Citizens, Inc. Reports First Quarter and Three Months 2013 Results

Investor Conference Call Scheduled for May 3, 2013, at 9:00 a.m. CDT

02 May, 2013, 16:31 ET from Citizens, Inc.

AUSTIN, Texas, May 2, 2013 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) reported results today for the first quarter and three months ended March 31, 2013.

Rick D. Riley, Vice Chairman and President, said, "Our life operations continued to be profitable, yet challenged due to the low interest rate environment. Our sales have remained strong in the international market and steady in the home service market as we continue to promote our key markets.  New life segment insurance sales were a particular highlight, rising 17.9% for the quarter on strong international interest in our endowment products."

Riley added, "The expansion in premiums also drove growth in our invested asset portfolio, a major factor in the 10.7% increase in investment income for the quarter.  Further, the portfolio yield increased slightly to 3.86% compared to 3.81% for the full year of 2012.  In addition, we are seeing a positive contribution from bond mutual fund dividends as well as interest on policyholder loans."

"Book value per share of Class A common stock was $5.27 at March 31, 2013."

FOR THE PERIODS ENDED MARCH 31,

YTD 2013

YTD 2012

(Unaudited, In thousands, except for per share amounts)

Premiums

$

40,940

39,096

Net investment income

8,389

7,577

Net realized investment gains

31

98

Change in fair value of warrants

36

Total revenue

49,546

46,905

Net income applicable to common stock

856

1,512

Net income per diluted share of Class A common stock

0.02

0.03

Diluted weighted average shares of Class A common stock

49,080

49,004

Operating income

$

836

1,412

Mr. Riley also observed, "In last year's fourth quarter, the remaining 52,121 outstanding warrants were converted to 12,487 Class A shares by cashless exercise.  As a result, we have no remaining outstanding warrants."

Reconciliation of Net Income to Operating Income (a non-GAAP measure)

FOR THE PERIODS ENDED MARCH 31,

YTD 2013

YTD 2012

(Unaudited, In thousands)

Net income

$

856

1,512

Items excluded in the calculation of operating income:

Net realized investment gains

(31)

(98)

Change in fair value of warrants

(36)

Pre-tax effect of exclusions

(31)

(134)

Tax effect at 35%

11

34

Operating income

$

836

1,412

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.

INSURANCE OPERATIONS

  • Life Insurance Our Life Insurance segment primarily issues ordinary whole life insurance and endowments in U.S. Dollar-denominated amounts to foreign residents in approximately 30 countries through independent marketing consultants, and domestically through independent marketing firms and consultants across the United States.
    • Premiums – Life insurance premium revenues increased for the first quarter of 2013, due to higher international renewal premiums, as we continue to experience strong persistency.  In addition, new sales increased in the first quarter with first year premiums up 17.9% for the three months ended in 2013 compared to last year's first quarter.  Endowment sales continue to be the preferred product internationally representing approximately 80% of first year premiums in the first three months of 2013.  Top selling products were our endowment to age sixty-five and the twenty-year endowment offerings.
    • Benefits and expenses – Total life insurance benefits and expenses rose in line with premium growth for the first quarter 2013 compared to the same period in 2012. Future policy benefit reserves increased as endowment products accumulate higher reserve balances on the front end when compared to whole life products.  We are also continuing to recognize the effect of the current low interest rate environment on reserves for policies issued. Commission expense increased as first year sales expanded and renewal premium remained strong.
  • 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 employees and independent agents.
    • Premiums – Home service premiums were flat for the period ended in 2013 compared to 2012. We expect full-year 2013 sales levels for this business segment to be in line with the levels reported last year.
    • Benefits and expenses – Claims and surrenders increased by 13.3% for the three months of 2013, in part due to increased weather related property claims in the current year. Further, last year's results included the release of an incurred but not reported liability of $0.5 million.  In addition, this segment reported increased amortization of deferred acquisition costs, as we saw a higher incidence of lapses in the current year.

Results for the non-insurance segment have fluctuated over the past several years due to the change in fair value of warrants. This segment represents the administrative support entities to the insurance operations whose revenues are primarily intercompany and have been eliminated in consolidation under GAAP. 

INVESTMENTS

  • Invested assets – Total invested assets increased from year-end 2012 as new premium revenues were invested in bonds and policy loans rose.
    • Fixed maturity securities represented 88.3% of the investment portfolio at March 31, 2013, compared with 88.1% at year-end 2012.
    • Equity security holdings increased to $54.0 million at March 31, 2013 from $53.7 million at year-end 2012 due to increases in fair value of equity mutual funds.
    • Cash and cash equivalents represented 4.4% of total cash, cash equivalents and invested assets at March 31, 2013, down from 5.9% at year-end 2012, reflecting the timing of calls of securities owned and of investment and reinvestment of new premium revenues and other available funds.
  • Investment income – Net investment income increased 10.7% for the three months ended March 31, 2013 compared to the same period in 2012, primarily due to an increase in overall invested assets from premium collections received and invested in fixed maturity bonds, as well as dividend income from bond mutual funds.  The policy loan asset balance increased by 4.4% in 2013, resulting in an increase in policy loan income, a component of investment income.
    • Yield – Average annualized yield was 3.86% for the three months of 2013 compared to 3.81% for the full year of 2012.
    • Duration – The average maturity of the fixed income bond portfolio was 12.3 years with an estimated effective maturity of 6.8 years as of March 31, 2013.

 

INVESTOR CONFERENCE CALL

On Friday, May 3, 2013, Citizens will host a conference call to discuss operating results at 9:00 a.m. Central Daylight 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, 2012, 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,

2013

2012

(Unaudited)

Revenues:

Premiums:

Life insurance

$

39,414

37,406

Accident and health insurance

349

413

Property insurance

1,177

1,277

Net investment income

8,389

7,577

Realized investment gains, net

31

98

Decrease in fair value of warrants

36

Other income

186

98

Total revenues

49,546

46,905

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders

14,806

14,754

Increase in future policy benefit reserves

16,959

14,141

Policyholders' dividends

2,074

1,874

Total insurance benefits paid or provided

33,839

30,769

Commissions

9,058

8,664

Other general expenses

6,699

6,616

Capitalization of deferred policy acquisition costs

(6,362)

(5,939)

Amortization of deferred policy acquisition costs

4,626

4,126

Amortization of cost of customer relationships acquired

578

576

Total benefits and expenses

48,438

44,812

Income before federal income tax

1,108

2,093

Federal income tax expense

252

581

Net income

856

1,512

Per Share Amounts:

Basic earnings per share of Class A common stock

$

0.02

0.03

Basic earnings per share of Class B common stock

0.01

0.02

Diluted earnings per share of Class A common stock

0.02

0.03

Diluted earnings per share of Class B common stock

0.01

0.02

Other comprehensive income:

Unrealized gains on available-for-sale securities:

Unrealized holding gains arising during period

96

2,561

Reclassification adjustment for gains included in net income

(31)

(86)

Unrealized gains on available-for-sale securities, net

65

2,475

Income tax expense on unrealized gains on available-for-sale securities

27

896

Other comprehensive income

38

1,579

Comprehensive income

$

894

3,091

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position

(In thousands)

 

March 31,

December 31,

2013

2012

(Unaudited)

Assets:

Investments:

Fixed maturities available-for-sale, at fair value

$

647,682

604,520

Fixed maturities held-to-maturity, at amortized cost

167,707

187,008

Equity securities available-for-sale, at fair value

54,029

53,741

Mortgage loans on real estate

1,376

1,509

Policy loans

44,872

42,993

Real estate held for investment

8,503

8,496

Other long-term investments

56

57

Short-term investments

2,853

2,340

Total investments

927,078

900,664

Cash and cash equivalents

42,608

56,299

Accrued investment income

10,912

10,304

Reinsurance recoverable

6,829

9,651

Deferred policy acquisition costs

137,311

135,569

Cost of customer relationships acquired

24,606

25,116

Goodwill

17,160

17,160

Other intangible assets

872

879

Federal income tax receivable

270

Property and equipment, net

7,279

7,383

Due premiums, net

10,231

10,527

Prepaid expenses

1,613

344

Other assets

1,077

782

Total assets

$

1,187,576

1,174,948

 

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position, Continued

(In thousands)

 

March 31,

December 31,

2013

2012

(Unaudited)

Liabilities:

Policy liabilities:

Future policy benefit reserves:

Life insurance

$

778,481

762,319

Annuities

52,450

51,750

Accident and health

2,775

5,491

Dividend accumulations

12,300

11,962

Premiums paid in advance

29,629

27,455

Policy claims payable

10,783

11,015

Other policyholders' funds

8,505

9,440

Total policy liabilities

894,923

879,432

Commissions payable

2,095

2,606

Federal income tax payable

1,130

Deferred federal income tax

16,180

17,301

Payable for securities in process of settlement

2,358

Other liabilities

9,246

10,143

Total liabilities

923,574

911,840

Stockholders' equity:

Class A, common stock

259,383

259,383

Class B, common stock

3,184

3,184

Accumulated deficit

(16,479)

(17,335)

Accumulated other comprehensive income:

Unrealized gains on securities, net of tax

28,925

28,887

Treasury stock, at cost

(11,011)

(11,011)

Total stockholders' equity

264,002

263,108

Total liabilities and stockholders' equity

$

1,187,576

1,174,948

 

 

SOURCE Citizens, Inc.



RELATED LINKS

http://www.citizensinc.com