Citizens, Inc. Reports Second Quarter three and six months 2014 Results Investor Conference Call Scheduled for August 8, 2014, at 9:00 a.m. CDT

AUSTIN, Texas, Aug. 7, 2014 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) reported results today for the three and six months ended June 30, 2014.

Rick D. Riley, Vice Chairman and President, said, "We are reporting an increase in premium sales revenue of 5.7% and 5.4% for the three and six months ended June 30, 2014 as well as continued improvement in investment yields and income as we steadily move up from the historical low interest rate levels from the prior years. Claim and surrenders remained flat for the three months as we experienced a claims reported increase in both insurance segments while lower surrenders in the life segment muted the impact overall.  For the  six months ended June 30, 2014 our reported claims were up by 5.3% with increases in both the life and home service insurance segments yet reported amounts were within expected levels."

Riley added, "Our investment income increased 8.8% and 13.2% for the current three and six months compared to the same  periods in 2013, as the portfolio yield climbed to 4.21% compared to 4.11% for the full year of 2013 and 4.03% for the six months ended June 30, 2013.  Interest on policyholder loans also contributed positively to this improvement as policy loans increased 6.4% from year end 2013."

"Book value per share of Class A common stock was $5.30 at June 30, 2014."

FOR THE PERIODS ENDED JUNE 30,


Q2 2014


Q2 2013


2014



2013


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













Premiums


$

46,329



43,834



89,342



84,774


Net investment income


10,083



9,265



19,989



17,654


Net realized investment gains (losses)


(73)



82



(129)



113


Total revenue


56,502



53,608



109,534



103,154


Net income applicable to common stock


1,150



1,307



2,347



2,163


Net income per diluted share of Class A common stock


0.03



0.03



0.05



0.05


Diluted weighted average shares of Class A common stock


49,080



49,080



49,080



49,080


Operating income


$

1,197



1,254



2,431



2,090


"We closed the acquisition of Magnolia Guaranty Life Insurance Company ("MGLIC") on March 7, 2014 and as of June 30, 2014 its assets totaled $12.7 million, liabilities $7.1 million and stockholders equity $5.6 million.  We continue to anticipate this entity will account for approximately $0.3 million of additional net income for the full year of 2014.  We are currently integrating MGLIC into our insurance administration system as we work to streamline overall operational expenditures.  MGLIC is included in our home service business segment as a wholly owned Security Plan Life Insurance Company subsidiary."

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














FOR THE PERIODS ENDED JUNE 30,


Q2 2014


Q2 2013


2014



2013


(Unaudited, In thousands)













Net income


$

1,150



1,307



2,347



2,163


Items excluded in the calculation of operating income:













Net realized investment (gains) losses


73



(82)



129



(113)


Pre-tax effect of exclusions


73



(82)



129



(113)


Tax effect at 35%


(26)



29



(45)



40


Operating income


$

1,197



1,254



2,431



2,090















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 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 three and six months of 2014, primarily from higher international renewal premiums, as we continue to experience strong endowment sales and persistency.  First year premiums decreased 7.4% for the three months but increased 2.7% for the six months ended June 30, 2014 compared to the same periods in 2013. The endowment to age sixty-five and the twenty-year endowment  continue to be the preferred products internationally.  Venezuela, Colombia and Taiwan which have been our top three producing countries, all showed premium growth for the six months ended June 30, 2014 compared to the same period in 2013.
    • Benefits and expenses – Future policy benefit reserves increased as endowment products accumulate higher reserve balances on the front end when compared to whole life products. Commission expense increased comparatively as first year sales expanded and renewal premium remained strong. Death claims increased for the three months ended June 30, 2014 by 12.8% due to higher reported claims and is up 9.6% year to date in  2014 compared to 2013. Surrender expense was down by 12.6% for the three months ended June 30, 2014 but up 3.0% for the six months ended in 2014 compared to 2013 levels for the same period. Our overall surrenders have remained at a level totaling approximately 0.6% of in force with a large portion related to policies that have passed the surrender charge period, which is typically fourteen years.
  • 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 increased 7.1% and 5.3% for the three and six months in 2014 compared to 2013 primarily due to the added premium associated with the MGLIC acquisition of $0.7 million and $0.9 million. We expect this acquisition will benefit our Home Service segment through enhanced marketing opportunities in Mississippi.
    • Benefits and expenses – Claims and surrenders increased by 5.2% and 4.2% for the three and six months in 2014 compared to 2013, due primarily to increased death claims reported in both current periods. In 2013, we experienced increased weather-related property claims, which was not the case in 2014, therefore current property claims are lower on a comparative basis by 17.9% and 26.3% for the three and six months ended June 30, 2014 to 2013.  This segment reported increased amortization of deferred acquisition costs, as we experienced higher policy lapses in the current year. Additionally, the inclusion of MGLIC results affected comparability.

The non-insurance 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 continued to increase from year-end 2013 as new premium revenues were invested primarily in fixed maturity bonds and policy loans rose.
    • Fixed maturity securities represented 83.6% of invested assets and cash at June 30, 2014, compared to 83.9% at year-end 2013.
    • Equity security holdings increased to $56.6 million at June 30, 2014 from $47.3 million at year-end 2013 with the increase primarily from the MGLIC acquisition and additional purchases in mutual funds in the current quarter.  The majority of our equity holdings are bond mutual funds.
    • Cash and cash equivalents represented 5.4% of total cash, cash equivalents and invested assets at June 30, 2014, down from 5.5% at year-end 2013, 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 8.8% and 13.2% for the three and six months ended June 30, 2014 compared to the same periods in 2013, primarily due to an increase in overall yield on invested assets and from overall asset growth from premium collections received and invested in fixed maturity bonds.  In addition, our policy loan asset balance rose by 6.4% during the six months in 2014, resulting in policy loan income increase as a component of investment income.
    • Yield – Average annualized yield was 4.21% for the six months ended in 2014 compared to 4.11% for the full year of 2013 and 4.03% for the six months ended June 30, 2013.
    • Duration – The average maturity of the fixed income bond portfolio was approximately12 years with an estimated effective maturity of 7 years as of June 30, 2014.
  • Realized investment gains (losses) - During the three months ended June 30, 2014 the Company sold two bond mutual fund issues totaling $11.1 million for a net loss of $0.1 million as the current investment environment resulted in a change in our intent to hold certain U.S. Government backed funds. We reinvested these proceeds into more attractive bond mutual funds for expected improvement in yields.

INVESTOR CONFERENCE CALL

On Friday, August 8, 2014, Citizens will host a conference call to discuss operating results at 9:00 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 888-427-9411 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 Relations section under SEC Filings & News Releases 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, 2013, 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 June 30,



2014


2013



(Unaudited)

Revenues:











Premiums:











Life insurance





$

44,667





42,223

Accident and health insurance





390





406

Property insurance





1,272





1,205

Net investment income





10,083





9,265

Realized investment gains (losses), net





(73)





82

Other income





163





427

Total revenues





56,502





53,608

Benefits and expenses:











Insurance benefits paid or provided:











Claims and surrenders





16,668





16,660

Increase in future policy benefit reserves





19,979





17,896

Policyholders' dividends





2,412





2,235

Total insurance benefits paid or provided





39,059





36,791

Commissions





10,403





10,429

Other general expenses





7,448





7,342

Capitalization of deferred policy acquisition costs





(7,423)





(7,672)

Amortization of deferred policy acquisition costs





4,893





4,363

Amortization of cost of customer relationships acquired





614





560

Total benefits and expenses





54,994





51,813

Income before federal income tax





1,508





1,795

Federal income tax expense





358





488

Net income





1,150





1,307

Per Share Amounts:











Basic earnings per share of Class A common stock


$

0.03





0.03




Basic earnings per share of Class B common stock


0.01





0.01




Diluted earnings per share of Class A common stock


0.03





0.03




Diluted earnings per share of Class B common stock


0.01





0.01




Other comprehensive income (loss):











Unrealized gains (losses) on available-for-sale securities:











Unrealized holding gains (losses) arising during period





12,296





(25,544)

Reclassification adjustment for (gains) losses  included in net income





73





(73)

Unrealized gains (losses) on available-for-sale securities, net





12,369





(25,617)

Income tax expense (benefit) on unrealized gains (losses) on available-for-sale securities





4,340





(8,953)

Other comprehensive income (loss)





8,029





(16,664)

Comprehensive income (loss)





$

9,179





(15,357)

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)




Six Months Ended June 30,



2014


2013



(Unaudited)

Revenues:











Premiums:











Life insurance





$

86,064





81,637

Accident and health insurance





741





755

Property insurance





2,537





2,382

Net investment income





19,989





17,654

Realized investment gains (losses), net





(129)





113

Other income





332





613

Total revenues





109,534





103,154

Benefits and expenses:











Insurance benefits paid or provided:











Claims and surrenders





33,125





31,466

Increase in future policy benefit reserves





37,677





34,855

Policyholders' dividends





4,514





4,309

Total insurance benefits paid or provided





75,316





70,630

Commissions





20,313





19,487

Other general expenses





13,950





14,041

Capitalization of deferred policy acquisition costs





(14,491)





(14,034)

Amortization of deferred policy acquisition costs





10,102





8,989

Amortization of cost of customer relationships acquired





1,145





1,138

Total benefits and expenses





106,335





100,251

Income before federal income tax





3,199





2,903

Federal income tax expense





852





740

Net income





2,347





2,163

Per Share Amounts:











Basic earnings per share of Class A common stock


$

0.05





0.05




Basic earnings per share of Class B common stock


0.02





0.02




Diluted earnings per share of Class A common stock


0.05





0.05




Diluted earnings per share of Class B common stock


0.02





0.02




Other comprehensive income (loss):











Unrealized gains (losses) on available-for-sale securities:











Unrealized holding gains (losses) arising during period





26,392





(25,448)

Reclassification adjustment for (gains) losses included in net income





105





(104)

Unrealized gains (losses) on available-for-sale securities, net





26,497





(25,552)

Income tax expense (benefit) on unrealized gains (losses) on available-for-sale securities





9,294





(8,926)

Other comprehensive income (loss)





17,203





(16,626)

Comprehensive income (loss)





$

19,550





(14,463)

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position

(In thousands)






June 30,


December 31,


2014


2013


(Unaudited)



Assets:




Investments:




Fixed maturities available-for-sale, at fair value

$

663,501


605,256

Fixed maturities held-to-maturity, at amortized cost

228,948


227,696

Equity securities available-for-sale, at fair value

56,637


47,259

Mortgage loans on real estate

650


671

Policy loans

52,001


48,868

Real estate held for investment

8,218


8,440

Other long-term investments

44


45

Short-term investments


Total investments

1,009,999


938,235

Cash and cash equivalents

57,437


54,593

Accrued investment income

12,877


12,251

Receivable for securities


Reinsurance recoverable

4,730


4,394

Deferred policy acquisition costs

150,891


146,691

Cost of customer relationships acquired

24,624


23,374

Goodwill

17,306


17,160

Other intangible assets

976


851

Federal income tax receivable


Property and equipment, net

6,513


6,662

Due premiums, net

10,080


11,209

Prepaid expenses

1,995


95

Other assets

1,038


765

Total assets

$

1,298,466


1,216,280


(Continued)

 

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position, Continued

(In thousands)



June 30,


December 31,


2014


2013


(Unaudited)



Liabilities:




Policy liabilities:




Future policy benefit reserves:




Life insurance

$

876,228


834,269

Annuities

56,489


55,485

Accident and health

1,217


1,250

Dividend accumulations

14,677


13,662

Premiums paid in advance

34,700


32,560

Policy claims payable

10,733


9,488

Other policyholders' funds

7,099


7,982

Total policy liabilities

1,001,143


954,696

Commissions payable

2,377


2,562

Federal income tax payable

645


590

Deferred federal income tax

10,501


1,704

Payable for securities in process of settlement

6,103


Other liabilities

12,338


10,919

Total liabilities

1,033,107


970,471





Stockholders' equity:




Class A, common stock

259,383


259,383

Class B, common stock

3,184


3,184

Accumulated deficit

(10,195)


(12,542)

Accumulated other comprehensive income:




Unrealized gains on securities, net of tax

23,998


6,795

Treasury stock, at cost

(11,011)


(11,011)

Total stockholders' equity

265,359


245,809

Total liabilities and stockholders' equity

$

1,298,466


1,216,280

 

SOURCE Citizens, Inc.



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