Citizens, Inc. Reports First Quarter 2012 Results Investor conference call scheduled for Tuesday, May 8, at 10 a.m. CDT

Transcription

1 NEWS RELEASE FOR FURTHER INFORMATION CONTACT: Kay Osburn Chief Financial Officer (512) FOR IMMEDIATE RELEASE May 7, 2012 Citizens, Inc. Reprts First Quarter 2012 Results Investr cnference call scheduled fr Tuesday, May 8, at 10 a.m. CDT AUSTIN, TEXAS (May 7, 2012) Citizens, Inc. (NYSE: CIA) reprted results tday fr the first quarter ended March 31, Rick D. Riley, Vice Chairman and President, said, We are beginning the year f 2012 as expected, reprting stable and cnsistent earnings. These results are being driven by ur seasned blcks f traditinal business. Net incme fr the quarter was $1.5 millin, r $0.03 per diluted Class A share, cmpared t $1.6 millin, $0.03 per diluted Class A share, fr the three mnths f Operating incme increased t $1.4 millin cmpared t $1.2 millin. THREE MONTHS ENDED MARCH 31, (Unaudited, In thusands, except fr per share amunts) (As adjusted) Premiums $ 39,096 37,228 Net investment incme $ 7,577 7,300 Net realized investment gains $ Change in fair value f warrants $ Ttal revenue $ 46,905 45,069 Net incme applicable t cmmn stck $ 1,512 1,622 Net incme per diluted share f Class A cmmn stck $ Diluted weighted average shares f Class A cmmn stck 48,959 48,687 Operating incme $ 1,412 1,211 Riley added, Our ttal revenue increased 4.1% fr the three mnths driven by an increase f 5.0% in ttal premiums, which was largely due t the grwth in renewal premiums. Excluding the change in fair value f warrants, revenues increased 4.9% fr the same perid. Investment incme increased fr the quarter, benefiting frm bnd mutual funds purchased in the latter part f The increase in invested assets was ffset by the lw interest rate envirnment, as ur prtfli yield decreased t 3.76% cmpared with 3.92% at year-end P.O. Bx Austin, Texas Phne: (512) Fax: (512) PR@citizensinc.cm Website:

2 Further, bk value per share f Class A cmmn stck increased 1.3% t $5.03 at March 31, Bk value was up $0.06 frm December 31, 2011, due t fluctuatins in the market values f bnds in ur prtfli, Riley said. Riley cmmented, The change in the fair value f warrants had a psitive effect n net incme f $36,000 and $399,000 fr the first quarters f 2012 and 2011, respectively. The number f utstanding warrants was reduced substantially during 2011 and the 159,997 remaining warrants will either be exercised r expire this year, eliminating this cnsideratin frm net incme ging frward. Recnciliatin f Net Incme t Operating Incme (a nn-gaap measure) (Unaudited, In thusands, except fr per share data) THREE MONTHS ENDED MARCH 31, (As adjusted) Net Incme $ 1,512 1,622 Items excluded in the calculatin f perating incme: Net realized investment (gains) and lsses $ (98) (19) Changes in the fair value f warrants (36) (399) Pre-tax effect f exclusins (134) (418) Tax effect at 35% 34 7 Operating incme $ 1,412 1,211 Nn-GAAP Financial Measures - The table abve recnciles Net Incme t Operating Incme. Operating Incme is a "Nn-GAAP" financial measure that is widely used in ur industry t evaluate the perfrmance f underwriting peratins. Operating Incme excludes the Fair Value Changes f Warrants and the after-tax net effects f Net Realized Investment Gains and Lsses. We believe it presents a useful view f the perfrmance f ur insurance peratins. While we believe disclsure f certain Nn-GAAP infrmatin is apprpriate, yu shuld nt cnsider this infrmatin withut als cnsidering the infrmatin we present in accrdance with GAAP. RECENT ACCOUNTING STANDARD ADOPTION On January 1, 2012, the Cmpany retrspectively adpted the revised accunting guidance fr accunting fr csts assciated with acquiring r renewing insurance cntracts ( DAC ). These amended accunting rules are intended t address the diversity amng insurers in identifying csts that meet the accunting criteria f DAC. Thrughut this dcument, certain prir perid numbers have been restated t reflect the retrspective adptin f the accunting standard. The effects f this adptin in ur deferred acquisitin csts as f December 31, 2011, resulted in a decrease in the stckhlders equity balance by $7.6 millin, the DAC asset and deferred taxes decreased by $11.8 millin and $4.1 millin, respectively. Fr the three mnths ended March 31, 2011, net incme was reduced by a ttal f $0.2 millin, with minimal impact per diluted share f Class A cmmn stck. INSURANCE OPERATIONS Life Insurance Our Life Insurance segment primarily issues rdinary whle life insurance in U.S. Dllar-denminated amunts t freign residents in apprximately 30 cuntries thrugh apprximately 2,300 independent marketing cnsultants, and dmestically thrugh almst 300 independent marketing firms and cnsultants thrughut the United States. Premiums Life insurance premium revenues increased fr the first quarter f 2012, due t higher internatinal renewal premiums, which have experienced strng persistency. First year premiums decreased in the current year, which we believe was primarily due t reduced sales activity related t preparatin thrughut ur marketing system fr an agent cnventin held in P.O. Bx Austin, Texas Phne (512) Fax: (512) PR@citizensinc.cm Website:

3 April. In additin, mst f ur life insurance plicies cntain a plicy lan prvisin that allws the plicyhlder t utilize cash value f a plicy t pay premiums and keep plicies in frce. The plicy lan asset balance in the life insurance segment increased 2.8% frm year-end 2011 and increased 11.3% frm first quarter Benefits and expenses Life insurance benefits and expenses increased fr the first quarter 2012 cmpared t the same perid in 2011, primarily due t increases in claims, surrenders and plicy benefit reserves. Endwment prducts require accumulatin f higher reserve balances n the frnt end when cmpared t whle life prducts. Cmmissin expense decreased frm the prir year as renewal premiums, which have lwer cmmissin rates, cmprised a larger percentage f ttal premiums this year. Hme Service Our Hme Service Insurance segment prvides pre-need and final expense rdinary life insurance and annuities t middle and lwer incme individuals primarily in Luisiana, Mississippi and Arkansas. Our plicies in this segment are sld and serviced thrugh funeral hmes and a hme service marketing distributin system utilizing apprximately 530 emplyees and independent agents. Premiums Hme service premiums increased 2.0% frm first quarter 2011, primarily due t premiums frm a small blck f business we acquired in the latter part f 2011 that is nt included in results fr the first three mnths f Benefits and expenses Hme service benefits and expenses decreased by 3.9% fr the first quarter Claims and surrenders were dwn 11.9% frm 2011 reprted amunts as we released $500,000 f incurred but nt reprted liability based upn ur claims experience calculatin. INVESTMENTS Invested assets Ttal invested assets decreased slightly frm year-end 2011 as cash balances increased due t prceeds frm calls f bnds. Fixed maturity securities represented 88.1% f the prtfli at March 31, 2012, cmpared with 88.4% at year-end Equity security hldings increased slightly t $46.7 millin at March 31, 2012 frm $46.1 millin at year-end 2011 due t increases in fair value. Cash and cash equivalents represented 6.8% f ttal cash, cash equivalents and invested assets at March 31, 2012, up frm 3.8% at year-end 2011, reflecting the timing f calls and reinvestment. A prtin f that cash balance was pending lng term investment at March 31, Investment incme Net investment incme increased slightly fr the quarter ended March 31, 2012 cmpared t the same perid in The gains were primarily due t dividend incme frm bnd mutual funds purchased in the last half f The plicy lan asset balance increased by 2.8% in 2012, resulting in an increase in plicy lan incme, a cmpnent f investment incme. Yield During 2012, average invested assets decreased slightly and average yield decreased t 3.76% cmpared with 3.92% at year-end Duratin The average maturity f the fixed incme bnd prtfli was 12.9 years with an estimated effective maturity f 5.9 years as f March 31, P.O. Bx Austin, Texas Phne (512) Fax: (512) PR@citizensinc.cm Website:

4 INVESTOR CONFERENCE CALL On Tuesday, May 8, Citizens will hst a cnference call t discuss perating results at 10 a.m. Central Time. The cnference call will be hsted by Rick D. Riley, Vice Chairman and President, Kay Osburn, Chief Financial Officer, and ther members f the Cmpany s management team. T participate, please dial and ask t jin the Citizens, Inc. call. We recmmend accessing the call three t five minutes befre the call is scheduled t begin. A recrding f the cnference call will be available n Citizens' website at in the Investr Infrmatin sectin under News Release & Publicatins fllwing the call. ABOUT CITIZENS, INC. Citizens, Inc. is a financial services cmpany listed n the New Yrk Stck Exchange under the symbl CIA. The Cmpany utilizes a three-prnged strategy fr grwth based upn wrldwide sales f U.S. Dllar-denminated whle life cash value insurance plicies, life insurance prduct sales in the U.S. and the acquisitin f ther U.S. based life insurance cmpanies. SAFE HARBOR Infrmatin herein cntains frward-lking statements within the meaning f the Private Securities Litigatin Refrm Act f 1995, which can be identified by wrds such as may, will, expect, anticipate r cntinue r cmparable wrds. In additin, all statements ther than statements f histrical facts that address activities that the Cmpany expects r anticipates will r may ccur in the future are frward-lking statements. Readers are encuraged t read the SEC reprts f the Cmpany, particularly its Frm 10-K fr the fiscal year ended December 31, 2011, its quarterly reprts n Frm 10-Q and its current reprts n Frm 8-K, fr the meaningful cautinary language disclsing why actual results may vary materially frm thse anticipated by management. The Cmpany undertakes n duty r bligatin t update any frwardlking statements cntained in this release as a result f new infrmatin, future events r changes in the Cmpany s expectatins. The Cmpany als disclaims any duty t cmment upn r crrect infrmatin that may be cntained in reprts published by the investment cmmunity. P.O. Bx Austin, Texas Phne (512) Fax: (512) PR@citizensinc.cm Website:

5 CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Cnslidated Statements f Cmprehensive Incme (In thusands, except per share amunts) Three Mnths Ended March 31, * (Unaudited) Revenues: Premiums: Life insurance $ 37,406 35,611 Accident and health insurance Prperty insurance 1,277 1,245 Net investment incme 7,577 7,300 Realized investment gains, net Decrease in fair value f warrants Other incme Ttal revenues 46,905 45,069 Benefits and expenses: Insurance benefits paid r prvided: Claims and surrenders 14,754 14,879 Increase in future plicy benefit reserves 14,141 12,318 Plicyhlders dividends 1,874 1,662 Ttal insurance benefits paid r prvided 30,769 28,859 Cmmissins 8,664 9,072 Other general expenses 6,616 6,403 Capitalizatin f deferred plicy acquisitin csts (5,939) (6,641) Amrtizatin f deferred plicy acquisitin csts 4,126 4,238 Amrtizatin f cst f custmer relatinships acquired Ttal benefits and expenses 44,812 42,578 Incme befre incme tax expense 2,093 2,491 Incme tax expense Net incme 1,512 1,622 Per Share Amunts: Basic earnings per share f Class A cmmn stck $ Basic earnings per share f Class B cmmn stck $ Diluted earnings per share f Class A cmmn stck $ Diluted earnings per share f Class B cmmn stck $ Other cmprehensive incme: Unrealized gains n available-fr-sale securities: Unrealized hlding gains arising during perid 2,561 1,626 Reclassificatin adjustment fr gains included in net incme (86) (19) Unrealized gains n available-fr-sale securities, net 2,475 1,607 Incme tax expense n unrealized gains n available-fr-sale securities (896) (562) Other cmprehensive incme 1,579 1,045 Cmprehensive Incme $ 3,091 2,667 *Certain prir perid amunts have been restated t reflect the retrspective adptin f revised accunting guidance fr accunting fr csts assciated with deferred acquisitin csts. P.O. Bx Austin, Texas Phne (512) Fax: (512) PR@citizensinc.cm Website:

6 CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Cnslidated Statements f Financial Psitin (In thusands) Assets: March 31, 2012 (Unaudited) December 31, 2011* Investments: Fixed maturities available-fr-sale, at fair value $ 497, ,253 Fixed maturities held-t-maturity, at amrtized cst 239, ,500 Equity securities available-fr-sale, at fair value 46,723 46,137 Mrtgage lans n real estate 1,546 1,557 Plicy lans 40,170 39,090 Real estate held fr investment 8,574 8,539 Other lng-term investments Shrt-term investments 2,030 2,048 Ttal investments 836, ,229 Cash and cash equivalents 61,096 33,255 Accrued investment incme 8,853 7,787 Reinsurance recverable 9,594 9,562 Deferred plicy acquisitin csts 126, ,542 Cst f custmer relatinships acquired 27,373 27,945 Gdwill 17,160 17,160 Other intangible assets Federal incme tax receivable Prperty and equipment, net 7,810 7,860 Due premiums, net 8,671 9,169 Prepaid expenses 1, Other assets Ttal assets $ 1,106,047 1,079,512 (Cntinued) *Certain prir perid amunts have been restated t reflect the retrspective adptin f revised accunting guidance fr accunting fr csts assciated with deferred acquisitin csts. P.O. Bx Austin, Texas Phne (512) Fax: (512) PR@citizensinc.cm Website:

7 CITIZENS, INC. AND CONSOLIDATED SUBSIDIARIES Cnslidated Statements f Financial Psitin, Cntinued (In thusands) March 31, 2012 (Unaudited) December 31, 2011* Liabilities: Future plicy benefit reserves: Life insurance $ 711, ,502 Annuities 48,119 47,060 Accident and health 5,556 5,612 Dividend accumulatins 10,864 10,601 Premiums paid in advance 26,276 25,291 Plicy claims payable 9,070 10,020 Other plicyhlders funds 8,832 8,760 Ttal plicy liabilities 819, ,846 Cmmissins payable 2,442 2,851 Current federal incme tax payable Deferred federal incme taxes 14,201 13,940 Payable fr securities in prcess f settlement 7,546 - Warrants utstanding Other liabilities 9,981 9,382 Ttal liabilities 854, ,470 Cmmitments and cntingencies Stckhlders equity: Cmmn stck: Class A cmmn stck 258, ,548 Class B cmmn stck 3,184 3,184 Accumulated deficit (20,339) (21,851) Accumulated ther cmprehensive incme: Unrealized gains n securities, net f tax 20,751 19,172 Treasury stck, at cst (11,011) (11,011) Ttal stckhlders equity 251, ,042 Ttal liabilities and stckhlders equity $ 1,106,047 1,079,512 *Certain prir perid amunts have been restated t reflect the retrspective adptin f revised accunting guidance fr accunting fr csts assciated with DAC. P.O. Bx Austin, Texas Phne (512) Fax: (512) PR@citizensinc.cm Website: