What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-03-10 · 195 added, 293 removed, 138 unchanged (78% of the section changed)

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dollar-denominated ordinary whole life insurance and endowment policies predominantly sold to non-U.S.

residents, located principally in Latin America and the Pacific Rim, sold through independent consultants in various countries;

• Home Service Insurance segment - final expense life insurance and limited liability property insurance policies marketed to middle- and lower-income households in Louisiana, Mississippi and Arkansas, and sold through independent agents and through funeral homes.

residents, located principally in Latin America and the Pacific Rim through independent marketing consultants and whole life insurance sold domestically through independent agents;

• Home Service Insurance segment - final expense life insurance and property insurance policies marketed to middle- and lower-income households, as well as whole life products with higher allowable face values, in Louisiana, Mississippi and Arkansas, and sold through independent agents and through funeral homes.

As an insurance provider, we collect premiums on an ongoing basis from our policyholders and invest the majority of the premiums to pay future benefits, including claims, surrenders and policyholder dividends.

Accordingly, the Company derives its revenues principally from:

(1) life insurance premiums earned for insurance coverages provided to insureds;

(1) premiums earned for insurance coverage provided to our policyholders;

and (2) net investment income.

1 unchanged sentence

Because collection of premiums is the primary source of our revenues, our overall financial performance depends primarily upon the pricing of our insurance products and the accuracy of our pricing assumptions.

The Company seeks to price our insurance policies such that insurance premiums and future net investment income earned on premiums received will cover our expenses and the ultimate cost of paying claims reported on the policies and provide for a profit margin.

Pricing adequacy depends on a number of factors, including proper evaluation of underwriting risks, the ability to project future losses based on historical loss experience adjusted for known trends, the Company’s response to competitors, the ability to obtain regulatory approval for rate changes if applicable, expectations about regulatory and legal developments and expense levels.

The Company seeks to price our insurance policies such that insurance premiums and future net investment income earned on premiums received will cover the ultimate cost of paying claims on our policies, our expenses and will also yield a profit margin.

Pricing adequacy depends on a number of factors, including proper evaluation of underwriting risks, the ability to project future losses based on historical loss experience adjusted for known trends, the Company’s response to competitors, the ability to obtain regulatory approval for rate changes, expectations about regulatory and legal developments and expense levels.

In order to manage the risks related to pricing, we employ medical underwriting procedures to assess and quantify risks before we issue policies.

Insurance applications are reviewed to determine eligibility based on underwriting guidelines we establish, as well as to determine the applicable premium.

Insurance applications are reviewed to make two determinations:

first, eligibility based on established underwriting guidelines and second, the applicable premium.

We periodically review our underwriting requirements and may make changes as needed.

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In addition to insurance premiums, the investment return, or yield, on invested assets is an important element of the Company’s earnings since insurance products are priced with the assumption that premiums received can be invested for a period of time before benefits are paid.

Most of the Company’s invested assets have been held in available for sale ("AFS") fixed maturity securities, primarily in asset classes of corporate bonds, municipal bonds, and government obligation bonds.

The interest rate environment has a significant impact on the determination of insurance contract liabilities, our investment rates and yields, and our asset/liability management.

The profitability

Pursuant to regulatory guidelines, most of the Company’s invested assets are held in available-for-sale ("AFS") fixed maturity securities, primarily in asset classes of corporate bonds, municipal bonds, and government obligation bonds.

The interest rate environment has a

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of fixed annuities, riders and other "spread-based" product features depends largely on the Company’s ability to earn target spreads between earned investment rates on assets and interest credited to policyholders.

significant impact on the determination of insurance contract liabilities, our investment rates and yields, and our asset/liability management.

The profitability of our "spread-based" product features depends largely on the Company’s ability to earn higher returns on invested assets than the interest we credit to policyholders.

The primary investment objective for the Company is to maximize economic value, consistent with acceptable risk parameters, including the management of credit risk and interest rate sensitivity of invested assets, while generating sufficient after-tax income to meet policyholder and corporate obligations.

The Company maintains a prudent investment strategy that may vary based on a variety of factors including business needs, regulatory requirements and tax considerations.

CHANGE IN CONTROL;

AGREEMENT TO PURCHASE THE CLASS B SHARES;

ANTICIPATED DIVESTITURE OF CONTROL

On July 29, 2020, the Harold E.

Riley Foundation (the “Foundation”) became the owner of 100% of the Company’s outstanding Class B common stock (the “Class B Shares”).

Because the Company’s Restated and Amended Articles of Incorporation provide that the holders of the Class B Shares shall have the exclusive right to elect a simple majority of the members of the Board of Directors (the “Board”) of the Company, as of such date, the Foundation controlled the Company (the “change in control”).

Following the change in control, several material events occurred that impacted us:

• On August 5, 2020, Geoffrey M.

Kolander, our President and Chief Executive Officer and a member of the Board, resigned, triggering the change in control severance provision in his employment agreement with the Company;

• On the same date, Gerald W.

Shields, our Vice Chairman of the Board, was appointed as the Interim Chief Executive Officer and President of the Company, to serve in such position while the Board conducted a search to find a permanent replacement for Mr.

• On August 13, 2020, the Foundation delivered an Action by Written Consent of the Foundation to the Company, purporting to remove the Company’s directors elected by the Class B Shares ("Class B directors") and add five director nominees to the Company’s Board;

• The Board disputed the Foundation's action, on the basis that the Foundation did not follow the required procedures for director appointments mandated by the Company's Corporate Governance Guidelines and Nominating and Corporate Governance Committee charter;

• As described in Item 3.

Legal Proceedings , on September 2, 2020, the Foundation filed suit against the Company and its eight directors in the District Court for Arapahoe County, Colorado (the “Colorado Litigation”,

• and on September 28, 2020, the Foundation and the Company entered into a mutually agreed Status Quo Stipulation, whereby the Board and its committees agreed not to direct or permit anyone on their or the Company’s behalf to take any significant action that is outside the ordinary course of business without the consent of the Foundation;

• The two sole charitable beneficiaries of the Foundation, Baylor University and Southwestern Baptist Theological Seminary (the “Foundation Beneficiaries”), subsequently filed a lawsuit against the Foundation and its Chief Executive Officer / President, Michael C.

Hughes (who was also one of the purported nominees submitted to the Company by the Foundation), claiming, among other things, that the Foundation’s board of trustees breached their fiduciary duties to the Foundation and misused Foundation monies for personal benefit, including the litigation against the Company in an attempt to seat themselves on the Company’s board (the “Texas Third-Party Litigation”);

• The Texas Attorney General intervened on behalf of the Foundation Beneficiaries in the Texas Third-Party Litigation;

• On December 7, 2020, the Company filed counterclaims and third-party claims in the Colorado Litigation against the Foundation and two of its officers or trustees, Charles W.

Hott and Michael C.

Hughes alleging that Mr.

Hughes and Mr.

Hott, as trustees or officers of the Foundation, among other things:

(i) defrauded state insurance regulators in order to seize control of the Company, (ii) breached their fiduciary duties to all of the Company’s shareholders, and (iii) violated the Colorado Consumer Protection Act (collectively, the “Counterclaims").

On February 6, 2021, the Foundation Beneficiaries settled the Texas Third-Party Litigation with the Foundation in which they alleged that the Foundation trustees, including Mr.

Hughes and Mr.

Hott, breached their fiduciary duties

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to the Foundation and misused Foundation monies for personal benefit, including the filing of the Colorado Litigation (see Item 3, Legal Proceedings - “Texas Suit filed by the Foundation’s Beneficiaries against the Foundation”).

As a result of their settlement, Mr.

Hughes and Mr.

Hott were removed as trustees from the Foundation.

The Foundation Beneficiaries, upon gaining control of the Foundation through their appointed trustees to the Foundation, agreed to dismiss the Colorado Litigation and entered into a Mutual Agreement for Compromise, Settlement and Release with the Company and its individual directors (the “Foundation Settlement Agreement”).

As a result of the Foundation Settlement Agreement:

• The Company, its directors and the Foundation dismissed all claims at issue in the Colorado Litigation and the parties agreed to mutual releases for conduct prior to February 5, 2021;

• The Company:

(a) restored its Board to its form as of August 12, 2020 consisting of a nine-seat Board comprised of four directors elected by the Company's Class A common stock (Christopher W.

Davis, Jr., Gerald W.

Shields, and Frank A.

Keating II), four Class B directors (E.

Dean Gage, Robert B.

Sloan, Terry S.

Maness, and Constance K.

Weaver), and one Class B vacancy;

and (b) restored the Company’s Amended and Restated Bylaws to the form in which they existed on August 12, 2020;

• The Foundation withdrew the Foundation nominees who had been submitted pursuant to the August 13, 2020 Action by Written Consent of the Foundation and approved the restoration of the four Class B directors named above;

• The Foundation agreed to sell, and the Company agreed to purchase, 100% of the Company’s Class B Shares from the Foundation for $9.1 million.

On February 6, 2021, pursuant to the Foundation Settlement Agreement, the Company entered into an agreement with the Foundation to purchase all of the Class B Shares for a purchase price of $9.1 million (the “B Share Transaction”).

As required by the insurance holding company systems laws that govern our insurance subsidiaries, the Company and the Foundation are in the process of acquiring the necessary regulatory approvals to consummate the B Share Transaction.

On March 5, 2021, the Company paid the purchase price to the Foundation to hold in escrow until the regulatory approval has been obtained.

As of the date that all such required regulatory approvals are obtained, the Foundation will deliver the Class B Shares to the Company and divest its control of the Company.

In accordance with Colorado law, the Class B Shares will then be classified as authorized, but unissued shares.

Once the Class B Shares are classified as unissued shares:

• the Company will only have one class of stock outstanding:

IN 2021, WE BECAME A NON-CONTROLLED COMPANY

Throughout most of our history, the Company was led and controlled by our founder Harold E.

Riley and his family members.

Riley passed away in 2017 and in 2020, a change-in-control of our Company occurred when the shares held by the Harold E.

Riley Trust were transferred to the Harold E.

Riley Foundation (the “Foundation”).

As a result of this change-in-control:

• On August 5, 2020, Geoffrey Kolander, our Chief Executive Officer and President resigned and Gerald W.

Shields, the Vice Chairman of the Board of Directors of the Company, was appointed Interim Chief Executive Officer and President;

• In February 2021, the Company entered into an agreement with the Foundation to purchase all of the outstanding shares of Class B common stock for a purchase price of $9.1 million (the “B Share Transaction”).

In April 2021, the Company and the Foundation obtained all regulatory approval required to consummate the B Share Transaction.

In accordance with Colorado law, the shares of Class B common stock are now classified as authorized, but unissued shares and the Company's Board of Directors (the "Board") has resolved not to vote the shares of Class B common stock as long as they are so classified.

Accordingly, since April 2021:

• the Company has only one class of stock outstanding:

the Class A common stock, which is registered under the Securities Exchange Act of 1934, as amended, and listed on the New York Stock Exchange (“NYSE”);

• the Class B Shares will not have any voting rights;

• the holders of the Class A shares will be entitled to elect all of the directors at the Company’s annual meetings (after any annual meeting for which the record date has already occurred);

• the Company will no longer be a “controlled” company as defined under the NYSE rules and therefore will be obligated to comply with certain additional listing standards.

Due to the settlement of the Colorado Litigation and the B Share Transaction, the Company believes that it will be better positioned to hire a new Chief Executive Officer and offer stability to our management team, employees and independent sales force in order to move forward with our business and Strategic Initiatives, as described below.

• the Class B Shares do not have any voting rights;

• the holders of the Class A shares are entitled to elect all of the directors at the Company’s annual meetings;

• for the first time in over 30 years, we are no longer a “controlled” company as defined under the NYSE rules.

After the consummation of the B Share Transaction, Mr.

Shields, then acting as our Interim Chief Executive Officer, began working with the Board and management to create and implement a new strategy for the Company in order to set a course for long-term profitable growth.

In December 2021, the Board announced that effective January 1, 2022, Mr.

Shields would become the permanent CEO and President.

After the B Share Transaction and the appointment of Mr.

Shields as our permanent Chief Executive Officer, the Company believes that it is positioned to offer stability to our management team, employees and independent sales force in order to move forward with our business and strategic initiatives, as described below.

STRATEGIC INITIATIVES

During 2020, the COVID-19 pandemic shifted customer, agent and employee needs, habits and expectations and forced virtualization of our operations.

When the pandemic emerged, we took immediate steps to ensure business continuity and stability.

Towards the end of 2020 and as we head into 2021, we accelerated longer-term recovery efforts and pivoted to reemphasize growth in order to cultivate enduring value for our key stakeholders.

We entered 2021 with clearly defined priorities in order to set a course for long-term profitable growth.

Our growth strategy consists of focusing on our customers’ needs, our sales force, and use of technology to improve our processes:

As mentioned above, in 2021, the Company became a non-controlled company for the first time in over 30 years.

This change allowed the Board and management to reset and clearly define our priorities to set a course for long-term profitable growth.

Our growth strategy consists of focusing on sales growth, improved policy retention, roadmap execution, and financial and expense discipline.

We believe that our roadmap execution is key to achieving sales growth, as it helps us improve sales and service across our three markets (international life, domestic life and home services) by focusing on three specific sales

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• Customers .

We are focusing on our customer needs by making changes to enhance existing products, repricing products and introducing new offerings.

• Sales Force .

We are focused on implementing sales promotions and campaigns in order to align our sales consultant compensation opportunities with our premium revenue goals and growth initiatives.

• Technology .

We are implementing process improvements and new technologies in order to get products to our customers faster, help our sales force by promoting safe, yet effective sales practices, and help our employees work more effectively and efficiently.

We believe this 3-prong growth strategy will help us grow premium revenues in existing markets and allow us to expand into new markets.

We are executing on this strategy as follows:

Expansion of Life Insurance Segment into Hispanic US Market in 2021.

Because we have developed the ability to complete insurance transactions end-to-end in Spanish and Portuguese and understand the needs of the Hispanic market due to over 45 years of doing business in Latin America, we have expanded our Life Insurance segment to the Hispanic market in the U.S.

and expect to begin selling in this market during early 2021.

We have developed a whole life insurance product for this expansion that has already been approved in the state of Florida and are partnering with a marketing agency to build out a sales force to sell this product.

Transformation of our Home Service Insurance Segment .

The Home Service Insurance business is a focus of transformation to drive sales growth for the Company in 2021.

levers in each market- products, promotions and processes.

Specifically, we implemented a five-quarter roadmap that lays out the following:

We are focusing on our customer needs by offering new products tailored to our specific markets and enhancing existing products.

New products also help our sales force, as they can sell additional products to existing customers and offer a broader portfolio of products to entice prospective customers.

• Promotions .

We are focused on implementing sales promotions and campaigns in order to align our sales consultant compensation opportunities with our premium revenue goals, and our growth and retention initiatives.

• Processes .

We are implementing process improvements and new technologies in order to get products to our customers faster and improve services for both our policyholders and our agents, as well as helping our employees work more effectively and efficiently.

Status of New and Enhanced Products;

Trends in Market Demand

As mentioned above, offering new and enhanced products are key to achieving our strategic goals.

Introduced New Products in our Home Service Insurance Segment .

Over the past 18 months, our Home Service Insurance business has been a focus of transformation to drive sales growth for the Company.

Prior to mid-2020, the focus of this segment was collections, i.e.

renewal premiums.

We reorganized our sales force, hired a new director of sales in 2020 and expect to update our product portfolio, to bring attractive and highly competitive offerings to market in early 2021.

Launched New Marketing Campaigns.

In 2020, we recognized the value that having different sales campaigns throughout the year had on our sales force and launched sales campaigns throughout 2020 that incentivized agents at all levels of seniority.

The incentives were different depending on the campaign, however they all created competition within the sales force, which we believe drove more sales per independent consultant / agent.

• In our Life Insurance segment, we created a sales campaign that helped lead to 75% higher first year premiums in the fourth quarter of 2020 as compared to the third quarter of 2020 and 15% higher first year premiums when compared to the fourth quarter of 2019.

The amount of first year premiums in our Life Insurance segment in the fourth quarter of 2020 were the highest since the fourth quarter of 2017.

We believe the reason this campaign worked so well was because of the various levels of detail included in the incentives, as well as our execution of the campaign.

• In the Home Service Insurance segment, we launched a sales campaign with incentives to our independent agents that resulted in an increase in the amount of in-force insurance for our current customer base.

Multiple campaigns are scheduled to occur during 2021 in order to continue incentivizing and motivating our sales force.

Implemented Operational Improvements.

As the world became more digital in 2020 due to the COVID-19 pandemic, we implemented technological improvements to make our operations more effective and efficient.

We updated our underwriting processes and introduced a revised policy application for our international business in order to remove barriers to sales with a more frictionless process for agents and applicants and to reduce underwriting expense.

We enhanced our policyholder and agent self-services with new capabilities to make it easier to do business with us including expanding our alternative payment methods for our Home Service Insurance segment to accept credit card and debit card payments.

We also focused on training our sales force to sell our policies and service our policyholders virtually.

As we seek to optimize value for the Company, its customers and its distributors, we believe our efforts to develop and enhance our products, incentivize our sales force and make process and technology improvements will continue to put the Company on a stronger financial footing and drive sustainable growth.

renewal premiums and our sales force had sold the same life insurance product for over 30 years.

In 2021, we introduced a higher face value whole life product in this segment, allowing us to expand our target customer.

In December 2021 , we launched a critical illness product that offers a true living benefit to policyholders by paying a lump sum amount in the event of a covered critical illness to use at the policyholder's discretion.

As we continue to expand our product offerings in this market, we believe that cross-selling opportunities (i.e., selling new products to existing customers and offering more than one product to a new customer) will lead to revenue growth.

Reevaluated expansion of Life Insurance Segment into Hispanic US Market .

As we previously disclosed, in 2021 we undertook an initiative to expand our Life Insurance segment to the Hispanic market in the U.S.

by bringing our infrastructure to complete insurance transactions end-to-end in Spanish to the Florida market.

We launched three products in this market in 2021.

While we still believe that there is a need for this type of product and service in the U.S., our efforts to recruit agents to sell our products have been slower than we expected and we are re-evaluating our sales distribution approach, initiatives and domestic life insurance offerings in the Florida market in 2022.

As policy surrenders have increased in our business over the last several years, in 2021, we formed a retention steering team in an effort to curb policy surrenders.

This team focused on cultivating and executing on ideas that would increase each of our segments' overall retention, while being beneficial to our policyholders.

Both our Life Insurance segment and our Home Service Insurance segment improved policy retention in 2021 due to these efforts.

As we seek to optimize value for the Company's shareholders, customers and distributors, we believe our efforts to develop and enhance our products, incentivize our sales force and make process and technology improvements will continue to put the Company on a stronger financial footing and drive sustainable growth.

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Our Life Insurance segment primarily operates through CICA Life Ltd.

("CICA Ltd."), a Bermuda company, which issues ordinary whole life insurance in U.S.

dollar-denominated amounts to non-U.S.

These products are designed to provide a fixed amount of insurance coverage over the life of the insured and can include rider benefits to provide additional coverage and annuity benefits to enhance accumulations.

Additionally, CICA Ltd.

issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection.

INTERNATIONAL SALES

We focus our international sales of U.S.

dollar-denominated ordinary whole life insurance and endowment policies to residents in Latin America and the Pacific Rim.

As of December 31, 2020, we had insurance policies in force in more than 75 foreign countries, with Colombia, Venezuela, Taiwan, Ecuador and Argentina as our top producing countries.

("CICA International"), a Bermuda company.

INTERNATIONAL LIFE INSURANCE

We focus our international sales to residents in Latin America and the Pacific Rim.

As of December 31, 2021, we had insurance policies in force in more than 70 foreign countries and receive the majority of our premiums from Colombia, Venezuela, Taiwan, Ecuador and Argentina.

International direct premiums comprised approximately 96% of total direct premiums in the Life Insurance segment and 68% of our total direct premiums in 2021.

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Our international sales force consists of independent marketing agencies and consultants who specialize in marketing life insurance products and generally have several years of insurance marketing experience.

We enter into contracts with the independent marketing agencies pursuant to which they recruit, train and supervise their managers and associates in the sales and service of our products.

We enter into sales and service contracts with the independent marketing agencies pursuant to which they recruit, train and supervise their managers and associates in the sales and service of our products.

These agencies receive commissions for products they sell, as well as commission overrides on the business that their agents produce and, in return for the override, they guarantee any debt their agents owe to us.

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Our contracts require the independent marketing agencies and consultants to understand and comply with all laws applicable to sales of our products in their country.

INTERNATIONAL PRODUCTS

We offer several ordinary whole life insurance and endowment products designed to meet the needs of our non-U.S.

policyowners.

CICA International issues ordinary whole life insurance and endowment products in U.S.

dollar-denominated amounts to non-U.S.

The whole life insurance products are designed to provide a fixed amount of insurance coverage over the life of the insured and can include rider benefits to provide additional coverage and annuity benefits to enhance accumulations.

Our endowment contracts are principally accumulation contracts that incorporate an element of life insurance protection.

These products have premium rates that are competitive with most foreign local companies and have been structured to provide the policyowners with:

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Our international products have both living and death benefit features.

Most policies contain guaranteed cash values and are participating (i.e., provide for cash dividends as apportioned by our Board of Directors).

Most policies contain guaranteed cash values and are participating (i.e., provide for cash dividends as apportioned by CICA International's board of directors).

Once a policyowner pays the annual premium and the policy is issued, the owner becomes entitled to policy cash dividends and may elect to receive annual premium benefits.

The policyowner has several options with regards to the policy dividends and annual premium benefits, which include, among other things, electing to receive cash, crediting such amounts towards the payment of premiums on the policy, leaving such amounts on deposit with the Company to accumulate at a defined interest rate or assigning them to a third-party.

Under the "assigned to a

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policyowner pays the annual premium and the policy is issued, the owner becomes entitled to policy cash dividends as well as annual premium benefits if the annual premium benefit is elected.

Under the "assigned to a third-party" provision, the Company has historically allowed policyowners, after receiving a copy of the Citizens, Inc.

third-party" provision, the Company has historically allowed policyowners, after receiving a copy of the Citizens, Inc.

Stock Investment Plan (the "CISIP") prospectus and acknowledging their understanding of the risks of investing in Citizens Class A common stock, the right to assign policy values outside of the policy to the CISIP, which is administered in the United States by Computershare Trust Company, N.A., our plan administrator and an affiliate of Computershare, Inc., our transfer agent.

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The Company has registered the shares of Class A common stock issuable to participants under the CISIP on a registration statement under the Securities Act of 1933, as amended (the "Securities Act") that is on file with the SEC.

Computershare administers the CISIP in accordance with the terms and conditions of the CISIP, a copy of which is available on the Computershare website and as part of the Company’s registration statement on file with the SEC.

INTERNATIONAL COMPETITION

Computershare administers the CISIP in accordance with the terms and conditions of the CISIP, which is available on the Computershare website and as part of the Company’s registration statement on file with the SEC.

The life insurance business is highly competitive.

We compete with a number of stock and mutual life insurance companies internationally and domestically, as well as with financial institutions that offer insurance products.

We face competition primarily from other insurance companies that operate in the same manner as we do, as well as companies formed and operated in the country in which an insured resides, and from companies foreign to the countries in which their products are sold, but issue insurance policies denominated in the local currency of those countries.

Some companies may have a competitive advantage over us due to their significantly greater financial resources, histories of successful operations and larger marketing forces.

Because premiums on our international policies are paid in U.S.

Internationally, we compete with a number of life insurance companies, as well as with financial institutions that offer insurance products.

We face competition from other insurance companies that operate in the same markets and manner as we do.

Additionally, some of our competitors are local companies formed and operated in the country in which an insured resides, and others are companies foreign to the countries in which their products are sold, but issue insurance policies denominated in the local currency of those countries or issue products approved by regulators of those countries.

Some of these companies may have a competitive advantage over us due to their greater financial resources, histories of successful operations and brand recognition, local licensing, partnering with local insurance companies and larger marketing forces.

We believe that we have a competitive advantage over some of our competitors because premiums on our international policies are paid in U.S.

dollars, cash value is accumulated in U.S.

dollars, and we pay claims and benefits in U.S.

dollars, we provide life insurance solutions that we believe are different from and superior to those offered by foreign-domiciled companies.

We believe our international products are usually purchased by individuals in the upper-middle class in their respective countries and those with significant net worth and earnings that place them in the upper income brackets of their respective countries.

The policies sold by our foreign competitors are generally offered broadly and are priced using the mortality of the entire population of the geographic region.

Our mortality charges are typically lower due to our customer demographics, which provides a competitive advantage.

Additionally, the assets backing the reserves for our foreign competitors' policies must be substantially invested in their respective foreign countries and, therefore, are exposed to the inflationary risks and social or economic crises that have been more common in these foreign countries.

DOMESTIC SALES

Domestic whole life insurance policies are sold to U.S.

citizens and certain U.S.

visa holders through our CICA Life Insurance Company of America ("CICA") and Citizens National Life Insurance Company ("CNLIC") insurance subsidiaries.

In 2020, domestic direct premiums comprised approximately 4% of total direct premiums in the Life Insurance segment and 3% of our total direct premiums overall.

The majority of our domestic in force business results from blocks of business of insurance companies we have acquired over the years.

CICA and CNLIC issued ordinary whole life, credit life and disability and accident and health related policies throughout the Midwest and Southern U.S.

until they ceased most domestic sales beginning January 1, 2017.

As discussed above under “Strategic Initiatives”, we plan to begin marketing our products again domestically in early 2021, beginning in Florida.

We believe this provides security and stability to our insureds, who are generally individuals in the middle to upper-middle class in their respective countries with significant net worth and earnings.

Therefore, our products protect them from the inflationary risks and economic crises that have been common in many of our top-producing foreign countries.

DOMESTIC LIFE INSURANCE

We operate our domestic life insurance business through CICA Life Insurance Company of America ("CICA") and Citizens National Life Insurance Company ("CNLIC").

In 2021, domestic direct life insurance premiums comprised approximately 4% of total direct premiums in the Life Insurance segment and 3% of our consolidated total direct premiums.

The majority of our domestic in force business results from renewal premiums from blocks of business of insurance companies we have acquired over the years.

CICA and CNLIC issued domestic ordinary whole life and endowment life insurance products prior to 2017, and except for our new domestic initiative described below, continues to sell primarily credit life and accident and health products in Texas.

In 2021, we undertook an initiative to re-start domestic sales in Florida.

We believe that our experience in developing and selling products in Latin America will help us expand into the large Hispanic market in the U.S.

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DOMESTIC LIFE INSURANCE PRODUCTS

Our domestic life insurance products have historically focused primarily on living needs and providing benefits focused toward accumulating financial benefits for the policyowner.

The features of our domestic life insurance products include:

• cash accumulation/living benefits;

• tax-deferred interest earnings;

• guaranteed lifetime income options;

• monthly income for surviving family members;

• accidental death benefit coverage options;

• an option to waive premium payments in the event of disability.

Our life insurance products have historically been designed to address the insured's concern about outliving his or her monthly income, while at the same time providing death benefits.

The primary purpose of our current product portfolio is to help the insured create capital for needs such as retirement income, children's higher education, business opportunities, emergencies and health care needs.

In addition, our insurance products offer financial benefits like savings protection and immediate funds in event of the insured's death.

Through detailed research and analysis, the Company has recognized the opportunity to re-enter the domestic life insurance market.

We believe that we hold a strong competitive edge in the fast-growing Latin American and Hispanic segments because of our insights and expertise from doing business for over 45 years in Latin America.

We have developed competitive and attractive products that we believe will allow us to succeed in the domestic market.

However, our efforts to recruit agents to sell our product have been slower than we expected and we are re-evaluating our sales distribution approach, initiatives and domestic offerings in the Florida market in 2022.

HOME SERVICE INSURANCE

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through our subsidiaries Security Plan Life Insurance Company ("SPLIC"), Magnolia Guaranty Life Insurance Company ("MGLIC") and Security Plan Fire Insurance Company ("SPFIC").

These companies focus on final expense life insurance needs of middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas.

Our policies are sold and serviced through a home service marketing distribution system of about 240 independent agents as of December 31, 2020, who work on a route system and through over 175 funeral homes, all of whom sell policies, collect premiums and service policyholders.

We also sell limited liability, named peril property policies covering dwelling and contents through SPFIC.

SPLIC and MGLIC focus on final expense life insurance needs of middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas.

Prior to 2021, all of our Home Service Insurance products issued by SPLIC were sold primarily through employee agents who worked on a debit route system.

Starting in late 2020 and continuing throughout 2021, we have been transforming this segment by converting a large portion of our sales force to independent agents, reducing layers of management and introducing

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new products for the first time in almost 35 years.

This transformation led to increased sales and decreased operational expenses in 2021.

Policies issued by MGLIC are primarily burial policies which are sold and serviced through funeral homes, who are also typically the beneficiaries of the policies.

SPFIC is a limited liability casualty company that sells small face value property insurance policies covering dwelling and contents, primarily in Louisiana.

In 2021, we expanded our product offering to Arkansas in part to mitigate the risk of hurricane-related claims that have impacted our business over the last two years.

In 2021, our Home Service Insurance segment comprised 29% of our total consolidated direct premiums.

HOME SERVICE PRODUCTS AND COMPETITION

Products and Competition

Our Home Service Insurance products consist primarily of small face amount ordinary whole life and pre-need policies, which are designed to fund final expenses for the insured (e.g.

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Due to the lower risk associated with small face amount polices, the underwriting performed on these applications is limited.

To a much lesser extent, our Home Service Insurance segment sells limited liability named-peril property policies covering dwellings and content.

As part of the Home Services Insurance segment transformation mentioned above, in 2021 we introduced a new product, Security Plan Plus, which has a higher allowed face amount.

In December 2021, we also introduced a critical illness product, which pays the insured a lump sum following the diagnosis of an illness covered under the plan.

To a much lesser extent, our Home Service Insurance segment sells property insurance policies covering dwellings and content.

We provide $30,000 maximum coverage on any one dwelling and contents, while content-only coverage and dwelling-only coverage are both limited to $20,000.

We provide final expense ordinary life insurance and annuity products primarily to middle- and lower-income individuals and families in Louisiana, Mississippi and Arkansas, a demographic that has been disproportionally impacted by the COVID-19 pandemic.

We face competition in Louisiana, Mississippi and Arkansas from other companies specializing in final expense insurance.

We face competition in Louisiana, Mississippi and Arkansas from other companies specializing in final expense insurance as well as from other property & casualty insurance companies.

We seek to compete based upon our emphasis on personal service to our customers.

We intend to continue premium growth within this segment via direct sales.

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We intend to continue premium growth within this segment via our new products and increased focus on direct sales through our independent agents.

We follow the industry practice of reinsuring a portion of our insurance risks with unaffiliated reinsurers.

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We enter into various agreements with reinsurers that cover individual risks, group risks or defined blocks of business, primarily on a coinsurance, yearly renewable term, excess of loss or catastrophe excess basis.

These reinsurance agreements spread risk and minimize the effect of losses.

For the majority of our business, we retain the first $100,000 of risk on any one life and reinsure the remainder of the risk.

For the majority of our life insurance business, we retain the first $100,000 of risk on any one life and reinsure the remainder of the risk.

Therefore, under the terms of the reinsurance agreements, the reinsurers agree to reimburse us for the ceded amount (i.e., the death benefit amount less our retained risk) in the event a claim is paid.

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In the event reinsurers do not meet their obligations under the terms of the reinsurance agreements, reinsurance recoverable balances could become uncollectible.

For SPFIC, we obtain catastrophic reinsurance in order to minimize the risks related to payments we owe our insureds due to catastrophic events, such as hurricanes.

Upon the occurrence of a catastrophic event, we retain ( i.e.

, pay) the first $500,000 in claims, and then the reinsurer pays the next $10.5 million in claims.

Upon the occurrence of a catastrophic event, in order to continue receiving reinsurance, we also have to pay reinstatement premiums in order to be covered for another catastrophic event in the same calendar year.

Our amounts recoverable from reinsurers represent receivables from and/or reserves ceded to reinsurers.

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We focus on obtaining reinsurance from a diverse group of well-established reinsurers.

We have restructured our reinsurance relationships as of January 1, 2021 and reinsure our international business with three different reinsurers and our domestic business with two reinsurers.

We have restructured our reinsurance relationships as of January 1, 2021 and reinsure our international business with three different

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reinsurers and our domestic business with two reinsurers.

We regularly evaluate the financial condition of our reinsurers and monitor concentration risk with our reinsurers.

OTHER NON-INSURANCE ENTERPRISES

Other Non-Insurance Enterprises includes the results of the parent company, Citizens, Inc.

Other Non-Insurance Enterprises includes the results of our parent company, Citizens, Inc.

and our non-insurance subsidiary, Computing Technology, Inc., which entities primarily provide the Company's information technology and corporate-support functions to the insurance operations.

OPERATIONS AND TECHNOLOGY

Our administrative operations principally serve our Life Insurance segment and are conducted primarily at our executive offices in Austin, Texas where our administrative, operating and underwriting personnel are located.

Our executive offices are also the base for our policy design, marketing oversight, underwriting, accounting and reporting, actuarial, customer service, legal, human resources, claims processing, administrative and investing activities.

Our Home Service Insurance segment is conducted, to a large degree, from our district offices in Louisiana, Arkansas and Mississippi, as well as our service center in Donaldsonville, Louisiana.

At our Bermuda office, we perform underwriting, policy issuance, claims processing, accounting and reporting related to CICA Ltd.'s policies.

Most of our operations are based at our corporate headquarters in Austin, Texas.

We also conduct operations for our Home Service Insurance segment from our district offices in Louisiana, Arkansas and Mississippi, as well as our service center in Donaldsonville, Louisiana.

At our Bermuda office, we perform underwriting, policy issuance, claims processing, accounting and reporting related to CICA International's policies.

We have a single integrated information technology system for our entire Company, which is a centrally-controlled, mainframe-based administrative system.

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This system has been in place for more than 30 years and has been updated on an ongoing basis as technology has evolved.

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ENTERPRISE RISK MANAGEMENT

The Company has an enterprise risk management function ("ERM") that analyzes the Company’s risks on an individual and aggregated basis and is responsible for ensuring that the Company’s risks remain within its risk appetite and tolerances as determined by management with oversight from the Audit Committee.

The Company's focus on ERM strengthens its risk management culture and discipline.

The mission of ERM is to support the Company in achieving its strategic priorities by:

• providing a comprehensive view of the risks facing the Company, including risk concentrations and correlations;

• helping management define the Company’s overall capacity and appetite for risk by evaluating the risk return profile of the business relative to the Company’s strategic intent and financial underpinning;

• assisting management in setting specific risk tolerances and limits that are measurable, actionable, and comply with the Company’s overall risk philosophy;

• communicating and monitoring the Company’s risk exposures relative to set limits and recommending, or implementing as appropriate, mitigating strategies;

• providing insight to assist in growing the businesses and achieving optimal risk-adjusted returns within established guidelines.

ENTERPRISE RISK MANAGEMENT STRUCTURE AND GOVERNANCE

Effective risk oversight is an important priority for the Company’s Board and senior management team.

While it is the job of the Chief Executive Officer and senior management to assess and manage the Company’s risk exposure through ERM, the Audit Committee of the Board is charged with discussing guidelines and policies to govern the process by which ERM is handled.

The Audit Committee periodically discusses the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.

The four broad categories of risk exposures assessed and managed by senior management include, but are not limited to:

• Strategic risk, including international business risks;

• Insurance risk, including those arising out of unforeseen events (such as the COVID-19 pandemic), catastrophes and acts of terrorism;

• Financial risk, including market, credit and liquidity risks;

• Operational risk, including cybersecurity risk and legal and regulatory compliance risks.

In addition, any other risk that poses a material threat to the operational and/or strategic viability of the Company is immediately reviewed and assessed.

In addition to the Audit Committee, the Compensation Committee considers the risks that may be presented by our executive compensation philosophy and programs, and the Nominating and Corporate Governance Committee oversees the Company’s governance practices, director succession and committee composition and leadership to manage risks associated with corporate governance.

Although risk oversight is conducted primarily through committees of the Board, the full Board has retained responsibility for general oversight of risks.

The Board satisfies this responsibility through full reports by each committee chair regarding the committees’ considerations and actions, as well as through regular reports directly from officers responsible for oversight of particular risks within the Company.

The insurance industry is heavily regulated and both Citizens and our insurance subsidiaries are subject to regulation and supervision by the U.S.

states in which they do business and for CICA Ltd., by Bermuda.

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insurance operations are subject to a wide variety of laws and regulations.

State insurance laws establish supervisory agencies with broad regulatory authority to regulate most aspects of our U.S.

insurance businesses, and our insurance subsidiaries are regulated by the insurance departments of each state in which they are licensed.

In addition to insurance-specific laws, U.S.

laws, such as the USA Patriot Act of 2001, the Foreign Corrupt Practices Act, the Gramm-Leach-Bliley Act of 1999, the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Tax Cuts and Jobs Act, are examples of U.S.

laws that affect our business.

We are subject to comprehensive regulations under the USA Patriot Act and the U.S.

Bank Secrecy Act with respect to money laundering, as well as federal regulations regarding privacy and confidentiality.

Our U.S.-based insurance products and thus our businesses also are affected by U.S.

federal, state and local tax laws.

The laws and regulations that affect our insurance business are enacted primarily to protect our insureds and not our stockholders.

Many of the laws and regulations to which we are subject are regularly re-examined, and existing or future laws and regulations may become more restrictive or otherwise adversely affect our operations.

In addition, insurance regulatory authorities (including state law enforcement agencies and attorneys general) periodically make inquiries and regularly conduct examinations regarding compliance by us and our subsidiaries with insurance, and other laws and regulations regarding the conduct of our insurance businesses.

It is our practice to fully and consistently cooperate with such inquiries and examinations and take corrective action when warranted.

insurance subsidiaries are collectively licensed to transact business in 31 states and in the District of Columbia.

We have insurance subsidiaries domiciled in the states of Colorado, Louisiana, Mississippi and Texas.

insurance subsidiaries are licensed and regulated in all U.S.

jurisdictions in which they conduct insurance business.

The extent of this regulation varies, but most jurisdictions have laws and regulations based upon the National Association of Insurance Commissioners ("NAIC") model rules governing the financial condition of insurers, including standards of solvency, types and concentration of investments, establishment and maintenance of reserves, credit for reinsurance and requirements of capital adequacy, and the business conduct of insurers, including marketing and sales practices and claims handling.

In addition, statutes and regulations usually require the licensing of insurers and their agents, the approval of policy forms and related materials and the approval of rates for certain types of insurance products.

jurisdictions in which our U.S.

insurance subsidiaries conduct insurance business have enacted legislation that requires each U.S.

insurance company in a holding company system, except captive insurance companies, to register with the insurance regulatory authority of its jurisdiction of domicile and to furnish that regulatory authority with financial and other information concerning the operations of, and the interrelationships and transactions among, companies within its holding company system that may materially affect the operations, management or financial condition of the insurers within the system.

These laws and regulations also regulate transactions between insurance companies and their parents and affiliates.

Generally, these laws and regulations require that all transactions within a holding company system between an insurer and its affiliates be fair and reasonable and that the insurer's statutory capital and surplus following any transaction with an affiliate be both reasonable in relation to its outstanding liabilities and adequate to its financial needs.

For certain types of agreements and transactions between an insurer and its affiliates, these laws and regulations require prior notification to, and non-disapproval or approval by, the insurance regulatory authority of the insurer's jurisdiction of domicile.

The payment of dividends or other distributions to us by our insurance subsidiaries is regulated by the insurance laws and regulations of their respective state or jurisdiction of domicile.

The laws and regulations of some of these jurisdictions also prohibit an insurer from declaring or paying a dividend except out of its earned surplus or require the insurer to obtain regulatory approval before it may do so.

In addition, insurance regulators may prohibit the payment of ordinary dividends or other payments by our insurance subsidiaries to us (such as a payment under a tax sharing agreement or for employee or other services) if they determine such payment could be adverse to policyholders or insurance contract holders of the subsidiary.

The laws and regulations of the jurisdictions in which our U.S.

insurance subsidiaries are domiciled require that a controlling party obtain the approval of the insurance commissioner of the insurance company's jurisdiction of domicile prior to acquiring or divesting control of the insurer and may delay, deter or prevent a transaction our

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shareholders might consider desirable.

As described above, the Company and the Foundation are in the process of obtaining such regulatory approval in order for the Company to purchase the Class B common stock from the Foundation.

Risk-based capital ("RBC") requirements are imposed on life and property and casualty insurance companies.

The NAIC has established minimum capital requirements in the form of RBC.

RBC requirements weight the type of business underwritten by an insurance company, the quality of its assets, and various other aspects of an insurance company's business to develop a minimum level of capital called "authorized control level risk-based capital" and compares this level to adjusted statutory capital that includes capital and surplus as reported under statutory accounting principles, plus certain investment reserves.

Should the ratio of adjusted statutory capital to control level risk-based capital fall below 200%, a series of actions would be required by the affected company, including submitting a capital plan to the Department of Insurance in the insurance company's state of domicile.

states in which they do business, by U.S.

federal laws, and for CICA International, by Bermuda.

INTERNATIONAL REGULATION

CICA Ltd., our Bermuda domiciled subsidiary, is subject to regulation and supervision by the Bermuda Monetary Authority (the "BMA") and compliance with all applicable Bermuda laws and insurance statutes and regulations, including but not limited to Bermuda’s Insurance Act of 1978 (the "Insurance Act").

CICA Ltd., which is incorporated to conduct long-term business, is registered as a Class E insurer, which is the license class for long-term insurers and reinsurers with total assets of more than $500 million that are not registrable as a single-parent or multi-owner long-term captive insurer or reinsurer.

is not licensed to conduct any business other than life insurance business.

The Insurance Act regulates the insurance business of CICA Ltd.

and provides that no person may conduct any insurance business in or within Bermuda unless registered as an insurer under the Insurance Act by the BMA.

CICA International, our Bermuda domiciled subsidiary, is subject to regulation and supervision by the Bermuda Monetary Authority (the "BMA") and compliance with all applicable Bermuda laws and insurance statutes and regulations, including but not limited to Bermuda’s Insurance Act of 1978 (the "Insurance Act").

CICA International, which is incorporated to conduct long-term business, is registered as a Class E insurer, which is the license class for long-term insurers and reinsurers with total assets of more than $500 million that are not registrable as a single-parent or multi-owner long-term captive insurer or reinsurer.

CICA International is not licensed to conduct any business other than life insurance business.

The Insurance Act regulates the insurance business of CICA International and provides that no person may conduct any insurance business in or within Bermuda unless registered as an insurer under the Insurance Act by the BMA.

The Insurance Act imposes solvency and liquidity standards as well as auditing and reporting requirements and confers on the BMA powers to supervise, investigate and intervene in the affairs of insurance companies.

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compliance with minimum solvency margins;

limitations on dividends and distributions that CICA Ltd.

may make to Citizens, its parent company;

limitations on dividends and distributions that CICA International may make to Citizens, its parent company;

preparation of an annual Financial Condition Report providing details of measures governing the business operations, corporate governance framework, solvency and financial performance;

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and appointment of an actuary approved by the BMA.

The BMA measures an insurer’s risk and determines appropriate levels of capitalization by using a risk-based capital model called the Bermuda Solvency Capital Requirement (“BSCR”), which CICA Ltd.

uses to calculate its solvency requirements.

The BSCR employs a standard mathematical model that correlates the risk underwritten by Bermuda insurers to their capital.

In order to minimize the risk of a shortfall in capital arising from an unexpected adverse deviation or excess risk, the BMA has established a threshold capital level (termed the Target Capital Level ("TCL")), which is set at 120% of a company’s enhanced capital requirement.

The TCL serves as an early warning tool for the BMA.

For the quarter ended March 31, 2020, because of the disruption that the COVID-19 pandemic had on the worldwide economy, the fair value of our assets decreased and interest rates also decreased, which increased the fair value of our statutory economic insurance liabilities.

As a result, CICA Ltd.’s statutory economic capital and surplus at March 31, 2020 was below the TCL by $8.9 million.

While the failure to meet the minimum threshold was rectified as of April 30, 2020, the BMA conducted a review of CICA Ltd.

in the third and fourth quarter of 2020 in order to assess CICA Ltd.’s compliance with the Insurance Act and other relevant rules applicable to CICA Ltd.

(the “Prudential Review”).

As a result of the 2020 Prudential Review by the BMA, on January 14, 2021, the BMA issued a letter to CICA Ltd.

that, among other things, requires Citizens to enter into a “Keepwell Agreement” by September 30, 2021.

A Keepwell Agreement is a contract between a parent company and its subsidiary to maintain solvency and financial

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backing throughout the term set in the agreement.

The Keepwell Agreement should include a specific target solvency level at which a capital injection would be required to be made into CICA Ltd.

to ensure compliance with the Insurance Act and related rules.

calculate its solvency requirements.

The BSCR employs a standard mathematical model that correlates the risk underwritten by Bermuda insurers to their capital.

In order to minimize the risk of a shortfall in capital arising from an unexpected adverse deviation or excess risk, the BMA requires Bermuda insurers to maintain available statutory capital and surplus at a level equal to or in excess of the enhanced capital requirement, which requires a threshold capital level (termed the Target Capital Level ("TCL")), of 120% of a company’s enhanced capital requirement.

The TCL serves as an early warning tool for the BMA.

In addition to being required to meet the TCL, at the request of the BMA, on April 15, 2021, Citizens and CICA International entered into a “Keep Well Agreement.” The Keep Well Agreement requires Citizens to contribute up to $10 million in capital to CICA International as necessary to ensure that it has a minimum capital level of 120%.

Bermuda law distinguishes between those companies that are at least 60% owned and controlled by Bermudians, which are "local companies", and those which are owned and controlled by non-Bermudians, which are "exempted companies".

Exempted companies may be resident in Bermuda and conduct business from Bermuda in connection with transactions and activities which are external to Bermuda or with other exempted companies, and exempted companies must obtain a license to conduct business activities within Bermuda from the Minister of Finance of Bermuda.

Generally, it is not permitted without a special license granted by the Minister of Finance of Bermuda to insure Bermuda domestic risks or risks of persons of, in or based in Bermuda.

Generally, it is not permitted without a special license granted by the Minister of Finance of Bermuda to ensure Bermuda domestic risks or risks of persons of, in or based in Bermuda and we do not offer insurance products to residents of Bermuda.

In December 2018, the Economic Substance Act (the "ES Act") came into force.

The ES Act, as amended, and the regulations promulgated thereunder (collectively, "ES Law"), apply to any "relevant entity" that conducts any "relevant activity" in a "relevant financial period".

Under the ES Law, insurance and holding entities are each defined as a "relevant activity" and thus the ES Act applies to CICA Ltd.

Under the ES Law, insurance and holding entities are each defined as a "relevant activity" and thus the ES Act applies to CICA International.

Under the provisions of the ES Law, a relevant entity that conducts a relevant activity must satisfy the economic substance requirements under the ES Law (the "ES Requirements") in relation to the relevant activity and where a relevant entity is conducting more than one relevant activity, it must meet the ES Requirements with respect to each relevant activity that it conducts.

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(b) the core income-generating activities are undertaken in Bermuda with respect to each relevant activity;

(d) there are adequate full-time employees in Bermuda with suitable qualifications;

and (e) there is adequate operating expenditure incurred in Bermuda in relation to each relevant activity.

is required to demonstrate compliance with the ES Requirements by filing an annual economic substance declaration with the Registrar of Companies in Bermuda no later than six months after the last day of the relevant financial period.

CICA International is required to demonstrate compliance with the ES Requirements by filing an annual economic substance declaration with the Registrar of Companies in Bermuda no later than six months after the last day of the relevant financial period.

Companies that conduct insurance as a relevant activity are deemed to comply with the ES Requirements, with respect to their insurance business, if they comply with the existing regulatory requirements under the Insurance Act and the corporate governance provisions of the Companies Act 1981.

is in compliance with these requirements as of December 31, 2020.

CICA International is in compliance with these requirements as of December 31, 2021.

Other International Regulation

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Some of these countries also require that local regulatory authorities approve the terms of any insurance product sold to residents of that country.

We have never qualified to do business in any foreign country or jurisdiction and have never submitted our insurance policies issued to residents of foreign countries for approval by any foreign or domestic insurance regulatory agency.

Other than Bermuda, we have never qualified to do business in any foreign country or jurisdiction and have never submitted our insurance policies for approval by any foreign or domestic insurance regulatory agency.

As described above, we sell our policies to residents of foreign countries through independent marketing agencies and independent consultants located in those countries, and we rely on our independent consultants to comply with laws applicable to them in marketing our insurance products in their respective countries.

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Our compliance review has confirmed certain risks related to foreign insurance laws associated with our current business model, at least in certain jurisdictions, as described in detail in Item 1A.

R i s k F a c t o r s .

Risk Factors .

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Our domestic insurance subsidiaries are primarily regulated by the insurance departments of the state in which they are domiciled (Colorado, Louisiana, Texas and Mississippi).

They are also regulated in each of the 31 states and the District of Columbia in which we conduct insurance business.

In supervising and regulating insurance companies, state insurance departments generally aim to protect policyholders and the public rather than investors, and enjoy broad authority and discretion in applying applicable insurance laws and regulation for that purpose.

The extent of this regulation varies, but most U.S.

jurisdictions have laws and regulations based upon the National Association of Insurance Commissioners ("NAIC") model rules governing the financial condition of insurers, including standards of solvency, types and concentration of investments, establishment and maintenance of reserves, credit for reinsurance and requirements of capital adequacy, and the business conduct of insurers, including marketing and sales practices and claims handling.

Risk-based capital ("RBC") requirements are imposed on life and property and casualty insurance companies.

The NAIC has established minimum capital requirements in the form of RBC.

Should the ratio of adjusted statutory capital to control level risk-based capital fall below 200%, a series of actions would be required by the affected company, including submitting a capital plan to the department of insurance in the insurance company's state of domicile.

Insurance regulatory authorities (including state law enforcement agencies and attorneys general) periodically make inquiries and regularly conduct examinations regarding compliance by us and our subsidiaries with insurance and other laws and regulations regarding the conduct of our insurance businesses.

It is our practice to fully and consistently cooperate with such inquiries and examinations and take corrective action when warranted.

Because Citizens is a holding company that directly and indirectly owns insurance operating subsidiaries, we are also subject to regulation in our four domiciliary states that require us to furnish the respective insurance regulators with financial and other information concerning the operations of, and the interrelationships and transactions among, the companies within our holding company system that may materially affect the operations, management or financial condition of the insurers within the system.

These laws also require that a controlling party obtain the approval of the insurance commissioner of the insurance company's jurisdiction of domicile prior to acquiring or divesting control of the insurer.

The payment of dividends or other distributions to Citizens by our insurance subsidiaries is also regulated by the insurance laws and regulations of their respective state or jurisdiction of domicile.

In addition to state insurance-specific laws, U.S.

laws that affect our business.

We are subject to comprehensive regulations under the USA Patriot Act and the U.S.

Bank Secrecy Act with respect to money laundering, as well as federal regulations regarding privacy and confidentiality.

Our U.S.-based insurance products and thus our businesses also are affected by U.S.

federal, state and local tax laws.

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HUMAN CAPITAL RESOURCES

Our employees and independent consultants are critical to selling our insurance products and providing services to our global base of policyholders.

Composition and Demographics

Our human capital is a critical component to our success.

Our employees implement and drive our strategic initiatives and contribute to the success of our products (development, underwriting, pricing adequacy, customer service), promotions and processes.

Our independent consultants and agents also drive our key goals, as they sell our insurance products and provide local services to our global base of policyholders.

We also believe that we derive a great deal of strength from our diverse workforce.

Fostering an equitable and inclusive workplace with diverse teams produces more creative solutions and results in more innovative products and services and is crucial to our efforts to attract, develop and retain key talent.

As of December 31, 2021, we had 215 employees.

We currently do not utilize captive employee agents to distribute our products and thus contract with almost 1,000 independent consultants internationally and 415 independent agencies and agents domestically to sell and service our insurance products.

Independent agents work for themselves and may sell insurance policies for a variety of insurers and make most of

The pie charts below illustrate the gender, racial, ethnicity, and generational make-up of our total employee workforce as of such date.

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their money through sales commissions and bonuses.

We determine race, ethnicity, gender, and generation based on our employees' self-identification or other information compiled to meet requirements of the U.S.

None of our employees are subject to a collective bargaining agreement.

In order to continue to develop, administer and sell our products, it is crucial that we continue to attract and retain both experienced employees and independent agents.

Compensation and Benefits Program.

Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.

We provide employees with compensation packages that include base salary, annual incentive bonuses, and long-term equity awards ("RSUs") for certain employees tied to the value of our stock price.

We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans.

In addition to cash and equity compensation, we also offer standard employee benefits such as life and health (medical, dental & vision) insurance, paid parental leave, and a 401(k) plan.

We currently do not utilize captive employee agents to distribute our products and thus contract with almost 1,000 actively producing independent consultants internationally and over 500 independent agencies and agents domestically to sell and service our insurance products.

Our independent agents generally reflect the demographics of the areas in which they sell their products, i.e ., our agents in Latin America are almost all Hispanic or Latino and our agents in Taiwan are almost all Asian.

In order to continue to develop, sell and administer our products, it is crucial that we continue to attract and retain both experienced employees and independent agents.

Compensation and Benefits

Our compensation program is designed to attract and retain talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders.

We provide employees with compensation packages that include base salary and annual performance-based bonus opportunities that include cash, and for our executive officers, long-term equity awards currently in the form of restricted stock units ("RSUs").

We believe that a compensation program with both short-term cash awards and long-term equity awards provides fair and competitive compensation and aligns employee and stockholder interests.

In addition to cash and equity compensation, we also offer standard employee benefits such as life and health (medical, dental & vision) insurance, HSA contributions, paid parental leave, and a 401(k) plan.

Independent agents work for themselves and may sell insurance policies for a variety of insurers and make most of their money through sales commissions and bonuses.

We attract and retain our independent agent sales force through the use of our commission structure and agent campaigns and promotions.

We believe that our standard commission structure is attractive and competitive in the market.

In our Life Insurance segment, our campaigns and promotions provide an extra incentive to agents that not only promote first year premium growth, but also create improvements within policyholder retention.

In our Home Service Insurance segment, our agent campaigns and promotions are critical in attracting and retaining our independent agent sales force.

In our Life Insurance segment, we believe our campaigns and promotions provide an extra incentive to agents that not only promote first year premium growth, but also create improvements within policyholder retention.

In our Home Service Insurance segment, we believe our agent campaigns and promotions are critical in attracting and retaining our independent agent sales force.

This business contains a large block of existing in force policies.

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We believe that providing agent campaigns and promotions with additional incentives that provide long-term value creates an advantage for Citizens over our competition.

Diversity and Inclusion.

We derive a great deal of strength from our diverse workforce.

We believe that an equitable and inclusive environment with diverse teams produces more creative solutions, results in better, more innovative products and services and is crucial to our efforts to attract and retain key talent.

We are focused on building on the existing executive team's work to foster diversity and inclusion in the workplace.

Health and Safety.

In response to the COVID-19 pandemic, we implemented significant operating environment changes that we determined were in the best interest of the health of our employees and independent agents, as well as the communities in which we operate, and which comply with government regulations.

These changes included having the vast majority of our employees work from home, while implementing additional safety measures for employees continuing critical on-site work.

We also created training programs to assist our independent agents with online sales efforts in order to minimize face-to-face interactions with potential customers and our policyholders.

We are committed to the health and safety of our work force and compliance with applicable regulatory and legal requirements.

In response to the COVID-19 pandemic, in 2021 we implemented operating changes that we determined were in the best interest of the health of our employees, including offering a hybrid work environment where our employees can work part- or full-time from home, depending on their position and circumstances.

We also have implemented training programs to assist our independent agents with online sales efforts in order to minimize face-to-face interactions with potential customers and our policyholders.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business