UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ____________

Commission File No. 0-16867

	UTG, INC.
	(Exact name of registrant as specified in its charter)
Delaware		20-2907892
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
	5250 SOUTH SIXTH STREET
	P.O. BOX 5147
	SPRINGFIELD, IL  62705
	(Address of principal executive offices) (Zip Code)

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of the registrant's common stock as of July 29, 2016 was 3,368,933.

UTG, Inc.

(The "Company")

TABLE OF CONTENTS

PART I.   Financial Information	3
Item 1.  Financial Statements	3
Condensed Consolidated Balance Sheets	3
Condensed Consolidated Statements of Operations	4
Condensed Consolidated Statements of Comprehensive Income (Loss)	5
Condensed Consolidated Statements of Cash Flows	6
Notes to Condensed Consolidated Financial Statements	7
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 4.  Controls and Procedures	24
PART II.  Other Information	24
Item 1.  Legal Proceedings	24
Item 1A. Risk Factors	24
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3.  Defaults Upon Senior Securities	24
Item 4.  Mine Safety Disclosures	24
Item 5.  Other Information	24
Item 6.  Exhibits	24
Signatures	25
Exhibit Index	26

Part 1.   Financial Information

Item 1.  Financial Statements

UTG, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

ASSETS
		June 30,		December 31,
		2016		2015*
Investments:
Investments available for sale:
Fixed maturities, at fair value (amortized cost $173,593,690 and $188,647,671)	$	191,847,215	$	185,119,097
Equity securities, at fair value (cost $44,247,930 and $43,954,737)		54,367,773		45,685,340
Trading securities, at fair value (cost $70,690 and $0)		63,000		-
Mortgage loans on real estate, at amortized cost		19,379,549		17,769,930
Investment real estate		51,475,190		47,650,102
Notes receivable		14,963,160		10,597,907
Policy loans		10,566,130		10,684,244
Total investments		342,662,017		317,506,620
Cash and cash equivalents		14,033,579		11,822,615
Accrued investment income		2,922,409		2,821,338
Reinsurance receivables:
Future policy benefits		26,942,419		27,462,830
Policy claims and other benefits		3,913,650		3,553,978
Cost of insurance acquired		7,703,887		8,140,379
Property and equipment, net of accumulated depreciation		1,790,778		2,016,611
Income tax recoverable		752,261		619,043
Other assets		2,869,119		3,283,681
Total assets	$	403,590,119	$	377,227,095
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Policy liabilities and accruals:
Future policyholder benefits	$	267,418,927	$	269,119,859
Policy claims and benefits payable		3,497,170		3,759,565
Other policyholder funds		440,485		457,774
Dividend and endowment accumulations		14,449,910		14,233,644
Deferred income taxes		13,856,140		3,405,467
Trading securities, at fair value (proceeds $181,160 and $108,881)		53,721		28,609
Other liabilities		7,257,126		9,234,675
Total liabilities		306,973,479		300,239,593
Shareholders' equity:
Common stock - no par value, stated value $.001 per share.  Authorized 7,000,000 shares - 3,670,514 and 3,699,447 shares outstanding		3,670		3,699
Additional paid-in capital		42,547,054		43,002,670
Retained earnings		33,631,562		33,062,282
Accumulated other comprehensive income (loss)		18,427,817		(1,183,552)
Total UTG shareholders' equity		94,610,103		74,885,099
Noncontrolling interests		2,006,537		2,102,403
Total shareholders' equity		96,616,640		76,987,502
Total liabilities and shareholders' equity	$	403,590,119	$	377,227,095

* Balance sheet audited at December 31, 2015.

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

		Three Months Ended				Six Months Ended
		June 30,		June 30,		June 30,		June 30,
		2016		2015		2016		2015
Revenue:
Premiums and policy fees	$	3,040,968	$	2,861,481	$	5,815,731	$	5,798,995
Ceded reinsurance premiums and policy fees		(736,897)		(777,916)		(1,504,198)		(1,557,242)
Net investment income		3,210,481		2,055,900		7,228,972		8,010,402
Other income		110,351		148,037		295,547		315,430
Revenues before realized gains (losses)		5,624,903		4,287,502		11,836,052		12,567,585
Realized investment gains (losses), net:
Other-than-temporary impairments		-		-		-		-
Other realized investment gains, net		655,564		1,522,414		4,067,797		4,426,320
Total realized investment gains (losses), net		655,564		1,522,414		4,067,797		4,426,320
Total revenue		6,280,467		5,809,916		15,903,849		16,993,905
Benefits and other expenses:
Benefits, claims and settlement expenses:
Life		5,567,327		5,197,017		11,382,479		9,873,230
Ceded Reinsurance benefits and claims		(910,789)		(627,557)		(1,506,070)		(1,122,253)
Annuity		298,677		280,984		627,576		530,234
Dividends to policyholders		121,555		120,962		249,234		251,598
Commissions and amortization of deferred policy acquisition costs		(39,176)		(42,051)		(71,942)		(84,276)
Amortization of cost of insurance acquired		218,246		226,901		436,492		453,802
Operating expenses		1,904,102		2,148,087		3,678,339		4,347,182
Interest expense		-		23,550		-		61,523
Total benefits and other expenses		7,159,942		7,327,893		14,796,108		14,311,040
Income before income taxes		(879,475)		(1,517,977)		1,107,741		2,682,865
Income tax (expense) benefit		307,193		646,356		(492,487)		(814,893)
Net income (loss)		(572,282)		(871,621)		615,254		1,867,972
Net (income) loss attributable to noncontrolling interests		(140,540)		83,832		(45,973)		(152,006)
Net income (loss) attributable to common shareholders'	$	(712,822)	$	(787,789)	$	569,281	$	1,715,966
Amounts attributable to common shareholders'
Basic income (loss) per share	$	(0.19)	$	(0.21)	$	0.15	$	0.46
Diluted income (loss) per share	$	(0.19)	$	(0.21)	$	0.15	$	0.46
Basic weighted average shares outstanding		3,673,545		3,712,325		3,686,968		3,710,038
Diluted weighted average shares outstanding		3,673,545		3,712,325		3,686,968		3,710,038

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

		Three Months Ended				Six Months Ended
		June 30,		June 30,		June 30,		June 30,
		2016		2015		2016		2015
Net income (loss)	$	(572,282)	$	(871,621)	$	615,254	$	1,867,972
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period, pre-tax		19,065,483		(4,156,380)		30,868,008		(446,781)
Tax (expense) benefit on unrealized holding gains (losses) arising during the period		(6,672,919)		1,454,733		(10,803,803)		156,373
Unrealized holding gains (losses) arising during period, net of tax		12,392,564		(2,701,647)		20,064,205		(290,408)
Less reclassification adjustment for gains included in net income		(442,220)		(706,760)		(696,673)		(823,051)
Tax expense  for gains included in net income		154,777		247,366		243,836		288,068
Reclassification adjustment for gains included in net income, net of tax		(287,443)		(459,394)		(452,837)		(534,983)
Subtotal:  Other comprehensive income (loss), net of tax		12,105,121		(3,161,041)		19,611,368		(825,391)
Comprehensive income (loss)		11,532,839		(4,032,662)		20,226,622		1,042,581
Less comprehensive (income) loss attributable to noncontrolling interests		(140,540)		83,832		(45,973)		(152,006)
Comprehensive income (loss) attributable to UTG, Inc.	$	11,392,299	$	(3,948,830)	$	20,180,649	$	890,575

See accompanying notes.

UTG, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

		Six Months Ended
		June 30,		June 30,
		2016		2015
Cash flows from operating activities:
Net income attributable to common shareholders	$	569,281	$	1,715,966
Adjustments to reconcile net income to net cash used in operating activities:
Amortization (accretion) of investments		(658,331)		(3,008,714)
Realized investment gains, net		(4,067,797)		(4,426,320)
Unrealized trading (gains) losses included in income		(39,476)		1,019,262
Amortization of cost of insurance acquired		436,492		453,802
Depreciation		412,472		396,041
Net income (loss) attributable to noncontrolling interest		45,973		152,006
Charges for mortality and administration of universal life and annuity products		(1,107,778)		(3,325,645)
Interest credited to account balances		867,663		2,533,573
Change in accrued investment income		(101,071)		(128,529)
Change in reinsurance receivables		160,739		(82,973)
Change in policy liabilities and accruals		(1,764,350)		(1,672,749)
Change in income taxes receivable (payable)		(133,218)		(2,542,138)
Change in other assets and liabilities, net		(1,701,843)		1,459,220
Net cash used in operating activities		(7,081,244)		(7,457,198)
Cash flows from investing activities:
Proceeds from investments sold and matured:
Fixed maturities available for sale		21,633,273		10,878,924
Equity securities available for sale		1,195,793		5,697,643
Trading securities		72,279		112,879
Mortgage loans		2,000,374		13,888,981
Real estate		8,002,596		9,713,102
Notes receivable		2,682,590		-
Policy loans		1,300,996		958,134
Short-term investments		-		388,392
Total proceeds from investments sold and matured		36,887,901		41,638,055
Cost of investments acquired:
Fixed maturities available for sale		(6,139,596)		(7,408,461)
Equity securities available for sale		(1,463,409)		(4,125,392)
Trading securities		(70,690)		(463,895)
Mortgage loans		(2,694,686)		(5,044,175)
Real estate		(8,668,777)		(6,904,517)
Notes Receivable		(7,047,843)		-
Policy loans		(1,182,883)		(686,113)
Short-term investments		-		(19,200)
Total cost of investments acquired		(27,267,884)		(24,651,753)
Net cash provided by investing activities		9,620,017		16,986,302
Cash flows from financing activities:
Policyholder contract deposits		772,689		2,712,136
Policyholder contract withdrawals		(594,960)		(3,013,592)
Purchase of treasury stock		(455,645)		(28,297)
Non controlling contributions (distributions) of consolidated subsidiary		(49,893)		(532,542)
Net cash used in financing activities		(327,809)		(2,862,295)
Net increase in cash and cash equivalents		2,210,964		6,666,809
Cash and cash equivalents at beginning of period		11,822,615		13,977,443
Cash and cash equivalents at end of period	$	14,033,579	$	20,644,252

See accompanying notes.

UTG, Inc.

Notes to Condensed Consolidated Financial Statements

Note 1 – Basis of Presentation

The accompanying Condensed Consolidated Balance Sheet as of December 31, 2015, which has been derived from audited consolidated financial statements, and the unaudited interim Condensed Consolidated Financial Statements include the accounts of UTG, Inc. (the "Parent") and its subsidiaries (collectively with the Parent, the "Company").  All significant intercompany accounts and transactions have been eliminated in consolidation.  The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 8 of regulation S-X.  Accordingly, they do not include all of the information and notes required by GAAP for audited annual financial statements.  The information furnished includes all adjustments and accruals of a normal recurring nature, which in the opinion of Management, are necessary for a fair presentation of the results for the interim periods.  The unaudited Condensed Consolidated Financial Statements included herein and these related notes should be read in conjunction with the Company's consolidated financial statements, and the notes thereto, included in the Company's Annual Report on Form 10-K for the year ended  December 31, 2015.  The Company's results of operations for the three and six month periods ended  June 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or for any other future period.

This document at times will refer to the Registrant's largest shareholder, Mr. Jesse T. Correll and certain companies controlled by Mr. Correll.  Mr. Correll holds a majority ownership of First Southern Funding, LLC ("FSF"), a Kentucky corporation, and First Southern Bancorp, Inc. ("FSBI"), a financial services holding company.  FSBI operates through its 100% % owned subsidiary bank, First Southern National Bank ("FSNB").  Banking activities are conducted through multiple locations within south-central and western Kentucky.  Mr. Correll is Chief Executive Officer and Chairman of the Board of Directors of UTG and is currently UTG's largest shareholder through his ownership control of FSF, FSBI and affiliates.  At June 30, 2016, Mr. Correll owns or controls directly and in directly approximately  58.17% of UTG's outstanding stock.

UTG's life insurance subsidiary, Universal Guaranty Life Insurance Company ("UG"), has several wholly-owned and majority-owned subsidiaries.  The subsidiaries were formed to hold certain real estate investments.  The real estate investments were placed into the limited liability companies and partnerships to provide additional protection to the policyholders and to UG.

Note 2 – Recently Issued Accounting Standards

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

Note 3 – Investments

Available for Sale Securities – Fixed Maturity and Equity Securities

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

Investments in available for sale securities are summarized as follows:

June 30, 2016		Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	19,056,637	$	1,585,358	$	-	$	20,641,995
U.S. special revenue and assessments		1,137,465		18,864		-		1,156,329
All other corporate bonds		153,399,588		17,714,583		(1,065,280)		170,048,891
		173,593,690		19,318,805		(1,065,280)		191,847,215
Equity securities		44,247,930		11,058,428		(938,585)		54,367,773
Total	$	217,841,620	$	30,377,233	$	(2,003,865)	$	246,214,988

December 31, 2015		Original or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Investments available for sale:
Fixed maturities
U.S. Government and govt. agencies and authorities	$	20,336,681	$	1,441,890	$	(32,083)	$	21,746,488
U.S. special revenue and assessments		1,137,546		7,843		(2,550)		1,142,839
All other corporate bonds		167,173,444		3,762,156		(8,705,830)		162,229,770
		188,647,671		5,211,889		(8,740,463)		185,119,097
Equity securities		43,954,737		2,119,205		(388,602)		45,685,340
Total	$	232,602,408	$	7,331,094	$	(9,129,065)	$	230,804,437

The amortized cost and estimated market value of debt securities at June 30, 2016, by contractual maturity, is shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Fixed Maturities Available for Sale June 30, 2016		Amortized Cost		Estimated Fair Value
Due in one year or less	$	2,527,870	$	2,589,157
Due after one year through five years		22,721,141		24,073,765
Due after five years through ten years		54,643,263		62,833,387
Due after ten years		93,701,416		102,350,906
Total	$	173,593,690	$	191,847,215

The fair value of investments with sustained gross unrealized losses at June 30, 2016 and December 31, 2015 are as follows:

June 30, 2016		Less than 12 months			12 months or longer			Total
		Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value	Unrealized losses
All other corporate bonds		13,681,500	(668,105)		13,280,629	(397,175)		26,962,129	(1,065,280)
Total fixed maturities	$	13,681,500	(668,105)	$	13,280,629	(397,175)	$	26,962,129	(1,065,280)
Equity securities	$	16,418,159	(938,585)	$	-	-	$	16,418,159	(938,585)

December 31, 2015		Less than 12 months			12 months or longer			Total
		Fair value	Unrealized losses		Fair value	Unrealized losses		Fair value	Unrealized losses
U.S. Government and govt. agencies and authorities	$	4,966,210	(32,083)	$	-	-	$	4,966,210	(32,083)
U.S. special revenue and assessments		984,770	(2,550)		-	-		984,770	(2,550)
All other corporate bonds		85,734,097	(5,255,276)		19,400,640	(3,450,554)		105,134,737	(8,705,830)
Total fixed maturities	$	91,685,077	(5,289,909)	$	19,400,640	(3,450,554)	$	111,085,717	(8,740,463)
Equity securities	$	4,741,132	(388,602)	$	-	-	$	4,741,132	(388,602)

Additional information regarding investments in an unrealized loss position is as follows:

	Less than 12 months	12 months or longer	Total
As of June 30, 2016
Fixed maturities	3	8	11
Equity securities	6	-	6
As of December 31, 2015
Fixed maturities	40	9	49
Equity securities	9	-	9

Substantially all of the unrealized losses on fixed maturities available for sale and equity securities at June 30, 2016 and December 31, 2015 are attributable to changes in market interest rates and general disruptions in the credit market subsequent to purchase.  The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position.  Based upon the Company's expected continuation of receipt of contractually required principal and interest payments and its intent and ability to retain the securities until price recovery, as well as the Company's evaluation of other relevant factors, the Company deems these securities to be temporarily impaired as of  June 30, 2016 and December 31, 2015.

The Company regularly reviews its investment securities for factors that may indicate that a decline in fair value of an investment is other than temporary.  The factors considered by Management in its regular review to identify and recognize other-than-temporary impairment losses on fixed maturities include, but are not limited to: the length of time and extent to which the fair value has been less than cost; the Company's intent to sell, or be required to sell, the debt security before the anticipated recovery of its remaining amortized cost basis; the financial condition and near-term prospects of the issuer; adverse changes in ratings announced by one or more rating agencies; subordinated credit support; whether the issuer of a debt security has remained current on principal and interest payments; current expected cash flows; whether the decline in fair value appears to be issuer specific or, alternatively, a reflection of general market or industry conditions, including the effect of changes in market interest rates.  If the Company intends to sell a debt security, or it is more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis and its fair value at the balance sheet date would be recognized by a charge to other-than-temporary losses in the Condensed Consolidated Statements of Operations.

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

Based on Management's review of the investment portfolio, the Company did not record any losses for other-than-temporary impairments in the Condensed Consolidated Statements of Operations for the six-month period ended  June 30, 2016 and 2015.

Trading Securities

Securities designated as trading securities are reported at fair value, with gains or losses resulting from changes in fair value recognized in net investment income on the Condensed Consolidated Statements of Operations.  Trading securities include exchange-traded equities and exchange-traded options.  Trading securities carried as liabilities are securities sold short. A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale.  The fair value of derivatives included in trading security assets and trading security liabilities as of  June 30, 2016 was $63,000 and $(53,721), respectively. The fair value of derivatives included in trading security assets and trading security liabilities as of  December 31, 2015 was $0 and $(28,609), respectively.  Earnings from trading securities are classified in cash flows from operating activities. The derivatives held by the Company are for income generation purposes only.

Trading revenue charged to net investment income from trading securities was:

		Three Months Ended
		June 30,
		2016		2015
Net unrealized gains (losses)	$	24,938	$	71,632
Net realized gains (losses)		-		(92,310)
Net unrealized and realized gains (losses)	$	24,938	$	(20,678)

		Six Months Ended
		June 30,
		2016		2015
Net unrealized gains (losses)	$	39,477	$	1,019,262
Net realized gains (losses)		-		(515,967)
Net unrealized and realized gains (losses)	$	39,477	$	503,295

Mortgage Loans

The Company, from time to time, acquires mortgage loans through participation agreements with FSNB.  FSNB has been able to provide the Company with additional expertise and experience in underwriting commercial and residential mortgage loans, which provide more attractive yields than the traditional bond market.  The Company is able to receive participations from FSNB for three primary reasons:  1) FSNB has already reached its maximum lending limit to a single borrower, but the borrower is still considered a suitable risk; 2) the interest rate on a particular loan may be fixed for a long period that is more suitable for UG given its asset-liability structure; and 3) FSNB's loan growth might at times outpace its deposit growth, resulting in FSNB participating such excess loan growth rather than turning customers away.  For originated loans, the Company's Management is responsible for the final approval of such loans after evaluation.  Before a new loan is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control.  These criteria include, but are not limited to, a credit report, personal financial information such as outstanding debt, sources of income, and personal equity.  Once the loan is approved, the Company directly funds the loan to the borrower.  The Company bears all risk of loss associated with the terms of the mortgage with the borrower.

Approximately 27% and 30 % of the mortgage loan portfolio consists of discounted commercial mortgage loans as of June 30, 2016 and December 31, 2015, respectively. The Company began purchasing discounted commercial mortgage loans in 2009.  Management has extensive background and experience in the analysis and valuation of commercial real estate. The discounted loans are available through the FDIC's sale of assets of closed banks and from banks wanting to reduce their loan portfolios.  The loans are available on a loan by loan bid process.  Once a loan has been acquired, contact is made with the appropriate individuals to begin a dialog with a goal of determining the borrower's willingness to work together.  There are generally three paths a discounted loan will take:  the borrowers pay as required; a settlement is reached with the loan being paid off at a discounted value; or the loan is foreclosed.

During 2016 and 2015, the Company acquired approximately $2.6 million and $13.8 million in mortgage loans, respectively, including both regular participation mortgage loans as well as discounted mortgage loans.  FSNB services the majority of the Company's mortgage loan portfolio.  The Company pays FSNB a .25% servicing fee on these loans and a one-time fee at loan origination of .50% of the original loan cost to cover costs incurred by FSNB relating to the processing and establishment of the loan.

During 2016 and 2015, the maximum and minimum lending rates for mortgage loans were:

	2016		2015
	Maximum rate	Minimum rate	Maximum rate	Minimum rate
Commercial Loans	8.50%	3.94%	8.00%	4.00%
Residential Loans	8.00%	3.00%	8.00%	3.00%

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

The Company has in place a monitoring system to provide Management with information regarding potential troubled loans.  Letters are sent to each mortgagee when the loan becomes 30 days or more delinquent.  Management is provided with a monthly listing of loans that are 60 days or more past due along with a brief description of what steps are being taken to resolve the delinquency.  All loans 90 days or more past due are placed on a non-performing status and classified as delinquent loans.  Quarterly, coinciding with external financial reporting, the Company reviews each delinquent loan and determines how each delinquent loan should be classified.  Management believes the current internal controls surrounding the mortgage loan selection process provide a quality portfolio with minimal risk of foreclosure and/or negative financial impact.

Changes in the current economy could have a negative impact on the loans, including the financial stability of the borrowers, the borrowers' ability to pay or to refinance, the value of the property held as collateral and the ability to find purchasers at favorable prices.  Given the uncertainty of the current market, Management has taken a conservative approach with the discounted mortgage loans and has classified all discounted mortgage loans held as non-accrual.  In such status, the Company is not recording any accrued interest income nor is it recording any accrual of discount on the loans held.  The Company records repayments on loans as discount accrual when the loan basis has been paid in full.

On the remainder of the mortgage loan portfolio, interest accruals are analyzed based on the likelihood of repayment.  In no event will interest continue to accrue when accrued interest along with the outstanding principal exceeds the net realizable value of the property.  The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

A mortgage loan reserve is established and adjusted based on Management's quarterly analysis of the portfolio and any deterioration in value of the underlying property which would reduce the net realizable value of the property below its current carrying value.  The Company acquired the discounted mortgage loans at below contract value, and believes that it will fully recover its carrying value upon disposal, therefore no reserve for delinquent loans is deemed necessary.  Those not currently paying are being vigorously worked by Management.  The current discounted commercial mortgage loan portfolio has an average price of  33.0% and 39.0% of face value as of June 30, 2016 and December 31, 2015, respectively.  Management has determined that this deep discount provides a financial cushion or built in allowance for any of the loans that are not currently performing within the portfolio of loans purchased.  The mortgage loan reserve was $0 at June 30, 2016 and December 31, 2015.

The following table summarizes the number of loans held in the discounted mortgage loan portfolio and the carrying value of the loans:

June 30, 2016 Payment Frequency	Number of Loans		Carrying Value
No payments received	8	$	0
One-time payment received	1		0
Irregular payments received	2		20,834
Periodic payments received	6		5,123,277
Total	17	$	5,144,111

December 31, 2015 Payment Frequency	Number of Loans		Carrying Value
No payments received	8	$	0
One-time payment received	1		0
Irregular payments received	2		20,834
Periodic payments received	7		5,347,215
Total	18	$	5,368,049

The following table summarizes the mortgage loan holdings of the Company:

		June 30, 2016		December 31, 2015
In good standing	$	16,399,487	$	14,701,228
Overdue interest over 90 days		20,834		20,834
Restructured		66,827		126,118
In process of foreclosure		2,892,401		2,921,750
Total mortgage loans	$	19,379,549	$	17,769,930
Total foreclosed loans during the year	$	-	$	-

Investment Real Estate

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

Notes Receivable

Notes receivable represent collateral loans and promissory notes issued by the Company and are reported at their unpaid principal balances, adjusted for valuation allowances. Valuation allowances are established for impaired loans when it is probable that contractual principal and interest will not be collected. The valuation allowance as of June 30, 2016 and December 31, 2015 was $0. Interest accruals are analyzed based on the likelihood of repayment.  The Company does not utilize a specified number of days delinquent to cause an automatic non-accrual status.

Before a new note is issued, the applicant is subject to certain criteria set forth by Company Management to ensure quality control.  Once the note is approved, the Company directly funds the note to the borrower. Several of the notes have participation agreements in place, whereas the Company has reduced its investment in the note receivable by participating a portion of the note to a third party.

Similar to the mortgage loans, FSNB services several of the notes receivable. The Company, and the participants in the notes, share in the risk of loss associated with the terms of the note with the borrower, based upon their ownership percentage in the note.  The Company has in place a monitoring system to provide Management with information regarding potential troubled loans. 

Note 4 – Fair Value Measurements

The Company measures its assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets based on the framework set forth in the GAAP fair value accounting guidance.  The framework establishes a fair value hierarchy of three levels based upon the transparency of information used in measuring the fair value of assets or liabilities as of the measurement date.  The fair value hierarchy prioritizes the inputs in the valuation techniques used to measure fair value into three categories.

Level 1 – Valuation is based upon quoted prices for identical assets or liabilities in active markets that the Company is able to access.  Level 1 fair value is not subject to valuation adjustments.

Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets or quoted prices for identical or similar instruments in markets that are not active. In addition, the Company may use various valuation techniques or pricing models that use observable inputs to measure fair value.

Level 3 – Valuation is based upon unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the Company's own assumptions about the inputs that market participants would use in pricing the asset or liability.

The Company determines the existence of an active market for an asset or liability based on its judgment as to whether transactions for the asset or liability occur in such market with sufficient frequency and volume to provide reliable pricing information.  If the Company concludes that there has been a significant decrease in the volume and level of activity for an investment in relation to normal market activity for such investment, adjustments to transactions and quoted prices are made to estimate fair value.

The inputs used in the valuation techniques employed by the Company are provided by nationally recognized pricing services, external investment managers and internal resources.  To assess these inputs, the Company's review process includes, but is not limited to, quantitative analysis including benchmarking, initial and ongoing evaluations of methodologies used by external parties to calculate fair value, and ongoing evaluations of fair value estimates based on the Company's knowledge and monitoring of market conditions.

The Company periodically reviews the pricing service provider's policies and procedures for valuing securities.  The assumptions underlying the valuations from external service providers, including unobservable inputs, are generally not readily available as this information is often deemed proprietary.  Accordingly, the Company is unable to obtain comprehensive information regarding these assumptions and methodologies.

The Company's investments in fixed maturity securities available for sale, equity securities available for sale and trading securities assets and liabilities are carried at fair value.  The following are the Company's methodologies and valuation techniques for assets and liabilities measured at fair value.

Fixed maturities available for sale mainly consist of U.S. treasury securities and corporate debt securities. The Company employs a market approach to the valuation of securities where there are sufficient market transactions involving identical or comparable assets. If sufficient market data is not available for identical or comparable assets, the Company uses an income approach to valuation. The majority of the financial instruments included in fixed maturity securities available for sale are evaluated utilizing observable inputs; accordingly, they are categorized in either Level 1 or Level 2 of the fair value hierarchy. However, in instances where significant inputs utilized in valuation of the securities are unobservable, the securities are categorized in Level 3 of the fair value hierarchy.

Corporate securities primarily include fixed rate corporate bonds. Inputs utilized in connection with the Company's valuation techniques relating to this class of securities include recently executed transactions, market price quotations, benchmark yields and issuer spreads. Corporate securities are categorized in Level 2 of the fair value hierarchy.

U.S. treasury securities are based on quoted prices in active markets and are generally categorized in Level 1 of the fair value hierarchy.

Equity securities available for sale consist of common and preferred stocks mainly in private equity investments, financial institutions and insurance companies. Equity securities for which there is sufficient market data are categorized as Level 1 or 2 in the fair value hierarchy.  For the equity securities in which quoted market prices are not available, the transaction price is used as the best estimate of fair value at inception.  When evidence is believed to support a change to the carrying value from the transaction price, adjustments are made to reflect the expected exit values. The Company performs ongoing reviews of the underlying investments. The reviews consist of the evaluations of expected cash flows, material events and market data. These investments are included in Level 3 of the fair value hierarchy.

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

The following table presents the Company's assets and liabilities measured at fair value in the Condensed Consolidated Balance Sheet on a recurring basis as of June 30, 2016.

		Level 1		Level 2		Level 3		Total
Assets
Fixed Maturities, available for sale	$	9,264,960	$	180,348,186	$	2,234,069	$	191,847,215
Equity Securities, available for sale		19,730,733		5,893,870		28,743,170		54,367,773
Trading Securities		63,000		0		0		63,000
Total	$	29,058,693	$	186,242,056	$	30,977,239	$	246,277,988
Liabilities
Trading Securities	$	53,721	$	-	$	-	$	53,721

The following table presents the Company's assets and liabilities measured at fair value in the Condensed Consolidated Balance Sheet on a recurring basis as of December 31, 2015.

		Level 1		Level 2		Level 3		Total
Assets
Fixed Maturities, available for sale	$	10,459,758	$	173,632,645	$	1,026,694	$	185,119,097
Equity Securities, available for sale		13,312,331		5,567,061		26,805,948		45,685,340
Total	$	23,772,089	$	179,199,706	$	27,832,642	$	230,804,437
Liabilities
Trading Securities	$	28,609	$	-	$	-	$	28,609

The following table provides reconciliations for Level 3 assets measured at fair value on a recurring basis. Transfers into and out of Level 3 are recognized as of the end of the quarter in which they occur.

		Fixed Maturities, Available for Sale		Equity Securities, Available for Sale		Total
Balance at December 31, 2015	$	1,026,694	$	26,805,948	$	27,832,642
Total unrealized gains (losses):
Included in realized gains (losses)		54,881		-		54,881
Included in other comprehensive income		1,250,898		1,291,614		2,542,512
Purchases		-		897,158		897,158
Sales	$	(98,404)	$	(251,550)	$	(349,954)
Balance at June 30, 2016		2,234,069		28,743,170		30,977,239

The Level 3 securities include collateralized debt obligations of trust preferred securities issued by banks and insurance companies and certain equity securities with unobservable inputs. The Company computed fair value of Level 3 equity investments based on a review of current financial information, earnings trends and similar companies in the same industries.

There were no transfers in or out of Level 3 as of June 30, 2016.  Transfers occur when there is a lack of observable market information.

Certain assets are not carried at fair value on a recurring basis, including investments such as mortgage loans and policy loans. Accordingly, such investments are only included in the fair value hierarchy disclosure when the investment is subject to re-measurement at fair value after initial recognition and the resulting re-measurement is reflected in the Consolidated Financial Statements.

The carrying values and estimated fair values of certain of the Company's financial instruments not recorded at fair value in the Consolidated Balance Sheets are shown below. Because the fair value for all Consolidated Balance Sheet items are not required to be disclosed, the aggregate fair value amounts presented below are not reflective of the underlying value of the Company.

		June 30, 2016				December 31, 2015
Assets		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Mortgage loans on real estate	$	19,379,549	$	19,775,065	$	17,769,930	$	17,775,178
Investment real estate		51,475,190		51,475,190		47,650,102		47,650,102
Notes receivable		14,963,160		14,963,160		10,597,907		10,597,907
Policy loans		10,566,130		10,566,130		10,684,244		10,684,244
Cash and cash equivalents		14,033,579		14,033,579		11,822,615		11,822,615

The above estimated fair value amounts have been determined based upon the following valuation methodologies. Considerable judgment was required to interpret market data in order to develop these estimates. Accordingly, the estimates are not necessarily indicative of the amounts which could be realized in a current market exchange.  The use of different market assumptions or estimation methodologies may have a material effect on the fair value amounts.

The fair values of mortgage loans on real estate are estimated using discounted cash flow analyses and interest rates being offered for similar loans to borrowers with similar credit ratings.  The inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 3 within the fair value hierarchy.

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

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

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

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

The carrying amount of cash and cash equivalents in the Consolidated Balance Sheets approximates fair value given the highly liquid nature of the instruments.  The inputs used to measure the fair value of our cash and cash equivalents are classified as Level 1 within the fair value hierarchy.

The carrying amount of short term investments in the Consolidated Balance Sheets approximates fair value.  The inputs used to measure the fair value of our short term investments are classified as Level 3 within the fair value hierarchy.

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

Note 5 – Credit Arrangements

At June 30, 2016 and December 31, 2015 the Company had the following outstanding debt:

Instrument	Issue Date	Maturity Date		Revolving Credit Limit		December 31, 2015	Borrowings	Repayments		June 30, 2016
Lines of Credit:
UTG	2013-11-20	2015-11-20	$	8,000,000	$	-	-	-	$	-
UG	2015-06-02	2017-05-10		10,000,000		-	-	-		-

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

During May of 2016, the Federal Home Loan Bank approved UG's Cash Management Advance Application ("CMA"). The CMA gives the Company the option of selecting a variable rate of interest for up to 90 days or a fixed rate for a maximum of 30 days. The variable rate CMA is prepayable at any time without a fee, while the fixed CMA is not prepayable prior to maturity.

On July 22, 2016, the Company entered in to an agreement to acquire 300,000 shares of its outstanding common stock from a shareholder that owned approximately 8 % of the Company's outstanding common stock.  The acquisition was made under the Company's stock buy-back program. As part of this transaction, two promissory notes totaling $2.9 million were issued. The notes require principal payments of one half of the note value to be paid one year from the date of purchase and the other one half to be paid two years from the date of purchase. The notes bear interest at 0%. This transaction occurred subsequent to the reporting period, and was not reported as of the balance sheet date.

Note 6 – Shareholders' Equity

Stock Repurchase Programs - The Board of Directors of UTG has authorized the repurchase in the open market or in privately negotiated transactions of UTG's common stock. At a meeting of the Board of Directors on June 15, 2016, the Board of Directors of UTG authorized the repurchase of up to an additional $2 million of UTG's common stock and on July 14, 2016, the BOD again increased the amount available by an additional $4.5 million, for a total repurchase of $14.5 million. Repurchased shares are available for future issuance for general corporate purposes. Company Management has broad authority to operate the program, including the discretion of whether to purchase shares and the ability to suspend or terminate the program. Open market purchases are made based on the last available market price but may be limited.  During the first six months of 2016, the Company repurchased approximately 46,000shares through the stock repurchase program for approximately $703,000. Through June 30, 2016, UTG has spent approximately $7.3 million in the acquisition of approximately 735,000shares under this program.

As mentioned in Note 5 above, on July 22, 2016 the Company entered in to an agreement to acquire 300,000 shares of its outstanding common stock form a shareholder that owned approximately 8 % of the Company's outstanding common stock. The purchase price per share was $14.50 and was paid with cash and was derived through private negotiation. The purchase was paid with cash and the issuance of promissory notes. This transaction occurred subsequent to the reporting period, and was not reported as of the balance sheet date.

Earnings Per Share Calculations - Earnings per share are based on the weighted average number of common shares outstanding during each period.  For the three and six months ended June 30, 2016 and 2015, diluted earnings per share were the same as basic earnings per share since the Company had no dilutive instruments outstanding.

Note 7 – Commitments and Contingencies

The insurance industry has experienced a number of civil jury verdicts which have been returned against life and health insurers in the jurisdictions in which the Company does business involving the insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters.  Some of the lawsuits have resulted in the award of substantial judgments against the insurer, including material amounts of punitive damages.  In some states, juries have substantial discretion in awarding punitive damages in these circumstances.  In the normal course of business, the Company is involved from time to time in various legal actions and other state and federal proceedings.  Management is of the opinion that the ultimate disposition of the matters will not have a materially adverse effect on the Company's results of operations or financial position.

Under the insurance guaranty fund laws in most states, insurance companies doing business in a participating state can be assessed up to prescribed limits for policyholder losses incurred by insolvent or failed insurance companies.  Although the Company cannot predict the amount of any future assessments, most insurance guaranty fund laws currently provide that an assessment may be excused or deferred if it would threaten an insurer's financial strength.  Mandatory assessments may be partially recovered through a reduction in future premium tax in some states. The Company does not believe such assessments will be materially different from amounts already provided for in the condensed consolidated financial statements, though the Company has no control over such assessments.

Within the Company's trading accounts, certain trading securities carried as liabilities represent securities sold short.  A gain, limited to the price at which the security was sold short, or a loss, potentially unlimited in size, will be recognized upon the termination of the short sale.

The following table represents the total funding commitments and the unfunded commitment as of June 30, 2016 related to certain investments:

		Total Funding		Unfunded
		Commitment		Commitment
RLF III, LLC	$	4,000,000	$	398,120
Sovereign's Capital, LP Fund I		500,000		56,142
UGLIC, LLC		1,600,000		120,000
Sovereign's Capital, LP Fund II		1,000,000		730,000
Barton Springs Music, LLC		2,500,000		1,751,700
Master Mineral Holdings II, LP		4,122,167		3,129,994
PBEX II, LLC		5,000,000		527,157

During 2006, the Company committed to invest in RLF III, LLC ("RLF"), which makes land-based investments in undervalued assets. RLF makes capital calls as funds are needed for continued land purchases.

During 2012, the Company committed to invest in Sovereign's Capital, LP Fund I ("Sovereign's"), which invests in companies in emerging markets. Sovereign's makes capital calls to investors as funds are needed.

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

During 2015, the Company committed to invest in Sovereign's Capital, LP Fund II ("Sovereign's II"), which invests in companies in emerging markets. Sovereign's II makes capital calls to investors as funds are needed.

During 2016, the Company made a commitment to invest in Barton Springs Music, LLC ("Barton"), which invests in music royalties.  Barton makes capital calls to its investors as funds are needed to acquire the royalty rights.

During 2016, the Company made a commitment to invest in Master Mineral Holdings II, LP ("MMH"), which purchases land for leasing opportunities to those looking to harvest natural resources.  MMH makes capital calls to its investors as funds are needed for continued land purchases.

During 2016, the Company made a commitment to invest in PBEX II, LLC ("PBEX"), which purchases land for leasing opportunities to those looking to harvest natural resources.  PBEX makes capital calls to its investors as funds are needed for continued land purchases.

Note 8 – Other Cash Flow Disclosures

On a cash basis, the Company paid the following expenses:

		Three Months Ended
		June 30,
		2016		2015
Interest	$	-	$	-
Federal income tax		735,000		-

		Six Months Ended
		June 30,
		2016		2015
Interest	$	-	$	-
Federal income tax		735,000		3,000,000

Note 9 – Concentrations of Credit Risk

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

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is Management's discussion and analysis of the financial condition and results of operations of UTG, Inc. and its subsidiaries (collectively with the Parent, the "Company").  The following discussion of the financial condition and results of operations of the Company should be read in conjunction with, and is qualified in its entirety by reference to, the Consolidated Financial Statements of the Company and the related Notes thereto appearing in the Company's annual report on Form 10-K for the year ended December 31, 2015, as filed with the Securities and Exchange Commission, and our unaudited Condensed Consolidated Financial Statements and related Notes thereto appearing elsewhere in this quarterly report.

Cautionary Statement Regarding Forward-Looking Statements

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

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

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

Overview

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

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ significantly from those estimates.  The Company has identified certain estimates that involve a higher degree of judgment and are subject to a significant degree of variability.  The Company's critical accounting policies and the related estimates considered most significant by Management are disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.  Management has identified the accounting policies related to cost of insurance acquired, assumptions and judgments utilized in determining if declines in fair values of investments are other-than-temporary, and valuation methods for investments that are not actively traded as those, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company's Condensed Consolidated Financial Statements and this Management's Discussion and Analysis.

During the six months ended June 30, 2016, there were no additions to or changes in the critical accounting policies disclosed in the 2015 Form 10-K, except for recently adopted accounting standards discussed in Note 2 of the Notes to the Condensed Consolidated Financial Statements.

Results of Operations

On a consolidated basis, the Company reported net income attributable to common shareholders' of approximately $569,000 for the six-month period ended June 30, 2016 and a net loss attributable to common shareholders' of approximately $(713,000) for the three-month period ended June 30, 2016.  For the six-month period ended June 30, 2015, the Company reported net income attributable to common shareholders' of approximately $1.7 million and for the three-month period ended June 30, 2015, the Company reported a net loss attributable to common shareholders' of approximately $(788,000).

Revenues

The Company's total revenues decreased approximately 6% when comparing the six month periods ended June 30, 2016 and 2015. The Company's revenues increased by approximately 8% when comparing the three month periods ended June 30, 2016 and 2015. The variance in total revenues reported, year to date and for the quarter, is mainly attributable to fluctuations in net investment income reported by the Company during 2016 and 2015. Further analysis of the fluctuations in net investment income is provided below.

Premium and policy fee revenues, net of reinsurance, increased approximately 2% when comparing the first six months of 2016 to the same period in 2015.  Premium and policy fee revenues, net of reinsurance, increased by approximately 11% when comparing the second quarter of 2016 to the same quarter in 2015.  The Company writes minimal new business.  Premium and policy fee revenues, net of reinsurance, represented 28% and 25% of the Company's revenues as of June 30, 2016 and 2015, respectively.

The following table reflects net investment income of the Company for the three and six month periods ended June 30, 2016:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2016		2015		2016		2015
Fixed maturities available for sale	$	2,354,484	$	2,086,089	$	4,637,567	$	4,192,853
Equity securities		484,906		603,611		700,862		1,308,784
Trading securities		24,938		20,678		39,477		(503,295)
Mortgage loans		151,941		385,802		1,252,774		3,903,965
Real estate		562,633		69,005		1,126,929		453,745
Notes receivable		232,394		67,625		941,581		133,738
Policy loans		219,655		112,505		265,118		316,502
Short-term		0		56,370		0		167,406
Cash and cash equivalents		5,996		404		9,560		566
Total consolidated investment income		4,036,947		3,402,089		8,973,868		9,974,264
Investment expenses		(826,466)		(1,346,189)		(1,744,896)		(1,963,862)
Consolidated net investment income	$	3,210,481	$	2,055,900	$	7,228,972	$	8,010,402

Net investment income represented 45% and 47% of the Company's total revenues as of June 30, 2016 and 2015, respectively.  The Company reported net investment income of approximately $7.2 million for the six-month period ended June 30, 2016, a decrease of approximately 10% compared to the same period in 2015.  For the three-month period ended June 30, 2016, net investment income increased approximately 56% or $1.2 million, compared to the same quarter in 2015.

The fluctuation in net investment income for the three and six month periods ended June 30, 2016, compared to the same periods in 2015, is the result of a shift in income received by multiple investment types.

For the six-month period ended June 30, 2016, compared to the same period in 2015, income from the mortgage loan portfolio and the equity securities portfolio was down. The declines were offset slightly by an increase in income from the real estate and notes receivable investment portfolios.

Income from the mortgage loan investment portfolio, which includes discounted mortgage loans, was down approximately 65% and 33% when comparing year to date and second quarter 2016 and 2015 activity, respectively. During the first quarter of 2015, the Company had two discounted mortgage loans that were repaid.  Income from the mortgage loan portfolio, as well as the timing of the income recognition, is expected to vary from quarter to quarter, depending on when the discounted loans are repaid.

Year to date, income from the equity securities portfolio is down approximately 46% compared to the same period in 2015. A portion of the Company's equity securities portfolio is tied to the oil and gas industry, which has experienced a decline in recent periods leading to a decrease in the amount of the dividend distributions received by the Company.  The securities related to the oil and gas industry continue to pay dividends, but at a lesser rate.

Year to date and for the second quarter 2016, compared to the same periods in 2015, income from the real estate and notes receivable investment portfolios was up. The increase in income from the real estate portfolio is attributable to an increase in income reported by certain consolidated subsidiaries that hold real estate. The Company's notes receivable portfolio has increased approximately 41% since December 31, 2015, which has led to an increase in income earned and reported by this portion of the investment portfolio. The notes receivable portfolio has increased as a result of the Company finding an opportunity to enhance yield by investing in certain financing transactions classified as notes receivable.

The Company reported net realized investment gains of approximately $4.1 million and $4.4 million for the six month periods ended June 30, 2016 and 2015, respectively.  During the second quarter of 2016 and 2015, the Company reported net realized investment gains of approximately $656,000 and $1.5 million, respectively. During both the first quarter of 2016 and 2015, the Company sold a parcel of real estate, which produced a majority of the gains reported for both years. Realized investment gains are the result of one-time events and are expected to vary from quarter to quarter.

In summary, the Company's basis for future revenue growth is expected to come from the following primary sources: conservation of business currently in-force, the maximization of investment earnings and the acquisition of other companies or policy blocks in the life insurance business.  Management has placed a significant emphasis on the development of these revenue sources to enhance these opportunities.

Expenses

The Company reported total benefits and other expenses of approximately $14.8 million for the six-month period ended June 30, 2016, an increase of approximately 3% from the same period in 2015.  For the three-month period ended June 30, 2016, total benefits and other expenses decreased approximately 2%, compared to the same quarter in 2015.  Benefits, claims and settlement expenses represented approximately 73% of the Company's total expenses for the six-month period ended June 30, 2016 and 71% for the three-month period ended June 30, 2016.  The other major expense category of the Company is operating expenses, which represented approximately 27% and 25% of the Company's total expenses for the three and six month periods ended June 30, 2016, respectively.

Life benefits, claims and settlement expenses, net of reinsurance benefits and claims, increased approximately 13% in the six-month period ended June 30, 2016, compared to the same period in 2015.  For the three-month period ended June 30, 2016, life benefits, claims and settlement expenses, net of reinsurance benefits and claims, increased approximately 2%, compared to the same quarter in 2015.  Policy claims vary from period to period and therefore, fluctuations in mortality are to be expected and are not considered unusual by Management.

Net amortization of cost of insurance acquired decreased4% during the six-month and three-month periods ended June 30, 2016 compared to the same period in 2015.  Cost of insurance acquired is established when an insurance company is acquired or when the Company acquires a block of in-force business.  The Company assigns a portion of its cost to the right to receive future profits from insurance contracts existing at the date of the acquisition.  Cost of insurance acquired is amortized with interest in relation to expected future profits, including direct charge-offs for any excess of the unamortized asset over the projected future profits. The interest rates may vary due to risk analysis performed at the time of acquisition on the business acquired. The Company utilizes a 12% discount rate on the remaining unamortized business.  The amortization is adjusted retrospectively when estimates of current or future gross profits to be realized from a group of products are revised.  Amortization of cost of insurance acquired is particularly sensitive to changes in interest rate spreads and persistency of certain blocks of insurance in-force.  This expense is expected to decrease, unless the Company acquires a new block of business.

Operating expenses decreased approximately 15% in the six-month period ended June 30, 2016 in comparison to the same period in 2015.  Second quarter 2016 operating expenses were down approximately 11% compared to operating expenses reported in the second quarter of 2015. In comparison to the prior year, operating expenses were comparable or slightly lower in the majority of the major expense categories. Salaries and charitable contributions recognized the largest decrease when comparing 2016 and 2015 results.  Salary expense is down slightly as a result of changes in staffing. Charitable contributions are a function of the Company's earnings.

UTG has a strong philanthropic program. The Company generally allocates a portion of its taxable income to be used for its philanthropic efforts primarily targeted to Christ-centered organizations or organizations that help the weak or poor. Charitable contributions made by the Company are expected to vary from year to year depending on the earnings of the Company.

During 2015, Management determined it was in the Company's best long term interest to relocate its main operations from Springfield, IL to Stanford, Kentucky. The Company's majority shareholder, Jess Correll, headquarters his other operating entities in Stanford, Kentucky.  Management believes this move will provide the Company with significant synergies, improve efficiencies and reduce overall operating expenses.  The relocation is expected to be substantially complete by December 31, 2016.  Significant time and planning has been put into this relocation to help ensure as smooth a transition as possible.

Financial Condition

Investment Information

Investments represent approximately 85% and 84% of total assets at June 30, 2016 and December 31, 2015, respectively.  Accordingly, investments are the largest asset group of the Company.  The Company's insurance subsidiary is regulated by insurance statutes and regulations as to the type of investments that it is permitted to make and the amount of funds that may be used for any one type of investment.  In light of these statutes and regulations, the majority of the Company's investment portfolio is invested in a diverse set of securities.

As of June 30, 2016, the carrying value of fixed maturity securities in default as to principal or interest was immaterial in the context of consolidated assets, shareholders' equity or results from operations.  To provide additional flexibility and liquidity, the Company has identified all fixed maturity securities as "investments available for sale".  Investments available for sale are carried at market, with changes in market value charged directly to shareholders' equity.  Changes in the market value of available for sale securities resulted in net unrealized gains of approximately $20 million for the six-month period ended June 30, 2016 and $12.4 million for the second quarter of 2016.  Changes in the market value of available for sale securities resulted in net unrealized losses of approximately $2.7 million and $290,000 for the three and six-month periods ended June 30, 2015, respectively. The variance in the net unrealized gains and losses is the result of normal market fluctuations and lower interest rates.

Capital Resources

Total shareholders' equity increased by approximately 25% as of June 30, 2016 compared to December 31, 2015. The increase in total shareholders' equity was the result of an increase in accumulated other comprehensive income, which is attributable to the increase in unrealized gains mentioned above.

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

Liquidity

The Company has three principal needs for cash - the insurance company's contractual obligations to policyholders, the payment of operating expenses and debt service.  Cash and cash equivalents represented 3% of total assets as of June 30, 2016 and December 31, 2015, respectively.  Fixed maturities as a percentage of total assets were approximately 48% and 49% as of June 30, 2016 and December 31, 2015, respectively.

The Company currently has access to funds for operating liquidity.  UTG has an $8,000,000 revolving credit note with Illinois National Bank.  At June 30, 2016, the Company had no outstanding borrowings against the UTG line of credit.

Future policy benefits are primarily long-term in nature and therefore, the Company's investments are predominantly in long-term fixed maturity investments such as bonds and mortgage loans which provide sufficient return to cover these obligations.

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

Net cash used in operating activities was approximately $7.1 million and $7.5 million for the six-month periods ended June 30, 2016 and 2015, respectively.  Sources of operating cash flows of the Company, as with most insurance entities, is comprised primarily of premiums received on life insurance products and income earned on investments.  Uses of operating cash flows consist primarily of payments of benefits to policyholders and beneficiaries and operating expenses.  The Company has not marketed any significant new products for several years.  As such, premium revenues continue to decline.  Management anticipates future cash flows from operations to remain similar to historic trends.

Net cash provided by investing activities was approximately $9.6 million and $17 million for the six-month period ended June 30, 2016 and 2015, respectively. The net cash provided by investing activities is expected to vary from quarter to quarter depending on market conditions and management's ability to find and negotiate favorable investment contracts.

Net cash used in financing activities was approximately $328,000 and $2.9 million for the six-month period ended June 30, 2016 and 2015, respectively.  During the second quarter of 2015, the Company paid $2 million on its outstanding line of credit.

UTG is a holding Company that has no day-to-day operations of its own.  Funds required to meet its expenses, generally costs associated with maintaining the Company in good standing with states in which it does business and the servicing of its debt, are primarily provided by its subsidiaries.  On a parent only basis, UTG's cash flow is dependent on Management fees received from its insurance subsidiary, stockholder dividends from its subsidiary and earnings received on cash balances.  At June 30, 2016, substantially all of the consolidated shareholders' equity represented net assets of its subsidiary.  The Company's insurance subsidiary has maintained adequate statutory capital and surplus.  The payment of cash dividends to shareholders by UTG is not legally restricted.  However, the state insurance department regulates insurance Company dividend payments where the Company is domiciled.  No dividends were paid to shareholders in 2015 or the six-month period ended June 30, 2016.

UG is an Ohio domiciled insurance company, which requires notification within five business days to the insurance commissioner following the declaration of any ordinary dividend and at least ten calendar days prior to payment of such dividend.  Ordinary dividends are defined as the greater of:  a) prior year statutory net income or b) 10% of statutory capital and surplus.  For the year ended December 31, 2015, UG had statutory net income of approximately $306,000.  At December 31, 2015 UG's statutory capital and surplus amounted to approximately $39.8 million.  Extraordinary dividends (amounts in excess of ordinary dividend limitations) require prior approval of the insurance commissioner and are not restricted to a specific calculation.  During 2015, UG paid UTG ordinary dividends of $4 million.  UTG used the dividends received during 2015 for general operations of the Company.   During the third quarter of 2016, UG paid UTG an ordinary dividend of $1 million. UTG used the dividend received during 2016 for general operations of the Company.

ITEM 4.  CONTROLS AND PROCEDURES

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to Management, including the principal executive officer and principal financial officer, allowing timely decisions regarding required disclosure. Under the supervision and with the participation of our Management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

NONE

ITEM 1A.  RISK FACTORS

NONE

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

NONE

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

NONE

ITEM 4.  MINE SAFETY DISCLOSURES

NONE

ITEM 5.  OTHER INFORMATION

NONE

ITEM 6.  EXHIBITS

*31.1	Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1	Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2	Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101	Interactive Data File

*Filed herewith

SIGNATURES

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

UTG, INC.

(Registrant)

Date:	August 12, 2016	By	/s/ James P. Rousey
			James P. Rousey
			President and Director

Date:	August 12, 2016	By	/s/ Theodore C. Miller
			Theodore C. Miller
			Senior Vice President
			and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number Description

*31.1	Certification of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2	Certification of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1	Certificate of Jesse T. Correll, Chief Executive Officer and Chairman of the Board of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*32.2	Certificate of Theodore C. Miller, Chief Financial Officer, Senior Vice President and Corporate Secretary of UTG, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
**101	Interactive Data File

* Filed herewith