What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-06 compared with 2024-05-07 · 297 added, 130 removed, 902 unchanged (32% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

(In thousands) March 31, 2024 December 31, 2023

(In thousands) June 30, 2024 December 31, 2023

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

17 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

March 31, 2024 | 10-Q 2

June 30, 2024 | 10-Q 2

CITIZENS, INC.

1 unchanged sentence

Consolidated Balance Sheets, Continued

(In thousands, except share amounts) March 31, 2024 December 31, 2023

(In thousands, except share amounts) June 30, 2024 December 31, 2023

Liabilities and Stockholders' Equity:

17 unchanged sentences

Total liabilities 1,471,004 1,496,799

Commitments and contingencies ( Note 7 )

Commitments and contingencies ( Note s 7 and 8 )

Stockholders' Equity:

9 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

March 31, 2024 | 10-Q 3

June 30, 2024 | 10-Q 3

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Income (Loss)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands, except per share amounts)

2024 2023 2024 2023

Life insurance $ 42,101 39,292 80,362 76,226

19 unchanged sentences

Income before federal income tax 3,302 6,044 8,227 12,759

Federal income tax expense

Federal income tax expense (benefit)

( 657 ) ( 82 ) ( 274 ) 1,761

Net income 3,959 6,126 8,501 10,998

Per Share Amounts:

Basic and diluted earnings per share of Class A common stock

0.08 0.12 0.17 0.22

Other Comprehensive Income (Loss):

8 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

March 31, 2024 | 10-Q 4

June 30, 2024 | 10-Q 4

CITIZENS, INC.

14 unchanged sentences

Balance at March 31, 2024 268,802 3,184 46,692 ( 99,770 ) ( 23,725 ) 195,183

Comprehensive income (loss):

— — 3,959 — — 3,959

Other comprehensive income (loss) — — — ( 8,154 ) — ( 8,154 )

Total comprehensive income (loss) — — 3,959 ( 8,154 ) — ( 4,195 )

Stock-based compensation 481 — — — — 481

Balance at June 30, 2024 $ 269,283 3,184 50,651 ( 107,924 ) ( 23,725 ) 191,469

Balance at December 31, 2022

6 unchanged sentences

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

Comprehensive income (loss):

— — 6,126 — — 6,126

Other comprehensive income (loss) — — — ( 12,898 ) — ( 12,898 )

Total comprehensive income (loss) — — 6,126 ( 12,898 ) — ( 6,772 )

Acquisition of treasury stock — — — — ( 719 ) ( 719 )

Stock-based compensation 46 — — — — 46

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

See accompanying Notes to Consolidated Financial Statements.

March 31, 2024 | 10-Q 5

June 30, 2024 | 10-Q 5

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

18 unchanged sentences

Net cash provided by operating activities

11,376 12,198

Cash flows from investing activities:

7 unchanged sentences

Purchases of property and equipment ( 189 ) ( 84 )

Maturities of short-term investments — 500

Net cash used in investing activities

1 unchanged sentence

See accompanying Notes to Consolidated Financial Statements.

March 31, 2024 | 10-Q 6

June 30, 2024 | 10-Q 6

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows, Continued

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

2 unchanged sentences

Annuity withdrawals ( 5,017 ) ( 5,390 )

Acquisition of treasury stock — ( 719 )

Other ( 33 ) ( 50 )

6 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the three months ended March 31, 2023, various fixed maturity issuers exchanged securities with book values of $ 2.1 million for securities of equal value while none were exchanged during the three months ended March 31, 2024.

The Company had $ 1.4 million of net unsettled security trades at March 31, 2024 and none at March 31, 2023.

During the six months ended June 30, 2023, various fixed maturity issuers exchanged securities with book values of $ 5.4 million for securities of equal value while $ 3.7 million were exchanged during the six months ended June 30, 2024.

The Company had $ 0.8 million of net unsettled security trades at June 30, 2024 and none at June 30, 2023.

See accompanying Notes to Consolidated Financial Statements.

March 31, 2024 | 10-Q 7

June 30, 2024 | 10-Q 7

CITIZENS, INC .

8 unchanged sentences

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

The consolidated balance sheet as of March 31, 2024, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three months ended March 31, 2024 and March 31, 2023 and the consolidated statements of cash flows for the three months ended March 31, 2024 and March 31, 2023 have been prepared by the Company without audit and are not subject to audit.

In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at March 31, 2024 and for comparative periods have been made.

The consolidated balance sheet as of June 30, 2024, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and six months ended June 30, 2024 and June 30, 2023 and the consolidated statements of cash flows for the six months ended June 30, 2024 and June 30, 2023 have been prepared by the Company without audit and are not subject to audit.

In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at June 30, 2024 and for comparative periods have been made.

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

12 unchanged sentences

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

CNLIC merged into CICA Domestic on July 1, 2023.

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.

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.

3 unchanged sentences

NES provides services to policyholders of CICA International.

March 31, 2024 | 10-Q 8

June 30, 2024 | 10-Q 8

CITIZENS, INC .

17 unchanged sentences

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.

As the ASU only requires additional disclosures about the Company's operating segments, the impact to the consolidated financial statements will be minimal.

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

7 unchanged sentences

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

March 31, 2024 | 10-Q 9

June 30, 2024 | 10-Q 9

CITIZENS, INC .

1 unchanged sentence

(3) INVESTMENTS

The Company invests primarily in fixed maturity securities, which totaled 86.7 % of total cash and invested assets at March 31, 2024, as shown below.

The Company invests primarily in fixed maturity securities, which totaled 86.0 % of total cash and invested assets at June 30, 2024, as shown below.

Carrying Value

(In thousands, except for %)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Amount % Amount %

7 unchanged sentences

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

March 31, 2024

June 30, 2024

(In thousands)

15 unchanged sentences

Total fixed maturity securities $ 1,390,487 4,948 182,032 1,213,403

March 31, 2024 | 10-Q 10

June 30, 2024 | 10-Q 10

CITIZENS, INC .

18 unchanged sentences

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

Most of the Company's equity securities are invested in a non-redeemable preferred stock fund.

The Company's investments in equity securities are shown below.

(In thousands)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Equity securities:

7 unchanged sentences

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

The Company recognized net investment related gains of $ 0.1 million and $ 0.3 million on equity securities held for the three months ended March 31, 2024 and 2023, respectively.

The Company recognized net investment related losses of $ 0.1 million and $ 0.2 million for the three months ended June 30, 2024 and 2023, respectively.

The Company recognized net investment related gains of $ 0.1 million for both of the six months ended June 30, 2024 and 2023.

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

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

For the three months ended March 31, 2024 and 2023, the Company recorded no credit valuation losses on fixed maturity securities.

March 31, 2024 | 10-Q 11

For the three and six months ended June 30, 2024 and 2023, the Company recorded no credit valuation losses on fixed maturity securities.

June 30, 2024 | 10-Q 11

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For fixed maturity security investments that have unrealized losses as of March 31, 2024 and December 31, 2023, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows.

March 31, 2024 Less than 12 months Greater than 12 months Total

For fixed maturity security investments that have unrealized losses as of June 30, 2024 and December 31, 2023, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows.

June 30, 2024 Less than 12 months Greater than 12 months Total

(In thousands, except for # of securities) Fair

42 unchanged sentences

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

March 31, 2024 | 10-Q 12

June 30, 2024 | 10-Q 12

CITIZENS, INC .

1 unchanged sentence

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

As of March 31, 2024 and December 31, 2023, 99.0 % and 99.4 % of the fair value of our fixed maturity securities portfolio, respectively, were rated investment grade.

As of June 30, 2024 and December 31, 2023, 99.2 % and 99.4 % of the fair value of our fixed maturity securities portfolio, respectively, were rated investment grade.

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

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

These unrealized losses on fixed maturity securities are due to noncredit-related factors, including change in 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 March 31, 2024 by contractual maturity are shown in the table below.

The amortized cost and fair value of fixed maturity securities at June 30, 2024 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.

March 31, 2024 Amortized

June 30, 2024 Amortized

(In thousands)

6 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2024 2023 2024 2023

10 unchanged sentences

We utilize valuation techniques that maximize the use of

March 31, 2024 | 10-Q 13

June 30, 2024 | 10-Q 13

CITIZENS, INC .

17 unchanged sentences

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

March 31, 2024 Level 1 Level 2 Level 3 Total

June 30, 2024 Level 1 Level 2 Level 3 Total

(In thousands)

20 unchanged sentences

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

March 31, 2024 | 10-Q 14

June 30, 2024 | 10-Q 14

CITIZENS, INC .

26 unchanged sentences

Fixed maturity securities, available-for-sale.

At March 31, 2024, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 92.7 % of total reported fair value of our financial assets.

At June 30, 2024, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 92.1 % of total reported fair value of our financial assets.

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

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

There were no Level 3 assets at March 31, 2024.

As of March 31, 2024, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.

There were no Level 3 assets at June 30, 2024.

As of June 30, 2024, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.

Equity securities.

4 unchanged sentences

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

The Company recognized net investment related gains of $ 1.3 million and losses of $ 0.6 million on limited partnerships

March 31, 2024 | 10-Q 15

The Company recognized net investment related gains of $ 4 thousand and $ 1.3 million and gains of $ 0.9 million and

June 30, 2024 | 10-Q 15

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

held for the three months ended March 31, 2024 and March 31, 2023, respectively.

$ 0.3 million on limited partnerships held for the three and six months ended June 30, 2024 and June 30, 2023, respectively.

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(In thousands, except for years)

16 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(In thousands) Carrying

6 unchanged sentences

Annuity - investment contracts 67,627 61,066 67,690 63,283

March 31, 2024 | 10-Q 16

June 30, 2024 | 10-Q 16

CITIZENS, INC .

1 unchanged sentence

Policy loans.

Policy loans had a weighted average annual interest rate of 7.7 % at both March 31, 2024 and December 31, 2023 and no specified maturity dates.

Policy loans had a weighted average annual interest rate of 7.7 % at both June 30, 2024 and December 31, 2023 and no specified maturity dates.

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

2 unchanged sentences

Residential mortgage loan.

The mortgage loan is secured by a residential property.

The interest rate for this loan was 7.0 % at both March 31, 2024 and December 31, 2023.

At March 31, 2024, the remaining loan matures in four years .

Management estimated the fair value using an annual interest rate of 6.25 % at both March 31, 2024 and December 31, 2023.

This mortgage loan is secured by a residential property.

The interest rate for this loan was 7.0 % at both June 30, 2024 and December 31, 2023.

At June 30, 2024, the remaining loan matures in four years .

Management estimated the fair value using an annual interest rate of 6.25 % at both June 30, 2024 and December 31, 2023.

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

2 unchanged sentences

Annuity liabilities.

The fair value of the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at March 31, 2024 and December 31, 2023 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.13 % to 4.63 % and 3.80 % to 4.50 %, respectively.

The fair value of the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at June 30, 2024 and December 31, 2023 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 4.25 % to 4.74 % and 3.80 % to 4.50 %, respectively.

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

4 unchanged sentences

(In thousands )

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Other long-term investments:

7 unchanged sentences

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

The following tables roll forward the DAC and COIA balances for the three months ended March 31, 2024 and 2023 by reporting cohort.

The following tables roll forward the DAC and COIA balances for the six months ended June 30, 2024 and 2023 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

March 31, 2024 | 10-Q 17

June 30, 2024 | 10-Q 17

CITIZENS, INC .

2 unchanged sentences

Both reporting cohorts include whole life and endowment policies.

Three Months Ended March 31, 2024

(In thousands) Permanent Permanent Limited Pay Other Business Total

Six Months Ended June 30, 2024

(In thousands)

Permanent Permanent Limited Pay Other Business Total

Life Insurance:

13 unchanged sentences

Balance, end of period $ 157,796 26,188 2,347 186,331

Three Months Ended March 31, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

Six Months Ended June 30, 2023

(In thousands)

Permanent Permanent Limited Pay Other Business Total

Life Insurance:

13 unchanged sentences

Balance, end of period $ 143,347 22,758 2,236 168,341

March 31, 2024 | 10-Q 18

DAC capitalization increased for the six months ended June 30, 2024, compared to the same prior year period mainly from increased commissions from higher first year sales in our Life Insurance segment.

June 30, 2024 | 10-Q 18

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DAC capitalization increased for the three months ended March 31, 2024, compared to the same prior year period mainly from increased commissions from higher first year sales in our Life Insurance segment.

Three Months Ended March 31, 2024

(In thousands) Permanent Permanent Limited Pay Other Business Total

Six Months Ended June 30, 2024

(In thousands)

Permanent Permanent Limited Pay Other Business Total

Life Insurance:

10 unchanged sentences

Balance, end of period $ 7,248 834 1,637 9,719

Three Months Ended March 31, 2023

(In thousands) Permanent Permanent Limited Pay Other Business Total

Six Months Ended June 30, 2023

(In thousands)

Permanent Permanent Limited Pay Other Business Total

Life Insurance:

14 unchanged sentences

Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy,

March 31, 2024 | 10-Q 19

June 30, 2024 | 10-Q 19

CITIZENS, INC .

2 unchanged sentences

Both reporting cohorts include whole life and endowment policies.

March 31, 2024

June 30, 2024

(In thousands)

27 unchanged sentences

Net liability for future policy benefits $ 705,282 174,312 879,594 107,113 101,742 208,855

March 31, 2024 | 10-Q 20

Reinsurance recoverable 142 — 142 — — —

Net liability for future policy benefits, after reinsurance recoverable $ 705,140 174,312 879,452 107,113 101,742 208,855

June 30, 2024 | 10-Q 20

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

June 30, 2023

(In thousands)

27 unchanged sentences

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 three months ended March 31, 2024 and 2023.

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

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

Derecognition refers to a subset of the issuances or the present value of future premiums released on new issues that lapsed during the three months ended March 31, 2024 and 2023 as well as other reconciling items.

Derecognition refers to a subset of the issuances or the present value of future premiums released on new issues that lapsed during the six months ended June 30, 2024 and 2023 as well as other reconciling items.

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

1 unchanged sentence

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

March 31, 2024 | 10-Q 21

June 30, 2024 | 10-Q 21

CITIZENS, INC .

1 unchanged sentence

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.

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

(In thousands) Life

13 unchanged sentences

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

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

(In thousands) Life

13 unchanged sentences

Expected future benefit payments 188,339 116,312 194,592 119,607

March 31, 2024 | 10-Q 22

June 30, 2024 | 10-Q 22

CITIZENS, INC .

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2024 2023 2024 2023

(In thousands)

Gross Premiums Interest Expense Gross Premiums Interest Expense

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

Life Insurance Segment:

21 unchanged sentences

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

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

(In years) Life

7 unchanged sentences

Duration at current discount rate 7.8 14.4 7.6 15.3

March 31, 2024 | 10-Q 23

June 30, 2024 | 10-Q 23

CITIZENS, INC .

1 unchanged sentence

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

March 31, 2024 March 31, 2023

June 30, 2024 June 30, 2023

Insurance Home Service

9 unchanged sentences

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

March 31, 2024

June 30, 2024

(In thousands)

10 unchanged sentences

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

March 31, 2023

June 30, 2023

(In thousands)

9 unchanged sentences

Total $ 163,522 626 1,193 37,814 203,155

March 31, 2024 | 10-Q 24

June 30, 2024 | 10-Q 24

CITIZENS, INC .

1 unchanged sentence

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

March 31, 2024

June 30, 2024

(In thousands, except for %)

10 unchanged sentences

Cash surrender value $ 53,332 86,792 46,644 30,627

March 31, 2023

June 30, 2023

(In thousands, except for %)

10 unchanged sentences

Cash surrender value $ 39,393 86,558 43,384 33,820

March 31, 2024 | 10-Q 25

June 30, 2024 | 10-Q 25

CITIZENS, INC .

1 unchanged sentence

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

As of March 31,

As of June 30,

(In thousands)

7 unchanged sentences

Total premiums paid in advance $ 32,737 36,432

(7) REINSURANCE

In the normal course of business, the Company reinsures portions of certain policies that we underwrite to mitigate exposure to potential losses and/or to provide additional capacity for growth.

In our international business, we generally retain $ 100,000 on any one individual life insurance policy and reinsure the death benefit amount above $ 100,000 .

We also reinsure 100 % of our accidental death benefit rider coverage.

In the second quarter of 2024, CICA Domestic entered into a coinsurance agreement with RGA Reinsurance Company ("RGA").

Under this agreement, CICA Domestic initially elected for RGA to reinsure 50 % of its newly written final expense business.

Prior to 2024, the Company maintained catastrophic reinsurance for its Louisiana property and casualty business operated through Security Plan Fire Insurance Company.

This reinsurance had a net retention on any one loss of $ 30,000 , which was the maximum policy limit on any single risk.

The Company ceased this business in June 2023 and thus did not renew this reinsurance.

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

We obtain reinsurance from multiple reinsurers.

We monitor our reinsurance concentration as well as the financial strength ratings of our reinsurers.

Their ratings by A.M.

Best Company range from A- (Excellent) to A+ (Superior).

Assumed and ceded life reinsurance activity is summarized as follows:

(In thousands)

June 30, 2024 December 31, 2023

Aggregate assumed life insurance in force $ 3,772 3,772

Aggregate ceded life insurance in force $ 673,880 619,597

Net life insurance in force $ 4,449,826 4,306,429

June 30, 2024 | 10-Q 26

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company's reinsurance recoverable on ceded reinsurance was $ 5.2 million and $ 4.0 million as of June 30, 2024 and December 31, 2023, respectively.

Premiums, claims and surrenders assumed and ceded and expenses ceded for all lines of business for the three and six months ended June 30, 2024 and 2023 are summarized as follows:

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2024 2023 2024 2023

Premiums from short duration contracts:

Direct $ 475 1,741 927 3,637

Assumed — — — —

Ceded ( 1 ) ( 1,255 ) ( 2 ) ( 1,782 )

Net premiums earned 474 486 925 1,855

Premiums from long duration contracts:

Direct 43,450 39,655 82,056 77,197

Assumed 16 16 33 36

Ceded ( 1,381 ) ( 431 ) ( 1,782 ) ( 1,113 )

Net premiums earned 42,085 39,240 80,307 76,120

Total premiums earned $ 42,559 39,726 81,232 77,975

Claims and surrenders assumed $ 41 35 75 67

Claims and surrenders ceded

$ ( 697 ) ( 172 ) ( 1,481 ) ( 524 )

Commissions assumed and ceded

$ ( 949 ) 9 ( 941 ) 18

Other general expenses ceded $ ( 156 ) — ( 156 ) —

(8) COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

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

Trade Secret Lawsuit

In the first quarter of 2024, a jury trial was held in the “trade secret lawsuit”.

The trade secret lawsuit was filed in 2018 by Citizens, CICA Life Ltd.

(Bermuda) and CICA Life Insurance Company of America (collectively, the “Citizens Companies,” “we,” "us" or "our") against certain former employees and independent consultants who we alleged unlawfully took Citizens’ confidential information in order to unfairly compete with us.

Our claims against these parties included various unfair competition, tortious interference, breach of contract and other related claims.

In March 2024, the jury found that (i) Defendant Carlos Nalsen Landa (“Landa”), a former independent consultant, misappropriated the Citizens’ Companies policyholder information, (ii) Citizens’ former chief underwriter, Michael P.

Buchweitz (“Buchweitz”) and Randall Riley (“Riley”), a former Citizens executive and son of Citizens’ founder Harold E.

Riley, failed to comply with their Citizens’ confidentiality agreements, and (iii) both Buchweitz and Riley intentionally interfered with former Chief Actuary Jonathan Pollio’s ("Pollio") Citizens’ confidentiality agreement.

For Buchweitz, the jury also found that he did not have a good faith belief that he was acting in the bona fide exercise of his own rights when he interfered with Pollio’s Citizens’ confidentiality agreement.

Despite these findings, the jury

June 30, 2024 | 10-Q 27

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

did not believe that the above-mentioned actions damaged the Citizens Companies economically and thus did not assess any monetary damages against any of the above parties.

Additionally, the jury found that Citizens should pay Alexis Delgado (“Delgado”, a former independent consultant) and Landa approximately $ 1.3 million for “money had and received”, an equitable theory that claimed that the Citizens Companies would be unjustly enriched if they didn’t pay past and future commissions to Delgado and Landa.

We accrued this expense at December 31, 2023.

On April 30, 2024, Defendants Riley (through his estate), Buchweitz and Delgado filed a motion against the Citizens Companies seeking payment of legal fees and a hearing was held on these matters on May 21, 2024.

On July 26, 2024, the trial court awarded Riley and Buchweitz approximately $ 3.5 million of their legal fees.

We accrued this expense in the quarter ended June 30, 2024.

We do not believe the jury properly found that Delgado or Landa were entitled to any prior or future commissions as there was no evidence that we actually held any amount of commissions that they claim they should have received.

We also do not believe that Riley or Buchweitz are entitled to legal fees because they were found to have breached the contracts whose fee shifting provisions they sought to invoke.

We have not paid any amounts to Delgado, Landa, Riley, Buchweitz or any of their attorneys and intend to appeal the judgment against us.

If we aren't successful in our appeal, we may have to pay approximately $ 5 million as a result of the trade secret lawsuit.

The accrued amounts are reflected as "other liabilities" on our balance sheet.

CONTRACTUAL OBLIGATIONS

As of March 31, 2024, CICA International is committed to fund investments up to $ 25.7 million related to limited partnerships previously described.

As of June 30, 2024, CICA International is committed to fund investments up to $ 21.2 million related to limited partnerships previously described.

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").

On May 3, 2024 , the Company renewed its $ 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, 2027, 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 %.

At the Company's election, the revolving loans may either bear a rate (a fluctuating rate per annum) equal to the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50 %, (c) the index rate plus 1.00 % or (d) 0.75 %.

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

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.

Obligations under the Credit Facility are secured by substantially all of the assets of the Company other than the equity interests in its 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 March 31, 2024, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants.

March 31, 2024 | 10-Q 26

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We renewed the line of credit in May 2024 for an additional three years at substantially the same terms as described above.

As of June 30, 2024, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants.

(9) STOCKHOLDERS' EQUITY AND RESTRICTIONS

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

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;

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

June 30, 2024 | 10-Q 28

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Class B common stock, if any;

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

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

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

Citizens has never issued any preferred stock.

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

Three Months Ended March 31,

(In thousands) Common Stock Treasury Common Stock Treasury

Class A Class B Stock Class A Class B Stock

Citizens currently has no outstanding preferred stock or Class B common stock other than that held in treasury.

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

Six Months Ended June 30, 2024 2023

(In thousands)

Common Stock Class A

Treasury Stock

Common Stock Class A Treasury Stock

Balance at beginning of year 53,883 5,330 53,758 4,937

Stock issued for compensation 163 — 106 —

Acquisition of Class A shares — — — 325

Balance at end of period 54,046 5,330 53,864 5,262

1 unchanged sentence

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

Three Months Ended March 31, 2024 2023

Three Months Ended June 30, 2024 2023

(In thousands, except per share amounts)

6 unchanged sentences

Basic and diluted earnings per share of Class A common stock

Six Months Ended June 30, 2024 2023

(In thousands, except per share amounts)

Basic and diluted earnings per share:

$ 8,501 10,998

Net income allocated to Class A common stock

$ 8,501 10,998

Weighted average shares of Class A outstanding - basic 49,606 49,791

Weighted average shares of Class A outstanding - diluted 50,775 50,584

Basic and diluted earnings per share of Class A common stock

STATUTORY CAPITAL AND SURPLUS

1 unchanged sentence

These include capital requirements imposed by the U.S.

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

All domestic insurance subsidiaries exceeded the minimum capital requirements at March 31, 2024.

On March 27, 2024 , Citizens and the Colorado Division of Insurance entered into

March 31, 2024 | 10-Q 27

National Association of Insurance Commissioners ("NAIC") and

June 30, 2024 | 10-Q 29

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

a capital maintenance agreement that specifies that Citizens will infuse capital as needed to ensure that CICA Domestic's RBC remains above 350 %.

As CICA Domestic's RBC exceeded 350% at March 31, 2024, no capital contribution was necessary.

the Bermuda Monetary Authority ("BMA").

All domestic insurance subsidiaries exceeded the minimum capital requirements at June 30, 2024.

On March 27, 2024 , Citizens and the Colorado Division of Insurance entered into a capital maintenance agreement that specifies that Citizens will infuse capital as needed to ensure that CICA Domestic's RBC remains above 350 %.

As CICA Domestic's RBC exceeded 350% at June 30, 2024, no capital contribution was necessary.

CICA International is a Puerto Rico domiciled company.

3 unchanged sentences

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.

The Keep Well Agreement, which expires on August 31, 2024 , 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.

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

17 unchanged sentences

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

March 31, 2024 | 10-Q 28

June 30, 2024 | 10-Q 30

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 7,472 1,411 ( 5,581 ) 3,302

March 31, 2024 | 10-Q 29

June 30, 2024 | 10-Q 31

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended March 31, 2023

Six Months Ended June 30, 2024

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 13,272 2,034 ( 7,079 ) 8,227

June 30, 2024 | 10-Q 32

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended June 30, 2023

(In thousands)

Premiums $ 28,773 10,953 — 39,726

Net investment income 13,498 3,450 293 17,241

Investment related gains (losses), net 738 ( 12 ) ( 23 ) 703

Other income 856 1 — 857

Total revenues 43,865 14,392 270 58,527

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 26,968 5,808 — 32,776

Increase (decrease) in future policy benefit reserves ( 1,863 ) 919 — ( 944 )

Policyholder liability remeasurement (gain) loss 885 71 — 956

Policyholders' dividends 1,255 6 — 1,261

Total insurance benefits paid or provided 27,245 6,804 — 34,049

Commissions 4,765 4,118 — 8,883

Other general expenses 5,646 4,299 2,323 12,268

Capitalization of deferred policy acquisition costs ( 4,457 ) ( 2,087 ) — ( 6,544 )

Amortization of deferred policy acquisition costs 3,167 507 — 3,674

Amortization of cost of insurance acquired 26 127 — 153

Total benefits and expenses 36,392 13,768 2,323 52,483

Income (loss) before federal income tax $ 7,473 624 ( 2,053 ) 6,044

June 30, 2024 | 10-Q 33

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Six Months Ended June 30, 2023

(In thousands)

Premiums $ 54,980 22,995 — 77,975

Net investment income 26,809 6,920 586 34,315

Investment related gains (losses), net 301 87 27 415

Other income 1,735 1 — 1,736

Total revenues 83,825 30,003 613 114,441

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders 51,407 11,668 — 63,075

Increase (decrease) in future policy benefit reserves ( 3,683 ) 1,761 — ( 1,922 )

Policyholder liability remeasurement (gain) loss 1,701 135 — 1,836

Policyholders' dividends 2,356 13 — 2,369

Total insurance benefits paid or provided 51,781 13,577 — 65,358

Commissions 9,524 8,372 — 17,896

Other general expenses 11,105 8,767 3,656 23,528

Capitalization of deferred policy acquisition costs ( 8,817 ) ( 4,085 ) — ( 12,902 )

Amortization of deferred policy acquisition costs 6,329 1,159 — 7,488

Amortization of cost of insurance acquired 58 256 — 314

Total benefits and expenses 69,980 28,046 3,656 101,682

Income (loss) before federal income tax $ 13,845 1,957 ( 3,043 ) 12,759

(11) INCOME TAXES

The effective tax rate is the ratio of tax expense over pre-tax income.

The effective tax rate was 7.8 % for the three months ended March 31, 2024, compared to 27.4 % for the same period in 2023, respectively.

The effective tax rate was ( 19.9 )% and 3.3 % for the three and six months ended June 30, 2024, compared to ( 1.4 )% and 13.8 % for the same periods in 2023, respectively.

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

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

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

Due to the 0 % enacted tax rate in Bermuda for all periods prior to the transfer of CICA Bermuda's insurance in force business to CICA International, there are no deferred taxes recorded for CICA Bermuda's temporary differences.

The Government of Puerto Rico approved a tax exemption decree for CICA International which freezes the income tax rate at 0 % on taxable earnings up to $ 1.2 million and 4 % on taxable earnings in excess of $ 1.2 million for a minimum of 15 years.

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

At March 31, 2024 and 2023, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety.

At June 30, 2024 and 2023, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety.

The Company recorded valuation allowances of $ 5.0 million and $ 3.9 million, respectively, through Other Comprehensive Income (Loss).

March 31, 2024 | 10-Q 30

June 30, 2024 | 10-Q 34

CITIZENS, INC .

1 unchanged sentence

(12) OTHER COMPREHENSIVE INCOME (LOSS)

The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% for domestic entities and 4 % for Puerto Rican entities for the three months ended March 31, 2024 and 2023, as indicated below.

Three Months Ended March 31, 2024 2023

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 for the three and six months ended June 30, 2024 and 2023, as indicated below.

Three Months Ended June 30, 2024 2023

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

1 unchanged sentence

Unrealized holding gains (losses) arising during the period $ ( 14,258 ) 993 ( 13,265 ) ( 20,430 ) 1,111 ( 19,319 )

Reclassification adjustment for losses (gains) included in net income (loss) 199 ( 42 ) 157 24 ( 5 ) 19

Unrealized holding gains (losses), net ( 14,059 ) 951 ( 13,108 ) ( 20,406 ) 1,106 ( 19,300 )

Change in current discount rate for liability for future policy benefits 5,522 ( 568 ) 4,954 6,251 151 6,402

Other comprehensive income (loss) $ ( 8,537 ) 383 ( 8,154 ) ( 14,155 ) 1,257 ( 12,898 )

Six Months Ended June 30, 2024 2023

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

Unrealized gains (losses):

Unrealized holding gains (losses) arising during the period $ ( 27,674 ) 2,191 ( 25,483 ) 23,006 ( 1,169 ) 21,837

Reclassification adjustment for losses (gains) included in net income

5 unchanged sentences

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

There were no changes related to these relationships during the three months ended March 31, 2024 except as described in Note 1.

There were no changes related to these relationships during the six months ended June 30, 2024 except as described in Note 1.

Financial Statements under Basis of Presentation and Consolidation.

2 unchanged sentences

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

March 31, 2024 | 10-Q 31

June 30, 2024 | 10-Q 35

CITIZENS, INC.

1 unchanged sentence

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

What changed 10-Q

Item 1. Financial Statements