CITIZENS, INC. 10-K

Item 9A. CONTROLS AND PROCEDURES (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2023, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2023 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and such information is accumulated and reported to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding disclosure. (b) MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. 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. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management evaluated the design and operating effectiveness of internal control over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management concluded that our internal control over financial reporting as of December 31, 2023 was effective. December 31, 2023 | 10-K 55 Table of Contents 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. (c) ATTESTATION REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Citizens, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Citizens, Inc. (a Colorado corporation) and subsidiaries (the “Company”) 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"). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated March 14, 2024, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may December 31, 2023 | 10-K 56 Table of Contents CITIZENS, INC. become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Miami, Florida March 14, 2024 (d) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. 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.” Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. December 31, 2023 | 10-K 57 Table of Contents CITIZENS, INC. PART III The information in this Part III indicated below is incorporated by reference from other sections of this Annual Report on Form 10-K or from our definitive proxy statement pursuant to General Instruction G(3) of Form 10-K. We plan to file our definitive proxy statement for our 2024 annual meeting of shareholders within 120 days after December 31, 2023. Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Item 10 of this Annual Report on Form 10-K incorporates by reference the information in the sections entitled "Corporate Governance," "Audit Matters," "Directors" and "Executive Officers" in our Proxy Statement. Item 11. EXECUTIVE COMPENSATION Item 11 of this Annual Report on Form 10-K incorporates by reference the information in the sections entitled "Directors - Director Compensation," "Executive Compensation" and "Board Matters - Compensation Committee Interlocks and Insider Participation" in our Proxy Statement. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Item 12 of this Annual Report on Form 10-K incorporates by reference the information in the sections entitled "Security Ownership of Directors and Management" and "Security Ownership of Certain Beneficial Owners" in our Proxy Statement. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information regarding securities authorized for issuance under our equity compensation plan, the Citizens, Inc. Omnibus Incentive Plan, as of December 31, 2023. See Note 13. Stock Compensation in the notes to our consolidated financial statements for additional information regarding our Omnibus Incentive Plan. Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining for future issuance under equity compensation plans Equity compensation plans approved by security holders 573,978 $ 3.37 2,234,569 Equity compensation plans not approved by security holders — — — Total 573,978 $ 3.37 2,234,569 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Item 13 of this Annual Report on Form 10-K incorporates by reference the information in the sections entitled "Board Matters - Director Independence" and "Board Matters - Certain Relationships and Related Party Transactions" in our Proxy Statement. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Item 14 of this Annual Report on Form 10-K incorporates by reference the information in the section entitled "Audit Matters" in our Proxy Statement. December 31, 2023 | 10-K 58 Table of Contents CITIZENS, INC. PART IV Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this Report (1) and (2) Financial Statements and Schedules The financial statements and schedules listed on the following index to financial statements and financial statement schedules are filed under Item 8 as part of this Form 10-K. Index to Consolidated Financial Statements and Financial Statement Schedules Page Reference Report of Independent Registered Public Accounting Firm (PCAOB ID: 248 ) 60 Financial Statements at December 31, 2023 and 2022 and for the Years Ended December 31, 2023, 2022 and 2021: Consolidated Balance Sheets 62 Consolidated Statements of Operations and Comprehensive Income (Loss) 64 Consolidated Statements of Stockholders' Equity 65 Consolidated Statements of Cash Flows 66 Notes to Consolidated Financial Statements N ote 1: Summary of Significant Accounting 68 N ote 2: Investments 78 N ote 3: Fair Value Measurements 83 Note 4: Deferred Policy Acquisition Costs & Cost of Insurance Acquired 87 N ote 5: Policyholders ' Liabilities 90 Note 6: Policy Claim Liabilit y and Short Duration Contr acts 97 Note 7: Reinsurance 99 Note 8: Commitment s and Contingencies 100 Note 9: Stockholders' Equity and Restrictions 101 Note 10: Segment and Other Operating In formation 104 Note 11: Income Taxes 108 Note 12: Other Comprehensive Income (Loss) 112 Note 13: Stock Compensation 112 Note 14: Benefit Plans 113 Note 1 5: Related Party Transactions 114 Note 16: Quarterly Fi nancial Informa t i on (Unaudited) 114 Note 17: Subsequent Events 114 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 115 Schedule III – Consolidated Supplementary Insurance Information 118 Schedule IV – Consolidated Statement of Reinsurance 119 All other schedules have been omitted because the required information is inapplicable or the information required is presented in the consolidated financial statements or the notes thereto filed elsewhere herein. (3) Exhibits See the Index of Exhibits . December 31, 2023 | 10-K 59 Table of Contents CITIZENS, INC. Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Citizens, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Citizens, Inc. (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 These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. December 31, 2023 | 10-K 60 Table of Contents CITIZENS, INC. 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 We have served as the Company’s auditor since 2021. Miami, Florida March 14, 2024 December 31, 2023 | 10-K 61 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets December 31, (In thousands) 2023 2022 Assets: Investments: Fixed maturity securities available-for-sale, at fair value (amortized cost: $ 1,389,038 and $ 1,381,318 in 2023 and 2022, respectively) $ 1,238,981 1,179,619 Equity securities, at fair value 5,282 11,590 Policy loans 75,359 78,773 Other long-term investments (portion measured at fair value $ 82,460 and $ 66,846 in 2023 and 2022, respectively) 82,725 69,558 Short-term investments — 1,241 Total investments 1,402,347 1,340,781 Cash and cash equivalents 26,997 22,973 Accrued investment income 17,360 17,131 Reinsurance recoverable 3,991 4,560 Deferred policy acquisition costs 175,768 162,927 Cost of insurance acquired 10,043 10,647 Federal income tax receivable 1,546 601 Property and equipment, net 11,809 12,926 Due premiums 11,264 11,829 Other assets (less allowance for losses of $ 408 and $ 347 in 2023 and 2022, respectively) 7,803 6,328 Total assets $ 1,668,928 1,590,703 See accompanying Notes to Consolidated Financial Statements. December 31, 2023 | 10-K 62 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets December 31, continued (In thousands, except share amounts) 2023 2022 Liabilities and Stockholders' Equity: Liabilities: Policy liabilities: Future policy benefit reserves: 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 Dividend accumulations 44,960 41,663 Premiums paid in advance 32,446 36,384 Policy claims payable 6,637 9,884 Other policyholders' funds 7,363 7,501 Total policyholders' funds 224,622 216,854 Total policy liabilities 1,454,764 1,416,268 Commissions payable 3,445 1,967 Deferred federal income tax liability, net 1,102 3,653 Other liabilities 37,488 41,025 Total liabilities 1,496,799 1,462,913 Commitments and contingencies (Notes 7 and 8 ) Stockholders' Equity: Common stock: Class A, no par value, 100,000,000 shares authorized, 53,882,661 and 53,758,176 shares issued and outstanding as of December 31, 2023 and 2022, respectively, including shares in treasury of 4,327,810 and 3,935,581 as of December 31, 2023 and 2022 268,675 268,147 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 3,184 3,184 Retained earnings 42,150 16,309 Accumulated other comprehensive income (loss) ( 118,155 ) ( 137,044 ) Treasury stock, at cost ( 23,725 ) ( 22,806 ) Total stockholders' equity 172,129 127,790 Total liabilities and stockholders' equity $ 1,668,928 1,590,703 See accompanying Notes to Consolidated Financial Statements. December 31, 2023 | 10-K 63 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (Loss) Years Ended December 31, (In thousands, except share amounts) 2023 2022 2021 Revenues: Premiums: Life insurance $ 164,609 167,586 169,801 Accident and health insurance 1,637 1,278 1,250 Property insurance 793 4,850 3,677 Net investment income 69,254 65,426 61,495 Investment related gains (losses), net 760 ( 10,291 ) 10,991 Other income 3,627 3,675 3,332 Total revenues 240,680 232,524 250,546 Benefits and Expenses: Insurance benefits paid or provided: Claims and surrenders 135,993 119,935 119,735 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 Total insurance benefits paid or provided 140,371 133,636 137,122 Commissions 39,241 36,222 35,463 Other general expenses 47,131 45,177 43,370 Capitalization of deferred policy acquisition costs ( 28,301 ) ( 24,899 ) ( 22,740 ) Amortization of deferred policy acquisition costs 15,460 14,390 13,445 Amortization of cost of insurance acquired 604 621 757 Goodwill impairment — — 12,624 Total benefits and expenses 214,506 205,147 220,041 Income (loss) before federal income tax 26,174 27,377 30,505 Federal income tax expense (benefit) 1,737 1,370 ( 42,201 ) Net income (loss) 24,437 26,007 72,706 Basic Earnings Per Share: Class A common stock $ 0.49 0.52 1.46 Class B common stock — — 0.73 Diluted Earnings Per Share: Class A common stock 0.48 0.51 1.44 Class B common stock — — 0.72 Other Comprehensive Income (Loss): Unrealized gains (losses) on fixed maturity securities: Unrealized holding gains (losses) arising during period 50,894 ( 328,673 ) ( 41,123 ) Reclassification adjustment for losses (gains) included in net income (loss) 756 104 ( 243 ) Unrealized gains (losses) on fixed maturity securities, net 51,650 ( 328,569 ) ( 41,366 ) 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 Total comprehensive income (loss) $ 43,326 27,952 122,287 See accompanying Notes to Consolidated Financial Statements. December 31, 2023 | 10-K 64 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Stockholders' Equity Common Stock Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity (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 Other comprehensive income (loss) — — — 49,581 — 49,581 Total comprehensive income (loss) — — 72,706 49,581 — 122,287 Acquisition of treasury stock — — — — ( 9,090 ) ( 9,090 ) Stock-based compensation 2,692 — — — — 2,692 Balance at December 31, 2021 265,561 3,184 ( 9,698 ) ( 138,989 ) ( 20,101 ) 99,957 Comprehensive income (loss): Net income (loss) — — 26,007 — — 26,007 Other comprehensive income (loss) — — — 1,945 — 1,945 Total comprehensive income (loss) — — 26,007 1,945 — 27,952 Acquisition of treasury stock — — — — ( 2,705 ) ( 2,705 ) Issuance of common stock 2,244 — — — — 2,244 Stock-based compensation 342 — — — — 342 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 Other (2) — — 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. December 31, 2023 | 10-K 65 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended December 31, (In thousands) 2023 2022 2021 Cash Flows from Operating Activities: Net income (loss) $ 24,437 26,007 72,706 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Investment related (gains) losses, net on sales of investments and other assets ( 760 ) 10,291 ( 10,991 ) Net deferred policy acquisition costs ( 12,841 ) ( 10,509 ) ( 9,295 ) Amortization of cost of insurance acquired 604 621 757 Depreciation 515 536 1,140 Amortization of premiums and discounts on investments 4,940 4,240 5,568 Stock-based compensation 588 461 646 Deferred federal income tax expense (benefit) 860 1,923 1,701 Goodwill Impairment — — 12,624 Change in: Accrued investment income ( 229 ) ( 934 ) ( 60 ) Reinsurance recoverable 569 979 214 Due premiums 565 ( 1,081 ) 561 Future policy benefit reserves ( 4,062 ) 4,694 3,890 Other policyholders' liabilities 10,325 7,553 20,247 Federal income tax payable ( 922 ) 161 ( 44,678 ) Commissions payable and other liabilities ( 917 ) 12,652 ( 15,450 ) Other, net ( 1,616 ) ( 674 ) 875 Net cash provided by (used in) operating activities 22,056 56,920 40,455 Cash Flows from Investing Activities: Sales of fixed maturity securities, available-for-sale 29,883 33,914 8,238 Maturities and calls of fixed maturity securities, available-for-sale 29,488 44,493 53,089 Purchases of fixed maturity securities, available-for-sale ( 72,802 ) ( 120,094 ) ( 94,265 ) Sales of equity securities 6,631 500 7,383 Principal payments on mortgage loans 7 1,098 10 Funding of mortgage loans — — ( 1,000 ) Change in policy loans, net 3,414 1,534 3,011 Sales of other long-term investments and real estate 5,394 5,033 24,238 Purchases of other long-term investments ( 17,318 ) ( 25,870 ) ( 40,788 ) Purchases of property and equipment ( 442 ) ( 100 ) ( 1,007 ) Sales of property and equipment — — 14 Maturities of short-term investments 750 — — Sales of short-term investments 499 — — Purchases of short-term investments — ( 1,250 ) — Net cash provided by (used in) investing activities ( 14,496 ) ( 60,742 ) ( 41,077 ) See accompanying Notes to Consolidated Financial Statements. December 31, 2023 | 10-K 66 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended December 31, (In thousands) 2023 2022 2021 Cash Flows from Financing Activities: Annuity deposits $ 7,129 8,626 8,839 Annuity withdrawals ( 9,686 ) ( 8,546 ) ( 7,763 ) Issuance of common stock — 2,244 2,255 Acquisition of treasury stock ( 919 ) ( 2,705 ) ( 9,090 ) Other ( 60 ) ( 118 ) ( 456 ) 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 Cash and cash equivalents at end of year $ 26,997 22,973 27,294 SUPPLEMENTAL DISCLOSURE OF OPERATING ACTIVITIES: 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 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. December 31, 2023 | 10-K 67 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND CONSOLIDATION The accompanying consolidated financial statements of Citizens, Inc. and its wholly-owned subsidiaries have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). 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 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," "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. residents. These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional increasing or decreasing coverage and annuity benefits to enhance accumulations. On August 31, 2023, CICA 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. SIGNIFICANT ACCOUNTING POLICIES INVESTMENTS Investment securities are classified as held-to-maturity ("HTM"), available-for-sale ("AFS") or trading. Management determines the appropriate classification at the time of purchase. The classification of securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. 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 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. The Company does not classify any fixed maturity securities as trading or as HTM. 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 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 December 31, 2023 | 10-K 68 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Changes in the allowance for credit losses are recorded through investment related gains and losses. 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 on 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. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities sold. The Company from time to time may dispose of an impaired security in response to asset/liability management decisions, future market movements, business plan changes, or if the net proceeds can be reinvested at a rate of return that is expected to recover the loss within a reasonable period of time. Policy loans are reported at unpaid principal balances. Other long-term investments consist primarily of investments in limited partnerships, Federal Home Loan Bank ("FHLB") common stock and mortgage loans. We initially estimate the fair value of investments in limited partnerships by reference to the transaction price. Subsequently, we obtain the fair value of these investments from net asset value information provided by the general partner or manager of the investments, the financial statements of which are audited annually. Recognition of investment income on these funds is delayed due to the availability of the related financial statements, which are generally obtained from the partnerships' general partners. As a result, our limited partnerships are generally reported on a three-month delay. 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. Mortgage loans on real estate are reported at unpaid principal balances. The Company had cash equivalents and fixed maturity securities with an aggregate fair value of $ 8.6 million and $ 9.8 million at December 31, 2023 and 2022, respectively, on deposit with various state regulatory authorities to fulfill statutory requirements. SHORT-TERM INVESTMENTS The Company considers investments maturing within one year at acquisition as short-term. These securities are carried at fair value. CASH AND CASH EQUIVALENTS Cash consists of balances on hand and on deposit in banks and financial institutions. Cash equivalents consists of securities whose duration does not exceed 90 days at the date of acquisition. December 31, 2023 | 10-K 69 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) REINSURANCE RECOVERABLE Reinsurance recoverable includes expected reimbursements for policyholder claim amounts in excess of the Company's retention, as well as profit sharing and experience refund accruals. Reinsurance recoverable is reduced for estimated uncollectible amounts, if any. 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 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. Profit-sharing and similar adjustable provisions are accrued based on the experience of the underlying policies. DEFERRED POLICY ACQUISITION COSTS Deferred policy acquisition costs (“DAC”) are costs that are incremental and directly related to the successful acquisition of new or renewal insurance contracts. Such costs include the incremental direct costs of contract acquisition, such as sales commissions; the portion of employees’ total compensation and payroll-related fringe benefits related directly to time spent performing acquisition activities, such as underwriting, issuing and processing policies for contracts that have actually been acquired; and other costs related directly to acquisition activities that would not have been incurred if the contract had not been acquired. Contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. DAC is amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. For the Life Insurance segment, the constant level basis used is policy count in force. For the Home Service Insurance segment, the constant level basis used is face amount in force. The constant level bases used for amortization are projected using mortality and lapse assumptions that are based on the Company’s experience, industry data, and other factors at the end of each reporting period and are consistent with those used for the liability for future policy benefit life reserves. Annually, the Company completes experience studies with respect to mortality and lapse 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 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. 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 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. These annual recoverability tests are based initially on an estimate of the available premium (gross premium less the benefit and expense portion of premium) for the next 50 years. Management believes that our COIA is recoverable for the years ended December 31, 2023 and 2022. This belief is based upon the analysis performed on estimated future results of the block and our annual recoverability testing. December 31, 2023 | 10-K 70 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 %. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill is the difference between the purchase price in a business combination and the fair value of assets and liabilities acquired and is not amortized. Other intangible assets include various state insurance licenses, which have been determined to have indefinite useful lives and, therefore, are not amortized. Both goodwill and other intangible assets with indefinite useful lives are subject to annual impairment analysis. Goodwill is tested for impairment on an annual basis or more frequently if indicators of potential impairment exist. The goodwill testing requires us to compare the estimated fair value of a reporting unit to its carrying value. If the carrying value of the reporting unit is lower than its estimated fair value, no further evaluation is required. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment charge is recorded for that excess, limited to the total amount of goodwill allocated to that reporting unit. We have the option of performing an assessment of certain qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying value or proceeding directly to a quantitative impairment test. 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 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 Property and equipment are carried at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the useful lives of the assets, ranging from three years to thirty years . The following is a summary of property and equipment. December 31, (In thousands) 2023 2022 Property and equipment: Home office, land and buildings $ 3,980 3,980 Furniture and equipment 1,389 1,267 Electronic data processing equipment and computer software 7,800 7,485 Real estate and equipment leases (See Note 8 ) 9,073 10,116 Total property and equipment 22,242 22,848 Accumulated depreciation ( 10,433 ) ( 9,922 ) 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. The Company uses its estimated incremental borrowing rate, which is derived from information available at lease commencement date, in determining the present value of lease payments. FUTURE POLICY BENEFITS AND EXPENSES As premium revenue is recognized, a liability for future policy benefits, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders less the present value of estimated future net premiums to be collected from policyholders, is accrued. The liability is estimated using current assumptions that include December 31, 2023 | 10-K 71 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. Annuity interest crediting rates range from 2.5 % to 5.5 % annually. Benefits and expenses are charged against the account balance to recognize costs as incurred over the estimated lives of the contracts. Expenses include interest credited to contract account balances and benefits paid in excess of contract account balances. Unpaid claims on accident and health and specialty property insurance policies represent the estimated liability for benefit expenses, both reported but not paid and incurred but not reported to the Company. The liability for incurred but not reported claims includes estimates for additional claim amounts due related to reported claims. Liabilities for unpaid claims are estimated using individual case basis valuations and statistical analysis. Those estimates are subject to the effects of trends in claim severity and frequency. Anticipated investment income is not considered in determining whether a premium deficiency exists with respect to short-duration contracts. Premium deposits accrue interest at rates ranging from 1.5 % to 6.0 % per annum. The cost of insurance is included in the premium when collected and interest is credited annually to deposit accounts. 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, 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. Policyholder dividends are accrued over the premium paying periods of the insurance contract. CONTINGENCIES An estimated loss from a contingency is accrued and charged to results of operations only if both of the following conditions are met: 1. Information available prior to the issuance of the consolidated financial statements indicates that it is probable (virtual certainty is not required) that an asset has been impaired or a liability incurred as of the date of the consolidated financial statements; and 2. The amount of the loss can be reasonably estimated. Reasonable estimation of a possible loss does not require estimating a single amount of the loss. It requires that a loss be accrued if it can be estimated within a range. If an amount within the range is a better estimate than any other amount within the range, that amount is accrued. If no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued. A gain contingency is an uncertain situation that will be resolved in the future, possibly resulting in a gain. We do not allow the recognition of a gain contingency prior to settlement of the underlying event. There were none as of December 31, 2023 and 2022. PREMIUM REVENUE AND RELATED EXPENSES Premiums on life policies are recognized as earned when due. Premiums paid in advance on the consolidated balance sheets are held on deposit and accrue interest at rates ranging from 1.5 % to 6.0 % until such time as the premiums become due. Premiums on accident and health policies are recognized as revenue over the contract period on a pro rata basis. 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 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. Premium receipts are not reported as revenue, rather as deposit liabilities to annuity contracts. 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. INCOME TAXES 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. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered. 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 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 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 The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. 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. RECLASSIFICATIONS Certain amounts presented in prior years have been reclassified to conform to the current presentation. ACCOUNTING PRONOUNCEMENTS 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. 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Consolidated Liability for Future Policy Benefits Pre-adoption liability as of 12/31/2020 $ 987,373 255,513 1,242,886 Change in discount rate assumptions 261,823 108,468 370,291 Effect of reserve changes 6 96 102 Post-adoption liability as of 1/1/2021 $ 1,249,202 364,077 1,613,279 Fixed Annuity Liability Pre-adoption liability as of 12/31/2020 $ 60,027 18,277 78,304 Adjustments for the removal of shadow adjustments — 3,426 3,426 Post-adoption liability as of 1/1/2021 $ 60,027 21,703 81,730 Deferred Acquisition Costs Pre-adoption balance as of 12/31/2020 $ 94,771 10,142 104,913 Adjustments for the removal of shadow adjustments 8,270 29,905 38,175 Impact of flooring cohorts at zero 23 12 35 Post adoption balance as of 1/1/2021 $ 103,064 40,059 143,123 Cost of Insurance Acquired Pre-adoption balance as of 12/31/2020 $ 1,734 9,807 11,541 Adjustments for the removal of shadow adjustments — 484 484 Post adoption balance as of 1/1/2021 $ 1,734 10,291 12,025 At transition, the Company recorded a charge of $ 0.1 million to retained earnings, net of tax, primarily from capping net premium ratios for certain policyholder benefit cohorts at 100%, increasing reserves for certain non-premium paying cohorts and flooring certain DAC cohorts at zero. Other comprehensive income (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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Year Ended December 31, 2022 Year Ended 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year Ended December 31, 2022 Year Ended 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. 2022-03, Fair Value Measurement (Topic 820: Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This standard clarifies that contractual restrictions on equity security sales are not considered part of the security unit of account and, therefore, are not considered in measuring fair value. In addition, the amendments clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. Disclosures on such restrictions are also required. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and are required to be applied prospectively, with any adjustments from the adoption recognized in earnings and disclosed. Early adoption is available. 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (2) INVESTMENTS The Company invests primarily in fixed maturity securities, which totaled 86.7 % of total cash and invested assets at December 31, 2023. Carrying Value as of December 31, (In thousands, except for %) 2023 % 2022 % Cash and invested assets: Fixed maturity securities $ 1,238,981 86.7 % $ 1,179,619 86.5 % Equity securities 5,282 0.4 11,590 0.8 Policy loans 75,359 5.3 78,773 5.8 Other long-term investments 82,725 5.8 69,558 5.1 Short-term investments — — 1,241 0.1 Cash and cash equivalents 26,997 1.8 22,973 1.7 Total cash and invested assets $ 1,429,344 100.0 % $ 1,363,754 100.0 % 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. December 31, 2023 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed maturity securities: Available-for-sale: U.S. Treasury securities $ 5,983 127 48 6,062 U.S. Government-sponsored enterprises 3,404 250 1 3,653 States and political subdivisions 314,203 2,160 29,132 287,231 Corporate: Financial 266,485 2,066 31,255 237,296 Consumer 250,672 2,145 37,094 215,723 Utilities 123,625 615 20,253 103,987 Energy 73,808 64 8,049 65,823 All other 185,153 956 21,331 164,778 Commercial mortgage-backed 171 — — 171 Residential mortgage-backed 107,174 9 10,060 97,123 Asset-backed 58,360 290 1,516 57,134 Total fixed maturity securities $ 1,389,038 8,682 158,739 1,238,981 December 31, 2023 | 10-K 78 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2022 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed maturity securities: Available-for-sale: U.S. Treasury securities $ 9,425 152 9 9,568 U.S. Government-sponsored enterprises 3,434 277 1 3,710 States and political subdivisions 344,208 1,114 37,964 307,358 Corporate: Financial 243,758 512 42,383 201,887 Consumer 247,824 758 47,138 201,444 Utilities 115,738 39 23,790 91,987 Energy 76,065 — 11,395 64,670 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 Asset-backed 45,991 18 2,767 43,242 Foreign governments 100 1 — 101 Total fixed maturity securities $ 1,381,318 3,563 205,262 1,179,619 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, (In thousands) 2023 2022 Equity securities: Stock mutual funds $ — 2,615 Bond mutual funds 740 4,337 Common stock 665 857 Non-redeemable preferred stock 7 8 Non-redeemable preferred stock fund 3,870 3,773 Total equity securities $ 5,282 11,590 VALUATION OF INVESTMENTS AFS fixed maturity securities are reported in the consolidated financial statements at fair value. Equity securities are measured at fair value with the change in fair value recorded through net income (loss). The Company recognized net investment related losses of $ 0.2 million and $ 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. The Company evaluates whether a credit impairment exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. 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, December 31, 2023 | 10-K 79 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 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. Any credit losses are presented as an allowance rather than as a write-down on AFS fixed maturity securities management does not intend to sell or believes that it is more likely than not we will be required to sell. The Company recorded no credit valuation losses on fixed maturity securities for the years ended December 31, 2023 and 2022. 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 (In thousands, except for # of securities) Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fixed maturity securities: Available-for-sale securities: U.S. Treasury securities $ 1,203 40 5 65 8 2 1,268 48 7 U.S. Government-sponsored enterprises 221 1 1 — — — 221 1 1 States and political subdivisions 19,540 357 35 164,264 28,775 192 183,804 29,132 227 Corporate: Financial 12,584 383 19 176,521 30,872 217 189,105 31,255 236 Consumer 10,175 265 16 176,725 36,829 223 186,900 37,094 239 Utilities 3,596 66 20 85,169 20,187 137 88,765 20,253 157 Energy 3,291 57 1 59,392 7,992 76 62,683 8,049 77 All Other 7,864 185 10 141,865 21,146 169 149,729 21,331 179 Residential mortgage-backed 849 38 5 95,806 10,022 86 96,655 10,060 91 Asset-backed 4,757 111 8 32,764 1,405 40 37,521 1,516 48 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2022 Less than 12 months Greater than 12 months Total (In thousands, except for # of securities) Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fixed maturity securities: Available-for-sale securities: U.S. Treasury securities $ — — — 64 9 2 64 9 2 U.S. 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 Corporate: Financial 182,447 39,122 237 6,144 3,261 16 188,591 42,383 253 Consumer 164,224 34,823 220 23,417 12,315 30 187,641 47,138 250 Utilities 73,483 15,959 152 16,413 7,831 18 89,896 23,790 170 Energy 59,053 9,601 75 5,617 1,794 8 64,670 11,395 83 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 Asset-backed 37,067 2,485 41 4,264 282 9 41,331 2,767 50 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 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. The unrealized losses on fixed maturity securities detailed in the previous tables are due to noncredit-related factors, including widening credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of our investments, hence they are not recognized as credit losses. The fair value is expected to recover as the securities approach maturity or if market yields for such investments decline. The amortized cost and fair value of fixed maturity securities at December 31, 2023 by contractual maturity are shown in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date have been reflected based upon final stated maturity. (In thousands) Amortized Cost Fair Value Fixed maturity securities: Due in one year or less $ 11,055 11,017 Due after one year through five years 122,681 121,443 Due after five years through ten years 296,313 290,023 Due after ten years 958,989 816,498 Total fixed maturity securities $ 1,389,038 1,238,981 There were no investments that were non-income producing for the years ended December 31, 2023 or 2022. December 31, 2023 | 10-K 81 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Major categories of net investment income are summarized as follows: Years ended December 31, (In thousands) 2023 2022 2021 Gross investment income: Fixed maturity securities $ 60,127 58,400 55,579 Equity securities 630 650 1,024 Policy loans 6,011 6,189 6,420 Other long-term investments 4,509 2,535 809 Other 576 246 54 Total investment income 71,853 68,020 63,886 Investment expenses ( 2,599 ) ( 2,594 ) ( 2,391 ) Net investment income $ 69,254 65,426 61,495 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. Years ended December 31, (In thousands) 2023 2022 2021 Fixed maturity securities, available-for-sale: Proceeds $ 29,883 33,914 8,238 Gross realized gains 53 120 189 Gross realized losses 602 112 1 Equity securities: Proceeds $ 6,631 500 7,383 Gross realized gains 568 44 — Gross realized losses 55 — 149 Investment related gains (losses) are as follows: Years ended December 31, (In thousands) 2023 2022 2021 Investment related gains (losses): Sales, calls and maturities: Fixed maturity securities $ ( 756 ) ( 104 ) 243 Equity securities 513 62 ( 152 ) Real estate — — 981 Property and equipment — — 13 Other long-term investments 342 2,320 1,892 Investment related gains (losses) 99 2,278 2,977 Change in fair value of equity securities ( 190 ) ( 2,665 ) 376 Change in fair value of limited partnerships 912 ( 9,667 ) 7,452 Change in credit loss allowance ( 61 ) ( 237 ) 186 Net investment related gains (losses) $ 760 ( 10,291 ) 10,991 December 31, 2023 | 10-K 82 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. The facility was owned by Citizens and was held in Other Non-Insurance Enterprises. (3) FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through 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 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. All assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three categories: • Level 1 - Quoted prices for identical instruments in active markets. • Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs or whose significant value drivers are observable. • Level 3 - Instruments whose significant value drivers are unobservable. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments. Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes. These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments. All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities. Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information. We have no investments in this category. December 31, 2023 | 10-K 83 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables set forth our assets that are measured at fair value on a recurring basis. December 31, 2023 (In thousands) Level 1 Level 2 Level 3 Total Fair Value Financial assets: Fixed maturity securities, available-for-sale: U.S. Treasury and U.S. Government-sponsored enterprises $ 6,062 3,653 — 9,715 States and political subdivisions — 287,231 — 287,231 Corporate 43 787,564 — 787,607 Commercial mortgage-backed — 171 — 171 Residential mortgage-backed — 97,123 — 97,123 Asset-backed — 57,134 — 57,134 Total fixed maturity securities available-for-sale 6,105 1,232,876 — 1,238,981 Equity securities: Bond mutual funds 740 — — 740 Common stock 665 — — 665 Non-redeemable preferred stock 7 — — 7 Non-redeemable preferred stock fund 3,870 — — 3,870 Total equity securities 5,282 — — 5,282 Other long-term investments (1) — — — 82,460 Total financial assets $ 11,387 1,232,876 — 1,326,723 (1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. December 31, 2023 | 10-K 84 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2022 (In thousands) Level 1 Level 2 Level 3 Total Fair Value Financial assets: Fixed maturity securities, available-for-sale: U.S. Treasury and U.S. Government-sponsored enterprises $ 9,567 3,711 — 13,278 States and political subdivisions — 307,358 — 307,358 Corporate 44 715,601 — 715,645 Commercial mortgage-backed — 169 — 169 Residential mortgage-backed — 99,826 — 99,826 Asset-backed — 43,242 — 43,242 Foreign governments — 101 — 101 Total fixed maturity securities available-for-sale 9,611 1,170,008 — 1,179,619 Equity securities: Stock mutual funds 2,615 — — 2,615 Bond mutual funds 4,337 — — 4,337 Common stock 857 — — 857 Non-redeemable preferred stock 8 — — 8 Non-redeemable preferred stock fund 3,773 — — 3,773 Total equity securities 11,590 — — 11,590 Other long-term investments (1) — — — 66,846 Total financial assets $ 21,201 1,170,008 — 1,258,055 (1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. FINANCIAL INSTRUMENTS VALUATION FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE Fixed maturity securities, available-for-sale. At December 31, 2023, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 92.9 % of total reported fair value of our financial assets. The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades. In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness. There were no Level 3 assets as of December 31, 2023 and 2022. For the year ended December 31, 2023, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received. Equity securities. Our equity securities are classified as Level 1 assets as their fair values are based upon quoted market prices. Limited partnerships. The Company considers the net asset value ("NAV") to represent the value of the investment fund and is measured by the total value of assets minus the total value of liabilities. The following table includes information related to our investments in limited partnerships that calculate NAV per share. For these investments, which are measured at fair value on a recurring basis, we use the NAV per share to measure fair value. 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2022. These investments are included in other long-term investments on the consolidated balance sheets. December 31, 2023 December 31, 2022 (In thousands, except years) Fair Value Using NAV Per Share Unfunded Commit- ments Range (In years) Fair Value Using NAV Per Share Unfunded Commit- ments Range (In years) Description Limited partnerships: Middle market Investments in privately-originated, performing senior secured debt primarily in North America-based companies $ 34,858 3,452 4 $ 33,234 6,011 5 Global equity fund Investments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth 10,345 — 0 9,037 — 0 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 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 Total limited partnerships $ 82,460 27,299 $ 66,846 28,562 The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the funds are liquidated. The life spans indicated above may be shortened or extended at the fund manager's discretion, typically in one or two-year increments. The global equity fund is redeemable monthly. FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE Estimates of fair values are made at a specific point in time, based on relevant market prices and information about the financial instruments. The estimated fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions. The carrying amount and fair value for the financial assets and liabilities on the consolidated financial statements not otherwise disclosed for the periods indicated were as follows: December 31, 2023 December 31, 2022 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Financial assets: Policy loans $ 75,359 75,359 78,773 78,773 Residential mortgage loans 42 42 49 50 Cash and cash equivalents 26,997 26,997 22,973 22,973 Financial liabilities: Annuity - investment contracts 67,690 63,283 67,344 61,701 Policy loans. Policy loans had a weighted average annual interest rate of 7.7 % at both December 31, 2023 and 2022 and no specified maturity dates. 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 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. The fair value of cash and cash equivalents approximate carrying value and are characterized as Level 1 assets in the fair value hierarchy. Annuity liabilities. The fair value of the Company's liabilities under annuity 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. Other long-term investments. The following table summarizes the carrying amounts of other long-term investments. As of December 31, (In thousands) 2023 2022 Other long-term investments: Limited partnerships $ 82,460 69,294 FHLB common stock 202 193 Mortgage loans 42 49 All other investments 21 22 Total other long-term investments $ 82,725 69,558 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) 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DAC 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) COIA 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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: Year: 2024 $ 647 2025 599 2026 555 2027 515 2028 479 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Plus: 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Insurance Undiscounted: Permanent: 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 Discounted: Permanent: 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 — Less: 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 — Less: 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 — Less: 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 Insurance Permanent: 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table provides the weighted-average interest rates for the liability for future policy benefits. December 31, 2023 December 31, 2022 Life Insurance Home Service Insurance Life Insurance Home Service Insurance Permanent: 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 — — — Less: 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 — — — Less: 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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) 2023 2022 Annuities: Supplemental contracts without life contingencies $ 44,569 32,995 Fixed annuity 87,134 86,807 Unearned revenue reserve 1,513 1,619 Other — 1 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. Years ended December 31, (In thousands) 2023 2022 2021 Policy claims payable: Balance at January 1 $ 9,884 14,590 13,206 Less: reinsurance recoverable 2,070 2,469 3,012 Net balance at January 1 7,814 12,121 10,194 Add claims incurred, related to: Current year 25,630 28,720 32,595 Prior years (1) ( 522 ) ( 46 ) 1,052 25,108 28,674 33,647 Deduct claims paid, related to: Current year 20,786 22,771 23,369 Prior years 6,797 10,210 8,351 27,583 32,981 31,720 Net balance December 31 5,339 7,814 12,121 Plus: reinsurance recoverable 1,298 2,070 2,469 Balance at December 31 $ 6,637 9,884 14,590 (1) This line is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A positive number implies an unfavorable result where claim resolutions were less favorable than assumed while a negative number implies a favorable result compared to assumptions. Our claim assumptions will vary from actual experience in any one period, either favorably or unfavorably. SHORT DURATION CONTRACTS 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 December 31, 2023 | 10-K 97 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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) The following table presents incurred claims development as of December 31, 2023, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts. This information is presented for the last five years as these claims rarely pay out over a longer period of time. 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, ($ In thousands) 2019 2020 2021 2022 2023 Accident Year: (Unaudited) 2019 $ 1,549 1,150 1,161 1,106 1,105 — 610 2020 2,598 2,670 2,577 2,694 — 2,415 2021 2,087 1,644 1,312 2 2,397 2022 1,213 1,262 4 362 2023 776 27 191 Total $ 7,149 The following table presents paid claims development as of December 31, 2023, net of reinsurance. Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance Years Ended December 31, (In thousands) 2019 2020 2021 2022 2023 Accident Year: (Unaudited) 2019 $ 1,166 1,071 1,091 1,105 1,105 2020 1,997 2,639 2,576 2,694 2021 1,435 1,638 1,311 2022 1,011 1,259 2023 755 Total $ 7,124 All outstanding liabilities before 2019, net of reinsurance $ — Liabilities for claims and claim adjustment expenses, net of reinsurance $ 33 December 31, 2023 | 10-K 98 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim adjustment expenses in the consolidated balance sheets are as follows: As of December 31, (In thousands) 2023 2022 Net outstanding liabilities: Special property $ 33 263 Other short duration insurance lines 151 158 Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance 184 421 Reinsurance recoverable on unpaid claims: Special property 1,220 1,275 Other short duration insurance lines 78 798 Total reinsurance recoverable on unpaid claims 1,298 2,073 Insurance lines other than short duration 5,155 7,390 Total gross liability for unpaid claims and claim adjustment expense $ 6,637 9,884 The following is supplementary information to the consolidated financial statements about average historical claims duration as of December 31, 2023. Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited) Years 1 2 3 4 5 Special property 93 % 13 % ( 8 ) % 3 % — % (7) REINSURANCE In the normal course of business, the Company reinsures portions of certain policies that we underwrite to limit disproportionate risks. During 2023 and 2022, we generally retained $ 100,000 on any one individual life insurance policy. The Company also reinsures 100 % of our accidental death benefit rider coverage. 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 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. Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers. We obtain reinsurance from multiple reinsurers, and we monitor concentration as well as financial strength ratings of our principal reinsurers. The ratings by A.M. Best Company range from A- (Excellent) to A+ (Superior). Assumed and ceded life reinsurance activity is summarized as follows: December 31, (In thousands) 2023 2022 Aggregate assumed life insurance in force $ 3,772 4,074 Aggregate ceded life insurance in force $ 619,597 543,496 Net life insurance in force $ 4,306,429 4,257,148 December 31, 2023 | 10-K 99 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's reinsurance recoverable on ceded reinsurance was $ 4.0 million and $ 4.6 million in 2023 and 2022, respectively. 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 ) Net premiums earned 2,633 6,449 5,319 Premiums from long duration contracts: Direct 166,132 169,111 171,175 Assumed 68 74 84 Ceded ( 1,794 ) ( 1,920 ) ( 1,850 ) Net premiums earned 164,406 167,265 169,409 Total premiums earned $ 167,039 173,714 174,728 Claims and surrenders assumed $ 113 151 169 Claims and surrenders ceded $ ( 936 ) ( 1,130 ) ( 11,764 ) During the third quarter of 2021, SPFIC was impacted by Hurricane Ida, the second-most damaging and intense hurricane in Louisiana on record, behind Hurricane Katrina in 2005. 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 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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: 2024 $ 1,499 2025 1,433 2026 1,385 2027 1,403 2028 1,438 After 2028 2,728 Total operating lease liabilities 9,886 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 STOCK 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. 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. In April 2021, we repurchased all of the outstanding Class B common stock and it is now classified as treasury stock. As a result, all of the directors are elected by the holders of the Class A common stock. Citizens has never issued any preferred stock. December 31, 2023 | 10-K 101 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Class A Class B Stock Balance at December 31, 2020 52,654 1,002 3,136 Stock issued under stock investment plan 404 — — Stock issued for compensation 112 — — Acquisition of Class B shares — — 1,002 Balance at December 31, 2021 53,170 1,002 4,138 Stock issued under stock investment plan 475 — — Stock issued for compensation 91 — — Acquisition of Class A shares — — 799 Other share issuance 22 — — Balance at December 31, 2022 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 The following table sets forth the computation of basic and diluted earnings per share. Years ended December 31, (In thousands, except per share amounts) 2023 2022 2021 Net income (loss) $ 24,437 26,007 72,706 Numerator for Basic Earnings Per Share: Net income (loss) allocated to Class A common stock $ 24,437 26,007 72,481 Net income (loss) allocated to Class B common stock — — 225 Net income (loss) $ 24,437 26,007 72,706 Denominator for Basic Earnings Per Share: Weighted average shares of Class A outstanding 49,696 50,139 49,664 Weighted average shares of Class B outstanding — — 308 Total weighted average shares outstanding 49,696 50,139 49,972 Basic earnings (loss) per share of Class A common stock $ 0.49 0.52 1.46 Basic earnings (loss) per share of Class B common stock — — 0.73 Numerator for Diluted Earnings Per Share: Net income (loss) allocated to Class A common stock $ 24,437 26,007 72,484 Net income (loss) allocated to Class B common stock — — 222 Net income (loss) $ 24,437 26,007 72,706 Denominator for Diluted Earnings Per Share: Weighted average shares of Class A outstanding 50,681 50,867 50,337 Weighted average shares of Class B outstanding — — 308 Total weighted average shares outstanding 50,681 50,867 50,645 Diluted earnings (loss) per share of Class A common stock $ 0.48 0.51 1.44 Diluted earnings (loss) per share of Class B common stock — — 0.72 December 31, 2023 | 10-K 102 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 since CICA Domestic is the only subsidiary directly owned by Citizens. All other domestic subsidiaries are owned by CICA Domestic. As of December 31, (In thousands) 2023 2022 Combined statutory capital and surplus: Life insurance operations $ 29,416 35,433 Property insurance operations 5,692 6,912 Total combined statutory capital and surplus $ 35,108 42,345 Years ended December 31, (In thousands) 2023 2022 2021 Combined statutory net income (loss): Life insurance operations $ ( 3,606 ) ( 1,885 ) 5,280 Property insurance operations ( 1,219 ) 1,615 ( 1,512 ) Total combined statutory net income (loss) $ ( 4,825 ) ( 270 ) 3,768 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, 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 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. 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, (In thousands) 2023 2022 CICA Bermuda capital and surplus $ — 61,801 CICA International capital and surplus $ 66,619 — 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) $ 27,484 — — 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 The Company has two reportable segments: Life Insurance and Home Service Insurance. Our Life Insurance segment issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection, and ordinary whole life insurance to non-U.S. residents through CICA International. 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 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 Home Service Insurance segment operates through our subsidiaries SPLIC, MGLIC and SPFIC, and focuses on the life insurance needs of the middle- and lower-income markets, primarily in Louisiana, Mississippi and Arkansas. Our policies are sold and serviced through funeral homes and independent agents who sell policies, collect premiums and service policyholders. Our Home Service Insurance segment also 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. The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S. GAAP and are the same as those described in the summary of significant accounting policies. The Company evaluates profit and loss performance based on U.S. GAAP net income (loss) before federal income taxes for its two reportable segments. The Company's Other Non-Insurance Enterprises represents the only reportable difference between segments and consolidated operations. December 31, 2023 | 10-K 104 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year ended December 31, 2023 (In thousands) Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated Revenues: Premiums: Life insurance $ 121,424 43,185 — 164,609 Accident and health insurance 721 916 — 1,637 Property insurance — 793 — 793 Net investment income (loss) 54,352 13,832 1,070 69,254 Investment related gains (losses), net 301 522 ( 63 ) 760 Other income (loss) 3,605 17 5 3,627 Total revenues 180,403 59,265 1,012 240,680 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 113,428 22,565 — 135,993 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 Total insurance benefits paid or provided 112,162 28,209 — 140,371 Commissions 22,896 16,345 — 39,241 Other general expenses 23,969 16,690 6,472 47,131 Capitalization of deferred policy acquisition costs ( 20,251 ) ( 8,050 ) — ( 28,301 ) Amortization of deferred policy acquisition costs 12,895 2,565 — 15,460 Amortization of cost of insurance acquired 111 493 — 604 Total benefits and expenses 151,782 56,252 6,472 214,506 Income (loss) before federal income tax $ 28,621 3,013 ( 5,460 ) 26,174 December 31, 2023 | 10-K 105 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year ended December 31, 2022 (In thousands) Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated Revenues: Premiums: Life insurance $ 124,156 43,430 — 167,586 Accident and health insurance 497 781 — 1,278 Property insurance — 4,850 — 4,850 Net investment income (loss) 50,680 13,632 1,114 65,426 Investment related gains (losses), net ( 8,826 ) ( 1,277 ) ( 188 ) ( 10,291 ) 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year ended December 31, 2021 (In thousands) Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated Revenues: Premiums: 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 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 91,390 28,345 — 119,735 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 Total insurance benefits paid or provided 106,181 30,941 — 137,122 Commissions 18,747 16,716 — 35,463 Other general expenses 20,846 14,739 7,785 43,370 Capitalization of deferred policy acquisition costs ( 16,174 ) ( 6,566 ) — ( 22,740 ) Amortization of deferred policy acquisition costs 11,536 1,909 — 13,445 Amortization of cost of insurance acquired 150 607 — 757 Goodwill impairment 12,624 — — 12,624 Total benefits and expenses 153,910 58,346 7,785 220,041 Income (loss) before federal income tax $ 31,902 4,173 ( 5,570 ) 30,505 The table below summarizes assets by segment. December 31, (In thousands) 2023 2022 Assets: Segments: Life Insurance $ 1,267,243 1,194,285 Home Service Insurance 359,773 341,671 Total Segments 1,627,016 1,535,956 Other Non-Insurance Enterprises 41,912 54,747 Total assets $ 1,668,928 1,590,703 December 31, 2023 | 10-K 107 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) GEOGRAPHIC INFORMATION The following table sets forth, by country, the Company's annual total of earned premiums from geographic area for the years indicated: Years ended December 31, (In thousands) 2023 2022 2021 Area: United States $ 50,594 54,712 56,000 Colombia 25,453 25,181 24,829 Taiwan 17,760 18,236 19,042 Venezuela 15,143 16,429 17,788 Ecuador 13,379 12,992 13,115 Argentina 9,533 9,251 9,160 Other foreign countries 38,695 40,172 38,871 Net reinsurance ( 3,518 ) ( 3,259 ) ( 4,077 ) Total premiums $ 167,039 173,714 174,728 (11) INCOME TAXES 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 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A reconciliation between the U.S. corporate income tax rate and the effective income tax rate is as follows: Years ended December 31, (In thousands, except for %) 2023 % 2022 % 2021 % Expected tax expense (benefit) $ 5,497 21.0 % $ 5,749 21.0 % $ 6,406 21.0 % Change in valuation allowance — — 1 — — — % Foreign income tax rate differential ( 5,029 ) ( 19.2 ) ( 5,260 ) ( 19.2 ) ( 9,427 ) ( 30.9 ) Tax-exempt interest and dividends-received deduction ( 35 ) ( 0.1 ) ( 63 ) ( 0.2 ) ( 114 ) ( 0.4 ) Adjustment of prior year taxes — — — — ( 83 ) ( 0.3 ) Effect of uncertain tax position ( 971 ) ( 3.7 ) ( 1,185 ) ( 4.3 ) ( 43,834 ) ( 143.7 ) Nondeductible costs to remediate tax compliance issue — — — — ( 176 ) ( 0.6 ) Compensation limitation under 162(m) and 280(g) 80 0.3 67 0.2 ( 21 ) ( 0.1 ) 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 Goodwill impairment — — — — 2,651 8.7 Other 78 0.2 8 — 5 — Total federal income tax expense (benefit) $ 1,737 6.6 % $ 1,370 5.0 % $ ( 42,201 ) ( 138.4 ) % Income tax expense (benefit) consists of: Years ended December 31, (In thousands) 2023 2022 2021 Income tax expense (benefit): Current - normal operations $ 1,848 632 ( 68 ) Current - UTP release impact ( 971 ) ( 1,185 ) ( 43,834 ) Deferred 860 1,923 1,701 Total income tax expense (benefit) $ 1,737 1,370 ( 42,201 ) December 31, 2023 | 10-K 109 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of deferred federal income taxes are as follows: December 31, (In thousands) 2023 2022 Deferred tax assets: Future policy benefit reserves $ 739 — Net operating and capital loss carryforwards 353 388 Accrued policyholder dividends and expenses 218 134 Investments — 113 Deferred intercompany loss 1,780 1,744 Unrealized losses on investments available-for-sale 12,786 11,688 Accrued compensation 379 360 Lease liability 1,895 2,124 Fixed assets 249 237 Other 270 203 Total gross deferred tax assets 18,669 16,991 Less: Valuation allowance 4,468 4,238 Net deferred tax assets 14,201 12,753 Deferred tax liabilities: DAC, COIA and intangible assets ( 11,556 ) ( 10,274 ) Future policy benefit reserves — ( 1,756 ) Unrealized gains on investments available-for-sale ( 322 ) — Tax reserves transition liability ( 1,494 ) ( 2,242 ) Right-of-use lease asset ( 1,895 ) ( 2,124 ) Other ( 36 ) ( 10 ) Total gross deferred tax liabilities ( 15,303 ) ( 16,406 ) 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: December 31, (In thousands) 2023 2022 Deferred federal and state income taxes: Balance January 1, $ ( 3,653 ) 5,533 Deferred tax benefit (expense) ( 860 ) ( 1,923 ) Investments available-for-sale 2,424 21,770 Change in valuation allowance ( 230 ) ( 4,238 ) Effects of unrealized gains (losses) on reserves 1,217 ( 24,795 ) Balance December 31, $ ( 1,102 ) ( 3,653 ) 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. December 31, 2023 | 10-K 110 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. A reconciliation of unrecognized tax benefits is as follows: Years ended December 31, (In thousands) 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 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. 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, $ 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. The CARES Act, among other things, permitted net operating losses incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. During the year ended December 31, 2022, the Company was able to claim a net refund for taxes paid in preceding years as a result of the CARES Act. As of December 31, 2023, the Company has an accrued tax refund remaining of $ 1.5 million. 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. The Company's federal income tax return is filed on a consolidated basis with the following entities: Citizens, Inc. CICA Life Insurance Company of America Magnolia Guaranty Life Insurance Company Security Plan Life Insurance Company Security Plan Fire Insurance Company Computing Technology, Inc. The method of tax allocation among companies is subject to a written tax sharing agreement, approved by the Board of Directors, whereby allocation is made primarily on a separate return basis pursuant to the wait-and-see method. Under this method, consolidated group members are not given current credit or refunds for net operating losses until taxable income on a separate return basis is generated. Intercompany tax balances are settled at least annually. The Company and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various U.S. states. Our subsidiaries are subject to examination by U.S. tax authorities for tax years ending after December 31, 2019. December 31, 2023 | 10-K 111 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (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% for domestic entities and 4 % for Puerto Rican entities as indicated below. (In thousands) Amount Tax Effect Total Year ended December 31, 2023: Unrealized gains (losses): Unrealized holding gains (losses) arising during the period $ 50,894 971 51,865 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 Year ended December 31, 2022: Unrealized gains (losses): Unrealized holding gains (losses) arising during the period $ ( 328,673 ) 17,555 ( 311,118 ) 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 In 2023, 2022 and 2021, the Company's Board of Directors approved awards of restricted stock units ("RSUs") under the Citizens, Inc. Omnibus Incentive Plan for non-employee directors and the executive management team. 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 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. In addition, the Board also approved an allotment of RSUs for other employees with a delegation to the Chief Executive Officer to determine the participants and number of RSUs to be awarded. There were three million shares originally authorized to be granted under the plan. December 31, 2023 | 10-K 112 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table provides a rollforward of restricted stock activity. Restricted Stock Units Units Weighted Average Grant Price Weighted Average Remaining Contractual Life Aggregate Fair Value (1) (In thousands) (In years) (In thousands) Outstanding at December 31, 2020 190 $ 6.03 0.88 $ 1,142 Granted 178 5.83 1,040 Less: Vested 147 6.21 913 Forfeited 8 5.96 47 Outstanding at December 31, 2021 213 $ 5.75 1.63 $ 1,222 Granted 184 4.00 734 Less: Vested 119 5.63 669 Forfeited 12 4.27 51 Outstanding at December 31, 2022 266 4.65 1.61 1,236 Granted 464 3.03 1,409 Less: 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, 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 $ 0.6 million, $ 0.5 million and $ 0.6 million was recognized in 2023, 2022 and 2021, respectively, related to these awards. (14) BENEFIT PLANS The Company sponsors a defined contribution retirement plan. The plan was initially established as the Citizens, Inc. Profit Sharing Plan and was restated as the Citizens, Inc. 401(k) Retirement and Profit Sharing Plan effective March 1, 2016. There have been no profit sharing contributions since 2014. The 401(k) plan automatically enrolls employees who have completed three months of service. 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 $ 0.8 million in 2023 and $ 0.7 million in both 2022 and 2021. The Company is primarily self-insured for employee health benefits. The Company records its self-insurance liability based on an estimate of claims incurred but not yet reported. There is stop-loss coverage for amounts in excess of $ 80,000 per individual per year. 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. December 31, 2023 | 10-K 113 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (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) The following table contains selected unaudited financial data for each quarter. (In thousands, except per share amounts) Fourth Quarter Third Quarter Second Quarter First Quarter 2023 Revenues $ 66,849 59,390 58,527 55,914 Benefits and expenses 58,075 54,749 52,483 49,199 Federal income tax expense (benefit) ( 1,967 ) 1,943 ( 82 ) 1,843 Net income (loss) 10,741 2,698 6,126 4,872 Net income (loss) available to common shareholders 10,741 2,698 6,126 4,872 Basic earnings (losses) per share of Class A common stock 0.21 0.06 0.12 0.10 Diluted earnings (losses) per share of Class A common stock 0.21 0.05 0.12 0.10 2022 Revenues $ 67,257 56,176 53,734 55,357 Benefits and expenses 55,846 51,354 49,768 48,179 Federal income tax expense (benefit) ( 2,248 ) 1,415 1,474 729 Net income (loss) 13,659 3,407 2,492 6,449 Net income (loss) available to common shareholders 13,659 3,407 2,492 6,449 Basic earnings (losses) per share of Class A common stock 0.27 0.07 0.05 0.13 Diluted earnings (losses) per share of Class A common stock 0.27 0.06 0.05 0.13 (17) SUBSEQUENT EVENTS The Company has evaluated the impact of subsequent events as defined by the accounting guidance through the date this report was issued and determined that no subsequent events need to be recognized or disclosed. December 31, 2023 | 10-K 114 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule II Condensed Financial Information of Registrant CITIZENS, INC. (Parent Company) Balance Sheets December 31, (In thousands) 2023 2022 Assets: Investment in subsidiaries (1) $ 140,557 88,222 Fixed maturity securities available-for-sale, at fair value 21,190 28,566 Equity securities, at fair value 23 770 Short-term investments — 1,241 Cash 3,905 2,163 Accrued investment income 230 342 Accounts receivable from subsidiaries (1) 4,332 5,126 Property and equipment, net 9,251 10,387 Other assets 1,151 1,715 Total assets $ 180,639 138,532 Liabilities and Stockholders' Equity: Liabilities: Accrued expense and other liabilities $ 8,510 10,743 Total liabilities 8,510 10,743 Stockholders' equity: Common stock: Class A 268,675 268,147 Class B 3,184 3,184 Retained earnings 42,150 16,308 Unrealized investment gains (losses) on securities held by parent and subsidiaries, net of tax ( 118,155 ) ( 137,044 ) Treasury stock ( 23,725 ) ( 22,806 ) Total stockholders' equity 172,129 127,789 Total liabilities and stockholders' equity $ 180,639 138,532 (1) Eliminated in consolidation. 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 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 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule II, Continued Condensed Financial Information of Registrant CITIZENS, INC. (Parent Company) Statements of Operations and Comprehensive Income (Loss) Years ended December 31, (In thousands) 2023 2022 2021 Comprehensive Income (Loss): Revenues: Management service fees (1) $ 42,394 35,413 33,311 Investment income 1,083 6,124 1,063 Other 6 6 ( 37 ) Investment related gains (losses), net ( 63 ) ( 188 ) 1,197 Total revenues 43,420 41,355 35,534 Expenses: General expenses 44,642 38,926 37,977 Taxes, licenses and fees 158 149 198 Total expenses 44,800 39,075 38,175 Income (loss) before federal income tax expense (benefit) and equity in income (loss) of consolidated subsidiaries ( 1,380 ) 2,280 ( 2,641 ) Federal income tax expense (benefit) 1,798 ( 571 ) ( 1,661 ) Income (loss) before equity in income (loss) of consolidated subsidiaries ( 3,178 ) 2,851 ( 980 ) Equity in income (loss) of consolidated subsidiaries 27,615 23,156 73,686 Net income (loss) 24,437 26,007 72,706 Other comprehensive income (loss) 18,889 1,945 49,581 Total comprehensive income (loss) $ 43,326 27,952 122,287 (1) Eliminated in consolidation. 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 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 116 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule II, Continued Condensed Financial Information of Registrant CITIZENS, INC. (Parent Company) Statements of Cash Flows Years ended December 31, (In thousands) 2023 2022 2021 Cash flows from operating activities: Net income (loss) $ 24,437 26,007 72,706 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Investment related gains (losses), net 63 188 ( 1,197 ) Equity in loss (income) of consolidated subsidiaries ( 27,615 ) ( 23,156 ) ( 73,686 ) Change in accrued expenses and other liabilities ( 1,398 ) 643 ( 11,458 ) Change in federal income tax payable — ( 9,318 ) ( 2,683 ) Deferred federal income tax expense (benefit) — — 227 Amortization of premiums and discounts on investments 107 281 473 Depreciation 228 224 239 Change in accrued investment income 112 97 32 Stock-based compensation 588 461 646 Decrease (increase) in receivable from subsidiaries and other assets 795 705 ( 921 ) Other, net 481 188 151 Net cash provided by (used in) operating activities ( 2,202 ) ( 3,680 ) ( 15,471 ) Cash flows from investing activities: Purchases of fixed maturity securities, available-for-sale ( 723 ) ( 11,232 ) ( 2,678 ) Maturities and calls of fixed maturity securities, available-for-sale 6,027 9,721 7,548 Sales of fixed maturity securities, available-for-sale 2,580 4,314 6,952 Sales of property and equipment — 2 14 Sale of equity securities 770 500 — Sale of other long-term investments — — 8,790 Sale of real estate — — 3,552 Funding of mortgage loans — — ( 1,000 ) Principal payments on mortgage loans — 1,000 — Purchases of property and equipment ( 130 ) ( 32 ) ( 119 ) Purchases of short-term investments — ( 1,250 ) — Maturities of short-term investments 750 — — Sales of short-term investments 499 — — Net cash provided by (used in) investing activities 9,773 3,023 23,059 Cash flows from financing activities: Issuance of common stock — 2,244 2,255 Acquisition of treasury stock ( 919 ) ( 2,705 ) ( 9,090 ) Capital contribution to subsidiary ( 4,850 ) — — Other ( 60 ) ( 118 ) ( 456 ) Net cash provided by (used in) financing activities ( 5,829 ) ( 579 ) ( 7,291 ) Net increase (decrease) in cash 1,742 ( 1,236 ) 297 Cash at beginning of year 2,163 3,399 3,102 Cash at end of year $ 3,905 2,163 3,399 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 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 117 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule III Consolidated Supplementary Insurance Information Years ended December 31, (In thousands) 2023 2022 Deferred policy acquisition costs: Life Insurance $ 120,840 113,484 Home Service Insurance 54,928 49,443 Total consolidated deferred policy acquisition costs $ 175,768 162,927 Future policy benefit reserves and policy claims payable: Life Insurance $ 970,327 955,157 Home Service Insurance 266,452 254,140 Total consolidated future policy benefit reserves and policy claims payable $ 1,236,779 1,209,297 Unearned premiums: Life Insurance $ 1,356 1,501 Home Service Insurance 38 267 Total consolidated unearned premiums $ 1,394 1,768 Other policy claims and benefits payable: Life Insurance $ 192,953 181,242 Home Service Insurance 23,638 23,961 Total consolidated other policy claims and benefits payable $ 216,591 205,203 December 31, 2023 | 10-K 118 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES For the Company's short duration contracts (property), written premium is not materially different from earned premium, therefore only earned premiums are detailed in Schedule IV. Schedule IV Consolidated Statement of Reinsurance (In thousands) Direct Amount Ceded to Other Companies Assumed From Other Companies Net Amount % of Amount Assumed to Net Year ended December 31, 2023: Life insurance in force $ 4,922,254 619,597 3,772 4,306,429 0.1 % Premiums: Life insurance $ 166,336 1,795 68 164,609 Accident and health insurance 1,641 4 — 1,637 Property insurance 2,580 1,787 — 793 Total premiums $ 170,557 3,586 68 167,039 — % Year ended December 31, 2022: Life insurance in force $ 4,796,570 543,496 4,074 4,257,148 0.1 % Premiums: Life insurance $ 169,432 1,920 74 167,586 Accident and health insurance 1,283 5 — 1,278 Property insurance 6,258 1,408 — 4,850 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 % Premiums: 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 EXHIBITS Exhibit No. The following exhibits are filed herewith: 3.1 Restated and Amended Articles of Incorporation dated March 4, 2004 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 15, 2004) 3.2 Amended and Restated Bylaws dated June 2, 2021 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on June 7, 2021) 4.1* Description of Securities of Citizens, Inc. 10.1 Form of Indemnification Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 8, 2017) 10.2 Form of Indemnification Agreement for Directors (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 8, 2017) 10.3† Citizens, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 filed by the Registrant on December 5, 2017) 10.4† Form of Citizens, Inc. Employee Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K filed on March 29, 2018) 10.5† Form of Citizens, Inc. Non-employee Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K filed on March 29, 2018) 10.6† Executive Employment Agreement by and between Citizens, Inc. and Gerald W. 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) 10.7† 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) 10.8 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) 10.9 Pledge and Security Agreement dated May 5, 2021 by and between Citizens, Inc. 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) 10.10† 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: Jeffery P. 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) 10.11 † * C ompensation Recovery P olicy 21* Subsidiaries of the Registrant 23* Consent of Independent Registered Public Accounting Firm - Grant Thornton LLP 24 Power of Attorney (included on signature page enclosed herein) 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act December 31, 2023 | 10-K 120 32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act 32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase 104 Inline XBRL for the cover page of this Annual Report on Form 10-K for the year ended December 31, 2023, filed electronically herewith, included in the Exhibit 101 Inline XBRL Document Set. † Indicates management contract or compensatory plan or arrangement. * Filed herewith. Item 16. FORM 10-K SUMMARY None. December 31, 2023 | 10-K 121 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. CITIZENS, INC. Date: March 14, 2024 By: /s/ Gerald W. Shields Gerald W. Shields, Chief Executive Officer and President (Principal Executive Officer) By: /s/ Jeffery P. Conklin Jeffery P. Conklin, Vice President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial and Accounting Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Gerald W. Shields and Jeffery P. Conklin jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on March 14, 2024. Dated: March 14, 2024 /s/ Jerry D. Davis, Jr. /s/ Gerald W. Shields Jerry D. Davis, Jr., Chairman of the Board and Director Gerald W. Shields, Vice Chairman of the Board and Director /s/ Christopher W. Claus /s/ Cynthia H. Davis Christopher W. Claus, Director Cynthia H. Davis, Director /s/ Dr. Terry S. Maness /s/ Mary Taylor Dr. Terry S. Maness, Director Mary Taylor, Director /s/ Francis A. Keating II /s/ J. Keith Morgan Francis A. Keating II, Director J. Keith Morgan, Director December 31, 2023 | 10-K 122