CITIZENS, INC. 10-Q

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions including those factors discussed in the "Risk Factors" contained in our Annual Report on Form 10-K for the year ended December 31, 2024, which is incorporated herein by reference. The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q, as well as in conjunction with MD&A and the consolidated financial statements and notes thereto that are included in our Form 10-K. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law. The U.S. Securities and Exchange Commission ("SEC") maintains a website that contains reports, proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files with the SEC at http://www.sec.gov. We also make available, free of charge, through our website (http://www.citizensinc.com), our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Section 16 Reports filed by officers and directors, news releases, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC. We are not including any of the information contained on our website as part of, or incorporating it by reference into, this Form 10-Q. OBJECTIVE OF OUR MANAGEMENT'S DISCUSSION AND ANALYSIS We refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations as our “MD&A”. The objective of our MD&A is to provide investors with information in order to assess the material changes in our financial condition from December 31, 2024 to March 31, 2025 and the material changes in our results of operations for the three months ended March 31, 2025 as compared to the same period in 2024. We also discuss in the MD&A any trends that we believe may materially affect our future operations or financial condition. OVERVIEW For over 55 years, Citizens has been fulfilling the needs of our policyholders and their families by providing insurance products that offer both living and death benefits. We conduct insurance related operations through our insurance subsidiaries, which provide benefits to policyholders and their beneficiaries globally. We specialize in offering primarily individual whole life insurance, endowment products and final expense insurance in niche markets where we believe we can optimize our competitive position. As an insurance provider, we collect premiums on an ongoing basis from our policyholders and invest the majority of the premiums to pay future benefits, including claims, surrenders and policyholder dividends. Accordingly, the Company derives its revenues principally from: (1) life insurance premiums earned for insurance coverages provided to insureds in our two operating segments – Life Insurance and Home Service Insurance; and (2) net investment income. In addition to paying and reserving for insurance benefits that we pay to our policyholders, our expenses consist primarily of the costs of selling our insurance products (e.g., commissions, underwriting, marketing expenses), operating expenses and income taxes. March 31, 2025 | 10-Q 34 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS EVENTS THAT IMPACTED OUR BUSINESS From time-to-time, certain events may affect our business in ways that cause current or future results to differ from past results. In addition to (1) the factors described in Part 1. Item 1A. Risk Factors in our Annual Report on Form 10-K for the period ended December 31, 2024 ("2024 Form 10-K"), as updated by Part II. Item 1A. herein; and (2) the events described in Part 1. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Events that Impacted Our Business" in the 2024 Form 10-K ; the following events impacted our results of operations or financial condition. Investment Related Losses due to BlackRock write-down Investment related gains and losses derive principally from our investments in equity securities and include unrealized gains and losses from market price changes in these equities during the period. As evidenced, investment related gains and losses can cause significant fluctuations from period to period and while they are included in our operating revenue, we do not believe they are indicative of our operating results. As discussed in our 2024 Form 10-K , in December 2024, BlackRock, Inc. ("BlackRock") announced a substantial write-down of its Global Renewable Power Fund III, a $4.8 billion flagship renewable fund, due to the collapse of two key investments: Northvolt and SolarZero. In 2025, BlackRock continued to review the valuation of this fund and reduced the net asset value further. We had invested in this fund as part of our environmental, social and governance ("ESG") initiatives and although we did not sell this investment, we reported an investment related loss on this investment of $3.3 million in the fourth quarter of 2024 and an additional $3.1 m illion in the quarter ended March 31, 2025. This sector has experienced market headwinds primarily driven by rising interest rates, supply chain disruption and less certain policy environment. FINANCIAL HIGHLIGHTS Summary Net income (loss) before federal income tax decreased to a loss of $1.8 million in 2025 from income of $4.9 million in 2024. The factors that impacted this change were: • $3.9 million decrease in investment related gains and losses primarily related to the BlackRock write-down; • $1.4 million increase in other general expenses; and • total premium revenues increased by $1.1 million in the three months ended March 31, 2025, but were offset by a $2.5 million increase in total insurance benefits paid or provided. Financial Condition at March 31, 2025 • Total assets of $1.7 billion • Total direct insurance in force of $5.28 billion • Total investments of $1.4 billion; fixed maturity securities comprised 88% of total investments • No debt • Diluted loss per share of Class A common stock of $0.03 • Book value per share of Class A common stock of $4.37 • Adjusted book value per share of Class A common stock of $6.12 1 1 Adjusted book value per of Class A common share is a non-GAAP measure that is calculated by dividing actual Class A common stockholders’ equity, excluding AOCI, by the number of Class A common shares outstanding at the end of the period. March 31, 2025 | 10-Q 35 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS The Factors that Drive our Operating Results We see the following as the primary factors that drive our operating results. • Sales of our products • Investments • Claims and surrenders • Operating expenses • Actuarial assumptions Sales of Our Products. We believe sales statistics are meaningful to gain an understanding of, among other things, the attractiveness of our products, how expansion of our distribution channels affects our revenue, customer retention and the performance of our business from period-to-period. Throughout the MD&A, we describe the actions and initiatives we are taking to increase sales and improve retention, sales performance in each period and as compared to prior year period, and how we view trends with respect to sales and retention. One sales factor that is key to our profitability is product mix. We offer a competitive product mix designed to meet the needs of our specific customer segments and actively manage new product margins and in-force profitability. Product mix can have an impact on profitability - selling a higher volume of lower-margin products, we may receive more premiums but may not be as profitable as in periods when we sell a greater percentage of higher-margin products. Our product mix has been trending towards sales of our newer whole life products, both internationally and domestically, which have a smaller margin than sales of endowment products. We expect this trend to continue due to the anticipated volumes of endowment maturities being replaced by higher volumes of whole life products. Premium Revenues. Premium revenues consist of all money deposited by customers into new and existing insurance policies. We view these premiums in two categories - first year premiums are premiums received within the first 12 months of a policy's issuance and thereafter any premiums received are renewal premiums. Throughout the MD&A, we refer to "direct" premiums as all premiums received and "net" or "total" premiums as all premiums received less premiums ceded to RGA Reinsurance Company ("RGA") and our other reinsurers. Direct premium revenue increased 8% in the three months ended March 31, 2025, to $42.4 million from $39.1 million in the three months ended March 31, 2024. First Year Premiums. Direct first year premiums increased 49%, to $8.8 million in the three months ended March 31, 2025, compared to $5.9 million in the three months ended March 31, 2024, including 66% growth in our Life Insurance segment, driven by sales of our newer products and an increased number of producing agents. First year premium growth was primarily in our new domestic final expense business, but first year premiums in our international business also increased in the three months ended March 31, 2025, as compared to the same period in 2024 as we continue to work with our distribution partners to expand sales. March 31, 2025 | 10-Q 36 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS Renewal Premiums. Our direct renewal premium revenues in the three months ended March 31, 2025 slightly increased primarily due to strong sales in 2024 leading to higher number of policies paying renewal premiums in the current period. Investment Income. Our net investment income decreased slightly for the three months ended March 31, 2025 compared to the same prior year period, due primarily to lower investment income from our limited partnership investments. Claims and Surrenders. Payment of policyholder benefits for claims and surrenders is our largest expense and thus key to our profitability. The three largest components of this expense are reflected in the graphs below. In the three months ended March 31, 2025 compared to the prior year period, • death claim benefits decreased in our Life Insurance segment due to a combination of lower volume of claims and our coinsurance agreement with RGA alleviating some of our liability to pay these claims than in the prior year quarter, • surrenders increased slightly, and • matured endowments increased as expected due to many of our endowment policies reaching their contractual maturity dates. March 31, 2025 | 10-Q 37 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS Operating Expenses. Operating expenses are our second largest expense and thus also drive our operating results. Operating expenses are meaningful to gain an understanding of how we manage our business, including among other things, salaries, benefits and spending on growth initiatives. The primary reasons for the increase in the three months ended March 31, 2025 as compared to the prior year quarter were our continued investment in the growth of our business and higher costs associated with our equity compensation program as a result of increased stock price and additional participants. Actuarial Assumptions. The actuarial assumptions that underlie our reserves are based upon our best estimates of certain factors such as mortality, lapses, morbidity and discount rates. Our results will be affected to the extent there is a variance between our actuarial assumptions and actual experience. We expect to see a rebalancing in our mix of business arising due to the anticipated volume of maturities in our international endowment business, as well as continued domestic growth in the Life Insurance segment, which has been discussed previously. Our current profitability is affected by how closely actual experience matches our actuarial assumptions for these shifts, and by the amount of reserves we must hold. Actuarial assumptions are continually monitored and updated at least annually to reflect overall experience as well as emerging trends. OUR OPERATING SEGMENTS We manage our business in two operating segments: Life Insurance and Home Service Insurance. Our insurance operations are the primary focus of the Company, as these operations generate most of our income. See the discussion under Segment Operations below for a detailed analysis. The amount of direct March 31, 2025 | 10-Q 38 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS insurance, number of policies, and average face amounts for life policies issued during the periods indicated are shown below. Three Months Ended March 31, 2025 2024 Amount of Insurance Issued Number of Policies Issued Average Policy Face Amount Issued Amount of Insurance Issued Number of Policies Issued Average Policy Face Amount Issued Life Insurance: International $ 106,875,869 942 $ 113,456 $ 96,140,734 920 $ 104,501 Domestic 83,864,597 10,004 8,383 111,718,773 9,476 11,790 Total Life Insurance 190,740,466 10,946 17,426 207,859,507 10,396 19,994 Home Service Insurance 64,420,718 4,815 13,379 66,600,824 5,128 12,988 Total $ 255,161,184 15,761 $ 274,460,331 15,524 In the first three months of 2025, we issued $255 million in new insurance as we continued to grow our business with our newer products tailored to our specific markets and expansion of our distribution channels both domestically and internationally. In our Life Insurance segment, we continued to experience strong sales and increased number of policies issued of our new domestic final expense products; however, implementation of new initiatives, including use of information to enhance underwriting decisions with additional medical and lab data from third parties, resulted in higher sales of products with lower policy f ace amounts i n the first quarter of 2025 as compared to the prior year period. Internationally, the Life Insurance segment benefited from increased sales of our whole life product, which accounted for 63% of total insurance issued internationally in this segment for the three months ended March 31, 2025. This product tends to have higher policy face amounts than our older endowment products. Insurance issued in our Home Service Insurance segment decreased for the three months ended March 31, 2025 compared to the prior year period largely due to strategic actions intended to improve sales quality and persistency, which led to a decrease in our agent sales force as we focus on these improvements. These improvements did result in higher insurance issued from the fourth quarter of 2024. We also believe the impact of inflation on the cost of living, and more recently the impact of tariffs on prices, has affected new sales since the customer demographic is primarily lower-income individuals. The amount of direct insurance inforce for the periods indicated is shown below. Overall insurance inforce growth has been and will be impacted by persistency rates, policy maturities and surrenders. March 31, 2025 | 10-Q 39 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS CONSOLIDATED RESULTS OF OPERATIONS REVENUES Our revenues are generated primarily by life insurance premiums and investment income from invested assets. Three Months Ended March 31, (In thousands) 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 Total revenues decreased in the three months ended March 31, 2025 as compared to the prior year period. Despite the increase in both first year and renewal premiums, revenues decreased due to the Blackrock material adjustment in valuation, which led to a $3.9 million decrease in investment related gains (losses) which was mostly non-cash. Three Months Ended March 31, (In thousands) 2025 2024 Life and A&H premiums: Direct premiums: First year $ 8,817 5,931 Renewal 33,533 33,129 Total direct life and A&H premiums 42,350 39,060 Reinsurance (2,553) (385) Total life and A&H premiums $ 39,797 38,675 Our first year direct premiums increased 49% in the three months ended March 31, 2025, compared to the same period in 2024, due to sales of our newer products in our Life Insurance segment and expanded domestic distribution. Renewal premiums increased from strong first year sales in 2024 in our Life Insurance segment leading to higher number of policies paying renewal premiums in the first quarter of 2025, which more than offset the impacts from a higher level of surrenders during the last few years and increasing matured endowment benefits paid in the international portion of our Life Insurance segment. Reinsurance premiums ceded increased in the three months ended March 31, 2025 compared to the same period in 2024 due to a coinsurance agreement we entered into with RGA in the second quarter of 2024. March 31, 2025 | 10-Q 40 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS Net Investment Income. A summary of our net investment income and annualized net investment income performance is as follows: Three Months Ended March 31, (In thousands, except for %) 2025 2024 Gross investment income: Fixed maturity securities $ 15,428 15,137 Equity securities 75 75 Policy loans 1,369 1,456 Long-term investments 970 1,224 Other investment income 194 236 Total investment income 18,036 18,128 Investment expenses (659) (641) Net investment income $ 17,377 17,487 Net investment income, annualized $ 69,508 69,948 Average invested assets, at amortized cost $ 1,537,288 1,525,102 Annualized yield on average invested assets 4.52 % 4.59 % Fixed maturity securities constitute the vast majority, or 88% of our investment portfolio based on fair value and thus provide the majority of our net investment income. Our net fixed maturity investment portfolio, primarily invested in callable securities, has faced challenges as many securities were called between 2019 and 2021, necessitating reinvestment in low interest rate fixed maturity assets, which impact net investment income and yields. Investment Related Gains (Losses), Net. We recorded investment related losses of $2.9 million during the three months ended March 31, 2025, compared to investment related gains of $1.0 million during the same prior year period. The gains and losses are primarily related to the non-cash write-down of our Blackrock ESG investment. We did not sell this investment; however, the changes in fair values of our equity securities are reflected as investment related gains or losses in our income statement, in addition to executed transactions that result in a gain or loss. Other Income. Other income consists primarily of supplemental contracts issued to international policyholders in our Life Insurance segment upon the surrender or maturity of their original policies. Supplemental contracts offer our policyholders the opportunity to leave their cash with us and be paid interest at a guaranteed rate or receive an annuity, at their option. March 31, 2025 | 10-Q 41 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS BENEFITS AND EXPENSES Three Months Ended March 31, (In thousands) 2025 2024 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 Payments of claims and surrenders benefits and other general expenses constitute the majority of our expenses. Claims and Surrenders. Three Months Ended March 31, (In thousands) 2025 2024 Claims and surrenders: Death claim benefits $ 6,067 6,858 Surrender benefits 12,901 12,131 Endowment benefits 1,679 1,754 Matured endowment benefits 17,351 10,761 A&H and other policy benefits 2,100 1,609 Total claims and surrenders $ 40,098 33,113 Death claim benefits decreased 12% in 2025 compared to 2024 due to a combination of lower volume and our coinsurance agreement with RGA alleviating some of our liability to pay these claims. We did not have this agreement during the first quarter of 2024. Many of our endowment policies are reaching their contractual maturity dates and thus matured endowment benefits increased in the three months ended March 31, 2025 compared to the prior year quarter. We anticipated this $6.6 million increase in the first quarter of 2025 based upon the contractual maturity dates and expect continued year-over-year increases in matured endowment benefits throughout 2025, then to remain at elevated, but slightly lower levels over the next few years, as more of these contracts expire. Increase (Decrease) in Future Policy Benefit Reserves. Future policy benefit reserves reflect the liability established to provide for the payment of policy benefits that we expect to pay in the future and thus generally March 31, 2025 | 10-Q 42 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS increase when we have a larger in force block of business due to higher sales and better persistency (i.e., more policies on which we expect to pay future benefits) and decrease when we have lower sales and persistency. In the three months ended March 31, 2025, the change in future policy benefit reserves decreased as compared to the prior year period due to the amount of reserves released in connection with the high level of matured endowments. Policyholder Liability Remeasurement (Gain) Loss. Most of our products are long-duration contracts that provide a specified, fixed amount of insurance benefit in exchange for a fixed premium. When a policy is initially issued, we establish a "net premium ratio" ("NPR") using assumptions regarding expected premiums and policyholder benefit liabilities. On a quarterly basis, we review actual versus expected experience in such quarter, which is reported as a policyholder liability remeasurement gain (if better performance than assumptions) or loss (if lower performance than assumptions). Commissions. Commission expenses are a cost of acquiring business, as commissions are the primary compensation paid to our independent consultants and independent agents for selling our products. First year commission rates are higher than renewal commission rates and thus commissions fluctuate directly in relation to first year sales. The increase in first year sales in the three months ended March 31, 2025 led to an increase in commission related expenses as compared to the prior year period. Other General Expenses. Total general expenses increased $1.4 million, or 12%, in 2025 compared to 2024. The increase was primarily driven by costs related to our strategic growth initiatives and costs incurred associated with our equity compensation program due to higher stock price and additional participants. We continue to work on managing controllable operating expenses while investing in growth initiatives. Capitalization of Deferred Policy Acquisition Costs ("DAC"). We capitalize costs related to successful sales of our insurance products, which include certain commissions, policy issuance costs, and underwriting and agency expenses. These costs vary based upon amounts of premiums received related to new and renewal business. Capitalized DAC increased in the three months ended March 31, 2025, which is in line with the increases in new sales activity. Significantly lower amounts are capitalized related to renewal business in correlation with the lower commissions paid on that business compared to first year business, which has higher commission rates. Amortization of Deferred Policy Acquisition Costs. Amortization of DAC increased in the three months ended March 31, 2025, compared to the same period in 2024. DAC is amortized on a constant level basis over the expected term of the related contracts to approximate straight-line amortization. SEGMENT OPERATIONS We operate in two business segments: Life Insurance and Home Service Insurance. These segments are reported in accordance with U.S. GAAP. The Company evaluates profit and loss performance based on U.S. GAAP net income (loss) before federal income taxes for these segments. The Company's Other Non-Insurance Enterprises include non-insurance operations such as IT and corporate-support functions, which are included in the table presented below to properly reconcile the segment information with the consolidated financial statements of the Company. March 31, 2025 | 10-Q 43 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS The following table sets forth income (loss) before federal income tax by segment during the periods indicated. Three Months Ended March 31, (In thousands) 2025 2024 Income (loss) before federal income tax: Segments: Life Insurance $ 243 5,800 Home Service Insurance 120 623 Total segments 363 6,423 Other Non-Insurance Enterprises (2,150) (1,498) Total income (loss) before federal income tax $ (1,787) 4,925 LIFE INSURANCE Detailed results of operations in the Life Insurance segment for the periods indicated are as follows: Three Months Ended March 31, (In thousands) 2025 2024 Revenues: Premiums: Life insurance $ 28,967 27,698 Accident and health insurance 187 163 Net investment income 13,512 13,686 Investment related gains (losses), net (2,747) 1,086 Other income 1,372 506 Total revenues 41,291 43,139 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 34,142 27,364 Increase (decrease) in future policy benefit reserves (5,326) (1,193) Policyholder liability remeasurement (gain) loss 13 373 Policyholders' dividends 1,289 1,231 Total insurance benefits paid or provided 30,118 27,775 Commissions 8,163 6,960 Other general expenses 6,572 6,036 Capitalization of deferred policy acquisition costs (7,719) (6,816) Amortization of deferred policy acquisition costs 3,893 3,358 Amortization of cost of insurance acquired 21 26 Total benefits and expenses 41,048 37,339 Income before federal income tax $ 243 5,800 In our Life Insurance segment, income before federal income tax was $0.2 million during the three months ended March 31, 2025, respectively, compared to $5.8 million during the same prior year period primarily from a $3.8 March 31, 2025 | 10-Q 44 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS million decrease in investment related gains and losses related to our BlackRock investment. In addition, our higher premiums were offset by an increase in total insurance benefits paid or provided. Other general expenses were also higher to support our CICA Domestic growth. Life Insurance segment premium breakout is detailed below. Three Months Ended March 31, (In thousands) 2025 2024 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 Premiums. Direct premiums increased by $3.5 million in the three months ended March 31, 2025, as compared to the same period in 2024 driven by sales of our newer products and an increased number of producing agents. First year premium growth was primarily in our new domestic final expense business, but first year premiums in our international business also increased in the three months ended March 31, 2025, as compared to the same period in 2024 as we continue to work with our distribution partners to expand sales. Due to the coinsurance agreement with RGA entered into in the second quarter of 2024, ceded reinsurance premiums increased. While our domestic life insurance business drove the significant increase in first year premiums, life insurance premiums are generated largely from our international policyholders living in almost 80 different countries across the globe. The following table sets forth our premiums by location for the three months ended March 31, 2025 and 2024. Three Months Ended March 31, (In thousands) 2025 2024 International premiums: 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 non-U.S. 9,702 8,815 Total international premiums 28,788 27,797 Domestic premiums 5,791 2,322 Reinsurance and change in premium accruals (5,425) (2,258) Total premiums $ 29,154 27,861 Investment Related Gains (Losses), Net. We recorded investment related losses of $2.7 million during the three months ended March 31, 2025, compared to investment related gains of $1.1 million during the same prior year period, resulting primarily from the change in estimated fair market value of the ESG Blackrock investment. March 31, 2025 | 10-Q 45 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS Claims and Surrenders. The following table sets forth our primary claims and surrender benefits paid within our Life Insurance segment for the three months ended March 31, 2025 compared to the same period in 2024. Three Months Ended March 31, (In thousands) 2025 2024 Claims and surrenders: Death claim benefits $ 1,270 1,998 Surrender benefits 11,991 11,437 Endowment benefits 1,678 1,753 Matured endowment benefits 17,203 10,615 A&H and other policy benefits 2,000 1,561 Total claims and surrenders $ 34,142 27,364 The majority of our claims and surrender benefits in our Life Insurance segment were related to payment of surrender benefits and matured endowment benefits. Many of our endowment policies are reaching their contractual maturity dates and thus matured endowment benefits are increasing in 2025 as compared to 2024. We expect elevated trends to continue over the next few years but at a reduced level when compared to 2025. Death claim benefits decreased for the three months ended March 31, 2025, compared to the prior year period due to a combination of lower volume and our coinsurance agreement with RGA alleviating some of our liability to pay these claims. Mortality experience is closely monitored by the Company as a key performance indicator and these amounts were within expected levels. Increase (Decrease) in Future Policy Benefit Reserves. The change in future policy benefit reserves for the three months ended March 31, 2025 and 2024 was the result of reserves released due to surrenders and higher matured endowment benefits. These releases were partially offset by increases in reserves due to new insurance issued and the reserves that increase on our in force block of business nearing maturity. Other General Expenses. General expenses increased due primarily to expenses related to costs associated with continued investment in the growth of CICA domestic. March 31, 2025 | 10-Q 46 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS HOME SERVICE INSURANCE Detailed results of operations for the Home Service Insurance segment for the periods indicated are as follows: Three Months Ended March 31, (In thousands) 2025 2024 Revenues: Premiums: Life insurance $ 10,382 10,563 Accident and health insurance 261 251 Property insurance — (2) Net investment income 3,678 3,537 Investment related gains (losses), net (148) (91) Total revenues 14,173 14,258 Benefits and expenses: Insurance benefits paid or provided: Claims and surrenders 5,956 5,749 Increase (decrease) in future policy benefit reserves 1,680 1,644 Policyholder liability remeasurement (gain) loss (185) (54) Policyholders' dividends 6 6 Total insurance benefits paid or provided 7,457 7,345 Commissions 3,112 3,490 Other general expenses 3,783 3,489 Capitalization of deferred policy acquisition costs (1,130) (1,515) Amortization of deferred policy acquisition costs 754 680 Amortization of cost of insurance acquired 77 146 Total benefits and expenses 14,053 13,635 Income before federal income tax $ 120 623 In our Home Service Insurance segment, income before federal income tax was $0.1 million in the three months ended March 31, 2025, as compared to $0.6 million in the prior year period. The decline is attributed to higher investment related losses and other general expenses. March 31, 2025 | 10-Q 47 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS Premiums. Home Service Insurance segment life and A&H premium breakout is detailed below. Three Months Ended March 31, (In thousands) 2025 2024 Premiums: 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 Our life and A&H premiums declined slightly in the three months ended March 31, 2025 compared to the same prior year period. The decrease is largely due to strategic actions intended to improve sales quality and persistency, which actions led to a decrease in our agent sales force as we focus on these improvements. Additionally, we believe external economic pressures, such as inflation, have impacted revenue in this segment disproportionately. Claims and Surrenders. Payments of claims and surrender benefits, which are the largest portion of our expenses, are summarized as follows: Three Months Ended March 31, (In thousands) 2025 2024 Claims and surrenders: Death claim benefits $ 4,797 4,860 Surrender benefits 910 694 Endowment benefits 1 1 Matured endowment benefits 148 146 A&H and other policy benefits 100 48 Total claims and surrenders $ 5,956 5,749 The majority of claims and surrender benefits in our Home Service Insurance segment are death claim benefits. Death claim benefits decreased slightly in the three months ended March 31, 2025 compared to the same prior year period due to lower volume of reported claims. Mortality experience is closely monitored by the Company as a key performance indicator and fluctuates from quarter-to-quarter based on reported claims. Surrender benefits increased in the first three months of 2025 compared to the same period in 2024. We believe the impact of inflation is negatively impacting persistency. March 31, 2025 | 10-Q 48 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS OTHER NON-INSURANCE ENTERPRISES Three Months Ended March 31, (In thousands) 2025 2024 Loss before federal income tax $ (2,150) (1,498) This operating unit represents the administrative support functions for the insurance operations. Its revenues are primarily intercompany and have been eliminated in consolidation under U.S. GAAP, which typically results in a loss. Revenue in this operating unit consists primarily of net investment income and investment related gains or losses, while expenses consist of other general expenses related to corporate functions. The primary reason for the increased loss before federal income tax in the three months ended March 31, 2025 compared to the same period in 2024 is higher other general expenses, including costs incurred related to our equity incentive compensation program due to additional participants as well as an increased stock price, which increases our expense taken upon vesting of prior year grants. INVESTMENTS Our investments are an integral part of our business success, as we invest the majority of premiums collected to pay for future benefits and rely on net investment income of our ongoing operations. Our cash and invested assets at March 31, 2025 were $1.4 billion, of which 87% was invested in fixed maturity securities, all of which are classified as available-for-sale. We closely monitor the duration of our fixed maturity investments, and investment purchases and sales are executed with the objective of having adequate funds available to satisfy our insurance obligations. The following table sets forth the carrying value of our investments by investment category and cash, cash equivalents and the percentage of each to total cash, cash equivalents and invested assets. Carrying Value March 31, 2025 December 31, 2024 (In thousands, except for %) Amount % Amount % Cash, cash equivalents and invested assets: Fixed maturity securities: U.S. Treasury and U.S. Government-sponsored enterprises $ 9,289 0.6 % $ 9,213 0.6 % Corporate 816,553 56.9 794,989 56.0 States and political subdivisions (1) 270,436 18.8 268,302 18.9 Mortgage-backed (2) 96,717 6.7 93,953 6.6 Asset-backed 54,433 3.9 54,504 3.9 Total fixed maturity securities 1,247,428 86.9 1,220,961 86.0 Cash and cash equivalents 18,355 1.3 29,271 2.0 Other investments: Policy loans 70,961 4.9 71,216 5.0 Equity securities 5,493 0.4 5,447 0.4 Other long-term investments 93,318 6.5 93,604 6.6 Total cash, cash equivalents and invested assets $ 1,435,555 100.0 % $ 1,420,499 100.0 % (1) Includes $113.8 million and $113.4 million of securities guaranteed by third parties at March 31, 2025 and December 31, 2024, respectively. (2) Includes $95.6 million and $92.8 million of U.S. Government-sponsored enterprises at March 31, 2025 and December 31, 2024, respectively. March 31, 2025 | 10-Q 49 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS The carrying value of the Company’s fixed maturity securities investment portfolio at March 31, 2025 was $1.25 billion compared to $1.22 billion at December 31, 2024. This increase primarily reflects the impact of interest rate sensitivity on the fair value of our fixed maturity securities. The distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of March 31, 2025 did not materially change from December 31, 2024 – the weighted average was “A” at both dates. Cash and cash equivalents decreased as of March 31, 2025 from December 31, 2024 and fluctuates from period-to-period primarily due to the timing of operating and investing activities. Other long-term investments decreased by $0.3 million as of March 31, 2025 from December 31, 2024 due to additional funding and changes in the fair market value of our limited partnership investments. Obligations of States and Political Subdivisions The Company’s fixed maturity securities investment portfolio at March 31, 2025 and December 31, 2024 included $270.4 million and $268.3 million, respectively, of securities that are obligations of states and political subdivisions, including municipalities (collectively referred to as the municipal fixed maturity security portfolio). The Company's municipal fixed maturity security portfolio includes third-party guarantees. Detailed below is a presentation by the Nationally Recognized Statistical Rating Organization ("NRSRO") rating of these holdings by funding type as of March 31, 2025. General Obligation Special Revenue Other Total % Based on Amortized Cost (In thousands, except for %) Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost State and political subdivision fixed maturity securities including third-party guarantees: AAA $ 12,446 12,383 9,983 10,336 — — 22,429 22,719 7.6 % AA 45,090 45,318 113,475 130,412 6,342 6,548 164,907 182,278 61.1 A 2,943 3,264 67,241 76,389 2,139 2,123 72,323 81,776 27.4 BBB 443 455 7,289 7,932 — — 7,732 8,387 2.8 BB and other 2,995 3,141 50 50 — — 3,045 3,191 1.1 Total $ 63,917 64,561 198,038 225,119 8,481 8,671 270,436 298,351 100.0 % State and political subdivision fixed maturity securities excluding third-party guarantees: AA $ 31,790 31,800 35,113 39,758 4,554 4,574 71,457 76,132 25.5 % A 14,549 14,877 80,403 90,665 2,925 3,097 97,877 108,639 36.4 BBB 2,830 3,070 21,801 23,444 — — 24,631 26,514 8.9 BB and other 14,748 14,814 60,721 71,252 1,002 1,000 76,471 87,066 29.2 Total $ 63,917 64,561 198,038 225,119 8,481 8,671 270,436 298,351 100.0 % March 31, 2025 | 10-Q 50 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS The table below shows the categories in which the Company held investments in special revenue fixed maturity securities that were greater than 10% of fair value based upon the Company's total municipal fixed maturity security portfolio at March 31, 2025. (In thousands, except for %) Fair Value Amortized Cost % of Total Fair Value Education $ 45,409 51,241 16.8 % Utilities 42,822 46,755 15.8 Transportation 33,214 40,237 12.3 The Company's municipal fixed maturity security portfolio is spread across many states, however, municipal fixed maturity securities from Texas and California comprise the most significant concentration of the total municipal fixed maturity security portfolio as of March 31, 2025. The Company holds 22% and 16% of its municipal fixed maturity security portfolio in Texas and California issuers, respectively, as of March 31, 2025. There were no other states or individual issuer holdings that represented or exceeded 10% of the total municipal fixed maturity security portfolio as of March 31, 2025. The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in Texas at March 31, 2025. General Obligation Special Revenue Other Total (In thousands) Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Texas state and political subdivision fixed maturity securities including third-party guarantees: AAA $ 11,941 11,881 2,575 2,632 — — 14,516 14,513 AA 14,733 14,650 14,838 17,559 — — 29,571 32,209 A — — 11,113 14,886 — — 11,113 14,886 BBB — — 3,235 3,170 — — 3,235 3,170 Total $ 26,674 26,531 31,761 38,247 — — 58,435 64,778 Texas state and political subdivision fixed maturity securities excluding third-party guarantees: AA $ 22,082 21,941 3,129 3,694 — — 25,211 25,635 A 3,091 3,090 12,849 14,892 — — 15,940 17,982 BBB — — 6,482 6,586 — — 6,482 6,586 BB and other 1,501 1,500 9,301 13,075 — — 10,802 14,575 Total $ 26,674 26,531 31,761 38,247 — — 58,435 64,778 March 31, 2025 | 10-Q 51 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in California at March 31, 2025. General Obligation Special Revenue Other Total (In thousands) Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost California state and political subdivision fixed maturity securities including third-party guarantees: AA $ 2,073 2,087 32,980 39,629 2,496 2,734 37,549 44,450 A 1,299 1,650 5,538 6,456 — — 6,837 8,106 Total $ 3,372 3,737 38,518 46,085 2,496 2,734 44,386 52,556 California state and political subdivision fixed maturity securities excluding third-party guarantees: AA $ 445 445 4,248 5,059 708 760 5,401 6,264 A 2,927 3,292 20,086 23,986 1,788 1,974 24,801 29,252 BB and other — — 14,184 17,040 — — 14,184 17,040 Total $ 3,372 3,737 38,518 46,085 2,496 2,734 44,386 52,556 IMPAIRMENT CONSIDERATIONS RELATED TO INVESTMENTS IN FIXED MATURITY AND EQUITY SECURITIES The Company assesses available-for-sale ("AFS") fixed maturity securities in an unrealized loss position for expected credit losses. The Company did not record any credit valuation allowances on fixed maturity securities in either of the three months ended March 31, 2025 or 2024. Gross unrealized losses on AFS fixed maturity securities amounted to $169.3 million as of March 31, 2025 and $185.7 million as of December 31, 2024. This decrease in gross unrealized losses during 2025 was a result of the increase in average market interest rates at the end of 2025 as compared to 2024. Information on both unrealized and realized gains and losses by category is set forth in Part I, Item 1, Note 3. Investments of the notes to our consolidated financial statements herein. LIQUIDITY AND CAPITAL RESOURCES Below are our primary capital resources (based on carrying value of each) as of the periods indicated. (In thousands) March 31, 2025 December 31, 2024 Fixed maturity securities $ 1,247,428 1,220,961 Cash and cash equivalents 18,355 29,271 Liquidity refers to a company's ability to generate sufficient cash flows to meet the needs of its operations. We manage our insurance operations in order to ensure that we have stable and reliable sources of cash flows to meet our obligations. We currently anticipate meeting our short-term and long-term cash needs with cash generated by our insurance operations and from our invested assets. From time to time, we may raise capital by selling shares in our SIP (as defined below) and we may also access our Credit Facility if needed (also as described below). Citizens had no debt as of March 31, 2025. Cash from Operating Activities. Cash provided by or used in operating activities is an important liquidity metric because it reflects, during a given period, the amount of cash generated that is available to pay our operating March 31, 2025 | 10-Q 52 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS expenses, invest in our business or make strategic acquisitions. Cash provided by operating activities was $0.7 million in the three months ended March 31, 2025. Cash used in Investing Activities. We have traditionally also had significant cash flows from both scheduled and unscheduled investment security maturities, redemptions, and prepayments. These cash flows, for the most part, are reinvested in new investments. Net cash outflows from investing activities totaled $11.4 million in the three months ended March 31, 2025. The investing activities fluctuate from period to period due to timing of securities activities such as calls and maturities and reinvestment of those funds. We purchased $17.5 million of fixed maturity securities and used $2.8 million to purchase other long-term investments during the three months ended March 31, 2025. 87% of our investments consist of marketable fixed maturity securities classified as available-for-sale that could be readily converted to cash for liquidity needs. PARENT COMPANY LIQUIDITY AND CAPITAL RESOURCES Citizens is a holding company and has minimal operations of its own. Our assets consist of the capital stock of our subsidiaries, cash and investments. Our liquidity requirements are met primarily from two sources: cash generated from our operating subsidiaries and our invested assets. Our ability to obtain cash from our insurance subsidiaries depends primarily upon the availability of statutorily permissible payments, including payments we receive from service agreements with our insurance subsidiaries and dividends from the subsidiaries. The ability to make payments to the holding company is limited by applicable laws of the U.S. states of domicile and by the Puerto Rico Office of Commissioner of Insurance, which all subject insurance operations to significant regulatory restrictions. These laws and regulations require, among other things, that our insurance subsidiaries maintain minimum solvency or premium to surplus ratio requirements, which limit the amount of dividends that can be paid to the holding company. The regulations also require approval of our service agreements with the applicable regulatory authority in order to prevent insurance subsidiaries from moving large amounts of cash to the less regulated holding company. In addition to the above-mentioned sources of cash, we offer a Stock Investment Plan ("SIP"), which allows investors, policyholders, independent contractors and agents, employees and directors to directly purchase our stock. At our option, purchases of stock under the SIP can be made from newly issued or treasury stock, rather than in the open market, in which case, we can raise capital by selling our shares. We renewed our Credit Facility with Regions Bank on May 3, 2024 for an additional three years. See Part I, Item 1, Note 8. Commitments and Contingencies in the notes to our consolidated financial statements, herein, for a description of the Credit Facility. The Credit Facility provides additional liquidity to the Company for short-term or longer-term needs. We have not borrowed any money under the Credit Facility. INSURANCE COMPANY SUBSIDIARY LIQUIDITY AND CAPITAL RESOURCES The liquidity requirements of our insurance operations are primarily met by premium revenues, investment income and proceeds from investment maturities, calls or sales. Primary cash needs are for payments of policyholder benefits, investment purchases, and operating expenses. We manage our insurance operations in order to ensure that we have stable and reliable sources of cash flow to meet our obligations. As we have discussed, we have been growing our domestic business by developing new products and expanding our distribution channels, which has led to an increase in first year direct premiums (i.e. , new sales) of 71% from the year ended December 31, 2023 to the year ended December 31, 2024, and another 49% from the three months ended March 31, 2024 to the three months ended March 31, 2025. When selling new policies, we incur upfront policy acquisition costs, such as agent commission payments. While historically, cash flows from our operations have been sufficient to meet our cash needs, in the second quarter of 2024 we entered into a coinsurance reinsurance agreement with RGA to help with some of the costs, and the insurance subsidiaries also have the available-for-sale fixed maturity investment portfolio available to create additional cash flows if needed. Two of our insurance subsidiaries are members of the Federal Home Loan Bank ("FHLB") of Dallas. FHLB membership provides the insurance subsidiaries with access to various March 31, 2025 | 10-Q 53 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS low-cost collateralized borrowings and funding agreements. While not the only source of additional liquidity, the FHLB could provide the insurance subsidiaries with an additional source of liquidity, if needed. We believe that we have adequate capital resources and ability to obtain additional capital if needed to support the short-term and longer-term liquidity requirements of our insurance operations. See Contractual Obligations and Off-balance Sheet Arrangements in our 2024 Form 10-K and below for a discussion of known and estimated cash needs. Cash flow projections and cash flow tests under various market interest rate scenarios are performed annually to assist in evaluating liquidity needs and adequacy. Trends, Demands and Restrictions on our Uses of Cash Payment of benefits for claims and surrenders are our largest use of cash. There are three primary components of these payments: death claims, surrenders and matured endowments. Matured Endowments. Our endowment products have contractual maturity dates and provide the policyholder with alternatives once the policy matures - they can choose to take a lump sum payout or leave the money on deposit at interest with the Company. Approximately 18% of the endowments in force will mature in the next five years, totaling approximately 6% of our in force business as of March 31, 2025. The highest level of maturities will occur this year. Policyholder election behavior is unknown, but if too many policyholders elect lump sum distributions, the Company could be exposed to liquidity risk in years of high maturities. Meeting these distributions could require the Company to sell its investments at inopportune times to pay policyholder withdrawals. Alternatively, if the policyholders were to leave the money on deposit with the Company at interest, our profitability could be impacted if the product guaranteed rate is higher than the market rate we are earning on our investments. We currently anticipate that our available operating cash flow and capital resources will be adequate to meet our needs for funds, but we are closely monitoring our policyholder behavior patterns, and in 2024, introduced a new product designed to allow policyholders with maturing endowments to purchase a new life insurance policy. Surrenders. Surrender benefits, which have been higher than usual the last several years, slightly increased in the first three months of 2025. In order to mitigate the risk of early policyholder surrenders, we include provisions in our insurance policies, such as surrender charges, that help limit and discourage early withdrawals, but as many of our policies have reached the age where surrender charges have expired or significantly decreased, we have experienced high levels of surrenders. We believe that surrenders have been high due to other reasons, including the loss of one of our biggest distributors in Venezuela in 2018, increasing interest rates, which may encourage policyholders to seek higher rates of return in different investment products, post-pandemic beliefs that life insurance may not be as important as it was during the pandemic, and inflationary and tariff pressures, which may cause policyholders to want the cash values of their policies due to decreased purchasing power elsewhere. To the extent that early surrenders are higher than expected, our use of cash could be higher than expected. We continue to monitor surrenders and early withdrawals and focus on our retention initiatives and efforts to retain cash when policyholders surrender their policies. Our cash flow from operations is also negatively impacted with high matured endowments and surrenders, as they lead to lower renewal premiums. Death Claims. Our product pricing assumes a certain mortality rate and thus a primary liquidity concern is the risk of higher than expected mortality experience. Our death benefit payments decreased in the three ended March 31, 2025. Another significant use of cash is payment of commissions. In our CICA Domestic business, we pay advance commissions on some of our insurance products, meaning we pay an agent a portion of their first year commission immediately upon sale of a policy, rather than "as earned", or when premiums are received by us. Because of this, another liquidity concern is that rapid growth in first year sales of these products creates a significant increase in commission payments. CICA Domestic sales have increased significantly since the third quarter of 2023. To offset some of this strain on our capital, we entered into the coinsurance agreement with RGA in the second quarter of March 31, 2025 | 10-Q 54 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS 2024 and elected to cede 50% of our final expense business to RGA, which alleviates some of the expense strain. We may also seek other options, such as loans at the holding company level (from the Credit Facility or otherwise) that would allow us to reduce the liquidity risk should CICA Domestic's required commission payments exceed current resources. See Part I, Item 1, Note 8. Commitments and Contingencies , as well as Legal Proceedings - Trade Secret Lawsuit in our 2024 Form 10-K for a discussion of the trade secret lawsuit, which could negatively impact our cash if we do not succeed in our appeal. Regulatory Restrictions on our Use of Cash As discussed above, we are subject to regulatory capital requirements that could affect the Company’s ability to access capital from our insurance operations or cause the Company to have to put additional cash in our wholly-owned subsidiaries. Our domestic companies are subject to minimum capital requirements set by the NAIC in the form of risk-based capital ("RBC"). RBC considers the type of business written by an insurance company, the quality of its assets, and various other aspects of an insurance company's business to develop a minimum level of capital called "Authorized Control Level Risk-Based Capital". This level of capital is then compared to an adjusted statutory capital that includes capital and surplus as reported under statutory accounting principles, plus certain investment reserves. Should the ratio of adjusted statutory capital to control level RBC fall below 200% for our domestic companies, a series of remedial actions by the affected company would be required. Additionally, we have a Capital Maintenance Agreement between Citizens and CICA Domestic, Citizens' wholly-owned subsidiary domiciled in Colorado, which would require Citizens to contribute capital to CICA Domestic in order to maintain a RBC level above 350%. At March 31, 2025, our domestic insurance subsidiaries were above the required minimum RBC levels and CICA Domestic was above 350%. For CICA Domestic, commission advances are non-admitted assets, which means we need capital to "replace" these assets in order to maintain required regulatory capital levels. As discussed above, management is investigating various options in order to reduce both regulatory capital and liquidity risk should the capital required to support this pace of growth exceed current resources. Citizens may have to contribute capital to CICA Domestic to maintain the required RBC ratio. 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 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 exceeded the required minimum capital and related ratio. Any capital that Citizens is required to contribute to its insurance subsidiaries would negatively impact the holding Company's capital resources and liquidity. CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS As of March 31, 2025, we have no additional contractual obligations or off-balance sheet arrangements other than those described in Part I, Item 1, Note 8. Commitments and Contingencies in the notes to our consolidated financial statements herein and in Part II, Item 7, Contractual Obligations and Off-Balance Sheet Arrangements in our 2024 Form 10-K . We do not utilize special purpose entities as investment vehicles, nor are there any such entities in which we have an investment that engage in speculative activities of any nature, and we do not use such investments to hedge our investment positions. March 31, 2025 | 10-Q 55 Table of Contents CITIZENS, INC. MANAGEMENT'S DISCUSSION & ANALYSIS CRITICAL ACCOUNTING POLICIES We believe that the accounting policies set forth in Part I, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - "Critical Accounting Policies" and Part IV, Item 15, Note 1. Summary of Significant Accounting Policies of our consolidated financial statements in our 2024 Form 10-K continue to describe the significant judgments and estimates used in the preparation of our consolidated financial statements. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide the information required by this Item.