What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-14 compared with 2023-03-10 · 911 added, 426 removed, 1406 unchanged (49% of the section changed)

7 unchanged sentences

The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

December 31, 2022 | 10-K 56

CITIZENS, INC.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

2 unchanged sentences

Based on this evaluation, management concluded that our internal control over financial reporting as of December 31, 2023 was effective.

Grant Thornton LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over financial reporting as of December 31, 2022.

Their attestation report is included in Item 9A(c) of this Annual Report.

December 31, 2023 | 10-K 55

CITIZENS, INC.

Grant Thornton LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over financial reporting as of December 31, 2023.

Their attestation report is included in Item 9A(c) of this Annual Report.

32 unchanged sentences

OTHER INFORMATION

During the three months ended December 31, 2023, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Citizens, Inc.

securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.”

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

29 unchanged sentences

Index to Consolidated Financial Statements and Financial Statement Schedules Page

Reports of Independent Registered Public Accounting Firm - Auditor Name:

Grant Thornton LLP Auditor Firm ID:

248 Auditor Location:

Consolidated Balance Sheets at December 31, 2022 and 2021

Consolidated Statements of Operations and Comprehensive Income (Loss) - years ended December 31, 2022 and 2021

Consolidated Statements of Stockholders' Equity - years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows - years ended December 31, 2022 and 2021

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Financial Statements at December 31, 2023 and 2022 and for the Years Ended December 31, 2023, 2022 and 2021:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Summary of Significant Accounting

Fair Value Measurements

Deferred Policy Acquisition Costs & Cost of Insurance Acquired

Policyholders ' Liabilities

Policy Claim Liabilit y and Short Duration Contr acts

Commitment s and Contingencies

Stockholders' Equity and Restrictions

Segment and Other Operating In formation

Other Comprehensive Income (Loss)

Stock Compensation

Benefit Plans

Related Party Transactions

Quarterly Fi nancial Informa t i on (Unaudited)

Subsequent Events

Financial Statement Schedules at December 31, 2023 and 2022 and for the Years Ended December 31, 2023, 2022 and 2021:

Schedule II – Condensed Financial Information of Registrant

10 unchanged sentences

We have audited the accompanying consolidated balance sheets of Citizens, Inc.

(a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

(a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 14, 2024 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for the liability for future policy benefits, deferred policy acquisition costs, and cost of insurance acquired for all periods presented due to the adoption of Accounting Standard Update No.

2018-12, Financial Services – Insurance (Topic 944) Targeted Improvements to the Accounting for Long-Duration Contracts.

Basis for opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it they relate.

Development of Assumptions used in the Future Policy Benefit Reserves Adequacy Testing

As described further in Notes 1 and 4 to the financial statements, the Company estimates future policy benefit reserves for life insurance contracts which is the liability for the payment of policy benefits it expects to pay in the future.

Management’s estimate of future policy benefit reserves for life insurance was $ 1.31 billion as of December 31, 2022.

Management tests this liability for adequacy.

The adequacy testing uses key actuarial assumptions which are updated annually and include mortality, persistency, and investment experience.

These assumptions are based upon the Company’s experience, modified as necessary to reflect anticipated trends and to

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

December 31, 2023 | 10-K 60

CITIZENS, INC.

include provisions for possible adverse deviations.

We identified the development of assumptions used in the future policy benefit reserves adequacy testing as a critical audit matter.

The principal consideration for our determination that the development of assumptions used in the future policy benefit reserves adequacy testing is a critical audit matter is that the development of these assumptions requires management to make significant estimates regarding mortality, persistency, and investment experience based on historical experience and future expectations, which could result in the recording of a premium deficiency.

As such, auditing the development of such assumptions involved subjective and complex auditor judgment and the involvement of an actuarial specialist.

Our audit procedures related to the development of assumptions used in the future policy benefit reserves adequacy testing included the following, among others.

• We tested the design and operating effectiveness of management’s review controls over the mortality, persistency, and investment experience assumption development and approval processes.

• We utilized an actuarial specialist in evaluating management’s methodologies and reasonableness of the assumptions of mortality, persistency, and investment experience, that were used to reperform management’s testing the adequacy of the future policy benefit reserves.

Assumptions used in the Estimation of the Liability For Future Policy Benefit Reserves - Life Insurance

As described further in Notes 1 and 5 to the financial statements, the Company estimates a liability for future policy benefits which is calculated as the present value of estimated future policy benefits to be paid to or on behalf of policyholders of life insurance contracts, less the present value of estimated future net premiums to be collected from policyholders on those same life insurance contracts.

Management’s estimate of the liability for future policy benefit reserves for life insurance was $ 1.23 billion as of December 31, 2023.

The liability is estimated using actuarial assumptions including mortality and lapse.

Changes to the mortality and lapse assumptions impact both the timing and amount of estimated future policy payments to be paid and future net premiums to be received on life insurance contracts.

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

We identified the updating of the mortality and lapse assumptions used in the estimation of the liability for future policy benefit reserves – life insurance as a critical audit matter.

The principal consideration for our determination that the updating of the mortality and lapse assumptions used in the estimation of the liability for future policy benefit reserves for life insurance contracts is a critical audit matter is that the updating of these assumptions requires management to make significant estimates regarding mortality and lapse based on historical experience, industry data and other factors.

As such, auditing the updating of such assumptions involved subjective and complex auditor judgment and the involvement of an actuarial specialist.

Our audit procedures related to the updating of the mortality and lapse assumptions used in the estimation of the liability for future policy benefit reserves - life insurance included the following, among others.

• We tested the design and operating effectiveness of management’s review controls over the mortality and lapse assumption updating and approval processes.

• We utilized an actuarial specialist in evaluating management’s methodologies and reasonableness of the assumptions of mortality and lapse, that were used in management’s calculation of future policy benefit reserves on life insurance contracts.

/s/ GRANT THORNTON LLP

23 unchanged sentences

Federal income tax receivable 1,546 601

Deferred tax asset, net 2,414 —

Property and equipment, net 11,809 12,926

14 unchanged sentences

Life insurance $ 1,229,253 1,198,647

Accident and health insurance 889 767

Total future policy benefit reserves 1,230,142 1,199,414

Policyholders' funds:

Annuities 133,216 121,422

Accident and health 767 784

Dividend accumulations 44,960 41,663

2 unchanged sentences

Other policyholders' funds 7,363 7,501

Total policyholders' funds 224,622 216,854

Total policy liabilities 1,454,764 1,416,268

9 unchanged sentences

Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding as of December 31, 2023 and 2022, including shares in treasury of 1,001,714 as of December 31, 2023 and 2022

Accumulated deficit ( 52,203 ) ( 45,565 )

Retained earnings

42,150 16,309

Accumulated other comprehensive income (loss)

Net unrealized gains (losses) on fixed maturity securities, net of tax ( 195,279 ) 117,492

( 118,155 ) ( 137,044 )

Treasury stock, at cost ( 23,725 ) ( 22,806 )

9 unchanged sentences

(In thousands, except share amounts)

2023 2022 2021

Life insurance $ 164,609 167,586 169,801

8 unchanged sentences

Claims and surrenders 135,993 119,935 119,735

Increase in future policy benefit reserves 29,640 36,444

Increase (decrease) in future policy benefit reserves ( 5,624 ) 4,804 9,773

Policyholder liability remeasurement (gain) loss 4,460 2,884 1,434

Policyholders' dividends 5,542 6,013 6,180

21 unchanged sentences

Unrealized gains (losses) on fixed maturity securities, net 51,650 ( 328,569 ) ( 41,366 )

Income tax expense (benefit) on unrealized gains (losses) on fixed maturity securities ( 17,994 ) 5,465

Change in current discount rate for liability for future policy benefits ( 34,790 ) 337,776 92,396

Income tax expense (benefit) on other comprehensive income items ( 2,029 ) 7,262 1,449

Other comprehensive income (loss) 18,889 1,945 49,581

6 unchanged sentences

Consolidated Statements of Stockholders' Equity

Common Stock Accumulated

Common Stock Retained Earnings

Deficit) Accumulated

Comprehensive

income (loss) Treasury

Stock-holders'

Income (Loss)

Stockholders'

(In thousands) Class A Class B

Balance at December 31, 2020 $ 262,869 3,184 ( 82,352 ) 128,255 ( 11,011 ) 300,945

Accounting Standards adopted January 1, 2021 (1)

— — ( 52 ) ( 316,825 ) — ( 316,877 )

Comprehensive income (loss):

Net income (loss) — — 72,706 — — 72,706

Unrealized gains (losses) on fixed maturity securities, net of tax — — — ( 10,763 ) — ( 10,763 )

Other comprehensive income (loss) — — — 49,581 — 49,581

Total comprehensive income (loss) — — 72,706 49,581 — 122,287

4 unchanged sentences

Net income (loss) — — 26,007 — — 26,007

Unrealized gains (losses) on fixed maturity securities, net of tax — — — ( 312,771 ) — ( 312,771 )

Other comprehensive income (loss) — — — 1,945 — 1,945

Total comprehensive income (loss) — — 26,007 1,945 — 27,952

Repurchase of treasury stock — — — — ( 2,705 ) ( 2,705 )

Acquisition of treasury stock — — — — ( 2,705 ) ( 2,705 )

Issuance of common stock 2,244 — — — — 2,244

1 unchanged sentence

Balance at December 31, 2022 268,147 3,184 16,309 ( 137,044 ) ( 22,806 ) 127,790

Comprehensive income (loss):

Net income (loss) — — 24,437 — — 24,437

Other comprehensive income (loss) — — — 18,889 — 18,889

Total comprehensive income (loss) — — 24,437 18,889 — 43,326

Acquisition of treasury stock

— — — — ( 919 ) ( 919 )

Stock-based compensation 528 — — — — 528

— — 1,404 — — 1,404

Balance at December 31, 2023 $ 268,675 3,184 42,150 ( 118,155 ) ( 23,725 ) 172,129

(1) See Note 1 and (2) see Note 11 in the Notes to Consolidated Financial Statements for more details.

See accompanying Notes to Consolidated Financial Statements.

6 unchanged sentences

(In thousands)

2023 2022 2021

Cash Flows from Operating Activities:

30 unchanged sentences

Sales of property and equipment — — 14

Maturities of short-term investments 750 — —

Sales of short-term investments

Purchases of short-term investments — ( 1,250 ) —

8 unchanged sentences

(In thousands)

2023 2022 2021

Cash Flows from Financing Activities:

4 unchanged sentences

Other ( 60 ) ( 118 ) ( 456 )

Net cash provided by (used in) financing activities ( 499 ) ( 6,215 )

Net decrease in cash and cash equivalents ( 4,321 ) ( 6,837 )

Net cash used in financing activities ( 3,536 ) ( 499 ) ( 6,215 )

Net increase (decrease) in cash and cash equivalents 4,024 ( 4,321 ) ( 6,837 )

Cash and cash equivalents at beginning of year 22,973 27,294 34,131

1 unchanged sentence

SUPPLEMENTAL DISCLOSURE OF OPERATING ACTIVITIES:

Cash paid for income taxes during 2022 and 2021 were $ 0.3 million and $ 1.2 million, respectively.

Cash paid for income taxes during 2023, 2022 and 2021 was $ 1.8 million, $ 0.3 million and $ 1.2 million, respectively.

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During 2022 and 2021, various fixed maturity issuers exchanged securities with book values of $ 6.9 million and $ 12.1 million, respectively, for securities of equal value.

The Company recognized right-of-use assets of $ 0.4 million in exchange for new operating lease liabilities during 2022 and none during 2021.

During 2023, 2022 and 2021, various fixed maturity issuers exchanged securities with book values of $ 5.4 million, $ 6.9 million and $ 12.1 million, respectively, for securities of equal value.

The Company recognized right-of-use assets of $ 0.1 million and $ 0.4 million in exchange for new operating lease liabilities during 2023 and 2022, respectively, and none during 2021.

See accompanying Notes to Consolidated Financial Statements.

8 unchanged sentences

The consolidated financial statements include the accounts and operations of Citizens, Inc.

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

("CICA International"), CICA Life, A.I.

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

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

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

("CTI"), Nexo Global Services LLC, a Puerto Rico holding company ("Nexo") and Nexo Enrollment Services LLC, a Puerto Rico service company ("NES").

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

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

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

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

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

Our Life Insurance segment operates through CICA International and CICA Domestic.

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

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

These companies provide U.S.

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

dollar-denominated amounts sold to non-U.S.

Effective January 1, 2023, all new policies are issued 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 increasing or decreasing coverage and annuity benefits to enhance accumulations.

Our domestic life insurance business operates through CICA and CNLIC.

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

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

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

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

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

CICA Domestic issues ordinary whole life, final expense, life products with living benefits, critical illness and 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 Domestic on July 1, 2023.

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

Our products in this segment consist primarily of small face amount ordinary whole life, industrial life and pre-need policies, which are designed to fund final expenses for the insured, primarily consisting of funeral and burial costs as well as critical illness and property insurance policies, which cover dwelling and contents.

As of June 30, 2023, the Company ceased all operations for SPFIC.

CTI provides data processing systems and services to the Company.

4 unchanged sentences

Fixed maturity securities are classified as HTM and carried at amortized cost when management has the positive intent and the Company has the ability to hold the securities to maturity.

Securities not classified as HTM are classified as AFS and are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income and are not reported in earnings until realized.

Securities classified as AFS are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income (loss) and are not reported in earnings until realized.

Our fixed maturity securities consist primarily of bonds classified as AFS.

1 unchanged sentence

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

Unrealized gains (losses) of fixed maturity securities held as AFS are shown as a separate component of stockholders' equity, net of tax, and is a separate component of comprehensive income (loss).

Unrealized gains (losses) of fixed maturity securities held as AFS are shown as a separate component of stockholders' equity, net of tax, and is a separate component of other comprehensive income (loss).

The Company assesses AFS fixed maturity securities in an unrealized loss position for expected credit losses.

First, we assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost.

If either of the criteria is met, the security's amortized cost is written down to its fair value.

For AFS fixed maturity securities that do not meet either criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency,

First, we assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security

December 31, 2023 | 10-K 68

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and adverse conditions specifically related to the security, among other factors.

before recovery of its amortized cost.

If either of the criteria is met, the security's amortized cost is written down to its fair value.

For AFS fixed maturity securities that do not meet either criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If management deems a credit loss has occurred, the impairment is recorded through an allowance for credit losses rather than as a write-down.

1 unchanged sentence

Any impairment that has not been recorded through an allowance for credit losses is recognized in accumulated other comprehensive income (loss) on our consolidated balance sheets.

The Company made a policy election to exclude accrued interest from the amortized cost of AFS fixed maturity securities and report accrued interest separately in accrued investment income in the consolidated balance sheets.

AFS fixed maturity securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due.

21 unchanged sentences

Cash equivalents consists of securities whose duration does not exceed 90 days at the date of acquisition.

December 31, 2023 | 10-K 69

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REINSURANCE RECOVERABLE

2 unchanged sentences

Reinsurance premiums, benefits and expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts.

The cost of reinsurance

December 31, 2022 | 10-K 71

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

related to long duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies.

The cost of reinsurance related to long duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies.

The cost of reinsurance related to short duration contracts is accounted for over the coverage period.

1 unchanged sentence

DEFERRED POLICY ACQUISITION COSTS

Policy acquisition costs consist of commissions and policy issuance, underwriting and agent convention expenses that are directly related to and vary with the successful production of new business and are deferred.

These deferred amounts, referred to as deferred policy acquisition costs ("DAC"), are recorded as an asset on the consolidated balance sheets and amortized to income in a systematic manner, based on related contract revenues or gross profits as appropriate.

Traditional life insurance and accident and health insurance acquisition costs are amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing future policy benefit liabilities.

For universal life type contracts and investment contracts that include significant surrender charges or that yield significant revenues from sources other than the investment contract holders' funds, the deferred contract acquisition cost amortization is matched to the recognition of gross profit.

The effect on the DAC asset that would result from realization of unrealized gains or losses is recognized with an offset to accumulated other comprehensive income (loss) in consolidated stockholders' equity.

If an internal replacement of insurance or investment contract modification substantially changes a contract as defined in current accounting guidance, the DAC is written off immediately through income (loss) and any new deferrable costs associated with the new replacement are deferred.

If a contract modification does not substantially change the contract, the DAC amortization on the original contract will continue and any acquisition costs associated with the related modification are immediately expensed.

The ending DAC asset balance is calculated at a seriatim level for policies in force at the end of each reporting period based on the remaining unamortized asset.

The assumptions used to calculate DAC are set when a policy is issued and do not change with changes in actual experience, unless a loss recognition event occurs.

The seriatim method ensures that policies lapsed or surrendered during the reporting period are no longer included in the DAC calculation.

This method limits the amount of deferred costs to its estimated realizable value, provided actual experience is comparable to that contemplated in the locked-in assumptions.

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

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

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

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

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

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

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

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

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

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

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

Inherent in the capitalization and amortization of DAC are certain management judgments about what acquisition costs are deferred, the ending asset balance and the annual amortization.

Approximately 95 % of our capitalized DAC is attributed to first year and renewal excess commissions.

The remaining 5 % is attributed to costs that vary with and are directly related to the successful acquisition of new insurance business.

Approximately 93 % of our capitalized DAC are attributed to first year and renewal excess commissions.

The remaining 7 % are attributed to other costs that vary with and are directly related to the successful acquisition of new insurance business.

Those costs generally include costs related to the production, underwriting and issuance of new business.

DAC is subject to recoverability testing at the time of policy issuance and loss recognition testing on an annual basis, or when an event occurs that might require loss recognition testing.

If loss recognition or impairment is necessary, DAC would be written off to the extent that anticipated future premiums and investment income is insufficient to cover expected future policy benefits and expenses.

Loss recognition testing that considers, among other things, actual experience and projected future experience calculates the available premium (gross premium less the benefit and expense portion of premium) for the next 50 years.

DAC is evaluated for recoverability using best estimate assumptions.

Based on the results of DAC recoverability testing and loss recognition testing, management believes that our DAC as of the years ended December 31, 2022 and 2021 limits the amount of deferred costs to its estimated recoverable value.

DAC related to investment-oriented products is also adjusted to reflect the effect of unrealized gains or losses on AFS fixed maturity securities with related changes recognized through other comprehensive income (shadow DAC).

The adjustment is made at each balance sheet date, as if the securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields.

Similarly, for long-duration traditional insurance contracts, if the assets supporting the liabilities are in a net unrealized gain position at the balance sheet date, loss recognition testing assumptions are updated to exclude such gains from future cash flows by reflecting the impact of reinvestment rates on future yields.

If a future loss is anticipated under this basis, any additional shortfall indicated by loss recognition tests is recognized as a reduction in accumulated other comprehensive income (shadow loss recognition).

Similar to other loss recognition on long-duration insurance contracts, such shortfall is first reflected as

December 31, 2022 | 10-K 72

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

a reduction in DAC and secondly as an increase in liabilities for future policy benefits.

The change in these adjustments, net of tax, is included with the change in net gains (losses) on available-for-sale fixed maturity securities that is credited or charged directly to other comprehensive income (loss).

The components of DAC from year to year are summarized as follows:

Years ended December 31,

(In thousands)

Balance at beginning of period $ 140,380 104,913

Capitalization of deferred policy acquisition costs 24,899 22,740

Amortization of deferred policy acquisition costs ( 26,529 ) ( 24,952 )

Effects of unrealized (gains) losses 1,417 37,679

Balance at end of period $ 140,167 140,380

We converted to a new actuarial valuation software solution that provided enhanced modeling capabilities for the ordinary whole life policies of CNLIC as of April 1, 2021.

The impact of this system conversion, which impacted the Life Insurance segment, was an increase to pretax income of $ 0.7 million consisting of a reduced increase in future policy benefit reserves of $ 0.8 million and increased amortization of deferred policy acquisition costs of $ 0.1 million, reflecting changes in actuarial valuation estimates associated with the conversion.

Amortization of DAC is included in the consolidated statements of operations and comprehensive income (loss).

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

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

COST OF INSURANCE ACQUIRED

Cost of insurance acquired ("COIA") is established when we purchase a block of insurance.

COIA is amortized over the emerging profit of the related policies using the same assumptions as were used in computing liabilities for future policy benefits.

Inherent in the amortization of COIA are certain management judgments used in the estimation of the ending asset balance and the annual amortization.

The key assumptions used in management's estimates are based upon interest, mortality and lapses at the time of purchase.

The Company recognizes an intangible asset that arises in the application of U.S.

GAAP purchase accounting as the difference between the reported value and the fair value of insurance contract liabilities, or comparable amounts determined in purchased insurance business combinations.

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

A recoverability test that considers, among other things, actual experience and projected future experience is performed at least annually.

2 unchanged sentences

This belief is based upon the analysis performed on estimated future results of the block and our annual recoverability testing.

COIA relative to purchased blocks of insurance is summarized as follows:

Years ended December 31,

(In thousands)

Balance at beginning of period $ 10,611 11,541

Amortization ( 974 ) ( 1,206 )

Change in effects of unrealized (gains) losses on COIA 623 276

Balance at end of period $ 10,260 10,611

December 31, 2023 | 10-K 70

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimated amortization of COIA in each of the next five years and thereafter is as follows.

Actual future amortization will differ from these estimates due to variances from estimated future withdrawal assumptions.

(In thousands) Amount

Cost of insurance acquired:

Thereafter 5,509

Effects of unrealized (gains) losses on COIA 415

Total cost of insurance acquired $ 10,260

The value of COIA resulting from our various acquisitions was determined based on the present value of future profits discounted at annual rates ranging from 3.7 % to 8.5 %.

9 unchanged sentences

We elected to apply the quantitative assessment for the goodwill in our reporting units within the Life Insurance segment as of December 31, 2021.

We recorded an impairment of $ 12.6 million in 2021 in our Life Insurance segment caused by increases in our carrying value of the segment due to recognition of an $ 43.8 million uncertain tax position in the fourth quarter of 2021, following the expiration of the statute of limitations on the tax year ended December 31, 2017.

This impairment is recorded on the Consolidated Statement of Operations.

The following is a summary of changes in goodwill in our Life Insurance segment:

Years ended December 31,

(In thousands)

Balance at beginning of period $ — 12,624

Impairment — 12,624

Balance at end of period $ — —

December 31, 2022 | 10-K 74

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We recorded an impairment of $ 12.6 million in 2021 in our Life Insurance segment caused by increases in our carrying value of the segment due to recognition of a $ 43.8 million uncertain tax position in the fourth quarter of 2021, following the expiration of the statute of limitations on the tax year ended December 31, 2017.

This impairment is recorded on the consolidated statements of operations and comprehensive income (loss).

The Company has no remaining goodwill as of December 31, 2021.

PROPERTY AND EQUIPMENT

8 unchanged sentences

Real estate and equipment leases (See Note 8 )

10,116 10,827

Total property and equipment 22,242 22,848

Accumulated depreciation ( 10,433 ) ( 9,922 )

Total property and equipment $ 12,926 14,074

The Company has several lease agreements for real estate and equipment, such as its corporate home office and several district office locations related to our Home Service Insurance segment.

Property and equipment, net

$ 11,809 12,926

The Company has several lease agreements for real estate and equipment, such as its corporate home office, Puerto Rico service center and several district office locations related to our Home Service Insurance segment.

The Company recognizes these lease agreements on the consolidated balance sheets as a right-of-use asset and a corresponding lease liability.

1 unchanged sentence

FUTURE POLICY BENEFITS AND EXPENSES

Future policy benefit reserves for traditional life insurance are established based on methods and underlying assumptions in accordance with U.S.

GAAP and applicable actuarial standards.

Assumptions as to investment yields, expenses, mortality and lapses are based upon our experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviations.

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

The liability is estimated using current assumptions that include

December 31, 2023 | 10-K 71

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

discount rate, mortality and lapses.

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

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

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

Both reporting cohorts include whole life and endowment policies.

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

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

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

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

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

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

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

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

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

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

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

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

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

The accrued account balance for non-traditional life insurance and investment contracts is computed as deposits net of withdrawals made by the contract holder, plus amounts credited based on contract specifications, less contract fees and charges assessed, plus any additional interest.

9 unchanged sentences

The cost of insurance is included in the premium when collected and interest is credited annually to deposit accounts.

The development of liabilities for future policy benefits requires management to make estimates and assumptions regarding mortality, persistency, expense, and investment experience based on historical experience and future expectations of those assumptions.

Actual results could differ materially from estimates.

An additional provision is made on most products to allow for possible adverse deviation from the assumptions assumed.

We monitor actual experience and revise assumptions as necessary.

DEFERRED PROFIT LIABILITY

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

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

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

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

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

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

The DPL is updated each quarter based on the current period's actual experience relative to

December 31, 2023 | 10-K 72

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

expected experience with the changes recorded within the increase (decrease) in future policy benefit reserves in the consolidated statements of operations and comprehensive income (loss).

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

PARTICIPATING POLICIES

At December 31, 2022 and 2021, participating business approximated 55 % and 59 % of direct life insurance in force, respectively.

Future policy benefits on participating policies are estimated based on net level premium reserves for death and endowment policy benefits with interest rates ranging from 2.5 % to 9.0 %, and the cash surrender values described in such contracts.

The scaling rate used for the 2022 portfolio ranged between 2.54 % for 1 year and then going up to 2.99 % over 20 years and remaining there for the duration.

Earnings and dividends on participating policies are allocated based on policies in force.

At December 31, 2023 and 2022, participating business approximated 51 % and 55 %, respectively, of direct life insurance in force.

Policyholder dividends are determined based on the discretion of the board of directors of the policy issuing subsidiary.

16 unchanged sentences

Benefits and expenses are associated with earned premiums resulting in the recognition of profits over the estimated lives of the contracts.

This matching is accomplished by means of a provision for future policy benefits and the capitalization and amortization of deferred policy acquisition costs.

This matching is accomplished by means of a provision for future policy benefits and the capitalization and amortization of deferred policy acquisition costs and amortization of deferred profit liability for limited pay plans.

Annuity policies, primarily flexible premium fixed annuity products, are accounted for in a manner consistent with accounting for interest bearing financial instruments.

1 unchanged sentence

The annuity products issued do not include fees or other such charges.

There is also a block of annuity products accounted for as FAS97 insurance products.

Reserves are set up for surrenders and death benefits.

Acquisition costs and premium loads are capitalized and amortized.

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

1 unchanged sentence

A deferred tax asset is recorded only if a determination is made that it is more-likely-than-not that the tax treatment on which the deferred tax asset depends will be sustained in the event of an audit.

These determinations inherently

These determinations inherently involve management's judgment.

In addition, the Company must record a tax valuation allowance with respect to deferred tax assets if it is more-likely-than-not that the tax benefit will not be realized.

December 31, 2023 | 10-K 73

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

involve management's judgment.

In addition, the Company must record a tax valuation allowance with respect to deferred tax assets if it is more-likely-than-not that the tax benefit will not be realized.

The Company releases stranded tax effects in accumulated other comprehensive income on an aggregate portfolio basis.

EARNINGS PER SHARE

Basic earnings per share are computed by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during each period.

Basic earnings per share are computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during each period.

Diluted earnings per share are computed under the if-converted method for convertible securities and the treasury stock method for warrants, giving effect to all potential dilutive common stock, including options, warrants and convertible/redeemable preferred stock.

The basic and diluted earnings per share of Class B common stock are one half the earnings per share of the Class A common stock.

We hold 100% of our Class B common stock in treasury.

USE OF ESTIMATES

3 unchanged sentences

Significant estimates include those used in the evaluation of credit losses on fixed maturity securities, actuarially determined assets and liabilities and assumptions, valuation allowance on deferred tax assets, valuation of uncertain tax positions and contingencies relating to litigation and regulatory matters.

Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the consolidated financial statements.

RECLASSIFICATIONS

Certain amounts presented in prior years have been reclassified to conform to the current presentation.

No individual amounts were material.

ACCOUNTING PRONOUNCEMENTS

ACCOUNTING STANDARDS NOT YET ADOPTED

In August 2018, the FASB issued ASU No.

ACCOUNTING STANDARDS RECENTLY ADOPTED

Impacts at Transition Date

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

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

Targeted Improvements to the Accounting for Long-Duration Contracts.

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

• Requires updated assumptions for liability measurement.

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

• Standardizes the liability discount rate.

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

• Provides greater consistency in measurement of market risk benefits.

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

• Simplifies amortization of DAC.

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

• Requires enhanced disclosures.

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

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

December 31, 2023 | 10-K 74

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

As of the January 1, 2021 transition date, the adoption of the new guidance will increase previously reported accumulated deficit by $ 0.1 million, net of tax, primarily from capping net premium ratios for certain policyholder benefit cohorts at 100% as of the transition date, and decrease accumulated other comprehensive income (loss) (“AOCI”) by $ 316.8 million, net of tax, primarily from remeasuring in-force contract liabilities using upper-medium grade fixed income instrument yields as of the transition date.

As of December 31, 2022, these estimates have declined, ranging from an increase in AOCI of approximately $ 25 million to $ 75 million primarily due to the increase in interest rates since the transition date.

We estimate that our previously reported accumulated deficit will decrease by a range of $ 50 million to $ 100 million primarily due to a reduction in policyholder benefits resulting from updating the underlying reserve assumptions annually compared to the use of historical assumptions that were locked at issue and reduced DAC amortization due to changes in amortization methods and the elimination of accruing and amortizing interest on existing DAC balances.

All amounts assume a tax rate of 21%.

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

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

Home Service Insurance

Liability for Future Policy Benefits

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

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

Effect of reserve changes 6 96 102

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

Fixed Annuity Liability

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

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

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

Deferred Acquisition Costs

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

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

Impact of flooring cohorts at zero 23 12 35

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

Cost of Insurance Acquired

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

Adjustments for the removal of shadow adjustments — 484 484

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

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

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

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

December 31, 2023 | 10-K 75

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impacts to Previously Reported Results

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

As of December 31, 2022

(In thousands)

As Previously Reported Adoption of New Standard Post Adoption

Consolidated Balance Sheet

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

Cost of insurance acquired 10,260 387 10,647

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

Total assets 1,569,970 20,733 1,590,703

Future policy benefit reserves:

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

Annuities 91,234 ( 91,234 ) —

Policyholders' funds:

Annuities — 121,422 121,422

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

Deferred federal income tax liability, net

— 3,653 3,653

Total liabilities 1,568,927 ( 106,014 ) 1,462,913

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

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

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

December 31, 2022

December 31, 2021

(In thousands, except per share amounts)

As Previously Reported Adoption of New Standard Post Adoption As Previously Reported Adoption of New Standard Post Adoption

Consolidated Statements of Operations

Increase (decrease) in future policy benefit reserves $ 29,640 ( 24,836 ) 4,804 36,444 ( 26,671 ) 9,773

Policyholder liability remeasurement (gain) loss — 2,884 2,884 — 1,434 1,434

Amortization of deferred policy acquisition costs 26,529 ( 12,139 ) 14,390 24,952 ( 11,507 ) 13,445

Amortization of cost of insurance acquired 974 ( 353 ) 621 1,206 ( 449 ) 757

Federal income tax expense (benefit) ( 429 ) 1,799 1,370 ( 43,475 ) 1,274 ( 42,201 )

Net income (loss) ( 6,638 ) 32,645 26,007 36,787 35,919 72,706

Basic earnings (losses) per share of Class A common stock ( 0.13 ) 0.65 0.52 0.74 0.72 1.46

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

— — — 0.37 0.36 0.73

Diluted earnings (losses) per share of Class A common stock ( 0.13 ) 0.64 0.51 0.73 0.71 1.44

Diluted earnings (losses) per share of Class B common stock — — — 0.36 0.36 0.72

December 31, 2023 | 10-K 76

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

December 31, 2021

(In thousands)

As Previously Reported Adoption of New Standard Post Adoption As Previously Reported Adoption of New Standard Post Adoption

Consolidated Statement of Comprehensive Income (Loss)

Unrealized holding gains (losses) arising during period $ ( 330,765 ) 2,196 ( 328,569 ) ( 5,298 ) ( 36,068 ) ( 41,366 )

Change in current discount rate for liability for future policy benefits — 337,776 337,776 — 92,396 92,396

Income tax expense (benefit) on other comprehensive income items ( 17,994 ) 25,256 7,262 5,465 ( 4,016 ) 1,449

Other comprehensive income (loss) ( 312,771 ) 314,716 1,945 ( 10,763 ) 60,344 49,581

Total comprehensive income (loss) ( 319,409 ) 347,361 27,952 26,024 96,263 122,287

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

6 unchanged sentences

Early adoption is available.

Adoption of this standard will have no impact on our consolidated financial statements.

Citizens' elected to adopt this standard as of December 31, 2023 as adoption of this standard has no impact on our consolidated financial statements.

ACCOUNTING STANDARDS NOT YET ADOPTED

On November 27, 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

This amendment expands a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures.

The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is available.

Although the ASU only requires additional disclosures about the Company's operating segments, the Company is currently evaluating the effects of adopting this guidance on the consolidated financial statements.

On December 14, 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures.

The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories.

A public entity is also required to provide a qualitative description of the state and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions.

The amendments also remove certain disclosures that are no longer considered cost beneficial.

The amendments are effective prospectively for annual periods beginning after December 15, 2024 and early adoption and retrospective application are permitted.

The Company is currently evaluating the impact of adopting this pronouncement on the consolidated financial statements.

No other new accounting pronouncement issued or effective during 2023 had, or is expected to have, a material impact on our consolidated financial statements.

December 31, 2023 | 10-K 77

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) INVESTMENTS

11 unchanged sentences

Total cash and invested assets $ 1,429,344 100.0 % $ 1,363,754 100.0 %

December 31, 2022 | 10-K 78

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table represents the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of December 31, 2023 and 2022.

14 unchanged sentences

Asset-backed 58,360 290 1,516 57,134

Foreign governments 100 1 — 101

Total fixed maturity securities $ 1,389,038 8,682 158,739 1,238,981

December 31, 2023 | 10-K 78

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

10 unchanged sentences

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

Commercial mortgage-backed 171 — 2 169

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

2 unchanged sentences

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

December 31, 2022 | 10-K 79

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Most of the Company's equity securities are invested in a non-redeemable preferred stock fund at December 31, 2023.

Fair Value as of December 31,

10 unchanged sentences

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

The Company recognized net realized losses of $ 2.7 million and net realized gains of $ 0.4 million on equity securities held for the years ended December 31, 2022 and 2021.

The Company recognized net investment related losses of $ 0.2 million and $ 2.7 million on equity securities held for the years ended December 31, 2023 and 2022, respectively and net investment related gains of $ 0.4 million for the year ended December 31, 2021.

The Company monitors all AFS fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews.

5 unchanged sentences

The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process.

Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information.

Quantitative review includes information received from third-party sources such as financial statements,

December 31, 2023 | 10-K 79

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

pricing and rating changes, liquidity and other statistical information.

Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost.

The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates.

These assumptions require the use of significant management judgment and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value.

These assumptions require the use of significant management judgement and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value.

In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer.

1 unchanged sentence

The Company recorded no credit valuation losses on fixed maturity securities for the years ended December 31, 2023 and 2022.

December 31, 2022 | 10-K 80

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For fixed maturity security investments that have unrealized losses as of December 31, 2022 and 2021, the gross unrealized losses that have been in a continuous unrealized loss position for less than 12 months, gross unrealized losses that have been in a continuous unrealized loss position for 12 months or longer and fair value are as follows.

For fixed maturity security investments that have unrealized losses as of December 31, 2023 and 2022, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows.

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

6 unchanged sentences

Fixed maturity securities:

Available-for-sale:

Available-for-sale securities:

Treasury securities $ 1,203 40 5 65 8 2 1,268 48 7

6 unchanged sentences

All Other 7,864 185 10 141,865 21,146 169 149,729 21,331 179

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

Residential mortgage-backed 849 38 5 95,806 10,022 86 96,655 10,060 91

1 unchanged sentence

Total fixed maturity securities $ 64,080 1,503 120 932,571 157,236 1,142 996,651 158,739 1,262

December 31, 2023 | 10-K 80

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022 Less than 12 months Greater than 12 months Total

6 unchanged sentences

Fixed maturity securities:

Available-for-sale:

Available-for-sale securities:

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

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

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

4 unchanged sentences

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

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

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

1 unchanged sentence

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

In each category of our fixed maturity securities described below, 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.

At December 31, 2022 and 2021, 98.7 % and 98.0 %, respectively, of the fair value of our fixed maturity

December 31, 2022 | 10-K 81

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

securities portfolio was rated investment grade.

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.

At December 31, 2023 and 2022, 99.4 % and 98.7 %, respectively, of the fair value of our fixed maturity securities portfolio was rated investment grade.

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

12 unchanged sentences

There were no investments that were non-income producing for the years ended December 31, 2023 or 2022.

December 31, 2023 | 10-K 81

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Major categories of net investment income are summarized as follows:

1 unchanged sentence

(In thousands)

2023 2022 2021

Gross investment income:

3 unchanged sentences

Other long-term investments 4,509 2,535 809

Other 576 246 54

Total investment income 71,853 68,020 63,886

1 unchanged sentence

Net investment income $ 69,254 65,426 61,495

December 31, 2022 | 10-K 82

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

1 unchanged sentence

(In thousands)

2023 2022 2021

Fixed maturity securities, available-for-sale:

6 unchanged sentences

Gross realized losses 55 — 149

We sold 20 and 28 fixed maturity securities from our available-for-sale portfolio in 2022 and 2021, respectively.

There was two sales of equity securities in 2022 and one sale in 2021.

Investment related gains (losses) are as follows:

1 unchanged sentence

(In thousands)

2023 2022 2021

Investment related gains (losses):

5 unchanged sentences

Other long-term investments 342 2,320 1,892

Realized investment gains (losses) 2,278 2,977

Investment related gains (losses)

99 2,278 2,977

Change in fair value of equity securities ( 190 ) ( 2,665 ) 376

2 unchanged sentences

Net investment related gains (losses) $ 760 ( 10,291 ) 10,991

December 31, 2023 | 10-K 82

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company sold its former training facility near Austin, Texas during 2021 for a gross sale price of $ 3.8 million, resulting in a gain on the sale of $ 1.0 million.

2 unchanged sentences

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

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

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

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

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

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

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

December 31, 2022 | 10-K 83

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in the absence of observable market information.

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

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

14 unchanged sentences

December 31, 2023 | 10-K 83

T a b l e o f C o n t e n t s

CITIZENS, INC.

13 unchanged sentences

Asset-backed — 57,134 — 57,134

Foreign governments — 101 — 101

Total fixed maturity securities available-for-sale 6,105 1,232,876 — 1,238,981

Equity securities:

Stock mutual funds 2,615 — — 2,615

Bond mutual funds 740 — — 740

8 unchanged sentences

December 31, 2023 | 10-K 84

T a b l e o f C o n t e n t s

CITIZENS, INC.

9 unchanged sentences

Corporate 44 715,601 — 715,645

Commercial mortgage-backed — 169 — 169

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

27 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 losses of $ 9.7 million on limited partnerships held for the year ended

The Company recognized net investment related gains of $ 0.9 million and $ 7.5 million on limited partnerships held for the years ended December 31, 2023 and 2021, respectively, and losses of $ 9.7 million for the year ended

December 31, 2023 | 10-K 85

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022 and gains of $ 7.5 million for year 2021.

December 31, 2022.

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

7 unchanged sentences

Late-stage growth Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale 20,524 14,271 4 to 6

20,468 4,459 6

16,892 18,444 5 to 7

Infrastructure Investments in environmental infrastructure and related technology, focusing on renewable power generation and distribution 16,733 9,576 10 7,683 4,107 11

12 unchanged sentences

Policy loans $ 75,359 75,359 78,773 78,773

Commercial mortgage loan — — 1,000 1,000

Residential mortgage loans 42 42 49 50

4 unchanged sentences

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

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

Policy loans are an integral part of the life insurance policies we have

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

Therefore, the fair value of policy loans approximates the carrying value reflected on the consolidated balance sheets and are considered Level 3 assets in the fair value hierarchy.

December 31, 2023 | 10-K 86

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

in force, cannot be valued separately and are not marketable.

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

Commercial mortgage loan.

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

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

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

Residential mortgage loans.

Mortgage loans are secured principally by residential properties.

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

At December 31, 2022, the remaining loan matures in six years .

Residential mortgage loan.

The mortgage loan is secured principally by a residential property.

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

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

Management estimated the fair value using an annual interest rate of 6.25 % at both December 31, 2023 and 2022.

Our mortgage loans are considered Level 3 assets in the fair value hierarchy.

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.

Cash and cash equivalents.

1 unchanged sentence

Annuity liabilities.

The fair value of the Company's liabilities under annuity contract policies, which are considered Level 3 liabilities, was estimated at December 31, 2022 and 2021 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.74 % to 5.09 % and 0.50 % to 2.63 %, respectively.

The fair value of the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at December 31, 2023 and 2022 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.80 % to 4.50 % 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.

9 unchanged sentences

Total other long-term investments $ 82,725 69,558

We carried $ 2.4 million of limited partnership investments at cost at December 31, 2022.

None were carried at cost at December 31, 2021.

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

We are a member of the FHLB of Dallas and such membership requires members to own stock in the FHLB.

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

(4) POLICY LIABILITIES AND SHORT DURATION CONTRACTS

Various assumptions used to determine the future policy benefit reserves of life insurance include valuation interest rates, mortality assumptions and withdrawals.

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

The following tables roll forward the DAC and COIA balances for the years ended December 31, 2023 and 2022 by reporting cohort.

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

Both reporting cohorts include whole life and endowment policies.

December 31, 2023 | 10-K 87

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

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

Capitalizations 16,451 3,332 468 20,251

Amortization expense ( 11,825 ) ( 799 ) ( 271 ) ( 12,895 )

Balance, end of year

105,552 14,075 1,213 120,840

Home Service Insurance:

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

Capitalizations 6,570 1,232 248 8,050

Amortization expense ( 2,083 ) ( 397 ) ( 85 ) ( 2,565 )

Balance, end of year

43,280 10,564 1,084 54,928

Consolidated:

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

Capitalizations 23,021 4,564 716 28,301

Amortization expense ( 13,908 ) ( 1,196 ) ( 356 ) ( 15,460 )

Balance, end of year

$ 148,832 24,639 2,297 175,768

Year Ended December 31, 2022

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

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

Capitalizations 14,599 3,193 150 17,942

Amortization expense ( 11,348 ) ( 652 ) ( 160 ) ( 12,160 )

Balance, end of year

100,926 11,542 1,016 113,484

Home Service Insurance:

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

Capitalizations 5,501 1,372 84 6,957

Amortization expense ( 1,845 ) ( 366 ) ( 19 ) ( 2,230 )

Balance, end of year

38,793 9,729 921 49,443

Consolidated:

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

Capitalizations 20,100 4,565 234 24,899

Amortization expense ( 13,193 ) ( 1,018 ) ( 179 ) ( 14,390 )

Balance, end of year

$ 139,719 21,271 1,937 162,927

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

December 31, 2023 | 10-K 88

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

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

Amortization expense ( 18 ) ( 55 ) ( 38 ) ( 111 )

Balance, end of year

249 695 406 1,350

Home Service Insurance:

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

Amortization expense ( 389 ) ( 8 ) ( 96 ) ( 493 )

Balance, end of year

7,194 168 1,331 8,693

Consolidated:

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

Amortization expense ( 407 ) ( 63 ) ( 134 ) ( 604 )

Balance, end of year

$ 7,443 863 1,737 10,043

Year Ended December 31, 2022

(In thousands) Permanent Permanent Limited Pay Other Business Total

Life Insurance:

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

Amortization expense ( 20 ) ( 62 ) ( 41 ) ( 123 )

Balance, end of year

267 750 444 1,461

Home Service Insurance:

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

Amortization expense ( 406 ) ( 8 ) ( 84 ) ( 498 )

Balance, end of year

7,583 176 1,427 9,186

Consolidated:

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

Amortization expense ( 426 ) ( 70 ) ( 125 ) ( 621 )

Balance, end of year

$ 7,850 926 1,871 10,647

December 31, 2023 | 10-K 89

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Estimated amortization of COIA in each of the next five years and thereafter is as follows.

Actual future amortization will differ from these estimates due to variances from estimated future withdrawal assumptions.

(In thousands) Amount

Cost of insurance acquired:

Thereafter 7,248

Total cost of insurance acquired $ 10,043

(5) POLICYHOLDERS’ LIABILITIES

LIABILITY FOR FUTURE POLICY BENEFITS

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

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

Both reporting cohorts include whole life and endowment policies.

December 31, 2023 | 10-K 90

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2023

(In thousands)

Life Insurance

Home Service Insurance

Permanent Permanent Limited Pay Total Permanent Permanent Limited Pay Total

Present Value of Expected Net Premiums:

Balance, beginning of year $ 235,228 10,209 245,437 93,508 13,255 106,763

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 4,184 1,536 5,720 ( 8,287 ) ( 6,402 ) ( 14,689 )

Adjusted beginning of year balance 251,575 12,256 263,831 91,595 8,077 99,672

Issuances 34,285 3,607 37,892 17,668 3,951 21,619

Interest accrual 9,291 355 9,646 4,045 468 4,513

Net premiums collected ( 43,307 ) ( 2,955 ) ( 46,262 ) ( 11,901 ) 2,832 ( 9,069 )

Derecognition and other 582 270 852 638 184 822

Ending balance at original discount rate 252,426 13,533 265,959 102,045 15,512 117,557

Effect of changes in discount rates ( 7,509 ) ( 273 ) ( 7,782 ) ( 3,214 ) ( 586 ) ( 3,800 )

Balance, end of year

$ 244,917 13,260 258,177 98,831 14,926 113,757

Present Value of Expected Future Policy Benefits:

Balance, beginning of year $ 947,415 195,612 1,143,027 200,351 116,356 316,707

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 7,370 5,330 12,700 ( 8,126 ) ( 2,103 ) ( 10,229 )

Adjusted beginning of year balance 1,003,150 212,679 1,215,829 205,805 120,136 325,941

Issuances 34,922 3,792 38,714 17,664 3,973 21,637

Interest accrual 43,275 8,355 51,630 9,339 5,667 15,006

Benefit payments ( 85,257 ) ( 22,129 ) ( 107,386 ) ( 15,891 ) ( 6,002 ) ( 21,893 )

Derecognition and other ( 128 ) 58 ( 70 ) 607 167 774

Ending balance at original discount rate 995,962 202,755 1,198,717 217,524 123,941 341,465

Effect of changes in discount rates ( 22,612 ) ( 7,633 ) ( 30,245 ) ( 5,578 ) ( 1,157 ) ( 6,735 )

Balance, end of year

$ 973,350 195,122 1,168,472 211,946 122,784 334,730

Net liability for future policy benefits $ 728,433 181,862 910,295 113,115 107,858 220,973

December 31, 2023 | 10-K 91

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022

(In thousands)

Life Insurance Home Service Insurance

Permanent Permanent Limited Pay Total Permanent Permanent Limited Pay Total

Present Value of Expected Net Premiums:

Balance, beginning of year $ 269,528 4,939 274,467 104,556 10,196 114,752

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 3,466 1,534 5,000 ( 3,744 ) ( 8,407 ) ( 12,151 )

Adjusted beginning of year balance 246,190 6,864 253,054 90,521 2,339 92,860

Issuances 35,826 4,086 39,912 19,030 5,288 24,318

Interest accrual 8,382 82 8,464 3,454 244 3,698

Net premiums collected ( 41,560 ) ( 258 ) ( 41,818 ) ( 11,202 ) 6,752 ( 4,450 )

Derecognition and other ( 1,237 ) ( 92 ) ( 1,329 ) ( 1,578 ) ( 229 ) ( 1,807 )

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

Effect of changes in discount rates ( 12,373 ) ( 473 ) ( 12,846 ) ( 6,717 ) ( 1,139 ) ( 7,856 )

Balance, end of year

$ 235,228 10,209 245,437 93,508 13,255 106,763

Present Value of Expected Future Policy Benefits:

Balance, beginning of year $ 1,168,282 240,679 1,408,961 266,206 161,715 427,921

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 4,528 4,910 9,438 ( 3,278 ) ( 992 ) ( 4,270 )

Adjusted beginning of year balance 991,533 212,389 1,203,922 206,884 118,198 325,082

Issuances 36,604 4,187 40,791 19,054 5,286 24,340

Interest accrual 42,547 8,474 51,021 8,754 5,452 14,206

Benefit payments ( 72,383 ) ( 16,765 ) ( 89,148 ) ( 18,870 ) ( 6,770 ) ( 25,640 )

Derecognition and other ( 2,132 ) ( 234 ) ( 2,366 ) ( 1,634 ) ( 258 ) ( 1,892 )

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

Effect of changes in discount rates ( 48,754 ) ( 12,439 ) ( 61,193 ) ( 13,837 ) ( 5,552 ) ( 19,389 )

Balance, end of year

$ 947,415 195,612 1,143,027 200,351 116,356 316,707

Net liability for future policy benefits $ 712,187 185,403 897,590 106,843 103,101 209,944

Flooring impact 1 — 1 — — —

Net liability for future policy benefits, after flooring impact $ 712,188 185,403 897,591 106,843 103,101 209,944

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 years ended December 31, 2023 and 2022.

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

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

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

The effects of actual variances from expected experience lines are primarily impacted by the actual policy cash flows during the period

December 31, 2023 | 10-K 92

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

compared to that which was expected in the reserve assumptions.

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

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

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.

December 31, 2023

December 31, 2022

(In thousands) Life

Insurance Home Service

Insurance Consolidated Life

Insurance Home Service

Insurance Consolidated

Life Insurance:

Permanent $ 728,433 113,115 841,548 712,188 106,843 819,031

Permanent limited pay 181,862 107,858 289,720 185,403 103,101 288,504

Deferred profit liability 28,933 26,804 55,737 25,655 24,459 50,114

Other 28,319 13,929 42,248 27,370 13,628 40,998

Total life insurance 967,547 261,706 1,229,253 950,616 248,031 1,198,647

Accident & Health:

Other 588 301 889 533 234 767

Total future policy benefit reserves $ 968,135 262,007 1,230,142 951,149 248,265 1,199,414

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

December 31, 2023 December 31, 2022

(In thousands) Life

Insurance Home Service

Insurance Life

Insurance Home Service

Undiscounted:

Expected future gross premiums $ 621,935 455,552 612,531 461,298

Expected future benefit payments 1,495,206 484,740 1,479,562 473,039

Permanent Limited Pay:

Expected future gross premiums 47,161 77,266 47,447 74,278

Expected future benefit payments 326,821 320,810 323,559 316,225

Expected future gross premiums $ 481,963 275,629 472,754 271,440

Expected future benefit payments 973,350 211,946 947,415 200,351

Permanent Limited Pay:

Expected future gross premiums 42,138 53,075 41,853 52,030

Expected future benefit payments 195,122 122,784 195,612 116,356

December 31, 2023 | 10-K 93

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables summarize the amount of revenue and interest related to long-term duration contracts recognized in the consolidated statements of operations and comprehensive income (loss):

Years Ended December 31,

2023 2022 2021

(In thousands)

Gross Premiums Interest Expense Gross Premiums Interest Expense Gross Premiums Interest Expense

Life Insurance Segment:

Life Insurance:

Permanent $ 93,917 33,984 94,905 34,165 96,766 34,067

Permanent Limited Pay 16,396 8,923 15,023 9,214 13,678 9,331

Other 12,813 — 16,047 — 16,856 —

Reinsurance 1,702 — 1,819 — 1,742 —

Total, net of reinsurance 121,424 42,907 124,156 43,379 125,558 43,398

Accident & Health:

Other 725 — 502 — 505 —

Reinsurance 4 — 5 — 5 —

Total, net of reinsurance 721 — 497 — 500 —

Total $ 122,145 42,907 124,653 43,379 126,058 43,398

Home Service Insurance Segment:

Life Insurance:

Permanent $ 33,263 5,294 33,312 5,300 33,706 5,447

Permanent Limited Pay 8,576 6,388 8,396 6,255 8,324 6,187

Other 1,371 — 1,749 — 2,236 —

Reinsurance 25 — 27 — 23 —

Total, net of reinsurance 43,185 11,682 43,430 11,555 44,243 11,634

Accident & Health:

Other 916 — 781 — 750 —

Total $ 44,101 11,682 44,211 11,555 44,993 11,634

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

December 31, 2023 December 31, 2022

(In years) Life

Insurance Home Service

Insurance Life

Insurance Home Service

Duration at original discount rate 8.5 16.4 8.0 15.4

Duration at current discount rate 8.5 16.4 8.5 16.2

Permanent Limited Pay:

Duration at original discount rate 8.2 14.8 7.6 14.3

Duration at current discount rate 8.1 15.3 7.5 15.7

December 31, 2023 | 10-K 94

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

December 31, 2023 December 31, 2022

Insurance Home Service

Insurance Life

Insurance Home Service

Interest rate at original discount rate 4.89 % 4.97 % 4.93 % 5.00 %

Interest rate at current discount rate 4.79 % 4.96 % 5.10 % 5.22 %

Permanent Limited Pay:

Interest rate at original discount rate 4.29 % 5.04 % 4.30 % 5.05 %

Interest rate at current discount rate 4.77 % 4.95 % 5.07 % 5.21 %

LIABILITY FOR POLICYHOLDERS’ ACCOUNT BALANCES

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

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

December 31, 2023

(In thousands)

Range of Guaranteed Minimum Crediting Rates:

0.00 % - 1.49 %

$ 784 — 1,146 34,886 36,816

1.50 % - 2.99 %

33,073 671 49 — 33,793

3.00 % - 4.49 %

105,684 9 — — 105,693

Greater or equal to 4.50 %

31,400 — — — 31,400

Total $ 170,941 680 1,195 34,886 207,702

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

December 31, 2022

(In thousands)

Range of Guaranteed Minimum Crediting Rates:

0.00 % - 1.49 %

$ 736 — 1,089 38,671 40,496

1.50 % - 2.99 %

24,155 631 51 — 24,837

3.00 % - 4.49 %

98,902 9 — — 98,911

Greater or equal to 4.50 %

31,825 — — — 31,825

Total $ 155,618 640 1,140 38,671 196,069

December 31, 2023 | 10-K 95

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

December 31, 2023

(In thousands, except for %)

Supplemental Contracts Without Life Contingencies Fixed Annuity Dividend Accumulations

Premiums Paid in Advance

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

Issuances 22,387 2,741 660 3,693

Premiums received 123 4,387 5,860 793

Interest credited 1,483 2,653 1,364 1,627

Other 1 — — —

Surrenders and withdrawals — 9,454 4,587 9,677

Benefit payments 12,420 — — —

Balance, end of year

$ 44,569 87,134 44,960 31,039

Weighted-average crediting rates 4.00 % 3.56 % 3.04 % 2.95 %

Cash surrender value $ 44,569 87,134 44,960 31,039

December 31, 2022

(In thousands, except for %)

Supplemental Contracts Without Life Contingencies Fixed Annuity Dividend Accumulations

Premiums Paid in Advance

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

Issuances 12,071 3,044 683 2,820

Premiums received 176 4,940 5,538 779

Interest credited 1,067 2,631 1,216 964

Other 2 — — —

Surrenders and withdrawals — 7,725 3,534 8,835

Benefit payments 4,271 — — —

Balance, end of year

$ 32,995 86,807 41,663 34,603

Weighted-average crediting rates 4.08 % 3.59 % 3.07 % 3.04 %

Cash surrender value $ 32,995 86,807 41,663 34,603

December 31, 2023 | 10-K 96

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of December 31,

(In thousands)

Supplemental contracts without life contingencies $ 44,569 32,995

Fixed annuity 87,134 86,807

Unearned revenue reserve 1,513 1,619

Total annuities $ 133,216 121,422

Premiums Paid in Advance:

Premiums paid in advance $ 31,039 34,603

Other 1,407 1,781

Total premiums paid in advance $ 32,446 36,384

(6) POLICY CLAIM LIABILITY AND SHORT DURATION CONTRACTS

The following table presents information on changes in the liability for life, accident and health and property policy and contract claims.

1 unchanged sentence

(In thousands)

2023 2022 2021

Policy claims payable:

6 unchanged sentences

( 522 ) ( 46 ) 1,052

25,108 28,674 33,647

Deduct claims paid, related to:

10 unchanged sentences

The Company's short duration contracts consist of credit life and credit disability in the Life Insurance segment and property insurance in the Home Service Insurance segment.

The credit insurance lines are an immaterial part of short duration contracts so the following disclosures cover only the property insurance line of business in the Home Service Insurance segment.

The credit insurance lines are an immaterial part of

December 31, 2023 | 10-K 97

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

short duration contracts so the following disclosures cover only the property insurance line of business in the Home Service Insurance segment.

Special Property Insurance (Allied and Fire)

1 unchanged sentence

This information is presented for the last five years as these claims rarely pay out over a longer period of time.

December 31, 2022

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Total of Incurred but Not Reported Liabilities Plus Expected Development on Reported Claims Cumulative Number of Reported Claims

As of December 31, 2023

Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Total of Incurred-but-Not-Reported Liabilities Plus Expected Development on Reported Claims

Cumulative Number of Reported Claims

For the Years Ended December 31,

20 unchanged sentences

December 31, 2023 | 10-K 98

T a b l e o f C o n t e n t s

CITIZENS, INC.

21 unchanged sentences

The Company also reinsures 100 % of our accidental death benefit rider coverage.

The Company maintains catastrophe reinsurance with the net retention on any one loss of $ 30,000 , which is the maximum policy limit on any single risk.

The Company maintained catastrophe reinsurance with the net retention on any one loss of $ 30,000 , which is the maximum policy limit on any single risk.

During 2023, this reinsurance provided $ 11.0 million of coverage with the Company retaining $ 2.4 million of the risk.

In 2022, this reinsurance provided $ 11.0 million of coverage once the Company paid a $ 1.4 million deductible.

In consideration for a reinstatement premium, second event coverage is provided under the same terms for both years.

The Company's principal reinsurers are R+V Versicherung AG and Lloyds Underwriter Syndicates.

In consideration for a reinstatement premium, second event coverage was provided under the same terms for both years.

The Company remains contingently liable in the event that any of the reinsurers are unable to meet their obligations under any reinsurance agreement.

9 unchanged sentences

December 31, 2023 | 10-K 99

T a b l e o f C o n t e n t s

CITIZENS, INC.

1 unchanged sentence

The Company's reinsurance recoverable on ceded reinsurance was $ 4.0 million and $ 4.6 million in 2023 and 2022, respectively.

Premiums, claims and surrenders assumed and ceded for all lines of business for these years are summarized as follows:

Premiums and claims and surrenders assumed and ceded for all lines of business for these years are summarized as follows:

Years ended December 31,

(In thousands)

2023 2022 2021

Premiums from short duration contracts:

Direct $ 4,425 7,862 7,631

Assumed — — —

Ceded ( 1,792 ) ( 1,413 ) ( 2,312 )

11 unchanged sentences

The Company has a reinsurance agreement that covers catastrophic events such as Hurricane Ida.

We paid the $ 0.5 million retention in claim amounts for Ida and did not exceed the maximum reinsurance coverage.

We paid the $ 0.5 million retention in claim amounts for Ida and do not expect to exceed the maximum reinsurance coverage.

(8) COMMITMENTS AND CONTINGENCIES

LITIGATION AND REGULATORY ACTIONS

From time to time, we are subject to legal and regulatory actions relating to our business.

We defend all claims vigorously.

As a result, we incur defense costs, including attorneys' fees, other direct litigation costs and the expenditure of management time that otherwise would be devoted to our business.

If we suffer an adverse judgment as a result of litigation claims or if a regulator fines us, it could have a material adverse effect on our business, results of operations and financial condition.

CREDIT FACILITY

On May 5, 2021 , the Company entered into a $ 20 million senior secured revolving credit facility (the “Credit Facility”) with Regions Bank ("Regions").

The Credit Facility has a three-year term, maturing on May 5, 2024 , and allows the Company to borrow up to $ 20 million for working capital purposes, capital expenditures and other corporate purposes.

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

At the Company's election, the revolving loans may either bear a base rate, which is 1.75 % plus a base rate (a fluctuating rate per annum) equal to the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50 %, or (c) 0.75 %.

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

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

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

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

December 31, 2023 | 10-K 100

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CONTRACTUAL OBLIGATIONS

The Company leases home office space in Austin, Texas for Citizens and in Puerto Rico for NES as well as several district office locations related to our Home Service Insurance segment across Louisiana, Mississippi and Arkansas, which are classified as operating leases.

Certain operating leases include renewal options that extend the lease term.

The exercise of lease renewal options is at our sole discretion when it is reasonably certain that we will exercise such option.

Leases with an initial term of 12 months or less are immaterial to the consolidated financial statements and are recognized as lease expense on a straight-line basis over the lease term and not recorded on the consolidated balance sheets.

Our operating lease liabilities had a weighted-average lease term of 6.8 years remaining as of December 31, 2023.

Maturities of our remaining operating lease liabilities as of December 31, 2023 are as follows.

(In thousands) Operating Lease Payments

Maturity of operating lease liabilities:

After 2028 2,728

Total operating lease liabilities

Interest expense ( 813 )

Present value of operating lease liabilities $ 9,073

We record the lease right-of-use asset in Property and Equipment, net and the lease liability in Other Liabilities using a weighted average discount rate of 2.59 %.

Cash payments related to the operating lease liabilities were $ 1.4 million for both of the years ended December 31, 2023 and 2022 and were reported in operating cash flows.

The Company does not engage in lease agreements among related parties.

As of December 31, 2023, CICA International is committed to fund investments up to $ 27.3 million related to limited partnership investments.

(9) STOCKHOLDERS' EQUITY AND RESTRICTIONS

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

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

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

December 31, 2023 | 10-K 101

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

(In thousands) Common Stock Treasury

13 unchanged sentences

53,758 1,002 4,937

Stock issued for compensation 125 — —

Acquisition of Class A shares — — 393

Balance at December 31, 2023

53,883 1,002 5,330

EARNINGS PER SHARE

2 unchanged sentences

(In thousands, except per share amounts)

2023 2022 2021

Net income (loss) $ 24,437 26,007 72,706

20 unchanged sentences

December 31, 2023 | 10-K 102

T a b l e o f C o n t e n t s

CITIZENS, INC.

1 unchanged sentence

STATUTORY CAPITAL AND SURPLUS

The table below shows the combined total of all of our domestic insurance subsidiaries' statutory capital and surplus and statutory net income (loss) for life insurance operations and property insurance operations, although these amounts are not all available as dividends to Citizens because only CICA is directly owned by Citizens.

All other domestic subsidiaries are owned by CICA.

All other domestic subsidiaries are owned by CICA Domestic.

As of December 31,

6 unchanged sentences

(In thousands)

2023 2022 2021

Combined statutory net income (loss):

3 unchanged sentences

Generally, the net assets of the domestic insurance subsidiaries available for transfer to their immediate parent are limited to the lesser of the subsidiary's net gain from operations during the preceding year or 10 % of the subsidiary's net statutory surplus as of the end of the preceding year as determined in accordance with accounting practices prescribed or permitted by insurance regulatory authorities.

Under these practices, total surplus at December 31, 2022 was $ 32.3 million and net gain from operations was $ 0.7 million for CICA for the year ended December 31, 2022.

Based upon these amounts, a $ 0.7 million dividend could be paid to the Company without prior regulatory approval in 2023.

Under these practices, total surplus at December 31, 2023 was $ 26.3 million and net loss from operations was $ 0.9 million for CICA Domestic for the year ended December 31, 2023.

Based upon these amounts, no dividend could be paid to the Company without prior regulatory approval in 2024.

Payments of dividends in excess of such amounts would generally require approval by regulatory authorities.

Our domestic insurance subsidiaries have calculated their risk-based capital ("RBC") in accordance with the National Association of Insurance Commissioners' ("NAIC") Model Rule and the RBC rules as adopted by their respective states of domicile.

As part of the novation transaction with CICA International, the Company agreed to infuse capital into CICA as required by the Colorado Department of Insurance to maintain CICA's RBC above 350% in any future calendar year-end periods.

As part of the novation transaction with CICA Bermuda, the Company agreed to infuse capital into CICA Domestic as required by the Colorado Department of Insurance to maintain CICA Domestic's RBC above 350% in any future calendar year-end periods.

All domestic insurance subsidiaries exceeded RBC minimum levels at December 31, 2023.

Under the Bermuda Insurance Act 1978 (the "Insurance Act"), an insurer is prohibited from declaring or paying a dividend if it is in breach of its Enhanced Capital Requirement (“ECR”) or Minimum Margin of Solvency (“MMS”) or if the declaration or payment of such dividend would cause such a breach.

Where an insurer fails to meet its MMS on the last day of any financial year, it is prohibited from declaring or paying any dividends during the next financial year without the approval of the Bermuda Monetary Authority (the “BMA” or the "Authority").

Insurers are also prohibited from paying a dividend in an amount exceeding 25 % of the prior year’s total statutory capital and surplus, unless at least two members of the board of directors and its principal representative sign and submit to the BMA an affidavit attesting that a dividend in excess of this amount would not cause such insurer to fail to meet its relevant margins.

In certain instances, the insurer would also be required to provide prior notice to the BMA in advance of the payment of dividends.

In the event that such an affidavit is submitted to the BMA in accordance with the Insurance Act, and further subject to CICA International meeting its MMS and ECR requirements, CICA International would be permitted to distribute a dividend not exceeding 25 % of its prior year's total statutory capital and surplus.

Distributions in excess of this amount require the approval of the BMA.

Further, CICA International must obtain the BMA’s prior approval before

CICA International is a Puerto Rico domiciled company.

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

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

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

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

The Keep Well Agreement requires Citizens to contribute up to $ 10 million in capital to CICA International as necessary to ensure that CICA International 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 International'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.

December 31, 2023 | 10-K 103

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

reducing its total statutory capital as shown in its previous financial year statutory balance sheet by 15 % or more.

CICA International is also prohibited from declaring or paying any dividends unless the value of its long-term business assets exceeds its long-term business liabilities, as certified by its approved actuary, by the amount of the dividend and at least the MMS.

These restrictions on declaring or paying dividends and distributions under the Insurance Act are in addition to those under Bermuda’s Companies Act 1981, which apply to all Bermuda-domiciled companies.

Based upon these rules, CICA International can pay a dividend of $ 4.6 million without prior regulatory approval in 2023.

However, the BMA has requested that CICA International notify it in advance of any potential dividend payments and any intercompany related payments or transactions.

As of December 31,

(In thousands)

CICA Bermuda capital and surplus

CICA International capital and surplus

CICA Bermuda requested a modification as permitted under Section 6C (1) of the Bermuda Insurance Act 1978 (the "Insurance Act") to remove the impact of unrealized gains or losses from the Minimum Margin of Solvency requirement.

On January 19, 2023, the Bermuda Monetary Authority granted CICA Bermuda a permitted practice, effective December 31, 2022, pursuant to Section 6C (1) of the Insurance Act to report its fixed income maturity securities at amortized cost in its unconsolidated statutory financial statements.

Years ended December 31,

(In thousands)

2023 2022 2021

CICA Bermuda net income (loss)

$ — ( 1,024 ) 14,029

CICA International net income (loss)

The BMA established risk-based regulatory capital adequacy and solvency margin requirements for Bermuda insurers that require us to calculate our ECR by using the Bermuda Solvency Capital Requirement ("BSCR").

CICA International held capital in excess of the BSCR requirements at December 31, 2022.

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

The Keep Well Agreement requires Citizens to contribute up to $ 10 million in capital to CICA International as necessary to ensure that CICA International has a minimum capital level of 120 % (equal to the TCL).

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

As the Insurance Act permits, we requested a modification under Section 6C of the Insurance Act to remove the impact of unrealized gains or losses from the MMS requirement.

On January 19, 2023, the BMA granted CICA International a permitted practice, effective December 31, 2022, pursuant to Section 6C (1) of the Insurance Act to report its fixed income maturity securities at amortized cost in its unconsolidated statutory financial statements.

(7) COMMITMENTS AND CONTINGENCIES

LITIGATION AND REGULATORY ACTIONS

From time to time we are subject to legal and regulatory actions relating to our business.

We defend all claims vigorously.

As a result, we incur defense costs, including attorneys' fees, other direct litigation costs and the expenditure of management time that otherwise would be devoted to our business.

If we suffer an adverse judgment as a result of litigation claims or if a regulator fines us, it could have a material adverse effect on our business, results of operations and financial condition.

CREDIT FACILITY

On May 5, 2021 , the Company entered into a $ 20 million senior secured revolving credit facility (the “Credit Facility”) with Regions Bank ("Regions").

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

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

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

December 31, 2022 | 10-K 95

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2022, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants.

CONTRACTUAL OBLIGATIONS

The Company leases home office space in Austin, Texas for Citizens and in Bermuda for CICA International as well as several district office locations related to our Home Service Insurance segment across Louisiana, Mississippi and Arkansas, which are classified as operating leases.

Certain operating leases include renewal options that extend the lease term.

The exercise of lease renewal options is at our sole discretion when it is reasonably certain that we will exercise such option.

The Company also has a minimal amount of finance leases regarding equipment.

Our operating lease liabilities had a weighted-average lease term of 7.7 years remaining as of December 31, 2022.

Maturities of our remaining operating lease liabilities as of December 31, 2022 are as follows.

(In thousands) Operating Lease Payments

Maturity of operating lease liabilities:

After 2027 4,165

Total operating lease payments 11,160

Interest expense ( 1,044 )

Present value of operating lease liabilities $ 10,116

We record the lease right-of-use asset in Property and Equipment, net and the lease liability in Other Liabilities using a weighted average discount rate of 2.59 %.

Cash payments related to the operating lease liabilities were $ 1.4 million for both of the years ended December 31, 2022 and 2021 and were reported in operating cash flows.

The Company does not engage in lease agreements among related parties.

As of December 31, 2022, CICA International is committed to fund investments up to $ 28.6 million related to limited partnership investments.

As stated above, CICA International exceeded both of the capital and surplus metrics established by the OIC.

CICA International could pay up to $ 5.0 million in dividends during 2024 without regulatory approval.

(10) SEGMENT AND OTHER OPERATING INFORMATION

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 coverage and annuity benefits to enhance accumulations.

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

CNLIC issues ordinary whole life and critical illness products.

December 31, 2022 | 10-K 96

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

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

In addition to the Life Insurance and Home Service Insurance business, the Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and Corporate-support functions that is included in the tables presented below to properly reconcile the segment information with the consolidated financial statements of the Company.

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

2 unchanged sentences

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

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

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

December 31, 2023 | 10-K 104

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended December 31, 2023

10 unchanged sentences

Other income (loss) 3,605 17 5 3,627

Total revenue 170,175 61,417 932 232,524

Total revenues 180,403 59,265 1,012 240,680

Benefits and expenses:

2 unchanged sentences

Increase in future policy benefit reserves ( 10,931 ) 5,307 — ( 5,624 )

Policyholder liability remeasurement (gain) loss

4,153 307 — 4,460

Policyholders' dividends 5,512 30 — 5,542

8 unchanged sentences

December 31, 2023 | 10-K 105

T a b l e o f C o n t e n t s

CITIZENS, INC.

12 unchanged sentences

Other income (loss) 3,668 1 6 3,675

Total revenues 170,175 61,417 932 232,524

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 95,576 24,359 — 119,935

Increase in future policy benefit reserves 3,894 910 — 4,804

Policyholder liability remeasurement (gain) loss

1,728 1,156 — 2,884

Policyholders' dividends 5,990 23 — 6,013

Total insurance benefits paid or provided 107,188 26,448 — 133,636

Commissions 20,031 16,191 — 36,222

Other general expenses 23,192 16,444 5,541 45,177

Capitalization of deferred policy acquisition costs ( 17,942 ) ( 6,957 ) — ( 24,899 )

Amortization of deferred policy acquisition costs 12,160 2,230 — 14,390

Amortization of cost of insurance acquired 123 498 — 621

Total benefits and expenses 144,752 54,854 5,541 205,147

Income (loss) before federal income tax $ 25,423 6,563 ( 4,609 ) 27,377

December 31, 2023 | 10-K 106

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year ended December 31, 2021

(In thousands)

Insurance Home

Service Insurance Other

Non-Insurance

Enterprises Consolidated

Life insurance $ 125,558 44,243 — 169,801

Accident and health insurance 500 750 — 1,250

Property insurance — 3,677 — 3,677

Net investment income (loss) 47,216 13,224 1,055 61,495

Investment related gains (losses), net 9,176 618 1,197 10,991

Other income (loss) 3,362 7 ( 37 ) 3,332

Total revenue 185,812 62,519 2,215 250,546

3 unchanged sentences

Increase in future policy benefit reserves 7,822 1,951 — 9,773

Policyholder liability remeasurement (gain) loss

829 605 — 1,434

Policyholders' dividends 6,140 40 — 6,180

6 unchanged sentences

Goodwill impairment

12,624 — — 12,624

Total benefits and expenses 153,910 58,346 7,785 220,041

4 unchanged sentences

Home Service Insurance 359,773 341,671

Total Segments

1,627,016 1,535,956

Other Non-Insurance Enterprises 41,912 54,747

1 unchanged sentence

December 31, 2023 | 10-K 107

T a b l e o f C o n t e n t s

CITIZENS, INC.

4 unchanged sentences

(In thousands)

2023 2022 2021

United States $ 50,594 54,712 56,000

8 unchanged sentences

(11) INCOME TAXES

CICA International, a wholly-owned subsidiary of Citizens, is considered a controlled foreign corporation for federal income tax purposes.

As a result, the insurance activity of CICA International is subject to Subpart F of the IRC and is 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.

For both of the years ended December 31, 2022 and 2021, the Subpart F income inclusion generated $ 2.1 million of federal income tax expense.

CICA PR, a wholly-owned subsidiary of Citizens, was formed in September 2022.

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

CICA PR's insurance activity will be subject to Subpart F of the IRC and included in Citizens' taxable income.

CICA PR's activity for the current period is immaterial to the financial statements as it was not operational until 2023.

CICA International and CICA Bermuda, wholly-owned subsidiaries of Citizens, are considered controlled foreign corporations for federal income tax purposes.

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

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

CICA International 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.

For the year ended December 31, 2023, the Subpart F income inclusion generated $ 1.6 million of federal income tax expense and $ 2.1 million of federal income tax expense for the years ended December 31, 2022 and 2021.

In connection with the transfer of CICA Bermuda’s business from a zero tax jurisdiction to CICA International’s 4 % tax jurisdiction in Puerto Rico, certain opening tax assets and liabilities, mainly related to investments, DAC and reserves, were established.

The net deferred tax asset of $ 1.4 million was recorded to retained earnings during 2023 in accordance with ASC Topic 805.

December 31, 2023 | 10-K 108

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation between the U.S.

12 unchanged sentences

Subpart F income 1,595 6.1 2,053 7.5 2,102 6.9

PFIC QEF inclusions

570 2.2 — — — —

Puerto Rico income tax exclusion

( 48 ) ( 0.2 ) — — — —

Rate differential on net operating loss carryback claim — — — — 290 1.0

2 unchanged sentences

Total federal income tax expense (benefit) $ 1,737 6.6 % $ 1,370 5.0 % $ ( 42,201 ) ( 138.4 ) %

December 31, 2022 | 10-K 99

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense (benefit) consists of:

1 unchanged sentence

(In thousands)

2023 2022 2021

Income tax expense (benefit):

3 unchanged sentences

Total income tax expense (benefit) $ 1,737 1,370 ( 42,201 )

December 31, 2023 | 10-K 109

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of deferred federal income taxes are as follows:

15 unchanged sentences

DAC, COIA and intangible assets ( 11,556 ) ( 10,274 )

Future policy benefit reserves — ( 1,756 )

Unrealized gains on investments available-for-sale ( 322 ) —

3 unchanged sentences

Total gross deferred tax liabilities ( 15,303 ) ( 16,406 )

Net deferred tax asset (liability) $ 2,414 ( 15,456 )

December 31, 2022 | 10-K 100

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net deferred tax liability $ ( 1,102 ) ( 3,653 )

A summary of the changes in the components of deferred federal and state income taxes is as follows:

5 unchanged sentences

Change in valuation allowance ( 230 ) ( 4,238 )

Effects of unrealized gains on DAC, COIA and reserves 462 244

Effects of unrealized gains (losses) on reserves

1,217 ( 24,795 )

Balance December 31, $ ( 1,102 ) ( 3,653 )

The Company and our subsidiaries have net operating loss carryforwards of $ 0.9 million at December 31, 2022.

The Company and our subsidiaries have no net operating loss carryforwards at December 31, 2023.

The Company and our subsidiaries have capital loss carryforwards of $ 1.6 million at December 31, 2023, which begin expiring in 2026.

At December 31, 2022, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety.

Thus, the Company holds a $ 4.2 million valuation allowance in other comprehensive income (loss) at December 31, 2022.

We did not hold any valuation allowances at December 31, 2021.

December 31, 2023 | 10-K 110

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2023 and 2022, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety.

Thus, the Company holds valuation allowances of $ 4.5 million and $ 4.2 million in other comprehensive income (loss) at December 31, 2023 and 2022.

The Company recognizes only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority.

2 unchanged sentences

(In thousands)

Balance at January 1, $ 2,156 45,990

Additions for tax positions of prior years — —

2023 2022 2021

Balance January 1,

$ 971 2,156 45,990

Reductions for tax positions of prior years ( 971 ) ( 1,185 ) ( 43,834 )

Balance December 31, $ — 971 2,156

This unrecognized tax benefit is reported net in current federal income tax payable on the consolidated balance sheets.

This unrecognized tax benefit was reported in the balance of current federal income tax payable on the consolidated balance sheets.

Included in these amounts are interest expense of $ 0.2 million and $ 0.4 million with respect to unrecognized tax benefits as of December 31, 2022 and 2021, respectively.

The Company’s unrecognized tax benefits at December 31, 2022 would affect the effective tax rate if recognized.

The Company accrued an uncertain tax position of $ 2.2 million at December 31, 2021.

However, the Company released $ 1.2 million of this uncertain tax position, including interest, during the fourth quarter of 2022 following the expiration of the statute of limitations on the tax year ended December 31, 2018.

The Company believes it is reasonably possible that the remaining uncertain tax benefits will decrease within the next twelve months.

There are no unrecognized tax benefits remaining as of December 31, 2023.

The Company accrued an uncertain tax position of $ 1.0 million and $ 2.2 million at December 31, 2022 and 2021, respectively, which would have affected the effective tax rate if recognized.

However, the Company released all of the remaining uncertain tax positions, including interest, during the fourth quarter of 2023 following the expiration of the statute of limitations on the tax year ended December 31, 2019.

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.

In the consolidated statements of operations and comprehensive income (loss), the amount of interest income recorded was $ 0.2 million and $ 9.5 million for the years ended December 31, 2022 and 2021, respectively.

December 31, 2022 | 10-K 101

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In the consolidated statements of operations and comprehensive income (loss), the amount of interest income recorded was $ 0.2 million, $ 0.2 million and $ 9.5 million for the years ended December 31, 2023, 2022 and 2021, respectively.

The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in response to the COVID-19 pandemic.

2 unchanged sentences

As of December 31, 2023, the Company has an accrued tax refund remaining of $ 1.5 million.

The Consolidated Appropriations Act was enacted on December 27, 2020 and the American Rescue Plan Act of 2021 was enacted March 11, 2021.

The American Rescue Plan Act of 2021 was enacted March 11, 2021 and the Inflation Reduction Act was enacted on August 16, 2022.

These Acts did not have a material impact on the Company's financial statements.

2 unchanged sentences

CICA Life Insurance Company of America

Citizens National Life Insurance Company

Magnolia Guaranty Life Insurance Company

8 unchanged sentences

Our subsidiaries are subject to examination by U.S.

tax authorities for tax years 2014 - 2016 and 2019 - 2021.

tax authorities for tax years ending after December 31, 2019.

December 31, 2023 | 10-K 111

T a b l e o f C o n t e n t s

CITIZENS, INC.

1 unchanged sentence

(12) 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% in 2022 and 2021, as indicated below.

The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% for domestic entities and 4 % for Puerto Rican entities as indicated below.

(In thousands) Amount Tax Effect Total

2 unchanged sentences

Unrealized holding gains (losses) arising during the period $ 50,894 971 51,865

Reclassification adjustment for (gains) losses included in net income 104 ( 22 ) 82

Effects on DAC 1,416 ( 296 ) 1,120

Effects on COIA 623 ( 131 ) 492

Effects on unearned revenue reserves ( 4,235 ) 889 ( 3,346 )

Change in tax valuation allowance — ( 4,238 ) ( 4,238 )

Reclassification adjustment for (gains) losses included in net income (loss)

756 ( 159 ) 597

Unrealized holding gains (losses), net

51,650 812 52,462

Change in current discount rate for liability for future policy benefits

( 34,790 ) 1,217 ( 33,573 )

Other comprehensive income (loss) $ 16,860 2,029 18,889

2 unchanged sentences

Unrealized holding gains (losses) arising during the period $ ( 328,673 ) 17,555 ( 311,118 )

Reclassification adjustment for (gains) losses included in net income ( 243 ) 51 ( 192 )

Effects on DAC 37,679 ( 8,938 ) 28,741

Effects on COIA 276 ( 58 ) 218

Effects on unearned revenue reserves ( 1,887 ) 396 ( 1,491 )

Reclassification adjustment for (gains) losses included in net income (loss)

104 ( 22 ) 82

Unrealized holding gains (losses), net

( 328,569 ) 17,533 ( 311,036 )

Change in current discount rate for liability for future policy benefits

337,776 ( 24,795 ) 312,981

Other comprehensive income (loss) $ 9,207 ( 7,262 ) 1,945

Year ended December 31, 2021:

Unrealized gains (losses):

Unrealized holding gains (losses) arising during the period $ ( 41,123 ) 3,084 ( 38,039 )

Reclassification adjustment for (gains) losses included in net income (loss)

( 243 ) 51 ( 192 )

Unrealized holding gains (losses), net

( 41,366 ) 3,135 ( 38,231 )

Change in current discount rate for liability for future policy benefits

92,396 ( 4,584 ) 87,812

Other comprehensive income (loss) $ 51,030 ( 1,449 ) 49,581

(13) STOCK COMPENSATION

2 unchanged sentences

The RSUs granted to the directors vest one year from the date of the annual shareholders meeting, subject to continued service on the Board.

RSUs to the executive management team are subject to achieving performance goals and once the goals are met, RSUs are awarded.

RSUs granted to the executive management team are subject to achieving performance goals and once the goals are met, RSUs are awarded.

These awarded RSUs have a time-based vesting component of three years , subject to continued employment.

2 unchanged sentences

December 31, 2023 | 10-K 112

T a b l e o f C o n t e n t s

CITIZENS, INC.

4 unchanged sentences

Outstanding at December 31, 2020

190 $ 6.03 0.88 $ 1,142

Granted 178 5.83 1,040

6 unchanged sentences

Outstanding at December 31, 2022 266 4.65 1.61 1,236

Granted 464 3.03 1,409

Vested 148 4.56 673

Forfeited 8 4.47 37

Outstanding at December 31, 2023 574 $ 3.37 1.63 $ 1,935

(1) Fair value per share of restricted stock units was equal to Grant Date fair value per share, which was calculated based on the closing price of the Company's Class A common stock on the NYSE on the grant date, in accordance with ASC Topic 718.

As of December 31, 2022, we recognized $ 0.6 million of expense, while $ 0.8 million was unrecognized and is expected to be amortized up to three years .

As of December 31, 2023, we recognized $ 0.9 million of expense, while $ 1.3 million was unrecognized and is expected to be amortized up to two years .

Restricted stock unit awards give the participant the right to receive common stock in the future, subject to certain restrictions and a risk of forfeiture.

Forfeitures are recognized in the period they occur.

Compensation expense of $ 0.5 million and $ 0.6 million was recognized in 2022 and 2021, respectively, related to these awards.

Compensation expense of $ 0.6 million, $ 0.5 million and $ 0.6 million was recognized in 2023, 2022 and 2021, respectively, related to these awards.

(14) BENEFIT PLANS

6 unchanged sentences

Voluntary contributions are made by employees and the Company provides a matching contribution based upon the employee's level of contribution.

The Company's expense was $ 0.7 million in both 2022 and 2021.

The Company's expense was $ 0.8 million in 2023 and $ 0.7 million in both 2022 and 2021.

The Company is primarily self-insured for employee health benefits.

2 unchanged sentences

If more claims are made than were estimated or if the costs of actual claims increase beyond what was anticipated, reserves recorded may not be sufficient and additional accruals may be required in future periods.

(13) RELATED PARTY TRANSACTIONS

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

We perform an expense study on an annual basis, utilizing an enterprise-wide time study, and we adjust cost allocations among entities as needed based upon this review.

Any allocation changes are reflected in the segment operations, but do not impact consolidated expenses.

December 31, 2023 | 10-K 113

T a b l e o f C o n t e n t s

CITIZENS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

no changes related to these relationships during the year ended December 31, 2022 and no additional related party transactions.

(15) RELATED PARTY TRANSACTIONS

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

We perform an expense study on an annual basis, utilizing an enterprise-wide time study, and we adjust cost allocations among entities as needed based upon this review.

Any allocation changes are reflected in the segment operations, but do not impact consolidated expenses.

There were no changes related to these relationships during the year ended December 31, 2023 and no additional related party transactions.

(16) QUARTERLY FINANCIAL INFORMATION (Unaudited)

10 unchanged sentences

Basic earnings (losses) per share of Class A common stock 0.21 0.06 0.12 0.10

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

Diluted earnings (losses) per share of Class A common stock 0.21 0.05 0.12 0.10

Diluted earnings (losses) per share of Class B common stock — — — —

Revenues $ 67,257 56,176 53,734 55,357

4 unchanged sentences

Basic earnings (losses) per share of Class A common stock 0.27 0.07 0.05 0.13

Basic earnings (losses) per share of Class B common stock 0.36 — 0.05 ( 0.04 )

Diluted earnings (losses) per share of Class A common stock 0.27 0.06 0.05 0.13

Diluted earnings (losses) per share of Class B common stock 0.36 — 0.05 ( 0.04 )

(17) SUBSEQUENT EVENTS

12 unchanged sentences

Equity securities, at fair value 23 770

Mortgage loans on real estate — 1,000

Short-term investments — 1,241

12 unchanged sentences

Class B 3,184 3,184

Accumulated deficit ( 52,203 ) ( 45,565 )

Retained earnings

42,150 16,308

Unrealized investment gains (losses) on securities held by parent and subsidiaries, net of tax ( 118,155 ) ( 137,044 )

3 unchanged sentences

(1) Eliminated in consolidation.

Negative amount due to unrealized losses on fixed maturity securities during at December 31, 2022.

Note to Schedule II :

Citizens, Inc.'s investments in consolidated subsidiaries are stated at cost plus equity in undistributed income of consolidated subsidiaries and unrealized gains (losses) on investments held by consolidated subsidiaries.

The Company includes in its Statement of Operations and Comprehensive Income (Loss) dividends from its subsidiaries and equity in income (loss) of consolidated subsidiaries, which represents the net income (loss) of each of its wholly-owned subsidiaries.

The Company includes in its statements of operations and comprehensive income (loss) dividends from its subsidiaries and equity in income (loss) of consolidated subsidiaries, which represents the net income (loss) of each of its wholly-owned subsidiaries.

December 31, 2023 | 10-K 115

8 unchanged sentences

(In thousands)

2023 2022 2021

Comprehensive Income (Loss):

15 unchanged sentences

Total comprehensive income (loss)

$ 43,326 27,952 122,287

(1) Eliminated in consolidation.

1 unchanged sentence

December 31, 2023 | 10-K 116

8 unchanged sentences

(In thousands)

2023 2022 2021

Cash flows from operating activities:

25 unchanged sentences

Purchases of short-term investments — ( 1,250 ) —

Maturities of short-term investments 750 — —

Sales of short-term investments

Net cash provided by (used in) investing activities 9,773 3,023 23,059

2 unchanged sentences

Acquisition of treasury stock ( 919 ) ( 2,705 ) ( 9,090 )

Capital contribution to subsidiary ( 4,850 ) — —

Other ( 60 ) ( 118 ) ( 456 )

5 unchanged sentences

December 31, 2023 | 10-K 117

41 unchanged sentences

Total premiums $ 176,973 3,333 74 173,714 — %

Year ended December 31, 2021:

Life insurance in force $ 4,627,509 465,954 4,366 4,165,921 0.1 %

Life insurance $ 171,567 1,850 84 169,801

Accident and health insurance 1,255 5 — 1,250

Property insurance 5,984 2,307 — 3,677

Total premiums $ 178,806 4,162 84 174,728 — %

December 31, 2023 | 10-K 119

14 unchanged sentences

Shields, effective as of January 1, 2022 (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on December 21, 2021)

Amendment to Executive Employment Agreement by and between Citizens, Inc.

and Gerald W.

Shields, effective as of January 1, 2024 (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on November 15, 2023)

Credit Agreement between the Company and Regions Bank dated May 5, 2021 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 4, 2021)

1 unchanged sentence

as obligor, and Regions Bank, as lender (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on August 4, 2021)

Form of Executive Change in Leadership Agreement entered into on November 3, 2023, by and between the Company and each of the following Named Executive Officers:

Conklin, Sheryl Kinlaw, Robert M.

Mauldin III and Harvey J.L.

Waite (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on November 6, 2023)

C ompensation Recovery P olicy

Subsidiaries of the Registrant

3 unchanged sentences

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

December 31, 2023 | 10-K 120

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

December 31, 2022 | 10-K 111

101.INS XBRL Instance Document

7 unchanged sentences

* Filed herewith.

FORM 10-K SUMMARY

December 31, 2023 | 10-K 121

18 unchanged sentences

/s/ Christopher W.

Claus /s/ Dr.

Claus /s/ Cynthia H.

Christopher W.

Claus, Director Dr.

Sloan, Jr., Director

Maness /s/ Cynthia H.

Maness, Director Cynthia H.

Claus, Director Cynthia H.

Davis, Director

Maness /s/ Mary Taylor

Maness, Director Mary Taylor, Director

/s/ Francis A.

Keating II /s/ Mary Taylor

Keating II, Director Mary Taylor, Director

Keating II /s/ J.

Keating II, Director J.

Keith Morgan, Director

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-K

Item 9A. Controls and Procedures