What changed in this filing

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Item 1. Business

2025-03-13 compared with 2024-03-14 · 119 added, 139 removed, 162 unchanged (61% of the section changed)

Citizens, Inc.

("Citizens" or the "Company") is an insurance holding company incorporated in Colorado serving the life insurance needs of individuals in the United States since 1969 and internationally since 1975.

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

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

("Citizens" or the "Company") is an insurance holding company incorporated in Colorado and with its headquarters in Austin, Texas, serving the life insurance needs of individuals in the United States since 1969 and internationally since 1975.

Through our domestic insurance subsidiaries, we are licensed to issue insurance products in 43 U.S.

states and through our international subsidiaries, we provide insurance benefits to residents in almost 80 different countries.

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

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

We had approximately $1.7 billion of assets and over $5.2 billion of direct insurance in force at December 31, 2024.

We operate in two business segments:

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

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

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

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

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

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

we primarily sell whole life final expense insurance and insurance with living benefits.

• Home Service Insurance - We sell affordable life insurance policies to lower-income households in Louisiana, Mississippi and Arkansas.

Our Principal Brands

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

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

Accordingly, the Company derives its revenues principally from:

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

and (2) net investment income.

In addition to paying and reserving for insurance benefits that we pay to our policyholders, our expenses consist primarily of the costs of selling our insurance products (e.g., commissions, underwriting, marketing expenses), operating expenses and income taxes.

Because collection of premiums is the primary source of our revenues, our overall financial performance depends primarily upon the development and distribution of our products.

A key to product development is the pricing of our insurance products and the accuracy of our pricing assumptions.

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

Accordingly, we derive our revenues principally from:

(1) life insurance premiums, and (2) net investment income.

In addition to paying and reserving for insurance benefits that we pay to our policyholders and their beneficiaries, our expenses consist primarily of the costs of selling our insurance products, operating expenses and income taxes.

Because collection of premiums is the primary source of our revenues, our overall financial performance depends primarily upon the successful development, distribution and persistency of our products.

A key to product development is the accuracy of our pricing assumptions as profitability is affected by actual experience deviations from the established assumptions.

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

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

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

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CITIZENS, INC.

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

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

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

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The Company maintains a prudent investment strategy that may vary based on a variety of factors including business needs, regulatory requirements and tax considerations.

IN 2021, WE BECAME A NON-CONTROLLED COMPANY

Throughout most of our history, the Company was led and controlled by our founder Harold E.

Riley and his family members.

Riley passed away in 2017 and in 2020, a change-in-control of our Company occurred when the shares held by the Harold E.

Riley Trust were transferred to the Harold E.

Riley Foundation (the “Foundation”).

In February 2021, the Company entered into an agreement with the Foundation to purchase all of the outstanding shares of Class B common stock for a purchase price of $9.1 million (the “B Share Transaction”).

After the completion of the B Share Transaction and the appointment of a new Chief Executive Officer, we believe the Company was positioned to offer stability to our management team, employees and independent sales force and was able to move forward with new business and strategic initiatives, as described below.

STRATEGIC INITIATIVES

The Pursuit of Profitable Growth

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

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

We believe these factors will lead to growth and profitability.

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

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

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

Domestically, most of our historical growth came from the acquisition of assets rather than new sales.

Internationally, our limited products, which were mostly endowment products, burdened us with known high levels of maturities after a certain period with limited products to replace the business.

As a result, from 2017 through 2021, our total premium revenue fell by over $20 million.

In 2021, we became a non-controlled company for the first time in over 20 years and under new leadership, our strategy shifted to the pursuit of long-term profitable growth through a 4-pronged strategy:

• Grow first year sales to reverse the decline in our total revenue.

We do this through the introduction of new products and by expanding our distribution.

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

Our management team meets regularly to ensure we are bringing the right products to market at the right time.

• Distribution.

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

A broader product portfolio also helps attract new distributors.

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

• Promotions .

We are focused on implementing sales promotions and campaigns in order to align our sales consultant compensation opportunities with our premium revenue goals and our growth and retention initiatives.

We are also focused on implementing sales promotions and campaigns in order to align our sales consultant compensation opportunities with our premium revenue goals and our growth and retention initiatives.

• Slow the decline of premiums through retention efforts.

We pay certain costs (e.g., commissions, underwriting, marketing expenses) to obtain new policyholders.

First year commissions paid to our agents are significantly higher than renewal commissions.

Accordingly, it is important to preserve policyholder relationships once we have issued a new policy.

We are focused on improving the customer experience and policyholder retention.

• Focus on execution.

• Processes .

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

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

We are implementing process improvements and new technologies not only to speed up product delivery but also to improve the experience for both our policyholders and our agents.

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

• Financial and expense discipline.

We believe these factors will lead to growth and profitability.

As a result of these efforts over the last few years, in 2024, our total premium revenue grew for the first time since 2017.

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Trends in Market Demand

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

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

• Obtained an A.M.

Best rating for the first time ever in July 2023.

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

In 2024, we issued the highest amount of insurance ever in a year by Citizens - $1.1 billion and achieved our highest ever total direct insurance in force - $5.2 billion.

• Following the filing of 3 new products in our domestic markets in 2023, we continued growing our domestic business in 2024:

◦ we became licensed in 8 additional states.

CICA Domestic is licensed in 43 states, up from 35 states at 2023 year-end and up from 32 states at 2022 year-end;

◦ we expanded our domestic distribution network, growing from over 2,000 agents at December 31, 2023 to over 5,000 agents at December 31, 2024.

This led to direct first year premium revenue growth of 106% in our Life Insurance segment.

• We maintained our A.M.

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

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

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

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

• We introduced a new product in our international markets designed to allow policyholders with maturing endowments to use some or all of the funds to purchase a new life insurance policy.

This led to increased first year premiums in the international business.

LIFE INSURANCE SEGMENT

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

("CICA Bermuda"), a Bermuda company.

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

("CICA International").

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

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

Because CICA International provides our non-U.S.

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

territory and in a jurisdiction where the primary language spoken is Spanish, which is the primary language of the majority of our international policyholders, we believe this change will drive sales and improve policy retention, leading to revenue growth.

INTERNATIONAL LIFE INSURANCE

Sales and Distribution

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

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

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

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CITIZENS, INC.

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

dollar-denominated amounts to non-U.S.

The products accumulate guaranteed cash values beginning in the first policy year and provide lifetime income guarantees for an insured or for surviving beneficiaries.

In addition to death benefits, our international products have living benefit features.

Most policies contain guaranteed cash values that can be used during an insured's lifetime by taking a loan or advance on the death benefit, have options for annual premium benefits, and are participating (i.e .

, provide for cash dividends).

Our policyowners have several options with regards to the policy dividends and annual premium benefits, which include, among other things, electing to receive cash, crediting such amounts towards the payment of premiums on the policy, leaving such amounts on deposit with the Company to accumulate at a specified interest rate or assigning them to a third party, Computershare Trust Company, N.A.

( an affiliate of Computershare, Inc., our transfer agent), who facilitates their purchase of our Class A common stock, through the Citizens, Inc.

Stock Investment Plan (the "SIP") .

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

The Company has registered the shares of Class A common stock issuable to participants under the SIP on a Form S-3 registration statement under the Securities Act of 1933, as amended, (the "Securities Act") that is on file with the SEC.

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

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

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

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

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

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

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

• premiums paid annually at the beginning of each policy year rather than monthly or quarterly, which reduces our administrative expenses, accelerates cash flow and results in lower policy lapse rates than premium payment options with more frequently scheduled payments.

We sell our products internationally through independent marketing agencies and consultants who specialize in life insurance products.

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CITIZENS, INC.

Sales and Distribution

We sell our international products through independent marketing agencies and consultants located primarily in Latin America and the Pacific Rim.

As of December 31, 2024, we had insurance policies in force in almost 80 foreign countries and receive the majority of our premiums from Colombia, Taiwan, Venezuela, Ecuador and Argentina.

International direct premiums comprised approximately 89% of total direct premiums in the Life Insurance segment and 67% of our total consolidated direct premiums in 2024.

The independent marketing agencies and consultants who sell our products specialize in life insurance products.

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

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

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

dollar-denominated amounts to non-U.S.

The whole life insurance products are designed to provide a fixed amount of insurance coverage over the life of the insured and can include rider benefits to provide additional coverage and annuity benefits to enhance accumulations.

Our endowment contracts are principally accumulation contracts that incorporate an element of life insurance protection.

These products have premium rates that are competitive with most foreign local companies and have been structured to provide the policyowners with:

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

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

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

• lifetime income guarantees for an insured or for surviving beneficiaries.

Our international products have both living and death benefit features.

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

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

The policyowner has several options with regards to the policy dividends and annual premium benefits, which include, among other things, electing to receive cash, crediting such amounts towards the payment of premiums on the policy, leaving such amounts on deposit with the Company to accumulate at a defined interest rate or assigning them to a third-party.

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

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

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

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

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CITIZENS, INC.

The life insurance business is highly competitive.

The life insurance business is competitive.

Internationally, we compete with a number of life insurance companies, as well as with financial institutions that offer insurance products.

We face competition from other insurance companies that operate in the same markets and manner as we do.

Additionally, some of our competitors are local companies formed and operated in the country in which an insured resides, and others are companies foreign to the countries in which their products are sold, but issue insurance policies denominated in the local currency of those countries or issue products approved by regulators of those countries.

We face competition from (i) other insurance companies that operate in the same markets and manner as we do, (ii) local companies formed and operated in the country in which an insured resides, and (iii) other foreign companies who issue insurance policies denominated in the local currency of those countries or issue products approved by regulators of those countries.

Some of these companies may have a competitive advantage over us due to their greater financial resources, histories of successful operations and brand recognition, local licensing, partnering with local insurance companies and larger marketing forces.

We believe that we have a competitive advantage over some of our competitors because premiums on our international policies are paid in U.S.

We believe that issuing U.S.

dollar-denominated products is a key competitive advantage for us.

Because premiums on our international policies are paid in U.S.

dollars, cash value is accumulated in U.S.

dollars, and we pay claims and benefits in U.S.

We believe this provides security and stability to our insureds, who are generally individuals in the middle- to upper-middle class in their respective countries with significant net worth and earnings.

Therefore, our products protect them from the inflationary risks and economic crises that have been common in many of our top-producing foreign countries.

We believe this provides security and stability to our policy owners and insureds, who are generally individuals in the middle- to upper-middle class in their respective countries with significant net worth and earnings, by providing:

• protection against devaluation of the policyowners' local currency;

• protection against local hyper-inflation that has historically occurred in Latin America;

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

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CITIZENS, INC.

DOMESTIC LIFE INSURANCE

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

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

Over the last couple of years, we began our "white label" program to expand our distribution by expanding CICA Domestic's state licenses, developing new final expense and living benefit products, and filing these new products in multiple states.

At December 31, 2024, we had over 5,000 agents appointed to sell these products.

As a result, in the past year, we have significantly expanded our domestic distribution in the Life Insurance segment and first year premiums have more than doubled in this segment compared to 2023.

In 2024, domestic direct life insurance premiums comprised approximately 11% of total direct premiums in the Life Insurance segment and 9% of our consolidated total direct premiums.

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

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

The average life insurance policy face amount issued in 2024 was approximately $10,800 per policy.

Due to the lower risk associated with small face amount polices, the underwriting performed on these applications is limited.

Domestically we face competition with other insurance carriers specializing in final expense insurance.

We seek to compete effectively through policyholder service, price, product design, and distribution efforts.

While there are insurance companies competing with us, no individual company dominates any of our life insurance markets.

The Company effectively competes with other carriers, in part, due to our ability to tailor products to individual distributors' needs.

HOME SERVICE INSURANCE SEGMENT

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

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

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

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

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

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

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

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

Additionally, prior to June 30, 2023, we operated through Security Plan Fire Insurance Company ("SPFIC"), a limited liability casualty company that issued small face value property insurance policies covering dwelling and contents, primarily in Louisiana.

We ceased operations on June 30, 2023 and dissolved SPFIC in 2024.

In 2024, our Home Service Insurance segment comprised 24% of our total consolidated direct premiums.

Products and Competition

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

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

The average life insurance policy face amount issued in 2024 was approximately $12,800 per policy.

Due to the lower risk associated with small face amount polices, the underwriting performed on these applications is limited.

As part of the Home Service Insurance segment transformation mentioned above, in 2021 we introduced a new product, Security Plan Plus, which has a higher allowed face amount.

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

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

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

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

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

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CITIZENS, INC.

management team and upgrading our agent field force.

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

We seek to compete by delivering exceptional personal service to our customers, enhancing our management team and upgrading our agent field force.

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

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

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

Therefore, under the terms of the reinsurance agreements, the reinsurers agree to reimburse us for the ceded amount (i.e., the death benefit amount less our retained risk) in the event a claim is paid.

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

Therefore, under the terms of the reinsurance agreements, the reinsurers

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CITIZENS, INC.

agree to reimburse us for the ceded amount (i.e., the death benefit amount less our retained risk) in the event a claim is paid.

The Company evaluates the maximum amount it is willing to retain from time to time and may increase its retention, which can reduce premiums ceded to our reinsurers and allow us to keep a larger portion of premiums received.

In the second quarter of 2024, CICA Domestic entered into a coinsurance agreement with RGA Reinsurance Company ("RGA") in order to provide more capacity for growth.

Under this agreement (the "RGA Agreement"), CICA Domestic initially elected for RGA to reinsure 50% of its newly written final expense business, which means that we cede 50% of premiums received and benefits paid in our domestic final expense benefit to RGA.

Cessions under reinsurance agreements do not discharge our obligations as the primary insurer.

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OTHER NON-INSURANCE ENTERPRISES

Other Non-Insurance Enterprises includes the results of our parent company, Citizens, Inc.

and our non-insurance subsidiary, Computing Technology, Inc., which primarily provide the Company's corporate-support and information technology functions to the insurance operations.

Other Non-Insurance Enterprises includes the results of our parent company, Citizens, Inc., Nexo Global Services LLC, a Puerto Rico holding company ("Nexo"), Nexo Enrollment Services LLC ("NES"), a Puerto Rico company that provides services to the customers of CICA International, and our non-insurance subsidiary, Computing Technology, Inc., which primarily provides the Company's corporate-support and information technology functions to the insurance operations.

OPERATIONS AND TECHNOLOGY

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

For the international portion of our Life Insurance segment, operations including underwriting, policy issuance, claims processing, accounting and reporting related to certain international policies were conducted in Bermuda until December 31, 2023 and are now conducted in Puerto Rico.

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

For the international portion of our Life Insurance segment, certain operations are conducted at our office in Puerto Rico and, starting in 2024, some customer service functions are conducted in the Philippines.

The Company is actively engaged in optimizing its operations by seeking opportunities to leverage the global workforce to meet the needs of its international policyholders.

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

Our PAS performs various functions to effectively handle our insurance operations.

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• our policyholder service and claims representatives with a customer account-centric view of our policyholders and beneficiaries, reducing customer inquiry response time and claims processing time;

• streamline, automated processes that deliver the scalability needed for continue growth;

• business-to-business solutions.

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

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

We operate on a non-admitted basis and are not licensed to do business in any foreign country, and we have never submitted our international insurance policies for approval to any regulatory agency.

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

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

The application of foreign laws to our sales of insurance policies in foreign countries varies by country.

There is a lack of uniform regulation, lack of clarity in certain regulations and lack of legal precedent in addressing circumstances similar to ours.

Our compliance review has confirmed certain risks related to foreign insurance laws associated with our current business model, at least in certain jurisdictions, as described in detail in Item 1A.

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

These laws vary by country.

There is a lack of uniform regulation, lack of clarity in certain countries regarding application of regulations and in many cases, lack of legal precedent in addressing circumstances similar to ours.

Our compliance review has confirmed certain risks related to foreign insurance laws associated with our business model, at least in certain jurisdictions, as described in detail in Part I.

Risk Factors .

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

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

We are also regulated by the departments of insurance in Louisiana (SPLIC) and Mississippi (Magnolia), as well as each of the 43 states and the District of Columbia in which we conduct insurance business.

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

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

Insurance companies are also required to file detailed annual reports with our supervisory agencies.

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

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

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

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

In 2024, due to our strategic plan to expand CICA Domestic's business, we entered into a capital maintenance agreement with the Colorado Division of Insurance that specifies that Citizens will infuse capital as needed to ensure that CICA Domestic's RBC ratio remains at or above 350%.

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

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CITIZENS, INC.

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

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

As of December 31, 2024, we had 247 full-time employees and 3 part-time employees.

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

Gender Composition

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We do not utilize captive employee agents to distribute our products and thus contract with over 1,000 actively producing independent consultants internationally and over 5,000 independent agencies and agents domestically to sell and service our insurance products.

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

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

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CITIZENS, INC.

Compensation and Benefits

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

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

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

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

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

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

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

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

In our Home Service Insurance segment, we believe our agent campaigns and promotions are critical in attracting and retaining our independent agent sales force.

This business contains a large block of existing in force policies.

To ensure we maintain this book of business, the agent campaigns and promotions provide an extra incentive to not only grow the business but to collect on the existing policies.

We believe that creating agent campaigns and promotions with additional incentives provides long-term value for our shareholders.

We are committed to the health and safety of our work force and compliance with applicable regulatory and legal requirements.

In response to the COVID-19 pandemic, in 2021, we implemented operating changes that we determined were in the best interest of the health of our employees, including offering a hybrid work environment where our employees can work part- or full-time from home, depending on their position and circumstances.

We have continued with the hybrid work environment as it offers employees flexibility and helps attract and retain talent.

We also have implemented training programs to assist our independent agents with online sales efforts in order to minimize face-to-face interactions with potential customers and our policyholders when necessary.

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Item 1. Business