What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-06 · 222 added, 186 removed, 1013 unchanged (29% of the section changed)

3 unchanged sentences

Consolidated Balance Sheets

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

(In thousands) September 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.

June 30, 2024 | 10-Q 2

September 30, 2024 | 10-Q 2

CITIZENS, INC.

1 unchanged sentence

Consolidated Balance Sheets, Continued

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

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

Liabilities and Stockholders' Equity:

14 unchanged sentences

Deferred federal income tax liability 2,367 1,102

Payable for securities in process of settlement 787 —

Other liabilities 42,533 37,488

Total liabilities 1,528,236 1,496,799

Commitments and contingencies ( Note s 7 and 8 )

Commitments and contingencies ( Notes 7 and 8 )

Stockholders' Equity:

9 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

June 30, 2024 | 10-Q 3

September 30, 2024 | 10-Q 3

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Operations and Comprehensive Income (Loss)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(In thousands, except per share amounts)

25 unchanged sentences

Per Share Amounts:

Basic and diluted earnings per share of Class A common stock

Basic earnings per share of Class A common stock

0.06 0.06 0.23 0.28

Diluted earnings per share of Class A common stock

0.05 0.05 0.22 0.27

Other Comprehensive Income (Loss):

8 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

June 30, 2024 | 10-Q 4

September 30, 2024 | 10-Q 4

CITIZENS, INC.

2 unchanged sentences

Common Stock Retained Earnings

Accumulated Other

Comprehensive

Income (Loss) Treasury

Stockholders' Equity

Accumulated Other Comprehensive Income (Loss)

Treasury Stock

Total Stockholders' Equity

(In thousands) Class A Class B

12 unchanged sentences

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

Comprehensive income (loss):

— — 2,790 — — 2,790

Other comprehensive income (loss) — — — 13,241 — 13,241

Total comprehensive income (loss) — — 2,790 13,241 — 16,031

Stock-based compensation 73 — — — — 73

Balance at September 30, 2024 $ 269,356 3,184 53,441 ( 94,683 ) ( 23,725 ) 207,573

See accompanying Notes to Consolidated Financial Statements.

September 30, 2024 | 10-Q 5

CITIZENS, INC.

AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Stockholders' Equity, Continued

Common Stock Retained Earnings

Accumulated Other Comprehensive

Income (Loss)

Treasury Stock

Total Stockholders' Equity

(In thousands) Class A Class B

Balance at December 31, 2022

13 unchanged sentences

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

Comprehensive income (loss):

— — 2,698 — — 2,698

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

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

Stock-based compensation 180 — — — — 180

— — 1,327 — — 1,327

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

1 See Note 11 - Income Taxes for details.

See accompanying Notes to Consolidated Financial Statements.

June 30, 2024 | 10-Q 5

September 30, 2024 | 10-Q 6

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

23 unchanged sentences

Maturities and calls of fixed maturity securities, available-for-sale 37,907 23,128

Sales of equity securities

Principal payments on mortgage loans 7 6

7 unchanged sentences

See accompanying Notes to Consolidated Financial Statements.

June 30, 2024 | 10-Q 6

September 30, 2024 | 10-Q 7

CITIZENS, INC.

1 unchanged sentence

Consolidated Statements of Cash Flows, Continued

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands)

6 unchanged sentences

( 2,373 ) ( 3,161 )

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

5,385 ( 6,188 )

2 unchanged sentences

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

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.

During the nine months ended September 30, 2024 and 2023, various fixed maturity issuers exchanged securities with book values of $ 3.7 million and $ 5.4 million, respectively, for securities of equal value.

The Company had $ 0.3 million of net unsettled security trades at September 30, 2023 and none at September 30, 2024.

The Company recognized $ 36 thousand right-of-use assets in exchange for new operating lease liabilities during the nine months ended September 30, 2023 and none during the nine months ended September 30, 2024.

See accompanying Notes to Consolidated Financial Statements.

June 30, 2024 | 10-Q 7

September 30, 2024 | 10-Q 8

CITIZENS, INC .

4 unchanged sentences

("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"), Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC"), Magnolia Guaranty Life Insurance Company ("MGLIC"), Computing Technology, Inc.

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

("CICA Bermuda"), 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 its wholly-owned subsidiaries, CICA Life A.I., a Puerto Rico company ("CICA International") 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," "it," "we," "us" or "our".

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 balance sheet as of September 30, 2024, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and nine months ended September 30, 2024 and September 30, 2023 and the consolidated statements of cash flows for the nine months ended September 30, 2024 and September 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 September 30, 2024 and for comparative periods have been made.

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

3 unchanged sentences

Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Our Life Insurance segment operates through CICA International 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.

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.

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

CICA Domestic.

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

CNLIC merged into CICA Domestic on July 1, 2023.

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.

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.

CICA Domestic issues primarily ordinary whole life, final expense and life products with living benefits throughout the U.S.

CICA International.

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

CICA International offers U.S.

dollar-denominated products to non-U.S.

residents/citizens internationally, including endowment products, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance.

NES provides services to policyholders of CICA International.

June 30, 2024 | 10-Q 8

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

SPLIC also issues critical illness policies.

Prior to June 30, 2023, SPFIC issued dwelling and contents property insurance policies.

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

September 30, 2024 | 10-Q 9

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CTI provides data processing systems and services to the Company.

USE OF ESTIMATES

25 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.

June 30, 2024 | 10-Q 9

September 30, 2024 | 10-Q 10

CITIZENS, INC .

1 unchanged sentence

(3) INVESTMENTS

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.

The Company invests primarily in fixed maturity securities, which totaled 86.2 % of total cash and invested assets at September 30, 2024, as shown below.

Carrying Value

(In thousands, except for %)

June 30, 2024 December 31, 2023

September 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.

June 30, 2024

September 30, 2024

(In thousands)

15 unchanged sentences

Total fixed maturity securities $ 1,391,580 13,034 131,117 1,273,497

June 30, 2024 | 10-Q 10

September 30, 2024 | 10-Q 11

CITIZENS, INC .

20 unchanged sentences

(In thousands)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Equity securities:

Bond mutual funds $ 766 740

Common stock 693 665

Common stocks

Non-redeemable preferred stock 8 7

4 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 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 recognized net investment related gains of $ 0.4 million for both the three and nine months ended September 30, 2024, respectively, on equity securities held.

The Company recognized net investment related losses of $ 0.4 million and $ 0.3 million for the three and nine months ended September 30, 2023, respectively.

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

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

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

June 30, 2024 | 10-Q 11

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

September 30, 2024 | 10-Q 12

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For fixed maturity security investments that have unrealized losses as of September 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.

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

(In thousands, except for # of securities) Fair

7 unchanged sentences

Treasury securities $ 569 16 2 315 13 4 884 29 6

Government-sponsored enterprises — — — 220 1 1 220 1 1

States and political subdivisions 12,007 126 21 160,393 23,814 180 172,400 23,940 201

32 unchanged sentences

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

June 30, 2024 | 10-Q 12

September 30, 2024 | 10-Q 13

CITIZENS, INC .

1 unchanged sentence

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

As of June 30, 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.

As of September 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.

1 unchanged sentence

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

The amortized cost and fair value of fixed maturity securities at June 30, 2024 by contractual maturity are shown in the table below.

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

June 30, 2024 Amortized

September 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

(In thousands) 2024 2023 2024 2023

10 unchanged sentences

We utilize valuation techniques that maximize the use of

June 30, 2024 | 10-Q 13

September 30, 2024 | 10-Q 14

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.

June 30, 2024 Level 1 Level 2 Level 3 Total

September 30, 2024 Level 1 Level 2 Level 3 Total

(In thousands)

12 unchanged sentences

Bond mutual funds 766 — — 766

Common stock 693 — — 693

Common stocks

Non-redeemable preferred stock 8 — — 8

5 unchanged sentences

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

June 30, 2024 | 10-Q 14

September 30, 2024 | 10-Q 15

CITIZENS, INC .

15 unchanged sentences

Bond mutual funds 740 — — 740

Common stock 665 — — 665

Common stocks

Non-redeemable preferred stock 7 — — 7

8 unchanged sentences

Fixed maturity securities, available-for-sale.

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.

At September 30, 2024, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.3 billion for Level 2 assets and comprised 92.3 % of total reported fair value of our financial assets.

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

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

There were no Level 3 assets at June 30, 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.

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

As of September 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 $ 4 thousand and $ 1.3 million and gains of $ 0.9 million and

June 30, 2024 | 10-Q 15

The Company recognized net investment related gains of $ 0.5 million and $ 1.8 million for the three and nine months ended September 30, 2024, respectively, and losses of $ 0.1 million and gains of $ 0.2 million on limited partnerships

September 30, 2024 | 10-Q 16

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

held for the three and nine months ended September 30, 2023, respectively.

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In thousands, except for years)

6 unchanged sentences

20,524 14,271 4 to 6

Infrastructure Investments in climate infrastructure assets, focusing on renewable power generation in wind and solar energy 19,177 7,548 9 to 11

Infrastructure Investments in environmental infrastructure and related technology, focusing on renewable power generation and distribution 20,996 6,345 9 to 11

16,733 9,576 10

7 unchanged sentences

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(In thousands) Carrying

6 unchanged sentences

Annuity - investment contracts 68,077 63,468 67,690 63,283

June 30, 2024 | 10-Q 16

Policy loans.

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

The aggregate fair value of policy loans approximates the

September 30, 2024 | 10-Q 17

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Policy loans.

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.

carrying value reflected on the consolidated balance sheets.

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

2 unchanged sentences

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.

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

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

Management estimated the fair value using an annual interest rate of 6.25 % at both September 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 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 the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at September 30, 2024 and December 31, 2023 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.40 % to 4.40 % 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 )

June 30, 2024 December 31, 2023

September 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 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

June 30, 2024 | 10-Q 17

The following tables roll forward the DAC and COIA balances for the nine months ended September 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

September 30, 2024 | 10-Q 18

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

Both reporting cohorts include whole life and endowment policies.

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(In thousands)

15 unchanged sentences

Balance, end of period $ 163,136 26,688 2,444 192,268

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(In thousands)

15 unchanged sentences

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

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

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

September 30, 2024 | 10-Q 19

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(In thousands)

12 unchanged sentences

Balance, end of period $ 7,152 822 1,592 9,566

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(In thousands)

16 unchanged sentences

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

June 30, 2024 | 10-Q 19

September 30, 2024 | 10-Q 20

CITIZENS, INC .

2 unchanged sentences

Both reporting cohorts include whole life and endowment policies.

June 30, 2024

September 30, 2024

(In thousands)

5 unchanged sentences

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

Effects of actual variances from expected experience ( 3,880 ) 456 ( 3,424 ) ( 2,791 ) ( 1,813 ) ( 4,604 )

Effect of changes in cash flow assumptions 17,731 274 18,005 ( 462 ) 21 ( 441 )

Effect of actual variances from expected experience

( 12,203 ) 973 ( 11,230 ) ( 5,784 ) ( 3,526 ) ( 9,310 )

Adjusted beginning of year balance 257,954 14,780 272,734 95,799 12,007 107,806

9 unchanged sentences

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

Effects of actual variances from expected experience ( 2,480 ) 2,137 ( 343 ) ( 2,714 ) ( 917 ) ( 3,631 )

Effect of changes in cash flow assumptions 18,320 734 19,054 ( 502 ) ( 1,078 ) ( 1,580 )

Effect of actual variances from expected experience

( 9,656 ) 2,916 ( 6,740 ) ( 5,880 ) ( 1,692 ) ( 7,572 )

Adjusted beginning of year balance 1,004,626 206,405 1,211,031 211,142 121,171 332,313

9 unchanged sentences

Net liability for future policy benefits, after reinsurance recoverable $ 731,773 180,572 912,345 113,324 105,728 219,052

June 30, 2024 | 10-Q 20

The Company performed its annual review of policy benefit reserves assumptions in the third quarter of 2024 and recorded the effects of changes in its cash flow assumptions, which resulted in a net increase in future policy benefit

September 30, 2024 | 10-Q 21

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

reserves, primarily driven by mortality and lapse assumptions that better reflect emerging experience for the new CICA Domestic block of business.

For the nine months ended September 30, 2024, the Life Insurance segment increased reserves compared to the same period in 2023 due to the unfavorable impact of actual versus expected experience related to mortality and lapses.

There was little impact to the Home Service Insurance segment resulting from actual to expected experience for the nine months ended September 30, 2024 and 2023.

September 30, 2023

(In thousands)

4 unchanged sentences

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

Effects of actual variances from expected experience 3,081 466 3,547 ( 2,910 ) ( 2,291 ) ( 5,201 )

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

Effect of actual variances from expected experience

4,156 1,059 5,215 ( 5,631 ) ( 4,477 ) ( 10,108 )

Adjusted beginning of year balance 251,547 11,779 263,326 94,251 10,002 104,253

9 unchanged sentences

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

Effects of actual variances from expected experience 4,533 2,114 6,647 ( 2,750 ) ( 579 ) ( 3,329 )

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

Effect of actual variances from expected experience

6,338 3,489 9,827 ( 5,472 ) ( 1,337 ) ( 6,809 )

Adjusted beginning of year balance 1,002,118 210,838 1,212,956 208,459 120,902 329,361

7 unchanged sentences

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

Net premiums collected is defined as the transactional gross premiums collected in the current period times the net premium ratio.

Issuances are calculated as the present value, using the locked-in discount rate, of the expected net premiums or the expected future policy benefits related to new policies issued during the six months ended June 30, 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 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.

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.

June 30, 2024 | 10-Q 21

September 30, 2024 | 10-Q 22

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.

June 30, 2024

June 30, 2023

September 30, 2024

September 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.

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

(In thousands) Life

13 unchanged sentences

Expected future benefit payments 195,610 120,606 184,456 110,991

June 30, 2024 | 10-Q 22

September 30, 2024 | 10-Q 23

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

2024 2023 2024 2023

24 unchanged sentences

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

June 30, 2024 June 30, 2023

September 30, 2024 September 30, 2023

(In years) Life

7 unchanged sentences

Duration at current discount rate 7.8 14.7 7.6 14.4

June 30, 2024 | 10-Q 23

September 30, 2024 | 10-Q 24

CITIZENS, INC .

1 unchanged sentence

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

June 30, 2024 June 30, 2023

September 30, 2024 September 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

June 30, 2024

September 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

June 30, 2023

September 30, 2023

(In thousands)

9 unchanged sentences

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

June 30, 2024 | 10-Q 24

September 30, 2024 | 10-Q 25

CITIZENS, INC .

1 unchanged sentence

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

June 30, 2024

September 30, 2024

(In thousands, except for %)

Supplemental Contracts Without Life Contingencies Fixed Annuity Dividend

Accumulations Premiums Paid in Advance

Supplemental Contracts Without Life Contingencies Fixed Annuity Dividend Accumulations

Premiums Paid in Advance

Balance, beginning of year $ 44,569 87,134 44,960 31,039

7 unchanged sentences

Cash surrender value $ 57,030 87,327 47,052 30,600

June 30, 2023

September 30, 2023

(In thousands, except for %)

Supplemental Contracts Without Life Contingencies Fixed Annuity Dividend

Accumulations Premiums Paid in Advance

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

2 unchanged sentences

Interest credited 1,103 1,988 993 948

Other 1 — — —

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

3 unchanged sentences

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

June 30, 2024 | 10-Q 25

September 30, 2024 | 10-Q 26

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

As of June 30,

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

As of September 30,

(In thousands)

23 unchanged sentences

(In thousands)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Aggregate assumed life insurance in force $ 3,605 3,772

1 unchanged sentence

Net life insurance in force $ 4,480,563 4,306,429

June 30, 2024 | 10-Q 26

September 30, 2024 | 10-Q 27

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,

The Company's reinsurance recoverable on ceded reinsurance was $ 7.3 million and $ 4.0 million as of September 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 nine months ended September 30, 2024 and 2023 are summarized as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

(In thousands) 2024 2023 2024 2023

1 unchanged sentence

Direct $ 449 283 1,376 3,920

Assumed — — — —

Ceded ( 14 ) ( 16 ) ( 16 ) ( 1,798 )

26 unchanged sentences

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

Despite these findings, the jury 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

September 30, 2024 | 10-Q 28

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.

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.

5 unchanged sentences

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

We purchased and filed an appeal bond in September 2024 to supercede enforcement of the judgment during the appeal process.

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.

Additionally, $ 1.3 million that is reported in cash and cash equivalents on our balance sheet is restricted while the appeal bond remains in place.

CONTRACTUAL OBLIGATIONS

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

As of September 30, 2024, CICA International is committed to fund investments up to $ 18.1 million related to limited partnerships previously described.

CREDIT FACILITY

6 unchanged sentences

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

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

As of September 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

June 30, 2024 | 10-Q 28

Both authorized classes of common stock are equal in all respects, except (a)

September 30, 2024 | 10-Q 29

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Class B common stock, if any;

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.

1 unchanged sentence

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

Nine Months Ended September 30, 2024 2023

(In thousands)

8 unchanged sentences

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

Three Months Ended June 30, 2024 2023

Three Months Ended September 30, 2024 2023

(In thousands, except per share amounts)

5 unchanged sentences

Weighted average shares of Class A outstanding - diluted 50,669 50,522

Basic and diluted earnings per share of Class A common stock

Six Months Ended June 30, 2024 2023

Basic earnings per share of Class A common stock $ 0.06 0.06

Diluted earnings per share of Class A common stock

Nine Months Ended September 30, 2024 2023

(In thousands, except per share amounts)

5 unchanged sentences

Weighted average shares of Class A outstanding - diluted 50,519 50,647

Basic and diluted earnings per share of Class A common stock

STATUTORY CAPITAL AND SURPLUS

Each of our regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements.

These include capital requirements imposed by the U.S.

National Association of Insurance Commissioners ("NAIC") and

June 30, 2024 | 10-Q 29

Basic earnings per share of Class A common stock $ 0.23 0.28

Diluted earnings per share of Class A common stock

September 30, 2024 | 10-Q 30

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Bermuda Monetary Authority ("BMA").

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

STATUTORY CAPITAL AND SURPLUS

Each of our domestic regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements imposed by the U.S.

National Association of Insurance Commissioners ("NAIC").

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

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

CICA International is a Puerto Rico domiciled company.

2 unchanged sentences

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, 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.

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

At September 30, 2024, CICA International exceeded the required minimum capital and related ratio.

(10) SEGMENT AND OTHER OPERATING INFORMATION

4 unchanged sentences

These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional coverage and annuity benefits to enhance accumulations.

CICA 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.

CICA Domestic issues ordinary whole life, final expense and life products with living benefits throughout the U.S.

SPLIC also issues critical illness policies.

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.

SPFIC 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.

5 unchanged sentences

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

June 30, 2024 | 10-Q 30

September 30, 2024 | 10-Q 31

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 4,416 ( 80 ) ( 1,299 ) 3,037

June 30, 2024 | 10-Q 31

September 30, 2024 | 10-Q 32

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

(In thousands)

18 unchanged sentences

Income (loss) before federal income tax $ 17,688 1,954 ( 8,378 ) 11,264

June 30, 2024 | 10-Q 32

September 30, 2024 | 10-Q 33

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

(In thousands)

18 unchanged sentences

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

June 30, 2024 | 10-Q 33

September 30, 2024 | 10-Q 34

CITIZENS, INC .

1 unchanged sentence

Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(In thousands)

19 unchanged sentences

(11) INCOME TAXES

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

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.

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

The effective tax rate was 8.1 % and ( 0.2 )% for the three and nine months ended September 30, 2024, compared to 41.9 % and 21.3 % for the same periods in 2023, respectively.

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

3 unchanged sentences

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

At June 30, 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).

June 30, 2024 | 10-Q 34

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

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

September 30, 2024 | 10-Q 35

CITIZENS, INC .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At September 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 $ 3.8 million and $ 6.2 million, respectively, through Other Comprehensive Income (Loss).

(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 and six months ended June 30, 2024 and 2023, as indicated below.

Three Months Ended June 30, 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 nine months ended September 30, 2024 and 2023, as indicated below.

Three Months Ended September 30, 2024 2023

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

5 unchanged sentences

Other comprehensive income (loss) $ 13,597 ( 356 ) 13,241 656 1,040 1,696

Six Months Ended June 30, 2024 2023

Nine Months Ended September 30, 2024 2023

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

7 unchanged sentences

(13) RELATED PARTY TRANSACTIONS

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

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

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.

There were no changes related to these relationships during the nine months ended September 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.

June 30, 2024 | 10-Q 35

September 30, 2024 | 10-Q 36

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