CITIZENS, INC. 10-K

Item 9A. CONTROLS AND PROCEDURES (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2024, the end of the period covered by this Annual Report on Form 10-K. Based on such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2024 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and such information is accumulated and reported to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding disclosure. (b) MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management evaluated the design and operating effectiveness of internal control over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring December 31, 2024 | 10-K 54 Table of Contents CITIZENS, INC. Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management concluded that our internal control over financial reporting as of December 31, 2024 was effective. Grant Thornton LLP, an independent registered public accounting firm, audited the effectiveness of our internal control over financial reporting as of December 31, 2024. Their attestation report is included in Item 9A(c) of this Annual Report. (c) ATTESTATION REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Citizens, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of Citizens, Inc. (a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control — Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated financial statements of the Company as of and for the year ended December 31, 2024, and our report dated March 13, 2025, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable December 31, 2024 | 10-K 55 Table of Contents CITIZENS, INC. assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Miami, Florida March 13, 2025 (d) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in our internal control over financial reporting during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. OTHER INFORMATION During the three months ended December 31, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Citizens, Inc. securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.” Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. December 31, 2024 | 10-K 56 Table of Contents CITIZENS, INC. PART III The information in this Part III indicated below is incorporated by reference from other sections of this Annual Report on Form 10-K or from our definitive proxy statement pursuant to General Instruction G(3) of Form 10-K. We plan to file our definitive proxy statement for our 2025 annual meeting of shareholders within 120 days after December 31, 2024. Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Item 10 of this Annual Report on Form 10-K incorporates by reference the information in the sections entitled "Board of Directors", "Corporate Governance", "Executive Officers" and "Other Matters" in our Proxy Statement. Item 11. EXECUTIVE COMPENSATION Item 11 of this Annual Report on Form 10-K incorporates by reference the information in the sections entitled "Board of Directors - Director Compensation", "Corporate Governance - Board Processes - Compensation Committee Interlocks and Insider Participation" and "Executive Compensation" in our Proxy Statement. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Item 12 of this Annual Report on Form 10-K incorporates by reference the information in the section entitled "Stock Ownership Information" in our Proxy Statement. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth information regarding securities authorized for issuance under our equity compensation plan, the Citizens, Inc. Omnibus Incentive Plan, as of December 31, 2024. See Part IV. Item 15. Note 13. Stock Compensation in the notes to our consolidated financial statements for additional information regarding our Omnibus Incentive Plan. Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining for future issuance under equity compensation plans Equity compensation plans approved by security holders 1,141,015 $ 2.64 1,882,065 Equity compensation plans not approved by security holders — — — Total 1,141,015 $ 2.64 1,882,065 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Item 13 of this Annual Report on Form 10-K incorporates by reference the information in the section entitled "Corporate Governance" in our Proxy Statement. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Item 14 of this Annual Report on Form 10-K incorporates by reference the information in the section entitled "Audit Committee Matters" in our Proxy Statement. December 31, 2024 | 10-K 57 Table of Contents CITIZENS, INC. PART IV Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this Report (1) and (2) Financial Statements and Schedules The financial statements and schedules listed on the following index to financial statements and financial statement schedules are filed under Part III. Item 8. Financial Statements and Supplementary Data as part of this Form 10-K. Index to Consolidated Financial Statements and Financial Statement Schedules Page Reference Report of Independent Registered Public Accounting Firm (PCAOB ID: 248 ) 59 Financial Statements at December 31, 2024 and 2023 and for the Years Ended December 31, 2024 and 2023: Consolidated Balance Sheets 61 Consolidated Statements of Operations and Comprehensive Income (Loss) 63 Consolidated Statements of Stockholders' Equity 64 Consolidated Statements of Cash Flows 65 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies 67 Note 2: Investments 74 Note 3: Fair Value Measurements 78 Note 4: Deferred Policy Acquisition Costs & Cost of Insurance Acquired 82 Note 5: Policyholders' Liabilities 85 Note 6: Policy Claim Liability 92 Note 7: Reinsurance 92 Note 8: Commitments and Contingencies 93 Note 9: Stockholders' Equity and Restrictions 95 Note 10: Segment and Other Operating Information 97 Note 11: Income Taxes 100 Note 12: Other Comprehensive Income (Loss) 105 Note 13: Stock Compensation 105 Note 14: Benefit Plans 107 Note 15: Related Party Transactions 107 Note 16: Quarterly Financial Information (Unaudited) 107 Note 17: Subsequent Events 108 Financial Statement Schedules at December 31, 2024 and 2023 and for the Years Ended December 31, 2024 and 2023: Schedule II – Condensed Financial Information of Registrant 109 Schedule III – Consolidated Supplementary Insurance Information 112 Schedule IV – Consolidated Schedule of Reinsurance 113 All other schedules have been omitted because the required information is inapplicable or the information required is presented in the consolidated financial statements or the notes thereto filed elsewhere herein. (3) Exhibits See the Index of Exhibits . December 31, 2024 | 10-K 58 Table of Contents CITIZENS, INC. Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Citizens, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Citizens, Inc. (a Colorado corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes and financial statement schedules included under Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023 and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 13, 2025 expressed an unqualified opinion. Basis for opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Assumptions used in the Estimation of the Liability for Future Policy Benefit Reserves - Life Insurance As described further in Notes 1 and 5 to the consolidated financial statements, the Company estimates a liability for future policy benefit reserves which is calculated as the present value of estimated future policy benefits to be paid to or on behalf of policyholders of life insurance contracts, less the present value of estimated future net premiums to be collected from policyholders on those same life insurance contracts. Management’s estimate of the liability for future policy benefit reserves for life insurance was $1.17 billion as of December 31, 2024. The liability is estimated using actuarial assumptions including those for mortality and lapse. Changes to the mortality and lapse assumptions impact both the timing and amount of estimated future policy benefits to be paid and future net premiums to be collected from policyholders on life insurance contracts. These assumptions, which are updated annually, are based December 31, 2024 | 10-K 59 Table of Contents CITIZENS, INC. on judgements that consider the Company’s historical experience, industry data and other factors. We identified the updating of the mortality and lapse assumptions used in the estimation of the liability for future policy benefit reserves – life insurance as a critical audit matter. The principal considerations for our determination that the updating of the mortality and lapse assumptions used in the estimation of the liability for future policy benefit reserves for life insurance contracts is a critical audit matter is that the updating of these assumptions requires management to make significant assumptions regarding mortality and lapse based on historical experience, industry data and other factors. As such, auditing the updating of such assumptions involved subjective and complex auditor judgment, including the involvement of an actuarial specialist to assess the reasonableness of these assumptions. Our audit procedures related to the updating of the mortality and lapse assumptions used in the estimation of the liability for future policy benefit reserves - life insurance included the following, among others. • We tested the design and operating effectiveness of management’s review control over the mortality and lapse assumption updating and approval processes. • With the assistance of an actuarial specialist, we evaluated management’s methodologies and assessed the reasonableness of the assumptions for mortality and lapse used in management’s calculation of future policy benefit reserves on life insurance contracts. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2021. Miami, Florida March 13, 2025 December 31, 2024 | 10-K 60 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets December 31, (In thousands) 2024 2023 Assets: Investments: Fixed maturity securities, available-for-sale, at fair value (amortized cost: $ 1,401,301 and $ 1,389,038 in 2024 and 2023, respectively) $ 1,220,961 1,238,981 Equity securities, at fair value 5,447 5,282 Policy loans 71,216 75,359 Other long-term investments (portion measured at fair value $ 93,337 and $ 82,460 in 2024 and 2023, respectively) 93,604 82,725 Total investments 1,391,228 1,402,347 Cash and cash equivalents (restricted portion: $ 1,554 and none in 2024 and 2023, respectively) 29,271 26,997 Accrued investment income 17,546 17,360 Reinsurance recoverable 6,941 3,991 Deferred policy acquisition costs 199,635 175,768 Cost of insurance acquired 9,446 10,043 Federal income tax receivable 148 1,546 Property and equipment, net 10,574 11,809 Due premiums 11,721 11,264 Other assets (less allowance for losses of $ 516 and $ 408 in 2024 and 2023, respectively) 8,815 7,803 Total assets $ 1,685,325 1,668,928 See accompanying Notes to Consolidated Financial Statements. December 31, 2024 | 10-K 61 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets December 31, continued (In thousands, except share amounts) 2024 2023 Liabilities and Stockholders' Equity: Liabilities: Policy liabilities: Future policy benefit reserves: Life insurance $ 1,172,034 1,229,253 Accident and health insurance 1,071 889 Total future policy benefit reserves 1,173,105 1,230,142 Policyholders' funds: Annuities 149,977 133,216 Dividend accumulations 47,768 44,960 Premiums paid in advance 31,182 32,446 Policy claims payable 8,822 6,637 Other policyholders' funds 7,271 7,363 Total policyholders' funds 245,020 224,622 Total policy liabilities 1,418,125 1,454,764 Commissions payable 4,546 3,445 Deferred federal income tax liability, net 3,442 1,102 Other liabilities 48,857 37,488 Total liabilities 1,474,970 1,496,799 Commitments and contingencies (Notes 7 and 8 ) Stockholders' Equity: Common stock: Class A, no par value, 100,000,000 shares authorized, 54,235,165 and 53,882,661 shares issued and outstanding as of December 31, 2024 and 2023, respectively, including shares in treasury of 4,327,810 in 2024 and 2023 269,799 268,675 Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2024 and 2023, including shares in treasury of 1,001,714 in 2024 and 2023 3,184 3,184 Retained earnings 57,062 42,150 Accumulated other comprehensive income (loss) ( 95,965 ) ( 118,155 ) Treasury stock, at cost ( 23,725 ) ( 23,725 ) Total stockholders' equity 210,355 172,129 Total liabilities and stockholders' equity $ 1,685,325 1,668,928 See accompanying Notes to Consolidated Financial Statements. December 31, 2024 | 10-K 62 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (Loss) Years Ended December 31, (In thousands, except share amounts) 2024 2023 Revenues: Premiums: Life insurance $ 171,561 164,609 Accident and health insurance 1,785 1,637 Property insurance ( 18 ) 793 Net investment income 69,712 69,254 Investment related gains (losses), net ( 2,626 ) 760 Other income 4,587 3,627 Total revenues 245,001 240,680 Benefits and Expenses: Insurance benefits paid or provided: Claims and surrenders 146,082 135,993 Increase (decrease) in future policy benefit reserves ( 4,286 ) ( 5,624 ) Policyholder liability remeasurement (gain) loss 4,756 4,460 Policyholders' dividends 5,355 5,542 Total insurance benefits paid or provided 151,907 140,371 Commissions 49,118 39,241 Other general expenses 52,266 47,131 Capitalization of deferred policy acquisition costs ( 41,302 ) ( 28,301 ) Amortization of deferred policy acquisition costs 17,435 15,460 Amortization of cost of insurance acquired 597 604 Total benefits and expenses 230,021 214,506 Income before federal income tax 14,980 26,174 Federal income tax expense (benefit) 68 1,737 Net income 14,912 24,437 Per Share Amounts: Basic earnings per share Class A common stock $ 0.30 0.49 Diluted earnings per share Class A common stock 0.29 0.48 Other Comprehensive Income (Loss): Unrealized gains (losses) on fixed maturity securities: Unrealized holding gains (losses) arising during period ( 30,982 ) 50,894 Reclassification adjustment for losses (gains) included in net income 699 756 Unrealized gains (losses) on fixed maturity securities, net ( 30,283 ) 51,650 Change in current discount rate for liability for future policy benefits 56,613 ( 34,790 ) Income tax expense (benefit) on other comprehensive income items 4,140 ( 2,029 ) Other comprehensive income (loss) 22,190 18,889 Total comprehensive income (loss) $ 37,102 43,326 See accompanying Notes to Consolidated Financial Statements. December 31, 2024 | 10-K 63 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Stockholders' Equity 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 $ 268,147 3,184 16,309 ( 137,044 ) ( 22,806 ) 127,790 Comprehensive income (loss): Net income (loss) — — 24,437 — — 24,437 Other comprehensive income (loss) — — — 18,889 — 18,889 Total comprehensive income (loss) — — 24,437 18,889 — 43,326 Acquisition of treasury stock — — — — ( 919 ) ( 919 ) Stock-based compensation 528 — — — — 528 Other (1) — — 1,404 — — 1,404 Balance at December 31, 2023 268,675 3,184 42,150 ( 118,155 ) ( 23,725 ) 172,129 Comprehensive income (loss): Net income (loss) — — 14,912 — — 14,912 Other comprehensive income (loss) — — — 22,190 — 22,190 Total comprehensive income (loss) — — 14,912 22,190 — 37,102 Stock-based compensation 1,124 — — — — 1,124 Balance at December 31, 2024 $ 269,799 3,184 57,062 ( 95,965 ) ( 23,725 ) 210,355 (1) See Note 11 in the Notes to Consolidated Financial Statements for more details. See accompanying Notes to Consolidated Financial Statements. December 31, 2024 | 10-K 64 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Years Ended December 31, (In thousands) 2024 2023 Cash Flows from Operating Activities: Net income $ 14,912 24,437 Adjustments to reconcile net income to net cash provided by operating activities: Investment related (gains) losses on sales of investments and other assets, net 2,626 ( 760 ) Net deferred policy acquisition costs ( 23,867 ) ( 12,841 ) Amortization of cost of insurance acquired 597 604 Depreciation 619 515 Amortization of premiums and discounts on investments 5,116 4,940 Stock-based compensation 1,517 588 Deferred federal income tax expense (benefit) ( 1,800 ) 860 Change in: Accrued investment income ( 186 ) ( 229 ) Reinsurance recoverable ( 2,950 ) 569 Due premiums ( 457 ) 565 Future policy benefit reserves ( 423 ) ( 4,062 ) Other policyholders' liabilities 22,476 10,325 Federal income tax payable 1,398 ( 922 ) Commissions payable and other liabilities 13,754 ( 917 ) Other, net ( 1,414 ) ( 1,616 ) Net cash provided by operating activities 31,918 22,056 Cash Flows from Investing Activities: Sales of fixed maturity securities, available-for-sale 15,161 29,883 Maturities and calls of fixed maturity securities, available-for-sale 51,234 29,488 Purchases of fixed maturity securities, available-for-sale ( 84,412 ) ( 72,802 ) Sales of equity securities — 6,631 Principal payments on mortgage loans 9 7 (Increase) decrease in policy loans, net 4,143 3,414 Sales of other long-term investments 3,565 5,394 Purchases of other long-term investments ( 16,210 ) ( 17,318 ) Purchases of property and equipment ( 663 ) ( 442 ) Maturities of short-term investments — 750 Sales of short-term investments — 499 Net cash used in investing activities ( 27,173 ) ( 14,496 ) See accompanying Notes to Consolidated Financial Statements. December 31, 2024 | 10-K 65 Table of Contents CITIZENS, INC. CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows, Continued Years Ended December 31, (In thousands) 2024 2023 Cash Flows from Financing Activities: Annuity deposits $ 7,500 7,129 Annuity withdrawals ( 9,578 ) ( 9,686 ) Acquisition of treasury stock — ( 919 ) Other share repurchases ( 393 ) ( 60 ) Net cash used in financing activities ( 2,471 ) ( 3,536 ) Net increase (decrease) in cash and cash equivalents 2,274 4,024 Cash and cash equivalents at beginning of year 26,997 22,973 Cash and cash equivalents at end of year $ 29,271 26,997 SUPPLEMENTAL DISCLOSURE OF OPERATING ACTIVITIES: Cash paid for income taxes during 2024 and 2023 was $ 0.5 million and $ 1.8 million, respectively. SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: During 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 recognized right-of-use assets of $ 0.1 million in exchange for new operating lease liabilities during 2023 and none during 2024. See accompanying Notes to Consolidated Financial Statements. December 31, 2024 | 10-K 66 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND CONSOLIDATION The accompanying consolidated financial statements of Citizens, Inc. and its wholly-owned subsidiaries have been prepared in conformity with U.S. generally accepted accounting principles ("U.S. GAAP"). The consolidated financial statements include the accounts and operations of Citizens, Inc. ("Citizens" or the "Company"), a Colorado corporation, and its wholly-owned subsidiaries, CICA Life Insurance Company of America ("CICA Domestic"), CICA Life Ltd. ("CICA Bermuda"), 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," "we," "it," "us," or "our". 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 primarily 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 whole life insurance. 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. NES provides services to policyholders of CICA International. 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, primarily in Louisiana, Mississippi and Arkansas. Our products in this segment consist primarily of small face amount 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. SPLIC also issues critical illness policies. Prior to June 30, 2023, SPFIC issued dwelling and contents property insurance policies. As of June 30, 2023, the Company ceased all operations for SPFIC and SPFIC was dissolved in 2024. CTI provides data processing systems and services to the Company. SIGNIFICANT ACCOUNTING POLICIES INVESTMENTS Investment securities are classified as held-to-maturity ("HTM"), available-for-sale ("AFS") or trading. Management determines the appropriate classification at the time of purchase. The classification of securities is significant since it directly impacts the accounting for unrealized gains and losses on securities. Fixed maturity securities are classified as HTM and carried at amortized cost when management has the positive intent and the Company has the ability to hold the securities to maturity. Securities classified as AFS are carried at fair value, with the unrealized holding gains and losses, net of tax, reported in other comprehensive income (loss) and are not reported in earnings until realized. Our fixed maturity securities consist primarily of bonds classified as AFS. The Company does not classify any fixed maturity securities as trading or as HTM. Equity securities are measured at fair value with the change in fair value recorded through the consolidated statements of operations and comprehensive income (loss). December 31, 2024 | 10-K 67 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Unrealized gains (losses) of fixed maturity securities held as AFS are shown as a separate component of stockholders' equity, net of tax, and is a separate component of other comprehensive income (loss). The Company assesses AFS fixed maturity securities in an unrealized loss position for expected credit losses. First, we assess whether we intend to sell, or it is more likely than not that we will be required to sell, the security before recovery of its amortized cost. If either of the criteria is met, the security's amortized cost is written down to its fair value. For AFS fixed maturity securities that do not meet either criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If management deems a credit loss has occurred, the impairment is recorded through an allowance for credit losses rather than as a write-down. Changes in the allowance for credit losses are recorded through investment related gains and losses. Any impairment that has not been recorded through an allowance for credit losses is recognized in accumulated other comprehensive income (loss) on our consolidated balance sheets. The Company made a policy election to exclude accrued interest from the amortized cost of AFS fixed maturity securities and report accrued interest separately in accrued investment income on the consolidated balance sheets. AFS fixed maturity securities are placed on non-accrual status when we no longer expect to receive all contractual amounts due. Accrued interest receivable is reversed against interest income when a security is placed on non-accrual status. Accordingly, we do not recognize an allowance for credit loss against accrued interest receivable. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification method for determining the cost of securities sold. The Company from time to time may dispose of an impaired security in response to asset/liability management decisions, future market movements, business plan changes, or if the net proceeds can be reinvested at a rate of return that is expected to recover the loss within a reasonable period of time. Policy loans are reported at unpaid principal balances. Other long-term investments consist primarily of investments in limited partnerships, Federal Home Loan Bank ("FHLB") common stock and mortgage loans. We initially estimate the fair value of investments in limited partnerships by reference to the transaction price. Subsequently, we obtain the fair value of these investments from net asset value information provided by the general partner or manager of the investments, the financial statements of which are audited annually. Recognition of investment income on these funds is delayed due to the availability of the related financial statements, which are generally obtained from the partnerships' general partners. As a result, our limited partnerships are generally reported on a three-month delay. We are a member of the FHLB of Dallas and such membership requires members to own stock in the FHLB. Our FHLB stock is carried at amortized cost, which approximates fair value. Mortgage loans on real estate are reported at unpaid principal balances. The Company had restricted cash equivalents and fixed maturity securities with an aggregate fair value of $ 7.9 million and $ 8.6 million at December 31, 2024 and 2023, respectively, on deposit with various state regulatory authorities to fulfill statutory requirements. SHORT-TERM INVESTMENTS The Company considers investments maturing within one year at acquisition as short-term. These securities are carried at fair value. CASH AND CASH EQUIVALENTS Cash consists of balances on hand and on deposit in banks and financial institutions. Cash equivalents consists of securities whose duration does not exceed 90 days at the date of acquisition. Restricted cash represents amounts December 31, 2024 | 10-K 68 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) on deposit with state regulatory authorities noted above and our appeal bond discussed in Note 8 . Commitments and Contingencies . REINSURANCE RECOVERABLE Reinsurance recoverable includes expected reimbursements for policyholder claim amounts in excess of the Company's retention, as well as profit sharing and experience refund accruals. Reinsurance recoverable is reduced for estimated uncollectible amounts, if any. Reinsurance premiums, benefits and expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. The cost of reinsurance related to long duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies. The cost of reinsurance related to short duration contracts is accounted for over the coverage period. Profit-sharing and similar adjustable provisions are accrued based on the experience of the underlying policies. DEFERRED POLICY ACQUISITION COSTS Deferred policy acquisition costs (“DAC”) are costs that are incremental and directly related to the successful acquisition of new or renewal insurance contracts. Such costs include the incremental direct costs of contract acquisition, such as sales commissions; the portion of employees’ total compensation and payroll-related fringe benefits related directly to time spent performing acquisition activities, such as underwriting, issuing and processing policies for contracts that have actually been acquired; and other costs related directly to acquisition activities that would not have been incurred if the contract had not been acquired. Contracts are grouped by contract type and issue year into cohorts consistent with the grouping used in estimating the associated liability. DAC is amortized on a constant level basis for the grouped contracts over the expected term of the related contracts to approximate straight-line amortization. For the Life Insurance segment, the constant level basis used is policy count in force. For the Home Service Insurance segment, the constant level basis used is face amount in force. The constant level bases used for amortization are projected using mortality and lapse assumptions that are based on the Company’s experience, industry data, and other factors at the end of each reporting period and are consistent with those used for the liability for future policy benefit life reserves. Annually, the Company completes experience studies with respect to mortality and lapse assumptions. If those assumptions are updated, the DAC amortization basis is recalculated and the effect of the assumption change will be reflected in the cohort level amortization in future periods. Inherent in the capitalization and amortization of DAC are certain management judgments about what acquisition costs are deferred, the ending asset balance and the annual amortization. Approximately 93 % of our capitalized DAC are attributed to first year and renewal excess commissions. The remaining 7 % are attributed to other costs that vary with and are directly related to the successful acquisition of new insurance business. Those costs generally include costs related to the production, underwriting and issuance of new business. Amortization of DAC is included in the consolidated statements of operations and comprehensive income (loss). The DAC balance on the consolidated balance sheets is reduced for actual experience in excess of expected experience. Changes in future estimates are recognized prospectively over the remaining expected contract term. COST OF INSURANCE ACQUIRED The Company recognizes an intangible asset that arises in the application of U.S. GAAP purchase accounting as the difference between the reported value and the fair value of insurance contract liabilities, or comparable amounts determined in purchased insurance business combinations. This intangible asset is referred to as the Cost of Insurance Acquired (“COIA”), which is amortized on a basis consistent with DAC, such that it is amortized in proportion to policies in force for the Life Insurance segment and face amount in force for the Home Service Insurance segment to approximate straight-line amortization. A recoverability test that considers, among other things, actual experience and projected future experience is performed at least annually. These annual recoverability tests are based initially on an estimate of the available premium (gross premium less the benefit and expense portion of premium) for the next 50 years. Management December 31, 2024 | 10-K 69 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) believes that our COIA is recoverable for the years ended December 31, 2024 and 2023. This belief is based upon the analysis performed on estimated future results of the block and our annual recoverability testing. The value of COIA resulting from our various acquisitions was determined based on the present value of future profits discounted at annual rates ranging from 3.7 % to 8.5 %. PROPERTY AND EQUIPMENT Property and equipment are carried at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the useful lives of the assets, ranging from three years to thirty years . The following is a summary of property and equipment. December 31, (In thousands) 2024 2023 Property and equipment: Home office, land and buildings $ 3,995 3,980 Furniture and equipment 1,359 1,389 Electronic data processing equipment and computer software 6,044 7,800 Real estate and equipment leases (See Note 8 ) 7,789 9,073 Total property and equipment 19,187 22,242 Accumulated depreciation ( 8,613 ) ( 10,433 ) Property and equipment, net $ 10,574 11,809 The Company has several lease agreements for real estate and equipment, such as its corporate home office, Puerto Rico service center and several district office locations related to our Home Service Insurance segment. The Company recognizes these lease agreements on the consolidated balance sheets as a right-of-use asset and a corresponding lease liability. The Company uses its estimated incremental borrowing rate, which is derived from information available at lease commencement date, in determining the present value of lease payments. FUTURE POLICY BENEFITS AND EXPENSES As premium revenue is recognized, a liability for future policy benefits, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders less the present value of estimated future net premiums to be collected from policyholders, is accrued. The liability is estimated using current assumptions that include discount rate, mortality and lapses. These current assumptions are based on judgements that consider the Company’s historical experience, industry data, and other factors. Our traditional and limited-payment contracts are grouped into cohorts by contract type and issue year. Our reporting cohorts are (i) Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and (ii) Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies. The liability is adjusted for differences between actual and expected experience. The Company reviews its historical cash flow assumptions quarterly and in the third quarter of the year, the Company reviews its future cash flow assumptions. The net premium ratio used to calculate the liability is updated each quarter based on the current period's actual experience relative to expected experience. The revised net premium ratio is used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted at the locked-in discount rate. This amount is then compared to the carrying amount of the liability as of that same date, before the updating of cash flow assumptions, to determine the current period change in liability estimate. The current period change in the liability is the policyholder liability remeasurement gain or loss and is presented as a separate component of total insurance benefits paid or provided in the consolidated statements of operations and comprehensive income (loss). In subsequent periods, the revised net premiums are used to measure the liability for future policy benefits, subject to future revisions. December 31, 2024 | 10-K 70 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For traditional and limited-payment contracts, the current discount rate assumption is a yield curve that equals the yield of an upper-medium grade fixed income instrument, based on A-quality corporate bonds. The Company selects fixed-income instruments that have been A rated by one of the major credit rating agencies, such as Moody’s or Standard & Poor’s. The current discount rate assumption is updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in other comprehensive income. For liability cash flows that are projected beyond the duration of market-observable A credit-rated fixed-income instruments, the Company uses the last market-observable yield level and linear interpolation to determine yield assumptions for durations that do not have market observable yields. The locked-in discount rate for policies issued prior to transition equals the rate set at contract issuance. For current year issues, the locked-in discount rate is the average of the current year quarterly discount rates and will change throughout the year as new discount rates are calculated, with the change reflected in net income. The accrued account balance for non-traditional life insurance and investment contracts is computed as deposits net of withdrawals made by the contract holder, plus amounts credited based on contract specifications, less contract fees and charges assessed, plus any additional interest. Annuity interest crediting rates range from 2.5 % to 5.5 % annually. Benefits and expenses are charged against the account balance to recognize costs as incurred over the estimated lives of the contracts. Expenses include interest credited to contract account balances and benefits paid in excess of contract account balances. Unpaid claims on accident and health policies represent the estimated liability for benefit expenses, both reported but not paid and incurred but not reported to the Company. The liability for incurred but not reported claims includes estimates for additional unreported claim amounts due derived from previously reported claims. Liabilities for unpaid claims are estimated using individual case basis valuations and statistical analysis. Those estimates are subject to the effects of trends in claim severity and frequency. Anticipated investment income is not considered in determining whether a premium deficiency exists with respect to short-duration contracts. Premium deposits accrue interest at rates ranging from 1.5 % to 6.0 % per annum. The cost of insurance is included in the premium when collected and interest is credited annually to deposit accounts. DEFERRED PROFIT LIABILITY For limited-payment products, gross premiums received in excess of net premiums are deferred at initial recognition as a deferred profit liability (“DPL”). Gross premiums are measured using assumptions consistent with those used in the measurement of the liability for future policy benefit life reserves, including discount rate, mortality and lapses. The DPL is amortized and recognized in net income within the increase (decrease) in future policy benefit reserves. The amortization basis for the DPL is the present value of insurance in force for life insurance contracts. Interest is accreted on the balance of the DPL using the locked-in discount rate. The Company reviews and updates its estimates of cash flows for the DPL at the same time as the estimates of cash flows for the liability for future policy benefit life reserves. The DPL is updated each quarter based on the current period's actual experience relative to expected experience with the changes recorded within the increase (decrease) in future policy benefit reserves in the consolidated statements of operations and comprehensive income (loss). On the consolidated balance sheets, DPL is recorded as a component of the liability for future policy benefit life reserves. PARTICIPATING POLICIES At December 31, 2024 and 2023, participating business approximated 46 % and 51 %, respectively, of direct life insurance in force. Policyholder dividends are determined based on the discretion of the board of directors of the policy issuing subsidiary. Policyholder dividends are accrued over the premium paying periods of the insurance contract. December 31, 2024 | 10-K 71 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) CONTINGENCIES An estimated loss from a contingency is accrued and charged to results of operations only if both of the following conditions are met: 1. Information available prior to the issuance of the consolidated financial statements indicates that it is probable (virtual certainty is not required) that an asset has been impaired or a liability incurred as of the date of the consolidated financial statements; and 2. The amount of the loss can be reasonably estimated. Reasonable estimation of a possible loss does not require estimating a single amount of the loss. It requires that a loss be accrued if it can be estimated within a range. If an amount within the range is a better estimate than any other amount within the range, that amount is accrued. If no amount within the range is a better estimate than any other amount, the minimum amount in the range is accrued. PREMIUM REVENUE AND RELATED EXPENSES Premiums on life policies are recognized as earned when due. Premiums paid in advance on the consolidated balance sheets are held on deposit and accrue interest at rates ranging from 1.5 % to 6.0 % until such time as the premiums become due. Premiums on accident and health policies are recognized as revenue over the contract period on a pro rata basis. Benefits and expenses are associated with earned premiums resulting in the recognition of profits over the estimated lives of the contracts. This matching is accomplished by means of a provision for future policy benefits and the capitalization and amortization of deferred policy acquisition costs and amortization of deferred profit liability for limited pay plans. Annuity policies, primarily flexible premium fixed annuity products, are accounted for in a manner consistent with accounting for interest bearing financial instruments. Premium receipts are not reported as revenue, rather as deposit liabilities to annuity contracts. The annuity products issued do not include fees or other such charges. Reserves are set up for surrenders and death benefits. Acquisition costs and premium loads are capitalized and amortized. STOCK COMPENSATION The Company accounts for stock compensation arrangements using a fair-value based method. The Company determines the fair value of performance-based and restricted stock unit awards on the date of grant. The fair value of time-based awards is recognized over the period during which an award holder is required to provide services in exchange for the award, know as the requisite service period, which is typically the vesting period using the straight-line method. The Company records forfeitures and adjusts compensation expense on stock-based awards in the period they occur. INCOME TAXES Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered. A deferred tax asset is recorded only if a determination is made that it is more likely than not that the tax treatment on which the deferred tax asset depends will be sustained in the event of an audit. These determinations inherently involve management's judgment. In addition, the Company must record a tax valuation allowance with respect to deferred tax assets if it is more likely than not that the tax benefit will not be realized. The Company releases stranded tax effects in accumulated other comprehensive income on an aggregate portfolio basis. EARNINGS PER SHARE Basic earnings per share are computed by dividing net income available to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per share are December 31, 2024 | 10-K 72 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) computed under the if-converted method for convertible securities and the treasury stock method for warrants, giving effect to all potential dilutive common stock, including options, warrants and convertible/redeemable preferred stock. The basic and diluted earnings per share of Class B common stock are one half the earnings per share of the Class A common stock. We hold 100% of our Class B common stock in treasury. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates. Significant estimates include those used in the evaluation of credit losses on fixed maturity securities, actuarially determined assets and liabilities and assumptions, valuation allowance on deferred tax assets and contingencies relating to litigation and regulatory matters. Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the consolidated financial statements. RECLASSIFICATIONS Certain amounts presented in prior years have been reclassified to conform to the current presentation. ACCOUNTING PRONOUNCEMENTS ACCOUNTING STANDARDS ADOPTED On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . This amendment expands a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. The amendments became effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. As this ASU only requires additional disclosures about the Company's operating segments, there was no material impact to the consolidated financial statements. On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public entity is also required to provide a qualitative description of the state and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. The amendments are effective prospectively for annual periods beginning after December 15, 2024 and early adoption and retrospective application are permitted. The Company adopted this pronouncement at December 31, 2024 using the retrospective approach. As this ASU only requires additional disclosures about the Company's taxes, there was no material impact to the consolidated financial statements. ACCOUNTING STANDARDS NOT YET ADOPTED In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which is intended to enhance expense disclosures by requiring additional disaggregation of certain costs and expenses, on an interim and annual basis, within the footnotes to the financial statements. This ASU is effective for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the amendments may be applied either prospectively or retrospectively. While this ASU will impact only our disclosures and not our financial condition and results of operations, we are currently evaluating the impact of adopting this pronouncement on the consolidated financial statements. December 31, 2024 | 10-K 73 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) No other new accounting pronouncement issued or effective during 2024 had, or is expected to have, a material impact on our consolidated financial statements. (2) INVESTMENTS The Company invests primarily in fixed maturity securities, which totaled 86.0 % of total cash and invested assets at December 31, 2024. Carrying Value as of December 31, (In thousands, except for %) 2024 % 2023 % Cash and invested assets: Fixed maturity securities $ 1,220,961 86.0 % $ 1,238,981 86.7 % Equity securities 5,447 0.4 5,282 0.4 Policy loans 71,216 5.0 75,359 5.3 Other long-term investments 93,604 6.6 82,725 5.8 Cash and cash equivalents 29,271 2.0 26,997 1.8 Total cash and invested assets $ 1,420,499 100.0 % $ 1,429,344 100.0 % The following tables represents the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of the dates indicated. December 31, 2024 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed maturity securities: U.S. Treasury securities $ 5,939 85 115 5,909 U.S. Government-sponsored enterprises 3,152 152 — 3,304 States and political subdivisions 300,757 1,087 33,542 268,302 Corporate: Financial 272,925 1,593 33,285 241,233 Consumer 263,242 899 45,955 218,186 Utilities 126,361 220 22,770 103,811 Energy 79,247 40 9,959 69,328 Communications 70,896 111 9,910 61,097 All other 117,387 315 16,368 101,334 Commercial mortgage-backed 315 1 5 311 Residential mortgage-backed 106,661 7 13,026 93,642 Asset-backed 54,419 891 806 54,504 Total fixed maturity securities $ 1,401,301 5,401 185,741 1,220,961 December 31, 2024 | 10-K 74 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2023 (In thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Fixed maturity securities: U.S. Treasury securities $ 5,983 127 48 6,062 U.S. Government-sponsored enterprises 3,404 250 1 3,653 States and political subdivisions 314,203 2,160 29,132 287,231 Corporate: Financial 266,485 2,066 31,255 237,296 Consumer 250,672 2,145 37,094 215,723 Utilities 123,625 615 20,253 103,987 Energy 73,808 64 8,049 65,823 Communications 74,029 309 8,892 65,446 All other 111,124 647 12,439 99,332 Commercial mortgage-backed 171 — — 171 Residential mortgage-backed 107,174 9 10,060 97,123 Asset-backed 58,360 290 1,516 57,134 Total fixed maturity securities $ 1,389,038 8,682 158,739 1,238,981 The Company's investments in equity securities are shown below. Fair Value as of December 31, (In thousands) 2024 2023 Equity securities: Bond mutual funds $ 739 740 Common stock 810 665 Non-redeemable preferred stock 7 7 Non-redeemable preferred stock fund 3,891 3,870 Total equity securities $ 5,447 5,282 VALUATION OF INVESTMENTS AFS fixed maturity securities are reported in the consolidated financial statements at fair value. Equity securities are measured at fair value with the change in fair value recorded through net income (loss). The Company recognized net investment related gains of $ 0.2 million on equity securities held for the year ended December 31, 2024 and losses of $ 0.2 million on equity securities held for the year ended December 31, 2023. The Company monitors all AFS fixed maturity securities on an on-going basis relative to changes in credit ratings, market prices, earnings trends and financial performance, in addition to specific region or industry reviews. The Company evaluates whether a credit impairment exists for fixed maturity securities by considering primarily the following factors: (a) changes in the financial condition of the security's underlying collateral; (b) whether the issuer is current on contractually obligated interest and principal payments; (c) changes in the financial condition, credit rating and near-term prospects of the issuer; and (d) the payment structure of the security. The Company's best estimate of expected future cash flows used to determine the credit loss amount is a quantitative and qualitative process. Quantitative review includes information received from third-party sources such as financial statements, pricing and rating changes, liquidity and other statistical information. Qualitative factors include judgments related to business strategies, economic impacts on the issuer, overall judgment related to estimates and industry factors as well as the Company's intent to sell the security, or if it is more likely than not that the Company would be required to sell a security before recovery of its amortized cost. December 31, 2024 | 10-K 75 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company's best estimate of future cash flows involves assumptions including, but not limited to, various performance indicators, such as historical and projected default and recovery rates, credit ratings, and current delinquency rates. These assumptions require the use of significant management judgement and include the probability of issuer default and estimates regarding timing and amount of expected recoveries, which may include estimating the underlying collateral value. In addition, projections of expected future fixed maturity security cash flows may change based upon new information regarding the performance of the issuer. Any credit losses are presented as an allowance rather than as a write-down on AFS fixed maturity securities management does not intend to sell or believes that it is more likely than not we will be required to sell. The Company recorded no credit valuation losses on fixed maturity securities for the years ended December 31, 2024 and 2023. For fixed maturity security investments that have unrealized losses as of December 31, 2024 and 2023, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows. December 31, 2024 Less than 12 months Greater than 12 months Total (In thousands, except for # of securities) Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fixed maturity securities: U.S. Treasury securities $ 835 51 3 435 64 5 1,270 115 8 States and political subdivisions 42,583 1,484 63 147,534 32,058 177 190,117 33,542 240 Corporate: Financial 29,258 756 53 154,448 32,529 192 183,706 33,285 245 Consumer 37,231 2,053 57 161,795 43,902 216 199,026 45,955 273 Utilities 16,750 687 47 79,488 22,083 142 96,238 22,770 189 Energy 11,654 438 29 52,537 9,521 65 64,191 9,959 94 Communications 9,973 250 11 48,462 9,660 60 58,435 9,910 71 All Other 25,208 1,237 38 68,756 15,131 87 93,964 16,368 125 Commercial mortgage-backed 100 — 1 89 5 1 189 5 2 Residential mortgage-backed 160 2 11 93,231 13,024 84 93,391 13,026 95 Asset-backed 10,330 243 14 14,741 563 16 25,071 806 30 Total fixed maturity securities $ 184,082 7,201 327 821,516 178,540 1,045 1,005,598 185,741 1,372 December 31, 2024 | 10-K 76 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2023 Less than 12 months Greater than 12 months Total (In thousands, except for # of securities) Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fair Value Unrealized Losses # of Securities Fixed maturity securities: U.S. Treasury securities $ 1,203 40 5 65 8 2 1,268 48 7 U.S. Government-sponsored enterprises 221 1 1 — — — 221 1 1 States and political subdivisions 19,540 357 35 164,264 28,775 192 183,804 29,132 227 Corporate: Financial 12,584 383 19 176,521 30,872 217 189,105 31,255 236 Consumer 10,175 265 16 176,725 36,829 223 186,900 37,094 239 Utilities 3,596 66 20 85,169 20,187 137 88,765 20,253 157 Energy 3,291 57 1 59,392 7,992 76 62,683 8,049 77 Communications 5,784 153 5 56,108 8,739 69 61,892 8,892 74 All Other 2,080 32 5 85,757 12,407 100 87,837 12,439 105 Residential mortgage-backed 849 38 5 95,806 10,022 86 96,655 10,060 91 Asset-backed 4,757 111 8 32,764 1,405 40 37,521 1,516 48 Total fixed maturity securities $ 64,080 1,503 120 932,571 157,236 1,142 996,651 158,739 1,262 In each category of our fixed maturity securities described above, we do not intend to sell our investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. At December 31, 2024 and 2023, 99.2 % and 99.4 %, respectively, of the fair value of our fixed maturity securities portfolio was rated investment grade. While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an on-going basis as future information may become available which could result in an allowance being recorded. The unrealized losses on fixed maturity securities detailed in the previous tables are due to noncredit-related factors, including widening credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of our investments, hence they are not recognized as credit losses. The fair value is expected to recover as the securities approach maturity or if market yields for such investments decline. The amortized cost and fair value of fixed maturity securities at December 31, 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. (In thousands) Amortized Cost Fair Value Fixed maturity securities: Due in one year or less $ 20,091 19,999 Due after one year through five years 141,692 140,359 Due after five years through ten years 252,359 244,946 Due after ten years 987,159 815,657 Total fixed maturity securities $ 1,401,301 1,220,961 There were no investments that were non-income producing for the years ended December 31, 2024 or 2023. December 31, 2024 | 10-K 77 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Major categories of net investment income are summarized as follows: Years ended December 31, (In thousands) 2024 2023 Gross investment income: Fixed maturity securities $ 60,940 60,127 Equity securities 302 630 Policy loans 5,597 6,011 Other long-term investments 4,846 4,509 Other 834 576 Total investment income 72,519 71,853 Investment expenses ( 2,807 ) ( 2,599 ) Net investment income $ 69,712 69,254 The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales. Years ended December 31, (In thousands) 2024 2023 Fixed maturity securities: Proceeds $ 15,161 29,883 Gross realized gains $ 131 53 Gross realized losses $ 225 602 Investment related gains and losses are as follows: Years ended December 31, (In thousands) 2024 2023 Investment related gains (losses): Sales, calls and maturities: Fixed maturity securities $ ( 699 ) ( 756 ) Equity securities — 513 Other long-term investments ( 788 ) 342 Investment related gains (losses) ( 1,487 ) 99 Change in fair value of equity securities 164 ( 190 ) Change in fair value of limited partnerships ( 969 ) 912 Change in credit loss allowance ( 334 ) ( 61 ) Net investment related gains (losses) $ ( 2,626 ) 760 (3) FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through other comprehensive income (loss). We also report our equity securities and certain other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations and comprehensive income (loss). December 31, 2024 | 10-K 78 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. All assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three categories: • Level 1 - Quoted prices for identical instruments in active markets. • Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs or whose significant value drivers are observable. • Level 3 - Instruments whose significant value drivers are unobservable. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments. Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes. These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments. All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities. Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information. We have no investments in this category. The following tables set forth our assets that are measured at fair value on a recurring basis as of the dates indicated. December 31, 2024 (In thousands) Level 1 Level 2 Level 3 Total Fair Value Financial assets: Fixed maturity securities: U.S. Treasury and U.S. Government-sponsored enterprises $ 5,909 3,304 — 9,213 States and political subdivisions — 268,302 — 268,302 Corporate 42 794,947 — 794,989 Commercial mortgage-backed — 311 — 311 Residential mortgage-backed — 93,642 — 93,642 Asset-backed — 54,504 — 54,504 Total fixed maturity securities 5,951 1,215,010 — 1,220,961 Equity securities: Bond mutual funds 739 — — 739 Common stock 810 — — 810 Non-redeemable preferred stock 7 — — 7 Non-redeemable preferred stock fund 3,891 — — 3,891 Total equity securities 5,447 — — 5,447 Other long-term investments (1) — — — 93,337 Total financial assets $ 11,398 1,215,010 — 1,319,745 (1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. December 31, 2024 | 10-K 79 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2023 (In thousands) Level 1 Level 2 Level 3 Total Fair Value Financial assets: Fixed maturity securities: U.S. Treasury and U.S. Government-sponsored enterprises $ 6,062 3,653 — 9,715 States and political subdivisions — 287,231 — 287,231 Corporate 43 787,564 — 787,607 Commercial mortgage-backed — 171 — 171 Residential mortgage-backed — 97,123 — 97,123 Asset-backed — 57,134 — 57,134 Total fixed maturity securities 6,105 1,232,876 — 1,238,981 Equity securities: Bond mutual funds 740 — — 740 Common stock 665 — — 665 Non-redeemable preferred stock 7 — — 7 Non-redeemable preferred stock fund 3,870 — — 3,870 Total equity securities 5,282 — — 5,282 Other long-term investments (1) — — — 82,460 Total financial assets $ 11,387 1,232,876 — 1,326,723 (1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet. FINANCIAL INSTRUMENTS VALUATION FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE Fixed maturity securities, available-for-sale. At December 31, 2024, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 92.1 % of total reported fair value of our financial assets. The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades. In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness. There were no Level 3 assets as of December 31, 2024 and 2023. For the year ended December 31, 2024, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received. Equity securities. Our equity securities are classified as Level 1 assets as their fair values are based upon quoted market prices. Limited partnerships. The Company considers the net asset value ("NAV") to represent the value of the investment fund and is measured by the total value of assets minus the total value of liabilities. The following table includes information related to our investments in limited partnerships that calculate NAV per share. For these investments, which are measured at fair value on a recurring basis, we use the NAV per share to measure fair value. The Company recognized net investment related losses of $ 1.0 million on limited partnerships held for the year ended December 31, 2024 | 10-K 80 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) December 31, 2024 and gains of $ 0.9 million for the year ended December 31, 2023. These investments are included in other long-term investments on the consolidated balance sheets. December 31, 2024 December 31, 2023 (In thousands, except years) Fair Value Using NAV Per Share Unfunded Commit- ments Range (In years) Fair Value Using NAV Per Share Unfunded Commit- ments Range (In years) Description Limited partnerships: Middle market Investments in privately-originated, performing senior secured debt primarily in North America-based companies $ 35,369 1,660 3 $ 34,858 3,452 4 Global equity fund Investments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth 11,568 — 0 10,345 — 0 Late-stage growth Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale 27,825 8,134 3 to 5 20,524 14,271 4 to 6 Infrastructure Investments in environmental infrastructure and related technology, focusing on renewable power generation and distribution 18,575 5,637 9 16,733 9,576 10 Total limited partnerships $ 93,337 15,431 $ 82,460 27,299 The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the funds are liquidated. The life spans indicated above may be shortened or extended at the fund manager's discretion, typically in one or two-year increments. The global equity fund is redeemable monthly. FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE Estimates of fair values are made at a specific point in time, based on relevant market prices and information about the financial instruments. The estimated fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions. The carrying amount and fair value for the financial assets and liabilities on the consolidated financial statements not otherwise disclosed for the periods indicated were as follows: December 31, 2024 December 31, 2023 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Financial assets: Policy loans $ 71,216 71,216 75,359 75,359 Residential mortgage loans 33 34 42 42 Cash and cash equivalents 29,271 29,271 26,997 26,997 Financial liabilities: Annuity - investment contracts 68,888 63,629 67,690 63,283 Policy loans. Policy loans had a weighted average annual interest rate of 7.7 % at both December 31, 2024 and 2023 and no specified maturity dates. Policy loans are an integral part of the life insurance policies we have in force, cannot be valued separately and are not marketable. Therefore, the fair value of policy loans approximates the carrying value reflected on the consolidated balance sheets and are considered Level 3 assets in the fair value hierarchy. December 31, 2024 | 10-K 81 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Residential mortgage loan. The mortgage loan is secured principally by a residential property. The interest rate for this loan was 7.0 % at December 31, 2024 and 2023. At December 31, 2024, the remaining loan matures in four years . Management estimated the fair value using an annual interest rate of 6.25 % at both December 31, 2024 and 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. Cash and cash equivalents. The fair value of cash and cash equivalents approximates carrying value and these assets are characterized as Level 1 assets in the fair value hierarchy. Annuity liabilities. The fair value of the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at December 31, 2024 and 2023 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.96 % to 4.96 % 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. Other long-term investments. Financial instruments included in other long-term investments are classified in various levels of the fair value hierarchy. The following table summarizes the carrying amounts of these investments. As of December 31, (In thousands) 2024 2023 Other long-term investments: Limited partnerships $ 93,337 82,460 FHLB common stock 212 202 Mortgage loans 33 42 All other investments 22 21 Total other long-term investments $ 93,604 82,725 We carried no limited partnership investments at cost at either December 31, 2024 or December 31, 2023. We are a member of the FHLB of Dallas and such membership requires members to own stock in the FHLB. Our FHLB stock is carried at amortized cost, which approximates fair value. (4) DEFERRED POLICY ACQUISITION COSTS AND COST OF INSURANCE ACQUIRED The following tables roll forward the DAC and COIA balances for the years ended December 31, 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 premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies. December 31, 2024 | 10-K 82 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DAC Year Ended December 31, 2024 (In thousands) Permanent Permanent Limited Pay Other Business Total Life Insurance: Balance, beginning of year $ 105,552 14,075 1,213 120,840 Capitalizations 31,740 3,314 350 35,404 Amortization expense ( 12,567 ) ( 1,001 ) ( 1,016 ) ( 14,584 ) Balance, end of year 124,725 16,388 547 141,660 Home Service Insurance: Balance, beginning of year 43,280 10,564 1,084 54,928 Capitalizations 4,643 1,017 238 5,898 Amortization expense ( 2,267 ) ( 430 ) ( 154 ) ( 2,851 ) Balance, end of year 45,656 11,151 1,168 57,975 Consolidated: Balance, beginning of year 148,832 24,639 2,297 175,768 Capitalizations 36,383 4,331 588 41,302 Amortization expense ( 14,834 ) ( 1,431 ) ( 1,170 ) ( 17,435 ) Balance, end of year $ 170,381 27,539 1,715 199,635 Year Ended December 31, 2023 (In thousands) Permanent Permanent Limited Pay Other Business Total Life Insurance: Balance, beginning of year $ 100,926 11,542 1,016 113,484 Capitalizations 16,451 3,332 468 20,251 Amortization expense ( 11,825 ) ( 799 ) ( 271 ) ( 12,895 ) Balance, end of year 105,552 14,075 1,213 120,840 Home Service Insurance: Balance, beginning of year 38,793 9,729 921 49,443 Capitalizations 6,570 1,232 248 8,050 Amortization expense ( 2,083 ) ( 397 ) ( 85 ) ( 2,565 ) Balance, end of year 43,280 10,564 1,084 54,928 Consolidated: Balance, beginning of year 139,719 21,271 1,937 162,927 Capitalizations 23,021 4,564 716 28,301 Amortization expense ( 13,908 ) ( 1,196 ) ( 356 ) ( 15,460 ) Balance, end of year $ 148,832 24,639 2,297 175,768 DAC capitalization increased for the year ended December 31, 2024, compared to the same prior year period mainly from increased commissions from higher first year sales in our Life Insurance segment. December 31, 2024 | 10-K 83 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) COIA Year Ended December 31, 2024 (In thousands) Permanent Permanent Limited Pay Other Business Total Life Insurance: Balance, beginning of year $ 249 695 406 1,350 Amortization expense 350 ( 47 ) ( 406 ) ( 103 ) Balance, end of year 599 648 — 1,247 Home Service Insurance: Balance, beginning of year 7,194 168 1,331 8,693 Amortization expense ( 369 ) ( 7 ) ( 118 ) ( 494 ) Balance, end of year 6,825 161 1,213 8,199 Consolidated: Balance, beginning of year 7,443 863 1,737 10,043 Amortization expense ( 19 ) ( 54 ) ( 524 ) ( 597 ) Balance, end of year $ 7,424 809 1,213 9,446 Year Ended December 31, 2023 (In thousands) Permanent Permanent Limited Pay Other Business Total Life Insurance: Balance, beginning of year $ 267 750 444 1,461 Amortization expense ( 18 ) ( 55 ) ( 38 ) ( 111 ) Balance, end of year 249 695 406 1,350 Home Service Insurance: Balance, beginning of year 7,583 176 1,427 9,186 Amortization expense ( 389 ) ( 8 ) ( 96 ) ( 493 ) Balance, end of year 7,194 168 1,331 8,693 Consolidated: Balance, beginning of year 7,850 926 1,871 10,647 Amortization expense ( 407 ) ( 63 ) ( 134 ) ( 604 ) Balance, end of year $ 7,443 863 1,737 10,043 December 31, 2024 | 10-K 84 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Estimated amortization of COIA in each of the next five years and thereafter is as follows. Actual future amortization will differ from these estimates due to variances from estimated future withdrawal assumptions. (In thousands) Amount Cost of insurance acquired: Year: 2025 $ 635 2026 582 2027 534 2028 491 2029 453 Thereafter 6,751 Total cost of insurance acquired $ 9,446 (5) POLICYHOLDERS’ LIABILITIES LIABILITY FOR FUTURE POLICY BENEFITS The following tables summarize balances of and changes in the liability for future policy benefits for our reporting cohorts: Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, December 31, 2024 | 10-K 85 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) and Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies. December 31, 2024 (In thousands) Life Insurance Home Service Insurance Permanent Permanent Limited Pay Total Permanent Permanent Limited Pay Total Present Value of Expected Net Premiums: Balance, beginning of year $ 244,917 13,260 258,177 98,831 14,926 113,757 Beginning balance at original discount rate 252,426 13,533 265,959 102,045 15,512 117,557 Effect of changes in cash flow assumptions 17,731 274 18,005 ( 462 ) 22 ( 440 ) Effects of actual variances from expected experience ( 17,588 ) 1,646 ( 15,942 ) ( 7,931 ) ( 5,058 ) ( 12,989 ) Adjusted beginning of year balance 252,569 15,453 268,022 93,652 10,476 104,128 Issuances 101,962 3,612 105,574 14,783 2,306 17,089 Interest accrual 11,576 527 12,103 4,246 520 4,766 Net premiums collected ( 50,482 ) ( 4,455 ) ( 54,937 ) ( 12,113 ) 1,346 ( 10,767 ) Derecognition and other ( 4,706 ) 43 ( 4,663 ) 458 84 542 Ending balance at original discount rate 310,919 15,180 326,099 101,026 14,732 115,758 Effect of changes in discount rates ( 11,001 ) ( 218 ) ( 11,219 ) ( 6,568 ) ( 854 ) ( 7,422 ) Balance, end of year $ 299,918 14,962 314,880 94,458 13,878 108,336 Present Value of Expected Future Policy Benefits: Balance, beginning of year $ 973,350 195,122 1,168,472 211,946 122,784 334,730 Beginning balance at original discount rate 995,962 202,755 1,198,717 217,524 123,941 341,465 Effect of changes in cash flow assumptions 18,320 735 19,055 ( 502 ) ( 1,078 ) ( 1,580 ) Effects of actual variances from expected experience ( 13,669 ) 4,771 ( 8,898 ) ( 8,049 ) ( 2,408 ) ( 10,457 ) Adjusted beginning of year balance 1,000,613 208,261 1,208,874 208,973 120,455 329,428 Issuances 102,793 3,740 106,533 14,776 2,312 17,088 Interest accrual 45,246 8,253 53,499 9,641 5,730 15,371 Benefit payments ( 95,848 ) ( 19,185 ) ( 115,033 ) ( 15,255 ) ( 5,556 ) ( 20,811 ) Derecognition and other ( 1,311 ) 728 ( 583 ) 420 75 495 Ending balance at original discount rate 1,051,493 201,797 1,253,290 218,555 123,016 341,571 Effect of changes in discount rates ( 54,937 ) ( 14,731 ) ( 69,668 ) ( 19,746 ) ( 11,377 ) ( 31,123 ) Balance, end of year $ 996,556 187,066 1,183,622 198,809 111,639 310,448 Net liability for future policy benefits $ 696,638 172,104 868,742 104,351 97,761 202,112 Plus: Flooring impact 2 — 2 — — — Less: Reinsurance recoverable 1,639 — 1,639 — — — Net liability for future policy benefits, after reinsurance recoverable $ 695,001 172,104 867,105 104,351 97,761 202,112 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 reserves, primarily from mortality and lapse assumptions that better reflect emerging experience for the new CICA Domestic block of business. December 31, 2024 | 10-K 86 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the year ended December 31, 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 minimal impact to the Home Service Insurance segment resulting from actual to expected experience for the years ended December 31, 2024 and 2023. December 31, 2023 (In thousands) Life Insurance Home Service Insurance Permanent Permanent Limited Pay Total Permanent Permanent Limited Pay Total Present Value of Expected Net Premiums: Balance, beginning of year $ 235,228 10,209 245,437 93,508 13,255 106,763 Beginning balance at original discount rate 247,601 10,682 258,283 100,225 14,394 114,619 Effect of changes in cash flow assumptions ( 210 ) 38 ( 172 ) ( 343 ) 85 ( 258 ) Effects of actual variances from expected experience 4,184 1,536 5,720 ( 8,287 ) ( 6,402 ) ( 14,689 ) Adjusted beginning of year balance 251,575 12,256 263,831 91,595 8,077 99,672 Issuances 34,285 3,607 37,892 17,668 3,951 21,619 Interest accrual 9,291 355 9,646 4,045 468 4,513 Net premiums collected ( 43,307 ) ( 2,955 ) ( 46,262 ) ( 11,901 ) 2,832 ( 9,069 ) Derecognition and other 582 270 852 638 184 822 Ending balance at original discount rate 252,426 13,533 265,959 102,045 15,512 117,557 Effect of changes in discount rates ( 7,509 ) ( 273 ) ( 7,782 ) ( 3,214 ) ( 586 ) ( 3,800 ) Balance, end of year $ 244,917 13,260 258,177 98,831 14,926 113,757 Present Value of Expected Future Policy Benefits: Balance, beginning of year $ 947,415 195,612 1,143,027 200,351 116,356 316,707 Beginning balance at original discount rate 996,169 208,051 1,204,220 214,188 121,908 336,096 Effect of changes in cash flow assumptions ( 389 ) ( 702 ) ( 1,091 ) ( 257 ) 331 74 Effects of actual variances from expected experience 7,370 5,330 12,700 ( 8,126 ) ( 2,103 ) ( 10,229 ) Adjusted beginning of year balance 1,003,150 212,679 1,215,829 205,805 120,136 325,941 Issuances 34,922 3,792 38,714 17,664 3,973 21,637 Interest accrual 43,275 8,355 51,630 9,339 5,667 15,006 Benefit payments ( 85,257 ) ( 22,129 ) ( 107,386 ) ( 15,891 ) ( 6,002 ) ( 21,893 ) Derecognition and other ( 128 ) 58 ( 70 ) 607 167 774 Ending balance at original discount rate 995,962 202,755 1,198,717 217,524 123,941 341,465 Effect of changes in discount rates ( 22,612 ) ( 7,633 ) ( 30,245 ) ( 5,578 ) ( 1,157 ) ( 6,735 ) Balance, end of year $ 973,350 195,122 1,168,472 211,946 122,784 334,730 Net liability for future policy benefits $ 728,433 181,862 910,295 113,115 107,858 220,973 December 31, 2024 | 10-K 87 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table reconciles the net liability for future policy benefits shown above to the liability for future policy benefits reported in the consolidated balance sheets. December 31, 2024 December 31, 2023 (In thousands) Life Insurance Home Service Insurance Consolidated Life Insurance Home Service Insurance Consolidated Life Insurance: Permanent $ 695,001 104,351 799,352 728,433 113,115 841,548 Permanent limited pay 172,104 97,761 269,865 181,862 107,858 289,720 Deferred profit liability 31,101 29,535 60,636 28,933 26,804 55,737 Other 27,967 14,214 42,181 28,319 13,929 42,248 Total life insurance 926,173 245,861 1,172,034 967,547 261,706 1,229,253 Accident & Health: Other 635 436 1,071 588 301 889 Total future policy benefit reserves $ 926,808 246,297 1,173,105 968,135 262,007 1,230,142 The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for long-term duration contracts. December 31, 2024 December 31, 2023 (In thousands) Life Insurance Home Service Insurance Life Insurance Home Service Insurance Undiscounted: Permanent: Expected future gross premiums $ 770,148 444,658 621,935 455,552 Expected future benefit payments 1,623,273 487,177 1,495,206 484,740 Permanent Limited Pay: Expected future gross premiums 45,502 74,616 47,161 77,266 Expected future benefit payments 324,043 319,376 326,821 320,810 Discounted: Permanent: Expected future gross premiums $ 570,976 257,925 481,963 275,629 Expected future benefit payments 996,556 198,809 973,350 211,946 Permanent Limited Pay: Expected future gross premiums 40,627 48,690 42,138 53,075 Expected future benefit payments 187,066 111,639 195,122 122,784 December 31, 2024 | 10-K 88 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables summarize the amount of revenue and interest related to long-term duration contracts recognized in the consolidated statements of operations and comprehensive income (loss) as of the dates indicated. For the Years Ended (In thousands) December 31, 2024 December 31, 2023 Gross Premiums Interest Expense Gross Premiums Interest Expense Life Insurance Segment: Life Insurance: Permanent $ 105,236 33,670 93,917 33,984 Permanent Limited Pay 17,004 8,978 16,396 8,923 Other 12,651 — 12,813 — Less: Reinsurance 5,465 — 1,702 — Total, net of reinsurance 129,426 42,648 121,424 42,907 Accident & Health: Other 766 — 725 — Less: Reinsurance 3 — 4 — Total, net of reinsurance 763 — 721 — Total $ 130,189 42,648 122,145 42,907 Home Service Insurance Segment: Life Insurance: Permanent $ 32,808 5,395 33,263 5,294 Permanent Limited Pay 7,832 6,537 8,576 6,388 Other 1,522 — 1,371 — Less: Reinsurance 27 — 25 — Total, net of reinsurance 42,135 11,932 43,185 11,682 Accident & Health: Other 1,022 — 916 — Total $ 43,157 11,932 44,101 11,682 The following table provides the weighted-average durations of the liability for future policy benefits. December 31, 2024 December 31, 2023 (In years) Life Insurance Home Service Insurance Life Insurance Home Service Insurance Permanent: Duration at original discount rate 8.4 15.6 8.5 16.4 Duration at current discount rate 8.5 14.8 8.5 16.4 Permanent Limited Pay: Duration at original discount rate 8.0 14.4 8.2 14.8 Duration at current discount rate 7.6 13.8 8.1 15.3 December 31, 2024 | 10-K 89 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table provides the weighted-average interest rates for the liability for future policy benefits. December 31, 2024 December 31, 2023 Life Insurance Home Service Insurance Life Insurance Home Service Insurance Permanent: Interest rate at original discount rate 4.87 % 4.96 % 4.89 % 4.97 % Interest rate at current discount rate 5.25 % 5.63 % 4.79 % 4.96 % Permanent Limited Pay: Interest rate at original discount rate 4.28 % 5.03 % 4.29 % 5.04 % Interest rate at current discount rate 5.27 % 5.62 % 4.77 % 4.95 % LIABILITY FOR POLICYHOLDERS’ ACCOUNT BALANCES The following table presents the policyholders' account balances by range of guaranteed minimum crediting rates and the related range of the difference, in basis points, between rates being credited and the respective guaranteed minimums. At Guaranteed Minimum 1 Basis Point-50 Basis Points Above 51 Basis Points-150 Basis Points Above Greater Than 150 Basis Points Above Total December 31, 2024 (In thousands) Range of Guaranteed Minimum Crediting Rates: 0.00 % - 1.49 % $ 826 — — 34,741 35,567 1.50 % - 2.99 % 4,761 178 6 32,452 37,397 3.00 % - 4.49 % 102,478 369 18,977 — 121,824 Greater or equal to 4.50 % 31,371 — — — 31,371 Total $ 139,436 547 18,983 67,193 226,159 At Guaranteed Minimum 1 Basis Point-50 Basis Points Above 51 Basis Points-150 Basis Points Above Greater Than 150 Basis Points Above Total December 31, 2023 (In thousands) Range of Guaranteed Minimum Crediting Rates: 0.00 % - 1.49 % $ 784 — 1,146 34,886 36,816 1.50 % - 2.99 % 33,073 671 49 — 33,793 3.00 % - 4.49 % 105,684 9 — — 105,693 Greater or equal to 4.50 % 31,400 — — — 31,400 Total $ 170,941 680 1,195 34,886 207,702 December 31, 2024 | 10-K 90 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tables summarize balances of and changes in policyholders' account balances. December 31, 2024 (In thousands, except for %) 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 Issuances 24,241 3,263 779 5,820 Premiums received 438 4,201 5,703 778 Interest credited 2,031 2,790 1,827 800 Other 5 — — — Less: Surrenders and withdrawals — 9,308 5,501 8,540 Benefit payments 10,870 — — — Balance, end of year $ 60,414 88,080 47,768 29,897 Weighted-average crediting rates 4.01 % 3.73 % 3.58 % 3.02 % Cash surrender value $ 60,414 88,080 47,768 29,897 December 31, 2023 (In thousands, except for %) Supplemental Contracts Without Life Contingencies Fixed Annuity Dividend Accumulations Premiums Paid in Advance Balance, beginning of year $ 32,995 86,807 41,663 34,603 Issuances 22,387 2,741 660 3,693 Premiums received 123 4,387 5,860 793 Interest credited 1,483 2,653 1,364 1,627 Other 1 — — — Less: Surrenders and withdrawals — 9,454 4,587 9,677 Benefit payments 12,420 — — — Balance, end of year $ 44,569 87,134 44,960 31,039 Weighted-average crediting rates 4.00 % 3.56 % 3.04 % 2.95 % Cash surrender value $ 44,569 87,134 44,960 31,039 December 31, 2024 | 10-K 91 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table reconciles policyholders' account balances shown above to the policyholders' account balance liability in the consolidated balance sheets. As of December 31, (In thousands) 2024 2023 Annuities: Supplemental contracts without life contingencies $ 60,414 44,569 Fixed annuity 88,080 87,134 Unearned revenue reserve 1,483 1,513 Total annuities $ 149,977 133,216 Premiums paid in advance: Premiums paid in advance $ 29,897 31,039 Other 1,285 1,407 Total premiums paid in advance $ 31,182 32,446 (6) POLICY CLAIM LIABILITY The following table presents information on changes in the liability for policy and contract claims. Years ended December 31, (In thousands) 2024 2023 Policy claims payable: Balance at January 1 $ 6,637 9,884 Less: reinsurance recoverable 1,298 2,070 Net balance at January 1 5,339 7,814 Add claims incurred, related to: Current year 26,781 25,630 Prior years (1) ( 552 ) ( 522 ) 26,229 25,108 Deduct claims paid, related to: Current year 19,189 20,786 Prior years 4,480 6,797 23,669 27,583 Net balance December 31 7,899 5,339 Plus: reinsurance recoverable 923 1,298 Balance at December 31 $ 8,822 6,637 (1) This line is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A positive number implies an unfavorable result where claim resolutions were less favorable than assumed while a negative number implies a favorable result compared to assumptions. Our claim assumptions will vary from actual experience in any one period, either favorably or unfavorably. (7) REINSURANCE In the normal course of business, the Company reinsures portions of certain policies that we underwrite to mitigate exposure to potential losses and/or to provide additional capacity for growth. In our international business, we generally retain $ 100,000 on any one individual life insurance policy and reinsure the death benefit amount above $ 100,000 . We also reinsure 100 % of our accidental death benefit rider coverage. In the second quarter of 2024, CICA Domestic entered into a coinsurance agreement with RGA Reinsurance Company ("RGA"). Under this agreement, CICA Domestic initially elected for RGA to reinsure 50 % of its newly written final expense business. The December 31, 2024 | 10-K 92 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Company remains contingently liable in the event that any of the reinsurers are unable to meet their obligations under any reinsurance agreement. Prior to 2024, the Company maintained catastrophic reinsurance for its Louisiana property and casualty business operated through Security Plan Fire Insurance Company. This reinsurance had a net retention on any one loss of $ 30,000 , which was the maximum policy limit on any single risk. The Company ceased this business in June 2023 and thus did not renew this reinsurance. Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers. We obtain reinsurance from multiple reinsurers and monitor our reinsurance concentration as well as the financial strength ratings of our reinsurers. Their ratings by A.M. Best Company range from A- (Excellent) to A+ (Superior). A summary of insurance in force, along with assumed and ceded life reinsurance activity, is summarized below as of the periods indicated. December 31, (In thousands) 2024 2023 Insurance in force: Direct life insurance in force $ 5,227,506 4,922,254 Aggregate assumed life insurance in force 3,427 3,772 Aggregate ceded life insurance in force ( 821,215 ) ( 619,597 ) Net life insurance in force $ 4,409,718 4,306,429 The Company's reinsurance recoverable on ceded reinsurance was $ 6.9 million and $ 4.0 million in 2024 and 2023, respectively. Premiums, claims and surrenders assumed and ceded and expenses ceded for all lines of business are summarized for the periods indicated below. Years ended December 31, (In thousands) 2024 2023 Premiums from short duration contracts: Direct $ 1,837 4,425 Ceded ( 16 ) ( 1,792 ) Net premiums earned 1,821 2,633 Premiums from long duration contracts: Direct 176,999 166,132 Assumed 67 68 Ceded ( 5,559 ) ( 1,794 ) Net premiums earned 171,507 164,406 Total premiums earned $ 173,328 167,039 Claims and surrenders assumed $ 122 113 Claims and surrenders ceded $ ( 2,341 ) ( 936 ) Commissions assumed and (ceded) $ ( 5,539 ) 35 Other general expenses ceded $ ( 960 ) — (8) COMMITMENTS AND CONTINGENCIES LITIGATION AND REGULATORY ACTIONS From time to time, we are subject to legal and regulatory actions relating to our business. We may incur defense costs, including attorneys' fees, and other direct litigation costs associated with defending claims. If we suffer an adverse judgment as a result of litigation claims, it could have a material adverse effect on our business, results of December 31, 2024 | 10-K 93 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) operations and financial condition. The Company's policy is to accrue for defense costs as those services are provided. Trade Secret Lawsuit In the first quarter of 2024, a jury trial was held in the “trade secret lawsuit”. The trade secret lawsuit was filed in 2018 by Citizens, CICA Life Ltd. (Bermuda) and CICA Life Insurance Company of America (collectively, the “Citizens Companies,” “we,” "us" or "our") against certain former employees and independent consultants who we alleged unlawfully took Citizens’ confidential information in order to unfairly compete with us. Our claims against these parties included various unfair competition, tortious interference, breach of contract and other related claims. As previously disclosed, the jury found that Citizens should pay Alexis Delgado and Carlos Nalsen Landa, former independent consultants, 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. Additionally, the trial court awarded defendants Michael P. Buchweitz and Randall Riley approximately $ 3.5 million of their legal fees incurred during the trade secret lawsuit. On August 16, 2024, the judge signed a Final Judgment reflecting the jury decision and the court award of the legal fees. We do not believe the jury properly found that Delgado or Landa were entitled to any prior or future commissions as there was no evidence that we actually held any amount of commissions that they claim they should have received. We also do not believe that Riley or Buchweitz are entitled to legal fees because they were found to have breached the contracts whose fee shifting provisions they sought to invoke. Both of these judgments have been accrued pending the result of our appeal. On September 17, 2024, we filed an appeal bond with the trial court in order to stay any execution of the judgment against us. We have appealed the judgment against us and the appeal is currently pending in the Court of Appeals, Third District of Texas. CREDIT FACILITY On May 3, 2024 , the Company renewed its $ 20 million senior secured revolving credit facility (the “Credit Facility”) with Regions Bank ("Regions"). The Credit Facility has a three-year term, maturing on May 5, 2027 , and allows the Company to borrow up to $ 20 million for working capital purposes, capital expenditures and other corporate purposes. Revolving loans may be requested by the Company in aggregate minimum principal amounts of $ 0.5 million per loan. At the Company's election, the revolving loans may either bear a rate (a fluctuating rate per annum) equal to the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50 %, (c) the index rate plus 1.00 % or (d) 0.75 %. The Company is required to pay Regions a quarterly commitment fee of 0.375 % of the unused portion of the Credit Facility, which the Company expenses as it is incurred. Obligations under the Credit Facility are secured by substantially all of the assets of the Company other than the equity interests its subsidiaries, real estate owned by the Company, and other limited exceptions. The Credit Facility contains customary events of default and financial, affirmative and negative covenants, including but not limited to restrictions on indebtedness, liens, investments, asset dispositions and restricted payments. As of December 31, 2024, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants. CONTRACTUAL OBLIGATIONS The Company leases home office space in Austin, Texas for Citizens and in Puerto Rico for NES as well as several district office locations related to our Home Service Insurance segment across Louisiana, Mississippi and Arkansas, which are classified as operating leases. Certain operating leases include renewal options that extend the lease term. The exercise of lease renewal options is at our sole discretion when it is reasonably certain that we will exercise such option. Leases with an initial term of 12 months or less are immaterial to the consolidated financial statements and are recognized as lease expense on a straight-line basis over the lease term and not recorded on the consolidated balance sheets. Our operating lease liabilities had a weighted-average lease term of 5.8 years remaining as of December 31, 2024. December 31, 2024 | 10-K 94 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Maturities of our remaining operating lease liabilities as of December 31, 2024 are as follows. (In thousands) Operating Lease Payments Maturity of operating lease liabilities: 2025 $ 1,433 2026 1,385 2027 1,403 2028 1,438 2029 1,474 After 2029 1,253 Total operating lease liabilities 8,386 Interest expense ( 597 ) Present value of operating lease liabilities $ 7,789 We record the lease right-of-use asset in Property and Equipment, Net and the lease liability in Other Liabilities using a weighted average discount rate of 2.71 %. Cash payments related to the operating lease liabilities were $ 1.5 million and $ 1.4 million for the years ended December 31, 2024 and 2023, respectively, and were reported in operating cash flows. The Company does not engage in lease agreements among related parties. As of December 31, 2024, CICA International is committed to fund investments up to $ 15.4 million related to limited partnership investments. (9) STOCKHOLDERS' EQUITY AND RESTRICTIONS STOCK Our Restated and Amended Articles of Incorporation authorize the issuance of 127,000,000 shares, of which 100,000,000 shares shall be Class A common stock, 2,000,000 shares shall be Class B common stock, and 25,000,000 shall be preferred stock. Both authorized classes of common stock are equal in all respects, except (a) each share of Class A common stock is entitled to receive twice the cash dividends paid on a per share basis to the Class B common stock, if any; and (b) the holders of the Class B common stock have the exclusive right to elect a simple majority of the Board of Directors of Citizens. Citizens currently has no outstanding preferred stock or Class B common stock other than that held in treasury. A summary of the change in the number of shares of Class A common stock and treasury stock issued is as follows: (In thousands) Common Stock Treasury Class A Stock Balance at December 31, 2022 53,758 4,937 Stock issued for compensation 125 — Acquisition of Class A shares — 393 Balance at December 31, 2023 53,883 5,330 Stock issued for compensation 352 — Balance at December 31, 2024 54,235 5,330 December 31, 2024 | 10-K 95 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share. Years ended December 31, (In thousands, except per share amounts) 2024 2023 Basic and diluted earnings per share: Numerator: Net income $ 14,912 24,437 Net income allocated to Class A common stock $ 14,912 24,437 Denominator: Weighted average shares of Class A outstanding - basic 49,738 49,696 Weighted average shares of Class A outstanding - diluted 50,748 50,681 Basic earnings per share of Class A common stock $ 0.30 0.49 Diluted earnings per share of Class A common stock $ 0.29 0.48 STATUTORY CAPITAL AND SURPLUS The table below shows the combined total of all of our domestic insurance subsidiaries' statutory capital and surplus and statutory net income (loss) for life insurance operations and property insurance operations, although these amounts are not all available as dividends to Citizens since CICA Domestic is the only subsidiary directly owned by Citizens. All other domestic subsidiaries are owned by CICA Domestic. SPFIC, our property insurance subsidiary, was dissolved during 2024. As of December 31, (In thousands) 2024 2023 Combined statutory capital and surplus: Life insurance operations $ 28,814 29,416 Property insurance operations — 5,692 Total combined statutory capital and surplus $ 28,814 35,108 Years ended December 31, (In thousands) 2024 2023 Combined statutory net income (loss): Life insurance operations $ ( 9,996 ) ( 3,606 ) Property insurance operations ( 294 ) ( 1,219 ) Total combined statutory net income (loss) $ ( 10,290 ) ( 4,825 ) Generally, the net assets of the domestic insurance subsidiaries available for transfer to their immediate parent are limited to the lesser of the subsidiary's net gain from operations during the preceding year or 10 % of the subsidiary's net statutory surplus as of the end of the preceding year as determined in accordance with accounting practices prescribed or permitted by insurance regulatory authorities. Under these practices, total surplus at December 31, 2024 was $ 25.7 million and net loss from operations was $ 10.2 million for CICA Domestic for the year ended December 31, 2024. Based upon these amounts, no dividend could be paid to the Company without prior regulatory approval in 2025. Payments of dividends in excess of such amounts would generally require approval by regulatory authorities. Our domestic insurance subsidiaries have calculated their risk-based capital ("RBC") in accordance with the National Association of Insurance Commissioners' ("NAIC") Model Rule and the RBC rules as adopted by their December 31, 2024 | 10-K 96 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) respective states of domicile. All domestic insurance subsidiaries exceeded the minimum capital requirements at December 31, 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 December 31, 2024, no capital contribution was necessary. CICA International is a Puerto Rico domiciled company. The Insurance Code of Puerto Rico does not specifically set forth minimum capital and surplus standards, but rather requires that an insurer submit a business plan for approval to the Office of the Commissioner of Insurance ("OIC") that includes proposed minimum capital and surplus. CICA International is required to maintain a minimum of $750,000 in capital and maintain a premium to surplus ratio of 7 to 1. CICA International began issuing new business as of January 1, 2023 and received the transfer of all of CICA Bermuda's in force insurance business as of August 31, 2023. CICA International's capital exceeds both of the required minimum capital and related ratio. As of December 31, (In thousands) 2024 2023 CICA International capital and surplus $ 91,513 66,619 Years ended December 31, (In thousands) 2024 2023 CICA International net income $ 18,871 27,484 As stated above, CICA International exceeded both of the capital and surplus metrics established by the OIC. CICA International could pay up to $ 1.0 million in dividends during 2025 without regulatory approval. (10) SEGMENT AND OTHER OPERATING INFORMATION The Company's segments are defined by management's reporting structure and operating activities. The chief operating decision maker ("CODM"), our President and Chief Executive Officer, reviews and analyzes income statement information by segment to make decisions, assess financial performance and allocate resources across the Company in order to meet the overall strategic objectives of the Company. The Company has two reportable segments: Life Insurance and Home Service Insurance. Our Life Insurance segment issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection, and whole life insurance to non-U.S. residents through CICA International. These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional coverage and annuity benefits to enhance accumulations. CICA Domestic issues whole life, final expense and life products with living benefits throughout the U.S. Our Home Service Insurance segment operates through our subsidiaries SPLIC and MGLIC, and focuses on the life insurance needs of the lower-income markets, primarily in Louisiana, Mississippi and Arkansas. 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. SPFIC sold property insurance policies in Louisiana and Arkansas until operations were ceased effective June 30, 2023. SPFIC was dissolved during 2024. The Life Insurance and Home Service Insurance portions of the Company constitute separate businesses. In addition to the Life Insurance and Home Service Insurance business, the Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and corporate-support functions. The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S. GAAP and are the same as those described in the summary of significant accounting policies. The CODM evaluates profit and loss performance based on U.S. GAAP net income (loss) before federal income taxes for its two reportable segments. The Company's Other Non-Insurance Enterprises represents the only reportable difference between segments and consolidated operations. December 31, 2024 | 10-K 97 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year ended December 31, 2024 (In thousands) Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated Revenues: Premiums: Life insurance $ 129,426 42,135 — 171,561 Accident and health insurance 763 1,022 — 1,785 Property insurance — ( 18 ) — ( 18 ) Net investment income (loss) 54,666 14,162 884 69,712 Investment related gains (losses), net ( 2,185 ) ( 424 ) ( 17 ) ( 2,626 ) Other income (loss) 4,483 21 83 4,587 Total revenues 187,153 56,898 950 245,001 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 123,020 23,062 — 146,082 Increase in future policy benefit reserves ( 10,501 ) 6,215 — ( 4,286 ) Policyholder liability remeasurement (gain) loss 5,380 ( 624 ) — 4,756 Policyholders' dividends 5,332 23 — 5,355 Total insurance benefits paid or provided 123,231 28,676 — 151,907 Commissions 35,795 13,323 — 49,118 Other general expenses 25,898 14,972 11,396 52,266 Capitalization of deferred policy acquisition costs ( 35,404 ) ( 5,898 ) — ( 41,302 ) Amortization of deferred policy acquisition costs 14,584 2,851 — 17,435 Amortization of cost of insurance acquired 103 494 — 597 Total benefits and expenses 164,207 54,418 11,396 230,021 Income (loss) before federal income tax $ 22,946 2,480 ( 10,446 ) 14,980 December 31, 2024 | 10-K 98 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Year ended December 31, 2023 (In thousands) Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated Revenues: Premiums: Life insurance $ 121,424 43,185 — 164,609 Accident and health insurance 721 916 — 1,637 Property insurance — 793 — 793 Net investment income (loss) 54,352 13,832 1,070 69,254 Investment related gains (losses), net 301 522 ( 63 ) 760 Other income (loss) 3,605 17 5 3,627 Total revenues 180,403 59,265 1,012 240,680 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 113,428 22,565 — 135,993 Increase in future policy benefit reserves ( 10,931 ) 5,307 — ( 5,624 ) Policyholder liability remeasurement (gain) loss 4,153 307 — 4,460 Policyholders' dividends 5,512 30 — 5,542 Total insurance benefits paid or provided 112,162 28,209 — 140,371 Commissions 22,896 16,345 — 39,241 Other general expenses 23,969 16,690 6,472 47,131 Capitalization of deferred policy acquisition costs ( 20,251 ) ( 8,050 ) — ( 28,301 ) Amortization of deferred policy acquisition costs 12,895 2,565 — 15,460 Amortization of cost of insurance acquired 111 493 — 604 Total benefits and expenses 151,782 56,252 6,472 214,506 Income (loss) before federal income tax $ 28,621 3,013 ( 5,460 ) 26,174 The Company categorizes premiums in two categories - first year premiums are premiums received within the first 12 months of a policy's issuance and any premiums received thereafter are renewal premiums. A summary of the direct premiums for the Life Insurance segment is detailed below. Years ended December 31, (In thousands) Life Insurance Segment 2024 2023 Premiums: Direct premiums: First year $ 27,796 13,479 Renewal 107,861 110,372 Total direct premiums 135,657 123,851 Reinsurance ( 5,468 ) ( 1,706 ) Total premiums $ 130,189 122,145 December 31, 2024 | 10-K 99 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Since the property casualty business was dissolved during 2024, a summary of the Home Service Insurance segment direct life and A&H premium breakout is detailed below. Years ended December 31, (In thousands) Home Service Insurance Segment 2024 2023 Direct life and A&H premiums: First year $ 5,226 5,810 Renewal 37,958 38,316 Total direct life and A&H premiums $ 43,184 44,126 The table below summarizes assets by segment. December 31, (In thousands) 2024 2023 Assets: Segments: Life Insurance $ 1,291,300 1,267,243 Home Service Insurance 358,788 359,773 Total Segments 1,650,088 1,627,016 Other Non-Insurance Enterprises 35,237 41,912 Total assets $ 1,685,325 1,668,928 GEOGRAPHIC INFORMATION The following table sets forth the Company's annual total of earned premiums by country of policyholder residence for the years indicated. Years ended December 31, (In thousands) 2024 2023 Area: United States $ 58,468 50,594 Colombia 25,727 25,453 Taiwan 16,690 17,760 Venezuela 14,305 15,143 Ecuador 13,159 13,379 Argentina 10,319 9,533 Other foreign countries 39,317 38,943 Reinsurance and change in premium accruals ( 4,657 ) ( 3,766 ) Total premiums $ 173,328 167,039 (11) INCOME TAXES CICA International and CICA Bermuda are considered controlled foreign corporations for federal income tax purposes. As a result, the insurance activity of CICA International and CICA Bermuda are subject to Subpart F of the Internal Revenue Code ("IRC") and are included in Citizens’ taxable income. Due to the 0 % enacted tax rate in Bermuda for all periods prior to the transfer of CICA Bermuda's insurance in force business to CICA International, there are no deferred taxes recorded for CICA Bermuda's temporary differences. The Government of Puerto Rico December 31, 2024 | 10-K 100 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) approved a tax exemption decree for CICA International which freezes the income tax rate at 0 % on taxable earnings up to $ 1.2 million and 4 % on any taxable earnings in excess of $ 1.2 million for a minimum of 15 years. In connection with the transfer of CICA Bermuda’s business from a zero tax jurisdiction to CICA International’s 4 % tax jurisdiction in Puerto Rico, certain opening tax assets and liabilities, mainly related to investments, DAC and reserves, were established and the Company's consolidated deferred federal income tax liability was reduced by $ 4.4 million. Since the transfer was between companies under common control, the $ 4.4 million reduction in the deferred federal income tax liability was recorded as a credit to equity, $ 1.4 million of which increased retained earnings and $ 3.0 million of which reduced accumulated other comprehensive income (loss), based on the nature of the components during 2023 in accordance with ASC Topic 805. A summary of the income (loss) before federal income tax expense, by jurisdiction, is as follows: Years ended December 31, (In thousands) 2024 2023 Income (loss) before federal income tax: United States $ ( 4,317 ) ( 214 ) Puerto Rico 19,297 11,514 Bermuda — 14,874 Total income before federal income tax $ 14,980 26,174 Federal income tax expense (benefit) consists of: Years ended December 31, (In thousands) 2024 2023 Current income tax expense (benefit) related to: United States - normal operations $ 286 1,271 United States - UTP impact — ( 971 ) Puerto Rico 1,582 577 Bermuda — — Total current income tax expense 1,868 877 Deferred income tax expense (benefit) related to: United States ( 908 ) 968 Puerto Rico ( 892 ) ( 108 ) Bermuda — — Total deferred income tax expense (benefit) ( 1,800 ) 860 Total federal income tax expense (benefit) $ 68 1,737 December 31, 2024 | 10-K 101 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A reconciliation between the U.S. corporate income tax rate and the effective income tax rate is as follows: Years ended December 31, (In thousands, except for %) 2024 % 2023 % Expected federal income tax expense (benefit): $ 3,146 21.0 % $ 5,497 21.0 % Foreign tax effects: Puerto Rico: Statutory tax rate difference between Puerto Rico and United States ( 3,280 ) ( 21.9 ) ( 5,029 ) ( 19.2 ) Income tax exclusion ( 48 ) ( 0.3 ) ( 48 ) ( 0.2 ) Other ( 35 ) ( 0.2 ) — — Effect of cross-border tax laws: Subpart F inclusions ( 524 ) ( 3.5 ) 1,595 6.1 PFIC QEF inclusions 800 5.3 570 2.2 Other 2 — — — Nontaxable or nondeductible items: Tax-exempt interest and dividends-received deduction ( 23 ) ( 0.1 ) ( 35 ) ( 0.1 ) Compensation limitation under Section 162(m) & 280(g) ( 2 ) — 80 0.3 Other 52 0.3 — — Changes in unrecognized tax benefits — — ( 971 ) ( 3.7 ) Other ( 20 ) ( 0.1 ) 78 0.2 Total federal income tax expense (benefit) $ 68 0.5 % $ 1,737 6.6 % A summary of the total federal income tax payments made and refunds received by jurisdiction is as follows: Years ended December 31, (In thousands) 2024 2023 Tax payments (refunds) United States $ ( 828 ) 1,798 Puerto Rico 1,300 1 Bermuda — — Total tax payments $ 472 1,799 December 31, 2024 | 10-K 102 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of deferred federal income taxes are as follows: December 31, (In thousands) 2024 2023 Deferred tax assets: Future policy benefit reserves $ — 739 Net operating and capital loss carryforwards 1,774 353 Accrued policyholder dividends and expenses 200 218 Deferred intercompany loss 1,721 1,780 Unrealized losses on investments available-for-sale 15,816 12,786 Accrued compensation 745 379 Lease liability 1,628 1,895 Fixed assets 394 249 Other 1,065 270 Total gross deferred tax assets 23,343 18,669 Less: Valuation allowance 5,073 4,468 Net deferred tax assets 18,270 14,201 Deferred tax liabilities: DAC, COIA and intangible assets ( 14,619 ) ( 11,556 ) Future policy benefit reserves ( 4,363 ) — Investments ( 316 ) ( 322 ) Tax reserves transition liability ( 747 ) ( 1,494 ) Right-of-use lease asset ( 1,628 ) ( 1,895 ) Other ( 39 ) ( 36 ) Total gross deferred tax liabilities ( 21,712 ) ( 15,303 ) Net deferred tax liability $ ( 3,442 ) ( 1,102 ) A summary of changes in the components of deferred federal and state income taxes is as follows: December 31, (In thousands) 2024 2023 Deferred federal and state income taxes: Balance January 1, $ ( 1,102 ) ( 3,653 ) Deferred tax benefit (expense) 1,800 ( 860 ) Investments available-for-sale 3,031 2,424 Change in valuation allowance ( 605 ) ( 230 ) Effects of unrealized gains (losses) on reserves ( 6,566 ) 1,217 Balance December 31, $ ( 3,442 ) ( 1,102 ) The Company and our subsidiaries have $ 6.3 million in net operating loss carryforwards in the U.S. at December 31, 2024. The Company and our subsidiaries have capital loss carryforwards of $ 2.0 million in the U.S. and $ 0.5 million in Puerto Rico at December 31, 2024, which begin expiring in 2026 and 2031, respectively. December 31, 2024 | 10-K 103 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) At December 31, 2024 and 2023, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety. Thus, the Company holds valuation allowances of $ 5.1 million and $ 4.5 million in other comprehensive income (loss) at December 31, 2024 and 2023, respectively. The Company recognizes only the impact of tax positions that, based on their technical merits, are more likely than not to be sustained upon an audit by the taxing authority. A reconciliation of unrecognized tax benefits is as follows: Years ended December 31, (In thousands) 2024 2023 Balance January 1, $ — 971 Reductions for tax positions of prior years — ( 971 ) Balance December 31, $ — — The Company accrued an uncertain tax position of $ 1.0 million at December 31, 2022 which would have affected the effective tax rate if recognized. However, the Company released all of the remaining uncertain tax positions, including interest, during the fourth quarter of 2023 following the expiration of the statute of limitations on the tax year ended December 31, 2019. The Company has no uncertain tax positions as of December 31, 2024. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. In the consolidated statements of operations and comprehensive income (loss), we recorded no interest income for the year ended December 31, 2024 and $ 0.2 million for the year ended December 31, 2023. The Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted on March 27, 2020 in response to the COVID-19 pandemic. The CARES Act, among other things, permitted net operating losses incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. During the year ended December 31, 2022, the Company was able to claim a net refund for taxes paid in preceding years as a result of the CARES Act. As of December 31, 2024, the Company has an accrued tax refund remaining of $ 0.7 million. The American Rescue Plan Act of 2021 was enacted on March 11, 2021 and the Inflation Reduction Act was enacted on August 16, 2022. These Acts did not have a material impact on the Company's financial statements. The Company's federal income tax return is filed on a consolidated basis with the following entities: Citizens, Inc. CICA Life Insurance Company of America Magnolia Guaranty Life Insurance Company Security Plan Life Insurance Company Security Plan Fire Insurance Company Computing Technology, Inc. The method of tax allocation among companies is subject to a written tax sharing agreement, approved by the Board of Directors, whereby allocation is made primarily on a separate return basis pursuant to the wait-and-see method. Under this method, consolidated group members are not given current credit or refunds for net operating losses until taxable income on a separate return basis is generated. Intercompany tax balances are settled at least annually. The Company and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various U.S. states. Our subsidiaries are subject to examination by U.S. tax authorities for tax years ending after December 31, 2021. The Company's Puerto Rico subsidiaries are subject to examination by Puerto Rico tax authorities for tax years ending after December 31, 2022. December 31, 2024 | 10-K 104 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (12) OTHER COMPREHENSIVE INCOME (LOSS) The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% for domestic entities and 4 % for Puerto Rican entities as indicated below. (In thousands) Amount Tax Effect Total Year ended December 31, 2024: Unrealized gains (losses): Unrealized holding gains (losses) arising during the period $ ( 30,982 ) 2,572 ( 28,410 ) Reclassification adjustment for (gains) losses included in net income (loss) 699 ( 147 ) 552 Unrealized holding gains (losses), net ( 30,283 ) 2,425 ( 27,858 ) Change in current discount rate for liability for future policy benefits 56,613 ( 6,565 ) 50,048 Other comprehensive income (loss) $ 26,330 ( 4,140 ) 22,190 Year ended December 31, 2023: Unrealized gains (losses): Unrealized holding gains (losses) arising during the period $ 50,894 971 51,865 Reclassification adjustment for (gains) losses included in net income (loss) 756 ( 159 ) 597 Unrealized holding gains (losses), net 51,650 812 52,462 Change in current discount rate for liability for future policy benefits ( 34,790 ) 1,217 ( 33,573 ) Other comprehensive income (loss) $ 16,860 2,029 18,889 (13) STOCK COMPENSATION Citizens grants stock-based compensation in the form of restricted stock units ("RSUs") and beginning in 2024, performance share units ("PSUs"). All stock awards are granted pursuant to the Citizens, Inc. Omnibus Incentive Plan (the "Plan"), which was approved by our shareholders in 2017. There were 3,000,000 shares authorized to be granted under the Plan. Awards may be granted under the Plan until June 05, 2027 . Restricted Stock Units. RSUs consist of time-vested grants and give the grantee the right to receive one share of our Class A common stock in the future for each RSU granted, subject to certain restrictions and a risk of forfeiture. For non-employee directors, RSUs are granted annually on the date of the annual shareholders meeting and vest one year from the date of grant, subject to continued service on the Board. Employee RSU grants vest over three years , subject to continued employment (except in the case of retirement, death or disability). December 31, 2024 | 10-K 105 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table provides a rollforward of RSU activity for the two-year period ended December 31, 2024. Restricted Stock Units Units Weighted Average Grant Date Fair Value (In thousands) Outstanding at December 31, 2022 266 $ 4.65 Granted 464 3.03 Less: Vested 148 4.56 Forfeited 8 4.47 Outstanding at December 31, 2023 574 3.37 Granted 892 2.29 Less: Vested 433 2.73 Forfeited 17 2.84 Outstanding at December 31, 2024 1,016 $ 2.70 In 2024, we recognized $ 1.5 million of expense for RSUs granted on or prior to December 31, 2024, while $ 1.8 million was unrecognized and is expected to be amortized up to two years . We also recognized compensation expenses of $ 1.4 million and $ 0.6 million in 2024 and 2023, respectively, related to RSU awards that vested during these periods. The aggregate intrinsic value of RSUs vested during the years ended December 31, 2024 and 2023 was $ 1.2 million and $ 0.4 million, respectively. Performance Share Units. In 2024, the Board of Directors granted PSUs to a limited number of senior executives. PSUs have a three-year performance period and and give the grantee the right to receive one share of our Class A common stock in the future for each PSU granted, subject to subject to certain restrictions and a risk of forfeiture. While the PSU grant specifies a stated target number of shares, the grantees can earn up to 200 % of the target PSUs awarded based on the achievement of the Board approved metric over the performance period. PSUs are not settled in shares until the Board certifies that the approved performance metrics have been met. Employees must continue to be employed during the performance period in order to receive shares, except in the case of death or disability, change in control, retirement (settled pro-rata) or certain involuntary terminations (settled pro-rata). The following table provides a rollforward of PSU activity for the period beginning on the first date of grant and ending on December 31, 2024. Performance Stock Units Units Weighted Average Grant Date Fair Value (In thousands) Outstanding at March 28, 2024 — $ — Granted 333 2.14 Less: Forfeited 83 2.14 Outstanding at December 31, 2024 250 (1) $ 2.14 (1) The number of PSUs represents the base number of PSUs that may vest. The actual number of PSUs that vest will be between 0 and 500,000 , depending on the Company's achievement of certain performance goals. December 31, 2024 | 10-K 106 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In 2024, for the PSU grants, we recognized $ 0.1 million of expense, while $ 0.2 million was unrecognized and is expected to be amortized over the next two years . As of December 31, 2024, management estimates that the probability of achieving the performance targets was 50 %. (14) BENEFIT PLANS The Company sponsors a defined contribution retirement plan. The plan was initially established as the Citizens, Inc. Profit Sharing Plan and was restated as the Citizens, Inc. 401(k) Retirement and Profit Sharing Plan effective March 1, 2016. There have been no profit sharing contributions since 2014. The 401(k) plan automatically enrolls employees who have completed three months of service. Voluntary contributions are made by employees and the Company provides a matching contribution based upon the employee's level of contribution. The Company's expense was $ 0.8 million in both 2024 and 2023. Until December 31, 2024, the Company was primarily self-insured for employee health benefits. The Company recorded its self-insurance liability based on an estimate of claims incurred but not yet reported. Through December 31, 2024, we also had stop-loss coverage for amounts in excess of $ 80,000 per individual per year. (15) RELATED PARTY TRANSACTIONS The Company has various routine related party transactions in conjunction with our holding company structure, such as management service agreements related to costs incurred, a tax sharing agreement between entities, and inter-company dividends and capital contributions. We perform an expense study on an annual basis, utilizing an enterprise-wide time study, and we adjust cost allocations among entities as needed based upon this review. Any allocation changes are reflected in the segment operations, but do not impact consolidated expenses. There were no changes related to these relationships during the year ended December 31, 2024 and no additional related party transactions. (16) QUARTERLY FINANCIAL INFORMATION (Unaudited) The following table contains selected unaudited financial data for each quarter. (In thousands, except per share amounts) Fourth Quarter Third Quarter Second Quarter First Quarter 2024 Revenues $ 63,474 61,731 62,084 57,712 Benefits and expenses 59,758 58,694 58,782 52,787 Federal income tax expense (benefit) 95 247 ( 657 ) 383 Net income 3,621 2,790 3,959 4,542 Net income available to common shareholders 3,621 2,790 3,959 4,542 Basic earnings per share of Class A common stock 0.07 0.06 0.08 0.09 Diluted earnings per share of Class A common stock 0.07 0.05 0.08 0.09 2023 Revenues $ 66,849 59,390 58,527 55,914 Benefits and expenses 58,075 54,749 52,483 49,199 Federal income tax expense (benefit) ( 1,967 ) 1,943 ( 82 ) 1,843 Net income 10,741 2,698 6,126 4,872 Net income available to common shareholders 10,741 2,698 6,126 4,872 Basic earnings per share of Class A common stock 0.21 0.06 0.12 0.10 Diluted earnings per share of Class A common stock 0.21 0.05 0.12 0.10 December 31, 2024 | 10-K 107 Table of Contents CITIZENS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (17) SUBSEQUENT EVENTS The Company has evaluated the impact of subsequent events as defined by the accounting guidance through the date this report was issued and determined that no subsequent events need to be recognized or disclosed. December 31, 2024 | 10-K 108 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule II Condensed Financial Information of Registrant CITIZENS, INC. (Parent Company) Balance Sheets December 31, (In thousands) 2024 2023 Assets: Investment in subsidiaries (1) $ 188,678 140,557 Fixed maturity securities, available-for-sale, at fair value 16,331 21,190 Equity securities, at fair value 21 23 Cash (restricted portion: $ 1,554 and none in 2024 and 2023, respectively) 4,272 3,905 Accrued investment income 197 230 Accounts receivable from subsidiaries (1) 4,292 4,332 Property and equipment, net 8,018 9,251 Other assets 283 1,151 Total assets $ 222,092 180,639 Liabilities and Stockholders' Equity: Liabilities: Accrued expense and other liabilities $ 11,737 8,510 Total liabilities 11,737 8,510 Stockholders' equity: Common stock: Class A 269,799 268,675 Class B 3,184 3,184 Retained earnings 57,062 42,150 Unrealized investment gains (losses) on securities held by parent and subsidiaries, net of tax ( 95,965 ) ( 118,155 ) Treasury stock ( 23,725 ) ( 23,725 ) Total stockholders' equity 210,355 172,129 Total liabilities and stockholders' equity $ 222,092 180,639 (1) Eliminated in consolidation. Note to Schedule II : Citizens, Inc.'s investments in consolidated subsidiaries are stated at cost plus equity in undistributed income of consolidated subsidiaries and unrealized gains (losses) on investments held by consolidated subsidiaries. The Company includes in its statements of operations and comprehensive income (loss) dividends from its subsidiaries and equity in income (loss) of consolidated subsidiaries, which represents the net income (loss) of each of its wholly-owned subsidiaries. December 31, 2024 | 10-K 109 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule II, Continued Condensed Financial Information of Registrant CITIZENS, INC. (Parent Company) Statements of Operations and Comprehensive Income (Loss) Years ended December 31, (In thousands) 2024 2023 Comprehensive Income (Loss): Revenues: Management service fees (1) $ 41,636 42,394 Investment income 4,900 1,083 Other 83 6 Investment related gains (losses), net ( 17 ) ( 63 ) Total revenues 46,602 43,420 Expenses: General expenses 47,470 44,642 Taxes, licenses and fees 216 158 Total expenses 47,686 44,800 Income (loss) before federal income tax expense (benefit) and equity in income (loss) of consolidated subsidiaries ( 1,084 ) ( 1,380 ) Federal income tax expense (benefit) — 1,798 Income (loss) before equity in income (loss) of consolidated subsidiaries ( 1,084 ) ( 3,178 ) Equity in income of consolidated subsidiaries 15,996 27,615 Net income 14,912 24,437 Other comprehensive income (loss) 22,190 18,889 Total comprehensive income (loss) $ 37,102 43,326 (1) Eliminated in consolidation. Note to Schedule II : Citizens, Inc.'s investments in consolidated subsidiaries are stated at cost plus equity in undistributed income of consolidated subsidiaries and unrealized gains (losses) on investments held by consolidated subsidiaries. The Company includes in its statements of operations and comprehensive income (loss) dividends from its subsidiaries and equity in income (loss) of consolidated subsidiaries, which represents the net income (loss) of each of its wholly-owned subsidiaries. December 31, 2024 | 10-K 110 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule II, Continued Condensed Financial Information of Registrant CITIZENS, INC. (Parent Company) Statements of Cash Flows Years ended December 31, (In thousands) 2024 2023 Cash flows from operating activities: Net income $ 14,912 24,437 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Investment related gains (losses), net 17 63 Equity in income of consolidated subsidiaries ( 15,996 ) ( 27,615 ) Change in accrued expenses and other liabilities 4,303 ( 1,398 ) Change in federal income tax payable 828 — Amortization of premiums and discounts on investments 81 107 Depreciation 243 228 Change in accrued investment income 32 112 Stock-based compensation 1,517 588 Decrease (increase) in receivable from subsidiaries and other assets 39 795 Other, net ( 23 ) 481 Net cash provided by (used in) operating activities 5,953 ( 2,202 ) Cash flows from investing activities: Purchases of fixed maturity securities, available-for-sale ( 5,066 ) ( 723 ) Maturities and calls of fixed maturity securities, available-for-sale 9,989 6,027 Sales of fixed maturity securities, available-for-sale — 2,580 Sale of equity securities — 770 Purchases of property and equipment ( 106 ) ( 130 ) Maturities of short-term investments — 750 Sales of short-term investments — 499 Net cash provided by (used in) investing activities 4,817 9,773 Cash flows from financing activities: Acquisition of treasury stock — ( 919 ) Capital contribution to subsidiary ( 10,010 ) ( 4,850 ) Other share repurchases ( 393 ) ( 60 ) Net cash provided by (used in) financing activities ( 10,403 ) ( 5,829 ) Net increase (decrease) in cash 367 1,742 Cash at beginning of year 3,905 2,163 Cash at end of year $ 4,272 3,905 Note to Schedule II : Citizens, Inc.'s investments in consolidated subsidiaries are stated at cost plus equity in undistributed income of consolidated subsidiaries and unrealized gains (losses) on investments held by consolidated subsidiaries. The Company includes in its statements of operations and comprehensive income (loss) dividends from its subsidiaries and equity in income (loss) of consolidated subsidiaries, which represents the net income (loss) of each of its wholly-owned subsidiaries. December 31, 2024 | 10-K 111 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES Schedule III Consolidated Supplementary Insurance Information Years ended December 31, (In thousands) 2024 2023 Deferred policy acquisition costs: Life Insurance $ 141,660 120,840 Home Service Insurance 57,975 54,928 Total consolidated deferred policy acquisition costs $ 199,635 175,768 Future policy benefit reserves and policy claims payable: Life Insurance $ 931,302 970,327 Home Service Insurance 250,625 266,452 Total consolidated future policy benefit reserves and policy claims payable $ 1,181,927 1,236,779 Unearned premiums: Life Insurance $ 1,232 1,356 Home Service Insurance 40 38 Total consolidated unearned premiums $ 1,272 1,394 Other policy claims and benefits payable: Life Insurance $ 211,739 192,953 Home Service Insurance 23,187 23,638 Total consolidated other policy claims and benefits payable $ 234,926 216,591 December 31, 2024 | 10-K 112 Table of Contents CITIZENS, INC. FINANCIAL SCHEDULES T he Company's written premium is not materially different from earned premium, therefore only earned premiums are detailed in Schedule IV. Schedule IV Consolidated Statement of Reinsurance (In thousands) Direct Amount Ceded to Other Companies Assumed From Other Companies Net Amount % of Amount Assumed to Net Year ended December 31, 2024: Life insurance in force $ 5,227,506 821,215 3,427 4,409,718 0.1 % Premiums: Life insurance $ 177,053 5,559 67 171,561 Accident and health insurance 1,788 3 — 1,785 Property insurance ( 5 ) 13 — ( 18 ) Total premiums $ 178,836 5,575 67 173,328 — % Year ended December 31, 2023: Life insurance in force $ 4,922,254 619,597 3,772 4,306,429 0.1 % Premiums: Life insurance $ 166,336 1,795 68 164,609 Accident and health insurance 1,641 4 — 1,637 Property insurance 2,580 1,787 — 793 Total premiums $ 170,557 3,586 68 167,039 — % December 31, 2024 | 10-K 113 EXHIBITS Exhibit No. The following exhibits are filed herewith: 3.1 Restated and Amended Articles of Incorporation dated March 4, 2004 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 15, 2004) 3.2 Amended and Restated Bylaws dated June 2, 2021 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on June 7, 2021) 4.1* Description of Securities of Citizens, Inc. 10.1 Form of Indemnification Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on November 8, 2017) 10.2 Form of Indemnification Agreement for Directors (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on November 8, 2017) 10.3† Citizens, Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 filed by the Registrant on December 5, 2017) 10.4† Form of Citizens, Inc. Employee Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.6 to the Registrant's Annual Report on Form 10-K filed on March 29, 2018) 10.5† * Form of Citizens, Inc. E xecutive O fficer Performance Share Unit Agreemen t 10.6† Form of Citizens, Inc. Non-employee Director Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K filed on March 29, 2018) 10.7† Executive Employment Agreement by and between Citizens, Inc. and Gerald W. Shields, effective as of January 1, 2022 (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on December 21, 2021) 10.8† Amendment to Executive Employment Agreement by and between Citizens, Inc. and Gerald W. Shields, effective as of January 1, 2024 (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K, filed on November 15, 2023) 10.9† Executive Employment Agreement by and between Citizens, Inc. and Jon Stenberg, e ntered into as of March 18, 2024 (incorporated by reference to Exhibit 10.1 to the Registra nt's Current Report on Form 8-K filed on Ma rch 18 , 2024) 10.10 Credit Agreement between the Company and Regions Bank dated May 5 , 202 1 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 4 , 202 1 ) 10.11 Pledge and Security Agreement dated May 5, 2021 by and between Citizens, Inc. as obligor, and Regions Bank, as lender (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed on August 4, 2021) 10.12 First Amendment to Credit Agreement between the Company and Regions Bank dated May 3, 2024 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on August 6 , 202 4 ) 10.13† Form of Executive Change in Leadership Agreement entered into on November 3, 2023, by and between the Company and each of the following Named Executive Officers: Jeffery P. Conklin, Sheryl Kinlaw, Robert M. Mauldin III and Harvey J.L. Waite (incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on November 6, 2023) 10.14† Compensation Recovery Policy (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report for the Year Ended December 31, 2023 on Form 10-K filed on March 14, 2024) December 31, 2024 | 10-K 114 10.15† Services Agreement between Citizens, Inc. and Robert M. Mauldin III effective August 2, 2024 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed on November 7, 2024) 19* Citizens, Inc. Insider Trading Policy 21* Subsidiaries of the Registrant 23* Consent of Independent Registered Public Accounting Firm - Grant Thornton LLP 24 Power of Attorney (included on signature page enclosed herein) 31.1* Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act 31.2* Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act 32.1* Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act 32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema 101.CAL XBRL Taxonomy Extension Calculation Linkbase 101.DEF XBRL Taxonomy Extension Definition Linkbase 101.LAB XBRL Taxonomy Extension Label Linkbase 101.PRE XBRL Taxonomy Extension Presentation Linkbase 104 Inline XBRL for the cover page of this Annual Report on Form 10-K for the year ended December 31, 2024, filed electronically herewith, included in the Exhibit 101 Inline XBRL Document Set. † Indicates management contract or compensatory plan or arrangement. * Filed herewith. Item 16. FORM 10-K SUMMARY None. December 31, 2024 | 10-K 115 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. CITIZENS, INC. Date: March 13, 2025 By: /s/ Jon Stenberg Jon Stenberg, Chief Executive Officer and President (Principal Executive Officer) By: /s/ Jeffery P. Conklin Jeffery P. Conklin, Vice President, Chief Financial Officer, Chief Investment Officer and Treasurer (Principal Financial and Accounting Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jon Stenberg and Jeffery P. Conklin jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on March 13, 2025. Dated: March 13, 2025 /s/ Jerry D. Davis, Jr. /s/ Gerald W. Shields Jerry D. Davis, Jr., Chairman of the Board and Director Gerald W. Shields, Vice Chairman of the Board and Director /s/ Christopher W. Claus /s/ Cynthia H. Davis Christopher W. Claus, Director Cynthia H. Davis, Director /s/ Dr. Terry S. Maness /s/ Mary Taylor Dr. Terry S. Maness, Director Mary Taylor, Director /s/ J. Keith Morgan J. Keith Morgan, Director December 31, 2024 | 10-K 116