Citizens, Inc 10-Q for FY2020 Q1

Citizens, Inc. (CIA)

10-Q 2020-05-07 For: 2020-03-31

Added on April 11, 2026

About this 10-Q

Citizens, Inc filed this 10-Q on May 7, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $55.72M; down 10.7% from $62.41M a year earlier
Net loss: $3.58M; compared with a net loss of $3.8M a year earlier

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


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐




(In thousands)	March 31, 2020		December 31, 2019
Assets	(Unaudited)
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost: $1,314,907 and $1,293,853 in 2020 and 2019, respectively)	$	1,356,244	1,377,959

Equity securities, at fair value	19,369		16,033

Policy loans	81,329		82,005

Real estate held-for-sale (less $1,325 accumulated depreciation in 2020 and 2019, respectively)	2,571		2,571
Other long-term investments (portion measured at fair value $2,809 in 2020; less allowance for losses of $11 in 2020)	3,180		385
Short-term investments	690		1,301
Total investments	1,463,383		1,480,254
Cash and cash equivalents	34,944		46,205
Accrued investment income	17,105		17,453

Reinsurance recoverable	3,252		3,696
Deferred policy acquisition costs	148,350		149,249
Cost of insurance acquired	13,202		13,455
Goodwill and other intangible assets	13,574		13,575


Property and equipment, net	5,275		5,904
Due premiums	11,611		12,656

Other assets (less allowance for losses of $500 in 2020)	2,591		2,489
Total assets	$	1,713,287	1,744,936



(In thousands, except share amounts)	March 31, 2020		December 31, 2019
Liabilities and Stockholders' Equity	(Unaudited)
Liabilities:
Policy liabilities:
Future policy benefit reserves:
Life insurance	$	1,227,484	1,218,757
Annuities	78,550		76,380
Accident and health	955		1,031
Dividend accumulations	30,261		29,211
Premiums paid in advance	43,068		43,102
Policy claims payable	8,070		8,059
Other policyholders' funds	19,483		18,192
Total policy liabilities	1,407,871		1,394,732
Commissions payable	2,063		2,514
Current federal income tax payable	46,472		44,622
Deferred federal income tax payable	9,342		12,428
Payable for securities in process of settlement	3,415		—
Other liabilities	28,390		30,804
Total liabilities	1,497,553		1,485,100
Commitments and contingencies (Note 7)
Stockholders' Equity:
Common stock:
Class A, no par value, 100,000,000 shares authorized, 52,476,800 and 52,364,993 shares issued and outstanding in 2020 and 2019, respectively, including shares in treasury of 3,135,738 in 2020 and 2019	261,462		261,515
Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2020 and 2019	3,184		3,184
Accumulated deficit	(74,948)		(70,969)
Accumulated other comprehensive income:
Net unrealized gains on fixed maturity securities, net of tax	37,047		77,117
Treasury stock, at cost	(11,011)		(11,011)
Total stockholders' equity	215,734		259,836
Total liabilities and stockholders' equity	$	1,713,287	1,744,936


Three Months Ended March 31, (In thousands, except per share amounts)	2020		2019
Revenues:
Premiums:
Life insurance	$	39,946	40,980
Accident and health insurance	261		323
Property insurance	1,110		1,161
Net investment income	15,169		13,796
Realized investment gains (losses), net	(1,306)		5,961
Other income	542		185
Total revenues	55,722		62,406
Benefits and Expenses:
Insurance benefits paid or provided:
Claims and surrenders	26,449		23,033
Increase in future policy benefit reserves	9,471		12,299
Policyholders' dividends	1,233		1,182
Total insurance benefits paid or provided	37,153		36,514
Commissions	7,853		7,884
Other general expenses	11,473		14,132
Capitalization of deferred policy acquisition costs	(5,009)		(4,828)
Amortization of deferred policy acquisition costs	6,119		6,277
Amortization of cost of insurance acquired	368		419
Total benefits and expenses	57,957		60,398
Income (loss) before federal income tax	(2,235)		2,008
Federal income tax expense	1,349		5,810
Net loss	(3,584)		(3,802)
Per Share Amounts:
Basic and diluted losses per share of Class A common stock	(0.07)		(0.08)
Basic and diluted losses per share of Class B common stock	(0.04)		(0.04)
Other Comprehensive Income (Loss):
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) arising during period	(42,929)		28,801
Reclassification adjustment for losses included in net income	132		104
Unrealized gains (losses) on fixed maturity securities, net	(42,797)		28,905
Income tax expense (benefit) on unrealized gains (losses) on fixed maturity securities	(2,727)		2,025
Other comprehensive income (loss)	(40,070)		26,880
Total comprehensive income (loss)	$	(43,654)	23,078


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




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

Balance at December 31, 2019	$	261,515	3,184	(70,969)	77,117	(11,011)	259,836
Accounting standards adopted January 1, 2020	—		—	(395)	—	—	(395)
Comprehensive loss:
Net loss	—		—	(3,584)	—	—	(3,584)
Unrealized investment losses, net	—		—	—	(40,070)	—	(40,070)
Total comprehensive loss	—		—	(3,584)	(40,070)	—	(43,654)
Stock-based compensation	(53)		—	—	—	—	(53)
Balance at March 31, 2020	$	261,462	3,184	(74,948)	37,047	(11,011)	215,734










Balance at December 31, 2018	$	259,793	3,184	(69,599)	5,366	(11,011)	187,733
Comprehensive income (loss):
Net loss	—		—	(3,802)	—	—	(3,802)
Unrealized investment gains, net	—		—	—	26,880	—	26,880
Total comprehensive income (loss)	—		—	(3,802)	26,880	—	23,078
Stock-based compensation	1,083		—	—	—	—	1,083
Balance at March 31, 2019	$	260,876	3,184	(73,401)	32,246	(11,011)	211,894


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


Three Months Ended March 31, (In thousands)	2020		2019
Cash flows from financing activities:
Annuity deposits	$	1,618	1,541
Annuity withdrawals	(561)		(1,676)
Other	(246)		(377)
Net cash provided by (used in) financing activities	811		(512)
Net decrease in cash and cash equivalents	(11,261)		(11,399)
Cash and cash equivalents at beginning of year	46,205		45,492
Cash and cash equivalents at end of period	$	34,944	34,093


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


	Life Insurance		Home Service Insurance	Other Non-Insurance Enterprises	Consolidated
Three Months Ended March 31, 2020
(In thousands)

Revenues:
Premiums	$	29,819	11,498	—	41,317
Net investment income	11,480		3,332	357	15,169
Realized investment gains (losses), net	735		(1,717)	(324)	(1,306)
Other income	524		18	—	542
Total revenue	42,558		13,131	33	55,722
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders	20,160		6,289	—	26,449
Increase in future policy benefit reserves	8,146		1,325	—	9,471
Policyholders' dividends	1,225		8	—	1,233
Total insurance benefits paid or provided	29,531		7,622	—	37,153
Commissions	4,478		3,375	—	7,853
Other general expenses	4,948		4,316	2,209	11,473
Capitalization of deferred policy acquisition costs	(3,921)		(1,088)	—	(5,009)
Amortization of deferred policy acquisition costs	5,318		801	—	6,119
Amortization of cost of insurance acquired	118		250	—	368
Total benefits and expenses	40,472		15,276	2,209	57,957
Income (loss) before federal income tax expense	$	2,086	(2,145)	(2,176)	(2,235)


Three Months Ended March 31,	2020		2019
(In thousands, except per share amounts)
Basic and diluted earnings per share:
Numerator:
Net loss	$	(3,584)	(3,802)
Net loss allocated to Class A common stock	$	(3,548)	(3,764)
Net loss allocated to Class B common stock	(36)		(38)
Net loss	$	(3,584)	(3,802)

Denominator:
Weighted average shares of Class A outstanding - basic	49,305		49,229
Weighted average shares of Class A outstanding - diluted	49,455		49,267
Weighted average shares of Class B outstanding - basic and diluted	1,002		1,002
Basic and diluted loss per share of Class A common stock	$	(0.07)	(0.08)
Basic and diluted loss per share of Class B common stock	(0.04)		(0.04)


Carrying Value (In thousands, except for %)	March 31, 2020									December 31, 2019
			Amount			%			Amount			%

Cash and invested assets:
Fixed maturity securities	$	1,356,244		90.5	%		$	1,377,959		90.2	%
Equity securities	19,369			1.3	%		16,033			1.1	%
Policy loans	81,329			5.4	%		82,005			5.4	%
Real estate and other long-term investments	5,751			0.4	%		2,956			0.2	%
Short-term investments	690			0.1	%		1,301			0.1	%
Cash and cash equivalents	34,944			2.3	%		46,205			3.0	%

Total cash and invested assets	$	1,498,327		100.0	%		$	1,526,459		100.0	%


	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses	Fair Value
March 31, 2020
(In thousands)

Fixed maturity securities:
Available-for-sale:
U.S. Treasury securities	$	9,690	2,152	—	11,842
U.S. Government-sponsored enterprises	3,509		1,327	—	4,836
States and political subdivisions	478,619		25,682	1,006	503,295
Corporate:
Financial	192,453		7,288	7,607	192,134
Consumer	157,768		11,921	6,457	163,232
Energy	74,475		386	11,502	63,359
All Other	228,879		10,756	6,466	233,169
Commercial mortgage-backed	401		2	15	388
Residential mortgage-backed	118,205		21,886	1	140,090
Asset-backed	50,806		8	7,037	43,777
Foreign governments	102		20	—	122
Total fixed maturity securities	$	1,314,907	81,428	40,091	1,356,244


Fair Value (In thousands)	March 31, 2020		December 31, 2019

Equity securities:
Stock mutual funds	$	2,498	3,274
Bond mutual funds	11,134		12,311
Common stock	1,040		134
Non-redeemable preferred stock	4,697		314
Total equity securities	$	19,369	16,033


March 31, 2020	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 maturities:
Available-for-sale securities:

States and political subdivisions	$	41,267	971	35	$	768	35	4	$	42,035	1,006	39
Corporate:
Financial	82,957		7,607	102	—		—	—	82,957		7,607	102
Consumer	53,797		6,457	62	—		—	—	53,797		6,457	62
Energy	53,378		11,502	66	—		—	—	53,378		11,502	66
All Other	80,110		6,466	91	—		—	—	80,110		6,466	91
Commercial mortgage-backed	210		15	1	—		—	—	210		15	1
Residential mortgage-backed	23		1	2	87		—	1	110		1	3
Asset-backed	40,790		7,037	42	—		—	—	40,790		7,037	42

Total fixed maturities	$	352,532	40,056	401	$	855	35	5	$	353,387	40,091	406



	Three Months Ended
Fixed Maturity Securities, Available-for-Sale	March 31,
(In thousands)	2020		2019

Proceeds	$	940	7,659
Gross realized gains	$	—	2
Gross realized losses	$	38	183


March 31, 2020	Level 1		Level 2	Level 3	Total Fair Value
(In thousands)
Financial Assets
Fixed maturities available-for-sale
U.S. Treasury and U.S. Government-sponsored enterprises	$	11,842	4,836	—	16,678
States and political subdivisions	—		503,295	—	503,295
Corporate	50		651,844	—	651,894
Commercial mortgage-backed	—		388	—	388
Residential mortgage-backed	—		140,090	—	140,090
Asset-backed	—		43,777	—	43,777
Foreign governments	—		122	—	122
Total fixed maturities available-for-sale	11,892		1,344,352	—	1,356,244

Equity securities
Stock mutual funds	2,498		—	—	2,498
Bond mutual funds	11,134		—	—	11,134
Common stock	1,040		—	—	1,040
Non-redeemable preferred stock	4,697		—	—	4,697
Total equity securities	19,369		—	—	19,369
Other long-term investments ⁽¹⁾	—		—	—	2,809
Total financial assets	$	31,261	1,344,352	—	1,378,422


Carrying Value (In thousands)	March 31, 2020		December 31, 2019
Other long-term investments:
Private equity	$	2,809	—
FHLB common stocks	187		187
Mortgage loans	162		177
All other investments	22		21
Total other long-term investments	$	3,180	385


Net Deferred Tax Asset (Liability) (In thousands)	March 31, 2020		December 31, 2019
Deferred tax assets:
Future policy benefit reserves	$	2,716	2,641
Net operating and capital loss carryforwards	38		230

Investments	703		702
Deferred intercompany loss	3,234		3,539


Lease liability	183		238
Other	854		700
Total gross deferred tax assets	7,728		8,050


Deferred tax liabilities:
Deferred policy acquisition costs, cost of insurance acquired and intangible assets	(8,403)		(8,417)
Unrealized gains on investments available-for-sale	(4,149)		(7,300)

Tax reserves transition liability	(4,297)		(4,483)
Right of use lease asset	(183)		(238)
Other	(38)		(40)
Total gross deferred tax liabilities	(17,070)		(20,478)
Net deferred tax liability	$	(9,342)	(12,428)


	March 31,			December 31,		March 31,
(In thousands, except for %)	2020			2019		2019

Net investment income, annualized	$	60,676		59,531		55,185
Average invested assets, at amortized cost	1,408,688			1,365,036		1,352,299
Annualized yield on average invested assets	4.31		%	4.36	%	4.08	%


	Three Months Ended			Year Ended		Three Months Ended
	March 31,			December 31,		March 31,
(In thousands, except for %)	2020			2019		2019
Net investment income, annualized	$	45,920		44,779		40,677
Average invested assets, at amortized cost	1,057,428			1,016,055		1,003,732
Annualized yield on average invested assets	4.34		%	4.41	%	4.05	%


Carrying Value	March 31, 2020						December 31, 2019
(In thousands, except for %)	Amount		%		Amount		%
Cash and Invested Assets
Fixed maturity securities:
U.S. Treasury and U.S. Government-sponsored enterprises	$	16,678	1.1	%	$	15,878	1.0	%
States and political subdivisions ⁽¹⁾	503,295		33.6	%	536,284		35.1	%
Corporate	651,894		43.5	%	650,088		42.6	%
Mortgage-backed ⁽²⁾	140,478		9.4	%	131,387		8.6	%
Asset-backed	43,777		2.9	%	44,203		2.9	%
Foreign governments	122		—	%	119		—	%
Total fixed maturity securities	1,356,244		90.5	%	1,377,959		90.2	%
Short-term investments	690		0.1	%	1,301		0.1	%
Cash and cash equivalents	34,944		2.3	%	46,205		3.0	%
Other investments:
Policy loans	81,329		5.4	%	82,005		5.4	%
Equity securities	19,369		1.3	%	16,033		1.1	%

Real estate and other long-term investments	5,751		0.4	%	2,956		0.2	%
Total cash and invested assets	$	1,498,327	100.0	%	$	1,526,459	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
Municipal fixed maturity securities shown including third-party guarantees
AAA	$	26,052	25,592	12,257	11,956	—	—	38,309	37,548	7.9	%
AA	102,178		98,517	158,152	151,590	12,747	11,299	273,077	261,406	54.5	%
A	23,481		22,303	128,858	118,957	7,688	7,067	160,027	148,327	31.0	%
BBB	4,794		4,796	12,721	12,245	1,532	1,450	19,047	18,491	3.9	%
BB and other	4,830		4,970	8,005	7,877	—	—	12,835	12,847	2.7	%
Total	$	161,335	156,178	319,993	302,625	21,967	19,816	503,295	478,619	100.0	%

Municipal fixed maturity securities shown excluding third-party guarantees
AAA	$	5,013	4,899	520	512	—	—	5,533	5,411	1.1	%
AA	79,109		77,966	86,522	83,403	8,209	7,054	173,840	168,423	35.2	%
A	38,184		36,421	166,299	154,896	10,612	9,793	215,095	201,110	42.0	%
BBB	10,011		9,641	29,004	27,934	—	—	39,015	37,575	7.9	%
BB and other	29,018		27,251	37,648	35,880	3,146	2,969	69,812	66,100	13.8	%
Total	$	161,335	156,178	319,993	302,625	21,967	19,816	503,295	478,619	100.0	%


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						Third Amended and Restated Bylaws dated November 2, 2017 (incorporated herein by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K, filed on November 8, 2017)
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*
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