What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-06 compared with 2026-05-07 · 210 added, 160 removed, 497 unchanged (43% of the section changed)

11 unchanged sentences

These materials are made available on our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC.

Information contained on, or accessible through, our website is not incorporating by reference into, and should not be considered part of, this Form 10-Q.

Information contained on, or accessible through, our website is not incorporated by reference into, and should not be considered part of, 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, 2025 to March 31, 2026 and the material changes in our results of operations for the three months ended March 31, 2026 as compared to the same period in 2025.

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, 2025 to June 30, 2026 and the material changes in our results of operations for the three and six months ended June 30, 2026 as compared to the same periods in 2025.

We also discuss in the MD&A any trends that we believe may materially affect our future operations or financial condition.

9 unchanged sentences

Our International Insurance segment operates through CICA Life, A.I., a Puerto Rican insurer, referred to as "CICA International".

March 31, 2026 | 10-Q 34

June 30, 2026 | 10-Q 38

CITIZENS, INC.

7 unchanged sentences

"Management's Discussion and Analysis of Financial Condition and Results of Operations - Events that Impacted Our Business" in the 2025 Form 10-K .

Venezuela Earthquakes May Impact Insurance Premiums and Claims

Venezuela represents one of our most significant markets in the International Insurance segment.

The earthquakes that occurred in Venezuela in June 2026 may adversely affect this segment by hindering policyholders' capacity to submit timely premium payments and driving higher-than-expected claims activity.

Due to the magnitude and breadth of the disaster, the full count of impacted policyholders will likely emerge gradually, as missed payments and submitted claims are tracked and confirmed.

As an immediate measure, a $0.5 million death claim liability has been recorded.

While current data does not point to a material effect on our operations, we will maintain diligent oversight and update our projections as new information becomes available.

FINANCIAL HIGHLIGHTS

Income before federal income tax increased by $4.2 million in the three months ended March 31, 2026 compared to the same period in 2025, to $2.4 million from a loss of $1.8 million, respectively.

The primary factor that drove this was a $3.9 million increase in investment related gains and losses, reflecting the absence of the BlackRock write-down recorded in the prior year period.

Financial Condition at March 31, 2026

Net loss before federal income tax in the three months ended June 30, 2026 of $0.5 million decreased from income before federal income tax of $6.9 million in the same prior year period.

The primary factors that drove this change were:

• $3.9 million decline in investment related gains and losses primarily related to the change in fair market value for certain of our limited partnership investments that we have not sold;

• $1.7 million increase in insurance benefits paid or provided due to:

◦ $6.5 million decrease in claims and surrenders benefits due to the expected contractual decreases of matured endowments;

more than offset by;

◦ $7.7 million increase in future policy benefit reserves primarily due to the increased business in our Domestic Insurance segment and the large amount of reserves released in the prior year period as we paid out matured endowment and released the corresponding reserves.

Net income before federal income tax in the six months ended June 30, 2026 decreased to $1.8 million from $5.1 million in the same year period.

The factors that drove this decrease were:

• $1.1 million increase in insurance benefits paid or provided due to:

◦ $6.9 million decrease in claims and surrenders as described above;

more than offset by

◦ $6.7 million increase in future policy benefit reserves as described above;

• $1.3 million increase in general operating expenses to support our growth initiatives.

Financial Condition at June 30, 2026

• Total assets of $1.8 billion

3 unchanged sentences

• Book value per share of Class A common stock of $4.64

June 30, 2026 | 10-Q 39

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

• Adjusted book value per share of Class A common stock of $6.44 1

• Diluted earnings per share of Class A common stock for the three months ended of $0.04

• Diluted earnings per share of Class A common stock for the six months ended of $0.04

The Factors that Drive our Operating Results

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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.

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 periods, and how we view trends with respect to sales and retention.

One sales factor that is key to our profitability is product mix.

3 unchanged sentences

Our product mix has been trending towards sales of our newer whole life products, which have a smaller margin than sales of our international endowment products.

We expect this trend in our International

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, 2026 | 10-Q 35

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

Insurance segment to continue due to the anticipated volumes of endowment maturities being replaced by higher volumes of whole life products.

We expect this trend in our International Insurance segment to continue due to the anticipated volumes of endowment maturities being replaced by higher volumes of whole life products.

Customer retention, or persistency, is another key factor influencing both revenue and profitability.

Persistency refers to the extent to which policyholders keep their insurance policies in force over time rather than allowing them to lapse, surrender, or terminate.

Persistency is a key measure because we spend a significant amount of money acquiring a policyholder upfront ( e.g.

, commissions, underwriting, marketing) and expect to recover those costs over many years.

A highly persistent block of business is one where policyholders continue paying premiums and maintaining coverage for many years.

Unfavorable persistency is characterized by higher than expected policy lapses, surrenders, or terminations, which can negatively impact profitability by reducing the in-force block of business generating premiums, coupled with an increase in reserves resulting from less projected future premiums, as well as an acceleration in the recognition of deferred acquisition costs.

We actively monitor persistency trends across our product lines and customer segments, and where unfavorable persistency is observed, we may take targeted retention actions;

however, there can be no assurance that such efforts will fully offset the financial impact of higher than expected policy terminations.

Premium Revenues.

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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 our reinsurers.

Direct premium revenue increased 4% in the three months ended March 31, 2026 to $43.9 million from $42.4 million in the three months ended March 31, 2025.

Direct premium revenue increased 4% in the three and six months ended June 30, 2026 to $48.1 million and $92.0 million, respectively, from $46.4 million and $88.8 million in the three and six months ended June 30, 2025, respectively.

This increase was driven by sales and renewal premiums in our Domestic Insurance segment.

June 30, 2026 | 10-Q 40

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

First Year Premiums.

Direct first year premiums increased 2% in the three months ended March 31, 2026 to $9.0 million from $8.8 million in the three months ended March 31, 2025, driven by sales in our Domestic Insurance segment and an increased number of producing agents.

Direct first year premiums increased 3% in the three and six months ended June 30, 2026 to $9.8 million and $18.7 million, respectively, from $9.4 million and $18.3 million in the three and six months ended June 30, 2025, respectively, driven by sales in our Domestic Insurance segment and from an increased number of producing agents.

First year premium growth primarily resulted from our CLOA final expense business.

Renewal Premiums.

Our direct renewal premiums in the three months ended March 31, 2026 increased primarily due to strong sales in 2025 in our Domestic Insurance segment, leading to higher number of policies paying renewal premiums in the current period.

Premium growth was constrained by the high level of surrenders and matured endowments in our International Insurance segment during the last few years, which has lowered the number of policies remaining in force and paying renewal premiums in this segment.

Our direct renewal premiums in the three and six months ended June 30, 2026 increased primarily due to strong sales in prior periods in our Domestic Insurance segment, leading to higher number of policies paying renewal premiums in the current period.

Premium growth was constrained by unfavorable persistency in our Domestic Insurance segment, as well as the high level of surrenders and matured endowments in our International Insurance segment during the last few years, both of which have lowered the number of policies remaining in force and paying renewal premiums.

Investment Income.

Our net investment income decreased for the three months ended March 31, 2026 compared to the same prior year period.

Total investment income increased for the three months ended March 31, 2026 compared to the same prior year period as we began investing in investment grade private placement credit, where we expect higher returns.

This increase was outweighed by non-recurring fund fees due to the underperformance of the BlackRock middle market limited partnership.

Excluding one time and unanticipated events, we expect our

March 31, 2026 | 10-Q 36

Our net investment income decreased slightly for the three and six months ended June 30, 2026 compared to the same prior year periods.

Total investment income increased for the three and six months ended June 30, 2026 compared to the same prior year periods, as we have been investing in investment grade private placement fixed income securities, where we expect higher returns.

However, this increase was offset by higher fund fees.

June 30, 2026 | 10-Q 41

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MANAGEMENT'S DISCUSSION & ANALYSIS

net investment income to increase, as we have begun investing in investment grade private placement credit, where we expect higher returns.

Claims and Surrenders.

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Operating expenses are our second largest expense and thus also drive our operating results.

These 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.

Our operating expenses increased by $0.7 million in the three months ended March 31, 2026, as compared to the prior year period due to continued investment in supporting the growth of our business.

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.

Our operating expenses increased by $0.6 million and $1.3 million in the three and six months ended June 30, 2026, respectively, as compared to the prior year periods due to continued investment in supporting the growth of our business.

Actuarial Assumptions.

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This is reflected in our Consolidated Statements of Operations and Comprehensive Income as increase (decrease) in future policy benefit reserves and policyholder liability remeasurement (gain) loss.

March 31, 2026 | 10-Q 37

Recently, we have experienced a rebalancing in our business mix due to the volume of maturities in our international endowment business and continued growth in the Domestic Insurance segment.

June 30, 2026 | 10-Q 42

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

Recently, we have experienced a rebalancing in our business mix due to the volume of maturities in our international endowment business and continued growth in the Domestic Insurance segment.

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.

profitability is affected by how closely actual experience matches our actuarial assumptions for these shifts, and by the amount of reserves we must hold.

Updated assumptions to policyholder liability remeasurement (gain) loss negatively affected our operating results by $0.4 million compared to the same prior year quarter due to unfavorable experience in our International Insurance segment.

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The amount of direct insurance, number of policies, and average face amounts for life policies issued during the periods indicated are shown below.

Three Months Ended March 31, 2026 2025

Six Months Ended June 30, 2026 2025

Issued Number of

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Total $ 519,610,285 39,485 $ 517,262,265 32,247

In the first three months of 2026, we issued $235.7 million in new direct insurance.

The number of insurance policies issued, average policy face amount and total insurance issued in our International Insurance segment decreased in the three months ended March 31, 2026 as compared to the prior year period due to lower volume and product mix.

During the first three months of 2026, a larger proportion of our sales was comprised of our single premium product aimed at replacing maturing endowments, which has a $100,000 maximum face value, as well as other endowment products.

In the first six months of 2026, we issued $519.6 million in new direct insurance.

The number of insurance policies issued, average policy face amount and total insurance issued in our International Insurance segment decreased in the six months ended June 30, 2026 as compared to the prior year period due to lower volume and product mix.

During the first six months of 2026, a larger proportion of our sales was comprised of our single premium product aimed at replacing maturing endowments, which has a $100,000 maximum face value, as well as other endowment products.

Our endowment products generally have lower policy face amounts than our whole life product.

1 unchanged sentence

The use of information to enhance underwriting decisions with additional medical and lab data from third parties is resulting in issuance of policies with lower face amounts, as expected.

We also believe this segment is being impacted by inflation on the cost of living, which 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 has grown due to the issuance of new business, but growth has been and will be impacted by persistency rates, policy maturities and surrenders.

March 31, 2026 | 10-Q 38

June 30, 2026 | 10-Q 43

CITIZENS, INC.

2 unchanged sentences

Our revenues are generated primarily by life insurance premiums and investment income from invested assets.

Three Months Ended

Total revenues declined in the three months ended June 30, 2026 primarily due to the $3.9 million decline in investment related gains (losses) resulting from changes in market value of the underlying assets.

The decline in other income also contributed to the decline in the three month-period, as well as the six months ended June 30, 2026.

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

4 unchanged sentences

Total revenues $ 60,408 65,086 120,128 120,738

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands)

2026 2025 2026 2025

Direct premiums:

6 unchanged sentences

$ 43,703 43,388 83,641 83,185

Our first year direct premiums increased 2% in the three months ended March 31, 2026 compared to the same period in 2025, due to sales and expanded distribution in our Domestic Insurance segment.

Renewal premiums also increased from strong first year sales in 2025 in our Domestic Insurance segment, leading to higher number of policies paying renewal premiums in the current period, which more than offset the impact from the high level of surrenders during the last few years and increasing matured endowment benefits paid in our International Insurance segment which has lowered the number of policies paying renewal premiums in this segment.

Reinsurance premiums ceded increased in the three months ended March 31, 2026 compared to the same period in 2025.

Our first year direct premiums increased 3% in the three and six months ended June 30, 2026 compared to the same periods in 2025, due to sales and expanded distribution in our Domestic Insurance segment.

Renewal premiums also increased from strong first year sales in prior periods in our Domestic Insurance segment, leading to higher number of policies paying renewal premiums in the current period, which more than offset the impact from the high level of surrenders during the last few years and increasing matured endowment benefits paid in our International Insurance segment, which has lowered the number of policies paying renewal premiums in this segment.

Reinsurance premiums ceded increased in the three and six months ended June 30, 2026 compared to the same periods in 2025.

We have a coinsurance agreement with RGA Reinsurance Company ("RGA") in order to provide more capacity for growth in our Domestic Insurance segment.

Since we cede 50% of the direct premiums we receive for our CLOA final expense products to RGA, as sales of these products increase, reinsurance ceded to RGA also increases.

March 31, 2026 | 10-Q 39

June 30, 2026 | 10-Q 44

CITIZENS, INC.

2 unchanged sentences

A summary of our net investment income performance is as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands, except for %) 2026 2025 2026 2025

4 unchanged sentences

Other long-term investments

762 1,041 1,583 2,205

Total investment income 18,054 17,948 36,511 35,984

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In order to enhance yields, we are investing in new opportunities, including investment grade private placement fixed income securities and other asset classes, while maintaining a prudent risk profile.

As discussed above, net investment income is down slightly for the three months ended March 31, 2026 as a result of higher investment expenses when compared to prior year quarter.

As discussed above, net investment income and our annualized yield are down for the three and six months ended June 30, 2026 as a result of higher investment expenses when compared to prior year periods.

Investment Related Gains (Losses), Net.

We recorded investment related gains of $1.0 million during the three months ended March 31, 2026 compared to investment related losses of $2.9 million during the same prior year period.

The losses in the prior year period are primarily related to the non-cash write-down of our BlackRock 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 Consolidated Statements of Operations and Comprehensive Income, in addition to executed transactions that result in a gain or loss.

We recorded investment related losses of $1.5 million and $0.5 million during the three and six months ended June 30, 2026, respectively, compared to investment related gains of $2.4 million and losses of $0.5 million during the same prior year periods, respectively, primarily in our International Insurance segment.

The gain or loss between periods is attributable to changes in the estimated fair market value of our limited partnership investments, which can vary considerably based on market conditions and underlying fund performance.

Other Income.

Other income consists primarily of supplemental contracts issued to policyholders in our International Insurance segment upon the surrender or maturity of their original policies.

Other income is derived mainly from supplemental contracts issued to policyholders in our International 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, 2026 | 10-Q 40

We expect other income to decline as our matured endowments decline, as this income is primarily related to supplemental contracts issued to policyholders when their endowments mature.

The net impact from these supplemental contracts on the consolidated financial statements is minimal as the reserve liability setup for these policies offsets any recognized income.

June 30, 2026 | 10-Q 45

CITIZENS, INC.

1 unchanged sentence

BENEFITS AND EXPENSES

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

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Total benefits and expenses $ 60,937 58,172 118,283 115,611

Payments of claims and surrenders benefits constitute the vast majority of our expenses.

Payments of claims and surrenders benefits, which constitute the vast majority of our expenses, declined in both the three- and six-month periods ended June 30, 2026.

Claims and Surrenders.

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

6 unchanged sentences

Total claims and surrenders $ 33,751 40,220 73,404 80,318

Death claim benefits increased in the three months ended March 31, 2026 compared to the same period in 2025 due to a higher volume of claims.

While we maintain diligent oversight of claims activities, we expect a rise in line with the expansion of our business.

Many of these death claims are expected to be partially offset by our reinsurance coverage.

Death claim benefits increased in the three and six months ended June 30, 2026 compared to the same periods in 2025 due to a higher volume of claims, especially in our expanding Domestic Insurance business.

While we maintain diligent oversight of claims activities, we expect this rise in line with the expansion of our business.

Additionally, as discussed above, the Venezuela earthquakes in June 2026 have had a direct impact on our International Insurance segment's claims experience.

Although the impact is immaterial at this time, we have established a $0.5 million death claim liability given the number of people still missing as we expect the total impact to be determined over time as claims are reported and verified.

We will continue to monitor developments related to this event and update our estimates as additional information becomes available.

Many of these death claims may be partially offset by our reinsurance coverage.

June 30, 2026 | 10-Q 46

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

The vast majority of our surrender benefits payments are made on policies surrendered in our International Insurance segment.

These policies are generally policies that have been in place for many years, built up cash values, and have little or no surrender charges remaining.

Surrender benefits decreased 8% in the three months ended March 31, 2026 compared to the prior year period and can vary from one period to another.

Surrender benefits decreased 7% in the three and six months ended June 30, 2026 compared to the prior year periods and can vary from one period to another.

We continue to focus efforts on retention initiatives.

March 31, 2026 | 10-Q 41

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

Many of our endowment policies are reaching their contractual maturity dates and thus matured endowment benefits increased slightly in the three months ended March 31, 2026 compared to the prior year period.

Compared to peak endowment activity in 2025, we expect maturity benefits to decrease throughout 2026.

As we have previously disclosed, 2025 was the year in which the highest number of our endowment policies reached their contractual maturity dates and thus matured endowment benefits decreased in the three and six months ended June 30, 2026 compared to the prior year periods.

Compared to peak endowment activity in 2025, we expect maturity benefits to continue to decrease throughout 2026.

Increase (Decrease) in Future Policy Benefit Reserves.

Future policy benefit reserves reflect the liability established to provide for the future payment of policy benefits and thus they generally increase when we have a larger in force block of business due to higher sales and 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, 2026, the change in future policy benefit reserves decreased compared to the prior year period despite the increase in our inforce business, driven by reserves released in connection with policyholder benefits payouts.

In the three and six months ended June 30, 2026, the change in future policy benefit reserves increased compared to the prior year periods from the increase to inforce business and due to the high level of reserves released in the prior year periods in connection with policyholder benefits payouts.

Policyholder Liability Remeasurement (Gain) Loss.

3 unchanged sentences

Additionally, the best estimate assumptions are updated every year in our third quarter and are reflected on our income statement as a policyholder liability remeasurement gain or loss.

In the three months ended March 31, 2026, the remeasurement (gain) loss was negatively affected by unfavorable experience in our International Insurance segment.

In the three and six months ended June 30, 2026, the remeasurement (gain) loss was negatively affected by unfavorable experience in our International Insurance segment.

Commission expenses are a cost of acquiring business, as commissions are the primary compensation paid to our 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.

Although first year sales increased in the three months ended March 31, 2026 as compared to the same period in 2025, commissions decreased in the three months ended March 31, 2026 due to more sales of our single premium product offered to policyholders with maturing endowments in the International Insurance segment, which has a lower commission rate than other products.

Although first year sales increased in the three and six months ended June 30, 2026 as compared to the same period in 2025, commissions decreased in the three and six months ended June 30, 2026 due to more sales of our single premium product offered to policyholders with maturing endowments in the International Insurance segment, which has a lower commission rate than other products.

Other General Expenses.

Total general expenses increased $0.7 million in the three months ended March 31, 2026 compared to the same period in 2025 due to continued investment in supporting the growth of our business.

We continue to work on managing controllable operating expenses while investing in growth initiatives.

Total general expenses increased $0.6 million and $1.3 million in the three and six months ended June 30, 2026, respectively, as compared to the prior year periods due to continued investment in supporting the growth of our business.

Capitalization of Deferred Policy Acquisition Costs ("DAC").

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Our deferred policy acquisition costs (DAC) are amortized on a constant level basis over the expected term of the related contracts to approximate straight-line amortization.

As described above, unfavorable persistency leads to accelerated amortization of deferred policy acquisition costs, which contributed to the increased costs in both the three- and six-month periods ended June 30, 2026.

Federal Income Tax.

Tax expense increased in the current period as compared to prior year, reflecting higher taxable income.

We reported federal income tax benefit in the three months ended June 30, 2026 as compared to a federal income tax expense in the same prior year period, reflecting lower taxable income.

See Part I, Item 1, Note 11.

Income Taxes in the notes to our consolidated financial statements herein.

June 30, 2026 | 10-Q 47

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

SEGMENT OPERATIONS

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GAAP income (loss) before federal income tax for these segments.

The Company's Other Non-Insurance Enterprises include non-insurance operations such as IT and corporate-support functions, which are

March 31, 2026 | 10-Q 42

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

included in the table presented below to properly reconcile the segment information with the consolidated financial statements of the Company.

The Company's other non-insurance operations include non-insurance activities and corporate-support functions, which are presented in the table presented below to reconcile segment information with the consolidated financial statements of the Company.

The following table sets forth income (loss) before federal income tax by segment during the periods indicated.

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

3 unchanged sentences

Domestic Insurance

1,614 2,628 2,865 3,186

Total segments 2,738 9,755 7,594 10,118

Other Non-Insurance Enterprises (2,482) (2,150)

Other non-insurance operations (3,267) (2,841) (5,749) (4,991)

Total income (loss) before federal income tax

$ (529) 6,914 1,845 5,127

June 30, 2026 | 10-Q 48

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

INTERNATIONAL INSURANCE

Detailed results of operations in the International Insurance segment for the periods indicated are as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

16 unchanged sentences

Total benefits and expenses 38,572 38,774 74,990 75,307

Income (loss) before federal income tax

$ 3,605 (195)

In our International Insurance segment, income before federal income tax was $3.6 million in the three months ended March 31, 2026 compared to a loss before federal income tax of $0.2 million in the prior year period.

March 31, 2026 | 10-Q 43

Income before federal income tax $ 1,124 7,127 4,729 6,932

In the three months ended June 30, 2026, premiums were $28.4 million, while our total insurance benefits paid or provided were $29.4 million.

This reflects a $0.5 million decrease in premiums compared to the prior-year period with only a $0.4 million decrease in total insurance benefits paid or provided.

The lower premiums are mainly due to the impact from the level of surrenders and matured endowments in prior years, which has lowered the number of policies remaining in force and paying renewal premiums in this segment.

In the six months ended June 30, 2026, premiums received were $53.6 million, while our total insurance benefits paid or provided were $56.4 million.

This reflects a $0.9 million decrease in premiums compared to the prior-year period with only a $0.8 million decrease in total insurance benefits paid or provided for the reasons described above.

June 30, 2026 | 10-Q 49

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

was driven by a $4.1 million increase in investment related gains and losses primarily related to the BlackRock write-down in the prior year period.

Premium breakout is detailed below.

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

5 unchanged sentences

Total premiums $ 28,369 28,878 53,567 54,486

Direct premiums decreased by $0.5 million in the three months ended March 31, 2026 compared to the same period in 2025 mainly due to the impact the matured endowments have had on renewal premiums.

Our International Insurance segment derives its premiums from policyholders residing in over 80 different countries across the globe.

The following table sets forth our premiums by location for the three months ended March 31, 2026 and 2025.

Three Months Ended

The following table sets forth our premiums by location for the three and six months ended June 30, 2026 and 2025.

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

4 unchanged sentences

Argentina 3,214 2,923 5,816 5,019

9,291 9,121 18,569 19,032

Reinsurance and change in premium accruals

3 unchanged sentences

Sales in Taiwan have been declining recently due to leadership succession related difficulties within our primary distribution agency in Taiwan and regulatory challenges.

We are facing some headwinds in Venezuela that may affect premium revenues due to the strength of the U.S.

dollar compared to the local currency and their difficulties to obtain dollars.

We are facing some headwinds in Venezuela that may affect premium revenues.

Most notably, the Venezuela earthquakes of June 2026 may impair policyholders' ability to make timely premium payments.

The strength of the U.S.

dollar, combined with policyholders' difficulties in obtaining dollars, may further constrain their ability to remit premiums.

The recent political instability may cause further decline in this business.

We continue to closely monitor emerging trends in our Venezuela business.

Investment Related Gains (Losses), Net.

Investment related gains and losses improved in the three months ended March 31, 2026 compared to the prior year period largely due to the BlackRock write-down in 2025.

These gains and losses are generally a result of the change in estimated fair market value for our limited partnerships, as previously discussed.

Other Income.

Other income consists primarily of supplemental contracts issued to policyholders upon the surrender or maturity of their original policies.

Supplemental contracts offer our policyholders the opportunity to

March 31, 2026 | 10-Q 44

June 30, 2026 | 10-Q 50

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

leave their cash with us and be paid interest at a guaranteed rate or receive an annuity, at their option.

As our matured endowments have increased, a growing number of policyholders have chosen to enter into a supplemental contract and thus other income has steadily increased over the last few years.

Benefits and Expenses.

Claims and surrender benefits breakout is detailed below.

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

6 unchanged sentences

Total claims and surrenders $ 25,907 34,399 58,018 67,433

As discussed, the majority of our claims and surrender benefits in this segment were related to payment of matured endowment benefits.

As discussed, the majority of our claims and surrender benefits in this segment are related to payment of matured endowment and surrender benefits.

Matured endowment benefits peaked in 2025 and has decreased in the three and six months ended June 30, 2026 compared to the prior year periods, as contractually expected.

Surrender benefits are also a large component of this expense;

often as surrender charges expire on endowments after certain periods, policyholders surrender their policies to access the cash value.

Surrenders decreased in the three months ended March 31, 2026 compared to the prior year period and can vary from one period to another.

We continue to focus efforts on retention initiatives.

Commissions decreased due to strong sales of our single premium product offered to policyholders with maturing endowments, which product has a lower commission rate than other products.

March 31, 2026 | 10-Q 45

Accordingly, as our block of maturing endowments decreases, surrenders will generally decrease as well.

Increase (Decrease) in Future Policy Benefit Reserves.

In the three and six months ended June 30, 2026, the change in future policy benefit reserves was higher compared to the prior year periods, reflecting reserve growth on our inforce block of business.

In contrast, the prior year periods were impacted by a greater level of reserves released in connection with surrender benefits and higher matured endowment benefit payments.

Commissions decreased due to strong sales of our single premium product offered to policyholders with maturing endowments, which has a lower commission rate than other products.

June 30, 2026 | 10-Q 51

CITIZENS, INC.

2 unchanged sentences

Detailed results of operations for the Domestic Insurance segment for the periods indicated are as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

18 unchanged sentences

Income before federal income tax

Income before federal income tax in the three months ended March 31, 2026 increased to $1.3 million from $0.6 million in the prior year period.

The increase was driven by increased premiums and slightly lower insurance benefits paid or provided.

$ 1,614 2,628 2,865 3,186

In the three months ended June 30, 2026, premiums in our Domestic Insurance segment were $15.3 million, while total insurance benefits paid or provided were $10.6 million.

This reflects an increase in premiums of $0.8 million from the prior year period, while total insurance benefits paid or provided increased by $2.1 million.

Premiums increased due to sustained first year sales and increase in renewal year premiums due to strong prior year sales, while the total benefits and expenses paid increased due to higher claims and surrenders paid.

We expect death benefit payments to increase in the Domestic Insurance segment as our business has significantly grown in this segment over the last several years.

In the six months ended June 30, 2026, premiums in our Domestic Insurance segment were $30.1 million, while total insurance benefits paid or provided were $20.6 million.

This reflects an increase in premiums of $1.4 million from the prior year period, while total insurance benefits paid or provided increased by $1.9 million for the reasons described above.

June 30, 2026 | 10-Q 52

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

Premium breakout is detailed below.

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

7 unchanged sentences

$ 15,334 14,510 30,074 28,699

March 31, 2026 | 10-Q 46

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

Total direct premiums increased by $2.1 million in the three months ended March 31, 2026 compared to the same prior year period due to sustained first year sales and increase in renewal year premiums due to strong prior year sales.

As a result of these increases, reinsurance premiums ceded also increased.

Benefits and Expenses.

Claims and surrender benefits breakout is detailed below.

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands) 2026 2025 2026 2025

7 unchanged sentences

In our Domestic Insurance segment, the majority of claims and surrender benefits are death claim benefits.

Death claim benefits increased slightly in the three months ended March 31, 2026 compared to the same prior year period due primarily to a higher volume of reported claims.

Death claim benefits increased in the three and six months ended June 30, 2026 compared to the same prior year periods due primarily to a higher volume of reported claims.

The Company carefully tracks mortality experience as an important measure of performance, which can fluctuate from quarter-to-quarter based on reported claims.

1 unchanged sentence

A portion of these death claims should be offset by our reinsurance coverage.

NON-INSURANCE ENTERPRISES

Three Months Ended

OTHER NON-INSURANCE OPERATIONS

Three Months Ended Six Months Ended

June 30, June 30,

(In thousands)

2026 2025 2026 2025

Loss before federal income tax

4 unchanged sentences

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.

For the three months ended March 31, 2026, the elevated loss before federal income tax compared to the same period in 2025 is mainly due to higher general expenses.

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 for our ongoing operations.

Our cash and invested assets at March 31, 2026 were $1.4 billion, of which 88% 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.

March 31, 2026 | 10-Q 47

For the three and six months ended June 30, 2026, the elevated loss before federal income tax compared to the same periods in 2025 is mainly due to higher general expenses to support our growth initiatives.

June 30, 2026 | 10-Q 53

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

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 for our ongoing operations.

Our cash and invested assets at June 30, 2026 were $1.4 billion, of which 88% was invested in fixed maturity securities, all of which are classified as available-for-sale.

The following table shows the carrying value of our investments by investment category and the percentage of each to total cash, cash equivalents and invested assets.

Carrying Value March 31, 2026 December 31, 2025

Carrying Value June 30, 2026 December 31, 2025

(In thousands, except for %) Amount % Amount %

16 unchanged sentences

Total cash, cash equivalents and invested assets $ 1,449,659 100.0 % $ 1,465,087 100.0 %

(1) Includes $100.1 million and $106.9 million of securities guaranteed by third parties at March 31, 2026 and December 31, 2025, respectively.

(1) Includes $97.6 million and $106.9 million of securities guaranteed by third parties at June 30, 2026 and December 31, 2025, respectively.

(2) Includes $90.4 million and $101.1 million of U.S.

Government-sponsored enterprises at March 31, 2026 and December 31, 2025, respectively.

The carrying value of the Company’s fixed maturity securities investment portfolio at March 31, 2026 was $1.27 billion compared to $1.29 billion at December 31, 2025.

Government-sponsored enterprises at June 30, 2026 and December 31, 2025, respectively.

The carrying value of the Company’s fixed maturity securities investment portfolio at June 30, 2026 was $1.28 billion compared to $1.29 billion at December 31, 2025.

This decrease 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, 2026 did not materially change from December 31, 2025 – the weighted average was “A” at both dates.

Cash and cash equivalents decreased as of March 31, 2026 from December 31, 2025 and fluctuate from period to period primarily due to the timing of operating and investing activities.

As of March 31, 2026, other long-term investments increased by $1.2 million compared to December 31, 2025, primarily due to funding commitments of other investments and the impact of changes in the fair market value of our limited partnership holdings.

The distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of June 30, 2026 did not materially change from December 31, 2025 – the weighted average was “A” at both dates.

Cash and cash equivalents decreased as of June 30, 2026 from December 31, 2025 and fluctuate from period to period primarily due to the timing of operating and investing activities.

As of June 30, 2026, other long-term investments decreased by $2.2 million compared to December 31, 2025, primarily due to the impact of changes in the fair market value of our limited partnership holdings partially offset by additional funding of our commitments of other investments.

Obligations of States and Political Subdivisions

21% of the Company’s fixed maturity securities investment portfolio at March 31, 2026 consists of municipal bonds, which are securities that are obligations of states and political subdivisions.

20% of the Company’s fixed maturity securities investment portfolio at June 30, 2026 consists of municipal bonds, which are securities that are obligations of states and political subdivisions.

A portion of these municipal bonds

March 31, 2026 | 10-Q 48

June 30, 2026 | 10-Q 54

CITIZENS, INC.

21 unchanged sentences

Total $ 54,022 54,539 194,028 220,106 10,335 10,458 258,385 285,103 100.0 %

The table below shows the categories in which we held investments in special revenue municipal bonds that were greater than 10% of the fair value of our total municipal bond portfolio at March 31, 2026.

(In thousands, except for %) Fair

1 unchanged sentence

Cost % of Total

Education $ 38,033 44,154 14.5 %

Utilities $ 41,721 45,620 16.1 %

Education 38,720 44,843 15.0

Transportation 32,549 39,517 12.6

The Company's municipal bond portfolio consists of bonds from states and political subdivisions in many states;

however, as of March 31, 2026, municipal bonds from issuers in Texas and California comprised 22% and 18%, respectively, of the portfolio.

There were no other states or individual issuer holdings equal to or greater than 10% of the total municipal bond portfolio as of March 31, 2026.

March 31, 2026 | 10-Q 49

however, as of June 30, 2026, municipal bonds from issuers in Texas and California comprised 22% and 18%, respectively, of the portfolio.

There were no other states or individual issuer holdings equal to or greater than 10% of the total municipal bond portfolio as of June 30, 2026.

June 30, 2026 | 10-Q 55

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in Texas at March 31, 2026.

The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in Texas at June 30, 2026.

General Obligation Special Revenue Other Total

16 unchanged sentences

Total $ 24,542 24,356 33,404 39,845 46 55 57,992 64,256

The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in California at March 31, 2026.

The table below represents the Company's detailed exposure to municipal fixed maturity securities by credit rating in California at June 30, 2026.

General Obligation Special Revenue Other Total

15 unchanged sentences

We analyze our available-for-sale ("AFS") fixed maturity securities that are experiencing unrealized losses to ascertain if there is an expectation of credit related impairments.

We did not record any credit valuation allowances on fixed maturity securities in either of the three months ended March 31, 2026 or 2025.

Gross unrealized losses on AFS fixed maturity securities amounted to $167.6 million as of March 31, 2026 and $154.3 million as of December 31, 2025.

This increase in gross unrealized losses during 2026 was a result of the decrease in average market interest rates in 2026 as compared to 2025.

March 31, 2026 | 10-Q 50

We did not record any credit valuation allowances on fixed maturity securities in either of the three and six months ended June 30, 2026 or 2025.

Gross unrealized losses on AFS fixed maturity securities amounted to $162.6 million as of June 30, 2026 and $154.3 million as of December 31, 2025.

This increase in gross unrealized losses during 2026 was a result of the increase in average market interest rates in 2026 as compared to 2025.

June 30, 2026 | 10-Q 56

CITIZENS, INC.

5 unchanged sentences

(In thousands)

March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025

Fixed maturity securities $ 1,282,060 1,287,861

3 unchanged sentences

We manage our insurance operations in order to ensure that we have stable and reliable sources of cash flows to meet our obligations.

In the three months ended March 31, 2026, our operations used $0.3 million of net cash due to matured endowment benefit payments, commissions and general expenses supporting our business growth.

We expect our business will generate cash the remainder of the year as our level of maturities declines.

Despite using cash in the first quarter of 2026, we anticipate meeting our short-term and long-term cash needs with cash generated by our insurance operations and from our invested assets.

In the six months ended June 30, 2026, our operations provided $1.7 million of net cash.

We anticipate meeting our short-term and long-term cash needs with cash generated by our insurance operations and from our invested assets.

89% of our investments consist of marketable fixed maturity securities classified as available-for-sale that could be readily converted to cash for liquidity needs.

Additionally, we may raise capital by selling shares in our SIP (as defined below) and we may also access our Credit Facility if needed (also described below).

Citizens had no debt as of March 31, 2026.

Citizens had no debt as of June 30, 2026.

We have traditionally also had significant cash flows from both scheduled and unscheduled investment security maturities, redemptions, and prepayments.

1 unchanged sentence

The investing activities fluctuate from period to period due to timing of securities activities such as calls, maturities and reinvestment of those funds.

We purchased $31.0 million of fixed maturity securities and we also used $1.0 million to purchase other long-term investments in the first three months of 2026.

We purchased $53.4 million of fixed maturity securities and we also used $1.5 million to purchase other long-term investments in the first six months of 2026.

PARENT COMPANY LIQUIDITY AND CAPITAL RESOURCES

10 unchanged sentences

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.

March 31, 2026 | 10-Q 51

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

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.

Commitments and Contingencies in the notes to our consolidated financial statements herein for a

June 30, 2026 | 10-Q 57

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

description of the Credit Facility.

The Credit Facility provides additional liquidity to the Company for short-term or longer-term needs.

20 unchanged sentences

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 5% of our in force business as of March 31, 2026.

Approximately 18% of the endowments in force will mature in the next five years, totaling approximately 5% of our in force business as of June 30, 2026.

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.

2 unchanged sentences

We currently anticipate that our available operating cash flow and capital resources will be adequate to meet our needs for funds, and 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.

Surrender benefits, which have been high the last several years, slightly decreased during 2025 and continued to decrease the first three months of 2026.

Surrender benefits, which have been high the last several years, slightly decreased during 2025 and continued to decrease the first six months of 2026.

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 reach the age where surrender charges have expired or significantly decreased, we have experienced high levels of surrenders.

March 31, 2026 | 10-Q 52

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 pressures, which may cause policyholders to want the cash values of their policies due to decreased purchasing power elsewhere.

June 30, 2026 | 10-Q 58

CITIZENS, INC.

MANAGEMENT'S DISCUSSION & ANALYSIS

that life insurance may not be as important as it was during the pandemic, and inflationary 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.

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.

2 unchanged sentences

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 increased in the three months ended March 31, 2026 due to a higher volume of reported claims.

Another significant use of cash is payment of commissions.

13 unchanged sentences

Additionally, we have a Capital Maintenance Agreement between Citizens and CLOA, Citizens' wholly-owned subsidiary domiciled in Colorado, that would require Citizens to contribute capital to CLOA in order to maintain an RBC level above 350%.

At March 31, 2026, our domestic insurance subsidiaries were above the required minimum RBC levels and CLOA was above 350%.

At June 30, 2026, our domestic insurance subsidiaries were above the required minimum RBC levels and CLOA was above 350%.

CICA International is a Puerto Rico domiciled company.

1 unchanged sentence

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, 2026, CICA International exceeded the required minimum capital and related ratio.

At June 30, 2026, 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.

March 31, 2026 | 10-Q 53

June 30, 2026 | 10-Q 59

CITIZENS, INC.

1 unchanged sentence

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

As of March 31, 2026, we have no additional contractual obligations or off-balance sheet arrangements other than those described in Part I, Item 1, Note 8.

As of June 30, 2026, 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 2025 Form 10-K .

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis