Citizens, Inc. Reports Fourth Quarter and Full-Year 2010 Results

- Investor conference call scheduled for Friday, March 11, at 10 a.m. CST

Mar 10, 2011, 17:35 ET from Citizens, Inc.

AUSTIN, Texas, March 10, 2011 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) reported results today for the fourth quarter and full-year ended December 31, 2010.

Rick D. Riley, Vice Chairman and President, said, "During 2010, Citizens continued to offer life insurance products emphasizing living benefits in our targeted domestic and international markets. While the business and investing environments remained challenging, the Company experienced growth in revenues and net income, reflecting both an increase in premiums from our insurance operations and an increase in investment income over 2009 as higher invested assets offset declining yields over the course of 2010."

Riley noted, "In keeping with the long-term horizon of our policyholders, we manage our business with long-range objectives and have responded to conditions of recent years by continuing to foster the relationships that support new insurance sales and high persistency."

Q410

Q409

2010

2009

(In thousands, except share amounts)

Premiums

$     42,131

40,786

152,052

147,280

Net investment income

$       6,181

7,869

30,077

29,602

Net realized gains (losses), net

$       7,364

5,213

8,012

8,040

Change in fair value of warrants

$        (148)

73

232

3,154

Total revenue

$     55,734

54,049

191,181

188,980

Net income applicable to common stock

$       9,055

7,627

15,511

14,835

Net income per diluted share of Class A common stock

$         0.19

0.16

0.32

0.31

Weighted average shares of Class A common stock (diluted)

48,718

48,687

48,688

47,556

Riley added, "Full-year 2010 net realized gains were comparable to 2009 as the Company again sold previously impaired mutual fund holdings as well as below investment-grade securities in order to recover taxes paid on prior year gains and to accomplish current year consolidated return tax-savings.  Though the contribution to net income of full-year realized gains were unchanged, the year-over-year comparison was impacted by another non-operating item -- a significantly lower gain on the change in the fair value of outstanding warrants, which relates to changes in the market value of our Class A common stock."

Consolidated results

  • Total revenues – Total revenues increased 3.1% for the quarter ended December 31, and 1.2% for full-year 2010, due to growth in both premiums and investment income.  Total revenue, excluding the change in fair value of warrants, increased 3.5% and 2.8% for the same periods.  
  • Net income – Net income rose by $1.4 million for the quarter ended December 31, and $0.7 million for full-year 2010.  On an after-tax basis, realized gains contributed $5.2 million, or $0.11 per share of Class A common stock, to full-year net income, unchanged from 2009.  On an after-tax basis, the non-cash charge for the change in fair value of warrants increased net income in 2010 by $0.2 million, which would be less than 1 cent per share of Class A common stock, compared with $3.2 million, or $0.04 per share of Class A common stock, in 2009.
  • Book value – Book value per share of Class A common stock rose 5.3% to $4.58 at December 31, 2010, compared with $4.35 at year-end 2009.  Year-end 2010 book value declined $0.19 from September 30, 2010, due to market declines in bond values.

Insurance operations

  • Premiums Premium growth for the fourth quarter and full-year was driven by strong persistency and higher endowment sales in the international life insurance business.  Life first-year premiums increased 2.8% for 2010 and represented approximately 15% of total life premiums for 2010 and 2009.
    • Endowment sales now represent a significant portion of international new business sales, reflecting increased interest in guaranteed products in recent years from the Pacific Rim and Latin America. Endowment sales rose 10.6% to $9.4 million in 2010.
    • Most of our life insurance policies contain a policy loan provision, which allows the policyholder to tap the cash value of a policy to pay premiums and keep policies in force. The policy loan asset balance increased 10.9% year over year.  
  • Underwriting profit Total benefits and expenses rose less rapidly than premiums for the fourth quarter and full-year.  For those periods, increases in insurance benefits paid or provided and commissions, which were related to premium growth, particularly the higher endowment sales, were offset by lower expenses and changes in capitalization and amortization of deferred acquisition costs and other items.  Investment income is a factor in profitability, but the Company's product design does not depend solely on interest rate spreads, but also relies on the mortality, expense and persistency margins.

Investments

  • Invested assets – Total invested assets grew 8.1% to $725.7 million at December 31, 2010, from $671.3 million at December 31, 2009, reflecting additional premium income from new and renewal business over the past year.  Fixed maturity securities represented 90.4% of the portfolio at year-end 2010, compared with 88.3% at year-end 2009.  Cash and cash equivalents were 6.4% at year-end 2010, down from 6.8% in 2009 of total cash, cash equivalents and invested assets, reflecting the timing of calls relating to higher-yielding fixed maturity investments.
  • Investment income – Net investment income decreased 21.5% for the quarter ended December 31, 2010, but rose 1.6% for the full-year.  Lower yields on invested assets continue to offset higher average investment balances.  As noted above, the policy loan asset balance rose by 10.9% in 2010, resulting in an increase in policy loan income, which is included in investment income.
  • Yield and duration – During 2010, average invested assets rose 12.6% while average yield declined to 4.32% compared with 4.75% in 2009.  The average annualized yield for the quarter ended December 31, 2010 was 3.47% compared to 4.87% for the quarter ended December 31, 2009.  Significant calls by issuers of fixed maturity securities has resulted in the Company reinvesting proceeds at lower yields as market rates have declined.  During 2010, the Company continued to invest in bonds of U.S. Government-sponsored enterprises.  In addition, the Company made additional investments in high quality corporate and municipal bonds to obtain higher yields.
  • Realized gains – Realized gains for the full year ended 2010 were comparable to net realized gains from 2009.  In 2010 and 2009, the Company sold equity mutual funds, which were previously impaired, and realized gains of $6.4 million and $4.9 million, respectively.  During the current year, the Company also realized net gains of $1.3 million on sales of securities related to an acquired entity that were primarily below investment grade quality.  The Company also sold a number of fixed maturity investments in 2009, resulting in a total gain of over $8.0 million that was offset by realized losses from impairments of $0.3 million.

Investor Conference Call

On Friday, March 11, 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) 674-0222 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, 2010, its quarterly reports on Form 10Q 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 Operations

(In thousands, except per share amounts)

Three Months Ended

Twelve Months Ended

December 31,

December 31,

Unaudited

Unaudited

2010

2009

2010

2009

Revenues:

Premiums:

Life insurance

$    40,551

39,143

145,665

141,001

Accident and health insurance

362

396

1,577

1,531

Property insurance

1,218

1,247

4,810

4,748

Net investment income

6,181

7,869

30,077

29,602

Realized gains (losses), net

7,364

5,213

8,012

8,040

Decrease (increase) in fair value of  warrants  

(148)

73

232

3,154

Other income

206

108

808

904

Total revenues

55,734

54,049

191,181

188,980

Benefits and expenses:

Insurance benefits paid or provided:

Claims and surrenders

14,628

15,734

61,038

59,988

Increase in future policy benefit reserves

15,694

12,769

46,420

40,790

Policyholders’ dividends

2,161

1,938

7,485

6,680

Total insurance benefits paid or provided

32,483

30,441

114,943

107,458

Commissions

10,200

10,074

36,585

35,536

Other underwriting, acquisition and insurance

expenses

6,516

6,451

27,057

28,340

Capitalization of deferred policy acquisition costs

(7,414)

(7,450)

(27,960)

(27,132)

Amortization of deferred policy acquisition costs

3,278

5,538

17,840

20,678

Amortization of cost of customer relationships

     acquired and other intangibles

754

864

3,086

3,494

Total benefits and expenses

45,817

45,918

171,551

168,374

Income (loss) before income tax expense

9,917

8,131

19,630

20,606

Income tax expense (benefit)

862

504

4,119

3,266

Net income (loss)

$      9,055

7,627

15,511

17,340

Net income (loss) applicable to common stockholders

$      9,055

7,627

15,511

14,835

Per Share Amounts:

Basic and diluted earnings (loss) per share of

    Class A common stock

$        0.19

0.16

0.32

0.31

Basic and diluted earnings (loss) per share of

     Class B common stock

$        0.09

0.08

0.16

0.15

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position

December 31,

(In thousands)

Assets

2010

2009

Unaudited

Investments:

Fixed maturities held-to-maturity, at amortized cost

(fair value $0 and $9,144 in 2006 and 2005, respectively)

Fixed maturities available-for-sale, at fair value

(cost: $578,412 in 2010 and $389,195 in 2009)

$  575,737

385,579

Fixed maturities held-to-maturity, at amortized cost

(fair value: $79,103 in 2010 and $199,767 in 2009)

80,232

206,909

Equity securities available-for-sale, at fair value

(cost: $19,844 in 2010 and $25,899 in 2009)

23,304

33,477

Mortgage loans on real estate

1,489

1,533

Policy loans

35,585

32,096

Real estate held for investment (less $1,017 and $913 accumulated

depreciation in 2010 and 2009, respectively)

9,200

9,032

Other long-term investments

148

184

Short-term investments

-

2,510

Total investments

725,695

671,320

Cash and cash equivalents

49,723

48,625

Accrued investment income

7,433

7,455

Reinsurance recoverable

9,729

11,587

Deferred policy acquisition costs

125,684

115,570

Cost of customer relationships acquired

31,631

34,728

Goodwill

17,160

17,160

Other intangible assets

1,019

1,046

Federal income tax receivable

1,914

4,023

Property and equipment, net

7,101

6,018

Due premiums, net (less $1,568 and $1,644 allowance for doubtful

accounts in 2010 and 2009, respectively)

8,537

8,960

Prepaid expenses

474

288

Other assets

406

546

Total assets

$  986,506

927,326

(Continued)

CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Financial Position, Continued

December 31, 2010 and 2009

(In thousands)

Liabilities and Stockholders’ Equity

2010

2009

Unaudited

Liabilities:

Future policy benefit reserves:

Life insurance

$  637,140

592,358

Annuities

42,096

37,882

Accident and health

5,910

6,399

Dividend accumulations

9,498

5,621

Premiums paid in advance

23,675

20,373

Policy claims payable

10,540

10,222

Other policyholders’ funds

8,191

8,105

Total policy liabilities

737,050

680,960

Commissions payable

2,538

2,434

Deferred federal and state income taxes

9,410

8,052

Payable for securities in process of settlement

-

6,000

Warrants outstanding

1,587

1,819

Other liabilities

8,287

11,986

Total liabilities

758,872

711,251

Commitments and contingencies

Stockholders’ equity:

Common stock:

Class A, no par value, 100,000,000 shares authorized,

51,822,497 shares issued and outstanding in 2010 and 2009,

including shares in treasury of 3,135,738 in 2010 and 2009

256,703

256,703

Class B, no par value, 2,000,000 shares authorized,

1,001,714 shares issued and outstanding in 2010 and 2009

3184

3184

Accumulated deficit

(22,581)

(38,092)

Accumulated other comprehensive income (loss):

Unrealized gains (losses) on securities, net of tax

1,339

5,291

238,645

227,086

Treasury stock, at cost

(11,011)

(11,011)

Total stockholders’ equity

227,634

216,075

Total liabilities and stockholders’ equity

$  986,506

927,326

SOURCE Citizens, Inc.



RELATED LINKS

http://www.citizensinc.com