Citizens, Inc 10-Q for FY2022 Q3

Citizens, Inc. (CIA)

10-Q 2022-11-04 For: 2022-09-30

Added on April 11, 2026

About this 10-Q

Citizens, Inc filed this 10-Q on November 4, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $56.18M; down 8.8% from $61.58M a year earlier
Net loss: $5.13M; compared with a net loss of $2.8M a year earlier

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Colorado			84-0755371
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)


Securities registered pursuant to Section 12(b) of the Act

Class A Common Stock	CIA	NYSE
(Title of each class)	(Trading symbol(s))	(Name of each exchange on which registered)


			Page Number
Part I. FINANCIAL INFORMATION

	Item 1.	Financial Statements

		Consolidated Balance Sheet s , September 30, 2022 (Unaudited) and December 31, 2021	2

		Consolidated Statements of Operations and Comprehensive Income (Loss), Three and Nine Months Ended September 30, 2022 and 2021 (Unaudited)	4

		Consolidated Statements of Stockholders' Equity (Deficit), Nine Months Ended September 30, 2022 and 2021 (Unaudited)	5

		Consolidated Statements of Cash Flows, Nin e Months Ended September 30, 2022 and 2021 (Unaudited)	7

		Notes to Consolidated Financial Statements (Unaudited)	9

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53

	Item 4.	Controls and Procedures	53

Part II. OTHER INFORMATION

	Item 1.	Legal Proceedings	54

	Item 1A.	Risk Factors	54

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

	Item 3.	Defaults Upon Senior Securities	55

	Item 4.	Mine Safety Disclosures	55

	Item 5.	Other Information	55

	Item 6.	Exhibits	56




(In thousands)	September 30, 2022		December 31, 2021
Assets	(Unaudited)
Investments:
Fixed maturity securities available-for-sale, at fair value (amortized cost: $1,374,777 and $1,343,755 in 2022 and 2021, respectively)	$	1,161,048	1,470,617

Equity securities, at fair value	11,789		14,844

Policy loans	78,085		80,307


Other long-term investments (portion measured at fair value $62,454 and $56,038 in 2022 and 2021, respectively)	62,717		57,399
Short-term investments	1,241		—
Total investments	1,314,880		1,623,167
Cash and cash equivalents	21,007		27,294
Accrued investment income	16,615		16,197

Reinsurance recoverable	3,485		5,539
Deferred policy acquisition costs	140,727		140,380
Cost of insurance acquired	10,530		10,611
Current federal income tax receivable	—		762
Deferred tax asset	3,273		—
Property and equipment, net	13,310		14,074
Due premiums	10,551		10,748

Other assets (less allowance for losses of $344 and $111 in 2022 and 2021, respectively)	6,572		5,739
Total assets	$	1,540,950	1,854,511




(In thousands, except share amounts)	September 30, 2022		December 31, 2021
Liabilities and Stockholders' Equity (Deficit)	(Unaudited)
Liabilities:
Policy liabilities:
Future policy benefit reserves:
Life insurance	$	1,299,924	1,278,987
Annuities	91,984		83,918
Accident and health	729		784
Dividend accumulations	40,483		37,760
Premiums paid in advance	38,437		40,690
Policy claims payable	7,979		14,590
Other policyholders' funds	37,935		30,690
Total policy liabilities	1,517,471		1,487,419
Commissions payable	1,772		2,285
Current federal income tax payable	469		—
Deferred federal income tax payable	—		15,456

Other liabilities	35,466		28,780
Total liabilities	1,555,178		1,533,940
Commitments and contingencies (Note 7)
Stockholders' Equity (Deficit):
Common stock:
Class A, no par value, 100,000,000 shares authorized, 53,756,692 and 53,170,413 shares issued and outstanding in 2022 and 2021, respectively, including shares in treasury of 3,751,396 in 2022 and 3,135,738 in 2021	267,988		265,561
Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2022 and 2021, including shares in treasury of 1,001,714 in 2022 and 2021	3,184		3,184
Accumulated deficit	(55,577)		(45,565)
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on fixed maturity securities, net of tax	(207,539)		117,492
Treasury stock, at cost	(22,284)		(20,101)
Total stockholders' equity (deficit)	(14,228)		320,571
Total liabilities and stockholders' equity (deficit)	$	1,540,950	1,854,511


CITIZENS, INC.
(Exact name of registrant as specified in its charter)



	Three Months Ended September 30,			Nine Months Ended September 30,
(In thousands, except per share amounts)	2022		2021	2022	2021
Revenues:
Premiums:
Life insurance	$	42,423	43,239	120,930	122,319
Accident and health insurance	299		311	865	945
Property insurance	1,153		(223)	3,668	1,921
Net investment income	16,604		15,454	47,983	46,018
Investment related gains (losses), net	(4,991)		2,126	(10,589)	7,277
Other income	688		677	2,410	2,145
Total revenues	56,176		61,584	165,267	180,625
Benefits and Expenses:
Insurance benefits paid or provided:
Claims and surrenders	30,729		31,816	86,260	91,701
Increase in future policy benefit reserves	7,090		10,888	23,037	22,407
Policyholders' dividends	1,389		1,650	4,257	4,431
Total insurance benefits paid or provided	39,208		44,354	113,554	118,539
Commissions	9,210		9,115	25,807	26,073
Other general expenses	11,559		10,542	32,989	33,427
Capitalization of deferred policy acquisition costs	(6,372)		(6,026)	(17,337)	(16,798)
Amortization of deferred policy acquisition costs	7,082		6,043	18,869	18,300
Amortization of cost of insurance acquired	276		283	775	959
Total benefits and expenses	60,963		64,311	174,657	180,500
Income (loss) before federal income tax	(4,787)		(2,727)	(9,390)	125
Federal income tax expense (benefit)	344		72	622	1,475
Net income (loss)	(5,131)		(2,799)	(10,012)	(1,350)
Per Share Amounts:
Basic and diluted earnings (losses) per share of Class A common stock	(0.10)		(0.06)	(0.20)	(0.03)
Basic and diluted earnings (losses) per share of Class B common stock	—		—	—	(0.01)
Other Comprehensive Income (Loss):
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) arising during period	(89,713)		(1,564)	(343,989)	(25,706)
Reclassification adjustment for losses (gains) included in net income (loss)	43		(102)	78	(91)
Unrealized gains (losses) on fixed maturity securities, net	(89,670)		(1,666)	(343,911)	(25,797)
Income tax expense (benefit) on unrealized gains (losses) on fixed maturity securities	(5,079)		(271)	(18,880)	(32)
Other comprehensive income (loss)	(84,591)		(1,395)	(325,031)	(25,765)
Total comprehensive income (loss)	$	(89,722)	(4,194)	(335,043)	(27,115)




	Common Stock			Accumulated deficit	Accumulated other comprehensive income (loss)	Treasury stock	Total Stock- holders' equity (deficit)
(In thousands)	Class A		Class B

Balance at December 31, 2021	$	265,561	3,184	(45,565)	117,492	(20,101)	320,571
Comprehensive income (loss):
Net income (loss)	—		—	(1,333)	—	—	(1,333)
Unrealized investment gains (losses), net	—		—	—	(124,217)	—	(124,217)
Total comprehensive income (loss)	—		—	(1,333)	(124,217)	—	(125,550)
Common stock issuance	1,788		—	—	—	—	1,788
Stock-based compensation	93		—	—	—	—	93
Balance at March 31, 2022	267,442		3,184	(46,898)	(6,725)	(20,101)	196,902
Comprehensive income (loss):
Net income (loss)	—		—	(3,548)	—	—	(3,548)
Unrealized investment gains (losses), net	—		—	—	(116,223)	—	(116,223)
Total comprehensive income (loss)	—		—	(3,548)	(116,223)	—	(119,771)
Common stock issuance	455		—	—	—	—	455
Acquisition of treasury stock	—		—	—	—	(1,300)	(1,300)
Stock-based compensation	(47)		—	—	—	—	(47)
Balance at June 30, 2022	267,850		3,184	(50,446)	(122,948)	(21,401)	76,239
Comprehensive income (loss):
Net income (loss)	—		—	(5,131)	—	—	(5,131)
Unrealized investment gains (losses), net	—		—	—	(84,591)	—	(84,591)
Total comprehensive income (loss)	—		—	(5,131)	(84,591)	—	(89,722)
Acquisition of treasury stock	—		—	—	—	(883)	(883)
Stock-based compensation	138		—	—	—	—	138
Balance at September 30, 2022	$	267,988	3,184	(55,577)	(207,539)	(22,284)	(14,228)


Nine Months Ended September 30, (In thousands)	2022		2021
Cash flows from operating activities:
Net income (loss)	$	(10,012)	(1,350)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Investment related (gains) losses on sale of investments and other assets	10,589		(7,277)
Net deferred policy acquisition costs	1,532		1,502
Amortization of cost of insurance acquired	775		959
Depreciation	413		954
Amortization of premiums and discounts on investments	3,456		4,065
Stock-based compensation	300		406
Deferred federal income tax expense (benefit)	150		(370)
Change in:
Accrued investment income	(418)		512
Reinsurance recoverable	2,054		(7,971)
Due premiums	197		1,940
Future policy benefit reserves	22,920		22,292
Other policyholders' liabilities	1,104		20,668
Federal income tax payable	1,231		1,855
Commissions payable and other liabilities	6,367		(14,342)
Other, net	(895)		(73)
Net cash provided by (used in) operating activities	39,763		23,770
Cash flows from investing activities:
Purchases of fixed maturity securities, available-for-sale	(102,348)		(62,809)
Sales of fixed maturity securities, available-for-sale	30,348		8,238
Maturities and calls of fixed maturity securities, available-for-sale	37,890		40,395

Principal payments on mortgage loans	1,097		7
Funding of mortgage loans	—		(1,000)
(Increase) decrease in policy loans, net	2,222		3,216
Sales of other long-term investments	4,130		20,893
Purchases of other long-term investments	(18,150)		(27,514)
Sales of property and equipment	—		14
Purchases of property and equipment	(76)		(847)

Purchases of short-term investments	(1,250)		—


Net cash provided by (used in) investing activities	(46,137)		(19,407)

See accompanying Notes to Consolidated Financial Statements.


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

Nine Months Ended September 30, (In thousands)	2022		2021
Cash flows from financing activities:
Annuity deposits	$	6,777	6,901
Annuity withdrawals	(6,634)		(5,855)
Acquisition of treasury stock	(2,183)		(9,090)
Issuance of common stock	2,244		—
Other	(117)		(363)
Net cash provided by (used in) financing activities	87		(8,407)
Net increase (decrease) in cash and cash equivalents	(6,287)		(4,044)
Cash and cash equivalents at beginning of year	27,294		34,131
Cash and cash equivalents at end of period	$	21,007	30,087



	Life Insurance		Home Service Insurance	Other Non-Insurance Enterprises	Consolidated
Three Months Ended September 30, 2022
(In thousands)

Revenues:
Premiums	$	31,696	12,179	—	43,875
Net investment income	12,806		3,527	271	16,604
Investment related gains (losses), net	(4,367)		(462)	(162)	(4,991)
Other income	682		—	6	688
Total revenues	40,817		15,244	115	56,176
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders	24,742		5,987	—	30,729
Increase in future policy benefit reserves	6,040		1,050	—	7,090
Policyholders' dividends	1,382		7	—	1,389
Total insurance benefits paid or provided	32,164		7,044	—	39,208
Commissions	5,103		4,107	—	9,210
Other general expenses	6,016		4,228	1,315	11,559
Capitalization of deferred policy acquisition costs	(4,592)		(1,780)	—	(6,372)
Amortization of deferred policy acquisition costs	4,991		2,091	—	7,082
Amortization of cost of insurance acquired	66		210	—	276
Total benefits and expenses	43,748		15,900	1,315	60,963
Income (loss) before federal income tax expense	$	(2,931)	(656)	(1,200)	(4,787)


Carrying Value (In thousands, except for %)	September 30, 2022				December 31, 2021
	Amount		%		Amount	%

Cash and invested assets:
Fixed maturity securities	$	1,161,048	86.9	%	1,470,617	89.0	%
Equity securities	11,789		0.9	%	14,844	0.9	%
Policy loans	78,085		5.8	%	80,307	4.9	%
Other long-term investments	62,717		4.7	%	57,399	3.5	%
Short-term investments	1,241		0.1	%	—	—	%
Cash and cash equivalents	21,007		1.6	%	27,294	1.7	%

Total cash and invested assets	$	1,335,887	100.0	%	1,650,461	100.0	%


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
September 30, 2022
(In thousands)

Fixed maturity securities:
Available-for-sale:
U.S. Treasury securities	$	9,448	190	10	9,628
U.S. Government-sponsored enterprises	3,441		272	—	3,713
States and political subdivisions	349,835		1,686	36,222	315,299
Corporate:
Financial	237,294		189	46,131	191,352
Consumer	249,551		562	50,401	199,712
Utilities	114,259		5	25,643	88,621
Energy	76,175		—	13,377	62,798
All other	184,197		669	32,737	152,129
Commercial mortgage-backed	50		—	—	50
Residential mortgage-backed	110,610		8	9,807	100,811
Asset-backed	39,817		—	2,984	36,833
Foreign governments	100		2	—	102
Total fixed maturity securities	$	1,374,777	3,583	217,312	1,161,048


Fair Value (In thousands)	September 30, 2022		December 31, 2021

Equity securities:
Stock mutual funds	$	2,865	3,571
Bond mutual funds	4,136		5,060
Common stock	769		990
Non-redeemable preferred stock	10		161
Non-redeemable preferred stock fund	4,009		5,062
Total equity securities	$	11,789	14,844


September 30, 2022	Less than 12 months				Greater than 12 months			Total
(In thousands, except for # of securities)	Fair Value		Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities	Fair Value	Unrealized Losses	# of Securities

Fixed maturity securities:
Available-for-sale securities:
U.S. Treasury securities	$	—	—	—	64	10	2	64	10	2
U.S. Government-sponsored enterprises	224		—	1	—	—	—	224	—	1
States and political subdivisions	202,975		35,836	255	627	386	2	203,602	36,222	257
Corporate:
Financial	185,874		45,602	253	778	529	1	186,652	46,131	254
Consumer	178,490		46,447	240	6,355	3,954	10	184,845	50,401	250
Utilities	84,016		22,774	162	4,557	2,869	6	88,573	25,643	168
Energy	62,798		13,377	83	—	—	—	62,798	13,377	83
All Other	142,448		31,285	183	2,799	1,452	2	145,247	32,737	185
Commercial mortgage-backed	49		—	1	—	—	—	49	—	1
Residential mortgage-backed	100,546		9,807	100	—	—	—	100,546	9,807	100
Asset-backed	34,177		2,732	41	2,655	252	6	36,832	2,984	47

Total fixed maturity securities	$	991,597	207,860	1,319	17,835	9,452	29	1,009,432	217,312	1,348



	Three Months Ended			Nine Months Ended
	September 30,			September 30,
(In thousands)	2022		2021	2022	2021
Fixed maturity securities, available-for-sale:
Proceeds	$	1,520	984	30,348	8,238
Gross realized gains	$	19	89	120	189
Gross realized losses	$	1	—	103	1


September 30, 2022	Level 1		Level 2	Level 3	Total Fair Value
(In thousands)
Financial Assets
Fixed maturity securities available-for-sale:
U.S. Treasury and U.S. Government-sponsored enterprises	$	9,628	3,713	—	13,341
States and political subdivisions	—		315,299	—	315,299
Corporate	47		694,565	—	694,612
Commercial mortgage-backed	—		50	—	50
Residential mortgage-backed	—		100,811	—	100,811
Asset-backed	—		36,833	—	36,833
Foreign governments	—		102	—	102
Total fixed maturity securities available-for-sale	9,675		1,151,373	—	1,161,048

Equity securities:
Stock mutual funds	2,865		—	—	2,865
Bond mutual funds	4,136		—	—	4,136
Common stock	769		—	—	769
Non-redeemable preferred stock	10		—	—	10
Non-redeemable preferred stock fund	4,009		—	—	4,009
Total equity securities	11,789		—	—	11,789
Other long-term investments (1)	—		—	—	62,454
Total financial assets	$	21,464	1,151,373	—	1,235,291


		September 30, 2022				December 31, 2021
		Fair Value Using NAV Per Share		Unfunded Commit- ments	Range (in years)	Fair Value Using NAV Per Share		Unfunded Commit- ments	Range (in years)
(In thousands, except years)
Limited partnerships
Middle market	Investments in privately-originated, performing senior secured debt primarily in North America-based companies	$	31,427	8,233	5	$	21,947	18,712	10
Global equity fund	Investments in common stocks of U.S., international developed and emerging markets with a focus on long-term capital growth	8,095		—	0	10,607		—	0

Late-stage growth	Investments in private late-stage, established companies seeking capital to accelerate growth prior to an IPO or sale	17,639		20,000	5 to 7	20,468		4,459	6
Infrastructure	Investments in climate infrastructure assets, focusing on renewable power generation in wind and solar energy	5,293		14,462	11	3,016		16,653	12
Total limited partnerships		$	62,454	42,695		$	56,038	39,824


Carrying Value (In thousands)	September 30, 2022		December 31, 2021
Other long-term investments:
Limited partnerships	$	62,454	56,038
FHLB common stock	192		192
Mortgage loans	50		1,148
All other investments	21		21
Total other long-term investments	$	62,717	57,399


Carrying Value	September 30, 2022				December 31, 2021
(In thousands, except for %)	Amount		%		Amount		%
Cash, Cash Equivalents and Invested Assets
Fixed maturity securities:
U.S. Treasury and U.S. Government-sponsored enterprises	$	13,341	1.0	%	$	15,070	0.9	%
Corporate	694,612		52.0	%	893,008		54.0	%
States and political subdivisions (1)	315,299		23.6	%	383,958		23.3	%
Mortgage-backed (2)	100,861		7.6	%	133,795		8.1	%
Asset-backed	36,833		2.7	%	44,676		2.7	%
Foreign governments	102		—	%	110		—	%
Total fixed maturity securities	1,161,048		86.9	%	1,470,617		89.0	%
Short-term investments	1,241		0.1	%	—		—	%
Cash and cash equivalents	21,007		1.6	%	27,294		1.7	%
Other investments:
Policy loans	78,085		5.8	%	80,307		4.9	%
Equity securities	11,789		0.9	%	14,844		0.9	%

Other long-term investments	62,717		4.7	%	57,399		3.5	%
Total cash, cash equivalents and invested assets	$	1,335,887	100.0	%	$	1,650,461	100.0	%


	General Obligation			Special Revenue		Other		Total		% Based on Amortized Cost
(In thousands, except for %)	Fair Value		Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost
State and political subdivision fixed maturity securities including third-party guarantees
AAA	$	14,631	14,567	6,712	7,119	—	—	21,343	21,686	6.2	%
AA	43,996		44,028	117,429	135,154	10,492	11,098	171,917	190,280	54.4	%
A	12,255		13,064	87,680	100,730	4,447	4,407	104,382	118,201	33.8	%
BBB	2,435		2,548	8,561	9,990	1,335	1,450	12,331	13,988	4.0	%
BB and other	4,038		4,395	1,288	1,285	—	—	5,326	5,680	1.6	%
Total	$	77,355	78,602	221,670	254,278	16,274	16,955	315,299	349,835	100.0	%

State and political subdivision fixed maturity securities excluding third-party guarantees

AA	$	28,696	28,565	44,341	49,045	6,594	6,514	79,631	84,124	24.0	%
A	22,508		23,472	119,383	139,248	6,793	7,136	148,684	169,856	48.6	%
BBB	4,375		4,455	26,853	30,656	1,552	1,855	32,780	36,966	10.6	%
BB and other	21,776		22,110	31,093	35,329	1,335	1,450	54,204	58,889	16.8	%
Total	$	77,355	78,602	221,670	254,278	16,274	16,955	315,299	349,835	100.0	%


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs [2]
July 2022	147,452	$	3.9571	147,452
August 2022	76,123	3.9412		76,123
September 2022	—	—		—
Total	223,575			223,575	$	5,800,000


Exhibit Number						The following exhibits are filed herewith:

3.1						Restated and Amended Articles of Incorporation dated March 4, 2004 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the Year Ended December 31, 2003, filed on March 15, 2004)
3.2						Amended and Restated Bylaws dated February 6, 2021 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on February 9, 2021)
31.1*						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
31.2*						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act*
32.1*						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act*
32.2*						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act*
101*						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*


		CITIZENS, INC.


		By:	/s/ Gerald W. Shields
			Gerald W. Shields
			Chief Executive Officer & President


		By:	/s/ Jeffery P. Conklin
			Jeffery P. Conklin
			Vice President, Chief Financial Officer, Chief Investment Officer & Treasurer



Date:	November 4, 2022


			By:			/s/ Gerald W. Shields
			Name:			Gerald W. Shields
			Title:			Chief Executive Officer and President


			Date:			November 4, 2022