What changed in this filing

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Item 1. Financial Statements

2023-11-06 compared with 2023-08-04 · 213 added, 171 removed, 1107 unchanged (26% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(In thousands) June 30, 2023 December 31, 2022

(In thousands) September 30, 2023 December 31, 2022

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

18 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

June 30, 2023 | 10-Q 2

September 30, 2023 | 10-Q 2

CITIZENS, INC.

1 unchanged sentence

Consolidated Balance Sheets, Continued

(In thousands, except share amounts) June 30, 2023 December 31, 2022

(In thousands, except share amounts) September 30, 2023 December 31, 2022

Liabilities and Stockholders' Equity

13 unchanged sentences

Commissions payable 1,681 1,967

Current federal income tax payable 652 —

Deferred federal income tax liability 2,097 3,653

Payable for securities in process of settlement 250 —

Other liabilities 36,110 41,025

12 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

June 30, 2023 | 10-Q 3

September 30, 2023 | 10-Q 3

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Income (Loss)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(In thousands, except per share amounts)

24 unchanged sentences

Per Share Amounts:

Basic and diluted earnings (losses) per share of Class A common stock 0.12 0.05 0.22 0.18

Basic earnings (losses) per share of Class A common stock

0.06 0.07 0.28 0.25

Diluted earnings (losses) per share of Class A common stock

0.05 0.06 0.27 0.24

Other Comprehensive Income (Loss):

8 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

June 30, 2023 | 10-Q 4

September 30, 2023 | 10-Q 4

CITIZENS, INC.

5 unchanged sentences

Income (Loss) Treasury

Stock Total Stockholders' Equity

Stockholders' Equity

(In thousands) Class A Class B

13 unchanged sentences

Balance at June 30, 2023 268,243 3,184 27,307 ( 128,363 ) ( 23,525 ) 146,846

Comprehensive income (loss):

Net income (loss) — — 2,698 — — 2,698

Other comprehensive income (loss) — — — 1,696 — 1,696

Total comprehensive income (loss) — — 2,698 1,696 — 4,394

Stock-based compensation 180 — — — — 180

— — 1,327 — — 1,327

Balance at September 30, 2023 $ 268,423 3,184 31,332 ( 126,667 ) ( 23,525 ) 152,747

1 See Note 10 - Income Taxes for details.

See accompanying Notes to Consolidated Financial Statements.

September 30, 2023 | 10-Q 5

CITIZENS, INC.

AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Stockholders' Equity, Continued

Common Stock Retained Earnings (Accumulated

Deficit) Accumulated Other

Comprehensive

Income (Loss) Treasury

Stockholders' Equity

(In thousands) Class A Class B

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

14 unchanged sentences

Balance at June 30, 2022 267,850 3,184 ( 757 ) ( 125,552 ) ( 21,401 ) 123,324

Comprehensive income (loss):

Net income (loss) — — 3,407 — — 3,407

Other comprehensive income (loss) — — — ( 14,941 ) — ( 14,941 )

Total comprehensive income (loss) — — 3,407 ( 14,941 ) — ( 11,534 )

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

Stock-based compensation 138 — — — — 138

Balance at September 30, 2022 $ 267,988 3,184 2,650 ( 140,493 ) ( 22,284 ) 111,045

See accompanying Notes to Consolidated Financial Statements.

June 30, 2023 | 10-Q 5

September 30, 2023 | 10-Q 6

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

22 unchanged sentences

Maturities and calls of fixed maturity securities, available-for-sale 23,128 37,890

Sales of equity securities

Principal payments on mortgage loans 6 1,097

7 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

June 30, 2023 | 10-Q 6

September 30, 2023 | 10-Q 7

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows, Continued

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

10 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the six months ended June 30, 2023 and 2022, various fixed maturity issuers exchanged securities with book values of $ 5.4 million and $ 6.1 million, respectively, for securities of equal value.

The Company had no net unsettled security trades at June 30, 2023 and $ 3.3 million at June 30, 2022.

The Company recognized no right-of-use assets in exchange for new operating lease liabilities during the six months ended June 30, 2023 and $ 0.4 million during the six months ended June 30, 2022.

During the nine months ended September 30, 2023 and 2022, various fixed maturity issuers exchanged securities with book values of $ 5.4 million and $ 6.1 million, respectively, for securities of equal value.

The Company had $ 0.3 million net unsettled security trades at September 30, 2023 and none at September 30, 2022.

The Company recognized $ 36 thousand right-of-use assets in exchange for new operating lease liabilities during the nine months ended September 30, 2023 and $ 0.4 million during the nine months ended September 30, 2022.

See accompanying Notes to Consolidated Financial Statements.

June 30, 2023 | 10-Q 7

September 30, 2023 | 10-Q 8

CITIZENS, INC .

8 unchanged sentences

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

The consolidated balance sheet as of June 30, 2023, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and six months ended June 30, 2023 and June 30, 2022 and the consolidated statements of cash flows for the six months ended June 30, 2023 and June 30, 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 June 30, 2023 and for comparative periods have been made.

The consolidated balance sheet as of September 30, 2023, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and nine months ended September 30, 2023 and September 30, 2022 and the consolidated statements of cash flows for the nine months ended September 30, 2023 and September 30, 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 September 30, 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 PR, CICA and CNLIC.

Our Life Insurance segment operates through CICA PR and CICA.

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

4 unchanged sentences

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 increasing or decreasing coverage and annuity benefits to enhance accumulations.

On August 31, 2023, CICA International transferred all of its insurance in force business to CICA PR.

Prior to July 1, 2023, our domestic life insurance business operated through CICA and CNLIC.

9 unchanged sentences

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent

June 30, 2023 | 10-Q 8

September 30, 2023 | 10-Q 9

CITIZENS, INC .

30 unchanged sentences

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

June 30, 2023 | 10-Q 9

September 30, 2023 | 10-Q 10

CITIZENS, INC .

25 unchanged sentences

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

June 30, 2023 | 10-Q 10

September 30, 2023 | 10-Q 11

CITIZENS, INC .

8 unchanged sentences

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 Service Insurance Segment Consolidated

(In thousands) Life Insurance

Home Service Insurance

Liability for Future Policy Benefits

19 unchanged sentences

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.

June 30, 2023 | 10-Q 11

September 30, 2023 | 10-Q 12

CITIZENS, INC .

21 unchanged sentences

Total stockholders' equity 1,043 126,747 127,790

June 30, 2023 | 10-Q 12

September 30, 2023 | 10-Q 13

CITIZENS, INC .

2 unchanged sentences

As Previously Reported Adoption of New Standard Post Adoption

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Consolidated Statement of Operations

5 unchanged sentences

Net income (loss) ( 5,131 ) 8,538 3,407

Basic and diluted earnings (losses) per share of Class A common stock ( 0.07 ) 0.12 0.05

Basic earnings (losses) per share of Class A common stock ( 0.10 ) 0.17 0.07

Diluted earnings (losses) per share of Class A common stock ( 0.10 ) 0.16 0.06

Consolidated Statement of Comprehensive Income (Loss)

4 unchanged sentences

Total comprehensive income (loss) ( 89,722 ) 78,188 ( 11,534 )

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Consolidated Statement of Operations

5 unchanged sentences

Net income (loss) ( 10,012 ) 22,360 12,348

Basic and diluted earnings (losses) per share of Class A common stock ( 0.10 ) 0.28 0.18

Basic earnings (losses) per share of Class A common stock ( 0.20 ) 0.45 0.25

Diluted earnings (losses) per share of Class A common stock ( 0.20 ) 0.44 0.24

Consolidated Statement of Comprehensive Income (Loss)

8 unchanged sentences

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

This standard clarifies that contractual restrictions on equity security sales are not considered part of the security unit of account and, therefore, are not considered in measuring fair value.

In addition, the amendments clarify that an entity cannot, as a separate unit of

June 30, 2023 | 10-Q 13

This standard clarifies that contractual restrictions on equity security sales are not considered part of the security unit of account and, therefore, are not

September 30, 2023 | 10-Q 14

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

account, recognize and measure a contractual sale restriction.

considered in measuring fair value.

In addition, the amendments clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction.

Disclosures on such restrictions are also required.

4 unchanged sentences

(3) INVESTMENTS

The Company invests primarily in fixed maturity securities, which totaled 86.5 % of total cash and invested assets at June 30, 2023, as shown below.

The Company invests primarily in fixed maturity securities, which totaled 86.3 % of total cash and invested assets at September 30, 2023, as shown below.

Carrying Value

(In thousands, except for %)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Amount % Amount %

7 unchanged sentences

Total cash and invested assets $ 1,334,241 100.0 % 1,363,754 100.0 %

June 30, 2023 | 10-Q 14

September 30, 2023 | 10-Q 15

CITIZENS, INC .

1 unchanged sentence

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

June 30, 2023

September 30, 2023

(In thousands)

12 unchanged sentences

Asset-backed 56,702 417 2,506 54,613

Foreign governments 100 — — 100

Total fixed maturity securities $ 1,389,390 3,321 241,358 1,151,353

16 unchanged sentences

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

June 30, 2023 | 10-Q 15

September 30, 2023 | 10-Q 16

CITIZENS, INC .

2 unchanged sentences

(In thousands)

June 30, 2023 December 31, 2022

September 30, 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 $ 0.2 million and gains of $ 0.1 million on equity securities held for the three and six months ended June 30, 2023 and losses of $ 1.2 million and $ 2.0 million for the same periods ended June 30, 2022, respectively.

The Company recognized net investment related losses of $ 0.4 million and $ 0.3 million on equity securities held for the three and nine months ended September 30, 2023 and losses of $ 0.9 million and $ 2.9 million for the same periods ended September 30, 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 six months ended June 30, 2023 and 2022, the Company recorded no credit valuation losses on fixed maturity securities.

June 30, 2023 | 10-Q 16

For the three and nine months ended September 30, 2023 and 2022, the Company recorded no credit valuation losses on fixed maturity securities.

September 30, 2023 | 10-Q 17

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 June 30, 2023 and December 31, 2022.

June 30, 2023 Less than 12 months Greater than 12 months Total

September 30, 2023 Less than 12 months Greater than 12 months Total

(In thousands, except for # of securities) Fair

39 unchanged sentences

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

June 30, 2023 | 10-Q 17

September 30, 2023 | 10-Q 18

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 June 30, 2023 and December 31, 2022, 99 % of the fair value of our fixed maturity securities portfolio was rated investment grade.

As of September 30, 2023 and December 31, 2022, 99 % of the fair value of our fixed maturity securities portfolio were 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.

While we experience unrealized losses across all corporate sectors, the financial sector includes exposure to regional 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.

1 unchanged sentence

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

The amortized cost and fair value of fixed maturity securities at June 30, 2023 by contractual maturity are shown in the table below.

The amortized cost and fair value of fixed maturity securities at September 30, 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.

June 30, 2023 Amortized

September 30, 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(In thousands) 2023 2022 2023 2022

7 unchanged sentences

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

June 30, 2023 | 10-Q 18

September 30, 2023 | 10-Q 19

CITIZENS, INC .

18 unchanged sentences

We have no investments in this category.

June 30, 2023 | 10-Q 19

September 30, 2023 | 10-Q 20

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.

June 30, 2023 Level 1 Level 2 Level 3 Total

September 30, 2023 Level 1 Level 2 Level 3 Total

(In thousands)

8 unchanged sentences

Asset-backed — 54,613 — 54,613

Foreign governments — 100 — 100

Total fixed maturity securities available-for-sale 5,870 1,145,483 — 1,151,353

10 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.

June 30, 2023 | 10-Q 20

September 30, 2023 | 10-Q 21

CITIZENS, INC .

27 unchanged sentences

Fixed maturity securities, available-for-sale.

At June 30, 2023, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 93 % of total reported fair value of our financial assets.

At September 30, 2023, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.1 billion for Level 2 assets and comprised 92 % 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 June 30, 2023.

As of June 30, 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.

There were no Level 3 assets at September 30, 2023.

As of September 30, 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.

4 unchanged sentences

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

The Company recognized net investment related gains of $ 0.9 million and $ 0.3 million and losses of $ 4.4 million and

June 30, 2023 | 10-Q 21

The Company recognized net investment related losses of $ 0.1 million and gains of $ 0.2 million and losses of $ 4.2 million and $ 9.4 million on limited partnerships held for the three and nine months ended September 30, 2023 and

September 30, 2023 | 10-Q 22

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

$ 5.2 million on limited partnerships held for the three and six months ended June 30, 2023 and June 30, 2022, respectively.

September 30, 2022, respectively.

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

June 30, 2023 December 31, 2022

(In thousands, except years) Fair Value

September 30, 2023 December 31, 2022

(In thousands, except for years)

Using NAV Per Share Unfunded Commit-

15 unchanged sentences

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:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(In thousands) Carrying

6 unchanged sentences

Annuity - investment contracts 67,224 59,063 67,344 61,701

June 30, 2023 | 10-Q 22

September 30, 2023 | 10-Q 23

CITIZENS, INC .

1 unchanged sentence

Policy loans.

Policy loans had a weighted average annual interest rate of 7.7 % at both June 30, 2023 and December 31, 2022 and no specified maturity dates.

Policy loans had a weighted average annual interest rate of 7.7 % at both September 30, 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.

3 unchanged sentences

The mortgage loan is secured principally by a residential property.

The interest rate for this loan was 7.0 % at both June 30, 2023 and December 31, 2022.

At June 30, 2023, the remaining loan matures in five years .

Management estimated the fair value using an annual interest rate of 6.25 % at June 30, 2023.

The interest rate for this loan was 7.0 % at both September 30, 2023 and December 31, 2022.

At September 30, 2023, the remaining loan matures in five years .

Management estimated the fair value using an annual interest rate of 6.25 % at September 30, 2023.

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

2 unchanged sentences

Annuity liabilities.

The fair value of the Company's liabilities under annuity contract policies, which are considered Level 3 liabilities, was estimated at June 30, 2023 and December 31, 2022 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.00 % to 4.71 % and 4.74 % to 5.09 %, respectively.

The fair value of the Company's liabilities under annuity contract policies, which are considered Level 3 liabilities, was estimated at September 30, 2023 and December 31, 2022 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.57 % to 5.01 % 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.

4 unchanged sentences

(In thousands )

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Other long-term investments:

4 unchanged sentences

Total other long-term investments $ 79,798 69,558

We carried no limited partnership investments at cost at June 30, 2023 while $ 2.4 million were carried at cost at December 31, 2022.

We carried no limited partnership investments at cost at September 30, 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.

1 unchanged sentence

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

The following tables roll forward the DAC asset for the six months ended June 30, 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.

June 30, 2023 | 10-Q 23

The following tables roll forward the DAC asset for the nine months ended September 30, 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

September 30, 2023 | 10-Q 24

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2023

premiums payable for a limited time after which the policy is fully paid up.

Both reporting cohorts include whole life and endowment policies.

Nine Months Ended September 30, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

14 unchanged sentences

Balance, end of period $ 145,564 23,640 2,213 171,417

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(In thousands) Permanent Permanent Limited Pay Other Business Total

14 unchanged sentences

Balance, end of period $ 137,081 20,162 1,861 159,104

DAC capitalization increased for the six months ended June 30, 2023, compared to the same prior year period mainly from increased commissions from higher first year sales across our business segments.

June 30, 2023 | 10-Q 24

September 30, 2023 | 10-Q 25

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables provide rollforwards of the COIA balances for the six months ended June 30, 2023 and 2022 by reporting cohort.

DAC capitalization increased for the nine months ended September 30, 2023, compared to the same prior year period mainly from increased commissions from higher first year sales across our business segments.

The following tables provide rollforwards of the COIA balances for the nine months ended September 30, 2023 and 2022 by reporting cohort.

Both reporting cohorts include whole life and endowment policies.

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

11 unchanged sentences

Balance, end of period $ 7,543 877 1,762 10,182

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(In thousands) Permanent Permanent Limited Pay Other Business Total

11 unchanged sentences

Balance, end of period $ 7,955 943 1,924 10,822

June 30, 2023 | 10-Q 25

September 30, 2023 | 10-Q 26

CITIZENS, INC .

5 unchanged sentences

Both reporting cohorts include whole life and endowment policies.

June 30, 2023

September 30, 2023

(In thousands)

Life Insurance Segment Home Service Insurance

Life Insurance

Home Service Insurance

Permanent Permanent Limited Pay Total Permanent Permanent Limited Pay Total

2 unchanged sentences

Beginning balance at original discount rate 247,601 10,682 258,283 100,225 14,394 114,619

Effect of changes in cash flow assumptions ( 210 ) 38 ( 172 ) ( 343 ) 85 ( 258 )

Effects of actual variances from expected experience 4,156 1,059 5,215 ( 5,631 ) ( 4,477 ) ( 10,108 )

10 unchanged sentences

Beginning balance at original discount rate 996,169 208,051 1,204,220 214,188 121,908 336,096

Effect of changes in cash flow assumptions ( 389 ) ( 702 ) ( 1,091 ) ( 257 ) 331 74

Effects of actual variances from expected experience 6,338 3,489 9,827 ( 5,472 ) ( 1,337 ) ( 6,809 )

8 unchanged sentences

Net liability for future policy benefits $ 682,693 172,086 854,779 100,332 96,799 197,131

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.

The Home Service Insurance segment impact of

June 30, 2023 | 10-Q 26

September 30, 2023 | 10-Q 27

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

updating actual experience for the current period contributed to an increase in liabilities due to higher premiums collected than expected.

June 30, 2022

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.

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.

September 30, 2022

(In thousands)

4 unchanged sentences

Beginning balance at original discount rate 246,386 5,093 251,479 90,012 9,532 99,544

Effect of changes in cash flow assumptions ( 3,662 ) 237 ( 3,425 ) 4,253 1,214 5,467

Effects of actual variances from expected experience 1,705 401 2,106 ( 299 ) ( 5,603 ) ( 5,902 )

10 unchanged sentences

Beginning balance at original discount rate 990,921 207,105 1,198,026 205,340 117,425 322,765

Effect of changes in cash flow assumptions ( 3,916 ) 374 ( 3,542 ) 4,822 1,765 6,587

Effects of actual variances from expected experience 2,127 3,392 5,519 158 7 165

10 unchanged sentences

Net liability for future policy benefits, after flooring impact $ 703,765 185,486 889,251 107,375 104,165 211,540

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.

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.

June 30, 2023 | 10-Q 27

September 30, 2023 | 10-Q 28

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Net premiums collected is 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 six months ended June 30, 2023 and 2022.

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 nine months ended September 30, 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 six months ended June 30, 2023 and 2022 as well as other reconciling items.

Derecognition refers to a subset of the issuances or the present value of future premiums released on new issues that lapsed during the nine months ended September 30, 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.

2 unchanged sentences

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

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

(In thousands) Life

12 unchanged sentences

Total future policy benefit reserves $ 911,002 237,476 1,148,478 942,056 249,175 1,191,231

June 30, 2023 | 10-Q 28

September 30, 2023 | 10-Q 29

CITIZENS, INC .

1 unchanged sentence

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

June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022

(In thousands) Life

13 unchanged sentences

Expected future benefit payments 184,456 110,991 193,898 117,159

June 30, 2023 | 10-Q 29

September 30, 2023 | 10-Q 30

CITIZENS, INC .

1 unchanged sentence

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

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2023 2022 2023 2022

22 unchanged sentences

Other 244 — 196 — 667 — 581 —

Reinsurance — — — — — — — —

Total, net of reinsurance 217 — 192 — 423 — 385 —

Total $ 10,942 2,921 11,026 2,887 33,093 8,745 33,334 8,674

June 30, 2023 | 10-Q 30

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022

(In years) Life

7 unchanged sentences

Duration at current discount rate 7.6 14.4 7.6 15.3

September 30, 2023 | 10-Q 31

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

June 30, 2023 June 30, 2022

September 30, 2023 September 30, 2022

Insurance Home Service

8 unchanged sentences

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.

At Guaranteed Minimum 1 Basis Point- 50 Basis Points Above

51 Basis Points- 150 Basis Points Above

Greater Than 150 Basis Points Above

June 30, 2023

At Guaranteed Minimum 1 Basis Point-50 Basis Points Above 51 Basis Points-150 Basis Points Above Greater Than 150 Basis Points Above Total

September 30, 2023

(In thousands)

9 unchanged sentences

Total $ 166,680 685 1,201 37,233 205,799

June 30, 2023 | 10-Q 31

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At Guaranteed Minimum 1 Basis Point- 50 Basis Points Above

51 Basis Points- 150 Basis Points Above

Greater Than 150 Basis Points Above

June 30, 2022

At Guaranteed Minimum 1 Basis Point-50 Basis Points Above 51 Basis Points-150 Basis Points Above Greater Than 150 Basis Points Above Total

September 30, 2022

(In thousands)

9 unchanged sentences

Total $ 151,766 613 857 40,055 193,291

September 30, 2023 | 10-Q 32

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

June 30, 2023

September 30, 2023

(In thousands, except for %)

5 unchanged sentences

Interest credited 1,103 1,988 993 948

Other 1 — — —

Surrenders and withdrawals — 7,647 3,238 6,098

3 unchanged sentences

Cash surrender value $ 41,804 86,581 44,102 33,312

June 30, 2022

September 30, 2022

(In thousands, except for %)

5 unchanged sentences

Interest credited 769 1,966 897 750

Other 2 — — —

Surrenders and withdrawals — 5,903 2,653 6,047

3 unchanged sentences

Cash surrender value $ 30,699 86,133 40,483 35,976

June 30, 2023 | 10-Q 32

September 30, 2023 | 10-Q 33

CITIZENS, INC .

1 unchanged sentence

The following table reconciles policyholders' account balances shown above to the policyholders' account balances liability in the consolidated balance sheets.

As of June 30,

As of September 30,

(In thousands)

13 unchanged sentences

CONTRACTUAL OBLIGATIONS

As of June 30, 2023, CICA International is committed to fund investments up to $ 33.0 million related to limited partnerships previously described.

As of September 30, 2023, CICA International is committed to fund investments up to $ 30.3 million related to limited partnerships previously described.

CREDIT FACILITY

6 unchanged sentences

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 June 30, 2023, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants.

June 30, 2023 | 10-Q 33

As of September 30, 2023, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants.

September 30, 2023 | 10-Q 34

CITIZENS, INC .

2 unchanged sentences

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;

Both 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.

3 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) Common Stock Treasury Common Stock Treasury

8 unchanged sentences

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

Three Months Ended June 30, 2023 2022

Three Months Ended September 30, 2023 2022

(In thousands, except per share amounts)

4 unchanged sentences

Weighted average shares of Class A outstanding - diluted 50,522 50,799

Basic and diluted earnings (loss) per share of Class A common stock $ 0.12 0.05

June 30, 2023 | 10-Q 34

Basic earnings (loss) per share of Class A common stock

Diluted earnings (loss) per share of Class A common stock

September 30, 2023 | 10-Q 35

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2023 2022

Nine Months Ended September 30, 2023 2022

(In thousands, except per share amounts)

4 unchanged sentences

Weighted average shares of Class A outstanding - diluted 50,647 50,927

Basic and diluted earnings (loss) per share of Class A common stock $ 0.22 0.18

Basic earnings (loss) per share of Class A common stock

Diluted earnings (loss) per share of Class A common stock

CAPITAL AND SURPLUS

2 unchanged sentences

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

All domestic insurance subsidiaries exceeded the minimum capital requirements at June 30, 2023.

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 June 30, 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.

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 required to make a capital contribution.

All domestic insurance subsidiaries exceeded the minimum capital requirements at September 30, 2023.

CICA PR is a Puerto Rico domiciled company.

1 unchanged sentence

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 order to maintain the required premium to surplus ratio.

CICA PR began issuing new business as of January 1, 2023 and received the transfer of all of CICA International's in force insurance business as of August 31, 2023 .

On that date, Citizens entered into a Keep Well Agreement with CICA PR to replace the Keep Well Agreement that had been in place between Citizens and CICA International (Bermuda).

The Keep Well Agreement requires Citizens to contribute up to $ 10 million in capital to CICA PR as necessary to ensure that CICA PR maintains at least either (i) 112 % of its required ratio of premiums to capital and surplus, or (ii) 200 % of the minimum capital and surplus requirement, whichever is higher.

The initial term of the Keep Well Agreement is 12 months.

Since CICA PR's capital exceeds both of the metrics, Citizens is not required to make a capital contribution.

Any capital that Citizens is required to contribute could negatively impact the Company's capital resources and liquidity.

(9) SEGMENT INFORMATION

2 unchanged sentences

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.

residents through 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 benefits to enhance accumulations.

CICA issues ordinary whole life, life products with living benefits, critical illness, credit life and disability policies throughout the U.S.

and CNLIC issued ordinary whole life and critical illness policies through June 30, 2023.

CNLIC merged into CICA on July 1, 2023.

June 30, 2023 | 10-Q 35

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CICA issues ordinary whole life, life products with living benefits, critical illness and credit life and disability policies throughout the U.S.

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.

1 unchanged sentence

Our Home Service Insurance segment also sold property insurance policies in Louisiana and Arkansas until operations were ceased effective June 30, 2023.

September 30, 2023 | 10-Q 36

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

6 unchanged sentences

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 6,550 ( 443 ) ( 1,466 ) 4,641

June 30, 2023 | 10-Q 36

September 30, 2023 | 10-Q 37

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 20,395 1,514 ( 4,509 ) 17,400

June 30, 2023 | 10-Q 37

September 30, 2023 | 10-Q 38

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 5,072 950 ( 1,200 ) 4,822

June 30, 2023 | 10-Q 38

September 30, 2023 | 10-Q 39

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 14,272 5,030 ( 3,336 ) 15,966

September 30, 2023 | 10-Q 40

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(10) INCOME TAXES

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

The effective tax rate was ( 1.4 )% and 13.8 % for the three and six months ended June 30, 2023, compared to 37.2 % and 19.8 % for the same periods in 2022, respectively.

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

As a result, the insurance activity of CICA International is subject to Subpart F of the Internal Revenue Code and is included in Citizens’ taxable income.

The effective tax rate was 41.9 % and 21.3 % for the three and nine months ended September 30, 2023, compared to 29.3 % and 22.7 % for the same periods in 2022, respectively.

CICA International and CICA PR are considered controlled foreign corporations for federal tax purposes.

As a result, the insurance activity of CICA International and CICA PR are subject to Subpart F of the Internal Revenue Code and are included in Citizens’ taxable income.

Due to the 0 % enacted tax rate in Bermuda, there are no deferred taxes recorded for CICA International's temporary differences.

CICA PR has applied for a tax exemption decree from the Government of Puerto Rico which will freeze the income tax rate at 4% on any taxable earnings in excess of $1.2 million.

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 June 30, 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.

As a result of the August 31, 2023 transfer of CICA International's in force business to CICA PR, the Company's consolidated deferred federal income tax liability was reduced by $ 4.3 million due to the difference in the tax rates in the jurisdictions in which the companies operate.

Since the transfer was between companies under common control, the $ 4.3 million reduction in the deferred federal income tax liability was recorded as a credit to equity, $ 1.3 million of which increased retained earnings and $ 3.0 million of which reduced accumulated other comprehensive income (loss), based on the nature of the tax components.

At September 30, 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 $ 6.2 million through Other Comprehensive Income (Loss).

June 30, 2023 | 10-Q 39

September 30, 2023 | 10-Q 41

CITIZENS, INC .

1 unchanged sentence

(11) 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 six months ended June 30, 2023 and 2022, as indicated below.

Three Months Ended June 30, 2023 2022

The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% for entities domiciled in the United States and 4 % for entities domiciled in Puerto Rico for the three and nine months ended September 30, 2023 and 2022, as indicated below.

Three Months Ended September 30, 2023 2022

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

1 unchanged sentence

Unrealized holding gains (losses) arising during the period $ ( 59,817 ) 8,717 ( 51,100 ) ( 88,382 ) 398 ( 87,984 )

Reclassification adjustment for (gains) losses included in net income 24 ( 5 ) 19 ( 24 ) 5 ( 19 )

Reclassification adjustment for losses (gains) included in net income (loss) 419 ( 88 ) 331 43 ( 9 ) 34

Unrealized holding gains (losses), net ( 59,398 ) 8,629 ( 50,769 ) ( 88,339 ) 389 ( 87,950 )

1 unchanged sentence

Other comprehensive income (loss) $ 656 1,040 1,696 ( 15,125 ) 184 ( 14,941 )

Six Months Ended June 30, 2023 2022

Nine Months Ended September 30, 2023 2022

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

1 unchanged sentence

Unrealized holding gains (losses) arising during the period $ ( 36,811 ) 7,548 ( 29,263 ) ( 340,678 ) 13,790 ( 326,888 )

Reclassification adjustment for (gains) losses included in net income 62 ( 13 ) 49 35 ( 7 ) 28

Reclassification adjustment for losses (gains) included in net income (loss) 481 ( 101 ) 380 78 ( 16 ) 62

Unrealized holding gains (losses), net ( 36,330 ) 7,447 ( 28,883 ) ( 340,600 ) 13,774 ( 326,826 )

3 unchanged sentences

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 six months ended June 30, 2023.

There were no changes related to these relationships during the nine months ended September 30, 2023 except as described in Note 1 .

Financial Statements under Basis of Presentation and Consolidation.

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

1 unchanged sentence

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.

June 30, 2023 | 10-Q 40

September 30, 2023 | 10-Q 42

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