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美国
证券交易委员会
华盛顿特区 20549

表格 10-Q
☒ 根据1934年证券交易法第13或15(d)条款的季度报告。
截止至本季度结束 2024年9月30日
或
☐ 根据1934年证券交易所法案第13或15(d)条进行的过渡报告
过渡期间从 到
委员会档案编号：  000-16509

citizens_logoonly_cmyk.jpg
CITIZENS, INC.
（依凭章程所载的完整登记名称）
科罗拉多84-0755371
(成立地或组织其他管辖区)（联邦税号）

11815 Alterra Pkwy, 15楼, 奥斯丁, 德克萨斯州 78758
(目前地址)

注册人的电话号码，包括区号： (512) 837-7100
根据法案第12(b)条登记的证券
A类普通股CIA 纽交所
（每类标题）(交易所标的)（每个注册交易所的名称）

请以勾选方式指示登记人：（1）是否已按照1934年证券交易法第13条或第15（d）条的规定提交所有应提交的报告，并（2）是否在过去12个月（或要求登记人提交此类报告的更短期间）及过去90天内一直受到此类提交要求的约束。 x Yes o 不
在前12个月内（或公司需要提交这些文件的较短时间内），公司是否已通过选中标记表明已阅读并提交了应根据S-t法规第405条规定（本章第232.405条）提交的所有互动式数据文件？ x Yes o 不
请以勾选的方式指示，登记者是否为大幅加速递交者、加速递交者、非加速递交者、较小的报告公司或新兴成长公司。请参见《交易法》第1202条对「大幅加速递交者」、「加速递交者」、「较小的报告公司」和「新兴成长公司」的定义：
大型快速进入文件 ☐加速归档人☒非加速申报者 ☐较小的报告公司 ☒新兴成长型公司 ☐
如果一家新兴成长型企业，请打勾表示公司已选择不使用扩展过渡期以符合根据《交易所法案》第13(a)条所提供的任何新的或修订财务会计准则。 o
请以核取方框表示，公司是否为外壳公司（如《交易所法》第1202条所定义）。 ☐ 是的 x 不
截至2024年11月1日，登记人拥有 49,906,575 份A类普通股。

                                            



























此页故意留白

                                            
citizens_logo_cmyk (jpg).jpg

目录
页码
第一部分 基本报表资料
 项目 1。
  
  
  
 项目2。
 项目3。
 项目4。
第二部分. 其他资讯 
 项目 1。
项目1A。
 项目2。
 项目3。
 项目4。
 项目5。
 第6项。


2024年9月30日 | 10-Q 1

目录                                            
第一部分。财务资讯

项目 1。 基本报表
公民公司及其合并子公司
合并资产负债表
(单位: 千元)2024年9月30日2023年12月31日
(未经审计)
 
资产：
投资：  
以公平价值列示的可供出售固定到期证券（摊销成本：$1,391,580 及1,389,038 在2024年和2023年，分别是)
$1,273,497 1,238,981 
股权证券，以公平价值衡量 5,716 5,282 
保险贷款72,463 75,359 
其他长期投资（按公允价值计量的部分 $93,167 及82,460 在2024年和2023年，分别是)
93,433 82,725 
总投资1,445,109 1,402,347 
现金及现金等价物32,382 26,997 
应计投资收入17,082 17,360 
再保险可收回款项7,278 3,991 
延期担保费用取得成本192,268 175,768 
取得的保险费用9,566 10,043 
当前联邦所得税应收款505 1,546 
不动产及设备，净额10,975 11,809 
到期保险费10,090 11,264 
其他资产（扣除损失准备金为$574 及408 在2024年和2023年，分别为)
10,554 7,803 
总资产$1,735,809 1,668,928 

请查看附带的基本报表注记。

2024年9月30日 | 10-Q 2

目录                                                

公民公司及其合并子公司
综合账目表，持续中
（以千为单位，股份数额除外）2024年9月30日2023年12月31日
(未经审计)
负债和股东权益：
负债：  
保险责任：  
未来保单利益准备金：  
人寿保险$1,236,873 1,229,253 
意外和健康保险998 889 
保单未来应计储备1,237,871 1,230,142 
保单持有人基金:
年金145,838 133,216 
红利积存47,052 44,960 
预缴保费32,420 32,446 
应付保单索赔9,236 6,637 
其他保户的所有基金类型7,076 7,363 
保险总基金额241,622 224,622 
保单负债总额1,479,493 1,454,764 
应付佣金3,843 3,445 
延迟支付联邦所得税负债2,367 1,102 
其他负债42,533 37,488 
总负债1,528,236 1,496,799 
承诺与条件款( Notes 7 和 8)
股东权益:  
普通股：
A类股份， no 面值， 100,000,000 授权股份数， 54,222,644 和 53,882,661 于2024年和2023年分别发行和流通的股份，包括库藏股在内， 4,327,810 于2024年和2023年
269,356 268,675 
B类股份， no 面值， 2,000,000 授权股份数， 1,001,714 于2024年和2023年发行和流通的股份，包括库藏股在内， 1,001,714 于2024年和2023年
3,184 3,184 
保留盈余 53,441 42,150 
其他综合损益（损失）累积额(94,683)(118,155)
库藏股票，成本(23,725)(23,725)
股东权益总额207,573 172,129 
负债总额及股东权益 $1,735,809 1,668,928 

请参阅合并财务报表附注。


2024年9月30日 | 10-Q 3

目录                                                

公民公司及其合并子公司
综合损益表及综合损益（亏损）表
(未经审计)
截至三个月九个月结束
九月三十日，九月三十日，
(以千为单位，每股金额除外)
2024202320242023
营业收入： 
保险费：  
人寿保险$42,461 41,794 122,823 118,020 
保险事故及健康保险452 296 1,324 1,201 
物业保险(16)(64)(18)780 
净投资收益17,377 17,372 52,404 51,687 
投资相关收益（损失），净额827 (892)1,537 (477)
其他收入630 884 3,457 2,620 
总营业收入61,731 59,390 181,527 173,831 
利益与费用：  
支付或提供的保险利益：  
索赔和解约36,478 37,723 104,121 100,798 
未来政策利益准备金增加（减少）471 (3,880)(130)(5,802)
保单持有人责任重新评估（增益）损失1,157 1,024 2,836 2,860 
保单持有人分红1,320 1,414 3,748 3,783 
已支付或提供的总保险利益39,426 36,281 110,575 101,639 
佣金12,957 9,444 35,639 27,340 
其他一般开支12,095 11,949 40,072 35,477 
推迟支付保单获取成本(10,430)(7,132)(29,304)(20,034)
推延保单取得成本摊销4,493 4,056 12,804 11,544 
保险收购成本摊销153 151 477 465 
所有利益和费用58,694 54,749 170,263 156,431 
联邦所得税前净收益3,037 4,641 11,264 17,400 
联邦所得税费用（利益)
247 1,943 (27)3,704 
净利润 2,790 2,698 11,291 13,696 
每股金额：  
A类普通股基本每股盈利
0.06 0.06 0.23 0.28 
A类普通股每股稀释盈利
0.05 0.05 0.22 0.27 
其他综合损益：  
固定投资证券的未实现收益（损失）：  
期间内发生的未实现持有收益（损失）59,101 (59,817)31,427 (36,811)
重新分类调整，计入净利润中的损失（收益）(100)419 547 481 
固定投资证券的未实现收益（损失），净额59,001 (59,398)31,974 (36,330)
未来保单负债的现行折现率变动(45,404)60,054 (5,887)45,825 
其他综合收益项目的所得税费用（收益）356 (1,040)2,615 (882)
其他综合收益（亏损）13,241 1,696 23,472 10,377 
总全面收益（损失）$16,031 4,394 34,763 24,073 


See accompanying Notes to Consolidated Financial Statements.

September 30, 2024 | 10-Q 4

Table of Contents                                                

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(Unaudited)
 Common Stock
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Total Stockholders' Equity
(In thousands)Class AClass B
Balance at December 31, 2023$268,675 3,184 42,150 (118,155)(23,725)172,129 
Comprehensive income (loss):
Net income
— — 4,542 — — 4,542 
Other comprehensive income (loss)— — — 18,385 — 18,385 
Total comprehensive income (loss)— — 4,542 18,385 — 22,927 
Stock-based compensation127 — — — — 127 
Balance at March 31, 2024268,802 3,184 46,692 (99,770)(23,725)195,183 
Comprehensive income (loss):      
Net income
— — 3,959 — — 3,959 
Other comprehensive income (loss)— — — (8,154)— (8,154)
Total comprehensive income (loss)— — 3,959 (8,154)— (4,195)
Stock-based compensation481 — — — — 481 
Balance at June 30, 2024269,283 3,184 50,651 (107,924)(23,725)191,469 
Comprehensive income (loss):      
Net income
— — 2,790 — — 2,790 
Other comprehensive income (loss)— — — 13,241 — 13,241 
Total comprehensive income (loss)— — 2,790 13,241 — 16,031 
Stock-based compensation73 — — — — 73 
Balance at September 30, 2024$269,356 3,184 53,441 (94,683)(23,725)207,573 
See accompanying Notes to Consolidated Financial Statements.

September 30, 2024 | 10-Q 5

Table of Contents                                                

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Stockholders' Equity, Continued
(Unaudited)
 Common Stock
Retained Earnings
Accumulated Other Comprehensive
 Income (Loss)
Treasury Stock
Total Stockholders' Equity
(In thousands)Class AClass B
Balance at December 31, 2022
$268,147 3,184 16,309 (137,044)(22,806)127,790 
Comprehensive income (loss):
Net income
— — 4,872 — — 4,872 
Other comprehensive income (loss)— — — 21,579 — 21,579 
Total comprehensive income (loss)— — 4,872 21,579 — 26,451 
Stock-based compensation50 — — — — 50 
Balance at March 31, 2023268,197 3,184 21,181 (115,465)(22,806)154,291 
Comprehensive income (loss):
Net income
— — 6,126 — — 6,126 
Other comprehensive income (loss)— — — (12,898)— (12,898)
Total comprehensive income (loss)— — 6,126 (12,898)— (6,772)
Acquisition of treasury stock— — — — (719)(719)
Stock-based compensation46 — — — — 46 
Balance at June 30, 2023268,243 3,184 27,307 (128,363)(23,525)146,846 
Comprehensive income (loss):
Net income
— — 2,698 — — 2,698 
Other comprehensive income (loss)— — — 1,696 — 1,696 
Total comprehensive income (loss)— — 2,698 1,696 — 4,394 
Stock-based compensation180 — — — — 180 
Other 1
— — 1,327 — — 1,327 
Balance at September 30, 2023$268,423 3,184 31,332 (126,667)(23,525)152,747 

1 See Note 11 - Income Taxes for details.
See accompanying Notes to Consolidated Financial Statements.

September 30, 2024 | 10-Q 6

Table of Contents                                                

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

Nine Months Ended September 30,
(In thousands)
20242023
Cash flows from operating activities: 
Net income
$11,291 13,696 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Investment related (gains) losses on sale of investments and other assets, net(1,537)477 
Net deferred policy acquisition costs(16,500)(8,490)
Amortization of cost of insurance acquired477 465 
Depreciation443 380 
Amortization of premiums and discounts on investments3,738 3,761 
Stock-based compensation1,052 333 
Deferred federal income tax expense (benefit)(1,350)652 
Change in:  
Accrued investment income278 8 
Reinsurance recoverable(3,287)778 
Due premiums1,174 2,168 
Future policy benefit reserves1,842 (5,111)
Other policyholders' liabilities19,002 8,156 
Federal income tax payable1,041 1,253 
Commissions payable and other liabilities6,397 (3,116)
Other, net(2,969)34 
Net cash provided by operating activities
21,092 15,444 
Cash flows from investing activities:  
Purchases of fixed maturity securities, available-for-sale(49,345)(50,077)
Sales of fixed maturity securities, available-for-sale4,659 13,690 
Maturities and calls of fixed maturity securities, available-for-sale37,907 23,128 
Sales of equity securities
— 770 
Principal payments on mortgage loans7 6 
(Increase) decrease in policy loans, net2,896 3,023 
Sales of other long-term investments2,226 3,793 
Purchases of other long-term investments(11,123)(13,262)
Purchases of property and equipment(561)(292)
Maturities of short-term investments— 750 
Net cash used in investing activities
(13,334)(18,471)
See accompanying Notes to Consolidated Financial Statements.

September 30, 2024 | 10-Q 7

Table of Contents                                                
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(Unaudited)
Nine Months Ended September 30,
(In thousands)
20242023
Cash flows from financing activities:  
Annuity deposits$5,181 5,443 
Annuity withdrawals(7,183)(7,828)
Acquisition of treasury stock— (719)
Other(371)(57)
Net cash used in financing activities
(2,373)(3,161)
Net increase (decrease) in cash and cash equivalents
5,385 (6,188)
Cash and cash equivalents at beginning of year26,997 22,973 
Cash and cash equivalents at end of period$32,382 16,785 


SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

During the nine months ended September 30, 2024 and 2023, various fixed maturity issuers exchanged securities with book values of $3.7 million and $5.4 million, respectively, for securities of equal value.

The Company had $0.3 million of net unsettled security trades at September 30, 2023 and none at September 30, 2024.

The Company recognized $36 thousand right-of-use assets in exchange for new operating lease liabilities during the nine months ended September 30, 2023 and none during the nine months ended September 30, 2024.

See accompanying Notes to Consolidated Financial Statements.


September 30, 2024 | 10-Q 8

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) FINANCIAL STATEMENTS

BASIS OF PRESENTATION AND CONSOLIDATION

The consolidated financial statements include the accounts and operations of Citizens, Inc. ("Citizens" or the "Company"), a Colorado corporation, and its wholly-owned subsidiaries, CICA Life Insurance Company of America ("CICA Domestic"), CICA Life Ltd. ("CICA Bermuda"), Security Plan Life Insurance Company ("SPLIC"), Security Plan Fire Insurance Company ("SPFIC"), Magnolia Guaranty Life Insurance Company ("MGLIC"), Computing Technology, Inc. ("CTI"), Nexo Global Services LLC, a Puerto Rico holding company ("Nexo") and its wholly-owned subsidiaries, CICA Life A.I., a Puerto Rico company ("CICA International") and Nexo Enrollment Services LLC, a Puerto Rico service company ("NES"). All significant inter-company accounts and transactions have been eliminated. Citizens and its wholly-owned subsidiaries are collectively referred to as the "Company," "it," "we," "us" or "our".

The consolidated balance sheet as of September 30, 2024, the consolidated statements of operations and comprehensive income (loss) and stockholders' equity for the three and nine months ended September 30, 2024 and September 30, 2023 and the consolidated statements of cash flows for the nine months ended September 30, 2024 and September 30, 2023 have been prepared by the Company without audit and are not subject to audit. In the opinion of management, all normal and recurring adjustments to present fairly the financial position, results of operations, and changes in cash flows at September 30, 2024 and for comparative periods have been made. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q adopted by the Securities and Exchange Commission ("SEC").  Accordingly, the consolidated financial statements do not include all the information and footnotes required for complete financial statements and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023 ("Form 10-K").  Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.

Our Life Insurance segment operates through CICA Domestic and CICA International.

CICA Domestic. Prior to July 1, 2023, our domestic life insurance business operated through CICA Domestic and Citizens National Life Insurance Company ("CNLIC"). CNLIC merged into CICA Domestic on July 1, 2023. CICA Domestic issues primarily ordinary whole life, final expense and life products with living benefits throughout the U.S.

CICA International. Until December 31, 2022, our international life insurance business operated through CICA Bermuda. Beginning January 1, 2023, all new international policies are issued by CICA International and on August 31, 2023, CICA Bermuda transferred all of its insurance in force business to CICA International. CICA International offers U.S. dollar-denominated products to non-U.S. residents/citizens internationally, including endowment products, which are principally accumulation contracts that incorporate an element of life insurance protection and ordinary whole life insurance.  These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional increasing or decreasing coverage and annuity benefits to enhance accumulations.

NES provides services to policyholders of CICA International.

Our Home Service Insurance segment operates through our subsidiaries SPLIC and MGLIC, and focuses on the life insurance needs of the middle- and lower-income markets in Louisiana, Mississippi and Arkansas.  Our products in this segment consist primarily of small face amount ordinary whole life, industrial life and pre-need policies, which are designed to fund final expenses for the insured, primarily consisting of funeral and burial costs. SPLIC also issues critical illness policies. Prior to June 30, 2023, SPFIC issued dwelling and contents property insurance policies. As of June 30, 2023, we ceased all operations for SPFIC.


September 30, 2024 | 10-Q 9

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
CTI provides data processing systems and services to the Company.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ materially from these estimates.

Significant estimates include those used in the evaluation of credit losses on fixed maturity securities, valuation allowances on deferred tax assets, actuarially determined assets and liabilities and assumptions and contingencies related to litigation and regulatory matters.  Certain of these estimates are particularly sensitive to market conditions, and deterioration and/or volatility in the worldwide debt or equity markets could have a material impact on the consolidated financial statements.

SIGNIFICANT ACCOUNTING POLICIES

For a description of all significant accounting policies, see Part IV, Item 15, Note 1. Summary of Significant Accounting Policies in the notes to our consolidated financial statements included in our Form 10-K, which should be read in conjunction with these accompanying consolidated financial statements.

(2) ACCOUNTING PRONOUNCEMENTS

ACCOUNTING STANDARDS NOT YET ADOPTED

On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This amendment expands a public entity's segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker, clarifying when an entity may report one or more additional measures to assess segment performance, requiring enhanced interim disclosures, providing new disclosure requirements for entities with a single reportable segment, and requiring other new disclosures. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is available. As the ASU only requires additional disclosures about the Company's operating segments, the impact to the consolidated financial statements will be minimal.

On December 14, 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which is intended to enhance the transparency, decision usefulness and effectiveness of income tax disclosures. The amendments in this ASU require a public entity to disclose a tabular tax rate reconciliation, using both percentages and currency, with specific categories. A public entity is also required to provide a qualitative description of the state and local jurisdictions that make up the majority of the effect of the state and local income tax category and the net amount of income taxes paid, disaggregated by federal, state and foreign taxes and also disaggregated by individual jurisdictions. The amendments also remove certain disclosures that are no longer considered cost beneficial. The amendments are effective prospectively for annual periods beginning after December 15, 2024 and early adoption and retrospective application are permitted. The Company is currently evaluating the impact of adopting this pronouncement on the consolidated financial statements.

No other new accounting pronouncements issued or effective during the year had, or is expected to have, a material impact on our consolidated financial statements.


September 30, 2024 | 10-Q 10

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3) INVESTMENTS

The Company invests primarily in fixed maturity securities, which totaled 86.2% of total cash and invested assets at September 30, 2024, as shown below.

Carrying Value
(In thousands, except for %)
September 30, 2024December 31, 2023
Amount%Amount%
Cash and invested assets:
Fixed maturity securities$1,273,497 86.2 %1,238,981 86.7 %
Equity securities5,716 0.4 5,282 0.4 
Policy loans72,463 4.9 75,359 5.3 
Other long-term investments93,433 6.3 82,725 5.8 
Cash and cash equivalents32,382 2.2 26,997 1.8 
Total cash and invested assets$1,477,491 100.0 %1,429,344 100.0 %

The following tables represent the amortized cost, gross unrealized gains and losses and fair value of fixed maturity securities as of the dates indicated.
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
September 30, 2024
(In thousands)
Fixed maturity securities:    
Available-for-sale:    
U.S. Treasury securities$5,950 165 29 6,086 
U.S. Government-sponsored enterprises3,380 287 — 3,667 
States and political subdivisions299,622 2,531 23,940 278,213 
Corporate:
Financial276,156 4,152 24,177 256,131 
Consumer253,133 2,358 32,726 222,765 
Utilities127,449 1,032 17,247 111,234 
Energy83,130 452 6,535 77,047 
Communications
71,071 293 7,500 63,864 
All other111,435 823 10,675 101,583 
Commercial mortgage-backed268 1 2 267 
Residential mortgage-backed106,816 14 7,633 99,197 
Asset-backed53,170 926 653 53,443 
Total fixed maturity securities$1,391,580 13,034 131,117 1,273,497 


September 30, 2024 | 10-Q 11

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
December 31, 2023
(In thousands)
Fixed maturity securities:    
Available-for-sale:    
U.S. Treasury securities$5,983 127 48 6,062 
U.S. Government-sponsored enterprises3,404 250 1 3,653 
States and political subdivisions314,203 2,160 29,132 287,231 
Corporate:
Financial266,485 2,066 31,255 237,296 
Consumer250,672 2,145 37,094 215,723 
Utilities123,625 615 20,253 103,987 
Energy73,808 64 8,049 65,823 
Communications
74,029 309 8,892 65,446 
All other111,124 647 12,439 99,332 
Commercial mortgage-backed171 — — 171 
Residential mortgage-backed107,174 9 10,060 97,123 
Asset-backed58,360 290 1,516 57,134 
Total fixed maturity securities$1,389,038 8,682 158,739 1,238,981 
 
The Company's investments in equity securities are shown below.

Fair Value
(In thousands)
September 30, 2024December 31, 2023
Equity securities: 
Bond mutual funds$766 740 
Common stocks
774 665 
Non-redeemable preferred stock8 7 
Non-redeemable preferred stock fund4,168 3,870 
Total equity securities$5,716 5,282 

VALUATION OF INVESTMENTS

Available-for-sale ("AFS") fixed maturity securities are reported in the consolidated financial statements at fair value. Equity securities are measured at fair value with the change in fair value recorded through net income. The Company recognized net investment related gains of $0.4 million for both the three and nine months ended September 30, 2024, respectively, on equity securities held. The Company recognized net investment related losses of $0.4 million and $0.3 million for the three and nine months ended September 30, 2023, respectively.

The Company considers several factors in its review and evaluation of individual investments, using the process described in Part IV, Item 15, Note 2. Investments in the notes to the consolidated financial statements of our Form 10-K to determine whether a credit valuation loss exists. For the three and nine months ended September 30, 2024 and 2023, the Company recorded no credit valuation losses on fixed maturity securities.


September 30, 2024 | 10-Q 12

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

For fixed maturity security investments that have unrealized losses as of September 30, 2024 and December 31, 2023, the gross unrealized losses and related fair values that have been in a continuous unrealized loss position by timeframe are as follows.

September 30, 2024Less than 12 monthsGreater than 12 monthsTotal
(In thousands, except for # of securities)Fair
Value		Unrealized
Losses		# of
Securities		Fair
Value		Unrealized
Losses		# of
Securities		Fair
Value		Unrealized
Losses		# of
Securities
Fixed maturity securities:        
Available-for-sale securities:        
U.S. Treasury securities$569 16 2 315 13 4 884 29 6 
States and political subdivisions12,007 126 21 160,393 23,814 180 172,400 23,940 201 
Corporate:
Financial11,511 27 8 165,303 24,150 194 176,814 24,177 202 
Consumer8,889 122 14 173,308 32,604 216 182,197 32,726 230 
Utilities2,805 132 8 86,941 17,115 146 89,746 17,247 154 
Energy3,199 4 4 55,625 6,531 65 58,824 6,535 69 
Communications
2,749 34 4 50,790 7,466 60 53,539 7,500 64 
All Other10,989 97 18 71,434 10,578 84 82,423 10,675 102 
Commercial mortgage-backed— — — 96 2 1 96 2 1 
Residential mortgage-backed46 — 3 98,714 7,633 84 98,760 7,633 87 
Asset-backed3,973 71 4 16,507 582 18 20,480 653 22 
Total fixed maturity securities$56,737 629 86 879,426 130,488 1,052 936,163 131,117 1,138 

December 31, 2023Less than 12 monthsGreater than 12 monthsTotal
(In thousands, except for # of securities)Fair
Value		Unrealized
Losses		# of
Securities		Fair
Value		Unrealized
Losses		# of
Securities		Fair
Value		Unrealized
Losses		# of
Securities
Fixed maturity securities:        
Available-for-sale securities:        
U.S. Treasury securities$1,203 40 5 65 8 2 1,268 48 7 
U.S. Government-sponsored enterprises221 1 1 — — — 221 1 1 
States and political subdivisions19,540 357 35 164,264 28,775 192 183,804 29,132 227 
Corporate:
Financial12,584 383 19 176,521 30,872 217 189,105 31,255 236 
Consumer10,175 265 16 176,725 36,829 223 186,900 37,094 239 
Utilities3,596 66 20 85,169 20,187 137 88,765 20,253 157 
Energy3,291 57 1 59,392 7,992 76 62,683 8,049 77 
Communications
5,784 153 5 56,108 8,739 69 61,892 8,892 74 
All Other2,080 32 5 85,757 12,407 100 87,837 12,439 105 
Residential mortgage-backed849 38 5 95,806 10,022 86 96,655 10,060 91 
Asset-backed4,757 111 8 32,764 1,405 40 37,521 1,516 48 
Total fixed maturity securities$64,080 1,503 120 932,571 157,236 1,142 996,651 158,739 1,262 


September 30, 2024 | 10-Q 13

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In each category of our fixed maturity securities described above, we do not intend to sell our investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. As of September 30, 2024 and December 31, 2023, 99.2% and 99.4% of the fair value of our fixed maturity securities portfolio, respectively, were rated investment grade. While the losses are currently unrealized, we continue to monitor all fixed maturity securities on an on-going basis as future information may become available which could result in an allowance being recorded.

These unrealized losses on fixed maturity securities are due to noncredit-related factors, including change in credit spreads and rising interest rates since purchase, which have little bearing on the recoverability of our investments, hence they are not recognized as credit losses. The fair value is expected to recover as the securities approach maturity or if market yields for such investments decline.

The amortized cost and fair value of fixed maturity securities at September 30, 2024 by contractual maturity are shown in the table below.  Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date have been reflected based upon final stated maturity.

September 30, 2024Amortized
Cost		Fair
Value
(In thousands)
Fixed maturity securities:  
Due in one year or less$13,425 13,375 
Due after one year through five years136,629 137,256 
Due after five years through ten years276,325 277,228 
Due after ten years965,201 845,638 
Total fixed maturity securities$1,391,580 1,273,497 

The Company uses the specific identification method of the individual security to determine the cost basis used in the calculation of realized gains and losses related to security sales.  

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Fixed maturity securities, available-for-sale:
Proceeds$— 9,446 4,659 13,690 
Gross realized gains$— 38 91 43 
Gross realized losses$— 436 196 453 

(4) FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  We hold AFS fixed maturity securities, which are carried at fair value with changes in fair value reported through other comprehensive income (loss). We also report our equity securities and certain other long-term investments at fair value with changes in fair value reported through the consolidated statements of operations and comprehensive income (loss).

Fair value measurements are generally based upon observable and unobservable inputs.  Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of

September 30, 2024 | 10-Q 14

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
observable inputs and minimize the use of unobservable inputs.  All assets and liabilities carried at fair value are required to be classified and disclosed in one of the following three categories.

•Level 1 - Quoted prices for identical instruments in active markets.
•Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs or whose significant value drivers are observable.
•Level 3 - Instruments whose significant value drivers are unobservable.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as U.S. Treasury securities and actively traded mutual fund and stock investments.

Level 2 includes those financial instruments that are valued by independent pricing services or broker quotes.  These pricing models are primarily industry-standard models that consider various inputs, such as interest rates, credit spreads and foreign exchange rates for the underlying financial instruments.  All significant inputs are observable or derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the marketplace.  Financial instruments in this category primarily include corporate securities, U.S. Government-sponsored enterprise securities, securities issued by states and political subdivisions and certain mortgage and asset-backed securities.

Level 3 is comprised of financial instruments whose fair value is estimated based on non-binding broker prices utilizing significant inputs not based on or corroborated by readily available market information.  We have no investments in this category.

The following tables set forth our assets measured at fair value on a recurring basis as of the dates indicated.

September 30, 2024Level 1Level 2Level 3Total
Fair Value
(In thousands)
Financial assets:
Fixed maturity securities, available-for-sale:
    
U.S. Treasury and U.S. Government-sponsored enterprises$6,086 3,667 — 9,753 
States and political subdivisions— 278,213 — 278,213 
Corporate47 832,577 — 832,624 
Commercial mortgage-backed— 267 — 267 
Residential mortgage-backed— 99,197 — 99,197 
Asset-backed— 53,443 — 53,443 
Total fixed maturity securities, available-for-sale
6,133 1,267,364 — 1,273,497 
Equity securities:    
Bond mutual funds766 — — 766 
Common stocks
774 — — 774 
Non-redeemable preferred stock8 — — 8 
Non-redeemable preferred stock fund4,168 — — 4,168 
Total equity securities5,716 — — 5,716 
Other long-term investments (1)
— — — 93,167 
Total financial assets$11,849 1,267,364 — 1,372,380 
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

September 30, 2024 | 10-Q 15

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 2023Level 1Level 2Level 3Total
Fair Value
(In thousands)
Financial assets:
Fixed maturity securities, available-for-sale:
    
U.S. Treasury and U.S. Government-sponsored enterprises$6,062 3,653 — 9,715 
States and political subdivisions— 287,231 — 287,231 
Corporate43 787,564 — 787,607 
Commercial mortgage-backed— 171 — 171 
Residential mortgage-backed— 97,123 — 97,123 
Asset-backed— 57,134 — 57,134 
Total fixed maturity securities, available-for-sale
6,105 1,232,876 — 1,238,981 
Equity securities:    
Bond mutual funds740 — — 740 
Common stocks
665 — — 665 
Non-redeemable preferred stock7 — — 7 
Non-redeemable preferred stock fund3,870 — — 3,870 
Total equity securities5,282 — — 5,282 
Other long-term investments (1)
— — — 82,460 
Total financial assets$11,387 1,232,876 — 1,326,723 
(1) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient are not classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.
 
FINANCIAL INSTRUMENTS VALUATION

FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE

Fixed maturity securities, available-for-sale.  At September 30, 2024, fixed maturity securities, valued using a third-party pricing source, totaled $1.3 billion for Level 2 assets and comprised 92.3% of total reported fair value of our financial assets.  The Level 1 and Level 2 valuations are reviewed and updated quarterly through testing by comparisons to separate pricing models, other third-party pricing services, and back tested to recent trades.  In addition, we obtain information annually relative to the third-party pricing models and review model parameters for reasonableness.  There were no Level 3 assets at September 30, 2024.  As of September 30, 2024, there were no material changes to the valuation methods or assumptions used to determine fair values, and no broker or third-party prices were changed from the values received.

Equity securities.  Our equity securities are classified as Level 1 assets as their fair values are based upon quoted market prices.

Limited partnerships. The Company considers the net asset value ("NAV") to represent the value of the investment fund and is measured by the total value of assets minus the total value of liabilities. The following table includes information related to our investments in limited partnerships that calculate NAV per share. For these investments, which are measured at fair value on a recurring basis, we use the NAV per share to measure fair value. The Company recognized net investment related gains of $0.5 million and $1.8 million for the three and nine months ended September 30, 2024, respectively, and losses of $0.1 million and gains of $0.2 million on limited partnerships

September 30, 2024 | 10-Q 16

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
held for the three and nine months ended September 30, 2023, respectively. These investments are included in other long-term investments on the consolidated balance sheets.

September 30, 2024December 31, 2023
(In thousands, except for years)
Fair Value
 Using NAV Per Share		Unfunded Commit-
ments
Range
(In years)
Fair Value
 Using NAV Per Share		Unfunded Commit-
ments
Range
(In years)
Description
Limited partnerships:
Middle marketInvestments in privately-originated, performing senior secured debt primarily in North America-based companies$34,832 1,669 3$34,858 3,452 4
Global equity fundInvestments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth11,908 — 010,345 — 0
Late-stage growthInvestments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale25,431 10,102 
4 to 6
20,524 14,271 
4 to 6
InfrastructureInvestments in environmental infrastructure and related technology, focusing on renewable power generation and distribution20,996 6,345 
9 to 11
16,733 9,576 10
Total limited partnerships$93,167 18,116 $82,460 27,299 

The majority of our limited partnership investments are not redeemable because distributions from the funds will be received when the underlying investments of the funds are liquidated. The life spans indicated above may be shortened or extended at the fund manager's discretion, typically in one or two-year increments. The global equity fund is redeemable monthly.

FINANCIAL INSTRUMENTS NOT CARRIED AT FAIR VALUE

Estimates of fair values are made at a specific point in time, based on relevant market prices and information about the financial instruments.  The estimated fair values of financial instruments presented below are not necessarily indicative of the amounts the Company might realize in actual market transactions.

The carrying amount and fair value for the financial assets and liabilities on the consolidated financial statements not otherwise disclosed for the periods indicated were as follows:

 September 30, 2024December 31, 2023
(In thousands)Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Financial assets:
    
Policy loans$72,463 72,463 75,359 75,359 
Residential mortgage loan35 36 42 42 
Cash and cash equivalents32,382 32,382 26,997 26,997 
Financial liabilities:
    
Annuity - investment contracts68,077 63,468 67,690 63,283 

Policy loans. Policy loans had a weighted average annual interest rate of 7.7% at both September 30, 2024 and December 31, 2023 and no specified maturity dates. The aggregate fair value of policy loans approximates the

September 30, 2024 | 10-Q 17

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
carrying value reflected on the consolidated balance sheets. Policy loans are an integral part of the life insurance policies we have in force, cannot be valued separately and are not marketable. Therefore, the fair value of policy loans approximates the carrying value and policy loans are considered Level 3 assets in the fair value hierarchy.

Residential mortgage loan. This mortgage loan is secured by a residential property. The interest rate for this loan was 7.0% at both September 30, 2024 and December 31, 2023. At September 30, 2024, the remaining loan matures in four years.  Management estimated the fair value using an annual interest rate of 6.25% at both September 30, 2024 and December 31, 2023. Our mortgage loan is considered a Level 3 asset in the fair value hierarchy and is included in other long-term investments on the consolidated balance sheets.

Cash and cash equivalents. The fair value of cash and cash equivalents approximates carrying value and are characterized as Level 1 assets in the fair value hierarchy.

Annuity liabilities. The fair value of the Company's liabilities under annuity contracts, which are considered Level 3 liabilities, was estimated at September 30, 2024 and December 31, 2023 using discounted cash flows based upon spot rates adjusted for various risk adjustments ranging from 3.40% to 4.40% and 3.80% to 4.50%, respectively. The fair value of liabilities under all insurance contracts are taken into consideration in the overall management of interest rate risk, which seeks to minimize exposure to changing interest rates through the matching of investment maturities with amounts due under insurance contracts.

Other long-term investments. Financial instruments included in other long-term investments are classified in various levels of the fair value hierarchy. The following table summarizes the carrying amounts of these investments.

Carrying Value
(In thousands)
September 30, 2024December 31, 2023
Other long-term investments:
Limited partnerships$93,167 82,460 
FHLB common stock210 202 
Mortgage loans35 42 
All other investments21 21 
Total other long-term investments$93,433 82,725 

We are a member of the Federal Home Loan Bank ("FHLB") of Dallas and such membership requires members to own stock in the FHLB. Our FHLB stock is carried at amortized cost, which approximates fair value.

(5) DEFERRED POLICY ACQUISITION COSTS AND COST OF INSURANCE ACQUIRED

DAC

The following tables roll forward the DAC and COIA balances for the nine months ended September 30, 2024 and 2023 by reporting cohort. Our reporting cohorts are Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and Permanent Limited Pay, which summarizes insurance policies

September 30, 2024 | 10-Q 18

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
with premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies.

Nine Months Ended September 30, 2024
(In thousands)
PermanentPermanent Limited PayOther BusinessTotal
Life Insurance:
Balance, beginning of year$105,552 14,075 1,213 120,840 
Capitalizations21,792 2,220 250 24,262 
Amortization expense(9,763)(740)(278)(10,781)
Balance, end of period117,581 15,555 1,185 134,321 
Home Service Insurance:
Balance, beginning of year43,280 10,564 1,084 54,928 
Capitalizations3,973 892 177 5,042 
Amortization expense(1,698)(323)(2)(2,023)
Balance, end of period45,555 11,133 1,259 57,947 
Consolidated:
Balance, beginning of year148,832 24,639 2,297 175,768 
Capitalizations25,765 3,112 427 29,304 
Amortization expense(11,461)(1,063)(280)(12,804)
Balance, end of period$163,136 26,688 2,444 192,268 


Nine Months Ended September 30, 2023
(In thousands)
PermanentPermanent Limited PayOther BusinessTotal
Life Insurance:
Balance, beginning of year$100,926 11,542 1,016 113,484 
Capitalizations11,220 2,385 353 13,958 
Amortization expense(8,859)(586)(197)(9,642)
Balance, end of period103,287 13,341 1,172 117,800 
Home Service Insurance:
Balance, beginning of year38,793 9,729 921 49,443 
Capitalizations5,026 865 185 6,076 
Amortization expense(1,542)(295)(65)(1,902)
Balance, end of period42,277 10,299 1,041 53,617 
Consolidated:
Balance, beginning of year139,719 21,271 1,937 162,927 
Capitalizations16,246 3,250 538 20,034 
Amortization expense(10,401)(881)(262)(11,544)
Balance, end of period$145,564 23,640 2,213 171,417 

DAC capitalization increased for the nine months ended September 30, 2024, compared to the same prior year period mainly from increased commissions from higher first year sales in our Life Insurance segment.

September 30, 2024 | 10-Q 19

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

COIA

Nine Months Ended September 30, 2024
(In thousands)
PermanentPermanent Limited PayOther BusinessTotal
Life Insurance:
Balance, beginning of year$249 695 406 1,350 
Amortization expense(12)(36)(33)(81)
Balance, end of period237 659 373 1,269 
Home Service Insurance:
Balance, beginning of year7,194 168 1,331 8,693 
Amortization expense(279)(5)(112)(396)
Balance, end of period6,915 163 1,219 8,297 
Consolidated:
Balance, beginning of year7,443 863 1,737 10,043 
Amortization expense(291)(41)(145)(477)
Balance, end of period$7,152 822 1,592 9,566 


Nine Months Ended September 30, 2023
(In thousands)
PermanentPermanent Limited PayOther BusinessTotal
Life Insurance:
Balance, beginning of year$267 750 444 1,461 
Amortization expense(14)(43)(29)(86)
Balance, end of period253 707 415 1,375 
Home Service Insurance:
Balance, beginning of year7,583 176 1,427 9,186 
Amortization expense(293)(6)(80)(379)
Balance, end of period7,290 170 1,347 8,807 
Consolidated:
Balance, beginning of year7,850 926 1,871 10,647 
Amortization expense(307)(49)(109)(465)
Balance, end of period$7,543 877 1,762 10,182 

(6) POLICYHOLDERS’ LIABILITIES

LIABILITY FOR FUTURE POLICY BENEFITS

The following tables summarize balances of and changes in the liability for future policy benefits for our reporting cohorts: Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy,

September 30, 2024 | 10-Q 20

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
and Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies.

September 30, 2024
(In thousands)
Life Insurance
Home Service Insurance
PermanentPermanent Limited PayTotalPermanentPermanent Limited PayTotal
Present Value of Expected Net Premiums:
Balance, beginning of year$244,917 13,260 258,177 98,831 14,926 113,757 
Beginning balance at original discount rate252,426 13,533 265,959 102,045 15,512 117,557 
Effect of changes in cash flow assumptions17,731 274 18,005 (462)21 (441)
Effect of actual variances from expected experience
(12,203)973 (11,230)(5,784)(3,526)(9,310)
Adjusted beginning of year balance257,954 14,780 272,734 95,799 12,007 107,806 
Issuances74,426 2,249 76,675 11,412 1,853 13,265 
Interest accrual8,342 380 8,722 3,193 394 3,587 
Net premiums collected(36,066)(2,420)(38,486)(9,116)892 (8,224)
Derecognition and other(5,530)92 (5,438)317 57 374 
Ending balance at original discount rate299,126 15,081 314,207 101,605 15,203 116,808 
Effect of changes in discount rates(1,303)(43)(1,346)(2,042)(325)(2,367)
Balance, end of period$297,823 15,038 312,861 99,563 14,878 114,441 
Present Value of Expected Future Policy Benefits:
Balance, beginning of year$973,350 195,122 1,168,472 211,946 122,784 334,730 
Beginning balance at original discount rate995,962 202,755 1,198,717 217,524 123,941 341,465 
Effect of changes in cash flow assumptions18,320 734 19,054 (502)(1,078)(1,580)
Effect of actual variances from expected experience
(9,656)2,916 (6,740)(5,880)(1,692)(7,572)
Adjusted beginning of year balance1,004,626 206,405 1,211,031 211,142 121,171 332,313 
Issuances75,132 2,352 77,484 11,407 1,858 13,265 
Interest accrual33,624 6,185 39,809 7,233 4,305 11,538 
Benefit payments(67,441)(13,281)(80,722)(11,399)(4,286)(15,685)
Derecognition and other(6,642)16 (6,626)301 51 352 
Ending balance at original discount rate1,039,299 201,677 1,240,976 218,684 123,099 341,783 
Effect of changes in discount rates(8,395)(6,067)(14,462)(5,797)(2,493)(8,290)
Balance, end of period$1,030,904 195,610 1,226,514 212,887 120,606 333,493 
Net liability for future policy benefits$733,081 180,572 913,653 113,324 105,728 219,052 
Less: Reinsurance recoverable1,308 — 1,308 — — — 
Net liability for future policy benefits, after reinsurance recoverable$731,773 180,572 912,345 113,324 105,728 219,052 

The Company performed its annual review of policy benefit reserves assumptions in the third quarter of 2024 and recorded the effects of changes in its cash flow assumptions, which resulted in a net increase in future policy benefit

September 30, 2024 | 10-Q 21

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
reserves, primarily driven by mortality and lapse assumptions that better reflect emerging experience for the new CICA Domestic block of business.

For the nine months ended September 30, 2024, the Life Insurance segment increased reserves compared to the same period in 2023 due to the unfavorable impact of actual versus expected experience related to mortality and lapses. There was little impact to the Home Service Insurance segment resulting from actual to expected experience for the nine months ended September 30, 2024 and 2023.

September 30, 2023
(In thousands)
Life InsuranceHome Service Insurance
PermanentPermanent Limited PayTotalPermanentPermanent Limited PayTotal
Present Value of Expected Net Premiums:
Balance, beginning of year$235,228 10,209 245,437 93,508 13,255 106,763 
Beginning balance at original discount rate247,601 10,682 258,283 100,225 14,394 114,619 
Effect of changes in cash flow assumptions(210)38 (172)(343)85 (258)
Effect of actual variances from expected experience
4,156 1,059 5,215 (5,631)(4,477)(10,108)
Adjusted beginning of year balance251,547 11,779 263,326 94,251 10,002 104,253 
Issuances20,918 2,608 23,526 13,854 3,107 16,961 
Interest accrual6,897 248 7,145 3,019 348 3,367 
Net premiums collected(31,480)(2,004)(33,484)(8,909)2,019 (6,890)
Derecognition and other567 240 807 475 113 588 
Ending balance at original discount rate248,449 12,871 261,320 102,690 15,589 118,279 
Effect of changes in discount rates(16,380)(501)(16,881)(9,438)(1,397)(10,835)
Balance, end of period$232,069 12,370 244,439 93,252 14,192 107,444 
Present Value of Expected Future Policy Benefits:
Balance, beginning of year$947,415 195,612 1,143,027 200,351 116,356 316,707 
Beginning balance at original discount rate996,169 208,051 1,204,220 214,188 121,908 336,096 
Effect of changes in cash flow assumptions(389)(702)(1,091)(257)331 74 
Effect of actual variances from expected experience
6,338 3,489 9,827 (5,472)(1,337)(6,809)
Adjusted beginning of year balance1,002,118 210,838 1,212,956 208,459 120,902 329,361 
Issuances21,360 2,798 24,158 13,854 3,115 16,969 
Interest accrual32,470 6,288 38,758 6,987 4,242 11,229 
Benefit payments(63,211)(16,732)(79,943)(12,246)(4,707)(16,953)
Derecognition and other97 42 139 464 109 573 
Ending balance at original discount rate992,834 203,234 1,196,068 217,518 123,661 341,179 
Effect of changes in discount rates(78,072)(18,778)(96,850)(23,934)(12,670)(36,604)
Balance, end of period$914,762 184,456 1,099,218 193,584 110,991 304,575 
Net liability for future policy benefits$682,693 172,086 854,779 100,332 96,799 197,131 


September 30, 2024 | 10-Q 22

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table reconciles the net liability for future policy benefits shown above to the liability for future policy benefits reported in the consolidated balance sheets.

September 30, 2024
September 30, 2023
(In thousands)Life
Insurance		Home Service
Insurance		ConsolidatedLife
Insurance		Home Service
Insurance		Consolidated
Life Insurance:
Permanent$731,773 113,324 845,097 682,693 100,332 783,025 
Permanent limited pay180,572 105,728 286,300 172,086 96,799 268,885 
Deferred profit liability29,572 29,158 58,730 27,616 26,138 53,754 
Other32,426 14,320 46,746 28,011 13,926 41,937 
Total life insurance974,343 262,530 1,236,873 910,406 237,195 1,147,601 
Accident & Health:
Other586 412 998 596 281 877 
Total future policy benefit reserves$974,929 262,942 1,237,871 911,002 237,476 1,148,478 

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for long-term duration contracts.

September 30, 2024September 30, 2023
(In thousands)Life
Insurance		Home Service
Insurance		Life
Insurance		Home Service
Insurance
Undiscounted:
Permanent:
Expected future gross premiums$731,580 448,837 604,059 459,405 
Expected future benefit payments1,586,017 487,851 1,483,068 484,239 
Permanent Limited Pay:
Expected future gross premiums46,270 76,032 47,868 77,544 
Expected future benefit payments322,188 320,318 325,964 320,563 
Discounted:
Permanent:
Expected future gross premiums$564,242 272,938 453,277 261,271 
Expected future benefit payments1,030,904 212,887 914,762 193,584 
Permanent Limited Pay:
Expected future gross premiums41,999 51,752 42,133 51,091 
Expected future benefit payments195,610 120,606 184,456 110,991 


September 30, 2024 | 10-Q 23

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables summarize the amount of revenue and interest related to long-term duration contracts recognized in the consolidated statement of operations and comprehensive income (loss):

Three Months Ended September 30,
Nine Months Ended September 30,
2024202320242023
(In thousands)
Gross PremiumsInterest ExpenseGross PremiumsInterest ExpenseGross PremiumsInterest ExpenseGross PremiumsInterest Expense
Life Insurance Segment:
Life Insurance:
Permanent$27,930 8,391 23,654 8,471 76,047 25,282 68,619 25,573 
Permanent Limited Pay3,395 2,269 3,555 2,308 11,067 6,739 11,333 6,811 
Other2,508 — 4,279 — 7,550 — 7,094 — 
Less:
Reinsurance1,828 — 392 — 3,559 — 1,452 — 
Total, net of reinsurance32,005 10,660 31,096 10,779 91,105 32,021 85,594 32,384 
Accident & Health:
Other197 — 53 — 565 — 537 — 
Less:
Reinsurance1 — 1 — 3 — 3 — 
Total, net of reinsurance196 — 52 — 562 — 534 — 
Total$32,201 10,660 31,148 10,779 91,667 32,021 86,128 32,384 
Home Service Insurance Segment:
Life Insurance:
Permanent$8,257 1,349 8,372 1,322 24,723 4,040 25,012 3,968 
Permanent Limited Pay1,837 1,636 2,154 1,599 5,905 4,894 6,425 4,777 
Other367 — 178 — 1,114 — 1,012 — 
Less:
Reinsurance5 — 6 — 24 — 23 — 
Total, net of reinsurance10,456 2,985 10,698 2,921 31,718 8,934 32,426 8,745 
Accident & Health:
Other256 — 244 — 762 — 667 — 
Total$10,712 2,985 10,942 2,921 32,480 8,934 33,093 8,745 

The following table provides the weighted-average durations of the liability for future policy benefits.

September 30, 2024September 30, 2023
(In years)Life
Insurance		Home Service
Insurance		Life
Insurance		Home Service
Insurance
Permanent:
Duration at original discount rate8.616.07.815.7
Duration at current discount rate8.615.68.215.6
Permanent Limited Pay:
Duration at original discount rate8.114.77.914.3
Duration at current discount rate7.814.77.614.4

September 30, 2024 | 10-Q 24

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The following table provides the weighted-average interest rates for the liability for future policy benefits.

September 30, 2024September 30, 2023
Life
Insurance		Home Service
Insurance		Life
Insurance		Home Service
Insurance
Permanent:
Interest rate at original discount rate4.87 %4.96 %4.92 %4.98 %
Interest rate at current discount rate4.61 %5.03 %5.62 %5.71 %
Permanent Limited Pay:
Interest rate at original discount rate4.28 %5.03 %4.29 %5.05 %
Interest rate at current discount rate4.63 %5.02 %5.60 %5.71 %

LIABILITY FOR POLICYHOLDERS’ ACCOUNT BALANCES

The following table presents the policyholders' account balances by range of guaranteed minimum crediting rates and the related range of the difference, in basis points, between rates being credited and the respective guaranteed minimums.
At Guaranteed Minimum1 Basis Point-50 Basis Points Above51 Basis Points-150 Basis Points AboveGreater Than 150 Basis Points AboveTotal
September 30, 2024
(In thousands)
Range of Guaranteed Minimum Crediting Rates:
0.00% - 1.49%
$816 — 726 34,772 36,314 
1.50% - 2.99%
8,840 176 37 27,092 36,145 
3.00% - 4.49%
101,646 346 16,039 — 118,031 
Greater or equal to 4.50%
31,519 — — — 31,519 
Total$142,821 522 16,802 61,864 222,009 

At Guaranteed Minimum1 Basis Point-50 Basis Points Above51 Basis Points-150 Basis Points AboveGreater Than 150 Basis Points AboveTotal
September 30, 2023
(In thousands)
Range of Guaranteed Minimum Crediting Rates:
0.00% - 1.49%
$746 — 1,138 37,233 39,117 
1.50% - 2.99%
30,256 675 63 — 30,994 
3.00% - 4.49%
104,304 10 — — 104,314 
Greater or equal to 4.50%
31,374 — — — 31,374 
Total$166,680 685 1,201 37,233 205,799 


September 30, 2024 | 10-Q 25

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following tables summarize balances of and changes in policyholders' account balances.

September 30, 2024
(In thousands, except for %)
Supplemental Contracts Without Life ContingenciesFixed Annuity
Dividend Accumulations
Premiums Paid in Advance
Balance, beginning of year$44,569 87,134 44,960 31,039 
Issuances17,642 2,132 598 4,211 
Premiums received126 3,015 4,173 500 
Interest credited1,496 2,043 1,377 1,348 
Less:
Surrenders and withdrawals— 6,997 4,056 6,498 
Benefit payments6,803 — — — 
Balance, end of period$57,030 87,327 47,052 30,600 
Weighted-average crediting rates4.00 %3.67 %3.53 %2.99 %
Cash surrender value$57,030 87,327 47,052 30,600 

September 30, 2023
(In thousands, except for %)
Supplemental Contracts Without Life ContingenciesFixed Annuity
Dividend Accumulations
Premiums Paid in Advance
Balance, beginning of year$32,995 86,807 41,663 34,603 
Issuances16,086 2,160 474 3,200 
Premiums received85 3,273 4,210 659 
Interest credited1,103 1,988 993 948 
Other1 — — — 
Less:
Surrenders and withdrawals— 7,647 3,238 6,098 
Benefit payments8,466 — — — 
Balance, end of period$41,804 86,581 44,102 33,312 
Weighted-average crediting rates4.01 %3.57 %3.05 %2.96 %
Cash surrender value$41,804 86,581 44,102 33,312 


September 30, 2024 | 10-Q 26

Table of Contents                                                

CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table reconciles policyholders' account balances shown above to the policyholders' account balance liability in the consolidated balance sheets.

As of September 30,
(In thousands)
20242023
Annuities:
Supplemental contracts without life contingencies$57,030 41,804 
Fixed annuity87,327 86,581 
Unearned revenue reserve1,481 1,524 
Total annuities$145,838 129,909 
Premiums paid in advance:
Premiums paid in advance$30,600 33,312 
Other1,820 2,141 
Total premiums paid in advance$32,420 35,453 

(7) REINSURANCE

In the normal course of business, the Company reinsures portions of certain policies that we underwrite to mitigate exposure to potential losses and/or to provide additional capacity for growth. In our international business, we generally retain $100,000 on any one individual life insurance policy and reinsure the death benefit amount above $100,000. We also reinsure 100% of our accidental death benefit rider coverage. In the second quarter of 2024, CICA Domestic entered into a coinsurance agreement with RGA Reinsurance Company ("RGA"). Under this agreement, CICA Domestic initially elected for RGA to reinsure 50% of its newly written final expense business.

Prior to 2024, the Company maintained catastrophic reinsurance for its Louisiana property and casualty business operated through Security Plan Fire Insurance Company. This reinsurance had a net retention on any one loss of $30,000, which was the maximum policy limit on any single risk. The Company ceased this business in June 2023 and thus did not renew this reinsurance.

Our amounts recoverable from reinsurers represent receivables from and reserves ceded to reinsurers.  We obtain reinsurance from multiple reinsurers. We monitor our reinsurance concentration as well as the financial strength ratings of our reinsurers. Their ratings by A.M. Best Company range from A- (Excellent) to A+ (Superior).  

Assumed and ceded life reinsurance activity is summarized as follows:


(In thousands)
September 30, 2024December 31, 2023
Aggregate assumed life insurance in force$3,605 3,772 
Aggregate ceded life insurance in force$712,565 619,597 
Net life insurance in force$4,480,563 4,306,429 


September 30, 2024 | 10-Q 27

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company's reinsurance recoverable on ceded reinsurance was $7.3 million and $4.0 million as of September 30, 2024 and December 31, 2023, respectively.  Premiums, claims and surrenders assumed and ceded and expenses ceded for all lines of business for the three and nine months ended September 30, 2024 and 2023 are summarized as follows:

 Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Premiums from short duration contracts:
  
Direct$449 283 1,376 3,920 
Ceded(14)(16)(16)(1,798)
Net premiums earned435 267 1,360 2,122 
Premiums from long duration contracts:
  
Direct44,295 42,156 126,351 119,353 
Assumed15 16 48 52 
Ceded(1,848)(413)(3,630)(1,526)
Net premiums earned42,462 41,759 122,769 117,879 
Total premiums earned$42,897 42,026 124,129 120,001 
Claims and surrenders assumed$22 23 97 90 
Claims and surrenders ceded
$(1,395)(133)(2,876)(657)
Commissions assumed and ceded
$(2,016)9 (2,957)26 
Other general expenses ceded$(341)— (497)— 

(8) COMMITMENTS AND CONTINGENCIES

LITIGATION AND REGULATORY ACTIONS

From time to time, we are subject to legal and regulatory actions relating to our business. We may incur defense costs, including attorneys' fees, and other direct litigation costs associated with defending claims. If we suffer an adverse judgment as a result of litigation claims, it could have a material adverse effect on our business, results of operations and financial condition.

Trade Secret Lawsuit

In the first quarter of 2024, a jury trial was held in the “trade secret lawsuit”. The trade secret lawsuit was filed in 2018 by Citizens, CICA Life Ltd. (Bermuda) and CICA Life Insurance Company of America (collectively, the “Citizens Companies,” “we,” "us" or "our") against certain former employees and independent consultants who we alleged unlawfully took Citizens’ confidential information in order to unfairly compete with us. Our claims against these parties included various unfair competition, tortious interference, breach of contract and other related claims.

In March 2024, the jury found that (i) Defendant Carlos Nalsen Landa (“Landa”), a former independent consultant, misappropriated the Citizens’ Companies' policyholder information, (ii) Citizens’ former chief underwriter, Michael P. Buchweitz (“Buchweitz”) and Randall Riley (“Riley”), a former Citizens executive and son of Citizens’ founder Harold E. Riley, failed to comply with their Citizens’ confidentiality agreements, and (iii) both Buchweitz and Riley intentionally interfered with former Chief Actuary Jonathan Pollio’s ("Pollio") Citizens’ confidentiality agreement. For Buchweitz, the jury also found that he did not have a good faith belief that he was acting in the bona fide exercise of his own rights when he interfered with Pollio’s Citizens’ confidentiality agreement. Despite these findings, the jury did not believe that the above-mentioned actions damaged the Citizens Companies economically and thus did not assess any monetary damages against any of the above parties. Additionally, the jury found that Citizens should

September 30, 2024 | 10-Q 28

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
pay Alexis Delgado (“Delgado”, a former independent consultant) and Landa approximately $1.3 million for “money had and received”, an equitable theory that claimed that the Citizens Companies would be unjustly enriched if they didn’t pay past and future commissions to Delgado and Landa. We accrued this expense at December 31, 2023.

On April 30, 2024, Defendants Riley (through his estate), Buchweitz and Delgado filed a motion against the Citizens Companies seeking payment of legal fees and a hearing was held on these matters on May 21, 2024. On July 26, 2024, the trial court awarded Riley and Buchweitz approximately $3.5 million of their legal fees. We accrued this expense in the quarter ended June 30, 2024.

We do not believe the jury properly found that Delgado or Landa were entitled to any prior or future commissions as there was no evidence that we actually held any amount of commissions that they claim they should have received. We also do not believe that Riley or Buchweitz are entitled to legal fees because they were found to have breached the contracts whose fee shifting provisions they sought to invoke.

We have not paid any amounts to Delgado, Landa, Riley, Buchweitz or any of their attorneys and intend to appeal the judgment against us. We purchased and filed an appeal bond in September 2024 to supercede enforcement of the judgment during the appeal process. If we aren't successful in our appeal, we may have to pay approximately $5 million as a result of the trade secret lawsuit. The accrued amounts are reflected as "other liabilities" on our balance sheet. Additionally, $1.3 million that is reported in cash and cash equivalents on our balance sheet is restricted while the appeal bond remains in place.

CONTRACTUAL OBLIGATIONS

As of September 30, 2024, CICA International is committed to fund investments up to $18.1 million related to limited partnerships previously described.

CREDIT FACILITY

On May 3, 2024, the Company renewed its $20 million senior secured revolving credit facility (the “Credit Facility”) with Regions Bank ("Regions"). The Credit Facility has a three-year term, maturing on May 5, 2027, and allows the Company to borrow up to $20 million for working capital purposes, capital expenditures and other corporate purposes.

Revolving loans may be requested by the Company in aggregate minimum principal amounts of $0.5 million per loan. At the Company's election, the revolving loans may either bear a rate (a fluctuating rate per annum) equal to the greatest of (a) Regions' prime rate, (b) the federal funds rate plus 0.50%, (c) the index rate plus 1.00% or (d) 0.75%. The Company is required to pay Regions an annual commitment fee of 0.375% of the unused portion of the Credit Facility in quarterly installments, which the Company expenses as it is incurred.

Obligations under the Credit Facility are secured by substantially all of the assets of the Company other than the equity interests in its subsidiaries, real estate owned by the Company, and other limited exceptions. The Credit Facility contains customary events of default and financial, affirmative and negative covenants, including but not limited to restrictions on indebtedness, liens, investments, asset dispositions and restricted payments. As of September 30, 2024, the Company had not borrowed any funds against the Credit Facility and was not in violation of any covenants.

(9) STOCKHOLDERS' EQUITY AND RESTRICTIONS

STOCK

Our Restated and Amended Articles of Incorporation authorize the issuance of 127,000,000 shares, of which 100,000,000 shares shall be Class A common stock, 2,000,000 shares shall be Class B common stock, and 25,000,000 shall be preferred stock. Both authorized classes of common stock are equal in all respects, except (a)

September 30, 2024 | 10-Q 29

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
each share of Class A common stock is entitled to receive twice the cash dividends paid on a per share basis to the Class B common stock, if any; and (b) the holders of the Class B common stock have the exclusive right to elect a simple majority of the Board of Directors of Citizens. Citizens currently has no outstanding preferred stock or Class B common stock other than that held in treasury.

A summary of the change in the number of shares of Class A common stock and treasury stock issued is as follows:

Nine Months Ended September 30,20242023
(In thousands)
Common Stock Class A
Treasury Stock
Common Stock Class ATreasury Stock
Balance at beginning of year53,883 5,330 53,758 4,937 
Stock issued for compensation340 — 122 — 
Acquisition of Class A shares— — — 325 
Balance at end of period54,223 5,330 53,880 5,262 

EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share.

Three Months Ended September 30,20242023
(In thousands, except per share amounts)
Basic and diluted earnings per share:
  
Numerator:  
Net income
$2,790 2,698 
Net income allocated to Class A common stock
$2,790 2,698 
Denominator:  
Weighted average shares of Class A outstanding - basic49,837 49,615 
Weighted average shares of Class A outstanding - diluted50,669 50,522 
Basic earnings per share of Class A common stock$0.06 0.06 
Diluted earnings per share of Class A common stock
$0.05 0.05 

Nine Months Ended September 30,20242023
(In thousands, except per share amounts)
Basic and diluted earnings per share:
Numerator:
Net income
$11,291 13,696 
Net income allocated to Class A common stock
$11,291 13,696 
Denominator:
Weighted average shares of Class A outstanding - basic49,687 49,739 
Weighted average shares of Class A outstanding - diluted50,519 50,647 
Basic earnings per share of Class A common stock$0.23 0.28 
Diluted earnings per share of Class A common stock
0.22 0.27 


September 30, 2024 | 10-Q 30

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
STATUTORY CAPITAL AND SURPLUS

Each of our domestic regulated insurance subsidiaries is required to meet stipulated regulatory capital requirements imposed by the U.S. National Association of Insurance Commissioners ("NAIC"). All domestic insurance subsidiaries exceeded the minimum capital requirements at September 30, 2024. On March 27, 2024, Citizens and the Colorado Division of Insurance entered into a capital maintenance agreement that specifies that Citizens will infuse capital as needed to ensure that CICA Domestic's RBC remains above 350%. As CICA Domestic's RBC exceeded 350% at September 30, 2024, no capital contribution was necessary.

CICA International is a Puerto Rico domiciled company. The Insurance Code of Puerto Rico does not specifically set forth minimum capital and surplus standards, but rather requires that an insurer submit a business plan for approval to the Office of the Commissioner of Insurance ("OIC") that includes proposed minimum capital and surplus. CICA International is required to maintain a minimum of $750,000 in capital and maintain a premium to surplus ratio of 7 to 1. CICA International began issuing new business as of January 1, 2023 and received the transfer of all of CICA Bermuda's in force insurance business as of August 31, 2023. At September 30, 2024, CICA International exceeded the required minimum capital and related ratio.

(10) SEGMENT AND OTHER OPERATING INFORMATION

The Company has two reportable segments:  Life Insurance and Home Service Insurance.  Our Life Insurance segment issues endowment contracts, which are principally accumulation contracts that incorporate an element of life insurance protection, and ordinary whole life insurance to non-U.S. residents through CICA International.  These contracts are designed to provide a fixed amount of insurance coverage over the life of the insured and may utilize rider benefits to provide additional coverage and annuity benefits to enhance accumulations. CICA Domestic issues ordinary whole life, final expense and life products with living benefits throughout the U.S.

Our Home Service Insurance segment operates through our subsidiaries SPLIC and MGLIC, and focuses on the life insurance needs of the middle- and lower-income markets in Louisiana, Mississippi and Arkansas.  SPLIC also issues critical illness policies. Our policies are sold and serviced through funeral homes and independent agents who sell policies, collect premiums and service policyholders.  SPFIC sold property insurance policies in Louisiana and Arkansas until operations were ceased effective June 30, 2023.

The Life Insurance and Home Service Insurance portions of the Company constitute separate businesses. In addition to the Life Insurance and Home Service Insurance business, the Company also operates other non-insurance portions of the Company ("Other Non-Insurance Enterprises"), which primarily include the Company’s IT and corporate-support functions.

The accounting policies of the reportable segments and Other Non-Insurance Enterprises are presented in accordance with U.S. GAAP and are the same as those described in the summary of significant accounting policies in our Form 10-K.  The Company evaluates profit and loss performance based on U.S. GAAP net income before federal income taxes for its two reportable segments. The Company's Other Non-Insurance Enterprises represents the only reportable difference between segments and consolidated operations.

September 30, 2024 | 10-Q 31

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life InsuranceHome Service InsuranceOther Non-Insurance EnterprisesConsolidated
Three Months Ended September 30, 2024
(In thousands)
Revenues:    
Premiums$32,201 10,696 — 42,897 
Net investment income13,578 3,552 247 17,377 
Investment related gains (losses), net936 (111)2 827 
Other income630 — — 630 
Total revenues47,345 14,137 249 61,731 
Benefits and expenses:   
Insurance benefits paid or provided:    
Claims and surrenders30,083 6,395 — 36,478 
Increase (decrease) in future policy benefit reserves(1,497)1,968 — 471 
Policyholder liability remeasurement (gain) loss1,681 (524)— 1,157 
Policyholders' dividends1,314 6 — 1,320 
Total insurance benefits paid or provided31,581 7,845 — 39,426 
Commissions9,549 3,408 — 12,957 
Other general expenses6,791 3,756 1,548 12,095 
Capitalization of deferred policy acquisition costs(8,855)(1,575)— (10,430)
Amortization of deferred policy acquisition costs3,837 656 — 4,493 
Amortization of cost of insurance acquired26 127 — 153 
Total benefits and expenses42,929 14,217 1,548 58,694 
Income (loss) before federal income tax$4,416 (80)(1,299)3,037 

September 30, 2024 | 10-Q 32

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life InsuranceHome Service InsuranceOther Non-Insurance EnterprisesConsolidated
Nine Months Ended September 30, 2024
(In thousands)
Revenues:    
Premiums$91,667 32,462 — 124,129 
Net investment income41,076 10,618 710 52,404 
Investment related gains (losses), net1,743 (179)(27)1,537 
Other income3,354 20 83 3,457 
Total revenues137,840 42,921 766 181,527 
Benefits and expenses:   
Insurance benefits paid or provided:    
Claims and surrenders86,616 17,505 — 104,121 
Increase (decrease) in future policy benefit reserves(4,959)4,829 — (130)
Policyholder liability remeasurement (gain) loss3,360 (524)— 2,836 
Policyholders' dividends3,731 17 — 3,748 
Total insurance benefits paid or provided88,748 21,827 — 110,575 
Commissions25,052 10,587 — 35,639 
Other general expenses19,752 11,176 9,144 40,072 
Capitalization of deferred policy acquisition costs(24,262)(5,042)— (29,304)
Amortization of deferred policy acquisition costs10,781 2,023 — 12,804 
Amortization of cost of insurance acquired81 396 — 477 
Total benefits and expenses120,152 40,967 9,144 170,263 
Income (loss) before federal income tax$17,688 1,954 (8,378)11,264 

September 30, 2024 | 10-Q 33

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life InsuranceHome Service InsuranceOther Non-Insurance EnterprisesConsolidated
Three Months Ended September 30, 2023
(In thousands)
Revenues:    
Premiums$31,148 10,878 — 42,026 
Net investment income13,661 3,459 252 17,372 
Investment related gains (losses), net(424)(370)(98)(892)
Other income884 — — 884 
Total revenues45,269 13,967 154 59,390 
Benefits and expenses:    
Insurance benefits paid or provided:    
Claims and surrenders32,419 5,304 — 37,723 
Increase (decrease) in future policy benefit reserves(5,587)1,707 — (3,880)
Policyholder liability remeasurement (gain) loss840 184 — 1,024 
Policyholders' dividends1,405 9 — 1,414 
Total insurance benefits paid or provided29,077 7,204 — 36,281 
Commissions5,406 4,038 — 9,444 
Other general expenses6,036 4,293 1,620 11,949 
Capitalization of deferred policy acquisition costs(5,141)(1,991)— (7,132)
Amortization of deferred policy acquisition costs3,313 743 — 4,056 
Amortization of cost of insurance acquired28 123 — 151 
Total benefits and expenses38,719 14,410 1,620 54,749 
Income (loss) before federal income tax$6,550 (443)(1,466)4,641 

September 30, 2024 | 10-Q 34

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Life InsuranceHome Service InsuranceOther Non-Insurance EnterprisesConsolidated
Nine Months Ended September 30, 2023
(In thousands)
Revenues:    
Premiums$86,128 33,873 — 120,001 
Net investment income40,470 10,379 838 51,687 
Investment related gains (losses), net(123)(283)(71)(477)
Other income2,619 1 — 2,620 
Total revenues129,094 43,970 767 173,831 
Benefits and expenses:    
Insurance benefits paid or provided:    
Claims and surrenders83,826 16,972 — 100,798 
Increase (decrease) in future policy benefit reserves(9,270)3,468 — (5,802)
Policyholder liability remeasurement (gain) loss2,541 319 — 2,860 
Policyholders' dividends3,761 22 — 3,783 
Total insurance benefits paid or provided80,858 20,781 — 101,639 
Commissions14,930 12,410 — 27,340 
Other general expenses17,141 13,060 5,276 35,477 
Capitalization of deferred policy acquisition costs(13,958)(6,076)— (20,034)
Amortization of deferred policy acquisition costs9,642 1,902 — 11,544 
Amortization of cost of insurance acquired86 379 — 465 
Total benefits and expenses108,699 42,456 5,276 156,431 
Income (loss) before federal income tax$20,395 1,514 (4,509)17,400 

(11) INCOME TAXES

The effective tax rate is the ratio of tax expense or tax benefit over pre-tax income. The effective tax rate was 8.1% and (0.2)% for the three and nine months ended September 30, 2024, compared to 41.9% and 21.3% for the same periods in 2023, respectively. CICA Bermuda and CICA International are considered controlled foreign corporations for federal income tax purposes. As a result, the insurance activity of CICA Bermuda and CICA International are subject to Subpart F of the Internal Revenue Code and are included in Citizens’ taxable income. Due to the 0% enacted tax rate in Bermuda for all periods prior to the transfer of CICA Bermuda's insurance in force business to CICA International, there are no deferred taxes recorded for CICA Bermuda's temporary differences. The Government of Puerto Rico approved a tax exemption decree for CICA International which freezes the income tax rate at 0% on taxable earnings up to $1.2 million and 4% on taxable earnings in excess of $1.2 million for a minimum of 15 years. The effective tax rate varies from the prevailing corporate federal income tax rate of 21.0% mainly due to the impact of Subpart F and uncertain tax positions.

As a result of the August 31, 2023 transfer of CICA Bermuda's in force business to CICA International, the Company's consolidated deferred federal income tax liability was reduced by $4.3 million due to the difference in the tax rates in the jurisdictions in which the companies operate. Since the transfer was between companies under common control, the $4.3 million reduction in the deferred federal income tax liability was recorded as a credit to equity, $1.3 million of which increased retained earnings and $3.0 million of which reduced accumulated other comprehensive income (loss), based on the nature of the tax components.


September 30, 2024 | 10-Q 35

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CITIZENS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At September 30, 2024 and 2023, we determined it was more likely than not that a portion of our capital deferred tax assets would not be realized in their entirety. The Company recorded valuation allowances of $3.8 million and $6.2 million, respectively, through Other Comprehensive Income (Loss).

(12) OTHER COMPREHENSIVE INCOME (LOSS)

The changes in the components of other comprehensive income (loss) are reported net of the effects of income taxes of 21% for domestic entities and 4% for Puerto Rican entities for the three and nine months ended September 30, 2024 and 2023, as indicated below.

Three Months Ended September 30,20242023
(In thousands)AmountTax EffectTotalAmountTax EffectTotal
Unrealized gains (losses):   
Unrealized holding gains (losses) arising during the period$59,101 (4,360)54,741 (59,817)8,717 (51,100)
Reclassification adjustment for losses (gains) included in net income (loss)(100)21 (79)419 (88)331 
Unrealized holding gains (losses), net59,001 (4,339)54,662 (59,398)8,629 (50,769)
Change in current discount rate for liability for future policy benefits(45,404)3,983 (41,421)60,054 (7,589)52,465 
Other comprehensive income (loss)$13,597 (356)13,241 656 1,040 1,696 
Nine Months Ended September 30,20242023
(In thousands)AmountTax EffectTotalAmountTax EffectTotal
Unrealized gains (losses):   
Unrealized holding gains (losses) arising during the period$31,427 (2,169)29,258 (36,811)7,548 (29,263)
Reclassification adjustment for losses (gains) included in net income
547 (115)432 481 (101)380 
Unrealized holding gains (losses), net31,974 (2,284)29,690 (36,330)7,447 (28,883)
Change in current discount rate for liability for future policy benefits(5,887)(331)(6,218)45,825 (6,565)39,260 
Other comprehensive income (loss)$26,087 (2,615)23,472 9,495 882 10,377 

(13) RELATED PARTY TRANSACTIONS

The Company has various routine related party transactions in conjunction with our holding company structure, such as management service agreements related to costs incurred, a tax sharing agreement between entities, and inter-company dividends and capital contributions. There were no changes related to these relationships during the nine months ended September 30, 2024 except as described in Note 1. Financial Statements under Basis of Presentation and Consolidation.  See our Form 10-K for a comprehensive discussion of related party transactions.

(14) SUBSEQUENT EVENTS

The Company has evaluated the impact of subsequent events as defined by the accounting guidance through the date this report was issued and determined that no other significant subsequent events need to be recognized or disclosed at this time.

September 30, 2024 | 10-Q 36

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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS
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, 2023, 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 Report 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, 2023 to September 30, 2024 and the material changes in our results of operations for the three and nine months ended September 30, 2024 as compared to the same periods in 2023. We also discuss in the MD&A any trends that we believe may materially affect our future operations or financial condition.

OVERVIEW

For 55 years, we have been fulfilling the needs of our policyholders and their families by providing insurance products that offer both living and death benefits. Citizens conducts insurance related operations through its insurance subsidiaries, which provide benefits to policyholders globally. We specialize in offering primarily ordinary 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.


September 30, 2024 | 10-Q 37

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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 (i.e., premium revenues)
•Investments
•Claims and surrenders
•Operating expenses
•Actuarial assumptions

Premium revenues and investment income are our two primary sources of revenue and thus key to our profitability.

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.

We believe premium statistics are meaningful to gaining an understanding of, among other things, the attractiveness of our new 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 the prior periods, and how we view trends with respect to sales and retention.

Over the last couple of years, we began our "white label" program to expand our distribution by expanding CICA Domestic's state licenses, developing new final expense and living benefit products, and filing these new products in multiple states. As a result, in the past year, we have significantly expanded our domestic distribution in the Life Insurance segment and first year premiums have almost doubled in this segment quarter-over-quarter and year-to-date as compared to 2023. We incur significant upfront costs in acquiring new business such as this, including the payment of sales commissions and underwriting costs, and thus in order to provide more capacity for growth, in the second quarter of 2024, we entered into a coinsurance agreement with RGA Reinsurance Company ("RGA"). Under this agreement, CICA Domestic initially elected for RGA to reinsure 50% of its newly written final expense business, which means that we cede 50% of premiums received and benefits paid in our domestic final expense business to RGA. We refer to "direct" premiums as all premiums received and "net" or "total" premiums as all premiums received less premiums ceded to RGA and our other reinsurers.

Because we ceased operations in our property insurance business effective June 30, 2023, the premiums charts below only reflect life insurance and accident and health insurance ("A&H") direct premium results.

First Year Premiums. In addition to increased first year premiums due to our domestic growth discussed above, first year premiums in our international business have increased in the nine months ended September 30, 2024, as compared to the same period in 2023 as we continue to work with our distribution partners to expand sales.

42964297
Renewal Premiums. Our renewal life and A&H premium revenues in the three and nine months ended September 30, 2024 slightly decreased primarily due to the impact of a higher level of surrenders and matured

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endowments in our international business during the last few years, which has led to a lower number of policies paying renewal premiums.

46234624
Investment Income. Our net investment income increased for both the three and nine months ended September 30, 2024 compared to the same prior year periods, due primarily to investment income from our limited partnership investments and a growing diversified invested asset base.

48684869

Claims and Surrenders. Payment of policyholder benefits for claims and surrenders is our largest expense and thus also key to our profitability. The three largest components of this expense are reflected in the graphs below. In the three and nine months ended September 30, 2024 compared to the prior year periods,

•death claim benefits increased due to the significant growth in our domestic life in force business as well as a higher volume of reported claims in our Home Services Insurance segment,
•surrenders decreased as we continue to focus on retention efforts, and
•matured endowments increased as expected due to many of our endowment policies reaching their contractual maturity dates.

While surrenders and matured endowments do not significantly affect current profitability since reserves are released in a corresponding amount of the surrendered policy or matured endowment benefit payment, they

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negatively affect future renewal premium revenue and thus have a greater impact to future profitability versus current profitability.
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Operating Expenses. Operating expenses are our second largest expense and thus also drive our operating results. Our general operating expenses for the three and nine months ended September 30, 2024 increased compared to the prior year periods. The primary reason for the increase in the nine months ended September 30, 2024 was the accrual of $3.5 million in legal fees awarded to certain defendants in the trade secret lawsuit. We have not paid any of these fees and intend to appeal the judgment against us. See Part I, Item 1, Note 8. Commitments and Contingencies, as well as Part II, Item 1, Legal Proceedings - Trade Secret Lawsuit for additional details. To a lesser extent, the increase was also due to our continued investment in the growth of our business and costs incurred as we transitioned to a new CEO.
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Actuarial Assumptions. The actuarial assumptions that underlie our reserves are based upon our best estimates of mortality, lapses and discount rates. Our results will be affected to the extent there is a variance between our actuarial assumptions and actual experience.

As discussed above, our domestic growth in the Life Insurance segment has been significantly expanded. Our current profitability is affected by the amount of reserves we have to hold for this new business, and how closely actual experience matches our actuarial assumptions. The actuarial assumptions that underlie our reserves are

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based upon our best estimates of mortality and lapses and are inherently more difficult to predict for a new product line. Actuarial assumptions are continually monitored and are expected to become less volatile as this business matures and we develop more experience.

FINANCIAL HIGHLIGHTS
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Our net income before federal income taxes decreased to $3.0 million in the three months ended September 30, 2024 from $4.6 million in the three months ended September 30, 2023. While our revenues increased by $2.3 million due primarily to higher first year premiums and investment related gains, our net income decreased due primarily to (i) lower renewal premiums resulting from high surrenders and matured endowments in the past few years, and (ii) an increase in total benefits and expenses paid including (a) an increase in future policyholder benefit reserves primarily related to increases in our domestic life in force business and issuance of supplemental contracts; (b) policyholder remeasurement loss related to updating our actuarial assumptions in our CICA Domestic business; and (c) an increase in death claims.

Our net income before federal income taxes decreased from $17.4 million in the nine months ended September 30, 2023 to $11.3 million in the nine months ended September 30, 2024. In addition to the reasons described above, during the nine month period we accrued $3.5 million in legal fees awarded to the certain defendants in the trade secret lawsuit.

Our basic net income per share of Class A common stock was $0.06 and $0.23 for the three and nine months ended September 30, 2024, respectively, compared to $0.06 and $0.28 in the same prior year periods.

Financial Condition at September 30, 2024

•Total assets of $1.7 billion
•Total investments of $1.4 billion; fixed maturity securities comprised 88% of total investments
•$5.2 billion of direct insurance in force
•No debt
•Diluted net income per share of Class A common stock of $0.22
•Book value per share of Class A common stock of $4.16

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. See Part II, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Events that Impacted Our Business" in our Annual Report on Form 10-K for the period ended December 31, 2023 for a discussion of certain events that have impacted and continue to impact our business, including inflation and market volatility, high interest rates and ceasing operations of our property insurance business. See also Part I, Item 1, Note 8. Commitments and Contingencies, as well as Part II, Item 1, Legal Proceedings - Trade Secret Lawsuit for a discussion of the trade secret lawsuit, which has impacted our results of operations and could negatively impact our cash if we do not succeed in our appeal.

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

Nine Months Ended September 30,20242023
 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
Ordinary Life Policies:
Life Insurance:
International$336,467,011 3,172 $106,074 $271,387,985 2,865 $94,725 
Domestic364,803,806 32,303 11,293 6,479,830 616 10,519 
Total Life Insurance701,270,817 35,475 19,768 277,867,815 3,481 79,824 
Home Service Insurance175,988,517 13,800 12,753 226,307,076 17,501 12,931 
Total$877,259,334 49,275 $504,174,891 20,982 

As we previously disclosed, our strategic initiatives include the introduction of new products tailored to our specific markets and expansion of our distribution channels both domestically and internationally. These new products and distribution channels helped drive the 74% increase in total insurance issued in the nine months ended September 30, 2024 as compared to the prior year period.

The growth in our Life Insurance segment is primarily attributable to strong sales of our new domestic final expense products, which accounted for over half of the insurance issued through September 30, 2024. The Life Insurance segment also benefited from sales of our international whole life product, which accounted for 68% of total insurance issued internationally in this segment for the nine months ended September 30, 2024.

Insurance issued in our Home Service Insurance segment decreased for the nine months ended September 30, 2024 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. We also believe the impact of inflation on the cost of living has affected new sales since the customer demographic is primarily middle- and lower-income individuals.



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CONSOLIDATED RESULTS OF OPERATIONS

REVENUES

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

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Revenues:    
Premiums:    
Life insurance$42,461 41,794 122,823 118,020 
Accident and health insurance452 296 1,324 1,201 
Property insurance(16)(64)(18)780 
Net investment income17,377 17,372 52,404 51,687 
Investment related gains (losses), net827 (892)1,537 (477)
Other income630 884 3,457 2,620 
Total revenues$61,731 59,390 181,527 173,831 

Total revenues increased in the three and nine months ended September 30, 2024 as compared to the prior year periods, due to significantly higher first year life insurance premiums, investment related gains and higher other income in the nine month period due to supplemental contract revenue.

The Company stopped accepting premiums for property insurance at the end of May 2023 and ceased these operations on June 30, 2023. Therefore, the table below shows a summary of our life and A&H premiums for the periods indicated.

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)
2024202320242023
Life and A&H premiums:
  
Direct premiums:
First year$8,790 5,185 22,614 13,637 
Renewal35,958 37,303 105,119 107,061 
Total direct life and A&H premiums
44,748 42,488 127,733 120,698 
Reinsurance
(1,835)(398)(3,586)(1,477)
Total life and A&H premiums
$42,913 42,090 124,147 119,221 

Premium Income. Direct premiums increased 5% and 6% in the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023 due to strong first year premium growth in our Life Insurance segment. Renewal premiums decreased in both periods due to the high level of surrenders and matured endowments in the prior year, which negatively affect renewal premiums in the current periods.

Reinsurance ceded premiums increased in the three and nine months ended September 30, 2024 compared to the same periods in 2023 due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.


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Net Investment Income. A summary of our net investment income and annualized net investment income performance is as follows:

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands, except for %)2024202320242023
Gross investment income:    
Fixed maturity securities$15,263 15,005 45,743 44,956 
Equity securities76 127 224 451 
Policy loans1,369 1,478 4,207 4,531 
Long-term investments1,151 1,249 3,643 3,261 
Other investment income230 166 651 430 
Total investment income18,089 18,025 54,468 53,629 
Investment expenses(712)(653)(2,064)(1,942)
Net investment income$17,377 17,372 52,404 51,687 
Net investment income, annualized$69,872 68,916 
Average invested assets, at amortized cost$1,522,602 1,520,389 
Annualized yield on average invested assets4.59 %4.53 %

Due to insurance regulations, fixed maturity securities constitute the vast majority (or 88%) of our investment portfolio based on fair value and thus provide the vast majority of our investment income. Our total investment income increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to a higher average portfolio yield on our fixed maturity securities in the current period.

Investment Related Gains (Losses), Net.  We recorded investment related gains of $0.8 million and $1.5 million during the three and nine months ended September 30, 2024, respectively, compared to investment related losses of $0.9 million and $0.5 million during the same prior year periods. The gains and losses are primarily related to the fair value change of our limited partnership and equity security investments, mostly in our Life Insurance segment, due to the volatility in equity markets over the past year. We did not sell these investments; 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.


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BENEFITS AND EXPENSES
 Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
 
Benefits and expenses:    
Insurance benefits paid or provided:    
Claims and surrenders$36,478 37,723 104,121 100,798 
Increase (decrease) in future policy benefit reserves471 (3,880)(130)(5,802)
Policyholder liability remeasurement (gain) loss1,157 1,024 2,836 2,860 
Policyholders' dividends1,320 1,414 3,748 3,783 
Total insurance benefits paid or provided39,426 36,281 110,575 101,639 
Commissions12,957 9,444 35,639 27,340 
Other general expenses12,095 11,949 40,072 35,477 
Capitalization of deferred policy acquisition costs(10,430)(7,132)(29,304)(20,034)
Amortization of deferred policy acquisition costs4,493 4,056 12,804 11,544 
Amortization of cost of insurance acquired153 151 477 465 
Total benefits and expenses$58,694 54,749 170,263 156,431 
 
Payments of claims and surrenders benefits constitute the majority of our expenses. Total benefits and expenses increased in the three and nine months ended September 30, 2024 as compared to same periods in 2023 driven primarily by the costs related to our new CICA domestic business, as described above as well as a higher volume of reported claims in our Home Services Insurance segment. The $3.5 million accrual of legal fees awarded to the defendants in the trade secret lawsuit, reflected in other general expenses, also contributed to the increase in the nine months ended September 30, 2024.

Claims and Surrenders.  
Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
 
Claims and surrenders:
Death claim benefits$6,768 4,984 18,924 16,002 
Surrender benefits13,621 17,264 40,082 44,570 
Endowment benefits1,865 1,932 5,564 6,117 
Matured endowment benefits12,644 11,080 34,452 28,907 
Property claims— 129 (6)837 
A&H and other policy benefits1,580 2,334 5,105 4,365 
Total claims and surrenders$36,478 37,723 104,121 100,798 

Death claim benefits are being impacted by the increase in policies issued over the past few years and an increase in volume of claims reported in our Home Service Insurance segment.

Surrender benefits decreased in the three and nine months ended September 30, 2024 compared to the same periods in 2023. Surrenders are primarily related to international policies that have passed their surrender charge period. We have implemented retention initiatives over the past few years, which we believe are helping to decrease surrenders.

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Matured endowment benefits increased for the three and nine months ended September 30, 2024 compared to the same periods in 2023. We anticipated this increase based upon the contractual maturity dates of the policies.

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 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 and nine months ended September 30, 2024, the change in future policy benefit reserves increased due to the amount of reserves on new insurance issued and the in force book of business somewhat offset by released reserves in connection with higher 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). Additionally, in the third quarter of each year, we update our cash flow assumptions to recalculate the NPR, with the impact on the liability for future policy benefits recognized as a policyholder liability remeasurement on a retrospective catch-up basis. In 2024, remeasurement (gain) loss was negatively affected by updates to mortality and lapse assumptions that better reflect emerging experience for the new CICA Domestic block of business.

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 increases in first year sales in the three and nine months ended September 30, 2024 led to an increase in commission related expenses in both periods as compared to the prior year periods.

Capitalization of Deferred Policy Acquisition Costs. 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 and nine months ended September 30, 2024, 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 and nine months ended September 30, 2024, compared to the same periods in 2023. 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
•Home Service Insurance

These segments are reported in accordance with U.S. GAAP.  The Company evaluates profit and loss performance based on net income 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.


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

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Income (loss) before federal income tax:
Segments:
  Life Insurance$4,416 6,550 17,688 20,395 
  Home Service Insurance(80)(443)1,954 1,514 
Total segments4,336 6,107 19,642 21,909 
Other Non-Insurance Enterprises(1,299)(1,466)(8,378)(4,509)
Total income before federal income tax
$3,037 4,641 11,264 17,400 

LIFE INSURANCE

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

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Revenues:    
Premiums$32,201 31,148 91,667 86,128 
Net investment income13,578 13,661 41,076 40,470 
Investment related gains (losses), net936 (424)1,743 (123)
Other income630 884 3,354 2,619 
Total revenues47,345 45,269 137,840 129,094 
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders30,083 32,419 86,616 83,826 
Increase (decrease) in future policy benefit reserves(1,497)(5,587)(4,959)(9,270)
Policyholder liability remeasurement (gain) loss1,681 840 3,360 2,541 
Policyholders' dividends1,314 1,405 3,731 3,761 
Total insurance benefits paid or provided31,581 29,077 88,748 80,858 
Commissions9,549 5,406 25,052 14,930 
Other general expenses6,791 6,036 19,752 17,141 
Capitalization of deferred policy acquisition costs(8,855)(5,141)(24,262)(13,958)
Amortization of deferred policy acquisition costs3,837 3,313 10,781 9,642 
Amortization of cost of insurance acquired26 28 81 86 
Total benefits and expenses42,929 38,719 120,152 108,699 
Income before federal income tax
$4,416 6,550 17,688 20,395 

In our Life Insurance segment, income before federal income tax was $4.4 million and $17.7 million during the three and nine months ended September 30, 2024, respectively, compared to $6.6 million and $20.4 million during the

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same prior year periods. Our higher revenues were offset by increases in reserves, higher policyholder liability remeasurement loss and higher general expenses supporting our CICA Domestic growth.

Life Insurance segment premium breakout is detailed below.

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Premiums:    
Direct premiums:
First year$7,541 3,796 18,621 9,195 
Renewal26,490 27,744 76,608 78,387 
Total direct premiums34,031 31,540 95,229 87,582 
Reinsurance
(1,830)(392)(3,562)(1,454)
Total premiums$32,201 31,148 91,667 86,128 

Premiums.  Our total premiums increased by 3% and 6% in the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023 due to the 62% and 78% increase, net of reinsurance, respectively, in first year premiums. First year premiums rose significantly due to sales of our new products and expanded domestic distribution. Renewal premiums decreased in the three and nine months ended September 30, 2024 as compared to the same prior year periods. As described above, this decline is due to high surrenders and matured endowments over the last several years.

The increase in reinsurance ceded premiums in the three and nine months ended September 30, 2024, compared to the same periods in 2023, is due to our new coinsurance agreement with RGA entered in the second quarter of 2024 related to our CICA Domestic business.

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 80 different countries across the globe. The following table sets forth our premiums by location for the three and nine months ended September 30, 2024 and 2023.
Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
International premiums:
  
Colombia$6,512 6,077 18,538 18,415 
Taiwan3,520 3,814 11,679 12,706 
Venezuela3,828 3,804 10,806 11,208 
Ecuador3,421 3,479 9,610 9,882 
Argentina2,790 2,550 7,561 7,130 
Other Non-U.S.9,935 9,866 28,282 28,241 
Total international premiums
30,006 29,590 86,476 87,582 
Domestic premiums4,507 972 10,211 2,865 
Reinsurance and change in premium accruals
(2,312)586 (5,020)(4,319)
Total premiums
$32,201 31,148 91,667 86,128 


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Investment Related Gains (Losses), Net.  We recorded investment related gains of $0.9 million and $1.7 million during the three and nine months ended September 30, 2024, respectively, compared to investment related losses of $0.4 million and $0.1 million during the same prior year periods, resulting primarily from the change in estimated fair market value of our limited partnership investments.
 
Claims and Surrenders. The following table sets forth our primary claims and surrender benefits paid within our Life Insurance segment for the three and nine months ended September 30, 2024 compared to the same periods in 2023.

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Claims and surrenders:
Death claim benefits$1,614 978 4,798 3,117 
Surrender benefits12,502 16,317 37,312 41,927 
Endowment benefits1,862 1,930 5,558 6,111 
Matured endowment benefits12,481 10,912 33,957 28,447 
A&H and other policy benefits1,624 2,282 4,991 4,224 
Total claims and surrenders$30,083 32,419 86,616 83,826 

During the three and nine months ended September 30, 2024 and 2023, 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. We expect this trend to continue over the next few years. Surrender benefits decreased for the three and nine months ended September 30, 2024 compared to the prior year periods which we believe is due to our retention efforts. Death claim benefits increased for the three and nine months ended September 30, 2024, compared to the prior year period as we saw a higher number of reported claims due to the increase in policies issued, primarily in our new domestic business. Mortality experience is closely monitored by the Company as a key performance indicator and fluctuates from quarter-to-quarter based on reported claims.

Increase (Decrease) in Future Policy Benefit Reserves. The change in future policy benefit reserves for the three and nine months ended September 30, 2024 and 2023 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 insurance issued and normal increases in our in force block of business policy benefit reserves.

Policyholder Liability Remeasurement (Gain) Loss. The third quarter update to mortality and lapse assumptions for CICA Domestic negatively affected our policyholder liability remeasurement loss. This was partially offset by better than expected surrender experience in our international business.


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HOME SERVICE INSURANCE

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

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Revenues:    
Premiums$10,696 10,878 32,462 33,873 
Net investment income3,552 3,459 10,618 10,379 
Investment related gains (losses), net(111)(370)(179)(283)
Other income— — 20 1 
Total revenues14,137 13,967 42,921 43,970 
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders6,395 5,304 17,505 16,972 
Increase (decrease) in future policy benefit reserves1,968 1,707 4,829 3,468 
Policyholder liability remeasurement (gain) loss(524)184 (524)319 
Policyholders' dividends6 9 17 22 
Total insurance benefits paid or provided7,845 7,204 21,827 20,781 
Commissions3,408 4,038 10,587 12,410 
Other general expenses3,756 4,293 11,176 13,060 
Capitalization of deferred policy acquisition costs(1,575)(1,991)(5,042)(6,076)
Amortization of deferred policy acquisition costs656 743 2,023 1,902 
Amortization of cost of insurance acquired127 123 396 379 
Total benefits and expenses14,217 14,410 40,967 42,456 
Income (loss) before federal income tax
$(80)(443)1,954 1,514 

In our Home Service Insurance segment, we reported a loss before federal income tax of $0.1 million and income of $2.0 million in the three and nine months ended September 30, 2024, respectively, as compared to loss of $0.4 million and income of $1.5 million in the prior year periods. The higher income is primarily driven by a decrease in other general expenses and partially due to ceasing our property insurance operations as of June 30, 2023, which also impacted premium revenue, somewhat offset by higher death claims.

Home Service Insurance segment life and A&H premium breakout is detailed below.

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Direct life and A&H premiums:
    
First year$1,249 1,390 3,993 4,442 
Renewal9,468 9,558 28,511 28,674 
Total direct life and A&H premiums
$10,717 10,948 32,504 33,116 


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Premiums. Our life and A&H premiums declined in the three and nine months ended September 30, 2024, respectively, compared to the same prior year periods. 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 EndedNine Months Ended
September 30,September 30,
(In thousands)2024202320242023
Claims and surrenders:
Death claim benefits$5,154 4,006 14,126 12,885 
Surrender benefits1,119 947 2,770 2,643 
Endowment benefits3 2 6 6 
Matured endowment benefits163 168 495 460 
Property claims— 129 (6)837 
A&H and other policy benefits(44)52 114 141 
Total claims and surrenders$6,395 5,304 17,505 16,972 

The majority of claims and surrender benefits in our Home Service Insurance segment are death claim benefits. Death claim benefits increased in the three and nine months ended September 30, 2024 compared to the same prior year periods due to higher 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.

Other General Expenses. General expenses decreased in the three and nine months ended September 30, 2024 compared to the same periods in 2023, primarily due to ceasing our property insurance business as discussed above.

OTHER NON-INSURANCE ENTERPRISES

Three Months EndedNine Months Ended
September 30,September 30,
(In thousands)
2024202320242023
Loss before federal income tax
$(1,299)(1,466)(8,378)(4,509)

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 nine months ended September 30, 2024 compared to the same period in 2023 is the legal accrual described above.

INVESTMENTS

Our investments are an integral part of our business success. Our cash and invested assets at September 30, 2024 were $1.5 billion, of which 86% 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.

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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS

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 and invested assets.

Carrying ValueSeptember 30, 2024December 31, 2023
(In thousands, except for %)Amount%Amount%
Cash, cash equivalents and invested assets:
Fixed maturity securities:    
U.S. Treasury and U.S. Government-sponsored enterprises$9,753 0.7 %$9,715 0.7 %
Corporate832,624 56.4 787,607 55.1 
States and political subdivisions (1)
278,213 18.8 287,231 20.1 
Mortgage-backed (2)
99,464 6.7 97,294 6.8 
Asset-backed53,443 3.6 57,134 4.0 
Total fixed maturity securities1,273,497 86.2 1,238,981 86.7 
Cash and cash equivalents32,382 2.2 26,997 1.8 
Other investments:    
Policy loans72,463 4.9 75,359 5.3 
Equity securities5,716 0.4 5,282 0.4 
Other long-term investments93,433 6.3 82,725 5.8 
Total cash, cash equivalents and invested assets$1,477,491 100.0 %$1,429,344 100.0 %
(1) Includes $119.6 million and $124.2 million of securities guaranteed by third parties at September 30, 2024 and December 31, 2023, respectively.
(2) Includes $98.3 million and $96.1 million of U.S. Government-sponsored enterprises at September 30, 2024 and December 31, 2023, respectively.

The carrying value of the Company’s fixed maturity securities investment portfolio at September 30, 2024 was $1.27 billion compared to $1.24 billion at December 31, 2023. The distribution of the credit ratings of our portfolio of fixed maturity securities by carrying value as of September 30, 2024 did not materially change from December 31, 2023 – the weighted average was “A” at both dates.

Cash and cash equivalents increased as of September 30, 2024 from December 31, 2023 and fluctuates from period-to-period primarily due to the timing of operating and investing activities.

Other long-term investments increased by $10.7 million as of September 30, 2024 from December 31, 2023 due to additional funding and increases 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 September 30, 2024 and December 31, 2023 included $278.2 million and $287.2 million, respectively, of securities that are obligations of states and political subdivisions, including municipalities (collectively referred to as the municipal bond portfolio).


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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS
The Company's municipal bond 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 September 30, 2024.

General ObligationSpecial RevenueOtherTotal% 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$12,474 12,390 6,827 6,888 — — 19,301 19,278 6.4 %
AA43,781 43,712 116,000 128,894 8,737 8,815 168,518 181,421 60.5 
A4,187 4,363 74,752 82,445 2,183 2,126 81,122 88,934 29.7 
BBB541 557 4,197 4,759 1,436 1,450 6,174 6,766 2.3 
BB and other3,028 3,152 70 71 — — 3,098 3,223 1.1 
Total$64,011 64,174 201,846 223,057 12,356 12,391 278,213 299,622 100.0 %
State and political subdivision fixed maturity securities excluding third-party guarantees:
AA$31,011 30,935 34,590 37,443 6,139 6,082 71,740 74,460 24.9 %
A15,133 15,215 87,657 95,749 3,779 3,859 106,569 114,823 38.3 
BBB2,997 3,173 20,394 21,854 — — 23,391 25,027 8.4 
BB and other14,870 14,851 59,205 68,011 2,438 2,450 76,513 85,312 28.4 
Total$64,011 64,174 201,846 223,057 12,356 12,391 278,213 299,622 100.0 %

The table below shows the categories in which the Company held investments in special revenue bonds that were greater than 10% of fair value based upon the Company's total municipal bond portfolio at September 30, 2024.

(In thousands, except for %)Fair
Value		Amortized
Cost		% of Total
Fair Value
  
Education$46,097 50,772 16.6 %
Utilities41,471 44,153 14.9 
Transportation34,807 40,551 12.5 

The Company's municipal bond portfolio is spread across many states, however, municipal bonds from Texas and California comprise the most significant concentration of the total municipal bond portfolio as of September 30, 2024. The Company holds 22% and 16% of its municipal bond portfolio in Texas and California issuers, respectively, as of September 30, 2024. There were no other states or individual issuer holdings that represented or exceeded 10% of the total municipal bond portfolio as of September 30, 2024.


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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS
The table below represents the Company's detailed exposure to municipal bonds in Texas at September 30, 2024.

General ObligationSpecial RevenueOtherTotal
(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$11,963 11,886 2,638 2,633 — — 14,601 14,519 
AA16,163 16,145 15,385 17,559 — — 31,548 33,704 
A— — 14,682 18,059 — — 14,682 18,059 
Total$28,126 28,031 32,705 38,251 — — 60,831 66,282 
Texas state and political subdivision fixed maturity securities excluding third-party guarantees:
AA$23,533 23,441 3,281 3,688 — — 26,814 27,129 
A3,092 3,090 16,492 18,073 — — 19,584 21,163 
BBB— — 3,306 3,415 — — 3,306 3,415 
BB and other1,501 1,500 9,626 13,075 — — 11,127 14,575 
Total$28,126 28,031 32,705 38,251 — — 60,831 66,282 

The table below represents the Company's detailed exposure to municipal bonds in California at September 30, 2024.

General ObligationSpecial RevenueOtherTotal
(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$2,145 2,074 30,294 34,941 2,599 2,733 35,038 39,748 
A1,365 1,650 7,328 8,688 — — 8,693 10,338 
Total$3,510 3,724 37,622 43,629 2,599 2,733 43,731 50,086 
California state and political subdivision fixed maturity securities excluding third-party guarantees:
AA$469 445 4,408 5,057 — — 4,877 5,502 
A3,041 3,279 18,430 21,531 2,599 2,733 24,070 27,543 
BB and other— — 14,784 17,041 — — 14,784 17,041 
Total$3,510 3,724 37,622 43,629 2,599 2,733 43,731 50,086 

IMPAIRMENT CONSIDERATIONS RELATED TO INVESTMENTS IN FIXED MATURITY AND EQUITY SECURITIES

The Company did not record any credit valuation allowances on fixed maturity securities in either of the three and nine months ended September 30, 2024 or 2023.

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.


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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES

Below are our primary capital resources (based on carrying value of each) as of the periods indicated.

(In thousands)
September 30, 2024
December 31, 2023
Fixed maturity securities$1,273,497 1,238,981 
Cash and cash equivalents32,382 26,997 

Liquidity refers to a company's ability to generate or obtain sufficient cash to meet the needs of its operations. Our liquidity is primarily derived from our cash flow from operations, our cash and cash equivalents, and our portfolio of marketable securities. We may also derive liquidity by accessing our Credit Facility (described below) or may raise capital by selling shares in our SIP (as defined below) or by other traditional means. Citizens has no debt as of September 30, 2024.

Cash from Operating Activities. Cash provided by 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 expenses, invest in our business or make strategic acquisitions. In the nine months ended September 30, 2024, our operations provided $21.1 million in net cash.

Cash from 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. In the nine months ended September 30, 2024, we had net cash outflows from investing activities of $13.3 million as we continue to invest excess funds in this high interest rate environment. The investing activities fluctuate from period to period due to timing of security activities such as calls and maturities and reinvestment of those funds. 86% of our total cash, cash equivalents and 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. Citizens' assets consist of the capital stock of its subsidiaries, cash and investments. Citizens' liquidity requirements are met primarily from two sources: cash generated from its operating subsidiaries and its invested assets. Citizens' ability to obtain cash from its insurance subsidiaries depends primarily upon the availability of statutorily permissible payments, including payments Citizens receives from service agreements with its 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"), whereby investors, policyholders, independent contractors and agents, employees and directors can 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. As of September 30, 2024, we have not borrowed any money under the Credit Facility.

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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS

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, policy acquisition costs and other 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 premiums (i.e., new sales) of 50% from 2023 to 2024. 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, we have entered into a reinsurance agreement with RGA to help with some of the costs, and the insurance companies also have the available-for-sale fixed maturity investment portfolio available to create additional cash flows if required. 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 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 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

Because claims and surrenders are our largest expense, a primary liquidity concern is the risk of either (i) an extraordinary level of early policyholder surrenders, or (ii) higher than expected mortality experience. Our death benefit payments increased in the nine months ended September 30, 2024, which is expected as the amount of insurance issued has increased significantly over the past couple of years. Surrender benefits, which have been higher than usual the last several years, slightly decreased in the first nine months of 2024. 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 withdrawal, 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 returns 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. To the extent that early surrenders are higher than expected, our liquidity could be negatively impacted due to benefit payments as well as lower renewal premiums. We continue to monitor surrenders and early withdrawals and focus on our retention initiatives.

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 17% of the endowments in force, totaling approximately 6% of our in force business as of September 30, 2024, will mature in the next five years. 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.


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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS
In our CICA Domestic business, we pay advance commissions on some of our insurance products, meaning we pay an agent their 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 the risk that rapid growth in first year sales of these products could create a significant increase in commission payments, which increases expenses and thus reduces our statutory capital until the commissions are recouped from premiums paid. CICA Domestic sales have increased significantly since the third quarter of 2023 and continue to grow rapidly. To mitigate this risk and strain on capital, we entered into a coinsurance agreement with RGA in the second quarter of 2024 and elected to cede 50% of our final expense business to RGA, which alleviates some of the strain on expenses. 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. If we are unable to borrow money to contribute capital to CICA Domestic, we could be exposed to cash flow strain.

See Part I, Item 1, Note 8. Commitments and Contingencies, as well as Part II, Item 1. Legal Proceedings - Trade Secret Lawsuit, 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, that would require Citizens to contribute capital to CICA Domestic in order to maintain a RBC level above 350%. At September 30, 2024, 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 increases required regulatory capital and reduces the excess capital available. 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. CICA International began issuing new business as of January 1, 2023 and received the transfer of all of CICA Bermuda's in force insurance business as of August 31, 2023. At September 30, 2024, CICA International exceeded the required minimum capital and related ratio.

Any capital that Citizens is required to contribute to its insurance subsidiaries could negatively impact the Company's capital resources and liquidity.


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CITIZENS, INC.MANAGEMENT'S DISCUSSION & ANALYSIS
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2024, 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 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.

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 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 have elected to comply with certain scaled disclosure reporting obligations and therefore are not required to provide the information required by this Item.

Item 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures.

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of September 30, 2024.  Based on such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and such information is accumulated and reported to management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the three months ended September 30, 2024, there were no changes in the Company's internal control over financial reporting (as defined in rules 13a-15(f) and 15d-15(f) under the Exchange Act) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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CITIZENS, INC.
PART II.  OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

Trade Secret Lawsuit

In the first quarter of 2024, a jury trial was held in the “trade secret lawsuit”. The trade secret lawsuit was filed in 2018 by Citizens, CICA Life Ltd. (Bermuda) and CICA Life Insurance Company of America (collectively, the “Citizens Companies,” “we,” "us" or "our") against certain former employees and independent consultants who we alleged unlawfully took Citizens’ confidential information in order to unfairly compete with us. Our claims against these parties included various unfair competition, tortious interference, breach of contract and other related claims.

As previously disclosed, the jury found that Citizens should pay Alexis Delgado and Carlos Nalsen Landa, former independent consultants, approximately $1.3 million for “money had and received”, an equitable theory that claimed that the Citizens Companies would be unjustly enriched if they didn’t pay past and future commissions to Delgado and Landa. Additionally, the trial court awarded defendants Michael P. Buchweitz (“Buchweitz”) and Randall Riley (“Riley”) approximately $3.5 million of their legal fees. On August 16, 2024, the judge signed a Final Judgment reflecting the jury decision and the court award of the legal fees. We do not believe the jury properly found that Delgado or Landa were entitled to any prior or future commissions as there was no evidence that we actually held any amount of commissions that they claim they should have received. We also do not believe that Riley or Buchweitz are entitled to legal fees because they were found to have breached the contracts whose fee shifting provisions they sought to invoke.

We intend to appeal the judgment against us and accordingly on September 16, 2024, we filed a Limited Motion for Partial New Trial on these issues. On September 17, 2024, we filed an appeal bond with the court in order to stay any execution of the judgment against us.

Item 1A. RISK FACTORS

Part I, Item 1A. Risk Factors of our Form 10-K includes a discussion of our risk factors. There have been no material changes in the three months ended September 30, 2024 from the risk factors included in our Form 10-K.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.
Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

Item 5(a)

In August 2024, our Chief Marketing Officer, Robert Mauldin III, transitioned to a part-time strategic sales consultant where he continues to retain responsibility and perform policy-making functions for our international sales division by providing strategic advice, product design and enhancement consultation, leadership for both our sales and

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CITIZENS, INC.
marketing teams, and relationship management. He also serves as chair of the steering committee for SPLIC in our Home Services Insurance segment.

In connection with the shift in responsibilities and hours, the Company and Mr. Mauldin entered into a Services Agreement effective as of August 2, 2024 (the "Mauldin Agreement"). Pursuant to the Mauldin Agreement, beginning on September 1, 2024, Mr. Mauldin is paid (i) a monthly fee in the amount of $2,500, plus (ii) a daily service fee in the amount of $2,282 per full day of services provided. It is anticipated that he will provide services for 8 full days per month. Additionally, he is reimbursed for reasonable travel expenses.

Item 5(b)

None.

Item 5(c)

During the three months ended September 30, 2024, none of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Citizens, Inc. securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement.” Additionally, Citizens did not adopt or terminate any Rule 10b5-1 trading arrangement during the three months ended September 30, 2024.

Item 6. EXHIBITS

Exhibit
Number
The following exhibits are filed herewith:
101*Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, Financial Statements of this Quarterly Report on Form 10-Q*
104*Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set*
* Filed herewith.
† Indicates management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 CITIZENS, INC.
  
   
 By:
/s/ Jon Stenberg
  
Jon Stenberg
  
President & Chief Executive Officer
By:/s/ Jeffery P. Conklin
 Jeffery P. Conklin
Vice President, Chief Financial Officer, Chief Investment Officer & Treasurer
  
  
   
Date:November 7, 2024  


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