In addition to the changing interest rate environment, the Company benefited from improved earnings on its real estate investment in Hampshire Plaza. New tenant leases during the year resulted in an increase in earnings on this investment, with 2004 being the first year of ownership to show positive results. The property is expected to continue showing positive results in future periods. This parcel was acquired two years ago with an original projection of two years of unprofitable results. Actual results have been better than originally projected as a result of leasing vacant space quicker. This property reflected an increase in investment income of approximately $992,000 in 2004 as compared to 2003.
Total liabilities increased less than 1% in 2004 compared to 2003. Policy liabilities and accruals, which represented 94% and 95% of total liabilities at year end 2004 and 2003, respectively, decreased slightly during the current year. The decrease is attributable to a decrease in the outstanding policy benefit claims at the end of the year.
The Company had $ 0 and $ 2,289,776 in outstanding notes payable as of December 31, 2004 and 2003, respectively. The Company has two lines of credit available for operating liquidity or acquisitions of additional lines of business. The Company's long-term debt is discussed in more detail in Note 11 to the consolidated financial statements, which is incorporated herein by this reference.
UTG is a holding company that has no day-to-day operations of its own. Funds required to meet its expenses, generally costs associated with maintaining the Company in good standing with states in which it does business, are primarily provided by its subsidiaries. On a parent only basis, UTG's cash flow is dependent on management fees received from its insurance subsidiary and earnings received on cash balances. On December 31, 2004, substantially all of the consolidated shareholders equity represents net assets of its subsidiary. The Company's insurance subsidiary has maintained adequate statutory capital and surplus and has not used surplus relief or financial reinsurance, which have come under scrutiny by many state insurance departments. The payment of cash dividends to shareholders is not legally restricted. However, the state insurance department regulates insurance company dividend payments where the company is domiciled.
Company action level 2* Regulatory action level 1.5 Authorized control level 1 Mandatory control level 0.7
Additional paid-in capital Balance, beginning of year $ 42,672,189 $ 42,976,344 $ 42,789,636 Issued during year 167,071 185,574 705,514 Treasury shares acquired (297,991) (181,817) (518,806) Reclassification under FAS 150 49,551 0 0 Retired during year 0 (258,361) 0 Cumulative change in accounting principal 0 (49,551) 0 ------------ ----------- ----------- Balance, end of year $ 42,590,820 $ 42,672,189 $ 42,976,344 ============ =========== ===========
---------------- ----------------- ---------------- Change for the year (437,380) (339,844) (645,432) ---------------- ----------------- ----------------
Carrying Value ---------------------------------------- 2004 2003 --------------- -------------- Investments held for sale: Fixed maturities U.S. Government, government agencies and authorities $ 41,632,843 $ 31,347,586 State, municipalities and political subdivisions 177,444 177,963 Collateralized mortgage obligations 79,643,440 89,117,375 All other corporate bonds 26,740,160 18,747,458 --------------- -------------- $ 148,193,887 $ 139,390,382 =============== ==============
2004 2003 ------------------------------------------------------------------------- Estimated Estimated Carrying Fair Carrying Fair Assets Amount Value Amount Value -------------- -------------- --------------- --------------- Fixed maturities $ 11,973,415 $ 12,097,788 $ 26,724,507 $ 27,440,277 Fixed maturities held for sale 148,193,887 148,193,887 139,390,382 139,390,382 Equity securities 20,399,172 20,399,172 9,362,165 9,362,165 Securities of affiliate 4,000,000 4,000,000 4,000,000 4,000,000 Mortgage loans on real estate 20,722,415 20,816,955 26,715,968 26,853,183 Investment in real estate 28,192,081 28,192,081 24,725,824 24,725,824 Policy loans 12,844,748 12,844,748 13,226,399 13,226,399 Short-term investments 39,489 39,489 34,677 34,677
Unrealized holding gains during period $ 7,896,605 $ (2,763,812) $ 5,132,793