RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2011

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

10. RELATED PARTY TRANSACTIONS

On February 20, 2003, UG purchased $4,000,000 of a trust preferred security offering issued by FSBI.  The security has a mandatory redemption after 30 years with a call provision after 5 years.  The security pays a quarterly dividend at a fixed rate of 6.515%.  The Company received $264,219 of dividends in 2011 and 2010.  On March 30, 2009, UG purchased $1,000,000 of FSBI common stock.  The sale and transfer of this security is restricted by the provisions of a stock restriction and buy-sell agreement.

On November 14, 2011, the merger of UTG, Inc and ACAP took place. Shareholders of ACAP received shares of UTG in exchange for their ACAP shares. ACAP was a 73% owned subsidiary of UG. The merger reduced the corporate structure and provided certain efficiencies and economies to the Companies.  All ACAP shareholders, other than UTG or UG, have the right to receive 233 shares of UTG common stock for each share of ACAP common stock they owned at closing.  Under the terms of the exchange ratio, UTG issued 50,328 shares to former ACAP shareholders.  An additional 129,548 UTG shares were not issued due to dissenting ACAP shareholders.  See discussion in note 9 relating to the ACAP dissenting shareholders.

On September 28, 2011 UTG entered a joint ownership agreement with Bandyco, LLC and First Southern National Bank, for an 8.08% interest in an aircraft. Bandyco, LLC is affiliated with Ward, F Correll, who is a director of the Company. The Company was responsible for an initial payment of $150,000 on September 30, 2011, along with a $125,000 payment on October 30, 2011. The Company will pay a monthly operational fee of $25,000 starting in November 2011 and lasting through July 2013. The aircraft is issued for business related travel by various officers and employees of the Company. For years 2011 and 2010 UTG paid $392,227 and $308,362 for costs associated with the aircraft.

Effective January 1, 2007, UTG entered into administrative services and cost sharing agreements with its subsidiaries, UG and AC.  Under these arrangements, each company pays its proportionate share of expenses of the entire group, based on an allocation formula.  During 2011, UG and AC paid $3,858,507 and $3,326,530, respectively.  During 2010, UG and AC paid $3,692,434 and $3,174,724, respectively.  Respective domiciliary insurance departments have approved the agreements of the insurance companies and it is Management's opinion that where applicable, costs have been allocated fairly and such allocations are based upon accounting principles generally accepted in the United States of America.

The Company from time to time acquires mortgage loans through participation agreements with FSNB.  FSNB services the Company's mortgage loans including those covered by the participation agreements.  The Company pays a .25% servicing fee on these loans and a onetime fee at loan origination of .50% of the original loan amount to cover costs incurred by FSNB relating to the processing and establishment of the loan.  The Company paid $136,457 and $190,297 in servicing fees and $89,651 and $508,283 in origination fees to FSNB during 2011 and 2010, respectively.

The Company reimbursed expenses incurred by employees of FSNB relating to travel and other costs incurred on behalf of or relating to the Company.  The Company paid $15,392 and $23,763 in 2011 and 2010, respectively to FSNB in reimbursement of such costs.  In addition, the Company began reimbursing FSNB a portion of salaries and pension costs for Mr. Correll, Mr. Ditto and a third employee.  The reimbursement was approved by the UTG Board of Directors and totaled $348,610 and $433,340 in 2011 and 2010, respectively, which included salaries and other benefits.