Kay Osbourn
Chief Financial Officer
(512) 837-7100
PR@citizensinc.com
FOR IMMEDIATE RELEASE Thursday, November 3, 2011
Citizens, Inc. Reports Third Quarter 2011 Results
• Investor conference call scheduled for Friday,
November 4, 2011, at 10 a.m. CDT
AUSTIN, TEXAS (November 3, 2011) - Citizens, Inc.
(NYSE: CIA) today reported results for the third quarter
ended September 30, 2011.
Rick D. Riley, Vice Chairman and President, said, "Third
quarter results continued the trends reported in the first
half of 2011, with premium income up 5.9% and 6.8% for the
three and nine month periods compared to 2010 results. Both
our Life and Home Service segments contributed to the overall
premium income increase.
Investment yields appear to be leveling off following the
significant interest rate declines seen over the past several
years. Citizens' consolidated annualized yield for the
first nine months of 2011 was 4.11%. Growth in the invested
asset portfolio from increased premium revenues led to higher
investment income for the third quarter, with asset growth
outpacing the portfolio yield decline."
(In thousands, except per share amounts)
QTR11
QTR10
YTD11
YTD10
Premiums
40,299
38,055
117,413
109,921
Net investment income
7,693
7,272
22,924
23,896
Net realized investment gains (losses)
35
(103)
41
648
Decrease in fair value of warrants
239
128
1,454
380
Total revenues
48,548
45,455
142,341
135,447
Net income applicable to common stock
2,223
1,666
7,246
6,456
Net income per diluted share of Class A common stock
0.05
0.03
0.15
0.13
Weighted average shares of Class A common stock
(diluted)
48,912
48,687
48,764
48,687
Consolidated results
• Total revenues- Total revenues
increased 6.8% and 5.1% for the three and nine months ended
September 30, 2011, primarily reflecting the growth in
premiums. Excluding the change in fair value of warrants,
revenues increased 6.6% and 4.3% for the same periods.
• Net income- Net income increased 33.4%
and 12.2% for the three and nine months ended September 30,
2011. Realized investment gains (losses), net of tax and
change in the fair value of warrants combined to increase net
income by $0.3 million, or $0.01 per share of diluted Class
A
common stock and $1.5 million, or $0.03 per share, for the
quarter and year ending September 30,
2011. The effect of these items was insignificant for the
third quarter of 2010 and increased net income by $1.0
million, or $0.02 per share, for the nine months of 2010.
• Book value- Book value per share
increased 6.9% to $5.10 at September 30, 2011, compared
with
$4.77 at September 30, 2010, reflecting net income and
portfolio appreciation.
Insurance operations
• Life insurance- Total premiums
increased 7.2% and 8.5% for the three and nine months of 2011
compared to the same periods in 2010. Income before income
taxes for the nine month period declined primarily because of
an increase in future policy benefit reserves expense and an
increase in other general expenses due to an annual
allocation review adjustment of expenses. For the nine months
ended 2011, the decline also reflected lower investment
income. Income for the three month period was up as
investment income increased and claims and surrenders
decreased.
o Life first-year premiums declined approximately 5% in
the third quarter while increasing approximately 11% for the
nine months ended September 30, 2011. Sales remained strong
internationally with Colombia, Venezuela and Taiwan
continuing as the top producing countries. Premiums from
Venezuela rose approximately 28% year to date with total
direct premiums collected of $14.8 million compared to $11.6
million during the nine months of 2010. International
persistency trends also remained favorable with renewals
accounting for 85% of premiums for the nine months of 2011
and 2010.
o Our international clients' focus on contract
guarantees is driving higher endowment sales, which now
represent approximately 75% of international new business
compared to 57% 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 increased 2.5%
and 2.6% for the three and nine month periods compared to
2010, as sales continued to pace at 2010 levels. Income
before taxes for the third quarter decreased to $1.2 million
compared to $1.3 million in third quarter of last year,
primarily due to an increase in reserves and an increase in
deferred policy acquisition costs amortization. Income before
taxes for the nine months increased to $5.5 million compared
with $4.5 million, due to favorable claim experience and a
reduction in general expense allocations. The expense
allocation adjustments were implemented at the beginning of
the current year following a periodic review of
assumptions.
o Death claims were down 13.0% and 11.6% for the three
and nine months in 2011 due to favorable experience. Property
casualty losses for the three and nine 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.
Investments
• Invested assets- Total invested assets
grew to $792.3 million at September 30, 2011, from $725.7
million at December 31, 2010. Fixed maturity securities
represent a significant percentage of the investment
portfolio, accounting for approximately 88% of the
investments at September 30, 2011.
o Annualized yield on the investment portfolio was
4.11% for the first nine months of 2011 compared with 4.32%
for full-year 2010.
o Available-for-sale fixed maturity securities totaled
approximately $564.3 million, or
71.2% of total investments. These securities are carried at
market value with the fair
value change reported as a component of Other Comprehensive
Income. Increases in unrealized gains in the total
available-for-sale portfolio were $15.7 million and $28.0
million in the three and nine months ended September 30,
2011, compared to unrealized gains of $11.4 million and $21.9
million for the same periods in 2010.
Investment income - Net investment income was down for
the nine months as annualized yield on the portfolio declined
to 4.11% from 4.66% a year ago due to lower prevailing
interest rates. Investment income increased in the third
quarter due to the growth in the portfolio assets reflecting
new money from premiums invested. Yield rates by quarter
appear to be leveling off primarily because of a shrinking
differential between the rates on called securities and the
rates available on new securities.
• Realized investment gains and losses-
Realized investment gains and losses in the portfolio during
the first nine months of 2011 resulted from issuer calls. Net
realized gains in 2010 totaled $0.6 million on the sale of
available-for-sale securities of lower-rated issuers that had
been part of an acquired portfolio. The Company recorded no
other-than-temporary impairment charges in 2011 or
2010.
Investor Conference Call
Citizens will host a conference call to discuss operating
results on Friday, November 4, 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) 637-2456 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 ordinary life, U.S. Dollar-denominated,
cash-value-oriented insurance policies, ordinary life and
annuity 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 nine months ended
September 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
September 30, (In thousands, except share amounts)
(Unaudited)
Revenues: Premiums:
2011 2010
Life insurance
$ 38,639
36,433
Accident and health insurance
383
392
Property insurance
1,277
1,230
Net investment income
7,693
7,272
Realized investment gains (losses), net
35
(103)
Decrease in fair value of warrants
239
128
Other income
282
103
Total revenues
48,548
45,455
Benefits and expenses:
Insurance benefits paid or provided: Claims and
surrenders
14,803
15,739
Increase in future policy benefit reserves
14,365
11,398
Policyholders' dividends
2,169
1,977
Total insurance benefits paid or provided
31,337
29,114
Commissions
9,224
9,229
Other general expenses
6,857
6,587
Capitalization of deferred policy acquisition costs
(7,121)
(6,973)
Amortization of deferred policy acquisition costs
4,500
3,800
Amortization of cost of customer relationships acquired
708
719
Total benefits and expenses
45,505
42,476
Income before federal income tax
3,043
2,979
Federal income tax expense
820
1,313
Net income
$ 2,223
1,666
Per Share Amounts:
Basic and diluted earnings per share of Class A common
stock
$ 0.05
0.03
Basic and diluted earnings per share of Class B common
stock
CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
Nine Months Ended September 30,
(In thousands, except per share amounts) (Unaudited)
Revenues: Premiums:
2011 2010
Life insurance
$ 112,481
105,114
Accident and health insurance
1,151
1,215
Property insurance
3,781
3,592
Net investment income
22,924
23,896
Realized investment gains (losses), net
41
648
Decrease in fair value of warrants
1,454
380
Other income
509
602
Total revenues
142,341
135,447
Benefits and expenses:
Insurance benefits paid or provided:
Claims and surrenders
44,587
46,410
Increase in future policy benefit reserves
39,683
30,726
Policyholders' dividends
5,751
5,324
Total insurance benefits paid or provided
90,021
82,460
Commissions
28,226
26,385
Other general expenses
20,386
20,562
Capitalization of deferred policy acquisition costs
(22,170)
(19,946)
Amortization of deferred policy acquisition costs
13,249
13,962
Amortization of cost of customer relationships acquired
2,113
2,311
Total benefits and expenses
131,825
125,734
Income before federal income tax
10,516
9,713
Federal income tax expense
3,270
3,257
Net income
$ 7,246
6,456
Per Share Amounts:
Basic and diluted earnings per share of Class A common
stock
$ 0.15
0.13
Basic and diluted earnings per share of Class B common
stock
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