What changed in this filing

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Item 1. Business

2024-03-14 compared with 2023-03-10 · 129 added, 142 removed, 172 unchanged (61% of the section changed)

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Through our domestic insurance subsidiaries, we are licensed to provide insurance benefits to residents in 39 U.S.

states and through our international subsidiaries, we provide insurance benefits to residents in more than 70 different countries.

states and through our international subsidiaries, we provide insurance benefits to residents in over 75 different countries.

We pursue a strategy of offering traditional insurance products in niche markets where we believe we are able to achieve competitive advantages.

We had approximately $1.6 billion of assets at December 31, 2022 and approximately $4.3 billion of insurance in force.

We had approximately $1.7 billion of assets and approximately $4.9 billion of direct insurance in force at December 31, 2023.

We operate in two business segments:

• Life Insurance segment - Internationally, we primarily sell U.S.

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

• Life Insurance - Internationally, we sell U.S.

dollar-denominated ordinary whole life insurance, endowment and critical illness policies to non-U.S.

residents, located principally in Latin America and the Pacific Rim.

Domestically, we sell whole life insurance, credit life, credit disability and critical illness products.

• Home Service Insurance segment - we sell final expense life insurance and property insurance policies to middle- and lower-income households, as well as whole life products with higher allowable face values, in Louisiana, Mississippi and Arkansas.

Domestically, we sell whole life insurance, life insurance with living benefits, critical illness, credit life and disability products throughout the U.S.

• Home Service Insurance - We sell final expense life insurance policies to middle- and lower-income households, as well as whole life products with higher allowable face values, in Louisiana, Mississippi and Arkansas.

Our Principal Brands

LIFE INSURANCE SEGMENT

Internationally, we conduct our Life Insurance segment business through CICA Life Ltd., a Bermuda company ("CICA International") and, beginning January 1, 2023, through CICA Life, A.I., a Puerto Rico company ("CICA PR").

Domestically, we conduct business primarily through CICA Life Insurance Company of America ("CICA").

Internationally, we conduct our Life Insurance segment business through CICA Life, A.I., a Puerto Rico company ("CICA International").

Domestically, we conduct our Life Insurance segment business through CICA Life Insurance Company of America ("CICA Domestic").

HOME SERVICE INSURANCE SEGMENT

We conduct our Home Service Insurance segment through Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC") and Magnolia Guaranty Life Insurance Company ("Magnolia").

We conduct our Home Service Insurance segment through Security Plan Life Insurance Company ("SPLIC") and Magnolia Guaranty Life Insurance Company ("Magnolia").

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

Accordingly, the Company derives its revenues principally from:

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

(1) life insurance premiums earned for insurance coverages provided to insureds in our two operating segments;

and (2) net investment income.

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

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

Pricing adequacy depends on a number of factors, including the ability to project future losses based on historical loss experience adjusted for

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

Insurance applications are reviewed to make two determinations:

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

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

We also seek to manage pricing risk through:

• favorable risk selection and diversification;

• management of claims;

• use of reinsurance;

• careful monitoring of our mortality and morbidity experience;

• management of our expense ratio.

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

known trends, proper evaluation of underwriting risks, the Company’s response to competitors, commission payments for selling our products, expectations about interest rates and regulatory or legal developments, and expense levels.

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

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

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Historically, our insurance companies have only issued a few products and had limited distribution channels.

Since the change-in-control described above, our growth strategy shifted to focusing on sales growth, improved policy retention, roadmap execution, and financial and expense discipline.

We believe that our roadmap execution is key to achieving sales growth, as it helps us expand our product offerings and distribution across our three markets (international life, domestic life and home services) by focusing on three specific sales levers in each market- products, promotions and processes.

Since the change-in-control described above, our growth strategy shifted to focusing on first year sales growth through introduction of new products and new distribution channels, retaining renewal premiums through policy retention efforts, focused execution, and financial and expense discipline.

We believe these factors will lead to growth and profitability.

We believe that our roadmap execution process is key to achieving our strategic goals as it helps us focus on three specific sales levers in each market - products, promotions and processes.

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

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

New products also help our sales force, as they can sell

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additional products to existing customers and offer a broader portfolio of products to entice prospective customers.

We have a robust product development process that focuses on our customer needs by developing new products tailored to our specific markets, working with partners to develop products tailored to their markets, and enhancing existing products.

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

A broader product portfolio also helps attract new distributors.

Our management team meets on a monthly basis to ensure we are bringing the right products to market at the right time.

• Promotions .

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• Processes .

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

We are implementing process improvements and new technologies in order to get products to our customers faster and improve the experience for both our policyholders and our agents.

We also implemented new processes and technologies to help our employees work more effectively and efficiently.

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Status of New and Enhanced Products;

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

• Introduced eight new products or product enhancements (e.g., riders) across our three markets, leading to first year premium revenue growth of 4% in our Life Insurance segment.

• Entered into a white-label distribution partnership with an independent insurance agency specializing in distribution of final expense products and related services, to sell newly developed final expense insurance products through their distribution channel.

• Continued the transformation of our Home Services Insurance segment to become a sales-focused organization, leading to an 18% increase in policies issued in this segment.

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

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

Our Life Insurance segment improved policy retention in 2022 due to these efforts.

• Introduced 3 new products in both English and Spanish under our CICA Domestic brand, leading to first year premium revenue growth of 13% in our Life Insurance segment.

• Obtained an A.M.

Best rating for the first time ever in July 2023.

◦ CICA Domestic is rated as a B++ with a "Very Strong" balance sheet.

We believe this will help us expand our distribution networks and the appeal of our products to consumers.

• Completed the move of our international business from Bermuda to Puerto Rico, which we believe will drive greater demand for our international products.

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

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Until December 31, 2022, our Life Insurance segment primarily operated through CICA Life Ltd.

("CICA International"), a Bermuda company.

("CICA Bermuda"), a Bermuda company.

Upon surveying the market demands and needs of our policyholders, in 2022 we formed a new subsidiary in Puerto Rico, CICA Life, A.I.

CICA PR received a license in September 2022 to issue business as a Puerto Rico international insurer for the Company’s international portion of its Life Insurance segment.

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

Because CICA PR provides our non-U.S.

("CICA International").

CICA International received a license in September 2022 to issue business as a Puerto Rico international insurer for the Company’s international portion of its Life Insurance segment.

Beginning January 1, 2023, all new international policies are issued by CICA International (CICA Life, A.I.) and on August 31, 2023, CICA Bermuda transferred all of its insurance in force business to CICA International and we voluntarily surrendered our insurance license in Bermuda.

Because CICA International provides our non-U.S.

policyholders the ability to purchase policies in a U.S.

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INTERNATIONAL LIFE INSURANCE

Sales and Distribution

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

As of December 31, 2022, we had insurance policies in force in more than 70 foreign countries and receive the majority of our premiums from

As of December 31, 2023, we had insurance policies in force in over 75 foreign countries and receive the majority of our premiums from Colombia, Taiwan, Venezuela, Ecuador and Argentina.

International direct premiums comprised approximately 97% of total direct premiums in the Life Insurance segment and 70% of our total consolidated direct premiums in 2023.

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Colombia, Venezuela, Taiwan, Ecuador and Argentina.

International direct premiums comprised approximately 96% of total direct premiums in the Life Insurance segment and 69% of our total consolidated direct premiums in 2022.

We believe positive attributes of our international insurance business typically include:

• larger face amount policies issued when compared to our U.S.

operations, which results in lower underwriting and administrative costs per dollar of coverage;

• larger face amount policies issued compared to our U.S.

operations, which results in low underwriting and administrative costs per dollar of coverage;

• high persistency and low mortality charges due to our customer demographics;

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

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

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

Their agents also contract directly with us as independent consultants and receive commission compensation directly from us.

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

CICA PR and prior to January 1, 2023, CICA International, issues primarily ordinary whole life insurance and endowment products in U.S.

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

dollar-denominated amounts to non-U.S.

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dollar-denominated cash values that accumulate, beginning in the first policy year, throughout a policyholder’s lifetime;

• protection against devaluation of the policyowners' local currency;

• protection against devaluation of the policyowners' local currency and local hyper-inflation;

• capital investment in a more secure economic environment (i.e., the U.S.);

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Our international products have both living and death benefit features.

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

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board of directors).

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

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

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

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

The CISIP is a direct stock purchase plan available to policyowners, shareholders, our employees and directors, independent consultants, and other potential investors through the Computershare website.

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

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

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

The SIP is a direct stock purchase plan available to policyowners, shareholders, our employees and directors, independent consultants, and other potential investors through the Computershare website.

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

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

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The life insurance business is highly competitive.

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DOMESTIC LIFE INSURANCE

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

Prior to July 1, 2023, our domestic life insurance business operated through CICA Domestic and Citizens National Life Insurance Company ("CNLIC").

CNLIC merged into CICA Domestic on July 1, 2023 in order to streamline and focus our domestic life insurance business in one entity.

In 2023, domestic direct life insurance premiums comprised approximately 3% of total direct premiums in the Life Insurance segment and 2% of our consolidated total direct premiums.

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

In 2022, we began our "white label" program, expanding CICA's state licenses and filing new white label products in multiple states.

In late 2022, we began our "white label" program to expand our distribution, we began expanding CICA Domestic's state licenses, developing new final expense and living benefit products, and filing these new products in multiple states.

HOME SERVICE INSURANCE SEGMENT

We operate our domestic Home Service Insurance segment through SPLIC, Magnolia and SPFIC.

SPLIC and Magnolia primarily issue final expense life insurance products to middle- and lower-income individuals, primarily in Louisiana, Mississippi and Arkansas.

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

In 2020 and 2021, we transformed this segment by converting a large portion of our sales force to independent agents, reducing layers of management and introducing new products for the first time in almost 35 years.

This transformation led to increased sales and decreased operational expenses in 2022.

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

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

In 2021, we expanded our product offering to Arkansas and in 2022, we discontinued selling coverage in high-risk parishes in Louisiana in part to mitigate the risk of hurricane-related claims that have impacted our business in 2021.

We operate our domestic Home Service Insurance segment through SPLIC and Magnolia and prior to June 30, 2023, Security Plan Fire Insurance Company ("SPFIC").

SPLIC issues final expense life insurance and critical illness products to middle- and lower-income individuals, primarily through a home service distribution model based in Louisiana.

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

SPFIC is a limited liability casualty company that prior to June 30, 2023, sold small face value property insurance policies covering dwelling and contents, primarily in Louisiana.

We ceased operations on June 30, 2023 as explained in more detail in Part II, Item 7, Managements' Discussion and Analysis, Overview section.

In 2023, our Home Service Insurance segment comprised 27% of our total consolidated direct premiums.

Products and Competition

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

funeral and burial costs).

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

The average life insurance policy face amount issued in 2023 was approximately $12,900 per policy.

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

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

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

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

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

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

To a much lesser extent, our Home Service Insurance segment sold property insurance policies covering dwellings and content until it ceased operations on June 30, 2023.

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

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

We seek to compete by delivering exceptional personal service to our customers, enhancing our

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management team and upgrading our agent field force.

We intend to continue premium growth within this segment by focusing on direct independent agent-to-consumer sales.

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

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We participate in reinsurance activities in order to minimize exposure to significant risks, limit losses, and provide additional capacity for future growth.

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

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

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

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

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

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

pay) the first $1 million in claims, our first layer of reinsurance provides 100% coverage of the next $1 million in claims, and our second layer of reinsurance provides 85% coverage in excess of $2 million up to $11 million in claims for each loss occurrence.

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

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

The amounts recoverable from reinsurers were $4.6 million as of December 31, 2022.

The amount recoverable from reinsurers was $4.0 million as of December 31, 2023.

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

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

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OTHER NON-INSURANCE ENTERPRISES

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

For the international portion of our Life Insurance segment, operations including underwriting, policy issuance, claims processing, accounting and reporting related to certain international policies are currently conducted in Bermuda.

We have a proprietary single, centrally-controlled, mainframe-based policy administrative system ("PAS") that we use for all of our insurance companies.

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• business-to-business solutions.

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

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

federal laws, and for CICA International and CICA PR, by Bermuda and Puerto Rico, respectively.

federal laws, and for CICA International, by Puerto Rico.

REGULATION OF OUR INTERNATIONAL BUSINESS

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

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

CICA International is registered as a Class E insurer in Bermuda, which is the license class for long-term insurers and reinsurers with total assets of more than $500 million.

CICA International is not licensed to conduct any business other than life insurance business and due to the type of license we have, we may not insure Bermuda domestic risks or risks of persons of, in or based in Bermuda and thus we do not offer insurance products to residents of Bermuda .

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

The Insurance Act requires us to, among other things:

file annual statutory financial returns, annual U.S.

GAAP financial statements, an annual capital and solvency return, and annual Common Reporting Standard reports;

deliver a declaration of compliance;

comply with minimum enhanced capital requirements, minimum solvency margins, and the BMA’s Insurance Code of Conduct;

prepare an annual Financial Condition Report providing details

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of measures governing our business operations, corporate governance framework, solvency and financial performance;

prepare an assessment of our own risk and solvency requirements (referred to as a Commercial Insurer’s Solvency Self-Assessment);

establish and maintain a head and principal office in Bermuda;

and appoint an independent auditor and an actuary approved by the BMA.

Additionally, the Insurance Act limits the dividends and distributions that CICA International may make to Citizens, its parent company.

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

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

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

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

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

CICA PR, our Puerto Rico domiciled subsidiary, is regulated by the Puerto Rico Office of the Insurance Commissioner (“OIC”) and is licensed pursuant to Chapter 61 of the Puerto Rico Insurance Code (the "Insurance Code").

CICA International, our Puerto Rico domiciled subsidiary, is regulated by the Puerto Rico Office of the Insurance Commissioner (“OIC”) and is licensed pursuant to the Puerto Rico Insurance Code (the "Insurance Code").

Although Puerto Rico is a U.S.

territory, it has its own tax code and own insurance code, including a provision under its Insurance Code (Chapter 61) that allows CICA PR to be established as an "international insurer" and thus export insurance to international markets.

Like in Bermuda, we may not insure risks of residents of Puerto Rico with this type of license and we do not issue policies to U.S.

risks through CICA PR.

territory, it has its own tax code and own insurance code, including a provision under its Insurance Code that allows CICA International to be established as an "international insurer" and thus export insurance to international markets.

We may not insure risks of residents of Puerto Rico with this type of license and we do not issue policies to U.S.

risks through CICA International.

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

The Insurance Code requires us to file annual U.S.

GAAP financial statements with the OIC that include schedules providing information regarding premiums written and reinsurance assumed and ceded, as well as an annual actuarial certification.

In addition to compliance with the Insurance Code, CICA PR must comply with other laws and regulations of Puerto Rico, most of which apply to our domestic subsidiaries as well, including the U.S.

In addition to compliance with the Insurance Code, CICA International must comply with other laws and regulations of Puerto Rico, most of which apply to our domestic subsidiaries as well, including the U.S.

Bank Secrecy Act and other anti-money laundering laws and regulations of the United States.

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

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

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

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

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

We have undertaken a comprehensive compliance review of risks associated with the potential application of foreign laws to our sales of insurance policies in foreign countries.

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Risk Factors .

In the United States, insurance is primarily regulated at the state level.

Our primary regulator in the U.S.

is the Colorado Division of Insurance, as both Citizens and CICA Domestic are Colorado companies.

We are also regulated by the departments of insurance in Louisiana (SPLIC and SPFIC) and Mississippi (Magnolia), as well as each of the 39 states and the District of Columbia in which we conduct insurance business.

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

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

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

and the business conduct of insurers,

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

They are also regulated in each of the 32 states and the District of Columbia in which we conduct insurance business.

Additionally, as Citizens is a Colorado-based company, the Colorado Division of Insurance has supervisory authority over the holding company and all of its subsidiaries.

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

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

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

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

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

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

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

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

including marketing and sales practices and claims handling.

In addition, statutes and regulations require the licensing of insurers and agents, the approval of most types of policy forms and related materials (such as advertising) and the approval of rates for certain types of insurance products.

In order for insurance regulators to monitor solvency, insurance companies are subject to risk-based capital ("RBC") requirements.

The RBC requirement is a statutory minimum level of capital that is based on two factors - (1) the insurance company's size, and (2) the inherent riskiness of its financial assets and operations, i.e .

a company must hold capital in proportion to its risk.

The RBC requirement thus determines a minimum level of capital required for an insurer to support its operations and write coverage.

The purpose of the RBC requirements is to identify weakly capitalized companies, which facilitates regulatory actions to ensure that the policyholders will receive the benefits promised.

Regulators have the legal authority to take preventive and corrective measures depending on the capital deficiency indicated by the RBC result.

If a company's ratio of total adjusted statutory capital to control level risk-based capital is above 200%, no regulatory intervention is needed.

If it falls below 200%, interventions range from submission of action plans to a regulatory takeover of the management of the company, which occurs if the ratio is below 70%.

We have committed to the Colorado Division of Insurance that we will keep CICA Domestic's RBC ratio at or above 350%.

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

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

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

In order to sell products in any state, we first have to become licensed in that state.

States have various rules for obtaining a license, including capital deposit requirements and seasoning requirements, among others.

Once we are licensed in a state, most states require us to file our products for their approval before being able to sell the products.

The application and product forms must comply with state insurance laws regarding policy requirements.

Once an application or product is approved in that state, we must use the approved forms to sell our products.

We have to file our domestic forms in both English and Spanish for separate approvals.

We are also subject to laws related to our advertising and may have to file certain marketing documents with state regulators as well.

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

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

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

While primarily regulated at the state level, our domestic business is subject to federal laws and regulations, such as the USA Patriot Act of 2001, the Foreign Corrupt Practices Act, the Gramm-Leach-Bliley Act of 1999, the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Tax Cuts and Jobs Act, are examples of U.S.

laws that affect our business.

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

Bank Secrecy Act with respect to money laundering, as well as federal regulations regarding

Because we maintain sensitive data regarding our customers, we are also subject to additional state regulations in states where we do business, such as data security and state privacy laws.

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CITIZENS, INC.

privacy and confidentiality.

While primarily regulated at the state level, our domestic business is subject to various federal laws and regulations.

Some of the primary federal laws include:

• USA Patriot Act and the Bank Secrecy Act, which require us to institute certain measures to detect and prevent money laundering;

• Foreign Corrupt Practices Act, which makes it unlawful to bribe foreign officials for the purpose of obtaining or retaining business;

• Gramm-Leach-Bliley Act, which requires us to explain our information-sharing practices to our customers and to safeguard sensitive data;

• Securities Act, Securities Exchange Act and Sarbanes-Oxley Act, which establish various requirements for Citizens, as a public company, to comply with, including registration of our Class A common stock, reporting and disclosure requirements, and public company audit and internal control requirements;

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

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

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

As of December 31, 2022, we had 224 employees.

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

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

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CITIZENS, INC.

As of December 31, 2023, we had 232 employees.

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

Gender Composition

Racial/Ethnic Composition

Generational Composition

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

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

We do not utilize captive employee agents to distribute our products and thus contract with almost 1,000 actively producing independent consultants internationally and almost 600 independent agencies and agents domestically to sell and service our insurance products.

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

We do not utilize captive employee agents to distribute our products and thus contract with over 1,000 actively producing independent consultants internationally and over 2,000 independent agencies and agents domestically to sell and service our insurance products.

Our international independent consultants generally reflect the demographics of the areas in which they sell their products.

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

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CITIZENS, INC.

Compensation and Benefits

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

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

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

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

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

In addition to cash and equity compensation, we also offer standard employee benefits such as life and health (medical, dental and vision) insurance, 401(k) and HSA contributions, life insurance, long-term and short-term disability, including paid parental leave, and a generous PTO plan.

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

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

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

We believe that our commission structure is attractive and competitive in the markets in which we do business.

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

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

What changed 10-K

Item 1. Business