CITIZENS, INC. 10-Q

Item 1. FINANCIAL STATEMENTS CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets (In thousands) March 31, 2025 December 31, 2024 (Unaudited) Assets: Investments: Fixed maturity securities available-for-sale, at fair value (amortized cost: $ 1,409,351 and $ 1,401,301 in 2025 and 2024, respectively) $ 1,247,428 1,220,961 Equity securities, at fair value 5,493 5,447 Policy loans 70,961 71,216 Other long-term investments (portion measured at fair value $ 93,036 and $ 93,337 in 2025 and 2024, respectively) 93,318 93,604 Total investments 1,417,200 1,391,228 Cash and cash equivalents (restricted portion: $ 1,554 in both 2025 and 2024) 18,355 29,271 Accrued investment income 17,257 17,546 Reinsurance recoverable 7,931 6,941 Deferred policy acquisition costs 203,837 199,635 Cost of insurance acquired 9,348 9,446 Current federal income tax receivable — 148 Property and equipment, net 10,164 10,574 Due premiums 9,461 11,721 Other assets (less allowance for losses of $ 646 and $ 516 in 2025 and 2024, respectively) 8,651 8,815 Total assets $ 1,702,204 1,685,325 See accompanying Notes to Consolidated Financial Statements. March 31, 2025 | 10-Q 2 Table of Contents CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Balance Sheets, Continued (In thousands, except share amounts) March 31, 2025 December 31, 2024 (Unaudited) Liabilities and Stockholders' Equity: Liabilities: Policy liabilities: Future policy benefit reserves: Life insurance $ 1,177,086 1,172,034 Accident and health insurance 1,113 1,071 Total future policy benefit reserves 1,178,199 1,173,105 Policyholders' funds: Annuities 158,034 149,977 Dividend accumulations 48,593 47,768 Premiums paid in advance 31,964 31,182 Policy claims payable 9,898 8,822 Other policyholders' funds 7,848 7,271 Total policyholders' funds 256,337 245,020 Total policy liabilities 1,434,536 1,418,125 Commissions payable 3,726 4,546 Current federal income tax payable 58 — Deferred federal income tax liability 4,009 3,442 Payable for securities in process of settlement 250 — Other liabilities 41,486 48,857 Total liabilities 1,484,065 1,474,970 Commitments and contingencies ( Notes 7 and 8 ) Stockholders' Equity: Common stock: Class A, no par value, 100,000,000 shares authorized, 54,236,438 and 54,235,165 shares issued and outstanding in 2025 and 2024, respectively, including shares in treasury of 4,327,810 in 2025 and 2024 270,315 269,799 Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2025 and 2024, including shares in treasury of 1,001,714 in 2025 and 2024 3,184 3,184 Retained earnings 55,439 57,062 Accumulated other comprehensive income (loss) ( 87,074 ) ( 95,965 ) Treasury stock, at cost ( 23,725 ) ( 23,725 ) Total stockholders' equity 218,139 210,355 Total liabilities and stockholders' equity $ 1,702,204 1,685,325 See accompanying Notes to Consolidated Financial Statements. March 31, 2025 | 10-Q 3 Table of Contents CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) Three Months Ended March 31, (In thousands, except per share amounts) 2025 2024 Revenues: Premiums: Life insurance $ 39,349 38,261 Accident and health insurance 448 414 Property insurance — ( 2 ) Net investment income 17,377 17,487 Investment related gains (losses), net ( 2,894 ) 963 Other income 1,372 589 Total revenues 55,652 57,712 Benefits and Expenses: Insurance benefits paid or provided: Claims and surrenders 40,098 33,113 Increase (decrease) in future policy benefit reserves ( 3,646 ) 451 Policyholder liability remeasurement (gain) loss ( 172 ) 319 Policyholders' dividends 1,295 1,237 Total insurance benefits paid or provided 37,575 35,120 Commissions 11,275 10,450 Other general expenses 12,693 11,338 Capitalization of deferred policy acquisition costs ( 8,849 ) ( 8,331 ) Amortization of deferred policy acquisition costs 4,647 4,038 Amortization of cost of insurance acquired 98 172 Total benefits and expenses 57,439 52,787 Income (loss) before federal income tax ( 1,787 ) 4,925 Federal income tax expense (benefit) ( 164 ) 383 Net income (loss) ( 1,623 ) 4,542 Per Share Amounts: Basic and diluted earnings (loss) per share of Class A common stock ( 0.03 ) 0.09 Other Comprehensive Income (Loss): Unrealized gains (losses) on fixed maturity securities: Unrealized holding gains (losses) arising during period 18,334 ( 13,416 ) Reclassification adjustment for (gains) losses included in net income (loss) 83 448 Unrealized gains (losses) on fixed maturity securities, net 18,417 ( 12,968 ) Change in current discount rate for liability for future policy benefits ( 8,589 ) 33,995 Income tax expense (benefit) on other comprehensive income items 937 2,642 Other comprehensive income (loss) 8,891 18,385 Total comprehensive income (loss) $ 7,268 22,927 See accompanying Notes to Consolidated Financial Statements. March 31, 2025 | 10-Q 4 Table of Contents CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Stockholders' Equity (Unaudited) Common Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Stockholders' Equity (In thousands) Class A Class B Balance at December 31, 2024 $ 269,799 3,184 57,062 ( 95,965 ) ( 23,725 ) 210,355 Comprehensive income (loss): Net income (loss) — — ( 1,623 ) — — ( 1,623 ) Other comprehensive income (loss) — — — 8,891 — 8,891 Total comprehensive income (loss) — — ( 1,623 ) 8,891 — 7,268 Stock-based compensation 516 — — — — 516 Balance at March 31, 2025 $ 270,315 3,184 55,439 ( 87,074 ) ( 23,725 ) 218,139 Balance at December 31, 2023 $ 268,675 3,184 42,150 ( 118,155 ) ( 23,725 ) 172,129 Comprehensive income (loss): Net income (loss) — — 4,542 — — 4,542 Other comprehensive income (loss) — — — 18,385 — 18,385 Total comprehensive income (loss) — — 4,542 18,385 — 22,927 Stock-based compensation 127 — — — — 127 Balance at March 31, 2024 $ 268,802 3,184 46,692 ( 99,770 ) ( 23,725 ) 195,183 See accompanying Notes to Consolidated Financial Statements. March 31, 2025 | 10-Q 5 Table of Contents CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, (In thousands) 2025 2024 Cash flows from operating activities: Net income (loss) $ ( 1,623 ) 4,542 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Investment related (gains) losses on sale of investments and other assets, net 2,894 ( 963 ) Net deferred policy acquisition costs ( 4,202 ) ( 4,293 ) Amortization of cost of insurance acquired 98 172 Depreciation 161 144 Amortization of premiums and discounts on investments 1,181 1,291 Stock-based compensation 572 154 Deferred federal income tax expense (benefit) ( 370 ) ( 143 ) Change in: Accrued investment income 289 70 Reinsurance recoverable ( 990 ) ( 217 ) Due premiums 2,260 1,384 Future policy benefit reserves ( 3,495 ) 128 Other policyholders' liabilities 11,491 6,929 Federal income tax payable 206 1,353 Commissions payable and other liabilities ( 7,855 ) ( 1,863 ) Other, net 131 ( 1,900 ) Net cash provided by operating activities 748 6,788 Cash flows from investing activities: Purchases of fixed maturity securities, available-for-sale ( 17,519 ) ( 23,271 ) Sales of fixed maturity securities, available-for-sale 65 2,508 Maturities and calls of fixed maturity securities, available-for-sale 8,402 12,366 Principal payments on mortgage loans 2 3 (Increase) decrease in policy loans, net 255 85 Sales of other long-term investments 232 82 Purchases of other long-term investments ( 2,763 ) ( 1,181 ) Purchases of property and equipment ( 107 ) ( 58 ) Net cash used in investing activities ( 11,433 ) ( 9,466 ) See accompanying Notes to Consolidated Financial Statements. March 31, 2025 | 10-Q 6 Table of Contents CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Consolidated Statements of Cash Flows, Continued (Unaudited) Three Months Ended March 31, (In thousands) 2025 2024 Cash flows from financing activities: Annuity deposits $ 2,211 1,600 Annuity withdrawals ( 2,385 ) ( 2,650 ) Other share repurchases ( 57 ) ( 27 ) Net cash used in financing activities ( 231 ) ( 1,077 ) Net increase (decrease) in cash and cash equivalents ( 10,916 ) ( 3,755 ) Cash and cash equivalents at beginning of year 29,271 26,997 Cash and cash equivalents at end of period $ 18,355 23,242 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES: During the three months ended March 31, 2025, various fixed maturity issuers exchanged securities with book values of $ 5.7 million for securities of equal value and none during the three months ended March 31, 2024. The Company had $ 0.3 million and $ 1.4 million of net unsettled security trades at March 31, 2025 and March 31, 2024, respectively. See accompanying Notes to Consolidated Financial Statements. March 31, 2025 | 10-Q 7 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) (1) FINANCIAL STATEMENTS BASIS OF PRESENTATION AND CONSOLIDATION 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"), Magnolia Guaranty Life Insurance Company ("MGLIC"), Computing Technology, Inc. ("CTI"), Nexo Global Services LLC, a Puerto Rico holding company ("Nexo") and its wholly-owned subsidiaries, CICA Life A.I., a Puerto Rico company ("CICA International") and Nexo Enrollment Services LLC, a Puerto Rico service company ("NES"). All significant inter-company accounts and transactions have been eliminated. Citizens and its wholly-owned subsidiaries are collectively referred to as the "Company," "it," "we," "us" or "our". The consolidated balance sheet as of March 31, 2025, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three months ended March 31, 2025 and March 31, 2024 and the consolidated statements of cash flows for the three months ended March 31, 2025 and March 31, 2024 have been prepared by the Company without audit and are not subject to audit. In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at March 31, 2025 and for comparative periods have been made. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission ("SEC"). Accordingly, the consolidated financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 ("Form 10-K"). Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. Our Life Insurance segment operates through our subsidiaries CICA Domestic and CICA International. CICA Domestic. CICA Domestic issues primarily ordinary whole life, final expense and life products with living benefits throughout the U.S. 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. Our Home Service Insurance segment operates through our subsidiaries SPLIC and MGLIC and focuses on the life insurance needs of the middle- and lower-income markets in Louisiana, Mississippi and Arkansas. 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. CTI provides data processing systems and services to the Company. NES provides services to policyholders of CICA International. 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 March 31, 2025 | 10-Q 8 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) 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, valuation allowances on deferred tax assets, actuarially determined assets and liabilities, and assumptions and contingencies related 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. SIGNIFICANT ACCOUNTING POLICIES For a description of all significant accounting policies, see Part IV, Item 15, Note 1. Summary of Significant Accounting Policies in the notes to our consolidated financial statements included in our Form 10-K , which should be read in conjunction with these accompanying consolidated financial statements. (2) ACCOUNTING PRONOUNCEMENTS ACCOUNTING STANDARDS NOT YET ADOPTED In November 2024, the FASB issued ASU No. ASU 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. ASU 2024-03 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. No other new accounting pronouncements issued or effective during the year had, or is expected to have, a material impact on our consolidated financial statements. (3) INVESTMENTS The Company invests primarily in fixed maturity securities as shown below. Carrying Value (In thousands, except for %) March 31, 2025 December 31, 2024 Amount % Amount % Cash and invested assets: Fixed maturity securities $ 1,247,428 86.9 % 1,220,961 86.0 % Equity securities 5,493 0.4 5,447 0.4 Policy loans 70,961 4.9 71,216 5.0 Other long-term investments 93,318 6.5 93,604 6.6 Cash and cash equivalents 18,355 1.3 29,271 2.0 Total cash and invested assets $ 1,435,555 100.0 % 1,420,499 100.0 % March 31, 2025 | 10-Q 9 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The following tables represent the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of the dates indicated. Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value March 31, 2025 (In thousands) Fixed maturity securities: U.S. Treasury securities $ 5,927 98 87 5,938 U.S. Government-sponsored enterprises 3,145 206 — 3,351 States and political subdivisions 298,351 1,402 29,317 270,436 Corporate: Financial 270,073 2,289 30,209 242,153 Consumer 265,695 1,269 43,081 223,883 Utilities 127,120 359 21,418 106,061 Energy 80,513 92 9,168 71,437 Communications 70,722 205 8,830 62,097 All other 126,765 472 16,315 110,922 Commercial mortgage-backed 313 2 4 311 Residential mortgage-backed 106,538 5 10,137 96,406 Asset-backed 54,189 972 728 54,433 Total fixed maturity securities $ 1,409,351 7,371 169,294 1,247,428 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value December 31, 2024 (In thousands) 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 March 31, 2025 | 10-Q 10 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The Company's investments in equity securities are shown below. Fair Value (In thousands) March 31, 2025 December 31, 2024 Equity securities: Bond mutual funds $ 748 739 Common stocks 952 810 Non-redeemable preferred stock 7 7 Non-redeemable preferred stock fund 3,786 3,891 Total equity securities $ 5,493 5,447 VALUATION OF INVESTMENTS Available-for-sale ("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 $ 47 thousand and $ 0.1 million for the three months ended March 31, 2025 and 2024, respectively, on equity securities held. The Company considers several factors in its review and evaluation of individual investments, using the process described in Part IV, Item 15, Note 2. Investments in the notes to the consolidated financial statements of our Form 10-K to determine whether a credit valuation loss exists. For the three months ended March 31, 2025 and 2024, the Company recorded no credit valuation losses on fixed maturity securities. For fixed maturity security investments that have unrealized losses as of March 31, 2025 and December 31, 2024, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows. March 31, 2025 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 $ 855 31 3 444 56 5 1,299 87 8 States and political subdivisions 29,060 845 44 151,175 28,472 178 180,235 29,317 222 Corporate: Financial 25,801 480 36 150,873 29,729 189 176,674 30,209 225 Consumer 34,644 1,452 43 164,681 41,629 217 199,325 43,081 260 Utilities 13,576 428 36 80,755 20,990 144 94,331 21,418 180 Energy 14,597 321 31 51,654 8,847 62 66,251 9,168 93 Communications 4,628 93 7 49,759 8,737 61 54,387 8,830 68 All Other 25,067 840 36 72,295 15,475 90 97,362 16,315 126 Commercial mortgage-backed — — — 88 4 1 88 4 1 Residential mortgage-backed 81 1 3 96,077 10,136 84 96,158 10,137 87 Asset-backed 9,736 192 15 14,602 536 16 24,338 728 31 Total fixed maturity securities $ 158,045 4,683 254 832,403 164,611 1,047 990,448 169,294 1,301 March 31, 2025 | 10-Q 11 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) 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 In each category of our fixed maturity securities described above, we do not intend to sell our investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. As of March 31, 2025 and December 31, 2024, 99.2 % of the fair value of our fixed maturity securities portfolio, respectively, were rated investment grade. While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an on-going basis as future information may become available which could result in an allowance being recorded. These unrealized losses on fixed maturity securities are due to noncredit-related factors, including changes in credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of our investments, hence they are not recognized as credit losses. The fair value is expected to recover as the securities approach maturity or if market yields for such investments decline. The amortized cost and fair value of fixed maturity securities at March 31, 2025 by contractual maturity are shown in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date have been reflected based upon final stated maturity. March 31, 2025 Amortized Cost Fair Value (In thousands) Fixed maturity securities: Due in one year or less $ 29,590 29,545 Due after one year through five years 134,188 134,263 Due after five years through ten years 261,428 257,371 Due after ten years 984,145 826,249 Total fixed maturity securities $ 1,409,351 1,247,428 March 31, 2025 | 10-Q 12 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales. Three Months Ended March 31, (In thousands) 2025 2024 Fixed maturity securities, available-for-sale: Proceeds $ 65 2,508 Gross realized gains $ 1 1 Gross realized losses $ 4 49 Real estate held-for-sale consists of former Home Service Insurance segment district offices in Baton Rouge and Bogalusa, Louisiana. It was determined during the quarter that these properties met the held-for-sale criteria. As a result, these properties were reclassified from property, plant and equipment, net to real estate held-for-sale and is included in other long-term investments on the consolidated balance sheets. These investments are listed at carrying value and are no longer being depreciated. (4) FAIR VALUE MEASUREMENTS Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through other comprehensive income (loss). We also report our equity securities and certain other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations and comprehensive income (loss). Fair value measurements are generally based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. All assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three categories. • Level 1 - Quoted prices for identical instruments in active markets. • Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or whose significant value drivers are observable. • Level 3 - Instruments whose significant value drivers are unobservable. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments. Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes. These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments. All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace. Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities. Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information. Real estate held- March 31, 2025 | 10-Q 13 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) for-sale is included in this category. There were no securities in this category as of or during the periods ended March 31, 2025 and December 31, 2024. The following tables set forth our assets measured at fair value on a recurring basis as of the dates indicated. March 31, 2025 Level 1 Level 2 Level 3 Total Fair Value (In thousands) Financial assets: Fixed maturity securities: U.S. Treasury and U.S. Government-sponsored enterprises $ 5,938 3,351 — 9,289 States and political subdivisions — 270,436 — 270,436 Corporate 42 816,511 — 816,553 Commercial mortgage-backed — 311 — 311 Residential mortgage-backed — 96,406 — 96,406 Asset-backed — 54,433 — 54,433 Total fixed maturity securities 5,980 1,241,448 — 1,247,428 Equity securities: Bond mutual funds 748 — — 748 Common stocks 952 — — 952 Non-redeemable preferred stock 7 — — 7 Non-redeemable preferred stock fund 3,786 — — 3,786 Total equity securities 5,493 — — 5,493 Other long-term investments (1) — — — 93,036 Total financial assets $ 11,473 1,241,448 — 1,345,957 (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 are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. March 31, 2025 | 10-Q 14 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) December 31, 2024 Level 1 Level 2 Level 3 Total Fair Value (In thousands) 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 stocks 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 are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets. FINANCIAL INSTRUMENTS VALUATION FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE Fixed maturity securities, available-for-sale. At March 31, 2025, fixed maturity securities, valued using a third-party pricing source, totaled $ 1.2 billion for Level 2 assets and comprised 92.2 % of total reported fair value of our financial assets. The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades. In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness. There were no Level 3 assets at March 31, 2025. As of March 31, 2025, 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 $ 1.5 million for the three months ended March 31, 2025, and March 31, 2025 | 10-Q 15 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) gains of $ 1.3 million on limited partnerships held for the three months ended March 31, 2024. These investments are included in other long-term investments on the consolidated balance sheets. March 31, 2025 December 31, 2024 (In thousands, except for years) Fair Value Using NAV Per Share Unfunded Commit- ments Range (In years) Fair Value Using NAV Per Share Unfunded Commit- ments Range (In years) Description Limited partnerships: Middle market Investments in privately-originated, performing senior secured debt primarily in North America-based companies $ 34,307 1,660 2 $ 35,369 1,660 3 Global equity fund Investments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth 11,416 — 0 11,568 — 0 Late-stage growth Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale 31,676 5,498 3 to 5 27,825 8,134 3 to 5 Infrastructure Investments in environmental infrastructure and related technology, focusing on renewable power generation and distribution 15,637 5,364 8 to 10 18,575 5,637 9 to 10 Total limited partnerships $ 93,036 12,522 $ 93,337 15,431 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: March 31, 2025 December 31, 2024 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Financial assets: Policy loans $ 70,961 70,961 71,216 71,216 Residential mortgage loan 31 31 33 34 Cash and cash equivalents 18,355 18,355 29,271 29,271 Financial liabilities: Annuity - investment contracts 69,492 64,285 68,888 63,629 Policy loans. Policy loans had a weighted average annual interest rate of 7.7 % at both March 31, 2025 and December 31, 2024 and no specified maturity dates. The aggregate fair value of policy loans approximates the March 31, 2025 | 10-Q 16 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) carrying value reflected on the consolidated balance sheets. Policy loans are an integral part of the life insurance policies we have in force, cannot be valued separately and are not marketable. Therefore, the fair value of policy loans approximates the carrying value and policy loans are considered Level 3 assets in the fair value hierarchy. Residential mortgage loan. This mortgage loan is secured by a residential property. The interest rate for this loan was 7.0 % at both March 31, 2025 and December 31, 2024. At March 31, 2025, the remaining loan matures in three years . Management estimated the fair value using an annual interest rate of 6.25 % at both March 31, 2025 and December 31, 2024. 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 March 31, 2025 and December 31, 2024 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.80 % to 4.92 % and 3.96 % to 4.96 %, 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. Carrying Value (In thousands ) March 31, 2025 December 31, 2024 Other long-term investments: Limited partnerships $ 93,036 93,337 FHLB common stock 215 212 Mortgage loans 31 33 Real estate held-for-sale 15 — All other investments 21 22 Total other long-term investments $ 93,318 93,604 We are a member of the Federal Home Loan Bank ("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. (5) DEFERRED POLICY ACQUISITION COSTS AND COST OF INSURANCE ACQUIRED DAC The following tables roll forward the DAC and COIA balances for the three months ended March 31, 2025 and 2024 by reporting cohort. Our reporting cohorts are Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and Permanent Limited Pay, which summarizes insurance policies with March 31, 2025 | 10-Q 17 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies. Three Months Ended March 31, 2025 (In thousands) Permanent Permanent Limited Pay Other Business Total Life Insurance: Balance, beginning of year $ 124,725 16,388 547 141,660 Capitalizations 6,715 920 84 7,719 Amortization expense ( 3,594 ) ( 276 ) ( 23 ) ( 3,893 ) Balance, end of period 127,846 17,032 608 145,486 Home Service Insurance: Balance, beginning of year 45,656 11,151 1,168 57,975 Capitalizations 895 173 62 1,130 Amortization expense ( 571 ) ( 107 ) ( 76 ) ( 754 ) Balance, end of period 45,980 11,217 1,154 58,351 Consolidated: Balance, beginning of year 170,381 27,539 1,715 199,635 Capitalizations 7,610 1,093 146 8,849 Amortization expense ( 4,165 ) ( 383 ) ( 99 ) ( 4,647 ) Balance, end of period $ 173,826 28,249 1,762 203,837 Three Months Ended March 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 5,976 766 74 6,816 Amortization expense ( 3,076 ) ( 227 ) ( 55 ) ( 3,358 ) Balance, end of period 108,452 14,614 1,232 124,298 Home Service Insurance: Balance, beginning of year 43,280 10,564 1,084 54,928 Capitalizations 1,174 271 70 1,515 Amortization expense ( 554 ) ( 105 ) ( 21 ) ( 680 ) Balance, end of period 43,900 10,730 1,133 55,763 Consolidated: Balance, beginning of year 148,832 24,639 2,297 175,768 Capitalizations 7,150 1,037 144 8,331 Amortization expense ( 3,630 ) ( 332 ) ( 76 ) ( 4,038 ) Balance, end of period $ 152,352 25,344 2,365 180,061 DAC capitalization increased for the three months ended March 31, 2025, compared to the same prior year period mainly from increased commissions from higher first year sales in our Life Insurance segment. March 31, 2025 | 10-Q 18 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) COIA Three Months Ended March 31, 2025 (In thousands) Permanent Permanent Limited Pay Other Business Total Life Insurance: Balance, beginning of year $ 599 648 — 1,247 Amortization expense ( 10 ) ( 11 ) — ( 21 ) Balance, end of period 589 637 — 1,226 Home Service Insurance: Balance, beginning of year 6,825 161 1,213 8,199 Amortization expense ( 89 ) ( 2 ) 14 ( 77 ) Balance, end of period 6,736 159 1,227 8,122 Consolidated: Balance, beginning of year 7,424 809 1,213 9,446 Amortization expense ( 99 ) ( 13 ) 14 ( 98 ) Balance, end of period $ 7,325 796 1,227 9,348 Three Months Ended March 31, 2024 (In thousands) Permanent Permanent Limited Pay Other Business Total Life Insurance: Balance, beginning of year $ 249 695 406 1,350 Amortization expense ( 4 ) ( 13 ) ( 9 ) ( 26 ) Balance, end of period 245 682 397 1,324 Home Service Insurance: Balance, beginning of year 7,194 168 1,331 8,693 Amortization expense ( 94 ) ( 2 ) ( 50 ) ( 146 ) Balance, end of period 7,100 166 1,281 8,547 Consolidated: Balance, beginning of year 7,443 863 1,737 10,043 Amortization expense ( 98 ) ( 15 ) ( 59 ) ( 172 ) Balance, end of period $ 7,345 848 1,678 9,871 (6) 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, March 31, 2025 | 10-Q 19 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) 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. March 31, 2025 (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 $ 299,918 14,962 314,880 94,458 13,878 108,336 Beginning balance at original discount rate 310,919 15,180 326,099 101,026 14,732 115,758 Effect of actual variances from expected experience ( 8,002 ) 424 ( 7,578 ) ( 1,714 ) ( 653 ) ( 2,367 ) Adjusted beginning of year balance 302,917 15,604 318,521 99,312 14,079 113,391 Issuances 26,908 985 27,893 3,632 547 4,179 Interest accrual 3,241 147 3,388 1,053 133 1,186 Net premiums collected ( 13,087 ) ( 1,442 ) ( 14,529 ) ( 3,017 ) ( 53 ) ( 3,070 ) Derecognition and other ( 2,484 ) 118 ( 2,366 ) ( 49 ) ( 21 ) ( 70 ) Ending balance at original discount rate 317,495 15,412 332,907 100,931 14,685 115,616 Effect of changes in discount rates ( 7,228 ) ( 113 ) ( 7,341 ) ( 5,556 ) ( 680 ) ( 6,236 ) Balance, end of period $ 310,267 15,299 325,566 95,375 14,005 109,380 Present Value of Expected Future Policy Benefits: Balance, beginning of year $ 996,556 187,066 1,183,622 198,809 111,639 310,448 Beginning balance at original discount rate 1,051,493 201,797 1,253,290 218,555 123,016 341,571 Effect of actual variances from expected experience ( 8,017 ) 1,025 ( 6,992 ) ( 1,849 ) ( 319 ) ( 2,168 ) Adjusted beginning of year balance 1,043,476 202,822 1,246,298 216,706 122,697 339,403 Issuances 27,035 1,113 28,148 3,633 541 4,174 Interest accrual 11,608 2,056 13,664 2,419 1,437 3,856 Benefit payments ( 26,576 ) ( 5,644 ) ( 32,220 ) ( 3,703 ) ( 1,358 ) ( 5,061 ) Derecognition and other ( 2,639 ) ( 12 ) ( 2,651 ) ( 57 ) ( 23 ) ( 80 ) Ending balance at original discount rate 1,052,904 200,335 1,253,239 218,998 123,294 342,292 Effect of changes in discount rates ( 44,101 ) ( 13,331 ) ( 57,432 ) ( 18,431 ) ( 11,109 ) ( 29,540 ) Balance, end of period $ 1,008,803 187,004 1,195,807 200,567 112,185 312,752 Net liability for future policy benefits $ 698,536 171,705 870,241 105,192 98,180 203,372 Less: Reinsurance recoverable 2,875 — 2,875 — — — Net liability for future policy benefits, after reinsurance recoverable $ 695,661 171,705 867,366 105,192 98,180 203,372 March 31, 2025 | 10-Q 20 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) March 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 actual variances from expected experience ( 1,772 ) 204 ( 1,568 ) ( 1,703 ) ( 1,078 ) ( 2,781 ) Adjusted beginning of year balance 250,654 13,737 264,391 100,342 14,434 114,776 Issuances 18,208 604 18,812 4,152 685 4,837 Interest accrual 2,550 117 2,667 1,057 132 1,189 Net premiums collected ( 10,497 ) ( 683 ) ( 11,180 ) ( 3,016 ) 80 ( 2,936 ) Derecognition and other ( 2,456 ) 47 ( 2,409 ) 74 7 81 Ending balance at original discount rate 258,459 13,822 272,281 102,609 15,338 117,947 Effect of changes in discount rates ( 9,285 ) ( 325 ) ( 9,610 ) ( 5,401 ) ( 832 ) ( 6,233 ) Balance, end of period $ 249,174 13,497 262,671 97,208 14,506 111,714 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 actual variances from expected experience ( 1,592 ) 1,094 ( 498 ) ( 1,697 ) ( 748 ) ( 2,445 ) Adjusted beginning of year balance 994,370 203,849 1,198,219 215,827 123,193 339,020 Issuances 18,424 649 19,073 4,153 683 4,836 Interest accrual 11,014 2,066 13,080 2,401 1,437 3,838 Benefit payments ( 20,342 ) ( 4,411 ) ( 24,753 ) ( 3,672 ) ( 1,436 ) ( 5,108 ) Derecognition and other ( 2,976 ) 2 ( 2,974 ) 73 7 80 Ending balance at original discount rate 1,000,490 202,155 1,202,645 218,782 123,884 342,666 Effect of changes in discount rates ( 41,718 ) ( 12,311 ) ( 54,029 ) ( 13,926 ) ( 6,975 ) ( 20,901 ) Balance, end of period $ 958,772 189,844 1,148,616 204,856 116,909 321,765 Net liability for future policy benefits $ 709,598 176,347 885,945 107,648 102,403 210,051 March 31, 2025 | 10-Q 21 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The following table reconciles the net liability for future policy benefits shown above to the liability for future policy benefits reported in the consolidated balance sheets. March 31, 2025 March 31, 2024 (In thousands) Life Insurance Home Service Insurance Consolidated Life Insurance Home Service Insurance Consolidated Life Insurance: Permanent $ 695,661 105,192 800,853 709,598 107,648 817,246 Permanent limited pay 171,705 98,180 269,885 176,347 102,403 278,750 Deferred profit liability 31,816 30,073 61,889 29,258 27,432 56,690 Other 30,284 14,175 44,459 28,818 13,926 42,744 Total life insurance 929,466 247,620 1,177,086 944,021 251,409 1,195,430 Accident & Health: Other 645 468 1,113 514 330 844 Total future policy benefit reserves $ 930,111 248,088 1,178,199 944,535 251,739 1,196,274 The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for long-term duration contracts. March 31, 2025 March 31, 2024 (In thousands) Life Insurance Home Service Insurance Life Insurance Home Service Insurance Undiscounted: Permanent: Expected future gross premiums $ 797,323 444,274 658,547 455,252 Expected future benefit payments 1,637,362 489,999 1,514,326 488,264 Permanent Limited Pay: Expected future gross premiums 45,977 75,039 46,558 76,799 Expected future benefit payments 323,489 320,033 326,302 320,554 Discounted: Permanent: Expected future gross premiums $ 593,281 259,462 499,821 268,852 Expected future benefit payments 1,008,803 200,567 958,772 204,856 Permanent Limited Pay: Expected future gross premiums 41,185 48,866 41,378 51,413 Expected future benefit payments 187,004 112,185 189,844 116,909 March 31, 2025 | 10-Q 22 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The following tables summarize the amount of revenue and interest related to long-term duration contracts recognized in the consolidated statement of operations and comprehensive income (loss): Three Months Ended March 31, 2025 2024 (In thousands) Gross Premiums Interest Expense Gross Premiums Interest Expense Life Insurance Segment: Life Insurance: Permanent $ 27,052 8,367 23,316 8,464 Permanent Limited Pay 4,627 2,214 3,646 2,263 Other ( 172 ) — 1,109 — Less: Reinsurance 2,540 — 373 — Total, net of reinsurance 28,967 10,581 27,698 10,727 Accident & Health: Other 188 — 164 — Less: Reinsurance 1 — 1 — Total, net of reinsurance 187 — 163 — Total $ 29,154 10,581 27,861 10,727 Home Service Insurance Segment: Life Insurance: Permanent $ 8,104 1,366 8,241 1,344 Permanent Limited Pay 1,957 1,657 2,040 1,626 Other 333 — 294 — Less: Reinsurance 12 — 12 — Total, net of reinsurance 10,382 3,023 10,563 2,970 Accident & Health: Other 261 — 251 — Total $ 10,643 3,023 10,814 2,970 The following table provides the weighted-average durations of the liability for future policy benefits. March 31, 2025 March 31, 2024 (In years) Life Insurance Home Service Insurance Life Insurance Home Service Insurance Permanent: Duration at original discount rate 8.5 15.2 8.2 16.0 Duration at current discount rate 8.6 14.5 8.5 15.8 Permanent Limited Pay: Duration at original discount rate 8.0 13.7 8.1 14.5 Duration at current discount rate 7.6 13.3 7.8 14.5 March 31, 2025 | 10-Q 23 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The following table provides the weighted-average interest rates for the liability for future policy benefits. March 31, 2025 March 31, 2024 Life Insurance Home Service Insurance Life Insurance Home Service Insurance Permanent: Interest rate at original discount rate 4.86 % 4.82 % 4.89 % 4.97 % Interest rate at current discount rate 5.13 % 5.49 % 5.10 % 5.31 % Permanent Limited Pay: Interest rate at original discount rate 4.25 % 4.87 % 4.28 % 5.03 % Interest rate at current discount rate 5.15 % 5.47 % 5.09 % 5.31 % 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 March 31, 2025 (In thousands) Range of Guaranteed Minimum Crediting Rates: 0.00 % - 1.49 % $ 815 — — 34,612 35,427 1.50 % - 2.99 % 3,956 187 6 35,108 39,257 3.00 % - 4.49 % 109,012 381 19,578 — 128,971 Greater or equal to 4.50 % 31,457 — — — 31,457 Total $ 145,240 568 19,584 69,720 235,112 At Guaranteed Minimum 1 Basis Point-50 Basis Points Above 51 Basis Points-150 Basis Points Above Greater Than 150 Basis Points Above Total March 31, 2024 (In thousands) Range of Guaranteed Minimum Crediting Rates: 0.00 % - 1.49 % $ 792 — 1,031 34,391 36,214 1.50 % - 2.99 % 22,353 531 37 11,622 34,543 3.00 % - 4.49 % 100,882 131 8,498 — 109,511 Greater or equal to 4.50 % 31,447 — — — 31,447 Total $ 155,474 662 9,566 46,013 211,715 March 31, 2025 | 10-Q 24 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The following tables summarize balances of and changes in policyholders' account balances. March 31, 2025 (In thousands, except for %) Supplemental Contracts Without Life Contingencies Fixed Annuity Dividend Accumulations Premiums Paid in Advance Balance, beginning of year $ 60,414 88,080 47,768 29,897 Issuances 9,719 1,001 183 1,249 Premiums received 39 1,135 1,416 212 Interest credited 655 759 454 222 Less: Surrenders and withdrawals — 2,267 1,228 1,607 Benefit payments 2,989 — — — Balance, end of period $ 67,838 88,708 48,593 29,973 Weighted-average crediting rates 4.08 % 3.97 % 3.78 % 3.19 % Cash surrender value $ 67,838 88,708 48,593 29,973 March 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 5,721 594 138 806 Premiums received 27 985 1,358 194 Interest credited 474 663 472 431 Less: Surrenders and withdrawals — 2,572 1,168 1,989 Benefit payments 2,121 — — — Balance, end of period $ 48,670 86,804 45,760 30,481 Weighted-average crediting rates 3.96 % 3.57 % 3.28 % 2.93 % Cash surrender value $ 48,670 86,804 45,760 30,481 March 31, 2025 | 10-Q 25 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The following table reconciles policyholders' account balances shown above to the policyholders' account balance liability in the consolidated balance sheets. As of March 31, (In thousands) 2025 2024 Annuities: Supplemental contracts without life contingencies $ 67,838 48,670 Fixed annuity 88,708 86,804 Unearned revenue reserve 1,488 1,491 Total annuities $ 158,034 136,965 Premiums paid in advance: Premiums paid in advance $ 29,973 30,481 Other 1,991 1,910 Total premiums paid in advance $ 31,964 32,391 (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 Company remains contingently liable in the event that any of the reinsurers are unable to meet their obligations under any reinsurance agreement. Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers. We obtain reinsurance from multiple reinsurers and 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. (In thousands) March 31, 2025 December 31, 2024 Insurance in force: Direct life insurance in force $ 5,282,585 5,227,506 Aggregate assumed life insurance in force 3,427 3,427 Aggregate ceded life insurance in force ( 838,457 ) ( 821,215 ) Net life insurance in force $ 4,447,555 4,409,718 March 31, 2025 | 10-Q 26 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) The Company's reinsurance recoverable on ceded reinsurance was $ 7.9 million and $ 6.9 million as of March 31, 2025 and December 31, 2024, respectively. Premiums, claims and surrenders assumed and ceded, and expenses ceded for all lines of business are summarized for the periods indicated below. Three Months Ended March 31, (In thousands) 2025 2024 Premiums from short duration contracts: Direct $ 449 452 Ceded ( 1 ) ( 1 ) Net premiums earned 448 451 Premiums from long duration contracts: Direct 41,901 38,606 Assumed 11 17 Ceded ( 2,563 ) ( 401 ) Net premiums earned 39,349 38,222 Total premiums earned $ 39,797 38,673 Claims and surrenders assumed $ ( 40 ) 34 Claims and surrenders ceded $ ( 677 ) ( 784 ) Commissions assumed and ceded $ ( 3,125 ) 8 Other general expenses ceded $ ( 588 ) — (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 operations and financial condition. Part I. Item 3. Legal Proceedings and Part IV. Item 1. Note 8. Commitments and Contingencies of our 2024 consolidated financial statements and notes thereto included in the Form 10-K includes a discussion of our legal proceedings. There have been no material developments in the three months ended March 31, 2025 from the legal proceedings described in our 2024 consolidated financial statements and notes thereto included in the Form 10-K . CONTRACTUAL OBLIGATIONS As of March 31, 2025, CICA International is committed to fund investments up to $ 12.5 million related to limited partnerships previously described. 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 March 31, 2025 | 10-Q 27 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50 %, (c) the index rate plus 1.00 % or (d) 0.75 %. The Company is required to pay Regions an annual commitment fee of 0.375 % of the unused portion of the Credit Facility in quarterly installments, which the Company expenses as it is incurred. Obligations under the Credit Facility are secured by substantially all of the assets of the Company other than the equity interests in its subsidiaries, real estate owned by the Company, and other limited exceptions. The Credit Facility contains customary events of default and financial, affirmative and negative covenants including, but not limited to, restrictions on indebtedness, liens, investments, asset dispositions and restricted payments. As of March 31, 2025, the Company had no t borrowed any funds against the Credit Facility and was not in violation of any covenants. (9) STOCKHOLDERS' EQUITY AND RESTRICTIONS 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: Three Months Ended March 31, 2025 2024 (In thousands) Common Stock Class A Treasury Stock Common Stock Class A Treasury Stock Balance at beginning of year 54,235 5,330 53,883 5,330 Stock issued for compensation 1 — 17 — Balance at end of period 54,236 5,330 53,900 5,330 EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share. Three Months Ended March 31, 2025 2024 (In thousands, except per share amounts) Basic and diluted earnings per share: Numerator: Net income (loss) $ ( 1,623 ) 4,542 Net income (loss) allocated to Class A common stock $ ( 1,623 ) 4,542 Denominator: Weighted average shares of Class A outstanding - basic 49,908 49,564 Weighted average shares of Class A outstanding - diluted (1) 50,912 50,561 Basic and diluted earnings (loss) per share of Class A common stock $ ( 0.03 ) 0.09 (1) Because the Company reported a net loss for the three months ended March 31, 2025, the effect of all potentially dilutive securities was excluded from the calculation of diluted earnings per share as it would be anti-dilutive. March 31, 2025 | 10-Q 28 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) STATUTORY CAPITAL AND SURPLUS Each of our domestic regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements imposed by the U.S. National Association of Insurance Commissioners ("NAIC"). All domestic insurance subsidiaries exceeded the minimum capital requirements at March 31, 2025. 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 March 31, 2025, 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 . At March 31, 2025, CICA International's capital exceeds both of the required minimum capital and related ratio. (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. 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 in our Form 10-K . 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. March 31, 2025 | 10-Q 29 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated Three Months Ended March 31, 2025 (In thousands) Revenues: Premiums: Life insurance $ 28,967 10,382 — 39,349 Accident and health insurance 187 261 — 448 Net investment income 13,512 3,678 187 17,377 Investment related gains (losses), net ( 2,747 ) ( 148 ) 1 ( 2,894 ) Other income 1,372 — — 1,372 Total revenues 41,291 14,173 188 55,652 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 34,142 5,956 — 40,098 Increase (decrease) in future policy benefit reserves ( 5,326 ) 1,680 — ( 3,646 ) Policyholder liability remeasurement (gain) loss 13 ( 185 ) — ( 172 ) Policyholders' dividends 1,289 6 — 1,295 Total insurance benefits paid or provided 30,118 7,457 — 37,575 Commissions 8,163 3,112 — 11,275 Other general expenses 6,572 3,783 2,338 12,693 Capitalization of deferred policy acquisition costs ( 7,719 ) ( 1,130 ) — ( 8,849 ) Amortization of deferred policy acquisition costs 3,893 754 — 4,647 Amortization of cost of insurance acquired 21 77 — 98 Total benefits and expenses 41,048 14,053 2,338 57,439 Income (loss) before federal income tax $ 243 120 ( 2,150 ) ( 1,787 ) March 31, 2025 | 10-Q 30 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) Life Insurance Home Service Insurance Other Non-Insurance Enterprises Consolidated Three Months Ended March 31, 2024 (In thousands) Revenues: Premiums: Life insurance $ 27,698 10,563 — 38,261 Accident and health insurance 163 251 — 414 Property insurance — ( 2 ) — ( 2 ) Net investment income 13,686 3,537 264 17,487 Investment related gains (losses), net 1,086 ( 91 ) ( 32 ) 963 Other income 506 — 83 589 Total revenues 43,139 14,258 315 57,712 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 27,364 5,749 — 33,113 Increase (decrease) in future policy benefit reserves ( 1,193 ) 1,644 — 451 Policyholder liability remeasurement (gain) loss 373 ( 54 ) — 319 Policyholders' dividends 1,231 6 — 1,237 Total insurance benefits paid or provided 27,775 7,345 — 35,120 Commissions 6,960 3,490 — 10,450 Other general expenses 6,036 3,489 1,813 11,338 Capitalization of deferred policy acquisition costs ( 6,816 ) ( 1,515 ) — ( 8,331 ) Amortization of deferred policy acquisition costs 3,358 680 — 4,038 Amortization of cost of insurance acquired 26 146 — 172 Total benefits and expenses 37,339 13,635 1,813 52,787 Income (loss) before federal income tax $ 5,800 623 ( 1,498 ) 4,925 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 premiums for the Life Insurance segment is detailed below. (In thousands) Three Months Ended March 31, 2025 2024 Life Insurance Segment: Premiums: Direct premiums: First year $ 7,604 4,584 Renewal 24,091 23,650 Total direct premiums 31,695 28,234 Reinsurance ( 2,541 ) ( 373 ) Total premiums $ 29,154 27,861 March 31, 2025 | 10-Q 31 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) A summary of the Home Service Insurance segment life and A&H premium breakout is detailed below. (In thousands) Three Months Ended March 31, 2025 2024 Home Service Insurance Segment: Direct life and A&H premiums: First year $ 1,213 1,347 Renewal 9,442 9,479 Total direct life and A&H premiums 10,655 10,826 Reinsurance ( 12 ) ( 12 ) Total life and A&H premiums $ 10,643 10,814 The table below summarizes assets by segment. As of March 31, (In thousands) 2025 2024 Assets: Segments: Life Insurance $ 1,303,166 1,270,247 Home Service Insurance 364,038 359,740 Total Segments 1,667,204 1,629,987 Other Non-Insurance Enterprises 35,000 35,676 Total assets $ 1,702,204 1,665,663 GEOGRAPHIC INFORMATION The following table sets forth the Company's annual total of earned premiums by country of policyholder residence for the periods indicated. Three Months Ended March 31, (In thousands) 2025 2024 Area: United States $ 16,500 13,151 Colombia 6,554 5,983 Taiwan 3,886 4,542 Venezuela 3,350 3,315 Ecuador 3,200 3,044 Argentina 2,096 2,098 Other foreign countries 9,702 8,815 Reinsurance and change in premium accruals ( 5,491 ) ( 2,275 ) Total premiums $ 39,797 38,673 March 31, 2025 | 10-Q 32 Table of Contents CITIZENS, INC . NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited ) (11) INCOME TAXES The effective tax rate is the ratio of tax expense or tax benefit over pre-tax income. The tax benefit effective rate was 9.2 % for the three months ended March 31, 2025, compared to effective tax rate of 7.8 % for the same period in 2024. CICA International is considered a controlled foreign corporation for federal income tax purposes. As a result, the insurance activity of CICA International is subject to Subpart F of the Internal Revenue Code and is included in Citizens’ taxable income. The Government of Puerto Rico approved a tax exemption decree for CICA International which freezes the income tax rate at 0 % on taxable earnings up to $ 1.2 million and 4 % on taxable earnings in excess of $ 1.2 million for a minimum of 15 years. The effective tax rate varies from the prevailing corporate federal income tax rate of 21% mainly due to the impact of Subpart F and the reduced Puerto Rico income tax rate. At March 31, 2025 and 2024, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety. The Company recorded valuation allowances of $ 4.7 million and $ 4.6 million at March 31, 2025 and 2024, respectively, through Other Comprehensive Income (Loss). (12) OTHER COMPREHENSIVE INCOME (LOSS) The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% for domestic entities and 4 % for Puerto Rican entities for the three months ended March 31, 2025 and 2024, as indicated below. Three Months Ended March 31, 2025 2024 (In thousands) Amount Tax Effect Total Amount Tax Effect Total Unrealized gains (losses): Unrealized holding gains (losses) arising during the period $ 18,334 ( 1,362 ) 16,972 ( 13,416 ) 1,198 ( 12,218 ) Reclassification adjustment for (gains) losses included in net income (loss) 83 ( 17 ) 66 448 ( 94 ) 354 Unrealized holding gains (losses), net 18,417 ( 1,379 ) 17,038 ( 12,968 ) 1,104 ( 11,864 ) Change in current discount rate for liability for future policy benefits ( 8,589 ) 442 ( 8,147 ) 33,995 ( 3,746 ) 30,249 Other comprehensive income (loss) $ 9,828 ( 937 ) 8,891 21,027 ( 2,642 ) 18,385 (13) 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. There were no changes related to these relationships during the three months ended March 31, 2025. See our Form 10-K for a comprehensive discussion of related party transactions. (14) 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 other significant subsequent events need to be recognized or disclosed at this time. March 31, 2025 | 10-Q 33 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS