CITIZENS 'A' : Citizens, Inc. Reports Second Quarter 2011 Results
08/08/2011| 04:55pm US/Eastern
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AUSTIN, Texas, Aug. 8, 2011 /PRNewswire/ -- Citizens, Inc. (NYSE: CIA) today reported results for the second quarter ended June 30, 2011.
Rick D. Riley, Vice Chairman and President, said, "Positive sales trends continued into the second quarter with 8.8% and 7.3% increases in premium income for the three and six months ended June 30, 2011, compared to 2010 results. International sales continued to reflect increased new business growth complemented with consistent renewals. In addition, our home service segment steadily produced for the quarter and reported favorable claims experience despite bad weather activity in Louisiana, its most significant geographic region."
Mr. Riley noted, "Citizens' strong balance sheet and revenue growth provides a sound foundation from which to take action if potential acquisition targets arise in this volatile economic climate."
(In thousands, except per share
amounts) QTR11 QTR10 YTD11 YTD10
Premiums 39,886 36,676 77,114 71,866
Net investment income 7,717 8,275 15,231 16,624
Net realized investment gains (losses) (13) 692 6 751
Decrease in fair value of warrants 816 366 1,215 252
Total revenues 48,510 46,160 93,793 89,992
Net income applicable to common stock 3,243 3,185 5,023 4,790
Net income per diluted share of Class
A common stock 0.07 0.07 0.08 0.10
------------------------------------- ---- ---- ---- ----
Weighted average shares of Class A
common stock (diluted) 48,689 48,687 48,704 48,687
---------------------------------- ------ ------ ------ ------
Consolidated results
-- Total revenues - Total revenues increased 5.1% and 4.2% for the three
and six months ended June 30, 2011, as premium growth continued to
offset lower investment income. Excluding the change in fair value of
warrants, revenues increased 4.1% and 3.2% for the same period.
-- Net income - Net income rose 1.8% and 4.9% for the three and six months
ended June 30, 2011. After tax, the realized investment gains (losses)
and change in the fair value of warrants combined to increase net income
by $0.8 million and $1.2 million, or $0.02 and $0.03 per share of
diluted Class A common stock, for the periods compared with a $0.8
million and $0.7 million, or $0.02 per share, increase to income for
both periods presented in the prior year.
On July 12, 2011, 255,216 of the 1,022,471 A-1 warrants expiring on that date were exercised for cash totaling $1.8 million. The remaining warrants were converted into 1,989 Class A shares issued by the Company to warrant holders by cashless exercise at expiration. In future quarters, the change in the fair value of warrants is not expected to be material because only 176,387 warrants remain outstanding, and all expire in 2012 on various dates.
-- Book value - Book value per share rose 4.3% to $4.84 at June 30, 2011,
compared with $4.64 at March 31, 2011, reflecting net income and
portfolio appreciation.
Insurance operations
-- Life insurance - Total premiums rose 11.3% and 9.2% for the three and
six months of 2011, while income before income taxes declined primarily
because of an increase in future policy benefit reserves expense and a
decline in investment income.
-- Life first-year premiums increased approximately 15% and 21% for the
three and six months ended June 30, 2011. First year premiums
represent approximately 16% of total life premiums for both periods
in 2011 compared to approximately 15% and 14% in 2010, respectively.
Sales remained strong internationally with Colombia, Venezuela and
Taiwan continuing as the top producing countries. Premiums from
Venezuela rose approximately 33% year to date with total direct
premiums collected of $9.7 million compared to $7.4 million during
the six months of 2010. International persistency trends also
remained favorable with renewals accounting for the remaining 84% of
premiums for the six months of 2011 and 86% for the same period in
2010.
-- Our international clients' focus on contract guarantees increased
endowment sales, which now represent approximately 75% of
international new business sales compared to 63% in 2010. The
increase in future policy benefit reserves correlates to the
increase in endowment sales, which produce a faster reserve build up
than whole life products.
-- Home service - Premiums rose 2.6% and 2.7% for the three and six month
periods compared to 2010, as sales continued to pace at 2010 levels.
Income before taxes increased to $2.5 million and $4.3 million, compared
to $2.2 million and $3.2 million in the prior year, primarily due to
favorable claim experience and a reduction in general expense
allocations. The expense allocations were implemented at the beginning
of the current year, following a periodic review of general expense
allocation assumptions.
-- Death claims were down 17.8% and 10.8% for the three and six months
in 2011 due to favorable experience. Property casualty losses for
the three and six month periods related to weather events in the
Company's home service markets were within normal levels. Property
casualty claims reported in 2010 had lower than expected claim
averages, which also affected comparability between periods.
-- The number of new life insurance policies written in the first six
months of 2011 rose approximately 6% at substantially the same
average face amount as in the first six months of 2010.
Investments
-- Invested assets - Total invested assets grew to $765.1 million at June
30, 2011, from $758.6 million at March 31, 2011. Fixed maturity
securities represent a significant percentage of the investment
portfolio, accounting for approximately 91% of the investments at June
30, 2011.
-- The Company made approximately $106.0 million in new investments in
the first six months of 2011, primarily investing in highly rated
municipal issuers. Annualized yield on the investment portfolio was
4.13% for the first six months of 2011 compared with 4.32% for
full-year 2010.
-- Available-for-sale securities totaled approximately $607.7 million,
or 79.4% of total investments. These securities are carried at
market value with the fair value change reported as a component of
Other Comprehensive Income. Unrealized gains in the available for
sale portfolio were $10.5 million and $12.3 million in the three and
six months ended June 30, 2011, compared to unrealized gains of $3.8
million and $10.3 million in 2010 for the same periods.
-- Cash and cash equivalents increased to $58.4 million as of June 30,
2011 compared to $49.7 million as of December 31, 2010, and
fluctuate based upon cash flows, which are impacted by the timing of
called securities and investment of excess cash holdings.
-- Investment income - Net investment income was down for the three and six
months as annualized yield on the portfolio declined to 4.13% from 4.98%
a year ago due to lower prevailing interest rates. The continued call
activity and lower yields experienced over the past several years will
result in lower investment income in the near term despite the higher
level of invested assets.
-- Realized investment gains and losses - Realized investment gains and
losses in the portfolio during the first six months of 2011 resulted
from issuer calls. 2010 net realized gains totaled $0.8 million on the
sale of available-for-sale securities from lower-rated issuers that had
been part of an acquired portfolio. The Company recorded no
other-than-temporary impairment charges in either period.
Investor Conference Call
Citizens will host a conference call to discuss operating results on Tuesday, August 9, 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 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 the Citizens, Inc. 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 ordinary life cash value insurance policies, life insurance product sales in the U.S. and the acquisition of other U.S.-based life insurance companies.
For additional information regarding the quarter's results, our Quarterly Report on Form 10-Q for the six months ended June 30, 2011 is available on our website at www.citizensinc.com.
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 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 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.
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended June 30,
(In thousands, except share amounts)
(Unaudited)
2011 2010
---- ----
Revenues:
Premiums:
Life insurance $38,231 35,085
Accident and health insurance 396 409
Property insurance 1,259 1,182
Net investment income 7,717 8,275
Realized investment gains (losses), net (13) 692
Decrease in fair value of warrants 816 366
Other income 104 151
--- ---
Total revenues 48,510 46,160
------ ------
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders 14,905 15,094
Increase in future policy benefit reserves 13,000 9,783
Policyholders' dividends 1,920 1,777
----- -----
Total insurance benefits paid or provided 29,825 26,654
Commissions 9,930 9,028
Other general expenses 6,919 7,122
Capitalization of deferred policy acquisition
costs (7,884) (6,978)
Amortization of deferred policy acquisition
costs 4,229 5,218
Amortization of cost of customer relationships
acquired 751 754
--- ---
Total benefits and expenses 43,770 41,798
------ ------
Income before federal income tax 4,740 4,362
Federal income tax expense 1,497 1,177
----- -----
Net income $3,243 3,185
====== =====
Net income applicable to common stockholders $3,243 3,185
====== =====
Per Share Amounts:
Basic and diluted earnings per share of Class A
common stock $0.07 0.07
Basic and diluted earnings per share of Class B
common stock 0.03 0.03
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
Six Months Ended June 30,
(In thousands, except per share amounts)
(Unaudited)
2011 2010
---- ----
Revenues:
Premiums:
Life insurance $73,842 68,681
Accident and health insurance 768 823
Property insurance 2,504 2,362
Net investment income 15,231 16,624
Realized investment gains (losses), net 6 751
Decrease in fair value of warrants 1,215 252
Other income 227 499
--- ---
Total revenues 93,793 89,992
------ ------
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders 29,784 30,671
Increase in future policy benefit reserves 25,318 19,328
Policyholders' dividends 3,582 3,347
----- -----
Total insurance benefits paid or provided 58,684 53,346
Commissions 19,002 17,156
Other general expenses 13,529 13,975
Capitalization of deferred policy
acquisition costs (15,049) (12,973)
Amortization of deferred policy acquisition
costs 8,749 10,162
Amortization of cost of customer
relationships acquired 1,405 1,592
----- -----
Total benefits and expenses 86,320 83,258
------ ------
Income before federal income tax 7,473 6,734
Federal income tax expense 2,450 1,944
----- -----
Net income $5,023 4,790
====== =====
Net income applicable to common
stockholders $5,023 4,790
====== =====
Per Share Amounts:
Basic earnings per share of Class A common
stock $0.10 0.10
Basic earnings per share of Class B common
stock 0.05 0.05
Diluted earnings per share of Class A
common stock 0.08 0.10
Diluted earnings per share of Class B
common stock 0.04 0.05
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Financial Position
(In thousands)
December
June 30, 31,
Assets 2011 2010
------ ---- ----
(Unaudited)
Investments:
Fixed maturities available-for-sale,
at fair value $583,108 575,737
Fixed maturities held-to-maturity, at
amortized cost 109,744 80,232
Equity securities available-for-sale,
at fair value 24,593 23,304
Mortgage loans on real estate 1,466 1,489
Policy loans 36,919 35,585
Real estate held for investment 9,152 9,200
Other long-term investments 144 148
--- ---
Total investments 765,126 725,695
Cash and cash equivalents 58,376 49,723
Accrued investment income 8,615 7,433
Reinsurance recoverable 9,440 9,729
Deferred policy acquisition costs 131,970 125,684
Cost of customer relationships acquired 30,083 31,631
Goodwill 17,160 17,160
Other intangible assets 970 1,019
Federal income tax receivable 847 1,914
Property and equipment, net 7,940 7,101
Due premiums, net 7,989 8,537
Prepaid expenses 1,463 474
Other assets 689 406
--- ---
Total assets $1,040,668 986,506
========== =======
(Continued)
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Financial Position
(In thousands, except share amounts)
December
June 30, 31,
Liabilities and Stockholders' Equity 2011 2010
------------------------------------ ---- ----
(Unaudited)
Liabilities:
Policy liabilities:
Future policy benefits reserves:
Life insurance $661,534 637,140
Annuities 44,241 42,096
Accident and health 5,634 5,910
Dividend accumulations 10,028 9,498
Premiums paid in advance 25,282 23,675
Policy claims payable 9,507 10,540
Other policyholders' funds 8,137 8,191
----- -----
Total policy liabilities 764,363 737,050
Commissions payable 2,564 2,538
Deferred federal income tax 13,695 9,410
Payable for securities in process of
settlement 10,078 -
Warrants outstanding 372 1,587
Other liablities 9,047 8,287
----- -----
Total liabilities 800,119 758,872
------- -------
Commitments and contingencies (Note
8)
Stockholders' equity:
Common stock:
Class A 256,720 256,703
Class B 3,184 3,184
Accumulated deficit (17,558) (22,581)
Accumulated other comprehensive
income:
Unrealized gains on securities, net
of tax 9,214 1,339
----- -----
251,560 238,645
Treasury stock, at cost (11,011) (11,011)
------- -------
Total stockholders' equity 240,549 227,634
------- -------
Total liabilities and stockholders'
equity $1,040,668 986,506
========== =======
FOR FURTHER INFORMATION CONTACT:Kay OsbournChief Financial Officer(512) 837-7100 PR@citizensinc.com
SOURCE Citizens, Inc.
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