What changed in this filing

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Item 1. Financial Statements

2023-05-08 compared with 2022-11-04 · 908 added, 398 removed, 472 unchanged (73% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(In thousands) September 30, 2022 December 31, 2021

Assets (Unaudited)

(In thousands) March 31, 2023 December 31, 2022

Fixed maturity securities available-for-sale, at fair value (amortized cost:

13 unchanged sentences

Current federal income tax receivable — 601

Deferred tax asset 3,273 —

Property and equipment, net 12,592 12,926

3 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

September 30, 2022 | 10-Q 2

March 31, 2023 | 10-Q 2

CITIZENS, INC.

1 unchanged sentence

Consolidated Balance Sheets, Continued

(In thousands, except share amounts) September 30, 2022 December 31, 2021

Liabilities and Stockholders' Equity (Deficit) (Unaudited)

(In thousands, except share amounts) March 31, 2023 December 31, 2022

Liabilities and Stockholders' Equity (Deficit)

Policy liabilities:

1 unchanged sentence

Life insurance $ 1,218,295 1,198,647

Annuities 91,984 83,918

Accident and health 848 767

Total future policy benefit reserves 1,219,143 1,199,414

Policyholders' funds:

Annuities 124,528 121,422

Dividend accumulations 42,668 41,663

2 unchanged sentences

Other policyholders' funds 7,325 7,501

Total policyholders' funds 218,703 216,854

Total policy liabilities 1,437,846 1,416,268

1 unchanged sentence

Current federal income tax payable 537 —

Deferred federal income tax payable — 15,456

Deferred federal income tax liability 5,775 3,653

Other liabilities 38,084 41,025

1 unchanged sentence

Commitments and contingencies ( Note 7 )

Stockholders' Equity (Deficit):

Stockholders' Equity:

Common stock:

Class A, no par value, 100,000,000 shares authorized, 53,756,692 and 53,170,413 shares issued and outstanding in 2022 and 2021, respectively, including shares in treasury of 3,751,396 in 2022 and 3,135,738 in 2021

Class A, no par value, 100,000,000 shares authorized, 53,792,476 and 53,758,176 shares issued and outstanding in 2023 and 2022, respectively, including shares in treasury of 3,935,581 in 2023 and 2022

268,197 268,147

Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2023 and 2022, including shares in treasury of 1,001,714 in 2023 and 2022

Accumulated deficit ( 55,577 ) ( 45,565 )

Retained earnings 21,181 16,309

Accumulated other comprehensive income (loss) ( 115,465 ) ( 137,044 )

Net unrealized gains (losses) on fixed maturity securities, net of tax ( 207,539 ) 117,492

Treasury stock, at cost ( 22,806 ) ( 22,806 )

Total stockholders' equity (deficit) ( 14,228 ) 320,571

Total liabilities and stockholders' equity (deficit) $ 1,540,950 1,854,511

Total stockholders' equity 154,291 127,790

Total liabilities and stockholders' equity $ 1,638,481 1,590,703

See accompanying Notes to Consolidated Financial Statements.

September 30, 2022 | 10-Q 3

March 31, 2023 | 10-Q 3

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Income (Loss)

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands, except per share amounts)

2022 2021 2022 2021

Life insurance $ 36,934 37,746

8 unchanged sentences

Claims and surrenders 30,299 28,434

Increase in future policy benefit reserves 7,090 10,888 23,037 22,407

Increase (decrease) in future policy benefit reserves ( 978 ) 114

Policyholder liability remeasurement (gain) loss 880 668

Policyholders' dividends 1,108 1,353

11 unchanged sentences

Basic and diluted earnings (losses) per share of Class A common stock 0.10 0.13

Basic and diluted earnings (losses) per share of Class B common stock — — — ( 0.01 )

Other Comprehensive Income (Loss):

3 unchanged sentences

Unrealized gains (losses) on fixed maturity securities, net 43,474 ( 132,706 )

Income tax expense (benefit) on unrealized gains (losses) on fixed maturity securities ( 5,079 ) ( 271 ) ( 18,880 ) ( 32 )

Change in current discount rate for liability for future policy benefits ( 20,480 ) 151,607

Income tax expense (benefit) on other comprehensive income items 1,415 1,712

Other comprehensive income (loss) 21,579 17,189

1 unchanged sentence

See accompanying Notes to Consolidated Financial Statements.

September 30, 2022 | 10-Q 4

March 31, 2023 | 10-Q 4

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Stockholders' Equity (Deficit)

Common Stock Accumulated

Common Stock Retained Earnings (Accumulated

Deficit) Accumulated Other

1 unchanged sentence

Income (Loss) Treasury

Stock Total Stockholders' Equity (Deficit)

(In thousands) Class A Class B

2 unchanged sentences

Net income (loss) — — 4,872 — — 4,872

Unrealized investment gains (losses), net — — — ( 124,217 ) — ( 124,217 )

Other comprehensive income (loss) — — — 21,579 — 21,579

Total comprehensive income (loss) — — 4,872 21,579 — 26,451

Common stock issuance 1,788 — — — — 1,788

Stock-based compensation 50 — — — — 50

Balance at March 31, 2023 $ 268,197 3,184 21,181 ( 115,465 ) ( 22,806 ) 154,291

Comprehensive income (loss):

Net income (loss) — — ( 3,548 ) — — ( 3,548 )

Unrealized investment gains (losses), net — — — ( 116,223 ) — ( 116,223 )

Total comprehensive income (loss) — — ( 3,548 ) ( 116,223 ) — ( 119,771 )

Common stock issuance 455 — — — — 455

Acquisition of treasury stock — — — — ( 1,300 ) ( 1,300 )

Stock-based compensation ( 47 ) — — — — ( 47 )

Balance at June 30, 2022 267,850 3,184 ( 50,446 ) ( 122,948 ) ( 21,401 ) 76,239

Comprehensive income (loss):

Net income (loss) — — ( 5,131 ) — — ( 5,131 )

Unrealized investment gains (losses), net — — — ( 84,591 ) — ( 84,591 )

Total comprehensive income (loss) — — ( 5,131 ) ( 84,591 ) — ( 89,722 )

Acquisition of treasury stock — — — — ( 883 ) ( 883 )

Stock-based compensation 138 — — — — 138

Balance at September 30, 2022 $ 267,988 3,184 ( 55,577 ) ( 207,539 ) ( 22,284 ) ( 14,228 )

See accompanying Notes to Consolidated Financial Statements.

September 30, 2022 | 10-Q 5

CITIZENS, INC.

AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Stockholders' Equity (Deficit), cont.

Common Stock Accumulated

deficit Accumulated other

comprehensive

income (loss) Treasury

(In thousands) Class A Class B

Balance at December 31, 2021 $ 265,561 3,184 ( 9,698 ) ( 138,989 ) ( 20,101 ) 99,957

1 unchanged sentence

Net income (loss) — — 6,449 — — 6,449

Unrealized investment gains (losses), net — — — ( 56,518 ) — ( 56,518 )

Other comprehensive income (loss) — — — 17,189 — 17,189

Total comprehensive income (loss) — — 6,449 17,189 — 23,638

Issuance of common stock 1,788 — — — — 1,788

Stock-based compensation 93 — — — — 93

Balance at March 31, 2022 $ 267,442 3,184 ( 3,249 ) ( 121,800 ) ( 20,101 ) 125,476

Comprehensive income (loss):

Net income (loss) — — 5,022 — — 5,022

Unrealized investment gains (losses), net — — — 32,148 — 32,148

Total comprehensive income (loss) — — 5,022 32,148 — 37,170

Acquisition of treasury stock — — — — ( 9,090 ) ( 9,090 )

Stock-based compensation 205 — — — — 205

Balance at June 30, 2021 263,060 3,184 ( 80,903 ) 103,885 ( 20,101 ) 269,125

Comprehensive income (loss):

Net income (loss) — — ( 2,799 ) — — ( 2,799 )

Unrealized investment gains (losses), net — — — ( 1,395 ) — ( 1,395 )

Total comprehensive income (loss) — — ( 2,799 ) ( 1,395 ) — ( 4,194 )

Stock-based compensation 100 — — — — 100

Balance at September 30, 2021 $ 263,160 3,184 ( 83,702 ) 102,490 ( 20,101 ) 265,031

See accompanying Notes to Consolidated Financial Statements.

September 30, 2022 | 10-Q 6

March 31, 2023 | 10-Q 5

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

23 unchanged sentences

Principal payments on mortgage loans 2 2

Funding of mortgage loans — ( 1,000 )

(Increase) decrease in policy loans, net 114 962

1 unchanged sentence

Purchases of other long-term investments ( 3,495 ) ( 7,940 )

Sales of property and equipment — 14

Purchases of property and equipment ( 73 ) ( 34 )

2 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

September 30, 2022 | 10-Q 7

March 31, 2023 | 10-Q 6

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows, Continued

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

Annuity withdrawals ( 2,365 ) ( 2,263 )

Acquisition of treasury stock ( 2,183 ) ( 9,090 )

Issuance of common stock — 1,788

5 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the nine months ended September 30, 2022 and 2021, various fixed maturity issuers exchanged securities with book values of $ 6.1 million and $ 10.9 million, respectively, for securities of equal value.

The Company had no net unsettled security trades during the nine months ended September 30, 2022 and $ 9.4 million during the nine months ended September 30, 2021.

The Company recognized right-of-use assets of $ 0.4 million in exchange for new operating lease liabilities during the nine months ended September 30, 2022 and none during the nine months ended September 30, 2021.

During the three months ended March 31, 2023 and 2022, various fixed maturity issuers exchanged securities with book values of $ 2.1 million and $ 0.6 million, respectively, for securities of equal value.

The Company had no net unsettled security trades during the three months ended March 31, 2023 and $ 3.8 million during the three months ended March 31, 2022.

The Company recognized no right-of-use assets in exchange for new operating lease liabilities during the three months ended March 31, 2023 and $ 0.4 million during the three months ended March 31, 2022.

See accompanying Notes to Consolidated Financial Statements.

September 30, 2022 | 10-Q 8

March 31, 2023 | 10-Q 7

CITIZENS, INC .

4 unchanged sentences

("Citizens" or the "Company"), a Colorado corporation, and its wholly-owned subsidiaries, CICA Life Insurance Company of America ("CICA"), CICA Life Ltd.

("CICA International"), CICA Life A.I., Citizens National Life Insurance Company ("CNLIC"), Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC"), Magnolia Guaranty Life Insurance Company ("MGLIC") and Computing Technology, Inc.

("CICA International"), CICA Life A.I., a Puerto Rico company ("CICA PR"), Citizens National Life Insurance Company ("CNLIC"), Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC"), Magnolia Guaranty Life Insurance Company ("MGLIC"), Computing Technology, Inc.

("CTI"), and Nexo Global Services, LLC ("Nexo").

All significant inter-company accounts and transactions have been eliminated.

Citizens and its wholly-owned subsidiaries are collectively referred to as the "Company", "it", "we", "us" or "our".

The consolidated balance sheet as of September 30, 2022, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity (deficit) for the three and nine months ended September 30, 2022 and September 30, 2021 and the consolidated statements of cash flows for the nine months ended September 30, 2022 and September 30, 2021 have been prepared by the Company without audit and are not subject to audit.

In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at September 30, 2022 and for comparative periods have been made.

The consolidated balance sheet as of March 31, 2023, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity (deficit) for the three months ended March 31, 2023 and March 31, 2022 and the consolidated statements of cash flows for the three months ended March 31, 2023 and March 31, 2022 have been prepared by the Company without audit and are not subject to audit.

In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at March 31, 2023 and for comparative periods have been made.

The consolidated financial statements have been prepared in accordance with U.S.

3 unchanged sentences

Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Our Life Insurance segment operates through CICA International, CICA and CNLIC.

Our international life insurance business, which operates through CICA International, issues U.S.

Our Life Insurance segment operates through CICA International, CICA PR, CICA and CNLIC.

Until December 31, 2022, our international life insurance business, operated through CICA International.

Beginning January 1, 2023, all new international policies are issued by CICA PR.

These companies provide U.S.

dollar-denominated endowment contracts internationally, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance in U.S.

2 unchanged sentences

Our domestic life insurance business operates through CICA and CNLIC.

CICA issues credit life and disability policies and CNLIC issues ordinary whole life and critical illness policies mainly in Texas and Florida.

CICA issues ordinary whole life, credit life and disability policies and CNLIC issues ordinary whole life and critical illness policies mainly in Texas and Florida.

Both companies service whole life and accident and health policies primarily in the Southern U.S., Midwest and Mountain West.

2 unchanged sentences

CTI provides data processing systems and services to the Company.

We converted the small block of ordinary whole life policies of CNLIC from a legacy platform to our new actuarial valuation software solution which provides enhanced modeling capabilities as of April 1, 2021.

The impact of this system conversion reflected in the accompanying consolidated financial statements as of and for the nine months ended September 30, 2021 was an increase to pretax income of $ 0.7 million consisting of a reduced increase in future policy benefit reserves of $ 0.8 million and increased amortization of deferred policy acquisition costs of $ 0.1 million.

September 30, 2022 | 10-Q 9

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

March 31, 2023 | 10-Q 8

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expenses during the reporting period.

Actual results could differ from those estimates.

2 unchanged sentences

SIGNIFICANT ACCOUNTING POLICIES

For a description of our significant accounting policies, see Part IV, Item 15, Note 1.

For a description of all significant accounting policies, see Part IV, Item 15, Note 1.

Summary of Significant Accounting Policies in the notes to our consolidated financial statements included in our Form 10-K , which should be read in conjunction with these accompanying consolidated financial statements.

DEFERRED POLICY ACQUISITION COSTS

Deferred policy acquisition costs (“DAC”) are costs that are incremental and directly related to the successful acquisition of new or renewal insurance contracts.

Such costs include the incremental direct costs of contract acquisition, such as sales commissions;

the portion of employees’ total compensation and payroll-related fringe benefits related directly to time spent performing acquisition activities, such as underwriting, issuing, and processing policies for contracts that have actually been acquired;

and other costs related directly to acquisition activities that would not have been incurred if the contract had not been acquired.

Contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability.

DAC is amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization.

For the Life Insurance Segment, the constant level basis used is policy count in force.

For the Home Service Insurance Segment, the constant level basis used is face amount in force.

The constant level bases used for amortization are projected using mortality and lapse assumptions that are based on the Company’s experience, industry data, and other factors at the end of each reporting period and are consistent with those used for the liability for future policy benefit life reserves.

Annually, the Company completes experience studies with respect to mortality and lapse.

If those assumptions are updated, the DAC amortization basis is recalculated and the effect of the assumption change will be reflected in the cohort level amortization in future periods.

Amortization of DAC is included in the consolidated statements of comprehensive income or loss.

The DAC balance on the consolidated balance sheet is reduced for actual experience in excess of expected experience.

Changes in future estimates are recognized prospectively over the remaining expected contract term.

COST OF INSURANCE ACQUIRED

The Company recognizes an intangible asset that arises in the application of GAAP purchase accounting as the difference between the reported value and the fair value of insurance contract liabilities, or comparable amounts determined in purchased insurance business combinations.

This intangible asset is referred to as the Cost of Insurance Acquired (“COIA”), which is amortized on a basis consistent with DAC, such that it is amortized in proportion to policies in force for the Life Insurance Segment and face amount in force for the Home Service Insurance Segment to approximate straight-line amortization.

FUTURE POLICY BENEFITS AND EXPENSES

As premium revenue is recognized, a liability for future policy benefits, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders less the present value of estimated future net premiums to be collected from policyholders, is accrued.

The liability is estimated using current assumptions that include discount rate, mortality and lapses.

These current assumptions are based on judgements that consider the Company’s historical experience, industry data, and other factors.

March 31, 2023 | 10-Q 9

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For traditional and limited-payment contracts, contracts are grouped into cohorts by contract type and issue year.

Our reporting cohorts are (i) Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and (ii) Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up.

Both reporting cohorts include whole life and endowment policies.

The liability is adjusted for differences between actual and expected experience.

The Company reviews its historical cash flow assumptions quarterly and in the third quarter of the year, the Company reviews its future cash flow assumptions.

The net premium ratio used to calculate the liability is updated each quarter based on the current period's actual experience relative to expected experience.

The revised net premium ratio is used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted at the locked-in discount rate.

This amount is then compared to the carrying amount of the liability as of that same date, before the updating of cash flow assumptions, to determine the current period change in liability estimate.

The current period change in the liability is the policyholder liability remeasurement gain or loss and is presented as a separate component of total insurance benefits paid or provided in the consolidated statements of comprehensive income or loss.

In subsequent periods, the revised net premiums are used to measure the liability for future policy benefits, subject to future revisions.

For traditional and limited-payment contracts, the current discount rate assumption is a yield curve that equals the yield of an upper-medium grade fixed income instrument, based on an A-quality corporate bonds.

The Company selects fixed-income instruments that have been A rated by one of the major credit rating agencies, such as Moody’s, Standard & Poor’s, or Fitch.

The current discount rate assumption is updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in other comprehensive income.

For liability cash flows that are projected beyond the duration of market-observable A credit-rated fixed-income instruments, the Company uses the last market-observable yield level and uses linear interpolation to determine yield assumptions for durations that do not have market observable yields.

The locked-in discount rate for policies issued prior to transition equals the rate set at contract issuance.

For current year issues, the locked-in discount rate is the average of the current year quarterly discount rates and will change throughout the year as new discount rates are calculated, with the change reflected in net income.

DEFERRED PROFIT LIABILITY

For limited-payment products, gross premiums received in excess of net premiums are deferred at initial recognition as a deferred profit liability (“DPL”).

Gross premiums are measured using assumptions consistent with those used in the measurement of the liability for future policy benefit life reserves, including discount rate, mortality and lapses.

The DPL is amortized and recognized in net income within the increase in future policy benefit reserves.

The amortization basis for the DPL is the present value of insurance in force for life insurance contracts.

Interest is accreted on the balance of the DPL using the locked-in discount rate.

The Company reviews and updates its estimates of cash flows for the DPL at the same time as the estimates of cash flows for the liability for future policy benefit life reserves.

The DPL is updated each quarter based on the current period's actual experience relative to expected experience with the changes recorded within the increase in future policy benefit reserves in the consolidated statements of comprehensive income or loss.

On the consolidated balance sheets, DPL is recorded as a component of the liability for future policy benefits.

March 31, 2023 | 10-Q 10

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) ACCOUNTING PRONOUNCEMENTS

ACCOUNTING STANDARDS NOT YET ADOPTED

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

ACCOUNTING STANDARDS RECENTLY ADOPTED

Impacts at Transition Date

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No.

2018-12, Financial Services-Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts.

This ASU amends four key areas of the accounting and impacts disclosures for long-duration insurance and investment contracts:

• Requires updated assumptions for liability measurement.

Assumptions used to measure the liability for traditional insurance contracts, which are typically determined at contract inception, will now be reviewed at least annually, and, if there is a change, updated, with the effect recorded in net income;

• Standardizes the liability discount rate.

The liability discount rate will be a market-observable discount rate (upper-medium grade fixed-income instrument yield), with the effect of rate changes recorded in other comprehensive income;

• Provides greater consistency in measurement of market risk benefits.

The two previous measurement models have been reduced to one measurement model (fair value), resulting in greater uniformity across similar market-based benefits and better alignment with the fair value measurement of derivatives used to hedge capital market risk;

• Simplifies amortization of deferred acquisition costs ("DAC").

Previous earnings-based amortization methods have been replaced with a more level amortization basis;

• Requires enhanced disclosures.

The new disclosures include rollforwards and information about significant assumptions and the effects of changes in those assumptions.

For calendar-year public companies, the changes will be effective on January 1, 2023, however, early adoption is permitted.

We will adopt this ASU effective January 1, 2023 with a transition date of January 1, 2021 using a modified retrospective approach.

We continue to make progress in our implementation process that includes, but is not limited to, making significant accounting policy decisions, employing appropriate internal controls, building and updating actuarial models and systems, revising reporting processes and developing informative qualitative and quantitative disclosures.

In 2022, we began the process of calculating our transition adjustments and preparing for the restatement of applicable periods.

We are currently refining our calculation of the impact of adopting this ASU on our consolidated financial condition and results of operations and will be able to finalize our calculation of the effects once we complete our implementation efforts.

September 30, 2022 | 10-Q 10

The Company adopted ASU 2018-12 for the liability for future policy benefits, DAC and COIA on a modified retrospective basis such that those balances were adjusted to conform to ASU 2018-12 effective January 1, 2021.

The following table summarizes the balance of and changes in the liability for future policy benefits, annuity reserves, DAC and COIA due to the adoption of ASU 2018-12.

(In thousands) Life Insurance Segment Home Services Insurance Segment Consolidated

Liability for Future Policy Benefits

Pre-adoption liability as of 12/31/2020 $ 987,373 255,513 1,242,886

Change in discount rate assumptions 261,823 108,468 370,291

Effect of reserve changes 6 96 102

Post-adoption liability as of 1/1/2021 $ 1,249,202 364,077 1,613,279

Fixed Annuity Liability

Pre-adoption liability as of 12/31/2020 $ 60,027 18,277 78,304

Adjustments for the removal of shadow adjustments — 3,426 3,426

Post-adoption liability as of 1/1/2021 $ 60,027 21,703 81,730

Deferred Acquisition Costs

Pre-adoption balance as of 12/31/2020 $ 94,771 10,142 104,913

Adjustments for the removal of shadow adjustments 8,270 29,905 38,175

Impact of flooring cohorts at zero 23 12 35

Post adoption balance as of 1/1/2021 $ 103,064 40,059 143,123

Cost of Insurance Acquired

Pre-adoption balance as of 12/31/2020 $ 1,734 9,807 11,541

Adjustments for the removal of shadow adjustments — 484 484

Post adoption balance as of 1/1/2021 $ 1,734 10,291 12,025

At transition, the Company recorded a charge of $ 0.1 million to retained earnings, net of tax, primarily from capping net premium ratios for certain policyholder benefit cohorts at 100%, increasing reserves for certain non-premium paying cohorts and flooring certain DAC cohorts at zero.

Other comprehensive income ("OCI") was reduced by $ 316.8 million primarily due to the difference in the discount rate used prior to transition and the discount rate at January 1, 2021.

The Company also removed shadow adjustments previously recorded in OCI for the impact of unrealized gains and losses on annuity products that previously amortized unearned revenue, DAC and COIA over expected future gross profits.

March 31, 2023 | 10-Q 11

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of the January 1, 2021 transition date, we estimate the adoption of the new guidance will increase previously reported accumulated deficit by approximately $ 1.5 million to $ 2.5 million, net of tax, primarily from capping net premium ratios for certain policyholder benefit cohorts at 100% as of the transition date, and decrease accumulated other comprehensive income (loss) (“AOCI”) by approximately $ 0.3 billion to $ 0.4 billion, net of tax, primarily from remeasuring in-force contract liabilities using upper-medium grade fixed income instrument yields as of the transition date.

As of June 30, 2022, these estimates have declined, ranging from a decrease in AOCI of approximately $ 50.0 million to an increase in AOCI of $ 50.0 million primarily due to the increase in interest rates since the transition date.

All amounts assume a tax rate of 21%.

In addition to the impacts to the balance sheets, we also expect an impact to the pattern of earnings emergence following the transition date.

While we have substantially completed the necessary updates to its valuation models and other systems to implement the standard, our implementation of the new guidance is ongoing.

The actual impact of adoption, including the actual tax rate, will be updated as the model validation, system testing and parallel runs continue through the remainder of 2022;

therefore, our estimates are subject to change.

Impacts to Previously Reported Results

Adoption of the standard impacted our previously reported consolidated financial results are as follows:

(in thousands, except per share amounts)

As Previously Reported Adoption of New Standard Post Adoption

As of December 31, 2022

Consolidated Balance Sheet

Deferred policy acquisition costs $ 140,167 22,760 162,927

Cost of insurance acquired 10,260 387 10,647

Deferred tax asset, net 2,414 ( 2,414 ) —

Future policy benefit reserves:

Life insurance 1,305,506 ( 106,859 ) 1,198,647

Annuities 91,234 ( 91,234 ) —

Policyholders' funds:

Annuities — 121,422 121,422

Other policyholders' funds 40,497 ( 32,996 ) 7,501

Deferred federal income tax liability — 3,653 3,653

Retained earnings (accumulated deficit) ( 52,203 ) 68,512 16,309

Accumulated other comprehensive income (loss) ( 195,279 ) 58,235 ( 137,044 )

For the Three Months Ended March 31, 2022

Consolidated Statement of Operations

Increase (decrease) in future policy benefit reserves $ 6,569 ( 6,455 ) 114

Policyholder liability remeasurement (gain) loss — 668 668

Amortization of deferred policy acquisition costs 5,817 ( 2,258 ) 3,559

Amortization of cost of insurance acquired 236 ( 107 ) 129

Federal income tax expense (benefit) 359 370 729

Basic and diluted earnings (losses) per share of Class A common stock ( 0.03 ) 0.16 0.13

Consolidated Statement of Comprehensive Income (Loss)

Unrealized holding gains (losses) arising during period $ ( 133,342 ) 577 ( 132,765 )

Change in current discount rate for liability for future policy benefits — 151,607 151,607

Income tax expense (benefit) on other comprehensive income items ( 9,066 ) 10,778 1,712

ACCOUNTING STANDARDS NOT YET ADOPTED

On June 30, 2022, the FASB issued ASU No.

4 unchanged sentences

Disclosures on such restrictions are also required.

March 31, 2023 | 10-Q 12

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and are required to be applied prospectively, with any adjustments from the adoption recognized in earnings and disclosed.

2 unchanged sentences

No other new accounting pronouncements issued or effective during the year had, or is expected to have, a material impact on our consolidated financial statements.

(3) SEGMENT INFORMATION

The Company has two reportable segments:

Life Insurance and Home Service Insurance.

Our Life Insurance segment primarily issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance, to non-U.S.

residents through CICA International.

These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional coverage and annuity benefits to enhance accumulations.

CICA issues credit life, credit disability and accident and health related policies throughout the Midwest and southern U.S.

CNLIC issues ordinary whole life and critical illness products in Florida and Texas.

Our Home Service Insurance segment operates through our subsidiaries SPLIC, MGLIC and SPFIC, and focuses on the life insurance needs of the middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas.

Our policies are sold and serviced through funeral homes and independent agents who sell policies, collect premiums and service policyholders.

Our Home Service Insurance segment also sells property insurance policies in Louisiana and Arkansas.

The Life Insurance and Home Service Insurance portions of the Company constitute separate businesses.

The Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and corporate-support functions that are included in the tables presented below to properly reconcile the segment information with the consolidated financial statements of the Company.

The Company's Other Non-Insurance Enterprises is the only reportable difference between segments and consolidated operations.

September 30, 2022 | 10-Q 11

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S.

GAAP and are the same as those used in the preparation of the consolidated financial statements.

The Company evaluates profit and loss performance based on U.S.

GAAP income or loss before federal income taxes for its two reportable segments.

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended September 30, 2022

(In thousands)

Premiums $ 31,696 12,179 — 43,875

Net investment income 12,806 3,527 271 16,604

Investment related gains (losses), net ( 4,367 ) ( 462 ) ( 162 ) ( 4,991 )

Other income 682 — 6 688

Total revenues 40,817 15,244 115 56,176

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 24,742 5,987 — 30,729

Increase in future policy benefit reserves 6,040 1,050 — 7,090

Policyholders' dividends 1,382 7 — 1,389

Total insurance benefits paid or provided 32,164 7,044 — 39,208

Commissions 5,103 4,107 — 9,210

Other general expenses 6,016 4,228 1,315 11,559

Capitalization of deferred policy acquisition costs ( 4,592 ) ( 1,780 ) — ( 6,372 )

Amortization of deferred policy acquisition costs 4,991 2,091 — 7,082

Amortization of cost of insurance acquired 66 210 — 276

Total benefits and expenses 43,748 15,900 1,315 60,963

Income (loss) before federal income tax expense $ ( 2,931 ) ( 656 ) ( 1,200 ) ( 4,787 )

September 30, 2022 | 10-Q 12

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Nine Months Ended September 30, 2022

(In thousands)

Premiums $ 88,461 37,002 — 125,463

Net investment income 37,124 10,054 805 47,983

Investment related gains (losses), net ( 8,644 ) ( 1,629 ) ( 316 ) ( 10,589 )

Other income 2,403 1 6 2,410

Total revenues 119,344 45,428 495 165,267

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 67,768 18,492 — 86,260

Increase in future policy benefit reserves 18,746 4,291 — 23,037

Policyholders' dividends 4,241 16 — 4,257

Total insurance benefits paid or provided 90,755 22,799 — 113,554

Commissions 13,701 12,106 — 25,807

Other general expenses 17,065 12,093 3,831 32,989

Capitalization of deferred policy acquisition costs ( 12,205 ) ( 5,132 ) — ( 17,337 )

Amortization of deferred policy acquisition costs 14,086 4,783 — 18,869

Amortization of cost of insurance acquired 206 569 — 775

Total benefits and expenses 123,608 47,218 3,831 174,657

Income (loss) before federal income tax expense $ ( 4,264 ) ( 1,790 ) ( 3,336 ) ( 9,390 )

September 30, 2022 | 10-Q 13

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended September 30, 2021

(In thousands)

Premiums $ 32,198 11,129 — 43,327

Net investment income 11,991 3,238 225 15,454

Investment related gains (losses), net 1,205 ( 36 ) 957 2,126

Other income 676 1 — 677

Total revenues 46,070 14,332 1,182 61,584

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 22,565 9,251 — 31,816

Increase in future policy benefit reserves 9,369 1,519 — 10,888

Policyholders' dividends 1,638 12 — 1,650

Total insurance benefits paid or provided 33,572 10,782 — 44,354

Commissions 4,854 4,261 — 9,115

Other general expenses 4,900 4,146 1,496 10,542

Capitalization of deferred policy acquisition costs ( 4,201 ) ( 1,825 ) — ( 6,026 )

Amortization of deferred policy acquisition costs 5,191 852 — 6,043

Amortization of cost of insurance acquired 68 215 — 283

Total benefits and expenses 44,384 18,431 1,496 64,311

Income (loss) before federal income tax expense $ 1,686 ( 4,099 ) ( 314 ) ( 2,727 )

September 30, 2022 | 10-Q 14

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Nine Months Ended September 30, 2021

(In thousands)

Premiums $ 89,399 35,786 — 125,185

Net investment income 35,468 9,826 724 46,018

Investment related gains (losses), net 5,741 393 1,143 7,277

Other income 2,142 3 — 2,145

Total revenues 132,750 46,008 1,867 180,625

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 69,366 22,335 — 91,701

Increase in future policy benefit reserves 17,081 5,326 — 22,407

Policyholders' dividends 4,400 31 — 4,431

Total insurance benefits paid or provided 90,847 27,692 — 118,539

Commissions 13,483 12,590 — 26,073

Other general expenses 15,273 12,024 6,130 33,427

Capitalization of deferred policy acquisition costs ( 11,578 ) ( 5,220 ) — ( 16,798 )

Amortization of deferred policy acquisition costs 15,739 2,561 — 18,300

Amortization of cost of insurance acquired 279 680 — 959

Total benefits and expenses 124,043 50,327 6,130 180,500

Income (loss) before federal income tax expense $ 8,707 ( 4,319 ) ( 4,263 ) 125

September 30, 2022 | 10-Q 15

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(4) STOCKHOLDERS' EQUITY (DEFICIT) AND RESTRICTIONS

Our Restated and Amended Articles of Incorporation authorize the issuance of 127,000,000 shares, of which 100,000,000 shares shall be Class A common stock, 2,000,000 shares shall be Class B common stock, and 25,000,000 shall be preferred stock.

The two authorized classes of common stock are equal in all respects, except (a) each share of Class A common stock is entitled to receive twice the cash dividends paid on a per share basis to the Class B common stock, if any;

and (b) the holders of the Class B common stock have the exclusive right to elect a simple majority of the board of Directors of Citizens.

In April 2021, we repurchased all of the outstanding Class B common stock, which is now classified as treasury stock.

As a result, all of the directors are elected by the holders of the Class A common stock.

Citizens has never issued any preferred stock.

A summary of the change in gross number of shares of Class A and Class B common stock issued and treasury stock is as follows:

Nine Months Ended September 30,

(In thousands) Common Stock Treasury Common Stock Treasury

Class A Class B Stock Class A Class B Stock

Balance at beginning of year 53,170 1,002 4,138 52,654 1,002 3,136

Stock issued under stock investment plan 475 — — 112 — —

Stock issued for compensation 90 — — — — —

Acquisition of Class A shares — — 615 — — —

Acquisition of Class B shares — — — — — 1,002

Other share issuance 22 — — — — —

Balance at end of period 53,757 1,002 4,753 52,766 1,002 4,138

September 30, 2022 | 10-Q 16

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

The following tables set forth the computation of basic and diluted earnings (loss) per share.

Three Months Ended September 30, 2022 2021

(In thousands, except per share amounts)

Basic and diluted earnings (loss) per share:

Net income (loss) $ ( 5,131 ) ( 2,799 )

Net income (loss) allocated to Class A common stock $ ( 5,131 ) ( 2,799 )

Net income (loss) allocated to Class B common stock — —

Net income (loss) $ ( 5,131 ) ( 2,799 )

Weighted average shares of Class A outstanding - basic 50,075 49,630

Weighted average shares of Class A outstanding - diluted 50,799 50,263

Weighted average shares of Class B outstanding - basic and diluted — —

Basic and diluted earnings (loss) per share of Class A common stock $ ( 0.10 ) ( 0.06 )

Basic and diluted earnings (loss) per share of Class B common stock — —

Nine Months Ended September 30, 2022 2021

(In thousands, except per share amounts)

Basic and diluted earnings (loss) per share:

Net income (loss) $ ( 10,012 ) ( 1,350 )

Net income (loss) allocated to Class A common stock $ ( 10,012 ) ( 1,345 )

Net income (loss) allocated to Class B common stock — ( 5 )

Net income (loss) $ ( 10,012 ) ( 1,350 )

Weighted average shares of Class A outstanding - basic 50,203 49,594

Weighted average shares of Class A outstanding - diluted 50,927 50,226

Weighted average shares of Class B outstanding - basic and diluted — 401

Basic and diluted earnings (loss) per share of Class A common stock $ ( 0.20 ) ( 0.03 )

Basic and diluted earnings (loss) per share of Class B common stock — ( 0.01 )

CAPITAL AND SURPLUS

Each of our regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements.

These include capital requirements imposed by the U.S.

National Association of Insurance Commissioners ("NAIC") and the Bermuda Monetary Authority ("BMA").

All domestic insurance subsidiaries exceeded the minimum capital requirements at September 30, 2022.

Due to the rapidly rising interest rates that caused the increase in unrealized losses reported in Other Comprehensive Income (Loss), CICA International fell below the required long-term business minimum solvency margin at September 30, 2022.

As the Bermuda Insurance Act of 1978 permits, we have requested a modification under Section 6C to allow CICA International to use total statutory economic capital

September 30, 2022 | 10-Q 17

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and surplus for purposes of calculating the minimum solvency margin in place of unconsolidated capital and surplus.

The BMA is currently evaluating our request and has not taken any action with respect to this matter.

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.

As of September 30, 2022, CICA International was above the TCL threshold.

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 CICA International has a minimum capital level of 120 % (equal to the TCL).

Since CICA International’s capital level currently exceeds 120% , Citizens is not currently required to make a capital contribution.

(3) INVESTMENTS

The Company invests primarily in fixed maturity securities, which totaled 86.9 % of total cash and invested assets at September 30, 2022, as shown below.

The Company invests primarily in fixed maturity securities, which totaled 87.0 % of total cash and invested assets at March 31, 2023, as shown below.

Carrying Value

(In thousands, except for %)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Amount % Amount %

7 unchanged sentences

Total cash and invested assets $ 1,412,671 100.0 % 1,363,754 100.0 %

September 30, 2022 | 10-Q 18

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables represent the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of the dates indicated.

September 30, 2022

March 31, 2023

(In thousands)

14 unchanged sentences

Total fixed maturity securities $ 1,387,919 6,755 164,983 1,229,691

March 31, 2023 | 10-Q 13

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

10 unchanged sentences

All other 184,022 683 29,048 155,657

Commercial mortgage-backed 171 — 2 169

Residential mortgage-backed 110,582 9 10,765 99,826

2 unchanged sentences

Total fixed maturity securities $ 1,381,318 3,563 205,262 1,179,619

September 30, 2022 | 10-Q 19

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Most of the Company's equity securities are diversified stock and bond mutual funds.

(In thousands)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Equity securities:

8 unchanged sentences

Equity securities are measured at fair value with the change in fair value recorded through net income (loss).

The Company recognized net investment related losses of $ 0.9 million and $ 2.9 million on equity securities held for the three and nine months ended September 30, 2022 and losses of $ 0.4 million and gains of $ 0.2 million for the same periods ended September 30, 2021, respectively.

The Company recognized net investment related gains of $ 0.3 million on equity securities held for the three months ended March 31, 2023 and losses of $ 0.8 million for the same period ended March 31, 2022, respectively.

The Company considers several factors in its review and evaluation of individual investments, using the process described in Part IV, Item 15, Note 2.

Investments in the notes to the consolidated financial statements of our Form 10-K to determine whether a credit valuation loss exists.

For the three and nine months ended September 30, 2022 and 2021, the Company recorded no credit valuation losses on fixed maturity securities.

September 30, 2022 | 10-Q 20

For the three months ended March 31, 2023 and 2022, the Company recorded no credit valuation losses on fixed maturity securities.

March 31, 2023 | 10-Q 14

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the fair values and gross unrealized losses of fixed maturity securities that are not deemed to have credit losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position at September 30, 2022 and December 31, 2021.

September 30, 2022 Less than 12 months Greater than 12 months Total

March 31, 2023 Less than 12 months Greater than 12 months Total

(In thousands, except for # of securities) Fair

28 unchanged sentences

Treasury securities $ — — — 64 9 2 64 9 2

Government-sponsored enterprises 223 1 1 — — — 223 1 1

States and political subdivisions 189,084 30,866 242 14,184 7,098 14 203,268 37,964 256

4 unchanged sentences

All Other 140,955 25,337 171 7,910 3,711 15 148,865 29,048 186

Commercial mortgage-backed 168 2 2 — — — 168 2 2

Residential mortgage-backed 98,758 10,514 95 759 251 5 99,517 10,765 100

1 unchanged sentence

Total fixed maturity securities $ 945,462 168,710 1,236 78,772 36,552 117 1,024,234 205,262 1,353

September 30, 2022 | 10-Q 21

March 31, 2023 | 10-Q 15

CITIZENS, INC .

1 unchanged sentence

In each category of our fixed maturity securities described above, we do not intend to sell our investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.

As of March 31, 2023 and December 31, 2022, 98.7 % of the fair value of our fixed maturity securities portfolio was rated investment grade.

While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an on-going basis as future information may become available which could result in an allowance being recorded.

While we experience unrealized losses across several corporate sectors, the financial sector includes exposure to banks which have been impacted the most by recent economic and interest rate pressures.

We have assessed our exposure in this sector and believe our investments have access to sufficient liquidity to meet their debt obligations.

These unrealized losses on fixed maturity securities are due to noncredit-related factors, including widening credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of our investments, hence they are not recognized as credit losses.

The fair value is expected to recover as the securities approach maturity or if market yields for such investments decline.

As of September 30, 2022 and December 31, 2021, 98.6 % and 98.0 %, respectively, of the fair value of our fixed maturity securities portfolio was rated investment grade.

While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an ongoing basis as future information may become available which could result in an allowance being recorded.

The amortized cost and fair value of fixed maturity securities at September 30, 2022 by contractual maturity are shown in the table below.

The amortized cost and fair value of fixed maturity securities at March 31, 2023 by contractual maturity are shown in the table below.

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Securities not due at a single maturity date have been reflected based upon final stated maturity.

September 30, 2022 Amortized

March 31, 2023 Amortized

(In thousands)

6 unchanged sentences

The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales.

Three Months Ended Nine Months Ended

September 30, September 30,

Three Months Ended

(In thousands) 2023 2022

3 unchanged sentences

Gross realized losses $ 12 —

The Company sold 2 and 19 AFS fixed maturity securities during the three and nine months ended September 30, 2022 and 10 and 28 during the three and nine months ended September 30, 2021, respectively.

The Company sold 4 AFS fixed maturity securities during the three months ended March 31, 2023 and 1 during the three months ended March 31, 2022, respectively.

(4) FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through comprehensive income (loss).

We also report our equity securities and other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations.

Fair value measurements are generally based upon observable and unobservable inputs.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions

September 30, 2022 | 10-Q 22

We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through other comprehensive income (loss).

We also report our equity

March 31, 2023 | 10-Q 16

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in the absence of observable market information.

securities and certain other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations.

Fair value measurements are generally based upon observable and unobservable inputs.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information.

We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

14 unchanged sentences

We have no investments in this category.

September 30, 2022 | 10-Q 23

March 31, 2023 | 10-Q 17

CITIZENS, INC .

1 unchanged sentence

The following tables set forth our assets that are measured at fair value on a recurring basis as of the dates indicated.

September 30, 2022 Level 1 Level 2 Level 3 Total

March 31, 2023 Level 1 Level 2 Level 3 Total

(In thousands)

21 unchanged sentences

The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

September 30, 2022 | 10-Q 24

March 31, 2023 | 10-Q 18

CITIZENS, INC .

8 unchanged sentences

Corporate 44 715,601 — 715,645

Commercial mortgage-backed — 169 — 169

Residential mortgage-backed — 99,826 — 99,826

16 unchanged sentences

Fixed maturity securities, available-for-sale.

At September 30, 2022, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 93.2 % of total reported fair value of our financial assets.

At March 31, 2023, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 93.2 % of total reported fair value of our financial assets.

The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades.

In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness.

There were no Level 3 assets at September 30, 2022.

As of September 30, 2022, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.

There were no Level 3 assets at March 31, 2023.

As of March 31, 2023, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.

Equity securities.

2 unchanged sentences

The Company considers the net asset value ("NAV") to represent the value of the investment fund and is measured by the total value of assets minus the total value of liabilities.

The following tables include information related to our investments in limited partnerships that calculate NAV per share.

The following table includes information related to our investments in limited partnerships that calculate NAV per share.

For these investments, which are measured at fair value on a recurring basis, we use the NAV per share to measure fair value.

Changes in the NAV of our limited partnerships are recorded through net income (loss).

The Company recognized net investment related losses of $ 4.2 million and $ 9.4 million on limited partnerships held for the three and nine months ended September 30, 2022 and net realized gains of $ 1.3 million and $ 5.8 million for the three and nine months

September 30, 2022 | 10-Q 25

The Company recognized net investment related losses of $ 0.6 million and $ 0.8 million on limited partnerships held for

March 31, 2023 | 10-Q 19

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ended September 30, 2021, respectively.

the three months ended March 31, 2023 and March 31, 2022, respectively.

These investments are included in other long-term investments on the consolidated balance sheets.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(In thousands, except years) Fair Value

Using NAV Per Share Unfunded Commit-

1 unchanged sentence

Using NAV Per Share Unfunded Commit-

(In thousands, except years)

Limited partnerships

2 unchanged sentences

Late-stage growth Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale 18,315 17,172 5 to 7

16,892 18,444 5 to 7

Infrastructure Investments in climate infrastructure assets, focusing on renewable power generation in wind and solar energy 10,703 14,926 10 to 12

7,683 4,107 11

Infrastructure Investments in climate infrastructure assets, focusing on renewable power generation in wind and solar energy 5,293 14,462 11 3,016 16,653 12

Total limited partnerships $ 71,990 35,550 $ 66,846 28,562

The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the partnerships are liquidated.

The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the funds are liquidated.

The life spans indicated above may be shortened or extended at the fund manager's discretion, typically in one or two-year increments.

The global equity fund is redeemable monthly.

We initially estimate the fair value of investments in limited partnerships by reference to the transaction price.

Subsequently, we obtain the fair value of these investments from net asset value information provided by the general partner or manager of the investments, the financial statements of which are audited annually.

We carried no limited partnership investments at cost at September 30, 2022 and December 31, 2021.

We review the fair value hierarchy classifications each reporting period.

Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets.

Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur.

There were no transfers in or out of Level 3 during the nine months ended September 30, 2022 or 2021.

FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE

Estimates of fair values are made at a specific point in time, based on relevant market prices and information about the financial instruments.

The fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions.

September 30, 2022 | 10-Q 26

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The carrying amount and fair value for the financial assets and liabilities on the consolidated balance sheets not otherwise disclosed for the periods indicated are as follows:

September 30, 2022 December 31, 2021

The estimated fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions.

The carrying amount and fair value for the financial assets and liabilities on the consolidated financial statements not otherwise disclosed for the periods indicated were as follows:

March 31, 2023 December 31, 2022

(In thousands) Carrying

2 unchanged sentences

Policy loans $ 78,659 78,659 78,773 78,773

Commercial mortgage loan — — 1,000 1,000

Residential mortgage loans 50 52 148 169

Residential mortgage loan 47 48 49 50

Cash and cash equivalents 18,924 18,924 22,973 22,973

1 unchanged sentence

Annuity - investment contracts 67,799 62,968 67,344 61,701

March 31, 2023 | 10-Q 20

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Policy loans.

Policy loans had a weighted average annual interest rate of 7.7 % at September 30, 2022 and December 31, 2021 and no specified maturity dates.

Policy loans had a weighted average annual interest rate of 7.7 % at both March 31, 2023 and December 31, 2022 and no specified maturity dates.

The aggregate fair value of policy loans approximates the carrying value reflected on the consolidated balance sheets.

Policy loans are an integral part of the life insurance policies we have in force, cannot be valued separately and are not marketable.

Therefore, the fair value of policy loans approximates the carrying value and policy loans are considered Level 3 assets in the fair value hierarchy.

Commercial mortgage loan.

We financed $ 1.0 million of the sale of our training facility at a 6.0 % interest rate during the third quarter of 2021.

The loan was paid in full during the third quarter of 2022.

Due to the short-term nature of the loan, the carrying value approximated fair value and was considered a Level 3 asset in the fair value hierarchy.

Residential mortgage loans.

Mortgage loans are secured principally by residential properties.

Weighted average interest rates for these loans were approximately 7.0 % at September 30, 2022 and 6.4 % at December 31, 2021.

At September 30, 2022, the remaining loan matures in six years .

Management estimated the fair value using an annual interest rate of 6.25 % at September 30, 2022.

Our mortgage loans are considered Level 3 assets in the fair value hierarchy and are included in other long-term investments on the consolidated balance sheet.

Residential mortgage loan.

The mortgage loan is secured principally by a residential property.

The interest rate for this loan was approximately 7.0 % at both March 31, 2023 and December 31, 2022.

At March 31, 2023, the remaining loan matures in five years .

Management estimated the fair value using an annual interest rate of 6.25 % at March 31, 2023.

Our mortgage loan is considered Level 3 assets in the fair value hierarchy and is included in other long-term investments on the consolidated balance sheet.

Cash and cash equivalents.

The fair value of cash and cash equivalents approximate carrying value and are characterized as Level 1 assets in the fair value hierarchy.

The fair value of cash and cash equivalents approximates carrying value and are characterized as Level 1 assets in the fair value hierarchy.

Annuity liabilities.

The fair value of the Company's liabilities under annuity contract policies, which are considered Level 3 liabilities, was estimated at September 30, 2022 and December 31, 2021 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.91 % to 4.53 % and 0.50 % to 2.63 %, respectively.

The fair value of the Company's liabilities under annuity contract policies, which are considered Level 3 liabilities, was estimated at March 31, 2023 and December 31, 2022 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.18 % to 4.41 % and 4.74 % to 5.09 %, respectively.

The fair value of liabilities under all insurance contracts are taken into consideration in the overall management of interest rate risk, which seeks to minimize exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.

September 30, 2022 | 10-Q 27

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other long-term investments.

3 unchanged sentences

(In thousands )

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Other long-term investments:

4 unchanged sentences

Total other long-term investments $ 72,254 69,558

We are a member of the Federal Home Loan Bank ("FHLB") of Dallas and such membership requires members to own stock in FHLB.

We carried no limited partnership investments at cost at March 31, 2023 while $ 2.4 million were carried at cost at December 31, 2022.

We are a member of the Federal Home Loan Bank ("FHLB") of Dallas and such membership requires members to own stock in the FHLB.

Our FHLB stock is carried at amortized cost, which approximates fair value.

(5) DEFERRED POLICY ACQUISITION COSTS AND COST OF INSURANCE ACQUIRED

The following tables roll forward the DAC asset for the three months ended March 31, 2023 and 2022 by reporting cohort.

Our reporting cohorts are Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up.

Both reporting cohorts include whole life and endowment policies.

March 31, 2023 | 10-Q 21

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Three Months Ended March 31, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

Balance, beginning of year $ 100,926 11,542 1,016 113,484

Capitalizations 3,453 822 85 4,360

Amortization expense ( 2,918 ) ( 186 ) ( 58 ) ( 3,162 )

Balance, end of period $ 101,461 12,178 1,043 114,682

Home Service Insurance:

Balance, beginning of year $ 38,793 9,729 921 49,443

Capitalizations 1,615 331 52 1,998

Amortization expense ( 492 ) ( 95 ) ( 65 ) ( 652 )

Balance, end of period $ 39,916 9,965 908 50,789

Consolidated:

Balance, beginning of year $ 139,719 21,271 1,937 162,927

Capitalizations 5,068 1,153 137 6,358

Amortization expense ( 3,410 ) ( 281 ) ( 123 ) ( 3,814 )

Balance, end of period $ 141,377 22,143 1,951 165,471

Three Months Ended March 31, 2022

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

Balance, beginning of year $ 97,675 9,001 1,026 107,702

Capitalizations 2,439 838 29 3,306

Amortization expense ( 2,793 ) ( 150 ) ( 77 ) ( 3,020 )

Balance, end of period $ 97,321 9,689 978 107,988

Home Service Insurance:

Balance, beginning of year $ 35,137 8,723 856 44,716

Capitalizations 1,149 323 3 1,475

Amortization expense ( 444 ) ( 89 ) ( 6 ) ( 539 )

Balance, end of period $ 35,842 8,957 853 45,652

Consolidated:

Balance, beginning of year $ 132,812 17,724 1,882 152,418

Capitalizations 3,588 1,161 32 4,781

Amortization expense ( 3,237 ) ( 239 ) ( 83 ) ( 3,559 )

Balance, end of period $ 133,163 18,646 1,831 153,640

DAC capitalization increased for the three months ended March 31, 2023, compared to the same prior year period mainly from increased commissions from higher first year sales across our business segments.

March 31, 2023 | 10-Q 22

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables provide rollforwards of the COIA balances for the three months ended March 31, 2023 and 2022 by reporting cohort.

Both reporting cohorts include whole life and endowment policies.

Three Months Ended March 31, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

Balance, beginning of year $ 267 750 444 1,461

Amortization expense ( 4 ) ( 15 ) ( 13 ) ( 32 )

Balance, end of period $ 263 735 431 1,429

Home Service Insurance:

Balance, beginning of year $ 7,583 176 1,427 9,186

Amortization expense ( 99 ) ( 2 ) ( 28 ) ( 129 )

Balance, end of period $ 7,484 174 1,399 9,057

Consolidated:

Balance, beginning of year $ 7,850 926 1,871 10,647

Amortization expense ( 103 ) ( 17 ) ( 41 ) ( 161 )

Balance, end of period $ 7,747 909 1,830 10,486

Three Months Ended March 31, 2022

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

Balance, beginning of year $ 287 812 485 1,584

Amortization expense ( 5 ) ( 16 ) ( 3 ) ( 24 )

Balance, end of period $ 282 796 482 1,560

Home Service Insurance:

Balance, beginning of year $ 7,989 184 1,511 9,684

Amortization expense ( 103 ) ( 2 ) — ( 105 )

Balance, end of period $ 7,886 182 1,511 9,579

Consolidated:

Balance, beginning of year $ 8,276 996 1,996 11,268

Amortization expense ( 108 ) ( 18 ) ( 3 ) ( 129 )

Balance, end of period $ 8,168 978 1,993 11,139

March 31, 2023 | 10-Q 23

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) POLICYHOLDERS’ LIABILITIES

LIABILITY FOR FUTURE POLICY BENEFITS

The following tables summarize balances of and changes in the liability for future policy benefits for our reporting cohorts:

Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up.

Both reporting cohorts include whole life and endowment policies.

Life Insurance Segment

March 31, 2023

(In thousands)

Permanent Permanent Limited Pay Total

Present Value of Expected Net Premiums

Balance, beginning of year $ 235,228 10,209 245,437

Beginning balance at original discount rate 247,601 10,682 258,283

Effects of actual variances from expected experience 1,742 365 2,107

Adjusted beginning of year balance 249,343 11,047 260,390

Issuances 6,236 759 6,995

Interest accrual 2,272 72 2,344

Net premiums collected ( 9,715 ) ( 751 ) ( 10,466 )

Derecognition and other 153 38 191

Ending balance at original discount rate 248,289 11,165 259,454

Effect of changes in discount rates ( 8,766 ) ( 370 ) ( 9,136 )

Balance, end of period $ 239,523 10,795 250,318

Present Value of Expected Future Policy Benefits

Balance, beginning of year $ 947,415 195,612 1,143,027

Beginning balance at original discount rate 996,169 208,051 1,204,220

Effects of actual variances from expected experience 2,538 1,045 3,583

Adjusted beginning of year balance 998,707 209,096 1,207,803

Issuances 6,375 785 7,160

Interest accrual 10,842 2,112 12,954

Benefit payments ( 19,153 ) ( 4,873 ) ( 24,026 )

Derecognition and other 14 12 26

Ending balance at original discount rate 996,785 207,132 1,203,917

Effect of changes in discount rates ( 31,065 ) ( 9,459 ) ( 40,524 )

Balance, end of period $ 965,720 197,673 1,163,393

Net liability for future policy benefits $ 726,197 186,878 913,075

The Life Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities primarily due to higher benefits than expected.

March 31, 2023 | 10-Q 24

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Home Service Insurance

March 31, 2023

(In thousands)

Permanent Permanent Limited Pay Total

Present Value of Expected Net Premiums

Balance, beginning of year $ 93,508 13,255 106,763

Beginning balance at original discount rate 100,225 14,394 114,619

Effects of actual variances from expected experience ( 1,371 ) ( 809 ) ( 2,180 )

Adjusted beginning of year balance 98,854 13,585 112,439

Issuances 4,789 1,176 5,965

Interest accrual 986 114 1,100

Net premiums collected ( 2,967 ) 467 ( 2,500 )

Derecognition and other 132 46 178

Ending balance at original discount rate 101,794 15,388 117,182

Effect of changes in discount rates ( 4,925 ) ( 873 ) ( 5,798 )

Balance, end of period $ 96,869 14,515 111,384

Present Value of Expected Future Policy Benefits

Balance, beginning of year $ 200,351 116,356 316,707

Beginning balance at original discount rate 214,188 121,908 336,096

Effects of actual variances from expected experience ( 1,299 ) 25 ( 1,274 )

Adjusted beginning of year balance 212,889 121,933 334,822

Issuances 4,789 1,176 5,965

Interest accrual 2,310 1,410 3,720

Benefit payments ( 4,178 ) ( 1,748 ) ( 5,926 )

Derecognition and other 132 45 177

Ending balance at original discount rate 215,942 122,816 338,758

Effect of changes in discount rates ( 10,101 ) ( 3,712 ) ( 13,813 )

Balance, end of period $ 205,841 119,104 324,945

Net liability for future policy benefits $ 108,972 104,589 213,561

Net premiums collected are defined as the transactional gross premiums collected in the current period times the net premium ratio.

Issuances are calculated as the present value, using the locked-in discount rate of the expected net premiums or the expected future policy benefits related to new policies issued during the three months ended March 31, 2023 and 2022.

Interest accrual is the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the locked-in discount rate.

Benefit payments are the transactional benefits (death, lapse, surrenders and maturities) paid in the current period.

Derecognition refers to a subset of the issuances or the present value of future premiums released on new issues that lapsed during the three months ended March 31, 2023 and 2022 as well as other reconciling items.

The effects of actual variances from expected experience lines are primarily impacted by the actual policy cash flows during the period compared to that which was expected in the reserve assumptions.

If the net of the two lines is a positive number, the implication is an unfavorable result with policy cash flows less favorable than assumed while a negative number implies a favorable result compared to assumptions.

Our policy experience will vary from actual experience in any one period, either favorably or unfavorably.

March 31, 2023 | 10-Q 25

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Home Service Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities due to higher premiums collected than expected.

Life Insurance

March 31, 2022

(In thousands)

Permanent Permanent Limited Pay Total

Present Value of Expected Net Premiums

Balance, beginning of year $ 269,528 4,939 274,467

Beginning balance at original discount rate 246,386 5,093 251,479

Effects of actual variances from expected experience 1,693 422 2,115

Adjusted beginning of year balance 248,079 5,515 253,594

Issuances 5,795 1,121 6,916

Interest accrual 2,088 ( 2 ) 2,086

Net premiums collected ( 9,166 ) 133 ( 9,033 )

Derecognition and other 57 24 81

Ending balance at original discount rate 246,853 6,791 253,644

Effect of changes in discount rates 6,040 ( 291 ) 5,749

Balance, end of period $ 252,893 6,500 259,393

Present Value of Expected Future Policy Benefits

Balance, beginning of year $ 1,168,282 240,679 1,408,961

Beginning balance at original discount rate 990,921 207,105 1,198,026

Effects of actual variances from expected experience 1,998 1,407 3,405

Adjusted beginning of year balance 992,919 208,512 1,201,431

Issuances 5,863 1,141 7,004

Interest accrual 10,658 2,125 12,783

Benefit payments ( 17,715 ) ( 3,918 ) ( 21,633 )

Derecognition and other ( 10 ) 4 ( 6 )

Ending balance at original discount rate 991,715 207,864 1,199,579

Effect of changes in discount rates 72,720 12,917 85,637

Balance, end of period $ 1,064,435 220,781 1,285,216

Net liability for future policy benefits $ 811,542 214,281 1,025,823

The Life Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities primarily due to higher benefits paid than expected.

March 31, 2023 | 10-Q 26

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Home Service Insurance

March 31, 2022

(In thousands)

Permanent Permanent Limited Pay Total

Present Value of Expected Net Premiums

Balance, beginning of year $ 104,556 10,196 114,752

Beginning balance at original discount rate 90,012 9,532 99,544

Effects of actual variances from expected experience 876 ( 1,083 ) ( 207 )

Adjusted beginning of year balance 90,888 8,449 99,337

Issuances 4,349 711 5,060

Interest accrual 822 43 865

Net premiums collected ( 2,723 ) 1,610 ( 1,113 )

Derecognition and other ( 1,113 ) 24 ( 1,089 )

Ending balance at original discount rate 92,223 10,837 103,060

Effect of changes in discount rates 5,130 ( 112 ) 5,018

Balance, end of period $ 97,353 10,725 108,078

Present Value of Expected Future Policy Benefits

Balance, beginning of year $ 266,206 161,715 427,921

Beginning balance at original discount rate 205,340 117,425 322,765

Effects of actual variances from expected experience 1,090 625 1,715

Adjusted beginning of year balance 206,430 118,050 324,480

Issuances 4,350 708 5,058

Interest accrual 2,164 1,349 3,513

Benefit payments ( 5,832 ) ( 2,057 ) ( 7,889 )

Derecognition and other ( 1,114 ) 24 ( 1,090 )

Ending balance at original discount rate 205,998 118,074 324,072

Effect of changes in discount rates 28,342 23,076 51,418

Balance, end of period $ 234,340 141,150 375,490

Net liability for future policy benefits $ 136,987 130,425 267,412

The Home Service Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities due to higher premiums collected than expected.

March 31, 2023 | 10-Q 27

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the net liability for future policy benefits shown above to the liability for future policy benefits in the consolidated balance sheet.

March 31, 2023

March 31, 2022

(In thousands) Life

Insurance Home Service

Insurance Consolidated Life

Insurance Home Service

Insurance Consolidated

Life Insurance

Permanent $ 726,197 108,972 835,169 811,542 136,987 948,529

Permanent limited pay 186,878 104,589 291,467 214,281 130,425 344,706

Deferred profit liability 26,347 25,113 51,460 23,042 22,502 45,544

Other 26,474 13,725 40,199 27,918 13,403 41,321

Total life insurance 965,896 252,399 1,218,295 1,076,783 303,317 1,380,100

Accident & Health

Other 599 249 848 521 245 766

Total $ 966,495 252,648 1,219,143 1,077,304 303,562 1,380,866

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for long-term duration contracts.

As of March 31, 2023 2022

(In thousands) Life

Insurance Home Service

Insurance Life

Insurance Home Service

Undiscounted:

Expected future gross premiums 607,319 463,491 623,969 459,627

Expected future benefit payments $ 1,478,777 478,978 1,468,066 453,855

Permanent Limited Pay

Expected future gross premiums 46,845 77,743 47,904 65,371

Expected future benefit payments 321,985 319,390 322,955 304,278

Expected future gross premiums 474,777 277,098 523,290 308,271

Expected future benefit payments $ 965,720 205,841 1,064,435 234,340

Permanent Limited Pay

Expected future gross premiums 41,719 54,170 44,202 53,038

Expected future benefit payments 197,673 119,104 220,781 141,150

March 31, 2023 | 10-Q 28

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize the amount of revenue and interest related to long-term duration contracts recognized in the consolidated statement of operations:

Life Insurance Home Service Insurance

Three Months Ended March 31, 2023

(In thousands)

Gross Premiums Interest Expense Gross Premiums Interest Expense

Life Insurance

Permanent $ 22,458 8,570 8,372 1,324

Permanent Limited Pay 4,168 2,336 2,154 1,586

Other 77 — 368 —

Reinsurance ( 648 ) — ( 15 ) —

Total, net of reinsurance 26,055 10,906 10,879 2,910

Accident & Health

Other 152 — 206 —

Reinsurance — — — —

Total, net of reinsurance 152 — 206 —

Total $ 26,207 10,906 11,085 2,910

Life Insurance Home Service Insurance

Three Months Ended March 31, 2022

(In thousands)

Gross Premiums Interest Expense Gross Premiums Interest Expense

Life Insurance

Permanent $ 22,257 8,570 8,456 1,342

Permanent Limited Pay 3,656 2,350 2,041 1,559

Other 1,425 — — —

Reinsurance ( 500 ) — ( 14 ) —

Total, net of reinsurance 26,838 10,920 10,483 2,901

Accident & Health

Other 94 — 193 —

Reinsurance ( 1 ) — — —

Total, net of reinsurance 93 — 193 —

Total $ 26,931 10,920 10,676 2,901

The following table provides the weighted-average durations of the liability for future policy benefits.

March 31, 2023 March 31, 2022

(In years) Life

Insurance Home Service

Insurance Life

Insurance Home Service

Original duration 8.1 15.9 8.8 16.0

Current duration 8.4 16.1 9.1 16.3

Permanent Limited Pay

Original duration 7.6 14.5 8.0 15.2

Current duration 7.6 15.2 8.4 17.5

March 31, 2023 | 10-Q 29

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides the weighted-average interest rates for the liability for future policy benefits.

March 31, 2023 March 31, 2022

(In thousands) Life

Insurance Home Service

Insurance Life

Insurance Home Service

Original discount rate 4.92 % 4.99 % 4.93 % 5.01 %

Current discount rate 4.86 % 5.09 % 3.43 % 3.68 %

Permanent Limited Pay

Original discount rate 4.30 % 5.05 % 4.33 % 5.06 %

Current discount rate 4.85 % 5.08 % 3.38 % 3.67 %

March 31, 2023 | 10-Q 30

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LIABILITY FOR POLICYHOLDERS’ ACCOUNT BALANCES

The following table presents the policyholders' account balances by range of guaranteed minimum crediting rates and the related range of the difference, in basis points, between rates being credited and the respective guaranteed minimums.

March 31, 2023 At Guaranteed Minimum 1 Basis Point- 50 Basis Points Above

51 Basis Points- 150 Basis Points Above

Greater Than 150 Basis Points Above

(In thousands) Range of Guaranteed Minimum Crediting Rate

Life Insurance:

0.00 % - 1.49 %

1.50 % - 2.99 %

1,452 — — — 1,452

3.00 % - 4.49 %

33,940 — — — 33,940

Greater or equal to 4.50 %

134 — — — 134

Total $ 35,526 — — — 35,526

Fixed annuity 0.00 % - 1.49 %

$ 197 — 1,144 — 1,341

1.50 % - 2.99 %

13,078 — 59 — 13,137

3.00 % - 4.49 %

21,568 10 — — 21,578

Greater or equal to 4.50 %

30,944 — — — 30,944

Total $ 65,787 10 1,203 — 67,000

Dividend accumulations 0.00 % - 1.49 %

$ 239 — — 3,499 3,738

1.50 % - 2.99 %

11,144 551 7 — 11,702

3.00 % - 4.49 %

26,985 — — — 26,985

Greater or equal to 4.50 %

Total $ 38,371 551 7 3,499 42,428

Premiums paid in advance 0.00 % - 1.49 %

$ — — — 34,122 34,122

1.50 % - 2.99 %

3.00 % - 4.49 %

Greater or equal to 4.50 %

Total $ — — — 34,122 34,122

Home Service Insurance:

0.00 % - 1.49 %

1.50 % - 2.99 %

250 — — — 250

3.00 % - 4.49 %

Greater or equal to 4.50 %

Total $ 309 — — — 309

Fixed annuity 0.00 % - 1.49 %

$ 296 — — 392 688

1.50 % - 2.99 %

3.00 % - 4.49 %

18,696 — — — 18,696

Greater or equal to 4.50 %

777 — — — 777

Total $ 19,769 — — 392 20,161

Dividend accumulations 0.00 % - 1.49 %

$ — — — 173 173

1.50 % - 2.99 %

3.00 % - 4.49 %

Greater or equal to 4.50 %

Total $ 25 42 — 173 240

(1) Supplemental Contracts Without Life Contingencies

March 31, 2023 | 10-Q 31

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022 At Guaranteed Minimum 1 Basis Point- 50 Basis Points Above

51 Basis Points- 150 Basis Points Above

Greater Than 150 Basis Points Above

(In thousands) Range of Guaranteed Minimum Crediting Rate

Life Insurance:

0.00 % - 1.49 %

1.50 % - 2.99 %

256 — — — 256

3.00 % - 4.49 %

24,862 — — — 24,862

Greater or equal to 4.50 %

145 — — — 145

Total $ 25,263 — — — 25,263

Fixed annuity 0.00 % - 1.49 %

$ 203 — 813 — 1,016

1.50 % - 2.99 %

10,584 — 12 — 10,596

3.00 % - 4.49 %

21,976 9 — — 21,985

Greater or equal to 4.50 %

30,662 — — — 30,662

Total $ 63,425 9 825 — 64,259

Dividend accumulations 0.00 % - 1.49 %

$ 250 — — 3,529 3,779

1.50 % - 2.99 %

8,501 533 11 — 9,045

3.00 % - 4.49 %

25,507 — — — 25,507

Greater or equal to 4.50 %

Total $ 34,261 533 11 3,529 38,334

Premiums paid in advance 0.00 % - 1.49 %

$ — — — 37,922 37,922

1.50 % - 2.99 %

3.00 % - 4.49 %

Greater or equal to 4.50 %

Total $ — — — 37,922 37,922

Home Service Insurance:

0.00 % - 1.49 %

1.50 % - 2.99 %

249 — — — 249

3.00 % - 4.49 %

Greater or equal to 4.50 %

Total $ 304 — — — 304

Fixed annuity 0.00 % - 1.49 %

$ 284 — — 408 692

1.50 % - 2.99 %

3.00 % - 4.49 %

18,743 — — — 18,743

Greater or equal to 4.50 %

903 — — — 903

Total $ 19,930 — — 408 20,338

Dividend accumulations 0.00 % - 1.49 %

$ — — — 173 173

1.50 % - 2.99 %

3.00 % - 4.49 %

Greater or equal to 4.50 %

Total $ 24 44 — 173 241

(1) Supplemental Contracts Without Life Contingencies

March 31, 2023 | 10-Q 32

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize balances of and changes in policyholders' account balances.

March 31, 2023

(In thousands)

Fixed Annuity Dividend

Accumulations Premiums Paid in Advance

Life Insurance:

Balance, beginning of year $ 32,667 66,543 41,424 34,603

Issuances 4,788 536 147 905

Premiums received 18 1,025 1,383 145

Interest credited 341 536 322 226

Surrenders and withdrawals — 1,640 848 1,757

Benefit payments 2,288 — — —

Balance, end of period $ 35,526 67,000 42,428 34,122

Weighted-average crediting rates 4.10 % 3.70 % 3.49 % 3.00 %

Cash surrender value $ 35,526 67,000 42,428 34,122

Home Service Insurance:

Balance, beginning of year $ 328 20,264 239 —

Issuances — 227 1 —

Premiums received — 145 1 —

Interest credited 2 132 2 —

Surrenders and withdrawals — 607 3 —

Benefit payments 21 — — —

Balance, end of period $ 309 20,161 240 —

Weighted-average crediting rates 2.20 % 3.10 % 3.09 % 4.00 %

Cash surrender value $ 309 20,161 240 —

Consolidated:

Balance, beginning of year $ 32,995 86,807 41,663 34,603

Issuances 4,788 763 148 905

Premiums received 18 1,170 1,384 145

Interest credited 343 668 324 226

Surrenders and withdrawals — 2,247 851 1,757

Benefit payments 2,309 — — —

Balance, end of period $ 35,835 87,161 42,668 34,122

Weighted-average crediting rates 4.05 % 3.57 % 3.05 % 2.98 %

Cash surrender value $ 35,835 87,161 42,668 34,122

(1) Supplemental Contracts Without Life Contingencies

March 31, 2023 | 10-Q 33

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

(In thousands)

Fixed Annuity Dividend

Accumulations Premiums Paid in Advance

Life Insurance:

Balance, beginning of year $ 23,628 63,591 37,513 38,875

Issuances 2,392 604 123 469

Premiums received 12 995 1,264 132

Interest credited 232 517 292 275

Surrenders and withdrawals — 1,448 858 1,829

Benefit payments 1,001 — — —

Balance, end of period $ 25,263 64,259 38,334 37,922

Weighted-average crediting rates 4.11 % 3.76 % 3.50 % 3.09 %

Cash surrender value $ 25,263 64,259 38,334 37,922

Home Service Insurance:

Balance, beginning of year $ 322 20,326 247 —

Issuances 10 213 3 —

Premiums received — 189 1 —

Interest credited 2 140 2 —

Surrenders and withdrawals — 530 12 —

Benefit payments 30 — — —

Balance, end of period $ 304 20,338 241 —

Weighted-average crediting rates 2.13 % 3.11 % 3.10 % 4.00 %

Cash surrender value $ 304 20,338 241 —

Consolidated:

Balance, beginning of year $ 23,950 83,917 37,760 38,875

Issuances 2,402 817 126 469

Premiums received 12 1,184 1,265 132

Interest credited 234 657 294 275

Surrenders and withdrawals — 1,978 870 1,829

Benefit payments 1,031 — — —

Balance, end of period $ 25,567 84,597 38,575 37,922

Weighted-average crediting rates 4.08 % 3.60 % 3.08 % 3.09 %

Cash surrender value $ 25,567 84,597 38,575 37,922

(1) Supplemental Contracts Without Life Contingencies

March 31, 2023 | 10-Q 34

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles policyholders' account balances to the policyholders' account balances' liability in the consolidated balance sheet.

March 31, 2023 March 31, 2022

(In thousands) Life

Insurance Home Service

Insurance Consolidated Life

Insurance Home Service

Insurance Consolidated

$ 35,526 309 35,835 25,263 304 25,567

Fixed annuity 67,000 20,161 87,161 64,259 20,338 84,597

Unearned revenue reserve — 1,531 1,531 — 1,588 1,588

Other 1 — 1 — ( 1 ) ( 1 )

Total annuities $ 102,527 22,001 124,528 89,522 22,229 111,751

(1) Supplemental Contracts Without Life Contingencies

Dividend Accumulations:

Dividend accumulations $ 42,428 240 42,668 38,334 241 38,575

Other 1 ( 1 ) — — — —

Total dividend accumulations $ 42,429 239 42,668 38,334 241 38,575

Premiums Paid in Advance:

Premiums paid in advance $ 34,122 — 34,122 37,922 — 37,922

Other 2,294 281 2,575 2,180 331 2,511

Total premiums paid in advance $ 36,416 281 36,697 40,102 331 40,433

(7) COMMITMENTS AND CONTINGENCIES

4 unchanged sentences

CONTRACTUAL OBLIGATIONS

As of September 30, 2022, CICA International is committed to fund investments up to $ 42.7 million related to limited partnerships previously described and other investments.

As of March 31, 2023, CICA International is committed to fund investments up to $ 35.6 million related to limited partnerships previously described.

CREDIT FACILITY

2 unchanged sentences

Revolving loans may be requested by the Company in aggregate minimum principal amounts of $ 0.5 million per loan.

At the Company's election, the revolving loans may either bear a base rate, which is 1.75 % plus a base rate (a fluctuating rate per annum) equal to the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50 %, (c) the one-month LIBOR rate plus 1 %, and (d) 0.75 %;

At the Company's election, the revolving loans may either bear a base rate, which is 1.75 % plus a base rate

March 31, 2023 | 10-Q 35

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(a fluctuating rate per annum) equal to the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50 %, (c) the one-month LIBOR rate plus 1 %, and (d) 0.75 %;

or an adjusted LIBOR rate, which is 2.75 % plus an adjusted LIBOR rate but cannot be less than 0.75 %.

The Company is required to pay Regions an annual commitment fee of 0.375 % of the unused portion of the Credit Facility in quarterly installments, which the Company expenses as it is incurred.

Regions informed the Company that after June 30, 2023, the United Kingdom's Financial Conduct Authority will no longer publish a LIBOR rate that may be used as the benchmark interest rate index.

Regions will transition to a replacement interest rate index on any future draws.

Obligations under the Credit Facility are secured by substantially all of the assets of the Company other than the equity interests in all of the regulated insurance subsidiaries, real estate owned by the Company, and other limited exceptions.

The Credit Facility contains customary events of default and financial, affirmative and negative covenants, including but not limited to restrictions on indebtedness, liens, investments, asset dispositions and restricted payments.

As of September 30, 2022, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants.

September 30, 2022 | 10-Q 28

As of March 31, 2023, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants.

(8) STOCKHOLDERS' EQUITY AND RESTRICTIONS

and (b) the holders of the Class B common stock have the exclusive right to elect a simple majority of the Board of Directors of Citizens.

In April 2021, we repurchased all of the outstanding Class B common stock, which is now classified as treasury stock.

As a result, all of the directors are elected by the holders of the Class A common stock.

Citizens has never issued any preferred stock.

A summary of the change in number of shares of Class A and Class B common stock and treasury stock issued is as follows:

Three Months Ended March 31,

(In thousands) Common Stock Treasury Common Stock Treasury

Class A Class B Stock Class A Class B Stock

Balance at beginning of year 53,758 1,002 4,937 53,170 1,002 4,138

Stock issued under stock investment plan — — — 345 — —

Stock issued for compensation 34 — — 18 — —

Balance at end of period 53,792 1,002 4,937 53,533 1,002 4,138

March 31, 2023 | 10-Q 36

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings (loss) per share.

Three Months Ended March 31, 2023 2022

(In thousands, except per share amounts)

Basic and diluted earnings (loss) per share:

Net income (loss) $ 4,872 6,449

Net income (loss) allocated to Class A common stock $ 4,872 6,449

Weighted average shares of Class A outstanding - basic 49,840 50,236

Weighted average shares of Class A outstanding - diluted 50,609 50,906

Basic and diluted earnings (loss) per share of Class A common stock $ 0.10 0.13

CAPITAL AND SURPLUS

Each of our regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements.

These include capital requirements imposed by the U.S.

National Association of Insurance Commissioners ("NAIC") and the Bermuda Monetary Authority ("BMA").

All domestic insurance subsidiaries exceeded the minimum capital requirements at March 31, 2023.

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

As of March 31, 2023, CICA International was above the TCL threshold.

At the request of the BMA, on April 15, 2021, Citizens and CICA International entered into a Keep Well Agreement.

Since CICA International’s capital level currently exceeds 120% , Citizens is not required to make a capital contribution.

CICA International had previously been granted a permitted practice by the BMA to report its fixed income maturity securities at amortized cost in its unconsolidated statutory financial statements.

This permitted practice has expired.

CICA PR is a Puerto Rico domiciled company.

The Insurance Code does not specifically set forth minimum capital and surplus standards, but rather requires that an insurer submit a business plan for approval to the Office of the Commissioner of Insurance that includes proposed minimum capital and surplus.

CICA PR is required to maintain a minimum of $750,000 in capital and maintain a premium to surplus ratio of 7 to 1 .

CICA PR began issuing new business as of January 1, 2023 and since higher costs are associated with new business than renewal business (e.g., first year commissions), we expect that Citizens will have to contribute capital to CICA PR in the foreseeable future in order to maintain the required premium to surplus ratio.

(9) SEGMENT INFORMATION

The Company has two reportable segments:

Life Insurance and Home Service Insurance.

Our Life Insurance segment issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance, to non-U.S.

residents through CICA International and, beginning January 1, 2023, CICA PR.

These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional coverage and annuity

March 31, 2023 | 10-Q 37

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

benefits to enhance accumulations.

Domestically, we currently offer whole life, credit life, credit disability, and critical illness products.

The critical illness products are sold in Texas and Florida through CICA and CNLIC.

Both CICA and CNLIC also service whole life and accident and health policies primarily in the Southern U.S., Midwest and Mountain West.

Our policies are sold and serviced through funeral homes and independent agents who sell policies, collect premiums and service policyholders.

Our Home Service Insurance segment also sells property insurance policies in Louisiana.

The Life Insurance and Home Service Insurance portions of the Company constitute separate businesses.

In addition to the Life Insurance and Home Service Insurance business, the Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and Corporate-support functions.

The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S.

GAAP and are the same as those described in the summary of significant accounting policies in our Form 10-K .

The Company evaluates profit and loss performance based on U.S.

GAAP net income (loss) before federal income taxes for its two reportable segments.

The Company's Other Non-Insurance Enterprises is the only reportable difference between segments and consolidated operations.

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended March 31, 2023

(In thousands)

Premiums $ 26,207 12,042 — 38,249

Net investment income 13,311 3,470 293 17,074

Investment related gains (losses), net ( 437 ) 99 50 ( 288 )

Other income (loss) 879 — — 879

Total revenues 39,960 15,611 343 55,914

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 24,439 5,860 — 30,299

Increase (decrease) in future policy benefit reserves ( 1,820 ) 842 — ( 978 )

Policyholder liability remeasurement (gain) loss 816 64 — 880

Policyholders' dividends 1,101 7 — 1,108

Total insurance benefits paid or provided 24,536 6,773 — 31,309

Commissions 4,759 4,254 — 9,013

Other general expenses 5,459 4,468 1,333 11,260

Capitalization of deferred policy acquisition costs ( 4,360 ) ( 1,998 ) — ( 6,358 )

Amortization of deferred policy acquisition costs 3,162 652 — 3,814

Amortization of cost of insurance acquired 32 129 — 161

Total benefits and expenses 33,588 14,278 1,333 49,199

Income (loss) before federal income tax $ 6,372 1,333 ( 990 ) 6,715

March 31, 2023 | 10-Q 38

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended March 31, 2022

(In thousands)

Premiums $ 26,931 12,433 — 39,364

Net investment income 11,971 3,244 272 15,487

Investment related gains (losses), net ( 293 ) ( 242 ) ( 47 ) ( 582 )

Other income (loss) 1,088 — — 1,088

Total revenues 39,697 15,435 225 55,357

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 21,458 6,976 — 28,434

Increase in future policy benefit reserves 1,376 ( 1,262 ) — 114

Policyholder liability remeasurement (gain) loss 414 254 — 668

Policyholders' dividends 1,350 3 — 1,353

Total insurance benefits paid or provided 24,598 5,971 — 30,569

Commissions 3,806 3,867 — 7,673

Other general expenses 5,691 4,350 989 11,030

Capitalization of deferred policy acquisition costs ( 3,306 ) ( 1,475 ) — ( 4,781 )

Amortization of deferred policy acquisition costs 3,020 539 — 3,559

Amortization of cost of insurance acquired 24 105 — 129

Total benefits and expenses 33,833 13,357 989 48,179

Income (loss) before federal income tax $ 5,864 2,078 ( 764 ) 7,178

(10) INCOME TAXES

The effective tax rate is the ratio of tax expense (benefit) over pre-tax income (loss).

The effective tax rate was ( 7.2 )% and ( 6.6 )% for the three and nine months ended September 30, 2022, compared to ( 2.6 )% and 1180.0 % for the same periods in 2021, respectively.

The effective tax rate was 27.4 % for the three months ended March 31, 2023, compared to 10.2 % for the same period in 2022, respectively.

CICA International is considered a controlled foreign corporation for federal tax purposes.

2 unchanged sentences

The effective tax rate varies from the prevailing corporate federal income tax rate of 21.0% mainly due to the impact of Subpart F and uncertain tax positions.

At September 30, 2022, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety.

At March 31, 2023, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety.

The Company recorded a valuation allowance of $ 3.7 million through Other Comprehensive Income (Loss).

(9) OTHER COMPREHENSIVE INCOME (LOSS)

The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% as of the three and nine months ended September 30, 2022 and 2021, as indicated below.

Three Months Ended September 30, 2022 2021

(In thousands) Amount Tax Effect Total Amount Tax Effect Total

Unrealized gains (losses):

Unrealized holding gains (losses) arising during the period $ ( 88,382 ) 4,808 ( 83,574 ) ( 9,561 ) 781 ( 8,780 )

Reclassification adjustment for (gains) losses included in net income 43 ( 8 ) 35 ( 102 ) 22 ( 80 )

Effects on deferred policy acquisition costs 725 ( 153 ) 572 7,975 ( 528 ) 7,447

Effects on cost of insurance acquired 251 ( 53 ) 198 7 ( 1 ) 6

Effects on unearned revenue reserves ( 2,307 ) 485 ( 1,822 ) 15 ( 3 ) 12

March 31, 2023 | 10-Q 39

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(11) OTHER COMPREHENSIVE INCOME (LOSS)

Nine Months Ended September 30, 2022 2021

The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% as of the three months ended March 31, 2023 and 2022, as indicated below.

Three Months Ended March 31, 2023 2022

(In thousands) Amount Tax Effect Total Amount Tax Effect Total

2 unchanged sentences

Reclassification adjustment for (gains) losses included in net income 38 ( 8 ) 30 59 ( 12 ) 47

Effects on deferred policy acquisition costs 1,879 ( 395 ) 1,484 11,681 ( 3,068 ) 8,613

Effects on cost of insurance acquired 694 ( 146 ) 548 284 ( 59 ) 225

Effects on unearned revenue reserves ( 5,884 ) 1,236 ( 4,648 ) ( 1,922 ) 404 ( 1,518 )

Unrealized holding gains (losses), net 43,474 ( 2,288 ) 41,186 ( 132,706 ) 8,945 ( 123,761 )

Change in current discount rate for liability for future policy benefits ( 20,480 ) 873 ( 19,607 ) 151,607 ( 10,657 ) 140,950

Other comprehensive income (loss) $ 22,994 ( 1,415 ) 21,579 18,901 ( 1,712 ) 17,189

September 30, 2022 | 10-Q 29

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(12) RELATED PARTY TRANSACTIONS

The Company has various routine related party transactions in conjunction with our holding company structure, such as a management service agreement related to costs incurred, a tax sharing agreement between entities, and inter-company dividends and capital contributions.

There were no changes related to these relationships during the nine months ended September 30, 2022.

There were no changes related to these relationships during the three months ended March 31, 2023.

See our Form 10-K for a comprehensive discussion of related party transactions.

(13) SUBSEQUENT EVENTS

The Company has evaluated the impact of subsequent events as defined by the accounting guidance through the date this report was issued and determined that no significant subsequent events need to be recognized or disclosed.

September 30, 2022 | 10-Q 30

The Company has a plan of disposal to cease operations for its property insurance business on June 30, 2023.

The property insurance business operates through SPFIC and represented less than 1 % of the Company’s total consolidated assets as of March 31, 2023 and less than 2 % of the Company's total consolidated revenues for the three months ended March 31, 2023.

The Company has evaluated the impact of subsequent events as defined by the accounting guidance through the date this report was issued and determined that no other significant subsequent events need to be recognized or disclosed at this time.

March 31, 2023 | 10-Q 40

CITIZENS, INC.

1 unchanged sentence

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-Q

Item 1. Financial Statements