Citizens, Inc. Reports First Quarter 2012 Results

              Citizens, Inc. Reports First Quarter 2012 Results

Investor conference call scheduled for Tuesday, May 8, at 10 a.m. CDT

PR Newswire

AUSTIN, Texas, May 7, 2012

AUSTIN, Texas, May 7, 2012 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) reported
results today for the first quarter ended March 31, 2012.

Rick D. Riley, Vice Chairman and President, said, "We are beginning the year
of 2012 as expected, reporting stable and consistent earnings. These results
are being driven by our seasoned blocks of traditional business. Net income
for the quarter was $1.5 million, or $0.03 per diluted Class A share, compared
to $1.6 million, $0.03 per diluted Class A share, for the three months of
2011. Operating income increased to $1.4 million compared to $1.2 million."

THREE MONTHS ENDED MARCH 31,                             2012    2011
(Unaudited, In thousands, except for per share                   (As adjusted)
amounts)
Premiums                                              $  39,096  37,228
Net investment income                                 $  7,577   7,300
Net realized investment gains                         $  98      19
Change in fair value of warrants                      $  36      399
Total revenue                                         $  46,905  45,069
Net income applicable to common stock                 $  1,512   1,622
Net income per diluted share of Class A common stock  $  0.03    0.03
Diluted weighted average shares of Class A
                     common stock                        48,959  48,687
Operating income                                      $  1,412   1,211

Riley added, "Our total revenue increased 4.1% for the three months driven by
an increase of 5.0% in total premiums, which was largely due to the growth in
renewal premiums.  Excluding the change in fair value of warrants, revenues
increased 4.9% for the same period.  Investment income increased for the
quarter, benefiting from bond mutual funds purchased in the latter part of
2011.  The increase in invested assets was offset by the low interest rate
environment, as our portfolio yield decreased to 3.76% compared with 3.92% at
year-end 2011."

"Further, book value per share of Class A common stock increased 1.3% to $5.03
at March 31, 2012.  Book value was up $0.06 from December 31, 2011, due to
fluctuations in the market values of bonds in our portfolio," Riley said.

Riley commented, "The change in the fair value of warrants had a positive
effect on net income of $36,000 and $399,000 for the first quarters of 2012
and 2011, respectively. The number of outstanding warrants was reduced
substantially during 2011 and the 159,997 remaining warrants will either be
exercised or expire this year, eliminating this consideration from net income
going forward."

Reconciliation of Net Income to Operating Income (a non-GAAP measure)
(Unaudited,In thousands, except for per share data)
THREE MONTHS ENDED MARCH 31,                          2012   2011
                                                             (As adjusted)
Net Income                                          $ 1,512  1,622
Items excluded in the calculation of operating
income:
     Net realized investment (gains) and losses     $ (98)   (19)
     Changes in the fair value of warrants            (36)   (399)
Pre-tax effect of exclusions                          (134)  (418)
Tax effect at 35%                                     34     7
Operating income                                    $ 1,412  1,211

Non-GAAP Financial Measures  - The table above reconciles Net Income to
Operating Income. Operating Income is a "Non-GAAP" financial measure that is
widely used in our industry to evaluate the performance of underwriting
operations. Operating Income excludes the Fair Value Changes of Warrants and
the after-tax net effects of Net Realized Investment Gains and Losses. We
believe it presents a useful view of the performance of our insurance
operations. While we believe disclosure of certain Non-GAAP information is
appropriate, you should not consider this information without also considering
the information we present in accordance with GAAP.

RECENT ACCOUNTING STANDARD ADOPTION

On January 1, 2012, the Company retrospectively adopted the revised accounting
guidance for accounting for costs associated with acquiring or renewing
insurance contracts ("DAC").  These amended accounting rules are intended to
address the diversity among insurers in identifying costs that meet the
accounting criteria of DAC.  Throughout this document, certain prior period
numbers have been restated to reflect the retrospective adoption of the
accounting standard.  The effects of this adoption in our deferred acquisition
costs as of December 31, 2011, resulted in a decrease in the stockholders'
equity balance by $7.6 million, the DAC asset and deferred taxes decreased by
$11.8 million and $4.1 million, respectively.  For the three months ended
March 31, 2011, net income was reduced by a total of $0.2 million, with
minimal impact per diluted share of Class A common stock.

INSURANCE OPERATIONS

  o Life Insurance –  Our Life Insurance segment primarily issues ordinary
    whole life insurance in U.S. Dollar-denominated amounts to foreign
    residents in approximately 30 countries through approximately 2,300
    independent marketing consultants, and domestically through almost 300
    independent marketing firms and consultants throughout the United States.

       o Premiums – Life insurance premium revenues increased for the first
         quarter of 2012, due to higher international renewal premiums, which
         have experienced strong persistency.  First year premiums decreased
         in the current year, which we believe was primarily due to reduced
         sales activity related to preparation throughout our marketing system
         for an agent convention held in April.  In addition, most of our life
         insurance policies contain a policy loan provision that allows the
         policyholder to utilize cash value of a policy to pay premiums and
         keep policies in force. The policy loan asset balance in the life
         insurance segment increased 2.8% from year-end 2011 and increased
         11.3% from first quarter 2011.
       o Benefits and expenses – Life insurance benefits and expenses
         increased for the first quarter 2012 compared to the same period in
         2011, primarily due to increases in claims, surrenders and policy
         benefit reserves.  Endowment products require accumulation of higher
         reserve balances on the front end when compared to whole life
         products. Commission expense decreased from the prior year as renewal
         premiums, which have lower commission rates, comprised a larger
         percentage of total premiums this year.

 

  o Home Service – Our Home Service Insurance segment provides pre-need and
    final expense ordinary life insurance and annuities to middle and lower
    income individuals primarily in Louisiana, Mississippi and Arkansas.  Our
    policies in this segment are sold and serviced through funeral homes and a
    home service marketing distribution system utilizing approximately 530
    employees and independent agents.

       o Premiums – Home service premiums increased 2.0% from first quarter
         2011, primarily due to premiums from a small block of business we
         acquired in the latter part of 2011 that is not included in results
         for the first three months of 2011.
       o Benefits and expenses – Home service benefits and expenses decreased
         by 3.9% for the first quarter 2012.  Claims and surrenders were down
         11.9% from 2011 reported amounts as we released $500,000 of incurred
         but not reported liability based upon our claims experience
         calculation.

INVESTMENTS

  o Invested assets – Total invested assets decreased slightly from year-end
    2011 as cash balances increased due to proceeds from calls of bonds.

       o Fixed maturity securities represented 88.1% of the portfolio at March
         31, 2012, compared with 88.4% at year-end 2011. 
       o Equity security holdings increased slightly to $46.7 million at March
         31, 2012 from $46.1 million at year-end 2011 due to increases in fair
         value.
       o Cash and cash equivalents represented 6.8% of total cash, cash
         equivalents and invested assets at March 31, 2012, up from 3.8% at
         year-end 2011, reflecting the timing of calls and reinvestment. A
         portion of that cash balance was pending long term investment at
         March 31, 2012.

 

  o Investment income – Net investment income increased slightly for the
    quarter ended March 31, 2012 compared to the same period in 2011.  The
    gains were primarily due to dividend income from bond mutual funds
    purchased in the last half of 2011.  The policy loan asset balance
    increased by 2.8% in 2012, resulting in an increase in policy loan income,
    a component of investment income.

       o Yield – During 2012, average invested assets decreased slightly and
         average yield decreased to 3.76% compared with 3.92% at year-end
         2011. 
       o Duration – The average maturity of the fixed income bond portfolio
         was 12.9 years with an estimated effective maturity of 5.9 years as
         of March 31, 2012.

 

INVESTOR CONFERENCE CALL

On Tuesday, May 8, Citizens will host a conference call to discuss operating
results at 10 a.m. Central Time.  The conference call will be hosted by Rick
D. Riley, Vice Chairman and President, Kay Osbourn, Chief Financial Officer,
and other members of the Company's management team.  To participate, please
dial 888-637-2456 and ask to join the Citizens, Inc. call.  We recommend
accessing the call three to five minutes before the call is scheduled to
begin.  A recording of the conference call will be available on Citizens'
website at www.citizensinc.com in the Investor Information section under News
Release & Publications following the call.

ABOUT CITIZENS, INC.

Citizens, Inc. is a financial services company listed on the New York Stock
Exchange under the symbol CIA.  The Company utilizes a three-pronged strategy
for growth based upon worldwide sales of U.S. Dollar-denominated whole life
cash value insurance policies, life insurance product sales in the U.S. and
the acquisition of other U.S. based life insurance companies.

SAFE HARBOR

Information herein contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, which can be identified
by words such as "may," "will," "expect," "anticipate" or "continue" or
comparable words. In addition, all statements other than statements of
historical facts that address activities that the Company expects or
anticipates will or may occur in the future are forward-looking statements. 
Readers are encouraged to read the SEC reports of the Company, particularly
its Form 10-K for the fiscal year ended December 31, 2011, its quarterly
reports on Form 10‑Q and its current reports on Form 8-K, for the meaningful
cautionary language disclosing why actual results may vary materially from
those anticipated by management.  The Company undertakes no duty or obligation
to update any forward-looking statements contained in this release as a result
of new information, future events or changes in the Company's expectations. 
The Company also disclaims any duty to comment upon or correct information
that may be contained in reports published by the investment community.

FOR FURTHER INFORMATION CONTACT:
Kay Osbourn
Chief Financial Officer
(512) 837-7100
PR@citizensinc.com

 

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(In thousands, except per share amounts)
                                                 Three Months Ended March 31,
                                                 2012            2011*
                                                 (Unaudited)
Revenues:
 Premiums:
         Life insurance                          $     37,406         35,611
         Accident and health insurance                 413            372
         Property insurance                            1,277          1,245
 Net investment income                                 7,577          7,300
 Realized investment gains, net                        98             19
 Decrease in fair value of warrants                    36             399
 Other income                                          98             123
Total revenues                                         46,905         45,069
Benefits and expenses:
 Insurance benefits paid or provided:
         Claims and surrenders                         14,754         14,879
         Increase in future policy benefit             14,141         12,318
         reserves
         Policyholders' dividends                      1,874          1,662
 Total insurance benefits paid or provided             30,769         28,859
 Commissions                                           8,664          9,072
 Other general expenses                                6,616          6,403
 Capitalization of deferred policy acquisition         (5,939)        (6,641)
 costs
 Amortization of deferred policy acquisition           4,126          4,238
 costs
 Amortization of cost of customer                      576            647
 relationships acquired
Total benefits and expenses                            44,812         42,578
Income before income tax expense                       2,093          2,491
Income tax expense                                     581            869
 Net income                                            1,512          1,622
Per Share Amounts:
 Basic earnings per share of Class A common    $ 0.03            0.03
 stock
 Basic earnings per share of Class B common    $ 0.02            0.02
 stock
 Diluted earnings per share of Class A common  $ 0.03            0.03
 stock
 Diluted earnings per share of Class B common  $ 0.02            0.01
 stock
Other comprehensive income:
 Unrealized gains on available-for-sale
 securities:
         Unrealized holding gains arising              2,561          1,626
         during period
         Reclassification adjustment for gains         (86)           (19)
         included in net income
 Unrealized gains on available-for-sale                2,475          1,607
 securities, net
 Income tax expense on unrealized gains on             (896)          (562)
 available-for-sale securities
Other comprehensive income                             1,579          1,045
Comprehensive Income                             $     3,091          2,667

*Certain prior period amounts have been restated to reflect the retrospective
adoption of revised accounting guidance for accounting for costs associated
with deferred acquisition costs.

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Financial Position
(In thousands)
                                                  March 31,      December 31,
                                                  2012           2011*
                                                  (Unaudited)
Assets:
    Investments:
        Fixed maturities available-for-sale, at   $              514,253
        fair value                                 497,977
        Fixed maturities held-to-maturity, at     239,040        227,500
        amortized cost
        Equity securities available-for-sale, at  46,723         46,137
        fair value
        Mortgage loans on real estate             1,546          1,557
        Policy loans                              40,170         39,090
        Real estate held for investment           8,574          8,539
        Other long-term investments               112            105
        Short-term investments                    2,030          2,048
    Total investments                             836,172        839,229
    Cash and cash equivalents                     61,096         33,255
    Accrued investment income                     8,853          7,787
    Reinsurance recoverable                       9,594          9,562
    Deferred policy acquisition costs             126,333        124,542
    Cost of customer relationships acquired       27,373         27,945
    Goodwill                                      17,160         17,160
    Other intangible assets                       899            906
    Federal income tax receivable                 -              901
    Property and equipment, net                   7,810          7,860
    Due premiums, net                             8,671          9,169
    Prepaid expenses                              1,234          396
    Other assets                                  852            800
Total assets                                      $              1,079,512
                                                  1,106,047
                                                                  (Continued) 

*Certain prior period amounts have been restated to reflect the retrospective
adoption of revised accounting guidance for accounting for costs associated
with deferred acquisition costs.

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Financial Position, Continued
(In thousands)
                                              March 31,           December 31,
                                              2012                2011*
                                              (Unaudited)
Liabilities:
  Future policy benefit reserves:
    Life insurance                            $          711,148  697,502
    Annuities                                 48,119              47,060
    Accident and health                       5,556               5,612
  Dividend accumulations                      10,864              10,601
  Premiums paid in advance                    26,276              25,291
  Policy claims payable                       9,070               10,020
  Other policyholders' funds                  8,832               8,760
Total policy liabilities                      819,865             804,846
  Commissions payable                         2,442               2,851
  Current federal income tax payable          396                 -
  Deferred federal income taxes               14,201              13,940
  Payable for securities in process of        7,546               -
  settlement
  Warrants outstanding                        415                 451
  Other liabilities                           9,981               9,382
Total liabilities                             854,846             831,470
Commitments and contingencies 
Stockholders' equity:
  Common stock:
    Class A common stock                      258,616             258,548
    Class B common stock                      3,184               3,184
  Accumulated deficit                         (20,339)            (21,851)
  Accumulated other comprehensive income:
    Unrealized gains on securities, net of    20,751              19,172
    tax
  Treasury stock, at cost                     (11,011)            (11,011)
Total stockholders' equity                    251,201             248,042
Total liabilities and stockholders' equity    $       1,106,047   1,079,512

*Certain prior period amounts have been restated to reflect the retrospective
adoption of revised accounting guidance for accounting for costs associated
with DAC.

SOURCE Citizens, Inc.