Citizens, Inc. Subsidiary, Security Plan Life, completes purchase of Magnolia Guaranty Life Insurance Company and Citizens, Inc. Reports Fourth Quarter and Full-Year 2013 Results - Investor conference call scheduled for Wednesday, March 12, at 10 a.m. CDT

AUSTIN, Texas, March 11, 2014 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) - Subsidiary Security Plan Life completed the purchase of Magnolia Guaranty Life Insurance Company and Citizens, Inc. reported results today for the fourth quarter and full year ended December 31, 2013.

On March 7, 2014, Citizens, Inc. subsidiary, Security Plan Life Insurance Company ("Security Plan"), completed its acquisition of Magnolia Guaranty Life Insurance Company ("Magnolia") of Ridgeland, Mississippi, for $5.23 million.  Security Plan paid cash in exchange for 409,553 shares of Magnolia capital stock outstanding.  In response to receiving the Mississippi Department of Insurance order approving the transaction, Rick D. Riley, CEO of Security Plan, said, "This Security Plan Life acquisition complements our home service segment.  Magnolia customarily sells policies through independent funeral homes while Security Plan customarily sells through a debit route-based system.  Together, we anticipate Mississippi clients will experience enhanced support from the affiliated companies."

Rick D. Riley, Vice Chairman and President, said, "Our 2013 results are in line with expectations which are reflective of our past experience in our market niche and traditional product foundations.  The low interest rate environment continues to impact our results and our industry as investment yields are an integral component of our business operations.  For the year, our consolidated  insurance premiums increased 3.7%, driven largely by continued growth in our international business, where endowment products continue to be our strongest selling product.  We have seen flat premium levels in our home service segment  year over year but our average policy size has increased in 2013 compared to 2012."

Riley added, "Our invested assets increased by 4.2% to $938 million from $901 million at year-end 2012 due to premium growth and increased yields on investments.  We reported investment income growth for the fourth quarter and full year as we obtained higher yields by investing in the municipal and corporate sectors in the current market.   Our portfolio is comprised primarily of fixed maturity investment grade bonds currently which are driving our overall yield just over 4.1% compared with 3.8% in 2012."

(In thousands, except for per share amounts)

Q413


Q412


2013


2012


Premiums

$

47,637


46,229


176,158


169,873


Net investment income

9,373


8,422


36,597


31,725


Net realized investment gains (losses), net

(390)


(911)


(247)


196


Change in fair value of warrants


137



451


Total revenue

56,866


54,070


213,636


202,759


Net income (loss) applicable to common stock

806


(297)


4,793


4,529


Net income (loss) per diluted share of Class A common stock

0.02


(0.01)


0.10


0.09


Diluted weighted average shares of Class A common stock

49,080


49,079


49,080


49,005


Operating income

$

1,059


206


5,308


3,882


"Further, book value per share of Class A common stock decreased 6% to $4.91 at December 31, 2013, compared with $5.25 at year-end 2012.  The 2013  decrease was due primarily to fluctuations in the market values of bonds and stocks in our portfolio as interest rates rose thus reducing fair values on lower coupon securities," Riley said.

Riley commented, "We recognized investment losses of $0.4 million in the quarter ending December 31, 2013 primarily related to sales of two bond mutual fund issues as new circumstances arose in December surrounding tax planning reviews. We reported net realized losses on investments for the full year of 2012 of $0.2 million compared to gains of $0.2 million for the three months and year ended.  No warrants were outstanding during 2013, as they were all exercised or expired during 2012." 

Turning to operating income, Riley noted, "Income for the year was boosted by improved investment yield as noted previously.  In addition our claims experience was favorable in the current year compared to 2012 thereby reducing benefits and surrender expense."

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

(in thousands, except for per share data)









Q413


Q412


2013


2012


Net Income (loss)

$

806


(297)


4,793


4,529


Items excluded in the calculation of operating income:








Net realized investment (gains) and losses

390


911


247


(196)


Changes in the fair value of warrants


(137)



(451)


Pre tax effect of exclusions

390


774


247


(647)


Tax effect at 35%

(137)


(271)


268



Operating income

$

1,059


206


5,308


3,882










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 informative, 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 endowment and ordinary whole life insurance in U.S. Dollar-denominated amounts to foreign residents and domestically across the United States.
    • Premiums – Life insurance premium revenues increased for the fourth quarter and full year of 2013, due to higher international first year and renewal premiums, which have experienced strong persistency as this block of business ages.  Improved new business performance in 2013 reflected strong sales from Colombia, Ecuador, Taiwan, and Venezuela.  Endowment sales represented $14.3 million or 73.0% of new first year premium as of December 31, 2013 compared to $14.3 million and 76.0% for the year in 2012.  In addition, most of our life insurance policies contain a policy loan provision, which allows policyholders to utilize cash value of a policy to pay premiums and keep policies in force. 
    • Benefits and expenses – Life insurance benefits and expenses increased by 6.3%. Commission expense decreased 3.8% for the quarter but increased 4.6% for the year ended in 2013 due to the mix of renewals and new premium sales compared to the same periods last year. General expenses were down 8.0% for the quarter but rose 3.3% for the year compared to the same periods in 2012. The overall increase was in our self-insurance health plan claims and temporary labor cost increases in some operation areas. We recorded favorable claim experience which decreased 1.4% and was offset by an increase in surrender expenses and other policy benefits for the fourth quarter and full year of 2013. Amortization of deferred acquisition costs increased by 4.1% compared to 2012 as our persistency was lower this year and increased amortization.
  • 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.
    • Premiums – Home service premiums have remained flat in 2013 compared to 2012. The purchase of MGLIC as noted above is expected to fit well with our overall home service strategy and increase our presence in Mississippi which we believe will benefit overall sales in that state.
    • Benefits and expenses – Home service benefits and expenses increased 1.8% as claims were up by 1.9% for the full year in 2013. We experienced favorable claims that were down 7.4% for the three months ended December 31, 2013.  Property claims declined 12.9% to $2.0 million in 2013 compared to 2012 due to Hurricane Isaac, which impacted Louisiana policyholders in the later part of 2012.  Our home service policyholders have been negatively impacted by the current economic conditions, including continued high levels of unemployment throughout the country.  We have noted average policy face amount increased from $6,574 to $6,771 year over year.

INVESTMENTS

  • Invested assets – Total invested assets including cash and cash equivalents grew 3.7% in 2013, reflecting additional premium income from new and renewal business and increased investment income over the past year.
    • Fixed maturity securities represented 83.9% of the portfolio at year-end 2013, compared with 82.7% at year-end 2012.
    • Equity security holdings decreased to $47.3 million at year-end 2013 from $53.7 million at year-end 2012 as we sold two bond mutual fund issues totaling approximately $6.0 million.
    • Cash and cash equivalents represented 5.5% of total cash, cash equivalents and short-term invested assets at year-end 2013, down from 5.9% in 2012.  These balances fluctuate based upon the timing of premium receipts and bond maturities, bond call activity and ultimate investment into fixed maturity investments.
  • Investment income – Net investment income increased 11.2% and 15.3% for the quarter ended and full year of December 31, 2013.  The gains were due to higher average investment balances and yields increasing during the periods. The policy loan asset balance increased by 13.7% in 2013, resulting in an increase in policy loan income, a component of investment income.
    • Yield - During 2013, invested assets increased 4.2% and the portfolio yield increased to 3.9% compared with 3.5% in 2012 as bond rates rose slightly. 
    • Duration - During 2013, the Company continued significant investments of bonds in state municipals and corporate utility sector issuers with credit ratings ranging from A A to BBB.  The Company began increasing investments in investment-grade corporate, municipal bonds and shorter duration bond mutual funds two years ago to obtain higher yields. The average maturity of the fixed income bond portfolio was 12.0 years with an estimated effective maturity of 7.0 years as of December 31, 2013.
  • Realized gains – We recorded net losses of $ 0.4 million as discussed above relative to 2013.  There were no other than temporary impairments during 2013.  We reported a gain of $0.2 million in 2012 and we recorded an other-than-temporary impairment for the three months and year ended December 31, 2012 totaling $1.3 million related to one issuer of bonds in the coal producing energy sector.  In 2012, the Company sold equity mutual funds, which were previously impaired, and other securities for realized gains of  $0.6 million for tax considerations. 

INVESTOR CONFERENCE CALL

On Wednesday, March 12, 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) 503-8175 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, 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


 

 

Consolidated Statements of Comprehensive Income

(In thousands, except per share amounts)



Three Months Ended

December 31,


Twelve Months Ended

December 31,


2013


2012


2013


2012

Revenues:








   Premiums:








      Life insurance

$

45,955


44,562


169,683


163,170

      Accident and health insurance

394


391


1,529


1,635

      Property insurance

1,288


1,276


4,946


5,068

   Net investment income

9,373


8,422


36,597


31,725

   Realized investment gains (losses), net

(390)


(911)


(247)


196

   Decrease (increase) in fair value of warrants


137



451

   Other income

246


193


1,128


514

Total revenues

56,866


54,070


213,636


202,759

Benefits and expenses:








   Insurance benefits paid or provided:








      Claims and surrenders

16,198


18,166


64,427


64,656

      Increase in future policy benefit reserves

21,967


18,883


74,220


66,676

      Policyholders' dividends

2,799


2,336


9,470


9,091

   Total insurance benefits paid or provided

40,964


39,385


148,117


140,423

   Commissions

11,050


11,234


40,477


39,398

   Other general expenses

6,386


6,651


26,590


25,664

   Capitalization of deferred policy acquisition costs

(8,297)


(8,544)


(29,398)


(29,074)

   Amortization of deferred policy acquisition costs

4,764


5,152


18,511


17,845

   Amortization of cost of customer relationships acquired

589


633


2,408


2,467

Total benefits and expenses

55,456


54,511


206,705


196,723

Income (loss) before income tax expense

1,410


(441)


6,931


6,036

Income tax expense (benefit)

604


(144)


2,138


1,507

   Net income (loss)

$

806


(297)


4,793


4,529

Per Share Amounts:








Basic and diluted earnings (loss) per share of Class A common stock

$

0.02


(0.01)


0.10


0.09

Basic and diluted earnings per share of Class B common stock

$

0.01



0.05


0.05

Other comprehensive income (loss):








Unrealized gains on available-for-sale securities:








Unrealized holding gains (losses) arising during period

(4,607)


(1,976)


(34,183)


15,130

Reclassification adjustment for (gains) losses included in net income

415


1,020


227


105

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

(4,192)


(956)


(33,956)


15,235

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

(1,464)


(317)


(11,864)


5,520

Other comprehensive income (loss)

(2,728)


(639)


(22,092)


9,715

Comprehensive income (loss)

$

(1,922)


(936)


(17,299)


14,244









 

 



Consolidated Statements of Financial Position

December 31,

(In thousands)





Assets

2013


2012

Investments:




Fixed maturities available-for-sale, at fair value (cost:  $595,944 and $559,736 in 2013 and 2012, respectively)

$

605,256


604,520

Fixed maturities held-to-maturity, at amortized cost (fair value:  $223,533 and $193,739 in 2013 and 2012, respectively)

227,696


187,008

Equity securities available-for-sale, at fair value (cost:  $45,883 and $52,744 in 2013 and 2012, respectively)

47,259


53,741

   Mortgage loans on real estate

671


1,509

   Policy loans

48,868


42,993

Real estate held for investment (less $1,429 and $1,287 accumulated depreciation in 2013 and 2012, respectively)

8,440


8,496

   Other long-term investments

45


57

   Short-term investments


2,340

Total investments

938,235


900,664

Cash and cash equivalents

54,593


56,299

Accrued investment income

12,251


10,304

Reinsurance recoverable

4,394


9,651

Deferred policy acquisition costs

146,691


135,569

Cost of customer relationships acquired

23,374


25,116

Goodwill

17,160


17,160

Other intangible assets

851


879

Federal income tax receivable


270

Property and equipment, net

6,662


7,383

Due premiums, net (less $1,429 and $1,345 allowance for doubtful accounts in 2013 and 2012, respectively)

11,209


10,527

Prepaid expenses

95


344

Other assets

765


782

Total assets

$

1,216,280


1,174,948

 

 

Consolidated Statements of Financial Position, Continued

December 31,

(In thousands)





Liabilities and Stockholders' Equity

2013


2012

Liabilities:




   Future policy benefit reserves:




      Life insurance

$

834,269


762,319

      Annuities

55,485


51,750

      Accident and health

1,250


5,491

   Dividend accumulations

13,662


11,962

   Premiums paid in advance

32,560


27,455

   Policy claims payable

9,488


11,015

   Other policyholders' funds

7,982


9,440

Total policy liabilities

954,696


879,432

   Commissions payable

2,562


2,606

   Deferred federal income tax

1,704


17,301

    Current federal income tax payable

590


   Payable for securities in process of settlement


2,358

   Other liabilities

10,919


10,143

Total liabilities

970,471


911,840

Stockholders' equity:




   Common stock:




      Class A, no par value, 100,000,000 shares authorized 52,215,852 shares issued and outstanding 2013 and 2012, including shares in treasury of 3,135,738 in 2013 and 2012

259,383


259,383

      Class B, no par value, 2,000,000 shares authorized, 1,001,714 shares issued and outstanding in 2013 and 2012

3,184


3,184

   Accumulated deficit

(12,542)


(17,335)

   Accumulated other comprehensive income:




      Unrealized gains on securities, net of tax

6,795


28,887

   Treasury stock, at cost

(11,011)


(11,011)

Total stockholders' equity

245,809


263,108

Total liabilities and stockholders' equity

$

1,216,280


1,174,948

SOURCE Citizens, Inc.



RELATED LINKS
http://www.citizensinc.com

Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

 

PR Newswire Membership

Fill out a PR Newswire membership form or contact us at (888) 776-0942.

Learn about PR Newswire services

Request more information about PR Newswire products and services or call us at (888) 776-0942.