSOLVENCY
SETOFF…………………………………………..............................................................................................................……….
|
12
|
ARTICLE X
|
MISCELLANEOUS PROVISIONS……………................................................................................................................……….
|
13
|
A
|
Policyholder Notice
|
|
B
|
Certificate of Assumption
|
|
C
|
Notice of Objection to Assumption
|
2.1
|
Coverage. After the Effective Date and upon the terms and subject to the conditions, including Section XVI of the Coinsurance Agreement, and other provisions of this Assumption Agreement and any required governmental and regulatory consents and approvals, the Company, if requested to do so by the Reinsurer, hereby agrees to cede to the Reinsurer and the Reinsurer hereby agrees to accept and reinsure, on an assumption basis, any Reinsured Policy. Reinsurance pursuant to this Section 2.1 shall occur no less frequently than on a monthly basis until all Reinsured Policies have been assumed pursuant to the provisions of Article III hereunder; provided, however, that reinsurance may occur more frequently if the parties hereto agree.
|
|
2.2
|
Exclusions. This Assumption Agreement does not apply to and specifically excludes from coverage any Extra Contractual Liabilities. In addition, the Reinsurer shall not assume, and shall be indemnified by the Comapny for, all guaranty fund assessments and premium taxes or similar charges imposed on or with respect to the Reinsured Policies to the extent that such assessments, taxes or charges are based on premiums remitted prior to the Effective Date.
|
|
2.3
|
Transfer of Reserves. Notwithstanding the provisions of Section 2.1 hereof, the Reinsurer will not be deemed to have accepted and reinsured, on an assumption basis, any Reinsured Policy unless the Reserves and Liabilities underlying such Reinsured Policy shall have been ceded by the Company to the Reinsurer, and accepted by the Reinsurer, pursuant to Article II of the Coinsurance Agreement, effective as of the Effective Date.
|
|
2.4
|
Assignment of Ceded Reinsurance.
|
|
(a)
|
Regardless of whether reinsurance novation agreements are entered into between the Reinsurer and any reinsurer, the Reinsurer shall be substituted for and succeed to all of the rights and liabilities of the Company, and shall, as between the parties hereto, be recognized for all purposes as the “Company” thereunder in substitution for the Company, under any Reinsurance Agreements in effect as of the date that the provisions of Section 2.1 hereunder take effect (the “Assumption Date”) with any reinsurer relating to the Reinsured Policies. For consideration which has already been provided for in Article IV of the Coinsurance Agreement, as of the Assumption Date, the Company shall assign, transfer and convey, and the Reinsurer shall be bound by and assume, any and all rights and obligation of the Company under any Reinsurance Agreement including amounts held by or which may become due from reinsurers for policy liabilities under the Reinsured Policies or for benefits or other amounts paid by the Company prior to the Assumption Date. The Company and the Reinsurer shall use their best efforts to effect, as promptly as possible, an endorsement to each Reinsurance Agreement substituting the Reinsurer for the Company and to amend the Ceded Reinsurance Agreement to comply with the credit for reinsurance provisions of (i) the Delaware Insurance Law and (ii) any other statute or regulation applicable to the cession of reinsurance by foreign life insurance companies. The Company agrees to enter into such endorsements and, if reasonably requested by the Reinsurer, aid the Reinsurer, at the Reinsurer’s expense, in obtaining any such endorsement.
|
|
(b)
|
From the Assumption Date, the Company hereby agrees that all amounts due the Reinsurer hereunder pursuant to the Reinsurance Agreements shall be paid directly to the Reinsurer by reinsurers and reinsurance brokers. The Company shall, if reasonably requested by the Reinsurer, aid the Reinsurer, at the Reinsurer’s expense, in collection of all amounts due from reinsurers. From the Assumption Date, the collectability of such reinsurance shall be the ultimate responsibility of the Reinsurer and shall be at the risk and for the account of the Reinsurer in the event such reinsurance is not collected.
|
|
(c)
|
From the Assumption Date, the Reinsurer shall have full power and authority as attorney-in-fact for the Company to act for and on behalf of the Company with respect to any and all letters of credit and trust funds outstanding for the benefit of the Company pursuant to the terms of any of the Reinsurance Agreements. The Company and the Reinsurer shall, at the expense of the Reinsurer, each use their best efforts to the extent mutually agreed to be necessary, to cause the reinsurers of the Company under the Reinsurance
Agreements to post replacement letters of credit or establish replacement trust funds to be issued or established directly in favor and for the benefit of the Reinsurer in the same or a grater amount and on terms equally as favorable to the Reinsurer, unless the Reinsurer shall otherwise consent. The Company agrees to transfer to the Reinsurer all funds withheld from reinsurers under the Reinsurance Agreements.
|
3.1
|
Policyholder Notices. Upon the request of the Reinsurer to reinsure, on an assumption basis, a Reinsured Policy pursuant to Section 2.1 hereof, and to the extent that the reinsurance of such Reinsured Policy is permitted or approval therefore has been granted under applicable laws, rules or regulations or positions of insurance regulatory authorities, the Reinsurer shall prepare, with the cooperation of the Company, a Policyholder notice (“Policyholder Notice”), certificate of assumption (“Certificate of Assumption”) and objection form (“Objection Form”), and mail them to the Policyholder of such Reinsured Policy. Subject to regulatory requirements of the various states, the Policyholder Notices, Certificates of Assumption and Objection Forms to be delivered to Policyholders pursuant to this Section 3.1 shall be substantially in the forms attached hereto as Exhibit A, B and C, respectively.
|
3.2
|
Right to Object. Subject to regulatory requirements of the various states, the Company and the Reinsurer agree that a Policyholder will be allowed to remain a Policyholder of the Company if such Policyholder refuses to effect the assumption of its Reinsured Policy in accordance with this Article III during the applicable period set forth in the Policyholder notice, and all of the rights and obligations of the Company and the Policyholder under such Reinsured Policy and of the Company and the Reinsurer under the Coinsurance Agreement with respect to such Reinsured Policy, shall remain the same.
|
3.3
|
Novated Policies. In the event that a Reinsured Policy defined herein as a Novated Policy is determined by applicable regulatory authorities or by judicial decision (in either case, following the exhaustion of all rights of appeal) not to have been novated, such Reinsured Policy shall, for all purposes of this Assumption Agreement, be deemed never to have been a Novated Policy. Notwithstanding the foregoing, the fact that a Reinsured Policy has not been or cannot be assumed and novated by the Reinsurer pursuant to the terms and conditions of this Assumption Agreement, for whatever reason, shall in no event cause it not to be a Reinsured Policy under the Coinsurance Agreement.
|
3.4
|
Direct Obligations. The Reinsurer shall be the successor to the Company under the Novated Policies as if the Novated Policies were direct obligations originally issued by the Reinsurer. The Reinsurer shall be substituted in the place and stead of the Company, and each Policyholder, insured or beneficiary under a Novated Policy shall disregard the Company as a party thereto and treat the Reinsurer as if it had been originally obligated thereunder. Such Persons shall have the right to file claims or take other actions under the Novated Policies on or after the effective date of such novation directly with the Reinsurer, and shall have a direct right of action for insurance liabilities reinsured thereunder against the Reinsurer, and the Reinsurer hereby consents to be subject to direct action taken by any such Persons under a Novated Policy. The Reinsurer accepts and assumes the Novated Policies subject to any and all defenses, setoffs and counterclaims to which the Company would be entitled with respect to such insurance liabilities, it being expressly understood and agreed by the parties hereto that no such defenses, setoffs or counterclaims are waived by the execution of this Assumption Agreement or the consummation of the transactions contemplated hereby and that the Reinsurer shall be fully subrogated to all such defenses, setoffs and counterclaims.
|
3.5
|
Release of Company; Indemnity. Upon the consummation of the assumption reinsurance of a Reinsured Policy from the Company to the Reinsurer under this Reinsurance Agreement, the Company shall be released from any and all liability, except for Extra Contractual Liabilities, with respect to such Reinsured Policy. From and after the consummation of the assumption reinsurance of a Reinsured Policy pursuant to this Assumption Agreement, the Reinsurer agrees to indemnify the Company for any and all damages, costs and expenses, including reasonable legal counsel fees and disbursements, arising out of, based upon or relating to such Novated Policy; provided, however, that the Reinsurer shall be under no obligation to indemnify the Company for any Extra Contractual Liabilities.
|
4.1
|
Policy Administration. To the extent that such transfers have not already taken place pursuant to the terms and conditions of the Coinsurance Agreement, the Company agrees to cooperate fully with the Reinsurer in the transfer of all books, records, papers or any other documents relating to such Novated Polices.
|
|
4.2
|
Billing and Collections. Effective on the respective dates on which the novation of any Reinsured Policy is effective, the Reinsurer shall have sole responsibility for billing and collecting policy loan repayments, interest and the making of payments of dividends in respect of the Novated Policies, subject to the terms of any administrative or other agreements between the parties hereto that have been or heretofore may be entered into and the terms of agreements between the Reinsurer and its agents or subcontractors.
|
|
4.3
|
Misunderstandings and Oversights. If any delay, omission, error or failure to pay amounts due or to perform any other act required by this Assumption Agreement is unintentional and caused by misunderstanding or oversight, the Company and the Reinsurer will adjust the situation to what it would have been had the misunderstanding or oversight not occurred. The party first discovering such misunderstanding or oversight, or act resulting from the misunderstanding or oversight, will notify the other party in writing promptly upon discovery thereof, and the parties shall act to correct such misunderstanding or oversight within thirty (30) Business Days of receipt of such notice. However, this Section shall not be construed as a waiver by either party of its right to enforce strictly the terms of this Assumption Agreement.
|
|
4.4
|
Litigation; Claims. The Reinsurer shall be responsible for the handling of, and all costs and expenses, including legal fees, relating to, litigation or other claims under the Novated Policies. Notwithstanding the foregoing, the Reinsurer shall have no liability for such costs and expenses to the extent they arise out of or are based on any Extra Contractual Liabilities, and to the extent that the Reinsurer incurs any such costs or expenses, the Reinsurer shall be indemnified by the Company.
|
|
4.5
|
Non-Compete. The Company shall take no action directly or indirectly to induce any Policyholder of a Novated Policy to terminate, reinstate, lapse or exchange such policy.
|
|
4.6
|
Compliance with Applicable Laws and Regulations.
|
|
(a)
|
Intent of Parties. It is the intention of the parties that this Assumption Agreement shall be interpreted in accordance with the laws as of the date of execution hereof by both parties and comply with all existing applicable state and federal laws and regulations, and as from time to time are or may be in effect, in such a way that the Reinsured Policies remain reinsured on the coinsurance plan and contingent assumption plan.
|
|
(b)
|
Procedures to Reflect Changes in Laws or Regulations. In the event that it is determined by an insurance regulatory authority or the Internal Revenue Service or by either party upon the advise of an insurance regulatory authority or the Internal Revenue Service that this Assumption Agreement fails to conform to the requirements of existing applicable laws and regulations and that the Assumption Agreement may be brought into conformity with said requirements only by means of a material change to the Assumption Agreement, or in the event that such laws or regulations are changed subsequent to the Effective Date and such change has a material adverse affect on either party or requires a material change to the Assumption Agreement in order for the Assumption Agreement to conform with applicable laws and regulations, the parties shall exercise reasonable efforts to reach an agreement to amend the Assumption Agreement so as to return the parties to the economic position that they would have been in had no such change occurred or so that both parties share the economic position that they would have been in had no such change occurred or so that both parties share the economic detriment of such change equally. If the parties are unable to reach an agreement to amend the Assumption Agreement, then the differences between the parties shall be resolved through arbitration in accordance with the provisions of Article VII. In the event that any changes required to conform the Assumption Agreement to the requirements of applicable law or regulation is not material, the Assumption Agreement shall be amended accordingly. In no event, however, shall this provision prevent either party from exercising any right it otherwise has under this Assumption Agreement. For purposes of this Section 4.6 (b), the word “material” shall mean, when used with respect to (i) any change in law or regulation, or any change into the Assumption Agreement necessary to bring the Assumption Agreement into conformity with the requirements of any law or regulation; or (ii) any delay, omission, error or failure to pay amounts due or to perform any other act required under this Assumption Agreement; or (iii) any default, that the effect or effects of any of (i), (ii) or (iii) above (either individually or cumulatively) results in a deviation from a projected return under this Assumption Agreement (absent the occurrence of (i), (ii) or (III) above, either individually or cumulatively) by at least five percent (5%), measured from the first day that the occurrence of (i), (ii) or (iii) above, or series thereof, taken into account on a cumulative basis, occurred or becomes effective.
|
|
(c)
|
Notification of Disapproval or Change in Law. The Company shall promptly notify the Reinsurer of any disapprovals, recommended changes or statements regarding the Assumption Agreement that are made by any insurance or tax regulatory authorities and of any change in law, regulation or rulings affecting this Assumption Agreement. The Reinsurer shall be allowed to make its own defense of the Assumption Agreement with said authorities.
|
|
4.7
|
Recoupment and Failure of Consideration. If either party to this Assumption Agreement fails to perform this Assumption Agreement in full, then the other party has the right to suspend performance, and if the defaults cannot be cured, within one hundred and twenty (120) days following delivery of written notice from the non-defaulting party to the defaulting party, to terminate this Assumption Agreement. Alternatively, the non-defaulting party can recoup damages (including, without limitation, the amount owned plus interest from the date owed and calculated at the Chase Bank prime rate plus two points) from future settlements between the parties.
|
5.1
|
Consideration. The consideration provided for in Article IV of the Coinsurance Agreement shall be the consideration for the assumption of the Novated Polices (as direct obligations) by the Reinsurer, and there shall be no additional consideration or premium due or payable under this Assumption Agreement.
|
6.1
|
Duty of Cooperation. Each party hereto shall cooperate fully with the other in all reasonable respects in order to accomplish the objectives of this Assumption Agreement. This duty to cooperate shall include obtaining the governmental and regulatory consents and approvals and taking the other steps necessary for the assumption of the Reinsured Policies, as described in Article III hereof. In addition, this duty to cooperate shall include making available any Reinsured Policy records which either party subsequently may require to resolve issues related to claims or liabilities. The Company and the Reinsurer agree to perform such additional acts and execute such additional documents and agreements as may be necessary or desirable to carry out the purposes and objectives of this Assumption Agreement; provide however, that Reinsurer shall reimburse the Company for reasonable out-of-pocket expenses incurred by the Company.
|
7.1
|
General. Any dispute or difference between the parties with respect to the operation or interpretation of, or arising from or relating to, this Assumption Agreement on which and amicable understanding cannot be reached shall be decided pursuant to and in accordance with the terms, conditions and procedures set forth in Article X1 of the Coinsurance Agreement.
|
7.2
|
Survival. This Article shall survive termination of this Assumption Agreement.
|
8.1
|
The Company. The Company hereby agrees on demand to indemnify and hold harmless the Reinsurer, and its respective officers, directors and employees from and against any and all demands, actions, proceedings, suits (by any person) and liabilities, paid or incurred (including reasonable attorneys’ fees), resulting from or arising out of the breach of or failure to perform any of the duties, obligations, covenants or agreements of the Company contained in this Assumption Agreement.
|
8.2
|
The Reinsurer. The Reinsurer hereby agrees to indemnify and hold harmless the Company, and its respective officers, directors and employees from and against any and all demands, actions, proceedings, suits (by and Person) and liabilities, paid or incurred (including reasonable attorneys’ fees), resulting from or arising out of the breach of or failure to perform any of the duties, obligations, covenants or agreements of the Reinsurer contained in this Assumption Agreement.
|
8.3
|
Survival of Article. This Article shall survive termination of this Assumption Agreement.
|
9.1
|
Insolvency-Setoff (or Offset). In the event either party to the Assumption Agreement shall be the subject of insolvency proceedings (“Insolvency Proceedings”) all independent debts on unrelated contracts between the parties shall be setoff to the extent:
|
|
(a)
|
the debt from the creditor to the insolvent arose pre-petition.
|
|
(b)
|
the debt from the insolvent to the creditor arose pre-petition.
|
|
(c)
|
the debts are mutual, meaning they are between the two parties to this Assumption Agreement, and in the same right and the same capacity.
|
|
The cash payment due on each reinsurance agreement between the parties shall constitute the “debt” on such agreement.
|
||
9.2
|
Adequate Assurance. In the event of Insolvency Proceedings involving the Company, the Reinsurer’s future performance is conditioned on receiving adequate assurance of future performance, as defined in the Uniform Commercial Code, §2-206, and the Official Comments thereunder.
|
|
9.3
|
Ipso Facto Clause. If the receiver, including any liquidator or rehabilitator, of one of the parties assigns the rights or delegates the duties of this Assumption Agreement, and the assignee is the subject of Insolvency Proceedings then the other party may immediately terminate the Assumption Agreement without further performance.
|
|
9.4
|
Executory Contract. In the event either party to the Assumption Agreement is the subject of Insolvency Proceedings the receiver of the insolvent, with respect to future account settlements, may affirm or reject the Assumption Agreement, but not affirm the rewards and reject the burdens. If this Assumption Agreement is neither affirmed nor rejected within one hundred and twenty (120) days after a party becomes the subject of Insolvency Proceedings, then the Assumption Agreement shall be deemed to be rejected.
|
|
If either party is the subject of Insolvency Proceedings other than liquidation proceedings, then the other party may request adequate assurance of continued performance and the first priority administrative expense with respect to future performance prior to the time the Assumption Agreement is either affirmed or rejected, and if such is not provided, then, after one hundred and twenty (120) days, the other party may treat its future performance as canceled.
|
||
9.5
|
Insolvency Proceedings. For purposes of this Assumption Agreement the term “Insolvency Proceedings” shall include, but not be limited to, any action by a state insurance regulatory authority to place a party in, or the actual commencement of, delinquency proceedings, including conservatorship, receivership, rehabilitation, reorganization, “adjustment of debts,” “voluntary supervision,” or liquidation.
|
10.1
|
No Third Party Beneficiaries. This Assumption Agreement is between the Company and the Reinsurer, and the performance of the obligations of each party under this Assumption Agreement shall be rendered solely to the other party. In no instance shall anyone other than the Company or the Reinsurer, or their successors or permitted assigns, have any rights, benefits or remedies under this Assumption Agreement. Until the Reinsurer has reinsured a Reinsured Policy on an assumption reinsurance basis pursuant to this Assumption Reinsurance Agreement, the Reinsurer shall not be liable to any insured, contract owner, or beneficiary under any Reinsured Policy.
|
|
10.2
|
Heading and Exhibit. Headings used herein are inserted solely for the convenience of reference and are not a part of this Assumption Agreement and shall not affect the terms hereof. The attached Exhibits are part of this Assumption Agreement.
|
|
10.3
|
Notices. All notices and communications hereunder shall be in writing and shall be deemed to have been received three (3) Business Days after mailing, or if by telefax or by hand, when received, and it by overnight mail, on the next Business Day. Any written notice shall be by either certified or registered mail, return receipt requested, or overnight delivery service (providing for delivery receipt) or delivered by hand. All notices or communications with the Reinsurer under this Assumption Agreement shall be addressed as follows:
|
|
First International Life Insurance Company
c/o The Guardian Life Insurance Company of America
201 Park Avenue South
New York, New York 10003
Attention: Jeremy Starr
Telefax No.: (212) 598-8659
|
||
All notices and communications with the Company under this Assumption Agreement shall be directed to:
|
||
Universal Guaranty Life Insurance Company
5250 South Sixth Street
Springfield, Illinois 62750-5147
Attention: James Melville
Telefax No.: (217) 786-4372
|
||
10.4
|
Severability. If any term or provision of this Assumption Agreement shall be held void, illegal, or unenforceable, the validity of the remaining portions or provisions of this Assumption Agreement shall not be affected thereby; provided, however, that to the extent that such remaining portions or provisions affect the economic positions of the parties hereunder, this Assumption Agreement shall be amended by the parties so as to return the parties to the economic positions that they would have been in had no such severance occurred or so that both parties share the economic detriment of such severance equally.
|
|
10.5
|
Assignment. This Assumption Agreement may not be assigned by either party without the prior written consent of the other and any attempted assignment without such consent shall be void.
|
|
10.6
|
Successors and Assigns. The provisions of this Assumption Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.
|
|
10.7
|
Execution in Counterparts. This Assumption Agreement may be executed by the parties hereto in any number of counterparts, and by each of the parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.
|
|
10.8
|
Amendments. This Assumption Agreement may be amended only by written amendment hereto executed by the parties.
|
|
10.9
|
Waiver. The failure of the Company or Reinsurer to insist on strict compliance with this Assumption Agreement, or to exercise any right or remedy under this Assumption Agreement, shall not constitute a waiver of any rights provided under this Reinsurance Agreement, nor stop the parties from thereafter demanding full and complete compliance nor prevent the parties from exercising such a right or remedy in the future.
|
|
10.10
|
Interpretation. No provision of this Assumption Agreement shall be construed against any party on the ground that such party drafted the provision or caused it to be drafted.
|
|
10.11
|
Entire Agreement. This Assumption Agreement and the Coinsurance Agreement constitute the sole and entire agreement and understanding between the parties hereto, and supersedes all prior agreements, whether oral or written, between the parties, with respect to the subject matter hereof.
|
|
10.12
|
Governing Law and Forum. This Assumption Agreement shall be governed by the laws of the State of New York, without giving effect to principles of conflicts or law thereof. Both parties hereby irrevocable and unconditionally submit themselves to the exclusive jurisdiction of the Courts of the State of New York for any actions, suits or proceedings of or relating to this Assumption Agreement and the transactions contemplated thereby that cannot be resolved pursuant to the provisions of Article VII hereof.
|
|
10.13
|
Confidentiality. Except as required by law or regulatory authority, neither the Company nor the Reinsurer shall publicly disclose the purchase price or other terms of the transfer proposed herein, but this restriction shall terminate if such price and terms shall otherwise become public knowledge. In the event that the Reinsurer or its representative are requested or required by oral questions, interrogatories, requests for information or documents, subpoena, civil investigation, demand or similar process to disclose any terms or information regarding such transfer provided, however, that to the extent practicable under the circumstances the Reinsurer shall give the Company reasonable notice of the order or request before making the disclosure provided that such notice can be provided without cost to the Reinsurer. This Section 10.13 shall survive termination of this Assumption Agreement and the Coinsurance Agreement.
|
|
IN WITNESS WHEREOF, the parties hereto have caused this Assumption Agreement to be executed by their duly authorized representatives.
|
By
|
/s/ James E. Melville
|
Name: James E Melville
|
|
Title: President
|
|
ATTEST
|
|
/s/ Theodore C. Miller
|
|
Name: Theodore C. Miller
|
|
Title: Vice President
|
|
By:
|
/s/ Jeremy Starr
|
Name: Jeremy Starr
|
|
Title: Vice President, Reinsurance
|
|
October 18, 1996
|
|
ATTEST:
|
|
/s/ Benjamin H Mitchell
|
|
Name: Benjamin H. Mitchell
|
|
Title: Actuary
|
|
October 18, 1996
|
1.
|
Effective as of June 18, 2003, a certain Aircraft Lease Agreement (hereinafter referred to as the “Lease”) was executed by Bandyco, FSNB and UTG.
|
2.
|
The Lease was for a term of five (5) years, commencing on the 18th day of June 2003 and ending on the 17th day of June, 2008.
|
1.
|
BANDYCO, FSNB and UTG mutually agree that the duration of the Lease shall be extended for an additional five (5) year period. Said term shall commence effective as of June 18, 2008 and shall remain in force until June 17, 2013.
|
2.
|
The parties further acknowledge and agree that said Lease shall remain in full force and effect for the extended term and that the “buy-out provisions” may be exercised at the conclusion of the additional term created hereby in the same manner as set forth in the Lease.
|
3.
|
This Agreement shall be binding on the heirs, successors and assigns of the parties hereto.
|
4.
|
This document may be signed in counterparts, each of which shall be considered an original signature and all of which when taken together shall constitute one and the same instrument.
|
1.
|
It is the expressed understanding of the respective Lessees that each party shall and does have different intentions pertaining to the uses of the said aircraft for the benefit of each particular Lessee, and that the parties desire by this agreement to allocate the respective responsibilities, duties and obligations each Lessee shall have in performance of the terms hereof and the terms and provisions of the underlying lease.
|
2.
|
It is the expressed intent of the Lessees to reduce to this writing the respective rights, duties, responsibilities, obligations and expectations each Lessee shall have concerning this agreement, the underlying lease and the use of the said aircraft.
|
3.
|
Is further the intent of the parties that the Lessee’s portion of the operational costs of using the aircraft shall be based on the amount of usage by Lessee of the said aircraft assessed at the rate of $1200.00 per hour, or as may be reestablished from time to time by Bandyco, LLC, and the Lessee’s portion of the non-operational costs shall be based on the percentage of ownership to be acquired by the Lessee as stated above.
|
1.
|
The parties mutually agree that at the conclusion of this lease, provided that the Lessees have fully performed in the manner as set forth herein, FSNB is hereby granted the right and option to purchase 33.33% interest in said aircraft for the sum of ONE DOLLAR ($1.00); and UTG is hereby granted the right and option to purchase 16.67% interest in said aircraft for the sum of ONE DOLLAR ($1.00).
|
1.
|
It is mutually agreed that use of the aircraft shall be on a “first-come-first-serve” basis.
|
2.
|
It is the duty of the Lessee who wishes to employ or use the aircraft to schedule its use as soon as practicable with Bandyco’s, LLC., agent who agrees to maintain a calendar for such purpose as to coordinate the aircraft’s use.
|
1.
|
It is understood and agreed by the parties hereto that financial record keeper as from time to time may be designated by Bandyco shall be responsible for overseeing the payment of all accounts payable and expenses incurred by the lessees as a result of the operation, fuelling, storage and piloting of said aircraft.
|
2.
|
It is further understood by the parties hereto that the aircraft shall maintain a “home base” which shall be the airport located in Junction City, Boyle County, Kentucky.
|
3.
|
The parties also stipulate that Don Bandy is the pilot in command, and he will designate the co-pilots of the aircraft and that no other pilot shall operate same with out approval of Bandyco, LLC. And that Don Bandy, or the approved pilot in command shall be responsible for maintaining a “flight log” which reports when the aircraft is in use, the Lessees using same and the duration of usage by the Lessees.
|
4.
|
This agreement may not be assigned without approval of all the members of Bandyco, LLC.
|
5.
|
Each Lessee agrees to save and hold Bandyco, LLC, the general members of Bandyco, LLC, and the other Lessee harmless from any and all claims, demands, damages, actions, and causes of action which may arise from the operation and employment of the aircraft due to loss from property damage or personal injury while that particular Lessee has the aircraft in its employment or use in the event that said loss in not a loss which is covered by the insurance policy herein below referenced.
|
6.
|
The Lessor agrees to and shall procure a general liability insurance policy with standard loss coverage terms with such limits, as the Lessor may deem appropriate. The costs of any coverage above, approved by the Lessor, shall be borne by the party requesting additional coverage.
|
7.
|
The parties agree that the agreement shall be binding as to those parties to whom their authorized signatures are affixed hereto, and that each Lessee may affix their signature to separate originals hereof.
|
BANDYCO, LLC
|
||||
DATE:
|
3/15/04
|
BY:
|
/s/ Stephen Acton
|
|
AUTHORIZED MEMBER
|
||||
DATE:
|
2/10/04
|
BY:
|
/s/ Jesse T. Correll
|
|
AUTHORIZED OFFICER
|
||||
DATE
|
March 2, 2004
|
BY:
|
/s/ Theodore C. Miller
|
|
AUTHORIZED OFFICER
|
Item Description
|
Page
|
|
1
|
Description of the parties ……………………………………....................................................................................................................................……..…
|
3
|
2
|
General description of loan activity ……………………………....................................................................................................................................….…
|
3
|
3
|
UG mortgage loan guidelines ……………..…………………….....................................................................................................................................……
|
3
|
4
|
Loan limitations …………………………………………………….....................................................................................................................................…..
|
5
|
5
|
Representations and warranties by FSNB ……………………......................................................................................................................................……
|
5
|
6
|
Representations and warranties by UG ………………………......................................................................................................................................…….
|
6
|
7
|
Loan origination fees ………………………………………………....................................................................................................................................….
|
6
|
8
|
Loan servicing fees …………………………………………………....................................................................................................................................…
|
7
|
9
|
FSNB as agent for collection and servicing …………………….....................................................................................................................................…..
|
7
|
10
|
Termination of agency status …………………………………….....................................................................................................................................…..
|
8
|
11
|
Additional obligations of FSNB …………………………………...................................................................................................................................……
|
8
|
12
|
Application of the payments ……………………………………...................................................................................................................................…….
|
9
|
13
|
Additional loans by FSNB ………………………………………....................................................................................................................................……
|
10
|
14
|
Default ……………………………………………………………....................................................................................................................................…….
|
10
|
15
|
Access to records …………………………………………………....................................................................................................................................…..
|
11
|
16
|
Indemnification ……………………………………………………....................................................................................................................................…...
|
11
|
17
|
Miscellaneous …………………………………………………….....................................................................................................................................……
|
12
|
1
|
Collateral: UG will in connection with the loans require real estate to be pledged as security. All loans will be properly margined with both Fair Market Value and Liquidation Value determined in order to understand and minimize the insurance subsidiaries risk.
|
2
|
Capacity: All loans will be authorized from borrower’s past income statements, tax returns and pro-formas to insure that sufficient income is available to repay UG loans.
|
3
|
Character: FSNB shall do background checks and credit investigations to insure that potential borrowers have a past history of paying as agreed and promised on previous obligations to other creditors.
|
4
|
Conditions: Each loan will be reviewed to make sure that the type of loan being considered should be repaid as projected with no foreseeable outside conditions or sources affecting the repayment ability of the borrower.
|
5
|
Capital: Each loan shall be analyzed to insure that each borrower has a net worth or credit position sufficient to withstand an economic downturn so that UG can expect repayment in full.
|
6
|
Documentation: Each loan that UG makes or purchases shall have a file with the following documentation:
|
a)
|
Financial statements/Income statements
|
b)
|
Legal documentation evidencing debt (note)
|
c)
|
Real estate mortgage
|
d)
|
Title opinions or policies
|
e)
|
Appraisals/Market values
|
FIRST SOUTHERN NATIONAL BANK
|
|||||
Signature
|
/s/ Randall Attkisson
|
||||
Printed Name
|
Randall Attkisson
|
||||
Title
|
CFO
|
||||
ATTEST:
|
|||||
Signature
|
/s/ Betty England
|
||||
Printed Name
|
Betty England
|
||||
Title
|
Administrative Assistant
|
||||
UNIVERSAL GUARANTY LIFE INSURANCE COMPANY
|
|||||
Signature
|
/s/ Theodore C. Miller
|
||||
Printed Name
|
Theodore C. Miller
|
||||
Title:
|
Sr. Vice President
|
||||
ATTEST
|
|||||
Signature
|
/s/ Daniel S. Maloney
|
||||
Printed Name
|
Daniel S. Maloney
|
||||
Title:
|
Treasurer
|
Originating Bank
|
Participant
|
First Southern National Bank
|
Universal Guaranty Life Insurance Company
|
BORROWER
|
|
Interest
Rate
|
Principal Amount/Credit Limit
|
Funding/
Agreement
Date
|
Maturity
Date
|
Customer Number
|
Loan
Number
|
1.
|
Sale of Loan Participation Interest: Originating Bank hereby sells, assigns, transfers and delivers to the Participant, a $___________________________ interest in the Originating Bank's ownership rights in and to the indebtedness, promissory note or notes, collateral security and all documents relating to the loan or loans described above (hereinafter, one or more, referred to as the 'Loan").
|
|
2.
|
Ownership of Loan Participation Interest: The parties hereto agree that the Participant shall be considered for all purposes as the legal and equitable owner of the above interest in the indebtedness, promissory note or notes, collateral security and all documents relating to the Loan, together with all of the rights, privileges and remedies applicable thereto.
|
|
THIS LOAN PARTICIPATION CONSTITUTES A SALE OF A PERCENTAGE OWNERSHIP INTEREST IN THE ABOVE REFERENCED INDEBTEDNESS, NOTE OR NOTES, COLLATERAL SECURITY AND OTHER LOAN DOCUMENTS AND SHALL IN NO WAY BE CONSTRUED AS AN EXTENSION OF CREDIT BY THE PARTICIPANT TO THE ORIGINATING BANK.
|
||
3.
|
Agent for Collection and Servicing:
|
|
(a)
|
The Originating Bank shall act as the disclosed agent of the Participant in connection with receipt and collection of the Participant's ownership interest in the Loan and in payments to be made thereunder. The Originating Bank shall additionally act as the disclosed agent of the Participant in connection with the continued servicing of the Loan.
|
|
(b)
|
The Originating Bank shall exercise the same degree of care and discretion in continuing to service the Loan and in collecting payments thereunder, as the Originating Bank would ordinarily take in servicing the Loan and in collecting payments thereunder solely for its own account.
|
|
(c)
|
The Originating Bank may not, however, without the prior consent and concurrence of the Participant; (i) make or consent to any amendments in the terms and conditions of the Loan, or the terms of the note or notes evidencing the Loan, or in any security agreement or instrument securing the Loan; (ii) waive or release any claim against any Borrower and/or against any co-maker, guarantor or endorser under the Loan; (iii) make or consent to any release, substitution or exchange of collateral; (iv) accelerate payment under the Loan and/or under any note or notes evidencing the Loan; (v) commence any type of collection proceeding against the Borrower and/or against any co-maker, guarantor or endorser under the Loan; and/or (vi) seize, sell, transfer, assign, foreclose or attempt to exercise against any collateral securing the Loan.
|
|
(d)
|
The Participant may terminate the agency status of the Originating Bank as provided in Section 4 of this Agreement.
|
|
4.
|
Termination of Agency Status:
|
|
(a)
|
The Originating Bank's agency status under Section 3 above shall terminate at the election of the Participant upon: (i) the insolvency, closing or liquidation of the Originating Bank; (ii) if, within the opinion of the Participant, the Originating Bank should fail to comply with its fiduciary and/or other obligations as provided under this Agreement; or (iii) if the Originating Bank and the Participant are unable to mutually agree as to a course of action to be taken with regard to collection of the Loan following the Borrower's default or as to any matter listed in Section 3(C) of this Agreement.
|
|
(b)
|
Upon termination of the Originating Bank's agency status, the Participant shall have the right to immediately notify the Borrower, directing the Borrower to forward principal and interest payments under the Loan directly to the Participant, in sufficient amounts to satisfy the Participant's then percentage ownership interest in the Loan. The Originating Bank shall join in this notice to the Borrower upon request by the Participant.
|
|
(c)
|
Unless otherwise provided herein, the remaining terms and conditions of this Agreement shall survive the termination of the Originating Bank agency status. Such remaining terms and conditions of this Agreement shall continue to apply until such time as the Loan is paid in full or the Participant's ownership interest in the Loan is repurchased by the Originating Bank as provided in Section 11 below.
|
|
5.
|
Representations and Warranties by Originating Bank:
|
|
(a)
|
The Originating Bank makes the following representations and warranties to the Participant: (i) the Originating Bank has provided the Participant with copies of all relevant credit and other information currently in the possession of the Originating Bank, that were used by the Originating Bank as a basis of and for its decision to make the Loan to the Borrower; (ii) the Originating Bank has additionally provided the Participant with copies of the Loan documents that were executed (and/or are to be executed) by the Borrower as well as by other co-makers, guarantors and endorsers under the Loan; (iii) where the Loan is presently in existence, there are no events of default under the Loan and/or under the Loan documents, the Loan has not been classified on the books of the Originating Bank, the Loan is presently on accrual status; and the terms of the Loan have not previously been renegotiated as a result of a prior deterioration in the Borrower's financial condition.
|
|
(b)
|
The Originating Bank makes no representation or warranties, whether expressed or implied, to the Participant, as to the collectibility of the Loan, the continued solvency of the Borrower, or as to the existence, sufficiency or value of the collateral securing the Loan.
|
|
(c)
|
The Originating Bank makes no representations or warranties, whether expressed or implied, to the Participant, as to the validity and enforceability of the Loan documents, other than that: (i) the Loan documents were validly executed by the Borrower, as well as, to the degree applicable, by the co-makers, guarantors and/or endorsers under the Loan; (ii) to the extent required under applicable law, the security agreements under the Loan were (and/or will be) properly recorded in order to result in the valid perfection of a security interest on the collateral subject to such agreements; and (iii) to the extent required under applicable law, the Originating Bank has taken (and/or will continue to take) whatever additional actions may be necessary and proper to validly perfect and maintain a security interest on the collateral securing the Loan.
|
|
6.
|
Representations and Warranties by Participant: The Participant represents and warrants to the Originating Bank that the Participant based its decision to purchase a participation ownership interest in the Loan solely upon the Participant's own independent evaluation of the Loan, the Borrower's creditworthiness and the existence, value and lien status of collateral securing the Loan.
|
7.
|
Additional Obligations of Originating Bank:
|
|
(a)
|
The Originating Bank shall promptly notify the Participant should the Originating Bank learn or have knowledge of the following: (i) any change in the financial condition of the Borrower, or any co-maker, guarantor or endorser under the Loan, which may have a material adverse effect upon continuation of the payments under the Loan or the Loan's ultimate collectibility; (ii) any material change in the value of collateral securing the Loan; (iii) any change in lien status as affecting the secured collateral; (iv) any request by the Borrower, or by any co-maker, guarantor or endorser under the Loan, for any change in the terms and conditions of the Loan, or in the terms of any note or notes evidencing the Loan, or in any security agreement or instrument securing the Loan; (v) any request by the Borrower, or by any co-maker, guarantor or surety under the Loan, or the release, substitution or exchange of any collateral securing the Loan; (vi) any request of the Borrower, or by any co-maker, guarantor or endorser under the Loan, for the release of any personal obligations of any such party under the Loan; (vii) any request by the Originating Bank for any change in the terms and conditions of the Loan, or in the terms of any note or notes evidencing the Loan, or in any security agreement or instrument securing the Loan; (viii) any request by the Originating Bank for an increase in and/or substitution or exchange of collateral securing the Loan; (ix) any failure by the Borrower to pay principal and/or interest payments under the Loan when due; and/or (x) the occurrence of any other event, which with the passage of time and/or failure to cure, would constitute an event of default under the Loan or under any note or notes evidencing the Loan, or under any security agreement or instrument securing the Loan.
|
|
(b)
|
As long as the Participant continues to have an ownership interest in the Loan, the Originating Bank agrees to regularly provide the Participant with complete and current credit related and other information concerning the Borrower, the Loan and the collateral securing the Loan including without limitations, copies of: (i) current financial statements of the Borrower, as well as of all co-makers, guarantors and sureties under the Loan; (ii) any officer's certificates, financial and other statements and information submitted by the Borrower to the Originating Bank in connection with the Loan; (iii) the records of the Originating Bank reflecting the amounts and dates of receipt of principal and interest payments under the Loan; (iv) any information and/or documents in possession of the Originating Bank bearing upon the continuing creditworthiness of the Borrower.
|
8.
|
Application of the Payments (only the checked provision applies):
|
|
(a)
|
The Originating Bank and the Participant shall each share in all principal and interest payments and other collections under the Loan in proportion to their respective percentage ownership interests in the Loan (with appropriate provisions made for differences in interest rates between the Originating Bank and the Participant).
|
|
(b)
|
All principal payments under the Loan shall be first applied towards payment of the Participant's ownership interest in the Loan, until such time as the Participant's ownership interest is paid in full. However, if there should be an event of default under the Loan (as provided under the Loan documents), the Originating Bank and the Participant shall thereafter each share in subsequent principal and interest payments and/or collections in proportion to their respective percentage ownership interests in the Loan as existing at time of default (with appropriate provisions made for differences in interest rates between the Originating Bank and the Participant).
|
Principal and interest payments and/or other amounts collected by the Originating Bank under the Loan shall be held in trust for the benefit of the Participant, until such funds, representing the Participant's ownership interest in such payments under (a) or (b) above, are actually paid to and received by the Participant.
|
9.
|
Additional Loans by Originating Bank:
|
|
(a)
|
The Participant recognizes and agrees that the Originating Bank may have other existing loans and in the future may make additional loans to the Borrower and/or to other co-makers, guarantors, and sureties under the Loan, which other and/or additional loans may not be participated to the Participant.
|
|
(b)
|
The Participant further recognizes and agrees that the Originating Bank shall have no obligation to attempt to collect payments under the Loan in preference and priority over the collection and/or enforcement of any other and/or additional loans by the Originating Bank as referenced in (a) above.
|
|
(c)
|
The Originating Bank, however, agrees that the proceeds of all collateral directly securing repayment of the Loan shall be applied first to the payment of the Loan as provided in Section 8 above. Any excess proceeds may be applied by the Originating Bank to the payment of any other and/or additional loans then owing to the Originating Bank, that may be indirectly secured by such collateral as a result of the inclusion of "cross-collateralization" provisions in the security agreements executed in connection with the Loan in favor of the Originating Bank.
|
|
(d)
|
The parties hereto further agree that the Participant shall have no interest in any other property of the Borrower or any co-maker, guarantor or endorser, taken as security for any other and/or additional loan or loans made by the Originating Bank, or acquired by the Originating Bank or in any property now or hereafter in the possession or control of the Originating Bank, which other property may indirectly secure repayment of the Loan by reason of "cross-collateralization"; except that, if any such other property or the proceeds thereof is applied to the reduction of the Loan, then the Participant shall be entitled to share in such an application of payment or payments as provided in Section 8 of this agreement.
|
10.
|
Default:
|
|
(a)
|
Upon the occurrence of any event of default under the Loan, the Originating Bank and the Participant shall consult upon themselves as to a mutually agreed upon course of action to pursue in order to collect the amounts then owed under the Loan.
|
|
(b)
|
If the Participant and the Originating Bank cannot mutually agree upon what course of action to take, or if the Originating Bank should fail for any reason to take such mutually agreed upon action or actions to the satisfaction of the Participant, the parties hereto unconditionally agree that either the Originating Bank or the Participant may then elect, upon written notice to the other, to accelerate payment under the Loan and/or under any note or notes evidencing the Loan, and to institute such legal proceedings as are necessary and appropriate, within the sole opinion of the instituting bank, to collect the indebtedness then due under the Loan, to enforce the security therefore, and to protect and preserve the respective rights and interests of the parties. To that end, the bank instituting such proceedings shall make the other bank a party thereto and each bank shall bear the costs and expenses of such proceedings in proportion to their respective percentage interest in the loan existing at the time of the default.
|
|
(c)
|
In the event that the Participant elects to accelerate payment of the Loan and to institute legal proceedings as provided in (b) above, or upon the Originating Bank's failure, insolvency and/or closing: (i) the Originating Bank unconditionally agrees to immediately forward the original Loan documents (including, without limitation, the original of the Borrower's note or notes evidencing the Loan and all security agreements and instruments therefore) to the Participant, together with such other documents, files and records as may be necessary, within the opinion of the Participant and its counsel, to permit the Participant to institute appropriate collection and/or foreclosure proceedings under the Loan and/or against the collateral securing the Loan; (ii) the Originating Bank shall further turn over any secured collateral in its possession to the Participant; (iii) the Originating Bank additionally agrees to join in any demand letter or other communications forwarded by the Participant to the Borrower and/or to any co-makers, guarantors or endorsers under the Loan; (iv) the Originating Bank further agrees to execute such additional documents in favor of the Participant as may be deemed to be necessary and proper by the Participant and its counsel to permit the Participant to foreclose against collateral securing the Loan under applicable state law procedures.
|
11.
|
Miscellaneous:
|
|
(a)
|
The Participant may not sell, pledge, assign, sub-participate or otherwise transfer its percentage ownership interest under the Loan without first obtaining the prior written consent of the Originating Bank, which consent shall not unreasonably be withheld.
|
|
(b)
|
This Agreement shall be governed and construed under the laws of the State of Ohio.
|
|
(c)
|
This Agreement shall be binding upon the parties hereto, as well as their respective legal representatives, successors and assigns.
|
|
(d)
|
All notices under this Agreement shall be in writing and mailed to the respective parties at the address given herein.
|
|
(e)
|
Should any provision of this Agreement be deemed invalid or unenforceable as contrary to applicable law, the parties hereto agree that such provision shall automatically be deemed to be reformed as to be consistent with applicable law.
|
|
12.
|
Other Terms and Conditions:
|
|
(a)
|
Participant will pay to Originating Bank an annual servicing fee of .25%.
|
ORIGINATING BANK:
|
PARTICIPANT:
|
|||||
First Southern National Bank
|
Universal Guaranty Life Insurance Company
|
|||||
Date
|
Date
|
Exhibit 21.1
|
|||||
LIST OF SUBSIDIARIES
|
|||||
Subsidiary Name
|
State of Incorporation
|
||||
Cumberland Woodlands, LLC
|
Kentucky
|
||||
Stanford Wilderness Road, LLC
|
Kentucky
|
||||
Roosevelt Equity Corporation
|
Delaware
|
||||
UTAG, Inc.
|
Illinois
|
||||
Universal Guaranty Life Insurance Company
|
Ohio
|
||||
HPG Acquisitions, LLC
|
Texas
|
||||
RLF Lexington Properties, LLC
|
Colorado
|
||||
Acap Corporation
|
Delaware
|
||||
American Capitol Insurance Company
|
Texas
|
||||
Imperial Plan, Inc.
|
Texas
|
||||
Sun Valley Homes, LLC
|
Arizona
|
||||
Sand Lake, LLC
|
Texas
|
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