Citizens, Inc. Reports Third Quarter and Nine Months 2013 Results

AUSTIN, Texas, Nov. 6, 2013 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) reported results today for the third quarter and nine months ended September 30, 2013.

Rick D. Riley, Vice Chairman and President, said, "Citizens recorded another solid quarter highlighted by continued growth in life insurance segment premium revenues and a higher yield on our fixed maturity securities portfolio. Nine-month operating income continues ahead of the same period in 2012, although third-quarter results are down as compared to the same period in 2012 driven by  increased surrender expenses in our life insurance segment and increased death claims in our home service segment. Total premiums rose 1.9% and 3.9% for the three and nine month periods ending September 30, 2013, as compared to the corresponding periods in 2012, with new life segment international insurance sales growth reflecting the market's continued interest in our endowment products."

Riley added, "New premium revenue drove invested asset growth while the consolidated investment yield improved to 4.10% compared to 3.81% for the full year of 2012.  As a result, investment income rose 17.9% and 16.8% for the three and nine month periods ended September 30, 2013, as compared to the corresponding periods in 2012.  Book value per share of Class A common stock was $4.95 at September 30, 2013, reflecting interest-rate driven mark-to-market adjustments."

Mr. Riley also observed, "During October, we entered into a purchase agreement with Magnolia Guaranty Life Insurance to acquire the company for $5.2 million. We are conducting our due diligence at this time and expect to close the transaction in the fourth quarter of 2013.  Magnolia is a Mississippi company that began writing industrial life insurance policies in Mississippi in 1992.  The Company had approximately $8.0 million of  assets at December 31, 2012 with approximately $60 million of life insurance in force.  Magnolia's 2012 statutory net premiums were approximately $2.1 million and its capital and surplus totaled nearly $2.3 million."

"We are continuing to review acquisition targets and situations as they come to us and we are optimistic about the potential for additional transactions in the current market," Riley noted. "Driven by our founder's original vision, Citizens reached $1 billion in assets in 2011, 42 years after the company was formed. Our goal now is to reach $2 billion in assets by the year 2020, one-quarter of the time it took to reach the first billion."

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 nine months of 2013, due to higher international renewal premiums, as we continue to experience strong persistency.  In addition, new sales decreased 5.9% for the three months primarily due to lower business generated from Venezuela and Colombia, but increased 8.8% for the nine months ended in 2013 compared to 2012.  Endowment sales continue to be the preferred product internationally representing approximately 79% of first year premiums in the three months ended September 30, 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 three and nine months of 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. We have noted higher reported claims for the three months ended in 2013 compared to 2012 but reported claims are lower for the nine months ended compared to the prior year levels which is positively impacting the current year to date earnings.  In addition, 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 are lower for the three and nine month periods 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 as we do experience some seasonality with premiums trending down in the third quarter.
  • Benefits and expenses – Claims and surrenders increased 1.8% and 4.1% for the three and nine months of 2013. Death claims were higher for the nine months ended September 30, 2013, and last year's nine month results included the release of an incurred but not reported liability for death claims of $0.5 million. Third quarter and nine-month results for 2012 results also reflected $0.5 million in losses related to Hurricane Isaac.   In addition, amortization of deferred acquisition costs for this segment rose from last year, as the 2012 results included an adjustment of $0.4 million that lowered amortization costs.

CICA Life Insurance Company of America, Citizens' largest life insurance subsidiary, was named to the 2013 Ward's 50 Top Performing Life-Health Insurance Companies List. Ward Group is a trusted leader of benchmarking and practices services for the insurance industry.  Based upon Ward's annual analysis of the life and health industry, CICA Life was recognized for achieving outstanding financial results in the areas of safety, consistency and performance over the eight year period of 2005-2012 according to Ward's recent announcement (available at www.wardinc.com).  This was CICA Life's second consecutive year to be named to this prestigious list and Ward's 23rd consecutive year of conducting this independent analysis.

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 while policy loans also rose.
  • Fixed maturity securities represented 88.2% of the investment portfolio at September 30, 2013, compared with 87.9% at year-end 2012.
  • Equity security holdings decreased to $53.1 million at September 30, 2013 from $53.7 million at year-end 2012 due to decreases in fair value of equity bond mutual funds as interest rates rose.
  • Cash and cash equivalents represented 4.3% of total cash, cash equivalents and invested assets at September 30, 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 17.9% and 16.8% for the three and nine months ended September 30, 2013 compared to the same periods in 2012. This is primarily due to an increase in overall invested assets from premium collections received and invested in fixed maturity bonds, and the increase in the overall consolidated portfolio yield by 33 basis points compared to the nine months ended in 2012.  The policy loan asset balance increased by 10.2% in 2013, resulting in an increase in policy loan income, a component of investment income.
  • Yield – Average annualized yield was 4.10% for the nine 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 years with an estimated effective maturity of 7 years as of September 30, 2013.

INVESTOR CONFERENCE CALL

On Thursday, November 7, 2013, Citizens will host a conference call to discuss operating results at 11:00 a.m. Central Standard 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 888-503-8169 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
[email protected]

SOURCE Citizens, Inc.