UTG, Inc. is an insurance holding company incorporated in the state of Delaware
in 2005. Its primary direct subsidiary is Universal Guaranty Life Insurance
Company ("UG"). The Registrant and its primary subsidiary have only
one significant segment, insurance. The Company's dominant business is individual
life insurance, which includes the servicing of existing insurance business
in-force, the acquisition of other companies in the insurance business, and
the administration processing of life insurance business for other entities.
The holding company has no significant business operations of its own and relies
on fees, dividends and other distributions from its operating subsidiary as
the principal source of cash flows to meet its obligations.
UG has several wholly-owned and majority-owned subsidiaries. The subsidiaries
were formed to hold certain real estate and other investments. The investments
were placed into the limited liability companies and partnerships to provide
additional protection to the policyholders and to UG.
Increased global IT security threats and more sophisticated and targeted computer
crime pose a risk to the security of systems and networks and the confidentiality,
availability and integrity of data. Although the Company makes efforts to maintain
the security and integrity of the networks and systems, there can be no assurance
that the security efforts will be effective or that attempted security breaches
or disruptions would not be successful or damaging. In the event a security
breach or failure results in the disclosure of sensitive third party data or
the transmission of harmful/malicious code to third parties, the Company could
be subject to liability claims. The Company does not currently carry insurance
coverage against such liabilities. Depending on their nature and scope, such
threats also could potentially lead to improper use of our systems and networks,
manipulation and destruction of data, loss of trade secrets, system downtimes
and operational disruptions, which in turn, could adversely affect our reputation,
competitiveness and results of operations.
UG's product portfolio consists of a limited number of life insurance product
offerings. All of the products are individual life insurance products, with
design variations from each other to provide choices to the customer. These
variations generally center around the length of the premium paying period,
length of the coverage period and whether the product accumulates cash value
or not.
While the Company does not actively sell any new policies today, it has the
following products available for issue:
Ten Pay Whole Life – This traditional insurance product has a level face
amount and level premium is payable for the first ten policy years. This product
is available for issue ages 0-65, and has a minimum face amount of $10,000.
This policy can be used in conversion situations, where it is available up to
age 75 at a minimum face amount of $5,000.
Tradition – The Tradition policy is a fixed premium whole life insurance
policy. Premiums are level and payable for life. Issue ages are 0-75. The minimum
face amount is the greater of $10,000 or the amount of coverage provided by
a $100 annual premium.
Kid Kare – The Kid Kare product is a single premium level term policy
to age 21. The product is sold in units, with one unit equal to a face amount
of $5,000 for a single premium of $250. The policy is issued from ages 0-15
and has conversion privileges at age 21.
As is customary in the insurance industry, the insurance subsidiary cedes insurance
to, and assumes insurance from, other insurance companies under reinsurance
agreements. Reinsurance agreements are intended to limit a life insurer's maximum
loss on a large or unusually hazardous risk or to obtain a greater diversification
of risk. The ceding insurance company remains primarily liable with respect
to ceded insurance should any reinsurer be unable to meet the obligations assumed
by it. However, it is the practice of insurers to reduce their exposure to loss
to the extent that they have been reinsured with other insurance companies.
The Company sets a limit on the amount of insurance retained on the life of
any one person. The Company will not retain more than $125,000, including accidental
death benefits, on any one life.
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.
2.35%